SAXON ASSET SECURITIES COMPANY,

                                    Depositor


                              SAXON MORTGAGE, INC.,

                                 Master Servicer


                        MERITECH MORTGAGE SERVICES, INC.,

                                    Servicer


                                       and


                              BANKERS TRUST COMPANY

                                     Trustee

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


                         POOLING AND SERVICING AGREEMENT

                          Dated as of September 1, 2001

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



                       SAXON ASSET SECURITIES TRUST 2001-3



             MORTGAGE LOAN ASSET BACKED CERTIFICATES, SERIES 2001-3

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                                                         TABLE OF CONTENTS

                                                                                                                               Page
                                                                                                                               ----
<S>                         <C>                                                                                                 <C>
ARTICLE 1 DEFINITIONS...........................................................................................................11
       Section 1.1          Defined Terms.......................................................................................11

ARTICLE 2 CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES..........................................................36
       Section 2.1          Conveyance of Mortgage Loans........................................................................36
       Section 2.2          Acceptance by Trustee of the Mortgage Loans.........................................................39
       Section 2.3          Representations, Warranties and Covenants of the Depositor and Servicer and Master Servicer.........40
       Section 2.4          Delivery of Opinion of Counsel in Connection with Substitutions.....................................46
       Section 2.5          Execution and Delivery of Certificates..............................................................46
       Section 2.6          Purchase of Subsequent Mortgage Loans...............................................................46
       Section 2.7          Pre-Funding Account and Capitalized Interest Account................................................48

ARTICLE 3 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................................49
       Section 3.1          Servicer to Service Mortgage Loans..................................................................49
       Section 3.2          Subservicing; Enforcement of the Obligations of Servicers...........................................51
       Section 3.3          Rights of the Depositor and the Trustee in Respect of the Servicer..................................51
       Section 3.4          Master Servicer to Act as Servicer..................................................................51
       Section 3.5          Collection of Mortgage Loan Payments; Collection Account; Distribution Account......................52
       Section 3.6          Collection of Taxes, Assessments and Similar Items; Escrow Accounts.................................55
       Section 3.7          Access to Certain Documentation and Information Regarding the Mortgage Loans........................55
       Section 3.8          Permitted Withdrawals from the Collection Account, Master Servicer
                             Custodial Account and Distribution Account.........................................................56
       Section 3.9          Maintenance of Hazard Insurance; Maintenance of Primary Insurance Policies..........................57
       Section 3.10         Enforcement of Due-on-Sale Clauses; Assumption Agreements...........................................59
       Section 3.11         Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans.....................60
       Section 3.12         Trustee to Cooperate; Release of Mortgage Files.....................................................64
       Section 3.13         Documents Records and Funds in Possession of Servicer to be Held for the Trustee....................64
       Section 3.14         Servicing Compensation..............................................................................65
       Section 3.15         Access to Certain Documentation.....................................................................65
       Section 3.16         Annual Statement as to Compliance...................................................................66
       Section 3.17         Annual Independent Public Accountants' Servicing Statement; Financial Statements....................66
       Section 3.18         Errors and Omissions Insurance; Fidelity Bonds......................................................66
       Section 3.19         Advances............................................................................................67
</TABLE>
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       Section 3.20         Advance Facility....................................................................................67
       Section 3.21         Prepayment Penalties................................................................................68

ARTICLE 4 DISTRIBUTIONS.........................................................................................................68
       Section 4.1          Priorities of Distribution..........................................................................68
       Section 4.2          Method of Distribution..............................................................................72
       Section 4.3          Allocation of Losses................................................................................73
       Section 4.4          Reports to the Depositor and the Trustee............................................................73
       Section 4.5          Reports by or on Behalf of the Master Servicer......................................................74
       Section 4.6          Basis Risk Reserve Fund.............................................................................75
       Section 4.7          The Instrument......................................................................................76
       Section 4.8          The Calculation Agent...............................................................................76

ARTICLE 5 THE CERTIFICATES......................................................................................................77
       Section 5.1          The Certificates....................................................................................77
       Section 5.2          Certificate Register; Registration of Transfer and Exchange of Certificates.........................78
       Section 5.3          Mutilated, Destroyed, Lost or Stolen Certificates...................................................82
       Section 5.4          Persons Deemed Owners...............................................................................82
       Section 5.5          Access to List of Certificateholders' Names and Addresses...........................................82
       Section 5.6          Maintenance of Office or Agency.....................................................................83

ARTICLE 6 THE DEPOSITOR, THE SERVICER AND MASTER SERVICER.......................................................................83
       Section 6.1          Respective Liabilities of the Depositor, Servicer and Master Servicer...............................83
       Section 6.2          Merger or Consolidation of the Depositor, Servicer and Master Servicer..............................83
       Section 6.3          Limitation on Liability of the Depositor, the Depositor, the Master Servicer and Others.............84
       Section 6.4          Limitation on Resignation of Servicer...............................................................84

ARTICLE 7 SERVICER DEFAULT......................................................................................................85
       Section 7.1          Events of Default...................................................................................85
       Section 7.2          Notification to Certificateholders..................................................................86

ARTICLE 8 CONCERNING THE TRUSTEE................................................................................................87
       Section 8.1          Duties of Trustee...................................................................................87
       Section 8.2          Certain Matters Affecting the Trustee...............................................................88
       Section 8.3          Trustee Not Liable for Certificates or Mortgage Loans...............................................90
       Section 8.4          Trustee May Own Certificates........................................................................90
       Section 8.5          Trustee's Fees and Expenses.........................................................................90
       Section 8.6          Eligibility Requirements for Trustee................................................................90
       Section 8.7          Resignation and Removal of Trustee..................................................................91
       Section 8.8          Successor Trustee...................................................................................91
       Section 8.9          Merger or Consolidation of Trustee..................................................................92
       Section 8.10         Appointment of Co-Trustee or Separate Trustee.......................................................92
       Section 8.11         Tax Matters.........................................................................................93
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       Section 8.12         Periodic Filings....................................................................................95

ARTICLE 9 TERMINATION...........................................................................................................95
       Section 9.1          Termination upon Liquidation or Purchase of all Mortgage Loans......................................95
       Section 9.2          Final Distribution on the Certificates..............................................................96
       Section 9.3          Additional Termination Requirements.................................................................98

ARTICLE 10 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER................................................98
       Section 10.1         Duties of the Master Servicer.......................................................................98
       Section 10.2         Compensation to the Master Servicer.................................................................99
       Section 10.3         Termination of Master Servicer; Trustee to Act......................................................99
       Section 10.4         Notification to Certificateholders.................................................................101

ARTICLE 11 MISCELLANEOUS PROVISIONS............................................................................................101
       Section 11.1         Amendment..........................................................................................101
       Section 11.2         Recordation of Agreement; Counterparts.............................................................103
       Section 11.3         Governing Law......................................................................................103
       Section 11.4         Intention of Parties...............................................................................103
       Section 11.5         Notices............................................................................................104
       Section 11.6         Severability of Provisions.........................................................................105
       Section 11.7         Assignment.........................................................................................105
       Section 11.8         Limitation on Rights of Certificateholders.........................................................105
       Section 11.9         Inspection and Audit Rights........................................................................106
       Section 11.10        Certificates Nonassessable and Fully Paid..........................................................106
       Section 11.11        Limitations on Actions; No Proceedings.............................................................106
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                                                             SCHEDULES

Schedule I:               Mortgage Loan Schedule (By Pool)...................................................................S-I-1
Schedule II:              Pass-Through Rate Schedule........................................................................S-II-1
Schedule III:             REMIC Structure..................................................................................S-III-1

                                                             EXHIBITS

Exhibit A:                Forms of Face of Certificate.........................................................................A-1
Exhibit B:                Form of Reverse of Certificates......................................................................B-1
Exhibit C:                Form of Initial Certification........................................................................C-1
Exhibit D:                Form of Final Certification of Custodian.............................................................D-1
Exhibit E:                Transfer Affidavit...................................................................................E-1
Exhibit F:                Form of Transferor Certificate.......................................................................F-1
Exhibit G:                Form of Investment Letter (Non-Rule 144A)............................................................G-1
Exhibit H:                Form of Rule 144A Letter.............................................................................H-1
Exhibit I:                Request for Release (for Trustee)....................................................................I-1
Exhibit J:                Request for Release (Mortgage Loan)..................................................................J-1
Exhibit K:                Form of Remittance Agency Agreement..................................................................K-1
Exhibit L:                Form of Security Release Certification...............................................................L-1
</TABLE>

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                      [THIS PAGE INTENTIONALLY LEFT BLANK]
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           THIS POOLING AND SERVICING AGREEMENT, dated as of September 1, 2001
(this "Agreement") among SAXON ASSET SECURITIES COMPANY, a Virginia corporation,
as depositor (the "Depositor"), SAXON MORTGAGE, INC., a Virginia corporation, as
master servicer (the "Master Servicer"), MERITECH MORTGAGE SERVICES, INC., a
Texas corporation, as servicer (the "Servicer"), and BANKERS TRUST COMPANY, a
New York corporation, as trustee (the "Trustee").

                                 WITNESSETH THAT

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

                              PRELIMINARY STATEMENT

           The Depositor is the owner of the assets that are hereby conveyed to
the Trustee in return for the Certificates. For federal income tax purposes, the
Trust Fund shall comprise three REMICs organized in a tiered REMIC structure in
the manner set forth in Schedule III hereto. The Certificates will represent the
entire beneficial ownership interest in the Trust Fund.

           The following table sets forth the initial Class Certificate Balances
of the Certificates and the minimum denominations (or Percentage Interests) and
integral multiples in excess thereof in which such Classes shall be issuable
(except that one Certificate of each Class of Certificates may be issued in a
different amount and, in addition, one Residual Certificate representing the Tax
Matters Person Certificate may be issued in a different Percentage Interest):

                                       1
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                                 Initial Class                Minimum Percentage        Integral Multiples in
     Class Designation        Certificate Balance            Interest/Denomination          Excess Minimum
     -----------------        -------------------            ---------------------          --------------
----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                            <C>                           <C>
Class AF-1                          $                              $25,000                       $1,000
----------------------------------------------------------------------------------------------------------------------
Class AF-2                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class AF-3                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class AF-4                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class AF-5                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class AF-6                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class AV-1                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class AV-2                                                          25,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class A-IO                          Notional                      [[     ]]                       1,000
----------------------------------------------------------------------------------------------------------------------
Class X-IO                          Notional                      [[     ]]                       1,000
----------------------------------------------------------------------------------------------------------------------
Class M-1                                                          100,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class M-2                                                          100,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class B                                                            100,000                        1,000
----------------------------------------------------------------------------------------------------------------------
Class C                                                              50%                           N/A
----------------------------------------------------------------------------------------------------------------------
Class P                                                              100%                          N/A
----------------------------------------------------------------------------------------------------------------------
Class R                                                              100%                          N/A
----------------------------------------------------------------------------------------------------------------------
</TABLE>

Account Designation:                       Saxon Asset Securities Trust Mortgage
                                           Loan Asset Backed Certificates,
                                           Series 2001-3

Assumed Investment Rate:                   [[       ]]% per annum.

Book-Entry Certificates:                   All Classes of Certificates other
                                           than the Physical Certificates.

Calculation Agent:                         Bankers Trust Company, a New York
                                           corporation, and its successors and
                                           assigns in such capacity.

Class A Principal
Allocation Percentage:                     With respect to any distribution date
                                           and a Group, the percentage
                                           equivalent of a fraction, the
                                           numerator of which is the related
                                           Principal Funds for such Group and
                                           the denominator of which is the
                                           Principal Funds for both loan Groups.

Class C Distribution Amount:               With respect to any Distribution
                                           Date, any amounts distributable
                                           pursuant to Section 4.1(h) hereof.

Closing Date:                              [[           ]], 2001.

Custodial Agreement:                       The Custodial Agreement between the
                                           Custodian and Trustee dated as of [[
                                           ]].

                                       2
<PAGE>


Component Certificates:                    None.

Components:                                For purposes of calculating
                                           distributions, the Component
                                           Certificates will be comprised of
                                           multiple payment components having
                                           the designations, Initial Component
                                           Balances and Pass-Through Rates set
                                           forth below:

                                                          Initial      Pass-
                                                         Component    Through
                                           Designation    Balance       Rate
                                           -----------    -------       ----
                                               N/A          N/A          N/A


Custodian:

Cut Off Date:                              September 1, 2001

Delay Certificates:                        All interest-bearing Classes of
                                           Certificates other than the Non-Delay
                                           Certificates.

ERISA-Restricted Certificates:

Extra Principal Distribution Amount:       With respect to any Distribution
                                           Date, the lesser of

                                           (x)  the Interest Funds available
                                                pursuant to Section 4.1(b)(v),
                                                and:

                                           (y)  the excess of:

                                                (i)   the Required
                                                      Overcollateralization
                                                      Amount for such date over

                                                (ii)  the Overcollateralization
                                                      Amount (assuming that all
                                                      Principal Funds are
                                                      distributed as principal
                                                      to the Certificates on
                                                      such date).

Funding Period Termination Date:           [[       ]]

Group:                                     Either Group I or Group II.

Group I:                                   The pool of Mortgage Loans identified
                                           in the Mortgage Loan Schedule as
                                           having been assigned to Group I,
                                           including any related Subsequent
                                           Mortgage Loans and any Substitute
                                           Mortgage Loans delivered in
                                           replacement thereof.

                                       3
<PAGE>

Group I Certificate:                       Any of the Class AF-1, Class AF-2,
                                           Class AF-3, Class AF-4, Class AF-5
                                           and Class AF-6 Certificates.

Group I Class A Certificate:               Any Group I Certificate.

Group I Class A Certificate
Principal Balance:                         The sum of the Certificate Principal
                                           Balances for the Group I Class A
                                           Certificates.

Group I Class A Principal
Distribution Amount:                       As to any Distribution Date, the
                                           Class A Principal Allocation
                                           Percentage for Group I of the Senior
                                           Class A Principal Distribution Amount
                                           on such date.

Group II:                                  The pool of Mortgage Loans identified
                                           in the Mortgage Loan Schedule as
                                           having been assigned to Group II,
                                           including any related Subsequent
                                           Mortgage Loans and any Substitute
                                           Mortgage Loans delivered in
                                           replacement thereof.

Group II Certificate:                      Any of the Class AV-1 and Class AV-2
                                           Certificates.

Group II Class A Certificates:             Any Group II Certificate.

Group II Class A Certificate
Principal Balance:                         The sum of the Certificate Principal
                                           Balances of Group II Class A
                                           Certificates.

Initial Capitalized Interest Amount:       $[[      ]].

Initial Distribution Date:

Initial Optional Termination Date:         The first Distribution Date on which
                                           the aggregate Assumed Principal
                                           Balance of the Mortgage Loans is less
                                           than 10% of the aggregate Assumed
                                           Principal Balance thereof as of the
                                           Cut Off Date.

Interest Determination Date:               With respect to the first Accrual
                                           Period for the Variable Rate
                                           Certificates[[ ]], and with respect
                                           to any subsequent Accrual Period for
                                           the Variable Rate Certificates, the
                                           second London Business Day preceding
                                           such Accrual Period.

Interest Only Certificates:                [[         ]]

Lower Tier Interest:                       Any interest created in REMIC 1 or
                                           REMIC 2.

                                       4
<PAGE>

Master Servicing Fee Rate:                 [[         ]]

Maximum Cap Rate:                          For any Distribution Date, a per
                                           annum rate that would equal the Net
                                           WAC Cap for such date if such Net WAC
                                           Cap were determined under the
                                           assumption that (i) each Mortgage
                                           Loan in Group II had an interest rate
                                           equal to the maximum rate permitted
                                           under the terms of the related
                                           mortgage note, and (ii) each Mortgage
                                           Loan in Group I had an interest rate
                                           equal to its stated fixed rate.

Mortgage Loan Group:                       Either Group I or Group II.

Net Rate:                                  As to each Mortgage Loan and
                                           Distribution Date, the related
                                           Mortgage Rate less the sum of the
                                           related Servicing Fee Rate and Master
                                           Servicing Fee Rate with respect to
                                           each Mortgage Loan.

Net WAC Cap:                               For any Distribution Date and the
                                           Group I Certificates, other than the
                                           Class AF-1 Certificates, a per annum
                                           rate equal to:

                                           (x)  The Weighted Average Net Rate of
                                                the Mortgage Loans less,

                                           (y)  The Pass-Through Rate for the
                                                Class A-IO Certificates for such
                                                Distribution Date multiplied by
                                                a fraction equal to:

                                                (i)   the Notional Principal
                                        Balance of the Class A-IO Certificates
                                        prior to such Distribution Date divided
                                        by;

                                                (ii)  the Assumed Principal
                                        Balance as of such Distribution Date.

                                                For any Distribution Date and
                                        the Variable Rate Certificates, however,
                                        the Net WAC Cap equals the product of

                                           (a)  the rate determined under the
                                                above-described formula, and

                                           (b)  a fraction, the numerator of
                                                which is 30 and the denominator
                                                of which is the actual number of
                                                days in the Accrual Period
                                                applicable to such Certificates.

                                       5
<PAGE>

Notional Principal Balance:                With respect to each Distribution
                                           Date and the Class A-IO Certificates,
                                           the lesser of the Assumed Principal
                                           Balance and the amount determined
                                           with reference to the following
                                           schedule:

                                            Distribution Dates   Notional Amount
                                            ------------------   ---------------
                                                    1-6
                                                   7-12
                                                   13-18
                                                   19-21
                                                   22-24
                                                   25-27
                                                   28-31
                                             32 and thereafter

                                           With respect to each Distribution
                                           Date and the Class X-IO Certificates,
                                           [[the Assumed Principal Balance]] of
                                           the Mortgage Loans for such date.

Non-Delay Certificates:                    [[       ]]

Notional Amount Certificates:              [[       ]]

Offered Certificates:                      The Class AF-1, Class AF-2, Class
                                           AF-3, Class AF-4, Class AF-5, Class
                                           AF-6, Class AV-1, Class AV-2, Class
                                           M-1, Class M-2, Class B-1, Class X-IO
                                           and Class A-IO Certificates.

Original Pre-Funded Amount:                $[[ ]], $[[ ]] of which may be
                                           applied to the purchase of additional
                                           fixed rate Mortgage Loans for Group I
                                           and $[[ ]] of which may be applied to
                                           the purchase of additional adjustable
                                           rate Mortgage Loans for Group II
                                           (with such latter amount being
                                           proportionately applied between the
                                           applicable subgroups).

Physical Certificates:                     The Private Certificates and the
                                           Residual Certificates.

Pledged Prepayment Penalties:              For any Distribution Date and each
                                           Group of Mortgage Loans, an amount
                                           equal to the sum of (i) the lesser of
                                           (x) Prepayment Penalties collected on
                                           Mortgage Loans in such Group during
                                           the related Prepayment Period and (y)
                                           60% of the Prepayment Penalties owed
                                           and not waived by the Servicer for
                                           the related Prepayment Period, and
                                           (ii) the aggregate amount, if any, by
                                           which (i)(y) exceeded (i)(x) for
                                           prior Distribution Dates for such
                                           Group.

                                       6
<PAGE>

Principal Only Certificates:               [[        ]]

Priority Principal Distribution
Amount:                                    With respect to any Distribution
                                           Date:

                                           (x)  the product of :

                                                (i)   a fraction the numerator
                                                      of which is the
                                                      Certificate Principal
                                                      Balance of the Class AF-6
                                                      Certificates and the
                                                      denominator of which is
                                                      the Group I Class A
                                                      Certificate Principal
                                                      Balance, in each case,
                                                      immediately prior to such
                                                      Distribution Date,

                                                (ii)  the Group I Class A
                                                      Principal Distribution
                                                      Amount for such
                                                      Distribution Date, and

                                                (iii) the applicable percentage
                                                      for such Distribution Date
                                                      set forth below:

                                             Distribution Date        Percentage
                                             -----------------        ----------
                                       September 2001 - August 2004       0%
                                       September 2004 - August 2006      45%
                                       September 2006 - August 2007      80%
                                       September 2007 - August 2008      100%
                                       September 2008 and thereafter     300%

Private Certificate:                       Any Class C, Class P or Class R
                                           Certificate.

Rating Agencies:                           S&P and Moody's

Regular Certificates:                      Any of the Group I Class A
                                           Certificates, Group II Class A
                                           Certificates, Class A-IO, Class X-IO,
                                           Class M-1, Class M-2, Class B-1 and
                                           Class C Certificates.

Required Overcollateralization
Amount:                                    With respect to any Distribution
                                           Date:


                                                (i)   prior to the Stepdown
                                        Date, [[ ]]% of the Assumed Principal
                                        Balance for the Mortgage Loans as of the
                                        Cut Off Date;


                                                (ii)  on and after the Stepdown
                                        Date, if a Trigger Event is not in
                                        effect, the greater of:

                                                (x)   the lesser of:

                                       7
<PAGE>

                                                      (I)  [[ ]]% of the Assumed
                                                           Principal Balance for
                                                           the Mortgage Loans as
                                                           of the Cut Off Date,
                                                           and

                                                      (II) [[ ]]% of the Assumed
                                                           Principal Balance of
                                                           the Mortgage Loans on
                                                           the preceding
                                                           Determination Date,
                                                           and

                                                (y)   [[ ]]% of the Assumed
                                                      Principal Balance of the
                                                      Mortgage Loans as of the
                                                      Cut- Off Date; and


                                                (iii) if a Trigger Event is in
                                        effect, the Overcollateralization Amount
                                        as of the preceding Distribution Date.

Required Reserve Fund Deposit:             For any Distribution Date on which
                                           the difference between (a) the excess
                                           of the Net WAC Cap over the rate
                                           payable on the Class X-IO
                                           Certificates for such date, and (b)
                                           the weighted average of the rates on
                                           the Offered Certificates, other than
                                           the Class A-IO and Class X-IO
                                           Certificates, is less than 0.25%, an
                                           amount that would cause the balance
                                           held in the Basis Risk Reserve Fund
                                           to equal 0.50% of the Assumed
                                           Principal Balance of the Mortgage
                                           Loans for such date, and, for any
                                           other Distribution Date, the amount
                                           that would cause the balance held in
                                           the Basis Risk Reserve Fund to equal
                                           $1,000.

Residual Certificates:                     The Class R Certificates.

Sales Agreement:                           The Sales Agreement dated [[ ]],
                                           between the Depositor and SMI
                                           regarding the sale of the Mortgage
                                           Loans.

Senior Certificates:                       Any Class of Certificates including
                                           the letter "A" in their class
                                           designation.

Servicing Fee Rate:

Stepdown Date:                             The earlier to occur of:


                                                (i)   the later to occur of:

                                                (A)   the Distribution Date in
                                                      [[ ]], and

                                       8
<PAGE>

                                                (B)   the first Distribution
                                                      Date on which the Group I
                                                      Class A Certificate
                                                      Principal Balance and
                                                      Group II Class A
                                                      Certificate Principal
                                                      Balance immediately prior
                                                      to such Distribution Date
                                                      (less the Principal Funds
                                                      for such Distribution
                                                      Date) is less than or
                                                      equal to [[ ]]% of the
                                                      Assumed Principal Balance
                                                      on such date, and


                                                (ii)  the Distribution Date
                                        after which the Group I and Group II
                                        Class A Certificate Principal Balance
                                        has been reduced to zero.

Subordinate Certificates:                  Any Class [[     ]].

Subsequent Delivery Requirements:          (a)  After giving effect to the
                                                acquisition of all Subsequent
                                                Mortgage Loans, the Mortgage
                                                Loans in Group I (which shall
                                                all be Mortgage Loans bearing
                                                interest at fixed rates of
                                                interest):

                                                (i)   shall have a weighted
                                                      average Mortgage Rate of
                                                      not less than [[ ]]% per
                                                      annum;

                                                (ii)  shall have a weighted
                                                      average combined loan to
                                                      value ratio not in excess
                                                      of [[ ]]%;

                                                (iii) shall be Mortgage Loans no
                                                      more than [[ ]]% of which
                                                      (by Stated Principal
                                                      Balance) were made in
                                                      connection with a cash out
                                                      refinancing;

                                                (iv)  shall be Mortgage Loans at
                                                      least [[ ]]% of which (by
                                                      Stated Principal Balance)
                                                      shall be classified by
                                                      Saxon Mortgage, Inc. as
                                                      "A-" or better;

                                                (v)   shall be Mortgage Loans at
                                                      least [[ ]]% of which (by
                                                      Stated Principal Balance)
                                                      will have been originated
                                                      pursuant to a full
                                                      documentation program; and

                                                (vi)  shall have a weighted
                                                      average credit score of
                                                      not less than [[ ]].

                                           (b)  After giving effect to the
                                                acquisition of all the
                                                Subsequent Mortgage Loans, the
                                                Mortgage Loans in

                                       9
<PAGE>

                                                Group II (which shall all be
                                                first lien Mortgage Loans
                                                bearing interest at adjustable
                                                rates):

                                                (i)   shall have a weighted
                                                      average Mortgage Rate of
                                                      not less than [[ ]]% per
                                                      annum;

                                                (ii)  shall have a weighted
                                                      average Loan to Value
                                                      Ratio not in excess of [[
                                                      ]]%;

                                                (iii) shall be Mortgage Loans at
                                                      least [[ ]]% of which (by
                                                      Stated Principal Balance)
                                                      shall be classified by
                                                      Saxon Mortgage, Inc. as
                                                      "A-" or better; and

                                                (iv)  shall have a weighted
                                                      average credit score of
                                                      not less than [[ ]].

Target Percentage:                         For the Senior Certificates, [[ ]]%
                                           the Class M-1 Certificates, [[ ]]%;
                                           for the Class M-2 Certificates, [[
                                           ]]%; and for the Class B
                                           Certificates, [[ ]]%.

Trigger Event:                             With respect to any Distribution Date
                                           after the Stepdown Date, a Trigger
                                           Event exists if the quotient
                                           (expressed as a percentage) of:

                                                (i)   the Stated Principal
                                                      Balances of all 60 or more
                                                      days Delinquent Mortgage
                                                      Loans (including Mortgage
                                                      Loans subject to
                                                      bankruptcy or foreclosure
                                                      proceedings and REO
                                                      Property), divided by

                                                (ii)  the Assumed Principal
                                                      Balance of the Mortgage
                                                      Loans as of the preceding
                                                      Determination Date

                                           equals or exceeds [[ ]]% of the
                                           Senior Credit Enhancement Percentage.

Trustee Fee Rate:

Trustee Series Designation:                Saxon 2001-3[SX0103]

Underwriters:

Upper Tier REMIC:                          REMIC 3

                                       10
<PAGE>

Variable Rate Certificates:                Any of the Class AF-1, Class AV-1,
                                           Class AV-2, Class M-1, Class M-2 and
                                           Class B-1 Certificates.

Voting Rights:                             The voting rights of the trust will
                                           be allocated as follows:


                                                (i)   1% to each of the Class
                                        A-IO and Class X-IO Certificates;


                                                (ii)  96% to the Group I
                                        Certificates and Group II Certificates
                                        in proportion to their respective
                                        outstanding certificate principal
                                        balances; and


                                                (iii) 1% to each of the Class C
                                        and Class R Certificates.

           With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.

                                   ARTICLE 1

                                   DEFINITIONS

           Section 1.1  Defined Terms
                        -------------

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

           Accrual Period: With respect to each Lower Tier Interest and each
Class of Delay Certificates and any Distribution Date, the calendar month
immediately preceding such Distribution Date. With respect to each Class of
Non-Delay Certificates and any Distribution Date, the period commencing on the
immediately preceding Distribution Date (or in the case of the first
Distribution Date, the Closing Date) and ending on the day immediately preceding
the current Distribution Date.

           Advance:  Each P&I Advance and Servicing Advance.

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

           Allocable Portion: For each Group and Distribution Date, an amount
equal to the (i) Certificate Principal Balance of the Class A Certificates of
such Group; divided by (ii) the sum of the Certificate Principal Balance of the
Class A Certificates of both groups.

                                       11
<PAGE>

           Applied Realized Loss Amount: As to any Distribution Date and Class
of Subordinate Certificates, the sum of any Realized Losses which have been
applied in reduction of the Certificate Principal Balance of such Class of
Certificates on such date.

           Assumed Principal Balance: As of any Distribution Date, the sum of:

               (i)        the aggregate Stated Principal Balances of the
           Mortgage Loans as of such Distribution Date, plus

               (ii)       the aggregate amount on deposit in any Pre-Funding
           Account (less all amounts representing investment earnings thereon).

           Available Funds: As to any Distribution Date, the sum of all
Principal Funds and Interest Funds for such date.

           Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
amended.

           Basis Risk Payment: For any Distribution Date, an amount to be
deposited into the Basis Risk Reserve Fund equal to the sum of (i) any Cap
Carryover Amounts for such Distribution Date and (ii) any Required Reserve Fund
Deposit for such Distribution Date, provided however, the amount of the Basis
Risk Payment for any Distribution Date cannot exceed the amount available for
distribution therefor pursuant to priorities for distributions pursuant to
Section 4.1(f).

           Basis Risk Reserve Fund: Any fund created hereunder and held as part
of the Trust Estate but not as part of any REMIC created hereunder, to provide a
source for payments of Cap Carryover Amounts.

           Blanket Mortgage: The mortgage or mortgages encumbering a Cooperative
Property.

           Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
a day on which banking institutions in New York City or the city in which any of
the Custodian, the Servicer, the Master Servicer, or the Corporate Trust Office
of the Trustee is located are authorized or obligated by law or executive order
to be closed.

