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                                                                     Exhibit 4.3
Draft: 25/02/03

THIS AMENDED AND RESTATED MORTGAGE SALE AGREEMENT is made on [6th March], 2003

BETWEEN:

(1)  HALIFAX PLC (registered number 02367076), a public limited company
     incorporated under the laws of England and Wales, whose registered office
     is at Trinity Road, Halifax, West Yorkshire HX1 2RG, acting in its
     capacities as the Seller and one of the Beneficiaries;

(2)  PERMANENT FUNDING (NO. 1) LIMITED (registered number 4267660), a private
     limited company incorporated under the laws of England and Wales, whose
     registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE,
     acting in its capacities as Funding 1 and one of the Beneficiaries;

(3)  PERMANENT MORTGAGES TRUSTEE LIMITED (registered number 83116), a private
     limited company incorporated under the laws of Jersey, Channel Islands,
     whose registered office is at 47 Esplanade, St Helier, Jersey JE1 0BD,
     Channel Islands, acting in its capacity as the Mortgages Trustee;

(4)  STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
     organised under the laws of the Commonwealth of Massachusetts, United
     States of America, acting through its office at 225 Franklin Street,
     Boston, Massachusetts 02110 acting as a co-trustee in its capacity as
     Security Trustee; and

(5)  U.S. BANK NATIONAL ASSOCIATION, a national banking association formed under
     the laws of the United States of America, acting through its office at 1
     Federal Street, 3rd Floor, Boston, Massachusetts 02110, acting as a
     co-trustee in its capacity as Security Trustee.

WHEREAS:

(A)  The Seller carries on the business of, inter alia, originating mortgage
     loans to individual borrowers secured on residential properties in England
     and Wales.

(B)  The Seller has assigned to the Mortgages Trustee certain of the above
     mentioned mortgage loans together with the benefit of the related security
     for the same on the terms and subject to the conditions set out in the
     Mortgage Sale Agreement dated 14th June, 2002 (as amended and/or restated
     from time to time, the "MORTGAGE SALE AGREEMENT").

(C)  The Mortgages Trustee holds all of the above mentioned assigned mortgage
     loans as bare trustee for the Beneficiaries upon, with and subject to the
     trusts, powers and provisions of the Mortgages Trust Deed dated 13th June,
     2002 (as amended and/or restated from time to time, the "MORTGAGES TRUST
     DEED").

(D)  The parties to the Mortgage Sale Agreement have agreed to amend and restate
     the terms of the Mortgage Sale Agreement as set out herein and the Seller
     will assign a new portfolio of mortgage loans and their related security to
     the Mortgages Trustee on or about the date hereof on such amended terms.

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IT IS HEREBY AGREED as follows:

1.   DEFINITIONS AND CONSTRUCTION

1.1  The Amended and Restated Master Definitions and Construction Schedule
     signed for the purposes of identification by Allen & Overy and Sidley
     Austin Brown & Wood on [5th March], 2003 (as the same may be amended,
     varied or supplemented from time to time with the consent of the parties
     hereto) is expressly and specifically incorporated into this Agreement and,
     accordingly, the expressions defined in the Amended and Restated Master
     Definitions and Construction Schedule (as so amended, varied or
     supplemented) shall, except where the context otherwise requires and save
     where otherwise defined herein, have the same meanings in this Agreement,
     including the Recitals hereto and this Agreement shall be construed in
     accordance with the interpretation provisions set out in CLAUSE 2 of that
     Amended and Restated Master Definitions and Construction Schedule.

1.2  Any reference in this Agreement to any discretion, power, right, duty or
     obligation on the part of the Mortgages Trustee shall be as exercised by
     the Mortgages Trustee subject in each case to the provisions of CLAUSE 16.2
     of the Mortgages Trust Deed.

1.3  For the purposes of Section 2 of the Law of Property (Miscellaneous
     Provisions) Act 1989, the terms of the Transaction Documents are, so far as
     applicable, incorporated herein.

1.4  The Initial Portfolio contained as PART 1 of the EXHIBIT to this Agreement
     and any schedule of New Loans attached to any New Portfolio Notice may be
     provided in a document stored upon electronic media (including, but not
     limited to, a CD-ROM) in a form acceptable to the Mortgages Trustee, the
     Security Trustee and Funding 1 (each acting reasonably).

1.5  This Agreement amends and restates the Mortgage Sale Agreement made on the
     14th June, 2002 between the parties hereto (the "PRINCIPAL AGREEMENT"). As
     of the date of this Agreement, any future rights or obligations (excluding
     such obligations accrued to the date of this Agreement) of a party under
     the Principal Agreement shall be extinguished and shall instead be governed
     by this Agreement.

2.   SALE AND PURCHASE OF INITIAL PORTFOLIO

2.1  Subject to CLAUSE 2.2, in consideration of the Purchase Price (which shall
     be paid in accordance with CLAUSE 3.3) and the covenant of the Mortgages
     Trustee to hold the Trust Property upon trust, with and subject to all the
     trusts, powers and provisions of the Mortgages Trust Deed, the Seller
     hereby agrees to sell and assign to the Mortgages Trustee with full title
     guarantee, the Initial Portfolio on the Initial Closing Date.

2.2  The obligation of the Seller under CLAUSE 2.1 shall be subject to and
     conditional upon:

     (a)  the issue by the First Issuer of the Issuer Notes on the Initial
          Closing Date and the borrowing by Funding 1 of the Term Advances under
          the First Issuer Intercompany Loan Agreement;

     (b)  the constitution of the Mortgages Trust on or prior to the Initial
          Closing Date; and

     (c)  the Transaction Documents having been executed and delivered by the
          parties thereto on or before the Initial Closing Date.

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2.3  The sale of the Portfolio shall not include any obligation to pay any
     Delayed Cashbacks, Home Cash Reserve Drawings or Flexible Loan Drawings (if
     any), which obligation shall at all times, and notwithstanding the sale of
     the Portfolio, remain an obligation of the Seller.

3.   INITIAL CLOSING DATE

3.1  (a)      A meeting shall take place at 11 a.m. on the Initial Closing
              Date at the offices of Allen & Overy, One New Change, London EC4M
              9QQ or such other time or offices as the parties may agree at
              which the Seller shall deliver to the Security Trustee or its
              representative the following documents:

              (i)   two originals of the power of attorney dated as at the
                    Initial Closing Date and substantially in the form set out
                    in SCHEDULE 5 hereto, duly executed by the Seller;

              (ii)  a certified copy of each of the duly executed Insurance
                    Acknowledgements;

              (iii) a certified copy of each of the duly executed Insurance
                    Endorsements;

              (iv)  a duly executed assignment of the Halifax Mortgage Re
                    Limited MIG Policies to the extent that they relate to the
                    Mortgages comprised in the Initial Portfolio from the Seller
                    to the Mortgages Trustee and a certified copy of a notice
                    (the original of which shall be served by the Seller by
                    courier or by special delivery) of such assignment from the
                    Seller to HBOS Insurance (PCC) Guernsey Limited dated as at
                    the Initial Closing Date and in the form (mutatis mutandis)
                    set out in SCHEDULES 8 and 9 hereto respectively and a
                    certified copy of consent to assignment of the Halifax
                    Mortgage Re Limited MIG Policies (or acknowledgement that
                    the Mortgages Trustee will be an insured in respect of the
                    Initial Portfolio under the Halifax Mortgage Re Limited MIG
                    Policies following such assignment) from HBOS Insurance
                    (PCC) Guernsey Limited in such form as HBOS Insurance (PCC)
                    Guernsey Limited reasonably requires;

              (v)   a certificate of a duly authorised officer of the Seller
                    dated as at the Initial Closing Date attaching a copy of the
                    board minute of the Seller authorising its duly appointed
                    representatives to agree the sale of the Portfolio and
                    authorising execution and performance of this Agreement, the
                    Servicing Agreement, the other Transaction Documents to
                    which the Seller is a party (in any capacity) and all of the
                    documentation to be entered into pursuant to this Agreement
                    and confirming that the resolutions referred to therein are
                    in full force and effect and have not been amended or
                    rescinded as at the date of the certificate;

              (vi)  a duly executed assignment of rights against third parties
                    comprised in the Initial Portfolio dated as at the Initial
                    Closing Date and in the form of the Assignment of Third
                    Party Rights; and

              (vii) a solvency certificate from an authorised signatory of the
                    Seller dated the Initial Closing Date in a form acceptable
                    to the Mortgages Trustee, Funding 1 and the Security Trustee
                    (each acting reasonably).

     (b)      The parties hereto acknowledge that completion on the Initial
              Closing Date of the sale and assignment to the Mortgages Trustee
              of all of the Seller's right, title, interest and


                                       3
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              benefit in and to the Initial Portfolio subject to the terms and
              provisions of the Mortgages Trust Deed shall occur as indicated in
              this CLAUSE 3 Provided That the matters described in CLAUSES 6.2
              and 6.3 shall not occur until the relevant time indicated in
              CLAUSE 6 or, as applicable, CLAUSE 7.4.

3.2  The Seller undertakes that from the Initial Closing Date until the
     perfection of the assignment in accordance with CLAUSES 6.2 and 6.3, the
     Seller shall hold the Title Deeds and Customer Files relating to the
     Portfolio that are in its possession or under its control or held to its
     order to the order of the Mortgages Trustee or as the Mortgages Trustee
     shall otherwise direct.

3.3  Subject to fulfilment of the conditions referred to in CLAUSES 2.2 and 3,
     the Seller shall be paid the Purchase Price by telegraphic transfer by
     Funding 1 on the Initial Closing Date.

3.4  The Seller shall provide all reasonable co-operation to the Mortgages
     Trustee, Funding 1 and the Security Trustee to enable them to carry out
     their respective duties and enforce their rights under the Transaction
     Documents. Without prejudice to the generality of the foregoing, the Seller
     shall:

     (a)  upon reasonable prior notice and during normal office hours, permit
          the Mortgages Trustee, Funding 1, the Security Trustee and their
          authorised employees and agents and other persons nominated by the
          Security Trustee and approved by the Seller (such approval not to be
          unreasonably withheld or delayed), to review the Customer Files and
          the Title Deeds in relation to the Portfolio (subject to such
          person(s) agreeing to keep the same confidential but provided that
          disclosure shall be permitted to the professional advisors and
          auditors of the party to whom such disclosure is made and/or to the
          extent that such disclosure is required by law or for the purpose of
          any judicial or other proceedings); and/or

     (b)  give promptly all such information and explanations relating to the
          Loans and their Related Security as the Mortgages Trustee, Funding 1
          or the Security Trustee may reasonably request (including a list of
          the Loans and their Related Security in the Portfolio along with
          details of the location of the Title Deeds relating thereto),

     provided that prior to completion in accordance with CLAUSE 6, the Seller
     shall be under no obligation to provide any information or documentation to
     any person other than the Mortgages Trustee and/or the Security Trustee or
     their respective employees and/or professional advisors or allow such
     person access to the Customer Files or Title Deeds if to do so would result
     in a breach of the applicable Mortgage Terms or the Data Protection Act
     1998.

4.   SALE AND PURCHASE OF NEW PORTFOLIOS

4.1  Subject to fulfilment of the conditions set out in CLAUSES 2.2, 3.1, 4.2
     (or as applicable, 4.3) and 4.4, if the Seller shall, at any time and from
     time to time serve a properly completed New Portfolio Notice on the
     Mortgages Trustee and Funding 1 with a copy to the Security Trustee (such
     service to be in the Seller's sole discretion), the Seller agrees that on
     the date for completion of the assignment specified in such New Portfolio
     Notice the Seller shall sell and assign with full title guarantee to the
     Mortgages Trustee the relevant New Portfolio.

4.2  The conditions to be met as at each Assignment Date are:

     (a)  no event of default under the Transaction Documents shall have
          occurred which is continuing as at the relevant Assignment Date;


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     (b)  the Principal Deficiency Ledger shall not have a debit balance as at
          the most recent Funding 1 Interest Payment Date after applying all
          Funding 1 Available Revenue Receipts on that Funding 1 Interest
          Payment Date;

     (c)  the Mortgages Trustee is not aware that the purchase of the New
          Portfolio on the relevant Assignment Date will adversely affect the
          then current rating by the Ratings Agencies (or any of them) of the
          Notes;

     (d)  as at the relevant Assignment Date, the Seller has not received any
          notice that the short term, unsecured, unguaranteed and unsubordinated
          debt obligations of the Seller are not rated at least P-1 by Moody's,
          A-1 by S&P and F1 by Fitch at the time of, and immediately following,
          the assignment of the New Loans to the Mortgages Trustee;

     (e)  as at the relevant Assignment Date, the aggregate Outstanding
          Principal Balances of the Loans in the Mortgages Trust, in respect of
          which the aggregate amount in arrears is more than three times the
          Monthly Payment then due, is less than 5 per cent. of the aggregate
          Outstanding Principal Balances of the Loans in the Mortgages Trust;

     (f)  except where Funding 1 pays amounts to the Mortgages Trustee in
          consideration of New Loans to be assigned to it, the aggregate
          Outstanding Principal Balance (excluding Arrears of Interest) of New
          Loans transferred in any one Interest Period must not exceed 15 per
          cent. of the aggregate Outstanding Principal Balance of Loans
          (excluding Arrears of Interest) in the Mortgages Trust as at the
          beginning of that Interest Period;

     (g)  the assignment of the New Portfolio on the relevant Assignment Date
          does not result in the product of WAFF and WALS for the Portfolio
          after such purchase calculated on the relevant Assignment Date in the
          same way as for the Initial Portfolio (or as agreed by the Servicer
          and the Rating Agencies from time to time) exceeding the product of
          WAFF and WALS for the Portfolio calculated on the most recent Closing
          Date plus 0.25 per cent.;

     (h)  the yield (as calculated below) of the Loans in the Mortgages Trust
          together with the yield of the New Loans to be assigned to the
          Mortgages Trustee on the relevant Assignment Date (together for the
          purposes of this paragraph, the "RELEVANT LOANS") is at least 0.50 per
          cent. greater than Sterling-LIBOR for three-month sterling deposits as
          at the previous Interest Payment Date, after taking into account the
          average yield on the Loans which are Variable Rate Loans, Tracker Rate
          Loans and Fixed Rate Loans and the margins on the Funding 1 Swap(s),
          in each case as at the relevant Assignment Date. The yield of the
          Relevant Loans is to be calculated as follows:

