Exhibit 4.1


                                                                  Execution Copy


                         SAXON ASSET SECURITIES COMPANY,

                                    Depositor


                              SAXON MORTGAGE, INC.,

                                 Master Servicer


                        MERITECH MORTGAGE SERVICES, INC.,

                                    Servicer


                                       and


                              BANKERS TRUST COMPANY

                                     Trustee


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

                         POOLING AND SERVICING AGREEMENT

                          Dated as of September 1, 2001

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



                       SAXON ASSET SECURITIES TRUST 2001-3



             MORTGAGE LOAN ASSET BACKED CERTIFICATES, SERIES 2001-3
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE 1  DEFINITIONS ..................................................... 14
     Section 1.1    Defined Terms .......................................... 14

ARTICLE 2  CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
           WARRANTIES ...................................................... 38
     Section 2.1    Conveyance of Mortgage Loans ........................... 38
     Section 2.2    Acceptance by Trustee of the Mortgage Loans ............ 41
     Section 2.3    Representations, Warranties and Covenants of the
                    Depositor and Servicer and Master Servicer ............. 43
     Section 2.4    Delivery of Opinion of Counsel in Connection with
                    Substitutions .......................................... 49
     Section 2.5    Execution and Delivery of Certificates ................. 49
     Section 2.6    Purchase of Subsequent Mortgage Loans .................. 49
     Section 2.7    Pre-Funding Account .................................... 51

ARTICLE 3  ADMINISTRATION AND SERVICING OF MORTGAGE LOANS .................. 52
     Section 3.1    Servicer to Service Mortgage Loans ..................... 52
     Section 3.2    Subservicing; Enforcement of the Obligations of
                    Servicers .............................................. 53
     Section 3.3    Rights of the Depositor and the Trustee in Respect of
                    the Servicer ........................................... 54
     Section 3.4    Master Servicer to Act as Servicer ..................... 54
     Section 3.5    Collection of Mortgage Loan Payments; Collection
                    Account; Distribution Account .......................... 54
     Section 3.6    Collection of Taxes, Assessments and Similar Items;
                    Escrow Accounts ........................................ 57
     Section 3.7    Access to Certain Documentation and Information
                    Regarding the Mortgage Loans ........................... 58
     Section 3.8    Permitted Withdrawals from the Collection Account,
                    Master Servicer Custodial Account and Distribution
                    Account ................................................ 58
     Section 3.9    Maintenance of Hazard Insurance; Maintenance of Primary
                    Insurance Policies ..................................... 60
     Section 3.10   Enforcement of Due-on-Sale Clauses; Assumption
                    Agreements ............................................. 61
     Section 3.11   Realization Upon Defaulted Mortgage Loans; Repurchase
                    of Certain Mortgage Loans .............................. 63
     Section 3.12   Trustee to Cooperate; Release of Mortgage Files. ....... 66
     Section 3.13   Documents Records and Funds in Possession of Servicer
                    to be Held for the Trustee ............................. 67
     Section 3.14   Servicing Compensation ................................. 67
     Section 3.15   Access to Certain Documentation ........................ 68
     Section 3.16   Annual Statement as to Compliance ...................... 68
     Section 3.17   Annual Independent Public Accountants' Servicing
                    Statement; Financial Statements ........................ 68
     Section 3.18   Errors and Omissions Insurance; Fidelity Bonds ......... 69
<PAGE>

     Section 3.19   Advances ............................................... 69
     Section 3.20   Advance Facility ....................................... 70
     Section 3.21   Prepayment Penalties. .................................. 70

ARTICLE 4  DISTRIBUTIONS ................................................... 71
     Section 4.1    Priorities of Distribution ............................. 71
     Section 4.2    Method of Distribution ................................. 75
     Section 4.3    Allocation of Losses ................................... 76
     Section 4.4    Reports to the Depositor and the Trustee ............... 76
     Section 4.5    Reports by or on Behalf of the Master Servicer ......... 77
     Section 4.6    Basis Risk Reserve Fund ................................ 79
     Section 4.7    The Instrument ......................................... 79
     Section 4.8    The Calculation Agent .................................. 80

ARTICLE 5  THE CERTIFICATES ................................................ 80
     Section 5.1    The Certificates ....................................... 80
     Section 5.2    Certificate Register; Registration of Transfer and
                    Exchange of Certificates. .............................. 81
     Section 5.3    Mutilated, Destroyed, Lost or Stolen Certificates ...... 85
     Section 5.4    Persons Deemed Owners .................................. 86
     Section 5.5    Access to List of Certificateholders' Names and
                    Addresses .............................................. 86
     Section 5.6    Maintenance of Office or Agency ........................ 86

ARTICLE 6  THE DEPOSITOR, THE SERVICER AND MASTER SERVICER ................. 86
     Section 6.1    Respective Liabilities of the Depositor, Servicer and
                    Master Servicer ........................................ 86
     Section 6.2    Merger or Consolidation of the Depositor, Servicer and
                    Master Servicer ........................................ 87
     Section 6.3    Limitation on Liability of the Depositor, the Servicer,
                    the Master Servicer and Others ......................... 87
     Section 6.4    Limitation on Resignation of Servicer .................. 88

ARTICLE 7  SERVICER DEFAULT ................................................ 88
     Section 7.1    Events of Default ...................................... 88
     Section 7.2    Notification to Certificateholders ..................... 90

ARTICLE 8  CONCERNING THE TRUSTEE .......................................... 90
     Section 8.1    Duties of Trustee ...................................... 90
     Section 8.2    Certain Matters Affecting the Trustee .................. 91
     Section 8.3    Trustee Not Liable for Certificates or Mortgage Loans .. 93
     Section 8.4    Trustee May Own Certificates ........................... 93
     Section 8.5    Trustee's Fees and Expenses ............................ 93
     Section 8.6    Eligibility Requirements for Trustee ................... 94
     Section 8.7    Resignation and Removal of Trustee ..................... 94
     Section 8.8    Successor Trustee ...................................... 95
     Section 8.9    Merger or Consolidation of Trustee ..................... 96
     Section 8.10   Appointment of Co-Trustee or Separate Trustee .......... 96
<PAGE>

     Section 8.11   Tax Matters ............................................ 97
     Section 8.12   Periodic Filings ....................................... 99

ARTICLE 9  TERMINATION ..................................................... 99
     Section 9.1    Termination upon Liquidation or Purchase of all
                    Mortgage Loans ......................................... 99
     Section 9.2    Final Distribution on the Certificates .................100
     Section 9.3    Additional Termination Requirements ....................101

ARTICLE 10 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER
           SERVICER ........................................................102
     Section 10.1   Duties of the Master Servicer ..........................102
     Section 10.2   Compensation to the Master Servicer ....................103
     Section 10.3   Termination of Master Servicer; Trustee to Act. ........103
     Section 10.4   Notification to Certificateholders .....................105

ARTICLE 11 MISCELLANEOUS PROVISIONS ........................................105
     Section 11.1   Amendment ..............................................105
     Section 11.2   Recordation of Agreement; Counterparts .................106
     Section 11.3   Governing Law ..........................................107
     Section 11.4   Intention of Parties ...................................107
     Section 11.5   Notices ................................................108
     Section 11.6   Severability of Provisions .............................108
     Section 11.7   Assignment .............................................109
     Section 11.8   Limitation on Rights of Certificateholders .............109
     Section 11.9   Inspection and Audit Rights ............................110
     Section 11.10  Certificates Nonassessable and Fully Paid ..............110
     Section 11.11  Limitations on Actions; No Proceedings .................110
<PAGE>

                                    SCHEDULES

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

                                    EXHIBITS

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

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

                                 WITNESSETH THAT

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

                              PRELIMINARY STATEMENT

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

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

                                       1
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                 Initial Class              Minimum Percentage            Integral Multiples in
   Class Designation          Certificate Balance          Interest/Denomination              Excess Minimum
   -----------------          -------------------          ---------------------              --------------
------------------------------------------------------------------------------------------------------------------
<S>                               <C>                             <C>                            <C>
Class AF-1                        $ 63,820,000                    $ 1,000                        $ 1,000
------------------------------------------------------------------------------------------------------------------
Class AF-2                          26,600,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class AF-3                          29,390,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class AF-4                          21,930,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class AF-5                          23,150,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class AF-6                          18,320,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class AV-1                         272,010,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class AV-2                         146,780,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class A-IO                            Notional                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class X-IO                            Notional                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class S-1                             Notional                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class S-2                             Notional                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class M-1                           49,000,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class M-2                           28,000,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class B                             21,000,000                      1,000                          1,000
------------------------------------------------------------------------------------------------------------------
Class C                                    N/A                        50%                            N/A
------------------------------------------------------------------------------------------------------------------
Class P                                    N/A                       100%                            N/A
------------------------------------------------------------------------------------------------------------------
Class R                                    N/A                       100%                            N/A
------------------------------------------------------------------------------------------------------------------
</TABLE>

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

Assumed Investment Rate:               Not applicable.
-----------------------

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

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

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

Closing Date:                          October 11, 2001.
------------

Component Certificates:                None.
----------------------

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

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                        Initial Component        Pass-Through
                                     Designation             Balance                 Rate
                                     -----------             -------                 ----

                                         <S>                   <C>                    <C>
                                         N/A                   N/A                    N/A
</TABLE>


Custodial Agreement:                   The Custodial Agreement between the
-------------------                    Custodian and Trustee dated as of
                                       September 1, 2001.

Custodian:                             Bankers Trust Company, and its successors
---------                              and assigns in such capacity.