           Cap Carryover Amount: On any Distribution Date and as to any Class,
the sum of:

               (i)        if the Pass-Through Rate for such Distribution Date
           and Class is based on the Net WAC Cap, the excess of (A) the amount
           of interest that would have been distributable on such Certificates
           for such Distribution Date had the interest rate thereon been
           calculated without regard to the Net WAC Cap, over (B) the amount of
           interest distributable based on the Net WAC Cap, and

               (ii)       the excess of the amount described in clause (i)(A)
           above over the amount described in clause (i)(B) above for all prior
           Distribution Dates, together with interest thereon calculated at the
           applicable Pass Through Rate (determined without regard to the

                                       12
<PAGE>

           Net WAC Cap), reduced by all amounts previously distributed with
           respect to such Class pursuant to Section 4.1(f)(x) through (xiii) on
           all such prior Distribution Dates.

           Capitalized Interest Account: Any Eligible Account created and
maintained with such designation pursuant to Section 2.7.

           Capitalized Interest Requirement: As to any Distribution Date to and
including the Distribution Date immediately following the end of the Funding
Period, the product of (x) the excess of (a) the sum of the Pre-Funded Amounts
for Group I and Group II on the Closing Date over (b) the aggregate of the
Principal Balances of the related Subsequent Mortgage Loans transferred to the
Trust Fund prior to such Distribution Date that have a monthly payment that will
be included in the amounts distributed for such Distribution Date, and (y) the
Weighted Average Net Rate for the Distribution Date.

           Certificate: Any one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.

           Certificate Owner: With respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Book-Entry Certificate.

           Certificate Principal Balance: With respect to any Certificate and as
of any Distribution Date, the certificate principal balance on the date of the
initial issuance of such Certificate as set forth on the face thereof, as
reduced by:

               (i)        all amounts distributed on previous Distribution Dates
           on such Certificate in reduction of the Certificate Principal Balance
           thereof; and

               (ii)       in the case of a Subordinate Certificate, such
           Certificate's pro rata share, if any, of any Applied Realized Loss
           Amounts for previous Distribution Dates; and

           Certificate Register: The register maintained pursuant to Section 5.2
hereof.

           Certificateholder or Holder: The person in whose name a Certificate
is registered in the Certificate Register, except that, solely for the purpose
of giving any consent pursuant to this Agreement, any Certificate registered in
the name of the Depositor or any affiliate of the Depositor shall be deemed not
to be Outstanding and the Percentage Interest evidenced thereby shall not be
taken into account in determining whether the requisite amount of Percentage
Interests necessary to effect such consent has been obtained; provided, however,
that if any such Person (including the Depositor) owns 100% of the Percentage
Interests evidenced by a Class of Certificates, such Certificates shall be
deemed to be Outstanding for purposes of any provision hereof that requires the
consent of the Holders of Certificates of a particular Class as a condition to
the taking of any action hereunder. The Trustee is entitled to rely conclusively
on a certification of the Depositor or any affiliate of the Depositor in
determining which Certificates are registered in the name of an affiliate of the
Depositor.

                                       13
<PAGE>

           Class: All Certificates bearing the same class designation as set
forth in the Preliminary Statement.

           Class A Group Principal Distribution Amount: With respect to each
Distribution Date and Group, the Group Percentage for such Group of the Senior
Class A Principal Distribution Amount on such date.

           Class B Principal Distribution Amount: With respect to any
Distribution Date before the Stepdown Date or for which a Trigger Event is in
effect, zero, and with respect to any Distribution Date on and after the
Stepdown Date and as long as a Trigger Event is not in effect the excess of:

               (i)        the sum of:

                          (A)  the Group I Class A Certificate Principal Balance
                               and Group II Class A Certificate Principal
                               Balance (after giving effect to distributions on
                               that date),

                          (B)  the Certificate Principal Balance of the Class
                               M-1 Certificates (after giving effect to
                               distributions on that date),

                          (C)  the Certificate Principal Balance of the Class
                               M-2 Certificates (after giving effect to
                               distributions on that date), and

                          (D)  the Certificate Principal Balance of the Class
                               B-1 Certificates immediately prior to such
                               Distribution Date over

               (ii)       the lesser of:

                          (A)  related Target Percentage of the Assumed
                               Principal Balance of the Mortgage Loans on the
                               preceding Determination Date, and

                          (B)  the excess, if any, of:

                               (I)   the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date over

                               (II)  the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date less 0.50% of the
                                     Assumed Principal Balance as of the Cut Off
                                     Date (but in no event less than zero).

           Class Certificate Balance: With respect to any Class of Certificates
and as of any Distribution Date, the aggregate of the Certificate Principal
Balances of all Certificates of such Class as of such date.

                                       14
<PAGE>

           Class M-1 Principal Distribution Amount: With respect to any
Distribution Date before the Stepdown Date or for which a Trigger Event is in
effect, zero, and with respect to any Distribution Date on or after the Stepdown
Date and as long as a Trigger Event is not in effect the excess of:

               (i)        the sum of:

                          (A)  the Group I Class A Certificate Principal Balance
                               and Group II Class A Certificate Principal
                               Balance (after giving effect to distributions on
                               that date), and

                          (B)  the Certificate Principal Balance of the Class
                               M-1 Certificates immediately prior to such
                               Distribution Date over

               (ii)       the lesser of:

                          (A)  the related Target Percentage of the Assumed
                               Principal Balance of the Mortgage Loans on the
                               preceding Determination Date, and

                          (B)  the excess, if any, of:

                               (I)   the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date over

                               (II)  the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date less 0.50% of the
                                     Assumed Principal Balance as of the Cut Off
                                     Date (but in no event less than zero).

           Class M-2 Principal Distribution Amount: With respect to any
Distribution Date before the Stepdown Date or for which a Trigger Event is in
effect, zero, and with respect to any Distribution Date on or after the Stepdown
Date and as long as a Trigger Event is not in effect the excess of:

               (i)        the sum of:

                          (A)  the Group I Class A Certificate Principal Balance
                               and Group II Class A Certificate Principal
                               Balance (after giving effect to distributions on
                               that date),

                          (B)  the Certificate Principal Balance of the Class
                               M-1 Certificates (after giving effect to
                               distributions on that date), and

                          (C)  the Certificate Principal Balance of the Class
                               M-2 Certificates immediately prior to such
                               Distribution Date over

               (ii)       the lesser of:

                                       15
<PAGE>

                          (A)  the related Target Percentage of the Assumed
                               Principal Balance of the Mortgage Loans on the
                               preceding Determination Date, and

                          (B)  the excess, if any, of:

                               (I)   the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date over

                               (II)  the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date less 0.50% of the
                                     Assumed Principal Balance as of the Cut Off
                                     Date (but in no event less than zero).

           Class P Prepayment Amount: As to each Distribution Date, the excess,
if any, of Prepayment Penalties collected with respect to the Mortgage Loans
during the related Prepayment Period over the Pledged Prepayment Penalties for
such Distribution Date.

           Code: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.

           Collection Account: The separate Eligible Account or Accounts created
and maintained by the Servicer pursuant to Section 3.5 with a depository
institution for the benefit of the Trustee on behalf of Certificateholders and
designated with the applicable Account Designation.

           Compensating Interest: As to any Distribution Date and any Principal
Prepayment in Full in respect of a Mortgage Loan that is received during the
period from the eighteenth day of the month prior to the month of such
Distribution Date through the last day of such month, an additional payment made
by the Servicer, to the extent funds are available from the Servicing Fee, equal
to the amount of interest at the Mortgage Rate (less the applicable Servicing
Fee Rate) for that Mortgage Loan from the date of the prepayment through the
last day of the month of such Distribution Date. For the avoidance of doubt, no
Compensating Interest payment shall be required in connection with any
shortfalls resulting from Principal Prepayments in part or the application of
the Relief Act.

           Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements constituting
the Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.

           Coop Shares: Shares issued by a Cooperative Corporation.

           Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a
Proprietary Lease.

           Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Coop Shares of the Cooperative Corporation.

                                       16
<PAGE>

           Cooperative Unit: A single-family dwelling located in a Cooperative
Property.

           Corporate Trust Office: The designated office of the Trustee in the
State of New York at which at any particular time its corporate trust business
with respect to this Agreement shall be administered.

           Credit Support Depletion Date: The Distribution Date on which the
Certificate Principal Balance of the Class M-1, Class M-2 and Class B-1
Certificates has been reduced to zero.

           Current Interest: With respect to any Distribution Date and any Class
of Certificates, the interest accrued on the Class Certificate Balance thereof
immediately prior to such Distribution Date during the related Accrual Period at
the applicable Pass-Through Rate; provided, however, that such Current Interest
shall be reduced by such Class's pro rata share of any Net Prepayment Interest
Shortfalls for such Distribution Date. All calculations of interest on each
Class of Delay Certificates will be made on the basis of a 360-day year assumed
to consist of twelve 30-day months and all calculations of interest on each
Class of Non-Delay Certificates will be made on the basis of the actual number
of days elapsed in the related Accrual Period and a 360-day year.

           Debt Service Reduction: With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.

           Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.2 or 2.3.

           Deficient Valuation: With respect to any Mortgage Loan, a valuation
by a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then-outstanding indebtedness under the Mortgage Loan, or any reduction
in the amount of principal to be paid in connection with any Scheduled Payment
that results in a permanent forgiveness of principal, which valuation or
reduction results from an order of such court which is final and non-appealable
in a proceeding under the Bankruptcy Code.

           Definitive Certificates: Any Certificate evidenced by a Physical
Certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 5.2(e).

           Deleted Mortgage Loan: As defined in Section 2.3(d) hereof.

           Delinquent: A Mortgage Loan is "Delinquent" if any payment due
thereon is not made by the close of business on the Determination Date
immediately following the day such payment is scheduled to be due. A Mortgage
Loan is "30 days Delinquent" if such payment has not been received by the close
of business on the Determination Date immediately succeeding the Determination
Date on which such payment was categorized as "Delinquent." Similarly for "60
days Delinquent," "90 days Delinquent" and so on.

                                       17
<PAGE>

           Denomination: With respect to each Certificate, the amount set forth
on the face thereof as the "Initial Certificate Balance of this Certificate" or
the Percentage Interest appearing on the face thereof.

           Depositor: Saxon Asset Securities Company, a Virginia corporation, or
its successor in interest.

           Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is CEDE & Co., as the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code of
the State of New York.

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

           Determination Date: As to any Distribution Date, the earlier of (i)
the 17th day of each month, or (ii) if such day is not a Business Day, the next
succeeding Business Day.

           Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.5(d) in the name of the Trustee
for the benefit of the Certificateholders and designated with the applicable
Account Designation.

           Distribution Account Deposit Date: As to any Distribution Date, 1:30
p.m. Eastern time on the Business Day immediately preceding such Distribution
Date.

           Distribution Date: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such 25th day is not a Business Day,
the next succeeding Business Day, commencing on the Initial Distribution Date.

           Due Date: With respect to any Distribution Date and each Mortgage
Loan, the day of the month in which each Distribution Date occurs on which the
related mortgage payment is due (or, in the case of an Odd Due Date Mortgage
Loan, such day in the preceding month).

           Due Period: The period from and including the second day of each
month through and including the first day of the following month.

           Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the uninsured
deposits in which accounts are otherwise secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating Agency, the

                                       18
<PAGE>

Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its fiduciary
capacity or (iv) any other account acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.

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

           Escrow Account: The Eligible Account or Accounts established and
maintained pursuant to Section 3.6(a) hereof.

           Event of Default: As defined in Section 7.1 hereof.

           Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the sum of any Liquidation Proceeds of such Mortgage
Loan received during the Prepayment Period in which such Mortgage Loan became a
Liquidated Mortgage Loan, net of any amounts previously reimbursed to the Master
Servicer as Nonrecoverable Advance(s) with respect to such Mortgage Loan
pursuant to Section 3.8(a)(iii), exceeds (i) the unpaid principal balance of
such Liquidated Mortgage Loan as of the Due Date in the month in which such
Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued interest at
the Mortgage Rate from the Due Date as to which interest was last paid or
advanced (and not reimbursed) to Certificateholders up to the Due Date
applicable to the Distribution Date immediately following the Prepayment Period
during which such liquidation occurred.

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

           FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.

           FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989.

           Fitch: Fitch, Inc., or any successor thereto. If Fitch is designated
as a Rating Agency in the Preliminary Statement, the address for notices to
Fitch shall be Fitch, Inc., One State Street Plaza, New York, New York 10004,
Attention: Residential Mortgage Surveillance Group, or such other address as
Fitch may hereafter furnish to the Depositor and the Master Servicer.

           FNMA: The Federal National Mortgage Association, a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.

           Funding Period: The period commencing on the Closing Date and ending
on the earliest to occur of :

                                       19
<PAGE>

                          (i)   the date on which the amount on deposit in the
                                Pre-Funding Account (exclusive of any investment
                                earnings) is less than $100,000,

                          (ii)  the date on which an Event of Default occurs,
                                and

                          (iii) the Funding Period Termination Date.

           Group: Any grouping of Mortgage Loans described in the Preliminary
Statement.

           Group Percentage: For any Distribution Date and Group, the percentage
equivalent of a fraction, the numerator of which is the Principal Funds for such
Group and the denominator of which is the aggregate Principal Funds for both
Groups.

           Group Principal Distribution Amount: With respect to any Group and
Distribution Date, the excess of:

               (A)        the sum of:

                          (i)   the related Principal Funds for such Group, and

                          (ii)  the related Group Percentage of the Extra
                                Principal Distribution Amount over

               (B)        the related Group Percentage of the Released Principal
Amount.

           Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.

           Insurance Policy: With respect to any Mortgage Loan included in the
Trust Fund, any insurance policy, including all riders and endorsements thereto
in effect, including any replacement policy or policies for any Insurance
Policies.

           Insurance Proceeds: Proceeds paid by an insurer pursuant to any
Insurance Policy, in each case other than any amount included in such Insurance
Proceeds in respect of Insured Expenses.

           Insured Expenses: Expenses covered by an Insurance Policy or any
other insurance policy with respect to the Mortgage Loans.

           Interest Carry Forward Amount: With respect to each Distribution Date
and Class, the sum of:

               (i)        the excess of:

                          (A)   Current Interest for such Class with respect to
                                prior Distribution Dates (excluding any Cap
                                Carryover Amount) over

                                       20
<PAGE>

                          (B)   the amount actually distributed to such Class
                                (other than in respect of any applicable Cap
                                Carryover Amount) with respect to interest on
                                such prior Distribution Dates, and

               (ii)       interest thereon at the applicable Pass-Through Rate
                          for the related Accrual Period.

           Interest Funds: With respect to any Group and any Determination Date,
the sum, without duplication, of:

               (i)        all scheduled interest due during the related Due
                          Period (and received by the related Determination
                          Date) with respect to such Group less the related
                          Servicing Fee and the Master Servicing Fee,

               (ii)       all Advances relating to interest with respect to such
                          Group,

               (iii)      any Compensating Interest payment with respect to such
                          Group,

               (iv)       Liquidation Proceeds with respect to such Group (to
                          the extent such Liquidation Proceeds relate to
                          interest) less all Non-Recoverable Advances relating
                          to interest and expenses,

               (v)        any Pledged Prepayment Penalties for such Group; and

               (vi)       any Subsequent Recoveries added to the Interest Funds
                          for such group pursuant to Section 4.1(j).

           The Interest Funds for such Group and any Determination Date shall be
increased by the pro rata portion for such Group (based on the amount on deposit
in the Pre-Funding Account in respect of such Group) of the Capitalized Interest
Requirement withdrawn from the Capitalized Interest Account for such
Distribution Date.

           Last Endorsee:  As defined in Section 2.1(b).

           Latest Possible Maturity Date: The Distribution Date following the
third anniversary of the scheduled maturity date of the Mortgage Loan having the
latest scheduled maturity date as of the Cut Off Date.

           Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
Prepayment Period for such Distribution Date and as to which the Servicer has
determined (in accordance with this Agreement) that it has received all amounts
it expects to receive in connection with the liquidation of such Mortgage Loan,
including the final disposition of an REO Property.

           Liquidation Proceeds: Amounts, including Insurance Proceeds, received
in connection with the partial or complete liquidation of defaulted Mortgage
Loans, whether through trustee's sale, foreclosure sale, disposition pursuant to
Section 3.11(i), or otherwise or amounts received

                                       21
<PAGE>

in connection with any condemnation or partial release of a Mortgaged Property
and any other proceeds received in connection with an REO Property, less the sum
of related unreimbursed Servicing Fees, Servicing Advances and P&I Advances.

           Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
date of determination, the fraction (expressed as a percentage) the numerator of
which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the lesser of the purchase price
of the related Mortgaged Property and the appraised value of the related
Mortgaged Property.

           London Business Day: A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.

           Lost Mortgage Note: Any Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.

           Maintenance: With respect to any Cooperative Unit, the rent paid by
the Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease.

           Majority in Interest: As to any Class of Regular Certificates, the
Holders of Certificates of such Class evidencing, in the aggregate, at least 51%
of the Percentage Interests evidenced by all Certificates of such Class.

           Master Servicer: Saxon Mortgage, Inc., a Virginia corporation, and
its successors and assigns, in its capacity as master servicer hereunder.

           Master Servicer Custodial Account: The separate Eligible Account
created and maintained by the Master Service pursuant to Section 3.5(c) for the
benefit of Certificateholders and designated with the applicable Account
Designation.

           Master Servicing Fee: As to each Mortgage Loan and any Distribution
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the first
day of the month prior to the month of such Distribution Date.

           Master Servicer Reporting Date: The opening of business on the third
Business Day preceding each Distribution Date.

           Meritech: Meritech Mortgage Services, Inc., a Texas corporation.

           Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.5.

           Moody's: Moody's Investors Service, Inc., or any successor thereto.
If Moody's is designated as a Rating Agency in the Preliminary Statement, the
address for notices to Moody's shall be Moody's Investors Service, Inc., 99
Church Street, New York, New York 10007,

                                       22
<PAGE>

Attention: Residential Pass-Through Monitoring, or such other address as Moody's
may hereafter furnish to the Depositor or the Master Servicer.

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

           Mortgage File: The mortgage documents listed in Section 2.1 hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.

           Mortgage Loans: Such of the mortgage loans transferred and assigned
pursuant to the provisions hereof as from time to time are held as a part of the
Trust Fund (including any REO Property), the mortgage loans so held being
identified in the Mortgage Loan Schedule, notwithstanding foreclosure or other
acquisition of title of the related Mortgaged Property.

           Mortgage Loan Schedule: The list of Mortgage Loans (as from time to
time amended by the Master Servicer to reflect the addition of Substitute or
Subsequent Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant to
the provisions of this Agreement) transferred to the Trustee as part of the
Trust Fund and from time to time subject to this Agreement, attached hereto as
Schedule I, setting forth the following information with respect to each
Mortgage Loan:

               (i)        the loan number;

               (ii)       the Mortgagor's name;

               (iii)      the original principal balance; and

               (iv)       the Stated Principal Balance as of the Cut-Off Date.

           Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

           Mortgage Rate: The annual rate of interest borne by a Mortgage Note
from time to time, net of any insurance premium charged by the mortgagee to
obtain or maintain any Primary Insurance Policy.

           Mortgaged Property: The underlying property securing a Mortgage Loan,
which, in the case of a Cooperative Loan, is the related Coop Shares and
Proprietary Lease.

           Mortgagor: Any obligor on a Mortgage Note.

           Net Prepayment Interest Shortfalls: As to any Distribution Date and
Group, the amount by which the aggregate of Prepayment Interest Shortfalls
during the related Prepayment Period for such Group exceeds an amount equal to
the Compensating Interest for such Group, if any, for such Distribution Date.

                                       23
<PAGE>

           Nonrecoverable Advance: Any portion of any P&I Advance or Servicing
Advance previously made or proposed to be made by the Servicer or Master
Servicer that, in the good faith judgment of the advancing party, will not be
ultimately recoverable by such advancing party from the related Mortgagor,
related Liquidation Proceeds or otherwise.

           Nonrecoverable Mortgage Loan: Any Mortgage Loan that has been
determined to be a Nonrecoverable Mortgage Loan pursuant to Section 3.11(f) and
is identified in an Officer's Certificate signed by a Servicing Officer
delivered to the Master Servicer pursuant to Section 3.11(f). For the avoidance
of doubt, Mortgage Loans represented by REO Property shall not constitute
Nonrecoverable Mortgage Loans.

           Nonrecoverable Mortgage Loan Purchase Price: As to any Nonrecoverable
Mortgage Loan, an amount equal to the sum of (i) the Projected Net Liquidation
Value thereof on the date of purchase of such loan pursuant to this Agreement;
and (ii) any accrued interest at the applicable Mortgage Rate from the date
through which interest was last paid by the Mortgagor to the Due Date occurring
in the Due Period immediately preceding the Distribution Date on which the
Nonrecoverable Mortgage Loan Purchase Price is to be distributed to
Certificateholders.

           Notice Address: For purposes hereof, the addresses of the Depositor,
the Master Servicer and the Trustee, are as follows:


                                        (i)       If to the Depositor:

                                Saxon Asset Securities Company
                                4880 Cox Road
                                Glen Allen, Virginia  23060


                                        (ii)      If to the Master Servicer:

                                Saxon Mortgage, Inc.
                                4880 Cox Road
                                Glen Allen, Virginia  23060
                                Attn:  Master Servicing


                                        (iii)     If to the Trustee:

                                Bankers Trust Company
                                1761 East St. Andrew Place
                                Santa Ana, California 92705
                                Attention:  Trustee Series Designation


                                        (iv)      If to the Servicer:

                                       24
<PAGE>

                                Meritech Mortgage Services, Inc.
                                P.O. Box 161489
                                Fort Worth, TX  76161-1489
                                Attn:  Executive Administration

           Notice of Final Distribution: The notice to be provided pursuant to
Section 9.2 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.

           Odd Due Date Mortgage Loan: Any Mortgage Loan whose monthly payments
are due on a day other than the first day of the month.

           Officer's Certificate: A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the entity required by the terms of this Agreement to deliver
such certificate, or by such officer of such entity as may be required to sign
such certificate by the terms of this Agreement relating to such particular
certificate.

           One Month LIBOR: As of any Interest Determination Date, the rate for
one-month U.S. dollar deposits which appears in the Telerate Page 3750, as of
11:00 a.m., London time, on such Interest Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day will be determined on
the basis of the rates at which deposits in United States dollars are offered by
the Reference Banks at approximately 11:00 a.m., London time, on that day to
prime banks in the London interbank market for a period equal to the relevant
Accrual Period (commencing on the first day of such Accrual Period). The
Calculation Agent, as agent for the Master Servicer, will request the principal
London office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, the rate for that day will be the
arithmetic- mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that day will be the arithmetic-mean of the rates quoted
by major banks in New York City, selected by the Master Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a period equal to the relevant
Accrual Period (commencing on the first day of such Accrual Period). The
Calculation Agent, as agent for the Master Servicer, shall review Telerate Page
3750 as of the required time, make the required requests to the principal
offices of the Reference Banks and selections of major banks in New York City
and shall determine the rate which constitutes One Month LIBOR for each Interest
Determination Date.

           Opinion of Counsel: A written opinion of counsel, who may be counsel
for the Depositor, Servicer or the Master Servicer, including, in-house counsel,
reasonably acceptable to the Trustee.

           Optional Termination: The termination of the trust created hereunder
in connection with the purchase of the Mortgage Loans pursuant to Section 9.1
hereof.

                                       25
<PAGE>

           Original Mortgage Loan: The Mortgage Loan refinanced in connection
with the origination of a Refinancing Mortgage Loan.

           OTS: The Office of Thrift Supervision.

           Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:

               (i)        Certificates theretofore canceled by the Trustee or
           delivered to the Trustee for cancellation; and

               (ii)       Certificates in exchange for which or in lieu of which
           other Certificates have been executed and delivered by the Trustee
           pursuant to this Agreement.

           Outstanding Mortgage Loan: As of any Determination Date, a Mortgage
Loan with a Stated Principal Balance greater than zero which was not the subject
of a Principal Prepayment in Full prior to such Determination Date and which did
not become a Liquidated Mortgage Loan prior to such Determination Date.

           Overcollateralization Amount: With respect to any Distribution Date,
the excess of the Assumed Principal Balance of the Mortgage Loans over the
aggregate Certificate Principal Balance of the Certificates after giving effect
to principal distributions on such Distribution Date.

           Overfunded Interest Amount: With respect to each Subsequent Sales
Date, the excess of:

               (i)        interest accruing from the related Subsequent Cut Off
           Date to the Distribution Date immediately following the last date on
           which the Funding Period may then end on the aggregate Stated
           Principal Balances of the Subsequent Mortgage Loans acquired by the
           Trust on such Subsequent Sales Date, calculated at a rate equal to
           the weighted average of the Pass-Through Rates on the Certificates
           over

               (ii)       interest accruing from such Subsequent Cut Off Date to
           such Distribution Date on the aggregate Stated Principal Balances of
           the Subsequent Mortgage Loans acquired by the Trust on such
           Subsequent Sales Date, calculated at the Assumed Investment Rate.

           Ownership Interest: As to any Residual Certificate, any ownership
interest in such Certificate including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial.

           P&I Advance: The payment required to be made by the Servicer with
respect to any Distribution Date pursuant to Section 3.19, the amount of any
such payment being equal to the aggregate of payments of principal and interest
(net of the related Servicing Fee and any net income in the case of any REO
Property) on the Mortgage Loans that were due during the related Due Period and
not received as of the close of business on the related Determination Date, less

                                       26
<PAGE>

the aggregate amount of any such delinquent payments that the Servicer or Master
Servicer has determined would constitute a Nonrecoverable Advance if advanced.

           Pass-Through Rate: For any interest bearing Class of Certificates or
Component, the per annum rate set forth or calculated in the manner described in
the Pass-Through Rate Schedule.

           Pass-Through Rate Schedule: The Schedule setting forth the
Pass-Through Rates of the Certificates, attached as Schedule II hereto.

           Paying Agent: Bankers Trust Company, a New York corporation, and its
successors and assigns in such capacity.

           Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made on the related Class,
such percentage interest being set forth on the face thereof or equal to the
percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.

           Permitted Investments: At any time, any one or more of the following
obligations and securities:

               (i)        obligations of the United States or any agency
           thereof, provided such obligations are backed by the full faith and
           credit of the United States;

               (ii)       general obligations of or obligations guaranteed by
           any state of the United States or the District of Columbia receiving
           the highest long-term debt rating of each Rating Agency, or such
           lower rating as will not result in the downgrading or withdrawal of
           the ratings then assigned to the Certificates by each Rating Agency;

               (iii)      commercial or finance company paper which is then
           receiving the highest commercial or finance company paper rating of
           each Rating Agency, or such lower rating as will not result in the
           downgrading or withdrawal of the ratings then assigned to the
           Certificates by each Rating Agency;

               (iv)       certificates of deposit, demand or time deposits, or
           bankers' acceptances issued by any depository institution or trust
           company incorporated under the laws of the United States or of any
           state thereof and subject to supervision and examination by federal
           and/or state banking authorities, provided that the commercial paper
           and/or long term unsecured debt obligations of such depository
           institution or trust company (or in the case of the principal
           depository institution in a holding company system, the commercial
           paper or long-term unsecured debt obligations of such holding
           company, but only if Moody's is not a Rating Agency) are then rated
           one of the two highest long-term and the highest short-term ratings
           of each Rating Agency for such securities, or such lower ratings as
           will not result in the downgrading or withdrawal of the rating then
           assigned to the Certificates by either Rating Agency;

                                       27
<PAGE>

               (v)        demand or time deposits or certificates of deposit
           issued by any bank or trust company or savings institution to the
           extent that such deposits are fully insured by the FDIC;

               (vi)       guaranteed reinvestment agreements issued by any bank,
           insurance company or other corporation containing, at the time of the
           issuance of such agreements, such terms and conditions as will not
           result in the downgrading or withdrawal of the rating then assigned
           to the Certificates by either Rating Agency;

               (vii)      repurchase obligations with respect to any security
           described in clauses (i) and (ii) above, in either case entered into
           with a depository institution or trust company (acting as principal)
           described in clause (iv) above, provided that the long-term or
           short-term unsecured debt obligations of the party agreeing to
           repurchase such obligations are at the time rated by each Rating
           Agency in one of its highest long-term unsecured debt rating
           categories or its highest short-term unsecured debt rating category,
           respectively;

               (viii)     securities (other than stripped bonds, stripped
           coupons or instruments sold at a purchase price in excess of 115% of
           the face amount thereof) bearing interest or sold at a discount
           issued by any corporation incorporated under the laws of the United
           States or any state thereof which, at the time of such investment,
           have one of the two highest ratings of each Rating Agency (except if
           the Rating Agency is Moody's, such rating shall be the highest
           commercial paper rating of Moody's for any such securities), or such
           lower rating as will not result in the downgrading or withdrawal of
           the rating then assigned to the Certificates by either Rating Agency
           as evidenced by a signed writing delivered by each Rating Agency;

               (ix)       units of a taxable money-market portfolio having the
           highest rating assigned by each Rating Agency (except if Fitch is a
           Rating Agency and has not rated the portfolio, the highest rating
           assigned by Moody's) and restricted to obligations issued or
           guaranteed by the United States of America or entities whose
           obligations are backed by the full faith and credit of the United
           States of America and repurchase agreements collateralized by such
           obligations; and

               (x)        such other investments bearing interest or sold at a
           discount acceptable to each Rating Agency as will not result in the
           downgrading or withdrawal of the rating then assigned to the
           Certificates by either Rating Agency, as evidenced by a signed
           writing delivered by each Rating Agency;

           provided that no such instrument shall be a Permitted Investment if
           such instrument evidences the right to receive interest only payments
           with respect to the obligations underlying such instrument.

           Permitted Transferee: Any person other than a "disqualified
organization" as derfined in section 860E(e)(5).

                                       28
<PAGE>

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

           Pool Principal Balance: As to any Distribution Date, the aggregate of
the Stated Principal Balances of the Mortgage Loans which were Outstanding
Mortgage Loans on the Determination Date in the month preceding the month of
such Distribution Date.

           Pre-Funded Amount: With respect to any date and Group, the amount
remaining on deposit in the Pre-Funding Account with respect to such Group
(exclusive of any related Pre-Funding Account Earnings).

