<PAGE>

                                                                    EXHIBIT 10.7


                      MORTGAGE LOAN REPURCHASE AGREEMENT
<PAGE>

                                     INDEX


MORTGAGE LOAN REPURCHASE AGREEMENT                                         1

MORTGAGE LOAN PARTICIPATION AGREEMENT                                      2

MORTGAGE LOAN CUSTODIAL AGREEMENT                                          3

MORTGAGE LOAN PURCHASE AGREEMENT                                           4
<PAGE>

                                                      WHOLE LOAN FINANCE PROGRAM





                      MORTGAGE LOAN REPURCHASE AGREEMENT


PURCHASER:                    PAINE WEBBER REAL ESTATE SECURITIES

ADDRESS:                      1285 AVENUE OF THE AMERICAS

                              NEW YORK, NEW YORK 10019

                              ATTENTION:  ______________________




SELLER:                         CRESCENT MORTGAGE SERVICES, INC.

ADDRESS:                        SOUTH TERRACES
                                115 PERIMETER CENTER PLACE
                                SUITE 285
                                ATLANTA, GEORGIA 30346


DATE OF AGREEMENT: May l , 1996
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                            <C>
Section 1.      Definitions                                                                          1

Section 2.      Procedures for Purchases of Mortgage Loans                                           9

Section 3.      Procedure for Repurchases of Mortgage Loans                                         13

Section 4.      Terms of Each Transaction                                                           13

Section 5.      Cash Account                                                                        13

Section 6.      Servicing of the Mortgage Loans                                                     14

Section 7.      Remedies                                                                            15

Section 8.      Transfers of Mortgage Loan by Purchaser                                             17

Section 9.      Record Title to Mortgage Loans; Intent of Parties; Security Interest                17

Section 10.     Representations and Warranties                                                      18

Section 11.     Covenants of Seller                                                                 24

Section 12.     Term                                                                                27

Section 13.     Exclusive Benefit of Parties: Assignment                                            27

Section 14.     Amendments; Waivers; Cumulative Rights                                              27

Section 15.     Execution in Counterparts                                                           27

Section 16.     Effect of Invalid of Provisions                                                     27

Section 17.     Governing Law                                                                       27

Section 18.     Notices                                                                             27

Section 19.     Entire Agreement                                                                    28

Section 20.     Costs of Enforcement                                                                28

Section 21.     Consent to Service                                                                  28

Section 22.     Construction                                                                        28
</TABLE>
<PAGE>

Exhibit A       Closing Loan Purchase Detail

Exhibit B       Rewarehousing Loan Purchase Detail

Exhibit D       Withdrawal/Deposit Notice

Exhibit E       Cash Account Wire Instructions

Exhibit F       Cash Account Adjustment Notice

Exhibit G       Escrow Agent Standing Wire Instructions

Exhibit H       Purchaser's Wire Instructions to Seller

Exhibit I       UCC-1 Financing Statement

Exhibit J       Seller's Delivery Instructions

Exhibit K       Seller's Release

Exhibit L       Seller's Wire Instructions

Exhibit M       Warehouse Lender's Release

Exhibit N       Warehouse Lender's Release

Exhibit O       Warehouse Lender's Wire Instructions
<PAGE>

                       MORTGAGE LOAN REPURCHASE AGREEMENT
                       ----------------------------------



     This Mortgage Loan Repurchase Agreement ("Agreement"), dated as of the date
set forth on the cover page hereof, between PAINE WEBBER REAL ESTATE SECURITIES
INC. ("Purchaser") and the Seller whose name is set forth on the cover page
hereof ("Seller").

                             PRELIMINARY STATEMENT
                             ---------------------

     Seller is engaged, among other pursuits, in the business of originating,
purchasing and selling Mortgage Loans. Purchaser is engaged in, among other
pursuits, the business of purchasing Mortgage Loans.

     Seller has requested Purchaser, and Purchaser is willing from time to time,
to enter into repurchase agreements with Seller in accordance with this
Agreement for the purpose of facilitating Seller's origination of Mortgage
Loans. It is contemplated by the parties hereto that the Mortgage Loans subject
to this Agreement, from time to time, will become the subject of transactions in
which Purchaser purchases such Mortgage Loans from Seller subject to an
obligation of Seller to repurchase such Mortgage Loans.

     The parties hereto hereby agree as follows:

     Section 1.  Definitions.
                 -----------

     Capitalized terms used but not defined herein shall have the meanings set
forth in the Custodial Agreement. As used in this Agreement, the following terms
shall have the following meanings:

          "Act of Insolvency": With respect to Seller or Parent Company, (a) the
     commencement by Seller or Parent Company as debtor of any case or
     proceeding under any bankruptcy, insolvency, reorganization, liquidation,
     dissolution or similar law, or Seller or Parent Company seeking the
     appointment of a receiver, trustee, custodian or similar official for
     Seller or Parent Company or any substantial part of Seller's or Parent,
     Company's property, or (b) the commencement of any such case or proceeding
     against Seller or Parent Company, or another's seeking such appointment, or
     the filing against Seller or Parent Company of an application for a
     protective decree which (1) is consented to or not timely contested by
     Seller or Parent Company, (2) results in the entry of an order for relief,
     such an appointment, the issuance of such a protective decree or the entry
     of an order having a similar effect, or (3) is not dismissed within 60
     days, (c) the making by Seller or Parent Company of a general assignment
     for the benefit of creditors, or (d) the admission in writing by Seller or
     Parent Company that Seller or Parent Company is unable to pay its debts as
     they become due or the nonpayment generally by Seller or Parent Company of
     its debts as they become due.
<PAGE>

          "Assignee": The Chase Manhattan Bank, National Association, as agent
     for certain beneficiaries pursuant to certain repurchase transaction tri-
     party custody agreements.

          "Business Day": Any day other than (a) a Saturday, Sunday or other day
     on which banks located in the City of New York, New York are authorized or
     obligated by law or executive order to be closed, or (b) any day on which
     Paine Webber Real Estate Securities Inc. is closed for business, provided
     that notice thereof shall have been given not less than seven calendar days
     prior to such day.

          "Cash Account": A separate cash account established and maintained by
     Seller at Paine Webber Real Estate Securities Inc. under the conditions set
     forth in Section 5.

          "Cash Account Adjustment": An adjustment to the Cash Account Balance
     pursuant to a Cash Account Adjustment Notice.

          "Cash Account Adjustment Notice": The cash account adjustment notice,
     in the form of Exhibit F, to be used by Purchaser to notify Seller of any
     adjustments to the Cash Account Balance.

          "Cash Account Balance": The net amount of funds in the Cash Account.

          "Cash Account Interest Accrual": The simple interest calculation
     posted on the last Business Day of each month resulting from the product of
     each Business Day's Cash Account Balance and Cash Account Interest Rate.

          "Cash Account Interest Rate": With respect to each month, the average
     opening federal funds rate for such month.  The opening federal funds rate
     on a Business Day shall be counted as the Cash Account Interest Rate until
     the next Business Day.

          "Cash Account Wire Instructions": The wire instructions, set forth in
     a letter in the form of Exhibit E, to be used for the payment of funds to
     Seller.

          "Closing Loan Purchase Detail": A loan purchase detail, prepared by
     Seller and delivered by Seller to Purchaser via facsimile transmission in
     the form of Exhibit A or via electronic transmission in a form acceptable
     to Purchaser, containing certain information regarding the characteristics
     of a Mortgage Loan being offered for sale by Seller to Purchaser under a
     Closing Transaction.

          "Closing Transaction": Any sale of a Mortgage Loan by Seller to
     Purchaser, structured as either a Wet Funding or a Dry Funding, wherein
     Purchaser wires the Disbursement Amount in accordance with the Escrow Agent
     Standing Wire Instructions subject to an obligation of Seller to repurchase
     such Mortgage Loan pursuant to this Agreement.

                                       2
<PAGE>

          "Collateral": The Mortgage Loans (including all servicing rights
     related thereto), any Custodial Account, the Cash Account and the proceeds
     of any and all of the foregoing.

          "Collateral Receipt": With respect to each Wet Mortgage Loan, the
     receipt by Custodian on a Business Day of a Dry Submission Package.

          "Collateral Receipt Adjustment": The process initiated by Collateral
     Receipt wherein the Pass-Through Rate on a Wet Mortgage Loan is reduced,
     effective from the date of Collateral Receipt through one calendar day
     prior to the Repurchase Date.

          "Collateral Receipt Date": With respect to each Wet Mortgage Loan, the
     Business Day on which a Collateral Receipt occurs.

          "Conforming Mortgage Loan": A Mortgage Loan having an original
     principal balance that does not exceed the maximum principal balance of a
     mortgage loan that is eligible for sale to FHLMC.

          "Credit File": All papers and records of whatever kind or description,
     whether developed or originated by Seller or others, required to document
     or service the Mortgage Loan; provided however, that such Mortgage Loan
     papers, documents and records shall not include any Mortgage Loan papers,
     documents or records which are contained in the Dry Submission Package.

          "Custodial Account": A separate custodial account, established and
     maintained by Seller under the conditions set forth in Section 6(b), for
     the deposit by Seller of all collections in respect of a Mortgage Loan that
     are payable to Purchaser as the owner of the Mortgage Loan.

          "Custodial Agreement": The Mortgage Loan Custodial Agreement, dated as
     of the date set forth on the cover sheet thereof, among Seller, Purchaser
     and Custodian, as amended from time to time.

          "Custodial Fee": With respect to each Repurchase, a fee payable to
     Purchaser by Seller in the amount set forth on the related Funding
     Confirmation, and remitted to Purchaser on the related Repurchase Date as a
     component of the related Repurchase Price.

          "Custodian": The Chase Manhattan Bank, National Association, and its
     permitted successors hereunder.

          "Defective Mortgage Loan": A Mortgage Loan that is not in compliance
     with this Agreement.

          "Desired Funding Date": The Business Day indicated by the Seller on
     the Closing Loan Purchase Detail or the Rewarehousing Loan Purchase Detail,
     on

                                       3
<PAGE>

     which Seller desires Purchaser to purchase a Mortgage Loan via a Wet
     Funding or a Dry Funding.

          "Disbursement Amount": With respect to a Mortgage Loan, the amount set
     forth on the related Closing Loan Purchase Detail or Rewarehousing Loan
     Purchase Detail as the "Disbursement Amount".

          "Discount": With respect to each Mortgage Loan, the amount set forth
     on the related Funding Confirmation as the "Discount".

          "Document File": The Credit File and the Dry Submission Package.

          "Dry Funding": Either (i) a Closing Transaction initiated by the
     delivery by Seller, either via electronic or facsimile transmission to
     Purchaser of a Closing Loan Purchase Detail and the receipt by Custodian of
     a Dry Submission Package or (ii) a Rewarehousing Transaction initiated by
     the delivery by Seller, either via electronic or facsimile transmission to
     Purchaser, of a Rewarehousing Loan Purchase Detail, a Warehouse Lender's or
     Seller's Release and the Custodian's receipt of a Dry Submission Package.

          "Dry Mortgage Loan": A Mortgage Loan with respect to which (i)
     Custodian has received a Dry Submission Package and (ii) no Repurchase has
     occurred.

          "Dry Submission Package": The documents required to be delivered by
     Seller to Custodian pursuant to the Custodial Agreement.

          "Due Date": The day of the month on which the Monthly Payment is due
     on the Mortgage Loan.

          "Escrow Agent": The agent appointed by the Title Insurance Company to
     administer the closing of a Mortgage Loan.

          "Escrow Agent Standing Wire Instructions": The wire instructions set
     forth in a letter in the form of Exhibit G, from Seller and the Escrow
     Agent to Purchaser for use when Purchaser wires Disbursement Amounts for
     Wet Fundings and Dry Fundings structured as Closing Transactions.

          "Event of Default": The occurrence of any of the following events: (i)
     an Act of Insolvency with respect to Seller or Parent Company; (ii) any
     representation or warranty made by Seller hereunder, other than as to a
     particular Mortgage Loan, shall have been incorrect or untrue in any
     material respect when made or when deemed to have been made; or (iii)
     Seller shall fail to perform, or shall admit to Purchaser its inability to,
     or its intention not to, perform any of its obligations hereunder.

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

                                       4
<PAGE>

          "FHLMC": The Federal Home Loan Mortgage Corporation or any successor

          "FNMA": The Federal National Mortgage Association or any successor
     thereto.

          "Funding Confirmation": With respect to each Mortgage Loan purchased
     by Purchaser from Seller via a single wire funds transaction on a
     particular Business Day, the trade confirmation from Purchaser to Seller
     confirming Seller's obligation to repurchase such Mortgage Loan from
     Purchaser by the Scheduled Repurchase Date.

          "GNMA": The Government National Mortgage Association or any successor
     thereto.

          "Incremental Pass-Through Rate": The amount by which the Pass-Through
     Rate increases upon the occurrence of any event giving Purchaser the right
     to elect a remedy pursuant to Section 7, which amount shall be set forth in
     the applicable Funding Confirmation as the "Incremental Pass-Through Rate".

          "Losses": Any and all losses, claims, damages, liabilities or expenses
     (including reasonable attorneys' fees) incurred by any person specified;
     provided, however, that "Losses" shall not include any losses, claims,
     damages, liabilities or expenses which would have been avoided had such
     person taken reasonable actions to mitigate such losses, claims, damages,
     liabilities or expenses.

          "Monthly Payment": The scheduled monthly payment of principal and
     interest on a Mortgage Loan.

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

          "Mortgage Loan": A one-to-four family residential mortgage loan that
     is subject to this Agreement.

          "Mortgage Note": The note or other evidence of the indebtedness of a
     Mortgagor secured by a Mortgage.

          "Mortgaged Property": The property subject to the lien of the Mortgage
     securing a Mortgage Note.

          "Mortgagor": The obligor on a Mortgage Note.

          "NCUA": The National Credit Union Administration, or any successor
     thereto.

                                       5
<PAGE>

          "Non-Conforming Mortgage Loan": A Mortgage Loan having an original
     principal balance that exceeds the maximum principal balance of a mortgage
     loan that is eligible for sale to FHLMC.

          "Note Rate": The rate of interest borne by a Mortgage Note.

          "OTS": The Office of Thrift Supervision, or any successor thereto.

          "Parent Company":  A corporation or other entity owning at least 50%
     of the outstanding shares of voting stock of Seller.

          "Pass-Through Rate": With respect to each Mortgage Loan, the rate at
     which interest is passed through to Purchaser which initially shall be the
     rate of interest specified on a Funding Confirmation as the "Pass-Through
     Rate".

          "Purchase Date": With respect to a Mortgage Loan, the date on which
     Purchaser purchases such Mortgage Loan from Seller.

          "Purchase Price": With respect to each Mortgage Loan, an amount equal
     to the face amount of the Mortgage Loan less' the Discount.

          "Purchaser": Paine Webber Real Estate Securities Inc. and its
     successors.

          "Purchaser's Wire Instructions": The wire instructions, set forth in a
     notice delivered by Purchaser to Seller in the form of Exhibit H,
     containing the information to be used for the payment of all amounts due
     and payable to Purchaser hereunder.

          "Repurchase": With respect to any Mortgage Loan, the transaction by
     which the Seller remits the Repurchase Price to Purchaser.

          "Repurchase Date": With respect to any Mortgage Loan, the date that
     Seller remits the Repurchase Price to Purchaser.

          "Repurchase Price": With respect to each Mortgage Loan, an amount
     equal to the Purchase Price plus the Custodial Fee plus the product of the
     Purchase Price of the Mortgage Loan, the Pass-Through Rate and the number
     of calendar days from the Purchase Date to the Repurchase Date divided by
     360.

          "Rewarehousing Loan Purchase Detail": A loan purchase detail, prepared
     and submitted by Seller to Purchaser via facsimile transmission in the form
     of Exhibit B or via electronic transmission in a form acceptable to
     Purchaser, containing certain information regarding the characteristics of
     a Mortgage Loan being offered for sale by Seller to Purchaser under a
     Rewarehousing Transaction.

          "Rewarehousing Transaction": Any sale of a Mortgage Loan by Seller to
     Purchaser structured as either a Wet Funding or Dry Funding wherein
     Purchaser wires the Disbursement Amount to the Warehouse Lender's Wire
     Instructions or

                                       6
<PAGE>

     Seller's Wire Instructions, as applicable, subject to an obligation of
     Seller to repurchase such Mortgage Loan pursuant to this Agreement.

          "RTC": The Resolution Trust Corporation or any successor thereto.

          "Scheduled Collateral Receipt Date": With respect to each Wet Mortgage
     Loan, the Business Day, as set forth on the Funding Confirmation as the
     "Collateral Receipt Date", by which a Collateral Receipt is required to
     occur, such date to be (i) within five Business Days of a Wet Funding
     structured as a Closing Transaction and (ii) within one Business Day of a
     Wet Funding structured as a Rewarehousing Transaction.

          "Scheduled Repurchase Date": With respect to each Mortgage Loan, the
     Business Day as set forth on the Funding Confirmation as the "Repurchase
     Date", by which a repurchase is required to occur, such date to be (i)
     within five Business Days after the later of the Purchase Date or the
     Collateral Receipt Date with respect to a Wet Mortgage Loan or (ii) within
     five Business Days after the Purchase Date with respect to a Dry Mortgage
     Loan, unless such date has been accelerated in connection with either an
     Event of Default pursuant to Section 7(a) or a Defective Mortgage Loan
     pursuant to Section 7(b).

          "Seller": The Seller whose name is set forth on the cover page hereof,
     and its permitted successors hereunder.

          "Seller's Delivery Instructions": With respect to each Mortgage Loan
     for which Seller has remitted the Repurchase Price to Purchaser, the
     notification provided by Seller to Purchaser via facsimile transmission in
     the Form of Exhibit J, instructing Purchaser to deliver the Dry Submission
     Package for such Mortgage Loan to the indicated address.

          "Seller's Release": A letter in the form of Exhibit K, delivered by
     Seller when no Warehouse Lender has an interest in a Mortgage Loan,
     conditionally releasing all of Seller's interest in a Mortgage Loan upon
     receipt of payment by Seller.

          "Seller's Wire Instructions": The wire instructions set forth in a
     letter in the form of Exhibit L, to be used for the payment of funds to
     Seller when no Warehouse Lender has an interest in the Mortgage Loans to
     which such payment relates.

          "Successor Servicer": An entity designated by Purchaser, in conformity
     with Section 18, to replace Seller as servicer for Purchaser.

          "Supplemental Amount": With respect to each Mortgage Loan, an amount
     equal to the Disbursement Amount less the Purchase Price.

          "Title Insurance Company": A title insurance company acceptable to
     Purchaser.

                                       7
<PAGE>

          "Transaction": Any sale of a Mortgage Loan by Seller to Purchaser
     subject to an obligation of Seller to repurchase such Mortgage Loan
     pursuant to a Funding Confirmation in accordance with this Agreement.

          "Warehouse Lender": Any lender providing financing to Seller in any
     fractional amount for the purpose of originating or purchasing Mortgage
     Loans, which lender has a security interest in such Mortgage Loans as
     collateral for the obligations of Seller to such lender.

          "Warehouse Lender's Release": A letter in the form of Exhibit M, or
     Exhibit N with respect to any Wet Funding structured as a Rewarehousing
     Transaction, from a Warehouse Lender to Purchaser, conditionally releasing
     all of Warehouse Lender's right, title and interest in certain Mortgage
     Loans identified therein upon receipt of payment by Warehouse Lender.

          "Warehouse Lender's Wire Instructions": The wire instructions set
     forth in a letter in the form of Exhibit O, from a Warehouse Lender who has
     an interest in the Mortgage Loans to which such payment relates.

          "Wet Funding": Either (i) a Closing Transaction initiated by the
     delivery by Seller, either via electronic or facsimile transmission to
     Purchaser, of a Closing Loan Purchase Detail and a pledge by Seller to
     Purchaser to deliver to Custodian a Dry Submission Package by the Scheduled
     Collateral Receipt Date or (ii) a Rewarehousing Transaction initiated by
     the delivery by Seller, either via electronic or facsimile transmission to
     Purchaser, of a Rewarehousing Loan Purchase Detail, a Warehouse Lender's
     Release and a pledge by Seller to Purchaser to deliver to Custodian a Dry
     Submission Package by the Scheduled Collateral Receipt Date.

          "Wet Mortgage Loan": A Mortgage Loan for which Purchaser, via
     Custodian, does not have physical possession of the related Dry Submission
     Package and which Seller has agreed to pledge to Purchaser all right, title
     and interest in, to and under such Mortgage Loan, free and clear of all
     liens, pledges, charges, encumbrances or security interests of any nature.

          "Whole Loan Finance Program": A program designed by Purchaser in which
     Seller participates pursuant to the terms of the Custodial Agreement and
     this Agreement.

          "Withdrawal/Deposit Notice": A notice, substantially in the form of
     Exhibit D, delivered by Seller to Purchaser, from time to time, in
     connection with withdrawals from and deposits to the Cash Account.

          "Wire Fee": For each disbursement relating to a Closing Transaction, a
     fee payable to Purchaser by Seller as set forth in the Funding
     Confirmation.

                                       8
<PAGE>

          Section 2.   Procedures for Purchases of Mortgage Loans.
                       ------------------------------------------

          (a)  General Procedures for Purchases of Mortgage Loans.
               ---------------------------------------------------

               (1)     Pursuant to either a Wet Funding or a Dry Funding,
                       Purchaser may, in its sole discretion, from time to time,
                       purchase one or more Mortgage Loans from Seller subject
                       to an obligation of Seller to repurchase such Mortgage
                       Loans. Seller shall be deemed to make for the benefit of
                       Purchaser, as of the applicable dates specified in
                       Section 10, the representations and warranties set forth
                       in Section 10 in respect of each such Mortgage Loan.

               (2)     Notwithstanding the satisfaction by Seller of the
                       conditions specified in this Section, Purchaser is not
                       obligated to purchase any Mortgage Loan offered to it
                       hereunder and the decision of Purchaser to purchase such
                       Mortgage Loan shall be at Purchaser's sole discretion. In
                       the event that Purchaser elects to reject a Mortgage Loan
                       offered by Seller for purchase by Purchaser in a Wet
                       Funding or a Dry Funding for any reason and/or does not
                       transmit the Disbursement Amount, any Dry Submission
                       Package delivered to Custodian in anticipation of such
                       purchase shall be returned by Custodian in accordance
                       with the terms of the Custodial Agreement.

          (b)  Specific Procedures for Purchases of Mortgage Loans related to
               --------------------------------------------------------------
               Wet Fundings structured as Closing Transactions.
               -----------------------------------------------

               (1)     Prior to Purchaser's election to purchase any Mortgage
                       Loan pursuant to a Wet Funding structured as a Closing
                       Transaction, Purchaser shall have received from Seller a
                       Closing Loan Purchase Detail, either electronically, or
                       via facsimile transmission, and the Seller's Cash Account
                       Balance shall not be less than the sum of the
                       Supplemental Amount plus the Wire Fee. The terms and
                       conditions of each such purchase shall be set forth in
                       this Agreement and in the applicable Funding
                       Confirmation.

               (2)     If Purchaser elects to purchase any Mortgage Loan
                       pursuant to a Wet Funding structured as a Closing
                       Transaction, Purchaser shall (i) withdraw the
                       Supplemental Amount, if any, and the Wire Fee from the
                       Cash Account and (ii) pay the Disbursement Amount for
                       such Mortgage Loans to the Escrow Agent by wire transfer
                       of immediately available funds in accordance with the
                       Escrow Agent Standing Wire Instructions.

                                       9
<PAGE>

               (3)    With respect to each Wet Funding structured as a Closing
                      Transaction, simultaneously with the payment by Purchaser
                      of the Disbursement Amount for a Mortgage Loan in
                      accordance with the Escrow Agent Standing Wire
                      Instructions, (i) Seller hereby conveys to Purchaser all
                      of Seller's right, title and interest in, to and under
                      such Mortgage Loan, free and clear of all liens, pledges,
                      charges, encumbrances or security interests of any nature,
                      and (ii) Seller hereby covenants to cause to occur a
                      Collateral Receipt by the Scheduled Collateral Receipt
                      Date.

               (4)    With respect to each Wet Funding structured as a Closing
                      Transaction, if by the Scheduled Collateral Receipt Date
                      (i) a Collateral Receipt has occurred and (ii) Seller is
                      not in breach of this Agreement or the Custodial Agreement
                      then with respect to any Collateral Receipt containing a
                      Dry Submission Package, a Collateral Receipt Adjustment
                      will occur. If a Collateral Receipt does not occur by the
                      Scheduled Collateral Receipt Date, Purchaser may elect a
                      remedy pursuant to Section 7 including, without
                      limitation, the application of an Incremental Pass-Through
                      Rate.

          (c)  Specific Procedures for Purchases of Mortgage Loans related to
               --------------------------------------------------------------
               Wet Fundings structured as Rewarehousing Transactions.
               -----------------------------------------------------

               (1)    Prior to Purchaser's election to purchase any Mortgage
                      Loan pursuant to a Wet Funding structured as a
                      Rewarehousing Transaction, Purchaser shall have received
                      from Seller a Rewarehousing Loan Purchase Detail, either
                      electronically or via facsimile transmission, a Warehouse
                      Lender's Release in the form of Exhibit N, and the Cash
                      Account Balance shall not be less than the sum of the
                      Supplemental Amount. The terms and conditions of each such
                      purchase shall be set forth in this Agreement and in the
                      applicable Funding Confirmation.

               (2)    If Purchaser elects to purchase any Mortgage Loan pursuant
                      to a Wet Funding structured as a Rewarehousing
                      Transaction, Purchaser shall (i) withdraw the Supplemental
                      Amount, if any, from the Cash Account and (ii) pay the
                      Disbursement Amount for such Mortgage Loans to the
                      Warehouse Lender by wire transfer of immediately available
                      funds in accordance with the Warehouse Lender's Wire
                      Instructions.

               (3)    With respect to each Wet Funding structured as a
                      Rewarehousing Transaction, simultaneously with the payment
                      by Purchaser of the Disbursement Amount for a Mortgage
                      Loan in accordance with the Warehouse Lender's Wire
                      Instructions, (i) Seller hereby conveys to Purchaser all
                      of Seller's right, title and interest in, to and under

                                      10
<PAGE>

                      such Mortgage Loan, free and clear of all liens, pledges,
                      charges, encumbrances or security interests of any nature
                      and (ii) Seller hereby covenants to cause to occur a
                      Collateral Receipt by the Scheduled Collateral Receipt
                      Date.

               (4)    With respect to each Wet Funding structured as a
                      Rewarehousing Transaction, if by the Scheduled Collateral
                      Receipt Date (i) a Collateral Receipt has occurred and
                      (ii) Seller is not in breach of this Agreement or the
                      Custodial Agreement then with respect to any Collateral
                      Receipt containing a Dry Submission Package a Collateral
                      Receipt Adjustment will occur. If a Collateral Receipt
                      does not occur by the Scheduled Collateral Receipt Date,
                      Purchaser may elect a remedy pursuant to Section 7
                      including, without limitation, the application of an
                      Incremental Pass-Through Rate.

          (d)  Specific Procedures for Purchases of Mortgage Loans related to
               --------------------------------------------------------------
               Dry Fundings structured as Closing Transactions.
               -----------------------------------------------

               (1)    Prior to Purchaser's election to purchase any Mortgage
                      Loan pursuant to a Dry Funding structured as a Closing
                      Transaction, Purchaser shall have received from Seller a
                      Closing Loan Purchase Detail, either electronically or via
                      a facsimile transmission. Custodian shall have received
                      all applicable documents required by Section 2 of the
                      Custodial Agreement, and the Cash Account Balance shall
                      not be less than the sum of the Supplemental Amount plus
                      the Wire Fee. The terms and conditions of each such
                      purchase shall be set forth in this Agreement and in the
                      applicable Funding Confirmation.

               (2)    If Purchaser elects to purchase any Mortgage Loan pursuant
                      to a Dry Funding structured as a Closing Transaction,
                      Purchaser shall (i) withdraw the Supplemental Amount, if
                      any, and the Wire Fee from the Cash Account and (ii) pay
                      the Disbursement Amount for such Mortgage Loans to the
                      Escrow Agent by wire transfer of immediately available
                      funds in accordance with the Escrow Agent Standing Wire
                      Instructions.

               (3)    With respect to each Dry Funding structured as a Closing
                      Transaction, simultaneously with the payment by Purchaser
                      of the Disbursement Amount for a Mortgage Loan in
                      accordance with the Escrow Agent Standing Wire
                      Instructions, Seller hereby conveys to Purchaser all of
                      Seller's right, title and interest in, to and under such
                      Mortgage Loan, free and clear of all liens, pledges,
                      charges, encumbrances or security interests of any nature.

                                      11
<PAGE>

               (4)    With respect to each Dry Funding structured as a Closing
                      Transaction, if a Repurchase has not occurred by the
                      Scheduled Repurchase Date and if Seller has not
                      repurchased the related Mortgage Loan(s), Purchaser may
                      elect a remedy pursuant to Section 7 including, without
                      limitation, the application of an Incremental Pass-Through
                      Rate.

          (e)  Specific Procedures for Purchases of Mortgage Loans related to
               --------------------------------------------------------------
               Dry Fundings structured as Rewarehousing Transactions.
               -----------------------------------------------------

               (1)    Prior to Purchaser's election to purchase any Mortgage
                      Loan pursuant to a Dry Funding structured as a
                      Rewarehousing Transaction, Purchaser shall have received
                      from Seller a Rewarehousing Loan Purchase Detail, either
                      electronically or via a facsimile transmission, an
                      original of a Warehouse Lender's or Seller's Release, and
                      the Cash Account Balance shall not be less than the sum of
                      the Supplemental Amount. Custodian shall have received all
                      applicable documents required by Section 2 of the
                      Custodial Agreement. The terms and conditions of each such
                      purchase shall be set forth in this Agreement and in the
                      applicable Funding Confirmation.

               (2)    If Purchaser elects to purchase any Mortgage Loan pursuant
                      to a Dry Funding structured as a Rewarehousing
                      Transaction, Purchaser shall (i) withdraw the Supplemental
                      Amount, if any, from the Cash Account and (ii) pay the
                      Disbursement Amount for such Mortgage Loans to the
                      Warehouse Lender or Seller by wire transfer of immediately
                      available funds in accordance with the Warehouse Lender's
                      Wire Instructions or Seller's Wire Instructions.

               (3)    With respect to each Dry Funding structured as a
                      Rewarehousing Transaction, simultaneously with the payment
                      by Purchaser of the Disbursement Amount for a Mortgage
                      Loan, in accordance with the Warehouse Lender's or
                      Seller's Wire Instructions, Seller hereby conveys to
                      Purchaser all of Seller's right, title and interest in, to
                      and under such Mortgage Loan, free and clear of all liens,
                      pledges, charges, encumbrances or security interests of
                      any nature.

               (4)    With respect to each Dry Funding structured as a
                      Rewarehousing Transaction, if a Repurchase has not
                      occurred by the Scheduled Repurchase Date and if Seller
                      has not repurchased the related Mortgage Loan(s),
                      Purchaser may elect a remedy pursuant to Section 7
                      including the application of an Incremental Pass-Through
                      Rate.

                                      12
<PAGE>

     Section 3.  Procedure for Repurchases of Mortgage Loans.
                 -------------------------------------------

     (a)  With respect to each Mortgage Loan, on either the Scheduled Collateral
Receipt Date or the Scheduled Repurchase Date, if Seller has not satisfied the
requirements of this Agreement or Purchaser has elected not to purchase such
Mortgage Loan:

          (i)    the Pass-Through Rate shall increase by the Incremental Pass-
                 Through Rate:

          (ii)   the Seller shall remit the Repurchase Price to Purchaser and
                 Purchaser shall assign, transfer and convey to Seller all of
                 Purchaser's right, title and interest in, to and under such
                 Mortgage Loan, free and clear of all liens, pledges, charges,
                 claims, encumbrances or security interests of any nature; and

          (iii)  upon receipt of the Repurchase Price and Seller's Delivery
                 Instructions from Seller, Purchaser shall direct Custodian to
                 deliver the Dry Submission Package related to such Mortgage
                 Loan pursuant to the Seller's Delivery Instructions.

     Section 4.  Terms of Each Transaction.
                 -------------------------

     (a)  The obligations of the parties hereto shall, with respect to each
Transaction, begin on a Purchase Date and terminate on the Repurchase Date or on
the satisfaction by Seller of its obligations pursuant to Section 7.

     (b)  The terms and conditions of each Transaction, including, without
limitation, the Purchase Date, the Scheduled Repurchase Date, the Mortgage Loan
subject thereto, the Purchase Price, the Pass-Through Rate, the Incremental
Pass-Through Rate, the Scheduled Collateral Receipt Date for Wet Fundings only,
the Custodial Fee and, if applicable, the Wire Fee, shall be set forth in the
related Funding Confirmation.  Each Funding Confirmation shall be deemed to be
controlling as to the related terms and provisions of the purchase of a Mortgage
Loan, absent manifest error, without regard to any other oral or written
communication between Purchaser and Seller with respect to the purchase of such
Mortgage Loan.  With respect to the purchase or repurchase of a Mortgage Loan,
in the event of any conflict between the terms and the provisions of this
Agreement and the terms and provisions of the related Funding Confirmation, the
terms and provisions of the related Funding Confirmation will prevail over the
terms and provisions of this Agreement.

     Section 5.  Cash Account.
                 ------------

     (a)  Seller hereby authorizes and directs Purchaser to create the Cash
Account.  The Cash Account shall be held in trust for Seller subject to the
terms and conditions of this Agreement.  Purchaser shall notify Seller, via
electronic or facsimile transmission, of the Cash Account Balance on each
Business Day when the Cash Account Balance is greater than zero and on each
Business Day on which a Transaction occurs hereunder.

                                      13
<PAGE>

     (b)  Purchaser shall credit the Cash Account for (i) any deposits therein
by Seller upon Seller's written direction pursuant to a Withdrawal/Deposit
Notice, (ii) any Supplemental Amount for any Mortgage Loan upon the refunding to
Purchaser of the Disbursement Amount for such Mortgage Loan by the Escrow Agent
upon any failure to apply the Disbursement Amount in connection with the
proposed funding of a Mortgage Loan, (iii) any credit pursuant to a Cash Account
Adjustment and (iv) any Cash Account Interest Accruals.

     (c)  Purchaser shall debit the Cash Account for (i) any withdrawals
therefrom by Seller upon Seller's written direction pursuant to a
Withdrawal/Deposit Notice, (ii) the Supplemental Amount for any Mortgage Loan
upon payment of the Disbursement Amount for such Mortgage Loan to the Escrow
Agent in accordance with Section 2(c)(1), (iii) any debit pursuant to a Cash
Account Adjustment and (iv) any Wire Fees.

     (d)  Upon termination of this Agreement and payment in full of all
obligations owing by Seller hereunder and under the Custodial Agreement,
Purchaser shall remit to Seller the Cash Account Balance.

     Section 6.  Servicing of the Mortgage Loans.
                 -------------------------------

     (a)  Seller shall service and administer each Mortgage Loan on behalf of
Purchaser in accordance with prudent mortgage loan servicing standards and
procedures generally accepted in the mortgage banking industry, provided that
Seller shall at all times comply with applicable law and the requirements of any
applicable insurer or guarantor so that the insurance in respect of any Mortgage
Loan is not voided or reduced. Seller shall at all times maintain accurate and
complete records of its servicing of each Mortgage Loan, and Purchaser may, at
any time during Seller's business hours, on reasonable notice, examine and make
copies of such records. Upon Purchaser's request, Seller shall deliver to
Purchaser reports regarding the status of each Mortgage Loan, which reports
shall include, without limitation, circumstances that could materially adversely
affect any such Mortgage Loan, Purchaser's ownership of any such Mortgage Loan
or the collateral securing any such Mortgage Loan.

     (b)  Within five Business Days of notice from Purchaser, or immediately
upon notice if an Event of Default has occurred, Seller shall establish and
maintain a Custodial Account entitled "[name of Seller], in trust for Paine
Webber Real Estate Securities Inc. and its assignees under the Mortgage Loan
Repurchase Agreement dated [the date of this Agreement]" and shall promptly
deposit into such Custodial Account, in the form received with any necessary
endorsements, all collections received in respect of each Mortgage Loan that are
payable to Purchaser as the owner of each such Mortgage Loan.

     (c)  Amounts deposited in the Custodial Account with respect to any
Mortgage Loan shall be held in trust for Purchaser as the owner of such Mortgage
Loan and shall be released only as follows:

          (1)  All amounts deposited in the Custodial Account shall be paid to
               Seller upon the repurchase by Seller of the related Mortgage
               Loans

                                      14
<PAGE>

               from Purchaser if, and to the extent that, the Repurchase Prices
               and all other amounts due and payable to Purchaser hereunder with
               respect to such Mortgage Loans have been paid. The amounts paid
               to Seller (if any) pursuant to this Section 6(c)(1) shall
               constitute Seller's sole compensation for servicing the Mortgage
               Loans as provided in this Section 6.

          (2)  If a Successor Servicer is appointed by Purchaser (either under
               the circumstances set forth in Section 7 or otherwise), or if an
               Event of Default has occurred, all amounts deposited in the
               Custodial Account shall be paid to Purchaser promptly upon such
               delivery.

          (3)  During the period that Seller acts as servicer, all amounts
               deposited in the Custodial Account shall be released only in
               accordance with Purchaser's written instructions.