                              (A X B)+(C X (D-E+F))+(G X (H+I))
                              ---------------------------------
                                              J

          where,

          A  = the Outstanding Principal Balance, on the relevant Assignment
               Date, of the Relevant Loans which are Fixed Rate Loans

          B  = the interest rate receivable by Funding 1 under the Funding 1
               Fixed-Floating Rate Swap as at the relevant Assignment Date


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          C  = the Outstanding Principal Balance, on the relevant Assignment
               Date, of the Relevant Loans which are Variable Rate Loans

          D  = the weighted average Variable Base Rate of the Relevant Loans
               which are Variable Rate Loans on the relevant Assignment Date

          E  = the Variable Rate Swap SVR for the Relevant Loans which are
               Variable Rate Loans on the relevant Assignment Date

          F  = the interest rate receivable by Funding 1 under the Funding 1
               Variable Rate Swap as at the relevant Assignment Date

          G  = the Outstanding Principal Balance, on the relevant Assignment
               Date, of the Relevant Loans which are Tracker Rate Loans

          H  = the interest rate receivable by Funding 1 under the Tracker
               Rate Swap as at the relevant Assignment Date

          I  = the weighted average margin of the Relevant Loans which are
               Tracker Rate Loans over or under the Bank of England Repo Rate on
               the relevant Assignment Date

          J  = the Outstanding Principal Balance of the Relevant Loans on the
               relevant Assignment Date;

     (i)  the assignment of the New Loans on the relevant Assignment Date does
          not result in the loan-to-value ratio of the Loans and the New Loans
          after application of the LTV Test on the relevant Assignment Date
          exceeding the loan-to-value ratio (based on the LTV Test) of Loans in
          the Portfolio on the most recent Closing Date plus 0.25 per cent.;

     (j)  the assignment of the New Loans on the relevant Assignment Date does
          not result in Loans (other than Fixed Rate Loans) which after taking
          into account the Funding 1 Swap will yield less than Sterling-LIBOR
          plus 0.50 per cent. as at the relevant Assignment Date and that have
          more than 2 years remaining on their incentive period accounting for
          more than 10 per cent. of the aggregate Outstanding Principal Balance
          of all Loans comprising the Trust Property;

     (k)  the assignment of the New Loans on the relevant Assignment Date does
          not result in the Fixed Rate Loans which have more than 1 year
          remaining on their incentive period accounting for more than 50 per
          cent. of the aggregate Outstanding Principal Balance of Loans
          comprising the Trust Property;

     (l)  no assignment of the New Portfolio may occur after the Interest
          Payment Date falling in December 2008 if the option to redeem the
          First Issuer Notes on the Interest Payment date in December 2008
          pursuant to the Terms and Conditions of the First Issuer Notes is not
          exercised;

     (m)  as at the Assignment Date, the adjusted Reserve Fund is equal to or
          greater than the Reserve Fund Threshold;

     (n)  if the assignment of New Loans includes the assignment of New Loan
          Types to the Mortgages Trustee, the Security Trustee has received
          written confirmation from each

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          of the Rating Agencies that such New Loan Types may be assigned to the
          Mortgages Trustee and that such assignment of New Loan Types would not
          have an adverse effect on the then current ratings of the Notes;

     (o)  the Funding 1 Swap Agreement has been modified as required (or, if
          appropriate, Funding 1 has entered into a new swap agreement) to hedge
          against the interest rates payable in respect of such New Loans and
          the floating rate of interest payable on the Issuer Intercompany Loan;
          and

     (p)  no Trigger Event has occurred on or before the relevant Assignment
          Date.

     In this CLAUSE 4.2 references to any Monthly Payment due at any date means
     the Monthly Payment payable in respect of the month in which that date
     falls.

4.3  The obligations of the Seller under CLAUSE 4.1 shall be subject to and
     conditional upon no Insolvency Event having occurred which is continuing as
     at the relevant Assignment Date.

4.4  Subject to fulfilment of the conditions referred to in CLAUSES 4.2, 4.3,
     4.4 and 4.6, the consideration to be provided to the Seller for the
     assignment of the New Portfolio to the Mortgages Trustee on an Assignment
     Date shall be the aggregate of:

     (a)  the payment by Funding 1 to the Seller by telegraphic transfer on the
          relevant Assignment Date of the proceeds of any New Intercompany Loan
          advanced to Funding 1 by a New Issuer; and

     (b)  the covenant of the Mortgages Trustee to hold the Trust Property on
          trust pursuant to the terms of the Mortgages Trust Deed.

4.5  (a)  On the date of the assignment of the relevant New Portfolio the
          Seller shall deliver to the Security Trustee or its representative the
          following documents:

          (i)   a duly executed assignment of the Halifax Mortgage Re Limited
                MIG Policies to the extent that they relate to the Mortgages
                comprised in the relevant New Portfolio from the Seller to the
                Mortgages Trustee and a certified copy of a notice (the original
                of which shall be served by the Seller by courier or by special
                delivery) of such assignment from the Seller to HBOS Insurance
                (PCC) Guernsey Limited dated as of the relevant Assignment Date
                and in the form (mutatis mutandis) set out in Schedules 8 and 9
                hereof respectively and a certified copy of consent to
                assignment of the Halifax Mortgage Re Limited MIG policies (or
                acknowledgement that the Mortgages Trustee will be an insured
                under the Halifax Mortgage Re Limited MIG Policies following the
                assignment) from HBOS Insurance (PCC) Guernsey Limited in such
                form as HBOS Insurance (PCC) Guernsey Limited reasonably
                requires;

          (ii)  a duly executed assignment of rights against third parties
                comprised in the relevant New Portfolio dated as at the relevant
                Assignment Date and in the form of the Assignment of Third Party
                Rights;

          (iii) a certified copy of each of the duly executed Insurance
                Acknowledgements;

          (iv)  on any Assignment Date that Funding 1 provides consideration for
                New Loans to be assigned to the Mortgages Trustee pursuant to
                CLAUSE 4.5(A)


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               above only, a certificate of a duly authorised officer of the
               Seller dated as at the relevant Assignment Date attaching a copy
               of the board minute referred to in CLAUSE 3.1(A)(IV) and
               confirming that the resolutions referred to therein are in full
               force and effect and have not been amended or rescinded as at the
               date of the certificate; and

          (v)  on any Assignment Date that Funding 1 provides consideration for
               New Loans to be assigned to the Mortgages Trustee pursuant to
               CLAUSE 4.5(A) above only, a solvency certificate from an
               authorised signatory of the Seller dated as at the relevant
               Assignment Date.

     (b)  The parties hereto acknowledge that completion on each relevant
          Assignment Date of the sale and assignment to the Mortgages Trustee of
          all of the Seller's right, title, interest and benefit in and to the
          relevant New Portfolio subject to the terms and provisions of the
          Mortgages Trust Deed shall occur as indicated in this CLAUSE 4
          Provided That the matters described in CLAUSES 6.2 and 6.3 shall not
          occur until the relevant time indicated in CLAUSE 6 or, as applicable,
          CLAUSE 7.4.

4.6  The Seller undertakes that from the relevant Assignment Date until the
     perfection of the assignment in accordance with CLAUSES 6.2 and 6.3, the
     Seller shall hold the Title Deeds and Customer Files relating to the New
     Portfolio that are in its possession or under its control or held to its
     order to the order of the Mortgages Trustee or as the Mortgages Trustee
     shall direct.

4.7  Prior to the earlier to occur of:

     (a)  a Trigger Event; and

     (b)  (i)  if Funding 1 does not enter into a New Intercompany Loan
               Agreement, the Interest Payment Date in [December, 2008]; or

          (ii) if Funding 1 does enter into New Intercompany Loan Agreements,
               the latest Interest Payment Date specified by Funding 1 by notice
               in writing to the Seller and the Mortgages Trustee as applying in
               relation to this covenant,

          the Seller undertakes to use all reasonable endeavours to offer to
          assign, in accordance with the provisions of this CLAUSE 4, to the
          Mortgages Trustee and the Mortgages Trustee undertakes to use all
          reasonable endeavours to acquire from the Seller and to hold pursuant
          to the terms of the Mortgages Trust Deed until the earlier of the
          Interest Payment Date falling in December 2007 (or such later date as
          may be notified by Funding 1) and the occurrence of a Trigger Event,
          sufficient New Loans and their Related Security so that the aggregate
          Outstanding Principal Balance of Loans in the Portfolio is not less
          than (pound)15,750,000,000 before December 2007 (or such other amount
          or amounts specified by Funding 1 in the notice referred to in CLAUSE
          4.78(B)(II) above) provided that the Seller shall not be obliged to
          assign to the Mortgages Trustee, and the Mortgages Trustee shall not
          be obliged to acquire, New Loans and their Related Security if in the
          reasonable opinion of the Seller the assignment to the Mortgages
          Trustee of New Loans and their Related Security would adversely affect
          the business of the Seller.

4.8  On each Assignment Date that Funding 1 provides consideration for New Loans
     to be assigned to the Mortgages Trustee pursuant to CLAUSE 4.5(A) above,
     the Beneficiaries shall appoint a firm of independent auditors to undertake
     a due diligence exercise on a sample of the Customer Files relating to the
     New Loans to be assigned to the Mortgages Trustee on the



                                       8
<PAGE>

     relevant Assignment Date. The costs of such independent auditors shall be
     borne by the relevant New Issuer (which shall be procured by Funding 1).

5.   TRUST OF MONIES

5.1  Notwithstanding the assignments effected by this Agreement, if at, or at
     any other time after, the Closing Date (but prior to any repurchase in
     accordance with CLAUSE 8.5) the Seller holds, or there is held to its
     order, or it receives, or there is received to its order any property,
     interests, rights or benefits and/or the proceeds thereof hereby agreed to
     be sold, the Seller undertakes to each of the Mortgages Trustee, Funding 1
     and the Security Trustee that, subject to CLAUSE 6, it will promptly remit,
     assign and/or transfer the same to the Mortgages Trustee or, if
     appropriate, the Security Trustee and until it does so or to the extent
     that the Seller is unable to effect such remittance, assignment or
     transfer, it will hold such property, interests, rights or benefits and/or
     the proceeds thereof upon trust for the Mortgages Trustee subject at all
     times to the Mortgages Trust.

5.2  If at, or any time after, the Closing Date the Mortgages Trustee holds, or
     there is held to its order, or it receives, or there is received to its
     order, any property, interests, rights or benefits relating to:

     (a)  any Loan or Loans under a Mortgage Account and its Related Security
          repurchased by the Seller pursuant to CLAUSE 8.5; or

     (b)  (without prejudice to Clause 11) amounts owed by a Borrower to the
          Seller which the Seller has not agreed to sell under CLAUSE 2.1,

     and/or the proceeds thereof, the Mortgages Trustee undertakes to the Seller
     that it will remit, assign, re-assign or transfer the same to the Seller,
     as the case may require, and until it does so or to the extent that the
     Mortgages Trustee is unable to effect such remittance, assignment,
     re-assignment or transfer, the Mortgages Trustee undertakes to hold such
     property, interests, rights or benefits and/or the proceeds thereof upon
     trust for the Seller as the beneficial owner thereof or as the Seller may
     direct provided that the Mortgages Trustee shall not be in breach of its
     obligations under this CLAUSE 5 if, having received any such monies and
     paid them to third parties in error, it pays an amount equal to the monies
     so paid in error to the Seller in accordance with the Servicing Agreement.

6.   PERFECTION OF THE ASSIGNMENT

6.1  The assignments contemplated by this Agreement shall be perfected on the
     twentieth London Business Day after the earliest to occur of:

     (a)  the service of an Intercompany Loan Acceleration Notice or a Note
          Acceleration Notice in relation to any Notes of any Issuer; or

     (b)  the Seller being required to perfect legal title to the Mortgages, or
          procure any or all of the acts referred to in this CLAUSE 6 by an
          order of a court of competent jurisdiction or by any regulatory
          authority of which the Seller is a member or any organisation whose
          members comprise (but are not necessarily limited to) mortgage lenders
          and with whose instructions it is customary for the Seller to comply;
          or

     (c)  it becoming necessary by law to do any or all of the acts referred to
          in this CLAUSE 6; or



                                       9
<PAGE>

     (d)  the Security Trustee certifying that, in its reasonable opinion, the
          property, assets and rights of Funding 1 comprised in the security
          constituted by the Funding 1 Deed of Charge or any material part
          thereof is/are in jeopardy and that the doing of any or all of the
          acts referred to in PARAGRAPHS (A) to (C) inclusive of CLAUSE 6.3 is
          necessary in order materially to reduce such jeopardy; or

     (e)  unless otherwise agreed in writing by the Rating Agencies and the
          Security Trustee, the termination of the Seller's role as Servicer
          under the Servicing Agreement; or

     (f)  the Seller calling for perfection by serving notice in writing to that
          effect on the Mortgages Trustee, Funding 1 and the Security Trustee;
          or

     (g)  the date on which the Seller ceases to be assigned a long term
          unsecured, unsubordinated debt obligation rating from S&P of at least
          BBB- or from Moody's of at least Baa3 or from Fitch of at least BBB- ;
          or

     (h)  the occurrence of an Insolvency Event in relation to the Seller; or

     (i)  the latest of the last repayment dates of the Intercompany Loans where
          any Intercompany Loan has not been discharged in full;

6.2  Perfection of the transfer of Mortgages in the Portfolio over Registered
     Land shall be effected by means of a transfer in the form of the Registered
     Transfer and, in the case of Mortgages in the Portfolio over Unregistered
     Land, by a transfer in the form of the Unregistered Transfer, and in
     respect of any other matter comprised in the Portfolio, shall be in such
     form as the Mortgages Trustee may reasonably require.

6.3  Subject to CLAUSE 7.4, prior to perfection pursuant to CLAUSE 6.1, neither
     the Mortgages Trustee nor Funding 1 nor the Security Trustee will:

     (a)  submit or require the submission of any notice, form, request or
          application to or pay any fee for the registration of, or the noting
          of any interest at the Land Charges Department of H.M. Land Registry
          or at H.M. Land Registry in relation to, the Mortgages Trustee's
          and/or Funding 1's interests in the Portfolio;

     (b)  give or require the giving of any notice to any Borrower of the
          assignment of that Borrower's Loan and its Related Security to the
          Mortgages Trustee or the charge by Funding 1 of Funding 1's interest
          in that Borrower's Loan and its Related Security to the Security
          Trustee pursuant to the Funding 1 Deed of Charge; or

     (c)  send or require to be sent to any solicitor who has acted on behalf of
          the Seller in respect of any Mortgage with respect to which the Seller
          has not received a complete set of the Title Deeds a letter or other
          communication requiring such solicitor to hold such documents to the
          order of the Mortgages Trustee or the Security Trustee (as the case
          may be).

