EXHIBIT 10.4

Mortgage Guaranty Insurance Corporation                            [LOGO - MGIC]


Steven M. Thompson
Vice President
Risk Management


December 13, 2006


Ms. Carla Walker
Wells Fargo Bank, N.A. as Securities Administrator for the
Wells Fargo Home Equity Asset-Backed Securities 2006-3 Trust
Wells Fargo Center
6th and Marquette
Minneapolis, Minnesota 55479


RE:   Terms for MGIC Mortgage Insurance Coverage ("Coverage") on Approximately
      $89 Million in Principal Balances of Loans (the "Insurable Loans") to be
      included in the Trust known as the Wells Fargo Home Equity Asset-Backed
      Securities 2006-3 Trust (the "Trust")


Dear Ms. Walker :


Mortgage Guaranty Insurance Corporation ("MGIC") has reviewed the information
provided by Wells Fargo Bank, N.A. ("Wells Fargo") concerning the Insurable
Loans and is providing pricing and terms to issue non-borrower-paid first lien
Coverage under the Master Policy (as defined below) on the loans contained
within the portfolio. This proposal is subject to due diligence findings and the
following terms and conditions:



1.    Portfolio Size. MGIC has identified the following Insurable Loans from the
      Final File (as defined below) submitted by Wells Fargo:


                Original LTV >60%(1)             $   Volume
                --------------------             ---------------
                        431                      $89,012,804.42

      The actual size of the final portfolio of Insurable Loans may be slightly
      different based on loan removals, additions and substitutions due to
      prepayments, delinquencies, and/or additional screening of loan
      eligibility.


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

(1)   For purposes of this letter, an Insurable Loan's "Original LTV" means the
      ratio, expressed as a percentage, of the initial principal balance of the
      Insurable Loan at origination to the Value of the related property at
      origination.

MGIC Plaza, P.O. Box 488, Milwaukee, Wisconsin 53201-0488, (414) 347-6893
WATS (800) 558-9900, FAX (414) 347-6854


<PAGE>


2.    Loan Coverage. Non-borrower-paid Coverage will be issued by MGIC on each
      Insurable Loan that meets the applicable Eligibility Criteria (as set
      forth in Section 10 below). The Coverage percent for an Insurable Loan is
      calculated as the Original LTV minus sixty percent (60%) divided by the
      Original LTV ratio, with the result rounded to the next highest whole
      number. Example:


               Original LTV = 87.49  (expressed as a percentage)
               Original LTV = .8749  (expressed as a ratio)

               Coverage percentage  = (87.49 - 60)/.8749) = 31.4207 = 32

3.    Premium. Wells Fargo, not in its individual capacity but solely in its
      capacity as Insured for the Trust, shall pay or cause to be paid in
      arrears a nonrefundable monthly premium for the Coverage calculated at an
      annualized premium rate of 146 basis points, applied to the unpaid
      principal balances of insured loans determined as of the beginning of the
      prior calendar month. For purposes of this letter, "Insured Loan" means an
      Insurable Loan as to which Coverage under the Master Policy (as defined
      below) is issued by MGIC.

      Wells Fargo shall provide or cause to be provided to MGIC on a monthly
      basis via computer file (in a mutually acceptable format), the following
      information for each Insured Loan as shall have been provided to Wells
      Fargo by the Servicer of the Insured Loan: the unpaid principal balance,
      MGIC certificate number, lender loan number, and premium due for each
      Insured Loan.

      The premium rate quoted in this paragraph does not include premium taxes
      that are required to be paid by the Insured in the States of Kentucky and
      West Virginia. The Final File includes Insurable Loans in the States of
      Kentucky and West Virginia. The tax rates generally range from 1.0% - 17%
      of the premium paid, and such rates shall be provided with respect to any
      Insured Loans on a loan-level basis to the Insured or its designee by
      MGIC, and such amount shall be added to the payment of the premium paid to
      MGIC who will cause such taxes to be paid.

      With respect to all Insured Loans, Wells Fargo represents and warrants
      that (a) the borrower will not be charged a separate or identified amount
      as payment or reimbursement for premiums for Coverage and that such
      premiums will be paid by the Insured from funds of the Trust or persons
      other than the borrower, and (b) that the Coverage will either not be
      subject to the Homeowners Protection Act of 1998 or will be "non-borrower
      paid mortgage insurance" thereunder. In addition, with respect to any
      Insured Loan secured by a property in New York State for which, at the
      effective date of Coverage or at any time while the Master Policy is in
      effect for such Insured Loan, the ratio of the unpaid principal balance of
      such Insured Loan to the Value of the related property at origination is
      less than 75%, Wells Fargo represents and warrants that all premiums for
      Coverage will not be paid by the borrower, including, for example, by a
      higher interest rate or other charges. It is acknowledged that these
      representations and warranties are relied upon by MGIC in insuring such
      Insured Loans because they relate to the maintenance of Coverage of such
      Insured Loans under the Master Policy.

4.    Effective Date of Coverage. Coverage for all Insured Loans shall take
      effect as of December 1, 2006. The initial monthly premium shall be due on
      January 25, 2007. Monthly renewal premiums shall be due thereafter on the
      25th day (or if that day is not a business day, the next business day) of
      each month while the Coverage is in effect.

      Renewal payments are paid in arrears representing payment for coverage in
      the prior calendar month. For any loan that prepays in full between the
      2nd and the end of that calendar month, a full month's premium payment
      will be due for that month representing the final premium due on such
      loan. If a loan is prepaid in full on the 1st day of a calendar month, no
      premium payment will be due for that month.

5.    Named Insured. Wells Fargo, solely in its capacity as Securities
      Administrator, shall be the named insured under the Master Policy and all
      Certificates covering the Insured Loans. The obligations of the "Insured"
      under this letter and under the Master Policy will be performed by the
      Securities Administrator or the Servicer on behalf of the Securities
      Administrator.

6.    Bulk Certificate. MGIC will provide to the Insured one bulk insurance
      Certificate for all of the Insured Loans, together with a summary of the
      coverage information on a loan-by-loan basis in an electronic format and
      thereafter a certificate number for each Insured Loan. MGIC will not be
      obligated to issue individual Certificates for each Insured Loan.

7.    Restrictions on Cancellation. The premium rates for the Insured Loans were
      calculated based upon a review of information pertaining to the Insurable
      Loans as described in Section 1 above. Wells Fargo acknowledges that the
      terms of the Master Policy (as defined below), including the restrictions
      on cancellation and assignment, were relied upon by MGIC in establishing
      such premium rates. Wells Fargo also agrees that the Coverage to be issued
      under the Master Policy is non-assignable except as provided for in the
      Master Policy.

      For purposes of Section 3.6 of the Master Policy, MGIC approves assignment
      of coverage on all Insured Loans as a group from the Securities
      Administrator to any successor Securities Administrator, provided, in each
      such case, that the Securities Administrator promptly notifies MGIC of
      such assignment.

8.    Cancellation of MGIC Coverage of An Insured Loan Upon Repurchase from the
      Trust. In the event of the repurchase of an Insured Loan from the Trust by
      Wells Fargo or its affiliate due a defect or breach as provided by a
      mortgage loan purchase agreement or Pooling and Servicing Agreement, Wells
      Fargo shall notify MGIC of such repurchase, upon which MGIC Coverage on
      such Insured Loan shall automatically be terminated effective as of such
      event, and any Default existing at the time of such termination and any
      future Default on such Insured Loan will not be covered under the Master
      Policy, and a refund of all premium paid with respect thereto shall be
      made.

9.    Cancellation of Policy and Coverage of Insured Loans Upon Termination of
      Trust. As provided in Section 2.9 of the Master Policy, except as
      otherwise provided below, in the event of a Redemption, or if the Trust is
      terminated for any other reason, or if there are no longer any Insured
      Loans that are security for, or represented by, the Trust, the Master
      Policy and the Coverage of all Insured Loans under the Master Policy shall
      automatically be terminated effective upon such event, without further
      action being required by either the Insured or MGIC, and any Default on
      any Insured Loan existing at the time of such termination (other than
      Defaults for which a Claim had been filed prior to the date of such
      termination) and any future Default on an Insured Loan will not be covered
      under the Master Policy, nor will any refund of premium be paid.

      Notwithstanding the foregoing, in the event of a Redemption, the Coverage
      of Loans insured under the Policy shall not automatically terminate and
      shall be permitted to be assigned to Wells Fargo if all of the Loans then
      insured under the Policy, including, but not limited to, all such Loans
      then in Default, are purchased by Wells Fargo, or any affiliate of Wells
      Fargo, within thirty (30) days after the effective date of the Redemption
      and MGIC is promptly notified of such purchase. Thereafter, no further
      assignment of Coverage shall be allowed by MGIC to any future new
      transferee for any Insured Loan.

10.   Loan Eligibility Criteria. Under the terms of the Master Policy,
      "Eligibility Criteria" may be established on the Insured Loans by MGIC
      upon notice to the Insured. This letter will serve as such notice for
      purposes of the Master Policy and will apply to all Insured Loans. All
      Insured Loans must meet all of the Eligibility Criteria as of the
      effective date of Coverage or as of such other date as otherwise noted
      below:

      a)    CLTVs (Combined LTVs). With respect to any Insured Loan, The CLTV
            (as defined below) may not exceed the Original LTV, except for loans
            for which the CLTV is specifically disclosed to exceed the Original
            LTV on the Final File. The CLTV may not exceed 100% in any case.

            The combined loan-to-value ratio ("CLTV") is defined as the ratio,
            expressed as a percentage, of the sum, as of the date of Insured
            Loan closing, of (1) the loan amount of the Insured Loan and (2) the
            outstanding principal balance of any other loan or loans secured by
            the property which are either (a) subordinated to the lien of the
            Insured Loan or (b) a second lien loan, divided by the Value of the
            property.

      b)    Section 32 (HOEPA) loans. No Insured Loan can be a loan which would
            be required to comply with Section 226.32 of the federal
            truth-in-lending regulations (commonly referred to as a "HOEPA
            loan").

      c)    Compliance with Applicable Laws. Each Insured Loan complied in all
            material respects with all applicable federal, state or other laws
            and regulations, including but not limited to any laws relating to
            fair lending or predatory lending practices, and such Insured Loan
            must comply with all of such laws and regulations.

      d)    Bankruptcies and Foreclosures.

            Foreclosures - No borrower on any Insured Loan may have been the
            subject of a foreclosure proceeding within the 24 months prior to
            the closing of the Insured Loan.

            Bankruptcies - No borrower on any Insured Loan may have been a
            debtor who was the subject of a bankruptcy proceeding during the 24
            months prior to the closing of the Insured Loan.

      e)    Delinquencies. Each Insured Loan is less than 30 days delinquent as
            of the effective date of Coverage.

            In the 12 months prior to the effective date of Coverage, payments
            on any Insured Loan may not have been (1) thirty days delinquent on
            more than one occasion or (2) sixty days delinquent on any occasion.

      f)    Single Property. Insured Loans may be secured by only one property.

      g)    Loan Instrument Type. Insured Loans must be positively amortizing or
            interest-only loans. Negatively amortizing loans are not eligible.

      h)    Manufactured Homes. Insured Loans cannot be secured by manufactured
            homes.

      i)    Property Type and Units. Insured Loans must be secured by 1-4 family
            residential properties located in the United States. Eligible
            property types include single-family detached and attached
            (including condominiums, PUDs, and cooperative housing).

      j)    Properties with Physical Damage. The property securing the Insured
            Loan is undamaged by water, fire, earthquake, earth movement other
            than earthquake, windstorm, flood, tornado or similar casualty
            (excluding casualty from the presence of hazardous wastes or
            hazardous substances, as to which the Insured makes no
            representations), in a matter which would adversely affect the value
            of such property as security for the Insured Loan or the use for
            which the premises were intended and to the best of the Insured's
            knowledge, there is no proceeding pending or threatened for the
            total or partial condemnation of the property.

      k)    Property Valuation. For an Insured Loan, the Value as represented on
            the Final File must have been obtained as the result of an appraisal
            as documented on the Universal Residential Appraisal Report or its
            equivalent and not as the result of an alternative valuation
            methodology such as an automated valuation model unless the use of
            such alternative evaluation methodology is disclosed in the Final
            File.