    Section 7. Remedies.
               --------

    (a)   Upon the occurrence of an Event of Default, at the option of Purchaser
exercised by written notice to Seller (which option shall be deemed to have been
exercised even if no notice is given, immediately upon the occurrence of an Act
of Insolvency with respect to Seller or Parent Company), the Scheduled
Repurchase Date for each Transaction hereunder shall be deemed immediately to
occur and, upon exercise of such option, (i) Seller's obligations hereunder to
repurchase all Mortgage Loans shall thereupon become immediately due and
payable, (ii) the Pass-Through Rate applicable to each Mortgage Loan shall
increase by the Incremental Pass-Through Rate, (iii) all amounts then or
thereafter held in any Custodial Accounts and the Cash Account shall be retained
by Purchaser and applied to the aggregate unpaid Repurchase Prices owed by
Seller and to any other amounts owing by Seller hereunder or under the Custodial
Agreement and (iv) Purchaser may, with concurrent notice to Seller (A)
immediately sell in a recognized market or in any other commercially reasonable
manner at such price or prices as Purchaser may reasonably deem satisfactory,
any or all the Mortgage Loans and apply the proceeds thereof (net of any
expenses of sale) to the aggregate unpaid Repurchase Prices and any other
amounts owing by Seller hereunder or under the Custodial Agreement or (B) in its
sole discretion elect, in lieu of selling all or a portion of such Mortgage
Loans, to give Seller credit for such Mortgage Loans in an amount equal to the
price therefore on such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the aggregate
unpaid Repurchase Prices and any other amounts owing by Seller hereunder or
under the Custodial Agreement, and in either case upon the determination and
receipt by Purchaser of all such amounts owing by Seller (including, without
limitation, any unpaid fees, expenses, legal fees and expenses of Purchaser's
counsel or other amounts owing to Purchaser under this Agreement or the
Custodial Agreement), Purchaser shall transfer any remaining portion of the
Mortgage Loans and proceeds thereof to either (1) Seller, if in Purchaser's
reasonable judgment Seller is legally entitled thereto, (2) such other entity as
is in Purchaser's reasonable judgment legally entitled thereto or (3) if
Purchaser cannot determine in its judgment the entity entitled thereto, a court
of competent jurisdiction;

                                      15
<PAGE>

provided that Seller shall be liable for any deficiency if the proceeds of any
sale or other disposition of the Mortgage Loans and any amounts applied from the
Custodial Account and the Cash Account are insufficient to pay all amounts to
which Purchaser is entitled hereunder.

     (b)  If any Mortgage Loan becomes a Defective Mortgage Loan prior to the
Repurchase Date, the Pass-Through Rate applicable to such Defective Mortgage
Loan shall increase by the Incremental Pass-Through Rate, and Purchaser, at its
election, may immediately accelerate the Scheduled Repurchase Date and require
that Seller, upon receipt of such election, immediately repurchase such
Defective Mortgage Loan by remitting to Purchaser (in immediately available
funds in accordance with Purchaser's Wire Instructions) the Repurchase Price for
such Defective Mortgage Loan.

     (c)  If Seller fails to comply with its obligations in the manner described
in Section 7(b), Seller's rights and obligations to service Mortgage Loans, as
provided in this Agreement, shall terminate. If an Event of Default occurs,
Seller's rights and obligations to service the Mortgage Loans, as provided in
this Agreement, shall terminate immediately, without any notice or action by
Purchaser. Upon any such termination, Purchaser is hereby authorized and
empowered as the exclusive agent for Seller to sell and transfer such rights to
service the Mortgage Loans for such price and on such terms and conditions as
Purchaser shall reasonably determine, and Seller shall not otherwise attempt to
sell or transfer such rights to service without the prior consent of Purchaser.
Seller shall perform all acts and take all action so that the Mortgage Loans and
all files and documents relating to such Mortgage Loans held by Seller, together
with all escrow amounts relating to such Mortgage Loans, are delivered to a
Successor Servicer. To the extent that the approval of any other insurer or
guarantor is required for any such sale or transfer, Seller shall fully
cooperate with Purchaser to obtain such approval. Upon exercise by Purchaser of
its remedies under this Section 7(b), Seller hereby authorizes Purchaser to
receive all amounts paid by any purchaser of such rights to service the Mortgage
Loans and to remit such amounts to Seller subject to Purchaser's rights of set-
off under this Agreement. Purchaser is hereby appointed the attorney-in-fact of
Seller for the purpose of carrying out the provisions of this Agreement and
taking any action and executing or endorsing any instruments that Purchaser may
deem necessary or advisable to accomplish the purposes hereof, including,
without limitation, completing or correcting any endorsement of a Mortgage Note
or Assignment of Mortgage, which appointment as attorney-in-fact is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
Purchaser shall have the right and power when exercising its remedies
contemplated by this Section 7(b) to receive, endorse and collect all checks
made payable to the order of Seller representing any payment on account of the
principal of or interest on any of the Mortgage Notes and to give full discharge
for the same.

     (d)  Each Mortgage Loan required to be delivered to a Successor Servicer by
Section 7(b) shall be delivered free of any servicing rights in favor of Seller
and free of any title, interest, lien, encumbrance or claim of any kind of
Seller, and Seller shall deliver or cause to be delivered all files and
documents relating to each Mortgage Loan held by Seller to a Successor Servicer.
Seller shall promptly take such actions and

                                      16
<PAGE>

furnish to Purchaser such documents that Purchaser deems necessary or
appropriate to enable Purchaser to cure any defect in each such Mortgage Loan or
to enforce such Mortgage Loans, as appropriate.

     (e)  Seller agrees to indemnify and hold Purchaser and its assigns harmless
from and against all Losses resulting from or relating to any Event of Default.

     (f)  No election by Purchaser pursuant to this Section 7 shall relieve
Seller of responsibility or liability for any breach of or under this Agreement.

     (g)  Seller hereby grants Purchaser a right of set-off, to secure the
payment of any amounts that may be due and payable to Purchaser from Seller,
such right to be upon any and all monies or other property of Seller held or
received by Purchaser, or due and owing from Purchaser to Seller.

     Section 8.  Transfers of Mortgage Loan by Purchaser.  Purchaser may, in its
                 ---------------------------------------
sole discretion, assign all of its right, title and interest in or grant a
security interest in any Mortgage Loan sold by Seller hereunder and all rights
of Purchaser under this Agreement and the Custodial Agreement, in respect of
such Mortgage Loan to Assignee, subject only to an obligation on the part of
Assignee to deliver each such Mortgage Loan to Purchaser to permit Purchaser or
its designee to make delivery thereof to Seller on the Repurchase Date. It is
anticipated that such assignment to Assignee will be made by Purchaser, and,
Seller hereby irrevocably consents to such assignment. No notice of such
assignment shall be given by Purchaser to Seller. Assignment by Purchaser of the
Mortgage Loans as provided in this Section 8 shall not release Purchaser from
its obligations otherwise under this Agreement.

     Without limitation of the foregoing, an assignment of a Mortgage Loan to
Assignee, as described in this Section 8, shall be effective upon delivery to
Assignee of a Dry Submission Package.

     Section 9.  Record Title to Mortgage Loans, Intent of Parties, Security
                 -----------------------------------------------------------
                 Interest.
                 --------

     (a)  From and after the delivery of the related Dry Submission Package, and
subject to the remedies of Purchaser in Section 7, Seller shall remain the last
named payee or endorsee of each Mortgage Note and the mortgagee or assignee of
record of each Mortgage in trust for the benefit of Purchaser, for the sole
purpose of facilitating the servicing of such Mortgage Loan.

     (b)  Seller shall maintain a complete set of books and records for each
Mortgage Loan which shall be clearly marked to reflect the ownership interest in
each Mortgage Loan of Purchaser.

     (c)   Purchaser and Seller confirm that the Transactions contemplated
herein are intended to be sales of the Mortgage Loans by Seller to Purchaser
rather than borrowings secured by the Mortgage Loans. In the event, for any
reason, any Transaction is construed by any court or regulatory authority as a
borrowing rather than

                                      17
<PAGE>

as a sale, Seller and Purchaser intend that Purchaser or Assignee, as the case
may be, shall have a perfected first priority security interest in the
Collateral, free and clear of adverse claims. In such case, Seller shall be
deemed to have hereby granted to Purchaser or Assignee, as the case may be, a
first priority security interest in and lien upon the Collateral, free and clear
of adverse claims. In such event, this Agreement shall constitute a security
agreement, the Custodian shall be deemed to be an independent custodian for
purposes of perfection of the security interest granted to Purchaser or
Assignee, as the case may be, and Purchaser or Assignee, as the case may be,
shall have all of the rights of a secured party under applicable law. Seller
shall, not later than the date of the first purchase of a Mortgage Loan by
Purchaser under this Agreement, deliver to Purchaser a UCC-1 Financing
Statement, executed by Seller, containing a description of collateral in the
form attached hereto in Exhibit I.

     Section 10. Representations and Warranties.
                 ------------------------------

     (a)  Seller hereby represents and warrants to Purchaser as of the date
hereof and as of the date of each delivery of a Submission Package that:

          (i)    Seller is duly organized, validly existing and in good standing
                 under the laws of the state of its organization or of the
                 United States of America and has all licenses necessary to
                 carry on its business as now being conducted and is licensed,
                 qualified and in good standing in the state where the Mortgaged
                 Property is located if the laws of such state require licensing
                 or qualification in order to conduct business of the type
                 conducted by Seller. Seller has all requisite power and
                 authority (including, if applicable, corporate power) to
                 execute and deliver this Agreement and to perform in accordance
                 herewith; the execution, delivery and performance of this
                 Agreement (including all instruments of transfer to be
                 delivered pursuant to this Agreement) by Seller and the
                 consummation of the transactions contemplated hereby have been
                 duly and validly authorized; this Agreement evidences the
                 valid, binding and enforceable obligation of Seller; and all
                 requisite action (including, if applicable, corporate action)
                 has been taken by Seller to make this Agreement valid and
                 binding upon Seller in accordance with its terms;

          (ii)   No approval of the transactions contemplated by this Agreement
                 from the OTS, the NCUA, the FDIC or any similar federal or
                 state regulatory authority having jurisdiction over Seller is
                 required, or if required, such approval has been obtained. The
                 transfers, assignments and conveyances provided for herein are
                 not subject to the bulk transfer or any similar statutory
                 provisions in effect in any applicable jurisdiction;

          (iii)  The consummation of the transactions contemplated by this
                 Agreement are in the ordinary course of business of Seller and
                 will

                                      18
<PAGE>

                 not result in the breach of any term or provision of the
                 charter or by-laws of Seller or result in the breach of any
                 term or provision of, or conflict with or constitute a default
                 under or result in the acceleration of any obligation under,
                 any agreement, indenture or loan or credit agreement or other
                 instrument to which Seller or its property is subject, or
                 result in the violation of any law, rule, regulation, order,
                 judgment or decree to which Seller or its property is subject;

          (iv)   This Agreement, the Custodial Agreement and every document to
                 be executed by Seller pursuant to this Agreement is and will be
                 valid, binding and subsisting obligations of Seller,
                 enforceable in accordance with their respective terms. No
                 consents or approvals are required to be obtained by Seller or
                 its Parent Company for the execution, delivery and performance
                 of this Agreement or the Custodial' Agreement by Seller;

          (v)    All information relating to Seller that Seller has delivered or
                 caused to be delivered to Purchaser, including, but not limited
                 to, all documents related to this Agreement, the Custodial
                 Agreement or Seller's financial statements, and all such
                 information hereafter furnished by Seller, does not and will
                 not contain any untrue statement of a material fact or omit to
                 state a material fact necessary to make the statements made
                 therein or herein in light of the circumstances under which
                 they were made, not misleading. Seller has disclosed in writing
                 any and all facts relating to Seller that materially and
                 adversely affect or may affect the business operations or
                 financial condition of Seller or the ability of Seller to
                 perform its obligations under this Agreement;

          (vi)   There are no actions, suits or proceedings pending, or to the
                 knowledge of Seller threatened, including any claims for which
                 an action, suit or proceeding has not been commenced, against
                 or affecting Seller or any of its assets in any court or before
                 any arbitrator or before any governmental commission, board,
                 bureau or other administrative agency that, in any such case,
                 if adversely determined, would have a material adverse effect
                 on the financial condition or business of Seller or the ability
                 of Seller to perform under this Agreement, each Funding
                 Confirmation and the Custodial Agreement; and

          (vii)  The principal place of business and chief executive office of
                 Seller is located at the address set forth opposite Seller's
                 name on the cover page hereof.

     (b)  Seller hereby represents, warrants and covenants to Purchaser with
respect to each Mortgage Loan as of the related Purchase Date that:

                                      19
<PAGE>

          (i)    The Mortgage Loan conforms in all respects to the requirements
                 of this Agreement and the related Funding Confirmation;

          (ii)   Seller is the sole owner and holder of the Mortgage Loan, free
                 and clear of any and all liens, pledges, charges, claims,
                 encumbrances or security interests of any nature and has full
                 right and authority, subject to no interest or participation
                 of, or agreement with, any other party, to sell and assign the
                 same pursuant to this Agreement;

          (iii)  Seller shall have entered into a sub-servicing agreement with
                 respect to the Mortgage Loan, which agreement shall be
                 satisfactory to Purchaser in its reasonable business judgment;

          (iv)   The Mortgage is a valid and subsisting first lien on the
                 property therein described and the Mortgaged Property is free
                 and clear of all encumbrances and liens having priority over
                 the first lien of the Mortgage except for liens for real estate
                 taxes and special assessments not yet due and payable. Any
                 pledge account, security agreement, chattel mortgage or
                 equivalent document related to, and delivered to Purchaser with
                 the Mortgage, establishes in Seller a valid and subsisting
                 first lien on the property described therein, and Seller has
                 full right to sell and assign the same to Purchaser;

           (v)   Neither Seller nor any prior holder of the Mortgage has
                 modified the Mortgage in any material respect; satisfied,
                 canceled or subordinated the Mortgage in whole or in part;
                 released the Mortgaged Property in whole or in part from the
                 lien of the Mortgage; or executed any instrument of release,
                 cancellation, modification or satisfaction unless such release,
                 cancellation, modification or satisfaction does not adversely
                 affect the value of the Mortgage Loan and is contained in the
                 related Document File;

          (vi)   The Mortgage Loan is not in default, and all Monthly Payments
                 due prior to the Purchase Date and all taxes, governmental
                 assessments, insurance premiums, water, sewer and municipal
                 charges but only to the extent that such water, sewer and
                 municipal charges constitute a lien on the Mortgage Property,
                 leasehold payments and ground rents have been paid. Seller has
                 not advanced funds, or induced or solicited any advance of
                 funds by a party other than the Mortgagor directly or
                 indirectly, for the payment of any amount required by the
                 Mortgage Loan. The collection practices used by each entity
                 which has serviced the Mortgage Loan have been in all respects
                 legal, proper, prudent, and customary in the mortgage servicing
                 business. With respect to escrow deposits and payments in those
                 instances where such were

                                      20
<PAGE>

                 required, there exist no deficiencies in connection therewith
                 for which customary arrangements for repayment thereof have not
                 been made and no escrow deposits or payments or other charges
                 or payments have been capitalized under any Mortgage or the
                 related Mortgage Note;

          (vii)  There is no default, breach, violation or event of acceleration
                 existing under the Mortgage or the related Mortgage Note and no
                 event which, with the passage of time or with notice and the
                 expiration of any grace of cure period, would constitute a
                 default, breach, violation or event of acceleration; and Seller
                 has not waived any default, breach, violation or event of
                 acceleration;

          (viii) The Mortgage Loan is not subject to any right of rescission,
                 set-off, counterclaim or defense, including the defense of
                 usury, nor will the operation of any of the terms of the
                 Mortgage Note or the Mortgage, or the exercise of any right
                 thereunder, render either the Mortgage Note or the Mortgage
                 unenforceable, in whole or in part, or subject to any right of
                 rescission, set-off, counterclaim or defense, including the
                 defense of usury, and no such right of rescission, set-off,
                 counterclaim or defense has been asserted with respect thereto;

          (ix)   The Mortgage Note and the related Mortgage are genuine and each
                 is the legal, valid and binding obligation of the maker
                 thereof, enforceable in accordance with its terms. All parties
                 to the Mortgage Note and the Mortgage had legal capacity to
                 execute the Mortgage Note and the Mortgage and each Mortgage
                 Note and Mortgage have been duly and property executed by the
                 Mortgagor;

          (x)    The Mortgage Loan meets, or is exempt from, applicable state or
                 federal laws, regulations and other requirements pertaining to
                 usury, and the Mortgage Loan is not usurious;

          (xi)   Any and all requirements of any federal, state or local law
                 including, without limitation, truth-in-lending, real estate
                 settlement procedures, consumer credit protection, equal credit
                 opportunity or disclosure laws applicable to the Mortgage Loan
                 have been complied with, and Seller shall deliver to Purchaser
                 upon demand, evidence of compliance with all such requirements;

          (xii)  Either: (i) Seller and every other holder of the Mortgage, if
                 any, were authorized to transact and do business in the
                 jurisdiction in which the Mortgaged Property is located at all
                 times when such party held the Mortgage; or (ii) the loan of
                 mortgage funds, the acquisition of the Mortgage (if Seller was
                 not the original lender), the holding of the Mortgage and the
                 transfer of the Mortgage did

                                      21

<PAGE>

                   not constitute the transaction of business or the doing of
                   business in such jurisdiction;

          (xiii)   The Mortgage Loan has closed and the proceeds of the Mortgage
                   Loan have been fully disbursed; provided that, with respect
                   to Mortgage Loans originated within the previous 120 days,
                   alterations and repairs with respect to the Mortgaged
                   Property or any part thereof may have required an escrow of
                   funds in an amount sufficient to pay for all outstanding work
                   within 120 of the origination of the Mortgage Loan, and if
                   so, such funds are held in escrow by Seller, a title company
                   or other escrow agent;

          (xiv)    The related Mortgage contains customary and enforceable
                   provisions such as to render the rights and remedies of the
                   holder thereof adequate for the realization against the
                   Mortgaged Property of the benefits of the security,
                   including, (i) in the case of a Mortgage designated as a deed
                   of trust, by trustee's sale, (ii) in the case of a Mortgage
                   designated as a security deed, by non judicial sale, (iii) in
                   the case of a Mortgage designated as any other instrument
                   which provides for enforcement by a non judicial sale, by
                   nonjudicial sale, and (iv) otherwise by judicial foreclosure;

          (xv)     The Mortgage Loan was originated free of any "original issue
                   discount" with respect to which the owner of the Mortgage
                   Loan could be deemed to have income pursuant to Sections 1271
                   et sect., of the Internal Revenue Code;

          (xvi)    At origination, the Mortgaged Property was free and clear of
                   all mechanics' and materialmen's liens or liens in the nature
                   thereof which are or could be prior to the Mortgage lien, and
                   no rights are outstanding that under law could give rise to
                   any such lien;

          (xvii)   Either (i) all improvements which were considered in
                   determining the appraised value of the Mortgaged Property lay
                   wholly within the boundaries and building restriction lines
                   of the Mortgaged Property, and no improvements on adjoining
                   properties encroach upon the Mortgaged Property or (ii) the
                   short form title insurance policy insures against loss or
                   damage resulting from any encroachments of boundary lines
                   affecting the Mortgage Property;

          (xviii)  As of the closing date of origination the Mortgaged Property
                   is lawfully occupied under applicable law. All inspections,
                   licenses and certificates required to be made or issued with
                   respect to all occupied portions of the Mortgaged Property
                   and, with respect to the use and occupancy of the same,
                   including but not limited to certificates of occupancy and
                   fire underwriting certificates, have been made or obtained
                   from the appropriate authorities. The

                                      22
<PAGE>

                    Mortgagor represented at the time of origination of the
                    Mortgage Loan that the Mortgagor would occupy the Mortgaged
                    Property as the Mortgagor's primary residence (except as may
                    be otherwise permitted by the terms hereof);

          (xix)     There is no proceeding pending for the total or partial
                    condemnation of the Mortgaged Property and said property is
                    undamaged by waste, fire, earthquake or earth movement,
                    windstorm, flood, tornado or other casualty;


          (xx)      All buildings upon the Mortgaged Property are insured
                    against loss by fire, hazards of extended coverage and such
                    other hazards as are customary in the area where the
                    Mortgaged Property is located, pursuant to fire and hazard
                    insurance policies with extended coverage or other insurance
                    required by Purchaser, in an amount at least equal to the
                    greater of (i) the outstanding principal balance of the
                    Mortgage Loan or (ii) the maximum insurable value
                    (replacement cost without deduction for depreciation) of the
                    improvements constituting the Mortgaged Property. If
                    applicable laws limit the amount of such insurance to the
                    replacement cost of the improvements constituting the
                    Mortgaged Property or to some other amount, then such
                    insurance is in an amount equal to the maximum allowed by
                    such laws. Such insurance amount is sufficient to prevent
                    the Mortgagor or the loss payee under the policy from
                    becoming a co-insurer. The insurer issuing such insurance is
                    acceptable pursuant to a Program. All individual insurance
                    policies contain a standard mortgagee clause naming Seller,
                    its successors and assigns, as mortgagee and all premiums
                    thereon have been paid. Each Mortgage obligates the
                    Mortgagor thereunder to maintain all such insurance at
                    Mortgagor's cost and expense, and upon the Mortgagor's
                    failure to do so, authorizes the holder of the Mortgage to
                    obtain and maintain such insurance at Mortgagor's cost and
                    expense and to seek reimbursement therefore from the
                    Mortgagor. Any flood insurance required by applicable law
                    has been obtained;

          (xxi)     The related Mortgage Note is payable on the Due Date of each
                    month in self-amortizing monthly installments of principal
                    and interest, with interest payable in arrears, providing
                    for full amortization by maturity, over an original term of
                    not more than thirty years;

          (xxii)    The Mortgaged Property consists of a single parcel of real
                    property;

          (xxiii)   There are no circumstances or conditions with respect to the
                    Mortgage, the Mortgaged Property, the Mortgagor or the

                                      23
<PAGE>

                    Mortgagor's credit standing that can be reasonably expected
                    to cause private institutional investors to regard, the
                    Mortgage Loan as an unacceptable investment, cause the
                    Mortgage Loan to become delinquent or adversely affect the
                    value or marketability of the Mortgage Loan. As used herein,
                    "knowledge" shall be deemed to include (A) knowledge of
                    facts or conditions of which Seller (including without
                    limitation, any of its directors, officers, agents or
                    employees) either is actually aware or should have been
                    aware under the circumstances with the exercise of
                    reasonable care, due diligence and competence in discharging
                    Seller's duties, (B) all matters of public record, and (C)
                    the making of any representation or warranty that is
                    inaccurate or incomplete, unless Seller can demonstrate
                    otherwise. The term "due diligence" means the care which
                    Seller would exercise in obtaining and verifying information
                    for a loan in which Seller would be entirely dependent on
                    the property securing such loan and on the borrower's
                    creditworthiness as security to protect its investment; and

          (xxiv)    Seller originated each such Conforming Mortgage Loan in
                    accordance with FHLMC underwriting standards in effect at
                    the time the Conforming Mortgage Loan was originated and
                    each such Non-Conforming Mortgage Loan in accordance with
                    the Residential Funding Corporation underwriting standards
                    in effect at the time the Non-Conforming Mortgage Loan was
                    originated.

     The representations and warranties of Seller in this Section 9 are
unaffected by and supersede any provision in any endorsement of any Mortgage
Loan or in any assignment with respect to such Mortgage Loan to the effect that
such endorsement or assignment is without recourse or without representation or
warranty.

     Section 11.    Covenants of Seller. Seller hereby covenants and agrees with
                    -------------------
                    Purchaser as follows:

     (a)  Seller shall deliver to Purchaser:

          (i)       Within 120 days after the end of each fiscal year of Seller,
                    consolidated balance sheets of Seller and its consolidated
                    subsidiaries and the related consolidated statements of
                    income showing the financial condition of Seller and its
                    consolidated subsidiaries as of the close of such fiscal
                    year and the results of operations during such year, and a
                    consolidated statement of cash flows, as of the close of
                    such fiscal year, setting forth, in each case, in
                    comparative form the corresponding figures for the preceding
                    year, all the foregoing consolidated financial statements to
                    be reported on by, and to carry the report (acceptable in
                    form and content to Purchaser) of an independent public
                    accountant of national standing acceptable to Purchaser;

                                      24
<PAGE>

               (ii)   Within 60 days after the end of each of the first three
                      fiscal quarters of each fiscal year of Seller, unaudited
                      consolidated balance sheets and consolidated statements of
                      income, all to be in a form acceptable to Purchaser,
                      showing the financial condition and results of operations
                      of Seller and its consolidated subsidiaries on a
                      consolidated basis as of the end of each such quarter and
                      for the then elapsed portion of the fiscal year, setting
                      forth, in each case, in comparative form the corresponding
                      figures for the corresponding periods of the preceding
                      fiscal year, certified by a financial officer of Seller
                      (acceptable to Purchaser) as presenting fairly the
                      financial position and results of operations of Seller and
                      its consolidated subsidiaries and as having been prepared
                      in accordance with generally accepted accounting
                      principles consistently applied, in each case, subject to
                      normal year-end audit adjustments;

               (iii)  Promptly upon receipt thereof, a copy of each other report
                      submitted to Seller by its independent public accountants
                      in connection with any annual, interim or special audit of
                      Seller;

               (iv)   Promptly upon becoming aware thereof, notice of (1) the
                      commencement of, or any determination in, any legal,
                      judicial or regulatory proceedings, (2) any dispute
                      between Seller or its Parent Company and any governmental
                      or regulatory body, (3) any event or condition, which, in
                      any case of (1) or (2), if adversely determined, would
                      have a material adverse effect on (A) the validity or
                      enforceability of this Agreement, (B) the financial
                      condition or business operations of Seller, or (C) the
                      ability of Seller to fulfill its obligations under this
                      Agreement or (4) any material adverse change in the
                      business, operations, prospects or financial condition of
                      Seller, including, without limitation, an Act of
                      Insolvency with respect to Seller or its Parent Company;

               (v)    Promptly upon becoming available, copies of all financial
                      statements, reports, notices and proxy statements sent by
                      its Parent Company, Seller or any of Seller's consolidated
                      subsidiaries in a general mailing to their respective
                      stockholders and of all reports and other material
                      (including copies of all registration statements under the
                      Securities Act of 1933, as amended) filed by any of them
                      with any securities exchange or with the Securities and
                      Exchange Commission or any governmental authority
                      succeeding to any or all of the functions of said
                      Commission;

               (vi)   Promptly upon becoming available, copies of any press
                      releases issued by its Parent Company or Seller and copies
                      of any annual and quarterly financial reports and any
                      reports on Form H-(b)12 which its Parent Company or Seller
                      may be required to file with

                                      25
<PAGE>

                 the OTS or the RTC or comparable reports which a Parent Company
                 or Seller may be required to file with the FDIC or any other
                 federal banking agency containing such financial statements and
                 other information concerning such Parent Company's or Seller's
                 business and affairs as is required to be included in such
                 reports in accordance with the rules and regulations of the
                 OTS, the RTC, the FDIC or such other banking agency, as may be
                 promulgated from time to time;

          (vii)  Such supplements to the aforementioned documents and such other
                 information regarding the operations, business, affairs and
                 financial condition of its Parent Company, Seller or any of
                 Seller's consolidated subsidiaries as Purchaser may request;
                 and

          (viii) A copy of (1) the articles of incorporation of Seller and any
                 amendments thereto, certified by the Secretary of State of
                 Seller's state of incorporation, (2) a copy of Seller's by-
                 laws, together with any amendments thereto, (3) a copy of the
                 resolutions adopted by Seller's Board of Directors authorizing
                 Seller to enter into this Agreement and the Custodial Agreement
                 and authorizing one or more of Seller's officers to execute the
                 documents related to this Agreement and the Custodial
                 Agreement, and (4) a certificate of incumbency and signature of
                 each officer of Seller executing any document in connection
                 with this Agreement.

     (c)  Seller will be solvent at all relevant times prior to, and will not be
rendered insolvent by, any sale of a Mortgage Loan to Purchaser.

     (d)  Seller will not sell any Mortgage Loan to Purchaser with any intent to
hinder, delay or defraud any of Seller's creditors.

     (e)  Seller shall comply, in all material respects, with all laws, rules
and regulations to which it is or may become subject.

     (f)  Seller shall, upon request of Purchaser, promptly execute and deliver
to Purchaser all such other and further documents and instruments of transfer,
conveyance and assignment, and shall take such other action as Purchaser may
require more effectively to transfer, convey, assign to and vest in Purchaser
and to put Purchaser in possession of the property to be transferred, conveyed,
assigned and delivered hereunder and otherwise to carry out more effectively the
intent of the provisions under this Agreement.

     (g)  If during the term of a Transaction, Seller gains possession of a Dry
Submission Package that relates to the Transaction, Seller shall hold such Dry
Submission Package in trust for Purchaser, immediately notify Purchaser of the
specific Dry Submission Package being held by Seller and promptly deliver such
Dry Submission Package via overnight courier in accordance with Purchaser's
instructions.

                                      26
<PAGE>

     Section 12.  Term.  This Agreement shall continue in effect until
                  ----
terminated as to future transactions by written instruction signed by either
Seller or Purchaser and delivered to the other, provided that no termination
will affect the obligations hereunder as to any outstanding Transaction.

     Section 13.  Exclusive Benefit of Parties; Assignment.  This Agreement is
                  -----------------------------------------
for the exclusive benefit of the parties hereto and their respective successors
and assigns and shall not be deemed to give any legal or equitable right to any
other person, including the Custodian.  Except as provided in Section 7, no
rights or obligations created by this Agreement may be assigned by any party
hereto without the prior written consent of the other parties.

     Section 14.  Amendments, Waivers; Cumulative Rights.  This Agreement may be
                  --------------------------------------
amended from time to time only by written agreement of Seller and Purchaser.
Any forbearance, failure or delay by either party in exercising any right, power
or remedy hereunder shall not be deemed to be a waiver thereof, and any single
or partial exercise by Purchaser of any right, power or remedy hereunder shall
not preclude the further exercise thereof.  Every right, power and remedy of
Purchaser shall continue in full force and effect until specifically waived by
Purchaser in writing.  No right, power or remedy shall be exclusive, and each
such right, power or remedy shall be cumulative and in addition to any other
right, power or remedy, whether conferred hereby or hereafter available at law
or in equity or by statute or otherwise.

     Section 15.  Execution in Counterparts.  This Agreement may be executed in
                  -------------------------
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.

     Section 16.  Effect of Invalidity of Provisions.  In case any one or more
                  ----------------------------------
of the provisions contained in this Agreement should be or become invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.

     Section 17.  Governing Law.  This Agreement shall be governed by and
                  -------------
construed in accordance with the laws of the State of New York, without regard
to conflict of laws rules.

     Section 18.  Notices.  Any notices, consents, elections, directions and
                  -------
other communications given under this Agreement shall be in writing and shall be
deemed to have been duly given when telecopied or delivered by overnight courier
to, personally delivered to, or on the third day following the placing thereof
in the mail, first class postage prepaid to, the respective addresses set forth
on the cover page hereof for Seller and Purchaser, or to such other, address as
either party shall give notice to the other party pursuant to this Section 18.
Notices to Assignee shall be given to such address as Assignee shall provide to
Seller in writing.

                                      27
<PAGE>

     Section 19.  Entire Agreement.  This Agreement, the Funding Confirmations
                  ----------------
and the Custodial Agreement contain the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements between them, oral or written, of any nature
whatsoever with respect to the subject matter hereof.

     Section 20.  Costs of Enforcement.  In addition to any other indemnity
                  --------------------
specified in this Agreement, in the event of a breach by Seller of this
Agreement or the Custodial Agreement, Seller agrees to pay the reasonable
attorneys' fees and expenses of Purchaser and, when applicable, Assignee
incurred as a consequence of such breach.

     Section 21.  Consent to Service.  Each party irrevocably consents to the
                  ------------------
service of process by registered or certified mail, postage prepaid, to it at
its address given in or pursuant to Section 18.

     Section 22.  Construction.  The headings in this Agreement are for
                  ------------
convenience only and are not intended to influence its construction. References
to Sections and Exhibits in this Agreement are to the Sections of and Exhibits
to this Agreement. The Exhibits are part of this Agreement, and are incorporated
herein by reference. The singular includes the plural, the plural the singular,
and the words "and" and "or" are used in the conjunctive or disjunctive as the
sense and circumstances may require.

                                      28
<PAGE>

     IN WITNESS WHEREOF, Purchaser and Seller have duly executed this Agreement
as of the date and year set forth on the cover page hereof.

                              PAINE WEBBER REAL ESTATE SECURITIES INC.


                              By:   /s/
                                    ______________________________________
                              Name:_______________________________________
                              Title:______________________________________


                              CRESCENT MORTGAGE SERVICES, INC.


                              By:   /s/
                                    ______________________________________
                              Name:_______________________________________
                              Title:______________________________________
                              Address (if different from cover page):

                                      29
<PAGE>

                                                                       EXHIBIT A


                   PAINE WEBBER REAL ESTATE SECURITIES INC.
                   CLOSING LOAN PURCHASE DETAIL

                   CLIENT:________________



<TABLE>
<S>             <C>            <C>        <C>          <C>          <C>                <C>            <C>            <C>
                                                                                                         # OF
                FUNDING       DESIRED                                                                   MONTHS        FIRST
 LOAN DATA       TYPE         FUNDING                     FACE       DISBURSEMENT      NOTE RATE          TO          PAYMENT
  LOAN #        WET/DRY        DATE       LAST NAME      AMOUNT         AMOUNT          (F or A)       MATURITY        DATE
[_______]      [_____]       [_____]     [_______]      [______]    [___________]     [_________]     [_______]      [______]

    WIRE
INSTRUCTIONS                                 ABA                         TITLE
  BANK NAME      CITY          STATE        NUMBER       ACCOUNT #      COMPANY         ORDER #
 [_______]      [_____]       [_____]     [_______]      [______]    [___________]     [_________]

                                                                                                         # OF
                FUNDING       DESIRED                                                                   MONTHS        FIRST
 LOAN DATA       TYPE         FUNDING                     FACE       DISBURSEMENT      NOTE RATE          TO          PAYMENT
  LOAN #        WET/DRY        DATE       LAST NAME      AMOUNT         AMOUNT          (F or A)       MATURITY        DATE
[_______]      [_____]       [_____]     [_______]      [______]    [___________]     [_________]     [_______]      [______]

    WIRE
INSTRUCTIONS                                 ABA                         TITLE
  BANK NAME      CITY          STATE        NUMBER       ACCOUNT #      COMPANY         ORDER #
 [_______]      [_____]       [_____]     [_______]      [______]    [___________]     [_________]
</TABLE>
<PAGE>

                        CLIENT:________________________

<TABLE>
<S>             <C>           <C>         <C>          <C>          <C>           <C>
                                                                                   # OF
                FUNDING       DESIRED                                              MONTHS
 LOAN DATA       TYPE         FUNDING                     FACE       NOTE RATE      TO
  LOAN #        WET/DRY        DATE       LAST NAME      AMOUNT       (F or A)    MATURITY
[_______]      [_____]       [_____]     [_______]      [______]    [_________]   [______]

    WIRE
INSTRUCTIONS

  WAREHOUSE
 OR SELLER'S     ABA         ACCOUNT
  BANK NAME     NUMBER       NUMBER
 [_______]      [_____]     [_______]
                                                                                        # OF
                FUNDING       DESIRED                                                  MONTHS
 LOAN DATA       TYPE         FUNDING                     FACE        NOTE RATE          TO
  LOAN #        WET/DRY        DATE       LAST NAME      AMOUNT       (F or A)         MATURITY
[_______]      [_____]       [_____]     [_______]      [______]    [___________]     [_________]

  WAREHOUSE
 OR SELLER'S     ABA         ACCOUNT
  BANK NAME     NUMBER       NUMBER
 [_______]      [_____]     [_______]


</TABLE>
<PAGE>

                                                                       EXHIBIT D

                    WITHDRAWAL/DEPOSIT NOTICE: CSH ACCOUNT
                           (ON SELLER'S LEATHERHEAD)

Please process a wire transfer representing a:
(Please check appropriate box)


                                                            WITHDRAWAL       [_]

                                                            DEPOSIT          [_]
From/To our Cash Account in the amount $_____________ on [Date].

The funds should be transferred in accordance with the following instruction:

                                  Bank Name:
                                  City, State:
                                  ABA #:
                                  Account #
                                  Account Name:
                                  Ref: [Name of Seller]

Deposits only require "Bank Name" and "City, State" information to be completed.

                                       [Seller]*



                                       By:_______________________________
                                       Name: ____________________________



______________________________

     *  The authorized officer of each Seller executing this letter must also
have executed the Cash Account Wire Instructions.
<PAGE>

                                                                       EXHIBIT E


                        [CASH ACCOUNT WIRE INSTRUCTIONS]
                            (ON SELLER'S LETTERHEAD)

Paine Webber Real Estate Securities Inc.  [Date]
1285 Avenue of the Americas
New York, New York 10019

    Re:  Whole Loan Finance Program
         --------------------------

Ladies and Gentlemen:

     Set forth below are the [Seller's] wire instructions applicable to the
above referenced Whole Loan Finance Program with [Seller].

Wire Instructions:
-----------------

          Wire location No. 1                  Wire location No. 2
          -------------------                  -------------------
          Bank Name:                           Bank Name:
          City, State:                         City, State:
          ABA #:                               ABA #:
          Account #:                           Account #:
          Account Name:                        Account Name:
          Ref:                                 Ref:

     Please acknowledge receipt of this letter in the space provided below. This
letter supersedes and replaces any prior notice specifying our Cash Account Wire
Instructions for the Whole Loan Finance Program and shall remains in effect
until superseded and replaced by a letter, in the form of this letter, executed
by us and acknowledged by you.

                                   Very truly yours,

                                   [SELLER]*

                                   By:_____________________________________
                                   Name:___________________________________
                                   Title:__________________________________

Receipt acknowledged by:

PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:__________________________
Name:________________________
Title:_______________________



__________________________
     *  Please add additional signatures of any person authorized to execute a
Cash Account Withdrawal/Deposit Notice.  Only authorized persons who have
executed this letter may execute a Cash Account Withdrawal/Deposit Notice.
<PAGE>

                                                                       EXHIBIT F


                       [CASH ACCOUNT ADJUSTMENT NOTICE]

                                                                          [Date]

To: [SELLER]
Re: [SELLER'S CASH ACCOUNT #_____________]

A journal entry will be processed today reflecting the following adjustment to
your Cash Account.

          [_]          CREDIT OF $____________________

          [_]          DEBIT OF $_____________________


     Explanation is as follows:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

     Upon request, additional backup documentation will be provided.