Cut Off Date:                          September 1, 2001.
------------

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

ERISA-Restricted Certificates:         The Class R Certificates.
-----------------------------

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

                                       (x)   the Interest Funds available after
                                             payment of the amounts set forth in
                                             Section 4.1(g)(i) through (v), and:

                                       (y)   the excess of:

                                             (i)   the Required
                                                   Overcollateralization Amount
                                                   for such date, over

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

Funding Period Termination Date:       January 9, 2002.
-------------------------------

Group:                                 Either Group I or Group II.
-----

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

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

                                       3
<PAGE>

Group I Class A Certificate:           Any Group I Certificate.
---------------------------

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

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

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

Group II Class A Certificates:         Any Group II Certificate (other than
-----------------------------          Class S-1 and Class S-2 Certificates).

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

Initial Distribution Date:             October 25, 2001.
-------------------------

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

Interest Determination Date:           With respect to the first Accrual Period
---------------------------            for the Variable Rate Certificates,
                                       October 9, 2001, and with respect to any
                                       subsequent Accrual Period for the
                                       Variable Rate Certificates, the second
                                       London Business Day preceding such
                                       Accrual Period.

Interest Only Certificates:            The Class A-IO, Class S-1, Class S-2 and
--------------------------             Class X-IO Certificates.

Lower Tier Interest:                   Any interest created in REMIC 1, REMIC 2,
-------------------                    REMIC 3 or REMIC 4.

Master Servicing Fee Rate:             0.05% per annum.
-------------------------

Maximum Cap Rate:                      For any Distribution Date, a per annum
----------------                       rate that would equal the Net WAC Cap for
                                       such date if such Net WAC Cap were
                                       determined under the assumption that (i)
                                       each

                                       4
<PAGE>

                                       Mortgage Loan in Group II had an
                                       interest rate equal to the maximum rate
                                       permitted under the terms of the related
                                       mortgage note, and (ii) each Mortgage
                                       Loan in Group I had an interest rate
                                       equal to its stated fixed rate.

Mortgage Loan Group:                   Either Group I or Group II.
-------------------

Net Pledged Prepayment Penalties:      For each Distribution Date means the
--------------------------------       Pledged Prepayment Penalties remaining
                                       after payment of any Cap Carryover
                                       Amounts for such date.

Net Rate:                              As to each Mortgage Loan and Distribution
--------                               Date, the related Mortgage Rate as of the
                                       Determination Date immediately preceding
                                       such Distribution Date less the sum of
                                       the related Servicing Fee Rate and Master
                                       Servicing Fee Rate with respect to each
                                       Mortgage Loan.

Net WAC Cap:                           For any Distribution Date, a per annum
-----------                            rate equal to the Weighted Average Net
                                       Rate of the Mortgage Loans less,

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

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

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

                                       (y)   the Pass-Through Rate for the Class
                                             S-1 Certificates for such
                                             Distribution Date multiplied by a
                                             fraction equal to:

                                             (i)   the Notional Principal
                                                   Balance of the Class S-1
                                                   Certificates prior to such
                                                   Distribution Date divided by

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

                                       (z)   the Pass-Through Rate for the Class
                                             S-2 Certificates for such
                                             Distribution Date multiplied by a
                                             fraction equal to:

                                       5
<PAGE>

                                             (i)   the Notional Principal
                                                   Balance of the Class S-2
                                                   Certificates prior to such
                                                   Distribution Date divided by

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

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

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

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

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

                                       Distribution Dates        Notional Amount
                                       ------------------        ---------------

                                         1 - 6                    $204,100,000
                                         7 - 9                     195,500,000
                                        10 - 12                    190,000,000
                                        13 - 15                    175,500,000
                                        16 - 18                    165,500,000
                                        19 - 21                    152,500,000
                                        22 - 24                    124,400,000
                                        25 - 27                     98,100,000
                                        28 - 31                     74,100,000
                                        32 and thereafter                    0


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

                                       With respect to each Distribution Date
                                       and the Class S-1 Certificates, the
                                       lesser of the Stated Principal Balance of
                                       the Group II Mortgage Loans and amounts
                                       of deposit in the Pre-Funding Account
                                       allocable to Group II for such

                                       6
<PAGE>

                                       Distribution Date and the amount
                                       determined with reference to the
                                       following schedule:

                                       Distribution Dates        Notional Amount
                                       ------------------        ---------------

                                         1                        $486,966,417
                                         2                         468,025,219
                                         3                         446,102,476
                                         4                         421,391,039
                                         5                         394,071,634
                                         6                         368,521,775
                                         7                         344,626,717
                                         8                         322,279,588
                                         9                         301,380,219
                                        10                         281,834,413
                                        11                         263,554,858
                                        12                         246,459,703
                                        13                         230,472,268
                                        14                         215,520,919
                                        15                         201,538,589
                                        16                         188,462,477
                                        17                         176,233,826
                                        18                         164,797,851
                                        19                         154,103,173
                                        20                         144,101,822
                                        21                         134,748,909
                                        22                         126,002,429
                                        23                         117,823,100
                                        24                         110,174,182
                                        25 and thereafter                    0

                                       With respect to each Distribution Date
                                       and the Class S-2 Certificates, the
                                       lesser of the Stated Principal Balance of
                                       the Group II Mortgage Loans and amounts
                                       on deposit in the Pre-Funding Account
                                       allocable to Group II for such
                                       Distribution Date and the amount
                                       determined with reference to the
                                       following schedule:

                                       Distribution Dates        Notional Amount
                                       ------------------        ---------------

                                         1                        $486,966,417
                                         2                         468,025,219
                                         3                         446,102,476
                                         4                         421,391,039
                                         5                         394,071,634

                                       7
<PAGE>

                                         6                         368,521,775
                                         7                         344,626,717
                                         8                         322,279,588
                                         9                         301,380,219
                                        10                         281,834,413
                                        11                         263,554,858
                                        12                         246,459,703
                                        13                         230,472,268
                                        14                         215,520,919
                                        15                         201,538,589
                                        16                         188,462,477
                                        17                         176,233,826
                                        18                         164,797,851
                                        19                         154,103,173
                                        20                         144,101,822
                                        21                         134,748,909
                                        22                         126,002,429
                                        23                         117,823,100
                                        24                         110,174,182
                                        25                         103,019,877
                                        26                          96,329,655
                                        27                          90,073,132
                                        28                          84,222,218
                                        29                          78,750,640
                                        30                          73,634,091
                                        31                          68,849,602
                                        32                          64,375,642
                                        33                          60,192,079
                                        34                          56,280,080
                                        35                          52,622,028
                                        36                          49,201,463
                                        37 and thereafter                    0

Non-Delay Certificates:                The Class AV-1, Class AV-2, Class S-1,
----------------------                 Class S-2, Class M-1, Class M-2, Class B
                                       and Class AF-1 Certificates.

Notional Amount Certificates:          The Class A-IO, Class S-1, Class S-2 and
----------------------------           Class X-IO Certificates.

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

                                       8
<PAGE>

Original Pre-Funded Amount:            $238,366,905.39, $68,368,111.69 of which
--------------------------             may be applied to the purchase of
                                       additional fixed rate Mortgage Loans for
                                       Group I and $169,998,793.70 of which may
                                       be applied to the purchase of additional
                                       adjustable rate Mortgage Loans for Group
                                       II (with such latter amount being
                                       proportionately applied between the
                                       applicable subgroups).

Physical Certificates:                 The Private Certificates.
---------------------

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

Principal Only Certificates:           None.
---------------------------

Principal Percentage:                  With respect to each Distribution Date
--------------------                   and Group, the percentage equivalent of a
                                       fraction, the numerator of which is the
                                       Principal Funds for such Group and date,
                                       and the denominator of which is the
                                       Principal Funds for both Groups and such
                                       date.

Priority Principal Distribution
-------------------------------        With respect to any Distribution Date:
Amount:
------
                                       (x)   the product of :

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

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

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

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                   Distribution Date            Percentage
                                                   -----------------            ----------
                                             <S>                                   <C>
                                             October 2001 - September 2004           0%
                                             October 2004 - September 2006          45%
                                             October 2006 - September 2007          80%
                                             October 2007 - September 2008         100%
                                             October 2008 and thereafter           300%
</TABLE>


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

Rating Agencies:                       S&P, Moody's and Fitch.
---------------

Regular Certificates:                  Any of the Offered Certificates and the
--------------------                   Class C Certificates.

Required Overcollateralization
------------------------------         With respect to any Distribution Date:
Amount:
------
                                             (i)   prior to the Stepdown Date,
                                                   2.25% of the Assumed
                                                   Principal Balance of the
                                                   Mortgage Loans as of the Cut
                                                   Off Date;

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

                                                   (x)  the lesser of:

                                                        (I)   2.25% of the
                                                              Assumed Principal
                                                              Balance for the
                                                              Mortgage Loans
                                                              as of the Cut Off
                                                              Date, and

                                                        (II)  4.50% of the
                                                              Assumed Principal
                                                              Balance of the
                                                              Mortgage Loans on
                                                              the preceding
                                                              Determination
                                                              Date, and

                                                   (y)  0.50% of the Assumed
                                                        Principal Balance of the
                                                        Mortgage Loans as of the
                                                        Cut Off Date; and

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

                                       10
<PAGE>

Required Reserve Fund Deposit:         For any Distribution Date on which the
-----------------------------          difference between (a) the excess of the
                                       Net WAC Cap over the rate payable on the
                                       Class X-IO Certificates for such date,
                                       and (b) the weighted average of the
                                       rates on the Offered Certificates, other
                                       than the Class A-IO, Class S-1, Class
                                       S-2 and Class X-IO Certificates, is less
                                       than 0.25%, an amount that would cause
                                       the balance held in the Basis Risk
                                       Reserve Fund to equal 0.50% of the
                                       Assumed Principal Balance of the
                                       Mortgage Loans for such date, and, for
                                       any other Distribution Date, the amount
                                       that would cause the balance held in the
                                       Basis Risk Reserve Fund to equal $1,000.

