<PAGE>

                                                                     EXHIBIT 4.3

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

                                 TRUST AGREEMENT

                                     between

                      SEQUOIA MORTGAGE FUNDING CORPORATION
                                    Depositor

                                       and

                            WILMINGTON TRUST COMPANY
                                  Owner Trustee

                            Dated as of June 1, 2004

                           SEQUOIA HELOC TRUST 2004-1
                     HELOC ASSET-BACKED NOTES, SERIES 2004-1

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  Page
<S>                                                                                                               <C>
ARTICLE I Definitions ......................................................................................       1

      SECTION 1.1.             Defined Terms................................................................       1
      SECTION 1.2.             Other Definitional Provisions................................................       2
      SECTION 1.3.             Action by or Consent of Noteholders and Residual Certificateholders..........       3

ARTICLE II Organization ....................................................................................       3

      SECTION 2.1.             Name.........................................................................       3
      SECTION 2.2.             Office.......................................................................       3
      SECTION 2.3.             Purposes and Powers..........................................................       4
      SECTION 2.4.             Appointment of Owner Trustee.................................................       4
      SECTION 2.5.             Initial Capital Contribution of Trust Estate; Capital Accounts...............       4
      SECTION 2.6.             Declaration of Trust.........................................................       5
      SECTION 2.7.             Liability....................................................................       5
      SECTION 2.8.             Title to Trust Property......................................................       5
      SECTION 2.9.             Situs of Trust...............................................................       6
      SECTION 2.10.            Representations and Warranties of the Depositor..............................       6
      SECTION 2.11.            Federal Income Tax Allocations...............................................       7
      SECTION 2.12.            Covenants of the Depositor...................................................       8
      SECTION 2.13.            Covenants of the Residual Certificateholders.................................       9

ARTICLE III [Reserved] .....................................................................................      10

ARTICLE IV Ownership of Trust Property; Residual Certificates and Transfer of Interests.....................      10

      SECTION 4.1.             Trust Property Ownership.....................................................      10
      SECTION 4.2.             The Residual Certificates....................................................      10
      SECTION 4.3.             Issuance and Authentication of Residual Certificates.........................      10
      SECTION 4.4.             Registration of Transfer and Exchange of Residual Certificates...............      11
      SECTION 4.5.             Mutilated, Destroyed, Lost or Stolen Residual Certificates...................      12
      SECTION 4.6.             Persons Deemed Residual Certificateholders...................................      12
      SECTION 4.7.             Access to List of Residual Certificateholders' Names and Addresses...........      12
      SECTION 4.8.             Maintenance of Office or Agency..............................................      13
      SECTION 4.9.             ERISA Restrictions...........................................................      13
      SECTION 4.10.            Restrictions on Transfer of Residual Certificates............................      13
      SECTION 4.11.            Distributions on Residual Certificates.......................................      15
      SECTION 4.12.            Class C Interest.............................................................      16

ARTICLE V Voting Rights and Other Actions...................................................................      16

      SECTION 5.1.             Prior Notice with Respect to Certain Matters.................................      16
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                               <C>
      SECTION 5.2.             Action by Residual Certificateholders with Respect to Certain Matters........      17
      SECTION 5.3.             Action with Respect to Bankruptcy............................................      17
      SECTION 5.4.             Restrictions on Residual Certificateholders' Power...........................      18
      SECTION 5.5.             Majority Control.............................................................      19
      SECTION 5.6.             Rights of the Insurer........................................................      19
      SECTION 5.7.             [Reserved]...................................................................      19
      SECTION 5.8.             Insurer's Rights Regarding Actions, Proceedings or Investigations............      19

ARTICLE VI Certain Duties...................................................................................      20

      SECTION 6.1.             Accounting and Records to the Noteholders, Residual Certificateholders,
                               the Internal Revenue Service and Others .....................................      20

      SECTION 6.2.             Signature on Returns; Tax Matters Partner....................................      21
      SECTION 6.3.             Underwriting Agreement.......................................................      21

ARTICLE VII Authority and Duties of Owner Trustee...........................................................      21

      SECTION 7.1.             General Authority............................................................      21
      SECTION 7.2.             General Duties...............................................................      22
      SECTION 7.3.             Action upon Instruction......................................................      22
      SECTION 7.4.             No Duties Except as Specified in this Agreement or in Instructions...........      23
      SECTION 7.5.             No Action Except under Specified Documents or Instructions...................      23
      SECTION 7.6.             Restrictions.................................................................      23

ARTICLE VIII Concerning the Owner Trustee...................................................................      24

      SECTION 8.1.             Acceptance of Trust and Duties...............................................      24
      SECTION 8.2.             Furnishing of Documents......................................................      25
      SECTION 8.3.             Representations and Warranties...............................................      26
      SECTION 8.4.             Reliance; Advice of Counsel..................................................      26
      SECTION 8.5.             Not Acting in Individual Capacity............................................      27
      SECTION 8.6.             Owner Trustee Not Liable for Notes, Residual Certificates or Mortgage Loans..      27
      SECTION 8.7.             Owner Trustee May Own Notes and Residual Certificates........................      27
      SECTION 8.8.             Payments from Owner Trust Estate.............................................      28
      SECTION 8.9.             Doing Business in Other Jurisdictions........................................      28

ARTICLE IX Compensation of Owner Trustee....................................................................      28

      SECTION 9.1.             Owner Trustee's Fees and Expenses............................................      28
      SECTION 9.2.             Indemnification..............................................................      28
      SECTION 9.3.             Payments to the Owner Trustee................................................      29
      SECTION 9.4.             Non-recourse Obligations.....................................................      29

ARTICLE X Termination of Trust Agreement....................................................................      29

      SECTION 10.1.            Termination of Trust Agreement...............................................      29
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                                                               <C>
ARTICLE XI Successor Owner Trustees and Additional Owner Trustees...........................................      31

      SECTION 11.1.            Eligibility Requirements for Owner Trustee...................................      31
      SECTION 11.2.            Resignation or Removal of Owner Trustee......................................      31
      SECTION 11.3.            Successor Owner Trustee......................................................      32
      SECTION 11.4.            Merger or Consolidation of Owner Trustee.....................................      32
      SECTION 11.5.            Appointment of Co-Owner Trustee or Separate Owner Trustee....................      33

ARTICLE XII Miscellaneous...................................................................................      34

      SECTION 12.1.            Supplements and Amendments...................................................      34
      SECTION 12.2.            No Legal Title to Owner Trust Estate in Residual Certificateholders..........      35
      SECTION 12.3.            Limitations on Rights of Others..............................................      35
      SECTION 12.4.            Notices......................................................................      35
      SECTION 12.5.            Severability.................................................................      36
      SECTION 12.6.            Separate Counterparts........................................................      36
      SECTION 12.7.            Assignments; Insurer.........................................................      36
      SECTION 12.8.            No Petition..................................................................      36
      SECTION 12.9.            No Recourse..................................................................      37
      SECTION 12.10.           Headings.....................................................................      37
      SECTION 12.11.           GOVERNING LAW................................................................      37
      SECTION 12.12.           Depositor....................................................................      37
      SECTION 12.13.           Customer Identification......................................................      38
</TABLE>

EXHIBITS

Exhibit A  Form of Residual Certificate
Exhibit B  Form of Certificate of Trust
Exhibit C  Form of Transfer Certificate

                                      iii
<PAGE>

            TRUST AGREEMENT dated as of June 1, 2004 (the "Agreement") between
SEQUOIA MORTGAGE FUNDING CORPORATION, a Delaware corporation (the "Depositor"),
and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Owner Trustee
(in such capacity and not in its individual capacity, the "Owner Trustee").

                                    ARTICLE I

                                   Definitions

            SECTION 1.1. Defined Terms. For the purposes of this Agreement, the
following terms shall have the meanings set forth below. All other capitalized
terms used herein but not defined shall have the meanings set forth in Annex A
to the Indenture dated as of June 1, 2004 (the "Indenture"), between the Issuer
and the Indenture Trustee, as the same may be amended and supplemented from time
to time.

            "Affiliate" shall mean with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, or owns, directly or
indirectly, 50% or more of, the Person specified.

            "Agreement" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time.

            "Benefit Plan" shall have the meaning assigned to such term in
Section 4.9.

            "Class" shall mean either the Class O or Class L Certificates as the
context requires.

            "Class C Interest" shall have the meaning assigned to such term in
Section 4.12.

            "Class L Certificates" shall mean the Class of Residual Certificate
denominated as Class L.

            "Class O Certificates" shall mean the Class of Residual Certificate
denominated as Class O.

            "Certificate of Trust" shall mean the Certificate of Trust in the
form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Statutory Trust Statute.

            "Certificate Register" and "Certificate Registrar" shall mean the
register maintained and the registrar appointed pursuant to Section 4.4,
respectively.

            "Definitive Residual Certificates" shall mean Residual Certificates
issued in certificated, fully registered form.

            "Expenses" shall have the meaning assigned to such term in Section
9.2.

            "Indemnified Parties" shall have the meaning assigned to such term
in Section 9.2.

<PAGE>

            "Instructing Party" shall have the meaning assigned to such term in
Section 7.3.

            "Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Collection Account and the Distribution Account and all other
property of the Trust from time to time, including any rights of the Issuer
pursuant to the Sale and Servicing Agreement or in respect of the
Acknowledgments.

            "Percentage Interest" shall mean the percentage set forth on the
face of a Residual Certificate, representing its interest in the related Class.

            "Proposer" shall have the meaning ascribed to it in Section 5.2
herein.

            "Record Date" shall mean, with respect to each Payment Date, the
close of business on the Business Day preceding such Payment Date.

            "Residual Certificates" shall mean the Class L Certificates and the
Class O Certificates evidencing, in the aggregate, the beneficial ownership
interest of the equity in the Trust, issued as Definitive Residual Certificates
and substantially in the form of Exhibit A attached hereto.

            "Residual Certificateholder," "Certificateholder" or "Holder" shall
mean the Person in whose name a Residual Certificate is registered on the
Certificate Register.

            "Secretary of State" shall mean the Secretary of State of the State
of Delaware.

            "Security Majority" shall mean a majority by principal amount of the
Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Residual Certificateholders thereafter.

            "Similar Law" shall have the meaning ascribed to it in Section 4.9
herein.

            "Statutory Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq. as the same may be amended from
time to time.

            "Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

            SECTION 1.2. Other Definitional Provisions.

            (a)   All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.

            (b)   As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any

                                       2
<PAGE>

such certificate or other document, and accounting terms partly defined in this
Agreement or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles as in effect on the date of this Agreement or any
such certificate or other document, as applicable. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.

            (c)   The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."

            (d)   The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.

            SECTION 1.3. Action by or Consent of Noteholders and Residual
Certificateholders.

            (a)   Whenever any provision of this Agreement refers to action to
be taken, or consented to, by Noteholders or Residual Certificateholders, such
provision shall be deemed to refer to the Noteholders or Residual
Certificateholders, as the case may be, of record as of the Record Date
immediately preceding the date on which such action is to be taken, or consent
given, by Noteholders or Residual Certificateholders. Solely for the purposes of
any action to be taken, or consented to, by Noteholders, any Note registered in
the name of the Depositor or any Affiliate thereof shall be deemed not to be
outstanding; provided, however, that, solely for the purpose of determining
whether the Owner Trustee is entitled to rely upon any such action or consent,
only Notes which a Responsible Officer of the Owner Trustee actually knows to be
so owned shall be so disregarded.

                                   ARTICLE II

                                  Organization

            SECTION 2.1. Name. There is hereby and upon the filing of the
Certificate of Trust with the Secretary of State formed a trust to be known as
"Sequoia HELOC Trust 2004-1", in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.

            SECTION 2.2. Office. The office of the Trust shall be in the care of
the Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Residual
Certificateholders, the Insurer and the Depositor.

                                       3
<PAGE>

            SECTION 2.3. Purposes and Powers.

      The purpose of the Trust is, and the Trust (and the Owner Trustee on
behalf of the Trust) shall have the power and authority, to engage in the
following activities:

            (i)   to issue the Notes pursuant to the Indenture and the Residual
      Certificates pursuant to this Agreement, and to sell the Notes and
      Residual Certificates;

            (ii)  to assign, grant, transfer, pledge, mortgage and convey the
      Owner Trust Estate to the Indenture Trustee on behalf of the Noteholders
      and for the benefit of the Insurer and to hold, manage and distribute to
      the Residual Certificateholders pursuant to the terms hereof and of the
      Sale and Servicing Agreement any portion of the Owner Trust Estate
      released from the Lien of, and remitted to the Trust pursuant to, the
      Indenture;

            (iii) with the proceeds of the sale of the Notes, to pay the
      organizational, start-up and transactional expenses of the Trust and to
      pay the balance to the Depositor pursuant to the Sale and Servicing
      Agreement;

            (iv)  to enter into, execute, deliver and perform its obligations
      under the Basic Documents to which it is a party;

            (v)   to engage in those activities, including entering into
      agreements, that are necessary, suitable or convenient to accomplish the
      foregoing or are incidental thereto or connected therewith; and

            (vi)  subject to compliance with the Basic Documents, to engage in
      such other activities as may be required in connection with conservation
      of the Owner Trust Estate and the making of distributions to the
      Noteholders and the Residual Certificateholders.

The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.

            SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby
appoints Wilmington Trust Company as the Owner Trustee of the Trust effective as
of the Closing Date, to have all the rights, powers and duties set forth herein
and Wilmington Trust Company hereby accepts such appointment.

            SECTION 2.5. Initial Capital Contribution of Trust Estate; Capital
Accounts.