6.4  Within 25 London Business Days following perfection pursuant to CLAUSE 6.1,
     the Seller will do such of the acts or things referred to in CLAUSE 6.3 as
     the Security Trustee or the Mortgages Trustee requires the Seller to do.

6.5  The Seller shall indemnify each of the Mortgages Trustee, Funding 1 and the
     Security Trustee from and against any and all costs, fees and expenses
     (including, without limitation, legal fees and expenses and any applicable
     Value Added Tax thereon) which may be incurred by the


                                       10
<PAGE>

     Mortgages Trustee and/or Funding 1 and/or the Security Trustee by reason of
     the doing of any act, matter or thing referred to in this CLAUSE 6 and
     CLAUSE 7.4.

7.   UNDERTAKINGS

7.1  The Mortgages Trustee and Funding 1 undertake to the Seller that they will
     at all times (or will direct the Servicer at all times to) use reasonable
     endeavours to administer and enforce (and exercise their powers and rights
     and perform their obligations under) the Loans comprised in the Portfolio
     and their Related Security in accordance with the Seller's Policy (for so
     long as it exists and thereafter in accordance with such policies as would
     be applied by a reasonable, prudent mortgage lender in the conduct of its
     business), provided that if the Seller fails to comply with its obligations
     to repurchase any Loan and its Related Security pursuant to CLAUSE 8.5 the
     Mortgages Trustee shall be entitled to waive any Early Repayment Fee in
     respect of such Loan and its Related Security if, in the Mortgages
     Trustee's reasonable opinion, such waiver is reasonably necessary in order
     to effect an interest rate change.

7.2  The Seller hereby undertakes to the Mortgages Trustee and Funding 1 that,
     in the event that any Borrower establishes that it has at any time prior to
     the Initial Closing Date or, as the case may be, the relevant Assignment
     Date, paid to the Seller any amounts in excess of sums due to the Seller as
     at the date of payment under the Mortgage Conditions applicable to that
     Loan, the Seller will reimburse the Borrower for such overpayment together
     with any interest, cost or other expense associated therewith. The Seller
     further agrees to hold the Mortgages Trustee and Funding 1 harmless against
     any such claims and to indemnify the Mortgages Trustee and Funding 1 on an
     after Tax basis in relation to any costs, expense, loss or other claim
     which may arise in connection therewith. Any payment made by the Seller to
     the Mortgages Trustee and Funding 1 in discharge of the foregoing indemnity
     shall be regarded as a rebate of part of the Purchase Price of the relevant
     Loan.

7.3  Each of the Seller and the Mortgages Trustee and Funding 1 undertakes to
     each other and to the Security Trustee that if and to the extent that any
     determination shall be made by any court or other competent authority or
     any ombudsman in respect of any Loan and its Related Security that:

     (a)  any term which relates to the recovery of interest under the Standard
          Documentation applicable to that Loan and its Related Security is
          unfair; or

     (b)  the interest payable under any Loan is to be set by reference to HVR 1
          or HVR 2 (as applicable) (and not a rate set by the Seller's
          successors or assigns or those deriving title from them); or

     (c)  the variable margin above the Bank of England repo rate under any
          Tracker Rate Loan must be set by the Seller (rather than by its
          successors or assigns or those deriving title from them); or

     (d)  the interest payable under any Loan is to be set by reference to an
          interest rate other than that set or purported to be set by either the
          Servicer or the Mortgages Trustee as a result of the Seller having
          more than one variable mortgage rate,

     then, at Funding 1's direction (subject to the prior written consent of the
     Security Trustee), the Mortgages Trustee will serve upon the Seller a
     notice in the form of the Loan Repurchase Notice requiring the Seller to
     repurchase the relevant Loan and all other Loans under the relevant
     Mortgage Account and its Related Security in accordance with CLAUSE 8.5
     (but in the case of a determination in respect of (b) above, only if at any
     time on or after such



                                       11
<PAGE>

     determination, HVR 1 or HVR 2 (as applicable) shall be below or shall fall
     below the standard variable rate of interest set by such successors or
     assigns or those deriving title from them).

7.4  The Seller hereby undertakes to the Mortgages Trustee, Funding 1 and the
     Security Trustee that:

     (a)  if the long term unsecured, unsubordinated and unguaranteed debt
          obligations of the Seller cease to be assigned a rating of Baa2 or
          higher from Moody's and BBB or higher from S&P and BBB or higher from
          Fitch, the Seller shall deliver to the Mortgages Trustee, Funding 1,
          the Security Trustee and the Rating Agencies a draft letter of notice
          to each of the Borrowers of the assignment, sale and purchase effected
          by this Agreement; and

     (b)  if the long term unsecured, unsubordinated and unguaranteed debt
          obligations of the Seller cease to be assigned a rating of Baa3 or
          higher from Moody's and BBB- or higher from S&P and BBB- or higher
          from Fitch, then the Seller shall, within 20 London Business Days of
          it becoming aware of such a rating being assigned, give notice of the
          sale and purchase effected by this Agreement to each Borrower.

7.5  The Seller undertakes to the Mortgages Trustee, Funding 1 and the Security
     Trustee that, pending perfection under CLAUSE 6, the Seller:

     (a)  shall not do or omit to do any act or thing which might, in the
          reasonable opinion of the Security Trustee, prejudice the interests of
          the Mortgages Trustee, Funding 1 and/or the Security Trustee in the
          Portfolio;

     (b)  shall promptly notify the Mortgages Trustee, Funding 1 and the
          Security Trustee in writing if it receives written notice of any
          litigation or claim calling into question in any material way the
          Seller's or the Mortgages Trustee's title to any Loan comprised in the
          Portfolio or its Related Security or if it becomes aware of any
          material breach of any of the Representations and Warranties or other
          obligations under this Agreement;

     (c)  shall, if reasonably required so to do by the Mortgages Trustee or the
          Security Trustee, participate or join in any legal proceedings to the
          extent necessary to protect preserve and enforce the Seller's or the
          Mortgages Trustee's or Funding 1's or the Security Trustee's title to
          or interest in any Loan or its Related Security;

     (d)  shall use all reasonable efforts to obtain the title numbers to each
          Property in respect of which a Mortgage is registered to the extent
          that such title number does not appear in the Exhibit to this
          Agreement (or, as the case may be, the relevant New Portfolio Notice)
          and shall in any event obtain each such title number prior to the
          Interest Payment Date falling in the month during which the first
          anniversary of the Closing Date (or, as the case may be, the relevant
          Assignment Date) falls; and

     (e)  shall make and enforce claims under the Buildings Policies and the
          Halifax Insurance Policies and hold the proceeds of such claims on
          trust for the Mortgages Trustee or as the Mortgages Trustee may
          direct.

7.6  The Seller hereby further undertakes to the Mortgages Trustee and Funding 1
     that it is and at all times shall remain solely responsible for funding any
     Delayed Cashbacks and any Home Cash Reserve Drawings and Flexible Loan
     Drawings (if any) made by a Borrower and for



                                       12
<PAGE>

     funding any request for any Further Advance made by a Borrower and, for the
     avoidance of doubt, neither the Mortgages Trustee nor Funding 1 will be
     required to advance moneys to the Seller or to a Borrower in order to fund
     such a Delayed Cashback, Home Cash Reserve Drawing, Flexible Loan Drawing
     (if any), or Further Advance in any circumstances whatsoever.

7.7  The Seller shall grant security powers of attorney to the Mortgages
     Trustee, Funding 1 and the Security Trustee in the form set out in SCHEDULE
     5 allowing any of the Mortgages Trustee, Funding 1 and the Security Trustee
     and their delegates from time to time (inter alia) to set the Seller's
     Variable Base Rate in the circumstances referred to in CLAUSE 4 of the
     Servicing Agreement and/or following perfection pursuant to CLAUSE 6.1
     PROVIDED THAT nothing in this CLAUSE 7.7 shall prevent the Seller (or any
     of its attorneys from time to time) from setting a higher Seller's Variable
     Base Rate than those set or to be set or required or to be required by the
     Mortgages Trustee, Funding 1 or the Security Trustee.

8.   WARRANTIES AND REPURCHASE BY THE SELLER

8.1  (a) The Seller hereby makes the Representations and Warranties:

          (i)  in respect of each Loan and its Related Security in the Initial
               Portfolio as at the date hereof and on the Initial Closing Date;
               and

          (ii) in relation to each New Loan and its Related Security in a New
               Portfolio, on the date of the service of the relevant New
               Portfolio Notice and on the relevant Assignment Date.

     (b)  Each statement comprised in the Representations and Warranties shall
          be construed as a separate statement and (save as expressly provided
          to the contrary) shall not be limited or restricted by reference to or
          inference from the terms of any other such statement.

     (c)  The Seller acknowledges:

          (i)  that the Representations and Warranties are made with a view to
               inducing the Mortgages Trustee, Funding 1 and the Security
               Trustee (as the case may be) either to enter into this Agreement
               and the other Transaction Documents to which is a party or to
               agree to purchase the New Loans and their Related Security
               comprised in each New Portfolio, and

          (ii) that each of the Mortgages Trustee, Funding 1 and the Security
               Trustee has entered into this Agreement and the other Transaction
               Documents to which it is a party in reliance upon the
               Representations and Warranties notwithstanding any information in
               fact possessed or discoverable by the Mortgages Trustee, Funding
               1 and/or the Security Trustee or otherwise disclosed to any of
               them, and

          (iii) that prior to entering into this Agreement and the other
               Transaction Documents to which each is a party neither the
               Mortgages Trustee nor Funding 1 nor the Security Trustee has made
               any enquiries of any matter.

8.2  The Mortgages Trustee's, Funding 1's and the Security Trustee's sole remedy
     in respect of a breach of any of the Representations and Warranties shall
     be to take action under this CLAUSE 8 or under CLAUSE 6 of the Mortgages
     Trust Deed.



                                       13
<PAGE>

8.3  In the event of a material breach of any of the Representations or
     Warranties in respect of any Loan and/or its Related Security made under
     CLAUSE 8.1 or if any of those Representations or Warranties proves to be
     materially untrue as at the Closing Date or, as the case may be, the
     relevant Assignment Date, and provided that:

     (a)  the Mortgages Trustee has given the Seller not less than 20 London
          Business Days' notice in writing;

     (b)  the Mortgages Trustee has obtained the prior written consent of the
          Security Trustee; and

     (c)  such breach or untruth, where capable of remedy, is not remedied to
          the reasonable satisfaction of Funding 1 and the Security Trustee
          within the 20 London Business Days period referred to in (a) (or such
          longer period as Funding 1 and the Security Trustee may direct the
          Mortgages Trustee in writing),

     then at Funding 1's direction (subject to the prior written consent of the
     Security Trustee) the Mortgages Trustee shall serve upon the Seller a
     notice in the form of the Loan Repurchase Notice requiring the Seller to
     repurchase the relevant Loan and its Related Security (and any other Loan
     secured or intended to be secured by that Related Security or any part of
     it) in accordance with CLAUSE 8.5.

8.4  (a)  If the Seller accepts an application from, or makes an offer
          (which is accepted) to, a Borrower for a Further Advance then (save in
          the case of any Loan which is then in arrears), at Funding 1's
          direction (subject to the prior written consent of the Security
          Trustee), the Mortgages Trustee will serve upon the Seller a notice in
          the form of the Loan Repurchase Notice requiring the Seller to
          repurchase the relevant Loan and its Related Security (and any other
          Loan secured or intended to be secured by that Related Security or any
          part of it) in accordance with CLAUSE 8.5.

     (b)  If the Seller accepts an application from, or makes an offer (which is
          accepted) to, a Borrower for a Product Switch and (except as provided
          in paragraph (c) below) on the immediately preceding Distribution
          Date, the Seller is in breach of the conditions referred to in CLAUSES
          4.2(A) to (P) inclusive as if references therein to "New Loans" and
          "New Portfolio" were references to the Loan which would result from
          the implementation of such Product Switch and as if references to
          "Assignment Date" were references to the date when the Seller and
          relevant Borrower complete such Product Switch then (save in the case
          of any Loan which is then in arrears) from and including the relevant
          Distribution Date to but excluding the date when such conditions have
          been satisfied, at Funding 1's direction (subject to the prior written
          consent of the Security Trustee), the Mortgages Trustee will serve
          upon the Seller a notice in the form of the Loan Repurchase Notice
          requiring the Seller to repurchase the relevant Loan and its Related
          Security (and any other Loan secured or intended to be secured by that
          Related Security or any part of it) in accordance with CLAUSE 8.5.

     (c)  If the Seller accepts an application from, or makes an offer (which is
          accepted) to, a Borrower for a Product Switch, the effect of which is
          to extend the final maturity date of the relevant Loan beyond June
          2040 then, at Funding 1's direction (subject to the prior written
          consent of the Security Trustee), the Mortgages Trustee will serve
          upon the Seller a notice in the form of the Loan Repurchase Notice
          requiring the Seller to repurchase the relevant Loan and its Related
          Security in accordance with CLAUSES 8.5 notwithstanding that the
          conditions referred to in CLAUSES 4.2(A) to (P) have been satisfied.



                                       14
<PAGE>

     (d)  For the avoidance of doubt, the Seller shall not accept an application
          from nor make an offer (which is accepted) to a Borrower for a Further
          Advance or a Product Switch if the relevant Loan to which such Further
          Advance or Product Switch relates is then in arrears subject only to
          such exceptions as made on a case by case basis as would be acceptable
          to a reasonable, prudent mortgage lender.