                                        Very truly yours,

                                        PAINE WEBBER REAL ESTATE
                                        SECURITIES INC.

                                        By:_____________________________
                                        Name:___________________________
                                        Title:__________________________
<PAGE>

                                                                       EXHIBIT G


                    ESCROW AGENT STANDING WIRE INSTRUCTIONS
                           (ON SELLER'S LETTERHEAD)
                                                                          [Date]

Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

     Re:  Whole Loan Finance Program

Ladies and Gentlemen:

     Set forth below are [Escrow/Title Companies] wire instructions applicable
to the above-mentioned Whole Loan Finance Program with [Seller].

Escrow/Title Wire Instructions:
-------------------------------

   Bank Name:
   City, State:
   ABA #:
   Account #:
   Account Name:

   All funds wired to the above referenced wire locations are to be held in
trust for Paine Webber until such time as the corresponding Mortgage Loan, which
is referenced on the Closing Loan Purchase Detail, is recorded and funds are
disbursed. If the Mortgage Loan is not recorded within twenty-four (24) hours of
receipt of the funds, the funds are to be returned via federal funds wire
transfer to Paine Webber as follows:

                         Attn: Whole Loans PWRES, INC.
                         Citibank, NYC, ABA # 021000089
                      further credit to Account #38897271

     Between the time the funds are received and such Mortgage Loan is recorded,
the acceptance of instructions regarding use of the funds that are in conflict
with the Escrow/Title Wire Instructions are only to be followed if said
instructions are in writing from Paine Webber.  This provision shall be
irrevocable and can only be modified with the express approval of Paine Webber.

     Please acknowledge receipt of this letter in the space provided below.
This letter supersedes and replaces any prior instruction received by Paine
Webber and shall remain in effect unless superseded and replaced by a letter, in
the form of this letter, executed by each of us and acknowledged by you.

                                         Very truly yours,

                                         [SELLER]


Receipt acknowledged by:                 By:__________________________________
PAINE WEBBER REAL ESTATE                 Name:________________________________
SECURITIES INC.                          Title:_______________________________

                                         [ESCROW AGENT/TITLE COMPANY]

By: ____________________________         By:__________________________________
Name: __________________________         Name:________________________________
Title: _________________________         Title:_______________________________
<PAGE>

                                                                       EXHIBIT H


                   [PURCHASER'S WIRE INSTRUCTIONS TO SELLER]


Wire Instructions:
-----------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     Account Name
     Ref: [Name of Seller]
<PAGE>

                                                                       EXHIBIT I


                           UCC-1 FINANCING STATEMENT



Debtor:         [Seller]

Secured Party:  Paine Webber Real Estate Securities Inc.

Item:
----

     All right (including the power to convey title thereto), title and interest
of Debtor in and to the property listed below:

          All participation certificates, trust receipts, mortgage loans,
          mortgage notes, mortgages or deeds of trust, assignments thereof and
          any and all documents and instruments related thereto, which are
          subject to the interest of Secured Party or any assignee under or
          pursuant to a Mortgage Loan Repurchase Agreement between Secured Party
          and the Debtor.
<PAGE>

                                                                       EXHIBIT J


                       [SELLER'S DELIVERY INSTRUCTIONS]
                           (ON SELLER'S LETTERHEAD)

Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

     Re:  Whole Loan Finance Program
          --------------------------


Loan #                      Last Name                              Face Amount


Upon your receipt of the Repurchase Price for the above-referenced Mortgage
Loan, please promptly instruct Custodian to deliver the related Dry Submission
Package to:

                                        [ADDRESS]

by: [METHOD OF DELIVERY]

                                        Very truly yours,

                                        [SELLER]


                                        By:_______________________
                                        Name:_____________________
                                        Title:____________________
<PAGE>

                                                                       EXHIBIT K


                              [SELLER'S RELEASE]
                           (ON SELLER'S LETTERHEAD)
                                                                          [Date]

Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, NY 10019

Ladies and Gentlemen:

     With respect to the mortgage loans referenced on the attached list (a) we
hereby certify to you that the mortgage loans are not subject to a lien of any
warehouse lender and (b) we hereby release all right, interest or claim of any
kind with respect to such mortgage loans, such release to be effective
automatically without further action by any party upon payment from Paine Webber
Real Estate Securities Inc., in accordance with our wire instructions in effect
on the date of such payment, of an amount not less than the aggregate of the
face amounts of such mortgage loans less the discount set forth on the related
funding confirmation, in immediately available funds.

                                        Very truly yours,

                                        [SELLER]*


                                        By:________________________
                                        Name:______________________
                                        Title:_____________________








_______________________
     *  The authorized officer of each Seller executing this letter must also
have executed the Seller's Wire Instructions.
<PAGE>

                                                                       EXHIBIT L


                         [SELLER'S WIRE INSTRUCTIONS]
                           (ON SELLER'S LETTERHEAD)

                                                                          [Date]

Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

     Re:  Whole Loan Finance Program
          --------------------------

Ladies and Gentleman:

     Set forth below are the [Seller's] wire instructions applicable to the
above referenced Whole Loan Finance Program with [Seller].

Wire Instructions:
------------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     Account Name:

     Please acknowledge receipt of this letter in the space provided below.
This letter supersedes and replaces any prior notice specifying our Whole Loan
Finance Program wire instructions and shall remain in effect until superseded
and replaced by a letter, in the form of this letter, executed by us and
acknowledged by you.

                                        Very truly yours,

                                        [SELLER]*


                                        By:_________________________
                                        Name:_______________________
                                        Title:______________________

Receipt acknowledged by:

PAINE WEBBER REAL ESTATE
SECURITIES INC.


By:_____________________________
Name:___________________________
Title:__________________________




____________________________
   *  Please add additional signatures of any person authorized to execute a
Seller's Release. Only authorized persons who have executed this letter may
execute a Seller's Release.
<PAGE>

                                                                       EXHIBIT M


                         [WAREHOUSE LENDER'S RELEASE]
                      (ON WAREHOUSE LENDER'S LETTERHEAD)

                                                                          [Date]
Paine Webber Real Estate Securities
1285 Avenue of the Americas
New York, New York 10019

Ladies and Gentlemen:

     We hereby release all right, interest or claim of any kind with respect to
the mortgage loans referenced on the attached loan list, such release to be
effective automatically without any further action by any party, upon receipt,
in one or more installments, from Paine Webber Real Estate Securities Inc., in
accordance with the wire instructions which we delivered to you in a letter
dated _______________, 199_, of an amount not less than the aggregate of the
face amounts of such mortgage loans less the discount set forth on the related
funding confirmation, in immediately available funds.

                                   Very truly yours,

                                   [WAREHOUSE LENDER]*


                                   By:_________________________
                                   Name:_______________________
                                   Title:______________________




_______________________
     *  The authorized officer of each Warehouse Lender executing this letter
must also have executed the Warehouse Lender's Wire Instructions.
<PAGE>

                                                                       EXHIBIT N


                         (WAREHOUSE LENDER'S RELEASE]*
                      (ON WAREHOUSE LENDER'S LETTERHEAD)

                                                                          [Date]
Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

Ladies and Gentlemen:

     We hereby release all right, interest or claim of any kind with respect to
the mortgage loans referenced on the attached loan list, such release to be
effective automatically without any further action by any party, upon receipt,
in one or more installments, from Paine Webber Real Estate Securities Inc., in
accordance with the wire instructions which we delivered to you in a letter
dated ______________, 199__, of an amount not less than the aggregate of the
face amounts of such mortgage loans less the discount set forth on the related
funding confirmation, in immediately available funds.

     Immediately upon release of the above referenced amount, we agree to act as
custodian for Paine Webber Real Estate Securities Inc. until the loan documents
in our possession that relate to such mortgage loans are delivered by us to
either Federal Express or such other courier service (for overnight delivery to
The Chase Manhattan Bank, N.A.) that you have designated to us as "approved".

                                        Very truly yours,

                                        [WAREHOUSE LENDER]**


                                        By:__________________________
                                        Name:________________________
                                        Title:_______________________





________________________________
     *  This form is to be used in Rewarehousing Transactions structured as Wet
Fundings.

     ** The authorized officer of each Warehouse Lender executing this letter
must also have executed the Warehouse Lender's Wire Instructions.
<PAGE>

                                                                       EXHIBIT O


                    [WAREHOUSE LENDER'S WIRE INSTRUCTIONS]
                      (ON WAREHOUSE LENDER'S LETTERHEAD)
                                                                          [Date]
Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

     Re:  Whole Loan Finance Program
          --------------------------

Ladies and Gentleman:

     Set forth below are the [Warehouse Lender's] wire instructions applicable
to the above-referenced Whole Loan Finance Program with [Seller].

Wire Instructions:
------------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     Account Name:

     Please acknowledge receipt of this letter in the space provided below.
This letter supersedes and replaces any prior notice specifying the name of
[Warehouse Lender] and setting forth wire instructions and shall remain in
effect until superseded and replaced by a letter, in the form of this letter,
executed by us and acknowledged by you.

                                        Very truly yours,

                                        [SELLER]

                                        By:_____________________________
                                        Name:___________________________
                                        Title:__________________________

                                        [Warehouse Lender(s)]*

                                        By:_____________________________
                                        Name:___________________________
                                        Title:__________________________

Receipt acknowledged by:
PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:____________________________
Name:__________________________
Title:_________________________



_____________________

     *  Please add additional signature of any person authorized to execute a
Warehouse Lender's Release.  Only authorized persons who have executed this
letter may execute a Warehouse Lender's Release.
<PAGE>

                     MORTGAGE LOAN PARTICIPATION AGREEMENT



<PAGE>

                                                                 GNMA/FNMA/FHLMC
                                                                          MASTER
                                                                         3/26/96

                     MORTGAGE LOAN PARTICIPATION AGREEMENT
                     -------------------------------------

PARTICIPANT:  PAINE  EBBER REAL ESTATE SECURITIES INC.

ADDRESS:      1285 AVENUE OF THE AMERICAS
              NEW YORK, NEW YORK 10019
              ATTENTION:____________________________

SELLER:       CRESCENT MORTGAGE SERVICES, INC.

ADDRESS:      SOUTH TERRACES
              115 PERIMETER CENTER PLACE
              SUITE 285
              ATLANTA, GEORGIA 30346

CUSTODIAN:    FHLMC

ADDRESS:      _________________________________________
              _________________________________________
              _________________________________________

DATE OF AGREEMENT: MAY 1, 1996
<PAGE>

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                       Page
<S>                                                                                                    <C>
Section 1.   Definitions ...........................................................................    2
Section 2.   Procedures for Purchases of Participation Certificates ................................    8
Section 3.   Issuance of Securities I...............................................................    8
Section 4.   Servicing of the Mortgage Loans .......................................................   11
Section 5.   Takeout Commitments ...................................................................   12
Section 6.   Transfers of Participation Certificates and Securities by Participant .................   13
Section 7.   Record Title to Mortgage Loans; Intent of Parties; Security Interest ..................   13
Section 8.   Representations and Warranties ........................................................   14
Section 9.   Covenants of Seller ...................................................................   17
Section 10.  Term...................................................................................   19
Section 11.  Exclusive Benefit of Parties; Assignment ..............................................   19
Section 12.  Amendments; Waivers Cumulative Rights .................................................   19
Section 13.  Execution in Counterparts..............................................................   19
Section 14.  Effect of Invalidity of Provisions.....................................................   20
Section 15.  Governing Law..........................................................................   20
Section 16.  Notices................................................................................   20
Section 17   Entire Agreement.......................................................................   20
Section 18.  Costs of Enforcement...................................................................   20
Section 19.  Consent to Service ....................................................................   20
Section 20.  Submission to Jurisdiction ............................................................   20
Section 21.  Jurisdiction Not Exclusive ............................................................   20
Section 22.  Construction ..........................................................................   21
</TABLE>
<PAGE>

Exhibit A    Participation Certificate

Exhibit B    Trade Assignment

Exhibit C    Document List

Exhibit D    Warehouse Lender's Release

Exhibit E    Assignment

Annex A      Seller's Delivery Instructions
<PAGE>

                     MORTGAGE LOAN PARTICIPATION AGREEMENT
                     -------------------------------------

     Mortgage Loan Participation Agreement ("Agreement"), dated as of the date
set forth on the cover page hereof, between PAINE WEBBER REAL ESTATE SECURITIES
INC. ("Participant") and the Seller whose name is set forth on the cover page
hereof ("Seller").

                             PRELIMINARY STATEMENT
                             ---------------------

     Seller desires to sell to Participant from time to time Participating
Certificates evidencing a 100% undivided ownership in certain Mortgage Loans
eligible in the aggregate to back Securities with the terms described in related
Take-Out Commitments.

     Participant desires and may in its sole discretion purchase such
Participation Certificates from Seller in accordance with the terms and
conditions set forth in this Agreement.  Seller, subject to the terms hereof,
will cause (a) Mortgage Loans evidenced by a Participation Certificate to back a
GNMA Security issued and guaranteed by GNMA, a FNMA Security issued and
guaranteed by FNMA or a FHLMC Security issued and guaranteed by FHLMC and (b)
Delivery of such GNMA Security, FNMA Security or FHLMC Security by GNMA, FNMA or
FHLMC to Participant or its designee, which GNMA Security, FNMA Security of
FHLMC Security will be purchased by a Takeout Investor.

     Participant's willingness to purchase an Participation Certificate
evidencing particular Mortgage Loans is based on Participant's expectation, in
reliance upon Seller's representation and warranties herein, that such Mortgage
Loans in the aggregate, constitute a pool or pools of mortgage loans that are
eligible to back a Security and that Security, in the amount and with the terms
described in the related Take-Out Commitment, will be issued and Participant
will receive Delivery thereof within the time period agreed upon between
Participant and Seller and reflected in the terms of such Participation
Certificate.

     The amount of the Purchase Price and the Performance fee to be paid by
Participant to Seller with respect to each Participation Certificate will be
calculated on the expectation of Participant, based upon the representations and
warranties of the Seller herein, that Participant will receive Delivery of the
Security to be backed by the Mortgage Loans evidenced by the Participation
Certificate purchased by Participant on the specified Anticipated Delivery Date
and that failure to receive such Delivery will result in a material decrease in
the market value of the Participation Certificate and the underlying Mortgage
Loans considered as a whole.  During the period from the purchase of a
Participation Certificate to Delivery of the related Security, Participant
expects to rely entirely upon Seller to service Mortgage Loans evidenced by the
applicable Participation Certificate, it being acknowledged that the continued
effectiveness of Seller's Approvals during such period constitutes an essential
factor in the calculation by Participant of the Purchase Price and the
Performance Fee paid to Seller for the related Participation Certificate and
that loss of such Approvals by Seller would result in a material decrease in the
market value of the Participation Certificate and the underlying Mortgage Loans
considered as a whole.

     The parties hereto hereby agree as follows:
<PAGE>

     Section 1.  Definitions.
                 -----------

     Capitalized terms used but not defined herein shall have the meanings set
forth in the Custodial Agreement. As used in this Agreement, the following terms
shall have the following meanings:

          "Act of Insolvency": With respect to Seller, (a) the commencement by
     Seller as debtor of any case or proceeding under any bankruptcy,
     insolvency, reorganization, liquidation, dissolution or similar law, or
     Seller's seeking the appointment of a receiver, trustee, custodian or
     similar official for Seller or any substantial part of its property, or (b)
     the commencement of any such case or proceeding against Seller, or
     another's seeking such appointment, or the filing against Seller of an
     application for a protective decree which (1) is consented to or not timely
     contested by Seller, (2) results in the entry of an order for relief, such
     an appointment, the issuance of such a protective decree or the entry of an
     order having similar effect, or (3) is not dismissed within sixty (60)
     days, (c) the making by Seller of a general assignment for the benefit of
     creditors, or (d) the admission in writing by Seller that Seller is unable
     to pay its debts as they become due or the nonpayment generally by Seller
     of its debts as they become due.

          "Anticipated Delivery Date": With respect to a Security, the date
     specified in the related Form HUD 11705 (Schedule of Subscribers), Fannie
     Mae Form 2014 (Delivery Schedule), or FHLMC Form 939 (Settlement and
     Information Multiple Registration Form), as applicable, on which it is
     anticipated that Delivery of the Security by the Applicable Agency will be
     made.

          "Applicable Agency": As defined in Section 3(a)(1).

          "Approvals": As defined in Section 8(a)(viii).

          "Assignee": As defined in Section 6.

          "Assignment of Mortgage": As defined in Section 6.

          "Collateral": As defined in Section 7(c).

          "Custodial Account": As defined in Section 4(b).

          "Custodial Agreement": The Custodial Agreement, dated as of the date
     set forth on the cover sheet hereof, among Seller, Participant and
     Custodian.

          "Custodian": The Custodian (which, under the appropriate circumstance,
     may include FHLMC as Custodian) set forth on the cover page hereof and its
     pr the Custodial Agreement.

                                       2

<PAGE>

          "Defective Mortgage Loan": With respect to a Participation
     Certificate, a mortgage loan that is not in Strict Compliance with the GNMA
     Program, FNMA Program or FHLMC Program, as applicable.

          "Delivery": The later to occur of (a) the issuance of the related
     Security and (b) the transfer of all of the right, title and ownership
     interest in that Security to Participant.

          "Discount": With respect to each Participation Certificate, the amount
     of the adjustment to the Trade Price of the related Security agreed upon by
     Seller and Participant to reserve for possibility that Seller may be unable
     to perform its obligations under this Agreement in accordance with their
     terms.

          "FDIC": Federal Deposit Insurance Corporation or any successor
     thereto.

          "FHA": Federal Housing Administration or any successor thereto.

          "FHLMC": Federal Home Loan Mortgage Corporation or any successor
     thereto.

          "FHLMC as Custodian":  With respect to FHLMC Participation
     Certificates, the circumstances in which Seller elects to appoint FHLMC (as
     opposed tosome other third party as permitted by the FHLMC Guide) as
     Custodian for the FHLMC Mortgage Loans subject to the FHLMC Participation
     Certificates to be purchased by Participant hereunder.

          "FHLMC Guide": The Freddie Mac Sellers' and Servicers' Guide, as such
     Guide may hereafter from time to time be amended.

          "FHLMC Mortgage Loan": With respect to any FHLMC Participation
     Certificate or any FHLMC Security, a mortgage loan that is in Strict
     Compliance with the eligibility requirements specified for the applicable
     FHLMC Program described in the FHLMC Guide.

          "FHLMC Participation Certificate": With respect to the FHLMC Program,
     a certificate, in the form of Exhibit A, issued by Seller and authenticated
     by Custodian, evidencing the 100 % undivided ownership interest in the
     Mortgage Loans forth that are either (a) set forth on a copy of the FHLMC
     Form 11 (Mortgage Submission Schedule) attached to such Participation
     Certificate or (b) identified on a computer tape compatible with MIDANET as
     belonging to the mortgage loan pool described in such Participation
     Certificate.

          "FHLMC Program": The FHLMC Home Mortgage Guarantor Program or the
     FHLMC FHA/VA Home Mortgage Guarantor Program, as described in the FHLMC
     Guide.

          "FHLMC Security": A modified pass-through mortgage-backed
     participation certificate, evidenced by a book-entry account in a
     depository institution having book-

                                       3

<PAGE>

     entry accounts at the Federal Reserve Bank of New York, issued and
     guaranteed, with respect to timely payment of interest and ultimate payment
     of principal, by FHLMC; and backed by a pool of FHLMC Mortgage Loans, in
     substantially the principal amount and with substantially the other terms
     as specified with respect to such FH MC Security in the related Takeout
     Commitment, if any.

          "FNMA" or "Fannie Mae": Federal National Mortgage Association or any
     successor thereto.

          "FNMA Guide": The Fannie Mae MBS Selling and Servicing Guide, as such
     Guide may hereafter from time to time be amended.

          "FNMA Mortgage Loan": With respect to any FNMA Participation
     Certificate or any FNM  Security, a mortgage loan that is in Strict
     Compliance with the eligibility requirements specified for the applicable
     FNMA Program described in the FNMA Guide.

          "FNMA Participation Certificate": With respect to the FNMA Program, a
     certificate, in the form of Exhibit A, authenticated by Custodian,
     evidencing the 100% undivided ownership interest in the Mortgage Loans set
     forth on Fannie Mae Form 2005 (Schedule of, Mortgages).

          "FNMA Program": The FNMA Guaranteed Mortgage-Backed Securities
     Programs, as described in the FNMA Guide.

          "FNMA Security":  An ownership interest in a pool of FNMA Mortgage
     Loans, evidenced by a book-entry account in a depositary institution having
     book-entry accounts at the Federal Reserve Bank of New York, in
     substantially the principal amount and with substantially the other terms
     as specified with respect to such FNMA Security in the related Takeout
     Commitment, if any.

          "GNMA": Government National Mortgage Association or any successor
     thereto.

          "GNMA Guide": The GNMA Mortgage-Backed Securities Guide I or II, as
     such Guide may hereafter from time to time be amended.

          "GNMA Mortgage Loan": With respect to any GNMA Participation
     Certificate or any GNMA Security, a mortgage loan that is in Strict
     Compliance with the eligibility requirements specified for the applicable
     GNMA Program in the applicable GNMA Guide.

          "GNMA Participation Certificate": With respect to the GNMA Program, a
     certificate, in the form, of Exhibit A, issued by Seller and authenticated
     by Custodian, evidencing the 100% undivided ownership interest in the
     Mortgage Loans set forth on the Form HD 11706 (Schedule of Pooled
     Mortgages).

                                       4

<PAGE>

          "GNMA Program": The GNMA Mortgage-Backed Securities Programs, as
     described in a GNMA Guide.

          "GNMA Security": A fully-modified pass-through mortgage-backed
     certificate guaranteed by (GNMA, evidenced by a book-entry account in a
     depository institution having book-entry accounts at Participant's Trust
     Company and backed by a pool of GNMA Mortgage Loans, in substantially the
     principal amount and with substantially the other terms as specified with
     respect to such GNMA Security in the related Takeout Commitment, if any.

          "HUD": United States Department of Housing and Urban Development or
     any successor thereto.

          "Issuance Date": With respect to a Security, the first day of the
     month in the month when the Security is issued.

          "Losses": Any and all losses, claims, damages, liabilities or
     expenses, including reasonable attorneys' fees, incurred by any person
     specified.

          "MIDANET": The FHLMC automated system by which sellers and servicers
     of mortgage loans to FHLMC transfer mortgage summary and record data or
     mortgage accounting and servicing information from their computer system or
     service bureau to FHLMC, as more fully described in the FHLMC Guide.

          "Mortgage": A mortgage, deed of trust or other security instrument,
     securing a Mortgage Note.

          "Mortgage Loan": A GNMA Mortgage Loan, a FNMA Mortgage Loan or a
     FHLMC Mortgage Loan.

          "Mortgage Note": A promissory note evidencing a Mortgage Loan.

          "OTS": Office of Thrift Supervision or any successor thereto.

          "Parent Company": A corporation or other entity owning at least 50% of
     the outstanding shares of voting stock of Seller.

          "Participant": Paine Webber Real Estate Securities Inc. and its
     successors in interest, including, but not limited to, any lender, designee
     or assignee to whom a Participation Certificate or a Security shall be
     pledged or assigned.

          "Participation Certificate": A GNMA Participation Certificate, a FNMA
     Participation Certificate or a FHLMC Participation Certificate.

                                       5

<PAGE>

          "Pass-Through Rate": With respect to a Participation Certificate, the
     rate of interest specified as the Pass-Through Rate in such Participation
     Certificate, which rate shall continue in effect until the latest of (a)
     the Settlement Date of the related Security, (b) either the date on which
     Receipt of the Security occurs or, if such Receipt occurs on such date
     after 12:00 noon, New York City time the next business day on which
     Participant is permitted under applicable laws and regulations to make
     delivery of the Security to the Takeout Investor and, if applicable, (c)
     the date on which Seller completes its performance of its obligations under
     Section 3(c)(2).

          "Performance Fee": With respect to each Participation Certificate, an
     amount equal to the Discount plus the Yield Compensation Adjustment, less
     any reduction pursuant to Section 3(b), which amount shall be payable to
     Seller by Participant as compensation to Seller for its services in
     connection with the issuance of a Security.

          "Purchase Date": With respect to a Participation Certificate, the
     date on which Participant elects to purchase such Participation
     Certificate.

          "Purchase Price": With respect to each Participation Certificate, the
     Trade Price of the Security to be backed by the Mortgage Loans evidenced by
     the Participation Certificate, less the Discount. Accrued interest shall be
     allocated in accordance with Section 3(a)(3).

          "Receipt": The Delivery of a Security, upon notice by Seller to
     Participant, not later than 12:00 noon, New York City time, on the second
     business day prior to the applicable Settlement Date, of (a) the amount of
     any change in the principal amount of the Mortgage Loans backing such
     Security, and (b) with respect to FHLMC Securities, the FHLMC Mortgage Loan
     pool number applicable to such Security. If the Seller fails to so notify
     Participant, "Receipt" shall be deemed to have occurred on the later of (1)
     the second business day after the date on which Seller provides such
     notification to Participant and (2) the date on which Participant receives
     Delivery of the Security.

          "RTC": Resolution Trust Corporation or any successor thereto.

          "Security": A GNMA Security, a FNMA Security or a FHLMC Security.

          "Settlement Date": The date specified in a Takeout Commitment upon
     which the related Security is scheduled to be delivered, against payment,
     to the specified Takeout Investor.

          "Strict Compliance" shall mean compliance of Seller and the Mortgage
     Loans with the requirements of the GNMA Guide, FNMA Guide or FHLMC Guide,
     as applicable and as amended by any agreements between Seller and the
     Applicable Agency, sufficient to enable Seller to issue and GNMA to
     guarantee or FNMA or FHLMC to issue and guarantee a Security, provided that
     until copies of any such agreements between Seller and the Applicable
     Agency have been provided to Participant by Seller, such agreements shall
     be deemed, as between Seller and

                                       6

<PAGE>

     Participant, not to amend the requirements of the GNMA Guide, FNMA Guide or
     FHLMC Guide, as applicable.

          "Successor Service": An entity with the necessary Approvals, as the
     circumstances may require, and designated by Participant, in conformity
     with Section 16, to replace Seller as issuer and servicer, mortgagee or
     seller/servicer of the Mortgage Loans or Securities related thereto.

          "Takeout Commitment": A trade confirmation from the Takeout Investor
     to Seller confirming the details of a forward trade between the Takeout
     Investor and Seller with respect to one or more Securities, which trade
     confirmation shall be enforceable and in full force and effect, and shall
     be validly and effectively assigned to Participant pursuant to a Trade
     Assignment, and relate to pools of Mortgage Loans that satisfy the "good
     delivery standards" of the Public Securities Association as set forth in
     the Public Securities Association Uniform Practices Guide.

          "Takeout Investor": A securities dealer or other financial
     institution, acceptable to Participant, who has made a Takeout Commitment.

          "Trade Assignment": A letter substantially in the form of Exhibit B.

          "Trade Price": The price specified in a Takeout Commitment at which a
     Takeout Investor is obligated to purchase the Security specified in such
     Takeout Commitment.

          "VA": United Sates Veterans Administration or any successor thereto.

          "Warehouse Lender": Any lender providing, financing to the Seller for
     the purpose of originating Mortgage Loans, which has a security interest in
     such Mortgage Loans as collateral for the obligations of Seller to such
     lender.

          "Wire Instructions": The wire instructions set forth opposite the name
     of the Warehouse Lender in a letter, in the form of Exhibit G to the
     Custodial Agreement, executed by Seller and Custodian, receipt of which has
     been acknowledged by Participant.

          "Yield Compensation Adjustment": Subject to any further adjustment
     provided in this Agreement, an amount (which may be a negative number)
     equal to:

                                    A(BC-DE)
                                    --------
                                      360

      where (i) A equals the number of days in the period beginning on the date
      Participant purchases such Participation Certificate to but not including
      the Settlement Date, (ii) B equals the aggregate principal amount of the
      Mortgage Loans evidenced by a Participation Certificate, (iii) C equals
      the interest rate (expressed as a decimal) on the

                                       7


<PAGE>

      Security backed by the Mortgage Loans subject to such Participation
      Certificate, (iv) D equals the Purchase Price and (v) E equals the Pass-
      Through Rate (expressed as a decimal) specified in such Participation
      Certificate.

     Section 2.  Procedure for Purchases of Participation Certificates.
                 -----------------------------------------------------

     (a)  Participant may, in its sole discretion from time to time, purchase
one or more Participation Certificates from Seller. Seller, on behalf of
Participant, shall arrange for the Delivery to Participant of a Security backed
by the Mortgage Loans evidenced by any Participation Certificate so purchased,
which Security shall be subject to a Takeout Commitment. Participant's
obligation to purchase any Participation Certificate which Participant elects to
purchase, shall be subject to the receipt by the Participant of the documents
listed in Exhibit C from Seller, in form and substance satisfactory to
Participant, and the execution of the Custodial Agreement relating to the
Participation Certificate by Seller and Custodian and delivery thereof to
Participant. Notwithstanding the `satisfaction of the conditions specified in
this Section 2(a), Participant is not obligated to purchase any Participation
Certificate offered to it hereunder.

     (b)  If Participant elects to purchase any Participation Certificate,
Participant shall pay to Seller, on the Purchase Date, the amount of the
Purchase Price for such Participation Certificate. In the event that Participant
does not transmit the Purchase Price, (i) any Participation Certificate
delivered by Custodian to Participant in anticipation of such purchase shall
automatically be null and void, (ii) Participant will not consummate the
transactions contemplated in the applicable Trade Assignment and (iii) to the
extent that Participant shall nevertheless receive the Security backed by the
Mortgage Loans to which such Participation Certificate relates prior to its
becoming null and void as provided in clause (i) above, Participant shall take
all reasonable actions necessary to ensure that such Security shall be delivered
in accordance with Seller's delivery instructions specified in Annex A.

     (c)  The terms and conditions of the purchase of each Participation
Certificate shall be as set forth in this Agreement. Each Participation
Certificate shall be deemed to incorporate, and Seller shall be deemed to make
as of the applicable dates specified in Section 8, for the benefit of
Participant and each Assignee of such Participation Certificate, the
representations and warranties set forth in Section 8 in respect of such
Participation Certificate and the Mortgage Loans evidenced by such Participation
Certificate.

     Section 3.  Issuance of Securities.
                 ----------------------

     (a)(1) With respect to Mortgage Loans evidenced by a Participation
Certificate which Participant has elected to purchase, Seller shall instruct
(and, if Seller fails to instruct, then Participant may instruct) Custodian to
deliver to GNMA, FNMA or FHLMC, as applicable (the "Applicable Agency"), the
documents listed in Exhibits C-1, C-2 or C-3 of the Custodial Agreement in
respect of such Mortgage Loans, in the manner and at the time set forth in the
Custodial Agreement. Seller shall thereafter promptly deliver to the Applicable
Agency any and all additional documents requested by the Applicable Agency to
enable the Applicable Agency to make Delivery to Participant of a Security,
backed by such Mortgage Loans on the

                                       8

<PAGE>

related Anticipated Delivery Date. Seller shall not revoke such instructions to
Custodian and shall not revoke its instructions to the Applicable Agency to make
Delivery to Participant or its designee of a Security backed by such Mortgage
Loans.

     (a)(2) Seller shall notify Participant, not later than 12:00 noon, New York
City time, on the second business day prior to the applicable Settlement Date,
(i) of the amount of any change in the principal amount of the Mortgage Loans
backing each such Security related to such Settlement Date and (ii) with respect
to FHLMC Securities, the FHLMC mortgage loan pool number applicable to each
Security to which such Settlement Date relates. Upon Delivery of such Security
to Participant or its designee, Participant shall cease to have any interest
under such Participation Certificate in the Mortgage Loans backing such
Security, notwithstanding anything to the contrary in the Participation
Certificate.

     (a)(3) With respect to each Participation Certificate that Participant
elects to purchase hereunder, Participant shall owe to Seller, on the later to
occur of four business days after the Purchase Date or on the date of Receipt by
Participant of the related Security, a Performance Fee. If a Participation
Certificate is purchased by Participant after the first day of the month in
which the Settlement Date occurs, Participant shall also pay to Seller on the
date of Receipt by Participant of the Security backed by the related Mortgage
Loans an amount equal to the accrued interest on the related Security at the
rate specified in the related Takeout Commitment from the first day of such
month to and including the day immediately preceding the date Participant
purchased such Participation Certificate. If a Participation Certificate is
purchased by Participant in the month prior to the month in which the Settlement
Date occurs, Seller, as servicer, shall pay to Participant all interest payments
which accrue on such Participation Certificate during the period from the date
of purchase of such Participation Certificate through and including the last day
of the month prior to the month in which such Settlement Date occurs.
Notwithstanding the foregoing, no amounts shall be owed by Participant to Seller
upon issuance of such Security in the circumstances contemplated in Section
3(c)(2). Except as otherwise provided in this Section 3(a)(3) and in Section
3(b), and subject to Participants right of set-off set forth in Section 3(g),
any Performance Fee owed by Participant with respect to a Participation
Certificate shall be paid by Participant to Seller not later than the Settlement
Date of the related Security. It is understood by Seller and Participant that,
if Seller requests and Participant agrees to pay the Performance Fee prior to
the Settlement Date of the related Security, the amount of such Performance Fee
shall be adjusted as mutually agreed by Seller and Participant.

     (b) Unless Receipt of a Security backed by the Mortgage Loans evidenced by
a Participation Certificate purchased hereunder has occurred by 12:00 noon, New
York City time, on the related Settlement Date, (1) the Performance Fee relating
to such Participation Certificate shall be reduced daily for the period from the
Settlement Date to but not including the earlier of the date of Receipt of such
Security and the date of satisfaction of the obligations of Seller pursuant to
the exercise by Participant of any remedial election authorized by this Section
3 by an amount equal to (A) the Purchase Price of for such Participation
Certificate multiplied by (B) the result obtained by dividing (i) the Pass-
Through Rate for the such Participation Certificate plus one percent by (ii)
three hundred and sixty (360) and (2) the

                                       9
<PAGE>

Performance Fee, if any, relating to such Participation Certificate shall not be
payable until the end of the period specified in clause (1) of this paragraph.

     (c)(1) If a breach by Seller of this Agreement results in any Mortgage Loan
being a Defective Mortgage Loan at the time of the delivery of the related
Participation Certificate to Participant, Participant in its sole discretion may
require that Seller, upon receipt of notice from Participant of its exercise of
such right, either (i) immediately repurchase Participant's ownership interest
in such Defective Mortgage Loan by remitting to Participant the allocable amount
paid by Participant for such Defective Mortgage Loan plus interest at the Pass-
Through Rate on the principal amount thereof from the date of Participant's
purchase of such Participation Certificate to the date of such repurchase, or
(ii) deliver to Custodian a Mortgage Loan eligible to back such Security in
exchange for such Defective Mortgage Loan, which newly delivered Mortgage Loan
shall be in all respects acceptable to Participant in Participant's sole
discretion, and such newly delivered Mortgage Loan will thereupon become one of
the Mortgage Loans evidenced by the Participation Certificate. If the aggregate
principal balance of any Mortgage Loans that are accepted by Participant
pursuant to clause (ii) of the immediately preceding sentence is less than the
aggregate principal balance of any Defective Mortgage Loan that is being
replaced by such Mortgage Loan, Seller shall remit with such Mortgage Loan to
Participant an amount equal to the difference between the aggregate principal
balance of the new Mortgage Loan accepted by Participant and the aggregate
principal balance of the Defective Mortgage Loan being replaced thereby.

     (c)(2) If Seller fails to comply with its obligations in the manner
described in Section 3(c)(1), or Seller is in breach of Section 8(a)(viii) or
8(b)(vii), not later than the third calendar day after receipt by Seller of
notice from Participant (or if such day is not a business day; the next business
day thereafter), Seller's rights and obligations to service the Mortgage Loans
evidenced by such Participation Certificate, as provided in this Agreement,
shall terminate. If an Act of Insolvency occurs at any time, Seller's rights and
obligations to service the Mortgage Loans, as provided in this Agreement, shall
terminate immediately, without any notice or action by Participant. Upon any
such termination, Participant is hereby authorized and empowered as the
exclusive agent for Seller to sell and transfer such rights to service the
Mortgage Loans for such price and on such terms and conditions as Participant
shall reasonably determine. Seller shall not otherwise attempt to sell or
transfer such rights to service without the prior consent of Participant. Seller
shall perform all acts and take all action so that the Mortgage Loans and all
files and documents relating to such Mortgage Loans held by Seller, together
with all escrow amounts relating to such Mortgage Loans, are delivered to
Successor Servicer. To the extent that the approval of the Applicable Agency is
required for any such sale or transfer, Seller shall fully cooperate with
Participant to obtain such approval. Upon exercise by Participant of its
remedies under this Section 3(c)(2), Seller hereby authorizes Participant to
receive all amounts paid by any purchaser of such rights to service the Mortgage
Loans and to remit such amounts to Seller subject to Participant's rights of
set-off under this Agreement. Upon exercise by Participant of its remedies under
this Section 3(c)(2), Participant's obligation to pay and Seller's right to
receive any portion of the Performance Fee relating to such Mortgage Loans shall
automatically be canceled and become null and void, provided that such
cancellation shall in no way relieve Seller or otherwise affect the obligation
of Seller to indemnify and hold Participant harmless as specified in Section
3(e).

                                      10
<PAGE>

     (d) Mortgage Loans required to be delivered to Successor Servicer by
Section 3(c)(2) shall be delivered free of any servicing rights in favor of
Seller and free of any title, interest, lien, encumbrance or claim of any kind
of Seller. Seller shall deliver or cause to be delivered all files and documents
relating to such Mortgage Loans held by Seller to Successor Servicer. Seller
shall promptly take such actions and furnish to Participant such documents that
Participant deems necessary or appropriate to enable Participant to obtain a
Security backed by such Mortgage Loans or to enforce such Mortgage Loans, as
appropriate.