            (a)   The Depositor hereby sells, assigns, transfers, conveys and
sets over to the Owner Trustee, as of the date hereof, the sum of $1 in exchange
for which the Owner Trustee shall issue to the Depositor the Class O
Certificate. The Owner Trustee hereby acknowledges receipt in trust from the
Depositor, as of the date hereof, of the foregoing contribution, which shall
constitute the initial Owner Trust Estate evidenced by the Class O Certificate
and shall be deposited in the Distribution Account. On the Closing Date, the
Owner Trustee will also, upon receipt thereof, acknowledge on behalf of the
Trust receipt of the Mortgage Loans pursuant to the Sale and Servicing
Agreement. The Depositor shall pay organizational expenses of the Trust

                                       4
<PAGE>

as they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. The
Depositor's payment of such amounts will not increase the Class Principal
Balance of the Class O Certificates.

            (b)   The Trust will create and maintain capital accounts for the
Class O Certificateholders and Class L Certificateholders, reflecting therein
all contributions by such holders and allocations of income and loss and
withdrawals and distributions. The initial capital account for the Class L
Certificateholders shall reflect capital of zero upon issuance and for the Class
O Certificateholders shall reflect capital of $1 upon issuance. In addition, if
the Class C Interest is characterized as an equity interest in the Trust, the
Trust will create and maintain a capital account for the holder of the Class C
Interest (which shall reflect capital of zero upon issuance). The Indenture
Trustee shall perform the obligations of the Trust in this Section 2.5(b)
pursuant to Section 6.23 of the Indenture. Under no circumstances shall the
Owner Trustee have any responsibility to perform the foregoing obligations, nor
shall the Owner Trustee have any duty or responsibility to supervise the
Indenture Trustee in the performance thereof.

            SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Residual
Certificateholders, subject to the obligations of the Trust under the Basic
Documents. It is the intention of the parties hereto that the Trust constitute a
statutory trust under the Statutory Trust Statute and that this Agreement
constitute the governing instrument of such statutory trust. It is the intention
of the parties hereto that, solely for income and franchise tax purposes, the
Trust shall be treated as a partnership in which the holders of the Class L
Certificates and the holders of the Class O Certificates (and, to the extent
that the Class C Interest is characterized as an equity interest in the Trust,
the holder of the Class C Interest) are partners and that, unless otherwise
required by appropriate tax authorities, the Trust will file or cause to be
filed annual or other necessary returns, reports and other forms consistent with
the characterization of the Trust as a partnership for such tax purposes.
Effective as of the Closing Date, the Owner Trustee shall have all rights,
powers and duties set forth herein and to the extent not inconsistent herewith
and not mandatory in nature, in the Statutory Trust Statute with respect to
accomplishing the purposes of the Trust. The Owner Trustee shall file the
Certificate of Trust with the Secretary of State. Notwithstanding any provision
of this Agreement to the contrary, this Agreement shall be effective as of the
Closing Date.

            SECTION 2.7. Liability. To the fullest extent permitted by law, no
Residual Certificateholder shall have any personal liability for any liability
or obligation of the Trust.

            SECTION 2.8. Title to Trust Property.

            (a)   Legal title to all the Owner Trust Estate shall be vested at
all times in the Trust as a separate legal entity except where applicable law in
any jurisdiction requires title to any part of the Owner Trust Estate to be
vested in a trustee or trustees, in which case title shall be deemed to be
vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case
may be.

            (b)   The Holders shall not have legal title to any part of the
Owner Trust Estate. The Holders shall be entitled to receive distributions with
respect to their undivided

                                       5
<PAGE>

ownership interest therein only in accordance with the Basic Documents. No
transfer, by operation of law or otherwise, of any right, title or interest by
any Residual Certificateholder of its ownership interest in the Owner Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal title
to any part of the Owner Trust Estate.

            SECTION 2.9. Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Trust
shall be located in the States of Delaware, New York, California or the
jurisdiction where the Indenture Trustee maintains bank accounts with respect to
collections on the Collateral. The only office of the Trust will be as described
in Section 2.2 hereof. The Trust shall not have any employees; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee from
having employees within or without the State of Delaware. Payments will be
received by the Trust only in Delaware, New York, California or such other
jurisdiction designated by the Depositor, and payments will be made by the Trust
only from Delaware, New York or such other jurisdiction designated by the
Depositor. To the extent bank accounts are to be maintained with the Owner
Trustee, such accounts shall be located in the State of Delaware. To the extent
payments are to be received and made by the Owner Trustee, such payments shall
be received in or made from the State of Delaware.

            SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor makes the following representations and warranties on which Wilmington
Trust Company relies in accepting its appointment as Owner Trustee, the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Notes and the Residual Certificates and upon which the Insurer relies in issuing
the Policy.

            (a)   The Depositor is a corporation duly organized, validly
      existing and in good standing under the laws governing its creation and
      existence and has full corporate power and authority to own its property,
      to carry on its business as presently conducted, to enter into and perform
      its obligations under this Agreement, and to create the trust pursuant
      hereto;

            (b)   The execution and delivery by the Depositor of this Agreement
      have been duly authorized by all necessary corporate action on the part of
      the Depositor; neither the execution and delivery of this Agreement, nor
      the consummation of the transactions herein contemplated, nor compliance
      with the provisions hereof, will conflict with or result in a breach of,
      or constitute a default under, any of the provisions of any law,
      governmental rule, regulation, judgment, decree or order binding on the
      Depositor or its properties or the certificate of incorporation or bylaws
      of the Depositor;

            (c)   The execution, delivery and performance by the Depositor of
      this Agreement and the consummation of the transactions contemplated
      hereby do not require the consent or approval of, the giving of notice to,
      the registration with, or the taking of any other action in respect of,
      any state, federal or other governmental authority or agency, except such
      as has been obtained, given, effected or taken prior to the date hereof;

                                       6
<PAGE>

            (d)   This Agreement has been duly executed and delivered by the
      Depositor and, assuming due authorization, execution and delivery by the
      Seller and Wilmington Trust Company, constitutes a valid and binding
      obligation of the Depositor enforceable against it in accordance with its
      terms except as such enforceability may be subject to (A) applicable
      bankruptcy and insolvency laws and other similar laws affecting the
      enforcement of the rights of creditors generally and (B) general
      principles of equity regardless of whether such enforcement is considered
      in a proceeding in equity or at law; and

            (e)   There are no actions, suits or proceedings pending or, to the
      knowledge of the Depositor, threatened or likely to be asserted against or
      affecting the Depositor, before or by any court, administrative agency,
      arbitrator or governmental body (A) with respect to any of the
      transactions contemplated by this Agreement or (B) with respect to any
      other matter which in the judgment of the Depositor will be determined
      adversely to the Depositor and will if determined adversely to the
      Depositor materially and adversely affect it or its business, assets,
      operations or condition, financial or otherwise, or adversely affect its
      ability to perform its obligations under this Agreement.

            SECTION 2.11. Federal Income Tax Allocations

            (a)   It is the intention of the Depositor, the Servicer and the
Residual Certificateholders that, for federal, state and other income tax
purposes (i) the Trust be classified as a partnership if there is more than one
Holder of Residual Certificates and that it be classified as a disregarded
entity if there is only one Holder of the Residual Certificates and (ii) the
Notes be classified as debt of the Trust. Neither the Owner Trustee nor any
Residual Certificateholder will, under any circumstances, and at any time, make
an election on IRS Form 8832 or otherwise, to classify the Trust as an
association taxable as a corporation for federal, state or any other applicable
tax purpose.

            (b)   The Issuer will compute net income or net loss (and each item
of income, gain, loss, and deduction entering into the computation thereof)
monthly as of the Record Date for such month for the period beginning on the
immediately preceding Payment Date and ending on and inclusive of such Record
Date. The Issuer will separately compute the items described in section 702(a)
of the Code, including gains and losses from sales and exchanges of capital
assets held for more than one year, and gains and losses from capital assets
held for less than one year. Except as provided in clause (d) below, the amounts
so calculated will be allocated between the Class L Certificateholder and the
Class O Certificateholders based on their relative Class Principal Balances as
of the immediately preceding Payment Date, after taking into account the
allocations of income, gain, deduction, and loss and any distribution occurring
on such immediately preceding Payment Date. Amounts allocated to the Class O
Certificates will be further allocated among the Class O Certificateholders in
accordance with their respective Percentage Interests.

            (c)   The Issuer will treat the "interest" paid to the Class L
Certificateholder on the Additional Balance Contributed Amount or the Class
Principal Amount of the Class L Certificates, as applicable, as a guaranteed
payment under section 707(c) of the Code, and therefore, an item of deduction
for the Issuer.

                                       7
<PAGE>

            (d)   Upon dissolution of the Trust in accordance with Article X
hereof, in connection with making final distributions to each class of Residual
Certificateholders, the Trust will modify the allocations set forth in this
paragraph if necessary or appropriate, in the sole discretion of a majority in
interest of the Class O Certificateholders and (if such dissolution occurs
during the Rapid Amortization Period) the Class L Certificateholers, to fairly
reflect the economic income, gain, deduction, or loss of each class of Residual
Certificateholders. In addition, to the extent that the Class C Interest is
characterized as an equity interest in the Trust, the Trust will modify the
allocations set forth in this paragraph if necessary or appropriate, in the sole
discretion of a majority in interest of the Class O Certificateholders and (if
such dissolution occurs during the Rapid Amortization Period) the Class L
Certificateholers, to fairly reflect the economic income, gain, deduction, or
loss of attributable to the Class C Interest, if any.

            (e)   The Indenture Trustee shall perform the obligations of the
Issuer in this Section 2.11 pursuant to Section 6.23 of the Indenture. The
Depositor shall, on or as soon as practicable after the Closing Date and on each
one year anniversary of the Closing Date, pay the Indenture Trustee an amount
equal to $8,000 in consideration of the performance of such services. Under no
circumstances shall the Owner Trustee have any responsibility to perform the
foregoing obligations, nor shall the Owner Trustee have any duty or
responsibility to supervise the Indenture Trustee in the performance thereof.

            SECTION 2.12. Covenants of the Depositor. The Depositor agrees and
covenants for the benefit of each Residual Certificateholder, the Insurer,
Wilmington Trust Company and the Owner Trustee, during the term of this
Agreement, and to the fullest extent permitted by applicable law, that:

            (a)   it shall not create, incur or suffer to exist any indebtedness
or engage in any business, except, in each case, as permitted by its certificate
of incorporation, its by-laws and the Basic Documents;

            (b)   it shall not, for any reason, institute proceedings for the
Trust to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;

            (c)   it shall obtain from each counterparty to each Basic Document
to which it or the Trust is a party and each other agreement entered into on or
after the date hereof to which it or the Trust is a party, an agreement by each
such counterparty that prior to the occurrence of the event specified in Section
10.1(e) such counterparty shall not institute against, or join any other Person
in instituting against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and

                                       8
<PAGE>

            (d)   it shall not, for any reason, withdraw or attempt to withdraw
from this Agreement, dissolve, institute proceedings for it to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of it or a substantial part of
its property, or make any assignment for the benefit of creditors, or admit in
writing its inability to pay its debts generally as they become due, or declare
or effect a moratorium on its debt or take any action in furtherance of any such
action.

            SECTION 2.13. Covenants of the Residual Certificateholders. Each
Residual Certificateholder, by its acceptance of a Residual Certificate, agrees:

            (a)   to be bound by the terms and conditions of the Residual
Certificates and of this Agreement, including any supplements or amendments
hereto and to perform the obligations of a Residual Certificateholder as set
forth therein or herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee, the Insurer
and all other Residual Certificateholders present and future;

            (b)   to hereby appoint the Depositor as such Residual
Certificateholder's agent and attorney-in-fact to sign any federal income tax
information return filed on behalf of the Trust, if any, and agree that, if
requested by the Trust, it will sign such federal income tax information return
in its capacity as holder of an interest in the Trust. Each Residual
Certificateholder also hereby agrees that in its tax returns it will not take
any position inconsistent with those taken in any tax returns that may be filed
by the Trust;

            (c)   if such Residual Certificateholder is other than an individual
or other entity holding its Residual Certificate through a broker who reports
securities sales on Form 1099-B, to notify the Owner Trustee of any transfer by
it of a Residual Certificate in a taxable sale or exchange, within 30 days of
the date of the transfer; and

            (d)   until the completion of the events specified in Section
10.1(e), not to, for any reason, institute proceedings for the Trust or the
Depositor to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Depositor or the Trust or a substantial part of its property,
or cause or permit the Depositor or the Trust to make any assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any action in furtherance of any such action.

            Except as provided in this Section 2.13, and notwithstanding any
other provision to the contrary in this Agreement, no Residual Certificateholder
other than the Depositor in its capacity as the "Depositor" shall be deemed to
have adopted, be bound by, or succeed in any way to any representation by, or
duty of indemnification by or any other duty of, the Depositor, including those
contained in Sections 2.10, 2.12, 4.6, 9.2 or elsewhere herein.

                                       9
<PAGE>

                                   ARTICLE III

                                   [Reserved]

                                   ARTICLE IV

  Ownership of Trust Property; Residual Certificates and Transfer of Interests

            SECTION 4.1. Trust Property Ownership. Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.5 and the
filing of the Certificate of Trust, the Owner Trustee is hereby authorized and
directed to execute, authenticate, date, issue, and deliver, in the name and on
behalf of the Trust, one (1) or more Class O Certificates representing in the
aggregate a 100% Percentage Interest and the Certificate Registrar is hereby
authorized and directed to register such issuance in the Certificate Register.
The Residual Certificates shall be issued in two classes, Class O and Class L.
Such Residual Certificate(s), upon their issuance in accordance with this
Agreement, shall be duly authorized, validly issued, and entitled to the
benefits of this Agreement and, to the extent not inconsistent herewith, as set
forth therein. The Depositor shall at all times keep and own a Class O
Certificate representing no less than a 1% Percentage Interest, and at no time
will the Depositor sell or alienate its interest represented by Class O
Certificates in such a way as to reduce its aggregate beneficial ownership in
the Class O Certificates to less than a 1% Percentage Interest.