8.5  Upon receipt of a Loan Repurchase Notice duly signed on behalf of the
     Mortgages Trustee, the Seller shall sign and return a duplicate copy and
     shall repurchase from the Mortgages Trustee, and the Mortgages Trustee
     shall re-assign to the Seller free from the Security Interests created by
     the Funding 1 Deed of Charge, the relevant Loan (and any other Loan secured
     or intended to be secured by that Related Security or any part of it) and
     their Related Security. Completion of such repurchase shall take place on
     the Distribution Date after receipt by the Seller of such Loan Repurchase
     Notice or such other date as the Mortgages Trustee may direct in the Loan
     Repurchase Notice (provided that the date so specified by the Mortgages
     Trustee shall not be later than 90 days after receipt by the Seller of such
     notice) when the Seller shall pay to the Mortgages Trustee GIC Account (or
     as the Mortgages Trustee shall direct) an amount equal to the aggregate
     Outstanding Principal Balance of such Loan or Loans and any Related
     Security and all Arrears of Interest and Accrued Interest relating thereto
     (save for the repurchase of any Loan and its Related Security which is
     subject to a Further Advance or a Product Switch pursuant to CLAUSE 8.4 in
     which case the Seller shall pay to the Mortgages Trustee GIC Account (or as
     the Mortgages Trustee shall direct) an amount equal to the aggregate
     Outstanding Principal Balance of such Loan and its Related Security and
     Accrued Interest relating thereto only) as at the date of such repurchase
     and the provisions of CLAUSE 8.6 shall apply.

8.6  On the date of completion of any repurchase of a Loan and its Related
     Security in accordance with CLAUSE 8.5 above, the Security Trustee, the
     Mortgages Trustee and Funding 1 shall at the cost of the Seller execute and
     deliver, or cause their respective duly authorised attorneys to execute and
     deliver, to the Seller:

     (a)  a memorandum of release of such Loan and its Related Security from the
          security constituted by the Funding 1 Deed of Charge in a form
          reasonably acceptable to the Seller;

     (b)  if perfection of the assignment to the Mortgages Trustee has occurred
          in accordance with CLAUSE 6:

          (i)  if the relevant Mortgage is over Registered Land, a transfer of
               such Mortgage to the Seller in the form of the Registered
               Transfer; or

          (ii) if the relevant Mortgage is over Unregistered Land, a transfer of
               such Mortgage to the Seller in the form of the Unregistered
               Transfer;

     (c)  a re-assignment of the rights of the Mortgages Trustee in respect of
          the relevant Related Security each in a form reasonably acceptable to
          the Seller (which shall, in the case of the re-assignment of the MIG
          Policies, be substantially in the form of the Assignment of MIG
          Policies); and

     (d)  a notification to the Servicer that all further sums due in respect of
          such repurchased Loan are for the Seller's account.



                                       15

<PAGE>
     Upon such completion the Seller shall cease to be under any further
     obligation to hold any Title Deeds or other documents relating to such Loan
     or Loans and its/their Related Security to the order of the Mortgages
     Trustee and if the Mortgages Trustee holds the Title Deeds it will return
     them to the Seller. Any repurchase by the Seller of or in respect of a Loan
     or Loans and its or their Related Security shall constitute a discharge and
     release of the Seller from any claims which the Mortgages Trustee and/or
     Funding 1 or the Security Trustee may have against the Seller arising from
     the relevant Representation or Warranty in relation to that Loan or Loans
     and its or their Related Security only but shall not affect any rights
     arising from a breach of any other express provision of this Agreement or
     any Representation or Warranty in relation to any other Loan and other
     Related Security.

8.7  After the Seller becomes aware of any event and/or fact which may
     reasonably give rise to an obligation under any clause of this Agreement to
     repurchase any Loan it shall notify the Mortgages Trustee, Funding 1 and
     the Security Trustee in writing thereof as soon as reasonably practicable.

8.8  The terms of this CLAUSE 8 shall not prejudice the rights of the Mortgages
     Trustee or the Beneficiaries under the Mortgages Trust Deed.

8.9  The parties to this Agreement may, with the prior written consent of the
     Security Trustee, waive or amend the Representations and Warranties. In
     determining whether to give its consent to the proposed waiver or
     amendments to the Representations and Warranties, the Security Trustee
     shall exercise its discretion in accordance with the terms of clause 25.8
     of the Funding 1 Deed of Charge.

9.   OTHER WARRANTIES

     On the date of this Agreement, the Closing Date, and each Assignment Date,
     the Seller represents and warrants to each of the Mortgages Trustee,
     Funding 1 and the Security Trustee that:

     (a)  the Seller has not acquired or owned or possessed any rights in any
          Issuer, the Mortgages Trustee or Funding 1 such that it would
          "control" such Issuer within the meaning of Section 416 ICTA 1988; and

     (b)  there is not any "connection" (within the meaning of Section 87
          Finance Act 1996) between any Issuer and any Borrower.

10.  FURTHER ASSURANCE

     The parties hereto agree that they will co-operate fully to do all such
     further acts and things and execute any further documents that may be
     necessary or desirable to give full effect to the transactions contemplated
     by this Agreement (but subject always to CLAUSE 6).

11.  CONSEQUENCES OF BREACH

     Without prejudice to CLAUSES 7 and 8, Funding 1, the Mortgages Trustee and
     the Security Trustee severally acknowledge to and agree with the Seller,
     and the Security Trustee acknowledges to and agrees with Funding 1 and the
     Mortgages Trustee, that the Seller shall have no liability or
     responsibility (whether, in either case, contractual or tortious, express
     or implied) for any loss or damage for or in respect of any breach of, or
     any act or omission in respect of, any of its obligations hereunder other
     than loss or damage directly (and not indirectly or consequentially)
     suffered by the Mortgages Trustee and/or Funding 1 or the


                                       16
<PAGE>

     assets comprised in the Funding 1 Security constituted by the Funding 1
     Deed of Charge by reason of such breach, act or omission. For this purpose
     (and without limiting the scope of the above exclusion in respect of
     indirect or consequential loss or damage) any loss or damage suffered by
     the Mortgages Trustee and/or Funding 1 or such assets as a result of the
     breach, act or omission in question also having been or given rise to an
     Event of Default or enforcement of the Funding 1 Security contributed by
     the Funding 1 Deed of Charge shall be treated as indirect or consequential
     loss or damage PROVIDED THAT this sentence shall not apply to any direct or
     non-consequential loss or damage arising from any such breach, act or
     omission.

12.  SUBORDINATION

     The Seller agrees with Funding 1, the Mortgages Trustee and the Security
     Trustee that on the enforcement of any Mortgage any sums owed to the Seller
     by a Borrower and which are secured under such Mortgage and the rights and
     remedies of the Seller in respect of the sums owed to the Seller shall at
     all times be subject and subordinated to any sums owed to the Mortgages
     Trustee by the Borrower and which are secured under such Mortgage and to
     the rights and remedies of the Mortgages Trustee in respect of such sums
     owed to the Mortgages Trustee by the Borrower.

13.  NON-MERGER

     Any term of this Agreement to which effect is not given on the Closing Date
     or on any Assignment Date (including in particular, but without limitation,
     the liability of the Seller under the Representations and Warranties and
     the indemnity in CLAUSE 6.5 and the provisions of CLAUSE 4) shall not merge
     and shall remain in full force and effect notwithstanding the sale and
     purchase contemplated by this Agreement.

14.  NO AGENCY OR PARTNERSHIP

     It is hereby acknowledged and agreed by the parties that nothing in this
     Agreement shall be construed as giving rise to any relationship of agency,
     save as expressly provided herein, or partnership between the parties and
     that in fulfilling its obligations hereunder, each party shall be acting
     entirely for its own account.

15.  PAYMENTS

     Except as otherwise specifically provided, all payments to be made pursuant
     to this Agreement shall be made in sterling in immediately available funds
     without exercising or seeking to exercise any right of set-off as may
     otherwise exist and shall be deemed to be made when they are received by
     the payee and shall be accounted for accordingly unless failure to receive
     any payment is due to an error by the payee's bank.

16.  WAIVERS AND VARIATION

16.1 Exercise or failure to exercise any right under this Agreement shall not,
     unless otherwise herein provided, constitute a waiver of that or any other
     right.

16.2 Subject to CLAUSE 25 of the Funding 1 Deed of Change any amendments to this
     Agreement will be made only with the prior written consent of each party to
     this Agreement.


                                       17
<PAGE>

17.  NOTICES

     Any notices to be given pursuant to this Agreement to any of the parties
     hereto shall be in writing and shall be sufficiently served if sent by
     prepaid first class post, by hand or by facsimile transmission and shall be
     deemed to be given (in the case of facsimile transmission) when despatched
     or (in the case of first class post) when it would be received in the
     ordinary course of the post and shall be sent:

     (a)  in the case of the Seller, to Halifax plc, Trinity Road, Halifax, West
          Yorkshire HX1 2RG, London (facsimile number +44 (0) 1422 391777) for
          the attention of the Mortgage Securitisation Manager with a copy to
          HBOS Treasury Services PLC, 33 Old Broad Street, London EC2N 1HZ
          (facsimile number +44 (020) 7574 8784) for the attention of Head of
          Capital Markets and Securitisation,;

     (b)  in the case of Funding 1, to Permanent Funding (No. 1) Limited ,
          Blackwell House, Guildhall Yard, London EC2V 5AE (facsimile number +44
          (020) 7556 0975) for the attention of the Secretary with a copy to
          HBOS Treasury Services PLC, 33 Old Broad Street, London EC2N 1HZ
          (facsimile number +44 (020) 7574 8784) for the attention of Head of
          Capital Markets and Securitisation;

     (c)  in the case of the Mortgages Trustee, to Permanent Mortgages Trustee
          Limited, 47 Esplanade, St Helier, Jersey JE1 0BD, (facsimile number
          +44 (0) 1534 726391) for the attention of the Secretary with a copy to
          HBOS Treasury Services PLC, 33 Old Broad Street, London EC2N 1HZ
          (facsimile number +44 (020) 7574 8784) for the attention of Head of
          Capital Markets and Securitisation; and

     (d)  in the case of the Security Trustee, to:

          (i)   State Street Bank and Trust Company, 225 Franklin Street,
                Boston, Massachusetts 02110, (facsimile number + 1 (617) 662
                2919) for the attention of Mark Nelson; and

          (ii)  U.S. Bank National Association, 1 Federal Street, 3rd Floor,
                Boston, Massachusetts 02110, (facsimile number + 1 (617) 603
                6638) for the attention of Corporate Trust Services,

     or to such other address or facsimile number or for the attention of such
     other person or entity as may from time to time be notified by any party to
     the others by written notice in accordance with the provisions of this
     CLAUSE 17.

18.  ASSIGNMENT

18.1 Subject always to the provisions of CLAUSE 19, no party hereto shall be
     entitled to assign all or any part of its rights or obligations hereunder
     to any other party without the prior written consent of each of the other
     parties hereto (which shall not, if requested, be unreasonably withheld)
     save that Funding 1 shall be entitled to assign whether by way of security
     or otherwise all or any of its rights under this Agreement without such
     consent to the Security Trustee pursuant to the Funding 1 Deed of Charge
     and the Security Trustee may at its sole discretion assign all or any of
     its rights under or in respect of this Agreement without such consent to
     any successor Security Trustee in exercise of its rights under the Funding
     1 Deed of Charge.


                                       18
<PAGE>

18.2 The Seller acknowledges that on the assignment pursuant to the Funding 1
     Deed of Charge by Funding 1 to the Security Trustee of Funding 1's rights
     under this Agreement the Security Trustee may enforce such rights in the
     Security Trustee's own name without joining Funding 1 in any such action
     (which right the Seller hereby waives) and the Seller hereby waives as
     against the Security Trustee any rights or equities in its favour arising
     from any course of dealing between the Seller and Funding 1.

19.  CHANGE OF SECURITY TRUSTEE

19.1 If there is any change in the identity of the Security Trustee in
     accordance with the Funding 1 Deed of Charge, the Seller, the Mortgages
     Trustee and Funding 1 shall execute such documents and take such action as
     the successor Security Trustee and the outgoing Security Trustee may
     reasonably require for the purpose of vesting in the successor Security
     Trustee the rights and obligations of the outgoing Security Trustee
     hereunder and releasing the outgoing Security Trustee from its future
     obligations under this Agreement and the Seller shall give notice thereof
     to the Rating Agencies.

19.2 It is hereby acknowledged and agreed that by its execution of this
     Agreement the Security Trustee shall not assume or have any of the
     obligations or liabilities of the Seller or Funding 1 or the Mortgages
     Trustee hereunder.

20.  NOT USED

21.  THIRD PARTY RIGHTS

     A person who is not a party to this agreement may not enforce any of its
     terms under the Contracts (Rights of Third Parties) Act 1999.

22.  GOVERNING LAW

22.1 This Agreement shall be governed by and construed in accordance with the
     laws of England.

22.2 Each party to this Agreement hereby irrevocably submits to the
     non-exclusive jurisdiction of the English courts in any action or
     proceeding arising out of or relating to this Agreement, and hereby
     irrevocably agrees that all claims in respect of such action or proceeding
     may be heard and determined by such courts. Each party to this Agreement
     hereby irrevocably waives, to the fullest extent it may possibly do so, any
     defence or claim that the English courts are an inconvenient forum for the
     maintenance or hearing of such action or proceeding. The Mortgages Trustee
     irrevocably appoints Structured Finance Management Limited of Blackwell
     House, Guildhall Yard, London EC2V 5AE as its agent for service of process.

22.3 This Agreement may be executed (manually or by facsimile) in any number of
     counterparts and all such counterparts taken together shall be deemed to
     constitute one and the same instrument.

IN WITNESS WHEREOF the parties hereto have executed and delivered this Agreement
on the day and year first before written.



                                       19
<PAGE>

                                   SCHEDULE 1

                         REPRESENTATIONS AND WARRANTIES

1.   LOANS

1.1  The particulars of the Loans set out in the Exhibit (or, as the case may
     be, the relevant New Portfolio Notice) are true, complete and accurate in
     all material respects.

1.2  Each Loan was originated by the Seller and was originated and is
     denominated in pounds sterling (or was originated and is denominated in
     euro if the euro has been adopted as the lawful currency for the time being
     of the United Kingdom).

1.3  Each Loan in the Portfolio as at the Closing Date was made not earlier than
     1st February, 1996 and not later than 15th November, 2002.