           Pre-Funding Account: The account created and maintained with the
Paying Agent by the Trust pursuant to Section 2.7 hereof.

           Pre-Funding Account Earnings: With respect to each Distribution Date
to and including the date immediately preceding the Distribution Date
immediately following the end of the Funding Period, the actual interest and
investment earnings on the Pre-Funded Amount as calculated by the Master
Servicer (based on information supplied by the Trustee).

           Prepayment Interest Excess: As to any Principal Prepayment received
by the Servicer from the first day through the seventeenth day of any calendar
month (other than the calendar month in which the Cut Off Date occurs), all
amounts paid by the related Mortgagor in respect of interest on such Principal
Prepayment. All Prepayment Interest Excess shall be paid to the Servicer as
additional servicing compensation.

           Prepayment Interest Shortfall: As to any Distribution Date, Mortgage
Loan and Principal Prepayment received (a) during the period from the eighteenth
day of the month preceding the month of such Distribution Date through the last
day of such month, in the case of a Principal Prepayment in full, or (b) during
the month preceding the month of such Distribution Date, in the case of a
partial Principal Prepayment, the amount, if any, by which one month's interest
at the related Mortgage Rate (less the related Servicing Fee) on such Principal
Prepayment exceeds the amount of interest actually paid by the Mortgagor in
connection with such Principal Prepayment.

           Prepayment Penalty: With respect to any Prepayment Period, any
prepayment premium, penalty or charge collected by the Servicer or Master
Servicer from a Mortgagor pursuant to the terms of the related Mortgage Note.

           Prepayment Period: As to each Distribution Date, the period from but
excluding the Cut Off Date to and including the 17th day of the month in which
the first Determination Date occurs and each period thereafter from and
including the 18th day of a month (or, if the prior Prepayment Period ended on
an earlier day, such earlier day) to and including the Determination Date
occurring in the following month.

           Primary Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage Loan.

                                       29
<PAGE>

           Principal Funds: With respect to each Group of Mortgage Loans and any
Determination Date the sum, without duplication, of:

               (i)        all scheduled principal with respect to such Group
           collected by the Servicer during the related Due Period or advanced
           on or before such Determination Date,

               (ii)       prepayments with respect to such Group collected by
           the Servicer in the related Prepayment Period,

               (iii)      the Stated Principal Balance of each Mortgage Loan in
           such Group repurchased by the Depositor in the related Prepayment
           Period,

               (iv)       any Substitution Adjustment Amount with respect to
           such Group for such date, and

               (v)        all Liquidation Proceeds with respect to such Group
           collected by the Servicer during the related Prepayment Period (to
           the extent such Liquidation Proceeds related to principal) less all
           non-recoverable Advances relating to principal with respect to such
           Group reimbursed during the related Prepayment Period, and

               (vi)       any remaining related Pre-Funded Amount immediately
           following the end of the Funding Period.

           Principal Prepayment: Any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Servicer in accordance with the
terms of the related Mortgage Note.

           Principal Prepayment in Full: Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.

           Projected Net Liquidation Value: With respect to any Nonrecoverable
Mortgage Loan, the amount, set forth in an Officer's Certificate signed by a
Servicing Officer in a form acceptable to the Master Servicer, equal to (i) the
fair market value of the related Mortgaged Property as determined by a real
estate broker meeting the qualifications, and applying broker's price opinion
methodology generally acceptable to, residential mortgage servicers, or other
property valuation opinion methodology customarily used by residential mortgage
servicers with respect to defaulted loans, less (ii) the Servicer's good faith
estimate of the total of all related costs of liquidation, Servicing Fees, and
Advances reasonably expected to be incurred in the event the Mortgaged Property
were the subject of foreclosure or otherwise converted to, and sold as, REO
Property.

           Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.

                                       30
<PAGE>

           PUD: Planned Unit Development.

           Purchase Price: With respect to any Mortgage Loan, an amount equal to
the sum of (i) 100% of the unpaid principal balance of such Mortgage Loan on the
date of such purchase, and (ii) accrued interest thereon at the applicable
Mortgage Rate from the date through which interest was last paid by the
Mortgagor to the Due Date occurring in the Due Period immediately preceding the
Distribution Date on which the Purchase Price is to be distributed to
Certificateholders.

           Rating Agency: Each of the Rating Agencies specified in the
Preliminary Statement. If any such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, as is designated by the
Depositor, notice of which designation shall be given to the Trustee. References
herein to a given rating category of a Rating Agency shall mean such rating
category without giving effect to any modifiers.

           Realized Loss: With respect to any Mortgage Loan (other than a
Nonrecoverable Mortgage Loan), the amount by which the unpaid principal balance
thereof exceeds the net amount recovered in liquidation thereof (after payment
of expenses of liquidation, unpaid Servicing Fees, and reimbursement of
Advances), after payment of accrued interest on such Mortgage Loan and after
application of any Insurance Proceeds with respect thereto. With respect to any
Nonrecoverable Mortgage Loan, the amount by which the unpaid principal balance
thereof exceeds the Projected Net Liquidation Value thereof. The Realized Loss
in respect of any Nonrecoverable Mortgage Loan shall be given effect as of the
Prepayment Period during which the Servicer or Master Servicer classifies such
loan as a Nonrecoverable Mortgage Loan.

           Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the Cooperative Corporation and the originator of such
Mortgage Loan which establishes the rights of such originator in the Cooperative
Property.

           Record Date: With respect to any Distribution Date, the close of
business on the last Business Day of the month preceding the month in which such
Distribution Date occurs.

           Reference Bank: Leading banks selected by the Master Servicer and
engaged in transactions in U.S. dollar deposits in the London interbank market.

           Refinancing Mortgage Loan: Any Mortgage Loan originated in connection
with the refinancing of an existing mortgage loan.

           Released Principal Amount: With respect to any Distribution Date, the
amount by which the Overcollateralization Amount (assuming for such purpose that
all Principal Funds for such Distribution Date are distributed as principal to
the Certificates) exceeds the Required Overcollateralization Amount for such
date.

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

                                       31
<PAGE>

           REMIC: A "real estate mortgage investment conduit" within the meaning
of section 860D of the Code.

           REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to REMICs and the REMIC Provisions issued after the
Closing Date.

           REMIC Provisions: Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at sections 860A
through 860G of subchapter M of chapter 1 of the Code, and related provisions,
and regulations promulgated thereunder, as the foregoing may be in effect from
time to time.

           Remittance Agency Agreement: As defined in Section 2.2 hereof.

           REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.

           Request for Release: The Request for Release submitted by the
Servicer to the Trustee, substantially in the form of Exhibits I and J, as
appropriate.

           Required Recordation States: The states of Florida and Mississippi.

           Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Agreement and also
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.

           S&P: Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, the address for notices to S&P shall be Standard & Poor's, 26
Broadway, 15th Floor, New York, New York 10004, Attention: Mortgage Surveillance
Monitoring, or such other address as S&P may hereafter furnish to the Depositor
and the Master Servicer.

           Scheduled Payment: The scheduled monthly payment on a Mortgage Loan
due on any Due Date allocable to principal and/or interest on such Mortgage Loan
which, unless otherwise specified herein, shall give effect to any related Debt
Service Reduction and any Deficient Valuation that affects the amount of the
monthly payment due on such Mortgage Loan.

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

           Security Release Certification:  As defined in Section 2.2 hereof.

           Senior Class A Principal Distribution Amount: With respect to any
Distribution Date before the Stepdown Date or as to which a Trigger Event has
occurred, 100% of the Group I and

                                       32
<PAGE>

Group II Principal Distribution Amount for
such Distribution Date, and with respect to any Distribution Date on or after
the Stepdown Date and as to which a Trigger Event has not occurred, the excess
of:


                                        (i)    the Group I and Group II Class A
                                   Certificate Principal Balances immediately
                                   prior to such Distribution Date over


                                        (ii)   the lesser of:

                          (A)  the related Target Percentage of the Assumed
                               Principal Balance of the Mortgage Loans on the
                               preceding Determination Date, and

                          (B)  the excess, if any, of:

                               (I)   the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date over

                               (II)  the Assumed Principal Balance of the
                                     Mortgage Loans on the preceding
                                     Determination Date less 0.50% of the
                                     Assumed Principal Balance as of the Cut Off
                                     Date (but in no event less than zero).

           Senior Credit Enhancement Percentage: As of any Distribution Date is
equal to a fraction, expressed as a percentage, the numerator of which is the
sum of the aggregate Certificate Principal Balance of the Subordinate
Certificates for such Distribution Date and the Overcollateralization Amount for
such Distribution Date, and the denominator of which is the Assumed Principal
Balance of the Mortgage Loans as of such Distribution Date.

           Servicer: Meritech and its permitted successors and assigns.

           Servicer Deposit Date: The twenty-first day of each month, or if such
day is not a Business Day, the next succeeding day.

           Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations hereunder, including, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.1 and Section 3.9.

           Servicing Fee: As to each Mortgage Loan and any Distribution Date, an
amount payable out of each full payment of interest received on such Mortgage
Loan and equal to one-twelfth of the Servicing Fee Rate multiplied by the Stated
Principal Balance of such Mortgage Loan as of the first day of the month prior
to the month of such Distribution Date.

                                       33
<PAGE>

           Servicing Officer: Any of the President, any Vice President (however
denominated), or Assistant Vice President of the Servicer involved in, or
responsible for, the administration and servicing of one or more Mortgage Loans
at the time of performance of the relevant activity of the Servicer.

           SMI: Saxon Mortgage, Inc, a Virginia corporation, and its successor
         and assigns.

           Startup Day: The Closing Date.

           Stated Principal Balance: As to any Mortgage Loan and Determination
Date, the unpaid principal balance of such Mortgage Loan as of the applicable
Due Date as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any moratorium
or similar waiver or grace period) after giving effect to (i) any previous
partial Principal Prepayments and Liquidation Proceeds allocable to principal
(other than with respect to any Liquidated Mortgage Loan), (ii) the payment of
principal due on such Due Date, and (iii) in the case of any Nonrecoverable
Mortgage Loan, the amount of any Realized Loss in respect thereof (but otherwise
determined, in each case, regardless of any delinquency in payment by the
related Mortgagor).

           Subservicer: Any person to whom the Servicer (or Master Servicer) has
         contracted for the servicing of all or a portion of the Mortgage Loans
         pursuant to Section 3.2 hereof.

           Subsequent Cut Off Date: The date specified in a Subsequent Sales
Agreement with respect to those Subsequent Mortgage Loans which are transferred
and assigned to the Trust Fund pursuant to the related Subsequent Sales
Agreement.

           Subsequent Mortgage Loans: As of the Mortgage Loans listed on a
         Mortgage Loan Schedule attached to a Subsequent Sales Agreement.

           Subsequent Recoveries: As to any Nonrecoverable Mortgage Loan, the
excess of (i) any net Liquidation Proceeds received in respect of such loan;
over (ii) the Projected Net Liquidation Value thereof.

           Subsequent Sales Agreement: Each Subsequent Sales Agreement dated as
of a Subsequent Sales Date by which Subsequent Mortgage Loans are sold and
assigned to the Trust.

           Subsequent Sales Date: The date specified in each Subsequent Sales
         Agreement.

           Substitute Mortgage Loan: A Mortgage Loan substituted by the
Depositor or Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the form
of Exhibit I, (i) have a Stated Principal Balance, after deduction of the
principal portion of the Scheduled Payment due in the month of substitution, not
in excess of, and not more than 10% less than the Stated Principal Balance of
the Deleted Mortgage Loan; (ii) accrue interest on the same basis as the Deleted
Mortgage Loan and be accruing interest at a rate no lower than and not more than
1% per annum higher than, that of the Deleted Mortgage Loan; (iii) have a
Loan-to-Value Ratio no higher than that of the Deleted

                                       34
<PAGE>

Mortgage Loan; (iv) not be a Cooperative Loan unless the Deleted Mortgage Loan
was a Cooperative Loan; and (v) comply with each representation and warranty set
forth in Section 2.3 hereof. Any of the characteristics described above may be
satisfied in the aggregate by one or more Substitute Mortgage Loans.

           Substitution Adjustment Amount: The meaning ascribed to such term
pursuant to Section 2.3 hereof.

           Tax Matters Person: The person designated as "tax matters person" in
the manner provided under Treasury regulationss.1.860F-4(d) and Treasury
regulationss.301.6231(a)(7)-1. Initially, the Tax Matters Person shall be the
Trustee.

           Tax Matters Person Certificate: The Class R Certificate with a
Denomination of .00001%.

           Telerate Page 3750: The display page currently so designated on the
Bridge Telerate Market Report (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).

           Transfer: Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.

           Trustee: Bankers Trust Company and its successors and, if a successor
trustee is appointed hereunder, such successor.

           Trustee Fee: As to any Distribution Date, an amount equal to
one-twelfth of the Trustee Fee Rate multiplied by the Pool Principal Balance
with respect to such Distribution Date, to be paid by the Master Servicer from
the Master Servicing Fee.

           Trust Fund: As described in Section 2.01 hereof.

           Unpaid Realized Loss Amount: As to any Distribution Date and any
Class, the excess of:

               (i)        the Applied Realized Loss Amount for such Class over

               (ii)       the sum of all distributions in reduction of such
                          Applied Realized Loss Amount on all previous
                          Distribution Dates.

           Weighted Average Net Rate: The weighted average of the Net Rates of
the Mortgage Loans.

                                       35
<PAGE>

                                   ARTICLE 2

          CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES

         Section 2.1  Conveyance of Mortgage Loans
                      ----------------------------

             (a) To provide for the distribution of the principal of and
interest on the Certificates in accordance with their terms, the distribution of
all other sums distributable hereunder with respect to the Certificates and the
performance of the covenants contained herein, the Depositor hereby bargains,
sells, conveys, assigns and transfers to the Trustee, in trust, without recourse
and for the exclusive benefit of the Certificateholders as their interests may
appear, all the Depositor's right, title and interest in and to any and all
benefits accruing to the Depositor from: (i) the Mortgage Loans, which the
Depositor is causing to be delivered to the Trustee (or the Custodian) herewith
(and all Substitute Mortgage Loans substituted therefor), together in each case
with the related Mortgage Files and the Depositor's interest in any collateral
that secured a Mortgage Loan but that is acquired by foreclosure or deed-in-lieu
of foreclosure after the Closing Date, and all Scheduled Payments due after the
Cut Off Date and all principal prepayments received with respect to the Mortgage
Loans paid by the borrower after the Cut Off Date and proceeds of the
conversion, voluntary or involuntary, of the foregoing; (ii) any Subsequent
Mortgage Loans; (iii) the Sales Agreement, except that the Depositor does not
assign to the Trustee any of its rights under Sections 9 and 12 of the Sales
Agreement; (iv) any Pre-Funding Account and the Capitalized Interest Account,
whether in the form of cash, instruments, securities or other properties and (v)
all proceeds of any of the foregoing (including, but not limited to, all
proceeds of any mortgage insurance, hazard insurance, or title insurance policy
relating to the Mortgage Loans, cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, rights to
payment of any and every kind, and other forms of obligations and receivables,
which at any time constitute all or part or are included in the proceeds of any
of the foregoing) to pay the Certificates as specified herein (items (i) through
(v) above collectively, the "Trust Fund").

           With respect to any Mortgage Loan that does not have a first payment
date on or before the last day of the Due Period immediately preceding the first
Distribution Date, the Depositor shall deposit into the Distribution Account on
or before the Distribution Account Deposit Date relating to the first
Distribution Date, an amount equal to one month's interest at the related Net
Rate on the Cut Off Date Principal Balance of such Mortgage Loan.

             (b) In connection with the transfer set forth in clause (a) above,
the Depositor has delivered or caused to be delivered to the Trustee or the
Custodian on its behalf for the benefit of the Certificateholders the following
documents or instruments with respect to each Mortgage Loan so transferred:

                 (i)    (A) the original Mortgage Note endorsed by manual or
         facsimile signature to the Custodian or in blank, without recourse,
         with all intervening endorsements showing a complete chain of
         endorsement from the originator to the Person endorsing the Mortgage
         Note (the "Last Endorsee") (each such endorsement being sufficient to
         transfer

                                       36
<PAGE>

         all right, title and interest of the party so endorsing, as noteholder
         or assignee thereof, in and to that Mortgage Note); or

                        (B) with respect to any Lost Mortgage Note, a lost note
                 affidavit from the Depositor stating that the original Mortgage
                 Note was lost or destroyed, together with a copy of such
                 Mortgage Note;

                 (ii)   except with respect to any Cooperative Loan, the
         original recorded Mortgage or a copy of such Mortgage certified by the
         Depositor, the originating lender, settlement agent, or escrow company
         as being a true and complete copy of the Mortgage;

                 (iii)  except with respect to any Mortgage Loan for which the
         related Mortgage names the Custodian as nominee for the originating
         lender (or similar designation satisfactory to the Custodian), as
         beneficiary or mortgagee, either (A) a duly executed assignment of the
         Mortgage in blank, or (B) an original recorded assignment of the
         Mortgage from the Last Endorsee to the Custodian or a copy of such
         assignment of Mortgage certified by the Depositor, the originating
         lender, settlement agent, or escrow company as being a true and
         complete copy thereof which in either case may be included in a blanket
         assignment or assignments;

                 (iv)   each interim recorded assignment of such Mortgage, or a
         copy of each such interim recorded assignment of Mortgage certified by
         the Depositor, the originating lender, settlement agent, or escrow
         company as being a true and complete copy thereof;

                 (v)    the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any;

                 (vi)   except as to any second lien Mortgage Loan in the
         original principal amount of $50,000.00 or less, either the original or
         duplicate original title policy (including all riders thereto) with
         respect to the related mortgaged property, if available, provided that
         the title policy (including all riders thereto) will be delivered as
         soon as it becomes available, and if the title policy is not available,
         and to the extent required pursuant to the second paragraph below or
         otherwise in connection with the rating of the Certificates, a written
         commitment or interim binder or preliminary report of the title issued
         by the title insurance or escrow company with respect to the Mortgaged
         Property; and

                 (vii)  in the case of a Cooperative Loan, the originals of the
         following documents or instruments:

                        (a)   The Coop Shares, together with a stock power in
                              blank;
                        (b)   The executed Security Agreement;
                        (c)   The executed Proprietary Lease;
                        (d)   The executed Recognition Agreement;
                        (e)   The executed UCC-1 financing statement with
                              evidence of recording thereon which have been
                              filed in all places required to

                                       37
<PAGE>

                              perfect the Depositor's interest in the Coop
                              Shares and the Proprietary Lease; and
                        (f)   Executed UCC-3 financing statements or other
                              appropriate UCC financing statements required by
                              state law, evidencing a complete and unbroken line
                              from the mortgagee to the Trustee with evidence of
                              recording thereon (or in a form suitable for
                              recordation).

           In the event that in connection with any Mortgage Loan the Depositor
cannot deliver (a) the original recorded Mortgage or (b) any recorded
assignments or interim assignments satisfying the requirements of clause (ii) or
(iii) above, respectively, concurrently with the execution and delivery hereof
because such document or documents have not been returned from the applicable
public recording office, the Depositor shall deliver such documents to the
Trustee or the Custodian on its behalf as promptly as possible upon receipt
thereof and, in any event, within 720 days following the Closing Date. The
Depositor or Servicer shall forward or cause to be forwarded to the Trustee or
the Custodian on its behalf (a) from time to time additional original documents
evidencing an assumption or modification of a Mortgage Loan and (b) any other
documents required to be delivered by the Depositor or the Servicer to the
Trustee. In the case where a public recording office retains the original
recorded Mortgage or in the case where a Mortgage is lost after recordation in a
public recording office, the Depositor shall deliver to the Trustee a copy of
such Mortgage certified (to the extent such certification is reasonably
obtainable) by such public recording office to be a true and complete copy of
the original recorded Mortgage.

           In addition, in the event that in connection with any Mortgage Loan
the Depositor cannot deliver the original or duplicate original lender's title
policy (together with all riders thereto), satisfying the requirements of clause
(vi) above, concurrently with the execution and delivery hereof because the
related Mortgage or a related assignment has not been returned from the
applicable public recording office, the Depositor shall promptly deliver to the
Trustee or the Custodian on its behalf such original or duplicate original
lender's title policy (together with all riders thereto) upon receipt thereof
from the applicable title insurer, and in any event, within 720 days following
the Closing Date.

           Subject to the immediately following sentence, as promptly as
practicable subsequent to the transfer set forth in clause (a) of this Section
2.1, and in any event, within thirty (30) days thereafter, the Servicer shall as
to any Mortgage Loan with respect to which the Depositor delivers an assignment
of the Mortgage in blank pursuant to clause (a)(iii)(A) of this Section 2.1, (i)
complete each such assignment of Mortgage to conform to clause (a)(iii)(B) of
this Section 2.1, (ii) cause such assignment to be in proper form for recording
in the appropriate public office for real property records, and (iii) cause to
be delivered for recording in the appropriate public office for real property
records each such assignment of the Mortgages, except that, with respect to any
assignments of Mortgage as to which the Servicer has not received the
information required to prepare such assignments in recordable form, the
Servicer's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after receipt thereof. Notwithstanding the

                                       38
<PAGE>

foregoing, the Servicer need not cause to be recorded any assignment which
relates to a Mortgage Loan in any state other than the Required Recordation
States.

           In the case of Mortgage Loans that have been prepaid in full as of
the Closing Date, the Depositor, in lieu of delivering the above documents to
the Trustee or the Custodian on its behalf, will deposit in the Collection
Account the portion of such payment that is required to be deposited in the
Collection Account pursuant to Section 3.8 hereof.

           Section 2.2  Acceptance by Trustee of the Mortgage Loans
                        -------------------------------------------

           The Trustee or the Custodian, on behalf of the Trustee acknowledges
receipt of the documents identified in the initial certification in the form
annexed hereto as Exhibit C (the "Initial Certification") and declares that it
or the Custodian holds and will hold such documents and the other documents
delivered to it constituting the Mortgage Files, and that it or the Custodian
holds or will hold such other assets as are included in the Trust Fund, in trust
for the exclusive use and benefit of all present and future Certificateholders.

           The Trustee agrees to execute and deliver or to cause the Custodian
to execute and deliver on the Closing Date to the Depositor, the Master Servicer
and the Servicer an Initial Certification in the form annexed hereto as Exhibit
C. Based on its or the Custodian's review and examination, and only as to the
documents identified in such Initial Certification, the Custodian, on behalf of
the Trustee acknowledges that such documents appear regular on their face and
relate to such Mortgage Loan. Neither the Trustee nor the Custodian shall be
under any duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same are
genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded in the real estate records or that they are other
than what they purport to be on their face.

           Not later than 360 days after the Closing Date, the Trustee shall
deliver or shall cause the Custodian to deliver to the Depositor, the Master
Servicer and the Servicer a Final Certification in the form annexed hereto as
Exhibit D, with any applicable exceptions noted thereon.

           If, in the course of such review, the Trustee or the Custodian, on
behalf of the Trustee finds any document constituting a part of a Mortgage File
which does not meet the requirements of Section 2.1 hereof, the Trustee shall
list or shall cause the Custodian to list such as an exception in the Final
Certification; provided, however that neither the Trustee nor the Custodian
shall make any determination as to whether (i) any endorsement is sufficient to
transfer all right, title and interest of the party so endorsing, as noteholder
or assignee thereof, in and to that Mortgage Note or (ii) any assignment is in
recordable form or is sufficient to effect the assignment of and transfer to the
assignee thereof under the mortgage to which the assignment relates. SMI shall
promptly correct or cure such defect within 90 days from the date it was so
notified of such defect and, if SMI does not correct or cure such defect within
such period, SMI shall either (a) substitute for the related Mortgage Loan a
Substitute Mortgage Loan, which substitution shall be accomplished in the manner
and subject to the conditions set forth in Section 2.3 hereof, or (b) purchase
such Mortgage Loan from the Trustee within 90 days from the date SMI was
notified of such defect in writing at the Purchase Price of such Mortgage Loan;

                                       39
<PAGE>

provided, however, that in no event shall such substitution or purchase occur
more than 540 days from the Closing Date, except that if the substitution or
purchase of a Mortgage Loan pursuant to this provision is required by reason of
a delay in delivery of any documents by the appropriate recording office, and
there is a dispute between either the Servicer or SMI and the Trustee over the
location or status of the recorded document, then such substitution or purchase
shall occur within 720 days from the Closing Date. Any such substitution
pursuant to (a) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel required by Section 2.4 hereof, if any, and any
substitution pursuant to (a) above shall not be effected prior to the additional
delivery to the Trustee of a Request for Release substantially in the form of
Exhibit I. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. The Purchase Price for any such Mortgage
Loan shall be deposited by SMI in the Collection Account on or prior to the
Distribution Account Deposit Date for the Distribution Date in the month
following the month of repurchase and, upon receipt of such deposit and
certification with respect thereto in the form of Exhibit J hereto, the Trustee
shall cause the Custodian to release the related Mortgage File to SMI and shall
execute and deliver at SMI's request such instruments of transfer or assignment
prepared by SMI, in each case without recourse, as shall be necessary to vest in
SMI, or a designee, the Trustee's interest in any Mortgage Loan released
pursuant hereto.

           The Trustee shall retain or shall cause the Custodian to retain
possession and custody of each Mortgage File in accordance with and subject to
the terms and conditions set forth herein. The Servicer shall promptly deliver
to the Trustee or the Custodian on its behalf, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Mortgage File as come into the possession of the Servicer from time to time.

           It is understood and agreed that the obligation of SMI to substitute
for or to purchase any Mortgage Loan which does not meet the requirements of
Section 2.1 hereof shall constitute the sole remedy respecting such defect
available to the Trustee and any Certificateholder against the Depositor or SMI.

           In order to facilitate sales and deliveries of Mortgage Loans to the
Trust Fund, the Trustee may execute and deliver one or more remittance agency
agreements in substantially the form of Exhibit K hereto (each, a "Remittance
Agency Agreement"), and in such event the Trustee: (i) shall perform the duties
of Remittance Agent (as that term is defined in the related Remittance Agency
Agreement); and (ii) may accept as conclusive evidence of the release of the
related security interests one or more security release certifications in
substantially the form attached as Exhibit L hereto (each, a "Security Release
Certification").

           Section 2.3 Representations, Warranties and Covenants of the
                       Depositor and Servicer and Master Servicer
                       ------------------------------------------------

               (a)  The Servicer represents and warrants to the Trustee that, as
of the Closing Date:

                    (i)    The Servicer is a corporation licensed as a mortgage
           servicer duly organized, validly existing and in good standing under
           the laws of the state of its incorporation and has, and had at all
           relevant times, full corporate power to service the

                                       40
<PAGE>

           Mortgage Loans, to own its property, to carry on its business as
           presently conducted and to enter into and perform its obligations
           under this Agreement. The Servicer has all necessary licenses and is
           qualified to transact business in and is in good standing under the
           laws of each state where any Mortgaged Property is located or is
           otherwise exempt under applicable law from such qualification or is
           otherwise not required under applicable law to effect such
           qualification and no demand for such qualification has been made upon
           the Servicer by any state having jurisdiction;

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

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

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

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

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

                                       41
<PAGE>

               (i)         The Master Servicer is a corporation licensed as a
           mortgage banker duly organized, validly existing and in good standing
           under the laws of the state of its incorporation and has, and had at
           all relevant times, full corporate power to service the Mortgage
           Loans, to own its property, to carry on its business as presently
           conducted and to enter into and perform its obligations under this
           Agreement. The Master Servicer has all necessary licenses and is
           qualified to transact business in and is in good standing under the
           laws of each state where a Mortgaged Property is located or is
           otherwise exempt under applicable law from such qualification or is
           otherwise not required under applicable law to effect such
           qualification and no demand for such qualification has been made upon
           the Master Servicer by any state having jurisdiction;

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

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

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

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

                                       42
<PAGE>

           Master Servicer of any of its obligations under, or the validity or
           enforceability of, this Agreement.

               (c)  The Depositor represents and warrants to the Trustee that,
as of the Closing Date:

                    (i)    The Depositor is a corporation, duly organized,
           validly existing and in good standing under the laws of the state of
           its incorporation and has, and had at all relevant times, full
           corporate power to own its property, to carry on its business as
           presently conducted and to enter into and perform its obligations
           under this Agreement;

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

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

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

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

               (d)  Pursuant to Section 2.1(a)(iii) hereof, the Depositor has
assigned to the Trustee, for the benefit of Certificateholders, its rights under
the Sales Agreement, including each

                                       43
<PAGE>

representation and warranty of SMI set forth in such Sales Agreement in respect
of the Mortgage Loans.

           Upon discovery by any of the parties hereto of a breach of a
representation or warranty made by SMI in respect of the Mortgage Loans that
materially and adversely affects the interests of the Certificateholders in any
such Mortgage Loan, the party discovering such breach shall give prompt notice
thereof to the other parties. SMI hereby covenants that within 90 days of the
earlier of its discovery or its receipt of written notice from any party of a
breach such of any representation or warranty which materially and adversely
affects the interests of the Certificateholders in any Mortgage Loan, it shall
cure such breach in all material respects, and if such breach is not so cured,
shall, (i) if such 90-day period expires prior to the second anniversary of the
Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from the
Trust Fund and substitute in its place a Substitute Mortgage Loan, in the manner
and subject to the conditions set forth in this Section; or (ii) repurchase the
affected Mortgage Loan or Mortgage Loans from the Trustee at the Purchase Price
in the manner set forth below; provided, however, that any such substitution
pursuant to (i) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel required by Section 2.4(a) hereof, if any, and any
such substitution pursuant to (i) above shall not be effected prior to the
additional delivery to the Trustee or the Custodian on its behalf of a Request
for Release substantially in the form of Exhibit J and the Mortgage File for any
such Substitute Mortgage Loan. SMI shall promptly reimburse the Servicer and the
Trustee for any expenses reasonably incurred by the Servicer or the Trustee in
respect of enforcing the remedies for such breach. With respect to the
representations and warranties described in this Section which are made to the
best of SMI's knowledge, if it is discovered by either the Servicer or the
Trustee that the substance of such representation and warranty is inaccurate and
such inaccuracy materially and adversely affects the value of the related
Mortgage Loan or the interests of the Certificateholders therein,
notwithstanding SMI's lack of knowledge with respect to the substance of such
representation or warranty, such inaccuracy shall be deemed a breach of the
applicable representation or warranty.