            SECTION 4.2. The Residual Certificates. Each Class of Residual
Certificates shall be issued in minimum Percentage Interests of 10% and integral
multiples of 1% in excess thereof. The Residual Certificates shall be executed
on behalf of the Trust by manual or facsimile signature of an authorized officer
of the Owner Trustee. Residual Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefit of this Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Residual Certificates or did not hold such
offices at the date of authentication and delivery of such Residual
Certificates. A permitted transferee of a Residual Certificate shall become a
Residual Certificateholder and shall be entitled to the rights and subject to
the obligations of a Residual Certificateholder, hereunder, upon due
registration of such Residual Certificate in such transferee's name pursuant to
Section 4.4.

            SECTION 4.3. Issuance and Authentication of Residual Certificates.
Concurrently with the initial sale of the Mortgage Loans to the Trust pursuant
to the Sale and Servicing Agreement, the Owner Trustee shall cause the Class L
Certificates to be executed on behalf of the Trust, authenticated and delivered
to or upon the written order of the Depositor, signed by its chairman of the
board, its president or any vice president, its treasurer or any assistant
treasurer without further action by the Depositor, in authorized denominations.
No Residual Certificate shall entitle its holder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on such
Residual Certificate a certificate of authentication substantially in the form
set forth in Exhibit A (with respect to a Residual Certificate), executed by the
Owner Trustee, by manual or facsimile signature; such authentication shall
constitute conclusive evidence that such Residual Certificate shall have been

                                       10
<PAGE>

duly authenticated and delivered hereunder. All Residual Certificates shall be
dated the date of their authentication.

            SECTION 4.4. Registration of Transfer and Exchange of Residual
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 4.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Residual
Certificates and of transfers and exchanges of Residual Certificates as herein
provided. The Owner Trustee shall be the initial Certificate Registrar. The
Certificate Registrar shall provide the Indenture Trustee the names and
addresses of each Holder of a Residual Certificate upon initial issuance and as
soon as reasonably practicable following any transfer of any Residual
Certificate. At any time the Owner Trustee acts as Certificate Registrar
hereunder, the rights, privileges, protections and immunities afforded to the
Owner Trustee hereunder shall apply equally to the Owner Trustee in its role as
Certificate Registrar.

            In furtherance of and not in limitation of the foregoing, each
Residual Certificateholder, by acceptance of its Residual Certificate,
specifically acknowledges that it has no right to or interest in any monies at
any time held in the Owner Trust Estate prior to the release of such monies
pursuant to Section 8.7(b)(xiv) of the Indenture, as appropriate, such monies
being held in trust for the benefit of the Noteholders and the Insurer.
Notwithstanding the foregoing, in the event that it is ever determined that the
monies held in the Owner Trust Estate constitute a pledge of collateral, then
the provisions of the Sale and Servicing Agreement shall be considered to
constitute a security agreement and the Trust hereby grants to the Indenture
Trustee and the Insurer a first priority perfected security interest in such
amounts and the Depositor and the Residual Certificateholders hereby consent to
such grant. In addition, the Trust hereby appoints the Depositor as its agent to
pledge a first priority perfected security interest in the Owner Trust Estate,
and any amounts held therein from time to time to the Indenture Trustee and the
Insurer and agrees to execute and deliver such instruments of conveyance,
assignment, grant, confirmation, etc., as well as any financing statements, in
each case as the Insurer shall consider reasonably necessary in order to perfect
the Indenture Trustee's security interest in the Mortgage Loans and the
Depositor and the Residual Certificateholders hereby acknowledge and consent to
such appointment.

            The transfer of a Residual Certificate is registerable in the
Certificate Register upon surrender of such Residual Certificate for
registration of transfer at the offices or agencies of the Certificate Registrar
maintained by the Owner Trustee in the Corporate Trust Office, accompanied by a
written instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Holder thereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Residual
Certificates in authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee. In addition, Residual
Certificates are exchangeable for new Residual Certificates in authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.

                                       11
<PAGE>

            SECTION 4.5. Mutilated, Destroyed, Lost or Stolen Residual
Certificates. If (a) any mutilated Residual Certificate shall be surrendered to
the Certificate Registrar, or if the Certificate Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Residual
Certificate and (b) there shall be delivered to the Certificate Registrar, the
Owner Trustee and the Insurer such security or indemnity as may be required by
them to save each of them harmless, then in the absence of notice that such
Residual Certificate shall have been acquired by a bona fide purchaser, the
Owner Trustee on behalf of the Trust shall execute and the Owner Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Residual Certificate, a new Residual Certificate,
respectively, of like Class, tenor and Percentage Interest. In connection with
the issuance of any new Residual Certificate under this Section, the Owner
Trustee or the Certificate Registrar may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Residual Certificate issued pursuant to this Section
(other than a duplicate Residual Certificate that has been issued in replacement
of a Residual Certificate that was acquired by a bona fide purchaser) shall
constitute conclusive evidence of an ownership interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Residual
Certificate shall be found at any time.

            SECTION 4.6. Persons Deemed Residual Certificateholders. Every
Person by virtue of becoming a Residual Certificateholder in accordance with
this Agreement and the rules and regulations of the Certificate Registrar shall
be deemed to be bound by the terms of this Agreement. Prior to due presentation
of a Residual Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar, the Indenture Trustee and the Insurer and any agent of
the Owner Trustee, the Certificate Registrar, the Indenture Trustee and the
Insurer, may treat the Person in whose name any Residual Certificate shall be
registered in the Certificate Register as the owner of such Residual Certificate
for the purpose of receiving distributions pursuant to the Sale and Servicing
Agreement and the Indenture and for all other purposes whatsoever, and none of
the Owner Trustee, the Certificate Registrar, the Indenture Trustee or the
Insurer nor any agent of the Owner Trustee, the Certificate Registrar or the
Insurer shall be bound by any notice to the contrary.

            SECTION 4.7. Access to List of Residual Certificateholders' Names
and Addresses. The Certificate Registrar shall furnish or cause to be furnished
to the Servicer, the Depositor or the Insurer, within 15 days after receipt by
the Certificate Registrar of a request therefor from such Person in writing, a
list, of the names and addresses of the Residual Certificateholders as of the
most recent Record Date. If three or more Holders of Residual Certificates or
one or more Holders of a Class of Residual Certificates evidencing not less than
25% by Percentage Interest of such Class apply in writing to the Certificate
Registrar, and such application states that the applicants desire to communicate
with other Residual Certificateholders with respect to their rights under this
Agreement or under the Residual Certificates and such application is accompanied
by a copy of the communication that such applicants propose to transmit, then
the Certificate Registrar shall, within five Business Days after the receipt of
such application, afford such applicants access during normal business hours to
the current list of Residual Certificateholders. Each Holder, by receiving and
holding a Residual Certificate, shall be deemed to have agreed not to hold any
of the Depositor, the Servicer, the Owner Trustee, the Certificate Registrar or
the Insurer or any agent thereof

                                       12
<PAGE>

accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.

            SECTION 4.8. Maintenance of Office or Agency. The Owner Trustee
shall maintain an office or offices or agency or agencies where Residual
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the
Residual Certificates and the Basic Documents may be served. The Owner Trustee
initially designates its corporate trust administration office located at
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1605, Attention: Corporate Trust Administration for
such purposes. The Owner Trustee shall give prompt written notice to the
Depositor, the Residual Certificateholders and the Insurer of any change in the
location of the Certificate Register or any such office or agency.

            SECTION 4.9. ERISA Restrictions. The Residual Certificates may not
be acquired or transferred to a transferee, other than the Depositor or its
Affiliate, for, or with the assets of, an employee benefit plan or other
retirement arrangement that is subject to Section 406 of ERISA or Section 4975
of the Code or any substantially similar law ("Similar Law"), or any entity
deemed to hold the plan assets of the foregoing (collectively, "Benefit Plans").
Each prospective transferee, other than the Depositor or its Affiliate and the
initial Holder of the Class L Certificates, shall represent and warrant to the
Owner Trustee and the Certificate Registrar that it is not a Benefit Plan, in
accordance with Exhibit C hereto, upon which the Owner Trustee and the
Certificate Registrar may rely without investigation. By accepting and holding
its beneficial ownership interests in its Residual Certificate, the Holder
thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.

            SECTION 4.10. Restrictions on Transfer of Residual Certificates.

            (a)   The Residual Certificates shall be assigned, transferred,
exchanged, pledged, financed, hypothecated or otherwise conveyed (collectively,
for purposes of this Section 4.10 and any other Section referring to the
Residual Certificates, "transferred" or a "transfer") only in accordance with
this Section 4.10.

            (b)   Each prospective transferee of a Residual Certificate, other
than the Depositor and the initial Holder of the Class L Certificates, shall
represent and warrant, in writing, to the Owner Trustee and the Certificate
Registrar (and the Owner Trustee and the Certificate Registrar shall be entitled
to rely and shall be fully protected in relying on such representations and
warranties) and any of their respective successors that:

            (i)   Such Person is (A) a "qualified institutional buyer" as
      defined in Rule 144A under the Securities Act of 1933, as amended (the
      "Securities Act"), and is aware that the seller of such Residual
      Certificate may be relying on the exemption from the registration
      requirements of the Securities Act provided by Rule 144A and is acquiring
      such Residual Certificate for its own account or for the account of one or
      more qualified institutional buyers for whom it is authorized to act or
      (B) a Person involved in the organization or operation of the Trust or an
      affiliate of such Person within the meaning of Rule 3a-7 of the 1940 Act,
      as amended (including, but not limited to, the Depositor).

                                       13
<PAGE>

            (ii)  Such Person understands that such Residual Certificate has not
      been and will not be registered under the Securities Act and may be
      offered, sold, pledged or otherwise transferred only to a person whom the
      seller reasonably believes is (A) a "qualified institutional buyer" or (B)
      a Person involved in the organization or operation of the Trust or an
      affiliate of such Person, in each case in a transaction meeting the
      requirements of Rule 144A under the Securities Act or that is otherwise
      exempt from registration under the Securities Act and in accordance with
      any applicable securities laws of any state of the United States.

            (iii) Such Person shall comply with the provisions of Section 4.9,
      as applicable, relating to the ERISA restrictions with respect to the
      acceptance or acquisition of such Residual Certificate.

            (c)   Except with respect to the initial issuance of the Class L
Certificates to the Servicer (or its Affiliate) and the Class O Certificates to
the Depositor (or its Affiliate), no pledge or transfer of a Residual
Certificate shall be effective unless such purchase or transfer is (i) to a
single beneficial owner and (ii) accompanied by an Opinion of Counsel
satisfactory to the Owner Trustee and the Insurer, which Opinion of Counsel
shall not be an expense of the Trust, the Certificate Registrar, the Insurer or
the Depositor, to the effect that (a) such pledge or transfer will not adversely
affect the treatment of the Notes after such pledge or transfer as debt for
federal and applicable state income tax purposes, (b) such pledge or transfer
will not result in the Trust being subject to tax at the entity level for
federal and applicable state tax purposes, (c) such pledge or transfer will not
have any material adverse impact on the federal income taxation of any
Noteholder or any Residual Certificateholder and (d) such pledge or transfer
will not result in the arrangement created by this Agreement or any "portion" of
the Trust being treated as a taxable mortgage pool as defined in Section 7701(I)
of the Code.

            (d)   No transfer, including any pledge, of Residual Certificates
shall be effective, and the purported transferor shall continue to be regarded
as the beneficial owner of the Residual Certificates, if, as a result of the
transfer (or pledge), there would be more than 80 beneficial owners of Residual
Certificates. For purposes of applying this restriction, if the registered
holder of Certificates is a partnership (or an entity treated as a partnership
for federal income tax purposes), a grantor trust, or an S corporation, the
Residual Certificates shall be treated as being beneficially owned by the
partners, beneficiaries, or shareholders. The Owner Trustee and Certificate
Registrar shall be under no obligation to determine the number of such
beneficial owners. The transferee or pledgee shall certify in writing to the
Owner Trustee and Certificate Registrar the number of such partners,
beneficiaries and shareholders, and the Owner Trustee and Certificate Registrar
may conclusively rely on such certifications. Moreover, to ensure that the
Issuer will not become subject to payment of U.S. withholding tax, any transfer
of Certificates to a person other than a U. S. person (as defined in the Code)
is prohibited.

            (e)   Upon receipt of the aforementioned representations and
warranties, Opinion of Counsel and certifications, the Owner Trustee and
Certificate Registrar are hereby authorized and empowered (without any
obligation to verify the accuracy of such documentation) to register the
transfer of the applicable Residual Certificate.