Residual Certificates:                 The Class R Certificates.
---------------------

Sales Agreement:                       The Sales Agreement dated October 11,
---------------                        2001, between the Depositor and SMI
                                       regarding the sale of the Mortgage Loans.

Senior Certificates:                   Any Class of Certificates including the
-------------------                    letter "A" or the letter "S" in its class
                                       designation.

Servicing Fee Rate:                    As set forth in the Mortgage Loan
------------------                     Schedule.

Stepdown Date:                         The earlier to occur of:
-------------

                                             (i)   the later to occur of:

                                                   (A)  the Distribution Date in
                                                        October 2004, and

                                                   (B)  the first Distribution
                                                        Date on which the Group
                                                        I Class A Certificate
                                                        Principal Balance and
                                                        Group II Class A
                                                        Certificate Principal
                                                        Balance immediately
                                                        prior to such
                                                        Distribution Date (less
                                                        the Principal Funds for
                                                        such Distribution Date)
                                                        is less than or equal to
                                                        67.50% of the Assumed
                                                        Principal Balance on
                                                        such date, and

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

                                       11
<PAGE>

Subgroup IIA Mortgage Loans:           Mortgage Loans in Group II identified in
---------------------------            the Mortgage Loan Schedule as having been
                                       assigned to subgroup IIA.

Subgroup IIB Mortgage Loans:           Mortgage Loans in Group II identified in
---------------------------            the Mortgage Loan Schedule as having been
                                       assigned to subgroup IIB.

Subordinate Certificates:              Any Class M-1, Class M-2 and Class B
------------------------               Certificate.

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

                                             (i)   shall have a weighted average
                                                   Mortgage Rate of not less
                                                   than 10.00% per annum;

                                             (ii)  shall have a weighted average
                                                   combined loan to value ratio
                                                   not in excess of 76.50%;

                                             (iii) shall be Mortgage Loans no
                                                   more than 78.00% of which (by
                                                   Stated Principal Balance)
                                                   were made in connection with
                                                   a cash out refinancing;

                                             (iv)  shall be Mortgage Loans at
                                                   least 75.00% of which (by
                                                   Stated Principal Balance)
                                                   shall be classified by Saxon
                                                   Mortgage, Inc. as "A-" or
                                                   better;

                                             (v)   shall be Mortgage Loans at
                                                   least 77.50% of which (by
                                                   Stated Principal Balance)
                                                   will have been originated
                                                   pursuant to a full
                                                   documentation program; and

                                             (vi)  shall have a weighted average
                                                   credit score of not less than
                                                   597.

                                       (b)   After giving effect to the
                                             acquisition of all the Subsequent
                                             Mortgage Loans, the Mortgage Loans
                                             in Group II (which shall all be
                                             first lien Mortgage Loans bearing
                                             interest at adjustable rates):

                                             (i)   shall have a weighted average
                                                   Mortgage Rate of not less
                                                   than 9.65% per annum;

                                       12
<PAGE>

                                             (ii)  shall have a weighted average
                                                   Loan to Value Ratio not in
                                                   excess of 80.00%;

                                             (iii) shall be Mortgage Loans at
                                                   least 67.00% of which (by
                                                   Stated Principal Balance)
                                                   shall be classified by Saxon
                                                   Mortgage, Inc. as "A-" or
                                                   better; and

                                             (iv)  shall have a weighted average
                                                   credit score of not less than
                                                   572.

Target Percentage:                     For the Senior Certificates, 67.50%; for
-----------------                      the Class M-1 Certificates, 81.50%; for
                                       the Class M-2 Certificates, 89.50%; and
                                       for the Class B Certificates, 95.50%.

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

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

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

                                       equals or exceeds 50% of the Senior
                                       Credit Enhancement Percentage.

Trustee Fee Rate:                      0.00525% per annum.
----------------

Trustee Series Designation:            Saxon 2001-3(SX0103)
--------------------------

Underwriters:                          Credit Suisse First Boston Corporation,
------------                           Greenwich Capital Markets, Inc., First
                                       Union Securities, Inc. and J.P. Morgan
                                       Securities Inc.

Upper Tier REMIC:                      REMIC 5
----------------

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

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

                                       13
<PAGE>

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

                                             (ii)  0.50% to each of the Class
                                                   S-1 and Class S-2
                                                   Certificates;

                                             (iii) 95% to the Group I
                                                   Certificates and Group II
                                                   Certificates (other than the
                                                   Class S-1 and Class S-2
                                                   Certificates) in proportion
                                                   to their respective
                                                   outstanding Certificate
                                                   Principal Balances; and

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

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

                                   ARTICLE 1

                                   DEFINITIONS

         Section 1.1    Defined Terms

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

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

         Advance: Each P&I Advance and Servicing Advance.

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

         Allocable Portion: For each Group and Distribution Date, an amount
equal to the (i) Interest Funds for such Group and date; divided by (ii) the
Interest Funds for both groups and such date.

                                       14
<PAGE>

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

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

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

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

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

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

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

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

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

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

         Cap Carryover Amount: On any Distribution Date and as to any Class
whose Pass-Through Rate is subject to a cap equal to the Net WAC Cap, the sum
of:

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

               (ii)   the excess of the amount described in clause (i)(A) above
         over the amount described in clause (i)(B) above for all prior
         Distribution Dates, together with interest

                                       15
<PAGE>

         thereon calculated at the applicable Pass-Through Rate (determined
         without regard to the Net WAC Cap), reduced by all amounts previously
         distributed with respect to such Class pursuant to Section 4.1(g) in
         respect of Cap Carryover Amounts on all such prior Distribution Dates.

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

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

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

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

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

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

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

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

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

               (i)    the sum of:

                                       16
<PAGE>

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

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

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

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

               (ii)   the lesser of:

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

                      (B)  the excess, if any, of:

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

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

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

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

               (i)    the sum of:

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

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

               (ii)   the lesser of:

                                       17
<PAGE>

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

                      (B)  the excess, if any, of:

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

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

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

               (i)    the sum of:

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

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

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

               (ii)   the lesser of:

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

                      (B)  the excess, if any, of:

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

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

                                       18
<PAGE>

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

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

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

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

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

         Coop Shares: Shares issued by a Cooperative Corporation.

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

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

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

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

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

         Current Interest: With respect to any Distribution Date and any Class
of Certificates, the interest accrued on the Class Certificate Balance (or
Notional Principal Balance) thereof immediately prior to such Distribution Date
during the related Accrual Period at the applicable Pass-Through Rate; provided,
however, that such Current Interest shall be reduced by such

                                       19
<PAGE>

Class's pro rata share (based on the amount of Current Interest distributable on
such Class) of any Net Prepayment Interest Shortfalls and Relief Act Shortfalls
for such Distribution Date. All calculations of interest on each Class of Delay
Certificates will be made on the basis of a 360-day year assumed to consist of
twelve 30-day months and all calculations of interest on each Class of Non-Delay
Certificates will be made on the basis of the actual number of days elapsed in
the related Accrual Period and a 360-day year.

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

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

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

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

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

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

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

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

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

                                       20
<PAGE>

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

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

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

         Distribution Account Deposit Date: As to any Distribution Date, the
Business Day immediately preceding such Distribution Date.

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

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

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

         Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the uninsured
deposits in which accounts are otherwise secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its fiduciary
capacity or (iv) any other account acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.

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

                                       21
<PAGE>

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

         Event of Default: As defined in Section 7.1 hereof.

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

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

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

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

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

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

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

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

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

               (iii)  the Funding Period Termination Date.

                                       22
<PAGE>

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

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

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

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

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

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

               (i)    the excess of:

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

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

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

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

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

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

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

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

                                       23
<PAGE>

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

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

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

         Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated by the
Servicer or Master Servicer in any manner, including but not limited to a
disposition pursuant to Section 3.11(i), in the Prepayment Period for such
Distribution Date and as to which the Servicer has determined (in accordance
with this Agreement) that it has received all amounts it expects to receive in
connection with the liquidation of such Mortgage Loan, including the final
disposition of an REO Property.

         Liquidation Proceeds: Amounts, including Insurance Proceeds, received
by the Servicer or Master Servicer in connection with the partial or complete
liquidation of defaulted Mortgage Loans, whether through trustee's sale,
foreclosure sale, disposition pursuant to Section 3.11(i), or otherwise or
amounts received in connection with any condemnation or partial release of a
Mortgaged Property and any other proceeds received in connection with an REO
Property, less the sum of related unreimbursed Servicing Fees, Servicing
Advances and P&I Advances.

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

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

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

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

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

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

                                       24
<PAGE>

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

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

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

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

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

         Moody's: Moody's Investors Service, Inc., or any successor thereto. If
Moody's is designated as a Rating Agency in the Preliminary Statement, the
address for notices to Moody's shall be Moody's Investors Service, Inc., 99
Church Street, New York, New York 10007, Attention: Residential Pass-Through
Monitoring, or such other address as Moody's may hereafter furnish to the
Depositor or the Master Servicer.

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

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

         Mortgage Loan Documents: As defined in Section 2.1 hereof.

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

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

               (i)    the loan number;

               (ii)   the Mortgagor's name;

                                       25
<PAGE>

               (iii)  the original principal balance;

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

               (v)    Mortgage Rate;

               (vi)   Servicing Fee; and

               (vii)  group or subgroup.



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

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

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

         Mortgagor: Any obligor on a Mortgage Note.

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

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

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

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

                                       26
<PAGE>

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


               (i)    If to the Depositor:

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

               (ii)   If to the Master Servicer:

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

               (iii)  If to the Trustee:

                      Bankers Trust Company
                      1761 East St. Andrew Place
                      Santa Ana, California 92705
                      Attention: SX 0103

               (iv)   If to the Servicer:

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

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

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

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

                                       27
<PAGE>

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

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

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

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

         OTS: The Office of Thrift Supervision.