           With respect to any Substitute Mortgage Loan or Loans, SMI shall
deliver to the Trustee or the Custodian on its behalf for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.1. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Fund and will be retained by SMI on the next succeeding Distribution Date.
For the month of substitution, distributions to Certificateholders will include
the monthly payment due on any Deleted Mortgage Loan for such month and
thereafter SMI shall be entitled to retain all amounts received in respect of
such Deleted Mortgage Loan. The Servicer shall amend the Mortgage Loan Schedule
for the benefit of the Certificateholders to reflect the removal of such Deleted
Mortgage Loan and the substitution of the Substitute Mortgage Loan or Loans and
the Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee.
Upon such substitution, the Substitute Mortgage Loan or Loans shall be subject
to the terms of this Agreement in all respects, and SMI shall be deemed to have
made with respect to such Substitute Mortgage Loan

                                       44
<PAGE>

or Loans, as of the date of substitution, the representations and warranties
made by SMI pursuant to the Sales Agreement with respect to such Mortgage Loan.
Upon any such substitution and the deposit to the Collection Account of the
amount required to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall release or shall cause
the Custodian to release the Mortgage File held for the benefit of the
Certificateholders relating to such Deleted Mortgage Loan to SMI and shall
execute and deliver at SMI's direction such instruments of transfer or
assignment prepared by SMI , in each case without recourse, as shall be
necessary to vest title in SMI, or its designee, the Trustee's interest in any
Deleted Mortgage Loan substituted for pursuant to this Section 2.3.

           For any month in which SMI substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the monthly payments due in
the month of substitution). The amount of such shortage (the "Substitution
Adjustment Amount") plus an amount equal to the aggregate of any unreimbursed
Advances with respect to such Deleted Mortgage Loans shall be deposited in the
Collection Account by SMI on or before the Distribution Account Deposit Date for
the Distribution Date in the month succeeding the calendar month during which
the related Mortgage Loan became required to be purchased or replaced hereunder.

           In the event that SMI shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Distribution Account prior to
the Distribution Date in the month following the month during which SMI became
obligated hereunder to repurchase or replace such Mortgage Loan and upon such
deposit of the Purchase Price, the delivery of the Opinion of Counsel required
by Section 2.4 hereof and receipt of a Request for Release in the form of
Exhibit J hereto, the Trustee shall release or shall cause the Custodian to
release the related Mortgage File held for the benefit of the Certificateholders
to SMI, and the Trustee shall execute and deliver or shall cause the Custodian
to execute and deliver at SMI's direction such instruments of transfer or
assignment prepared by such Person, in each case without recourse, as shall be
necessary to transfer title from the Trustee. It is understood and agreed that
the obligation under this Agreement of SMI to cure, repurchase or replace any
Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on their behalf.

           The representations and warranties made pursuant to this Section 2.3
(and the representations and warranties with respect to the Mortgage Loans made
in the Sales Agreement) shall survive delivery of the respective Mortgage Files
to the Trustee or the Custodian for the benefit of the Certificateholders.

               (e)  Upon discovery by the Depositor, the Servicer, the Master
Servicer or the Trustee that any Mortgage Loan does not constitute a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall promptly (and in any event within five (5) Business
Days of discovery) give written notice thereof to the other parties. In

                                       45
<PAGE>

connection therewith, the Trustee shall require SMI, at SMI's option, to either
(i) substitute, if the conditions in Section 2.3(c) with respect to
substitutions are satisfied, a Substitute Mortgage Loan for the affected
Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90 days of
such discovery in the same manner as it would a Mortgage Loan for a breach of
representation or warranty made pursuant to this Section 2.3. The Trustee shall
reconvey or shall cause the Custodian to reconvey to SMI the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in this Section 2.3.

         Section 2.4  Delivery of Opinion of Counsel in Connection with
                      Substitutions
                      -------------------------------------------------

          (a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be made more than 90
days after the Closing Date unless the Depositor or SMI delivers to the Trustee
an Opinion of Counsel, which Opinion of Counsel shall not be at the expense of
either the Trustee or the Trust Fund, addressed to the Trustee, to the effect
that such substitution will not (i) result in the imposition of the tax on
"prohibited transactions" on the Trust Fund or contributions after the Startup
Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively,
or (ii) cause the REMIC created hereunder to fail to qualify as a REMIC at any
time that any Certificates are outstanding.

         Section 2.5  Execution and Delivery of Certificates
                      --------------------------------------

         The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.

         Section 2.6  Purchase of Subsequent Mortgage Loans.
                      --------------------------------------

          (a) Subject to the satisfaction of the conditions set forth in
paragraph (b) below in consideration of the delivery on a Subsequent Sales Date
to or upon the order of the Depositor of all or a portion of the Pre-Funded
Amount, as the case may be, the Depositor shall on such Subsequent Sales Date
sell, transfer, assign, set over and otherwise convey without recourse, to the
Trust Fund, and the Trustee shall purchase on behalf of the Trust Fund, all the
Depositor's right, title and interest in and to the Subsequent Mortgage Loans,
together with the related Mortgage Loan Files, covered by the Subsequent Sales
Agreement delivered on such date.

          (b) The obligation of the Trust to acquire Subsequent Mortgage Loans
is subject to the satisfaction of each of the following conditions on or prior
to the related Subsequent Sales Date:

              (i)    the Depositor shall have delivered to the Trustee with a
         copy to the Master Servicer a duly executed written Subsequent Sales
         Agreement, which shall include a

                                       46
<PAGE>

         Schedule of Subsequent Mortgage Loans, and specifying the amount to be
         withdrawn from the Pre-Funding Account;

              (ii)   the remaining term to maturity of each Subsequent Mortgage
         Loan may not exceed 30 years;

              (iii)  no Subsequent Mortgage Loan will have been selected in a
         manner adverse to the interests of Certificateholders;

              (iv)   the addition of the Subsequent Mortgage Loans will not
         result in the reduction, qualification or withdrawal of the then
         current ratings of the Certificates;

              (v)    no Subsequent Mortgage Loan may have a Loan-to-Value Ratio
         greater than 100.00%;

              (vi)   each Subsequent Mortgage Loan will be underwritten in
         accordance with the Depositor's underwriting guidelines;

              (vii)  after giving effect to the acquisition of all the
         Subsequent Mortgage Loans, the Mortgage Loans in the applicable Group
         shall conform to the applicable Subsequent Delivery Requirements):

              (viii) the Depositor shall have provided the Master Servicer and
         the Trustee any information reasonably requested by any of them with
         respect to the Subsequent Mortgage Loans then to be sold to the Trust
         Fund;

              (ix)   the Depositor shall have delivered to the Trustee a letter
         from an independent accountant stating whether or not the
         characteristics of the Subsequent Mortgage Loans conform to the
         characteristics of the Mortgage Loans required in Section 2.6(b);

              (x)    as of each Subsequent Sales Date, neither the Depositor nor
         SMI shall be insolvent, nor will either of them be made insolvent by
         such transfer;

              (xi)   the Funding Period shall not have ended; and

              (xii)  the Depositor and SMI each shall have delivered to the
         Master Servicer and the Trustee an Officer's Certificate confirming the
         satisfaction of each condition precedent specified in this paragraph
         (b) and in the related Subsequent Sales Agreement and opinions of
         counsel with respect to corporate, bankruptcy and tax matters relating
         to the transfer of Subsequent Mortgage Loans in the forms substantially
         similar to those delivered on the Closing Date.

          (c) Pursuant to Section 2.6(b) hereof, the Trustee shall remit on each
Subsequent Sales Date to or upon the order of the Depositor from the Pre-Funding
Account the amount specified by the Master Servicer only upon the Trustee's
receipt of:

                                       47
<PAGE>

              (i)    a fully executed Subsequent Sales Agreement;

              (ii)   the two Officer's Certificates required by Section 2.6(b)
         hereof;

              (iii)  an Opinion or Opinions of Counsel from each of the
         Depositor and SMI required by Section 2.6(b);

              (iv)   a letter from each Rating Agency on the final Subsequent
         Sale Date confirming the condition provided in Section 2.6(b);

              (v)    a letter from an independent accountant as required by
         Section 2.6(b); and

              (vi)   the written instruction from the Master Servicer setting
         forth the amounts to be paid as required by Section 2.6(b) hereof. The
         Trustee may rely and shall be protected in relying on all such
         Officer's Certificates as evidencing full compliance with all
         conditions precedent specified in Section 2.6(b), without any further
         duty of inquiry with respect thereto.

          (d) On each Subsequent Sales Date and on the Determination Date
immediately following the end of the Funding Period, the Master Servicer shall
determine:

              (i)    the amount and correct disposition of the Pre-Funded Amount
         and the amount remaining in the Capitalized Interest Account, and

              (ii)   any other necessary matters in connection with the
         administration of the Pre-Funding Account and the Capitalized Interest
         Account. With respect to each Subsequent Sales Date, the Master
         Servicer shall determine the Overfunded Interest Amount. If any amounts
         are released as a result of an error in calculation to the Holders or
         the Depositor from the Pre-Funding Account or from the Capitalized
         Interest Account, the Depositor shall immediately repay such amounts to
         the Master Servicer.

          (e) the Depositor shall deliver (or cause to be delivered) to the
Master Servicer for deposit in the Master Servicer Custodial Account on the
related Servicer Deposit Date all principal and interest due in respect of such
Subsequent Mortgage Loans after the related Subsequent Cut Off Date;

         Section 2.7  Pre-Funding Account and Capitalized Interest Account
                      ----------------------------------------------------

          (a) The Trustee shall establish and maintain the Pre-Funding Account
and the Capitalized Interest Account, each to be held in trust for the benefit
of the Certificateholders. Each of the Pre-Funding Account and the Capitalized
Interest Account shall be an Eligible Account. On the Closing Date, the
Depositor will cause to be deposited in the Pre-Funding Account the Original
Pre-Funded Amount and in the Capitalized Interest Account the Initial
Capitalized Interest Amount.

                                       48
<PAGE>

          (b) On any Subsequent Sales Date, the Master Servicer shall instruct
the Trustee, with a copy to the Depositor,

              (i)    to withdraw from the Pre-Funded Amount in the Pre-Funding
         Account an amount equal to 100% of the aggregate Stated Principal
         Balances of the Subsequent Mortgage Loans as of the applicable
         Subsequent Cut Off Date sold to the Trust on such Subsequent Sales
         Date, and

              (ii)   to pay such amounts to or upon the order of the Depositor
         upon satisfaction of the conditions set forth in Section 2.6(c) hereof
         with respect thereto. In no event shall the Trustee withdraw from the
         Pre-Funding Account an amount in excess of the Original Pre-Funded
         Amount.

          (c) On each Distribution Account Deposit Date to and including the
Distribution Account Deposit Date immediately following the end of the Funding
Period, the Master Servicer shall instruct the Paying Agent to transfer: (i) to
the Capitalized Interest Account from the Pre-Funding Account, the Pre-Funding
Account Earnings; and (ii) to the Distribution Account from the Capitalized
Interest Account, the Capitalized Interest Requirement.

          (d) On each Subsequent Sales Date the Master Servicer shall instruct
the Trustee to distribute the Overfunded Interest Amount, if any, to the
Depositor. At the end of the Funding Period, all amounts, if any, remaining in
the Capitalized Interest Account shall be transferred to the Depositor and the
Capitalized Interest Account shall be closed.

          (e) On the Distribution Account Deposit Date immediately following the
end of the Funding Period, the Master Servicer shall instruct the Trustee to
transfer the Pre-Funded Amount to the Distribution Account for distribution to
the Holders of the Certificates in accordance with Section Article 4.

          (f) The Pre-Funding Account and the Capitalized Interest Account shall
not be assets of any REMIC created pursuant to this Agreement.

                                   ARTICLE 3

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

         Section 3.1   Servicer to Service Mortgage Loans
                       ----------------------------------

           For and on behalf of the Certificateholders, the Servicer shall
service and administer the Mortgage Loans in accordance with the terms of this
Agreement and customary and usual standards of practice of prudent mortgage loan
servicers. In connection with such servicing and administration, the Servicer
shall have full power and authority, acting alone and/or through Subservicers as
provided in Section 3.2 hereof, to do or cause to be done any and all things
that it may deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other

                                       49
<PAGE>

instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Servicer shall not take any action that is
inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Servicer shall represent and protect the interests of the Trust Fund in the same
manner as it protects its own interests in mortgage loans in its own portfolio
in any claim, proceeding or litigation regarding a Mortgage Loan, provided,
however, that unless (x) the Mortgagor is in default with respect to the
Mortgage Loan, or such default is, in the judgment of the Servicer, imminent or
(y) in the absence of default or imminent default, any such waiver,
modification, postponement or indulgence would not cause any REMIC created
hereunder to be disqualified or result in the imposition of any tax under
Section 860F(a) or Section 860G(d) of the Code, the Servicer may not permit any
modification with respect to any Mortgage Loan. Without limiting the generality
of the foregoing, the Servicer, in its own name or in the name of the Depositor
and the Trustee, is hereby authorized and empowered by the Depositor and the
Trustee, when the Servicer believes it appropriate in its reasonable judgment,
to execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Certificateholders. The
Servicer shall prepare and deliver to the Depositor and/or the Trustee such
documents requiring execution and delivery by either or both of them as are
necessary or appropriate to enable the Servicer to service and administer the
Mortgage Loans to the extent that the Servicer is not permitted to execute and
deliver such documents pursuant to the preceding sentence. Upon receipt of such
documents, the Depositor and/or the Trustee shall promptly execute such
documents and deliver them to the Servicer.

           In accordance with the standards of the preceding paragraph, the
Servicer shall make Servicing Advances as necessary for the purpose of effecting
the payment of taxes and assessments on the Mortgaged Properties, which advances
shall be reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 3.6 hereof, and further as provided in Section
3.8 hereof. The costs incurred by the Servicer, if any, in effecting the timely
payments of taxes and assessments on the Mortgaged Properties and related
insurance premiums shall not, for the purpose of calculating monthly
distributions to the Certificateholders, be added to the Stated Principal
Balances of the related Mortgage Loans, notwithstanding that the terms of such
Mortgage Loans so permit.

           Upon request of the Servicer, the Trustee and the Custodian shall
furnish the Servicer with any powers of attorney necessary or appropriate to
enable Servicer to execute in the name of the Trustee or the Custodian, as
applicable, all documents reasonably required to perform the servicing functions
described in this Article 3.

                                       50
<PAGE>

         Section 3.2   Subservicing; Enforcement of the Obligations of Servicers
                       ---------------------------------------------------------

          (a) The Servicer may arrange for the subservicing of any Mortgage Loan
by a Subservicer pursuant to a subservicing agreement; provided, however, that
such subservicing arrangement and the terms of the related subservicing
agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder. Unless the
context otherwise requires, references in this Agreement to actions taken or to
be taken by the Servicer in servicing the Mortgage Loans include actions taken
or to be taken by a Subservicer on behalf of the Servicer. Notwithstanding the
provisions of any subservicing agreement, any of the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and liable to the Depositor, the Trustee and
the Certificateholders for the servicing and administration of the Mortgage
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such subservicing agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Mortgage Loans. All actions of each
Subservicer performed pursuant to the related subservicing agreement shall be
performed as an agent of the Servicer with the same force and effect as if
performed directly by the Servicer.

          (b) For purposes of this Agreement, the Servicer shall be deemed to
have received any collections, recoveries or payments with respect to the
Mortgage Loans that are received by a Subservicer regardless of whether such
payments are remitted by the Subservicer to the Servicer.

         Section 3.3   Rights of the Depositor and the Trustee in Respect of the
                       Servicer
                       ---------------------------------------------------------

         The Depositor may, but is not obligated to, enforce the obligations of
the Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of the Servicer hereunder and in
connection with any such defaulted obligation to exercise the related rights of
the Servicer hereunder; provided that the Servicer shall not be relieved of any
of its obligations hereunder by virtue of such performance by the Depositor or
its designee. Neither the Trustee nor the Depositor shall have any
responsibility or liability for any action or failure to act by the Servicer nor
shall the Trustee or the Depositor be obligated to supervise the performance of
the Servicer hereunder or otherwise.

         Section 3.4   Master Servicer to Act as Servicer
                       ----------------------------------

         In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default), the Master
Servicer or its successor shall thereupon assume all of the rights and
obligations of the Servicer hereunder arising thereafter (except that the Master
Servicer shall not be (i) liable for losses of the Servicer pursuant to Section
3.9 hereof or any acts or omissions of the predecessor Servicer hereunder, (ii)
obligated to make Advances if it is prohibited from doing so by applicable law,
(iii) obligated to effectuate repurchases or substitutions of Mortgage Loans
hereunder including, but not limited to, repurchases or

                                       51
<PAGE>

substitutions of Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv)
responsible for expenses of the Servicer pursuant to Section 2.3 hereof or (v)
deemed to have made any representations and warranties of the Servicer
hereunder). If the Servicer shall for any reason no longer be the Servicer
(including by reason of any Event of Default), the Master Servicer or its
successor shall succeed to any rights and obligations of the Servicer under each
subservicing agreement.

         The Servicer shall, upon request of the Master Servicer, but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to each subservicing agreement or substitute subservicing agreement and
the Mortgage Loans then being serviced thereunder and an accounting of amounts
collected or held by it and otherwise use its best efforts to effect the orderly
and efficient transfer of the substitute subservicing agreement to the assuming
party.

         Section 3.5  Collection of Mortgage Loan Payments; Collection Account;
                      Distribution Account
                      ---------------------------------------------------------

          (a) The Servicer shall make reasonable efforts in accordance with the
customary and usual standards of practice of prudent mortgage servicers to
collect all payments called for under the terms and provisions of the Mortgage
Loans to the extent such procedures shall be consistent with this Agreement.
Consistent with the foregoing, the Servicer may in its discretion (i) waive any
late payment charge or penalty interest and (ii) extend the due dates for
payments due on a Mortgage Note for a period not greater than 180 days;
provided, however, that the Servicer cannot extend the maturity of any such
Mortgage Loan past the date on which the final payment is due on the latest
maturing Mortgage Loan as of the Cut Off Date. In the event of any such
arrangement, any P&I Advance required to be made by the Servicer on the related
Mortgage Loan in accordance with the provisions hereof (i) with respect to the
Prepayment Period in which such arrangement became effective shall be made in
accordance with the amortization schedule of such Mortgage Loan without giving
effect to the modification thereof by reason of such arrangements and (ii) with
respect to any Prepayment Period thereafter shall be made in accordance with the
amortization schedule of such Mortgage Loan as so modified. The Servicer shall
not be required to institute or join in litigation with respect to collection of
any payment (whether under a Mortgage, Mortgage Note or otherwise or against any
public or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.

         The Servicer shall comply with the provisions of Section 3.21 hereof
with respect to each Prepayment Penalty related to the Mortgage Loans.

          (b) The Servicer shall establish and maintain a Collection Account
into which the Servicer shall deposit or cause to be deposited no later than two
Business Days after receipt, except as otherwise specifically provided herein,
the following payments and collections remitted by Subservicers or received by
it in respect of Mortgage Loans subsequent to the Cut Off Date (other than in
respect of principal and interest due on the Mortgage Loans on or before the Cut
Off Date) and the following amounts required to be deposited hereunder:

                                       52
<PAGE>

               (i)        all payments on account of principal on the Mortgage
         Loans, including Principal Prepayments;

               (ii)       all payments on account of interest on the Mortgage
         Loans, net of the related Servicing Fee and any Prepayment Interest
         Excess;

               (iii)      each Prepayment Penalty required to be deposited by
         the Servicer hereunder;

               (iv)       all Insurance Proceeds and Liquidation Proceeds, other
         than proceeds to be applied to the restoration or repair of the
         Mortgaged Property or released to the Mortgagor in accordance with the
         Servicer's normal servicing procedures;

               (v)        any amount required to be deposited by the Servicer
         pursuant to Section 3.5(e) in connection with any losses on Permitted
         Investments;

               (vi)       any amounts required to be deposited by the Servicer
         pursuant to Section 3.9(b) and (d) hereof, and in respect of net
         monthly rental income from REO Property pursuant to Section 3.11
         hereof;

               (vii)      all Substitution Adjustment Amounts; and

               (viii)     all P&I Advances made by the Servicer pursuant to
         Section 3.19 hereof.

         In addition, with respect to any Mortgage Loan that is subject to a
buydown agreement, on each Due Date for such Mortgage Loan, in addition to the
monthly payment remitted by the Mortgagor, the Servicer shall cause funds to be
deposited into the Collection Account in an amount required to cause an amount
of interest to be paid with respect to such Mortgage Loan equal to the amount of
interest that has accrued on such Mortgage Loan from the preceding Due Date at
the related Mortgage Rate (net of the Servicing Fee Rate) on such date.

         The foregoing requirements for remittance by the Servicer shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges, assumption
fees or amounts attributable to reimbursements of Advances, if collected, need
not be remitted by the Servicer. In the event that the Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct the
institution maintaining the Collection Account to withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice thereof
to the Trustee or such other institution maintaining the Collection Account
which describes the amounts deposited in error in the Collection Account. The
Servicer shall maintain adequate records with respect to all withdrawals made
pursuant to this Section. All funds deposited in the Collection Account shall be
held in trust for the Certificateholders until withdrawn in accordance with
Section 3.8.

          (c) The Master Servicer shall establish and maintain, for the benefit
of Certificateholders, a Master Servicer Custodial Account. On each Servicer
Deposit Date, the

                                       53
<PAGE>

Servicer shall remit to the Master Servicer for deposit in the
Master Servicer Custodial Account, the Available Funds for such date. In
addition, the Master Servicer shall deposit any amounts pursuant to Section
3.5(e) in connection with losses on Permitted Investments in the Master Servicer
Custodial Account.

          (d) The Trustee shall establish and maintain, on behalf of
Certificateholders, the Distribution Account. On each Distribution Account
Deposit Date, the Master Servicer shall remit to the Trustee for deposit in the
Distribution Account the Available Funds for such date. In addition, the Trustee
shall deposit any amounts received from the Master Servicer pursuant to Section
3.5(e) in connection with losses on permitted Investments in the Distribution
Account.

         In the event that the Servicer or Master Servicer shall remit any
amount not required to be remitted, it may at any time direct the Trustee to
withdraw such amount from the Distribution Account, any provision herein to the
contrary notwithstanding. Such direction may be accomplished by delivering an
Officer's Certificate to the Trustee which describes the amounts deposited in
error in the Distribution Account. All funds deposited in the Distribution
Account shall be held by the Trustee in trust for the Certificateholders until
disbursed in accordance with this Agreement or withdrawn in accordance with
Section 3.8. In no event shall the Trustee incur liability for withdrawals from
the Distribution Account at the direction of the Servicer.

          (e) The institutions at which the Collection Account, Master Servicer
Custodial Account and Distribution Account are maintained shall invest funds as
directed by the Master Servicer in Permitted Investments which in each case
shall mature not later than (i) in the case of the Collection Account, the
second Business Day next preceding the related Servicer Deposit Date (except
that if such Permitted Investment is an obligation of the institution that
maintains such account, then such Permitted Investment shall mature not later
than the Business Day next preceding such Servicer Deposit Date), (ii) in the
case of the Master Servicer Custodial Account, the second Business Day next
preceding the related Distribution Account Deposit Date (except that if such
Permitted Investment is an obligation of the institution that maintains such
account, then such Permitted Investment shall mature not later than the Business
Day next preceding such Distribution Account Deposit Date), and (iii) in the
case of the Distribution Account, the Business Day next preceding the related
Distribution Date (except that if such Permitted Investment is an obligation of
the institution that maintains such fund or account, then such Permitted
Investment shall mature not later than such Distribution Date) and, in each
case, shall not be sold or disposed of prior to its maturity. All such Permitted
Investments shall be made in the name of the Trustee, for the benefit of the
Certificateholders. All income and gain net of any losses realized from any such
investment of funds on deposit in the Collection Account shall be for the
benefit of the Servicer as servicing compensation and all income and gain net of
any losses realized from any such investment of funds on deposit in the Master
Servicer Custodial Account and the Distribution Account shall be for the benefit
of the Master Servicer. The amount of any realized losses in the Collection
Account in respect of any such investments shall promptly be deposited by the
Servicer in the Collection Account and the amount of any realized losses in the
Master Servicer Custodial Account and the Distribution Account in respect of any
such investments shall promptly be deposited therein by the Master Servicer. The
Trustee in its fiduciary capacity shall not be liable for the amount of any loss
incurred in respect of any

                                       54
<PAGE>

investment or lack of investment of funds held in the Collection Account or the
Master Servicer Custodial Account and made in accordance with this Section 3.5.

         Section 3.6   Collection of Taxes, Assessments and Similar Items;
                       Escrow Accounts
                       ---------------------------------------------------

          (a) To the extent required by the related Mortgage Note and not
violative of current law, the Servicer shall establish and maintain one or more
accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Servicer) for the payment of
taxes, assessments, hazard insurance premiums or comparable items for the
account of the Mortgagors. Nothing herein shall require the Servicer to compel a
Mortgagor to establish an Escrow Account in violation of applicable law.

          (b) Withdrawals of amounts so collected from the Escrow Accounts may
be made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Servicer out of related collections for any payments made pursuant to
Sections 3.1 hereof (with respect to taxes and assessments and insurance
premiums) and 3.9 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums determined to be overages, to pay interest, if required by
law or the terms of the related Mortgage or Mortgage Note, to Mortgagors on
balances in the Escrow Account or to clear and terminate the Escrow Account at
the termination of this Agreement in accordance with Section 9.1 hereof. The
Escrow Accounts shall not be a part of the Trust Fund.

          (c) The Servicer shall advance, as Servicing Advances, any payments
referred to in Section 3.6(a) that are not timely paid by the Mortgagors on the
date when the tax, premium or other cost for which such payment is intended is
due, provided, however that the Servicer shall not be required to make any such
advance if such advance, in the good faith judgment of the Servicer, would
constitute a Nonrecoverable Advance.

         Section 3.7   Access to Certain Documentation and Information Regarding
                       the Mortgage Loans
                       ---------------------------------------------------------

         The Servicer shall afford the Depositor and the Trustee reasonable
access to all records and documentation regarding the Mortgage Loans and all
accounts, insurance information and other matters relating to this Agreement,
such access being afforded without charge, but only upon reasonable request and
during normal business hours at the office designated by the Servicer.

         Upon reasonable advance notice in writing, the Servicer will provide to
each Certificateholder which is a savings and loan association, bank or
insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the Servicer in providing such
reports and access.

                                       55
<PAGE>

         Section 3.8  Permitted Withdrawals from the Collection Account, Master
                      Servicer Custodial Account and Distribution Account.
                      ---------------------------------------------------------

          (a) The Servicer may from time to time make withdrawals from the
Collection Account for the following purposes:

              (i)    to the extent not previously retained by the Servicer, to
         pay to the Servicer the servicing compensation to which it is entitled
         pursuant to Section 3.14, and earnings on or investment income with
         respect to funds in or credited to the Collection Account as additional
         servicing compensation;

              (ii)   to the extent not previously retained by the Servicer, to
         reimburse the Servicer for unreimbursed Advances made by it, such right
         of reimbursement pursuant to this subclause (ii) being limited to
         amounts received on the Mortgage Loan(s) in respect of which any such
         Advance was made;

              (iii)  to reimburse the Servicer for any Nonrecoverable Advance
         previously made;

              (iv)   to reimburse the Servicer for Insured Expenses from the
         related Insurance Proceeds;

              (v)    to reimburse the Servicer for unpaid Servicing Fees as
         provided in Section 3.11 hereof;

              (vi)   to pay to the purchaser, with respect to each Mortgage Loan
         or property acquired in respect thereof that has been purchased
         pursuant to Section 2.2, 2.3 or 3.11, all amounts received thereon
         after the date of such purchase;

              (vii)  to reimburse the Master Servicer, the Servicer or the
         Depositor for expenses incurred by any of them and reimbursable
         pursuant to Section 6.3 hereof;

              (viii) to pay to the Master Servicer any accrued and compensation
         to which it is entitled hereunder (and any amount to which it is
         entitled to reimbursement herewith);

              (ix)   to withdraw any amount deposited in the Collection Account
         and not required to be deposited therein;

              (x)    on or prior to each Servicer Deposit Date, to withdraw an
         amount equal to the related Available Funds and remit such amount to
         the Master Servicer for deposit in the Master Servicer Custodial
         Account; and

              (xi)   to clear and terminate the Collection Account upon
         termination of this Agreement pursuant to Section 9.1 hereof.

         The Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account

                                       56
<PAGE>

pursuant to such subclauses (i), (ii), (iv), (v) and (vi). Prior to making any
withdrawal from the Collection Account pursuant to subclause (iii), the Servicer
shall deliver to the Master Servicer an Officer's Certificate of a Servicing
Officer indicating the amount of any previous Advance determined by the Servicer
to be a Nonrecoverable Advance and identifying the related Mortgage Loan(s), and
their respective portions of such Nonrecoverable Advance.

          (b) The Master Servicer may from time to time make withdrawals from
the Master Servicer Custodial Account for the following purposes:

              (i)    to pay to itself any compensation due it hereunder;

              (ii)   to pay to itself earnings or investment income with respect
         to funds in the Master Servicer Custodial Account;

              (iii)  on each Distribution Account Deposit Date, to withdraw the
         Available Funds for such date and remit such amount to the Trustee for
         deposit in the Distribution Account; and

              (iv)   to clear and terminate the Master Servicer Custodial
         Account upon termination of the Agreement pursuant to Section 9.1
         hereof.