                                       14
<PAGE>

            SECTION 4.11. Distributions on Residual Certificates. (i) The
Residual Certificateholders will be entitled to distributions on each Payment
Date, as provided in this Agreement, the Sale and Servicing Agreement and the
Indenture. With respect to any Payment Date, (x) the Indenture Trustee shall
distribute to the Class L Certificateholders any amounts allocated to them in
accordance with Section 8.7(b)(iv), (v) and (vi) of the Indenture and (y) any
amounts remaining in the Distribution Account for payment to the Residual
Certificateholders pursuant to Section 8.7(b)(xiv) of the Indenture shall be
distributed by the Indenture Trustee on the Owner Trustee's behalf as follows:

            (i)   With respect to any Payment Date during the Managed
      Amortization Period, to the Class O Certificateholders, all amounts; and

            (ii)  with respect to any Payment Date during the Rapid Amortization
      Period, first, to the Class L Certificateholders, interest on the Class
      Principal Balance thereof at the Contribution Rate, second, to the Holders
      of the Class O Certificates, any remaining Interest Collections and third,
      all other amounts (x) to the Class O Certificateholders until the Class
      Principal Balance of the Class O Notes has been reduced to zero then (y)
      to the Class L Certificateholders until the Class Principal Balance of the
      Class L Certificates has been reduced to zero; provided, however, that the
      Class O Certificateholders shall have no right to such distributions
      unless all unpaid and unreimbursed Expenses due and owing to the Owner
      Trustee pursuant to the Basic Documents (including Section 9.2 herein)
      shall have been paid from such amounts available for distribution to the
      Class O Certificates.

provided, further, on the Payment Date on which the Redemption Price is
distributed, the portion, if any, of the Redemption Price allocable to the Class
L Certificates shall be distributed pursuant to this Section 4.11 to the Class L
Certificateholders and the portion, if any, of the Redemption Price allocable to
the Class O Certificates shall be distributed pursuant to this Section 4.11 to
the Class O Certificateholders, as applicable.

provided, further, that the Issuer shall cause any Mortgage Loans removed from
the Trust Property pursuant to Section 2.07 of the Sale and Servicing Agreement
to be assigned to the Holder of the Class L Certificates and the Class Principal
Balance of the Class L Certificates shall be reduced by the Principal Balance of
such Mortgage Loans (it being understood that, if any such assignment occurs
during the Managed Amortization Period, the Principal Balance of such Mortgage
Loans will be offset against the Class Principal Balance of the Class L
Certificates following commencement of the Rapid Amortization Period).

            (b)   With respect to each Payment Date, the Owner Trustee, to the
extent the Servicer has provided the related Servicing Certificate to the Owner
Trustee pursuant to the Master Servicing Agreement, shall deliver or make
available the Servicing Certificate for such Payment Date to each Residual
Certificateholder. Under no circumstances shall the Owner Trustee have any
responsibility to perform the obligations of the Indenture Trustee under this
Section 4.11, nor shall the Owner Trustee have any duty or responsibility to
supervise the Indenture Trustee in the performance thereof

                                       15
<PAGE>

            SECTION 4.12. Class C Interest. On the Closing Date, there shall be
created an interest in the Trust (the "Class C Interest") that will confer to
its holder the right to cause the Trust to redeem or repurchase the Notes in the
manner and under the circumstances set forth in Section 10.1 of the Indenture
and Section 7.01 of the Sale and Servicing Agreement. Such right shall be the
sole right conferred upon the holder of the Class C Interest. Other than as set
forth in this Section 4.12, the holder of the Class C Interest shall have no
duties, rights or powers with respect to the Trust and no economic interest in
the Trust. The Class C Interest shall not be evidenced by a physical certificate
and shall be duly authorized, validly issued and entitled to the benefits of
this Agreement upon entry of such interest and the holder thereof in the
Certificate Register. The Certificate Registrar is hereby authorized and
directed to cause an entry to be made in the Certificate Register registering
the Class C Interest in the name of Redwood Trust, Inc. The Class C Interest may
not be transferred except to an Affiliate of the initial holder thereof and
following receipt of an Opinion of Counsel by the Trust and the Owner Trustee
reasonably satisfactory to the Owner Trustee providing that such transfer will
not (a) violate any provisions of ERISA or any Similar Law, (b) result in a
violation of the Securities Act or require the Trust to register any securities
under the Securities Act or the Trust under the Investment Company Act of 1940,
as amended or (c) cause the Trust to be treated for federal income tax purposes
as an association taxable as a corporation, a taxable mortgage pool, or a
publicly traded partnership taxable as a corporation.

                                    ARTICLE V

                         Voting Rights and Other Actions

            SECTION 5.1. Prior Notice with Respect to Certain Matters. With
respect to the following matters, the Owner Trustee shall not take action unless
at least 30 days before the taking of such action, the Owner Trustee shall have
notified the Depositor and the Insurer in writing of the proposed action and the
Depositor, the Insurer and the Residual Certificateholders shall not have
notified the Owner Trustee in writing prior to the 30th day after such notice is
given that the Depositor or the Insurer have withheld consent or provided
alternative direction:

            (a)   the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Statutory Trust Statute);

            (b)   the amendment of the Indenture by a supplemental Indenture in
circumstances where the consent of any Noteholder is required;

            (c)   the amendment of the Indenture by a supplemental Indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Residual
Certificateholders;

            (d)   except pursuant to Section 9.01 of the Sale and Servicing
Agreement, the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement any
provision in a manner that would not materially adversely affect the interests
of the Residual Certificateholders;

            (e)   the consent to the calling or waiver of any default of any
Basic Document;

                                       16
<PAGE>

            (f)   the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;

            (g)   except as provided in Article X hereof, dissolve, terminate or
liquidate the Trust in whole or in part;

            (h)   cause the Trust to incur, assume or guaranty any indebtedness
other than as in this Agreement or the other Basic Documents;

            (i)   do any act that conflicts with any other Basic Document;

            (j)   do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.3 hereof;

            (k)   possess Trust assets, or assign the Trust's right to property,
for other than a Trust purpose;

            (l)   cause the Trust to lend any funds to any entity; or

            (m)   change the Trust's purpose and powers from those set forth in
this Trust Agreement.

Any action described under (b), (c), (d), (h), (i), (k), (l) and (m) shall
require the prior approval of the Residual Certificateholders. The Owner Trustee
shall notify the Residual Certificateholders in writing of any appointment of a
successor Certificate Registrar within five Business Days thereof.

            SECTION 5.2. Action by Residual Certificateholders with Respect to
Certain Matters. Upon the written request of any Residual Certificateholder (a
"Proposer"), the Owner Trustee shall distribute promptly to all Residual
Certificateholders any request for action or consent of Residual
Certificateholders submitted by such Proposer (at the initial cost and expense
of the Trust), with a copy to the Insurer and the Indenture Trustee by any means
of transmission reasonably selected by the Owner Trustee. The Owner Trustee
shall provide a reasonable method for collecting responses to such request and
shall tabulate and report the results thereof to the Residual
Certificateholders, the Insurer and the Indenture Trustee. The Owner Trustee
shall have no responsibility or duty to determine if any such proposed action or
consent is permitted under the terms of this Agreement or applicable law. The
Trust's reasonable costs and expenses (including overhead reasonably allocated
to such distribution, collection, tabulation and reporting) shall be reimbursed
to the Trust by the Proposer within 10 Business Days after receipt of an invoice
from the Trust for such costs and expenses.

            SECTION 5.3. Action with Respect to Bankruptcy. Until one year and
one day following the day on which the Notes have been paid in full, the Owner
Trustee shall not have the power to, and shall not, commence any proceeding or
other actions contemplated by Section 2.12(b) relating to the Trust without the
prior written consent of the Insurer. Until one year and one day following the
day on which the Notes have been paid in full, all amounts due to the Insurer
under the Insurance Agreement have been paid in full, the Policy has terminated
and the Indenture Trustee has surrendered the Policy to the Insurer, the Owner
Trustee shall not have

                                       17
<PAGE>

the power to, and shall not, commence any proceeding or other actions
contemplated by Section 2.12(b) relating to the Trust without the prior written
consent of all of the Residual Certificateholders and the Insurer, and the
delivery to the Owner Trustee by each such Residual Certificateholder and the
Insurer, of a certificate certifying that such Residual Certificateholder and
the Insurer reasonably believes that the Trust is insolvent. The Owner Trustee
in undertaking such proceedings or other actions contemplated by Section 2.12(b)
relating to the Trust shall consider the interest of the Noteholders and the
Insurer in addition to the interests of the Residual Certificateholders and
whether the Trust is insolvent. The Owner Trustee shall not commence such
proceedings or other actions contemplated by Section 2.12(b) unless the Owner
Trustee shall have been furnished (at the expense of the Trust) with a letter
from an independent accounting firm of national reputation stating that in the
opinion of such firm the Trust is then insolvent. The provisions of this Section
do not constitute an acknowledgement or admission by the Trust, the Owner
Trustee, any Residual Certificateholder or any creditor of the Trust that the
Trust is eligible to be a debtor under the United States Bankruptcy Code, 11
U.S.C. Sections 101 et seq., as amended.

            SECTION 5.4. Restrictions on Residual Certificateholders' Power.

            (a)   Neither the Residual Certificateholders nor the Insurer shall
direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement or any of the Basic Documents or would be contrary
to Section 2.3 or otherwise contrary to law nor shall the Owner Trustee be
obligated to follow any such direction, if given.

            (b)   No Residual Certificateholder shall have any right by virtue
or by availing itself of any provisions of this Agreement to institute any suit,
action, or proceeding in equity or at law upon or under or with respect to this
Agreement or any Basic Document, unless such party is the Instructing Party
pursuant to Section 7.3 and unless such party previously shall have given to the
Owner Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement, and also unless Residual Certificateholders
evidencing not less than 25% by Percentage Interest of each class (or, during
the Managed Amortization Period, the Class O Certificates only) shall have made
written request upon the Owner Trustee to institute such action, suit or
proceeding in its own name as Owner Trustee under this Agreement and shall have
offered to the Owner Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Owner Trustee, for 30 days after its receipt of such notice, request, and offer
of indemnity, shall have neglected or refused to institute any such action,
suit, or proceeding, and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Owner Trustee
pursuant to and in compliance with this Section or Section 7.3; it being
understood and intended, and being expressly covenanted by each Residual
Certificateholder with every other Residual Certificateholder, the Owner Trustee
or the Insurer, that no Holders of Residual Certificates shall have any right in
any manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb, or prejudice the rights of the
Holders of any other of the Residual Certificates, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce any
right under this Agreement, except in the manner provided in this Agreement and
for the equal, ratable, and common benefit of all Residual Certificateholders
and the Insurer. For the protection and enforcement of the provisions of this
Section 5.4, each and

                                       18
<PAGE>

every Residual Certificateholder, the Owner Trustee and the Insurer shall be
entitled to such relief as can be given either at law or in equity.

            SECTION 5.5. Majority Control. No Residual Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust except as expressly provided in this Agreement. Except
as expressly provided herein, any action that may be taken by the Residual
Certificateholders under this Agreement may be taken by the Holders of Residual
Certificates evidencing not less than a 51% Percentage Interest of each Class of
Residual Certificates (or, during the Managed Amortization Period, the Class O
Certificates only). Except as expressly provided herein, any written notice of
the Residual Certificateholders delivered pursuant to this Agreement shall be
effective if signed by Residual Certificateholders evidencing not less than a
51% Percentage Interest in each Class (or, during the Managed Amortization
Period, the Class O Certificates only) at the time of the delivery of such
notice.

            SECTION 5.6. Rights of the Insurer. Notwithstanding anything to the
contrary in the Basic Documents, without the prior written consent of the
Insurer, the Owner Trustee shall not (i) remove the Servicer, (ii) initiate any
claim, suit or proceeding by the Trust or compromise any claim, suit or
proceeding brought by or against the Trust, other than with respect to the
enforcement of any Mortgage Loan or any rights of the Trust thereunder or
confess a judgement against the Trust, (iii) authorize the merger or
consolidation of the Trust with or into any other statutory trust or other
entity or convey or transfer all or substantially all of the Trust's assets to
any other Person, (iv) amend the Certificate of Trust (unless such amendment is
required to be filed under the Statutory Trust Statute) or (v) amend this
Agreement in accordance with Section 12.1 of this Agreement.

            SECTION 5.7. [Reserved]

            SECTION 5.8. Insurer's Rights Regarding Actions, Proceedings or
Investigations. Until all Notes have been paid in full, all amounts owed to the
Insurer have been paid in full, the Insurance Agreement has terminated and the
Policy has been returned to the Insurer for cancellation, the following
provisions shall apply:

            (a)   Notwithstanding anything contained herein or in the other
Basic Documents to the contrary and providing that no Insurer Default has
occurred or is continuing, the Insurer shall have the right to participate in,
to direct the enforcement or defense of, and, at the Insurer's sole option, to
institute or assume the defense of, any action, proceeding or investigation that
could adversely affect the Trust, the Owner Trust Estate, the Collateral, the
Trust Property or the rights or obligations of the Insurer hereunder or under
the Policy or the Basic Documents, including (without limitation) any insolvency
or bankruptcy proceeding in respect of the Servicer, the Seller, the Depositor,
the Trust or any affiliate thereof. Following notice to the Indenture Trustee,
the Insurer shall have exclusive right to determine, in its sole discretion, the
actions necessary to preserve and protect the Trust, the Owner Trust Estate, the
Collateral, and the Trust Property. All costs and expenses of the Insurer in
connection with such action, proceeding or investigation, including (without
limitation) any judgment or settlement entered into affecting the Insurer or the
Insurer's interests, shall be included in the Reimbursement Amount.

                                       19
<PAGE>

            (b)   In connection with any action, proceeding or investigation
that could adversely affect the Trust, the Owner Trust Estate, the Collateral,
the Trust Property or the rights or obligations of the Insurer hereunder or
under the Policy or the Basic Documents, including (without limitation) any
insolvency or bankruptcy proceeding in respect of the Servicer, the Seller, the
Depositor, the Trust or any affiliate thereof, the Owner Trustee hereby agrees
to cooperate with, and to take such action as directed in writing by, the
Insurer, including (without limitation) entering into such agreements and
settlements as the Insurer shall direct, in its sole discretion, without the
consent of any Noteholder and the Owner Trustee shall be entitled to rely on
such direction and shall be fully protected in so relying.

            (c)   The Owner Trustee hereby agrees to provide to the Insurer
prompt written notice of any action, proceeding or investigation that names the
Trust or the Indenture Trustee as a party or that could adversely affect the
Trust, the Owner Trust Estate, the Collateral, the Trust Property or the rights
or obligations of the Insurer hereunder or under the Policy or the Basic
Documents, including (without limitation) any insolvency or bankruptcy
proceeding in respect of the Servicer, the Seller, the Depositor, the Trust or
any affiliate thereof after a Responsible Officer of the Owner Trustee obtains
actual knowledge of the occurrence of such event.