11.   Master Policy. All Coverage issued hereunder shall be subject to the terms
      and conditions of Mortgage Guaranty Master Policy for Multiple Loan
      Transactions [MGIC form #71-70275 (2/06) with #71-70276 (2/05)] (the
      "Master Policy").

12.   Accuracy of Information on Final File; Representations and Warranties and
      Covenants. It is understood that information relating to the Insured Loans
      will be delivered to MGIC by electronic format, and that MGIC will not
      individually underwrite each Insured Loan. Wells Fargo will deliver or
      cause to be delivered to MGIC a final data file of Insurable Loans that
      meet the Eligibility Criteria and the other requirements for Coverage
      under this letter in a form mutually agreed to by the parties (the "Final
      File"), a copy of which will be attached to the Certificate for Insured
      Loans. The Final File will constitute an Application for Coverage under
      the Master Policy and this letter and any other information provided to
      MGIC will be considered part of that Application.

      MGIC has been advised that the Insured loans were made and underwritten by
      the originator(s) in accordance with the underwriting requirements in
      effect at the time of origination of the Insured Loans (the "Underwriting
      Requirements"). Wells Fargo represents and warrants to MGIC that each
      Insured Loan meets (a) the Eligibility Criteria set forth in Section 10
      above and (b) in all material respects, the Underwriting Requirements.

      In extending this offer to insure, MGIC is relying on the truth and
      accuracy of the information relating to the Insured Loans provided by
      Wells Fargo, and MGIC has no obligation to insure loans which do not meet
      the requirements of this letter. Wells Fargo acknowledges and agrees that
      (a) the mortgage loan information for each Insurable Loan contained on the
      Final File provided to MGIC prior to issuance of Coverage and the
      representations, warranties and covenants in this letter are material to
      MGIC's decision as to whether to issue such Coverage on such Insurable
      Loan, (b) MGIC is relying on such information and representations,
      warranties and covenants in issuing such Coverage on such Insurable Loan,
      and (c) the submission of inaccurate information or the breach of such
      representations, warranties or covenants which is material to the
      acceptance or pricing of the risk with respect to any Insured Loan may
      result in rescission or cancellation of Coverage on the affected Insured
      Loan, with a refund of all premium paid with respect thereto. Wells Fargo
      represents and warrants to MGIC that all mortgage loan information
      provided to MGIC relevant to MGIC's insurance decision on an Insurable
      Loan, including but not limited to information contained on the Final File
      provided by Wells Fargo prior to issuance of Coverage, is materially true,
      correct, and accurate; however, MGIC's rights and remedies for a breach
      thereof shall be limited to MGIC's rights and remedies under the Master
      Policy and no other rights or remedies of MGIC shall be implied or created
      by this letter.

13.   Servicing of Insured Loans Under the Master Policy. Wells Fargo and the
      Insured acknowledge that (1) under Section 3.4 of the Master Policy if
      there is a change of Servicer, Coverage of an Insured Loan continues
      provided that prior written notice of the new Servicer is given to MGIC
      and the new Servicer is approved in writing by MGIC in advance of such
      change of Servicer, and that (2) under Section 4.6 of the Master Policy a
      Claim occurring on an Insured Loan when the Servicer for such Insured Loan
      is not approved by MGIC is excluded from Coverage under the Master Policy.

14.   GLB; Consumer Privacy. MGIC and Wells Fargo each represents to the other
      that it shall comply with all privacy and data protection laws, rules, and
      regulations which are or which may in the future be applicable to the
      information disclosed by Wells Fargo pursuant to this agreement or in
      connection with any transactions or activities covered by this agreement.
      Without limiting the generality of the preceding sentence, MGIC agrees
      that it will keep confidential and will not use nor disclose to any other
      party, except as necessary to fulfill its obligations under this agreement
      or as permitted by applicable law or regulation, any nonpublic personal
      information, if any, which it receives from or on behalf of Wells Fargo in
      connection with the activities or transactions covered by this Agreement
      ("NPI"). For purposes of this provision, the term "nonpublic personal
      information" shall have the meaning set forth in Section 509 of the
      Gramm-Leach-Bliley Act (P.L. 106-102) (15 U.S.C. Section 6801 et seq.) and
      implementing regulations thereof. MGIC represents and warrants that it
      has, and will continue to have for so long as it retains NPI, adequate
      administrative, technical, and physical safeguards designed (i) to insure
      the security and confidentiality of customer records and information, (ii)
      to protect against any anticipated threats or hazards to the security or
      integrity of such records, and (iii) to protect against unauthorized
      access to or use of such records or information which could result in
      substantial harm or inconvenience to any customer. MGIC shall immediately
      notify Wells Fargo if MGIC discovers there has been a material breach in
      its security safeguards required by this agreement, and such breach
      results in the security of NPI being compromised for any reason (which
      notice shall provide information related to the details of such event and
      a description of the information), and MGIC shall take all reasonable and
      appropriate steps to protect such NPI in such event. MGIC shall at all
      times during the term of the Coverage, keep proper books and records of
      account, and shall maintain records and information sufficient to show
      compliance with the terms of this Section.

15.   Counterparts and Facsimile Signatures. This letter agreement may be
      executed in separate counterparts, each of which shall be deemed an
      original but all of which together will constitute but one agreement, and
      will become effective when each party has executed one or more
      counterparts and delivered same to the other parties. This letter
      agreement may also be executed by facsimile signatures, which will be as
      effective as original signatures. All capitalized terms in this letter,
      unless defined herein, shall have the respective meanings as set forth in
      the Master Policy.

16.   Securities Administrator Capacity. It is expressly understood and agreed
      by the parties hereto that insofar as this Agreement is executed on behalf
      of the Trust, (i) this Agreement is executed and delivered by Wells Fargo
      Bank, N.A., not in its individual capacity but solely as Securities
      Administrator under the Pooling and Servicing Agreement in the exercise of
      the powers and authority conferred and vested in it, (ii) Wells Fargo
      Bank, N.A., not in its individual capacity but solely as Securities
      Administrator under the Pooling and Servicing Agreement, has delegated all
      of its rights and responsibilities under this Agreement to Wells Fargo
      Bank, N.A., as Servicer under the Pooling and Servicing Agreement, (iii)
      each of the representations, undertakings and agreements herein made on
      the part of the Trust is made and intended not as representations,
      warranties, covenants, undertakings and agreements by Wells Fargo Bank,
      N.A. in its individual capacity but is made and intended for the purpose
      of binding only the Trust and (iv) under no circumstances shall Wells
      Fargo Bank, N.A. in its individual capacity be personally liable for the
      payment of any indebtedness or expenses of the Trust or be liable for the
      breach or failure of any obligation, representation, warranty or covenant
      made or undertaken by the Trust under this Agreement.


17.   Notices. Copies of all notifications which are addressed to the Insured
      shall be sent to the attention of:

         Ms. Carla Walker
         9062 Old Annapolis Road
         Columbia, Maryland  21045
         -------------------------

If the foregoing terms and conditions accurately reflect the agreement between
MGIC and Wells Fargo, please acknowledge this letter as your request for
insurance of the Insured Loans and your acceptance of its terms by signing it in
the space provided below at your earliest convenience. In order for this letter
to be binding on MGIC, it must be signed and returned to me within 30 days
subsequent to the date of this letter, and the Master Policy must be issued no
later than 60 days subsequent to the date of this letter.



Please call me if you have any questions.


Sincerely,


/s/ Steven M. Thompson


Steven M. Thompson
Vice President
Risk Management


<PAGE>


Mortgage Guaranty Insurance Corporation                            [LOGO - MGIC]


The foregoing terms, conditions and provisions are hereby accepted, acknowledged
and agreed to by Wells Fargo Bank, National Association as Securities
Administrator for the Trust.



WELLS FARGO BANK, NATIONAL ASSOCIATION, SOLELY AS SECURITIES ADMINISTRATOR FOR
WELLS FARGO HOME EQUITY ASSET-BACKED SECURITIES 2006-3 TRUST


By:      /s/ Carla S. Walker                           Dated:  December 13, 2006
   --------------------------------------                      -----------------
Name:      Carla S. Walker


Title:     Vice President



Terms for MGIC Mortgage Insurance Coverage on Loans to be included in the Trust
known as the Wells Fargo Home Equity Asset-Backed Securities 2006-3 Trust


<PAGE>


Mortgage Guaranty Insurance Corporation                            [LOGO - MGIC]
250 E. Kilbourn Avenue
P.O. Box 488, Milwaukee, Wisconsin 53201-0488


                ------------------------------------------------
                          Declaration Page for Use With
                       Mortgage Guaranty Master Policy for
                           Multiple Loan Transactions
                ------------------------------------------------

--------------------------------------------------------------------------------
Mortgage Guaranty Insurance Corporation (a stock insurance company hereinafter
called the "Company") agrees to pay to the Insured identified below, in
consideration of the premium or premiums to be paid as specified in this Policy
and in reliance on the Insured's Application for coverage under this Policy any
Loss due to the Default by a Borrower on a Loan, subject to the terms and
conditions in this Policy.
--------------------------------------------------------------------------------


Insured's Name and Mailing Address:                      Master Policy Number:
Wells Fargo Bank, N.A. as Securities Administrator           22-400-4-3707
WFHET Asset-Backed Certificates, Series 2006-3
Wells Fargo Center, Sixth and Marquette                Effective Date of Policy:
Minneapolis, Minnesota  55479                              December 1, 2006

Security: Wells Fargo Home Equity Asset-Backed Securities 2006-3 Trust
--------------------------------------------------------------------------------

Includes Terms and Conditions #71-70276 (2/05)

Includes Endorsement(s):  none





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

In Witness Whereof, the Company has caused its Corporate Seal to be hereto
affixed and these presents to be signed by its duly authorized officers in
facsimile to become effective as its original seal and signatures and binding on
the Company.


                              [LOGO-CORPORATE SEAL]

                  /s/ Patrick Sinha         /s/ Jeffrey Thane
                        President               Secretary


                     MORTGAGE GUARANTY INSURANCE CORPORATION


                             /s/ Steven M. Thompson
              -----------------------------------------------------
                            Authorized Representative
                       Steven M. Thompson, Vice President

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


<PAGE>


                                Table of Contents
         Mortgage Guaranty Master Policy for Multiple Loan Transactions

1     Definitions

      1.1     Application
      1.2     Appropriate Proceedings
      1.3     Borrower
      1.4     Borrower's Own Funds
      1.5     Borrower's Title
      1.6     Certificate
      1.7     Certificate Effective Date
      1.8     Certificate Number
      1.9     Certificate Schedule
      1.10    Claim
      1.11    Claim Amount
      1.12    Collateral
      1.13    Conveyance of Title
      1.14    Default
      1.15    Eligibility Criteria
      1.16    Environmental Condition
      1.17    Good and Merchantable Title
      1.18    Insured
      1.19    Loan
      1.20    Loan File
      1.21    Loss
      1.22    Original LTV
      1.23    Per Loan Loss Percentage
      1.24    Perfected Claim
      1.25    Person
      1.26    Physical Damage
      1.27    Policy
      1.28    Possession of the Property
      1.29    Primary First Layer Policy
      1.30    Property
      1.31    Residential
      1.32    Security
      1.33    Servicer
      1.34    Settlement Period
      1.35    Value

2     Obtaining Coverage and Payment of Premiums

      2.1     Obtaining Coverage
      2.2     Representations of the Insured
      2.3     Company's Remedies for Misrepresentation
      2.4     Initial Premium and Term of Coverage
      2.5     Renewal of Certificate and Termination for Non-Payment of Renewal
              Premium
      2.6     Special Procedures for Receipt and Deposit of Initial and Renewal
              Premiums
      2.7     Cancellation by the Insured of a Certificate
      2.8     Cancellation of Policy
      2.9     Cancellation of Policy and Coverage of Loans Upon Termination of
              Security or Removal of Loans from Security
      2.10    Refund of Premium for Certain Circumstances
      2.11    Post Underwriting Review and Copies of Loan Files