          (c) The Trustee shall withdraw funds from the Distribution Account for
distributions to Certificateholders in the manner specified in this Agreement.
In addition, the Trustee may prior to making the distribution pursuant to
Section 4.1 from time to time make withdrawals from the Distribution Account for
the following purposes:

              (i)    to pay to itself the Trustee Fee for the related
         Distribution Date (allocated pro rata by Group, if applicable);

              (ii)   to pay to the Master Servicer earnings on or investment
         income with respect to funds in the Distribution Account;

              (iii)  to withdraw and return to the Servicer or Master Servicer
         any amount deposited in the Distribution Account and not required to be
         deposited therein; and

              (iv)   to clear and terminate the Distribution Account upon
         termination of the Agreement pursuant to Section 9.1 hereof.

         Section 3.9  Maintenance of Hazard Insurance; Maintenance of Primary
                      Insurance Policies
                      -------------------------------------------------------

          (a) The Servicer shall cause to be maintained, for each Mortgage Loan,
hazard insurance with extended coverage in an amount that is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan or (ii) the greater of (y) the outstanding principal balance of
the Mortgage Loan and (z) an amount such that the proceeds of such policy shall
be sufficient to prevent the Mortgagor and/or the mortgagee from

                                       57
<PAGE>

becoming a co-insurer. Each such policy of standard hazard insurance shall
contain, or have an accompanying endorsement that contains, a standard mortgagee
clause. Any amounts collected by the Servicer under any such policies (other
than the amounts to be applied to the restoration or repair of the related
Mortgaged Property or amounts released to the Mortgagor in accordance with the
Servicer's normal servicing procedures) shall be deposited in the Collection
Account. Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating monthly distributions to the
Certificateholders or remittances to the Trustee for their benefit, be added to
the principal balance of the Mortgage Loan, notwithstanding that the terms of
the Mortgage Loan so permit. Such costs shall be recoverable by the Servicer as
Servicing Advances or, if applicable, as Nonrecoverable Advances. It is
understood and agreed that no earthquake or other additional insurance is to be
required of any Mortgagor or maintained on property acquired in respect of a
Mortgage other than pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance. If the
Mortgaged Property is located at the time of origination of the Mortgage Loan in
a federally designated special flood hazard area and such area is participating
in the national flood insurance program, the Servicer shall cause flood
insurance to be maintained with respect to such Mortgage Loan. Such flood
insurance shall be in an amount equal to the least of (i) the original principal
balance of the related Mortgage Loan, (ii) the replacement value of the
improvements which are part of such Mortgaged Property, and (iii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program.

          (b) In the event that the Servicer shall obtain and maintain a blanket
policy insuring against hazard losses on any or all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section with respect to all of the Mortgage Loans so
covered, it being understood and agreed that such policy may contain a
deductible clause on terms substantially equivalent to those commercially
available and maintained by comparable servicers. If such policy contains a
deductible clause, the Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property a policy complying with the
first sentence of this Section, and there shall have been a loss that would have
been covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause. In
connection with its activities as Servicer of the Mortgage Loans, the Servicer
agrees to present, on behalf of itself, the Depositor, and the Trustee for the
benefit of the Certificateholders, claims under any such blanket policy.

          (c) The Servicer shall not take any action which would result in
non-coverage under any applicable Primary Insurance Policy of any loss which,
but for the actions of the Servicer, would have been covered thereunder. The
Servicer shall not cancel or refuse to renew any such Primary Insurance Policy
that is in effect at the date of the initial issuance of the Certificates and is
required to be kept in force hereunder unless the replacement Primary Insurance
Policy for such canceled or non-renewed policy is maintained with a Qualified
Insurer.

         The Servicer shall not be required to maintain any Primary Insurance
Policy (i) with respect to any Mortgage Loan with a Loan-to-Value Ratio less
than or equal to 80% (or such lower Loan-to-Value Ratio as may be provided by
applicable law) as of any date of

                                       58
<PAGE>

determination or, based on a new appraisal, the principal balance of such
Mortgage Loan represents 80% or less of the new appraised value (or other method
of determination as may be provided by applicable law) or (ii) if maintaining
such Primary Insurance Policy is otherwise prohibited by applicable law.

         The Servicer agrees to effect the timely payment of the premiums on
each Primary Insurance Policy, and such costs not otherwise recoverable shall be
recoverable by the Servicer as Servicing Advances or, if applicable, as
Nonrecoverable Advances.

          (d) In connection with its activities as Servicer of the Mortgage
Loans, the Servicer agrees to present on behalf of itself, the Trustee and
Certificateholders, claims to the insurer under any Primary Insurance Policies
and, in this regard, to take such reasonable action as shall be necessary to
permit recovery under any Primary Insurance Policies respecting defaulted
Mortgage Loans. Any amounts collected by the Servicer under any Primary
Insurance Policies shall be deposited in the Collection Account.

          Section 3.10  Enforcement of Due-on-Sale Clauses; Assumption
                        Agreements
                        ----------------------------------------------

          (a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Servicer shall to
the extent that it has knowledge of such conveyance enforce any due-on-sale
clause contained in any Mortgage Note or Mortgage, to the extent, in the
Servicer's reasonable judgment, enforcement is permitted under applicable law
and governmental regulations. Notwithstanding the foregoing, the Servicer is not
required to exercise such rights with respect to a Mortgage Loan if the Person
to whom the related Mortgaged Property has been conveyed or is proposed to be
conveyed satisfies the terms and conditions contained in the Mortgage Note and
Mortgage related thereto and the consent of the mortgagee under such Mortgage
Note or Mortgage is not otherwise so required under such Mortgage Note or
Mortgage as a condition to such transfer. In the event that the Servicer is
prohibited by law from enforcing any such due-on-sale clause, or if
nonenforcement is otherwise permitted hereunder, the Servicer is authorized,
subject to Section 3.10(b), to take or enter into an assumption and modification
agreement from or with the person to whom such property has been or is about to
be conveyed, pursuant to which such person becomes liable under the Mortgage
Note and, unless prohibited by applicable state law, the Mortgagor remains
liable thereon, provided that the Mortgage Loan shall continue to be covered (if
so covered before the Servicer enters such agreement) by the applicable Required
Insurance Policies. The Servicer, subject to Section 3.10(b), is also authorized
with the prior approval of the insurers under any Required Insurance Policies to
enter into a substitution of liability agreement with such Person, pursuant to
which the original Mortgagor is released from liability and such Person is
substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Servicer shall not be deemed to be in default
under this Section by reason of any transfer or assumption which the Servicer
reasonably believes it is restricted by law from preventing, for any reason
whatsoever.

          (b) Subject to the Servicer's duty to enforce any due-on-sale clause
to the extent set forth in Section 3.10(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification agreement or

                                       59
<PAGE>

supplement to the Mortgage Note or Mortgage that requires the signature of the
Trustee, or if an instrument of release signed by the Trustee is required
releasing the Mortgagor from liability on the Mortgage Loan, the Servicer shall
prepare and deliver or cause to be prepared and delivered to the Trustee for
signature and shall direct, in writing, the Trustee to execute the assumption
agreement with the Person to whom the Mortgaged Property is to be conveyed and
such modification agreement or supplement to the Mortgage Note or Mortgage or
other instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
may be changed. In addition, the substitute Mortgagor and the Mortgaged Property
must be acceptable to the Servicer in accordance with its underwriting standards
as then in effect. Together with each such substitution, assumption or other
agreement or instrument delivered to the Trustee for execution by it, the
Servicer shall deliver an Officer's Certificate signed by a Servicing Officer
stating that the requirements of this subsection have been met in connection
therewith. The Servicer shall notify the Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Trustee the
original of such substitution or assumption agreement, which in the case of the
original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Servicer for entering into an assumption or substitution of liability
agreement will be retained by the Servicer as additional servicing compensation.

          Section 3.11  Realization Upon Defaulted Mortgage Loans; Repurchase of
                        Certain Mortgage Loans
                        --------------------------------------------------------

          (a) Subject to the limitations ser forth in Sections 3.5(a), 3.11(b),
3.11(f), and 3.11(i), the Servicer shall use reasonable efforts to foreclose
upon or otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general mortgage servicing activities;
provided, however, that the Servicer shall not be required to expend its own
funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (i) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Collection Account). The Servicer
shall be responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the Liquidation Proceeds with respect to the related Mortgaged
Property, as Servicing Advances or, if applicable, as Nonrecoverable Advances.

          (b) If the Servicer has actual knowledge that a Mortgaged Property
which the Servicer is contemplating acquiring in foreclosure or by deed in lieu
of foreclosure is located

                                       60
<PAGE>

within a one mile radius of any site with material environmental or hazardous
waste risks known to the Servicer, the Servicer will, prior to acquiring the
Mortgaged Property, consider such risks and shall proceed with such in
foreclosure or by deed in lieu of foreclosure only if the Servicer reasonably
determines that doing so shall more like than not be in the best interests of
the Trust Fund, considering all relevant factors including such environmental
matters. For the purpose of this Section, actual knowledge of the Servicer means
actual knowledge of a Servicing Officer involved in the servicing of the
relevant Mortgage Loan at the time such knowledge was acquired. Actual knowledge
of the Servicer does not include knowledge imputable by virtue of the
availability of or accessibility to information relating to environmental or
hazardous waste sites or the locations thereof.

          (c) With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders,
provided that the Servicers may cause title to be placed in the name of the
Custodian or the Servicer if the Servicer reasonably determines that such manner
of holding title is required or advisable in order to facilitate the foreclosure
process as to any one or more particular Mortgage Loans. The Trustee's name
shall be placed on the title to such REO Property solely as the Trustee
hereunder and not in its individual capacity. The Servicer shall ensure that the
title to such REO Property references this Agreement and the Trustee's capacity
thereunder. Pursuant to its efforts to sell such REO Property, the Servicer
shall either itself or through an agent selected by the Servicer protect and
conserve such REO Property in the same manner and to such extent as is customary
in the locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Certificateholders, in its
sole discretion, rent or decline to rent the same, or any part thereof, as the
Servicer deems to be in the best interest of the Certificateholders for the
period prior to the sale of such REO Property. The Servicer shall prepare for
and deliver to the Trustee a statement with respect to any REO Property that has
been rented showing the aggregate rental income received and all expenses
incurred in connection with the management and maintenance of such REO Property
at such times as is necessary to enable the Trustee to comply with the reporting
requirements of the REMIC Provisions. The net monthly rental income, if any,
from such REO Property shall be deposited in the Collection Account no later
than the close of business on each Determination Date. The Servicer shall
perform the tax reporting and withholding required by Sections 1445 and 6050J of
the Code with respect to foreclosures and abandonments, the tax reporting
required by Section 6050H of the Code with respect to the receipt of mortgage
interest from individuals and any tax reporting required by Section 6050P of the
Code with respect to the cancellation of indebtedness by certain financial
entities, by preparing such tax and information returns as may be required, in
the form required, and delivering the same to the Trustee for filing.

          (d) In the event that the Trust Fund acquires any Mortgaged Property
as aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer shall dispose of such Mortgaged Property prior to
the close of the third taxable year after its acquisition by the Trust Fund
unless the Trustee shall have been supplied with an Opinion of Counsel to the
effect that the holding by the Trust Fund of such Mortgaged Property subsequent
to such three-year period will not result in the imposition of taxes on
"prohibited transactions" of any REMIC hereunder as defined in section 860F of
the Code or cause the REMIC created

                                       61
<PAGE>

hereunder to fail to qualify as a REMIC at any time that any Certificates are
outstanding, in which case the Trust Fund may continue to hold such Mortgaged
Property (subject to any conditions contained in such Opinion of Counsel).
Notwithstanding any other provision of this Agreement, no Mortgaged Property
acquired by the Trust Fund shall be rented (or allowed to continue to be rented)
or otherwise used for the production of income by or on behalf of the Trust Fund
in such a manner or pursuant to any terms that would (i) cause such Mortgaged
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or (ii) subject the REMIC hereunder to the
imposition of any federal, state or local income taxes on the income earned from
such Mortgaged Property, unless the Servicer has agreed to indemnify and hold
harmless the Trust Fund with respect to the imposition of any such taxes.

          (e) In the event of a default on a Mortgage Loan one or more of whose
obligor is not a "United States Person", as that term is defined in Section
7701(a)(30) of the Code, in connection with any foreclosure or acquisition of a
deed in lieu of foreclosure (together, "foreclosure") in respect of such
Mortgage Loan, the Servicer will cause compliance with the provisions of
Treasury Regulation Section 1.1445-2(d)(3) (or any successor thereto) necessary
to assure that no withholding tax obligation arises with respect to the proceeds
of such foreclosure except to the extent, if any, that proceeds of such
foreclosure are required to be remitted to the obligor on such Mortgage Loan.

          (f) The decision of the Servicer to foreclose, or to continue the
foreclosure process, on a defaulted Mortgage Loan shall be subject to a
determination by the Servicer that the proceeds of such foreclosure would more
likely than not exceed the costs and expenses of bringing such a proceeding and
liquidating the REO expected to be obtained through such foreclosure. Promptly
upon making any determination in accordance with the preceding sentence not to
foreclose, or to discontinue the foreclosure process, as to any Mortgage Loan,
the Servicer shall deliver to the Master Servicer an Officer's Certificate
signed by a Servicing Officer identifying the Mortgage Loans as to which such
determination has been made (each such Mortgage Loan, upon acceptance of such
Officer's Certificate by the Master Servicer, a "Nonrecoverable Mortgage Loan")
setting forth the basis for such determination in a form acceptable to the
Master Servicer..

          (g) The income earned from the management of any REO Properties, net
of reimbursement to the Servicer for expenses incurred (including any property
or other taxes) in connection with such management and net of unreimbursed
Master Servicing Fees, Advances and Servicing Advances, shall be applied to the
payment of principal of and interest on the related defaulted Mortgage Loans
(with interest accruing as though such Mortgage Loans were still current) and
all such income shall be deemed, for all purposes in this Agreement, to be
payments on account of principal and interest on the related Mortgage Notes and
shall be deposited into the Collection Account. To the extent the net income
received during any calendar month is in excess of the amount attributable to
amortizing principal and accrued interest at the related Mortgage Rate on the
related Mortgage Loan for such calendar month, such excess shall be considered
to be a partial prepayment of principal of the related Mortgage Loan.

                                       62
<PAGE>

          (h) The proceeds from any liquidation of a Mortgage Loan, as well as
any income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Servicer for any related unreimbursed
Servicing Advances and Servicing Fees; second, to reimburse the Servicer for any
unreimbursed Advances; third, to reimburse the Collection Account for any
Nonrecoverable Advances (or portions thereof) that were previously withdrawn by
the Servicer pursuant to Section 3.8(a)(iii) that related to such Mortgage Loan;
fourth, to accrued and unpaid interest (to the extent no Advance has been made
for such amount or any such Advance has been reimbursed) on the Mortgage Loan or
related REO Property, at the Mortgage Rate (net of the Servicing Fee Rate) to
the Due Date occurring in the month in which such amounts are required to be
distributed; and fifth, as a recovery of principal of the Mortgage Loan. Excess
Proceeds, if any, from the liquidation of a Liquidated Mortgage Loan will be
retained by the Servicer as additional servicing compensation pursuant to
Section 3.14.

          (i) Notwithstanding any provision hereof, in connection with the
foreclosure or other conversion of defaulted assets, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable in its
sole discretion, and as shall be normal and usual in its general mortgage
servicing activities. In connection therewith, the Master Servicer shall have
the sole discretion to determine whenever an immediate sale of any REO or
Nonrecoverable Mortgage Loan, or continued management of such REO or
Nonrecoverable Mortgage Loan, is in the best interest of certificateholders to
maximize recoveries. Any such disposition (including by means of a "whole loan
sale") shall be conducted by the Servicer on terms and conditions approved by
the Master Servicer in its sole discretion. The foregoing notwithstanding, the
Master Servicer shall not approve any such disposition that would (i) result in
the imposition of the tax on "prohibited transactions" on the Trust Fund, as
defined in Sections 860F(a)(2) of the Code, or (ii) cause any REMIC created
hereunder to fail to qualify as a REMIC at any time that any Certificates are
outstanding..

          (j) The Master Servicer, in its sole discretion, shall have the right
to purchase for its own account from the Trust Fund any Mortgage Loan which is
91 days or more Delinquent at a price equal to the Purchase Price; provided
however, that for any such Mortgage Loan that is a Nonrecoverable Mortgage Loan,
such purchase shall be at a price equal to the Nonrecoverable Mortgage Loan
Purchase Price, and provided further that any REO Property may be disposed of
pursuant to the preceding Section 3.11(i). The total price calculated pursuant
to the preceding sentence for any Mortgage Loan purchased hereunder shall be
deposited in the Collection Account and the Trustee, upon receipt of the Request
for Release from the Servicer in the form of Exhibit J hereto, shall release or
cause to be released to the purchaser of such Mortgage Loan the related Mortgage
File and shall execute and deliver such instruments of transfer or assignment
prepared by the purchaser of such Mortgage Loan, in each case without recourse,
as shall be necessary to vest in the purchaser of such Mortgage Loan any
Mortgage Loan released pursuant hereto and the purchaser of such Mortgage Loan
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The purchaser of such
Mortgage Loan shall thereupon own such Mortgage Loan, and all security and
documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

                                       63
<PAGE>

         Section 3.12 Trustee to Cooperate; Release of Mortgage Files.
                      ------------------------------------------------

         Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Trustee by
delivering, or causing to be delivered a Request for Release substantially in
the form of Exhibit J. Upon receipt of such request, the Trustee shall or shall
cause the Custodian to promptly release the related Mortgage File to the
Servicer, and the Trustee shall at the Servicer's direction execute and deliver
to the Servicer the request for reconveyance, deed of reconveyance or release or
satisfaction of mortgage or such instrument releasing the lien of the Mortgage,
in each case as provided by the Servicer, together with the Mortgage Note with
written evidence of cancellation thereon. In lieu of the document execution
process described in the preceding two sentences, the Servicer shall be
authorized to execute each such Request for Release, request for reconveyance,
deed of reconveyance, and release, satisfaction of mortgage, or such instrument
releasing the lien of the Mortgage as attorney in fact for the Trustee (or the
Custodian, if applicable) pursuant to the powers of attorney described in
Section 3.1. Expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to the related Mortgagor. From time
to time and as shall be appropriate for the servicing or foreclosure of any
Mortgage Loan, including for such purpose, collection under any policy of flood
insurance, any fidelity bond or errors or omissions policy, or for the purposes
of effecting a partial release of any Mortgaged Property from the lien of the
Mortgage or the making of any corrections to the Mortgage Note or the Mortgage
or any of the other documents included in the Mortgage File, the Trustee shall,
upon delivery to the Trustee of a Request for Release in the form of Exhibit K
signed by a Servicing Officer, release the Mortgage File to the Servicer.
Subject to the further limitations set forth below, the Servicer shall cause the
Mortgage File or documents so released to be returned to the Trustee or its
Custodian when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan is liquidated and the proceeds thereof are deposited in the
Collection Account, in which case the Servicer shall deliver to the Trustee a
Request for Release in the form of Exhibit L, signed by a Servicing Officer.

         If the Servicer at any time seeks to initiate a foreclosure proceeding
in respect of any Mortgaged Property as authorized by this Agreement, the
Servicer shall deliver or cause to be delivered to the Trustee, for signature,
as appropriate, any court pleadings, requests for trustee's sale or other
documents necessary to effectuate such foreclosure or any legal action brought
to obtain judgment against the Mortgagor on the Mortgage Note or the Mortgage or
to obtain a deficiency judgment or to enforce any other remedies or rights
provided by the Mortgage Note or the Mortgage or otherwise available at law or
in equity.

         Section 3.13 Documents Records and Funds in Possession of Servicer to
                      be Held for the Trustee.
                      --------------------------------------------------------

         Notwithstanding any other provisions of this Agreement, the Servicer
shall transmit to the Trustee, or the Custodian on its behalf, all documents and
instruments described in Section 2.1(b), and shall hold as Servicer and agent of
the Trustee all other documents, in respect of a Mortgage Loan coming into the
possession of the Servicer from time to time and shall account

                                       64
<PAGE>

fully to the Trustee for any funds received by the Servicer or which otherwise
are collected by the Servicer as Liquidation Proceeds or Insurance Proceeds in
respect of any Mortgage Loan. All Mortgage Files and funds collected or held by,
or under the control of, the Servicer in respect of any Mortgage Loans, whether
from the collection of principal and interest payments or from Liquidation
Proceeds, including but not limited to, any funds on deposit in the Collection
Account, shall be held by the Servicer for and on behalf of the Trustee and
shall be and remain the sole and exclusive property of the Trustee, subject to
the applicable provisions of this Agreement. The Servicer also agrees that it
shall not create, incur or subject any Mortgage File or any funds that are
deposited in the Collection Account, Distribution Account or any Escrow Account,
or any funds that otherwise are or may become due or payable to the Trustee for
the benefit of the Certificateholders, to any claim, lien, security interest,
judgment, levy, writ of attachment or other encumbrance, or assert by legal
action or otherwise any claim or right of setoff against any Mortgage File or
any funds collected on, or in connection with, a Mortgage Loan, except, however,
that the Servicer shall be entitled to set off against and deduct from any such
funds any amounts that are properly due and payable to the Servicer under this
Agreement.

         Section 3.14 Servicing Compensation.
                      -----------------------

         As compensation for its activities hereunder, the Servicer shall be
entitled to retain or withdraw from the Collection Account an amount equal to
the Servicing Fee for each Mortgage Loan, provided that the aggregate Servicing
Fee with respect to any Distribution Date shall be reduced (i) by the amount of
any Compensating Interest paid by the Servicer with respect to such Distribution
Date, and (ii) with respect to the first Distribution Date, an amount equal to
any amount to be deposited into the Distribution Account by the Depositor
pursuant to Section 2.1(a) and not so deposited.

         Additional servicing compensation in the form of (i) Prepayment
Interest Excess and all income and gain net of any losses realized from
Permitted Investments and (ii) prepayment penalties (other than to the extent
provided otherwise herein), assumption fees, late payment charges, and other
receipts not required to be deposited to the Collection Account pursuant to
Section 3.5 hereof, including any Excess Proceeds, shall be retained by the
Servicer as additional servicing compensation. The Servicer and Master Servicer
shall be required to pay all expenses incurred by them respectively in
connection with their respective activities hereunder to the extent such
expenses do not constitute Advances or Nonrecoverable Advances as defined in
this Agreement and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement.

         Section 3.15 Access to Certain Documentation
                      -------------------------------

         The Servicer shall provide to the OTS and the FDIC and to comparable
regulatory authorities supervising Holders of Subordinate Certificates and the
examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices designated by the Servicer. Nothing in this
Section shall limit the obligation of the Servicer to observe any applicable law
prohibiting disclosure of

                                       65
<PAGE>

information regarding the Mortgagors and the failure of the Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.

         Section 3.16 Annual Statement as to Compliance
                      ---------------------------------

         The Servicer shall deliver to the Depositor and the Trustee on or
before 120 days after the end of the Servicer's fiscal year, commencing with its
2002 fiscal year, an Officer's Certificate stating, as to the signer thereof,
that (i) a review of the activities of the Servicer during the preceding fiscal
year and of the performance of the Servicer under this Agreement has been made
under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all of its material
obligations under this Agreement throughout such year, or, if there has been a
material default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. The Trustee
shall forward a copy of each such statement to each Rating Agency.

         Section 3.17 Annual Independent Public Accountants' Servicing
                      Statement; Financial Statements.
                      ------------------------------------------------

         On or before 120 days after the end of the Servicer's fiscal year,
commencing with its 2002 fiscal year, the Servicer at its expense shall cause a
nationally or regionally recognized firm of independent public accountants (who
may also render other services to the Servicer, the Depositor or any affiliate
thereof) which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Trustee and the Depositor to the
effect that such firm has examined certain documents and records relating to the
servicing of the Mortgage Loans under this Agreement or of mortgage loans under
pooling and servicing agreements substantially similar to this Agreement (such
statement to have attached thereto a schedule setting forth the pooling and
servicing agreements covered thereby) substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or alternatively, if the
Master Servicer has so elected, the Audit Program for Mortgages serviced for
FNMA and FHLMC, and setting forth such firm's conclusions relating thereto in
accordance with the applicable attestation program or audit program. In
rendering such statement, such firm may rely, as to matters relating to direct
servicing of mortgage loans by Subservicers, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FNMA and FHLMC (rendered within one year of such statement) of
independent public accountants with respect to the related Subservicer. Copies
of such statement shall be provided by the Trustee to any Certificateholder upon
request at the Servicer's expense, provided such statement is delivered by the
Servicer to the Trustee.

         Section 3.18 Errors and Omissions Insurance; Fidelity Bonds
                      ----------------------------------------------

         The Servicer shall for so long as it acts as Servicer under this
Agreement, obtain and maintain in force (a) a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and (b) a fidelity bond in respect of its officers, employees and
agents. Each such policy or policies and bond shall, together, comply with the
requirements from time to time of FNMA or FHLMC for persons performing servicing

                                       66
<PAGE>

for mortgage loans purchased by FNMA or FHLMC. In the event that any such policy
or bond ceases to be in effect, the Servicer shall obtain a comparable
replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement.

         Section 3.19 Advances
                      --------

         The Servicer shall determine on or before each Determination Date
whether it is required to make a P&I Advance pursuant to the definition thereof.
If the Servicer determines it is required to make a P&I Advance, it shall, on or
before the Distribution Account Deposit Date, deposit into the Distribution
Account an amount equal to the P&I Advance. The Servicer shall be entitled to be
reimbursed for all P&I Advances of its own funds made pursuant to this Section
as provided in Section 3.8 hereof. The obligation to make P&I Advances with
respect to any Mortgage Loan shall continue if such Mortgage Loan has been
foreclosed or otherwise terminated and the related Mortgaged Property has not
been liquidated, provided that in no event shall the Servicer be required to
make any proposed Advance that, if made, would in the good faith judgment of the
Servicer to be a Nonrecoverable Advance.

         The Servicer shall deliver to the Trustee on the related Servicer
Deposit Date an Officer's Certificate of a Servicing Officer indicating the
amount of any proposed Advance that, if made, would in the good faith judgment
of the Servicer be a Nonrecoverable Advance.

         Section 3.20 Advance Facility

          (a) The Servicer is hereby authorized to enter into any facility with
any Person (any such Person, an "Advance Facility Counterparty") which provides
that the Servicer may pledge or sell its rights to receive reimbursement of
Advances pursuant to this Agreement ("Advance Reimbursement Rights") pursuant to
credit facilities, repurchase facilities, or similar facilities providing
liquidity for the funding of Advances, including facilities providing that such
Advance Facility Counterparty may make all or a portion of the Advances (any
such facility, an "Advance Facility"), although no Advance Facility shall reduce
or otherwise affect the Servicer's obligations to fund such Advances. If so
required pursuant to the terms of an Advance Facility, to the extent that an
Advance Facility Counterparty makes all or a portion of any Advance and the
Advance Facility Counterparty and the Servicer provide the Trustee with notice
acknowledged by the Servicer that such Advancing Servicer is entitled to
reimbursement, such Advancing Servicer shall be entitled to receive
reimbursement pursuant to this Agreement for such amount to the extent provided.
Such notice from the Advance Facility Counterparty and the Servicer must specify
the amount of the reimbursement and must specify which Section of this Agreement
permits the Advance to be reimbursed. The Trustee shall be entitled to rely
without independent investigation on the Advance Facility Counterparty's
statement with respect to the amount of any reimbursement pursuant to this
Section 3.20 and with respect to the Advance Facility Counterparty's statement
with respect to the Section of this Agreement permits the Advance to be
reimbursed. An Advance Facility Counterparty whose obligations are limited to
the making of Advances will not be deemed to be a Subservicer under this
Agreement.

          (b) If so required pursuant to the terms of an Advance Facility, the
Servicer may direct, and if so directed the Trustee is hereby authorized to and
shall pay to the Advance Facility

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<PAGE>

Counterparty (i) reimbursements for Advances; and (ii) all or such portion of
the Servicing Fee as may be so specified in the Advance Facility, that would
otherwise be payable to the Servicer pursuant to this Agreement or the Servicing
Agreement.

          (c) Upon request of the Servicer, the Trustee agrees to execute such
acknowledgments, certificates, and other documents recognizing the interests of
any Advance Facility Counterparty in such Advance Reimbursement Rights and
Servicing Fees as the Servicer may cause to be made subject to Advance
Facilities pursuant to this Section 3.20, and such other documents in connection
with such Advance Facilities as may be reasonably requested from time to time by
any Advance Facility Counterparty. The implementation of the arrangement
described in this Section shall not require the consent of Certificateholders or
the Trustee.

         Section 3.21 Prepayment Penalties.
                      ---------------------

         The Servicer will not waive any Prepayment Penalty or part of a
Prepayment Penalty unless (i) such waiver would, in the reasonable judgment of
the Servicer, maximize recovery of total net proceeds taking into account the
value of such Prepayment Penalty and related Mortgage Loan and, if such waiver
is made in connection with a refinancing of the related Mortgage Loan, such
refinancing is related to a default or a reasonably foreseeable default; (ii)
the related Mortgage Loan indebtedness has been accelerated; or (iii) the
Servicer obtains an Opinion of Counsel, which may be in-house counsel for the
Servicer, opining that the Prepayment Penalty is not legally enforceable in the
circumstances under which the related prepayment occurs. In no event will the
Servicer waive a Prepayment Penalty in connection with a refinancing of a
Mortgage Loan that is not related to a default or a reasonably foreseen default.