     (e) Seller agrees to indemnify and hold Participant and its assigns
harmless from and against all Losses (including, without limitation, Losses
incurred by Participant on account of fees paid by Participant to the Applicable
Agency to cause the Securities to be issued or any Losses in connection with any
indemnification by Participant of the Applicable Agency) resulting from or
relating to any breach or failure to perform by Seller of any representation,
warranty, covenant, term or condition made or to be performed by Seller under
this Agreement.

     (f) No exercise by Participant of its rights under this Section 3 shall
relieve Seller of responsibility or liability for any breach of this Agreement.

     (g) Seller hereby grants Participant a right of set-off against the payment
of any amounts that may be due and payable to Participant from Seller, such
right to be upon any and all monies or other property of Seller held or received
by Participant or due and owing from Participant to Seller.

     Section 4.  Servicing of the Mortgage Loans.
                 -------------------------------

     (a) Seller shall service and administer the Mortgage Loans evidenced by a
Participation Certificate on behalf of Participant in accordance with prudent
mortgage loan servicing standards and procedures generally accepted in the
mortgage banking industry and in accordance with the requirements of the GNMA
Program, FNMA Program or FHLMC Program, as the case may be, provided that Seller
shall at all times comply with applicable law, FHA regulations and VA
regulations and the requirements of any private mortgage insurer so that the FHA
insurance, VA guarantee or any other applicable insurance or guarantee in
respect of any Mortgage Loan is not voided or reduced. Seller shall at all times
maintain accurate and complete records of its servicing of the Mortgage Loans,
and Participant may, at any time during Seller's business hours on reasonable
notice, examine and make copies of such records. In addition, if Delivery of a
Security is not made to Participant on or before the Anticipated Delivery Date,
Seller shall deliver to Participant monthly reports regarding the status of
those Mortgage Loans for which a Security has not yet been issued, which reports
shall include, but shall not be limited to, a description of those Mortgage
Loans in default for more than thirty (30) days, and such other circumstances
with respect to any Mortgage Loans (whether or not such Mortgage Loans are
included in the foregoing list) that could materially adversely affect any of
such Mortgage Loans, Participant's ownership of any of such Mortgage Loans or
the collateral securing any of such Mortgage Loans. Seller shall deliver such a
report to Participant every thirty (30) days until (i) Delivery of the related
Security to Participant or (ii) the exercise by Participant of any remedial
election pursuant to Section 3.

                                      11
<PAGE>

     (b) Within five (5) business days of notice from Participant, Seller, as
servicer, shall establish and maintain a separate custodial account (the
"Custodial Account") entitled "[name of Seller], in trust for Paine Webber Real
Estate Securities Inc. and its assignees under the Mortgage Loan Participation
Agreement dated [the date of this Agreement]" and shall promptly deposit into
such account in the form received, with any necessary endorsements, all
collections received in respect of the Mortgage Loans that are payable to
Participant as the owner of the Mortgage Loans.

     (c) Amounts deposited in the Custodial Account with respect to any Mortgage
Loan shall be held in trust for Participant as the owner of the Mortgage Loans
and shall be released only as follows:

         (1) Except as otherwise provided in Section 4(c)(2), upon Delivery of
     the Security backed by such Mortgage Loans to Participant and either (i)
     receipt by Participant or its designee of the purchase price for the
     Security from the Takeout Investor or (ii) if earlier, on the date required
     by the GNMA Guide, FNMA Guide or FHLMC Guide, as the case may be, amounts
     deposited in the Custodial Account shall be released in accordance with
     Section 3(a)(3). Notwithstanding the foregoing, all amounts deposited in
     the Custodial Account shall be paid to Seller upon the Delivery of the
     related Security to Participant if, and to the extent that, the amounts due
     and payable to Participant hereunder have been set-off against the Purchase
     Price for the related Participation Certificate or the Performance Fee
     relating to the Mortgage Loans underlying such Participation Certificate.
     The amounts paid to Seller (if any) pursuant to this Section 4(c)(1) shall
     constitute Seller's sole compensation for servicing the Mortgage Loans as
     provided in this Section 4.

         (2) If Successor Servicer takes delivery of such Mortgage Loans either
     under the circumstances set forth in Section 3 or otherwise, all amounts
     deposited in the Custodial Account shall be paid to Participant promptly
     upon such delivery.

         (3) If a Security is not issued during the month in which the related
     Settlement Date occurs, in any period thereafter during which Seller
     remains as servicer, all amounts deposited in the Custodial Account shall
     be released only in accordance with Participant's written instructions.

     Section 5.  Takeout Commitments.  Seller hereby assigns to Participant,
                 -------------------
free of any security interest, lien, claim or encumbrance of any kind, Seller's
rights under each Takeout Commitment to deliver the Security specified therein
to the related Takeout Investor and to receive the purchase price therefor from
such Takeout Investor. Subject to Participant's rights under Section 3,
Participant agrees that it will satisfy the Takeout Commitment on the Settlement
Date specified therein. Seller understands that, as a result of this Section 5
and each Trade Assignment, Participant will succeed to the rights and
obligations of Seller with respect to each Takeout Commitment subject to a Trade
Assignment, and that in satisfying each such Takeout Commitment, Participant
will stand in the shoes of Seller and, consequently, will be acting as a non-
dealer in exercising its rights and fulfilling its obligations assigned pursuant
to

                                      12
<PAGE>

this Section 5 and each Trade Assignment. Each Trade Assignment delivered by
Seller to Participant pursuant to Section 2 shall be delivered by Seller in a
timely manner sufficient to enable Participant to facilitate the settlement of
the related trade on the trade date in accordance with Chapter 8 of the Public
Securities Association's Uniform Practices for the Clearance and Settlement of
Mortgage-Backed Securities and other Related Securities, as amended from time to
time.

     Section 6.  Transfers of Participation Certificates and Securities by
                 ---------------------------------------------------------
Participant. Participant may, in its sole discretion and without the consent of
-----------
Seller, assign all of its right, title and interest or grant a security interest
in any Participation Certificate, any Mortgage Note, Mortgage and any assignment
of Mortgages (an "Assignment of Mortgage"), each Security in respect thereof of
which Delivery is made to Participant and all rights of Participant under this
Agreement (including, but not limited to, the Custodial Account) in respect of
such Participation Certificate, Mortgage Note, Mortgage, Assignment of Mortgage
and such Security, to any person (an "Assignee"), subject only to an obligation
on the part of the Assignee to deliver each such Security to a Takeout Investor
pursuant to Section 5 or to Participant to permit Participant or its designee to
make delivery thereof to a Takeout Investor pursuant to Section 5. Assignment by
Participant of a Participation Certificate as provided in this Section 6 will
not release Participant from its obligations otherwise under this Agreement.

     Without limitation of the foregoing, an assignment of the Participation
Certificate to an Assignee, as described in this Section 6, shall be effective
upon delivery of the Participation Certificate to the Assignee or its designee,
together with a duly executed Assignment in the form of Exhibit E.

     Section 7.  Record Title to Mortgage Loans; Intent of Parties; Security
                 -----------------------------------------------------------
                 Interest.
                 --------

     (a) From and after the issuance and delivery of the related Participation
Certificate, and subject to the remedies of Participant in Section 3, Seller
shall remain the last named payee or endorsee of each Mortgage Note and the
mortgagee or assignee of record of each Mortgage, in trust for the benefit of
Participant, for the sole purpose of facilitating the servicing of such Mortgage
Loan and the issuance of a Security backed by such Mortgage Loan. Where Seller
has appointed FHLMC as Custodian, the parties hereto acknowledge that the
Mortgage Notes acquired hereunder have been deposited with FHLMC to facilitate
the issuance of FHLMC Securities with respect thereto and that prior to such
issuance FHLMC is holding such Mortgage Notes as Custodian for Participant.

     (b) Seller shall maintain a complete set of books and records for each
Mortgage Loan which shall be clearly marked to reflect the ownership interest in
each Mortgage Loan of the holder of the related Participation Certificate.

     (c) Participant and Seller confirm that the transactions contemplated
herein are intended to be sales of the Mortgage Loans by Seller to Participant
rather than borrowings secured by the Mortgage Loans. In the event, for any
reason, any transaction is construed by any court or regulatory authority as a
borrowing rather than as a sale, the Seller and Participant intend that
Participant or its Assignee, as the case may be, shall have a perfected first
priority

                                      13
<PAGE>

security interest in the Participation Certificates, the Custodial Account, the
Mortgage Loans subject to each Participation Certificate, all documents
evidencing the Mortgage Loans, the Securities to be issued as contemplated
hereunder and all proceeds thereof, the Takeout Commitments and the proceeds of
any and all of the foregoing (collectively, the "Collateral"), free and clear of
adverse claims. In such case, Seller shall be deemed to have hereby granted to
Participant or its Assignee, as the case may be, a first priority security
interest in and lien upon the Collateral, free and clear of adverse claims. In
such event, this Agreement shall constitute a security agreement, the Custodian
shall be deemed to be an independent custodian for purposes of perfection of the
security interest granted to Participant, and Participant or each such Assignee
shall have all of the rights of a secured party under applicable law.

     Section 8.  Representations and Warranties.
                 ------------------------------

     (a) Seller hereby represents and warrants to Participant as of the date
hereof and as of the date of each issuance and delivery of a Participation
Certificate that:

         (i)   All representations and warranties made and all information
     (including, without limitation, any financial information concerning
     Seller) and documents or copies of documents furnished by Seller to
     Participant pursuant to or in connection with this Agreement are and will
     be true and correct at the time when made and at all times thereafter or,
     if limited to a specific date, as of the date to which they refer;

         (ii)  Seller is duly organized and validly existing under the laws of
     the jurisdiction of its organization, and it has qualified to do business
     in each jurisdiction in which it is legally required to do so. Seller has
     the authority under its charter and applicable law to enter into this
     Agreement and the Custodial Agreement and to perform all acts contemplated
     hereby and thereby or in connection herewith and therewith; this Agreement,
     the Custodial Agreement and the transactions contemplated hereby and
     thereby have been approved by the Board of Directors of Seller, and Seller
     has taken all action necessary to make this Agreement and the Custodial
     Agreement its valid and binding obligation enforceable in accordance with
     the terms hereof;

         (iii) This Agreement, the Custodial Agreement and every document to be
     executed by Seller pursuant to this Agreement is and will be valid, binding
     and subsisting obligations of Seller, enforceable in accordance with their
     respective terms. No consents or approvals are required to be obtained by
     Seller or its Parent Company for the execution, delivery and performance of
     this Agreement or the Custodial Agreement by Seller;

          (iv) The consummation of the transactions contemplated by this
     Agreement and the Custodial Agreement are in the ordinary course of
     business of Seller and will not result in the breach of any provision of
     the charter or by-laws of Seller or result in the breach of any provision
     of, or conflict with or constitute a default under or result in the
     acceleration of any obligation under, any agreement, indenture, loan or
     credit agreement or other instrument to which Seller, the Mortgage Loans or
     any of Seller's property is subject, or result in the violation of any law,
     rule, regulation, order,

                                      14
<PAGE>

     judgment or decree to which Seller, the Mortgage Loans or Seller's property
     is subject. Without limiting the generality of the foregoing, the
     consummation of the transactions contemplated herein or therein will not
     violate any policy, regulation or guideline of the FHA or VA or result in
     the voiding or reduction of the FHA insurance, VA guarantee or any other
     insurance or guarantee in respect of any Mortgage Loan, and such insurance
     or guarantee is in full force and effect or shall be in full force and
     effect as required by the applicable GNMA Guide, FNMA Guide or FHLMC Guide;

          (v)     Seller has not sold, assigned, transferred, pledged or
     hypothecated any interest in any Participation Certificate to any person
     other than Participant, and upon delivery of a Participation Certificate to
     Participant, Participant will be the sole owner thereof, free and clear of
     any lien, claim or encumbrance;

          (vi)    All information relating to Seller that Seller has delivered
     or caused to be delivered to Participant, including, but not limited to,
     all documents related to this Agreement, the Custodial Agreement or
     Seller's financial statements, does not contain any untrue statement of a
     material fact or omit to state a material fact necessary to make the
     statements made therein or herein in light of the circumstances under which
     they were made, not misleading;

          (vii)   There is no action, suit, proceeding, inquiry or
     investigation, at law or in equity, or before, or by any court, public
     board or body pending or, to Seller's knowledge, threatened against or
     affecting Seller (or, to Seller's knowledge, any basis therefor) wherein an
     unfavorable decision, ruling or finding would adversely affect the validity
     or enforceability of this Agreement, the Custodial Agreement or any
     agreement or instrument to which Seller is a party and which is used or
     contemplated for use in the consummation of the transactions contemplated
     hereby, would adversely affect the proceedings of Seller in connection
     herewith or would or could materially and adversely affect Seller's ability
     to carry out its obligations hereunder; and

          (viii)  Seller is a GNMA-approved issuer, a GNMA- approved servicer, a
     FHA-approved mortgagee, a VA-approved lender, a FNMA-approved Lender or a
     FHLMC-approved Seller/Servicer, as applicable, in good standing
     ("Approvals").

     (b) Seller hereby represents and warrants to Participant with respect to
each Mortgage Loan as of the date of the payment by Participant of the Purchase
Price of the related Participation Certificate that:

          (i)     Such Mortgage Loan was, immediately prior to the sale to
     Participant of the related Participation Certificate, owned solely by
     Seller, is not subject to any lien, claim or encumbrance, including,
     without limitation, any such interest pursuant to a loan or credit
     agreement for warehousing mortgage loans, and was originated and serviced
     in accordance with all applicable law and regulations, including without
     limitation the Federal Truth-in-Lending Act, the Real Estate Settlement
     Procedures Act, regulations issued pursuant to any of the aforesaid, and
     any and all rules, requirements,

                                      15
<PAGE>

     guidelines and announcements of the Applicable Agency, and, as applicable,
     the FHA and VA, as the same may be amended from time to time;

          (ii) The improvements on the land securing such Mortgage Loan are and
     will be kept insured at all times by responsible insurance companies
     reasonably acceptable to Participant against fire and extended coverage
     hazards under policies, binders or certificates of insurance with a
     standard mortgagee clause in favor of Seller and its assigns, providing
     that such policy may not be canceled without prior notice to Seller. Any
     proceeds of such insurance shall be held in trust for the benefit of
     Participant. The scope and amount of such insurance shall satisfy the
     rules, requirements, guidelines and announcements of the Applicable Agency,
     and shall in all cases be at least equal to the lesser of (A) principal
     amount of such Mortgage Loan or (B) the maximum amount permitted by
     applicable law, and shall not be subject to reduction below such amount
     through the operation of a coinsurance, reduced rate contribution or
     similar clause;

          (iii)  Each Mortgage is a valid first lien on the mortgaged property
     and is covered by an attorney's opinion of title acceptable to GNMA, FNMA
     or FHLMC, as applicable, or by a policy of title insurance on a standard
     ALTA or similar lender's form in favor of Seller and its assigns, subject
     only to exceptions permitted by the GNMA, FNMA or FHLMC Program, as
     applicable. Seller shall hold in trust for Participant such policy of title
     insurance, and, upon request of Participant, shall immediately deliver such
     policy to Participant or to the Custodian on behalf of Participant;

          (iv) To the extent applicable, such Mortgage Loan is either insured by
     the FHA under the National Housing Act, guaranteed by the VA under the
     Servicemen's Readjustment Act of 1944 or is otherwise insured or guaranteed
     in accordance with the requirements of the GNMA, FNMA or FHLMC Program, as
     applicable, and is not subject to any defect that would prevent recovery in
     full or in part against the FHA, VA or other insurer or guarantor, as the
     case may be;

          (v) Such Mortgage Loan is in Strict (Compliance with the requirements
     and specifications (including, without limitation, all representations and
     warranties required in respect thereof) set forth in the GNMA Guide, FNMA
     Guide or FHLMC Guide, as applicable;

          (vi) Such Mortgage Loan conforms in all respects with all requirements
     of the Takeout Commitment applicable to the Security to be backed by such
     Mortgage Loan; and

          (vii)  To the extent applicable, each Mortgage Loan is being serviced
     by a mortgage sub-servicer having all Approvals necessary to make such
     Mortgage Loan eligible to back a GNMA, FNMA or FHLMC Security, as
     applicable.

          The representations and warranties of Seller in this Section 8 are
unaffected by and supersede any provision in any endorsement of any Mortgage
Loan or in any assignment

                                      16
<PAGE>

with respect to such Mortgage Loan to the effect that such endorsement or
assignment is without recourse or without representation or warranty.

     Section 9.  Covenants of Seller.  Seller hereby covenants and agrees with
                 -------------------
Participant as follows:

     (a) Seller shall deliver to Participant:

          (1) Within one hundred twenty (120) days after the end of each fiscal
     year of Seller, consolidated balance sheets of Seller and its consolidated
     subsidiaries and the related consolidated statements of income showing the
     financial condition of Seller and its consolidated subsidiaries as of the
     close of such fiscal year and the results of operations during such year,
     and a consolidated statement of cash flows, as of the close of such fiscal
     year, setting forth, in each case, in comparative form the corresponding
     figures for the preceding year, all the foregoing consolidated financial
     statements to be reported on by, and to carry the report (acceptable in
     form and content to Participant) of an independent public accountant of
     national standing acceptable to Participant;

          (2) Within sixty (60) days after the end of each of the first three
     fiscal quarters of each fiscal year of Seller, unaudited consolidated
     balance sheets and consolidated statements of income, all to be in a form
     acceptable to Participant, showing the financial condition and results of
     operations of Seller and its consolidated subsidiaries on a consolidated
     basis as of the end of each such quarter and for the then elapsed portion
     of the fiscal year, setting forth, in each case, in comparative form the
     corresponding figures for the corresponding periods of the preceding fiscal
     year, certified by a financial officer of Seller (acceptable to
     Participant) as presenting fairly the financial position and results of
     operations of Seller and its consolidated subsidiaries and as having been
     prepared in accordance with generally accepted accounting principles
     consistently applied, in each case, subject to normal year-end audit
     adjustments;

          (3) Promptly upon receipt thereof, a copy of each other report
     submitted to Seller by its independent public accountants in connection
     with any annual, interim or special audit of Seller;

          (4) Promptly upon becoming aware thereof, notice of (i) the
     commencement of, or any determination in, any legal, judicial or regulatory
     proceedings, (ii) any dispute between Seller or its Parent Company and any
     governmental or regulatory body, (iii) any event or condition, which, in
     any case of (i) or (ii), if adversely determined, would have a material
     adverse effect on (A) the validity or enforceability of this Agreement, (B)
     the financial condition or business operations of Seller, (C) the Approvals
     of Seller or (D) the ability of Seller to fulfill its obligations under
     this Agreement or (iv) any material adverse change in the business,
     operations, prospects or financial condition of Seller, including, without
     limitation, the insolvency of Seller or its Parent Company;

          (5) Promptly upon becoming available, copies of all financial
     statements, reports, notices and proxy statements sent by its Parent
     Company, Seller or any of

                                      17
<PAGE>

     Seller's consolidated subsidiaries in a general mailing to their respective
     stockholders and of all reports and other material (including copies of all
     registration statements under the Securities Act of 1933, as amended) filed
     by any of them with any securities exchange or with the Securities and
     Exchange Commission or any governmental authority succeeding to any or all
     of the functions of said Commission;

          (6) Promptly upon becoming available, copies of any press releases
     issued by its Parent Company or Seller and copies of any annual and
     quarterly financial reports and any reports on Form H-(b)12 which its
     Parent Company or Seller may be required to file with the OTS or the RTC or
     comparable reports which a Parent Company or Seller may be required to file
     with the FDIC or any other federal banking agency containing such financial
     statements and other information concerning such Parent Company's or
     Seller's business and affairs as is required to be included in such reports
     in accordance with the rules and regulations of the OTS, the RTC, the FDIC
     or such other banking agency, as may be promulgated from time to time;

          (7) Such supplements to the aforementioned documents and such other
     information regarding the operations, business, affairs and financial
     condition of its Parent Company, Seller or any of Seller's consolidated
     subsidiaries as Participant may request;

          (8) A copy of (i) the articles of incorporation of Seller and any
     amendments thereto, certified by the Secretary of State of Seller's state
     of incorporation, (ii) a copy of Seller's by-laws, together with any
     amendments thereto, (iii) a copy of the resolutions adopted by Seller's
     Board of Directors authorizing Seller to enter into this Agreement and the
     Custodial Agreement and authorizing one or more of Seller's officers to
     execute the documents related to this Agreement and Custodial Agreement,
     and (iv) a certificate of incumbency and signature of each officer of
     Seller executing any document in connection with this Agreement;

          (9) Neither the Seller nor any affiliate thereof will acquire at any
     time any Participation Certificate or any other economic interest in or
     obligation with respect to any Mortgage Loan;

          (10) Under generally accepted accounting principles ("GAAP") and for
     federal income tax purposes, the Seller will report each sale of a
     Participation Certificate to the Participant as a sale of the ownership
     interest in the Mortgage Loans evidenced by that Participation Certificate.
     The Seller has been advised by or has confirmed with its independent public
     accountants that the foregoing transactions will be so classified under
     GAAP;

          (11) The consideration received by the Seller upon the sale of each
     Participation Certificate will constitute reasonably equivalent value and
     fair consideration for the ownership interest in the Mortgage Loans
     evidenced by that Participation Certificate;

                                      18
<PAGE>

         (12) The Seller will be solvent at all relevant times prior to, and
     will not be rendered insolvent by, any sale of a Participation Certificate
     to the Participant; and

         (13) The Seller will not sell any Participation Certificate to the
     Participant with any intent to hinder, delay or defraud any of the Seller's
     creditors .

     (b) Seller shall take all necessary action to maintain its Approvals at all
times during the term of this Agreement. If, for any reason, Seller ceases to
maintain such Approvals, Seller shall so notify Participant immediately.

     (c) Seller will comply in all material respects with all laws, rules and
regulations to which it is or may become subject.

     (d) Seller shall, upon request of Participant, promptly execute and deliver
to Participant all such other and further documents and instruments of transfer,
conveyance and assignment, and shall take such other action as Participant may
require more effectively to transfer, convey, assign to and vest in Participant
and to put Participant in possession of the property to be transferred,
conveyed, assigned and delivered hereunder and otherwise to carry out more
effectively the intent of the provisions under this Agreement.

     Section 10.  Term. This Agreement shall continue in effect until terminated
                  ----
as to future transactions by written instruction signed by either Seller or
Participant and delivered to the other, provided that no termination will affect
the obligations hereunder as to any of the Participation Certificates then
outstanding hereunder or any Security not yet delivered to the related Takeout
Investor.

     Section 11.  Exclusive Benefit of Parties; Assignment. This Agreement is
                  ----------------------------------------
for the exclusive benefit of the parties hereto and their respective successors
and assigns and shall not be deemed to give any legal or equitable right to any
other person, including the Takeout Investor and Custodian. Except as provided
in Section 6, no rights or obligations created by this Agreement may be assigned
by either party hereto without the prior written consent of the other party.

     Section 12.  Amendments; Waivers; Cumulative Rights. This Agreement may be
                  --------------------------------------
amended from time to time only by written agreement of Seller and Participant.
Any forbearance, failure or delay by Participant in exercising any right, power
or remedy hereunder shall not be deemed to be a waiver thereof, and any single
or partial exercise by Participant of any right, power or remedy hereunder shall
not preclude the further exercise thereof. Every right, power and remedy of
Participant shall continue in full force and effect until specifically waived by
Participant in writing. No right, power or remedy shall be exclusive, and each
such right, power or remedy shall be cumulative and in addition to any other
right, power or remedy, whether conferred hereby or hereafter available at law
or in equity or by statute or otherwise.

     Section 13.  Execution in Counterparts.  This Agreement may be executed in
                  -------------------------
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.

                                      19
<PAGE>

     Section 14.  Effect of Invalidity of Provisions.  In case any one or more
                  ----------------------------------
of the provisions contained in this Agreement should be or become invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.

     Section 15.  Governing Law.  This Agreement shall be governed by and
                  -------------
construed in accordance with the laws of the State of New York, without regard
to conflict of laws rules.

     Section 16.  Notices.  Any notices, consents, elections, directions and
                  -------
other communications given under this Agreement shall be in writing and shall be
deemed to have been duly given when telecopied or delivered by overnight courier
to, personally delivered to, or on the third day following the placing thereof
in the mail, first class postage prepaid to, the respective addresses set forth
on the cover page hereof for Seller, Participant or Custodian, or to such other
address as either party shall give notice to the other party pursuant to this
Section. Notices to any Assignee shall be given to such address as the Assignee
shall provide to Seller in writing.

     Section 17.  Entire Agreement.  This Agreement, the Participation
                  ----------------
Certificates and the Custodial Agreement contain the entire agreement between
the parties hereto with respect to the subject matter hereof, and supersede all
prior and contemporaneous agreements between them, oral or written, of any
nature whatsoever with respect to the subject matter hereof.

     Section 18.  Costs of Enforcement. In addition to any other indemnity
                  --------------------
specified in this Agreement, in the event of a breach by Seller of this
Agreement, the Custodial Agreement, a Participation Certificate or a Takeout
Commitment, Seller agrees to pay the reasonable attorneys' fees and expenses of
Participant and/or any Assignee incurred as a consequence of such breach.

     Section 19.  Consent to Service.  Each party irrevocably consents to the
                  ------------------
service of process by registered or certified mail, postage prepaid, to it at
its address given in or pursuant to Section 16.

     Section 20.  Submission to Jurisdiction. With respect to any claim arising
                  --------------------------
out of this Agreement each party (a) irrevocably submits to the nonexclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, and (b)
irrevocably waives (i) any objection which it may have at any time to the laying
of venue of any suit, action or proceeding arising out of or relating hereto
brought in any such court, (ii) any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient forum
and (iii) the right to object, with respect to such claim, suit, action or
proceeding brought in any such court, that such court does not have jurisdiction
over such party.

     Section 21.  Jurisdiction Not Exclusive.  Nothing herein will be deemed to
                  --------------------------
preclude either party hereto from bringing an action or proceeding in respect of
this Agreement in any jurisdiction other than as set forth in Section 20.

                                      20
<PAGE>

     Section 22.  Construction.  The headings in this Agreement are for
                  ------------
convenience only and are not intended to influence its construction. References
to Sections, Exhibits and Annexes in this Agreement are to the Sections of and
Exhibits and Annexes to this Agreement.  The Exhibits and Annexes are part of
this Agreement. In this Agreement, the singular includes the plural, the plural
the singular, and the words "and" and "or" are used in the conjunctive or
disjunctive as the sense and circumstances may require.

                                      21
<PAGE>

     IN WITNESS WHEREOF, Participant and Seller have duly executed this
Agreement as of the date and year set forth on the cover page hereof.

                                PAINE WEBBER REAL ESTATE
                                SECURITIES INC.


                                By:  /s/
                                     _____________________
                                Name:_____________________
                                Title:____________________


                                CRESCENT MORTGAGE SERVICES, INC.


                                By:  /s/
                                     _____________________
                                Name:_____________________
                                Title:____________________
                                Address (if different from cover page):

                                      22
<PAGE>

                                                                       Exhibit A


                           PARTICIPATION CERTIFICATE

POOL NO. (FHLMC CONTRACT NO.) ______________
PASS-THROUGH RATE________________
DISCOUNT________________

     This Certificate evidences a one hundred percent (100%) undivided ownership
interest in (including the right to receive the payments of principal of and
interest on) the Mortgage Loans identified on the attached:

(Check Box)

               [  ] (a) Form HUD 11706 (Schedule of Pooled Mortgages);
               [  ] (b) Fannie Mae Form 2005 (Schedule of Mortgages); or
               [  ] (c) FHLMC Form 11 (Mortgage Submission Schedule) or
                        MIDANET computer tape

The Mortgage Loans have been sold to Participant pursuant to the terms of that
certain Mortgage Loan Participation Agreement, dated __________, 19__ (the
"Agreement") between ________________________________, as Seller, and PAINE
WEBBER REAL ESTATE SECURITIES INC., as Participant.  Capitalized terms used but
not defined herein shall have the meanings set forth in the Agreement, the terms
of which are hereby incorporated by reference and made a part of this
Participation Certificate.

     Upon Delivery of the related Security to Participant or its Assignee,
Participant's ownership interest in the Mortgage Loans backing such Security
evidenced in this Certificate shall terminate, and this Certificate shall be
void and of no further effect.

     This Participation Certificate may be amended only by a written agreement
between Seller and Participant.

                                                [SELLER]

                                                By:___________________________
___________________________                     Its:__________________________
___________________________                     Date:_________________________

AGGREGATE PRINCIPAL BALANCES OF THE MORTGAGE LOANS (GIVING EFFECT TO PAYMENTS
MADE AS OF __________, 19__): $_____________________

Hereby authenticated by [Custodian]
pursuant to the Custodial Agreement
(May not be applicable for FHLMC)

                                               By:____________________________
                                               Name:__________________________
                                               Title:_________________________
<PAGE>

                                                                       Exhibit B


                                TRADE ASSIGNMENT

____________("Takeout Investor")
[Address]

Attention: __________________
Fax No.: ___________________

Dear Sirs:

     Attached hereto is a correct and complete copy of your confirmation of
commitment (the "Commitment"), trade-dated _________, 19__, to purchase $______
of ____% ____year:

(Check Box)

     [  ]   (a)  Government National Mortgage Association;
     [  ]   (b)  Federal National Mortgage Association; or
     [  ]   (c)  Federal Home Loan Mortgage Corporation;

mortgage-backed pass-through securities ("Securities") at a purchase price of
________from ________on [Insert Settlement Date]. Our intention is to assign
$______________ of this commitment's full amount. This is to confirm that (i)
the form of this assignment conforms to the PSA guidelines, (ii) the commitment
is in full force and effect, (iii) the Commitment has been assigned to Paine
Webber Inc. ("P/W") whose acceptance of such assignment is indicated below, (iv)
you will accept delivery of such Securities directly from PIW, (v) you will pay
P/W for such Securities, (vi) P/W is obligated to make delivery of such
Securities to you in accordance with the attached Commitment and (vii) you have
released Seller from its obligation to deliver the Securities to you under the
Commitment.  Payment will be made "delivery versus payment (DVP)" to P/W in
immediately available funds.

     If you have any questions, please call (212) 713-6267 immediately or send
correspondence by fax to (212) 713-8355.

                                                    Very truly yours,

                                                    [SELLER]

Agreed to:                                          By:_______________________
                                                    Its:______________________
                                                    Date:_____________________

PAINE WEBBER INC, as agent for
PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:____________________________
Name:__________________________
Title:_________________________

Notice of delivery and confirmation of receipt are the obligations of Paine
Webber.  Prompt notification of incorrect information or rejection of the trade
assignment should be made to Paine Webber.
<PAGE>

                                                                       Exhibit C


                                 DOCUMENT LIST

     Seller shall deliver or cause to be delivered the following documents to
Participant:

               (i) the fully completed Participation Certificate, executed by
          Seller and, unless Seller has appointed FHLMC as Custodian,
          authenticated by Custodian and attached to the Participation
          Certificate the fully completed copy of (a) Form HUD 11706 (Schedule
          of Pooled Mortgages)*, (b) Fannie Mae Form 2005 (Schedule of
          Mortgages)** or (c) FHLMC Form 11 (Mortgage Submission Schedule) or
          MIDANET computer tape***;

               (ii) the fully completed copy of (a) Form HUD 11705 (Schedule of
          Subscribers)*, (b) Fannie Mae Form 2014 (Delivery Schedule)** or (c) a
          copy of FHLMC Form 381 (Contract Delivery Summary)*** and a copy of
          FHLMC Form 939 (Settlement and Information Multiple Registration
          Form)*** designating Participant as the party authorized to receive
          the Securities, executed by Seller and relating to the Securities to
          be backed by the Mortgage Loans, certified by Seller to be correct and
          unmodified copies of such forms in full force and effect;

               (iii)  either (a) a copy of a Takeout Commitment with respect to
          the Security to be backed by the Mortgage Loans evidenced by such
          Participation Certificate or (b) a letter from Seller confirming the
          details of such Takeout Commitment;

               (iv) if the Takeout Investor is not Paine Webber Inc., a Trade
          Assignment must also be delivered to Participant;

               (v) a letter from any warehouse lender, substantially in the form
          of Exhibit D, having a security interest in the Mortgage Loans,
          addressed to Participant, releasing any and all right, title and
          interest in such Mortgage Loans.

       *  For GNMA Program only
      **  For FNMA Program only
     ***  For FHLMC Program only
<PAGE>

                                                                       Exhibit D


                         [WAREHOUSE LENDER'S RELEASE]



Paine Webber Inc. as agent for
Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

Gentlemen:

     Capitalized terms used herein but not defined herein shall have the
meanings ascribed to such terms in the Custodial Agreement, dated as of
______________, 199_, among Paine Webber Real Estate Securities Inc., [Seller]
and [Custodian].

     We hereby release all right, interest or claim of any kind, including any
security interest or lien, with respect to the mortgage loans referenced in the
attached schedule (GNMA/FNMA/FHLMC Pool/Contract #_________________), such
release to be effective automatically without any further action by any party,
upon payment, in one or more installments, from Paine Webber Real Estate
Securities Inc., in accordance with the Wire Instructions in effect on the date
of such payment, in immediately available funds, of an aggregate amount equal to
the product of A multiplied by B (such product being rounded to the nearest
$0.01) multiplied by C.*

                                     Very truly yours,



                                     [WAREHOUSE LENDER]

* A =  weighted average Trade Price
  B =  principal amount of the Mortgage Loans
       backing the Security
  C =  1 minus the Discount
<PAGE>

                                                                       Exhibit E


                                  ASSIGNMENT


     For VALUE RECEIVED the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
______________________________________________________________________.  Please
print or typewrite name and address, including postal zip code of assignee)

an undivided Participation Interest equal to _______% of the Mortgage Loans
evidenced by the within Participation Certificate, Pool No. (FHLMC Contract No.)
______________________, Pass-Through Rate ______________, Discount
____________and hereby authorize(s) the transfer of registration of such
interest to assignee.

                                                     [Assignor]



Dated:______________                             By:______________________
                                                 Title:___________________

<PAGE>

                                                                         Annex A


                         SELLER'S DELIVERY INSTRUCTIONS

     (1) In the case of certificated Securities, Participant will pick up the
Securities upon receipt of notification of issuance from Seller and promptly
deliver such Securities in negotiable form to:

                                                ___________________________

                                                ___________________________

                                                ___________________________

                                                ___________________________


     (2) In the case of book-entry Securities, upon receipt by Participant of
such Securities, Participant will wire the Securities to:


                                                ___________________________

                                                ___________________________

                                                ___________________________

                                                ___________________________









<PAGE>

                       MORTGAGE LOAN CUSTODIAL AGREEMENT
                       ---------------------------------
<PAGE>

                                                         DRY/CW/CONDUIT PROGRAMS
                                                                         3/26/96

                       MORTGAGE LOAN CUSTODIAL AGREEMENT
                       ---------------------------------

PURCHASER:  PAINE WEBBER REAL ESTATE SECURITIES INC.

ADDRESS:    1285 AVENUE OF THE AMERICAS
            NEW YORK, NEW YORK 10019
            ATTENTION:____________________________

CUSTODIAN:  THE CHASE MANHATTAN BANK, N.A.

ADDRESS:    MORTGAGE BANKING DIVISION
            2 CHASE MANHATTAN PLAZA (20th FLOOR)
            NEW YORK, NEW YORK 10081
            ATTENTION: GLENN HETT

SELLER:     CRESCENT MORTGAGE SERVICES, INC.

ADDRESS:    SOUTH TERRACES
            115 PERIMETER CENTER PLACE
            SUITE 28
            ATLANTA, GEORGIA 30346


DATE:       MAY 1, 1996
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                       Page
<S>                                                                                                    <C>
Section 1.        Definitions                                                                           1

Section 2.        Delivery of Documents by Seller                                                       8

Section 3.        Custodian as Custodian for, and Bailee of, Purchaser, Assignee and Warehouse          9
                  Lender

Section 4.        Certification by Custodian; Delivery of Documents                                    10

Section 5.        Funding by the Takeout Investor                                                      13

Section 6.        Default                                                                              13

Section 7.        Access to Documents                                                                  13

Section 8.        Custodian's Fees and Expenses; Successor Custodian; Standard of Care                 14

Section 9.        Assignment by Purchaser                                                              15

Section 10.       Insurance                                                                            16

Section 11.       Representations, Warranties and Covenants                                            16

Section 12.       No Adverse Interests                                                                 17

Section 13.       Amendments                                                                           17

Section 14.       Execution in Counterparts                                                            17

Section 15.       Agreement for Exclusive Benefit of Parties; Assignment                               18

Section 16.       Effect of Invalidity of Provisions                                                   18

Section 17.       Governing Law                                                                        18

Section 18.       Consent to Service                                                                   18

Section 19.       Notices                                                                              18

Section 20.       Certification                                                                        18

Section 21.       Construction                                                                         18
</TABLE>
<PAGE>

Exhibit A      Dry Submission Package
Exhibit B-1    Cash Window Submission Package
Exhibit B-2    FHLMC Document List
Exhibit B-3    FNMA Document List
Exhibit B-4    FNMA Bailee Letter
Exhibit C-1    Conduit Submission Package
Exhibit C-2    Conduit Bailee Letter
Exhibit D      Conversion Submission Packages
Exhibit E      Request for Certification
Exhibit F      Document Codes
Exhibit G-1    Warehouse Lender's Release
Exhibit G-2    Warehouse Lender's Wire Instructions
Exhibit H-1    Seller's Release
Exhibit H-2    Seller's Wire Instructions
Exhibit I-1    Purchaser's Wire Instructions to Seller
Exhibit I-2    Purchaser's Wire Instructions to Custodian
Exhibit I-3    Purchaser's Delivery Instructions to Custodian
Exhibit J      Notice by Assignee to Custodian of Purchaser's Default
Exhibit K      Limited Power of Attorney
Exhibit L      Unidentified Mortgage Loans List
Exhibit M      Unidentified/Suspension Mortgage Loan Directive
Exhibit N      Form of Delivery Instructions
Exhibit O      Purchaser's Instructions to Custodian to Destroy Specified Files
Exhibit P      List of Primary Mortgage Insurers
Schedule A     List of Conduits
<PAGE>

                       MORTGAGE LOAN CUSTODIAL AGREEMENT

     THIS Mortgage Loan Custodial Agreement ("Agreement"), dated as of the date
set forth on the cover page hereof, among PAINE WEBBER REAL ESTATE SECURITIES
INC. ("Purchaser"), THE CHASE MANHATTAN BANK, N.A. ("Custodian") and the SELLER
whose name is set forth on the cover page hereof ("Seller").