3     Changes in Various Loan Terms, Servicing and Insured; Coordination and
      Duplication of Benefits

      3.1     Loan Modifications
      3.2     Open End Provisions
      3.3     Assumptions
      3.4     Servicing
      3.5     Change of Insured of this Policy
      3.6     Assignment of Coverage of a Loan under this Policy
      3.7     Coordination and Duplication of Insurance Benefits
      3.8     Indebtedness and Liens with Respect to Collateral

4     Exclusions From Coverage

      4.1     Balloon Payment
      4.2     Effective Date
      4.3     First Payment Default
      4.4     Incomplete Construction
      4.5     Fraud, Misrepresentation and Negligence
      4.6     Non-Approved Servicer
      4.7     Physical Damage (Other than Relating to Pre-Existing Environmental
              Conditions)
      4.8     Pre-Existing Environmental Conditions
      4.9     Down Payment
      4.10    First Lien Status
      4.11    Payment of the Full Benefit of the Primary
              First Layer Policy
      4.12    Non-Eligible Loans
      4.13    Breach of the Insured's
              Obligations or Failure to Comply with Terms

5     Conditions Precedent to Payment of Claim

      5.1     Notice of Default
      5.2     Monthly Reports
      5.3     Company's Option to Accelerate Filing of a Claim
      5.4     Voluntary Conveyance
      5.5     Appropriate Proceedings
      5.6     Mitigation of Damages
      5.7     Advances
      5.8     Claim Information and Other Requirements
      5.9     Acquisition of Borrower's Title Not Required
      5.10    Sale of a Property by the Insured Before End of Settlement Period
      5.11    Foreclosure Bidding Instructions Given by the Company
      5.12    Effect of Unexpired Redemption Period on Payment of a Claim
      5.13    Collection Assistance

6     Loss Payment Procedure

      6.1     Filing of Claim
      6.2     Calculation of Claim Amount
      6.3     Payment of Loss; Company's Options
      6.4     Claim Settlement Period
      6.5     Payment by the Company After the Settlement Period
      6.6     Discharge of Obligation

7     Additional Conditions

      7.1     Proceedings of Eminent Domain
      7.2     Pursuit of Deficiencies
      7.3     Subrogation
      7.4     Policy for Exclusive Benefit of the Insured
      7.5     Effect of Borrower Insolvency or Bankruptcy on Principal Balance
      7.6     Arbitration of Disputes; Suits and Actions Brought by the Insured
      7.7     Release of Borrower; Defenses of Borrower
      7.8     Amendments; No Waiver; Rights and Remedies; Use of Term
              "Including"
      7.9     No Agency
      7.10    Successors and Assigns
      7.11    Applicable Law and Conformity to Law
      7.12    Notice
      7.13    Reports and Examinations
      7.14    Electronic Media

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


<PAGE>


                              Terms and Conditions

1     Definitions

      1.1   Application means all documents, materials, statements,
            representations, warranties, data and other information,
            irrespective of the Person or Persons who prepared same, submitted
            to the Company by or on behalf of the Insured in connection with the
            Insured's request for insurance under this Policy.

      1.2   Appropriate Proceedings means any legal or administrative action by
            the Insured affecting either a Loan or title to a Property,
            including:

            (a)   Preserving a deficiency recovery by making a bid at the
                  foreclosure sale and pursuing a deficiency judgment until the
                  end of the Settlement Period, where appropriate and
                  permissible and where directed by the Company; or

            (b)   Enforcing the terms of the Loan as allowed by the laws where
                  the Property is located or those laws affecting either the
                  Loan or, if applicable, the Collateral; or

            (c)   Acquiring Borrower's Title or Good and Merchantable Title to
                  the Property, as either may be required under this Policy, but
                  excluding such title as may be acquired by a voluntary
                  conveyance from the Borrower; or

            (d)   Asserting the Insured's interest in the Property in a
                  Borrower's bankruptcy.

      1.3   Borrower means any Person legally obligated to repay the debt
            obligation created by a Loan, including any co-signer or guarantor
            of the Loan.

      1.4   Borrower's Own Funds means any funds used by the Borrower for the
            purpose of making installment payments, but will not include funds
            provided directly or indirectly by any Person (other than the
            Borrower) who is or was a party to the Loan or to the related
            Property transaction, unless expressly set forth in the Application.

      1.5   Borrower's Title means such title to a Property as was vested in the
            Borrower at the time of a conveyance to the Insured arising out of
            or pursuant to a foreclosure of the Loan; provided, however, if the
            Insured so elects, the redemption period need not have expired.
            Borrower's Title as conveyed to the Insured may be, but need not be,
            the equivalent of Good and Merchantable Title, and the deed
            evidencing Borrower's Title need not be recorded unless required by
            applicable law.

      1.6   Certificate means the document issued by the Company pursuant to
            this Policy extending the coverage indicated therein to one or more
            Loans as listed on a Certificate Schedule. A Certificate may take
            the form, without limitation, of a facsimile, electronic computer
            file, or other agreed-upon data interchange medium. As used in this
            Policy, the term "Certificate" shall mean the Certificate and the
            Certificate Schedule attached thereto and listing the Certificate
            Number assigned to each Loan to which coverage is extended.

      1.7   Certificate Effective Date means 12:01 a.m. on the date upon which
            coverage of a Loan under this Policy begins, as specified in the
            Certificate.

      1.8   Certificate Number means the identification number issued by the
            Company for a Loan to which coverage is extended as shown on the
            Certificate Schedule for such Loan.

      1.9   Certificate Schedule means a list of Loans to which coverage has
            been extended under this Policy, and which is attached to the
            Certificate.

      1.10  Claim means the timely filed written request, made on a form or in a
            format provided or approved by the Company, to receive the benefits
            of this Policy.

      1.11  Claim Amount means the amount calculated in accordance with Section
            6.2 of this Policy.

      1.12  Collateral means

            (a)   the stock or membership certificate issued to a
                  tenant-stockholder or resident-member by a completed fee
                  simple or leasehold cooperative housing corporation; and

            (b)   the proprietary lease relating to one (1) unit in the
                  cooperative housing corporation executed by such
                  tenant-stockholder or resident-member and any other rights of
                  such stockholder or member relating to any of the foregoing.

      1.13  Conveyance of Title means the transfer of title to the Property
            through

            (a)   voluntary conveyance to the Insured of Borrower's Title;

            (b)   Appropriate Proceedings or exercise of rights of redemption;
                  or

            (c)   approved sale of the Property.

      1.14  Default means the failure by a Borrower

            (a)   to pay when due any monthly or other regular periodic payment
                  under the terms of a Loan; or

            (b)   to pay all amounts due on acceleration of the Loan by the
                  Insured after breach by the Borrower of a due-on-sale
                  provision in the Loan, granting the Insured the right to
                  accelerate the Loan upon transfer of title to, or an interest
                  in, the Property and to institute Appropriate Proceedings.

            Violation by the Borrower of any other term or condition of the Loan
            which is a basis for Appropriate Proceedings shall not be considered
            to be a Default.

            A Loan is deemed to be in Default for that month as of the close of
            business on the installment due date for which a scheduled monthly
            or other regular periodic payment has not been made or as of the
            close of business on the due date stated in the notice of
            acceleration given pursuant to the due-on-sale provision in the
            Loan. The Loan will be considered to remain in Default until filing
            of a Claim so long as such periodic payment has not been made or
            such basis for Appropriate Proceedings remains. For example, a Loan
            is "four (4) months in Default" if the monthly installments due on
            January 1 through April 1 remain unpaid as of the close of business
            on April 1 or if a basis for acceleration and Appropriate
            Proceedings exists for a continuous period of four months.

      1.15  Eligibility Criteria means the requirements established by the
            Company for the insurability of a Loan under this Policy and of
            which the Company has notified the Insured prior to issuance of the
            Policy.

      1.16  Environmental Condition means the presence of environmental
            contamination, including nuclear reaction or radioactive waste,
            toxic waste, poisoning, or mold, contamination or pollution of the
            Property or of the earth or water subjacent to the Property or of
            the atmosphere above the Property; or the presence, on or under a
            Property, of any "Hazardous Substance" as that term is defined by
            the federal Comprehensive Environmental Response, Compensation, and
            Liability Act (42 U.S.C. Sec. 9601 et. seq., as amended from time to
            time) or as defined by any similar state law, or of any "Hazardous
            Waste" or "Regulated Substance" as those terms are defined by the
            federal Resource Conservation and Recovery Act (42 U.S.C. sec. 6901,
            et seq., as amended from time to time) or as defined by any similar
            state law. Environmental Condition does not mean the presence of
            radon, lead paint, or asbestos.

      1.17  Good and Merchantable Title means title to a Property (or, with
            respect to the Collateral securing a Loan, the title to both the
            Collateral and the Property), free and clear of all liens,
            encumbrances, covenants, conditions, restrictions, easements and
            rights of redemption, except for any of the following or as
            permitted in writing by the Company:

            (a)   Any lien established by public bond, assessment or tax, when
                  no installment, call or payment of or under such bond,
                  assessment or tax is delinquent;

            (b)   Any municipal and zoning ordinances and exceptions to title
                  waived by the regulations of federal mortgage insurers and
                  guarantors with respect to mortgages on one-to-four family
                  residences in effect on the date on which the Loan was closed
                  and all documents were executed;

            (c)   With respect to Collateral, a first mortgage lien on the
                  entire real estate owned by the cooperative housing
                  corporation which has been disclosed to the Person originating
                  the Loan secured by the Collateral; and

            (d)   Any other impediments which will not have a materially adverse
                  effect on either the transferability of the Property or the
                  sale thereof (or, if applicable, the transferability or sale
                  of the Collateral) to a bona fide purchaser.

            Good and Merchantable Title will not exist if (i) there is any lien
            pursuant to the Comprehensive Environmental Response, Compensation,
            and Liability Act, or similar federal or state law, as in effect
            from time to time, providing for liens in connection with the
            removal and clean-up of environmental conditions, or if notice has
            been given of commencement of proceedings which could result in such
            a lien, or (ii) there are limitations on ingress and egress to the
            Property or on use of utilities. Any action or proceeding after a
            foreclosure sale relating to establishing a deficiency judgment will
            not be considered in determining whether the Insured has acquired
            Good and Merchantable Title.

      1.18  Insured means:

            (a)   the Person designated on the face of this Policy; or

            (b)   any Person to whom coverage has been assigned as permitted by
                  Sections 3.5 or 3.6 resulting in a change in the Insured named
                  on a Certificate for a Loan in accordance with this Policy.

      1.19  Loan means any note, bond, or other evidence of indebtedness secured
            by a mortgage, deed of trust, or other similar instrument, which
            constitutes or is equivalent to a first lien or charge on a Property
            and which the Company has approved for insurance and to which
            coverage under this Policy has been extended.

      1.20  Loan File means, with respect to a Loan, copies of all documents and
            information (irrespective of form or medium) created or received by
            any Person in connection with the origination or closing of the
            Loan, including the Borrower's loan application, purchase contract,
            appraisal or other evidence of valuation, credit report,
            verifications of employment, income and deposit, and HUD-1 or other
            settlement statement.

      1.21  Loss means the liability of the Company with respect to a Loan for
            payment of a Perfected Claim which is calculated in accordance with
            Section 6.3. A Loss will be deemed to have occurred when a Default
            on a Loan occurs, even though the amount of Loss is not then either
            presently ascertainable or due and payable.

      1.22  Original LTV means the ratio of the principal balance of a Loan at
            its origination to the Value of the Property.

      1.23  Per Loan Loss Percentage means the indicated percentage as set forth
            for a Loan on the applicable Certificate.

      1.24  Perfected Claim means a Claim received by the Company which contains
            all information or proof required by the Company and for which all
            requirements of this Policy applicable to payment of a Claim are
            satisfied.

      1.25  Person means any individual, corporation, partnership, association
            or other entity.

      1.26  Physical Damage means any tangible injury to a Property, whether
            caused by accident, natural occurrence, or any other reason,
            including damage caused by defects in construction, land subsidence,
            earth movement or slippage, fire, flood, earthquake, riot, vandalism
            or any Environmental Condition.