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

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

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

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

                                       28
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                       29
<PAGE>

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

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

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

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

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

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

                                       30
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       31
<PAGE>

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

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

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

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

               (i)    the sum of:

                      (A)  the Principal Funds for that Distribution Date and
                           Group, and

                      (B)  the related Principal Percentage of any Extra
                           Principal Distribution Amount for that Distribution
                           Date over

               (ii)   the related Principal Percentage of the Released
         Principal Amount for that Distribution Date.

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

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

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

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

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

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

                                       32
<PAGE>

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

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

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

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

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

         PUD: Planned Unit Development.

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

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

         Realized Loss: With respect to any Mortgage Loan (other than a
Nonrecoverable Mortgage Loan), the amount by which the unpaid principal balance
thereof exceeds the net amount recovered in liquidation thereof (after payment
of expenses of liquidation, unpaid Servicing Fees, and reimbursement of
Advances), after payment of accrued interest on such

                                       33
<PAGE>

Mortgage Loan and after application of any Insurance Proceeds with respect
thereto. With respect to any Nonrecoverable Mortgage Loan, the sum of (i) the
amount by which the unpaid principal balance thereof exceeds the Projected Net
Liquidation Value thereof and (ii) the amount, if any, by which the Projected
Net Liquidation Value thereof exceeds Liquidation Proceeds received in respect
thereof. The Realized Loss in respect of any Nonrecoverable Mortgage Loan
calculated pursuant to clause (i) of the preceding sentence shall be given
effect as of the Prepayment Period during which the Servicer or Master Servicer
classifies such loan as a Nonrecoverable Mortgage Loan.

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

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

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

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

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

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

         Relief Act Shortfall: With respect to any Mortgage Loan as to which
there has been a reduction in the amount of interest collectible thereon as a
result of application of the Relief Act, any amount by which interest
collectible on such Mortgage Loan for the Due Date in the related Due Period is
less than interest accrued thereon for the applicable one-month period at the
Net Rate without giving effect to such reduction.

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

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

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

                                       34
<PAGE>

         Remittance Agency Agreement: As defined in Section 2.2 hereof.

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

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

         Required Recordation States: The states of Florida and Mississippi.

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

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

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

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

         Security Release Certification: As defined in Section 2.2 hereof.

         Senior Principal Distribution Amount: With respect to each Group and
any Distribution Date before the Stepdown Date or as to which a Trigger Event
has occurred, 100% of the Principal Distribution Amount for such Group and
Distribution Date, and with respect to any Distribution Date on or after the
Stepdown Date and as to which a Trigger Event has not occurred, the related
Principal Percentage of the excess of:

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

               (ii)   the lesser of:

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

                      (B)  the excess, if any, of:

                                       35
<PAGE>

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

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

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

         Servicer: Meritech and its permitted successors and assigns.

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

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

         Servicing Fee: As to each Mortgage Loan and any Distribution Date, an
amount payable out of each full payment of interest received on such Mortgage
Loan and equal to one-twelfth of the Servicing Fee Rate multiplied by the Stated
Principal Balance of such Mortgage Loan as of the Due Date in of the month prior
to the month of such Distribution Date (or, in the case of an Odd Due Date
Mortgage Loan, the Due Date occurring in the second month preceding the month of
such Distribution Date).

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

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

         Startup Day: The Closing Date.

         Stated Principal Balance: As to any Mortgage Loan and Determination
Date, the unpaid principal balance of such Mortgage Loan as of the applicable
Due Date as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization

                                       36
<PAGE>

schedule by reason of any moratorium or similar waiver or grace period) after
giving effect to (i) any previous partial Principal Prepayments and Liquidation
Proceeds allocable to principal (other than with respect to any Liquidated
Mortgage Loan), (ii) the payment of principal due on such Due Date, and (iii) in
the case of any Nonrecoverable Mortgage Loan, the amount of any Realized Loss in
respect thereof (but otherwise determined, in each case, regardless of any
delinquency in payment by the related Mortgagor).

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

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

         Subsequent Mortgage Loans: The Mortgage Loans listed on a Mortgage Loan
Schedule attached to a Subsequent Sales Agreement.

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

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

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

         Substitute Mortgage Loan: A Mortgage Loan substituted by the Depositor
or Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the form
of Exhibit I, (i) have a Stated Principal Balance, after deduction of the
principal portion of the Scheduled Payment due in the month of substitution, not
in excess of, and not more than 10% less than the Stated Principal Balance of
the Deleted Mortgage Loan; (ii) accrue interest on the same basis as the Deleted
Mortgage Loan and be accruing interest at a rate no lower than and not more than
1% per annum higher than, that of the Deleted Mortgage Loan; (iii) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (iv) not
be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan;
and (v) comply with each representation and warranty set forth in Section 2.3
hereof. Any of the characteristics described above may be satisfied in the
aggregate by one or more Substitute Mortgage Loans.

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

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

                                       37
<PAGE>

         Tax Matters Person Certificate: The Class R Certificate with a
Denomination of 0.00001%.

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

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

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

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

         Trust Fund: As described in Section 2.01 hereof.

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

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

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

         Weighted Average Net Rate: The weighted average of the Mortgage Rates
of the Mortgage Loans less the sum of the Servicing Fee Rate and the Master
Servicing Fee Rate, as applicable, provided, however, that for the first four
Distribution Dates, the Weighted Average Net Rate shall equal the product of (i)
the weighted average of the Mortgage Rates of only those Mortgage Loans
transferred to the Trust Fund on the Closing Date less the sum of the Servicing
Fee Rate and the Master Servicing Fee Rate, as applicable, multiplied by (ii) a
fraction, the numerator of which is the aggregate principal balance of the
Mortgage Loans transferred to the Trust Fund on the Closing Date and the
denominator of which is the Assumed Principal Balance.

                                   ARTICLE 2

                CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
                                   WARRANTIES

         Section 2.1    Conveyance of Mortgage Loans

         (a)   To provide for the distribution of the principal of and interest
on the Certificates in accordance with their terms, the distribution of all
other sums distributable hereunder with respect to the Certificates and the
performance of the covenants contained herein, the Depositor hereby bargains,
sells, conveys, assigns and transfers to the Trustee, in trust, without recourse

                                       38
<PAGE>

and for the exclusive benefit of the Certificateholders as their interests may
appear, all the Depositor's right, title and interest in and to any and all
benefits accruing to the Depositor from: (i) the Mortgage Loans, which the
Depositor is causing to be delivered to the Trustee (or the Custodian) herewith
(and all Substitute Mortgage Loans substituted therefor), together in each case
with the related Mortgage Files and the Depositor's interest in any collateral
that secured a Mortgage Loan but that is acquired by foreclosure or deed-in-lieu
of foreclosure after the Closing Date, and all Scheduled Payments due after the
Cut Off Date and all principal prepayments received with respect to the Mortgage
Loans paid by the borrower after the Cut Off Date and proceeds of the
conversion, voluntary or involuntary, of the foregoing; (ii) any Subsequent
Mortgage Loans; (iii) the Sales Agreement, except that the Depositor does not
assign to the Trustee any of its rights under Sections 9 and 12 of the Sales
Agreement; (iv) any Pre-Funding Account whether in the form of cash,
instruments, securities or other properties and (v) all proceeds of any of the
foregoing (including, but not limited to, all proceeds of any mortgage
insurance, hazard insurance, or title insurance policy relating to the Mortgage
Loans, cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other forms of obligations and receivables, which at any time
constitute all or part or are included in the proceeds of any of the foregoing)
to pay the Certificates as specified herein (items (i) through (v) above
collectively, the "Trust Fund").

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

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

               (i)    (A)  the original Mortgage Note endorsed by manual or
         facsimile signature to the Trustee or the Custodian or in blank,
         without recourse, with all intervening endorsements showing a complete
         chain of endorsement from the originator to the Person endorsing the
         Mortgage Note (the "Last Endorsee") (each such endorsement being
         sufficient to transfer all right, title and interest of the party so
         endorsing, as noteholder or assignee thereof, in and to that Mortgage
         Note); or

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

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

                                       39
<PAGE>

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

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

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

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

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

                      (a)  The Coop Shares, together with a stock power in
                           blank;
                      (b)  The executed Security Agreement;
                      (c)  The executed Proprietary Lease;
                      (d)  The executed Recognition Agreement;
                      (e)  The executed UCC-1 financing statement with evidence
                           of recording thereon which have been filed in all
                           places required to perfect the Depositor's interest
                           in the Coop Shares and the Proprietary Lease; and
                      (f)  Executed UCC-3 financing statements or other
                           appropriate UCC financing statements required by
                           state law, evidencing a complete and unbroken line
                           from the mortgagee to the Trustee with evidence of
                           recording thereon (or in a form suitable for
                           recordation).

         In the event that in connection with any Mortgage Loan the Depositor
cannot deliver (a) the original recorded Mortgage or (b) any recorded
assignments or interim assignments satisfying the requirements of clause (ii) or
(iii) above, respectively, concurrently with the execution and delivery hereof
because such document or documents have not been returned from

                                       40
<PAGE>

the applicable public recording office, the Depositor shall deliver such
documents to the Trustee or the Custodian on its behalf as promptly as possible
upon receipt thereof and, in any event, within 720 days following the Closing
Date. The Depositor or Servicer shall forward or cause to be forwarded to the
Trustee or the Custodian on its behalf (a) from time to time additional original
documents evidencing an assumption or modification of a Mortgage Loan and (b)
any other documents required to be delivered by the Depositor or the Servicer to
the Trustee. In the case where a public recording office retains the original
recorded Mortgage or in the case where a Mortgage is lost after recordation in a
public recording office, the Depositor shall deliver to the Trustee a copy of
such Mortgage certified (to the extent such certification is reasonably
obtainable) by such public recording office to be a true and complete copy of
the original recorded Mortgage.