1.4  Each Loan matures for repayment not later than June 2040.

1.5  No Loan has an Outstanding Principal Balance of more than(pound)400,000.

1.6  The Lending Criteria are the lending criteria applicable to the Loans and
     their Related Security.

1.7  Prior to the making of each Initial Advance and Further Advance:

     (a)  the Lending Criteria and all preconditions to the making of any Loan
          were satisfied in all material respects subject only to such
          exceptions as made on a case by case basis as would be acceptable to a
          reasonable, prudent mortgage lender; and

     (b)  the requirements of the relevant MIG Policy were met, so far as
          applicable to that Loan.

1.8  (a)  Each Loan was made and its Related Security taken or received
          substantially on the terms of the Standard Documentation without any
          material variation thereto and nothing has been done subsequently to
          add to, lessen, modify or otherwise vary the express provisions of any
          of the same in any material respect.

     (b)  The brochures, application forms, offers, offer conditions and
          marketing material distributed by the Seller to the Borrower when
          offering a Loan to a Borrower:

          (A)  do not conflict in any material respect with the terms applicable
               to the relevant Loan and its Related Security at the time that
               the Loan was entered into;

          (B)  do not conflict with and would not prohibit or otherwise limit
               the terms of, the Transaction Documents or the matters
               contemplated thereby, including for the avoidance of doubt and
               without limitation:

               (i)   the assignment of the Loans and their Related Security to
                     the Mortgages Trustee;

               (ii)  the administration of the Loans and their Related Security
                     by the Seller or a delegate of the Seller or the
                     appointment of a new Servicer



                                       20
<PAGE>

                     following the occurrence of an Insolvency Event in relation
                     to the Seller; and

               (iii) so far as the Seller is aware to the best of its knowledge,
                     information and belief, the ability of the Mortgages
                     Trustee or the Security Trustee to set the variable rate
                     payable under any Variable Rate Loan independently of (and
                     without regard to the level of) the Seller's standard
                     variable rate of interest or if the Seller has more than
                     one standard variable rate of interest, the relevant
                     Seller's standard variable rate of interest, subject to any
                     applicable cap on that variable rate which is not itself
                     linked to any rate set by the Seller and to set the
                     variable margin above the Bank of England repo rate under
                     any Tracker Rate Loan independently of (and without regard
                     to the level of) any differential set by the Seller,
                     subject to any applicable cap on that variable margin above
                     the Bank of England repo rate which is not itself linked to
                     any margin set by the Seller.

     (c)  There is no restriction on the Seller's successors' and assigns' to
          the legal title of the Loans (including, without limitation, the
          Mortgages Trustee if and when legal title to the Loans is transferred
          to it) right:

          (A)  to set the variable rate payable under any Variable Rate Loan
               independently of (and without regard to the level of) the
               Seller's standard variable rate of interest or if the Seller has
               more than one standard variable rate of interest, the relevant
               Seller's standard variable rate of interest, subject to any
               applicable cap on that variable rate which is not itself linked
               to any rate set by the Seller (subject to complying with the
               obligations under the Standard Documents as to changes in
               interest rates generally and so that in particular the successors
               will not be able to change the interest rate following a transfer
               of legal title unless the reasons for changing the interest rate
               set out in the Standard Documents apply) and provided that in
               relation to Loans which are subject to HVR 2, the differential
               between that rate and the Loans which are subject to HVR 1 is
               maintained; and

          (B)  to set the variable margin above the Bank of England repo rate
               under any Tracker Rate Loan independently of (and without regard
               to the level of) any differential set by the Seller, subject to
               any applicable cap on that variable margin above the Bank of
               England repo rate which is not itself linked to any margin set by
               the Seller (subject to complying with the obligations under the
               Standard Documents as to changes in margins generally and so that
               in particular the successors will not be able to change the
               margin following a transfer of legal title unless the reasons for
               changing the margin set out in the Standard Documents apply).

1.9  The Seller is under no obligation to make Further Advances (other than
     Flexible Loan Drawings (if any), Delayed Cashbacks and Home Cash Reserve
     Drawings) or to release retentions or to pay fees or other sums relating to
     any Loan or its Related Security to any Borrower.

1.10 Each Borrower has made at least two Monthly Payments.

1.11 Other than with respect to monthly interest payments or as provided in
     paragraph 1.12 below, no Borrower is or has, since the date of the relevant
     Mortgage, been in material breach of any



                                       21
<PAGE>

     obligation owed in respect of the relevant Loan or under the Related
     Security and accordingly no steps have been taken by the Seller to enforce
     any Related Security.

1.12 The total amount of arrears of interest or principal, together with any
     fees, commissions and premiums payable at the same time as such interest
     payment or principal repayment, on any Loan is not on the Initial Closing
     Date or the relevant Assignment Date (as applicable), nor has been during
     the 12 months immediately preceding the Initial Closing Date or the
     relevant Assignment Date (as applicable) more than the amount of the
     Monthly Payment then due.

1.13 No Loan is guaranteed by a third party save where the guarantee constitutes
     legal, valid and binding obligations of the guarantor enforceable in
     accordance with their terms.

1.14 The Outstanding Principal Balance, all Accrued Interest and all Arrears of
     Interest on each Loan and its Related Security (other than any agreement
     for Flexible Loan Drawings (if any), Delayed Cashbacks, Home Cash Reserve
     Drawings and any other Further Advances) constitute a legal, valid, binding
     and enforceable debt due to the Seller from the relevant Borrower and the
     terms of each Loan and its Related Security constitute valid and binding
     obligations of the Borrower enforceable in accordance with their terms
     (other than any agreement for Flexible Loan Drawings (if any), Delayed
     Cashbacks, Home Cash Reserve Drawings and any other Further Advance).

1.15 Interest on each Loan is charged in accordance with the Standard
     Documentation.

1.16 Interest on each Loan is payable monthly in arrear.

1.17 No Loan or any part of it:

     (a)  is or has ever been a regulated agreement within Section 8 of the
          Consumer Credit Act 1974 (as amended, extended or re-enacted from time
          to time);

     (b)  is or has ever been a linked transaction within Section 19 of the
          Consumer Credit Act 1974 (as amended, extended or re-enacted from time
          to time);

     (c)  is to be or has ever been treated as a regulated agreement under
          Section 82(3) of the Consumer Credit Act 1974 (as amended, extended or
          re-enacted from time to time or otherwise); or

     (d)  is or has ever been or may become liable to be re-opened on the ground
          that the credit bargain is extortionate under Sections 137 to 140 of
          the Consumer Credit Act 1974 (as amended, extended or re-enacted from
          time to time).

1.18 No Loan or any part of it is unenforceable under the Consumer Protection
     (Contracts Concluded away from Business Premises) Regulations 1987 (as
     amended, extended or re-enacted from time to time).

1.19 All of the Borrowers are individuals and were aged 18 years or older at the
     date he or she executed the relevant Mortgage.

1.20 Not used.

1.21 Each loan in the relevant Portfolio is either:

     (a)  a Variable Rate Loan, Tracker Rate Loan or Fixed Rate Loan; or



                                       22
<PAGE>

     (b)  a New Loan Type which each of the Rating Agencies has confirmed in
          writing may be included in the relevant New Portfolio.

2.   MORTGAGES

2.1  The whole of the Outstanding Principal Balance on each Loan and any Arrears
     of Interest and all Accrued Interest is secured by a Mortgage.

2.2  Each Mortgage is in the form of the pro forma contained in the Standard
     Documentation which was applicable at the time the Mortgage was executed.

2.3  Each Mortgage constitutes a valid and subsisting first charge by way of
     legal mortgage over the relevant Property subject only in certain
     appropriate cases to applications for registrations at H.M. Land Registry
     which where requisite have been made and are pending and in relation to
     such cases the Seller is not aware of any caution, notice or any other
     matter that would prevent such registration.

2.4  Each Mortgage has first priority for the whole of the Outstanding Principal
     Balance on the Loan and all Arrears of Interest and Accrued Interest
     thereon and all future interest, fees, costs and expenses payable under or
     in respect of such Mortgage.

2.5  Each Loan and its Related Security is, save in relation to any Loan and
     Related Security which is not binding by virtue of the Unfair Terms in
     Consumer Contracts Regulations 1994 or (as the case may be) the Unfair
     Terms in Consumer Contracts Regulations 1999, valid and binding and
     enforceable in accordance with its terms. To the best of the Seller's
     knowledge, none of the Loans or their Related Security is not binding by
     virtue of its being unfair pursuant to the Unfair Terms in Consumer
     Contracts Regulations 1994 or (as the case may be) the Unfair Terms in
     Consumer Contracts Regulations 1999.

3.   THE PROPERTIES

3.1  All of the Properties are in England or Wales.

3.2  Each Property constitutes a separate dwelling unit and is either freehold
     or leasehold.

3.3  Save for children of Borrowers and children of someone living with the
     Borrower, every person who, at the date upon which a Mortgage was granted,
     had attained the age of eighteen and was in or about to be in actual
     occupation of the relevant Property, is either named as a Borrower or has
     signed a Deed of Consent in the form of the pro forma contained in the
     Standard Documentation which was applicable at the time the Mortgage was
     executed.

3.4  No Property has been let otherwise than by way of:

     (a)  an assured shorthold tenancy which meets the requirements of Section
          19A or Section 20 of the Housing Act 1988; or

     (b)  an assured tenancy;

     in each case which meets the Seller's Policy in connection with lettings to
     non-owners.

3.5  No Property is the subject of a shared ownership lease arrangement or
     staircase purchasing arrangement.



                                       23
<PAGE>

4.   VALUERS' AND SOLICITORS' REPORTS

4.1  Not more than twelve months prior to the grant of each Mortgage (or such
     longer period as may be acceptable to a reasonable, prudent mortgage
     lender) the Seller received a Valuation Report from a Valuer on the
     relevant Property (or such other form of report concerning the valuation of
     the relevant Property as would be acceptable to a reasonable, prudent
     mortgage lender), the contents of which were such as would be acceptable to
     a reasonable, prudent mortgage lender.

4.2  The principal amount of the Initial Advance (including any retention(s)
     subsequently advanced to the Borrower but disregarding Capitalised
     Expenses) is either:

     (a)  not more than 75 per cent. of the lower of the purchase price and the
          appraised value of the Property as stated in the Valuation Report
          referred to above in paragraph 4.1 (the "APPRAISED VALUE") (or, in
          case of a remortgage, of the appraised value) of the Property; or

     (b)  greater than 75 per cent. (but not more than 97 per cent.) of the
          lower of the purchase price and the appraised value (or, in the case
          of a remortgage, of the appraised value), in which case for those
          Loans originated prior to 1st January, 2001 only that part of the
          Initial Advance which exceeds 75 per cent. of the lower of the
          purchase price and the appraised value (or, in the case of a
          remortgage, of the appraised value) is covered under the terms of a
          MIG Policy.

4.3  Prior to the taking of each Mortgage (other than a remortgage), the Seller:

     (a)  instructed the Seller's solicitor or licensed conveyancer to carry out
          an investigation of title to the relevant Property and to undertake
          such other searches, investigation, enquiries and other actions on
          behalf of the Seller as are set out in the instructions which the
          Seller issued to the relevant solicitor as are set out in the CML's
          Lenders' Handbook for England and Wales (or such comparable,
          predecessor or successor instructions and/or guidelines as may for the
          time being be in place), subject only to such variations made on a
          case by case basis as would have been acceptable to a reasonable,
          prudent mortgage lender at the relevant time;

     (b)  received a Certificate of Title from the solicitor or licensed
          conveyancer referred to in paragraph (a) relating to such Property the
          contents of which were such as would have been acceptable to a
          reasonable, prudent mortgage lender at that time.

4.4  The benefit of all Valuation Reports any other valuation report referred to
     in PARAGRAPH 4.1 and Certificates of Title which were provided to the
     Seller not more than two years prior to the date of this Agreement can be
     validly assigned to the Mortgages Trustee without obtaining the consent of
     the relevant Valuer, solicitor or licensed conveyancer.

5.   BUILDINGS INSURANCE

     5.1  Each Property is insured under:

     (a)  a buildings insurance policy arranged by the Borrower in accordance
          with the relevant Mortgage Conditions or in accordance with the
          Alternative Insurance Recommendations; or



                                       24
<PAGE>

     (b)  the Halifax Policies ; or

     (c)  a buildings insurance policy arranged by the relevant landlord; or

     (d)  the Properties in Possession Cover.

5.2  No act, event or circumstance has occurred which would adversely affect the
     Properties in Possession Cover or entitle the insurers to refuse to make
     payment thereunder or to reduce the amount payable in respect of any claim
     thereunder.

5.3  All claims under the Properties in Possession Cover have been paid in full
     within a reasonable time of the date of submission of the claim and, save
     in respect of minor claims, there are no claims outstanding.

6.   MIG POLICIES

6.1  Where applicable, the MIG Policies are in full force and effect in relation
     to the Initial Portfolio or, as the case may be, each New Portfolio and all
     premiums thereon have been paid.

6.2  The benefit of the Halifax Mortgage Re Limited MIG Policies can be and will
     have been, with effect from the Closing Date, validly assigned to the
     Mortgages Trustee and charged to the Security Trustee, insofar as they
     relate to the Initial Portfolio or, as the case may be, each New Portfolio
     in each case in the manner and to the extent contemplated by the
     Transaction Documents.

6.3  To the best of the knowledge of the Seller no act, event or circumstance
     has occurred which would adversely affect the MIG Policies or entitle the
     insurers to refuse to make payment thereunder or to reduce the amount
     payable in respect of any claim thereunder insofar as they relate to the
     Initial Portfolio or, as the case may be, each New Portfolio.

6.4  All valid claims under the MIG Policies have been paid in full within a
     reasonable time of the date of submission of the claim.

7.   THE SELLER'S TITLE

7.1  The Seller has good title to, and is the absolute unencumbered legal and
     beneficial owner of, all property, interests, rights and benefits agreed to
     be sold and/or assigned by the Seller to the Mortgages Trustee pursuant to
     this Agreement free and clear of all mortgages, charges, liens,
     Encumbrances, claims and equities (including, without limitation, rights of
     set-off or counterclaim and overriding interests within the meaning of
     Section 3 (xvi) of the Land Registration Act 1925) and the Seller is not in
     breach of any covenant implied by reason of its selling the Portfolio with
     full title guarantee (or which would be implied if the Registered Transfers
     or Unregistered Transfers, as applicable, were completed).