      1.27  Policy means this contract of insurance and all Applications,
            endorsements, schedules, and Certificates, which are incorporated in
            this Policy, related to Loans insured under this Policy.

      1.28  Possession of the Property means, if the Company elects to acquire
            the Property, physical and undisputed occupancy and control of the
            Property at the time of acquisition, or in the case of a Loan
            secured by Collateral, subject to the terms of the proprietary lease
            from the cooperative housing corporation.

      1.29  Primary First Layer Policy means the policy or guarantee issued by a
            mortgage guaranty insurance company approved for insurance of
            mortgage loans sold to either the Federal National Mortgage
            Association ("Fannie Mae"), or the Federal Home Loan Mortgage
            Corporation ("Freddie Mac"), which for a Loan provides coverage (a)
            in at least the coverage percent set forth for such Loan on the
            applicable Certificate, (b) that is issued under a form of policy
            issued by such company, approved by Fannie Mae or Freddie Mac and in
            general use for the mortgage loans sold to Fannie Mae or Freddie
            Mac, as applicable, and (c ) that is maintained in full force and
            effect until cancellation thereof is required under applicable law.
            Upon the Company's request, from time to time, the Insured shall
            provide to the Company a copy of the form of each Primary First
            Layer Policy under which it obtains coverage.

      1.30  Property means a Residential real property and all improvements
            thereon which secure a Loan, together with all easements and
            appurtenances, all rights of access, all rights to use common areas,
            recreational and other facilities, and all of their replacements or
            additions. In the case of a Loan secured by Collateral, Property
            means the Residential real property, including all improvements
            thereon, which is owned by the cooperative housing corporation, and
            which is leased to the Borrower who holds an ownership or membership
            interest in such cooperative housing corporation, which lease and
            interest secure the related Loan, together with all easements and
            appurtenances, all rights of access, all rights to use common areas,
            recreational and other facilities, and all replacements or additions
            to any of the foregoing.

            For purposes of this Policy, wherever the term "Property" is used in
            reference to the stock or membership certificate, the lease, or any
            other asset or right related thereto (but not the physical condition
            or structure of the Property), it shall be deemed to be changed to
            "Collateral", including for purposes of provisions relating to
            foreclosure, Appropriate Proceedings, or redemption; acquisition of
            title or other status of title, lien or ownership (including
            Borrower's Title and Good and Merchantable Title); or acquisition,
            disposition or Conveyance of Title by any Person.

      1.31  Residential means a type of building or a portion thereof which is
            designed for occupancy by not more than four (4) families, or a
            single-family condominium, or a unit in a planned unit development.
            In the case of a cooperative housing corporation, Residential means
            a type of building or a portion thereof which is designed for
            occupancy by more than one family, with ownership by a cooperative
            housing corporation.

      1.32  Security means a bond, certificate or other security instrument for
            which a Loan is security or in which a Loan is otherwise included
            and which is identified on the face of this Policy.

      1.33  Servicer means that Person acting on behalf of the Insured of a Loan
            (or on behalf of the Insured's designee, if any) to service the
            Loan. The Servicer acts as a representative of the Insured of the
            Loan (and the Insured's designee, if any) and will bind the Insured
            and its designee for all purposes of this Policy, including
            providing information to the Company, receiving any notices, paying
            premiums, accepting Loss payments, and performing any other acts
            under this Policy. For purposes of the Policy, the term "Servicer"
            shall include the master servicer for a Loan of whom the Company has
            been notified, as well as any servicer acting on behalf of the
            master servicer of whom the Company has been notified. References in
            this Policy to a Servicer's obligations will not be construed as
            relieving the Insured or its designee of responsibility for the
            Servicer's performance.

      1.34  Settlement Period means the sixty (60) day period as determined
            under Section 6.4, at the end of the which a Loss is payable by the
            Company; provided that if the Company pays a Loss prior to
            expiration of such sixty (60) day period, the Settlement Period ends
            with such payment.

      1.35  Value means the lesser of the sales price of a Property (only
            applicable in the case of a Loan to finance the purchase of such
            Property) or the value of the Property as determined from an
            appraisal or other method of valuation, as set forth in the
            Certificate.

      Any pronouns, when used in this Policy, will mean the singular or plural,
masculine or feminine, as the case may be.


2     Obtaining Coverage and Payment of Premiums

      2.1   Obtaining Coverage - This Policy shall extend to each Loan which the
            Insured submits for coverage under this Policy, provided that it is
            made in accordance with the terms and provisions of this Policy,
            including the Eligibility Criteria, and is accepted for insurance by
            the Company, as evidenced by a Certificate issued by the Company. In
            order to obtain coverage under this Policy for a Loan, the Insured
            or the Person acting on its behalf must submit a duly completed
            Application to the Company and notify the Company of the Servicer of
            the Loan, all of which must be acceptable to the Company. If all
            applicable requirements are satisfied, extension of coverage to a
            Loan under this Policy shall be evidenced by issuance of a
            Certificate Number on the Certificate Schedule.

      2.2   Representations of the Insured - The Insured represents that:

            (a)   All statements made and information provided to the Company in
                  the Application (including as such is related to continuation
                  of coverage upon assumption of a Loan) are supported by
                  statements and information in the Loan File;

            (b)   All statements made and information in the Application when
                  provided to the Company, or contained in the Loan File when
                  the Loan is closed, are not false or misleading in any
                  material respect as of such date(s) and do not omit any fact
                  necessary in order to make such statements and information not
                  false or misleading in any material respect as of such
                  date(s); and

            (c)   The Loan complies with the Eligibility Criteria.

            The foregoing representations will apply to all statements and
            information provided to the Company in the Application or contained
            in the Loan File, whether made or submitted by the Insured, the
            Borrower or any other Person, and will be deemed to have been made
            and provided for and on behalf of the Insured. The foregoing
            representations shall be effective whether or not they are made by
            the Insured or other Person with the intent to deceive or mislead,
            or with the knowledge that they are not true and correct.

            It is understood and agreed that such statements and information in
            the Application or Loan File in the aggregate are, and in certain
            instances individually may be, material to the Company's decision to
            offer or provide coverage of the related Loan; the Company issues
            the related Certificate in reliance on the accuracy and completeness
            of such statements and information submitted to it; and the
            Company's reliance on the representations in this Section 2.2
            survive the issuance of a Certificate or such continuation of
            coverage and any later review or audit of the Insured's files by the
            Company. Without otherwise limiting the scope of this Section 2.2, a
            breach of Section 4.9 relating to down payment will be deemed a
            material misrepresentation for purposes of this Section 2.2.

      2.3   Company's Remedies for Misrepresentation - If any of the Insured's
            representations as described in Section 2.2 are materially false or
            misleading with respect to a Loan, the Company will have, at its
            option, the right to defend against a Claim, or to the extent
            permitted by applicable law, to cancel or rescind coverage for such
            Loan under the Certificate retroactively to commencement of coverage
            (or if the misrepresentation occurs with respect to continuation of
            coverage upon assumption of a Loan, to so defend, cancel or rescind
            retroactively to the date of such continuation). In the case of such
            cancellation or rescission, the Company shall return at that time
            all paid premiums for such Loan retroactively to such applicable
            date.

      2.4   Initial Premium and Term of Coverage - Within fifteen (15) days from
            the Certificate Effective Date, or such other date as the Company
            and the Insured may agree to in writing, the Insured must forward to
            the Company the appropriate initial premium. Payment of the initial
            premium shall be a condition precedent to coverage being extended to
            the Loan. Subject to cancellation by the Insured or the Company as
            provided in this Policy, coverage shall remain in full force and
            effect for the period covered by the initial premium.

      2.5   Renewal of Certificate and Termination for Non-Payment of Renewal
            Premium - The Insured is obligated to continue coverage in effect
            and pay any premium which is due, as required by Section 2.7 of this
            Policy. The entire premium for all Loans (including all Loans then
            in Default) must be paid within a forty-five (45) day grace period
            (or such longer grace period generally allowed by the Company) after
            the due date for payment. Upon payment of the entire premium for all
            Loans within such grace period, this Policy will be in effect for
            the applicable period of coverage and a Default on a Loan occurring
            within said grace period which is not cured, and which results in a
            Claim being filed, will be covered. If the entire premium for all
            Loans is not paid within the grace period, at the option of the
            Company, the coverage of this Policy and the Company's liability as
            to all Loans will terminate effective as of 12:01 a.m. on the first
            day following the date through which the applicable premium has been
            paid and as a result, any future Defaults on any of the Loans will
            not be covered under this Policy.

            If the applicable premium on a Loan in Default has been paid for a
            renewal term following the renewal term during which such Default
            occurred, and if such Default is not cured and results in a Claim,
            such premium paid shall be refunded in connection with the
            settlement of the Claim. If such premium on such Loan in Default is
            not paid, coverage on such Loan shall be cancelled retroactive to
            the date through which the premium has been paid, but a Claim
            resulting from a Default which occurred before the date through
            which the applicable premium has been paid shall be covered, subject
            to the terms and conditions of this Policy.

      2.6   Special Procedures for Receipt and Deposit of Initial and Renewal
            Premiums - The Insured acknowledges that the Company deposits
            initial and renewal premium checks immediately upon receipt and
            agrees that the receipt and deposit of a premium check by the
            Company after the time specified in this Policy for receipt, does
            not constitute a waiver of the requirements of this Policy for
            timely receipt or an acceptance of premium by the Company. The
            Company will have the right to return such late premium payment, but
            only within sixty (60) days after receipt, in which case coverage of
            all Loans (including all Loans then in Default) will be cancelled
            retroactively to the Certificate Effective Date for a late initial
            premium, or to the last day of the period covered by the previous
            premium payment for a late renewal premium. Receipt, deposit and
            retention of a premium check will not constitute a waiver of any
            defenses with respect to any other matters which the Company may
            have under this Policy.

      2.7   Cancellation by the Insured of a Certificate - Notwithstanding any
            provision to the contrary in this Policy, the Insured shall be
            obligated to maintain coverage of a Certificate for a Loan (and to
            pay corresponding premiums for continuation of such coverage for
            each month or partial month coverage is in effect) unless or until
            (a) the Loan is paid in full or (b) the ratio of the outstanding
            principal balance of the Loan to the Value (as defined in Section
            1.35 of this Policy) of the Property securing the Loan is at least
            five (5) percentage points less than the Original LTV minus the
            product of the Per Loan Loss Percentage and the Original LTV for
            such Loan under this Policy or (c) otherwise permitted in writing by
            the Company. Subject to the foregoing obligation of the Insured to
            maintain coverage, the Insured may obtain cancellation of coverage
            on a Loan by making a written notification in the case of (a) or (b)
            above or a written request in the case of (c) above. However, no
            refund will be paid upon cancellation of coverage on a Loan.
            Cancellation of coverage on a Loan will not cancel this Policy.

      2.8   Cancellation of Policy - Either the Insured or the Company may
            cancel their respective right or obligation to receive or issue new
            Certificates immediately upon written notice of cancellation of this
            Policy. However, Certificates issued prior to such cancellation of
            this Policy will continue in force so long as all premiums are paid
            and all other terms and conditions of this Policy for coverage are
            complied with by the Insured.

      2.9   Cancellation of Policy and Coverage of Loans Upon Termination of
            Security or Removal of Loans from Security - Except as otherwise
            specified below, in the event that

            (a)   the bonds, certificates or other security instruments
                  designated or referred to in this Policy as the Security are
                  redeemed, paid in full, cancelled or otherwise terminated, or
                  the trust created in connection with the issuance of the
                  Security is terminated for any reason (individually, a
                  "Redemption"), or

            (b)   there are no longer any Loans that are security for, or
                  represented by, the Security,

            this Policy and the coverage of all Loans under this Policy shall
            automatically be terminated without further action being required by
            either the Insured or the Company, and the Company shall have no
            liability for any Default existing at the time of cancellation,
            other than Defaults on Loans for which a Claim had been filed in
            accordance with Section 6.1 of this Policy prior to the date of
            termination of coverage.