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

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

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

         Section 2.2    Acceptance by Trustee of the Mortgage Loans

         The Trustee or the Custodian, on behalf of the Trustee acknowledges
receipt of the documents identified in the initial certification in the form
annexed hereto as Exhibit C (the "Initial Certification") and declares that it
or the Custodian holds and will hold such documents

                                       41
<PAGE>

and the other documents delivered to it constituting the Mortgage Files, and
that it or the Custodian holds or will hold such other assets as are included in
the Trust Fund, in trust for the exclusive use and benefit of all present and
future Certificateholders.

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

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

         If, in the course of such review, the Trustee or the Custodian, on
behalf of the Trustee finds any document constituting a part of a Mortgage File
which does not meet the requirements of Section 2.1 hereof, the Trustee shall
list or shall cause the Custodian to list such as an exception in the Final
Certification; provided, however that neither the Trustee nor the Custodian
shall make any determination as to whether (i) any endorsement is sufficient to
transfer all right, title and interest of the party so endorsing, as noteholder
or assignee thereof, in and to that Mortgage Note or (ii) any assignment is in
recordable form or is sufficient to effect the assignment of and transfer to the
assignee thereof under the mortgage to which the assignment relates. SMI shall
promptly correct or cure such defect within 90 days from the date it was so
notified of such defect and, if SMI does not correct or cure such defect within
such period, SMI shall either (a) substitute for the related Mortgage Loan a
Substitute Mortgage Loan, which substitution shall be accomplished in the manner
and subject to the conditions set forth in Section 2.3 hereof, or (b) purchase
such Mortgage Loan from the Trustee within 90 days from the date SMI was
notified of such defect in writing at the Purchase Price of such Mortgage Loan;
provided, however, that in no event shall such substitution or purchase occur
more than 540 days from the Closing Date, except that if the substitution or
purchase of a Mortgage Loan pursuant to this provision is required by reason of
a delay in delivery of any documents by the appropriate recording office, and
there is a dispute between either the Servicer or SMI and the Trustee over the
location or status of the recorded document, then such substitution or purchase
shall occur within 720 days from the Closing Date. Any such substitution
pursuant to (a) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel required by Section 2.4 hereof, if any, and any
substitution pursuant to (a) above shall not be effected prior to the additional
delivery to the Trustee of a Request for Release substantially in the form of
Exhibit I. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. The Purchase Price for any such Mortgage
Loan shall be deposited by SMI in the Collection Account on or prior to the
Distribution Account Deposit Date for the Distribution

                                       42
<PAGE>

Date in the month following the month of repurchase and, upon receipt of such
deposit and certification with respect thereto in the form of Exhibit J hereto,
the Trustee shall cause the Custodian to release the related Mortgage File to
SMI and shall execute and deliver at SMI's request such instruments of transfer
or assignment prepared by SMI, in each case without recourse, as shall be
necessary to vest in SMI, or a designee, the Trustee's interest in any Mortgage
Loan released pursuant hereto.

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

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

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

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

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

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

               (ii)   the execution and delivery of this Agreement by the
         Servicer and the performance by it of and compliance with the terms of
         this Agreement will not (A) violate the Servicer's articles of
         incorporation or by-laws or constitute a default (or an event which,
         with notice or lapse of time or both, would constitute a default)
         under, or

                                       43
<PAGE>

         result in the breach or acceleration of, any material contract,
         agreement or other instrument to which the Servicer is a party or which
         may be applicable to the Servicer or any of its assets or (B) result in
         the creation or imposition of any lien, charge or encumbrance upon any
         of its properties pursuant to the terms of any such contract, agreement
         or other instrument;

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

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

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

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

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

                                       44
<PAGE>

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

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

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

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

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

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

                                       45
<PAGE>

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

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

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

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

         (d)   Pursuant to Section 2.1(a)(iii) hereof, the Depositor has
assigned to the Trustee, for the benefit of Certificateholders, its rights under
the Sales Agreement, including each representation and warranty of SMI set forth
in such Sales Agreement in respect of the Mortgage Loans.

         Upon discovery by any of the parties hereto of a breach of a
representation or warranty made by SMI in respect of the Mortgage Loans that
materially and adversely affects the interests of the Certificateholders in any
such Mortgage Loan, the party discovering such breach shall give prompt notice
thereof to the other parties. SMI hereby covenants that within 90 days of the

                                       46
<PAGE>

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

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

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<PAGE>

cause the Custodian to release the Mortgage File held for the benefit of the
Certificateholders relating to such Deleted Mortgage Loan to SMI and shall
execute and deliver at SMI's direction such instruments of transfer or
assignment prepared by SMI , in each case without recourse, as shall be
necessary to vest title in SMI, or its designee, the Trustee's interest in any
Deleted Mortgage Loan substituted for pursuant to this Section 2.3.

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

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

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

         (e)   Upon discovery by the Depositor, the Servicer, the Master
Servicer or the Trustee that any Mortgage Loan does not constitute a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall promptly (and in any event within five (5) Business
Days of discovery) give written notice thereof to the other parties. In
connection therewith, the Trustee shall require SMI, at SMI's option, to either
(i) substitute, if the conditions in Section 2.3(c) with respect to
substitutions are satisfied, a Substitute Mortgage Loan for the affected
Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90 days of
such discovery in the same manner as it would a Mortgage Loan for a breach of

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<PAGE>

representation or warranty made pursuant to this Section 2.3. The Trustee shall
reconvey or shall cause the Custodian to reconvey to SMI the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in this Section 2.3.

         Section 2.4    Delivery of Opinion of Counsel in Connection with
         Substitutions

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

         Section 2.5    Execution and Delivery of Certificates

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

         Section 2.6    Purchase of Subsequent Mortgage Loans.

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

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

               (i)    the Depositor shall have delivered to the Trustee with a
         copy to the Master Servicer a duly executed written Subsequent Sales
         Agreement, which shall include a Schedule of Subsequent Mortgage Loans,
         and specifying the amount to be withdrawn from the Pre-Funding Account;

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<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

               (i)    a fully executed Subsequent Sales Agreement;

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

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<PAGE>

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

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

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

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

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

               (i)    the amount and correct disposition of the Pre-Funded
         Amount, and

               (ii)   any other necessary matters in connection with the
         administration of the Pre-Funding Account. If any amounts are released
         as a result of an error in calculation to the Holders or the Depositor
         from the Pre-Funding Account, the Depositor shall immediately repay
         such amounts to the Master Servicer.

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

         Section 2.7    Pre-Funding Account

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

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

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

               (ii)   to pay such amounts to or upon the order of the Depositor
         upon satisfaction of the conditions set forth in Section 2.6(c) hereof
         with respect thereto. In no

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<PAGE>

         event shall the Trustee withdraw from the Pre-Funding Account an amount
         in excess of the Original Pre-Funded Amount.

         (c)   On the Business Day immediately following the end of the Funding
Period, the Master Servicer shall instruct the Trustee to transfer the
Pre-Funded Amount to the Distribution Account for distribution to the Holders of
the Certificates in accordance with Article 4. The Pre-Funded Amount shall not
be invested during the time such Pre-Funded Amount is held in the Distribution
Account.

         (d)   The Pre-Funding Account shall not be an asset of any REMIC
created pursuant to this Agreement.

                                   ARTICLE 3

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

         Section 3.1    Servicer to Service Mortgage Loans

         For and on behalf of the Certificateholders, the Servicer shall service
and administer the Mortgage Loans in accordance with the terms of this Agreement
and customary and usual standards of practice of prudent mortgage loan
servicers. In connection with such servicing and administration, the Servicer
shall have full power and authority, acting alone and/or through Subservicers as
provided in Section 3.2 hereof, to do or cause to be done any and all things
that it may deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Servicer shall not take any action that is
inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Servicer shall represent and protect the interests of the Trust Fund in the same
manner as it protects its own interests in mortgage loans in its own portfolio
in any claim, proceeding or litigation regarding a Mortgage Loan, provided,
however, that unless (x) the Mortgagor is in default with respect to the
Mortgage Loan, or such default is, in the judgment of the Servicer, imminent or
(y) in the absence of default or imminent default, any such waiver,
modification, postponement or indulgence would not cause any REMIC created
hereunder to be disqualified or result in the imposition of any tax under
Section 860F(a) or Section 860G(d) of the Code, the Servicer may not permit any
modification with respect to any Mortgage Loan. Without limiting the generality
of the foregoing, the Servicer, in its own name or in the name of the Depositor
and the Trustee, is hereby authorized and empowered by the Depositor and the
Trustee, when the Servicer believes it appropriate in its reasonable judgment,
to execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other

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<PAGE>

comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Certificateholders. The
Servicer shall prepare and deliver to the Depositor and/or the Trustee such
documents requiring execution and delivery by either or both of them as are
necessary or appropriate to enable the Servicer to service and administer the
Mortgage Loans to the extent that the Servicer is not permitted to execute and
deliver such documents pursuant to the preceding sentence. Upon receipt of such
documents, the Depositor and/or the Trustee shall promptly execute such
documents and deliver them to the Servicer.

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

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

         Section 3.2    Subservicing; Enforcement of the Obligations of
         Servicers

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

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

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<PAGE>

a Subservicer regardless of whether such payments are remitted by the
Subservicer to the Servicer.