                                   ARTICLE 4

                                  DISTRIBUTIONS

         Section 4.1  Priorities of Distribution
                      --------------------------

          (a) On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of an amount equal to the Interest
Funds for each Group in the following order of priority:

              (i)     from the Interest Funds for each Group, to the related
         Class A Certificates and the Class A-IO Certificate, the Current
         Interest and any Interest Carry Forward Amount for the such Class A
         Certificates (or, in the case of the Class A-IO Certificates, the
         applicable Allocable Portion thereof); provided, however, that any
         Group II Interest Funds distributable to the Class AV-1 Certificates
         shall be derived solely from the Subgroup IIA Mortgage Loans, and any
         such funds distributable to the Class AV-2 Certificates shall be
         derived solely from the Subgroup IIB Mortgage Loans; provided further,
         that any shortfall in available amounts in respect of the Group I Class
         A Certificates shall be applied, pro rata, among the Group I Class A
         Certificates.

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<PAGE>

              (ii)    any remaining amounts from both the Interest Funds for
         Group I and Group II shall be combined and distributed pursuant to
         Section 4.1(b) hereof.

          (b) On each Distribution Date, the Trustee shall apply all amounts
remaining pursuant to Section 4.1(a)(ii) in the following order of priority:

              (i)     to the Class M-1 Certificates, the Current Interest
         thereon;

              (ii)    to the Class M-2 Certificates, Current Interest thereon;

              (iii)   to the Class B-1 Certificates, Current Interest thereon;

              (iv)    to the Class X-IO Certificates, Current Interest thereon;
         and

              (v)     any remaining amounts pursuant to Section 4.1(f) hereof.

          (c) On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of an amount equal to the Principal
Distribution Amount for each Group as follows:

              o     From the Principal Distribution Amount for Group I, in an
                    amount up to the Group I Class A Principal Distribution
                    Amount as follows: (x) the Class AF-6 Principal Distribution
                    Amount to the Class AF-6 Certificates until the Certificate
                    Principal Balance thereof has been reduced to zero, and (y)
                    the balance of the Group I Class A Principal Distribution
                    Amount sequentially to the Class AF-1, Class AF-2, Class
                    AF-3, Class AF-4, Class AF-5 and Class AF-6 Certificates, in
                    that order, so that no such distribution pursuant to this
                    clause (y) will be made to any such Class until the
                    Certificate Principal Balances of all Group I Class A
                    Certificates with a lower numeral designation shall have
                    been reduced to zero; provided, however, that, on any
                    Distribution Date on or after the Credit Support Depletion
                    Date, the Group I Class A Principal Distribution Amount will
                    be distributed pro rata and not sequentially to the Group I
                    Class A Certificates;

              o     From the Principal Distribution Amount for Group II, in an
                    amount up to the Group II Class A Principal Distribution
                    Amount as follows: (x) amounts constituting Principal Funds
                    for the Subgroup IIA Mortgage Loan will be distributed to
                    the Class AV-1 Certificates until the Certificate Principal
                    Balance thereof has been reduced to zero; and (y) amounts
                    constituting Principal Funds for the Subgroup IIB Mortgage
                    Loans will be distributed to the Class AV-2 Certificates
                    until the Certificate Principal Balance thereof has been
                    reduced to zero; provided that any excess interest
                    (representing the allocable portion of the Extra Principal
                    Distribution Amount) included in the Group II Class A
                    Principal Distribution Amount will be distributed to the
                    Class AV-1 and Class AV-2 Certificate pro rata, based on the
                    Principal Funds received for each Subgroup;

                                       69
<PAGE>

              o     In the event the Certificate Principal Balance of one or
                    more of the (A) Group I Class A Certificates, (B) the Class
                    AV-1 Certificates or (C) the Class AV-2 Certificates has
                    been reduced to zero, on each Distribution Date thereafter
                    principal distributions otherwise distributable to such
                    retired Certificates will be applied to such remaining
                    Classes, pro rata, on the basis of their Certificate
                    Principal Balances. Any such distributions in respect of the
                    Group I Class A Certificates will be distributed to such
                    Classes in the manner provided in the first subparagraph of
                    this Section.

          (d) On each Distribution Date, the Trustee shall distribute the
Principal Distribution Amount for each Group remaining after distributions
pursuant to Section 4.1(c) in the following order of priority:

              (i)     to the Class M-1 Certificates, the Class M-1 Principal
         Distribution Amount, until the Certificate Principal Balance thereof
         has been reduced to zero;

              (ii)    to the Class M-2 Certificates, the Class M-2 Principal
         Distribution Amount, until the Certificate Principal Balance thereof
         has been reduced to zero; and

              (iii)   to the Class B-1 Certificates, the Class B-1 Principal
         Distribution Amount, until the Certificate Principal Balance thereof
         has been reduced to zero.

          (e) Notwithstanding Section 4.1(c) and (d) hereof, before the Stepdown
Date or if a Trigger Event is in effect on any Distribution Date each Principal
Distribution Amount shall be distributed in the following order of priority:

              (i)     to the related Class A Certificates in the manner
         described in Section 4.1(c) until the Certificate Principal Balance of
         such Class A Certificates has been reduced to zero;

              (ii)    after the Certificate Principal Balance of the Class A
         Certificates has been reduced to zero, the remaining combined Principal
         Distribution Amounts shall be distributed to the Class M-1 Certificates
         until the Certificate Principal Balance of the Class M-1 Certificates
         has been reduced to zero;

              (iii)   after the Certificate Principal Balance of the Class M-1
         Certificates has been reduced to zero, the remaining combined Principal
         Distribution Amounts shall be distributed to the Class M-2 Certificates
         until the Certificate Principal Balance of the Class M-2 Certificates
         has been reduced to zero, and

              (iv)    after the Certificate Principal Balance of the Class M-2
         Certificates has been reduced to zero, the remaining combined Principal
         Distribution Amounts shall be distributed to the Class B-1 Certificates
         until the Certificate Principal Balance of the Class B-1 Certificates
         has been reduced to zero.

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<PAGE>

          (f) On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of any remaining amounts pursuant to
Sections 4.1(b)(v) hereof in the following order of priority:

              (i)     the related Group Percentage of the Extra Principal
         Distribution Amount will be added to the Principal Distribution Amount
         for Group I; and the related Group Percentage of the Extra Principal
         Distribution Amount will be added to the Principal Distribution Amount
         for Group II;

              (ii)    to the Class X-IO Certificates, any related Interest Carry
         Forward Amount;

              (iii)   to the Class M-1 Certificates, any related Interest Carry
         Forward Amount;

              (iv)    to the Class M-1 Certificates, any related Unpaid Realized
         Loss Amount;

              (v)     to the Class M-2 Certificates, any related Interest Carry
         Forward Amount;

              (vi)    to the Class M-2 Certificates, any related Unpaid Realized
         Loss Amount;

              (vii)   to the Class B-1 Certificates, any related Interest Carry
         Forward Amount;

              (viii)  to the Class B-1 Certificates, any related Unpaid Realized
         Loss Amount;

              (ix)    to the Basis Risk Reserve Fund, any Basis Risk Payment for
         such date;

              (x)     on any Distribution Date on or before the Distribution
         Date on which the Certificate Principal Balance thereof has been
         reduced to zero, from and to the extent of amounts held in the Basis
         Risk Reserve Fund, to the Class A Certificates, on a pro rata basis any
         applicable Cap Carryover Amount;

              (xi)    on any Distribution Date on or before the Distribution
         Date on which the Certificate Principal Balance of the Class M-1
         Certificates has been reduced to zero, from and to the extent of
         amounts held in the Basis Risk Reserve Fund, to the Class M-1
         Certificates, any applicable Cap Carryover Amount;

              (xii)   on any Distribution Date on or before the Distribution
         Date on which the Certificate Principal Balance of the Class M-2
         Certificates has been reduced to zero, from and to the extent of
         amounts held in the Basis Risk Reserve Fund, to the Class M-2
         Certificates, any applicable Cap Carryover Amount;

              (xiii)  on any Distribution Date on or before the Distribution
         Date on which the Certificate Principal Balance of the Class B-1
         Certificates has been reduced to zero, from and to the extent of
         amounts held in the Basis Risk Reserve Fund, to the Class B-1
         Certificates, any applicable Cap Carryover Amount

              (xiv)   the remainder pursuant to Section 4.1(h) hereof.

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<PAGE>

          (g) On each Distribution Date, the Trustee shall distribute an amount
equal to the Class P Prepayment Amount for such Distribution Date to the Class P
Certificates.

          (h) On each Distribution Date, the Trustee shall distribute to the
Class C Certificates any remaining amounts pursuant to Section 4.1(f)(xiv)
hereof, to the extent of the sum of the interest accrued thereon at the rate
described in Schedule III and that has not been distributed thereon on prior
Distribution Dates (amounts deposited in the Basis Risk Reserve Fund under
Section 4.1(f)(ix) are treated as distributed for this purpose), amounts
representing earnings on the Basis Risk Reserve Fund, and any amounts released
from the Basis Risk Reserve Fund.

          (i) On each Distribution date, to the extent the Servicer or Master
Servicer shall have collected any Subsequent Recoveries during the related
Prepayment Period, the Trustee shall apply such amounts as follows:

              first, sequentially, in order of priority, to each Class of
              Subordinate Certificates then outstanding, in reduction of any
              amounts previously applied to such Class to reduce the Class
              Certificate Balance thereof pursuant to Section 4.3 hereof
              (provided, however, that any such amounts distributed pursuant to
              this clause first to a Class of Subordinate Certificates shall not
              reduce the Class Certificate Balance thereof); and

              second, as part of the related Interest Funds for such
              Distribution Date for application pursuant to Section 4.1(a).

          (j) On each Distribution Date the Trustee shall distribute to the
Class R Certificates any remaining amounts.

         Section 4.2  Method of Distribution
                      ----------------------

          (a) All distributions with respect to each Class of Certificates on
each Distribution Date shall be made pro rata among the outstanding Certificates
of such Class, based on the Percentage Interest in such Class represented by
each Certificate. Payments to the Certificateholders on each Distribution Date
shall be made by the Trustee to the Certificateholders of record on the related
Record Date by check or money order mailed to a Certificateholder at the address
appearing in the Certificate Register, or upon written request by such
Certificateholder to the Trustee made not later than the applicable Record Date,
by wire transfer to a U.S. depository institution acceptable to the Trustee, or
by such other means of payment as such Certificateholder and the Trustee shall
agree.

          (b) Each distribution with respect to a Book-Entry Certificate shall
be paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each financial
intermediary for which it acts as agent. Each such financial intermediary shall
be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the

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<PAGE>

Depository Participants in accordance with the provisions of the applicable
Certificates. Neither the Trustee nor the Master Servicer shall have any
responsibility therefor except as otherwise provided by applicable law.

          (c) The Trustee shall withhold or cause to be withheld such amounts as
it reasonably determines are required by the Code (giving full effect to any
exemptions from withholding and related certifications required to be furnished
by Certificateholders or Certificate Owners and any reductions to withholding by
virtue of any bilateral tax treaties and any applicable certification required
to be furnished by Certificateholders or Certificate Owners with respect
thereto) from distributions to be made to a "Foreign Person" as defined in
Section 1445(f)(3) of the Code.

         Section 4.3  Allocation of Losses
                      --------------------

         On each Distribution Date, the Trustee shall allocate any excess of the
aggregate Certificate Principal Balance of the Certificates over the Assumed
Principal Balance to reduce the Class Certificate Balances of the Subordinate
Certificates in the following order of priority:

              (i)     to the Class B-1 Certificates until the Class Certificate
         Balance thereof is reduced to zero;

              (ii)    to the Class M-2 Certificates until the Class Certificate
         Balance thereof is reduced to zero; and

              (iii)   to the Class M-1 Certificates until the Class Certificate
         Balance thereof is reduced to zero.

         Section 4.4  Reports to the Depositor and the Trustee
                      ----------------------------------------

         On or before the Business Day preceding each Distribution Date, based
on information provided by the Servicer, the Master Servicer shall notify, or
cause to be notified, the Depositor and the Trustee of the following information
with respect to the next Distribution Date (which notification may be given by
facsimile, electronic transmission or by telephone promptly confirmed in
writing):

          (a) the aggregate amount then on deposit in the Distribution Account
and the source thereof (identified as interest, scheduled principal or
unscheduled principal);

          (b) the amount of any Realized Losses, Applied Realized Loss Amounts
and Unpaid Realized Loss Amounts;

          (c) the application of the amounts distributed on such Distribution
Date pursuant to Section 4.1 hereof (including the distribution of any
Subsequent Recoveries);

          (d) whether a Trigger Event has occurred; and

          (e) For each Distribution Date during the Funding Period,

                                       73
<PAGE>

              (i)     the Pre-Funded Amount for each Group previously used to
         acquire Subsequent Mortgage Loans;

              (ii)    the Pre-Funding Account Earnings for each Group
         transferred to the Distribution Account;

              (iii)   the Capitalized Interest Requirement for each Group
         transferred to the Distribution Account; and

              (iv)    the Pre-Funded Amount and for the Distribution Date
         following the end of the Funding Period, the Pre-Funded Amount
         distributed to Certificateholders.

         Section 4.5  Reports by or on Behalf of the Master Servicer
                      ----------------------------------------------

          (a) On or as soon as practicable following each Distribution Date,
based on information provided by the Servicer, the Master Servicer shall report
or cause to be published on the Trustee's website located at
http://www.apps.gis.deutsche-bank.com/invr, or such other website designated by
the Master Servicer as may be set forth in a notice provided to the Holder of
each of the Certificates and each Rating Agency, the following information:

              (i)     with respect to each Class of Certificates (other than
         Class C and Class R) (based on a Certificate in the original principal
         amount of $1,000):

             (A)  the amount of the distributions on such Distribution Date;

             (B)  the amount of such distribution allocable to interest;

             (C)  the amount of such distributions allocable to principal,
                  separately identifying the aggregate amount of any
                  prepayments, Substitution Adjustment Amounts, repurchase
                  amounts pursuant to Article 2 or other recoveries of principal
                  included therein, any Group I or Group II Extra Principal
                  Distribution Amount and any Class M-1, Class M-2, Class B-1,
                  Applied Realized Loss Amount with respect to, and any Class
                  M-1, Class M-2, and Class B-1, Unpaid Realized Loss Amount at,
                  such Distribution Date;

             (D)  the principal balance after giving effect to any distribution
                  allocable to principal; and

             (E)  any Interest Carry Forward Amount and any Cap Carryover
                  Amount;

              (ii)    the Net WAC Cap and the Maximum Cap Rate;

              (iii)   any Subsequent Recoveries and Realized Losses for Group I
         and Group II for the period and since the Cut Off Date;

              (iv)    the largest Mortgage Loan balance outstanding in each
         Group;

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<PAGE>

              (v)     the Prepayment Penalties owed by borrowers and (if
         different) collected by the Servicer or the Master Servicer;

              (vi)    the Servicing Fees and Master Servicing Fees allocable to
         each Group;

              (vii)   One-Month LIBOR on the most recent Interest Determination
         Date;

              (viii)  the Pass-Through Rates for the Certificates for the
         current Accrual Period;

              (ix)    for each Distribution Date during the Funding Period, the
         Pre-Funded Amount allocable to each Group;

              (x)     the number and aggregate principal balances of Mortgage
         Loans in each Group (a) 30-59 days Delinquent, (b) 60-89 days
         Delinquent and (c) 90 or more days Delinquent, as of the close of
         business as of the end of the related prepayment period;

              (xi)    the percentage that each of the Stated Principal Balances
         set forth pursuant to clauses (a), (b) and (c) of paragraph (i) above
         represent with respect to all Mortgage Loans in each Group;

              (xii)   the number and Stated Principal Balance of all Mortgage
         Loans in each Group in foreclosure proceedings as of the close of
         business as of the end of the related Prepayment Period and in the
         immediately preceding Prepayment Period;

              (xiii)  the number of Mortgagors and the Stated Principal Balances
         of Mortgage Loans in each Group involved in bankruptcy proceedings as
         of the close of business as of the end of the related Prepayment
         Period;

              (xiv)   the aggregate number and aggregate book value of any REO
         Property in each Group as of the close of business as of the end of the
         related Prepayment Period; and

              (xv)    the number and amount by principal balance of 60+ Day
         Delinquent Loans in each Group, in each case by Servicer and as of the
         end of the related Prepayment Period.

          (b) All allocations made by the Trustee shall be based on information
the Trustee receives from the Master Servicer which the Trustee shall be
protected in relying on.

        Section 4.6   Basis Risk Reserve Fund
                      -----------------------

          (a) On the Closing Date, the Trustee shall establish and maintain in
its name, in trust for the benefit of the holders of the Certificates, other
than the Class A-IO, Class X-IO, Class P, and Class R Certificates, the Basis
Risk Reserve Fund, into which the Depositor shall deposit $1,000. The Basis Risk
Reserve Fund shall be an Eligible Account, and funds on deposit therein shall be
held separate and apart from, and shall not be commingled with, any other
moneys, including, without limitation, other moneys of the Trustee held pursuant
to this Agreement.

                                       75
<PAGE>

          (b) The Trustee shall make withdrawals from the Basis Risk Reserve
Fund to make distributions pursuant to Section 4.1(f)(x) through (xiii).

          (c) Funds in the Basis Risk Reserve Fund shall be invested in Eligible
Investments. Any earnings on such amounts shall be distributed to the Class C
Certificateholder pursuant to Section 4.1(h). The Class C Certificate shall
evidence ownership of the Basis Risk Reserve Fund for federal income tax
purposes and the Holder thereof shall direct the Trustee, in writing, as to
investment of amounts on deposit therein. The Class C Certificateholder shall be
liable for any losses incurred on such investments. In the absence of written
instructions from the Class C Certificateholder as to investment of funds on
deposit in the Basis Risk Reserve Fund, such funds shall be invested in the
Wells Fargo Prime Investment Money Market Fund or comparable investment vehicle.
Any amounts on deposit in the Basis Risk Reserve Fund in excess of the Required
Reserve Fund Deposit on any Distribution Date shall be distributed to the Class
C Certificateholder on the following Distribution Date. For all Federal income
tax purposes, amounts transferred by REMIC 3 to the Basis Risk Reserve Fund
shall be treated as amounts distributed by REMIC 3 to the Class C
Certificateholder.

          (d) Upon termination of the Trust Fund, any amounts remaining in the
Basis Risk Reserve Fund shall be distributed to the Class C Certificateholder
pursuant to Section 4.1(h).

         Section 4.7   The Instrument
                       --------------

         At any time on or after the Closing Date, the Depositor shall have the
right to deposit into the Trust Fund, solely for the benefit of the Holder of
the Class C Certificates, a derivative contract or comparable instrument. Any
such instrument shall constitute a fully prepaid agreement. All collections,
proceeds and other amounts in respect of such an instrument shall be distributed
to the Class C Certificates on the Distribution Date following receipt thereof
by the Trustee. In no event shall such an instrument constitute a part of any
REMIC created hereunder. In addition, in the event any such instrument is
deposited, the Trust Fund shall be deemed to be divided into two separate and
discrete sub-Trusts. The assets of one such sub-Trust shall consist of all the
assets of the Trust other than the instrument and the assets of the other
sub-Trust shall consist solely of such instrument.

         Section 4.8  The Calculation Agent
                      ---------------------

          (a) The Calculation Agent, as agent for the Master Servicer, shall
timely and accurately (i) perform and provide to the Trustee calculations of all
amounts of principal and interest required to be distributed on each
Distribution Date pursuant to this Article 4; (ii) in connection with such
calculations, determine the appropriate One Month LIBOR with respect to each
Interest Determination Date in accordance with the definition of "One Month
LIBOR" set forth in Section 1.1, and (iii) with respect to each Distribution
Date, determine the Pre-Funding Account Earnings in accordance with the
definition of "Pre-Funding Account Earnings" set forth in Section 1.1. The
Calculation Agent shall not resign from its capacity as the Calculation Agent on
fewer than sixty (60) prior written days notice to the Master Servicer.

                                       76
<PAGE>

          (b) The compensation of the Calculation Agent shall be the
responsibility of the Master Servicer, payable from the Master Servicing Fee.

          (c) The Master Servicer may terminate the Calculation Agent, in its
capacity as the Calculation Agent, at any time, with or without cause, upon
thirty (30) days notice in writing to the Calculation Agent. No fee shall be
payable to the Calculation Agent in connection with any such termination.

                                   ARTICLE 5

                                THE CERTIFICATES

         Section 5.1  The Certificates
                      ----------------

         The Certificates shall be substantially in the forms attached as
exhibits hereto. The Certificates shall be issuable in registered form, in the
minimum denominations, integral multiples in excess thereof (except that one
Certificate in each Class may be issued in a different amount which must be in
excess of the applicable minimum denomination) and aggregate denominations per
Class set forth in the Preliminary Statement.

         Subject to Section 9.2 hereof respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance
of any Class of Certificates or (B) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000 or (y) by check mailed by
first class mail to such Certificateholder at the address of such Holder
appearing in the Certificate Register.

         The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and delivered hereunder.
All Certificates shall be dated the date of their countersignature. On the
Closing Date, the Trustee shall countersign the Certificates to be issued at the
direction of the Depositor, or any affiliate thereof.

         The Depositor shall provide, or cause to be provided, to the Trustee on
a continuous basis, an adequate inventory of Certificates to facilitate
transfers.

                                       77
<PAGE>

         Section 5.2  Certificate Register; Registration of Transfer and
                      Exchange of Certificates.
                      --------------------------------------------------

          (a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.6 hereof, a Certificate Register for
the Trust Fund in which, subject to the provisions of subsections (b) and (c)
below and to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. Upon surrender for registration of transfer of
any Certificate, the Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and aggregate Percentage Interest.

         At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, authenticate, and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing.

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

         All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.

          (b) No Person shall transfer a Private Certificate unless such
transfer (i) is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or (ii) is exempt from
the registration requirements under said Act and such state securities laws. In
the event that a transfer is to be made in reliance upon an exemption from the
Securities Act and such laws, in order to assure compliance with the Securities
Act and such laws, the Certificateholder desiring to effect such transfer and
such Certificateholder's prospective transferee shall each certify to the
Trustee in writing the facts surrounding the transfer in substantially the forms
set forth in Exhibit F (the "Transferor Certificate") and (i) deliver a letter
in substantially the form of either Exhibit G (the "Investment Letter") or
Exhibit H (the "Rule 144A Letter") or (ii) there shall be delivered to the
Trustee at the expense of the transferor an Opinion of Counsel that such
transfer may be made pursuant to an exemption from the Securities Act. The
Depositor shall provide to any Holder of a Private Certificate and any
prospective transferee designated by any such Holder, information regarding the
related Certificates and the Mortgage Loans and such other information as shall
be necessary to satisfy the condition to eligibility set forth in Rule
144A(d)(4) for transfer of any such Certificate without registration thereof
under the Securities Act pursuant to the registration exemption provided by Rule
144A. The Trustee and the Master Servicer shall cooperate with the Depositor in
providing the Rule 144A information referenced in the preceding sentence,
including

                                       78
<PAGE>

providing to the Depositor such information regarding the Certificates, the
Mortgage Loans and other matters regarding the Trust Fund as the Depositor shall
reasonably request to meet its obligation under the preceding sentence. Each
Holder of a Private Certificate desiring to effect such transfer shall, and does
hereby agree to, indemnify the Trustee and the Depositor, the Depositor and the
Master Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws.

         No transfer of an ERISA-Restricted Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee (in the event such Certificate is a Private Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit G or Exhibit H),
to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan or arrangement subject to
Section 4975 of the Code, nor a person acting on behalf of any such plan or
arrangement, nor using the assets of any such plan or arrangement to effect such
transfer, (ii) in the case of a Private Certificate, if the purchaser is an
insurance company, a representation that the purchaser is an insurance company
which is purchasing such Certificates with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and
holding of such Certificates are covered under PTCE 95-60 or (iii) in the case
of any such ERISA-Restricted Certificate presented for registration in the name
of an employee benefit plan subject to ERISA, or a plan or arrangement subject
to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel
shall not be an expense of either the Trustee or the Trust Fund, addressed to
the Trustee to the effect that the purchase or holding of such ERISA-Restricted
Certificate will not result in the assets of the Trust Fund being deemed to be
"plan assets" and subject to the prohibited transaction provisions of ERISA and
the Code and will not subject the Trustee to any obligation in addition to those
expressly undertaken in this Agreement or to any liability. Notwithstanding
anything else to the contrary herein, any purported transfer of an
ERISA-Restricted Certificate to or on behalf of an employee benefit plan subject
to ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above shall be void and of no
effect.

         To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not permitted by this Section 5.2(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.

          (c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

                                       79
<PAGE>

              (i)     Each Person holding or acquiring any Ownership Interest in
         a Residual Certificate shall be a Permitted Transferee.

              (ii)    No Ownership Interest in a Residual Certificate may be
         registered on the Closing Date or thereafter transferred, and the
         Trustee shall not register the Transfer of any Residual Certificate
         unless, in addition to the certificates required to be delivered to the
         Trustee under subparagraph (b) above, the Trustee shall have been
         furnished with an affidavit (a "Transfer Affidavit") of the initial
         owner or the proposed transferee in the form attached hereto as Exhibit
         E.

              (iii)   Each Person holding or acquiring any Ownership Interest in
         a Residual Certificate shall agree (A) to obtain a Transfer Affidavit
         from any other Person to whom such Person attempts to Transfer its
         Ownership Interest in a Residual Certificate, (B) to obtain a Transfer
         Affidavit from any Person for whom such Person is acting as nominee,
         trustee or agent in connection with any Transfer of a Residual
         Certificate and (C) not to Transfer its Ownership Interest in a
         Residual Certificate or to cause the Transfer of an Ownership Interest
         in a Residual Certificate to any other Person if it has actual
         knowledge that such Person is not a Permitted Transferee.

              (iv)    Any attempted or purported Transfer of any Ownership
         Interest in a Residual Certificate in violation of the provisions of
         this Section 5.2(c) shall be absolutely null and void and shall vest no
         rights in the purported Transferee. If any purported transferee shall
         become a Holder of a Residual Certificate in violation of the
         provisions of this Section 5.2(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Residual
         Certificate. The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Residual Certificate that is in fact
         not permitted by Section 5.2(b) and this Section 5.2(c) or for making
         any payments due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the provisions of
         this Agreement so long as the Transfer was registered after receipt of
         the related Transfer Affidavit, Transferor Certificate and either the
         Rule 144A Letter or the Investment Letter. The Trustee shall be
         entitled but not obligated to recover from any Holder of a Residual
         Certificate that was in fact not a Permitted Transferee at the time it
         became a Holder or, at such subsequent time as it became other than a
         Permitted Transferee, all payments made on such Residual Certificate at
         and after either such time. Any such payments so recovered by the
         Trustee shall be paid and delivered by the Trustee to the last
         preceding Permitted Transferee of such Certificate.

              (v)     The Depositor shall use its best efforts to make
         available, upon receipt of written request from the Trustee, all
         information necessary to compute any tax imposed under Section 860E(e)
         of the Code as a result of a Transfer of an Ownership Interest in a
         Residual Certificate to any Holder who is not a Permitted Transferee.

         The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.2(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of

                                       80
<PAGE>

Counsel, which Opinion of Counsel shall not be an expense of the Trust Fund, the
Trustee, the Depositor or the Master Servicer, to the effect that the
elimination of such restrictions will not cause the REMIC created hereunder to
fail to qualify as a REMIC at any time that the Certificates are outstanding or
result in the imposition of any tax on the Trust Fund. Each Person holding or
acquiring any Ownership Interest in a Residual Certificate hereby consents to
any amendment of this Agreement which, based on an Opinion of Counsel furnished
to the Trustee, is reasonably necessary (a) to ensure that the record ownership
of, or any beneficial interest in, a Residual Certificate is not transferred,
directly or indirectly, to a Person that is not a Permitted Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a Person that is not a Permitted Transferee to a Holder that is a
Permitted Transferee.

          (d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.2 in connection with transfer shall be at
the expense of the parties to such transfers.

          (e) Except as provided below, the Book-Entry Certificates shall at all
times remain registered in the name of the Depository or its nominee and at all
times: (i) registration of the Certificates may not be transferred by the
Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository, Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of exercising the rights of holders under this Agreement, and requests
and directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.

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

         If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository, or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Class Certificate Balance of the
Book-Entry Certificates together advise the Trustee and the Depository through
the Depository Participants in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of

                                       81
<PAGE>

the Certificate Owners, the Trustee shall notify all Certificate Owners, through
the Depository, of the occurrence of any such event and of the availability of
definitive, fully-registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
related Class of Certificates by the Depository, accompanied by the instructions
from the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee shall
be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such instructions.
The Master Servicer shall provide the Trustee with an adequate inventory of
certificates to facilitate the issuance and transfer of Definitive Certificates.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder; provided
that the Trustee shall not by virtue of its assumption of such obligations
become liable to any party for any act or failure to act of the Depository.

         Section 5.3  Mutilated, Destroyed, Lost or Stolen Certificates
                      -------------------------------------------------

         If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.3, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 5.3 shall constitute complete and indefeasible evidence of
ownership, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.

         Section 5.4  Persons Deemed Owners
                      ---------------------

         The Trustee and any agent of the Trustee may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions as provided in this Agreement and for all
other purposes whatsoever, and neither the Trustee nor any agent of the Trustee
shall be affected by any notice to the contrary.

         Section 5.5  Access to List of Certificateholders' Names and Addresses
                      ---------------------------------------------------------

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from the
Trustee, then

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<PAGE>

the Trustee shall, within ten Business Days after the receipt of such request,
provide the Depositor, the Master Servicer or such Certificateholders at such
recipients' expense the most recent list of the Certificateholders of such Trust
Fund held by the Trustee, if any. The Depositor and every Certificateholder, by
receiving and holding a Certificate, agree that the Trustee shall not be held
accountable by reason of the disclosure of any such information as to the list
of the Certificateholders hereunder, regardless of the source from which such
information was derived.

         Section 5.6  Maintenance of Office or Agency
                      -------------------------------

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates its Corporate Trust Office for such purposes. The Trustee will give
prompt written notice to the Certificateholders of any change in such location
of any such office or agency.

                                   ARTICLE 6

                 THE DEPOSITOR, THE SERVICER AND MASTER SERVICER

         Section 6.1  Respective Liabilities of the Depositor, Servicer and
                      Master Servicer
                      -----------------------------------------------------

           The Depositor, Servicer and Master Servicer shall each be liable in
accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by them herein.