            (d)   Notwithstanding anything contained herein or in any of the
other Basic Documents to the contrary, the Owner Trustee shall not, without the
Insurer's prior written consent or unless directed by the Insurer, undertake or
join any litigation or agree to any settlement of any action, proceeding or
investigation affecting the Trust, the Owner Trust Estate, the Collateral, the
Trust Property or the rights or obligations of the Insurer hereunder or under
the Policy or the Basic Documents.

            (e)   Each Residual Certificateholder, by acceptance of its Residual
Certificate, as appropriate, and the Owner Trustee agree that the Insurer shall
have such rights as set forth in this Section, which are in addition to any
rights of the Insurer pursuant to the other provisions of the Basic Documents,
that the rights set forth in this Section may be exercised by the Insurer, in
its sole discretion, without the need for the consent or approval of any
Residual Certificateholder or the Owner Trustee, notwithstanding any other
provision contained herein or in any of the other Basic Documents, and that
nothing contained in this Section shall be deemed to be an obligation of the
Insurer to exercise any of the rights provided for herein.

                                   ARTICLE VI

                                 Certain Duties

            SECTION 6.1. Accounting and Records to the Noteholders, Residual
Certificateholders, the Internal Revenue Service and Others. The Indenture
Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on
a calendar year basis on the accrual method of accounting, including, without
limitation, the allocations of net income under Section 2.11 hereof, (b) deliver
(or cause to be delivered) to each Residual Certificateholder, as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1, if applicable) to enable each Residual
Certificateholder to prepare its federal and state income tax returns, (c)
prepare, file or cause to be filed, if necessary, such tax returns relating to
the Trust (including a partnership information return, Form 1065, if

                                       20
<PAGE>

applicable), and direct the Owner Trustee or the Depositor, as the case may be,
to make such elections as may from time to time be required or appropriate under
any applicable state or federal statute or rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes and (d) collect or cause to be collected any withholding tax as
described in and in accordance with Section 8.01(b)(ii) of the Sale and
Servicing Agreement with respect to income or distributions to Residual
Certificateholders and the appropriate forms relating thereto. The Owner Trustee
or the Residual Certificateholders, as the case may be, shall make all elections
pursuant to this Section as directed in writing by the Indenture Trustee. The
Owner Trustee shall sign all tax information returns, if any, prepared and filed
pursuant to this Section 6.1 and any other returns as may be required by law,
and in doing so shall rely entirely upon, and shall have no liability for
information provided by, or calculations provided by, the Indenture Trustee. The
Indenture Trustee will direct the Owner Trustee and the Owner Trustee shall
elect under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Mortgage Loans. The Indenture Trustee
shall not direct the Owner Trustee to make, and the Owner Trustee shall not
make, the election provided under Section 754 of the Code.

            SECTION 6.2. Signature on Returns; Tax Matters Partner.

            (a)   The Owner Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires a Residual
Certificateholder to sign such documents, in which case such documents shall be
signed by the applicable Residual Certificateholder.

            (b)   The Holder of 51% or more of the Percentage Interest in the
Class O Certificates shall be the "tax matters partner" of the Trust pursuant to
the Code.

            SECTION 6.3. Underwriting Agreement. The Depositor is hereby
authorized to execute and deliver the Underwriting Agreement with respect to the
Notes.

                                  ARTICLE VII

                      Authority and Duties of Owner Trustee

            SECTION 7.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver on behalf of the Trust the Basic Documents to
which the Trust is named as a party and each certificate or other document
attached as an exhibit to or contemplated by the Basic Documents to which the
Trust is named as a party and any amendment thereto, in each case, in such form
as the Depositor shall approve and provide to the Owner Trustee for execution as
evidenced conclusively by the Owner Trustee's execution thereof, and on behalf
of the Trust, to direct the Indenture Trustee to authenticate and deliver Notes
in the principal amounts of $317,440,000. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust pursuant to the Basic Documents. The Owner Trustee is
further authorized from time to time to take such action as the Instructing
Party recommends with respect to the Basic Documents. The Owner Trustee may rely
on the Manager to carry out any action that the Owner Trustee is authorized or
directed to perform hereunder, to the extent permitted by the Management
Agreement.

                                       21
<PAGE>

            SECTION 7.2. General Duties. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and to administer the Trust in the
interest of the Residual Certificateholders, subject to the Basic Documents and
in accordance with the provisions of this Agreement. Notwithstanding the
foregoing, the Owner Trustee shall be deemed to have discharged its duties and
responsibilities hereunder and under the Basic Documents to the extent the
Depositor has agreed herein or in the Sale and Servicing Agreement, or the
Manager has agreed in the Management Agreement or the Indenture Trustee has
agreed in any Basic Document, to perform any act or to discharge any duty of the
Trust or the Owner Trustee hereunder or under any Basic Document, and the Owner
Trustee shall not be liable for the negligence, default or failure of the
Depositor, the Indenture Trustee or the Manager to carry out its obligations
under any Basic Document. The Owner Trustee shall have no duty or obligation to
supervise the Depositor, Manager or Indenture Trustee in the exercise of their
respective duties and responsibilities hereunder and under the Sale and
Servicing Agreement, the Management Agreement or the Indenture, as applicable.

            SECTION 7.3. Action upon Instruction.

            (a)   Subject to Article V, the Insurer (the "Instructing Party")
shall have the exclusive right to direct the actions of the Owner Trustee in the
management of the Trust, so long as such instructions are not inconsistent with
the express terms set forth herein or in any Basic Document. The Instructing
Party shall not instruct the Owner Trustee in a manner inconsistent with this
Agreement or the Basic Documents. In acting in accordance with the direction of
the Instructing Party pursuant to this Section or pursuant to Article V, the
Owner Trustee shall not be deemed to (i) owe any fiduciary obligation to the
Insurer or (ii) have violated any fiduciary responsibility to the Residual
Certificateholders. In acting (or refraining from acting) in good faith in
accordance with any instruction or direction of the Instructing Party (or any
other Person authorized to instruct or direct the Owner Trustee hereunder) given
to the Owner Trustee pursuant to this Agreement, the Owner Trustee shall not be
liable, on account of such action or inaction, to any Person.

            (b)   The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.

            (c)   Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Basic Document, the Owner Trustee shall promptly give notice
(in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any instruction of the Instructing Party received, the Owner Trustee shall
not be liable on account of such action to any Person. If the Owner Trustee
shall not have received appropriate instruction within ten days of such notice
(or within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be under
no duty to, notwithstanding any other provision of this Agreement, take or
refrain from taking

                                       22
<PAGE>

such action, not inconsistent with this Agreement or the Basic Documents, as it
shall deem in good faith to be in the best interests of the Residual
Certificateholders and shall have no liability to any Person for such action or
inaction.

            (d)   In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Instructing
Party requesting instruction and, notwithstanding any other provision of this
Agreement, to the extent that the Owner Trustee acts or refrains from acting in
good faith in accordance with any such instruction received, the Owner Trustee
shall not be liable, on account of such action or inaction, to any Person. If
the Owner Trustee shall not have received appropriate instruction within 10 days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem in
good faith to be in the best interests of the Residual Certificateholders, and
shall have no liability to any Person for such action or inaction.

            SECTION 7.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee or the Trust is a party, except as expressly provided
by the terms of this Agreement or in any document or written instruction
received by the Owner Trustee pursuant to Section 7.3; and no implied duties or
obligations shall be read into this Agreement or any Basic Document against the
Owner Trustee. The Owner Trustee shall have no responsibility to file any
financing or continuation statement in any public office at any time or
otherwise to perfect or to maintain the perfection of any security interest or
lien granted under the Indenture or to prepare or file any SEC filing for the
Trust or to record this Agreement or any Basic Document. The Owner Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any Liens on any part of the Owner Trust
Estate that result from actions by, or claims against, the Owner Trustee (solely
in its individual capacity) and that are not related to the ownership or the
administration of the Owner Trust Estate.

            SECTION 7.5. No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 7.3.

            SECTION 7.6. Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual

                                       23
<PAGE>

knowledge of a Responsible Officer of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation or a publicly traded partnership for
federal income tax purposes. The Instructing Party and the Residual
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section.

                                  ARTICLE VIII

                          Concerning the Owner Trustee

            SECTION 8.1. Acceptance of Trust and Duties. The Owner Trustee
accepts the trust hereby created and agrees to perform its duties hereunder with
respect to such trust but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it in accordance
with the Basic Documents and constituting part of the Owner Trust Estate upon
the terms of the Basic Documents and this Agreement. The Owner Trustee shall not
be answerable or accountable hereunder or under any Basic Document under any
circumstances, except (i) for its own willful misconduct, bad faith or
negligence, (ii) in the case of the inaccuracy of any representation or warranty
contained in Section 8.3 expressly made by the Owner Trustee in its individual
capacity, (iii) for liabilities arising from the failure of the Owner Trustee to
perform obligations expressly undertaken by it in the last sentence of Section
7.4 hereof, or (iv) for taxes, fees or other charges on, based on or measured
by, any fees, commissions or compensation received by the Owner Trustee. In
particular, but not by way of limitation (and subject to the exceptions set
forth in the preceding sentence):

            (a)   the Owner Trustee shall not be liable for any error of
judgment, not constituting negligence, made by a Responsible Officer of the
Owner Trustee;

            (b)   the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it if such action or omission is in
accordance with the instructions of the Instructing Party, the Depositor, the
Servicer or any Residual Certificateholder pursuant to the terms hereof;

            (c)   the Owner Trustee shall not risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;

            (d)   the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution hereof
by the Depositor and the Seller or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Basic Documents, other than the
certificates of authentication on the Residual Certificates, and the Owner
Trustee shall in no event assume or incur any liability, duty or obligation to
the Depositor, the Insurer, the Indenture Trustee or any Residual
Certificateholder, other than as expressly provided for herein and in the Basic
Documents;

                                       24
<PAGE>

            (e)   the Owner Trustee shall not be liable for the negligence,
default or misconduct of the Depositor, any Residual Certificateholder, the
holder of the Class C Interest, the Insurer, the Indenture Trustee, or the
Servicer under any of the Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations under this
Agreement or the Basic Documents that are required to be performed by the
Depositor under this Agreement, by the Indenture Trustee under this Agreement
and the Indenture, the Manager under the Management Agreement or the Servicer
under the Sale and Servicing Agreement;

            (f)   the Owner Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of the
Instructing Party or any of the Residual Certificateholders, unless such
Instructing Party or Residual Certificateholders have offered to the Owner
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Basic Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable for other than its gross negligence, bad
faith or willful misconduct in the performance of any such act;

            (g)   Notwithstanding anything to the contrary herein or in any
Basic Document, the Owner Trustee shall not be required to execute, deliver or
certify on behalf of the Issuer or any other Person any filings, certificates,
affidavits or other instruments in connection with certifications required under
the Sarbanes-Oxley Act of 2002;

            (h)   the Owner Trustee shall have no responsibility for the
accuracy of any information provided to Residual Certificateholders or any other
Person that has been obtained from, or provided to the Owner Trustee by, any
other Person;

            (i)   in the absence of bad faith on its part, the Owner Trustee may
conclusively rely upon certificates or opinions furnished to the Owner Trustee
and conforming to the requirements of this Agreement in determining the truth of
the statements and the correctness of the opinions contained therein; provided,
however, that the Owner Trustee shall have examined such certificates or
opinions so as to determine compliance of the same with the requirements of this
Trust Agreement; and

                  (j)   the Owner Trustee shall incur no liability if, by reason
of any provision of any present or future law or regulation thereunder, or by
any force majeure event, including but not limited to natural disaster, war or
other circumstances beyond its reasonable control, the Owner Trustee shall be
prevented or forbidden from doing or performing any act or thing which the terms
of this Agreement provide shall or may be done or performed, or by reason of any
exercise of, or failure to exercise, any discretion provided for in this
Agreement.

            SECTION 8.2. Furnishing of Documents. The Owner Trustee shall
furnish to the Residual Certificateholders promptly upon receipt of a written
request therefor, duplicates or

                                       25
<PAGE>

copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.

            SECTION 8.3. Representations and Warranties. The Owner Trustee
hereby represents and warrants, in its individual capacity, to the Depositor,
the Certificateolders and the Insurer that:

            (a)   It is a banking corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware. It has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.

            (b)   It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.

            (c)   Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware state law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order binding on
it, or constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a party
(other than the Basic Documents) or by which any of its properties may be bound.

            (d)   The Owner Trustee has duly executed and delivered this
Agreement and, assuming the due authorization, execution and delivery of this
Agreement by the Depositor and the Seller, this Agreement constitutes the legal,
valid and binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its terms, except as (i) such enforceability may be
limited by bankruptcy, insolvency, reorganization and similar laws relating to
or affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.

            SECTION 8.4. Reliance; Advice of Counsel.

            (a)   The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties and
need not investigate any fact or matter in any such document as long as the
Owner Trustee has otherwise satisfied its obligations under this Agreement. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer, secretary or other authorized officers of the
relevant party, as to such fact or matter, and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.

                                       26
<PAGE>

            (b)   In the exercise or administration of the trust hereunder and
in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them (and shall not be
liable for the conduct or misconduct of such agents or attorneys if such agents
or attorneys shall have been selected by the Owner Trustee in good faith and
using reasonable care), and (ii) may consult with counsel, accountants and other
skilled persons to be selected with reasonable care and employed by it. The
Owner Trustee shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the opinion or advice of any such counsel,
accountants or other such persons and according to such opinion not contrary to
this Agreement or any Basic Document.

            SECTION 8.5. Not Acting in Individual Capacity. Except as provided
in this Article VIII, in accepting the trust hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.