                             PRELIMINARY STATEMENT

     Purchaser has agreed to purchase, from time to time, at its sole election
from Seller, certain residential first mortgage loans pursuant to the terms and
conditions of one or more Purchase Agreements between Purchaser and Seller
relating to Dry Transactions, Cash Window Transactions or Conduit Transactions.
Seller is obligated to service the Mortgage Loans pursuant to the terms and
conditions of the Purchase Agreements. Purchaser desires to have Custodian take
possession of the Mortgage Notes evidencing the Mortgage Loans, along with
certain other documents specified herein, as the custodian for and bailee of
Purchaser or Assignee in accordance with the terms and conditions hereof.

     The parties hereto agree as follows:

     Section 1.  Definitions.
                 -----------

     As used in this Agreement, the following terms shall have the following
meanings:

          "Agency": FHLMC or FNMA, as applicable.

          "Applicable Agency Documents": The documents listed on Exhibit B-2 or
     Exhibit B-3, as applicable.

          "Applicable Guide": With respect to each Takeout Investor the
     applicable guide published by such Takeout Investor setting forth the
     requirements each Mortgage Loan needs to satisfy in order to be eligible
     for purchase by such Takeout Investor, as such guide may be amended or
     supplemented from time to time.

          "Assignee": The Chase Manhattan Bank, National Association, as agent
     for certain beneficiaries pursuant to certain Repurchase Transaction Tri-
     Party Custody Agreements.

          "Assignment of Mortgage": An assignment of the Mortgage, notice of
     transfer or equivalent instrument sufficient under the laws of the
     jurisdiction wherein the related Mortgaged Property is located to reflect
     of record the sale of a Mortgage Loan.

          "Bailee Letter": A FNMA Bailee Letter or a Conduit Bailee Letter, as
     applicable.
<PAGE>

          "Business Day": Any day other than (a) a Saturday, Sunday or other day
     on which banks located in The City of New York, New York are authorized or
     obligated by law or executive order to be closed, or (b) any day on which
     Paine Webber Real Estate Securities Inc. is closed for business, provided
     that notice thereof shall have been given not less than seven calendar days
     prior to such day.

          "Cash Window Submission Package": The documents listed on Exhibit B-1,
     which shall be delivered by Seller to Custodian in connection with each
     Cash Window Transaction.

          "Cash Window Transaction": A transaction initiated by Purchaser's
     delivery of a Request for Certification which identifies FNMA or FHLMC as
     the Takeout Investor but does not include a Conversion Code.

          "Certification": With respect to a Mortgage Loan, the full performance
     by Custodian of the procedures set forth in Sections 4(a) and 4(b).

          "Certification Code": A Mortgage Loan Absentee Code, a Mortgage Loan
     Approval Code or a Mortgage Loan Suspension Code.

          "Certification Report": A Request for Certification to which Custodian
     has added its Certification Codes and, when a Certification Code indicates
     suspension, applicable Exception Codes, and which is transmitted by
     Custodian to Purchaser in an appropriate data layout provided by Purchaser.

          "Commitment": A commitment executed by Takeout Investor and Seller
     evidencing Takeout Investor's agreement to purchase one or more Mortgage
     Loans from Seller and Seller's agreement to sell one or more Mortgage Loans
     to an investor in a forward trade by the applicable Commitment Expiration
     Date.

          "Commitment Expiration Date": With respect to any Commitment, the
     expiration date thereof.

          "Conduit": Any of the Entities listed on Schedule A, as amended or
     supplemented from time to time.

          "Conduit Bailee Letter": The master bailee letter, in the form of
     Exhibit C-2, for use by Custodian in connection with the delivery of a
     Conduit Submission Package, provided, however, for the purposes of
     delivering the related Conduit Submission Package, excluding (i) a copy of
     the Commitment, (ii) the Warehouse Lender's Release or Seller's Release, as
     applicable, and (iii) the original Assignment of Mortgage, in blank, to a
     Conduit.

          "Conduit Submission Package": The documents listed on Exhibit C-1,
     which shall be delivered by Seller to Custodian in connection with each
     Conduit Transaction.

                                       2
<PAGE>

          "Conduit Transaction": A transaction initiated by Purchaser's delivery
     of a Request for Certification which identifies a Conduit as the Takeout
     Investor but does not include a Conversion Code.

          "Confirmation": A confirmation confirming a trade between Seller and
     Takeout Investor.

          "Conversion Code": With respect to a Mortgage Loan, the conversion
     code set forth in Part II of Exhibit F, entered by Purchaser, along with
     the Program Code, in the "PROG CODE" column of the related Request for
     Certification indicating that (i) such Mortgage Loan was previously
     acquired by Purchaser in a Dry Transaction and (ii) a Conversion Submission
     Package shall be received by Custodian on the applicable Delivery Date.

          "Conversion Submission Package":  One of the sets of documents listed
     on Exhibit D, which shall be delivered by Seller to Custodian in connection
     with each Conversion Transaction.

          "Conversion Transaction": With respect to a Mortgage Loan, a
     transaction initiated by Purchaser's delivery to Custodian of a Request for
     Certification containing a Conversion Code. A Conversion Transaction shall
     always be preceded by a Dry Transaction.

          "Custodian": The Chase Manhattan Bank, National Association, and its
     permitted successors hereunder.

          "Delivery Date": With respect to a Mortgage Loan, the date set forth
     on the related Request for Certification in the "DELIVERY DATE" column,
     which shall be the Business Day on which Seller desires the applicable
     portion of the related Submission Package be sent by Custodian to the
                                                  ----
     Takeout Investor, i.e., one Business Day prior to the Business Day on which
     Seller desires the applicable portion of the Submission Package to be
     received by the Takeout Investor.
     --------

          "Delivery Directive": With respect to each Mortgage Loan either
     appearing on an Unidentified Mortgage Loan List or marked by Custodian with
     a Suspension Code on a Certification Report, the delivery directive, set
     forth in Part IV of Exhibit F, used by Purchaser in a notice in the form of
     Exhibit M, to direct Custodian to deliver the related Submission Package in
     accordance with the Delivery Instructions.

          "Delivery Instructions": With respect to a Mortgage Loan, instructions
     prepared by Seller, in the form of Exhibit N indicating the address for the
     delivery by Custodian of the applicable portion of the related Submission
     Package.

          "Dry Submission Package": The documents listed on Exhibit A, which
     shall be delivered by Seller to Custodian in connection with each Dry
     Transaction.

                                       3
<PAGE>

          "Dry Transaction": A transaction initiated by Purchaser's delivery to
     Custodian of a Request for Certification, which does not identify a Takeout
     Investor, and which does not include a Conversion Code.

          "Entity": Any individual, corporation, partnership, joint venture,
     association, joint stock company, trust (including any beneficiary
     thereof), unincorporated organization or government or any agency or
     political subdivision thereof.

          "Exception Code": Each of the exception codes set forth in Part V of
     Exhibit F, placed by Custodian on a Certification Report indicating missing
     documents, incomplete documents and deficiencies in documents reviewed by
     Custodian.

          "Expected Delivery Date": The date identified on a Request for
     Certification as the "Expected Delivery Date of Mortgage File", which shall
     be the date on which Seller has informed Purchaser that a Submission
     Package will be received by Custodian from Seller.

          "FHLMC": The Federal Home Loan Mortgage Corporation and any successor
     thereto.

          "FHLMC Commitment": A commitment executed by FHLMC and Seller
     evidencing FHLMC's agreement to purchase one or more Mortgage Loans from
     Seller and Seller's agreement to sell one or more Mortgage Loans to FHLMC
     by the applicable Commitment Expiration Date under the Applicable Guide.

          "FNMA": The Federal National Mortgage Association and any successor
     thereto.

          "FNMA Bailee Letter": The master bailee letter, in the form of Exhibit
     B-4, for use by Custodian in connection with the delivery to FNMA of the
     Cash Window Submission Package, excluding (i) the original Assignment of
     Mortgage, in blank, (ii) the Warehouse Lender's Release or Seller's
     Release, as applicable, (iii) all modification agreements relating to a
     Mortgage, (iv) the Delivery Instructions and (v) a copy of the Commitment.

          "FNMA Commitment": A commitment executed by FNMA and Seller,
     evidencing FNMA's agreement to purchase one or more Mortgage Loans from
     Seller and Seller's agreement to sell one or more Mortgage Loans to FNMA by
     the applicable Commitment Expiration Date under the Applicable Guide.

          "Hold Directive": With respect to a Mortgage Loan either appearing on
     an Unidentified Mortgage Loan List or marked by Custodian with a Suspension
     Code on a Certification Report, the hold directive, set forth in Part IV of
     Exhibit F, used by Purchaser in a notice in the form of Exhibit M to direct
     Custodian to continue to hold the related Submission Package.

                                       4
<PAGE>

          "HUD": United States Department of Housing and Urban Development and
     any successor thereto.

          "Limited Power of Attorney": A limited power of attorney, in the form
     of Exhibit K, executed by Seller and delivered to Custodian, authorizing
     Custodian to prepare Mortgage Note endorsements in the form indicated
     thereon.

          "Loan Identification Data": The applicable information regarding a
     Mortgage Loan, set forth on a Request for Certification, which shall
     include Purchaser's reference number, the name of Purchaser's applicable
     program, the Mortgage Loan number, the last name of the Mortgagor, the face
     amount of the Mortgage Note, the number of months to maturity of the
     Mortgage Loan, and the interest rate borne by the Mortgage Note and, solely
     with respect to Cash Window Transactions, Conduit Transactions and
     Conversion Transactions, the name of the Takeout Investor, the sale price
     of the Mortgage Loan to the Takeout Investor, the commitment number, the
     Commitment Expiration Date, the Delivery Date, the Release Payment, and the
     name of the Warehouse Lender.

          "Losses": Any and all losses, claims, damages, liabilities or expenses
     (including reasonable attorney's fees) incurred by any person specified;
     provided however that "Losses" shall not include losses, claims, damages,
     liabilities or expenses which would have been avoided had such person taken
     reasonable actions to mitigate such losses, claims, damages, liabilities or
     expenses.

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

          "Mortgage Loan": A one-to-four family residential mortgage loan that
     is subject to this Agreement.

          "Mortgage Loan Absentee Code": The mortgage loan absentee code, set
     forth in Part III of Exhibit F, placed by Custodian on a Certification
     Report to notify Purchaser that a Submission Package related to a Mortgage
     Loan listed on a Request for Certification is not in Custodian's
     possession.

          "Mortgage Loan Approval Code": The mortgage loan approval code, set
     forth in Part III of Exhibit F, placed by Custodian on a Certification
     Report to notify Purchaser that Custodian's review of the applicable items
     in a Submission Package is complete and that such items satisfy all the
     applicable requirements set forth in Section 4(a) and Section 4(b).

          "Mortgage Loan Suspension Code": The mortgage loan suspension code,
     set forth in Part III of Exhibit F, placed by Custodian on a Certification
     Report to notify Purchaser that Custodian's review of the Submission
     Package has determined that one or more of the documents in the Submission
     Package are missing, incomplete or

                                       5
<PAGE>

     incorrect and/or do not satisfy one or more of the requirements set forth
     in Section 4(a) or Section 4(b).

          "Mortgage Note": The note or other evidence of the indebtedness of a
     Mortgagor secured by a Mortgage.

          "Mortgaged Property": The property subject to the lien of the Mortgage
     securing a Mortgage Note.

          "Mortgagor": The obligor on a Mortgage Note.

          "Notice of Bailment": A notice, in the form of Schedule A to Exhibit
     B-4 or C-2, as applicable, delivered by Custodian to Takeout Investor in
     connection with each delivery to Takeout Investor of the applicable portion
     of each Submission Package.

          "Payee Number": The code used by FNMA to indicate the wire transfer
     instructions that will be used, by FNMA to purchase a Mortgage Loan.

          "Primary Mortgage Insurer": Any one of the Entities set forth on
     Exhibit P, as such Exhibit may be amended or supplemented from time to
     time.

          "Program Code": Each of the codes, set forth in Part I of Exhibit F,
     placed by the Purchaser in the "PROG CODE" column of a Request for
     Certification indicating that the Mortgage Loan is being offered by Seller
     to Purchaser in a Dry Transaction, Cash Window Transaction or a Conduit
     Transaction, as applicable.

          "Purchase Agreement": Each Mortgage Loan Purchase Agreement, dated as
     of the date set forth on the cover page thereof, between Seller and
     Purchaser, as each is amended from time to time providing the terms of Dry
     Transactions, Cash Window Transactions, Conduit Transactions or Conversion
     Transactions.

          "Purchase Date": With respect to a Mortgage Loan, the date on which
     Purchaser purchases such Mortgage Loan from Seller.

          "Purchaser": Paine Webber Real Estate Securities Inc. and its
     successors.

          "Purchaser's Wire Instructions to Seller": The wire instructions, set
     forth on Exhibit I-1, specifying the account which shall be used for the
     payment of all amounts due and payable by Seller to Purchaser hereunder.

          "Purchaser's Payment":  The amount set forth on the Request for
     Certification in the "RELEASE PAYMENT" column.

          "Purchaser's Wire Instructions to Custodian": Wire Instructions
     delivered by Purchaser to Custodian, in the form of Exhibit I-2, executed
     by Purchaser, receipt of which has been acknowledged by Custodian
     specifying the wire address where all

                                       6
<PAGE>

     funds received in accordance with Purchaser's Wire Instructions to Seller
     shall be transferred by Custodian.

          "Release Payment": The funds referred to in a Warehouse Lender's
     Release or Seller's Release, as applicable.

          "Request for Certification": A report detailing Loan Identification
     Data supplied by Seller to Purchaser, transmitted by Purchaser to Custodian
     either via facsimile in the form of Exhibit E or transmitted electronically
     in an appropriate data layout, regarding all Mortgage Loans being offered
     for sale by Seller to Purchaser on the Submission Package Delivery Date.

          "Return Directive": With respect to each Mortgage Loan either
     appearing on an Unidentified Mortgage Loan List or marked by Custodian with
     a Suspension Code on a Certification Report, the return directive, set
     forth in Part IV of Exhibit F, used by Purchaser in a notice in the form of
     Exhibit M, to direct Custodian to deliver (i) the related Submission
     Package in accordance with the terms of the applicable bailee letter
     pursuant to which such Submission Package was delivered to Custodian or
     (ii) the related Submission Package to the Entity who sent such Submission
     Package to Custodian if no bailee letter was included in the Submission
     Package, as applicable.

          "Seller": The Seller whose name is set forth on the cover page hereof,
     and its permitted successors hereunder.

          "Seller's Release": A letter, in the form of Exhibit H-1, delivered by
     Seller when no Warehouse Lender has an interest in a Mortgage Loan,
     conditionally releasing all of Seller's right, title and interest in such
     Mortgage Loan upon receipt of payment by Seller.

          "Seller's Wire Instructions": The wire instructions, set forth in a
     letter in the form of Exhibit H-2, to be used for the payment of funds to
     Seller when no Warehouse Lender has an interest in the Mortgage Loans to
     which such payment relates.

          "Submission Package": With respect to each Mortgage Loan, a Dry
     Submission Package, a Cash Window Submission Package, a Conduit Submission
     Package or a Conversion Submission Package, as applicable.

          "Successor Servicer": An entity designated by Purchaser, in conformity
     with the Purchase Agreement, .to replace Seller as servicer for Purchaser,
     and, with respect to Cash Window Transactions, as seller/servicer of the
     Mortgage Loans for the Agency.

          "Takeout Investor": An Agency or a Conduit, as applicable.

          "Underwriter": Any party, including but not limited to a mortgage loan
     pool insurer, who underwrites a Mortgage Loan prior to its purchase by
     Purchaser.

                                       7
<PAGE>

          "Underwriter's Form": A FNMA/FHLMC Form 1008/1077, HUD 92900WS,
     HUD92900.4, VA Form 26-6393, VA Form 26-1866, a mortgage loan pool
     insurance certificate, or an underwriting approval form from a Primary
     Mortgage Insurer, as applicable, completed by an Underwriter with respect
     to a Mortgage Loan, indicating that such Mortgage Loan complies with its
     underwriting requirements.

          "Unidentified/Suspension Mortgage Loan Directive": A Delivery
     Directive, a Hold Directive or a Return Directive, as applicable.

          "Unidentified Mortgage Loans List": A list of Mortgage Loans for which
     Custodian has received the related Submission Packages from Seller but
     which have not been identified by Purchaser in a Request for Certification.
     Such list shall include, with respect to each Mortgage Loan, the
     information set forth in Exhibit L.

          "Warehouse Lender": Any lender providing financing to Seller in any
     fractional amount for the purpose of originating or purchasing Mortgage
     Loans, which lender has a security interest in such Mortgage Loans as
     collateral for the obligations of Seller to such lender. In all Dry
     Transactions and Conversion Transactions, Purchaser shall be the Warehouse
     Lender.

          "Warehouse Lender's Release":  letter, in the form of Exhibit G-1,
     from a Warehouse Lender to Purchaser, conditionally releasing all of
     Warehouse Lender's right, title and interest in certain Mortgage Loans
     identified therein upon receipt of payment by Warehouse Lender.

          "Warehouse Lender's Wire Instructions": The wire instructions, set
     forth in a letter in the form of Exhibit G-2, from a Warehouse Lender to
     Purchaser, setting forth wire instructions for all amounts due and payable
     to such Warehouse Lender.

     Section 2.  Delivery of Documents by Seller.
                 -------------------------------

     (a) Seller may, before the first purchase by Purchaser under a Purchase
Agreement of a Mortgage Loan, deliver to Custodian a Limited Power of Attorney,
provided, however, Custodian shall have no responsibility or obligation to act
under such Limited Power of Attorney.

     (b) If Seller desires to engage in Cash Window Transactions:

          (1) relating to a FHLMC Commitment, Seller shall deliver to Purchaser
     a copy of (i) FHLMC Form 1035 (Custodial Agreement), if applicable, duly
     executed by the related custodian and FHLMC, and (ii) FHLMC Form 3 (Summary
     Agreement) or such other equivalent agreement as is acceptable to
     Purchaser, duly executed by Seller and FHLMC; or

          (2) relating to a FNMA Commitment, Seller shall deliver to Purchaser a
     copy of (i) Fannie Mae Form 2003 (Custodial Agreement) if applicable, duly
     executed

                                       8
<PAGE>

     by the related custodian and FNMA, (ii) Fannie Mae Mortgage Selling and
     Servicing Contract, and Fannie Mae Form 482 (Designation of Payee - Wire
     Transfer Information).

          (c) With respect to each Mortgage Loan being offered by Seller for
sale to Purchaser pursuant to (i) a Dry Transaction, (ii) a Cash Window
Transaction, (iii) a Conduit Transaction or (iv) a Conversion Transaction,
Seller shall deliver to Custodian a Submission Package on the Expected Delivery
Date. In no event shall Seller deliver a Submission Package to Custodian later
than 12:00 Noon New York City time on the related Delivery Date.

     Section 3.  Custodian as Custodian for, and Bailee of Purchaser Assignee
                 ------------------------------------------------------------
and Warehouse Lender.  (a) With respect to each Mortgage Note, each Assignment
--------------------
of Mortgage and all other documents constituting each Submission Package that
are delivered to Custodian or that at any time come into Custodian's possession,
Custodian, subject to the provisions of paragraphs (b) and (c) of this Section
3, shall act solely in the capacity of custodian for, and bailee of, Purchaser.
Custodian shall, subject to the provisions of paragraphs (b) and (c) of this
Section 3 and except as otherwise required by Section 4, hold all documents
constituting a Submission Package received by it for the exclusive use and
benefit of Purchaser, and shall make disposition thereof only in accordance with
this Agreement.  Custodian shall segregate and maintain continuous custody of
all documents constituting a Submission Package received by it in secure and
fireproof facilities in accordance with customary standards for such custody and
shall mark its books and records to indicate that the Submission Package is
being held for Purchaser.

     (b) Purchaser hereby notifies Custodian that each Mortgage Loan purchased
by Purchaser from Seller shall be promptly assigned by Purchaser to Assignee, as
of the date of Purchase, as described in Section 9. Upon notice, in the form of
Exhibit J, by Assignee to Custodian of Purchaser's default, Assignee may (i)
require Custodian to act with respect to the related Submission Packages solely
in the capacity of custodian for, and bailee of, Assignee, but nevertheless
subject to and in accordance with the terms of this Agreement, (ii) require
Custodian to hold such Submission Packages for the exclusive use and benefit of
Assignee and (iii) assume the rights of Purchaser under this Agreement to
furnish instructions to Custodian as to the disposition of such Submission
Packages and such rights shall be exercisable solely by Assignee. Custodian
shall give Assignee written acknowledgment to the effect set forth in (i), (ii)
and (iii), by executing such notice and returning a copy thereof to Assignee. In
the event that, prior to receipt of such notice from Assignee, Custodian
delivered any Submission Package to Purchaser, Takeout Investor or Purchaser's
designee, Custodian shall so notify Assignee, and Custodian shall not be deemed
to hold such Submission Package for Assignee unless and until such Submission
Package is redelivered to Custodian.  The failure of Custodian to give the
written acknowledgment referred to above shall not affect the validity of such
assignment, pledge or grant of a security interest.  The effects of Assignee's
notice to Custodian set forth above shall continue until Custodian is otherwise
notified in writing by Assignee.  The terms of this Agreement shall not apply to
any Submission Package physically delivered by Custodian to Assignee.

                                       9
<PAGE>

     (c) Seller and Purchaser acknowledge that Warehouse Lender, if any,
identified from time to time in each Warehouse Lender's Release to be received
by Custodian pursuant to Section 2(c), is a warehouse lender for the Seller.
Seller and Purchaser acknowledge that, in accordance with the terms of each
Warehouse Lender's Release to be received by the Custodian pursuant to Section
2(c), pursuant to which each such Warehouse Lender conditionally releases its
security interest in the Mortgage Loan referred to in the related Warehouse
Lender's Release, such release shall not be effective until the Release Payment
is received in accordance with the Warehouse Lender's Wire Instructions. Until
receipt of a Release Payment, the interest of the related Warehouse Lender in a
Mortgage Loan shall continue and remain in full force and effect.

     (d) If any additional documents relating to the Submission Package come
into the Custodian's possession, the provisions of paragraphs (a), (b) and (c)
of this Section 3 shall apply to such additional documents in the same manner as
such provisions apply to related Submission Package.

     (e) Purchaser shall notify Custodian on each Business Day, of all Mortgage
Loans purchased by Purchaser on such Business Day which relate to this
Agreement.

     Section 4.  Certification by Custodian; Delivery of Documents.
                 -------------------------------------------------

     (a)  With respect to each Mortgage Loan that Purchaser desires to purchase,
Purchaser shall deliver to Custodian a Request for Certification. Upon receipt
by Custodian of a Request for Certification, Custodian shall perform the
following procedures with respect to each Mortgage Loan listed on such Request
for Certification:

          (i)  Custodian shall ascertain whether it is in possession of a
     Submission Package for each Mortgage Loan identified on a Request for
     Certification. If Custodian is not in possession of a Submission Package
     relating to a Mortgage Loan identified on a Request for Certification,
     Custodian shall annotate its Certification Report in the appropriate space
     provided with a Mortgage Loan Absentee Code.  If Custodian is in possession
     of Submission Packages delivered by Seller which do not relate to any of
     the Mortgage Loans listed on a Request for Certification, Custodian shall
     generate an Unidentified Mortgage Loans List and shall deliver such List
     promptly to Purchaser. Purchaser shall deliver a copy of such Unidentified
     Mortgage Loans List to Seller. No action shall be taken by Custodian, other
     than in accordance with Unidentified/ Suspension Mortgage Loan Directive or
     a notice in the form of Exhibit I-3, with respect to Mortgage Loans
     appearing on an Unidentified Mortgage Loans List until any such Mortgage
     Loans are included in a Request for Certification. On each Business Day
     during which a Mortgage Loan shall appear on an Unidentified Mortgage Loans
     List, Purchaser shall send to Custodian an Unidentified/Suspension Mortgage
     Loan Directive or a notice in the form of Exhibit I-3, with respect to the
     related Submission Package.

          (ii) With respect to each Request for Certification Custodian shall:

               (A) verify the Loan Identification Data appearing in (1) the
          "LAST NAME" column by comparing such Loan Identification Data to the
          information

                                      10
<PAGE>

          in the Mortgage Note and Assignment of Mortgage and (2) the "FACE
          AMOUNT", "# OF MONTHS TO MATURITY" and "NOTE RATE" columns by
          comparing such Loan Identification Data to the information in the
          Mortgage Note;

               (B) if the Program Code indicates a Cash Window Transaction,
          verify the Loan Identification Data appearing in the "LOAN #" column
          by comparing the related information in any of the related Applicable
          Agency Documents;

               (C) if the Program Code indicates a Cash Window Transaction,
          Conduit Transaction or Conversion Transaction, verify the Loan
          Identification Data appearing in the "TAKEOUT INVESTOR", "SALE PRICE",
          "COMMITMENT #", and "COMMITMENT EXPIRATION DATE" columns by comparing
          such Loan Identification Data to the information appearing in the
          Commitment; and

               (D) if the Program Code indicates a Cash Window Transaction or a
          Conduit Transaction, verify the Loan Identification Data appearing in
          the "WAREHOUSE LENDER" column by comparing such Loan Identification
          Data to the information appearing in the Warehouse Lender's Release or
          Seller's Release, as applicable.

After applying the applicable procedures set forth in clauses (A), (B) and (C)
above, any discrepancies between the Loan Identification Data and documents
comprising the Submission Package shall be noted by Custodian in the appropriate
column immediately below each item of Loan Identification Data.

     (b)  With respect to each Request for Certification, following completion
by Custodian of the procedures set forth in Section (4)(a).

          (i)  Custodian shall review each applicable set of documents
     comprising the Submission Package and shall ascertain whether (A) each such
     document is in Custodian's possession, (B) each such document accurately
     conforms with the Loan Identification Data set forth in the Request for
     Certification or as modified by any notations supplied by Custodian
     pursuant to Section 4(a)(ii), (C) each such document appears regular on its
     face, (D) each such document in the Submission Package appears on its face
     to conform to the requirements of Exhibit A, Exhibit B-1, Exhibit C-1 or
     Exhibit F, as applicable, (E) unless the Program Code indicates either a
     Dry Transaction or a Conversion Transaction, the Mortgage Loan is listed on
     a schedule attached to a Warehouse Lender's Release or a Seller's Release,
     as the case may be, (F) either (1) if the Release Payment is a dollar
     amount, the amount appearing in the "RELEASE PAYMENT" column on the Request
     for Certification is equal to or exceeds the Release Payment, or (2) if the
     Program Code indicates either a Dry Transaction or a Conversion
     Transaction, or if the Release Payment is a formula, as indicated in
     Exhibit G-1, the Custodian need not verify the amount, if any, appearing in
     the "RELEASE PAYMENT" column and (G) (1) with respect to the wire transfer
     instructions as set forth in FHLMC

                                      11
<PAGE>

     Form 987 (Wire Transfer Authorization for a Cash Warehouse Delivery) such
     wire transfer instructions are identical to Purchaser's Wire Instructions
     to Seller or (2) the Payee Number set forth on Fannie Mae Form 1068 (Fixed-
     Rate, Graduated-Payment, or Growing-Equity Mortgage Loan Schedule) or
     Fannie Mae Form 1069 (Adjustable-Rate Mortgage Loan Schedule), as
     applicable, is identical to the Payee Number that has been identified by
     Purchaser in the Request for Certification.

          (ii) If Custodian determines that the documents in the Submission
     Package and the Mortgage Loan to which they relate conform in all respects
     with Section 4(b)(i), Custodian shall so indicate in the space provided in
     its Certification Report with a Mortgage Loan Approval Code.  If Custodian
     determines that the documents in a Submission Package and the Mortgage Loan
     to which they relate conform in all respects with Section 4(b)(i) except
     that the endorsement of the Mortgage Note is missing, Custodian may, but
     shall not be obligated to, prepare such endorsement pursuant to the Limited
     Power of Attorney.  If documents in the Submission Package do not conform
     in all respects with Section 4(b)(i) or are missing and/or do not conform,
     Custodian shall annotate its Certification Report with a Mortgage Loan
     Suspension Code followed by each applicable Exception Code such that
     Purchaser is informed of each and every missing document and/or non-
     conformity in the space provided in its Certification Report.  With respect
     to each Mortgage Loan that has been given a Mortgage Loan Suspension Code,
     Purchaser shall, on each Business Day during which such Mortgage Loan
     Suspension Code is in effect, send to Custodian an Unidentified/Suspension
     Mortgage Loan Directive or a notice in the form of Exhibit 1-3, with
     respect to the related Submission Package.

     (c)  Custodian shall use its reasonable efforts to perform a Certification
with respect to any Submission Package delivered after 12:00 Noon New York City
time on a related Delivery Date for which it has received a Request for
Certification. Upon completion of its Certification, Custodian shall deliver a
Certification Report to Purchaser. All applicable documents comprising a
Submission Package relating to Mortgage Loans with respect to which Custodian
has assigned a Mortgage Loan Approval Code shall be delivered by Custodian in
the form and specific order required by Seller, via overnight courier in
accordance with the Delivery Instructions on the applicable Delivery Date and,
except with respect to Mortgage Loans for which FHLMC is the Takeout Investor,
under cover of a fully completed Notice of Bailment prepared by Custodian in
accordance with the terms of the Bailee Letter.  If Seller fails to instruct
Custodian regarding the order and specific form for a delivery to Takeout
Investor of such applicable documents, the Custodian shall deliver such
applicable documents in the original form and specific order received from
Seller. In those cases where a copy of any intervening mortgage assignment, or
an unrecorded original of any intervening mortgage assignment are delivered to
the Custodian, Seller shall cause the original of such instrument to be
recorded.  If Delivery Instructions direct Custodian to deliver any portion of a
Submission Package to a location that is not Takeout Investor's office,
Custodian must receive Purchaser's written consent to make deliveries to such
location prior to complying with such Delivery Instructions.  Upon receipt of
one written approval from Purchaser, such written approval shall, unless
Custodian receives a notice from Purchaser to the contrary, be deemed to apply
to all Delivery Instructions delivered in the future by Seller that list such
location. Following delivery by Custodian of the applicable portion of a

                                      12
<PAGE>

Submission File to Takeout Investor, all remaining documents comprising such
Submission Package shall be held by Custodian until receipt by Custodian of
written instructions from Purchaser to destroy such documents. Each month,
Purchaser may, but shall not be obligated to, deliver to Custodian a notice in
the form of Exhibit O, informing Custodian of all files that Purchaser has
authorized Custodian to destroy.

     All applicable documents comprising a Submission Package relating to
Mortgage Loans with respect to which Custodian has assigned a Mortgage Loan
Suspension Code shall be held by Custodian until receipt from Purchaser of
instructions. On each Business Day during which a Mortgage Loan shall have a
Mortgage Loan Suspension Code assigned to it, Purchaser shall send to Custodian
an Unidentified/Suspension Mortgage Loan Directive with respect to such Mortgage
Loan.

     (d) At any time following the delivery of a Certification, in the event
Custodian becomes aware of any defect with respect to such Submission Package or
the related forms, including the return of documents to the Custodian from
Takeout Investor due to a defect in such documents, the Custodian shall give
prompt oral notice of such defect to the Purchaser, followed by a written
specification thereof.

     Section 5.  Funding by the Takeout Investor.  Custodian shall promptly
                 -------------------------------
notify Purchaser, either electronically or by facsimile, upon receipt, in
accordance with Purchaser's Wire Instructions to Seller, of funds by Custodian.
Each notice shall identify all such funds by (i) the amount, (ii) the source
from which such funds were received and (iii) to the extent received by
Custodian, Seller's name. Unless Custodian is otherwise instructed by Assignee,
Custodian shall promptly transfer such funds to Purchaser in accordance with
Purchaser's Wire Instructions to Custodian.

     Section 6.  Default.  If Seller fails to fulfill any of its obligations
                 -------
under the Purchase Agreement or hereunder or in connection with the exercise by
Purchaser of any remedy pursuant to Section 3 of the Purchase Agreement then,
subject to the provisions of Section 3(c) hereof, Purchaser may, by notice to
Custodian, (a) appoint Custodian as its delegee to complete the endorsements on
the Mortgage Notes held by Custodian and to complete and record at Purchaser's
expense the related blank Assignments of Mortgages relating to the affected
Mortgage Loan in accordance with Purchaser's instructions and, when applicable,
and (b) require Custodian to deliver to Purchaser, Takeout Investor or Successor
Servicer the Submission Packages (or any portion thereof specified by Purchaser)
in Custodian's possession or under Custodian's control to which the failure
relates.

     Section 7.  Access to Documents.  Upon reasonable prior written notice to
                 -------------------
Custodian, Purchaser (and if the Mortgage Loans have been assigned, Assignee)
and its agents, accountants, attorneys and auditors will be permitted during
normal business hours to examine and copy at their expense the Submission
Packages, documents, records and other papers in possession of or under the
control of Custodian relating to any or all of the Mortgage Loans in which
Purchaser has an interest.  Upon the request of Purchaser (or, if applicable,
Assignee) and at the cost and expense of Purchaser (or, if applicable,
Assignee), Custodian shall provide such Purchaser (or, if applicable, Assignee)
with copies of the Mortgage Notes, Assignments

                                      13
<PAGE>

of Mortgage and other documents in Custodian's possession relating to any of the
Mortgage Loans in which Purchaser (or, if applicable, Assignee) has an interest.

     Section 8.  Custodian's Fees and Expenses: Successor Custodian, Standard of
                 ---------------------------------------------------------------
Care.  (a) It is understood that Seller will be charged for Custodian's fees for
----
its services under this Agreement in such amounts and in the manner set forth in
the related Purchase Agreement. Notwithstanding the foregoing, Custodian has no
lien on, and shall not attempt to place a lien on, any of the Mortgage Loans or
proceeds thereof to secure the payment of its fees.

     (b) Subject to the provisions of any other agreement between Custodian and
Purchaser, Custodian may only resign for cause. Such resignation shall take
effect upon the earlier of (i) the appointment of a successor Custodian by
Purchaser and delivery of all the Submission Packages and any portion of, the
related documents in Custodian's possession to the successor Custodian, and (ii)
the delivery of all the Submission Packages and any portion of the related
documents in Custodian's possession to the Purchaser or its designee pursuant to
(c) below.

     (c) In the event of any such resignation, Custodian shall promptly transfer
to the successor Custodian all Submission Packages and related documents in
Custodian's possession and the successor Custodian shall hold Submission
Packages and related documents in accordance with this Agreement.  If Purchaser
directs the removal of Custodian, Purchaser shall be responsible for all
expenses associated with the transfer of the Submission Packages and any related
documents in Custodian's possession and for any fee of the successor Custodian
in excess of the fees of the initial Custodian hereunder.  The Purchaser shall
have 90 days in which to appoint and designate an acceptable successor
Custodian.  If the Purchaser fails to appoint a successor Custodian within such
90-day period, then Custodian shall deliver possession and custody of the
Submission Packages and any related Submission Packages in Custodian's
possession to Purchaser at the address specified on the cover page hereof, or if
a timely written designation is received by Custodian, to any designee of
Purchaser.

     (d) Custodian shall have responsibility only for the Submission Packages
and the contents thereof which have been actually delivered to it and which have
not been released to Seller, Purchaser, the Agency or Assignee or their
respective agent or designee in accordance with this Agreement.  The standard of
care to be exercised by Custodian in the performance of its duties under this
Agreement shall be to exercise the same degree of care as Custodian exercises
when it holds mortgage loan documents as security for its own loans or its own
mortgage warehouse loan customers.  Custodian is an agent, bailee and custodian
only and is not intended to be, nor shall it be construed to be (except only as
agent, bailee and custodian), a representative, trustee or fiduciary of or for
either Seller, the Agency, Purchaser or Assignee.

     (e) Custodian shall incur no liability to any Entity for Custodian's acts
or omissions hereunder, except for liabilities which (i) arise from Custodian's
gross negligence or willful misconduct or (ii) solely with respect to the
Purchaser, which arise from Custodian negligently or intentionally failing to
(A) issue an accurate Certification Report, provided, however, any such
liability shall not be incurred with respect to the issuance of an inaccurate
Certification Report if the defect causing such inaccuracy would not have been
ascertainable by the Custodian applying

                                      14
<PAGE>

the procedures expressly set forth in this Agreement, (B) timely deliver the
Submission Package in accordance with the Delivery Instructions or Purchaser's
written instructions, as applicable, (C) prevent the loss, damage or destruction
of any document included in a Submission Package when held by Custodian, (D)
perform its obligations under Section 5 or (E) comply with an
Unidentified/Suspension Mortgage Loan Directive; provided, however, Custodian
shall have no liability hereunder if Custodian's failure to perform resulted
from the inaction or action of any other Entity, other than Entities that are
affiliated with Custodian or are acting under the direct control of Custodian.
Custodian's liability under this Agreement shall be limited to direct damages
resulting from aforesaid. In addition Custodian shall not be liable, directly or
indirectly, for any losses, claims, damages, liabilities or expenses which would
have been avoided had any Entity making a claim taken reasonable action to
mitigate such losses, claims, damages, liabilities or expenses or (2) special or
consequential damages, even if Custodian has been advised of the possibility of
such damages; provided, however, that Purchaser's direct damages resulting from
a decline in the market value of a Mortgage Loan shall not be deemed special or
consequential damages.