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

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

         Section 3.4    Master Servicer to Act as Servicer

         In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default), the Master
Servicer or its successor shall thereupon assume all of the rights and
obligations of the Servicer hereunder arising thereafter (except that the Master
Servicer shall not be (i) liable for losses of the Servicer pursuant to Section
3.9 hereof or any acts or omissions of the predecessor Servicer hereunder, (ii)
obligated to make Advances if it is prohibited from doing so by applicable law,
(iii) obligated to effectuate repurchases or substitutions of Mortgage Loans
hereunder including, but not limited to, repurchases or substitutions of
Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv) responsible for
expenses of the Servicer pursuant to Section 2.3 hereof or (v) deemed to have
made any representations and warranties of the Servicer hereunder). If the
Servicer shall for any reason no longer be the Servicer (including by reason of
any Event of Default), the Master Servicer or its successor shall succeed to any
rights and obligations of the Servicer under each subservicing agreement.

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

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

         (a)   The Servicer shall make reasonable efforts in accordance with the
customary and usual standards of practice of prudent mortgage servicers to
collect all payments called for under the terms and provisions of the Mortgage
Loans to the extent such procedures shall be consistent with this Agreement.
Consistent with the foregoing, and subject to the provisions of Section 3.1
hereof, the Servicer may in its discretion (i) waive any late payment charge or
penalty interest and (ii) extend the due dates for payments due on a Mortgage
Note for a period not greater than

                                       54
<PAGE>

180 days; provided, however, that the Servicer cannot extend the maturity of any
such Mortgage Loan past the date on which the final payment is due on the latest
maturing Mortgage Loan as of the Cut Off Date. In the event of any such
arrangement, any P&I Advance required to be made by the Servicer on the related
Mortgage Loan in accordance with the provisions hereof (i) with respect to the
Prepayment Period in which such arrangement became effective shall be made in
accordance with the amortization schedule of such Mortgage Loan without giving
effect to the modification thereof by reason of such arrangements and (ii) with
respect to any Prepayment Period thereafter shall be made in accordance with the
amortization schedule of such Mortgage Loan as so modified. The Servicer shall
not be required to institute or join in litigation with respect to collection of
any payment (whether under a Mortgage, Mortgage Note or otherwise or against any
public or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.

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

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

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

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

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

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

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

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

               (vii)  all Substitution Adjustment Amounts; and

                                       55
<PAGE>

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

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

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

         (c)   The Master Servicer shall establish and maintain, for the benefit
of Certificateholders, a Master Servicer Custodial Account. On each Servicer
Deposit Date, the Servicer shall remit to the Master Servicer for deposit in the
Master Servicer Custodial Account, the Available Funds for such date. In
addition, the Master Servicer shall deposit any amounts pursuant to Section
3.5(e) in connection with losses on Permitted Investments in the Master Servicer
Custodial Account.

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

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

         (e)   The institutions at which the Collection Account, Master Servicer
Custodial Account and Distribution Account are maintained shall invest funds as
directed by the Master

                                       56
<PAGE>

Servicer in Permitted Investments which in each case shall mature not later than
(i) in the case of the Collection Account, the second Business Day next
preceding the related Servicer Deposit Date (except that if such Permitted
Investment is an obligation of the institution that maintains such account, then
such Permitted Investment shall mature not later than the Business Day next
preceding such Servicer Deposit Date), (ii) in the case of the Master Servicer
Custodial Account, the second Business Day next preceding the related
Distribution Account Deposit Date (except that if such Permitted Investment is
an obligation of the institution that maintains such account, then such
Permitted Investment shall mature not later than the Business Day next preceding
such Distribution Account Deposit Date), and (iii) in the case of the
Distribution Account, the Business Day next preceding the related Distribution
Date (except that if such Permitted Investment is an obligation of the
institution that maintains such fund or account, then such Permitted Investment
shall mature not later than such Distribution Date) and, in each case, shall not
be sold or disposed of prior to its maturity. All such Permitted Investments
shall be made in the name of the Trustee, for the benefit of the
Certificateholders. All income and gain net of any losses realized from any such
investment of funds on deposit in the Collection Account shall be for the
benefit of the Servicer as servicing compensation and all income and gain net of
any losses realized from any such investment of funds on deposit in the Master
Servicer Custodial Account and the Distribution Account shall be for the benefit
of the Master Servicer. The amount of any realized losses in the Collection
Account in respect of any such investments shall promptly be deposited by the
Servicer in the Collection Account and the amount of any realized losses in the
Master Servicer Custodial Account and the Distribution Account in respect of any
such investments shall promptly be deposited therein by the Master Servicer. The
Trustee in its fiduciary capacity shall not be liable for the amount of any loss
incurred in respect of any investment or lack of investment of funds held in the
Collection Account or the Master Servicer Custodial Account and made in
accordance with this Section 3.5.

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

         (a)   The Servicer shall cause to be maintained, for each Mortgage
Loan, hazard insurance with extended coverage in an amount that is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan; (ii) the outstanding principal balance of the
Mortgage Loan and (iii) the maximum amount available in the locality of the
related Mortgaged Property from insurers generally acceptable to institutional
residential mortgage lenders without payment of extraordinary premium. Each such
policy of standard hazard insurance shall contain, or have an accompanying
endorsement that contains, a standard mortgagee clause. Any amounts collected by
the Servicer under any such policies (other than the amounts to be applied to
the restoration or repair of the related Mortgaged Property or amounts released
to the Mortgagor in accordance with the Servicer's normal servicing procedures)
shall be deposited in the Collection Account. Any cost incurred by the Servicer
in maintaining any such insurance shall not, for the purpose of calculating
monthly distributions to the Certificateholders or remittances to the Trustee
for their benefit, be added to the principal balance of the Mortgage Loan,
notwithstanding that the terms of the Mortgage Loan so permit. Such costs shall
be recoverable by the Servicer as Servicing Advances or, if applicable, as
Nonrecoverable Advances. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor or maintained on
property acquired in respect of a Mortgage other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Mortgaged Property is located at the
time of origination of the Mortgage Loan in a federally designated special flood
hazard area and such area is participating in the national flood insurance
program, the Servicer shall cause flood insurance to be maintained with respect
to such Mortgage Loan. Such flood insurance shall be in an amount equal to the
least of (i) the original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements which are part of such Mortgaged
Property, and (iii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program.

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<PAGE>

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

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

         The Servicer shall not be required to maintain any Primary Insurance
Policy (i) with respect to any Mortgage Loan with a Loan-to-Value Ratio less
than or equal to 80% (or such lower Loan-to-Value Ratio as may be provided by
applicable law) as of any date of determination or, based on a new appraisal,
the principal balance of such Mortgage Loan represents 80% or less of the new
appraised value (or other method of determination as may be provided by
applicable law) or (ii) if maintaining such Primary Insurance Policy is
otherwise prohibited by applicable law.

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

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

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

         (a)   Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Servicer shall to
the extent that it has knowledge of such conveyance enforce any due-on-sale
clause contained in any Mortgage Note or Mortgage, to the extent, in the
Servicer's reasonable judgment, enforcement is permitted

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<PAGE>

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

         (b)   Subject to the Servicer's duty to enforce any due-on-sale clause
to the extent set forth in Section 3.10(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification agreement or supplement
to the Mortgage Note or Mortgage that requires the signature of the Trustee, or
if an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Servicer shall prepare and
deliver or cause to be prepared and delivered to the Trustee for signature and
shall direct, in writing, the Trustee to execute the assumption agreement with
the Person to whom the Mortgaged Property is to be conveyed and such
modification agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
may be changed. In addition, the substitute Mortgagor and the Mortgaged Property
must be acceptable to the Servicer in accordance with its underwriting standards
as then in effect. Together with each such substitution, assumption or other
agreement or instrument delivered to the Trustee for execution by it, the
Servicer shall deliver an Officer's Certificate signed by a Servicing Officer
stating that the requirements of this subsection have been met in connection
therewith. The Servicer shall notify the Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Trustee the
original of such substitution or assumption agreement, which in the case of the
original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Servicer for entering into an

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<PAGE>

assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation.

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

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

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

         (c)   With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders,
provided that the Servicers may cause title to be placed in the name of the
Custodian or the Servicer if the Servicer reasonably determines that such manner
of holding title is required or advisable in order to facilitate the foreclosure
process as to any one or more particular Mortgage Loans. The Trustee's name
shall be placed on the title to such REO Property solely as the Trustee
hereunder and not in its individual capacity. The Servicer shall ensure that the
title to such REO Property references this Agreement and the Trustee's capacity
thereunder. Pursuant to its efforts to sell such REO Property, the Servicer
shall either itself or

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<PAGE>

through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Certificateholders, in its sole discretion, rent or decline
to rent the same, or any part thereof, as the Servicer deems to be in the best
interest of the Certificateholders for the period prior to the sale of such REO
Property. The Servicer shall prepare for and deliver to the Trustee a statement
with respect to any REO Property that has been rented showing the aggregate
rental income received and all expenses incurred in connection with the
management and maintenance of such REO Property at such times as is necessary to
enable the Trustee to comply with the reporting requirements of the REMIC
Provisions. The net monthly rental income, if any, from such REO Property shall
be deposited in the Collection Account no later than the close of business on
each Determination Date. The Servicer shall perform the tax reporting and
withholding required by Sections 1445 and 6050J of the Code with respect to
foreclosures and abandonments, the tax reporting required by Section 6050H of
the Code with respect to the receipt of mortgage interest from individuals and
any tax reporting required by Section 6050P of the Code with respect to the
cancellation of indebtedness by certain financial entities, by preparing such
tax and information returns as may be required, in the form required, and
delivering the same to the Trustee for filing.