7.2  All steps necessary to perfect the Seller's title to the Loans and the
     Related Security were duly taken at the appropriate time or are in the
     process of being taken, in each case (where relevant) within any applicable
     priority periods or time limits for registration with all due diligence and
     without undue delay.

7.3  Save for Title Deeds held at H.M. Land Registry, the Title Deeds and the
     Customer Files relating to each of the Loans and their Related Security are
     held by, or are under the control of:



                                       25
<PAGE>

     (a)  the Seller; or

     (b)  the Seller's solicitors or licensed conveyancers to the order of the
          Seller,

     and the Title Deeds held at H.M. Land Registry have been sent to it with a
     request that any such Title Deeds will be returned to the Seller or its
     solicitors on its behalf.

7.4  Neither the entry by the Seller into this Agreement nor any transfer,
     assignment or creation of trust contemplated by this Agreement affects or
     will adversely affect any of the Loans and their Related Security
     (including, without limitation, the Insurance Policies) and the Seller may
     freely assign all its rights, title, interests and benefits therein as
     contemplated in this Agreement without breaching any term or condition
     applying to any of them.

7.5  The Seller has not knowingly waived or acquiesced in any breach of any of
     its rights in respect of a Loan or its Related Security, other than waivers
     and acquiescence such as a reasonable, prudent mortgage lender might make
     on a case by case basis.

8.   GENERAL

8.1  The Seller has, since the making of each Loan, kept or procured the keeping
     of full and proper accounts, books and records showing clearly all
     transactions, payments, receipts, proceedings and notices relating to such
     Loan.

8.2  Neither the Seller nor as far as the Seller is aware any of its agents has
     received written notice of any litigation, claim, dispute or complaint (in
     each case, subsisting, threatened or pending) in respect of any Borrower,
     Property, Loan, Related Security, Halifax Policy, MIG Policy or Properties
     in Possession Cover which (if adversely determined) might have a material
     adverse effect on the Trust Property or any part of it.

8.3  The Seller has received from each Borrower a variable direct debit
     instruction in favour of the Seller signed by the relevant Borrower and
     addressed to its bank, variable as to the amount payable by such Borrower
     by unilateral notice given from time to time by the Seller to such
     Borrower's bank without further instruction or consent from such Borrower
     or such other method of payment as may be acceptable to a reasonable,
     prudent mortgage lender.

8.4  There are no authorisations, approvals, licences or consents required as
     appropriate for the Seller to enter into or to perform the obligations
     under this Agreement or to render this Agreement legal, valid, binding,
     enforceable and admissible in evidence.

8.5  The Insurance Acknowledgements are valid, binding and enforceable against
     the relevant insurer by the Mortgages Trustee and the Security Trustee.



                                       26
<PAGE>

                                   SCHEDULE 2

                               REGISTERED TRANSFER

IN THE FORM OF HM LAND REGISTRY FORM TR4 AS SHOWN OVERLEAF WITH SUCH AMENDMENTS
AS THE MORTGAGES TRUSTEE MAY REASONABLY REQUIRE TO GIVE EFFECT TO THIS AGREEMENT
OR IN SUCH OTHER FORM AS THE MORTGAGES TRUSTEE MAY REASONABLY REQUIRE TO TAKE
ACCOUNT OF CHANGES IN LAW OR PRACTICE.



                                       27
<PAGE>


                                   SCHEDULE 3

                              UNREGISTERED TRANSFER

THIS DEED OF TRANSFER OF MORTGAGES is made the    day of

BY:

(1)  HALIFAX PLC whose registered office is at Trinity Road, Halifax, West
     Yorkshire HX1 2RG (hereinafter called the "TRANSFEROR") of the one part;
     and

IN FAVOUR OF:

(2)  PERMANENT MORTGAGES TRUSTEE LIMITED whose registered office is 47
     Esplanade, St Helier, Jersey JE1 0BD (hereinafter called the "TRANSFEREE")
     of the other part.

WHEREAS:

(A)  By the charges by way of legal mortgage (the "MORTGAGES") brief particulars
     of which are set out in the Annexure hereto the properties brief
     particulars of which are similarly set out became security for the
     repayment of the monies therein mentioned.

(B)  By a Mortgage Sale Agreement (as amended and/or restated from time to time)
     made between, inter alia, the Transferor and the Transferee on 13th June,
     2002 (as the same may be or have been amended, varied or supplemented from
     time to time with the consent of the parties hereto, the "MORTGAGE SALE
     AGREEMENT"), the Transferor agreed to sell and the Transferee agreed to buy
     all right, title, interest, benefit and obligation (both present and
     future) of the Transferor in and under those Mortgages and all other
     mortgages in favour of the Transferor over such properties which do not
     relate to registered land for the consideration mentioned in the said
     Mortgage Sale Agreement.

NOW THIS DEED WITNESSETH as follows:

1.   In consideration for the sums payable and other consideration indicated
     under the Mortgage Sale Agreement (receipt of which is hereby
     acknowledged), the Transferor hereby transfers unto the Transferee with
     full title guarantee all rights, title, interests, benefits and obligations
     (both present and future) of the mortgagee in and under the Mortgages
     including for the avoidance of doubt:

(a)  the right to demand, sue for, recover, receive and give receipts for all
     principal moneys payable or to become payable under the relevant Mortgages
     or the unpaid part thereof and the interest due or to become due thereon;

(b)  the benefit of all securities for such principal moneys and interest, the
     benefit of all consents to mortgage signed by occupiers of the mortgaged
     properties and the benefit of and the right to sue on all covenants with,
     or vested in, the mortgagee in relation to each Mortgage and the rights to
     exercise all powers of the mortgagee in relation to each Mortgage;

(c)  all the estate and interest in the relevant mortgaged properties vested in
     the mortgagee subject to redemption or cesser; and



                                       28
<PAGE>

(d)  all causes of action of the mortgagee against any person in connection with
     any report, valuation, opinion, certificate, consent to mortgage or other
     statement of fact or opinion given in connection with any Mortgage or
     affecting the decision to make the relevant advance.

2.   This Deed shall be governed by and construed in accordance with English
     law.

IN WITNESS WHEREOF this document has been executed and delivered as a deed the
day and year first before written.

EXECUTED as a DEED by           )
HALIFAX PLC                     )
acting by its attorney in       )
the presence of:                )


Witness:

Name:

Address:


                                    ANNEXURE

<TABLE>
<S>             <C>                    <C>                      <C>
Account No.      Property address       Date of Mortgage         Borrower
</TABLE>



                                       29
<PAGE>



                                   SCHEDULE 4

                                LENDING CRITERIA

LENDING CRITERIA

The Loans in the Initial Portfolio or, as the case may be, the relevant New
Portfolio were originated according to the Seller's lending policy at the
relevant time, which in the case of the Initial Portfolio included the criteria
set out below. However, the Seller retains the right to revise its lending
policy from time to time, and so the criteria applicable to the New Loans may
not be the same as those set out below.

(1)  Types of Property

     Properties may be either freehold or leasehold. In the case of leasehold
     properties, the unexpired portion of the lease must in most cases not
     expire earlier than 30 years after the term of the Loan. The property must
     be used solely for residential purposes (with extremely limited case by
     case exceptions) and must be in sound structural condition and repair or be
     capable of being put into such state. House boats, mobile homes and any
     property on which buildings insurance cannot be arranged are not
     acceptable. All persons who are to be legal owners of the Property on
     completion of the relevant Mortgage must be Borrowers.

     All properties have been valued by a valuer approved by the Seller or,
     where appropriate, according to a methodology which would meet the
     standards of a reasonable, prudent mortgage lender and which has been
     approved by the Seller.

(2)  Term of Loan

     There is no minimum term on home purchase Loans and the maximum term is 25
     years for repayment Mortgages. A maximum term of 40 years is available for
     interest-only Mortgages. A repayment period for a new Further Advance that
     would extend beyond the term of the original advance may also be accepted
     at the Seller's discretion, subject to the following:

     (a)  the consent of any subsequent lender or guarantor to the Further
          Advance;

     (b)  the Seller may in its discretion extend the period of the original
          advance, provided that, in all leasehold cases, not less than 30 years
          of the lease must be left unexpired at the end of the term of the
          Mortgage; and

     (c)  the approval of the valuer where the valuer has previously recommended
          a term which is shorter than the maximum Loan terms referred to above.

     If a Borrower requests to increase the term of the existing Loan, the
     maximum term for a repayment Loan is 25 years from the date from which the
     extended term is granted. However, the total term from the start date of
     the account must not exceed 40 years.

(3)  Age of Applicant

     All Borrowers must be aged 18 or over. There is no maximum age limit.
     However, if the term of the Mortgage extends into retirement, the Seller
     will attempt to ascertain the Borrower's anticipated income in retirement.
     If the Seller determines the Borrower will not be able to afford the
     Mortgage into retirement, the application will be declined. If the Borrower
     is already retired, the Seller will consider the Borrower's ability to
     support the Loan.



                                       30
<PAGE>

(4)  Loan to Value (or LTV) Ratio

     The maximum original LTV ratio of Loans in the Initial Portfolio is 97 per
     cent. At the date of this Agreement, for Properties of (pound)150,000 or
     less, the Seller may lend up to 97 per cent. of the improved valuation of
     the Property (the original valuation plus the increase in value deriving
     from any improvements). For Properties in excess of (pound)150,000, the
     permissible LTV ratio decreases as the Loan amount increases. The Seller
     has approved measures whereby it may lend up to 97 per cent. of the LTV for
     properties of (pound)250,000 or less but this measure has not been
     implemented at the date of this Agreement. The Seller will not provide
     Loans in excess of 100 per cent. of the sum of the purchase price and the
     increase in value deriving from any improvements.

     In the case of a Property that is being purchased, value is determined by
     the lower of the valuation and the purchase price. In the case of a
     remortgage or Further Advance, value is determined on the basis of a
     valuation only.

(5)  Mortgage Indemnity Guarantee Policies/High LTV Fees

     Borrowers are currently required to pay high LTV fees to the Seller for
     each Mortgage account where the aggregate of the outstanding principal
     balance of the relevant Loan(s) at origination (excluding any capitalised
     high LTV fees and/or booking fees and/or valuation fees) exceeds certain
     specified percentages.

     If the LTV ratio exceeds 90 per cent., the Borrower pays high LTV fees
     based on the difference between the actual LTV ratio and a 75 per cent. LTV
     ratio.

     Prior to 1st January, 2001, the Seller required cover under mortgage
     indemnity guarantee, or MIG, policies for Mortgages where the LTV ratio
     exceeded 75 per cent., though during 1999 and 2000 the Seller paid the
     premium for the MIG cover if the LTV ratio was between 75 per cent. and 90
     per cent. Since 1st January, 2001, the Seller has not required cover under
     MIG policies for any Loans.

(6)  Status of Applicant(s)

     The maximum amount of the aggregate Loan(s) under a mortgage account is
     determined by a number of factors, including the applicant's income. In
     determining income, the Seller includes basic salary as primary income,
     along with performance or profit-related pay, allowances, mortgage
     subsidies, pensions, annuities and state benefits. Payments for overtime,
     bonus and commissions will not be automatically included in income. The
     Seller will deduct the annual cost of existing commitments from the
     applicant's gross income, depending on the applicant's credit score. The
     Seller will also verify the applicant's employment.

     In cases where a single Borrower is attempting to have the Seller take a
     secondary income into account, the Seller will consider the sustainability
     of the Borrower's work hours, the similarity of the jobs and/or skills, the
     commuting time and distance between the jobs, the length of employment at
     both positions and whether the salary is consistent with the type of
     employment. The Seller will determine, after assessing the above factors,
     if it is appropriate to use both incomes. If so, both incomes will be used
     as part of the normal income calculation.



                                       31
<PAGE>

     When there are two applicants, the Seller adds joint incomes together for
     the purpose of deciding which income band to use. The Seller may, at its
     discretion, consider the income of additional applicants as well but only a
     maximum rate of one times that income.

     The Seller may exercise discretion within its lending criteria in applying
     those factors which are used to determine the maximum amount of the
     Loan(s). Accordingly, these parameters may vary for some Loans. The Seller
     may take the following into account when exercising discretion: credit
     score result, existing customer relationship, percentage of LTV, stability
     of employment and career progression, availability of living allowances
     and/or mortgage subsidy from the employer, employer's standing, regularity
     of overtime, bonus or commission (up to a maximum of 60 per cent. of the
     income), credit commitments, quality of security (such as type of property,
     repairs, location or saleability), and the increase in income needed to
     support the Loan.

     The Seller may not exercise discretion where it is lending over 95 per
     cent. of value or the Borrower's credit score fails. There is an exception
     from this policy for existing Borrowers who are moving home and the
     Seller's overall position is improved.

(7)  Credit History

(a)  Credit Search

     With the exception, in some circumstances, of Further Advances to existing
     Borrowers, a credit search is carried out in respect of all applicants.
     Applications may be declined where an adverse credit history (for example,
     county court judgement, default, or bankruptcy notice) is revealed.

(b)  Existing Lender's Reference

     In some cases, the Seller may also seek a reference from any existing
     and/or previous lender. Any reference must satisfy the Seller that the
     account has been properly conducted and that no history of material arrears
     exists.

(c)  First Time Buyers/Applicants in rented accommodation

     Where applicants currently reside in rented accommodation, the Seller may
     seek a landlord's reference. In addition, if considered appropriate, a
     further reference may be taken in connection with any other property rented
     by the applicant(s) within the preceding 18 months.

(d)  Bank Reference

     A bank reference may be sought or the applicants may be required to provide
     bank statements in support of his or her application.

(8)  Scorecard

     The Seller uses some of the above criteria and various other criteria to
     provide an overall score for the application that reflects a statistical
     analysis of the risk of advancing the Loan. The lending policies and
     processes are determined centrally to ensure consistency in the management
     and monitoring of credit risk exposure. Full use is made of software
     technology in credit scoring new applications. Credit scoring applies
     statistical analysis to publicly available data and customer-provided data
     to assess the likelihood of an account going into arrears. In addition, the
     Seller is currently developing behavioural scoring, which will enable



                                       32
<PAGE>

     it to use customer data on existing accounts to make further lending
     decisions and to prioritise action in the case of arrears. Mortgage
     collection is conducted through a number of payment collection departments.

     The Seller reserves the right to decline an application that has received a
     passing score. The Seller does have an appeals process if an applicant
     believes his or her application to be unfairly denied. It is the Seller's
     policy to allow only authorised individuals to exercise discretion in
     granting variances from the scorecard.