            SECTION 8.6. Owner Trustee Not Liable for Notes, Residual
Certificates or Mortgage Loans. The recitals contained herein and in the Notes
and the Residual Certificates (other than the signature of the Owner Trustee on
the Notes and the Residual Certificates and the Owner Trustee's Certificate of
Authentication on the Residual Certificates), shall be taken as the statements
of the Depositor and the Owner Trustee assumes no responsibility for the
correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, of any Basic Document, of the Notes
(other than the signature and countersignature of the Owner Trustee on the
Notes) or of the Residual Certificates, (other than the signature of the Owner
Trustee on the Notes and the Residual Certificates and the Owner Trustee's
Certificate of Authentication on the Residual Certificates) or of any Mortgage
Loan or related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage Loan, or the perfection and priority of any
security interest created by any Mortgage Loan or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to
Residual Certificateholders under this Agreement or the Noteholders under the
Indenture, including, without limitation: the existence, condition and ownership
of any Mortgage Loan; the existence and enforceability of any insurance thereon;
the existence and contents of any Mortgage Loan on any computer or other record
thereof; the validity of the assignment of any Mortgage Loan to the Trust or of
any intervening assignment; the completeness of any Mortgage Loan; the
performance or enforcement of any Mortgage Loan; the compliance by the
Depositor, the Servicer or any other Person with any warranty or representation
made under any Basic Document or in any related document or the accuracy of any
such warranty or representation or any action of the Indenture Trustee or the
Servicer or any subservicer taken in the name of the Owner Trustee.

            SECTION 8.7. Owner Trustee May Own Notes and Residual Certificates.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Notes or Residual Certificates and may deal with the Depositor,
the Indenture Trustee and the Servicer in banking transactions with the same
rights as it would have if it were not Owner Trustee.

                                       27
<PAGE>

            SECTION 8.8. Payments from Owner Trust Estate. All payments to be
made by the Owner Trustee under this Agreement or any of the Basic Documents to
which the Trust or the Owner Trustee is a party shall be made only from the
income and proceeds of the Owner Trust Estate and only to the extent that the
Owner Trustee shall have received income or proceeds from the Owner Trust Estate
to make such payments in accordance with the terms hereof. Wilmington Trust
Company, or any successor thereto, in its individual capacity, shall not be
liable for any amounts payable under this Agreement or any of the Basic
Documents to which the Trust or the Owner Trustee is a party.

            SECTION 8.9. Doing Business in Other Jurisdictions. Notwithstanding
anything contained herein or elsewhere to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 11.5 hereof, (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware; (ii) result in any fee, tax or other governmental charge under the
laws of the State of Delaware becoming payable by Wilmington Trust Company (or
any successor thereto); or (iii) subject Wilmington Trust Company (or any
successor thereto) to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company (or any successor
thereto) or the Owner Trustee, as the case may be, contemplated hereby.

                                   ARTICLE IX

                          Compensation of Owner Trustee

            SECTION 9.1. Owner Trustee's Fees and Expenses. The Owner Trustee
shall receive as compensation for its services hereunder the Owner Trustee Fees,
and the Owner Trustee shall be entitled to be reimbursed by the Depositor for
its other reasonable expenses hereunder, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the exercise and performance
of its rights and its duties hereunder and under the Basic Documents.

            SECTION 9.2. Indemnification. The Depositor and the Seller shall be
jointly and severally liable as primary obligors for, and shall indemnify and
save and hold harmless the Owner Trustee (in its individual and trust
capacities) and its officers, directors, shareholders, successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may (in its trust or individual capacities) at
any time be imposed on, incurred by, or asserted against the Owner Trustee or
any Indemnified Party in any way relating to or arising out of this Agreement,
the Basic Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Depositor and the Seller shall not be liable for or required to
indemnify the Owner Trustee from and against Expenses

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<PAGE>

arising or resulting from any of the matters described in the third sentence of
Section 8.1. The indemnities contained in this Section and the rights under
Section 9.1 shall survive the resignation or termination of the Owner Trustee or
the termination of this Agreement. In any event of any claim, action or
proceeding for which indemnity will be sought pursuant to this Section, the
Owner Trustee's choice of legal counsel shall be subject to the approval of the
Depositor and the Seller, which approval shall not be unreasonably withheld.

            SECTION 9.3. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article IX shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.

            SECTION 9.4. Non-recourse Obligations. Notwithstanding anything in
this Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Residual Certificateholder.

                                   ARTICLE X

                         Termination of Trust Agreement

            SECTION 10.1. Termination of Trust Agreement.

            (a)   This Agreement shall terminate and be of no further force or
effect upon the dissolution and conclusion of the winding up of the business and
affairs of the Trust and the filing of a certificate of cancellation in
accordance with the Statutory Trust Statute; provided, however, that the rights
to indemnification under Section 9.2 and the rights under Section 9.1 shall
survive the termination of this Trust Agreement. The Trust shall dissolve and
proceed to wind up its business and affairs upon the later of (i) the maturity
or other liquidation of the last Mortgage Loan (including the redemption by the
Optional Redemption Holder at its option of the Notes as described in Section
7.01(b) of the Sale and Servicing Agreement) and the subsequent distribution of
amounts in respect of such Mortgage Loans as provided in the Basic Documents or
(ii) the payment to Residual Certificateholders of all amounts required to be
paid to them pursuant to this Agreement and the Indenture and the payment to the
Insurer of all amounts payable or reimbursable to it pursuant to the Sale and
Servicing Agreement, the Indenture and the Insurance Agreement; The Servicer
shall promptly notify the Owner Trustee and the Insurer of any prospective
dissolution pursuant to this Section 10.1. The bankruptcy, liquidation,
dissolution, death or incapacity of any Residual Certificateholder shall not (x)
operate to terminate this Agreement or dissolve the Trust, nor (y) entitle such
Residual Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of all or any part of the Trust or Owner Trust Estate nor (z)
otherwise affect the rights, obligations and liabilities of the parties hereto.

            (b)   Except as provided in clause (a), neither the Depositor nor
any other Residual Certificateholder shall be entitled to revoke or dissolve the
Trust.

                                       29
<PAGE>

            (c)   Notice of any dissolution of the Trust, specifying the Payment
Date upon which the Residual Certificateholders shall surrender their Residual
Certificates to the Owner Trustee for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to the Residual
Certificateholders mailed within five Business Days of receipt of notice of such
dissolution given pursuant to Section 10.1 of the Indenture, stating (i) the
Payment Date upon or with respect to which final payment of the Residual
Certificates shall be made upon presentation and surrender of the Residual
Certificates at the office of the Owner Trustee therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Payment Date is not applicable, payments being made only upon
presentation and surrender of the Residual Certificates at the office of the
Owner Trustee therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Indenture
Trustee at the time such notice is given to the Residual Certificateholders.
Upon presentation and surrender of the Residual Certificates, the Indenture
Trustee shall distribute to the Residual Certificateholders amounts
distributable on such Payment Date pursuant to Section 4.11(a) herein.

            In the event that all of the Residual Certificateholders shall not
surrender their Residual Certificates for cancellation within six months after
the date specified in the above-mentioned written notice, the Owner Trustee
shall give a second written notice to the remaining Residual Certificateholders
to surrender their Residual Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Residual Certificates shall not have been surrendered for cancellation,
the Owner Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Residual Certificateholders
concerning surrender of their Residual Certificates, and the cost thereof shall
be paid out of the funds and other assets that shall remain subject to this
Agreement. Any funds remaining in the Trust after exhaustion of such remedies
shall be distributed, subject to applicable escheat laws, by the Owner Trustee
to the Depositor and Holders shall look solely to the Depositor for payment.

            (d)   Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution, to the extent
received by the Owner Trustee, shall be distributed by the Owner Trustee (or the
Indenture Trustee) to the Residual Certificateholders pursuant to Section
4.11(a) herein.

            (e)   Upon the completion of the winding up of the Trust in
accordance with Section 3808 of the Statutory Trust Statute, the Owner Trustee,
upon receipt from the Holders of 51% or more in Percentage Interest of the Class
O Certificates of a direction to do so (which direction shall include such
factual certifications regarding the winding up of the Trust's business and
affairs as shall be reasonably requested by the Owner Trustee), shall cause the
Certificate of Trust to be canceled by filing a certificate of cancellation with
the Secretary of State in accordance with the provisions of Section 3810 of the
Statutory Trust Statute.

                                       30
<PAGE>

                                   ARTICLE XI

             Successor Owner Trustees and Additional Owner Trustees

            SECTION 11.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Statutory Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or State
authorities; (iv) having (or having a parent which has) a rating of at least A3
by Moody's or A-1 by Standard & Poor's ; and (v) acceptable to the Insurer in
its sole discretion. If such corporation shall publish reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of this Section, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 11.2.

            SECTION 11.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged its duties hereunder by giving
written notice thereof to the Depositor (or in the event that the Depositor is
not the sole Residual Certificateholder, the Holders of Residual Certificates
evidencing not less than a majority in each class), the Insurer and the
Servicer. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor Owner Trustee, meeting the qualifications set forth
in Section 11.1 herein, by written instrument, one copy of which instrument
shall be delivered to the resigning Owner Trustee and with additional copies to
the successor Owner Trustee and the Insurer provided that the Depositor shall
have received written confirmation from each of the Rating Agencies that the
proposed appointment will not result in an increased capital charge to the
Insurer by either of the Rating Agencies. If no successor Owner Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Owner Trustee or the Insurer
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.

            If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 11.1 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor with the consent of the Insurer may remove the
Owner Trustee. If the Depositor shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Depositor shall promptly
appoint a successor Owner Trustee, meeting the qualifications set forth in
Section 11.1 herein, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed, one copy
to the Insurer and one copy to the successor Owner Trustee and the Depositor
shall pay all fees owed to the outgoing Owner Trustee, if not previously paid by
the Trust.

                                       31
<PAGE>

            Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 11.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.

            Notwithstanding any other provision of this Agreement, and in
addition to any other method of removal of the Owner Trustee contained herein,
upon a proposal made pursuant to Section 5.2 and the subsequent consent of
Residual Certificateholders representing no less than a 66-2/3% Percentage
Interest of each Class (or, during the Managed Amortization Period, the Class O
Certificates only), the Owner Trustee may be removed as Owner Trustee, subject
to the consent of the Insurer, which consent is not to be unreasonably withheld.
In the event the Owner Trustee is removed pursuant to this paragraph, the
provisions of this Agreement, including Article X herein, shall apply as if the
Owner Trustee had resigned hereunder.

            SECTION 11.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 11.2 shall execute, acknowledge and deliver to the
Depositor, the Servicer and the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.

            No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 11.1.

            Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section, the Depositor shall mail notice of the successor of such Owner
Trustee to all Residual Certificateholders, the Indenture Trustee, the
Noteholders and the Rating Agencies. If the Depositor shall fail to mail such
notice within 10 days after acceptance of appointment by the successor Owner
Trustee, the successor Owner Trustee shall cause such notice to be mailed at the
expense of the Depositor.

            SECTION 11.4. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 11.1,
without the execution or

                                       32
<PAGE>

filing of any instrument or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, further, that
the Owner Trustee shall mail notice of such merger or consolidation to the
Rating Agencies and the Insurer.

            SECTION 11.5. Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, the Depositor and the Owner Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Owner Trustee and the Insurer to act as co-trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any part
of the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Depositor and the Owner Trustee may consider necessary or desirable. If the
Depositor shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee subject to the approval
of the Insurer (which approval shall not be unreasonably withheld) shall have
the power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 11.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 11.3.

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

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

            (ii)  no trustee under this Agreement shall be personally liable by
      reason of any act or omission of any other trustee under this Agreement;
      and

            (iii) the Depositor and the Owner Trustee acting jointly may at any
      time accept the resignation of or remove any separate trustee or
      co-trustee.

            Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be

                                       33
<PAGE>

provided therein, subject to all the provisions of this Agreement, specifically
including every provision of this Agreement relating to the conduct of,
affecting the liability of, or affording protection to, the Owner Trustee. Each
such instrument shall be filed with the Owner Trustee and a copy thereof given
to the Depositor, the Servicer and the Insurer.

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

                                   ARTICLE XII

                                  Miscellaneous

            SECTION 12.1. Supplements and Amendments.

            (a)   This Agreement may be amended by the Depositor and the Owner
Trustee, with the prior written consent of the Insurer and the Residual
Certificateholders and with prior written notice to the Rating Agencies, without
the consent of any of the Noteholders, (i) to cure any ambiguity or defect or
(ii) to correct, supplement or modify any provisions in this Agreement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel which may be based upon a certificate of the Depositor, adversely affect
in any material respect the interests of any Noteholder or Residual
Certificateholder.

            (b)   This Agreement may also be amended from time to time, with the
prior written consent of the Insurer, by the Depositor and the Owner Trustee,
with prior written notice to the Rating Agencies, and, to the extent such
amendment materially and adversely affects the interests of the Noteholders,
with the consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes, and the consent of the Residual
Certificateholders evidencing not less than a majority interest in each Class
(which consent of any Holder of a Note or Residual Certificate given pursuant to
this Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such Note or
Residual Certificate and of any Note or Residual Certificate issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Note or Residual Certificate) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or the Residual Certificateholders; provided, however, that,
subject to the express rights of the Insurer under the Basic Documents, no such
amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Mortgage Loans or
distributions that shall be required to be made for the benefit of the
Noteholders or the Residual Certificateholders or (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Residual Certificate,
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all the outstanding Notes and Holders of all
outstanding Residual Certificates.

                                       34
<PAGE>

            Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Residual Certificateholder, the Indenture Trustee,
the Insurer and each of the Rating Agencies.

            It shall not be necessary for the consent of the Noteholders or the
Residual Certificateholders pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Residual Certificateholders provided for in
this Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by Residual Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust, the
Owner Trustee shall cause the filing of such amendment with the Secretary of
State.

            Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.

            SECTION 12.2. No Legal Title to Owner Trust Estate in Residual
Certificateholders. The Residual Certificateholders shall not have legal title
to any part of the Owner Trust Estate. The Residual Certificateholders shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with Article IV. No transfer, by operation
of law or otherwise, of any right, title or interest of the Residual
Certificateholders to and in their Residual Certificates shall operate to
terminate this Agreement or the trust hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.

            SECTION 12.3. Limitations on Rights of Others. Except for Section
2.7, the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Residual Certificateholders, the Servicer and, to
the extent expressly provided herein, the Insurer, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

            SECTION 12.4. Notices.

            (a)   Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing and shall be deemed given upon receipt
personally delivered, delivered by overnight courier or mailed first class mail
or certified mail, in each case return receipt requested, and shall be deemed to
have been duly given upon receipt, if to the Owner Trustee, addressed to the
Corporate Trust Office; if to the Depositor, addressed to Sequoia Mortgage
Funding Corporation, One Belvedere Place, Suite 330, Mill Valley, California
94941, Attention: Sequoia HELOC Trust 2004-1; if to the Insurer, addressed to
Insurer, One State Street

                                       35
<PAGE>

Plaza, 19th Floor, New York, New York 10004, (212) 668-0340; or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party.

            (b)   Any notice required or permitted to be given to a Residual
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Residual Certificateholder
receives such notice.

            SECTION 12.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

            SECTION 12.6. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

            SECTION 12.7. Assignments; Insurer.

            (a)   This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
This Agreement shall also inure to the benefit of the Insurer. Without limiting
the generality of the foregoing, all covenants and agreements in this Agreement
which confer rights upon the Insurer shall be for the benefit of and run
directly to the Insurer and the Insurer shall be entitled to rely on and enforce
such covenants, subject, however, to the limitations on such rights provided in
this Agreement and the Basic Documents. The Insurer may disclaim any of its
rights and powers under this Agreement (but not its duties and obligations
hereunder or under the Policy) upon delivery of a written notice to the Owner
Trustee.

            (b)   In accepting instructions from the Insurer pursuant to Article
V or Section 7.3 of this Agreement, and with respect to any other obligations of
the Owner Trustee to the Insurer under this Agreement, the Owner Trustee
undertakes to perform or observe only its express obligations under this
Agreement, and no implied obligations with respect to the Insurer shall be read
into this Agreement against the Owner Trustee. The Owner Trustee shall not be
deemed to owe any fiduciary duty to the Insurer and it is expressly understood
and agreed by the Insurer that the Owner Trustee shall not be personally liable
or responsible for the payment of any amount owing on or with respect to the
Basic Documents or for the failure of the Trust to perform its obligations under
the Basic Documents or any other agreement with respect thereto.

            SECTION 12.8. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement and each
Residual Certificateholder, by accepting a Residual Certificate, hereby
covenants and agrees that they will not at any time institute against the
Depositor, or join in any institution against the Depositor of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other

                                       36
<PAGE>

proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Residual Certificates, this
Agreement or any of the Basic Documents.

            SECTION 12.9. No Recourse. Each Residual Certificateholder by
accepting a Residual Certificate acknowledges that such Residual
Certificateholder's Residual Certificates represent beneficial interests in the
Trust only and do not represent interests in or obligations of the Servicer, the
Depositor, the Owner Trustee, the Indenture Trustee, the Insurer or any
Affiliate thereof and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated in this Agreement,
the Residual Certificates or the Basic Documents.

            SECTION 12.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

            SECTION 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED,
HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS
AGREEMENT ANY PROVISION OF THE LAWS (COMMON OR STATUTORY) OF THE STATE OF
DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER
INCONSISTENT WITH THE TERMS HEREOF, (A) THE FILING WITH ANY COURT OR
GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND
CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS,
AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER
GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL
OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS,
AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES
TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE
NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO
THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G)
THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR
LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE
LIMITATIONS OR AUTHORITIES AND POWERS OF THE OWNER TRUSTEE HEREUNDER AS SET
FORTH OR REFERENCED IN THIS AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE
CODE SHALL NOT APPLY TO THE TRUST.

            SECTION 12.12. Depositor. The Depositor is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Trust or the Owner
Trustee all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust or Owner Trustee to prepare, file
or deliver pursuant to the Basic Documents. Upon written request, the Owner
Trustee shall execute and deliver to the Depositor a limited power of attorney
appointing

                                       37
<PAGE>

the Depositor the Trust's agent and attorney-in-fact to prepare, or cause to be
prepared, execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.

            SECTION 12.13. Customer Identification. To help the United States
("U.S.") government fight the funding of terrorism and money laundering
activities, U.S. federal law requires all financial institutions to obtain,
verify, and record information that identifies each person or entity who opens
an account. Accordingly, the Depositor shall (and shall cause the Servicer to)
provide to the Indenture Trustee and Wilmington Trust Company its legal name,
principal place of business, local office, or other physical location street
address, and government issued identification number. In addition, the Owner
Trustee, the Certificate Registrar or the Indenture Trustee may request, and the
Depositor agrees to promptly provide (or cause the Servicer to provide), copies
of documentation which substantiate such entity's identity. Such documentation
may include, but is not limited to, financial statements, government licenses,
certified copies of formation documents or identification documentation of
principals claiming to represent such entity.

                                       38
<PAGE>

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

                                         WILMINGTON TRUST COMPANY,
                                            Owner Trustee

                                         By:____________________________
                                            Name:
                                            Title:

                                         SEQUOIA MORTGAGE FUNDING
                                            CORPORATION,
                                            Depositor

                                         By:____________________________
                                            Name:
                                            Title:

Acknowledged and agreed (for purposes of Section 9.2),
as of the date first written above

RWT HOLDINGS, INC.
Seller

By:__________________________
Name:
Title:

<PAGE>

                                                                       EXHIBIT A

                          FORM OF RESIDUAL CERTIFICATE

THIS RESIDUAL CERTIFICATE EVIDENCES A BENEFICIAL OWNERSHIP INTEREST IN THE TRUST
REFERRED TO HEREIN AND ENTITLES THE HOLDER TO RECEIVE CERTAIN RESIDUAL PAYMENTS
TO THE EXTENT DESCRIBED HEREIN AND IN THE TRUST AGREEMENT REFERRED TO HEREIN.

THIS RESIDUAL CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED
STATES PERSON.

THIS RESIDUAL CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. ANY
RESALE, TRANSFER OR OTHER DISPOSITION OF THIS RESIDUAL CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4.10 OF THE TRUST AGREEMENT REFERRED TO HEREIN.

NO TRANSFER OF THIS RESIDUAL CERTIFICATE MAY BE MADE UNLESS THE TRANSFEREE
PROVIDES A REPRESENTATION LETTER FROM THE TRANSFEREE OF SUCH RESIDUAL
CERTIFICATE, ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER
TRUSTEE AND THE INSURER, TO THE EFFECT THAT SUCH TRANSFEREE IS NOT ACQUIRING THE
RESIDUAL CERTIFICATE FOR, OR WITH THE ASSETS OF, AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR ANY SUBSTANTIALLY
SIMILAR LAW, OR ANY ENTITY DEEMED TO HOLD THE PLAN ASSETS OF THE FOREGOING,
WHICH REPRESENTATION LETTER SHALL NOT BE AN EXPENSE OF THE OWNER TRUSTEE OR THE
INSURER.

NO TRANSFER OF A RESIDUAL CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE IN ACCORDANCE WITH
SAID ACT AND LAWS. EXCEPT FOR THE INITIAL ISSUANCE OF THE CLASS O CERTIFICATE TO
THE DEPOSITOR AND THE INITIAL ISSUANCE OF THE CLASS L CERTIFICATE TO THE INITIAL
HOLDER THEREOF, THE OWNER TRUSTEE SHALL REQUIRE (i) THE TRANSFEREE TO EXECUTE AN
INVESTMENT LETTER ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
OWNER TRUSTEE AND THE INSURER CERTIFYING TO THE OWNER TRUSTEE AND THE INSURER
THE FACTS SURROUNDING SUCH TRANSFER, WHICH INVESTMENT LETTER SHALL NOT BE AN
EXPENSE OF THE OWNER TRUSTEE, OR THE INSURER OR (ii) IF THE

<PAGE>

INVESTMENT LETTER IS NOT DELIVERED, A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO
AND IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE, THE INSURER AND THE
DEPOSITOR THAT SUCH TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION, DESCRIBING
THE APPLICABLE EXEMPTION AND THE BASIS THEREFOR, FROM SAID ACT OR IS BEING MADE
PURSUANT TO SAID ACT, WHICH OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE
OWNER TRUSTEE, THE INSURER OR THE DEPOSITOR. THE HOLDER OF A RESIDUAL
CERTIFICATE DESIRING TO EFFECT SUCH TRANSFER SHALL, AND DOES HEREBY AGREE TO,
INDEMNIFY THE DEPOSITOR, THE OWNER TRUSTEE AND THE INSURER AGAINST ANY LIABILITY
THAT MAY RESULT IF THE TRANSFER IS NOT SO EXEMPT OR IS NOT MADE IN ACCORDANCE
WITH SUCH FEDERAL AND STATE LAWS.

THE RESIDUAL CERTIFICATES AND ANY INTEREST THEREIN SHALL NOT BE TRANSFERRED
UNLESS THE TRANSFEREE OF THE RESIDUAL CERTIFICATES SHALL DELIVER TO THE OWNER
TRUSTEE, AND THE INSURER AN OPINION OF COUNSEL TO THE EFFECT THAT (A) SUCH
TRANSFER WILL NOT ADVERSELY AFFECT THE TREATMENT OF THE NOTES AFTER SUCH
TRANSFER AS DEBT FOR FEDERAL AND APPLICABLE STATE INCOME TAX PURPOSES, (B) SUCH
TRANSFER WILL NOT RESULT IN THE TRUST BEING SUBJECT TO TAX AT THE ENTITY LEVEL
FOR FEDERAL OR APPLICABLE STATE TAX PURPOSES, (C) SUCH TRANSFER WILL NOT HAVE
ANY MATERIAL ADVERSE IMPACT ON THE FEDERAL INCOME TAXATION OF A NOTEHOLDER OR
ANY RESIDUAL CERTIFICATEHOLDER AND (D) SUCH TRANSFER WILL NOT RESULT IN THE
ARRANGEMENT CREATED BY THE TRUST AGREEMENT OR ANY "PORTION" OF THE TRUST, BEING
TREATED AS A TAXABLE MORTGAGE POOL AS DEFINED IN SECTION 7701(I) OF THE CODE.

THIS RESIDUAL CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

<PAGE>

                 SEQUOIA HELOC TRUST 2004-1 RESIDUAL CERTIFICATE

Class:  __________
Percentage Interest:  100%                       Cut-Off Date:  __________, 200_
First Payment Date:  __________, 200_              Issue Date:  __________, 200_

No. _____

                                    [[     ]]
                           Residual Certificateholder

                  OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Residual Certificates referred to in the within-mentioned
Trust Agreement.

                         WILMINGTON TRUST COMPANY,
                         not in its individual capacity but solely as Owner
                         Trustee

                         By:____________________________________
                                   Authenticating Agent

<PAGE>

            The Trust was created pursuant to a Trust Agreement dated as of
________, 200_ (the "Trust Agreement"), between the Depositor and Wilmington
Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement. To the extent the terms hereof conflict
with the Trust Agreement, the terms of the Trust Agreement shall govern.

            This Residual Certificate is one of the duly authorized Residual
Certificates designated as "HELOC Asset-Backed Certificates, Series 2004-1,
Class _____" (herein called, together with the HELOC Asset Backed Certificates,
Class _____, the "Residual Certificates"). Also issued by the Trust under the
Indenture a single class of Notes (the "Notes"). These Residual Certificates are
issued under and are subject to the terms, provisions and conditions of the
Trust Agreement, to which Trust Agreement the holder of this Residual
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes a pool of certain adjustable rate
home equity revolving credit line loans (the "Mortgage Loans") (including any
Additional Balances related thereto).

            Under the Trust Agreement, there will be distributed on the __th day
of each month or, if such __th day is not a Business Day, the next Business Day
(the "Payment Date"), commencing on __________, 200_, to the Person in whose
name this Residual Certificate is registered at the close of business on the
Business Day preceding such Payment Date (the "Record Date") such Residual
Certificateholder's Percentage Interest in the amount to be distributed to
Residual Certificateholders of such Class on such Payment Date.

            The holder of this Residual Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Residual Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.

            The holder of this Residual Certificate, by acceptance of this
Residual Certificate, specifically acknowledges that it has no right to or
interest in any monies at any time held in the Trust Estate prior to the release
of such monies pursuant to Section 8.7(b)(xiv) (and, in the case of the Class L
Certificates, Sections 8.7(b)(iv), (v) and (vi)) of the Indenture, such monies
being held in trust for the benefit of the Noteholders and the Insurer.
Notwithstanding the foregoing, in the event that it is ever determined that the
monies held in the Owner Trust Estate constitute a pledge of collateral, then
the provisions of the Sale and Servicing Agreement shall be considered to
constitute a security agreement and the holder of this Residual Certificate
hereby acknowledges and consents to the grant by the Trust to the Indenture
Trustee and the Insurer a first priority perfected security interest in such
amounts. In addition, each Residual Certificateholder, by acceptance of its
Residual Certificate, hereby acknowledges and consents to the appointment by the
Trust of the Depositor as the Trust's agent to pledge a first priority perfected
security interest in the Reserve Fund and agrees to execute and deliver such
instruments of conveyance, assignment, grant, confirmation, etc., as well as any
financing statements, in each case as the Insurer shall consider reasonably
necessary in order to perfect the Indenture Trustee's security interest in the
Trust Property.