            The Insured shall notify the Company within thirty (30) days after
            the occurrence of either (a) or (b) above. The provisions of this
            Section 2.9 shall control, notwithstanding the right of the Insured
            to cancel coverage on some or all of the Loans and the exercise of
            such right by the Insured. No refund will be paid upon cancellation
            of this Policy and coverage of Loans under this Section 2.9.

            Notwithstanding the foregoing, coverage of Loans insured under this
            Policy shall not automatically terminate in the event of a
            Redemption, if a change of Insured for all, but not less than all,
            of the Loans then insured under this Policy, is requested by the
            Insured and approved by the Company as provided for in Section 3.5
            within thirty (30) days after the effective date of the Redemption.

      2.10  Refund of Premium for Certain Circumstances - If, because of a
            provision in Sections 2, 3, or 4 (other than Sections 4.4, 4.7, or
            4.8), no Loss is payable to the Insured, the Company shall return to
            the Insured all paid premiums retroactively and pro rata to the date
            when the event or circumstance occurred which resulted in no Loss
            being payable.

      2.11  Post Underwriting Review and Copies of Loan Files - The Company or
            representatives designated by it will have the right, from time to
            time, upon thirty (30) days advance notice to the Insured, to
            conduct a post underwriting review (including inspection) of the
            Loan Files and other information, papers, files, documents, books,
            records, agreements, and electronically stored data pertaining to or
            in connection with Loans insured under this Policy prepared or
            maintained by or in the possession of the Insured or of the
            Servicer, or which the Insured or the Servicer has a legal right to
            obtain. The Company will have the right to conduct the review on the
            Insured's premises during normal business hours. The Insured must
            cooperate fully with the review.

            In addition, either in connection with such review or separately,
            the Company will have the right upon ninety (90) days prior written
            notice to obtain from the Insured a copy of the Loan File for any
            Loan for which a Certificate has been issued pursuant to this
            Policy. If for any reason the Insured fails to provide a copy of a
            Loan File at the time of the Company's review or upon the Company's
            other notice, the Company will provide a second notice to the
            Insured, allowing the Insured to provide it within an additional
            ninety (90) day period. If for any reason the Insured fails to
            provide a copy of a Loan File within the additional ninety day
            period, then, at the Company's option, the Company will have the
            right to cancel coverage for the Loan if, in the Company's
            reasonable judgment, any portion of the Loan File not provided would
            be relevant to the Company's assessment or assertion of its rights
            and defenses under this Policy.

3     Changes in Various Loan Terms, Servicing, and Insured; Coordination and
      Duplication of Benefits

      3.1   Loan Modifications - Unless advance written approval is provided by,
            or obtained from, the Company, the Insured may not make any change
            in the terms of a Loan, including the borrowed amount, interest
            rate, term or amortization schedule of the Loan, except as permitted
            by terms of the Loan; nor make any change in the Property or other
            collateral securing the Loan; nor release the Borrower from
            liability on a Loan.

      3.2   Open End Provisions - The Insured may increase the principal balance
            of a Loan, provided that the written approval of the Company has
            been obtained. The Insured will pay the Company the additional
            premium due at the then prevailing premium rate.

      3.3   Assumptions - If a Loan is assumed with the Insured's approval, the
            Company's liability for coverage under its Certificate will
            terminate as of the date of such assumption, unless the Company
            approves the assumption in writing. The Company will not
            unreasonably withhold approval of an assumption. It is understood
            that coverage will continue, and that the restriction of this
            Section 3.3 will not apply, if under the Loan or applicable law the
            Insured cannot exercise a "due-on-sale" clause or is obligated to
            consent to such assumption under the Loan or applicable law.

      3.4   Servicing -

            (a)   If the servicing rights for a Loan are sold, assigned or
                  transferred by the Insured, coverage of the Loan hereunder
                  will continue provided that prior written notice of the new
                  Servicer is given to the Company and the new Servicer is
                  approved in writing by the Company in advance of such sale,
                  assignment, or transfer.

            (b)   The Company may notify the Insured at any time in writing that
                  a Servicer is no longer approved by the Company.

      3.5   Change of Insured of this Policy - Change of Insured of this Policy
            shall only be allowed if advance written approval is obtained from
            the Company (which approval shall be in the sole and absolute
            discretion of the Company). If the Company approves the change of
            Insured, the Company shall, thereafter, change its records to
            identify the new Insured for this Policy.

      3.6   Assignment of Coverage of a Loan under this Policy - Assignment of
            coverage of a Loan shall only be allowed if advance written approval
            is obtained from the Company (which approval shall be in the sole
            and absolute discretion of the Company). If the Company approves the
            assignment, the Company shall, thereafter, change its records to
            identify the new Insured for such Loan. Coverage for any Person
            becoming an Insured pursuant to this Section 3.6 shall be subject to
            all of the terms, conditions, and exclusions contained in this
            Policy and to all defenses to coverage available to the Company
            against the original Insured.

      3.7   Coordination and Duplication of Insurance Benefits - The coverage
            under this Policy shall be excess over any other insurance which may
            apply to the Property or to the Loan, except for mortgage guaranty
            pool insurance or supplemental or second tier mortgage insurance.

      3.8   Indebtedness and Liens with Respect to Collateral - The Insured
            shall not consent to or approve, without the prior written approval
            of the Company:

            (a)   a lien on the entire real estate or the Property that is owned
                  by a cooperative housing corporation, other than that
                  indebtedness secured by a first mortgage lien or other liens
                  disclosed to the Person originating the Loan secured by the
                  Collateral; or

            (b)   a modification or termination of any rights of the Insured to
                  exercise its consent or approval respecting the matters
                  described in (a).

4     Exclusions From Coverage

      The Company will not be liable for, and this Policy will not apply to,
extend to or cover the following:

      4.1   Balloon Payment - Any Claim arising out of or in connection with the
            failure of the Borrower to make any payment of principal and/or
            interest due under a Loan:

            (a)   as a result of the Insured exercising its right to call the
                  Loan (other than when the Loan is in Default) or because the
                  term of the Loan is shorter than the amortization period, and

            (b)   which is for an amount more than twice the regular periodic
                  payments of principal and interest that are set forth in the
                  Loan (commonly referred to as a "balloon payment").

            This exclusion will not apply:

            (1)   if the Insured or other Person acting on behalf of the Insured
                  offers the Borrower, in writing, a renewal or extension of the
                  Loan or a new loan which

                  (A)   constitutes a first lien,

                  (B)   is at rates and terms generally prevailing in the
                        marketplace (but otherwise subject to Section 3.1),

                  (C)   is in an amount not less than the then outstanding
                        principal balance,

                  (D)   has no decrease in the amortization period, and

                  (E)   is offered regardless of whether the Borrower is then
                        qualified under the Insured's underwriting standards, or
                        whether the Borrower accepts such offer, or

              (2)   if the Loan has an original term to maturity of fifteen (15)
                    or more years from the first due date thereunder and equal
                    monthly payments (except for the related balloon payment)
                    that otherwise would fully amortize the principal of the
                    Loan over thirty (30) years and pay interest at the
                    applicable interest rate.

      4.2   Effective Date - Any Claim resulting from a Default existing at the
            Certificate Effective Date or occurring after lapse or cancellation
            of a Certificate.

      4.3   First Payment Default - Any Claim arising from a Default due to the
            failure of the Borrower to have made or to make the first regular
            periodic payment on the Loan from the Borrower's Own Funds.

      4.4   Incomplete Construction - Any Claim when, as of the date of such
            Claim, construction of a Property is not completed in accordance
            with the construction plans and specifications upon which the
            valuation of the Property at origination of the Loan was based.

      4.5   Fraud, Misrepresentation and Negligence -

            (a)   Any Claim not otherwise within the scope of Section 2.3 where
                  there was fraud or misrepresentation by the Insured or the
                  Servicer with respect to the Loan, and the fraud or
                  misrepresentation (1) materially contributed to the Default
                  resulting in such Claim; or (2) increased the Loss, except
                  that if the Company can reasonably determine the amount of
                  such increase, such Claim will not be excluded, but the Loss
                  will be reduced to the extent of such amount.

            (b)   Any Claim where there was negligence by the Insured or the
                  Servicer, which (1) was material to either the acceptance of
                  the risk or the hazard assumed by the Company; (2) materially
                  contributed to the Default resulting in such Claim; or (3)
                  increased the Loss, except that if the Company can reasonably
                  determine the amount of such increase, such Claim will not be
                  excluded, but the Loss will be reduced to the extent of such
                  amount.

      4.6   Non-Approved Servicer - Any Claim arising from a Loan for which the
            Servicer, at time of Default or thereafter, is not approved by the
            Company as described in Section 3.4; provided that this exclusion
            shall not apply if the Company has notified the Insured in writing
            under Section 3.4(b) that a Servicer is no longer approved and if
            within ninety (90) days thereafter the Insured completed a transfer
            of servicing to a new Servicer approved by the Company.

      4.7   Physical Damage (Other than Relating to Pre-Existing Environmental
            Conditions) - Any Claim where, at any time after the Certificate
            Effective Date, Physical Damage to a Property (of a type other than
            as described in Section 4.8 and other than reasonable wear and
            tear), occurs or manifests itself subject to the following
            provisions:

            (a)   This exclusion will not apply if the Company in good faith
                  determines that the aggregate cost of restoring all such
                  Physical Damage is less than fifteen hundred dollars ($1,500),
                  or such higher amount as the Company may provide from time to
                  time.

            (b)   This exclusion will apply only if such Physical Damage
                  occurred or manifested itself:

                  (i)   prior to expiration of the Settlement Period and the
                        Company elects to acquire the related Property in
                        settlement of a Claim; or

                  (ii)  prior to the filing of the Claim and was the most
                        important cause of the Claim and the Property was either
                        uninsured for loss arising from such Physical Damage or
                        was insured for an amount which, disregarding normal and
                        customary deductibles not to exceed fifteen hundred
                        dollars ($1,500) or such higher amount as the Company
                        may provide from time to time, was insufficient for the
                        Property to be in the same condition (except for
                        reasonable wear and tear) as it was in as of the
                        Certificate Effective Date.

            (c)   The exclusion resulting from paragraph (b)(i) will not apply
                  if the Property is restored in a timely and diligent manner to
                  its condition (except reasonable wear and tear) as of the
                  Certificate Effective Date. In lieu of requiring restoration
                  of the Property, the Company may, at its option, reduce the
                  Claim Amount by an amount equal to the cost of such
                  restoration.

            (d)   For purposes of this Section 4.7, the Property subject to
                  restoration will consist only of the land, improvements or
                  personal property deemed part of the real property under
                  applicable law, and chattel items affixed to the real property
                  and identified in the appraisal or other valuation of the
                  Property at the time the Loan was made, whether or not they
                  are deemed part of the real property.

            (e)   Cost estimates relied upon by the Company in connection with
                  this Section 4.7 shall be provided in writing by an
                  independent party selected by the Company. The Company will
                  furnish the Insured with any such written cost estimates, if
                  requested by the Insured.

      4.8   Pre-Existing Environmental Conditions - Any Claim where there is an
            Environmental Condition which existed on the Property (whether or
            not known by the Person submitting an Application for coverage of
            the Loan) as of the Certificate Effective Date, subject to the
            following provisions:

            (a)   This exclusion will not apply if the existence of such
                  Environmental Condition, or the suspected existence of such
                  Environmental Condition, was specifically disclosed to the
                  Company in the Application relating to the Property.

            (b)   This exclusion will apply only if such Environmental Condition

                  (i)   was a principal cause of the Default, and

                  (ii)  has made the principal Residential structure on the
                        Property uninhabitable. A structure will be considered
                        "uninhabitable" if generally recognized standards for
                        residential occupancy are violated or if, in the absence
                        of such standards, a fully informed and reasonable
                        person would conclude that such structure was not safe
                        to live in without fear of injury to health or safety.

      4.9   Down Payment - Any Claim involving a Loan which is for the purchase
            of the Property, and for which the Borrower did not make a down
            payment as described in the Application or Loan File.