                                       33
<PAGE>


                                   SCHEDULE 5

        POWER OF ATTORNEY IN FAVOUR OF FUNDING 1, THE MORTGAGES TRUSTEE
                            AND THE SECURITY TRUSTEE

THIS DEED OF POWER OF ATTORNEY is made on the [o], 2003 by:

(1)  HALIFAX PLC whose registered office is at Trinity Road, Halifax, West
     Yorkshire HX1 2RG (registered number 02367076) (the "SELLER")

IN FAVOUR OF each of:

(2)  PERMANENT FUNDING (NO. 1) LIMITED whose registered office is at Blackwell
     House, Guildhall Yard, London EC2V 5AE (registered number 4267660)
     ("FUNDING 1");

(3)  PERMANENT MORTGAGES TRUSTEE LIMITED whose registered office is at 47
     Esplanade, St Helier, Jersey JE1 0BD (registered number 83116) (the
     "MORTGAGES TRUSTEE");

(4)  STATE STREET BANK AND TRUST COMPANY a Massachusetts trust company organised
     under the laws of the Commonwealth of Massachusetts, United States of
     America, acting through its office at 225 Franklin Street, Boston,
     Massachusetts 02110 acting as co-trustee in its capacity as trustee (the
     "SECURITY TRUSTEE", which expression shall include such company and all
     other persons or companies for the time being acting as the security
     trustee or security trustees under the Funding 1 Deed of Charge); and

(5)  U.S. BANK NATIONAL ASSOCIATION a national banking association formed under
     the laws of the United States of America, acting through its office at 1
     Federal Street, 3rd Floor, Boston, Massachusetts 02110 acting as co-trustee
     in its capacity as trustee (the "SECURITY TRUSTEE", which expression shall
     include such company and all other persons or companies for the time being
     acting as the security trustee or security trustees under the Funding 1
     Deed of Charge).

WHEREAS:

(1)  By virtue of a mortgage sale agreement (the "MORTGAGE SALE AGREEMENT")
     dated 14th June, 2002 and made between the Seller (1) Funding 1 (2) the
     Mortgages Trustee (3) and State Street Bank and Trust Company (4) provision
     was made for the execution by the Seller of this Power of Attorney.

(2)  Words and phrases in this Power of Attorney shall (save where expressed to
     the contrary) have the same meanings respectively as the words and phrases
     in the Master Definitions and Construction Schedule dated 13th June, 2002
     and signed for the purposes of identification by Allen & Overy and Sidley
     Austin Brown & Wood.

NOW THIS DEED WITNESSETH as follows:

1.   The Seller irrevocably and by way of security for the performance of the
     covenants, conditions and undertakings on the part of the Seller contained
     in the Mortgage Sale Agreement and the Servicing Agreement HEREBY APPOINTS
     each of Funding 1, the Mortgages Trustee and the Security Trustee and any
     receiver and/or administrator appointed from time to time in respect of
     Funding 1 and/or the Mortgages Trustee or their assets (each an "ATTORNEY")
     severally to be its true and lawful attorney for the Seller and in the
     Seller's



                                       34
<PAGE>

     name or otherwise to do any act matter or thing which any Attorney
     considers necessary or desirable for the protection, preservation or
     enjoyment of that Attorney's interest in the Loans and their Related
     Security and/or which ought to be done under the covenants, undertakings
     and provisions contained in the Mortgage Sale Agreement including (without
     limitation) any or all of the following:

     (a)  to execute, sign, seal and deliver (using the company seal of the
          Seller where appropriate) any conveyance or transfer of the Loans or
          any of them to the Mortgages Trustee and its successors in title or to
          any other person or persons entitled to the benefit thereof;

     (b)  to execute, sign, seal and deliver (using the company seal of the
          Seller where appropriate) any conveyance, assignment or transfer of
          the Related Security or any item comprised therein (to the extent only
          that such item or items relate to the Loans) to the Mortgages Trustee
          and its successors in title or to any other person or persons entitled
          to the benefit thereof or entitled to be registered at H.M. Land
          Registry as proprietor thereof (as the case may be);

     (c)  to do every other act or thing which the Seller is obliged to do under
          the Mortgage Sale Agreement or which that Attorney may otherwise
          consider to be necessary proper or expedient for fully and effectually
          vesting or transferring the interests sold thereunder in the Loans and
          their Related Security or any or each of them and/or the Seller's
          estate right and title therein or thereto in or to the Mortgages
          Trustee and its successors in title or to any other person or persons
          entitled to the benefit thereof (as the case may be) in the same
          manner and as fully and effectually in all respects as the Seller
          could have done including, without limitation, any of the acts
          referred to in CLAUSE 6.3(A) to (C) of the Mortgage Sale Agreement;

     (d)  to exercise its rights, powers and discretions under the Loans
          including the right to fix the rate or rates of interest payable under
          the Loans in accordance with the terms thereof including, for the
          avoidance of doubt, whilst such Loans subsist and subject to the
          consent of the Mortgages Trustee being given to the setting of such
          rates, setting the Seller's Variable Base Rate in the circumstances
          referred to in CLAUSE 4 of the Servicing Agreement and/or following
          perfection pursuant to CLAUSE 6.1 of the Mortgages Sale Agreement
          PROVIDED THAT nothing in the Clause shall prevent the Seller (or any
          of its attorneys from time to time) from setting a higher rate than
          those set or to be set or required or to be required by the Mortgages
          Trustee or Funding 1 under this Power of Attorney;

     (e)  to discharge the Mortgages or any of them and to sign, seal, deliver
          and execute such receipts releases surrenders instruments and deeds as
          may be requisite or advisable in order to discharge the relevant
          Property or Properties from the Mortgages or any of them; and

     (f)  to exercise all the powers of the Seller in relation to such Loans and
          their Related Security.

2.   Each Attorney shall have the power by writing under its hand by an officer
     of the Attorney from time to time to appoint a substitute who shall have
     power to act on behalf of the Seller as if that substitute shall have been
     originally appointed Attorney by this Power of Attorney (including, without
     limitation, the power of further substitution) and/or to revoke any such
     appointment at any time without assigning any reason therefor.



                                       35
<PAGE>

3.   The Seller hereby agrees at all times hereafter to ratify and confirm
     whatsoever the said Attorney or its attorneys shall lawfully do or cause to
     be done in and concerning the Loans or their Related Security by virtue of
     this Power of Attorney.

4.   The laws of England shall apply to this Power of Attorney and the
     interpretation thereof.



                                       36
<PAGE>


IN WITNESS WHEREOF the Seller has executed and delivered this document as a deed
the day and year first before written.

THE COMMON SEAL of          )
HALIFAX PLC                 )
was hereunto affixed in     )
the presence of:            )


.........................    Authorised Signatory

.........................    Authorised Signatory


                                       37
<PAGE>


                                   SCHEDULE 6

                             LOAN REPURCHASE NOTICE

Dated [               ]



1.   It is hereby agreed that for the purpose of this notice the "PRINCIPAL
     AGREEMENT" shall mean the Mortgage Sale Agreement dated 14th June, 2002
     made between HALIFAX plc (the "SELLER") (1) PERMANENT FUNDING (NO. 1)
     LIMITED (2) PERMANENT MORTGAGES TRUSTEE LIMITED (the "MORTGAGES TRUSTEE")
     (3) STATE STREET BANK AND TRUST COMPANY (4) and U.S. BANK NATIONAL
     ASSOCIATION (5) (as the same may be or have been amended, varied or
     supplemented from time to time with the consent of those parties).

2.   Save where the context otherwise requires, words and expressions in this
     notice shall have the same meanings respectively as when used in the
     Principal Agreement.

3.   In accordance with CLAUSE 8.4 of the Principal Agreement, upon receipt of
     this Loan Repurchase Notice by the Seller there shall exist between the
     Seller and the Mortgages Trustee an agreement (the "AGREEMENT FOR SALE")
     for the sale by the Mortgages Trustee to the Seller of the Loans and their
     Related Security more particularly described in the Schedule hereto.
     Completion of such sale shall take place on o.

4.   The Agreement for Sale shall incorporate, mutatis mutandis, the relevant
     provisions of the Principal Agreement.



.............................
Signed for and on behalf of

PERMANENT MORTGAGES TRUSTEE LIMITED

[On duplicate

We hereby acknowledge receipt of and confirm the contents of the Loan Repurchase
Notice dated [       ].


.............................
Signed for and on behalf of
HALIFAX PLC]



                                       38
<PAGE>


                                    SCHEDULE

<TABLE>
<S>               <C>            <C>            <C>            <C>
1.                 2.             3.             4.            5.
Title No.          Borrower       Account No.    Property      Date of Mortgage
(if registered)                                  Postcode
</TABLE>


                                       39
<PAGE>


                                   SCHEDULE 7

                        ASSIGNMENT OF THIRD PARTY RIGHTS

THIS DEED OF ASSIGNMENT is made on [o], 2003

BY:

(1)  HALIFAX PLC (registered number 02367076), a public limited company
     incorporated under the laws of England and Wales, whose registered office
     is at Trinity Road, Halifax, West Yorkshire HX1 2RG (the "TRANSFEROR"); and

IN FAVOUR OF:

(2)  PERMANENT MORTGAGES TRUSTEE LIMITED (registered number 83116), a private
     limited company incorporated under the laws of Jersey, Channel Islands,
     whose registered office is at 47 Esplanade, St Helier, Jersey JE1 0BD (the
     "TRANSFEREE").

WHEREAS:

(A)  By the charges by way of legal mortgage (the "MORTGAGES") brief particulars
     of which are set out in the Annexure hereto the properties brief
     particulars of which are similarly set out became security for the
     repayment of the moneys therein mentioned.

(B)  By a Mortgage Sale Agreement made between, inter alia, the Transferor and
     the Transferee on 14th June, 2002 as amended and restated on 6th March,
     2003, the Transferor agreed to sell and the Transferee agreed to buy all
     right, title, interest and benefit (both present and future) of the
     Transferor in and under those Mortgages and all Related Security and all
     monies secured by those Mortgages and Related Security.

NOW THIS DEED WITNESSETH as follows:

1.   Capitalised terms in this Deed (including the recitals) shall, except where
     the context otherwise requires and save where otherwise defined in this
     Deed, bear the meanings given to them in the Amended and Restated Master
     Definitions and Construction Schedule signed (in connection with, amongst
     other things, this Deed) for the purposes of identification by Allen &
     Overy and Sidley Austin Brown & Wood on 5th March, 2003 (as the same may be
     amended, varied or supplemented from time to time with the consent of the
     parties hereto) and this Deed shall be construed in accordance with the
     interpretation provisions set out in Clause 2 thereof.

2.   The Transferor hereby assigns absolutely unto the Transferee with full
     title guarantee:

     (a)  the benefit of all Related Security relating to the Mortgages
          (including without limitation all securities for the principal moneys
          and interest secured by the Mortgages and the benefit of all consents
          to mortgage signed by occupiers of the mortgaged properties and the
          benefit of all guarantees, indemnities and surety contracts relating
          to the Mortgages) other than any such Related Security which has been
          transferred to the Transferee by other means or which is not otherwise
          capable of such transfer; and



                                       40
<PAGE>

     (b)  all causes of action of the Transferor against any person in
          connection with any report, valuation, opinion, certificate, consent
          or other statement of fact or opinion given in connection with any
          Related Security relating to the Mortgages or affecting the decision
          to make any advance in connection with such Mortgages.

3.   This Deed shall be governed by and construed in accordance with English
     law.

IN WITNESS WHEREOF this document has been executed and delivered as a deed the
day and year first before written.

EXECUTED as a DEED by        )
HALIFAX PLC                  )
acting by its attorney in    )
the presence of:             )


Witness's signature:

Name:

Address:


                                    ANNEXURE

<TABLE>
<S>               <C>                   <C>               <C>
Account No.         Property address      Borrower         Date of Mortgage
</TABLE>




                                       41
<PAGE>


                                   SCHEDULE 8

             ASSIGNMENT OF HALIFAX MORTGAGE RE LIMITED MIG POLICIES

THIS DEED is made on [o], 2003

BY:

(1)  HALIFAX PLC (registered number 02367076), a public limited company
     incorporated under the laws of England and Wales, whose registered office
     is at Trinity Road, Halifax, West Yorkshire HX1 2RG (the "SELLER"); and

IN FAVOUR OF:

(2)  PERMANENT MORTGAGES TRUSTEE LIMITED (registered number 83116), a private
     limited company incorporated under the laws of Jersey, Channel Islands,
     whose registered office is at 47 Esplanade, St Helier, Jersey, JE1 0BD (the
     "MORTGAGES TRUSTEE").

WHEREAS:

(A)  By a Mortgage Sale Agreement made between, inter alia, the Seller and the
     Mortgages Trustee on 14th June, 2002 as amended and restated on 6th March,
     2003 the Seller agreed to transfer to the Mortgages Trustee certain charges
     by way of legal mortgage secured on residential property in England and
     Wales together with the benefit of any monies secured thereby.

(B)  The Seller has the benefit of mortgage indemnity insurance policies brief
     details of which are set out in the Schedule to this Deed (the "HMRL MIG
     POLICIES").

(C)  The Seller has agreed with the Mortgages Trustee to assign to the Mortgages
     Trustee the benefit of the HMRL MIG Policies to the extent that they relate
     to the Loans in the Portfolio.

(D)  The insurance businesses (including, for the avoidance of doubt, the HMRL
     MIG Policies) of Halifax Mortgage Re Limited were acquired by HBOS
     Insurance (PCC) Guernsey Limited on 21st December, 2001.

NOW THIS DEED WITNESSETH as follows:

1.   Capitalised terms in this Deed (including the recitals) shall, except where
     the context otherwise requires and save where otherwise defined in this
     Deed, bear the meanings given to them in the Amended and Restated Master
     Definitions and Construction Schedule signed (in connection with, among
     other things, this Deed) for the purposes of identification by Allen &
     Overy and Sidley Austin Brown & Wood on 5th March, 2003, (as the same may
     be amended, varied or supplemented from time to time with the consent of
     the parties hereto) and this Deed shall be construed in accordance with the
     interpretation provisions set out in CLAUSE 2 thereof.