<PAGE>

            It is the intention of the Depositor, the Servicer and the Residual
Certificateholders that, for federal, state and other income tax purposes, the
Notes be classified as debt of the Trust. In the event that the Residual
Certificates are held by more than one Holder, it is the intent of the
Depositor, the Servicer, and the Residual Certificateholders that, for purposes
of Federal income taxes, the Trust will be treated as a partnership and the
Residual Certificateholders (and, if the Class C Interest is characterized as an
equity interest in the Trust, the holder of the Class C Interest) will be
treated as partners in that partnership. The Depositor and any other Residual
Certificateholders, by acceptance of a Residual Certificate, agree to treat, and
to take no action inconsistent with the treatment of, the Residual Certificates
for such tax purposes as partnership interests in the Trust and the Notes as
indebtedness of the Trust. Each Residual Certificateholder, by its acceptance of
a Residual Certificate, covenants and agrees that such Residual
Certificateholder will not at any time institute against the Trust or the
Depositor, or join in any institution against the Trust or the Depositor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Residual
Certificates, the Trust Agreement or any of the Basic Documents.

            Distributions on this Residual Certificate will be made as provided
in the Trust Agreement and the Sale and Servicing Agreement and the Indenture by
the Owner Trustee by wire transfer to the Residual Certificateholder of record
in the Certificate Register without the presentation or surrender of this
Residual Certificate or the making of any notation hereon. Except as otherwise
provided in the Trust Agreement and notwithstanding the above, the final
distribution on this Residual Certificate will be made after due notice by the
Owner Trustee of the pendency of such distribution and only upon presentation
and surrender of this Residual Certificate at the office or agency maintained
for the purpose by the Owner Trustee in the Corporate Trust Office.

            Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Residual Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.

            The Residual Certificates do not represent an obligation of, or an
interest in, the Company, the Depositor, the Servicer, the Insurer, the Owner
Trustee or any Affiliates of any of them and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated
herein or in the Trust Agreement, the Indenture or the Basic Documents. In
addition, this Residual Certificate is not guaranteed by any governmental agency
or instrumentality and is limited in right of payment to certain collections
with respect to the Mortgage Loans, as more specifically set forth herein, in
the Sale and Servicing Agreement and in the Indenture. A copy of each of the
Sale and Servicing Agreement and the Trust Agreement may be examined during
normal business hours at the principal office of the Depositor, and at such
other places, if any, designated by the Depositor, by any Residual
Certificateholder upon written request.

            The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Residual Certificateholders
under the Trust Agreement at any time by the Depositor

<PAGE>

and the Owner Trustee with the prior written consent of the Insurer and with the
consent of the holders of the Notes and the Residual Certificates evidencing not
less than a majority of the outstanding Notes and the Residual Certificates. Any
such amendment shall be conclusive and binding upon the holder of this Residual
Certificate and on all future holders of this Residual Certificate and of any
Residual Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Residual
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the holders of any of the Residual
Certificates (other than the Depositor, or the Insurer).

            As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Residual Certificate is
registrable in the Certificate Register upon surrender of this Residual
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Corporate Trust
Office, accompanied by a written instrument of transfer in form satisfactory to
the Owner Trustee and the Certificate Registrar duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Residual Certificates in authorized denominations evidencing the
same aggregate interest in the Trust will be issued to the designated
transferee. The initial Certificate Registrar appointed under the Trust
Agreement is the Owner Trustee.

            The Residual Certificates are issuable only as registered Residual
Certificates without coupons in minimum Percentage Interests of 10% and integral
multiples of 1% in excess thereof. As provided in the Trust Agreement and
subject to certain limitations therein set forth, Residual Certificates are
exchangeable for new Residual Certificates in authorized denominations
evidencing the same aggregate denomination, as requested by the holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
payable in connection therewith.

            The Owner Trustee, the Certificate Registrar, the Insurer and any
agent of the Owner Trustee, the Certificate Registrar, or the Insurer may treat
the person in whose name this Residual Certificate is registered as the owner
hereof for all purposes, and none of the Owner Trustee, the Certificate
Registrar, the Insurer nor any such agent shall be affected by any notice to the
contrary.

            The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to Residual
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement, the Indenture and the Sale and Servicing Agreement and the
disposition of all property held as part of the Trust. The Holders of the Class
C Interest and the Class O Certificates may at their option redeem the Notes at
a price and upon the satisfaction of certain conditions specified in Section
7.01(b) of the Sale and Servicing Agreement, and if all of the Notes are
redeemed, such redemption may result in termination of the Trust which may
effect a transfer of the Residual Certificates; however, such right of purchase
is exercisable, subject to certain restrictions set forth in the Sale and
Servicing Agreement.

<PAGE>

            The recitals contained herein shall be taken as the statements of
the Depositor or the Servicer, as the case may be, and the Owner Trustee assumes
no responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Residual Certificate
or of any Mortgage Loan or related document.

<PAGE>

            IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Residual Certificate to be duly
executed.

                                   SEQUOIA HELOC TRUST 2004-1

                                   By: WILMINGTON TRUST COMPANY, not in its
                                       individual capacity but solely as Owner
                                       Trustee

                                   By:__________________________________________
                                      Name:
                                      Title:

Dated:  __________, 200_

<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE

________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)

________________________________________________________________________________
the within Residual Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing

_______________________________ Attorney to transfer said Residual Certificate
on the books of the Certificate Registrar, with full

power of substitution in the premises.

Dated:

                                         _____________________________________ *
                                                Signature Guaranteed:

                                         _____________________________________ *

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

*     NOTICE: The signature to this assignment must correspond with the name of
      the registered owner as it appears on the face of the within Residual
      Certificate in every particular, without alteration, enlargement or any
      change whatever. Such signature must be guaranteed by an "eligible
      guarantor institution" meeting the requirements of the Certificate
      Registrar, which requirements include membership or participation in STAMP
      or such other "signature guarantee program" as may be determined by the
      Certificate Registrar in addition to, or in substitution for, STAMP, all
      in accordance with the Securities Exchange Act of 1934, as amended.

<PAGE>

                                                                       EXHIBIT B

                             CERTIFICATE OF TRUST OF
                           SEQUOIA HELOC TRUST 2004-1

            This Certificate of Trust of Sequoia HELOC Trust 2004-1 (the
"Trust"), dated as of ___________, 200_, is being duly executed and filed by the
undersigned trustee to form a statutory trust under the Delaware Statutory Trust
Act (12 Del. Code, Section 3801 et seq.).

            1.    Name. The name of the statutory trust formed hereby is Sequoia
HELOC Trust 2004-1.

            2.    Delaware Trustee. The name and business address of the Owner
Trustee of the Trust having its principal place of business in the State of
Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-1605, Attention: Corporate Trust
Administration.

            3.    This Certificate of Trust shall be effective upon its filing
with the Secretary of State of the State of Delaware.

            IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.

                                         WILMINGTON TRUST COMPANY,
                                         not in its individual capacity but
                                         solely as Owner Trustee of the Trust.

                                         By:____________________________________
                                            Name:
                                            Title:

                                      B-1
<PAGE>

                                                                       EXHIBIT C

                              TRANSFER CERTIFICATE

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: GPHE 2004-2

Re:   Trust Agreement, dated as of June 1, 2004, between Sequoia Mortgage
      Funding Corporation and Wilmington Trust Company as Owner Trustee; Sequoia
      HELOC Trust 2004-1

Ladies and Gentlemen:

            The undersigned (the "Transferee") has agreed to purchase from
_____________ __________ (the "Transferor") a ___% Percentage Interest in the
Class ___ Certificates:

            A. Rule 144A "Qualified Institutional Buyers" should complete this
section

            I. The Transferee is (check one):

            ___   (i) An insurance company, as defined in Section 2(13) of the
                  Securities Act of 1933, as amended (the "Securities Act"),
                  (ii) an investment company registered under the Investment
                  Company Act of 1940, as amended (the "Investment Company
                  Act"), (iii) a business development company as defined in
                  Section 2(a)(48) of the Securities Act, (iv) a Small Business
                  Investment Company licensed by the U.S. Small Business
                  Administration under Section 301(c) or (d) of the Small
                  Business Investment Act of 1958, (v) a plan established and
                  maintained by a state, its political subdivisions, or any
                  agency or instrumentality of a state or its political
                  subdivisions, for the benefit of its employees, (vi) a
                  business development company as defined in Section 202(a)(22)
                  of the Investment Advisors Act of 1940, (vii) an organization
                  described in Section 501(c)(3) of the Internal Revenue Code,
                  corporation (other than a bank as defined in Section 3(a)(2)
                  of the Securities Act or a savings and loan association or
                  other institution referenced in Section 3(a)(2) of the
                  Securities Act or a foreign bank or savings and loan
                  association or equivalent institution), partnership, or
                  Massachusetts or similar business trust; or (viii) an
                  investment advisor registered under the Investment Advisors
                  Act of 1940, which, for each of (i) through (viii), owns and
                  invests on a discretionary basis at least $100 million in
                  securities other than securities of issuers affiliated with
                  the Transferee, securities issued or guaranteed by the United
                  States or a person controlled or supervised by and acting as
                  an

                                      C-1
<PAGE>

                  instrumentality of the government of the United States
                  pursuant to authority granted by the Congress of the United
                  States, bank deposit notes and certificates of deposit, loan
                  participations, repurchase agreements, securities owned but
                  subject to a repurchase agreement, and currency, interest rate
                  and commodity swaps (collectively, "Excluded Securities");

            ___   a dealer registered pursuant to Section 15 of the Securities
                  Exchange Act of 1934, as amended (the "Exchange Act") that in
                  the aggregate owns and invests on a discretionary basis at
                  least $10 million of securities other than Excluded Securities
                  and securities constituting the whole or part of an unsold
                  allotment to, or subscription by, Transferee as a participant
                  in a public offering;

            ___   an investment company registered under the Investment Company
                  Act that is part of a family of investment companies (as
                  defined in Rule 144A of the Securities and Exchange
                  Commission) which own in the aggregate at least $100 million
                  in securities other than Excluded Securities and securities of
                  issuers that are part of such family of investment companies;

            ___   an entity, all of the equity owners of which are entities
                  described in this Paragraph A(I);

            ___   a bank as defined in Section 3(a)(2) of the Securities Act,
                  any savings and loan association or other institution as
                  referenced in Section 3(a)(5)(A) of the Securities Act, or any
                  foreign bank or savings and loan association or equivalent
                  institution that in the aggregate owns and invests on a
                  discretionary basis at least $100 million in securities other
                  than Excluded Securities and has an audited net worth of at
                  least $25 million as demonstrated in its latest annual
                  financial statements, as of a date not more than (i) 16 months
                  preceding the date of transfer of the Transferor Interest to
                  the Transferee in the case of Wilmington Trust Company, and
                  (ii) not more than 18 months preceding such date in the case
                  of a foreign bank or savings association or equivalent
                  institution.

            II.   The Transferee is acquiring such Transferor Interest solely
for its own account, for the account of one or more others, all of which are
"Qualified Institutional Buyers" within the meaning of Rule 144A, or in its
capacity as a dealer registered pursuant to Section 15 of the Exchange Act
acting in a riskless principal transaction on behalf of a "Qualified
Institutional Buyer". The Transferee is aware that the seller of the Class ___
Certificate may be relying on the exemption from the registration requirements
of the Securities Act provided by Rule 144A and the Transferee is not acquiring
such Transferor Interest with a view to or for the resale, distribution,
subdivision or fractionalization thereof which would require registration of the
Transferor Interest under the Securities Act.

            B.    If the Transferee is unable to complete one of paragraph A(I)
above, the Transferee must furnish an opinion in form and substance satisfactory
to the Trustee of counsel

                                       C-2
<PAGE>

satisfactory to the Trustee to the effect that such purchase will not violate
any applicable federal or state securities laws.

            C.    The Transferee understands that the Class ___ Certificate has
not been and will not be registered under the Securities Act and may be offered,
sold, pledged or otherwise transferred only to a person whom the seller
reasonably believes is (A) a "qualified institutional buyer" or (B) a Person
involved in the organization or operation of the Trust or an affiliate of such
Person, in each case in a transaction meeting the requirements of Rule 144A
under the Securities Act or that is otherwise exempt from registration under the
Securities Act and in accordance with any applicable securities laws of any
state of the United States.

            D.    Each Transferee, other than the Depositor or its affiliate,
represents that it is not acquiring the Residual Certificate for, or with the
assets of, an "employee benefit plan" or other retirement arrangement that is
subject to Section 406 of the Employee Retirement Income Security Act of 1974,
as amended or Section 4975 of the Internal Revenue Code of 1986, as amended, or
any substantially similar law, or any entity deemed to hold the plan assets of
the foregoing.

            E.    Each Transferee, other than the Depositor or its affiliate,
represents that it is a U.S. person (as defined in the Code) and acknowledges
and agrees that no transfer, including any pledge, of Residual Certificates
shall be effective, and the purported transferor shall continue to be regarded
as the beneficial owner of the Residual Certificates, if, as a result of the
transfer (or pledge), there would be more than 80 beneficial owners of Residual
Certificates. For purposes of applying this restriction, if the registered
Holder of Residual Certificates is a partnership (or an entity treated as a
partnership for federal income tax purposes), a grantor trust, or an S
corporation, the Residual Certificates shall be treated as being beneficially
owned by the partners, beneficiaries, or shareholders. The Transferee hereby
certifies that it has _____ such partners, beneficiaries and shareholders.

                                   Very truly yours,
                                      [NAME OF PURCHASER]

                                      By:_______________________________________
                                      Title:____________________________________
Dated:

THE FOREGOING IS ACKNOWLEDGED THIS ____ DAY OF __________, 20__.

[NAME OF SELLER]
By:
Title:

                                       C-3