      4.10  First Lien Status - Any Claim, if the mortgage, deed of trust or
            other similar instrument executed by the Borrower and insured
            hereunder did not provide the Insured at origination with a first
            lien on the Property.

      4.11  Payment of the Full Benefit of the Primary First Layer Policy - Any
            portion of any Claim for Loss to the extent the Insured under the
            related Primary First Layer Policy has not received the amount of
            the full benefit of the percentage option claim payment under the
            Primary First Layer Policy (irrespective of the reason or cause,
            including insolvency of the Primary First Layer Policy insurer or
            failure of the Insured to maintain the Primary First Layer Policy or
            to comply with the terms and conditions of the Primary First Layer
            Policy).

      4.12  Non-Eligible Loans - Any Claim on a Loan that did not meet the
            Eligibility Criteria applicable to the Loan.

      4.13  Breach of the Insured's Obligations or Failure to Comply with Terms
            - Any Claim involving or arising out of any breach by the Insured of
            its obligations under, or its failure to comply with:

            (a)   the terms of this Policy (in any case where there is no
                  exclusion from coverage or express remedy for such breach or
                  noncompliance under this Policy), or

            (b)   its obligations as imposed by operation of law, and

            (c)   if such breach or failure in (a) or (b):

                  (i)   materially contributed to the Default resulting in such
                        Claim;

                  (ii)  increased the Loss, provided that if the Company can
                        reasonably determine the amount of such increase, such
                        Claim will not be excluded, but the Loss will be reduced
                        to the extent of such amount; or

                  (iii) resulted from a breach of the Insured's obligations
                        under Section 5.8, irrespective of whether such breach
                        contributed to the Default resulting in such Claim or
                        increased the Loss.

5     Conditions Precedent to Payment of Claim

      It is a condition precedent to the Company's obligation to pay a Loss that
      the Insured comply with all of the following requirements:

      5.1   Notice of Default - The Insured must give the Company written
            notice:

            (a)   Within forty-five (45) days of the Default, if it occurs when
                  the first payment is due under the Loan; or

            (b)   Within ten (10) days of either:

                  (i)   the date when the Borrower becomes four (4) months in
                        Default on the Loan; or

                  (ii)  the date when any Appropriate Proceedings which affect
                        the Loan or the Property or the Insured's or Borrower's
                        interest therein have been started;

                  whichever occurs first.


      5.2   Monthly Reports - Following a notice of Default on the Loan, the
            Insured must give the Company monthly reports on forms or in a
            format acceptable to the Company on the status of the Loan and on
            the servicing efforts undertaken to remedy the Default. These
            monthly reports may be furnished less frequently if allowed in
            writing by the Company and must continue until the Borrower is no
            longer in Default, the Appropriate Proceedings terminate, or until
            the Insured has acquired the Property.

      5.3   Company's Option to Accelerate Filing of a Claim - If the Company so
            directs, at any time after receiving the Insured's notice of
            Default, the Insured must file a Claim within thirty (30) days after
            notice from the Company. The Company will then make a payment of
            Loss in accordance with the per loan loss percentage guaranty option
            in Section 6.3(b). Thereafter, following the acquisition of
            Borrower's Title by the Insured, the Insured will be entitled to
            file a supplemental Claim at the time prescribed in Section 6.1 in
            an amount equal to the sum of its advances, less the deductions, all
            as specified in Section 6.2, to the extent not included in the
            payment of the initial Claim. Such supplemental Claim must be paid
            by the Company in accordance with Section 6.3(b). No interest shall
            be included in the Claim Amount under this Section 5.3 after the
            date that the accelerated Claim is filed. If a Loan for which the
            Company has paid a Claim is subsequently brought current by the
            Borrower, the Insured shall refund to the Company the Loss paid by
            the Company with respect to that Loan. If the Company exercises its
            option under this Section 5.3, the Company shall not have the right
            to direct or participate in a deficiency recovery under Section 7.2.

      5.4   Voluntary Conveyance - The Insured may only accept a conveyance of
            the Property from the Borrower in lieu of foreclosure or other
            proceeding if the prior written approval of the Company has been
            obtained. Such approval shall not be considered as an
            acknowledgement of liability by the Company with respect to such
            Loan.

      5.5   Appropriate Proceedings - The Insured must begin Appropriate
            Proceedings no later than when the Loan becomes six (6) months in
            Default unless the Company provides written instructions that some
            other action be taken. Such instructions may be general or
            applicable only to specific Loans. The Company reserves the right to
            direct the Insured to institute Appropriate Proceedings at any time
            after Default. When either defending against or bringing Appropriate
            Proceedings, the Insured must report their status to the Company as
            reasonably and expeditiously as possible.

            In conducting Appropriate Proceedings, the Insured must:

            (a)   diligently pursue the Appropriate Proceedings once they have
                  begun;

            (b)   apply for the appointment of a receiver and assignment of
                  rents, if permitted by law and requested by the Company;

            (c)   upon request by the Company in writing, furnish the Company
                  with the Loan File (whether or not the Insured is the
                  originator of the Loan), the payment and collection history
                  from the servicing file since the inception of coverage of
                  such Loan under this Policy, and copies of all notices and
                  pleadings filed or required in the Appropriate Proceedings;

            (d)   act and bid at the foreclosure sale in accordance with Section
                  5.11 so that its ability to preserve, transfer and assign to
                  the Company its rights against the Borrower are not impaired;
                  and so that the rights of the Company under this Policy
                  against the Borrower are fully protected. Such rights include
                  any rights to obtain a deficiency judgment, subject to the
                  Company's compliance with Sections 7.2 and 7.3 relating to
                  establishing a deficiency; and

            (e)   when requested by the Company, furnish the Company with a
                  written statement indicating the estimated potential Claim
                  Amount as computed under Section 6.2 at least fifteen (15)
                  days before the foreclosure sale.

      5.6   Mitigation of Damages - The Insured must take appropriate actions to
            mitigate the Loss. Accordingly, in order to comply with this
            provision, the Insured's obligations include collecting amounts due
            under the Loan and offering to any Borrower who has the ability and
            desire to cure the Default, a repayment plan, a forbearance plan, or
            a loan modification or other loan workout plan. In the event such
            efforts fail to cure the Default, the Insured must use its best
            efforts to effectuate the early disposition of the Property.

            The Company shall be entitled at its sole discretion to actively
            direct any such mitigation efforts. Such direction may be general or
            applicable only to specific Loans. The Company must administer this
            Policy in good faith.

      5.7   Advances - The Insured must advance:

            (a)   normal and customary hazard insurance premiums and real estate
                  property taxes, in each case as due and payable;

            (b)   reasonable and necessary Property protection and preservation
                  expenses approved by the Company at the time the Company
                  reviews the Claim, which shall not include expenditures to
                  remove an exclusion from coverage under Section 4; and

            (c)   reasonable costs to complete Appropriate Proceedings and
                  eviction and moving of occupants, including related court
                  expenses and attorney's fees.

      5.8   Claim Information and Other Requirements - The Insured must provide
            the Company with:

            (a)   a completed form furnished by or acceptable to the Company for
                  payment of a Claim;

            (b)   unless previously provided under Section 5.5(c), the Loan File
                  which is the subject of the Claim (whether or not the Insured
                  is the originator of the Loan), the payment and collection
                  history from the servicing file since the inception of
                  coverage of such Loan under this Policy;

            (c)   if the Property is not being acquired by the Company: a copy
                  of an executed trustee's or sheriff's deed (which may be
                  unrecorded) conveying Borrower's Title to the Property to the
                  Insured (or satisfactory evidence that the foreclosure sale
                  has been completed if the Borrower's right of redemption has
                  not expired); or a deed from the Borrower (which may be
                  unrecorded) if a voluntary conveyance has been approved by the
                  Company, conveying to the Insured the title that was required
                  by the Company in the approval of the conveyance;

                  In the event the most important cause of Default was a
                  circumstance or event which would prevent the Insured from
                  obtaining Good and Merchantable Title, the Insured shall
                  instead provide the Company with evidence described in Section
                  5.8 (d)(ii) below that it has acquired Good and Merchantable
                  Title to the Property;

            (d)   if the Property is being acquired by the Company:

                  (i)   a recordable deed in normal and customary form
                        containing the customary warranties and covenants
                        conveying to the Company or its designee Good and
                        Merchantable Title to the Property;

                  (ii)  a title insurance policy acceptable to the Company or an
                        attorney's opinion of title acceptable to the Company,
                        confirming that the Insured has and can convey to the
                        Company Good and Merchantable Title to the Property; and

                  (iii) Possession of the Property, but only if the Company has
                        required such Possession in writing;

            (e)   access to the Property, pursuant to the terms and conditions
                  of Section 6.4(b), if requested by the Company under such
                  Section;

            (f)   a copy of the claim and evidence of the payment of, and any
                  adjustments to, the claim under the Primary First Layer
                  Policy, if applicable, and other information related to such
                  Primary First Layer Policy as the Company may reasonably
                  request; and

            (g)   all other information and documentation reasonably requested
                  by the Company.

      5.9   Acquisition of Borrower's Title Not Required - The Insured will not
            be required to acquire Borrower's Title to a Property if (a) the
            Company approves a sale of the Property prior to a foreclosure sale
            and such sale is closed; (b) the Company requires an early Claim
            filing pursuant to Section 5.3, except that such acquisition will be
            required as a condition to the Insured's filing of a supplemental
            Claim; or (c) the Property is acquired by someone other than the
            Insured at a foreclosure sale, as provided in Section 5.11, or
            thereafter pursuant to exercise of rights of redemption.

      5.10  Sale of a Property by the Insured Before End of Settlement Period -

            (a)   The Insured must submit to the Company any offer to purchase a
                  Property which is acceptable to the Insured until such time as
                  a Claim is settled under this Policy. Upon such submission,
                  the Company must then promptly notify the Insured that it will
                  either approve or not approve such offer. The Insured shall
                  promptly notify the Company if the approved offer does not
                  close as scheduled.

            (b)   If an approved offer expires or is terminated, the Company
                  shall be entitled to pay the Loss payable by:

                  (i)   paying the per loan loss percentage guaranty option as
                        calculated under Section 6.3(b), or

                  (ii)  paying the property acquisition settlement option as
                        calculated under Section 6.3(a), and acquiring the
                        Property; but if the Company's right to acquire the
                        Property has expired pursuant to Section 6.5, or been
                        waived, then such acquisition shall be under the same
                        terms and conditions as the expired or terminated offer,
                        except for terms and conditions relating to the sale
                        price and method of payment of the sale price, which
                        shall instead be governed by Section 6.3.

            (c)   The following provisions shall apply to offers submitted to
                  the Company under this Section 5.10:

                  (i)   At the time it presents an offer, the Insured must also
                        provide the Company with a good faith estimate of gross
                        proceeds and expenses in sufficient detail for the
                        Company to calculate the estimated net proceeds
                        described below. The Company may not require any changes
                        to the offer, direct the marketing of the Property, or
                        require any expenditures by the Insured for restoration
                        of the Property as a condition to its approval.

                  (ii)  If the Company approves the offer submitted by the
                        Insured, it must also advise the Insured of the
                        estimated net proceeds which it has calculated. The
                        estimated net proceeds calculated by the Company will be
                        the estimated gross sales proceeds to be received by the
                        Insured less all reasonable estimated expenses submitted
                        by the Insured and approved by the Company in its
                        approval of the offer which have been or are expected to
                        be paid by the Insured in obtaining and closing the sale
                        of the Property. If the estimated net proceeds as
                        calculated by the Company are acceptable to the Insured,
                        the Loss payable shall be computed as determined below.
                        If such calculation is not acceptable to the Insured,
                        the offer shall be deemed to have not been approved by
                        the Company.

                  (iii) If the Company approves the offer, the Loss payable by
                        the Company under this Section 5.10 will be the lesser
                        of:

                        (A)   the actual net amount as calculated below, or

                        (B)   the per loan loss percentage guaranty option under
                              Section 6.3(b) without regard to a sale of the
                              Property.