         (d)   In the event that the Trust Fund acquires any Mortgaged Property
as aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer shall dispose of such Mortgaged Property prior to
the close of the third taxable year after its acquisition by the Trust Fund
unless the Trustee shall have been supplied with an Opinion of Counsel to the
effect that the holding by the Trust Fund of such Mortgaged Property subsequent
to such three-year period will not result in the imposition of taxes on
"prohibited transactions" of any REMIC created hereunder as defined in section
860F of the Code or cause any REMIC created hereunder to fail to qualify as a
REMIC at any time that any Certificates are outstanding, in which case the Trust
Fund may continue to hold such Mortgaged Property (subject to any conditions
contained in such Opinion of Counsel). Notwithstanding any other provision of
this Agreement, no Mortgaged Property acquired by the Trust Fund shall be rented
(or allowed to continue to be rented) or otherwise used for the production of
income by or on behalf of the Trust Fund in such a manner or pursuant to any
terms that would (i) cause such Mortgaged Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
(ii) subject any REMIC created hereunder to the imposition of any federal, state
or local income taxes on the income earned from such Mortgaged Property, unless
the Servicer has agreed to indemnify and hold harmless the Trust Fund with
respect to the imposition of any such taxes.

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

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<PAGE>

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

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

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

         (i)   Notwithstanding any provision hereof, in connection with the
foreclosure or other conversion of defaulted assets, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable in its
sole discretion, and as shall be normal and usual in its general mortgage
servicing activities. In connection therewith, the Master Servicer shall have
the sole discretion to determine whenever an immediate sale of any REO or
Nonrecoverable Mortgage Loan, or continued management of such REO or
Nonrecoverable Mortgage Loan, is in the best interest of certificateholders to
maximize recoveries. Any such disposition (including by means of a "whole loan
sale") shall be conducted by the Servicer on terms and conditions approved by

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<PAGE>

the Master Servicer in its sole discretion. The foregoing notwithstanding, the
Master Servicer shall not approve any such disposition that would (i) result in
the imposition of the tax on "prohibited transactions" on the Trust Fund, as
defined in Sections 860F(a)(2) of the Code, or (ii) cause any REMIC created
hereunder to fail to qualify as a REMIC at any time that any Certificates are
outstanding.

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

         Section 3.12   Trustee to Cooperate; Release of Mortgage Files.

         Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Trustee by
delivering, or causing to be delivered a Request for Release substantially in
the form of Exhibit J. Upon receipt of such request, the Trustee shall or shall
cause the Custodian to promptly release the related Mortgage File to the
Servicer, and the Trustee shall at the Servicer's direction execute and deliver
to the Servicer the request for reconveyance, deed of reconveyance or release or
satisfaction of mortgage or such instrument releasing the lien of the Mortgage,
in each case as provided by the Servicer, together with the Mortgage Note with
written evidence of cancellation thereon. In lieu of the document execution
process described in the preceding two sentences, the Servicer shall be
authorized to execute each such Request for Release, request for reconveyance,
deed of reconveyance, and release, satisfaction of mortgage, or such instrument
releasing the lien of the Mortgage as attorney in fact for the Trustee (or the
Custodian, if applicable) pursuant to the powers of attorney described in
Section 3.1. Expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to the related Mortgagor. From time
to time and as shall be appropriate for the servicing or foreclosure of any
Mortgage Loan, including for such purpose, collection under any policy of flood
insurance, any fidelity bond or errors or omissions policy, or for the purposes
of effecting a partial release of any Mortgaged Property from the lien of the
Mortgage or the making of any corrections to the Mortgage Note or the Mortgage
or any of the

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<PAGE>

other documents included in the Mortgage File, the Trustee shall, upon delivery
to the Trustee of a Request for Release in the form of Exhibit K signed by a
Servicing Officer, release the Mortgage File to the Servicer. Subject to the
further limitations set forth below, the Servicer shall cause the Mortgage File
or documents so released to be returned to the Trustee or its Custodian when the
need therefor by the Servicer no longer exists, unless the Mortgage Loan is
liquidated and the proceeds thereof are deposited in the Collection Account, in
which case the Servicer shall deliver to the Trustee a Request for Release in
the form of Exhibit L, signed by a Servicing Officer.

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

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

         Notwithstanding any other provisions of this Agreement, the Servicer
shall transmit to the Trustee, or the Custodian on its behalf, all documents and
instruments described in Section 2.1(b), and shall hold as Servicer and agent of
the Trustee all other documents, in respect of a Mortgage Loan coming into the
possession of the Servicer from time to time and shall account fully to the
Trustee for any funds received by the Servicer or which otherwise are collected
by the Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan. All Mortgage Files and funds collected or held by, or under the
control of, the Servicer in respect of any Mortgage Loans, whether from the
collection of principal and interest payments or from Liquidation Proceeds,
including but not limited to, any funds on deposit in the Collection Account,
shall be held by the Servicer for and on behalf of the Trustee and shall be and
remain the sole and exclusive property of the Trustee, subject to the applicable
provisions of this Agreement. The Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Collection Account, Distribution Account or any Escrow Account, or any funds
that otherwise are or may become due or payable to the Trustee for the benefit
of the Certificateholders, to any claim, lien, security interest, judgment,
levy, writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that the
Servicer shall be entitled to set off against and deduct from any such funds any
amounts that are properly due and payable to the Servicer under this Agreement.

         Section 3.14   Servicing Compensation.

         As compensation for its activities hereunder, the Servicer shall be
entitled to retain or withdraw from the Collection Account an amount equal to
the Servicing Fee for each Mortgage Loan, provided that the aggregate Servicing
Fee with respect to any Distribution Date shall be reduced (i) by the amount of
any Compensating Interest paid by the Servicer with respect to

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such Distribution Date, and (ii) with respect to the first Distribution Date, an
amount equal to any amount to be deposited into the Distribution Account by the
Depositor pursuant to Section 2.1(a) and not so deposited.

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

         Section 3.15   Access to Certain Documentation

         The Servicer shall provide to the OTS and the FDIC and to comparable
regulatory authorities supervising Holders of Subordinate Certificates and the
examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices designated by the Servicer. Nothing in this
Section shall limit the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.

         Section 3.16   Annual Statement as to Compliance

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

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

         On or before 120 days after the end of the Servicer's fiscal year,
commencing with its 2002 fiscal year, the Servicer at its expense shall cause a
nationally or regionally recognized firm of independent public accountants (who
may also render other services to the Servicer, the Depositor or any affiliate
thereof) which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Trustee and the Depositor to the
effect that such

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firm has examined certain documents and records relating to the servicing of the
Mortgage Loans under this Agreement or of mortgage loans under pooling and
servicing agreements substantially similar to this Agreement (such statement to
have attached thereto a schedule setting forth the pooling and servicing
agreements covered thereby) substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or alternatively, if the Master
Servicer has so elected, the Audit Program for Mortgages serviced for FNMA and
FHLMC, and setting forth such firm's conclusions relating thereto in accordance
with the applicable attestation program or audit program. In rendering such
statement, such firm may rely, as to matters relating to direct servicing of
mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and FHLMC (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon request
at the Servicer's expense, provided such statement is delivered by the Servicer
to the Trustee.

         Section 3.18   Errors and Omissions Insurance; Fidelity Bonds

         The Servicer shall for so long as it acts as Servicer under this
Agreement, obtain and maintain in force (a) a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and (b) a fidelity bond in respect of its officers, employees and
agents. Each such policy or policies and bond shall, together, comply with the
requirements from time to time of FNMA or FHLMC for persons performing servicing
for mortgage loans purchased by FNMA or FHLMC. In the event that any such policy
or bond ceases to be in effect, the Servicer shall obtain a comparable
replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement.

         Section 3.19   Advances

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

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

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         Section 3.20   Advance Facility

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

         (b)   If so required pursuant to the terms of an Advance Facility, the
Servicer may direct, and if so directed the Trustee is hereby authorized to and
shall pay to the Advance Facility Counterparty (i) reimbursements for Advances;
and (ii) all or such portion of the Servicing Fee as may be so specified in the
Advance Facility, that would otherwise be payable to the Servicer pursuant to
this Agreement or the Servicing Agreement.

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

         Section 3.21   Prepayment Penalties.

         The Servicer will not waive any Prepayment Penalty or part of a
Prepayment Penalty unless (i) such waiver would, in the reasonable judgment of
the Servicer, maximize recovery of total net proceeds taking into account the
value of such Prepayment Penalty and related Mortgage Loan and, if such waiver
is made in connection with a refinancing of the related Mortgage Loan, such
refinancing is related to a default or a reasonably foreseeable default; (ii)
the related Mortgage Loan indebtedness has been accelerated; or (iii) the
Servicer obtains an Opinion of Counsel, which may be in-house counsel for the
Servicer, opining that the

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Prepayment Penalty is not legally enforceable in the circumstances under which
the related prepayment occurs. In no event will the Servicer waive a Prepayment
Penalty in connection with a refinancing of a Mortgage Loan that is not related
to a default or a reasonably foreseen default.

                                   ARTICLE 4

                                  DISTRIBUTIONS

         Section 4.1   Priorities of Distribution

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

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

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

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

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

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

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

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

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

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

               o  From the Principal Distribution Amount for Group I, in an
                  amount up to the Senior Principal Distribution Amount for such
                  Group as follows: (x) the Class AF-6 Principal Distribution
                  Amount to the Class AF-6 Certificates until

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

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

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

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

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

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

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

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

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

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

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

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

         (f)   On each Distribution Date, the Trustee shall distribute Pledged
Prepayment Penalties for such Distribution Date in accordance with the
priorities set forth in clauses (xv) through (xviii) of Section 4.1(g) hereof
(without regard to references to the Basis Risk Reserve Fund).