     (f) Custodian shall be entitled to rely upon the advice of its legal
counsel from time to time and shall not be liable for any action or inaction by
it in reliance upon such advice. Custodian also shall be entitled to rely upon
any notice, document, correspondence, request or directive received by it from
Seller, Takeout Investor, Purchaser or Assignee, as the case may be, that
Custodian believes to be genuine and to have been signed or presented by the
proper and duly authorized officer or representative thereof, and shall not be
obligated to inquire as to the authority or power of any person so executing or
presenting such documents or as to. the truthfulness of any statements set forth
therein.

     (g) Seller hereby indemnifies, defends and holds Custodian harmless from
and against any claim, legal action, liability or loss that is initiated against
or incurred by Custodian, including court costs and reasonable attorney's fees
and disbursements, in connection with Custodian's performance of its duties
under this Agreement, including those involving ordinary negligence, but
excluding those involving gross negligence or willful misconduct of Custodian.

     (h) Custodian undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, it being expressly understood that
there are no implied duties hereunder.

     Section 9.  Assignment by Purchaser.  Purchaser hereby notifies Custodian
                 -----------------------
that Purchaser shall assign, as of the date of the purchase of all of its right,
title and interest in and to all Mortgage Loans purchased by Purchaser pursuant
to the Purchase Agreement and all rights of Purchaser under the Purchase
Agreement (and this Agreement) in respect of such Mortgage Loans represented
thereby to Assignee, subject only to an obligation on the part of Assignee to
deliver each such Mortgage Loan to Custodian or to Purchaser to permit
Custodian, Purchaser or its designee to make delivery thereof to Takeout
Investor, but not otherwise. Seller hereby irrevocably consents to such
assignment.  Assignment by Purchaser of the Mortgage Loans as provided in this
Section 9 shall not release Purchaser from its obligations otherwise under this
Agreement.  Subject to any limitations in any agreement between Assignee and
Purchaser, Assignee may, upon notice of Purchaser's default as provided in
Section 3(b) hereof, directly

                                      15
<PAGE>

enforce and exercise such rights under this Agreement that have been assigned or
pledged to it and, until otherwise notified by Assignee, Purchaser shall no
longer have any of such rights. Custodian shall assume that any assignment from
Purchaser to Assignee is subject to no limitations that are not expressly set
forth in this Agreement.

     Section 10.  Insurance.  Custodian shall, at its own expense, maintain at
                  ---------
all times during the existence of this Agreement such (a) fidelity insurance,
(b) theft of documents insurance, (c) forgery insurance and (d) errors and
omissions insurance as Custodian deems, from time to time appropriate.

     Section 11.  Representations, Warranties and Covenants.
                  -----------------------------------------

     (a)  By Custodian. Custodian hereby represents and warrants to, and
covenants with, Seller and Purchaser that, as of the date hereof and at all
times while Custodian is performing services under this Agreement:

          (i)  Custodian is duly organized, validly existing and in good
     standing under the laws of the jurisdiction of its incorporation; and

          (ii) Custodian has the full power and authority to hold each Mortgage
     Loan and to execute, deliver and perform, and to enter into and perform its
     duties and obligations as contemplated by, this Agreement, has duly
     authorized the execution, delivery and performance of this Agreement and
     has duly executed and delivered this Agreement, and this Agreement
     constitutes a legal, valid and binding obligation of Custodian, enforceable
     against it in accordance with its terms, except as the enforcement thereof
     may be limited by applicable receivership, conservatorship or similar
     debtor relief laws and except that certain equitable remedies may not be
     available regardless of whether enforcement is sought in equity or law.

     (b)  By Seller.  Seller hereby represents and warrants to, and covenants
          ---------
with, Custodian and Purchaser that, as of the date hereof and throughout the
term of this Agreement:

          (i)  Seller is duly organized, validly existing and in good standing
     under the laws of the jurisdiction of its incorporation; and

          (ii) Seller has the full power and authority to hold each Mortgage
     Loan and to execute, deliver and perform, and to enter into and consummate
     all transactions contemplated by, this Agreement, has duly authorized the
     execution, delivery and performance of this Agreement and has duly executed
     and delivered this Agreement, and this Agreement constitutes a legal, valid
     and binding obligation of Seller, enforceable against it in accordance with
     its terms, except as the enforcement thereof may be limited by applicable
     receivership, conservatorship or similar debtor relief laws and except that
     certain equitable remedies may not be available regardless of whether
     enforcement is sought in equity or law.

                                      16
<PAGE>

     (c)  By Purchaser. Purchaser hereby represents and warrants to, and
covenants with, Custodian and Seller that, as of the date hereof and throughout
the term of this Agreement:

          (i)   Purchaser is acquiring the Mortgage Loans for its own account
     only and not for any other person;

          (ii)  Purchaser considers itself a substantial, sophisticated
     institutional investor having such knowledge and experience in financial
     and business matters that it is capable of evaluating the merits and risks
     of investment in the Mortgage Loans;

          (iii) Purchaser has been furnished with all information regarding the
     related Mortgage Loans that it has requested from Seller;

          (iv)  Purchaser is duly organized, validly existing and in good
     standing under the laws of the jurisdiction of its incorporation; and

          (v)   Purchaser has the full power and authority to hold each Mortgage
     Loan and to execute, deliver and perform, and to enter into and consummate
     all transactions contemplated by, this Agreement, has duly authorized the
     execution, delivery and performance of this Agreement and has duly executed
     and delivered this Agreement, and this Agreement constitutes a legal, valid
     and binding obligation of Purchaser, enforceable against it in accordance
     with its terms, except as the enforcement thereof may be limited by
     applicable receivership, conservatorship or similar debtor relief laws and
     except that certain equitable remedies may not be available regardless of
     whether enforcement is sought in equity or law.

     Section 12.  No Adverse Interests.  By its acceptance of each Submission
                  --------------------
Package, Custodian covenants and warrants to Purchaser that: (a) as of the date
of payment by Purchaser of the Release Payment, Custodian, solely in its
capacity as Custodian, holds no adverse interests, by way of security or
otherwise, in the related Mortgage Loan and (b) Custodian hereby waives and
releases any such interest in such Mortgage Loan which it, acting solely in its
capacity as Custodian, has or which it may thereafter acquire prior to the time
of release of such Mortgage Loan from the terms of this Agreement.

     Section 13.  Amendments.  This Agreement may be amended from time to time
                  ----------
only by written agreement of Seller, Purchaser and Custodian except that, if
this Agreement shall have been assigned by Purchaser, no amendment shall be
effective unless the amendment is also signed by Assignee. Purchaser shall give
at least five days' prior written notice to Assignee of any proposed amendment
to this Agreement and shall furnish Assignee with a copy of each such amendment
within five days after it is executed and delivered.

     Section 14.  Execution in Counterparts.  This Agreement may be executed in
                  -------------------------
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.

                                      17
<PAGE>

     Section 15.  Agreement for Exclusive Benefit of Parties, Assignment.  This
                  ------------------------------------------------------
Agreement is for the exclusive benefit of the parties hereto and their
respective successors and permitted assigns hereunder and shall not be deemed to
give any legal or equitable right, remedy or claim to any other person
whatsoever. This Agreement shall bind the parties hereto and their respective
successors, but, except for the assignments provided in Sections 3(b) and 9,
shall not be assigned or pledged by any party without the prior written consent
of the other parties. Written notice from Assignee to Custodian (with a copy to
Purchaser) that Purchaser has defaulted in any material respect under any
funding or loan agreement relating to the financing of Purchaser's purchase of
Mortgage Loans shall be conclusive for all purposes of this Agreement.

     Section 16.  Effect of Invalidity of Provisions.  In case any one or more
                  ----------------------------------
of the provisions contained in this Agreement should be or become invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.

     Section 17.  Governing Law.  This Agreement shall be governed by and
                  -------------
construed in accordance with the laws of the State of New York, without regard
to conflict of laws rules.

     Section 18.  Consent to Service.  Each party irrevocably consents to the
                  ------------------
service of process by registered or certified mail, postage prepaid, to it at
its address given in or pursuant to Section 19.

     Section 19.  Notices.  Any notices,  consents, directions and other
                  -------
communications given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by facsimile or electronic
transmission, or personally delivered at, or sent by overnight courier to the
addresses of the parties hereto set forth on the cover page hereof or such other
address as any party shall give in a notice to the other parties pursuant to
this Section 19.

    Section 20.  Certification.  Custodian hereby acknowledges that each time it
                 -------------
enters the Approval Code on a Request for Certification in the "Approval Code"
column, it is making an express representation and warranty to Purchaser that it
has performed the Certification as specified in Sections 4(a) and (b) with
respect to the related Mortgage Loan.

     Section 21.  Construction.  The headings in this Agreement are for
                  ------------
convenience only and are not intended to influence its construction. References
to Sections and Exhibits in this Agreement are to the Sections of and Exhibits
to this Agreement. The Exhibits are part of this Agreement. In this Agreement,
the singular includes the plural, the plural the singular, and the words "and"
and "or" are used in the conjunctive or disjunctive as the sense and
circumstances may require.

                                      18
<PAGE>

     IN WITNESS WHEREOF, Seller, Purchaser and Custodian have caused this
Agreement to be duly executed as of the date and year first above written.

                              CRESCENT MORTGAGE SERVICES, INC.



                              By:  /s/
                                   ___________________________
                              Name:___________________________
                              Title:__________________________

                              PAINE WEBBER REAL ESTATE
                               SECURITIES INC.



                              By:  /s/
                                   ___________________________
                              Name:___________________________
                              Title:__________________________


                              THE CHASE MANHATTAN BANK, N.A.



                              By:  /s/
                                   ___________________________
                              Name:___________________________
                              Title:__________________________

                                      19
<PAGE>

                                                                       EXHIBIT A


                            DRY SUBMISSION PACKAGE

     With respect to each Mortgage Loan being offered by Seller for sale to
Purchaser Seller shall deliver and release to Custodian the following documents:

          (i)   The original Mortgage Note endorsed, "Pay to the order of
                without recourse" and signed in the name of Seller by an
                authorized officer and, if Seller did not originate the Mortgage
                Loan, bearing an unbroken chain of endorsements from the
                originator thereof to Seller; and (if applicable) the original
                assumption agreement, together with the original of any surety
                agreement or guaranty agreement relating to the Mortgage Note or
                any such assumption agreement, and if the Mortgage Note or
                Mortgage has been signed by a third party on behalf of the
                Mortgagor, the original power of attorney or other instrument
                that authorized and empowered such third-party to sign or a copy
                of such power of attorney together with an Officer's Certificate
                (or a certificate from the recorder's office) certifying that
                such copy presents a true and correct reproduction of the
                original and that such original has been duly recorded or
                delivered for recordation in the appropriate records of the
                jurisdiction in which the related Mortgaged Property is located;

          (ii)  If Seller did not originate the Mortgage Loan, all original
                intervening assignments duly executed, attested and acknowledged
                and in recordable form, which together with the Assignment of
                Mortgage, evidence the chain of mortgage assignments from the
                originator of the Mortgage Loan to Seller, and/or copies of all
                such intervening mortgage assignments, together with an
                Officer's Certificate, or a certificate from the recorder's
                office, certifying that any such copy represents a true and
                correct reproduction of the original of such instrument and that
                such original has been duly recorded or delivered for
                recordation in the appropriate records of the jurisdiction where
                the Mortgaged Property is located;

          (iii) An original Assignment of Mortgage, in blank, in recordable form
                but unrecorded signed in the name of Seller by an authorized
                officer; and

          (iv)  A copy of the Mortgage naming the Seller, or if the Seller was
                not the originator, the originator, as the "mortgagee" or
                "beneficiary" thereof, and either bearing evidence that such
                instrument has been recorded in the appropriate jurisdiction
                where the property with respect to the Mortgage Property is
                located or a duplicate or conformed copy of the Mortgage,
                together with a certificate of an officer of the originator
                certifying that such copy represents a true and correct copy of
                the original and that such original has been submitted to the
                title insurance company or settlement agent for recordation in
                the appropriate governmental recording office of the
                jurisdiction where the Mortgage Property is located.
<PAGE>

All documents delivered to Custodian have been and as to future deliveries will
be placed by Seller in an appropriate file folder, properly secured, and clearly
marked with Seller's loan number identifying such Mortgage Loan.

In those cases where a copy of a Mortgage, or any intervening mortgage
assignment, or an unrecorded original of any intervening mortgage assignment are
delivered to the Custodian, Seller shall cause the original of such instrument
to be recorded.

                                       2
<PAGE>

                                                                     EXHIBIT B-1


                        CASH WINDOW SUBMISSION PACKAGE

     With respect to each Mortgage Loan being offered by Seller for sale to
Purchaser pursuant to a Cash Window Transaction, Seller shall deliver and
release to Custodian the following documents:

          (i)    The original Mortgage Note endorsed, "Pay to the order of
     ____________________, without recourse" and signed in the name of Seller by
     an authorized officer and, if Seller did not originate the Mortgage Loan,
     bearing an unbroken chain of endorsements from the originator thereof to
     Seller; (if applicable) the original assumption agreement, together with
     the original of any surety agreement or guaranty agreement relating to the
     Mortgage Note or any such assumption agreement, and if the Mortgage Note
     has been signed by a third party on behalf of the Mortgagor, the original
     power of attorney or other instrument that authorized and empowered such
     Entity to sign or a copy of such power of attorney together with an
     officer's certificate (or a certificate from the recorder's office)
     certifying that such copy presents a true and correct reproduction of the
     original and that such original has been duly recorded or delivered for
     recordation in the appropriate records of the jurisdiction in which the
     related Mortgaged Property is located and if FHLMC is the Agency for the
     related Mortgage Loan, the Freddie Mac loan number should appear on the top
     right hand corner of the Mortgage Note;

          (ii)   With respect to each Mortgage Loan that has been designated for
     sale to FNMA, an original Assignment of Mortgage to FNMA in recordable form
     but unrecorded signed in the name of Seller by an authorized officer;

          (iii)  If Seller did not originate a Mortgage Loan, all necessary
     intervening assignments to show a complete chain of title from the
     originating mortgagee to Seller;

          (iv)   An original Assignment of Mortgage, in blank, in recordable
     form but unrecorded (which Assignment of Mortgage may be in the form of a
     blanket assignment of two or more such Mortgages to the extent permitted by
     applicable law) signed in the name of Seller by an authorized officer;

          (v)    A Warehouse Lender's Release, from any Warehouse Lender having
     a security interest in the Mortgage Loans or, if there is no Warehouse
     Lender with respect to such Mortgage Loans, a Seller's Release, from
     Seller, addressed to Purchaser, releasing any and all right, title and
     interest in such Mortgage Loans;

          (vi)   Delivery Instructions;

          (vii)  A copy of a Confirmation; and

          (viii) The Applicable Agency Documents, listed on Exhibit B-2 and
     Exhibit B-3.
<PAGE>

All documents delivered to Custodian will be placed by Seller in an appropriate
file folder, properly secured, and clearly marked with Seller's appropriate
FHLMC or FNMA loan number identifying such Mortgage Loan in the form and order
required by the Agency. In those cases where a copy of any intervening mortgage
assignment, or an unrecorded original of any intervening mortgage assignment are
delivered to the Custodian, Seller shall cause the original of such instrument
to be recorded.

                                       2
<PAGE>

                                                                     EXHIBIT B-2


                              FHLMC DOCUMENT LIST

(i)     FHLMC Form 1 (Fixed-Rate Mortgage Purchase Contract Conventional Home
        Mortgages - Original Cash) or FHLMC Form 9 (Fixed-Rate Mortgage Purchase
        Contract Conventional Home Mortgages - Gold Cash), or FHLMC Form 2
        (Adjustable Rate Purchase Contract Conventional Home Mortgages).

(ii)    FHLMC Form 1034 (Custodial Certification Schedule).

(iii)   FHLMC Form 996 (Warehouse Lender Release of Security Interest)./1/

(iv)    FHLMC Form 987 (Wire Transfer Authorization for a Cash Warehouse
        Delivery)

(v)     FHLMC Form 960 (Transfer of Servicing) (if supplied by Seller).



________________________
/1/  Consisting either of the form submitted by Seller to Custodian naming
     Purchaser as Warehouse Lender or a substituted form completed by Custodian
     naming Purchaser as Warehouse Lender.
<PAGE>

                                                                     EXHIBIT B-3


                              FNMA DOCUMENT LIST

(i)    Either a Standard Mandatory Delivery Commitment or a Negotiated Mandatory
       Delivery Commitment or a Negotiated Market-Rate Standby Commitment.

(ii)   FNMA Form 1068 (Fixed-Rate, Graduated-Payment, or Growing-Equity Mortgage
       Loan Schedule) or FNMA Form 1069 (Adjustable-Rate Mortgage Loan
       Schedule).

(iii)  FNMA Form 2004 (Security Release Certification) (executed by Purchaser
       and Seller)./1/

(iv)   FNMA Form 360 (Incumbency Certificate) (executed by Seller naming person
       authorized to instruct FNMA on where to wire funds)./2/

(v)    All original intervening assignments (if any) duly executed and
       acknowledged and in recordable form, but unrecorded.


___________________________
/1/  Consisting either of the form submitted by the Seller to the Custodian
     naming a person other than the Purchaser as Warehouse Lender or a
     substituted form completed by the Custodian naming the Purchaser as
     Warehouse Lender.

/2/  If applicable.
<PAGE>

                                                                     EXHIBIT B-4


                           [LETTERHEAD OF PURCHASER]

                           FNMA MASTER BAILEE LETTER


                                                   __________________ ___, 199__


The Chase Manhattan Bank, N.A.
Mortgage Banking Division
2 Chase Manhattan Plaza (20th Floor)
New York, New York 10081
Attention: Glenn Hett

Ladies and Gentlemen:

     In connection with its Conforming Whole Loan Purchase: Cash Window Program,
the undersigned Paine Webber Real Estate Securities Inc. ("Purchaser") shall
from time to time, cause The Chase Manhattan Bank, N.A., as custodian
("Custodian"), to deliver to the Federal National Mortgage Association ("FNMA")
original promissory notes ("Mortgage Notes") evidencing certain mortgage loans
("Mortgage Loans"), along with certain other documents comprising the related
files ("Mortgage Documents").  Custodian is hereby instructed to prepare and
insert a Notice of Bailment in the form of Schedule A hereto with respect to
each Mortgage Loan ("Notice of Bailment"), in each file of Mortgage Documents
delivered by Custodian to FNMA.

     Except as otherwise provided herein, each Mortgage Document so delivered to
FNMA is to be held by FNMA, as agent for Custodian, and subject to only
Purchaser's direction and control.

     Upon Purchaser's receipt of all of the proceeds from the sale of a Mortgage
Loan in accordance with the wiring instructions set forth in FNMA's Form 482 or
1068 all of Purchaser's legal or equitable interest in the Mortgage Loan shall
terminate.

     The persons listed on the attached Schedule B are the authorized
representatives ("Authorized Representatives") of Purchaser. Custodian shall not
honor any communication relating to a Mortgage Loan, which is not confirmed by
the written or telephonic consent, confirmed in writing at the request of
Custodian, of an Authorized Representative of Purchaser.
<PAGE>

     Please execute and return the enclosed copy of this Master Bailee Letter in
the enclosed self-addressed envelope.

                                   Sincerely,

                                   PAINE WEBBER REAL ESTATE
                                    SECURITIES INC.
                                   (Purchaser)

                                   By:____________________________
                                   Name:__________________________
                                   Title:_________________________

                                   Agreed to:


                                   THE CHASE MANHATTAN BANK, N.A.
                                   (Custodian)


                                   By:____________________________
                                   Name:__________________________
                                   Title:_________________________
                                   Dated: As of the date first set
                                          forth above

                                       2
<PAGE>

                                                                      SCHEDULE A
                                                                  TO EXHIBIT B-4


                               NOTICE OF BAILMENT
                               ------------------


[FNMA Address]


          Re:  [Insert Description of Loan, including Borrower's Name,
               Loan Amount and FNMA's Loan Number]
               -----------------------------------


Ladies and Gentlemen:

     Pursuant to the Master Bailee Letter, dated ________ __, 199_ (the "Master
Bailee Letter"), between Paine Webber Real Estate Securities Inc. ("Purchaser")
and The Chase Manhattan Bank, N.A. (the "Custodian"), you are hereby notified
that the enclosed original promissory note with respect to the referenced loan
together with certain other documents comprising the related file with respect
to that loan (the "Mortgage Documents") being hereby delivered to you herewith
are to be held by you as agent of Custodian (which holds the Mortgage Documents
as custodian and bailee for the benefit of Purchaser).

     Any Mortgage Documents (or portion thereof) not purchased by you in
accordance with the provisions of the Fannie Mae Guide shall be sent to the
Custodian by overnight courier to: [insert address for return of documents].

     Any questions relating to the Mortgage Documents should be referred to the
Purchaser at (212) 713-2419.

                              Sincerely,

                              THE CHASE MANHATTAN BANK, N.A.


                              By:___________________________
                              Name:_________________________
                              Title:________________________
<PAGE>

                                                                      SCHEDULE B
                                                                  TO EXHIBIT B-4


                    AUTHORIZED REPRESENTATIVES OF PURCHASER
                    ---------------------------------------


       Name                      Title                  Authorized Signature
       ----                      -----                  --------------------
<PAGE>

                                                                     EXHIBIT C-1


                          CONDUIT SUBMISSION PACKAGE


     With respect to each Mortgage Loan being offered by Seller for sale to
Purchaser, pursuant to a Conduit Transaction, Seller shall deliver and release
to Custodian the following documents:

          (i) The original Mortgage Note endorsed, "Pay to the order of
     _____________________ without recourse" and signed in the name of Seller by
     an authorized officer and, if Seller did not originate the Mortgage Loan,
     bearing an unbroken chain of endorsements from the originator thereof to
     Seller; (if applicable) the original assumption agreement, together with
     the original of any surety agreement or guaranty agreement relating to the
     Mortgage Note or any such assumption agreement, and if the Mortgage Note
     has been signed by a third, party on behalf of the Mortgagor, the original
     power of attorney or other instrument that authorized and empowered such
     Entity to sign or a copy of such power of attorney together with an
     officer's certificate (or a certificate from the recorder's office)
     certifying that such copy presents a true and correct reproduction of the
     original and that such original has been duly recorded or delivered for
     recordation in the appropriate records of the jurisdiction in which the
     related Mortgaged Property is located;

          (ii)   A Mortgage meeting one of the following requirements:

                 (A) The original Mortgage bearing evidence that the Mortgage
          has been duly recorded in the records of the jurisdiction in which the
          Mortgaged Property is located; or

                 (B) A copy of the Mortgage together with an officer's
          certificate (which may be a blanket officer's certificate of Seller
          covering all such Mortgage Loans), or a certificate from the
          recorder's office, certifying that such copy represents a true and
          correct reproduction of the original Mortgage and that such original
          has been duly recorded or delivered for recordation in the appropriate
          records of the jurisdiction in which the Mortgaged Property is
          located;

          (iii)  If Seller did not originate the Mortgage Loan, all original
     intervening assignments duly executed, attested and acknowledged and in
     recordable form, which together with the Assignment of Mortgage, evidence
     the chain of mortgage assignments from the originator of the Mortgage Loan
     to Seller, and/or two copies of each such intervening mortgage assignments,
     each copy together with an officer's certificate, or a certificate from the
     recorder's office, certifying that such copy represents a true and correct
     reproduction of the original of such instrument and that such original has
     been duly recorded or delivered for recordation in the appropriate records
     of the jurisdiction where the Mortgaged Property is located;
<PAGE>

          (iv)   An original Assignment of Mortgage, in blank, in recordable
     form but unrecorded signed in the name of Seller by an authorized officer;

          (v)    A Warehouse Lender's Release, from any Warehouse Lender having
     a security interest in the Mortgage Loans or, if there is no Warehouse
     Lender with respect to such Mortgage Loans, a Seller's Release, from
     Seller, addressed to Purchaser, releasing any and all right, title and
     interest in such Mortgage Loans;

          (vi)   Delivery Instructions;

          (vii)  A copy of a Commitment;

          (viii) A copy of a Confirmation;

          (ix)   Each Mortgage Loan, as identified by Seller, relating to a
     Mortgage Note with an original principal amount in excess of 80% of the
     appraised value of the related Mortgaged Property at the time of
     origination of such Mortgage Loan, either (A) an original of the
     certificate/commitment of Primary Mortgage Insurance Policy, issued by the
     applicable insurer, without verification of the expiration date thereon, or
     (B) an Officer's Certificate (which may be a blanket Officer's Certificate
     of Seller covering all such Mortgage Loans), certifying that an appraisal
     report has been obtained by Seller which shows that the appraised value of
     the Mortgage Property is such that the outstanding principal balance of
     such Mortgage Note is less than 80% of such appraised value; and*

          (x)    An Underwriter's Form.**















____________________________
*Not applicable to Submission Packages in which the Delivery Instructions
require delivery of the Submission Package to Springfield, Illinois.

                                       2
<PAGE>

                                                                     EXHIBIT C-2


                           [LETTERHEAD OF PURCHASER]

                          CONDUIT MASTER BAILEE LETTER

                                                     ___________________, 199___


[ADDRESS]

The Chase Manhattan Bank, N.A.
Mortgage Banking Division
2 Chase Manhattan Plaza (20th Floor
New York, New York 10081
Attention: Glenn Hett

Ladies and Gentlemen:

     The undersigned Paine Webb Real Estate Securities, Inc. ("Purchaser") shall
from time to time, cause The Chase Manhattan Bank, N.A., as custodian
("Custodian"), to deliver to [Conduit] ("Takeout Investor") original promissory
notes ("Mortgage Notes") evidencing certain mortgage loans ("Mortgage Loans"),
along with certain other documents comprising the related files ("Custodial
File") and, in each case, a Notice of Bailment in the form of Schedule A hereto
with respect to each Mortgage Loan ("Notice of Bailment"), for inspection by
Takeout Investor prior to the possible purchase by Takeout Investor of such
Mortgage Loans ("Sellers").  Prior to its delivery to Takeout Investor, all of
Seller's right, title and interest in each Mortgage Loan and proceeds thereof
shall have been conveyed to Purchaser in accordance with each Seller's agreement
with Purchaser.  Initially capitalized terms used herein but not defined herein
shall have the respective meanings ascribed to such terms in the Takeout
Investor [Acknowledgement] Agreement, dated _________________, 199___, (as
amended, supplemented or otherwise modified from time to time, the "TIAA")
between Takeout Investor and Purchaser.

     Except as otherwise provided herein and/or in the TIAA, each Custodial File
so delivered to Takeout Investor is to be held by Takeout Investor, as agent for
Custodian, and subject to only Purchaser's direction and control until released
as provided herein.  The TIA shall govern the manner in which Takeover Investor
and Purchaser may agree on the amount to be paid by Takeout Investor for each
Mortgage Loan accepted for purchase.  The proceeds of the sale of each Mortgage
Loan accepted for purchase must be remitted immediately upon settlement by
Takeout Investor, by wire transfer in immediately available funds, in accordance
with the wire instructions set forth in the Notice of Bailment which shall be
placed in each Custodial File by Custodian prior to the shipment of each
Custodial File to Takeout Investor.  Takeout Investor shall be responsible for
making certain that all of the proceeds from the sale of the Mortgage Loan are
received in accordance with the wire transfer instructions set forth on each
Notice of Bailment.
<PAGE>

     Upon Purchaser's receipt of all of the proceeds from the sale of a Mortgage
Loan in accordance with the wiring instructions in the applicable Notice of
Bailment, all of Purchaser's legal or equitable interest in the Mortgage Loan
shall terminate.

     All Mortgage Documents held by Takeout Investor which are received by
Takeout Investor from Custodian with respect to a Mortgage Loan that is not
purchased must be returned immediately to Custodian at the address for delivery
of documents set forth on the Notice of Bailment. Purchaser reserves the right
at any time, until a Mortgage Loan has been purchased by Takeout Investor, to
demand the return of the related Mortgage Documents to Custodian, and Takeout
Investor agrees to return to Custodian the Mortgage Documents pertaining to a
Mortgage Loan not purchased by Takeout Investor immediately upon such demand by
Purchaser.

     The persons listed on the attached Schedule B are the authorized
representatives ("Authorized Representatives") of Purchaser. Takeout Investor
shall not honor any communication from Sellers relating to a Mortgage Loan,
which is not confirmed by the written or telephonic consent of an Authorized
Representative of Purchaser, or until Purchaser has received the minimum amount
of proceeds of the sale of such Mortgage Loan.

     In the event Takeout Investor is not able for any reason to comply with the
terms of this Bailee Letter, Takeout Investor shall immediately return the
Custodial File to Custodian at the above address.

     Takeout Investor acknowledges that the Custodial File is being delivered in
accordance with its instructions.  Takeout Investor shall not deliver a
Custodial File to any third party without the prior written consent of Purchaser
unless such third party is a wholly owned subsidiary of Takeout Investor or a
custodian and bailee of Takeout Investor who is receiving such Custodial File
with written notice of the bailment created by this Master Bailee Letter.

     In the event Takeout Investor is not able for any reason to comply with the
terms of this Master Bailee Letter, Takeout Investor shall immediately return
each Custodial File in Takeout Investor's possession to Custodian at the address
for delivery of documents set forth in the related Notice of Bailment.

     Custodial File shall be delivered to Takeout Investor in accordance with
its instructions.

     No deviation in performance of the terms of any previous bailment agreement
will alter any of Takeout Investor's duties or responsibilities as provided
herein.

                                       2
<PAGE>

     By accepting delivery of a Custodial File containing a Notice of Bailment,
Takeout Investor shall be bound by the terms hereof. Please execute and return
the enclosed copy of this Master Bailee Letter in the enclosed self-addressed
envelope.

                                         Sincerely,

                                         PAINE WEBBER REAL ESTATE
                                         SECURITIES INC.
                                         (Purchaser)


                                         By:__________________________
                                         Name:________________________

                                         Title:_______________________


     The undersigned Custodian executes this Master Bailee Letter solely for
purposes of appointing Takeout Investor its custodian and bailee to hold the
Custodial Files in accordance with the terms of this Master Bailee Letter.

                                         Agreed to:

                                         THE CHASE MANHATTAN BANK, N.A.
                                         (Custodian)


                                         By:__________________________
                                         Name:________________________
                                         Title:_______________________
                                         Dated: As of the date first set forth
                                                above


Agreed to:

[CONDUIT]
(Takeout Investor)



By:________________________
Name:______________________
Title:_____________________
Dated: As of the date first
       set forth above

                                       3
<PAGE>

                                                                      SCHEDULE A
                                                                  TO EXHIBIT C-2


                              NOTICE OF BAILMENT
                              ------------------


[Conduit Address]

          Re:  [Insert Description of Loan, including Borrower's Name,
               Loan Amount and Loan Number]
               ----------------------------


Ladies and Gentlemen:

     Pursuant to the Master Bailee Letter, dated ________ __, 199__ (the "Master
Bailee Letter"), between Paine Webber Real Estate Securities Inc. ("Purchaser")
and The Chase Manhattan Bank, N.A. (the "Custodian"), you are hereby notified
that the enclosed original promissory note with respect to the referenced loan
together with certain other documents comprising the related file with respect
to that loan (the "Mortgage Documents") being hereby delivered to you herewith
are to be held by you as agent of Custodian (which holds the Mortgage Documents
as custodian and bailee for the benefit of Purchaser).

     Any Mortgage Documents (or portion thereof) not purchased by you in
accordance with the provisions of the Fannie Mae Guide shall be sent to the
Custodian by overnight courier to: [insert address for return of documents].

     Any questions relating to the Mortgage Documents should be referred to the
Purchaser at (212) 713-2419.

                              Sincerely,

                              THE CHASE MANHATTAN BANK, N.A.


                              By:___________________________
                              Name:_________________________
                              Title:________________________
<PAGE>

                                                                      SCHEDULE B
                                                                  TO EXHIBIT C-2


                    AUTHORIZED REPRESENTATIVES OF PURCHASER
                    ---------------------------------------


       Name                         Title                   Authorized Signature
       ----                         -----                   --------------------
<PAGE>

                                                                       EXHIBIT D


                         CONVERSION SUBMISSION PACKAGES


1.   To convert from a Dry Transaction to a Cash Window Transaction, Seller
     shall deliver to Custodian:

          A.   if FNMA is the Takeout Investor, an original Assignment of
               Mortgage to FNMA, in recordable form but unrecorded, signed in
               the name of Seller by an authorized officer;

          B.   the Applicable Agency Documents; and

          C.   Delivery Instructions.

2.   To convert from a Dry Transaction to a Conduit Transaction, Seller shall
     deliver to Custodian:

          A.   a Mortgage meeting one of the following requirements:

               (i)  The original Mortgage bearing evidence that the Mortgage has
                    been duly recorded in the records of the jurisdiction in
                    which the Mortgaged Property is located; or

               (ii) A copy of the Mortgage together with an officer's
                    certificate (which may be a blanket officer's certificate of
                    Seller covering all such Mortgage Loans), or a certificate
                    from the recorder's office, certifying that such copy
                    represents a true and correct reproduction of the original
                    Mortgage and that such original has been duly recorded or
                    delivered for recordation in the appropriate records of the
                    jurisdiction in which the Mortgaged Property is located;

          B.   a copy of a Commitment;

          C.   Delivery Instructions;

          D.   Each Mortgage Loan, as identified by Seller, relating to a
               Mortgage Note with an original principal amount in excess of 80%
               of the appraised value of the related Mortgaged Property at the
               time of origination of such Mortgage Loan, either (A) an original
               of the certificate/commitment of Primary Mortgage Insurance
               Policy, issued by the applicable insurer, without verification of
               the expiration date thereon, or (B) an Officer's Certificate
               (which may be a blanket Officer's Certificate of Seller covering
               all such Mortgage Loans), certifying that an appraisal report has
               been obtained by Seller which shows that the appraised value of
               the
<PAGE>

               Mortgage Property is such that the outstanding principal
               balance of such Mortgage Note is less than 80% of such appraised
               value;

          E.   An Underwriter's Form; and

          F.   A copy of a Confirmation.

                                       2
<PAGE>

                                                                       EXHIBIT E


                   PAINE WEBBER REAL ESTATE SECURITIES INC.
                           REQUEST FOR CERTIFICATION
    CLIENT:            , PAYEE NUMBER (ONLY APPLICABLE TO FNMA CASH WINDOW
                                 TRANSACTION):
         Expected Delivery Date of Mortgage File is __________, 199__

<TABLE>
<CAPTION>
                                           # OF                                                                          COMPLETION
                                         MONTHS TO                                COMMITMENT DELIVERY RELEASE WAREHOUSE  /EXCEPTION
 REF PROG             LAST NAME  FACE    MATURITY  NOTE TAKEOUT  SALE  COMMITMENT EXPIRATION   DATE   PAYMENT LENDER        CODE
 NO. CODE    LOAN #             AMOUNT             RATE INVESTOR PRICE     #         DATE
-----------------------------------------------------------------------------------------------------------------------------------
<S>  <C>  <C>         <C>      <C>       <C>       <C>  <C>      <C>   <C>        <C>        <C>      <C>     <C>        <C>
          Information Supplied Purchaser
                      by
-----------------------------------------------------------------------------------------------------------------------------------
          Information Supplied Custodian
                      by
-----------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

===================================================================================================================================
</TABLE>
<PAGE>

                                                                       EXHIBIT F


                           Paine Webber Real Estate
                                Document Codes

I.          Program Codes

        D   Dry Transaction

        W   Cash Window Transaction

        C   Conduit Transaction

II.     V   Conversion Code

III.        Certification Codes

        A   Mortgage Loan Absentee Code

        N   Mortgage Loan Suspension Code

        Y   Mortgage Loan Approval Code

IV.         Unidentified/Suspension Mortgage Loan Directives

        H   Hold Directive

        R   Return Directive

        D   Delivery Directive

V.          Exception Codes

        1.  Note is missing
        2.  Note is not original
        3.  Note is missing the borrower's name
        4.  Note - the borrower's name does not match the file
        5.  Note is missing the borrower's signature
        6.  Endorsement in blank on the note is missing
        7.  Endorsement in blank on the note is missing Seller's authorized
            signature
        8.  Intervening Endorsement (from/to) on the note is missing
        9.  Intervening Endorsement (from/to) on the note is missing authorized
            signature
       10.  Mortgage/deed is missing
       11.  Mortgage/deed is not certified
       12.  Mortgage/deed is missing assumption agreement
       13.  Mortgage/deed - the borrower's name and signature does not match the
            note
       14.  Mortgage/deed - the amount is not less or equal to the amount on the
            note
       15.  Mortgage/deed not signed
       16.  Intervening assignment (from/to) is missing
       17.  Intervening assignment (from/to) is not signed
       18.  Intervening assignment (from/to) is not certified
       19.  Assignment in blank is missing
       20.  Assignment in blank not signed


<PAGE>

       21.  Assignment in blank is not original
       22.  Assignment to FNMA is missing
       23.  Assignment to FNMA is not signed
       24.  Assignment to FNMA is not original
       25.  Warehouse/Sellers Release/Letter is missing
       26.  Warehouse/Sellers Release/Letter is not signed
       27.  Commitment is missing
       28.  LTV/PMI certificate is missing
       29.  LTV MI officer's certificate is not original
       30.  Third party underwriters form is missing
       31.  Consolidation/modification agreement is missing
       32.  Consolidation/modification agreement is not certified
       33.  FHLMC purchase contract confirmation is missing
       34.  FHLMC purchase contract confirmation is missing the price
       35.  FHLMC midanet/mortgage detail listing is missing
       36.  FHLMC Form 1034/certification schedule is missing
       37.  From the FHLMC Form 1034 all files are not present
       38.  FHLMC Form 996 is missing
       39.  FHLMC Form 996 wire instruction is incorrect
       40.  FHLMC Form 987 is missing
       41.  FHLMC Form 987 wire instruction is incorrect
       42.  FHLMC 960
       43.  FNMA mandatory delivery commitment is missing
       44.  FNMA mandatory delivery commitment is missing the price
       45.  FNMA Form 1068/1069 mornet is missing
       46.  FNMA Form 1068/1069 - all files are not present
       47.  FNMA Form 1068/1069 Payee Code is incorrect
       48.  FNMA Form 1068/1069 Information does not correspond to the note.
       49.  FNMA 2004 is missing
       50.  FNMA 360 is missing
       51.  Delivery Instructions missing
       52.  Submission Package does not appear regular on its face but no other
            Exception Code is applicable.
<PAGE>

                                                                     EXHIBIT G-1


                         [WAREHOUSE LENDER'S RELEASE]


Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019


Ladies and Gentlemen:

     We hereby release all right, interest or claim of any kind with respect to
the mortgage loan(s) referenced below, such release to be effective
automatically without any further action by any party, upon receipt, in one or
more installments, from Paine Webber Real Estate Securities Inc., in accordance
with the wire instructions which we delivered to you in a letter dated_________,
199__, in immediately available funds, of an aggregate amount equal to the
product of A multiplied by B (such product being rounded to the nearer $0.01)
multiplied by C.*


                          Street
Loan #      Mortgagor     Address     City        State        Zip

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

                              Very truly yours,



                              [WAREHOUSE LENDER]

                              By:_________________________
                              Name:_______________________
                              Title:______________________



        * A =  weighted average trade price
          B = principal amount of the mortgage loans
          C = 1 minus the discount set forth on the related funding confirmation
<PAGE>

                                                                     EXHIBIT G-2


                     [WAREHOUSE LENDER'S WIRE INSTRUCTIONS]

Paine Webber Real Estate Securities, Inc.
1285 Avenue of the Americas
New York, New York 10019

          Re:  Paine Webber Real Estate Securities, Inc. Conforming Whole Loan
               Purchase Cash Window Program with [Seller]
               ---------------------------------------------------------------

Ladies and Gentlemen:

     Set forth below are [Warehouse Lender's] wire instructions applicable to
the above-referenced Conforming Whole Loan Purchase: Cash Window Program.