                        The actual net amount will be the Claim Amount
                        calculated under Section 6.2, except that (a) delinquent
                        interest will be computed through the closing date for
                        sale of the Property, and (b) the Claim Amount shall be
                        reduced by the actual net proceeds realized by the
                        Insured from the sale of the Property. The actual net
                        proceeds will be determined in the same manner as the
                        estimated net proceeds, but on the basis of the actual
                        sales proceeds. For purposes of computing a Loss, such
                        actual net proceeds shall not be less than the estimated
                        net proceeds calculated by the Company under this
                        subparagraph (iii) or as otherwise approved by the
                        Company.

                  (iv)  The Company shall not unreasonably withhold its approval
                        of expenses submitted to it after its approval of an
                        offer. Expenses paid to Persons employed or controlled
                        by the Insured or their internal costs will not be
                        allowed in calculation of either the estimated or actual
                        net proceeds.

                  (v)   If requested by the Company, the Insured shall advise
                        the Company of the name of the real estate broker or
                        other Person marketing the Property and authorize such
                        broker or other Person to release information regarding
                        the marketing and physical condition of the Property to
                        the Company.

      5.11  Foreclosure Bidding Instructions Given by the Company - Unless
            otherwise directed by the Company, the Insured will be entitled to
            bid at the foreclosure sale held as part of the Appropriate
            Proceedings any amount which it determines necessary to obtain
            Borrower's Title to the Property. The Company will be entitled to
            direct the Insured to bid an amount to be determined by the Insured
            within a minimum and maximum range, as follows:

            (a)   The minimum amount shall not be less than the fair market
                  value of the Property, but if there has been Physical Damage
                  to the Property which affects its fair market value (as
                  determined before such Physical Damage) by more than ten
                  percent (10%), the fair market value of the Property shall be
                  its fair market value after restoration of the Property.

            (b)   The maximum amount shall not exceed the greater of

                  (i)   the fair market value of the Property as determined
                        under subparagraph (a) above, or

                  (ii)  the estimated Claim Amount less the amount which the
                        Company would pay as the per loan loss percentage
                        guaranty option under Section 6.3(b).

            (c)   For purposes of this Section 5.11, fair market value shall be
                  determined as of a date acceptable to the Company by an
                  opinion of an independent real estate broker, or by an
                  independent appraiser, in either case selected by or
                  acceptable to the Company.

            The Insured is not required to acquire Borrower's Title if it has
            bid in accordance with this Section 5.11, whether or not pursuant to
            directions from the Company.

      5.12  Effect of Unexpired Redemption Period on Payment of a Claim - If the
            Insured files a Claim prior to expiration of an applicable
            redemption period, the Loss payable shall only be computed through
            the date of filing of the Claim, and if the Company elects to
            acquire the Property, the Insured will remain responsible for
            management and control of the Property until the Company's
            acquisition thereof, which may be after expiration of the redemption
            period, but not later than as required by Section 6.4.

            If the Company has paid to the Insured a Claim under its per loan
            loss percentage guaranty option in Section 6.3(b), and the related
            Property is subsequently redeemed by the Borrower, the Insured shall
            promptly report such redemption to the Company and reimburse the
            Company for the amount of the Company's Claim payment, to the extent
            that the sum of the Company's Claim payment and the amount realized
            by the Insured from the redemption exceeds the Claim Amount, as
            would have been calculated through the date of redemption.

      5.13  Collection Assistance - If the Company so requests, the Insured
            shall permit the Company to cooperatively assist the Insured in the
            collection of moneys due under the Loan, including obtaining
            information from the Borrower, attempting to develop payment
            schedules acceptable to the Insured, conducting Property inspections
            and requesting appraisals of the Property.

6     Loss Payment Procedure

      6.1   Filing of Claim -

            (a)   The Insured shall file a Claim under this Policy after, but no
                  later than sixty (60) days following, the later of

                  (i)   Conveyance of Title to the Property, or

                  (ii)  if applicable, the settlement of a claim under the
                        Primary First Layer Policy.

            (b)   If the Insured fails to file a Claim within the period of time
                  required under paragraph 6.1(a) above, the Insured will not be
                  entitled to, and the Company will not be obligated for, any
                  payment under this Policy for amounts, including additional
                  interest and expenses, which would otherwise be claimable, but
                  which accrue or are incurred after the sixty (60) day period
                  for filing of a Claim.

            (c)   If the Insured fails to file a Claim within eighteen (18)
                  months following the Conveyance of Title, the Insured will not
                  be entitled to, and the Company will not be obligated for, any
                  payment under this Policy.

            Once a Claim has been filed, if the Insured fails to satisfy the
            requirements for a Perfected Claim within one hundred eighty (180)
            days after such filing (or within such longer period of time as the
            Company may allow in writing), the Insured will no longer be
            entitled to payment of a Loss and the Company will not be obligated
            to make any payment under this Policy.

      6.2   Calculation of Claim Amount - Subject to Sections 7.5 and 5.3, the
            Claim Amount will be an amount equal to:

            the sum of:

            (a)   the amount of unpaid principal balance due under the Loan as
                  of the date of Default without capitalization of delinquent
                  interest, penalties or advances; and

            (b)   the amount of accrued and unpaid interest due on the Loan
                  computed at the contract rate stated in the Loan through the
                  date that the Claim is filed with the Company, but excluding
                  applicable late charges, penalty interest or other changes to
                  the interest rate by reason of Default; and

            (c)   the amount of advances incurred by the Insured under Section
                  5.7 prior to filing of the Claim (except to Persons employed
                  or controlled by the Insured or their other internal costs)
                  provided that:

                  (i)   Attorney's fees advanced for completion of Appropriate
                        Proceedings and obtaining Possession of the Property
                        will not be allowed to the extent they exceed three
                        percent (3%) of the sum of the unpaid principal balance
                        and the accrued and accumulated interest due; and

                  (ii)  Such advances, other than attorney's fees, must have
                        first become due and payable after the Default, and
                        payment of such advances must be prorated from the date
                        of Default through the date the Claim is filed with the
                        Company;

            less the sum of:

            (1)   the amount of all rents and other payments (excluding proceeds
                  of a sale of the Property and the proceeds of fire and
                  extended coverage insurance) collected or received by the
                  Insured, which are derived from or in any way related to the
                  Property or the Loan;

            (2)   the amount of cash remaining in any escrow account as of the
                  last payment date;

            (3)   the amount of cash or other collateral to which the Insured
                  has retained the right of possession as security for the Loan;

            (4)   the amount paid under applicable fire and extended coverage
                  policies which are in excess of the cost of restoring and
                  repairing the Property, if the Property is damaged, and which
                  has not been paid to the Borrower or applied to the payment of
                  the Loan as required by the terms of the Loan;

            (5)   the greater of the amount of any claim payment pursuant to a
                  Primary First Layer Policy which the Insured received, or
                  which the Insured should have received as the full Primary
                  First Layer Policy benefit as described in Section 4.11; and

            (6)   any other amounts claimed by the Insured to the extent they
                  are excluded from the Claim Amount by reason of Section 4.

      6.3   Payment of Loss; Company's Options - Within the Settlement Period,
            but only if the Insured has satisfied all requirements for a payment
            of Loss and the requirements for a Perfected Claim have been met,
            the Company shall at its sole option exercise its:

            (a)   Property Acquisition Settlement Option. Pay to the Insured as
                  the Loss the Claim Amount calculated in accordance with
                  Section 6.2 for the Company's acquisition of the Property; or

            (b)   Per Loan Loss Percentage Guaranty Option. In the event the
                  Company does not acquire the Property, allow the Insured to
                  retain all rights and title to the Property and pay to the
                  Insured as the Loss the lesser of: (i) the difference between
                  the Claim Amount calculated in accordance with Section 6.2 and
                  the amount realized by the Insured pursuant to its sale, if
                  any, of the Property as provided in Section 5.10 and (ii) the
                  Per Loan Loss Percentage option which shall be calculated by
                  multiplying the applicable Per Loan Loss Percentage for such
                  Loan times the Claim Amount (without any reduction for the
                  Primary First Layer Policy claim payment). However, if prior
                  to the Company's payment of the Loss, a third party acquires
                  title to the Property at the foreclosure sale or a Borrower
                  redeems the Property (unless such acquisition or redemption
                  occurs because the Insured failed to bid as provided in
                  Section 5.11), then the Company shall pay the lesser of: (i)
                  the per loan loss percentage guaranty option amount described
                  above; or (ii) the difference between the Claim Amount and the
                  amount realized by the Insured at the foreclosure sale or
                  redemption; or

            (c)   Pre-Claim Sale Option. Pay to the Insured as the Loss the
                  amount calculated in accordance with Section 5.10, if the
                  terms and conditions of Section 5.10 are met.

            In addition to the sum due pursuant to the option described above
            which the Company selects, the Loss payable by the Company will
            include the other amounts provided for under Sections 6.5 or 7.2
            when such Sections are applicable. The Company will deduct from its
            payment of Loss such amounts as may be permitted by this Policy and
            the aggregate amounts of any payments of Loss which it had
            previously made.

            Without limiting the requirements and conditions to filing and
            payment of a Claim contained in this Policy, if the Property has
            been acquired by the insurer under a Primary First Layer Policy, no
            Loss shall be payable under this Policy. For purposes of this Policy
            any references to "percentage guaranty option" shall be to the "per
            loan loss percentage guaranty option".

      6.4   Claim Settlement Period - The Settlement Period will be a sixty (60)
            day period after the Company's receipt of a Claim, calculated as
            follows:

            (a)   No later than the twentieth (20th) day after filing of a
                  Claim, the Company may notify the Insured of additional
                  documents or information which it requires for processing the
                  Claim, upon which the sixty (60) day period shall be suspended
                  until the Company receives such additional documentation and
                  information. Additional items may be requested by the Company
                  after such twenty (20) day period and the Insured must use
                  reasonable efforts to satisfy such request, but the sixty (60)
                  day limit will not be tolled for their receipt.

            (b)   No later than the sixtieth (60th) day after filing of a Claim,
                  the Company may notify the Insured that it will require access
                  to the Property sufficient to inspect, appraise and evaluate
                  the Property. If the Company does not notify the Insured by
                  that date, its right to such access will be deemed waived. If
                  such notice is given, the Insured will use its best efforts to
                  provide access to the Company and, if access is not then
                  available, the sixty (60) day period will be suspended from
                  the date such notice was given until the Company receives
                  notice from the Insured that access is available to it. If
                  access is in fact not available when sought by the Company
                  after such notice from the Insured, the Company will promptly
                  notify the Insured of such unavailability, and the passage of
                  the sixty day period will remain suspended as if the Insured's
                  notice of availability had not been given to the Company.

            (c)   If the Company has elected to acquire the Property in
                  settlement of a Claim, the sixty day period also will be
                  suspended if necessary for there to be a period of ten (10)
                  days after the date on which the Insured satisfies all
                  conditions to acquisition, including any required restoration
                  of the Property, for the Insured's delivery of a recordable
                  deed and title policy or opinion evidencing Good and
                  Merchantable Title (not subject to any rights of redemption,
                  unless the Company waives such requirement) and, if
                  applicable, delivery of Possession to the Property.

      6.5   Payment by the Company After the Settlement Period - If the Company
            has not paid a Loss during the Settlement Period, then (a) the
            Company will include in its payment of Loss, if a Loss is ultimately
            payable, simple interest on the amount payable accruing after the
            Settlement Period to the date of payment of Loss at the applicable
            interest rate or rates which would have been payable on the Loan
            during such period, and (b) the Company will no longer be entitled
            to acquire the Property as an option for payment of the Loss.

            The Company must either pay the amount of applicable Loss (including
            any additional applicable interest as computed above) or deny the
            Claim in its entirety within (a) one hundred twenty (120) days after
            expiration of the Settlement Period, or (b) if the Settlement Period
            has not expired, no later than one hundred eighty (180) days after
            filing of the Perfected Claim. If at a later date it is finally
            determined by agreement between the Insured and the Company (or by
            completion of legal or other proceedings to which the Insured and
            the Company are parties) that the Company was not entitled to deny
            all or a portion of the Claim, the Company will include in any
            resulting subsequent payment of Loss interest as calculated above
            through the date of such payment on the amount of Loss which the
            Company was not entitled to deny.