         Section 6.2  Merger or Consolidation of the Depositor, Servicer and
                      Master Servicer
                      ------------------------------------------------------

         The Depositor, Servicer and Master Servicer will each keep in full
effect its existence, rights and franchises as a corporation under the laws of
the United States or under the laws of one of the states thereof and will each
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.

         Any Person into which the Depositor, Servicer or the Master Servicer
may be merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor, Servicer or the Master Servicer shall be a
party, or any person succeeding to the business of the Depositor, Servicer or
the Master Servicer, shall be the successor of the Depositor, Servicer or the
Master Servicer, as the case may be, hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person to the Servicer shall be qualified to sell
mortgage loans to, and to service mortgage loans on behalf of, FNMA or FHLMC.

                                       83
<PAGE>

         Section 6.3  Limitation on Liability of the Depositor, the Depositor,
                      the Master Servicer and Others
                      --------------------------------------------------------

         None of the Depositor, the Servicer, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Servicer or the
Master Servicer shall be under any liability to the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Servicer, the Master
Servicer or any such Person against any breach of representations or warranties
made by it herein or protect the Depositor, the Servicer, the Master Servicer or
any such Person from any liability which would otherwise be imposed by reasons
of willful misfeasance, bad faith or gross negligence in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
The Depositor, the Servicer, the Master Servicer and any director, officer,
employee or agent of the Depositor, the Servicer or the Master Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Servicer, the Master Servicer and any director, officer, employee or agent
of the Depositor, the Servicer or the Master Servicer shall be indemnified by
the Trust Fund and held harmless against any loss, liability or expense incurred
in connection with any audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the performance thereof, or the Certificates, other than any loss, liability or
expense related to any specific Mortgage Loan or Mortgage Loans (except as any
such loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. None of the Depositor, the Servicer or the Master Servicer shall be
under any obligation to appear in, prosecute or defend any legal action that is
not incidental to its respective duties hereunder and which in its opinion may
involve it in any expense or liability; provided, however, that any of the
Depositor, the Servicer or the Master Servicer may in its discretion undertake
any such action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties hereto and interests of the
Trustee and the Certificateholders hereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Fund, and the Depositor, the
Servicer and the Master Servicer shall be entitled to be reimbursed therefor out
of the Collection Account.

         Section 6.4  Limitation on Resignation of Servicer
                      -------------------------------------

         The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) upon appointment of a successor servicer and receipt by
the Trustee of a letter from each Rating Agency that such a resignation and
appointment will not result in a downgrading of the rating of any of the
Certificates, or (b) upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination under clause (b)
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee. No such resignation shall
become effective until the Trustee or a successor master

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<PAGE>

servicer shall have assumed the Servicer's responsibilities, duties, liabilities
and obligations hereunder.

                                   ARTICLE 7

                                SERVICER DEFAULT

         Section 7.1  Events of Default.
                      ------------------

         "Event of Default," wherever used herein, means any one of the
following events:

              (i)     any failure by the Servicer to deposit in the Collection
         Account or remit to the Trustee any payment required to be made under
         the terms of this Agreement, which failure shall continue unremedied
         for five days after the date upon which written notice of such failure
         shall have been given to the Servicer by the Trustee or the Depositor
         or to the Master Servicer and the Trustee by the Holders of
         Certificates having not less than 51% of the Voting Rights evidenced by
         the Certificates; or

              (ii)    any failure by the Servicer to observe or perform in any
         material respect any other of the covenants or agreements on the part
         of the Servicer contained in this Agreement, which failure materially
         affects the rights of Certificateholders, which failure continues
         unremedied for a period of 60 days after the date on which written
         notice of such failure shall have been given to the Servicer by the
         Trustee, the Master Servicer, or the Depositor, or to the Servicer and
         the Trustee by the Holders of Certificates evidencing not less than 51%
         of the Voting Rights evidenced by the Certificates; provided, however,
         that the 60-day cure period shall not apply to the initial delivery of
         the Mortgage File for Delay Delivery Mortgage Loans nor the failure to
         substitute or repurchase in lieu thereof; or

              (iii)   a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings, or for
         the winding-up or liquidation of its affairs, shall have been entered
         against the Servicer and such decree or order shall have remained in
         force undischarged or unstayed for a period of 60 consecutive days; or

              (iv)    the Servicer shall consent to the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings of or
         relating to the Servicer or all or substantially all of the property of
         the Servicer; or

              (v)     the Servicer shall admit in writing its inability to pay
         its debts generally as they become due, file a petition to take
         advantage of, or commence a voluntary case under, any applicable
         insolvency or reorganization statute, make an assignment for the
         benefit of its creditors, or voluntarily suspend payment of its
         obligations.

                                       85
<PAGE>

         Upon its obtaining actual knowledge of the occurrence of an Event of
Default, the Master Servicer shall promptly deliver to the Trustee, an Officer's
Certificate that an event has occurred that may justify termination of the
Servicer hereunder and describing the circumstances surrounding such event. Upon
determination by the Master Servicer that an Event of Default has occurred, the
Master Servicer shall promptly deliver to the Trustee an Officer's Certificate
to that effect, and the Master Servicer (a) may terminate the Servicer
hereunder, if in its judgment such termination is in the best interests of the
Trust Fund; or (b) shall terminate the Servicer hereunder, if instructed to do
so by the Trustee. The Trustee shall so instruct the Master Servicer if directed
to do so by the Holders of Certificates evidencing not less than 51% of the
Voting Rights evidenced by the Certificates exercised in writing following
delivery to such Holders by the Trustee of notice of the occurrence of such
Event of Default pursuant to Section 7.2(b).

         Upon any such termination, the Master Servicer shall enter into a
substitute servicing arrangement with another mortgage loan servicing company
acceptable to the Master Servicer and Rating Agency under which such mortgage
loan servicing company shall assume, satisfy, perform and carry out all
liabilities, duties, responsibilities and obligations that are to be, or
otherwise were to have been, satisfied, performed and carried out by the
terminated Servicer hereunder. Until such time as the Master Servicer enters
into a substitute servicing agreement with respect to the Mortgage Loans, the
Master Servicer shall assume, satisfy, perform and carry out all obligations
which otherwise were to have been satisfied, performed and carried out by the
terminated Servicer. As compensation to the Master Servicer for any servicing
obligations fulfilled or assumed by the Master Servicer, the Master Servicer
shall be entitled to any servicing compensation to which the terminated Servicer
would have been entitled if such Servicer had not been terminated.

         Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a Scheduled Payment on a Mortgage Loan which was due prior to the notice
terminating such Servicer's rights and obligations as Servicer hereunder and
received after such notice, that portion thereof to which such Servicer would
have been entitled pursuant to Sections 3.8(a)(i) through (viii), and any other
amounts payable to such Master Servicer hereunder the entitlement to which arose
prior to the termination of its activities hereunder.

         Section 7.2  Notification to Certificateholders
                      ----------------------------------

          (a) Upon any termination of or appointment of a successor to the
Servicer or Master Servicer, the Trustee shall give prompt written notice
thereof to Certificateholders and to each Rating Agency.

          (b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.

                                       86
<PAGE>

                                   ARTICLE 8

                             CONCERNING THE TRUSTEE

         Section 8.1  Duties of Trustee
                      -----------------

         The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default that may have occurred, shall undertake to perform such
duties and only such duties as are specifically set forth in this Agreement. In
case an Event of Default of which a Responsible Officer of the Trustee has
actual knowledge has occurred and remains uncured, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.

         The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected instrument.

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

              (i)     unless an Event of Default of which a Responsible Officer
         of the Trustee has actual knowledge shall have occurred and be
         continuing, the duties and obligations of the Trustee shall be
         determined solely by the express provisions of this Agreement, the
         Trustee shall not be liable except for the performance of such duties
         and obligations as are specifically set forth in this Agreement, no
         implied covenants or obligations shall be read into this Agreement
         against the Trustee and the Trustee may conclusively rely, as to the
         truth of the statements and the correctness of the opinions expressed
         therein, upon any certificates or opinions furnished to the Trustee and
         conforming to the requirements of this Agreement which it believed in
         good faith to be genuine and to have been duly executed by the proper
         authorities respecting any matters arising hereunder;

              (ii)    the Trustee shall not be liable for an error of judgment
         made in good faith by a Responsible Officer or Responsible Officers of
         the Trustee, unless it shall be finally proven that the Trustee was
         negligent in ascertaining the pertinent facts;

              (iii)   the Trustee shall not be liable with respect to any action
         taken, suffered or omitted to be taken by it in good faith in
         accordance with the direction of Holders of

                                       87
<PAGE>

         Certificates evidencing not less than 25% of the Voting Rights of
         Certificates relating to the time, method and place of conducting any
         proceeding for any remedy available to the Trustee, or exercising any
         trust or power conferred upon the Trustee under this Agreement;

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

              (v)     without limiting the generality of this Section 8.1, the
         Trustee shall have no duty (A) to see to any recording, filing, or
         depositing of this Agreement or any agreement referred to herein or any
         financing statement or continuation statement evidencing a security
         interest, or to see to the maintenance of any such recording or filing
         or deposit or to any rerecording, refiling or redepositing of any
         thereof, (B) to see to any insurance, (C) to see to the payment or
         discharge of any tax, assessment, or other governmental charge or any
         lien or encumbrance of any kind owing with respect to, assessed or
         levied against, any part of the Trust Fund other than from funds
         available in the Distribution Account (D) to confirm or verify the
         contents of any reports or certificates of the Servicer delivered to
         the Trustee pursuant to this Agreement believed by the Trustee to be
         genuine and to have been signed or presented by the proper party or
         parties.

         Section 8.2  Certain Matters Affecting the Trustee.
                      --------------------------------------

         Except as otherwise provided in Section 8.1:

              (i)     the Trustee may request and rely upon and shall be
         protected in acting or refraining from acting upon any resolution,
         Officers' Certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, appraisal, bond or other paper or document believed by
         it to be genuine and to have been signed or presented by the proper
         party or parties and the Trustee shall have no responsibility to
         ascertain or confirm the genuineness of any signature of any such party
         or parties;

              (ii)    the Trustee may consult with counsel, financial advisers
         or accountants and the advice of any such counsel, financial advisers
         or accountants and any Opinion of Counsel shall be full and complete
         authorization and protection in respect of any action taken or suffered
         or omitted by it hereunder in good faith and in accordance with such
         Opinion of Counsel;

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<PAGE>

              (iii)   the Trustee shall not be liable for any action taken,
         suffered or omitted by it in good faith and believed by it to be
         authorized or within the discretion or rights or powers conferred upon
         it by this Agreement;

              (iv)    the Trustee shall not be bound to make any investigation
         into the facts or matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice, request, consent,
         order, approval, bond or other paper or document, unless requested in
         writing so to do by Holders of Certificates evidencing not less than
         25% of the Voting Rights allocated to each Class of Certificates;
         provided, however, that if the payment within a reasonable time to the
         Trustee of the costs, expenses or liabilities likely to be incurred by
         it in the making of such investigation is, in the opinion of the
         Trustee, not assured to the Trustee by the security afforded to it by
         the terms of this Agreement, the Trustee may require indemnity
         satisfactory to the Trustee against such cost, expense or liability as
         a condition to taking any such action.

              (v)     the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents, accountants or attorneys and the Trustee shall not be
         responsible for any misconduct or negligence on the part of such agent,
         accountant or attorney appointed by the Trustee with due care;

              (vi)    the Trustee shall not be required to risk or expend its
         own funds or otherwise incur any financial liability in the performance
         of any of its duties or in the exercise of any of its rights or powers
         hereunder if it shall have reasonable grounds for believing that
         repayment of such funds or adequate indemnity against such risk or
         liability is not assured to it;

              (vii)   the Trustee shall not be liable for any loss on any
         investment of funds pursuant to this Agreement (other than as issuer of
         the investment security);

              (viii)  the Trustee shall not be deemed to have knowledge of an
         Event of Default until a Responsible Officer of the Trustee shall have
         received written notice thereof and in the absence of such notice, the
         Trustee may conclusively assume that there is no Event of Default;

              (ix)    the Trustee shall be under no obligation to exercise any
         of the trusts, rights or powers vested in it by this Agreement or to
         institute, conduct or defend any litigation hereunder or in relation
         hereto at the request, order or direction of any of the
         Certificateholders, pursuant to the provisions of this Agreement,
         unless such Certificateholders shall have offered to the Trustee
         reasonable security or indemnity satisfactory to the Trustee against
         the costs, expenses and liabilities which may be incurred therein or
         thereby;

              (x)     the right of the Trustee to perform any discretionary act
         enumerated in this Agreement shall not be construed as a duty, and the
         Trustee shall not be answerable for other than its negligence or
         willful misconduct in the performance of such act; and

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<PAGE>

              (xi)    the Trustee shall not be required to give any bond or
         surety in respect of the execution of the Trust Fund created hereby or
         the powers granted hereunder.

         Section 8.3  Trustee Not Liable for Certificates or Mortgage Loans
                      -----------------------------------------------------

         The recitals contained herein and in the Certificates shall be taken as
the statements of the Depositor, the Depositor or Master Servicer, as the case
may be, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates or of any Mortgage Loan or related document
other than with respect to the Trustee's execution and counter-signature of the
Certificates. The Trustee shall not be accountable for the use or application by
the Depositor or the Master Servicer of any funds paid to the Depositor or the
Master Servicer in respect of the Mortgage Loans or deposited in or withdrawn
from the Collection Account by the Depositor or the Master Servicer.

         Section 8.4  Trustee May Own Certificates.
                      -----------------------------

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

         Section 8.5  Trustee's Fees and Expenses.
                      ----------------------------

         The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.1 hereunder, shall be entitled to withdraw
from the Distribution Account on each Distribution Date an amount equal to the
Trustee Fee for such Distribution Date.

         Section 8.6  Eligibility Requirements for Trustee
                      ------------------------------------

         The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to super-vision or examination by federal or state authority and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current ratings of the Certificates (or having provided such
security from time to time as is sufficient to avoid such reduction). If such
corporation or association publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 8.6 the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 8.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.7 hereof.
The entity serving as Trustee may have normal banking and trust relationships
with the Depositor and its affiliates or the Master Servicer and its affiliates;
provided, however, that such entity cannot be an affiliate of the Master
Servicer other than the Trustee in its role as successor to the Master Servicer.

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<PAGE>

         Section 8.7  Resignation and Removal of Trustee
                      ----------------------------------

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor and the
Master Servicer and each Rating Agency not less than 60 days before the date
specified in such notice when, subject to Section 8.8, such resignation is to
take effect, and acceptance by a successor trustee in accordance with Section
8.8 meeting the qualifications set forth in Section 8.6. If no successor trustee
meeting such qualifications shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice or resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.

         If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.6 hereof and shall fail to resign after written
request thereto by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.

         The Holders of Certificates entitled to at least 51% of the Voting
Rights may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer, one complete
set to the Trustee so removed and one complete set to the successor so
appointed. Notice of any removal of the Trustee shall be given to each Rating
Agency by the Successor Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.7 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.8 hereof.

         Section 8.8  Successor Trustee
                      -----------------

         Any successor trustee appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and

                                       91
<PAGE>

certainly vesting and confirming in the successor trustee all such rights,
powers, duties, and obligations.

         No successor trustee shall accept appointment as provided in this
Section 8.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.6 hereof and its appointment shall
not adversely affect the then current rating of the Certificates.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.8, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Depositor.

         Section 8.9  Merger or Consolidation of Trustee
                      ----------------------------------

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 8.6 hereof without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.

         Section 8.10 Appointment of Co-Trustee or Separate Trustee
                      ---------------------------------------------

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 8.6 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.8.

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

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<PAGE>

              (i)     To the extent necessary to effectuate the purposes of this
         Section 8.10, all rights, powers, duties and obligations conferred or
         imposed upon the Trustee shall be conferred or imposed upon and
         exercised or performed by the Trustee and such separate trustee or
         co-trustee jointly (it being understood that such separate trustee or
         co-trustee is not authorized to act separately without the Trustee
         joining in such act), except to the extent that under any law of any
         jurisdiction in which any particular act or acts are to be performed
         (whether as Trustee hereunder or as successor to the Master Servicer
         hereunder), the Trustee shall be incompetent or unqualified to perform
         such act or acts, in which event such rights, powers, duties and
         obligations (including the holding of title to the applicable Trust
         Fund or any portion thereof in any such jurisdiction) shall be
         exercised and performed singly by such separate trustee or co-trustee,
         but solely at the direction of the Trustee;

              (ii)    No trustee hereunder shall be held personally liable by
         reason of any act or omission of any other trustee hereunder and such
         appointment shall not, and shall not be deemed to, constitute any such
         separate trustee or co-trustee as agent of the Trustee;

              (iii)   The Trustee may at any time accept the resignation of or
         remove any separate trustee or co-trustee; and

              (iv)    The Master Servicer, and not the Trustee, shall be liable
         for the payment of reasonable compensation, reimbursement and
         indemnification to any such separate trustee or co-trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and 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 VIII. 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 Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

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

         Section 8.11 Tax Matters
                      -----------

         It is intended that the assets with respect to which the REMIC
elections are to be made, as set forth in Schedule III, shall constitute, and
that the conduct of matters relating to such assets

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<PAGE>

shall be such as to qualify such assets as REMICs as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of each such REMIC and that in such
capacity it shall: (a) prepare and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax Return
(Form 1066 or any successor form adopted by the Internal Revenue Service) and
prepare and file or cause to be prepared and filed with the Internal Revenue
Service and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to each such REMIC, containing such
information and at the times and in the manner as may be required by the Code or
state or local tax laws, regulations, or rules, and furnish or cause to be
furnished to Certificateholders the schedules, statements or information at such
times and in such manner as may be required thereby; (b) within thirty days of
the Closing Date, furnish or cause to be furnished to the Internal Revenue
Service, on Forms 8811 or as otherwise may be required by the Code, the name,
title, address, and telephone number of the person that the Holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code; (c) make or
cause to be made REMIC elections as directed in Schedule III on the federal tax
returns for each such REMIC's first taxable year (and, if necessary, under
applicable state law); (d) prepare and forward, or cause to be prepared and
forwarded, to the Certificateholders and to the Internal Revenue Service and, if
necessary, state tax authorities, all information returns and reports as and
when required to be provided to them in accordance with the REMIC Provisions,
including without limitation, the calculation of any original issue discount
using the prepayment assumption; (e) provide information necessary for the
computation of tax imposed on the transfer of a Residual Certificate to a Person
that is not a Permitted Transferee, or an agent (including a broker, nominee or
other middleman) of a Non-Permitted Transferee, or a pass-through entity in
which a Non-Permitted Transferee is the record holder of an interest (the
reasonable cost of computing and furnishing such information may be charged to
the Person liable for such tax); (f) to the extent that they are under its
control conduct matters relating to such assets at all times that any
Certificates are outstanding so as to maintain the status of each REMIC created
hereunder under the REMIC Provisions; (g) not knowingly or intentionally take
any action or omit to take any action that would cause the termination of REMIC
status; (h) pay, from the sources specified in the last paragraph of this
Section 8.11, the amount of any federal or state tax, including prohibited
transaction taxes as described below, imposed on any such REMIC prior to its
termination when and as the same shall be due and payable (but such obligation
shall not prevent the Trustee or any other appropriate Person from contesting
any such tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings); (i) ensure that federal, state or local income tax or
information returns shall be signed by the Trustee or such other person as may
be required to sign such returns by the Code or state or local laws, regulations
or rules; (j) maintain records relating to any such REMIC, including but not
limited to the income, expenses, assets and liabilities thereof and the fair
market value and adjusted basis of the assets determined at such intervals as
may be required by the Code, as may be necessary to prepare the foregoing
returns, schedules, statements or information; and (k) as and when necessary and
appropriate, represent any such REMIC in any administrative or judicial
proceedings relating to an examination or audit by any governmental

                                       94
<PAGE>

taxing authority, request an administrative adjustment as to any taxable year of
any such REMIC, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any such
REMIC, and otherwise act on behalf of any such REMIC in relation to any tax
matter or controversy involving it.

         To enable the Trustee to perform its duties as set forth herein, the
Depositor shall provide, or cause to be provided, to the Trustee within ten (10)
days after the Closing Date all information or data that the Trustee requests in
writing and determines to be relevant for tax purposes to the valuations and
offering prices of the Certificates, including, without limitation, the price,
yield, prepayment assumption and projected cash flows of the Certificates and
the Mortgage Loans. Thereafter, the Depositor shall provide to the Trustee
promptly upon written request therefor, any such additional information or data
that the Trustee may, from time to time, reasonably request in order to enable
the Trustee to perform its duties as set forth herein. The Depositor hereby
indemnifies the Trustee for any losses, liabilities, damages, claims or expenses
of the Trustee arising from any errors or miscalculations of the Trustee that
result from any failure of the Depositor to provide, or to cause to be provided,
accurate information or data to the Trustee on a timely basis.

         Section 8.12 Periodic Filings
                      ----------------

         Pursuant to written instructions from the Depositor, the Trustee shall
prepare, execute and file all periodic reports required under the Securities
Exchange Act of 1934 in conformity with the terms of the "no-action" relief
granted by the SEC to issuers of asset-backed securities such as the
Certificates. In connection with the preparation and filing of such periodic
reports, the Depositor and the Master Servicer shall timely provide to the
Trustee all material information available to them which is required to be
included in such reports and not known to them to be in the possession of the
Trustee and such other information as the Trustee reasonably may request from
either of them and otherwise reasonably shall cooperate with the Trustee. The
Trustee shall have no liability with respect to any failure to properly prepare
or file such periodic reports resulting from or relating to the Trustee's
inability or failure to obtain any information not resulting from its own
negligence or willful misconduct.

                                   ARTICLE 9

                                   TERMINATION

         Section 9.1  Termination upon Liquidation or Purchase of all Mortgage
                      Loans
                      --------------------------------------------------------

          (a) Subject to Section 9.3, the obligations and responsibilities of
the Depositor, the Master Servicer and the Trustee created hereby with respect
to the Trust Fund shall terminate upon the earlier of:

              (i)     the purchase by the Master Servicer or its designee of all
         Mortgage Loans (including REO Properties not otherwise disposed of
         pursuant to Section 3.11(i)) remaining in the Trust Fund at a price
         equal to the sum of (i) 100% of the Stated Principal Balance of each
         Mortgage Loan that is not a Nonrecoverable Mortgage Loan, plus one

                                       95
<PAGE>

         month's accrued interest thereon at the applicable Net Rate; (ii) the
         Projected Net Liquidation Value of each Nonrecoverable Mortgage Loan
         (not including any REO), and (iii) the lesser of (x) the appraised
         value of any REO Property as determined by a real estate broker meeting
         the qualifications, and applying broker's price opinion methodology,
         generally acceptable to residential mortgage servicers, or other
         property valuation opinion methodology customarily used by residential
         mortgage servicers with respect to defaulted loans and (y) the Stated
         Principal Balance of each Mortgage Loan related to any REO Property. In
         addition, such purchase price shall include with respect to the
         Mortgage Loans (including REO Properties) described in clauses (ii) and
         (iii) above accrued and unpaid interest thereon at the applicable Net
         Rate, except to the extent was not or would not be required to be
         advanced as a P&I Advance hereunder; and

              (ii)    the later of (i) the maturity or other liquidation (or any
         Advance with respect thereto) of the last Mortgage Loan remaining in
         the Trust Fund and the disposition of all REO Property and (ii) the
         distribution to Certificateholders of all amounts required to be
         distributed to them pursuant to this Agreement. In no event shall the
         trusts created hereby continue beyond the earlier of (i) the expiration
         of 21 years from the death of the survivor of the descendants of Joseph
         P. Kennedy, the late Ambassador of the United States to the Court of
         St. James's, living on the date hereof, and (ii) the Latest Possible
         Maturity Date. The right to purchase all Mortgage Loans and REO
         Properties pursuant to clause (a) above shall be conditioned upon the
         Pool Principal Balance, at the time of any such repurchase, aggregating
         less than ten percent of the aggregate Cut Off Date Principal Balance
         of the Mortgage Loans.

          (b) With respect to any purchase pursuant to subsection (a), upon
deposit of the price determined pursuant to subsection (a) in the Distribution
Account, the Trustee shall release or cause to be released to the purchaser of
each such Mortgage Loan the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment prepared by the purchaser of such
Mortgage Loan (including appropriate instruments with respect to any REO
Property), in each case without recourse, as shall be necessary to vest in the
purchaser of such Mortgage Loan any Mortgage Loan sold pursuant hereto, and the
purchaser of such Mortgage Loan shall succeed to all the Trustee's right, title
and interest in and to such Mortgage Loan and all security and documents related
thereto. Such assignment shall be an assignment outright and not for security.
The purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and
all security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

         Section 9.2  Final Distribution on the Certificates
                      --------------------------------------

         If on any Determination Date, the Master Servicer determines that there
are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Collection Account, the Master Servicer shall direct
the Trustee promptly to send a final distribution notice to each
Certificateholder. If the Master Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.1, at least 20 days prior to the date notice
is to be mailed to the affected Certificateholders, the Master Servicer shall
notify the Depositor and the Trustee

                                       96
<PAGE>

of the date the Master Servicer intends to terminate the Trust Fund and of the
applicable repurchase price of the Mortgage Loans and REO Properties.

         Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 10th
day and no later than the 15th day of the month next preceding the month of such
final distribution. Any such notice shall specify (a) the Distribution Date upon
which final distribution on the Certificates will be made upon presentation and
surrender of Certificates at the office therein designated, (b) the amount of
such final distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.

         In the event such notice is given, the Master Servicer shall cause all
funds in the Collection Account to be remitted to the Trustee for deposit in the
Distribution Account on the Business Day prior to the applicable Distribution
Date in an amount equal to the final distribution in respect of the
Certificates. Upon such final deposit with respect to the Trust Fund and the
receipt by the Trustee of a Request for Release therefor, the Trustee shall
promptly release to the Master Servicer the Mortgage Files for the Mortgage
Loans.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon (or on their Notional Amount, if applicable) in
the case of an interest bearing Certificate, and (ii) as to the Residual
Certificates, the amount, if any, which remains on deposit in the Distribution
Account (other than the amounts retained to meet claims) after application
pursuant to clause (i) above.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the holder of each of the
Class R Certificates shall be entitled to all unclaimed funds and other assets
of the Trust Fund held for distribution to such Certificateholders, which remain
subject hereto.

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<PAGE>

         Section 9.3  Additional Termination Requirements
                      -----------------------------------

          (a) In the event the Master Servicer exercises its purchase option as
provided in Section 9.1, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the effect that
the failure to comply with the requirements of this Section 9.3 will not (i)
result in the imposition of taxes on "prohibited transactions" on any REMIC as
defined in section 860F of the Code, or (ii) cause any REMIC to fail to qualify
as a REMIC at any time that any Certificates are outstanding:

              (i)     The Trustee shall sell all of the assets that constitute
         the Trust Fund for cash as provided in Section 9.01(a)(i), and, within
         90 days of such sale, shall distribute to (or credit to the account of)
         the Holders of the Certificates the proceeds of such sale together with
         other cash on hand (less amounts retained to meet claims) in complete
         liquidation of the Trust Fund and each REMIC created hereunder; and

              (ii)    The Trustee shall attach a statement to the final federal
         income tax return for each REMIC created hereunder stating that
         pursuant to Treasury Regulation ss. 1.860F-1, the first day of the
         90-day liquidation period for each such REMIC was the date on which the
         Trustee sold the assets of the Trust Fund pursuant to Section
         9.01(a)(i).

          (b) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Trustee to undertake the above-described actions.

                                   ARTICLE 10

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
                             BY THE MASTER SERVICER

         Section 10.1 Duties of the Master Servicer.
                      ------------------------------

          (a) The Certificateholders, by their purchase and acceptance of the
Certificates, appoint Saxon Mortgage, Inc. as Master Servicer. For and on behalf
of the Depositor, the Trustee and the Certificateholders, the Master Servicer
shall master service the Mortgage Loans in accordance with the provisions of
this Agreement.

          (b) The Master Servicer shall supervise and provide oversight of the
Servicer's performance of its obligations hereunder. The Master Servicer shall,
for the benefit of Certificateholders, use its reasonable best efforts to
enforce the obligation of the Servicer hereunder, and, upon its obtaining actual
knowledge of an Event of Default, shall take such action as is required by
Section 7.1.

          (c) To the extent the Servicer defaults in its obligation to timely
make an P&I Advance required hereunder, upon notice of such failure, the Master
Servicer shall be required to make such P&I Advance by the related Distribution
Date. All rights of reimbursement otherwise

                                       98
<PAGE>

available to the Servicer hereunder in respect of any Advance shall be fully
available to the Master Servicer.

          (d) The Master Servicer shall, in the manner and at such times
specified, prepare and furnish the reports described in Sections 4.4 and 4.5.

         Section 10.2 Compensation to the Master Servicer.
                      ------------------------------------

          (a) The Master Servicer shall be entitled to the Master Servicing Fee
on each Distribution Date from amounts on deposit in the Master Servicer
Custodial Account. If, on any Distribution Date such fee is not distributed as
provided herein, the Master Servicer shall be entitled to direct the Trustee to
pay the Master Servicing Fee to the Master Servicer by withdrawal from the
Distribution Account. The Master Servicer shall be entitled to deposit account
earnings as provided in Section 3.5 as additional master servicing compensation.