Wire Instructions:
------------------

          Bank Name:
          City, State:
          ABA #:
          Account #:
          Account Name:

     Please acknowledge receipt of this letter in the space provided below. This
letter supersedes and replaces any prior notice specifying the name of
[Warehouse Lender] and setting forth wire instructions and shall remain in
effect until superseded and replaced by

a letter, in the form of this letter, executed by each of us and acknowledged by
you.

                              Very truly yours,
                              [SELLER]

                              By:____________________________
                              Name:__________________________
                              Title:_________________________

                              [WAREHOUSE LENDERS)]*

                              By:____________________________
                              Name:__________________________
                              Title:_________________________

PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:_______________________
Name:_____________________

__________________
* The authorized officer of each warehouse lender executing this letter must be
the same authorized officer as signs the Warehouse Lender's Release. Not
applicable if there is no warehouse lender.
<PAGE>

Title:____________________

                                       2
<PAGE>

                                                                     EXHIBIT H-1


                              [SELLER'S RELEASE]

Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

Ladies and Gentlemen:

     With respect to the mortgage loan(s) referenced below (a) we hereby certify
to you that the mortgage loan(s) is not subject to a lien of any warehouse
lender and (b) we hereby release all right, interest or claim of any kind with
respect to such mortgage loan, such release to be effective automatically
without any further action by any party upon payment from Purchaser to Seller of
an aggregate amount equal to the product of A multiplied by B (such product
being rounded to the nearer $0.01) multiplied by C* in accordance with our wire
instructions in effect on the date of such payment.

                          Street
Loan #      Mortgagor     Address     City        State        Zip

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

                                    Very truly yours,

                                    [SELLER]

                                    By: ____________________________
                                    Name:  _________________________
                                    Title: _________________________


         *A = weighted average trade price
          B = principal amount of the mortgage loan(s)
          C = 1 minus the discount set forth on the related funding confirmation
<PAGE>

                                                                     EXHIBIT H-2

                                                                     Date:______
                         [SELLER'S WIRE INSTRUCTIONS]

Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

         Re:   Mortgage Loan Custodial Agreement dated as of __________,
               199____, among Paine Webber Real Estate Securities Inc.,
                        -----------------------------------------------
               [Seller] and [Custodian]
               ------------------------

Ladies and Gentlemen:

     Capitalized terms used herein and not defined herein shall have the
meanings ascribed to such terms in the above-referenced Custodial Agreement.

     Set forth below are the Seller's Wire Instructions applicable to the above-
referenced Custodial Agreement.

Wire Instructions:
------------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     A/C Name:

     Please acknowledge receipt of this letter in the space provided below and
return it to Seller.  This letter supersedes and replaces any prior notice
specifying the name of Seller and the Seller's Wire Instructions and shall
remain in effect until superseded and replaced by a letter, in the form of this
letter, executed by us and acknowledged by you.

                                        Very truly yours,

                                        [SELLER]*


                                        By: _____________________
                                        Name: ___________________
                                        Title: __________________

Receipt acknowledged by:

PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:________________________
Name:______________________
Title: ____________________


________________
* The authorized officer of executing this letter must be the same authorized
officer as signs the Seller's Release. Applicable only if there is no Warehouse
Lender.
<PAGE>

                                                                     EXHIBIT I-1


                   [PURCHASER'S WIRE INSTRUCTIONS TO SELLER]

Wire Instructions:
------------------

          Bank Name:
          City, State:
          ABA#:
          Account #:
          A/C Name:
          Ref: [Name of Seller]
<PAGE>

                                                                     EXHIBIT I-2


                 [PURCHASER'S WIRE INSTRUCTIONS TO CUSTODIAN]

                                                                    Date:_______
[Custodian]
[Address]

          Re:  Whole Loan Purchase Program
               ---------------------------

Ladies and Gentlemen:

     Set forth below are the Purchaser's Wire Instructions to Custodian (as
defined in all Conforming Mortgage Loan Custodial Agreements used in the above-
referenced program).

Wire Instructions:
------------------

     Bank Name:
     City, State:
     ABA#:
     Account #:
     Account Name:

     Please acknowledge receipt of this letter in the space provided below and
return it to Paine Webber Real Estate Securities Inc. ("Purchaser"). This letter
supersedes and replaces any prior notice specifying the name of Purchaser and
the Purchaser's Wire Instructions to Custodian and shall remain in effect until
superseded and replaced by a letter, in the form of this letter, executed by us
and acknowledged by you.

                                   Very truly yours,

                                   PAINE WEBBER REAL ESTATE SECURITIES
                                   INC.

                                   By:______________________________
                                   Name:____________________________
                                   Title:___________________________

Receipt acknowledged by:

[CUSTODIAN]

By:__________________________
Name:________________________
Title:_______________________
<PAGE>

                                                                     EXHIBIT I-3


                PURCHASER'S DELIVERY INSTRUCTIONS TO CUSTODIAN

                                                                   Date:  ______

[CUSTODIAN]
[ADDRESS]
Attention: ______________

          Re:  Delivery of Submission Package
               ------------------------------

Dear _________:

     Please deliver, via overnight courier, each of the Submission Packages
relating the Mortgage Loans listed below to:

                             ____________________
                             ____________________
                             ____________________

     Initially capitalized terms are defined in the Mortgage Loan Custodial
Agreement, dated _______________, 199___ among [Seller], [Purchaser] and
[Custodian].

                                        Very truly yours,

                                        [PURCHASER]


                                        By:  ________________________
                                        Title: ______________________
<PAGE>

                                                                       EXHIBIT J



           [NOTICE BY ASSIGNEE TO CUSTODIAN OF PURCHASER'S DEFAULT]

[Custodian]
[Address]

          Re:  Whole Loan Purchase Program
               ---------------------------


Ladies and Gentlemen:

     Notice is hereby given that Purchaser has materially defaulted in its
obligations under an agreement between Assignee and Purchaser relating to the
financing by Assignee of Purchaser's purchase of Mortgage Loans described on
Schedule 1 hereto. Assignee hereby (i) directs that Custodian act with respect
to the related mortgage files solely in the capacity of custodian for, and
bailee of, Assignee, (ii) directs that Custodian hold such mortgage files for
the exclusive use and benefit of Assignee and (iii) assumes the rights of
Purchaser to furnish instructions to Custodian as to the disposition of such
mortgage files and such rights shall be exercisable solely by Assignee.

     Please acknowledge the foregoing by signing below and returning a copy of
this notice to us at [address].

                                        Very truly yours,

                                        [ASSIGNEE]

                                        By:___________________________
                                        Name:_________________________
                                        Title:________________________

RECEIPT ACKNOWLEDGED:

[CUSTODIAN]
By:_________________________
Name: ______________________
Title: _____________________

cc: Paine Webber Real Estate Securities Inc.
<PAGE>

                                                                       EXHIBIT K


                           LIMITED POWER OF ATTORNEY

     Reference is hereby made to the Mortgage Loan Custodial Agreement (the
"Agreement"), dated____________, 199____ , among The Chase Manhattan Bank, N.A.
("Custodian"), Paine Webber Real Estate Securities Inc. ("Purchaser") and
________ ("Seller"). Any capitalized term not otherwise defined herein shall
have the meaning assigned to such term in the Agreement.

     Know all people by these presents, that Seller, a corporation organized and
existing under the laws of the State of ___________, does hereby make,
constitute and appoint, ______________ or _________________________, or any
officer assigned to the [Corporate Trust Group] (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, any
Assistant Secretary, any trust officer or any other officer of Custodian
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
the Agreement, each acting singly and independently of the other, as its true
and lawful attorney for it and in its name, place and stead to endorse a
Mortgage Note that has not otherwise been endorsed as follows:

     "Pay to the order of ___________________

                                        [Name of Seller]

                                        By:  ________________________
                                        Its: Attorney-in-Fact"

provided, however, a Mortgage Note shall only be endorsed pursuant to this Power
of Attorney pursuant to the terms and conditions set forth in Section 4(b)(ii)
of the Agreement.

     IN WITNESS WHEREOF, [Name of Seller], has caused this Power of Attorney to
be executed in its name by its duly authorized officer this _____ day of
_____________199___.

                                        [Name of Seller]

                                        By:  ________________________
                                        Its: Attorney-in-Fact"


STATE OF _______________
                             ss.
COUNTY OF_______________

     On the ___th day of_______, in the year 199_, before me personally came
___________________________________ to me known, who, being by me duly sworn,
did depose and say that he/she is  of [Name of Seller], the corporation
described in and which executed the above instrument and that he/she executed
said instrument by order of the board of directors of said corporation.


                                        ______________________________________
                                        Notary Public
<PAGE>

                                                                       EXHIBIT L


                        UNIDENTIFIED MORTGAGE LOANS LIST

     With regard to [SELLER], the following mortgage loans were received by The
Chase Manhattan Bank, N.A. on [Date] and were not referenced on Paine Webber
Real Estate Securities Inc.'s Request for Certification.

<TABLE>
<CAPTION>
       Loan #                Last Name              Face Amount           Takeout Investor         Expiration Date
       ------                ---------              -----------           ----------------         ---------------
                                                                           (if applicable)
                                                                           ---------------
       <S>                   <C>                    <C>                    <C>                     <C>















</TABLE>

<PAGE>

                                                                       EXHIBIT M


                UNIDENTIFIED/SUSPENSION MORTGAGE LOAN DIRECTIVE
                -----------------------------------------------


                     Seller's Name: ______________________

                     Product Name: ______________________

<TABLE>
<CAPTION>
Reference #       Unidentified/    Loan        Last Name      Face           Commitment           Instruction
(if applicable)   Suspension       #                          Amount         Expiration Date      (Hold/Return/Delivery)
<S>               <C>              <C>         <C>            <C>            <C>                  <C>




















</TABLE>

<PAGE>

                                                                       EXHIBIT N


                            [LETTERHEAD OF SELLER]

[DATE]

To:  The Chase Manhattan Bank, N.A.
     Mortgage Banking Division
     2 Chase Manhattan Plaza (20th Floor)
     New York, New York 10081
     Attention: Glenn Hett



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

Please deliver the Submission Package(s) as indicated on the attached list, in
accordance with the terms of the agreement, to the following:


          Company Name         :______________________
          Address              :______________________
          City, State Zip Attn :______________________

The documents in the Submission Package shall be arranged as follows:
<PAGE>

                              [LETTER OF SELLER]

                                    [DATE]


LOANS TO BE DELIVERED BY CHASE MANHATTAN BANK, N.A. FOR [SELLER]

<TABLE>
<CAPTION>
Loan #:                               Borrower's Name:                        Loan Amount:
-------                               ----------------                        ------------
<S>                                   <C>                                     <C>
1.

2.

3.

4.

5.

6.

7.

8.

9.

10.
</TABLE>
<PAGE>

                                                                       EXHIBIT O


PURCHASER'S INSTRUCTIONS TO CUSTODIAN TO DESTROY SPECIFIED FILES


[CUSTODIAN]
[ADDRESS]
Attention: ___________________

               Re:  Destruction of Files
                    --------------------


Dear

     You are hereby authorized to destroy any documents relating the Mortgage
Loans listed below which were delivered to you in connection with the Mortgage
Loan Custodial Agreement referenced below and which remain in your possession:

          Loan #             Last Name              Face Amount
          ------             ---------              -----------
















     Initially capitalized terms are defined in the Mortgage Loan Custodial
Agreement, dated _____________, 199__ among [Seller], [Purchaser] and
[Custodian].

                              Very truly yours,

                              [PURCHASER]


                              By: ____________________________
                              Title: _________________________
<PAGE>

                                                                       EXHIBIT P


                       LIST OF PRIMARY MORTGAGE INSURERS
<PAGE>

                                                                      SCHEDULE A


                                LIST OF CONDUITS
                                ----------------


1.  BancBoston Mortgage Corporation

2.  Capstead Mortgage Corporation

3.  Citicorp Mortgage Corp.

4.  Countrywide Correspondent

5.  Fleet Mortgage Corp.

6.  GE Capital Mortgage Services, Inc.

7.  Hamilton Financial Corp.

8.  Headlands Mortgage Corp.

9.  Independent National Mortgage Corp.

10. LaSalle Talman Home Mortgage

11. Paine Webber Real Estate Securities Inc.

12. Prudential Home Mortgage Corp.-LEX Conduit and LEX Agency

13. Residential Funding Corporation
<PAGE>

                        MORTGAGE LOAN PURCHASE AGREEMENT
<PAGE>

                                                                  EXECUTION COPY



                       MORTGAGE LOAN PURCHASE AGREEMENT
                       --------------------------------


PURCHASER:                   PAINE WEBBER REAL ESTATE SECURITIES INC.

ADDRESS:                     1285 AVENUE OF THE AMERICAS
                             NEW YORK, NEW YORK 10019
                             ATTENTION:

SELLER:                      CRESCENT MORTGAGE SERVICES, INC.

ADDRESS:                     SOUTH TERRACES
                             115 PERIMETER CENTER PLACE
                             ATLANTA, GEORGIA 30346

DATE OF AGREEMENT:           MAY  1, 1996
                                 ---
<PAGE>

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                     Page

<S>                                                                                                <C>
Section 1.        Definitions..............................................................            1

Section 2.        Procedures for Purchases of Mortgage Loans...............................            6

Section 3.        Sale of Mortgage Loans to Takeout Investor...............................            7

Section 4.        Servicing. of the Mortgage Loans.........................................            8

Section 5.        Trade Assignments........................................................            9

Section 6.        Transfers of Mortgage Loans by Purchaser.................................           10

Section 7.        Record Title to Mortgage Loans; Intent of Parties Security Interest......           10

Section 8.        Representations and Warranties...........................................           11

Section 9.        Covenants of Seller......................................................           16

Section 10.       Term.....................................................................           19

Section 11.       Exclusive Benefit of Parties; Assignment.................................           19

Section 12.       Amendments; Waivers; Cumulative Rights...................................           19

Section 13.       Execution in Counterparts................................................           19

Section 14.       Effect of Invalidity of Provisions.......................................           19

Section 15.       Governing Law............................................................           20

Section 16.       Notices..................................................................           20

Section 17.       Entire Agreement.........................................................           20

Section 18.       Costs of Enforcement.....................................................           20

Section 19.       Consent to Service.......................................................           20

Section 20.       Construction.............................................................           20
</TABLE>
<PAGE>

Exhibit A    Loan Purchase Detail

Exhibit B-1  Warehouse Lender's Release

Exhibit B-2  Warehouse Lender's Wire Instructions

Exhibit C-1  Seller's Release

Exhibit C-2  Seller's Wire Instructions

Exhibit D    Purchaser's Wire Instructions to Seller

Exhibit E    UCC-1 Financing Statement
<PAGE>

                       MORTGAGE LOAN PURCHASE AGREEMENT

     This Mortgage Loan Purchase Agreement ("Agreement"), dated as of the date
set forth on the cover page hereof, between PAINE WEBBER REAL ESTATE SECURITIES
INC. ("Purchaser") and the Seller whose name is set forth on the cover page
hereof ("Seller").

                             PRELIMINARY STATEMENT

     Seller may, in its sole discretion, offer to sell to Purchaser from time to
time Mortgage Loans, and Purchaser, in its sole discretion, may agree to
purchase such Mortgage Loans from Seller in accordance with the terms and
conditions set forth in this Agreement.  Seller, subject to the terms hereof,
will cause each Mortgage Loan to be purchased by Takeout Investor. During the
period from the purchase of a Mortgage Loan to the sale of the Mortgage Loan to
Takeout Investor, Purchaser expects to rely entirely upon Seller to service each
such Mortgage Loan.

     The parties hereto hereby agree as follows:

     Section 1.  Definitions.
                 ------------

     Capitalized terms used but not defined herein shall have the meanings set
forth in the Custodial Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

          "Act of Insolvency": With respect to Seller, (a) the commencement by
     Seller as debtor of any case or proceeding under any bankruptcy,
     insolvency, reorganization, liquidation, dissolution or similar law, or
     Seller's seeking the appointment of a receiver, trustee, custodian or
     similar official for Seller or any substantial part of its property, or (b)
     the commencement of any such case or proceeding against Seller, or
     another's seeking such appointment, or the filing against Seller of an
     application for a protective decree which (1) is consented to or not timely
     contested by Seller, (2) results in the entry of an order for relief, such
     an appointment, the issuance of such a protective decree or the entry of an
     order having a similar effect, or (3) is not dismissed within sixty (60)
     days, (c) the making by Seller of a general assignment for the benefit of
     creditors, or (d) the admission in writing by Seller that Seller is unable
     to pay its debts as they become due or the nonpayment generally by Seller
     of its debts as they become due.

          "Applicable Guide": The Takeout Investor's eligibility requirements
     for Mortgage Loans, as applicable, and as each may be amended or
     supplemented from time to time.

          "Applicable Purchase Agreement": The applicable agreement, providing
     for the purchase by Takeout Investor of Mortgage Loans from Seller as such
     agreement may be amended from time to time.

          "Assignee": The Chase Manhattan Bank, National Association, as agent
     for certain beneficiaries pursuant to certain repurchase transaction tri-
     party custody agreements.
<PAGE>

          "Business Day": Any day other than (a) a Saturday, Sunday or other day
     on which banks located in the City of New York, New York are authorized or
     obligated by law or executive ,order to be closed, or (b) any day on which
     Paine Webber Real Estate Securities Inc. is closed for business, provided
     that notice thereof shall have been given not less than seven calendar days
     prior to such day.

          "Collateral": The Mortgage Loans (including all servicing rights
     related thereto), any Custodial Accounts, the Takeout Commitments and the
     proceeds of any and all of the foregoing.

          "Commitment Date": The date set forth in a Takeout Commitment as the
     commitment date.

          "Commitment Expiration Date": With respect to any Mortgage Loan, the
     date occurring 30 calendar days after the Purchase Date.

          "Commitment Requirements": The requirements issued by Takeout Investor
     in the Applicable Guide regarding the issuance of Takeout Commitments, as
     amended from time to time by Takeout Investor.

          "Conduit": As defined in the Custodial Agreement.

          "Conduit Submission Package": As defined in the Custodial Agreement.

          "Credit File": All papers and records of whatever kind or description,
     whether developed or originated by Seller or others, required to document
     or service the Mortgage Loan; provided, however, that such Mortgage Loan
     papers, documents and records shall not include any Mortgage Loan papers,
     documents or records which are contained in the Conduit Submission Package.

          "Custodial Account": A separate custodial account, established and
     maintained by Seller under the conditions set forth in Section 4(b), for
     the deposit by Seller of all collections in respect of a Mortgage Loan that
     are payable to Purchaser as the owner of the Mortgage Loan.

          "Custodial Agreement": The Mortgage Loan Custodial Agreement, dated as
     of the date set forth on the cover sheet thereof, among Seller, Purchaser
     and Custodian, as amended from time to time.

          "Custodial Fee": With respect to each Mortgage Loan, the amount set
     forth on the related Funding Confirmation as the "Custodial Fee."

          "Custodian": The Chase Manhattan Bank, National Association, and its
     permitted successors.

          "Defective Mortgage Loan": A Mortgage Loan that is not in compliance
     with the Applicable Guide and this Agreement.

                                       2
<PAGE>

          "Discount": With respect to each Mortgage Loan, the amount set forth
     on such related Funding Confirmation as the Discount.

          "Document File": The Credit File and the Conduit Submission Package.

          "Due Date": The day of the month on which the Monthly Payment is due
     on a Mortgage Loan.

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

          "Funding Confirmation": With respect to all Mortgage Loans purchased
     by Purchaser from Seller via a single wire funds transaction on a
     particular Business Day, the trade confirmation from Purchaser to Seller
     confirming the terms of Purchaser's purchase of such Mortgage Loans.

          "Incremental Pass-Through Rate": The amount by which the Pass-Through
     Rate is increased upon the occurrence of (i) an Commitment Expiration Date
     or (ii) any event giving Purchaser the right to elect a remedy pursuant to
     Section 3, which amount shall be set forth in a Funding Confirmation as the
     "Incremental Pass-Through Rate" .

          "Loan Purchase Detail": A loan purchase detail, transmitted via
     facsimile in the form of Exhibit A, or transmitted electronically in an
     appropriate data layout provided by Purchaser, prepared by Seller,
     containing certain information regarding the characteristics of all
     Mortgage Loans being offered for sale by Seller on a particular Business
     Day.

          "Losses": Any and all losses, claims, damages, liabilities or expenses
     (including reasonable attorneys' fees) incurred by any person specified;
     provided, however, that "Losses" shall not include any losses, claims,
     damages, liabilities or expenses which would have been avoided had such
     person taken reasonable actions to mitigate such losses, claims, damages,
     liabilities or expenses.

          "Monthly Payment": The scheduled monthly payment of principal and
     interest on a Mortgage Loan.

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

          "Mortgage Loan": A mortgage loan which is subject to this Agreement,
     and which satisfies the Commitment Requirements as the same may be modified
     from time to time.

          "Mortgage Note": The note or other evidence of the indebtedness of a
     Mortgagor secured by a Mortgage.

          "Mortgaged Property": The property subject to the lien of the Mortgage
     securing a Mortgage Note.

          "Mortgagor": The obligor on a Mortgage Note.

                                       3
<PAGE>

          "NCUA": The National Credit Union Administration, or any successor
     thereto.

          "OTS": The Office of Thrift Supervision, or any successor thereto.

          "Parent Company": A corporation or other entity owning at least 50% of
     the outstanding shares of voting stock of Seller.

          "Pass-Through Rate": With respect to each Mortgage Loan, the rate at
     which interest is passed through to Purchaser which initially shall be the
     rate of interest specified on a Funding Confirmation as the Pass-Through
     Rate.

          "Performance Fee": With respect to each Mortgage Loan, an amount equal
     to the Discount less the Custodial Fee, plus the Yield Compensation
     Adjustment plus or minus any other adjustments permitted hereunder, which
     amount shall be payable to Seller by Purchaser as compensation to Seller
     for its services hereunder.

          "Purchase Advice": An approved purchase list delivered to Purchaser by
     the Takeout Investor via electronic or facsimile transmission, confirming
     the amount of Takeout Proceeds allocable to each Mortgage Loan purchased by
     Takeout Investor.

          "Purchase Date": With respect to any Mortgage Loan, the date of
     payment thereof by Purchaser to Seller of the Purchase Price.

          "Purchase Price": With respect to each Mortgage Loan, an amount equal
     to the Trade Principal less an amount equal to the product of the Trade
     Principal and the Discount. Accrued interest shall be allocated in
     accordance with Section 2(c).

          "Purchaser": Paine Webber Real Estate Securities Inc. and its
     successors.

          "Purchaser's Wire Instructions to Seller": The wire instructions, set
     forth in a notice delivered by Purchaser to Seller containing the
     information set forth in Exhibit D, to be used for the payment of all
     amounts due and payable to Purchaser hereunder.

          "RTC": The Resolution Trust Corporation or any successor thereto.

          "Seller": The Seller whose name is set forth on the cover page hereof,
     and its permitted successors hereunder.

          "Seller's Release": A letter in the form of Exhibit C-1, delivered by
     Seller when no Warehouse has an interest in a Mortgage Loan, conditionally
     releasing all of Seller's interest in a Mortgage Loan upon receipt of
     payment by Seller.

          "Seller's Wire Instructions": The wire instructions, set forth in a
     letter in the form of Exhibit C-2, to be used for the payment of funds to
     Seller when no Warehouse Lender has an interest in the Mortgage Loans to
     which such payment relates.

          "Settlement Date": With respect to any Mortgage Loan, the date the
     allocable Pass-Through Rate shall cease to accrue upon payment by Takeout
     Investor to Purchaser

                                       4
<PAGE>

     of the Takeout Proceeds as confirmed by Purchaser's receipt from Seller of
     the related Settlement Information in accordance with Section 3(a).

          "Settlement Information": The Purchase Advice or group of Purchase
     Advices which shall identify each Mortgage Loan by the Mortgagor's name,
     and of which the aggregate disbursement amount equals the precise dollar
     amount of Takeout Proceeds to be received by Purchaser from Agreement.

          "Successor Servicer": An entity designated by Purchaser, in conformity
     with Section 16, to replace Seller as servicer for Purchaser.

          "Takeout Commitment": Commitment of Seller to sell one or more
     Mortgage Loans to Takeout Investor and of Takeout Investor to purchase one
     or more Mortgage Loans from Seller.

          "Takeout Investor": The applicable Conduit.

          "Takeout Proceeds": The amount of funds Takeout Investor pays to
     Purchaser on a particular Business Day as identified by the related
     Settlement Information.

          "Third Party Underwriter": Any third party, including but not limited
     to a mortgage loan pool insurer, who underwrites the Mortgage Loan(s) prior
     to the purchase by Purchaser.

          "Third Party Underwriter's Certificate": A certificate issued by a
     Third Party Underwriter with respect to a Mortgage Loan, certifying that
     such Mortgage Loan complies with its underwriting requirements.

          "Trade Price": The trade price set forth on a Takeout Commitment.

          "Trade Principal": With respect to any Mortgage Loan, the outstanding
     principal balance of the Mortgage Loan multiplied by a percentage equal to
     the Trade Price.

          "Warehouse Lender": Any lender, including, without limitation,
     Purchaser, providing financing to the Seller in any fractional amount for
     the purpose of originating or purchasing Mortgage Loans which lender has a
     security interest in such Mortgage Loans as collateral for the obligations
     of Seller to such lender.

          "Warehouse Lender's Release": A letter in the form of Exhibit B-1,
     from a Warehouse Lender to Purchaser, conditionally releasing all of
     Warehouse Lender's right, title and interest in certain Mortgage Loans
     identified therein upon receipt of payment by Warehouse Lender.

          "Warehouse Lender's Wire Instructions": The wire instructions, set
     forth in a letter in the form of Exhibit B-2, from a Warehouse Lender to
     Purchaser, setting forth wire instructions for all amounts due and payable
     to such Warehouse Lender hereunder.

                                       5
<PAGE>

          "Yield Compensation Adjustment": Subject to any further adjustment
     provided in this Agreement, an amount (which may be a negative number)
     equal to:

                                   A(BC-DE)
                                   --------
                                     360

where (i) A equals the number of days in the period beginning on the Purchase
Date to but not including the Settlement Date, (ii) B equals the principal
amount of the Mortgage Loan, (iii) C equals the interest rate (expressed as a
decimal) on the Mortgage Loan, (iv) D equals the Purchase Price and (v) E equals
the Pass-Through Rate (expressed as a decimal).

     Section 2.  Procedures for Purchases of Mortgage Loans.
                 ------------------------------------------

     (a)(1) Purchaser may, in its sole discretion, from time to time, purchase
one or more Mortgage Loans from Seller.  Seller shall be deemed to make for the
benefit of Purchaser, as of the applicable dates specified in Section 8, the
representations and warranties set forth in Section 8 in respect of each such
Mortgage Loan.

     (a)(2) Prior to Purchaser's election to purchase any Mortgage Loan,
Purchaser shall have received from Seller a Loan Purchase Detail, either
electronically or via a facsimile transmission, and Custodian shall have
received all applicable documents required by Section 2 of the Custodial
Agreement. The terms and conditions of such purchase shall be set forth in this
Agreement and in each Funding Confirmation.

     (b)(1) If Purchaser elects to purchase any Mortgage Loan, Purchaser shall
pay the amount of the Purchase Price for such Mortgage Loan by wire transfer of
immediately available funds (i) if a Warehouse Lender's Release has been
included in the related Conduit Submission Package, in accordance with the
Warehouse Lender's Wire Instructions or (ii) if there is no Warehouse Lender's
Release included in the related Conduit Submission Package, in accordance with
the Seller's Wire Instructions.  If Purchaser is the Warehouse Lender with
respect to a Mortgage Loan, the amount transferred shall be reduced to account
for amounts previously advanced by Purchaser with respect to such Mortgage Loan.
With respect to each Mortgage Loan which Purchaser has elected to purchase,
Custodian shall deliver to Takeout Investor the applicable portion of the
Conduit Submission Package, in the manner and at the time set forth in the
Custodial Agreement. Seller shall thereafter promptly deliver to Takeout
Investor any and all additional documents requested by Takeout Investor to
enable Takeout Investor to make payment to Purchaser of the Takeout Proceeds.

     (b)(2) Simultaneously with the payment by Purchaser of the Purchase Price
of a Mortgage Loan, in accordance with the Warehouse Lender's Wire Instructions
or the Seller's Wire Instructions, as applicable, with respect to a Mortgage
Loan, Seller hereby conveys to Purchaser all of Seller's right, title and
interest in and to, such Mortgage Loan, free and clear of any lien, claim or
encumbrance.

     (c)    With respect to each Mortgage Loan that Purchaser elects to purchase
hereunder, Purchaser shall owe to Seller a Performance Fee.  The Yield
Compensation Adjustment component of the Performance Fee shall include an
accrued interest calculation. Purchaser's

                                       6
<PAGE>

accrued interest calculation shall be identical to that of Takeout Investor,
therefore the amount of accrued interest included in a settlement calculation
will represent accrued interest paid to Purchaser and paid by Purchaser.

     (d)    Notwithstanding the satisfaction by Seller of the conditions
specified in Section 2(a), Purchaser is not obligated to purchase any Mortgage
Loan offered to it hereunder. In the event that Purchaser rejects a Mortgage
Loan for purchase for any reason and/or does not transmit the Purchase Price,
any Conduit Submission Package delivered to Custodian in anticipation of such
purchase shall be returned by Custodian in accordance with the terms of the
bailee letter under which it was received.

     Section 3.  Sale of Mortgage Loans to Takeout Investor.
                 ------------------------------------------

     (a)(1) Upon the sale to Takeout Investor of a Mortgage Loan previously
purchased by Purchaser hereunder, Seller shall cause Takeout Proceeds relating
to such Mortgage Loan to be paid to Purchaser in accordance with Purchaser's
Wire Instructions to Seller.

     (a)(2) All Takeout Proceeds received by Purchaser from Takeout Investor
after 3:00 P.M. New York City time on a Business Day (or at any time on a day
which is not a Business Day) shall be deemed, with regard to determining the
Settlement Date, received by Purchaser on the next succeeding Business Day.

     (b)(1) If any Mortgage Loan is rejected by Takeout Investor because it is a
Defective Mortgage Loan, Seller shall promptly notify Purchaser. If any Mortgage
Loan is a Defective Mortgage Loan on the Purchase Date and in Purchaser's sole
judgement the defects in such Mortgage Loan will not be cured (or in fact are
not cured) by Seller prior to the Commitment Expiration Date, the Pass-Through
Rate applicable to such Defective Mortgage Loan shall, on such Commitment
Expiration Date, increase by the Incremental Pass-Through Rate and Purchaser, at
its election, may require that Seller, upon receipt of notice from Purchaser,
immediately repurchase Purchaser's ownership interest in such Defective Mortgage
Loan by remitting to Purchaser (in immediately available funds in accordance
with Purchaser's instructions) the amount paid by Purchaser for such Defective
Mortgage Loan plus interest at the Pass-Through Rate on the principal amount
thereof from the Purchase Date of such Mortgage Loan to the date of such
repurchase.  If at any time prior to the repurchase of a Defective Mortgage Loan
by Seller or the purchase of a Mortgage Loan by Takeout Investor, Seller
receives the Mortgage Note or any other portion of the Conduit Submission
Package, Seller shall promptly forward such Mortgage Note and/or other portion
of the Conduit Submission Package to Purchaser.

     (b)(2) If Seller fails to comply with its obligations in the manner
described in Section 3(b)(1), upon receipt by Seller of notice from Purchaser,
Seller's rights and obligations to service Mortgage Loans, as provided in this
Agreement, shall terminate.  If an Act of Insolvency occurs at any time,
Seller's rights and obligations to service the Mortgage Loans, as provided in
this Agreement, shall terminate immediately, without any notice or action by
Purchaser. Upon any such termination, Purchaser is hereby authorized and
empowered as the exclusive agent for Seller to sell and transfer such rights to
service the Mortgage Loans for such price and on such terms and conditions as
Purchaser shall reasonably determine, and Seller shall not otherwise

                                       7
<PAGE>

attempt to sell or transfer such rights to service without the prior consent of
Purchaser. Seller shall perform all acts and take all action so that all files
and documents relating to the Mortgage Loans held by Seller, together with all
escrow amounts relating to such Mortgage Loans, are delivered to Successor
Servicer. To the extent that the approval of a Third Party Underwriter or any
other person is required for any such sale or transfer, Seller shall fully
cooperate with Purchaser to obtain such approval. Upon exercise by Purchaser of
its remedies under this Section 3(b)(2), Seller hereby authorizes Purchaser to
receive all amounts paid by any purchaser of such rights to service the Mortgage
Loans and to remit such amounts to Seller subject to Purchaser's rights of set-
off under this Agreement. Upon exercise by Purchaser of its remedies under this
Section 3(b)(2), Purchaser's obligation to pay and Seller's right to receive any
portion of the Performance Fee relating to such Mortgage Loans shall
automatically be canceled and become null and void, provided that such
cancellation shall in no way relieve Seller or otherwise affect the obligation
of Seller to indemnify and hold Purchaser harmless as specified in Section 3(c).

     (b)(3) Each Mortgage Loan required to be delivered to Successor Servicer by
Section 3(b)(2) shall be delivered free of any servicing rights in favor of
Seller and free of any title, interest, lien, encumbrance or claim of any kind
of Seller.  Seller shall deliver or cause to be delivered all files and
documents relating to each Mortgage Loan held by Seller to Successor Servicer.
Seller shall promptly take such actions and furnish to Purchaser such documents
that Purchaser deems necessary or appropriate to enable Purchaser to cure any
defect in each such Mortgage Loan or to enforce such Mortgage Loans, as
appropriate.

     (c)    Seller agrees to indemnify and hold Purchaser and its assignees
harmless from and against all Losses resulting from or relating to any breach or
failure to perform by Seller of any representation, warranty, covenant, term or
condition made or to be performed by Seller under this Agreement.

     (d)    No exercise by Purchaser of its rights under this Section 3 shall
relieve Seller of responsibility or liability for any breach of this Agreement.

     (e)    Seller hereby grants Purchaser a right of set-off against the
payment of any amounts that may be due and payable to Purchaser from Seller,
such right to be upon any and all monies or other property of Seller held or
received by Purchaser, or due and owing from Purchaser to Seller.

     Section 4.  Servicing of the Mortgage Loans.
                 -------------------------------

     (a)    Seller shall service and administer each Mortgage Loan on behalf of
Purchaser in accordance with prudent mortgage loan servicing standards and
procedures generally accepted in the mortgage banking industry and in accordance
with the requirements of Takeout Investor as though Takeout Investor's
requirement were set forth in independent contract between Seller and Purchaser,
provided that Seller shall at all times comply with applicable law, and the
requirements of any applicable insurer or guarantor so that the insurance in
respect of any Mortgage Loan is not voided or reduced. Seller shall at all times
maintain accurate and complete records of its servicing of each Mortgage Loan,
and Purchaser may, at any time during Seller's business hours on reasonable
notice, examine and make copies of such records.  In addition, if a Mortgage
Loan is not purchased by Takeout Investor on or before the Commitment Expiration

                                       8
<PAGE>

Date, Seller shall at Purchaser's request deliver to Purchaser monthly reports
regarding the status of such Mortgage Loan, which reports shall include, but
shall not be limited to, a description of each Mortgage Loan in default for more
than thirty days, and such other circumstances with respect to any Mortgage Loan
(whether or not such Mortgage Loan is included in the foregoing list) that could
materially adversely affect any such Mortgage Loan, Purchaser's ownership of any
such Mortgage Loan or the collateral securing any such Mortgage Loan. Seller
shall deliver such a report to Purchaser every thirty days until (i) the
purchase by Takeout Investor of such Mortgage Loan pursuant to the related
Takeout Commitment or (ii) the exercise by Purchaser of any remedial election
pursuant to Section 3.

     (b)    Within five Business Days of notice from Purchaser or, with respect
to any Mortgage Loan, on the Commitment Expiration Date, Seller shall establish
and maintain a Custodial Account entitled "[name of Seller], in trust for Paine
Webber Real Estate Securities Inc. and its assignees under the Mortgage Loan
Purchase Agreement dated [the date of this Agreement]" and shall promptly
deposit into such Custodial Account, in the form received with any necessary
endorsements, all collections received in respect of each Mortgage Loan that are
payable to Purchaser as the owner of each such Mortgage Loan.