      6.6   Discharge of Obligation - Payment by the Company of the amount of
            Loss required to be paid in accordance with this Policy will be a
            full and final discharge of its obligation with respect to such Loss
            under this Policy.

7     Additional Conditions

      7.1   Proceedings of Eminent Domain - In the event that part or all of a
            Property is taken by eminent domain, or condemnation or by any other
            proceedings by federal, state or local governmental unit or agency,
            the Insured must require that the Borrower apply the maximum
            permissible amount of any compensation awarded in such proceedings
            to reduce the principal balance of the Loan, in accordance with the
            law of the jurisdiction where the Property is located.

      7.2   Pursuit of Deficiencies -

            (a)   The Insured will be entitled to pursue Appropriate
                  Proceedings, or shall at the direction of the Company pursue
                  Appropriate Proceedings through the end of the Settlement
                  Period, which may result in the Borrower becoming liable for a
                  deficiency after completion of the Insured's acquisition of a
                  Property. Such pursuit may not be directed by the Company
                  unless such deficiency is estimated to exceed $7,500. If the
                  Company proposes to pursue a deficiency judgment, in whole or
                  in part for its account, it will notify the Insured at least
                  thirty (30) days before the foreclosure sale. If the Company
                  does not so notify the Insured, the deficiency judgment, if
                  established by the Insured, will be solely for the account of
                  the Insured, and the Company will not be subrogated to any
                  rights to pursue the deficiency judgment.

            (b)   The following provisions will apply if, in completing
                  Appropriate Proceedings there are additional expenses advanced
                  pursuant to Section 5.7 or additional interest accrued on the
                  Loan, due to (1) an additional redemptive period or a delay in
                  acquisition of Borrower's Title, which period or delay is
                  directly related to establishing the deficiency judgment or
                  (2) legal proceedings which are necessary to establish and
                  pursue the deficiency judgment and which would not otherwise
                  be the custom and practice used.

                  (i)   If the deficiency judgment is to be established, in
                        whole or in part, for the account of the Company, the
                        Company must pay the Insured at the time of payment of
                        the Claim, regardless of which settlement option the
                        Company has selected, the full amount of:

                        (A)   such additional expenses advanced pursuant to
                              Section 5.7 by the Insured; and

                        (B)   such additional interest accrued on the unpaid
                              principal balance of the Loan at the contract rate
                              stated in the Loan, but excluding applicable late
                              charges, penalty interest, or other changes to the
                              interest rate by reason of Default.

                  (ii)  If the deficiency judgment is not to be established, in
                        whole or in part, for the account of the Company, none
                        of the additional interest or expenses of the type
                        described in subparagraph (i) above will be included in
                        the Claim Amount or payable at any time by the Company.

                  (iii) For purposes of determining the additional expenses
                        described in subparagraph (i) above resulting from
                        pursuing the deficiency judgment, the limitation on
                        attorney's fees in Section 6.2 will not apply.

                  (iv)  All of the additional interest, expenses, attorney's
                        fees and court expenses described in subparagraph (i)
                        above will be accrued or advanced only through
                        acquisition of Borrower's Title, including any
                        additional redemptive period.

            (c)   The Company and the Insured may agree generally or with
                  respect to a Loan to different terms and conditions than set
                  forth in this Section 7.2. The Company and the Insured also
                  may agree to the joint pursuit or other arrangements for the
                  collection of deficiency judgments on mutually acceptable
                  terms and conditions.

      7.3   Subrogation - Subject to Section 7.2(a), and only to the extent that
            the Company is entitled under applicable law to pursue such
            deficiency rights, the Company will be subrogated, upon payment of
            the Loss, in the amount thereof and with an equal priority to all of
            the Insured's rights of recovery against a Borrower and any other
            Person relating to the Loan or to the Property. The Insured must
            execute and deliver at the request of the Company such instruments
            and papers and undertake such actions as may be necessary to
            transfer, assign and secure such rights. The Insured shall refrain
            from any action, either before or after payment of a Loss, that
            prejudices such rights.

      7.4   Policy for Exclusive Benefit of the Insured - A Certificate issued
            as the result of any Application submitted hereunder and the
            coverage provided under this Policy will be for the sole and
            exclusive benefit of the Insured, its successors and permitted
            assigns, and in no event will any Borrower or other Person be deemed
            a party to, or an intended beneficiary of, this Policy or any
            Certificate.

      7.5   Effect of Borrower Insolvency or Bankruptcy on Principal Balance -
            If under applicable insolvency or bankruptcy law, a Loan's principal
            balance secured by a Property is reduced (after all appeals of such
            reduction are final or the time for such appeals has lapsed without
            appeal), the portion of such principal balance of the Loan not
            secured by the Property, and related interest, will be included in
            the Claim Amount, as provided in this Section 7.5.

            If a Default occurs on the Loan, the Insured has acquired Borrower's
            Title or Good and Merchantable Title to the Property as required by
            this Policy, and all other requirements for filing of a Claim are
            complied with, the Insured will be entitled to include in the Claim
            Amount (a) the amount of the principal balance of the Loan which was
            deemed unsecured under applicable insolvency or bankruptcy law, less
            any collections or payments on such unsecured principal balance
            received by the Insured, and (b) interest thereon at the rate and as
            computed in Section 6.2, from the date of Default giving rise to the
            Claim (but for no prior period). In no event will any expenses or
            other amounts associated with the amount by which the principal
            balance of the Loan became unsecured be included in the Claim
            Amount, directly or by an addition to the principal balance included
            in the Claim Amount.

      7.6   Arbitration of Disputes; Suits and Actions Brought by the Insured -

            (a)   Unless prohibited by applicable law, all controversies,
                  disputes or other assertions of liability or rights arising
                  out of or relating to this Policy, including the breach,
                  interpretation or construction thereof, shall be settled by
                  arbitration. Notwithstanding the foregoing, the Company or the
                  Insured both retain the right to seek a declaratory judgment
                  from a court of competent jurisdiction on matters of
                  interpretation of this Policy. Such arbitration shall be
                  conducted in accordance with the Title Insurance Arbitration
                  Rules of the American Arbitration Association in effect on the
                  date the demand for arbitration is made, or if such Rules are
                  not then in effect, such other Rules of the American
                  Arbitration Association as the Company may designate as its
                  replacement.

                  The arbitrator(s) shall be neutral person(s) selected from the
                  American Arbitration Association's National Panel of
                  Arbitrators familiar with the mortgage lending or mortgage
                  guaranty insurance business. Any proposed arbitrator may be
                  disqualified during the selection process, at the option of
                  either party, if they are, or during the previous two (2)
                  years have been, an employee, officer or director of any
                  mortgage guaranty insurer, or of any entity engaged in the
                  origination, purchase, sale or servicing of mortgage loans or
                  mortgage-backed securities.

            (b)   No suit or action (including arbitration hereunder) brought by
                  the Insured against the Company with respect to the Company's
                  liability for a Claim under this Policy shall be sustained in
                  any court of law or equity or by arbitration unless the
                  Insured has substantially complied with the terms and
                  conditions of this Policy, and unless the suit or action is
                  commenced within three (3) years (five (5) years in Florida or
                  Kansas) after the Insured has acquired Borrower's Title to the
                  Property or sale of the Property approved by the Company is
                  completed, whichever is applicable to a Loan. No such suit or
                  action with respect to a Claim may be brought by the Insured
                  against the Company until sixty (60) days after such
                  acquisition of Borrower's Title or sale, as applicable to a
                  Loan.

            (c)   If a dispute arises concerning the Loan which involves either
                  the Property or the Insured, the Company has the right to
                  protect its interest by defending the suit, even if the
                  allegations contained in such suit are groundless, false or
                  fraudulent. The Company is not required to defend any lawsuit
                  involving the Insured, the Property or the Loan.

      7.7   Release of Borrower; Defenses of Borrower - The Insured's execution
            of a release or waiver of the right to collect any portion of the
            unpaid principal balance of a Loan or other amounts due under the
            Loan will release the Company from its obligation under its
            Certificate to the extent and amount of said release. If, under
            applicable law, the Borrower successfully asserts defenses which
            have the effect of releasing, in whole or in part, the Borrower's
            obligation to repay the Loan, or if for any other reason the
            Borrower is released from such obligation, the Company will be
            released to the same extent and amount from its liability under this
            Policy, except as provided by Section 7.5.

      7.8   Amendments; No Waiver; Rights and Remedies; Use of Term
            "Including" -

            (a)   The Company reserves the right to amend the terms and
                  conditions of this Policy from time to time; provided,
                  however, that any such amendment will be effective only after
                  the Company has given the Insured written notice thereof by
                  endorsement setting forth the amendment. Such amendment will
                  only be applicable to those Certificates issued on or after
                  the effective date of the amendment.

            (b)   No condition or requirement of this Policy will be deemed
                  waived, modified or otherwise compromised unless that waiver,
                  modification or compromise is stated in a writing properly
                  executed on behalf of the Company. Each of the conditions and
                  requirements of this Policy is severable, and a waiver,
                  modification or compromise of one will not be construed as a
                  waiver, modification or compromise of any other.

            (c)   No right or remedy of the Company provided for by this Policy
                  will be exclusive of, or limit, any other rights or remedies
                  set forth in this Policy or otherwise available to the Company
                  at law or equity.

            (d)   As used in this Policy, the term "include" or "including" will
                  mean "include or including, without limitation."

      7.9   No Agency - Neither the Insured, any Servicer, nor any of their
            employees or agents (including the Persons underwriting the Loan on
            behalf of the Insured) will be deemed for any reason to be agents of
            the Company. Neither the Company, nor any of its employees or
            agents, will be deemed for any reason to be agents of any Insured or
            Servicer.

      7.10  Successors and Assigns - This Policy will inure to the benefit of
            and shall be binding upon the Company and the Insured and their
            respective successors and permitted assigns.

      7.11  Applicable Law and Conformity to Law - All matters under this Policy
            will be governed by and construed in accordance with the laws of the
            jurisdiction in which the office of the original Insured on a
            Certificate is located. Any provision of this Policy which is in
            conflict with any provision of the law of such jurisdiction is
            hereby amended to conform to the provisions required by that law.

      7.12  Notice - All claims, premium payments, tenders, reports, other data
            and any other notices required to be submitted to the Company by the
            Insured must be sent to the Company at MGIC Plaza, 250 East Kilbourn
            Avenue, Milwaukee, WI 53202. The Company may change this address by
            giving written notice to the Insured. Unless the Insured otherwise
            notifies the Company in writing, all notices to the Insured must be
            sent to the address on the face of this Policy or, if the Insured is
            not located at such address, to the last known address of the
            Insured.

            All notices under this Policy, whether or not identified in this
            Policy as required to be in writing, will be effective only if in
            writing and only upon receipt thereof. Written notices may instead
            be given in the form of telecopy or, if acceptable to the Company
            (for notices given to the Company) or to the Insured (for notices
            given to the Insured) in the form of computer tape or
            computer-generated or any other electronic message. A telecopy or
            such tape or message shall be effective only when received. The
            Company and the Insured may mutually agree that notices will be sent
            to any additional Person. Except as expressly agreed to by the
            Company and the Insured, no liability shall be incurred by the
            Company for the failure to give a notice to a Person other than the
            Insured.

      7.13  Reports and Examinations - The Company may request, and the Insured
            must provide, such files, reports or information as the Company may
            deem necessary pertaining to any Loan, and the Company will be
            entitled to inspect the files, books and records of the Insured or
            any of its representatives pertaining to such Loan.

      7.14  Electronic Media - The Company and the Insured may, from time to
            time, deliver or transfer information, documents or other data
            between them by electronic media acceptable to them. In addition,
            the Company and the Insured may maintain information, documents or
            other data on electronic media or other media generally accepted for
            business records, including microfiche. Such electronic or other
            media will be as equally acceptable for all purposes between the
            Insured and the Company as information, documents or other data
            maintained in printed or written form.


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