         Section 10.3 Termination of Master Servicer; Trustee to Act.
                      -----------------------------------------------

         Each of the following shall constitute an event of default by the
Master Servicer (a "Master Servicer Event of Default") of its obligations
hereunder:

          (a) the Master Servicer shall fail duly to observe or perform in any
material respect any of its covenants or agreements (other than its obligation
to make an Advance) contained herein and such failure shall continue unremedied
for a period of 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master Servicer
by the Trustee or to the Master Servicer and the Trustee by the Holders of
Certificates entitled to at least 51% of the Voting Rights; or

          (b) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and 1iabilities or similar proceeding, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Master Servicer and such decree or order shall have remained in force
undischarged and unstayed for a period of 60 days; or

          (c) the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceeding of or relating to the
Master Servicer or relating to all or substantially all its property; or

          (d) the Master Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations; or

                                       99
<PAGE>

          (e) the Master Servicer shall fail to make any P&I Advance required to
be made by it hereunder within one Business Day of the date that such P&I
Advance is due.

         The rights and obligations of the Master Servicer under this Agreement
may be terminated only upon the occurrence of a Master Servicer Event of
Default. If a Master Servicer Event of Default described in clauses (a) through
(d) of this Section 10.3 shall occur, then, and in each and every such case, so
long as such Master Servicer Event of Default shall not have been remedied, the
Trustee may, and at the direction of the Holders of Certificates entitled to at
least 51% of the Voting Rights, the Trustee shall, by notice in writing to the
Master Servicer, terminate all the rights and obligations of the Master Servicer
hereunder, other than its rights as a Certificateholder. If a Master Servicer
Event of Default described in clause (e) of this Section 10.3 shall occur, the
Trustee may terminate, by notice in writing to the Master Servicer, all the
rights and obligations of the Master Servicer hereunder, other than its rights
as a Certificateholder. On and after the receipt by the Master Servicer of such
written notice, all authority and power of the Master Servicer hereunder,
whether with respect to the Certificates (other than as a Holder thereof) or the
Mortgage Loans or otherwise, shall, to the maximum extent permitted by law, pass
to and be vested in the Trustee pursuant to and under this Section 10.3
(provided, however, that the Master Servicer shall continue to be entitled to
receive all amounts accrued or owing to it hereunder on or prior to the date of
such termination. Without limiting the generality of the foregoing, the Trustee
is hereby authorized and empowered to execute and deliver on behalf of and at
the expense of the Master Servicer, as the Master Servicer's attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things that in the Trustee's sole and absolute judgment may be
necessary or appropriate, to effect such termination. Notwithstanding the
foregoing, upon any such termination the Master Servicer shall do all things
reasonably requested by the Trustee to effect the termination of the Master
Servicer's responsibilities, rights and powers hereunder, and the transfer
thereof to the Trustee, including, but not limited to, promptly providing to the
Trustee (and in no event later than ten Business Days subsequent to such notice)
all documents and records electronic and otherwise reasonably requested by the
Trustee to enable the Trustee or its designee to assume and carry out the duties
and obligations that otherwise were to have been performed and carried out by
the Master Servicer but for such termination.

         As successor Master Servicer, the Trustee shall be entitled to the fees
to which the Master Servicer would have been entitled if the Master Servicer had
continued to act as such. The Trustee shall also, as successor Master Servicer,
be entitled to all the protections and indemnification afforded to the Master
Servicer hereunder.

         Notwithstanding the above, upon the occurrence of a Master Servicer
Event of Default, if the Trustee shall be unwilling so to act, or shall, if it
is unable so to act or, if the Holders of Certificates entitled to at least 51%
of the Voting Rights so request in writing to the Trustee, promptly appoint, or
petition a court of competent jurisdiction to appoint, any established mortgage
loan servicing institution acceptable to each Rating Agency and having a net
worth of not less than $15,000,000 as the successor to the Master Servicer. No
appointment of a successor to the Master Servicer shall be effective until the
assumption by such successor of all future responsibilities, duties and
liabilities of the Master Servicer hereunder. Pending appointment of

                                      100
<PAGE>

a successor to the Master Servicer, the Trustee or an affiliate shall, to the
maximum extent permitted by law, act in such capacity as hereinabove provided.

         In connection with any such appointment and assumption described
herein, the Trustee may make such arrangements for the compensation of such
successor out of payments received on the assets included in .the Trust Fund as
it and such successor shall agree; provided, however, that no such compensation
shall be in excess of that permitted the Master Servicer hereunder. The Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession.

         Section 10.4 Notification to Certificateholders
                      ----------------------------------

         Upon any termination pursuant to Section 10.3 hereof, or any
appointment of a successor to the Master Servicer, the Trustee shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register.


                                   ARTICLE 11

                            MISCELLANEOUS PROVISIONS

         Section 11.1 Amendment
                      ---------

         This Agreement may be amended from time to time by the Depositor,
Servicer, the Master Servicer and the Trustee without the consent of any of the
Certificateholders (i) to cure any ambiguity or mistake, (ii) to cause the
provisions herein to conform to or be consistent with or in furtherance of the
statements made with respect to the Certificates, the Trust Fund or this
Agreement in any disclosure document pursuant to which any Certificates were
offered; to correct any defective provision herein or to supplement any
provision herein which may be inconsistent with any other provision herein,
(iii) to add to the duties of the Depositor, the Servicer or the Master
Servicer, (iv) to add any other provisions with respect to matters or questions
arising hereunder or (v) to modify, alter, amend, add to or rescind any of the
terms or provisions contained in this Agreement; provided that any action
pursuant to clauses (iv) or (v) above shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund), adversely affect in any material
respect the interests of any Certificateholder; provided, however, that the
amendment shall not be deemed to adversely affect in any material respect the
interests of the Certificateholders if the Person requesting the amendment
obtains a letter from each Rating Agency stating that the amendment would not
result in the downgrading or withdrawal of the respective ratings then assigned
to the Certificates; it being understood and agreed that any such letter in and
of itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, Servicer, the Depositor and the Master
Servicer also may at any time and from time to time amend this Agreement without
the consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i)

                                      101
<PAGE>

maintain the qualification of each REMIC created hereunder as a REMIC under the
Code, (ii) avoid or minimize the risk of the imposition of any tax on any such
REMIC pursuant to the Code that would be a claim at any time prior to the final
redemption of the Certificates or (iii) comply with any other requirements of
the Code, provided that the Trustee have been provided an Opinion of Counsel,
which opinion shall be an expense of the party requesting such opinion but in
any case shall not be an expense of the Trustee or the Trust Fund, to the effect
that such action is necessary or helpful to, as applicable, (i) maintain such
qualification, (ii) avoid or minimize the risk of the imposition of such a tax
or (iii) comply with any such requirements of the Code.

         This Agreement may also be amended from time to time by the Depositor,
Servicer, the Master Servicer and the Trustee with the consent of the Holders of
a Majority in Interest of each Class of Certificates affected thereby 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 Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66%, or (iii) reduce the
aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.

         Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on the REMIC or the Certificateholders or cause the REMIC
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

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

         Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 11.1.

                                      102
<PAGE>

         Section 11.2 Recordation of Agreement; Counterparts
                      --------------------------------------

         This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer at its expense, but only
upon direction a majority of the Certificateholders to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders. However, the foregoing sentence notwithstanding, the
Servicer may provide copies hereof to counsel, judicial officers, and government
agencies, or may cause this Agreement to be recorded, in any jurisdiction in
which, in the Servicer's judgment, such disclosure or recording may facilitate
foreclosure or other recovery with respect to any one or more of the Mortgage
Loans.

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

         Section 11.3 Governing Law
                      -------------

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

         Section 11.4 Intention of Parties
                      --------------------

         It is the express intent of the parties hereto that the conveyance of
the Trust Fund by the Depositor to the Trustee be, and be construed as, absolute
sales thereof to the Trustee. It is, further, not the intention of the parties
that such conveyances be deemed a pledge thereof by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York and
(ii) the conveyance provided for in this Agreement shall be deemed to be an
assignment and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

         The Depositor, for the benefit of the Certificateholders, shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Trust Fund, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. The Depositor shall arrange for filing any
Uniform

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<PAGE>

Commercial Code continuation statements in connection with any security interest
granted or assigned to the Trustee for the benefit of the Certificateholders.

         Section 11.5 Notices
                      -------

          (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency with respect to each of the following of which it has
actual knowledge:

              1.      Any material change or amendment to this Agreement;

              2.      The occurrence of any Event of Default that has not been
         cured;

              3.      The resignation or termination of the Servicer, the Master
         Servicer or the Trustee and the appointment of any successor;

              4.      The repurchase or substitution of Mortgage Loans pursuant
         to Section 2.3; and

              5.      The final payment to Certificateholders.

              6.      Any rating action involving the long-term credit rating of
         the Master Servicer, which notice shall be made by first-class mail
         within two Business Days after the Trustee gains actual knowledge
         thereof.

         In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

              1.      Each report to Certificateholders described in Section
         4.6;

              2.      Each annual statement as to compliance described in
         Section 3.16;

              3.      Each annual independent public accountants' servicing
         report described in Section 3.17; and

              4.      Any notice of a purchase of a Mortgage Loan pursuant to
         Section 2.2, 2.3 or 3.11.

          (b) All directions, demands, authorizations, consents, waivers,
communications and notices hereunder shall be in writing and shall be deemed to
have been duly given when delivered by first class mail, facsimile or courier to
the applicable Notice Address, or in the case of the Rating Agencies, the
address specified therefor in the definition corresponding to the name of such
Rating Agency. Notices to Certificateholders shall be deemed given when mailed,
first class postage prepaid, to their respective addresses appearing in the
Certificate Register.

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<PAGE>

         Section 11.6 Severability of Provisions
                      --------------------------

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

         Section 11.7 Assignment
                      ----------

           Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.

         Section 11.8 Limitation on Rights of Certificateholders
                      ------------------------------------------

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and

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<PAGE>

enforcement of the provisions of this Section 11.8, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.

         Section 11.9  Inspection and Audit Rights
                       ---------------------------

         The Servicer agrees that, on reasonable prior notice, it will permit
and will cause each Subservicer to permit any representative of the Depositor or
the Trustee during the Servicer's normal business hours, to examine all the
books of account, records, reports and other papers of the Servicer relating to
the Mortgage Loans, to make copies and extracts therefrom, to cause such books
to be audited by independent certified public accountants selected by the
Depositor or the Trustee and to discuss its affairs, finances and accounts
relating to the Mortgage Loans with its officers, employees and independent
public accountants (and by this provision the Master Servicer hereby authorizes
said accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the Depositor
or the Trustee of any right under this Section 11.9 shall be borne by the party
requesting such inspection; all other such expenses shall be borne by the
Servicer or the related Subservicer.

         Section 11.10 Certificates Nonassessable and Fully Paid
                       -----------------------------------------

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

         Section 11.11 Limitations on Actions; No Proceedings.
                       ---------------------------------------

          (a) Other than pursuant to this Agreement, or in connection with or
incidental to the provisions or purposes of this Agreement, the trust created
hereunder shall not (i) issue debt or otherwise borrow money, (ii) merge or
consolidate with any other entity reorganize, liquidate or transfer all or
substantially all of its assets to any other entity, or (iii) otherwise engage
in any activity or exercise any power not provided for in this Agreement.

          (b) Notwithstanding any prior termination of this Agreement, the
Trustee, the Servicer, the Master Servicer and the Depositor shall not, prior to
the date which is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause any Person to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Depositor or the Trust Fund under any federal or
state bankruptcy, insolvency or other similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Depositor or the Trust Fund or any substantial part of their respective
property, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust Fund.

                                      * * *

                                      106
<PAGE>

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

                             SAXON ASSET SECURITIES COMPANY


                             By:
                                 ----------------------------------------------
                                 Bradley D. Adams, Senior Vice President


                             SAXON MORTGAGE, INC.


                             By:
                                 ----------------------------------------------
                                 Bradley D. Adams, Senior Vice President


                             MERITECH MORTGAGE SERVICES, INC.


                             By:
                                 ----------------------------------------------


                             BANKERS TRUST COMPANY


                             By:
                                 ----------------------------------------------
                                 Barbara Campbell, Assistant Secretary

                                      107
<PAGE>

                                                                     Schedule II


                           PASS-THROUGH RATE SCHEDULE

         Set forth below are the Pass-Through Rates for each interest bearing
Class of Certificates:

         Class AF-1 Pass-Through Rate: With respect to any Distribution Date,
the least of :

               (x)    One Month LIBOR, plus in the case of any Distribution Date
                      prior to the Initial Optional Termination Date [[ ]]% per
                      annum, or in the case of any Distribution Date that occurs
                      after the Initial Optional Termination Date, plus [[ ]]%
                      per annum;

               (y)    the Net WAC Cap for such Distribution Date; and

               (z)    the Maximum Cap Rate for such Distribution Date.

         Class AF-2 Pass-Through Rate: With respect to each Distribution Date,
the lesser of:

               (x)    [[     ]]% per annum; and

               (y)    the Net WAC Cap for such Distribution Date.

         Class AF-3 Pass-Through Rate: With respect to each Distribution Date,
the lesser of:

               (x)    [[     ]]% per annum; and

               the Net WAC Cap for such Distribution Date.

         Class AF-4 Pass-Through Rate: With respect to each Distribution Date,
the lesser of:

               (x)    [[     ]]% per annum; and

               the Net WAC Cap for such Distribution Date.

         Class AF-5 Pass-Through Rate: With respect to each Distribution Date,
the lesser of:

               (x)    [[ ]]% per annum plus, after the Initial Optional
                      Termination Date,
                      [[ ]]%; and

               the Net WAC Cap for such Distribution Date.

         Class AF-6 Pass-Through Rate: With respect to each Distribution Date,
the lesser of:

               (x)    [[ ]]% per annum plus, after the Initial Optimal
                      Termination Date,
                      [[ ]]%; and

                                      108
<PAGE>

               (y)    the Net WAC Cap for such Distribution Date.

         Class A-IO Pass-Through Rate: With respect to each Distribution Date,
6.25% per annum.

         Class AV-1 Pass-Through Rate: With respect to each Distribution Date,
the least of:

               (x)    One Month LIBOR plus, in the case of any Distribution Date
                      on or prior to the Initial Optional Termination Date, [[
                      ]]% per annum, or in the case of any Distribution Date
                      that occurs after the Initial Optional Termination Date,
                      plus [[ ]]% per annum;

               (y)    the Net WAC Cap for such Distribution Date; and

               (z)    the Maximum Cap Rate for such Distribution Date.

         Class AV-2 Pass-Through Rate: With respect to each Distribution Date,
the least of :

               (x)    One Month LIBOR plus, in the case of any Distribution Date
                      on or prior to the Initial Optional Termination Date, [[
                      ]]% per annum, or in the case of any Distribution Date
                      that occurs after the Initial Optional Termination Date,
                      plus 0.480% per annum;

               (y)    the Net WAC Cap for such Distribution Date; and

               (z)    the Maximum Cap Rate for such Distribution Date.

         Class X-IO Pass-Through Rate: With respect to each Distribution Date,
the lesser of (i) up to and including the Distribution Date in [[ ]] 2003, [[
]]% per annum, and thereafter, 0.10% per annum; and (ii) the excess of (a) the
Net WAC Cap over (b) the weighted average of the Pass-Through Rates of the Class
A Certificates (other than the Class A-IO Certificates) and the Subordinate
Certificates (other than the Class X-IO Certificates), after adjusting the
Pass-Through Rate on each Class of Non-Delay Certificates to reflect a 30/360
day count convention.

         Class B Pass-Through Rate: With respect to each Distribution Date, the
least of:

               (x)    One Month LIBOR plus, in the case of any Distribution Date
                      on or prior to the Initial Optional Termination Date, [[
                      ]]% per annum, or in the case of any Distribution Date
                      that occurs after the Initial Optional Termination Date,
                      plus [[ ]]% per annum;

               (y)    the Net WAC Cap for such Distribution Date; and

               (z)    the Maximum Cap Rate for such Distribution Date.

         Class M-1 Pass-Through Rate: With respect to each Distribution Date,
the least of:

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<PAGE>

               (x)    One Month LIBOR plus, in the case of any Distribution Date
                      on or prior to the Initial Optional Termination Date, [[
                      ]]% per annum, or in the case of any Distribution Date
                      that occurs after the Initial Optional Termination Date,
                      plus [[ ]]% per annum;

               (y)    the Net WAC Cap for such Distribution Date; and

               (z)    the Maximum Cap Rate for such Distribution Date.

         Class M-2 Pass-Through Rate: With respect to each Distribution Date,
the least of:

               (x)    One Month LIBOR plus, in the case of any Distribution Date
                      on or prior to the Initial Optional Termination Date, [[
                      ]]% per annum, or in the case of any Distribution Date
                      that occurs after the Initial Optional Termination Date,
                      plus [[ ]]% per annum;

               (y)    the Net WAC Cap for such Distribution Date; and

               (z)    the Maximum Rate Cap for such Distribution Date.

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                                                                    Schedule III


                                 REMIC STRUCTURE

           The Trustee shall make elections to treat each of the segregated
pools of assets described below as a real estate mortgage investment conduit
(each a "REMIC" or, in the alternative, "REMIC 1", "REMIC 2", and "REMIC 3",
REMIC 3 also being referred to as the Upper-Tier REMIC). The Certificates, other
than the Class R Certificate and the Class P Certificate, represent ownership of
the regular interests in the Upper-Tier REMIC for purposes of the REMIC
Provisions. The Class P Certificate represents an interest in the Trust Fund but
does not represent an interest in any REMIC created hereunder. The Class P
Certificate shall be entitled to distributions of prepayment penalties received
by the Trustee with respect to the Mortgage Loans to the extent such prepayment
penalties do not represent Pledged Prepayment Penalties. The Class R
Certificates represents ownership of the sole class of residual interest in each
of REMIC 1, REMIC 2, and the Upper-Tier REMIC for purposes of the REMIC
Provisions. The Upper-Tier REMIC shall hold as its assets the several classes of
uncertificated Lower Tier Interests in REMIC 2, other than the Class LT2-R
Interest, and each such Lower Tier Interest is hereby designated as a regular
interest in REMIC 2 for purposes of the REMIC Provisions. REMIC 2 shall hold as
its assets the several classes of uncertificated Lower Tier Interests in REMIC
1, other than the Class LT1-R Interest, and each such Lower Tier Interest is
hereby designated as a regular interest in REMIC 1. REMIC 1 shall hold as its
assets the property of the Trust Fund other than the Lower Tier Interests in
REMIC 1 and REMIC 2, the Prefunding Account, the Capitalized Interest Account,
and the Basis Risk Reserve Fund. The startup day for each REMIC created hereby
for purposes of the REMIC Provisions is the Closing Date. In addition, for
purposes of the REMIC Provisions, the latest possible maturity date for each
regular interest in each REMIC created hereby is the Latest Possible Maturity
Date.

REMIC 1

           The following table sets forth (or describes) the class designation,
interest rate, and principal amount for each class of the REMIC 1 Lower Tier
Interests.

                   REMIC 1               REMIC 1
                 Lower Tier             Lower Tier         Initial Class
              Class Designation       Interest Rate       Principal Amount
              -----------------       -------------       ----------------
                Class LT1-A                (1)                    $
                Class LT1-B                (1)
                Class LT1-C                (1)
                Class LT1-D                (1)
                Class LT1-E                (1)
                Class LT1-F                (1)
                Class LT1-G                (1)
                Class LT1-H                (1)
                Class LT1-R                (2)                   (2)

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(1)        The interest rate with respect to any Distribution Date (and the
           related Accrual Period) for these Interests is a per annum rate equal
           to the Weighted Average Net Rate as of the first day of the calendar
           month immediately preceding the Distribution Date.

(2)        The Class LT1-R Interest is the sole class of residual interest in
           REMIC 1. It does not have an interest rate or a principal balance.

           On each Distribution Date, the Group 1 Interest Funds and the Group
II Interest Funds, in each case determined without regard to Pledged Prepayment
Penalties, shall be distributed with respect to the REMIC 1 Lower Tier Interests
at the rates described above.

           On each Distribution Date, the Group 1 Principal Funds and the Group
II Principal Funds shall be distributed, and all Realized Losses attributable to
the Mortgage Loans shall be allocated, first to the Class LT1-A Interest until
its principal balance is reduced to zero, and then to each of the remaining
Lower Tier Interests in REMIC 1, sequentially in the alphabetical order of their
class designation, until the principal balance of each such Lower Tier Interest
is reduced to zero.

           For any Distribution Date, Pledged Prepayment Penalties received with
respect to the Mortgage Loans in Group I and Group II shall be allocated
proportionally among the Lower Tier Interests in REMIC 1 in accordance with
their relative principal balances immediately before such Distribution Date.

REMIC 2

           The following table sets forth (or describes) the class designation,
interest rate, and principal amount for each class of REMIC 2 Lower Tier
Interests.

    REMIC 2              REMIC 2
   Lower Tier           Lower Tier         Initial Class    Corresponding Class
Class Designation      Interest Rate     Principal Amount     of Certificates
-----------------      -------------     ----------------     ---------------
Class LT2-D                 (1)                   $                N/A
Class LT2-AF-1              (1)                                 Class AF-1
Class LT2-AF-2              (1)                                 Class AF-2
Class LT2-AF-3              (1)                                 Class AF-3
Class LT2-AF-4              (1)                                 Class AF-4
Class LT2-AF-5              (1)                                 Class AF-5
Class LT2-AF-6              (1)                                 Class AF-6
Class LT2-AV-1              (1)                                 Class AV-1
Class LT2-AV-2              (1)                                 Class AV-2
Class LT2-M-1               (1)                                 Class M-1
Class LT2-M-2               (1)                                 Class M-2
Class LT2-B                 (1)                                 Class B-1
Class LT2-IO-1              (2)                  (2)               A-IO
Class LT2-IO-2              (3)                  (3)               A-IO

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    REMIC 2              REMIC 2
   Lower Tier           Lower Tier         Initial Class    Corresponding Class
Class Designation      Interest Rate     Principal Amount     of Certificates
-----------------      -------------     ----------------     ---------------
Class LT2-IO-3              (4)                  (4)               A-IO
Class LT2-IO-4              (5)                  (5)               A-IO
Class LT2-IO-5              (6)                  (6)               A-IO
Class LT2-IO-6              (7)                  (7)               A-IO
Class LT2-IO-7              (8)                  (8)               A-IO
Class LT2-R                 (9)                  (9)


(1)        The interest rate with respect to any Distribution Date (and the
           related Accrual Period) for these Interests is a per annum rate equal
           to the Net WAC Cap applicable to the Group I Certificates other than
           the Class AF-1 Certificates.

(2)        The Class LT2-R Interest is the sole class of residual interest in
           REMIC 1. It does not have an interest rate or a principal balance.

           On each Distribution Date, interest distributed with respect to the
REMIC 1 Lower Tier Interests shall be distributed on the REMIC 2 Lower Tier
Interests at the rates described above, provided however, that a portion of the
interest that accrues at the rate described above on the Class LT2-D Interest
shall be deferred and added to the principal balance of the Class LT2-D
Interest. For any Distribution Date, the portion so deferred shall equal 50% of
the increase occurring on such Distribution Date in the Overcollateralization
Amount. Interest so deferred shall be applied to make principal payments on the
other Lower Tier Interests in REMIC 2.

           On each Distribution Date principal distributed with respect to the
REMIC 1 Lower Tier Interests, and any interest deferred on the Class LT2-D
Interest, shall be distributed, and any Realized Losses shall be allocated,
among the REMIC 2 Lower Tier Interests in a manner such that immediately
following such Distribution Date:

           (a)   the principal balance of the Class LT2-AF-1 Interest equals 50%
                 of the Class AF-1 Certificate Principal Balance;

           (b)   the principal balance of the Class LT2-AF-2 Interest equals 50%
                 of the Class AF-2 Certificate Principal Balance;

           (c)   the principal balance of the Class LT2-AF-3 Interest equals 50%
                 of the Class AF-3 Certificate Principal Balance;

           (d)   the principal balance of the Class LT2-AF-4 Interest equals 50%
                 of the Class AF-4 Certificate Principal Balance;

           (e)   the principal balance of the Class LT2-AF-5 Interest equals 50%
                 of the Class AF-5 Certificate Principal Balance;

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           (f)   the principal balance of the Class LT2-AF-6 Interest equals 50%
                 of the Class AF-6 Certificate Principal Balance;

           (g)   the principal balance of the Class LT2-AV-1 Interest equals 50%
                 of the Class AV-1 Certificate Principal Balance;

           (h)   the principal balance of the Class LT2-AV-2 Interest equals 50%
                 of the Class AV-2 Certificate Principal Balance;

           (i)   the principal balance of the Class LT2-M-1 Interest equals 50%
                 of the Class M-1 Certificate Principal Balance;

           (j)   the principal balance of the Class LT2-M-2 Interest equals 50%
                 of the Class M-2 Certificate Principal Balance;

           (k)   the principal balance of the Class LT2-B Interest equals 50% of
                 the sum of the Class B-1 Certificate Principal Balance; and

           (l)   the principal balance of the Class LT2-D Interest equals the
                 excess of the Assumed Principal Balance over the sum of the
                 balances of the Class LT2-AF-1, Class LT2-AF-2, Class LT2-AF-3,
                 Class LT2-AF-4, Class LT-2-AF-5, Class LT2-AF-6, Class
                 LT2-AV-1, Class LT2-AV-2, Class LT2-M-1, Class LT2-M-2 and
                 Class LT2-B Interests.

           For any Distribution Date, Pledged Prepayment Penalties distributed
on the REMIC 1 Lower Tier Interests shall be distributed proportionally among
the REMIC 2 Lower Tier Interests in accordance with their relative principal
balances immediately before such Distribution Date.

REMIC 3

           The following table sets forth (or describes) the class designation,
interest rate, and principal amount for each class of the REMIC 3 Interests.

             REMIC 3                      REMIC 3
          Certificate                   Certificate             Initial Class
       Class Designation               Interest Rate           Principal Amount
       -----------------               -------------           ----------------
          Class AF-1                        (1)                        $
          Class AF-2                        (2)
          Class AF-3                        (3)
          Class AF-4                        (4)
          Class AF-5                        (5)
          Class AF-6                        (6)
          Class AV-1                        (7)
          Class AV-2                        (8)
          Class M-1                         (9)

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             REMIC 3                      REMIC 3
          Certificate                   Certificate             Initial Class
       Class Designation               Interest Rate           Principal Amount
       -----------------               -------------           ----------------
          Class M-2                         (10)
          Class B-1                         (11)
          Class A-IO                        (12)                     (12)
          Class X-IO                        (13)                     (13)
          Class C                           (14)                     (14)
          Class R                           (15)                     (15)


(1)        The Class AF-1 Pass-Through Rate.

(2)        The Class AF-2 Pass-Through Rate.

(3)        The Class AF-3 Pass-Through Rate.

(4)        The Class AF-4 Pass-Through Rate.

(5)        The Class AF-5 Pass-Through Rate.

(6)        The Class AF-6 Pass-Through Rate.

(7)        The Class AV-1 Pass-Through Rate.

(8)        The Class AV-2 Pass-Through Rate.

(9)        The Class M-1 Pass-Through Rate.

(10)       The Class M-2 Pass-Through Rate.

(11)       The Class B-1 Pass-Through Rate.

(12)       The Class A-IO Certificates do not have a principal balance. For any
           Distribution Date, the Class A-IO Certificate shall be entitled to
           all interest payable for such date with respect to the Class
           LT2-IO-1, Class LT2-IO-2, Class LT2-IO-3, Class LT2-IO-4, Class
           LT2-IO-5, Class LT2-IO-6, and Class LT2-IO 7 Interests.

(13)       The Class X-IO Certificates do not have a principal balance. For each
           Distribution Date (and the related Accrual Period) the Class X-IO
           Certificates shall have a notional principal balance equal to the
           Assumed Principal Balance (i.e., the aggregate of the principal
           balances of the REMIC 2 Lower Tier Interests), and shall accrue
           interest on such notional principal balance at a per annum rate equal
           to the Class X-IO Pass-Through Rate.

(14)       The Class C Certificate does not have a principal balance. For each
           Distribution Date (and the related Accrual Period) the Class C
           Certificate shall have a notional principal balance equal to the
           Assumed Principal Balance (i.e., the aggregate of the principal

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           balances of the REMIC 2 Lower Tier Interests), and shall accrue
           interest on such notional principal balance at a per annum rate equal
           to:

           (a)       for each Distribution Date up to an including the
                     Distribution Date in July, 2003, the excess, if any, of the
                     Net WAC Cap over the sum of (i) the product of (A) 2, and
                     (B) the Adjusted Net Rate, plus (ii) 0.275%; and

           (b)       for each Distribution Date after the Distribution Date in
                     July, 2003, the excess, if any, of the Net WAC Cap over the
                     sum of (i) the product of (A) 2, and (B) the Adjusted Net
                     Rate, plus (ii) 0.10%.

           For each Distribution Date, interest accrued on the Class C
           Certificate during the related Accrual Period shall be deferred to
           the extent of the increase in the Overcollateralization Amount for
           such Distribution Date. Any interest so deferred shall not itself
           bear interest.

(15)       The Class R Certificate evidences ownership of the Class LT1-R and
           Class LT2-R Interests and also represents the sole class of residual
           interest in REMIC 3. It does not have an interest rate or a principal
           balance.

           For any Distribution Date, distributions shall be made and realized
losses shall be allocated among the Certificates in the manner provided in the
Agreement.

           Certain capitalized terms used in this Schedule are defined as
provided in the Agreement or shall have the meaning set forth below:

           Adjusted Net Rate:   For any Distribution Date (and the related
                                Accrual Period), the weighted average of the
                                interest rates on the Class LT2-D, Class
                                LT2-AF-1, Class LT2-AF-2, Class LT2-AF-3, Class
                                LT2-AF-4, Class LT2-AF-5, Class LT2-AF-6, Class
                                LT-AV-1, Class LT-AV-2, Class LT2-M-1, Class
                                LT2-M-2 and Class LT2-B Interests computed for
                                this purpose by limiting the interest rate
                                payable on the Class LT2-D Interest at zero and
                                the rate payable on each of the other
                                above-listed Lower Tier Interests in REMIC 2 to
                                a rate that corresponds to the rate payable for
                                such Distribution Date on the corresponding
                                class of Certificates.

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