     (c)    Amounts deposited in the Custodial Account with respect to any
Mortgage Loan shall be held in trust for Purchaser as the owner of such Mortgage
Loan and shall be released only as follows:

            (1)  Except as otherwise provided in this Section 4(c), following
     receipt by Purchaser or its designee of the Takeout Proceeds for such
     Mortgage Loan from Takeout Investor or Seller amounts deposited in the
     Custodial Account shall be paid in accordance with Section 2(c).
     Notwithstanding the foregoing, all amounts deposited in the Custodial
     Account shall be paid to Seller upon the purchase by Takeout Investor of
     the related Mortgage Loan(s) from Purchaser if, and to the extent that, the
     amounts due and payable to Purchaser hereunder have been set off against
     the Purchase Price for the Mortgage Loan or the Performance Fee relating to
     the Mortgage Loan. The amounts paid to Seller (if any) pursuant to this
     Section 4(c)(1) shall constitute Seller's sole compensation for servicing
     the Mortgage Loans as provided in this Section 4.

            (2)  If Successor Servicer is appointed by Purchaser (either under
     the circumstances set forth in Section 3 or otherwise), all amounts
     deposited in the Custodial Account shall be paid to Purchaser promptly upon
     such delivery.

            (3)  If a Mortgage Loan is not purchased by Takeout Investor on or
     before the Commitment Expiration Date, during the period thereafter that
     Seller remains as servicer, all amounts deposited in the Custodial Account
     shall be released only in accordance with a Purchaser's written
     instructions.

     Section 5.  Trade Assignments.  Seller hereby assigns to Purchaser, free of
                 -----------------
any security interest, lien, claim or ,encumbrance of any kind, Seller's rights,
under each Takeout Commitment to the full extent permitted by Takeout Investor,
to deliver the Mortgage Loan(s) specified therein to Takeout Investor and to
receive the Takeout Proceeds therefor from Takeout Investor.  Purchaser shall
not be deemed to have accepted such rights of Seller which relate to a

                                       9
<PAGE>

particular Mortgage Loan unless and until it purchases the Mortgage Loan, and
nothing set forth herein shall be deemed to impair Purchaser's right to reject
any Mortgage Loan for any reason, in its sole discretion.

     Section 6.  Transfers of Mortgage Loans by Purchaser.  Purchaser may, in
                 ----------------------------------------
its sole discretion, assign all of its right, title and interest in or grant a
security interest in any Mortgage Loan sold by Seller hereunder and all rights
of Purchaser under this Agreement and the Custodial Agreement, in respect of
such Mortgage Loan to Assignee, subject only to an obligation on the part of
Assignee to deliver each such Mortgage Loan to Takeout Investor pursuant to
Section 5 or to Purchaser to permit Purchaser or its designee to make delivery
thereof to Takeout Investor pursuant to Section 5.  It is anticipated that such
assignment to Assignee will be made by Purchaser, and Seller hereby irrevocably
consents to such assignment.  No notice of such assignment shall be given by
Purchaser to Seller or Takeout Investor.  Assignment by Purchaser of the
Mortgage Loans as provided in this Section 6 shall not release Purchaser from
its obligations otherwise under this Agreement.

     Without limitation of the foregoing, an assignment of a Mortgage Loan to
Assignee, as described in this Section 6, shall be effective upon delivery to
Assignee of a Conduit Submission Package.

     Section 7.  Record Title to Mortgage Loans; Intent of Parties; Security
                 -----------------------------------------------------------
Interest.
--------

     (a)   From and after the delivery of the related Conduit Submission
Package, and subject to the remedies of Purchaser in Section 3, Seller shall
remain the last named payee or endorsee of each Mortgage Note and the mortgagee
or assignee of record of each Mortgage in trust for the benefit of Purchaser,
for the sole purpose of facilitating the servicing of such Mortgage Loan.

     (b)   Seller shall maintain a complete set of books and records for each
Mortgage Loan which shall be clearly marked to reflect the ownership interest in
each Mortgage Loan of Purchaser.

     (c)   Purchaser and Seller confirm that the transactions contemplated
herein are intended to be sales of the Mortgage Loans by Seller to Purchaser
rather than borrowings secured by the Mortgage Loans. In the event, for any
reason, any transaction is construed by any court or regulatory authority as a
borrowing rather than as a sale, the Seller and Purchaser intend that Purchaser
or Assignee, as the case may be, shall have a perfected first priority security
interest in the Collateral, free and clear of adverse claims. In such case,
Seller shall be deemed to have hereby granted to Purchaser or Assignee, as the
case may be, a first priority security interest in and lien upon the Collateral,
free and clear of adverse claims. In such event, this Agreement shall constitute
a security agreement, the Custodian shall be deemed to be an independent
custodian for purposes of perfection of the security interest granted to
Purchaser or Assignee, as the case may be, and Purchaser or Assignee, as the
case may be, shall have all of the rights of a secured party under applicable
law. Seller shall, not later than the date of the first purchase of a Mortgage
Loan by Purchaser under this Agreement, deliver to Purchaser a UCC-1 Financing
Statement, executed by Seller, containing a description of collateral in the
form attached hereto in Exhibit E.

                                      10
<PAGE>

     Section 8.  Representations and Warranties.
                 ------------------------------

     (a)  Seller hereby represents and warrants to Purchaser as of the date
hereof and as of the date of each delivery of a Conduit Submission Package that:

          (i)    Seller is duly organized, validly existing and in good standing
     under the laws of the state of its organization or of the United States of
     America and has all licenses necessary to carry on its business as now
     being conducted and is licensed, qualified and in good standing in the
     state where the Mortgaged Property is located if the laws of such state
     require licensing or qualification in order to conduct business of the type
     conducted by Seller.  Seller has all requisite power and authority
     (including, if applicable, corporate power) to execute and deliver this
     Agreement and to perform in accordance herewith; the execution, delivery
     and performance of this Agreement (including all instruments of transfer to
     be delivered pursuant to this Agreement) by Seller and the consummation of
     the transactions contemplated hereby have been duly and validly authorized;
     this Agreement evidences the valid, binding and enforceable obligation of
     Seller; and all requisite action (including, if applicable, corporate
     action) has been taken by Seller to make this Agreement valid and binding
     upon Seller in accordance with its terms;

          (ii)   No approval of the transactions contemplated by this Agreement
     from the OTS, the NCUA, the FDIC or any similar federal or state regulatory
     authority having jurisdiction over Seller is required, or if required, such
     approval has been obtained.  There are no actions or proceedings pending or
     affecting Seller which would adversely affect its ability to perform
     hereunder.  The transfers, assignments and conveyances provided for herein
     are not subject to the bulk transfer or any similar statutory provisions in
     effect in any applicable jurisdiction;

          (iii)  The consummation of the transactions contemplated by this
     Agreement are in the ordinary course of business of Seller and will not
     result in the breach of any term or provision of the charter or by-laws of
     Seller or result in the breach of any term or provision of, or conflict
     with or constitute a default under or result in the acceleration of any
     obligation under, any agreement, indenture or loan or credit agreement or
     other instrument to which Seller or its property is subject, or result in
     the violation of any law, rule, regulation, order, judgment or decree to
     which Seller or its property is subject;

          (iv)   This Agreement, the Custodial Agreement and every document to
     be executed by Seller pursuant to this Agreement is and will be valid,
     binding and subsisting obligations of Seller, enforceable in accordance
     with their respective terms. No consents or approvals are required to be
     obtained by Seller or its Parent Company for the execution, delivery and
     performance of this Agreement or the Custodial Agreement by Seller;

          (v)    Purchaser will be the sole owner of the related Mortgage Loan,
     free and clear of any lien, claim or encumbrance; and

          (vi)   All information relating to Seller that Seller has delivered or
     caused to be delivered to Purchaser, including, but not limited to, all
     documents related to this

                                      11
<PAGE>

     Agreement, the Custodial Agreement or Seller's financial statements, does
     not contain any untrue statement of a material fact or omit to state a
     material fact necessary to make the statements made therein or herein in
     light of the circumstances under which they were made, not misleading; and

          (vii)  There is no action, suit, proceeding, inquiry or investigation,
     at law or in equity, or before, or by any court, public board or body
     pending or, to Seller's knowledge, threatened against or affecting Seller
     (or, to Seller's knowledge, any basis therefor) wherein an unfavorable
     decision, ruling or finding would adversely affect the validity of
     enforceability of this Agreement, the Custodial Agreement or any agreement
     or instrument to which Seller is a party and which is used or contemplated
     for use in the consummation of the transactions contemplated hereby, would
     adversely affect the proceedings of Seller in connection herewith or would
     or could materially and adversely affect Seller's ability to carry out its
     obligations hereunder.

     (b)  Seller hereby represents, warrants and covenants to Purchaser with
respect to each Mortgage Loan as of the related Purchase Date that:

          (i)    The Mortgage Loan conforms in all respects to the requirements
     of this Agreement, the Commitment Requirements and all other requirements
     of Takeout Investor;

          (ii)   Seller is the sole owner and holder of the Mortgage Loan free
     and clear of any and all liens, claims, defenses, offsets, pledges,
     encumbrances, charges or security interests of any nature and has full
     right and authority, subject to no interest or participation of, or
     agreement with, any other party, to sell and assign the same pursuant to
     this Agreement;

          (iii)  Except for sub-servicing agreements with Dovenmuehle Mortgage,
     Inc. affecting said Mortgage Loans relating to sub-servicing for Seller,
     Purchaser and Takeout Investor, no servicing agreement has been entered
     into with respect to the Mortgage Loan, or any such servicing agreement has
     been terminated and there are no restrictions, contractual or governmental,
     which would impair the ability of Purchaser or Purchaser's designees from
     servicing the Mortgage Loan;

          (iv)   The Mortgage is a valid and subsisting first lien on the
     property therein described and the Mortgaged Property is free and clear of
     all encumbrances and liens having priority over the first lien of the
     Mortgage except for liens for real estate taxes and special assessments not
     yet due and payable. Any pledge account, security agreement, chattel
     mortgage or equivalent document related to, and delivered to Purchaser with
     the Mortgage, establishes in Seller a valid and subsisting first lien on
     the property described therein, and Seller has full right to sell and
     assign the same to Purchaser;

          (v)    Neither Seller nor any prior holder of the Mortgage has
     modified the Mortgage in any material respect; satisfied, canceled or
     subordinated the Mortgage in whole or in part; released the Mortgaged
     Property in whole or in part from the lien of the Mortgage; or executed any
     instrument of release, cancellation, modification or

                                      12
<PAGE>

     satisfaction unless such release, cancellation, modification or
     satisfaction does not adversely affect the value of the Mortgage Loan and
     is contained in the related Document File;

          (vi)   The Mortgage Loan is not in default, and all Monthly Payments
     due prior to the Purchase Date and all taxes, governmental assessments,
     insurance premiums, water, sewer and municipal charges (but only to the
     extent that such water, sewer and municipal charges constitute a lien on
     the Mortgaged Property), leasehold payments or ground rents have been paid.
     Seller has not advanced funds, or induced or solicited any advance of funds
     by a party other than the Mortgagor directly or indirectly, for the payment
     of any amount required by the Mortgage Loan. The collection practices used
     by each entity which has serviced the Mortgage Loan have been in all
     respects legal, proper, prudent, and customary in the mortgage servicing
     business. With respect to escrow deposits and payments in those instances
     where such were required, there exist no deficiencies in connection
     therewith for which customary arrangements for repayment thereof have not
     been made and no escrow deposits or payments or other charges or payments
     have been capitalized under any Mortgage or the related Mortgage Note;

          (vii)  There is no default, breach, violation or event of acceleration
     existing under the Mortgage or the related Mortgage Note and no event
     which, with the passage of time or with notice and the expiration of any
     grace of cure period, would constitute a default, breach, violation or
     event of acceleration; and Seller has not waived any default, breach,
     violation or event of acceleration;

          (viii) The Mortgage Loan is not subject to any right of rescission,
     set-off, counterclaim or defense, including the defense of usury, nor will
     the operation of any of the terms of the Mortgage Note or the Mortgage, or
     the exercise of any right thereunder, render either the Mortgage Note or
     the Mortgage unenforceable, in whole or in part, or subject to any right of
     rescission, set-off, counterclaim or defense, including the defense of
     usury, and no such right of rescission, set-off, counterclaim or defense
     has been asserted with respect thereto;

          (ix)   The Mortgage Note and the related Mortgage are genuine and each
     is the legal, valid and binding obligation of the maker thereof,
     enforceable in accordance with its terms.  All parties to the Mortgage Note
     and the Mortgage had legal capacity to execute the Mortgage Note and the
     Mortgage and each Mortgage Note and Mortgage have been duly and property
     executed by the Mortgagor.  No Mortgagor is a partnership, trust or
     corporation;

          (x)    The Mortgage Loan meets, or is exempt from, applicable state or
     federal laws, regulations and other requirements pertaining to usury, and
     the Mortgage Loan is not usurious;

          (xi)   Any and all requirements of any federal, state or local law
     including, without limitation, truth-in-lending, real estate settlement
     procedures, consumer credit protection, equal credit opportunity or
     disclosure laws applicable to the Mortgage Loan

                                      13
<PAGE>

     have been complied with, and Seller shall deliver to Purchaser upon demand,
     evidence of compliance with all such requirements;

          (xii)    Either: (i) Seller and every other holder of the Mortgage, if
     any, were authorized to transact and do business in the jurisdiction in
     which the Mortgaged Property is located at all times when such party held
     the Mortgage; or (ii) the loan of mortgage funds, the acquisition of the
     Mortgage (if Seller was not the original lender), the holding of the
     Mortgage and the transfer of the Mortgage did not constitute the
     transaction of business or the doing of business in such jurisdiction;

          (xiii)   The Mortgage Loan has closed and the proceeds of the Mortgage
     Loan have been fully disbursed; provided that, with respect to Mortgage
     Loans originated within the previous 120 days, alterations and repairs with
     respect to the Mortgaged Property or any part thereof may have required an
     escrow of funds in an amount sufficient to pay for all outstanding work
     within 120 of the origination of the Mortgage Loan, and if so, such funds
     are held in escrow by Seller, a title company or other escrow agent;

          (xiv)    The related Mortgage contains customary and enforceable
     provisions such as to render the rights and remedies of the holder thereof
     adequate for the realization against the Mortgaged Property of the benefits
     of the security, including, (i) in the case of a Mortgage designated as a
     deed of trust, by trustee's sale, (ii) in the case of a Mortgage designated
     as a security deed, by non-judicial sale, (iii) in the case of a Mortgage
     designated as any other instrument which provides for enforcement by a non
     judicial sale, by non-judicial sale, and (iv) otherwise by judicial
     foreclosure;

          (xv)     The Mortgage Loan was originated free of any "original issue
     discount" with respect to which the owner of the Mortgage Loan could be
     deemed to have income pursuant to Sections 1271 et seq. the Internal
                                                     -- ---
     Revenue Code;

          (xvi)    Each Mortgage Loan was originated by an institution that is
     eligible to issue Mortgage Loans under the Applicable Guide;

          (xvii)   At origination, the Mortgaged Property was free and clear of
     all mechanics' and materialmen's liens or liens in the nature thereof which
     are or could be prior to the Mortgage lien, and no rights are outstanding
     that under law could give rise to any such lien;

          (xviii)  Either (i) all improvements which were considered in
     determining the Appraised Value of the Mortgaged Property lay wholly within
     the boundaries and building restriction lines of the Mortgaged Property,
     and no improvements on adjoining properties encroach upon the Mortgaged
     Property or (ii) the short form title insurance policy insures against loss
     or damage resulting from any encroachments of boundary lines affecting the
     Mortgaged Property;

          (xix)    As of the Closing Date the Mortgaged Property is lawfully
     occupied under applicable law. All inspections, licenses and certificates
     required to be made or issued

                                      14

<PAGE>

     with respect to all occupied portions of the Mortgaged Property and, with
     respect to the use and occupancy of the same, including but not limited to
     certificates of occupancy and fire underwriting certificates, have been
     made or obtained from the appropriate authorities. The Mortgagor
     represented at the time of origination of the Mortgage Loan that the
     Mortgagor would occupy the Mortgaged Property as the Mortgagor's primary
     residence (except as may be otherwise permitted by the terms hereof);

          (xx)     There is no proceeding pending for the total or partial
     condemnation of the Mortgaged Property and said property is undamaged by
     waste, fire, earthquake or earth movement, windstorm, flood, tornado or
     other casualty;

          (xxi)    All buildings upon the Mortgaged Property are insured against
     loss by fire, hazards of extended coverage and such other hazards as are
     customary in the area where the Mortgaged Property is located, pursuant to
     fire and hazard insurance policies with extended coverage or other
     insurance required by the Applicable Purchase Agreement, in an amount at
     least equal to the greater of (i) the outstanding principal balance of the
     Mortgage Loan or (ii) the maximum insurable value (replacement cost without
     deduction for depreciation) of the improvements constituting the Mortgaged
     Property. If applicable laws limit the amount of such insurance to the
     replacement cost of the improvements constituting the Mortgaged Property or
     to some other amount, then such insurance is in an amount equal to the
     maximum allowed by such laws. Such insurance amount is sufficient to
     prevent the Mortgagor or the loss payee under the policy from becoming
     a co-insurer. The insurer issuing such insurance is acceptable pursuant to
     the Applicable Purchase Agreement. All individual insurance policies
     contain a standard mortgagee clause naming Seller, its successors and
     assigns, as mortgagee and all premiums thereon have been paid. Each
     Mortgage obligates the Mortgagor thereunder to maintain all such insurance
     at Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
     authorizes the holder of the Mortgage to obtain and maintain such insurance
     at Mortgagor's cost and expense and to seek reimbursement therefor from the
     Mortgagor. Any flood insurance required by applicable law has been
     obtained;

          (xxii)   The related Mortgage Note is payable on the Due Date of each
     month in self-amortizing monthly installments of principal and interest,
     with interest payable in arrears, providing for full amortization by
     maturity, over an original term of not more than thirty years;

          (xxiii)  At the time that the related Mortgage Loan was made the
     Mortgagor represented that the Mortgagor would occupy such Mortgaged
     Property as Mortgagor's primary residence;

          (xxiv)   The Mortgaged Property consists of a single parcel of real
     property;

          (xxv)    There are no circumstances or conditions with respect to the
     Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor's credit
     standing that can be reasonably expected to cause Takeout Investor or
     private institutional investors to regard the Mortgage Loan as an
     unacceptable investment, cause the Mortgage Loan to become delinquent or
     adversely affect the value or marketability of the Mortgage Loan;

                                      15

<PAGE>

          (xxvi)   The Document File contains or shall contain prior to the
     Commitment Expiration Date each of the documents and instruments specified
     to be included therein duly executed and in due and proper form and each
     such document or instrument is in form acceptable to Takeout Investor. Each
     Mortgage Note and Mortgage are on forms approved by Takeout Investor; and

          (xxvii)  Each Mortgage Loan is covered by a mortgage title insurance
     policy acceptable to Takeout Investor, issued by, and the valid and binding
     obligation of, a title insurer acceptable to Takeout Investor, and
     qualified to do business in the jurisdiction where the property subject to
     the Mortgage is located; insuring Seller, its successors and assigns, as to
     the first priority lien of the Mortgage in the original principal amount of
     the Mortgage Loan. The originating lender is the named insured and the sale
     insured of such mortgage title insurance policy, the assignment to
     Purchaser of Seller's interest in such mortgage title insurance policy does
     not require the consent of or notification to the insurer, such mortgage
     title insurance policy is in full force and effect and will be in full
     force and effect and inure to the benefit of Purchaser upon the
     consummation of the transactions contemplated by this Agreement and no
     claims have been made under such mortgage title insurance policy and no
     prior holder of the related Mortgage, including Seller, has done, by act or
     omission, anything which would impair the coverage of such mortgage title
     insurance policy.

          (xxviii) The loan-to-value ratio of each Mortgage Loan does not exceed
     the maximum loan-to-value ratio permitted by the Applicable Guide. All
     provisions of each related primary mortgage insurance policy have been and
     are being complied with, and such policy is written with a private mortgage
     insurance company acceptable to the Takeout Investor, is the binding
     obligation of such insurer, is in full force and effect, and all premiums
     due thereunder have been paid. Seller has not engaged in any act or
     omission, and Seller has no knowledge of any act or omission by or on
     behalf of the related Mortgagor or any other person, which act or omission
     would impair the coverage or validity of any such primary mortgage
     insurance policy, the benefit of the endorsement provided for in the
     Applicable Guide, or the validity or binding effect of either. Any Mortgage
     Loan subject to a primary mortgage insurance policy obligates the Mortgagor
     thereunder to maintain such primary mortgage insurance policy and to pay
     all premiums and charges in connection therewith. The interest rate for the
     Mortgage Loan is net of any such insurance premiums.

     The representations and warranties of Seller in this Section 8 are
unaffected by and supersede any provision in any endorsement of any Mortgage
Loan or in any assignment with respect to such Mortgage Loan to the effect that
such endorsement or assignment is without recourse or without representation or
warranty. With respect to each Mortgage Loan purchased by Purchaser hereunder,
to the extent that any representation or warranty made by Seller is either not
required by Takeout Investor or is waived by Takeout Investor, Purchaser hereby
agrees to waive such representation or warranty if such Mortgage Loan is
purchased by Takeout Investor from Purchaser, in accordance with the terms of
the related Takeout Commitment.

     Section 9.  Covenants of Seller.  Seller hereby covenants and agrees with
                 -------------------
Purchaser as follows:

                                      16
<PAGE>

     (a)  Seller shall deliver to Purchaser:

          (i)    Within one hundred twenty (120) days after the end of each
     fiscal year of Seller, consolidated balance sheets of Seller and its
     consolidated subsidiaries and the related consolidated statements of income
     showing the financial condition of Seller and its consolidated subsidiaries
     as of the close of such fiscal year and the results of operations during
     such year, and a consolidated statement of cash flows, as of the close of
     such fiscal year, setting forth, in each case, in comparative form the
     corresponding figures for the preceding year, all the foregoing
     consolidated financial statements to be reported on by, and to carry the
     report (acceptable in form and content to Purchaser) of an independent
     public accountant of national standing acceptable to Purchaser;

          (ii)   Within sixty (60) days after the end of each of the first three
     fiscal quarters of each fiscal year of Seller, unaudited consolidated
     balance sheets and consolidated statements of income, all to be in a form
     acceptable to Purchaser, showing the financial condition and results of
     operations of Seller and its consolidated subsidiaries on a consolidated
     basis as of the end of each such quarter and for the then elapsed portion
     of the fiscal year, setting forth, in each case, in comparative form the
     corresponding figures for the corresponding periods of the preceding fiscal
     year, certified by a financial officer of Seller (acceptable to Purchaser)
     as presenting fairly the financial position and results of operations of
     Seller and its consolidated subsidiaries and as having been prepared in
     accordance with generally accepted accounting principles consistently
     applied, in each case, subject to normal year-end audit adjustments;

          (iii)  Promptly upon receipt thereof, a copy of each other report
     submitted to Seller by its independent public accountants in connection
     with any annual, interim or special audit of Seller;

          (iv)   Promptly upon becoming aware thereof, notice of (1) the
     commencement of, or any determination in, any legal, judicial or regulatory
     proceedings, (2) any dispute between Seller or its Parent Company and any
     governmental or regulatory body, (3) any event or condition, which, in any
     case of (1) or (2) if adversely determined, would have a material adverse
     effect on (A) the validity or enforceability of this Agreement, (B) the
     financial condition or business operations of Seller, or (C) the ability of
     Seller to fulfill its obligations under this Agreement or (4) any material
     adverse change in the business, operations, prospects or financial
     condition of Seller, including, without limitation, the insolvency of
     Seller or its Parent Company;

          (v)    Promptly upon becoming available, copies of all financial
     statements, reports, notices and proxy statements sent by its Parent
     Company, Seller or any of Seller's consolidated subsidiaries in a general
     mailing to their respective stockholders and of all reports and other
     material (including copies of all registration statements under the
     Securities Act of 1933, as amended) filed by any of them with any
     securities exchange or with the Securities and Exchange Commission or any
     governmental authority succeeding to any or all of the functions of said
     Commission;

                                      17

<PAGE>

          (vi)   Promptly upon becoming available, copies of any press releases
     issued by its Parent Company or Seller and copies of any annual and
     quarterly financial reports and any reports on Form H-(b)12 which its
     Parent Company or Seller may be required to file with the OTS or the RTC or
     comparable reports which a Parent Company or Seller may be required to file
     with the FDIC or any other federal banking agency containing such financial
     statements and other information concerning such Parent Company's or
     Seller's business and affairs as is required to be included in such reports
     in accordance with the rules and regulations of the OTS, the RTC, the FDIC
     or such other banking agency, as may be promulgated from time to time;

          (vii)  Such supplements to the aforementioned documents and such other
     information regarding the operations, business, affairs and financial
     condition of its Parent Company, Seller or any of Seller's consolidated
     subsidiaries as Purchaser may request; and

          (viii) A copy of (1) the articles of incorporation of Seller and any
     amendments thereto, certified by the Secretary of State of Seller's state
     of incorporation, (2) a copy of Seller's by-laws, together with any
     amendments thereto, (3) a copy of the resolutions adopted by Seller's Board
     of Directors authorizing Seller to enter into this Agreement and the
     Custodial Agreement and authorizing one or more of Seller's officers to
     execute the documents related to this Agreement and Custodial Agreement,
     and (4) a certificate of incumbency and signature of each officer of Seller
     executing any document in connection with this Agreement.

     (b)  The consideration received by the Seller upon the sale of each
Mortgage Loan will constitute reasonably equivalent value and fair consideration
for the ownership interest in the Mortgage Loan.

     (c)  Except for (i) the right of Seller to service the Mortgage Loans, (ii)
the obligations of Seller and Crescent Bank and Trust Company to repurchase
certain Mortgage Loans under various agreements, and (iii) such actions or
documentation as may be necessary to transfer the Mortgage Loans to the Takeout
Investor, neither the Seller nor any affiliate thereof will acquire at any time
any Mortgage Loan or any other economic interest in or obligation with respect
to any Mortgage Loan.

     (d)  Under generally accepted accounting principles ("GAAP") and for
federal income tax purposes, the Seller will report each sale of a Mortgage Loan
to the Purchaser as a sale of the ownership interest in the Mortgage Loan. The
Seller has been advised by or has confirmed with its independent public
accountants that the foregoing transactions will be so classified under GAAP.

     (e)  The Seller will be solvent at all relevant times prior to, and will
not be rendered insolvent by, any sale of a Mortgage Loan to the Purchaser.

     (f)  The Seller will not sell any Mortgage Loan to the Purchaser with any
intent to hinder, delay or defraud any of the Seller's creditors.

                                      18

<PAGE>

     (g)  Seller shall comply, in all material respects, with all laws, rules
and regulations to which it is or may become subject.

     (h)  Seller shall, upon request of Purchaser, promptly execute and deliver
to Purchaser all such other and further documents and instruments of transfer,
conveyance and assignment, and shall take such other action as Purchaser may
require more effectively to transfer, convey, assign to and vest in Purchaser
and to put Purchaser in possession of the property to be transferred, conveyed,
assigned and delivered hereunder and otherwise to carry out more effectively the
intent of the provisions under this Agreement.

     (i)  Seller shall ensure that all Takeout Proceeds paid by Takeout Investor
resulting from Takeout Commitments that relate to Mortgage Loans purchased by
Purchaser pursuant to the terms of this Agreement are paid to Purchaser by
Takeout Investor in accordance with Purchaser's Wire Instructions to Seller.

     (j)  The consideration received by Seller upon sale of each Mortgage Loan
will constitute reasonably equivalent value and fair consideration for the
Mortgage Loan.

     Section 10.  Term.  This Agreement shall continue in effect until
                  ----
terminated as to future transactions by written instruction signed by either
Seller or Purchaser and delivered to the other, provided that no termination
will affect the obligations hereunder as to any of the Mortgage Loans with
respect to which Conduit Submission Packages have been delivered to Custodian
pursuant to the terms of this Agreement or the Custodial Agreement.

     Section 11.  Exclusive Benefit of Parties; Assignment.  This Agreement is
                  ----------------------------------------
for the exclusive benefit of the parties hereto and their respective successors
and assigns and shall not be deemed to give any legal or equitable right to any
other person, including the Custodian.  Except as provided in Section 6, no
rights or obligations created by this Agreement may be assigned by any party
hereto without the prior written consent of the other parties.

     Section 12.  Amendments, Waivers, Cumulative Rights.  This Agreement may be
                  --------------------------------------
amended from time to time only by written agreement of Seller and Purchaser.
Any forbearance, failure or delay by either party in exercising any right, power
or remedy hereunder shall not be deemed to be a waiver thereof, and any single
or partial exercise by Purchaser of any right, power or remedy hereunder shall
not preclude the further exercise thereof.  Every right, power and remedy of
Purchaser shall continue in full force and effect until specifically waived by
Purchaser in writing.  No right, power or remedy shall be exclusive, and each
such right, power or remedy shall be cumulative and in addition to any other
right, power or remedy, whether conferred hereby or hereafter available at law
or in equity or by statute or otherwise.

     Section 13.  Execution in Counterparts.  This Agreement may be executed in
                  -------------------------
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.

     Section 14.  Effect of Invalidity of Provisions.  In case any one or more
                  ----------------------------------
of the provisions contained in this Agreement should be or become invalid,
illegal or unenforceable in

                                      19
<PAGE>

any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall in no way be affected, prejudiced
or disturbed thereby.

     Section 15.  Governing Law.  This Agreement shall be governed by and
                  -------------
construed in accordance with the laws of the State of New York, without regard
to conflict of laws rules.

     Section 16.  Notices.  Any notices, consents, elections, directions and
                  -------
other communications given under this Agreement shall be in writing and shall be
deemed to have been duly given when telecopied or delivered by overnight courier
to, personally delivered to, or on the third day following the placing thereof
in the mail, first class postage prepaid to, the respective addresses set forth
on the cover page hereof for Seller and Purchaser, or to such other address as
either party shall give notice to the other party pursuant to this Section 16.
Notices to Assignee shall be given to such address as Assignee shall provide to
Seller in writing.

     Section 17.  Entire Agreement.  This Agreement, the Funding Confirmations
                  ----------------
and the Custodial Agreement contain the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements between them, oral or written, of any nature
whatsoever with respect to the subject matter hereof.

     Section 18.  Costs of Enforcement.  In addition to any other indemnity
                  --------------------
specified in this Agreement, in the event of a breach by Seller of this
Agreement, the Custodial Agreement or a Takeout Commitment, Seller agrees to pay
the reasonable attorneys' fees and expenses of Purchaser and, when applicable,
Assignee incurred as a consequence of such breach.

     Section 19.  Consent to Service.  Each party irrevocably consents to the
                  ------------------
service of process by registered or certified mail, postage prepaid, to it at
its address given in or pursuant to Section 16.

     Section 20.  Construction.  The headings in this Agreement are for
                  ------------
convenience only and are not intended to influence its construction.  References
to Sections, Exhibits and Annexes in this Agreement are to the Sections of and
Exhibits to this Agreement.  The Exhibits are part of this Agreement, and are
incorporated herein by reference.  The singular includes the plural, the plural
the singular, and the words "and" and "or" are used in the conjunctive or
disjunctive as the sense and circumstances may require.

                                      20
<PAGE>

     IN WITNESS WHEREOF, Purchaser and Seller have duly executed this Agreement
as of the date and year set forth on the cover page hereof.

                              PAINE WEBBER REAL ESTATE SECURITIES INC.


                              By:   /s/
                                    _________________________________
                              Name:__________________________________
                              Title:_________________________________


                              CRESCENT MORTGAGE SERVICES, INC.


                              By:   /s/
                                    _________________________________
                              Name:__________________________________
                              Title:_________________________________
                              Address (if different from cover page):

                                      21
<PAGE>

                                                                       EXHIBIT A


                   PAINE WEBBER REAL ESTATE SECURITIES INC.
                         CONDUIT LOAN PURCHASE DETAIL

                               CLIENT:_________

                             EXPECTED DELIVER DATE
                    OF MORTGAGE FILE IS:  __________, 199__


<TABLE>
<CAPTION>
                                        # OF
                              FACE    MONTHS TO   NOTE RATE  TAKEOUT   SALE PRICE  COMMIT. #     COMMIT    DELIVERY   WAREHOUSE
        LOAN #   LAST NAME   AMOUNT   MATURITY               INVESTOR                           EXP. DATE     DATE     LENDER
     ---------- ----------- -------- ----------- ----------- --------- ---------- ----------- ------------ ---------- ---------
     <S>         <C>        <C>      <C>         <C>         <C>       <C>        <C>         <C>         <C>         <C>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     ---------- ----------- -------- ----------- ----------- --------- ---------- ----------- ------------ ---------- ---------
</TABLE>
<PAGE>

                                                                     EXHIBIT B-1


                         [WAREHOUSE LENDER'S RELEASE]



Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

Ladies and Gentlemen:

     We hereby release all right, interest or claim of any kind, including any
security interest or lien, with respect to the mortgage loan(s) referenced
below, such release to be effective automatically without any further action by
any party, upon receipt, in one or more installments, from Paine Webber Real
Estate Securities Inc., in accordance with the wire instructions which we
delivered to you in a letter dated __________, 199__, in immediately available
funds, of an aggregate amount equal to the product of A multiplied by B (such
product being rounded to the nearest $0.01) multiplied by C.*

                                 Street
     Loan #       Mortgagor      Address        City          State       Zip

   __________    __________     __________    __________    __________  _______


                                           Very truly yours,

                                           [WAREHOUSE LENDER]


                                           By:______________________
                                           Name:____________________
                                           Title:___________________


       *  A = weighted average trade price
          B = principal amount of the mortgage loan(s)
          C = 1 minus the discount set forth on the related funding confirmation
<PAGE>

                                                                     EXHIBIT B-2

                    [WAREHOUSE LENDER'S WIRE INSTRUCTIONS]

Paine Webber Real Estate Securities, Inc.
1285 Avenue of the Americas
New York, New York 10019

          Re:  Paine Webber Real Estate Securities, Inc. Whole Loan Purchase:
               Conduit Funding Program with [Seller]
               --------------------------------------------------------------

Ladies and Gentlemen:

     Set forth below are [Warehouse Lender's] wire instructions applicable to
the above-referenced Whole Loan Purchase: Program.

Wire Instructions:
-----------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     Account Name:

     Please acknowledge receipt of this letter in the space provided below.
This letter supersedes and replaces any prior notice specifying the name of
[Warehouse Lender] and setting forth wire instructions and shall remain in
effect until superseded and replaced by a letter, in the form of this letter,
executed by each of us and acknowledged by you.

                              Very truly yours,

                              [SELLER]

                              By:__________________________
                              Name:________________________
                              Title:_______________________

                              [WAREHOUSE LENDER(S)]

                              By:__________________________
                              Name:________________________
                              Title:_______________________


PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:_______________________
Name:_____________________
Title:____________________


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

*    The authorized officer of each warehouse lender executing this letter must
     be the same authorized officer as signs the Warehouse Lender's Release. Not
     applicable if there is no warehouse lender.
<PAGE>

                                                                     EXHIBIT C-1


                              [SELLER'S RELEASE]



Paine Webber Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019

Ladies and Gentlemen:

     With respect to the mortgage loan(s) of referenced below (a) we hereby
certify to you that the mortgage loan(s) is not subject to a lien of any
warehouse lender and (b) we hereby release all right, interest or claim of any
kind with respect to such mortgage loan, such release to be effective
automatically without any further action by any part upon payment from Purchase
to Seller of an aggregate amount equal to the product of A multiplied by B (such
product being rounded to the nearest $0.01) multiplied by C* in accordance with
our wire instructions in effect on the date of such payment.

                                 Street
     Loan #       Mortgagor      Address        City          State       Zip

   __________    __________     __________    __________    __________  _______


                                           Very truly yours,

                                           [SELLER]


                                           By:______________________
                                           Name:____________________
                                           Title:___________________


       * A = weighted average trade price
         B = principal amount of the mortgage loan(s)
         C = 1 minus the discount set forth on the related funding confirmation
<PAGE>

                                                                     EXHIBIT C-2


                          [SELLER'S WIRE INSTRUCTIONS]

Paine Webber Real Estate Securities, Inc.
1285 Avenue of the Americas
New York, New York 10019

          Re:  Whole Loan Purchase: Conduit Funding Program with [Seller]
               ----------------------------------------------------------

Ladies and Gentlemen:

     Set forth below are [Seller's] wire instructions applicable to the above-
referenced Conforming Whole Loan Purchase: Program with [Seller].

Wire Instructions:
-----------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     Account Name:

     Please acknowledge receipt of this letter in the space provided below.
This letter supersedes and replaces any prior notice specifying our wire
instructions and shall remain in effect until superseded and replaced by a
letter, in the form of this letter, executed by us and acknowledged by you.

                                     Very truly yours,

                                     [SELLER]*

                                     By:___________________________
                                     Name:_________________________
                                     Title:________________________

PAINE WEBBER REAL ESTATE
SECURITIES INC.

By:_______________________
Name:_____________________
Title:____________________




--------------------
*    The authorized officer executing this letter must be the same authorized
     officer as signs the Seller's Release. Applicable only if there is no
     Warehouse Lender
<PAGE>

                                                                       EXHIBIT D


                   [PURCHASER'S WIRE INSTRUCTIONS TO SELLER]



Wire Instructions:
-----------------

     Bank Name:
     City, State:
     ABA #:
     Account #:
     Account Name:
     Ref: [Name of Seller]
<PAGE>

                                                                       EXHIBIT E

                           UCC-1 FINANCING STATEMENT


Debtor:           [Seller]

Secured Party:    Paine Webber Real Estate Securities Inc.


Item:
-----

     All right (including the power to convey title thereto), title and interest
of Debtor in and to the property listed below:

     All participation certificates evidencing an interest in
     mortgage loans, and all mortgage loans, mortgage notes,
     mortgages or deeds of trust, assignments thereof and any
     and all documents and instruments related thereto, which
     are subject to the interest of Secured Party or any assignee
     under or pursuant to the Mortgage Loan Participation
     Agreements and Mortgage Loan Purchase Agreements between
     Secured Party and the Debtor.