2.   The Seller with full title guarantee hereby conveys, transfers and assigns
     to the Mortgages Trustee absolutely all its right, title, interest and
     benefit in the HMRL MIG Policies to the extent that they relate to the
     Mortgages which as at this date are comprised in the Portfolio, and all
     moneys and proceeds to become payable under any of the same and all
     covenants relating thereto and all powers and remedies for enforcing the
     same.



                                       42
<PAGE>

3.   This Deed shall be governed by and construed in accordance with English
     law.

IN WITNESS WHEREOF which this document has been executed and delivered as a deed
the day and year first before written.

EXECUTED as a DEED by        )
HALIFAX PLC                  )
acting by its attorney in    )
the presence of:             )


Witness:

Name:

Address:


                                    SCHEDULE

     Mortgage indemnity guarantee policies numbered 227001, 227001(A), 227002,
     227003 and 227006 respectively issued to Halifax plc by Halifax Mortgage Re
     Limited.



                                       43
<PAGE>

                                   SCHEDULE 9

           HALIFAX MORTGAGE RE LIMITED MIG POLICIES ASSIGNMENT NOTICE

To:  HBOS Insurance (PCC) Guernsey Ltd
     c/o AON Insurance Managers (Guernsey) Limited
     (as Managers of HBOS Insurance (PCC) Ltd)
     PO Box 33
     Maison Trinity
     Trinity Square
     St Peter Port
     Guernsey GY1 4AT

                                                                       [o], 2003

Dear Sirs,

RE:  ASSIGNMENT OF MORTGAGE INDEMNITY INSURANCE POLICIES NUMBERED 227001,
     227001(A), 227002, 227003 AND 227006 RESPECTIVELY (THE "MIG POLICIES")

We hereby give you notice that, by an Assignment dated [o], 2003 and made
between ourselves and Permanent Mortgages Trustee Limited (the "MORTGAGES
TRUSTEE") (a copy of which is attached to this notice), we assigned all of our
right, title, benefit and interest in the MIG Policies to the Mortgages Trustee
(to the extent that they relate to the loans and the mortgages in a portfolio
referred to in a mortgage sale agreement dated 14th June, 2002 as amended and
restated on 6th March, 2003 between ourselves, Permanent Funding (No. 1)
Limited, the Mortgages Trustee and State Street Bank and Trust Company).

Yours faithfully,



.........................
For and on behalf of
HALIFAX PLC

Copy: Permanent Mortgages Trustee Limited
      Permanent Funding (No. 1) Limited
      State Street Bank and Trust Company
      U.S. Bank National Association



                                       44
<PAGE>

                                   SCHEDULE 10

                              INSURANCE ENDORSEMENT

               ON THE HEADED NOTEPAPER OF [THE RELEVANT INSURER ]

ENDORSEMENT [X] attaching to and forming part of policy number [policy number]
(the "POLICY") issued by [name of Insurer] (the "INSURER").

It is hereby noted and agreed that with effect from the date of this
Endorsement:-

1.   The definition of "Insured" shall be deleted in its entirety and replaced
     with the following wording:

     "(a) Halifax plc ("HALIFAX") whose registered office is at Trinity Road,
          Halifax, West Yorkshire, HX1 2RG;

     (b)  any assignee to whom Halifax has assigned (whether legally or
          equitably and whether by way of security or otherwise) any loans
          and/or mortgages and related collateral and/or assets to which this
          Policy relates (an "ASSIGNEE") (whether or not any such Assignee holds
          the same on trust for another or others); and

     (c)  any person benefiting from security granted by the Halifax or its
          Assignee over any loans and/or mortgages and related collateral and/or
          assets to which this Policy relates in connection with the financing
          or re-financing of such loans and/or mortgages and related collateral
          and/or assets."

2.   Each term of the Policy which is inconsistent with the intent and/or effect
     of the amended definition of "Insured" contemplated in paragraph 1 above
     (the "NEW DEFINITION") shall be subject to the New Definition and shall not
     apply to the extent that such term of the Policy is inconsistent with the
     New Definition.

3.   The Insurer acknowledges and agrees that any Insured under the Policy may
     from time to time appoint Halifax plc or any other person as agent of that
     Insured to deal with the Insurer on its behalf in the administration of and
     making and payment of claims under the Policy.



All other terms, clause and conditions of the Policy remain unchanged.

This Endorsement is signed for and on behalf of the Insurer by a duly authorised
signatory:

.................................
[Name]
[Position]
[Insurer]

Dated                          , 2002


                                       45
<PAGE>

                                   SCHEDULE 11

                           INSURANCE ACKNOWLEDGEMENTS

                                     PART 1

            ON THE HEADED NOTEPAPER OF GE MORTGAGE INSURANCE LIMITED

To:       Halifax plc (the "SELLER")
          Trinity Road
          Halifax
          West Yorkshire
          HX1 2RG

          Permanent Mortgages Trustee Limited (the "MORTGAGES TRUSTEE")
          47 Esplanade
          St Helier
          Jersey
          JE1 08D
          Channel Islands

          Permanent Funding (No. 1) Limited ("FUNDING 1")
          Blackwell House
          Guildhall Yard
          London
          EC2V 5AE

          State Street Bank and Trust Company (the "SECURITY TRUSTEE")
          225 Franklin Street
          Boston
          Massachusetts 02110

          U.S. Bank National Association (the "SECURITY TRUSTEE")
          1 Federal Street
          3rd Floor
          Boston
          Massachusetts 02110
                                                                          [date]

Dear Sirs,

MORTGAGE INDEMNITY GUARANTY POLICIES NUMBERS GECM-UK-003 AND GECM-UK-004 (THE
"MIG POLICIES")

We refer to the transaction entered into or to be entered into between, inter
alios, each of the parties to whom this letter is addressed, pursuant to which:

(a)  the Seller may assign or agree to transfer its interest in properties which
     are (or may from time to time be) covered by the MIG Policies to the
     Mortgages Trustee;



                                       46
<PAGE>

(b)  the Mortgages Trustee may declare a trust over its interest in such
     properties in favour of Funding 1 and the Seller; and

(c)  Funding 1 may charge its interest in such properties to the Security
     Trustee.

In consideration of the payment of (pound)1 made by each of the Seller, the
Mortgages Trustee, Funding 1 and the Security Trustee (receipt whereof is hereby
acknowledged), we hereby confirm that the arrangements set out in PARAGRAPHS (A)
to (C) inclusive above will not cause the MIG Policies to lapse or terminate
and, notwithstanding any such arrangements, we will continue to pay claims under
the MIG Policies in the same way and in the same amount as we would have paid
them, had the said arrangements not been entered into.

Yours faithfully,




FOR AND ON BEHALF OF GE MORTGAGE INSURANCE LIMITED



                                       47
<PAGE>



                                     PART 2

          ON THE HEADED NOTEPAPER OF HBOS INSURANCE (PCC) GUERNSEY LTD

To:       Halifax plc (the "SELLER")
          Trinity Road
          Halifax
          West Yorkshire
          HX1 2RG

          Permanent Mortgages Trustee Limited (the "MORTGAGES TRUSTEE")
          47  Esplanade
          St Helier
          Jersey
          JE1 08D
          Channel Islands

          Permanent Funding (No. 1) Limited ("FUNDING 1")
          Blackwell House
          Guildhall Yard
          London
          EC2V 5AE

          State Street Bank and Trust Company (the "SECURITY TRUSTEE")
          225 Franklin Street
          Boston
          Massachusetts 02110

          U.S. Bank National Association (the "SECURITY TRUSTEE")
          1 Federal Street
          3rd Floor
          Boston
          Massachusetts 02110

                                                                          [date]

Dear Sirs,

MORTGAGE INDEMNITY GUARANTEE POLICY NUMBERS 227001, 227001(A), 227002, 227003 &
227006 (THE "MIG POLICIES")

We refer to the transaction entered into or to be entered into between, inter
alios, each of the parties to whom this letter is addressed, pursuant to which:

(a)  all of the Seller's right, title, benefit and interest in the MIG Policies
     (to the extent that the same relate to the mortgage loans and their
     collateral security to be assigned by the Seller to the Mortgages Trustee
     pursuant to a mortgage sale agreement to be entered into between each of
     the parties to whom this letter is addressed) shall be assigned by the
     Seller to the Mortgages Trustee;

(b)  the Seller may assign or agree to transfer its interest in properties which
     are (or may from time to time be) covered by the MIG Policies to the
     Mortgages Trustee;



                                       48
<PAGE>

(c)  the Mortgages Trustee may declare a trust over its interest in such
     properties in favour of Funding 1 and the Seller; and

(d)  Funding 1 may charge its beneficial interest in such properties to the
     Security Trustee.

In consideration of the payment of (pound)1 made by each of the Seller, the
Mortgages Trustee, Funding 1 and the Security Trustee (receipt whereof is hereby
acknowledged), we hereby confirm that the arrangements set out in PARAGRAPHS (A)
to (D) inclusive above will not cause the MIG Policies to lapse or terminate
and, notwithstanding any such arrangements, we will continue to pay claims under
the MIG Policies in the same way and in the same amount as we would have paid
them, had the said arrangements not been entered into.

Yours faithfully,




FOR AND ON BEHALF OF HBOS INSURANCE (PCC) GUERNSEY LIMITED



                                       49
<PAGE>


                                   SCHEDULE 12

                              NEW PORTFOLIO NOTICE

                                                               Dated [         ]


1.   It is hereby agreed for the purpose of this notice the "PRINCIPAL
     AGREEMENT" shall mean the Mortgage Sale Agreement dated 14th June, 2002 (as
     amended and/or restated from time to time) made between HALIFAX plc (the
     "SELLER") (1) PERMANENT FUNDING (NO. 1) LIMITED ("FUNDING 1") (2) PERMANENT
     MORTGAGES TRUSTEE LIMITED (the "MORTGAGES TRUSTEE") (3) and STATE STREET
     BANK AND TRUST COMPANY (4) (as the same may be or have been amended, varied
     or supplemented from time to time with the consent of those parties).

2.   Save where the context otherwise requires, words and expressions in this
     notice shall have the same meanings respectively as when used in the
     Principal Agreement.

3.   In accordance with and subject to CLAUSE 4.1 of the Principal Agreement,
     upon receipt by the Seller of the duplicate of this notice signed by
     Funding 1 and the Mortgages Trustee, there shall exist between the Seller,
     Funding 1 and the Mortgages Trustee an agreement (the "AGREEMENT FOR SALE")
     for the sale by the Seller to the Mortgages Trustee of the New Loans and
     the Related Security more particularly described in the Schedule hereto
     (other than any New Loans and their Related Security which have been
     redeemed in full prior to the next following Assignment Date). Completion
     of such sale shall take place on [           ].

4.   The Agreement for Sale shall incorporate, mutatis mutandis, the relevant
     provisions of the Principal Agreement.



...............................................
Signed for and on behalf of
HALIFAX PLC

[On duplicate:

We hereby acknowledge receipt of the New Portfolio Notice dated [        ], and
confirm that we are prepared to purchase New Loans as set out in that notice.


...............................................
Signed for and on behalf of
PERMANENT FUNDING (NO. 1) LIMITED

...............................................
Signed for and on behalf of
PERMANENT MORTGAGES TRUSTEE LIMITED]


                                       50
<PAGE>


                                    SCHEDULE
<TABLE>
<S>              <C>         <C>                  <C>           <C>
1.               2.          3.                   4.            5.
Title No. (if    Borrower    Property Postcode    Account No.   Date of Mortgage
registered)
</TABLE>


                                       51
<PAGE>



                                     EXHIBIT

                            PART 1: INITIAL PORTFOLIO

                         PART 2: STANDARD DOCUMENTATION




                                       52
<PAGE>



                                     EXHIBIT

                                     PART 1

                                INITIAL PORTFOLIO


This is Part 1 (on accompanying CD-ROM) of the Exhibit to a Mortgage Sale
Agreement dated 14th June, 2002 made between Halifax plc (1) Permanent Funding
(No. 1) Limited (2) Permanent Mortgages Trustee Limited (3) and State Street
Bank and Trust Company (4).


Ian G Stewart
HALIFAX PLC


David Balai
PERMANENT FUNDING (NO. 1) LIMITED


David Balai
PERMANENT MORTGAGES TRUSTEE LIMITED


David Duclos
STATE STREET BANK AND TRUST COMPANY
[o]
U.S. BANK NATIONAL ASSOCIATION


                                       53
<PAGE>


                                     EXHIBIT

                                     PART 2

                             STANDARD DOCUMENTATION


This is Part 2 of the Exhibit to a Mortgage Sale Agreement dated 14th June, 2002
made between Halifax plc (1) Permanent Funding (No. 1) Limited (2) Permanent
Mortgages Trustee Limited (3) and State Street Bank and Trust Company (4).


Ian G Stewart
HALIFAX PLC


David Balai
PERMANENT FUNDING (NO. 1) LIMITED


David Balai
PERMANENT MORTGAGES TRUSTEE LIMITED


David Duclos
STATE STREET BANK AND TRUST COMPANY


[o]
U.S. BANK NATIONAL ASSOCIATION


                                       54
<PAGE>


                                   SIGNATORIES

SIGNED by                              )
for and on behalf of                   )
HALIFAX PLC                            )


SIGNED by                              )
for and on behalf of                   )
PERMANENT FUNDING (NO. 1) LIMITED      )


SIGNED by                              )
for and on behalf of                   )
PERMANENT MORTGAGES                    )
TRUSTEE LIMITED                        )


SIGNED by                              )
for and on behalf of                   )

STATE STREET BANK AND                  )
TRUST COMPANY                          )


SIGNED by                              )
for and on behalf of                   )

U.S. BANK NATIONAL ASSOCIATION         )




                                       55
<PAGE>


                             DATED [6TH MARCH], 2003



                                   HALIFAX PLC
                     as Seller and one of the Beneficiaries


                                       and


                        PERMANENT FUNDING (NO. 1) LIMITED
                    as Funding 1 and one of the Beneficiaries


                                       and


                       PERMANENT MORTGAGES TRUSTEE LIMITED
                              as Mortgages Trustee


                                       and


                       STATE STREET BANK AND TRUST COMPANY
                               as Security Trustee


                                       and


                         U.S. BANK NATIONAL ASSOCIATION
                               as Security Trustee




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

                              AMENDED AND RESTATED
                             MORTGAGE SALE AGREEMENT

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