         (g)   On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of any remaining amounts pursuant to
Sections 4.1(b)(v) hereof, together with any Net Pledged Prepayment Penalties
for such Distribution Date, in the following order of priority:

               (i)    on each of the first four Distribution Dates only, to the
                      Basis Risk Reserve Fund, any Basis Risk Payment for such
                      date;

               (ii)   on each of the first four Distribution Dates only, from
                      and to the extent of amounts held in the Basis Risk
                      Reserve Fund, to the Class A Certificates, on a pro rata
                      basis any applicable Cap Carryover Amount;

               (iii)  on each of the first four Distribution Dates only, from
                      and to the extent of amounts held in the Basis Risk
                      Reserve Fund, to the Class M-1 Certificates, any
                      applicable Cap Carryover Amount;

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               (iv)   on each of the first four Distribution Dates only, from
                      and to the extent of amounts held in the Basis Risk
                      Reserve Fund, to the Class M-2 Certificates, any
                      applicable Cap Carryover Amount;

               (v)    on each of the first four Distribution Dates only, from
                      and to the extent of amounts held in the Basis Risk
                      Reserve Fund, to the Class B Certificates, any applicable
                      Cap Carryover Amount;

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

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

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

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

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

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

               (xii)  to the Class B Certificates, any related Interest Carry
                      Forward Amount;

               (xiii) to the Class B Certificates, any related Unpaid
                      Realized Loss Amount;

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

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

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

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

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

               (xix)  the remainder pursuant to Section 4.1(i) hereof.

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

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

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

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

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

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

         Section 4.2    Method of Distribution

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

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         (b)   Each distribution with respect to a Book-Entry Certificate shall
be paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each financial
intermediary for which it acts as agent. Each such financial intermediary shall
be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the applicable Certificates. Neither the
Trustee nor the Master Servicer shall have any responsibility therefor except as
otherwise provided by applicable law.

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

         Section 4.3    Allocation of Losses

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

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

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

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

         Section 4.4    Reports to the Depositor and the Trustee

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

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

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

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

         (d)   whether a Trigger Event has occurred; and

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

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

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

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

         Section 4.5    Reports by or on Behalf of the Master Servicer

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

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

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

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

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

                      (D)  the Class Certificate Balance after giving effect to
                           any distribution allocable to principal; and

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

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

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

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

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

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

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

               (viii) the Pass-Through Rates for the Certificates for the
                      current Accrual Period and whether such rates have been
                      capped;

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

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

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

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

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

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

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

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

         Section 4.6    Basis Risk Reserve Fund

         (a)   On the Closing Date, the Trustee shall establish and maintain in
its name, in trust for the benefit of the holders of the Certificates, other
than the Class A-IO, Class S-1, Class S-2, Class X-IO, Class P, and Class R
Certificates, the Basis Risk Reserve Fund, into which the Depositor shall
deposit $1,000. The Basis Risk Reserve Fund shall be an Eligible Account, and
funds on deposit therein shall be held separate and apart from, and shall not be
commingled with, any other moneys, including, without limitation, other moneys
of the Trustee held pursuant to this Agreement.

         (b)   The Trustee shall make withdrawals from the Basis Risk Reserve
Fund to make distributions pursuant to Section 4.1(g) hereof.

         (c)   Funds in the Basis Risk Reserve Fund shall be invested in
Eligible Investments. Any earnings on such amounts shall be distributed to the
Class C Certificateholder pursuant to Section 4.1(i). The Class C Certificate
shall evidence ownership of the Basis Risk Reserve Fund for federal income tax
purposes and the Holder thereof shall direct the Trustee, in writing, as to
investment of amounts on deposit therein. The Class C Certificateholder shall be
liable for any losses incurred on such investments. In the absence of written
instructions from the Class C Certificateholder as to investment of funds on
deposit in the Basis Risk Reserve Fund, such funds shall be invested in the
Wells Fargo Prime Investment Money Market Fund or comparable investment vehicle.
Any amounts on deposit in the Basis Risk Reserve Fund in excess of the Required
Reserve Fund Deposit on any Distribution Date shall be distributed to the Class
C Certificateholder on the following Distribution Date. For all Federal income
tax purposes, amounts transferred by REMIC 5 to the Basis Risk Reserve Fund
shall be treated as amounts distributed by REMIC 5 to the Class C
Certificateholder.

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

         Section 4.7    The Instrument

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

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divided into two separate and discrete sub-Trusts. The assets of one such
sub-Trust shall consist of all the assets of the Trust other than the instrument
and the assets of the other sub-Trust shall consist solely of such instrument.

         Section 4.8    The Calculation Agent

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

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

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

                                   ARTICLE 5

                                THE CERTIFICATES

         Section 5.1    The Certificates

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

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

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

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

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

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

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

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

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

         (b)   No Person shall transfer a Private Certificate unless such
transfer (i) is made pursuant to an effective registration statement under the
Securities Act and any applicable state

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securities laws, or (ii) is exempt from the registration requirements under said
Act and such state securities laws. In the event that a transfer is to be made
in reliance upon an exemption from the Securities Act and such laws, in order to
assure compliance with the Securities Act and such laws, the Certificateholder
desiring to effect such transfer and such Certificateholder's prospective
transferee shall each certify to the Trustee in writing the facts surrounding
the transfer in substantially the forms set forth in Exhibit F (the "Transferor
Certificate") and (i) deliver a letter in substantially the form of either
Exhibit G (the "Investment Letter") or Exhibit H (the "Rule 144A Letter") or
(ii) there shall be delivered to the Trustee at the expense of the transferor an
Opinion of Counsel that such transfer may be made pursuant to an exemption from
the Securities Act. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Master Servicer shall
cooperate with the Depositor in providing the Rule 144A information referenced
in the preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the Depositor, the Depositor and the Master Servicer against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.

         No transfer of an ERISA-Restricted Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee (in the event such Certificate is a Private Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit G or Exhibit H),
to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan or arrangement subject to
Section 4975 of the Code, nor a person acting on behalf of any such plan or
arrangement, nor using the assets of any such plan or arrangement to effect such
transfer, (ii) in the case of a Private Certificate, if the purchaser is an
insurance company, a representation that the purchaser is an insurance company
which is purchasing such Certificates with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and
holding of such Certificates are covered under PTCE 95-60 or (iii) in the case
of any such ERISA-Restricted Certificate presented for registration in the name
of an employee benefit plan subject to ERISA, or a plan or arrangement subject
to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel
shall not be an expense of either the Trustee or the Trust Fund, addressed to
the Trustee to the effect that the purchase or holding of such ERISA-Restricted
Certificate will not result in the assets of the Trust Fund being deemed to be
"plan assets" and subject to the prohibited transaction provisions of ERISA and
the Code and will not subject the Trustee to any obligation in addition to those

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expressly undertaken in this Agreement or to any liability. Notwithstanding
anything else to the contrary herein, any purported transfer of an
ERISA-Restricted Certificate to or on behalf of an employee benefit plan subject
to ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above shall be void and of no
effect.

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

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

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

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

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

               (iv)   Any attempted or purported Transfer of any Ownership
         Interest in a Residual Certificate in violation of the provisions of
         this Section 5.2(c) shall be absolutely null and void and shall vest no
         rights in the purported Transferee. If any purported transferee shall
         become a Holder of a Residual Certificate in violation of the
         provisions of this Section 5.2(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Residual
         Certificate. The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Residual Certificate that is in fact
         not permitted by Section 5.2(b) and this Section 5.2(c) or for making
         any payments due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the

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         provisions of this Agreement so long as the Transfer was registered
         after receipt of the related Transfer Affidavit, Transferor Certificate
         and either the Rule 144A Letter or the Investment Letter. The Trustee
         shall be entitled but not obligated to recover from any Holder of a
         Residual Certificate that was in fact not a Permitted Transferee at the
         time it became a Holder or, at such subsequent time as it became other
         than a Permitted Transferee, all payments made on such Residual
         Certificate at and after either such time. Any such payments so
         recovered by the Trustee shall be paid and delivered by the Trustee to
         the last preceding Permitted Transferee of such Certificate.

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

         The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.2(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trust Fund, the Trustee, the Depositor
or the Master Servicer, to the effect that the elimination of such restrictions
will not cause any REMIC created hereunder to fail to qualify as a REMIC at any
time that the Certificates are outstanding or result in the imposition of any
tax on the Trust Fund. Each Person holding or acquiring any Ownership Interest
in a Residual Certificate hereby consents to any amendment of this Agreement
which, based on an Opinion of Counsel furnished to the Trustee, is reasonably
necessary (a) to ensure that the record ownership of, or any beneficial interest
in, a Residual Certificate is not transferred, directly or indirectly, to a
Person that is not a Permitted Transferee and (b) to provide for a means to
compel the Transfer of a Residual Certificate which is held by a Person that is
not a Permitted Transferee to a Holder that is a Permitted Transferee.

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

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

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Depository with respect to its Depository Participants and furnished by the
Depository Participants with respect to indirect participating firms and persons
shown on the books of such indirect participating firms as direct or indirect
Certificate Owners.

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

         If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository, or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Class Certificate Balance of the
Book-Entry Certificates together advise the Trustee and the Depository through
the Depository Participants in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the
Certificate Owners, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
definitive, fully-registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
related Class of Certificates by the Depository, accompanied by the instructions
from the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee shall
be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such instructions.
The Master Servicer shall provide the Trustee with an adequate inventory of
certificates to facilitate the issuance and transfer of Definitive Certificates.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder; provided
that the Trustee shall not by virtue of its assumption of such obligations
become liable to any party for any act or failure to act of the Depository.

         Section 5.3    Mutilated, Destroyed, Lost or Stolen Certificates

         If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.3, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.

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Any replacement Certificate issued pursuant to this Section 5.3 shall constitute
complete and indefeasible evidence of ownership, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.

         Section 5.4    Persons Deemed Owners

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

         Section 5.5    Access to List of Certificateholders' Names and
         Addresses

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of such Trust Fund held by the Trustee, if any. The Depositor
and every Certificateholder, by receiving and holding a Certificate, agree that
the Trustee shall not be held accountable by reason of the disclosure of any
such information as to the list of the Certificateholders hereunder, regardless
of the source from which such information was derived.

         Section 5.6    Maintenance of Office or Agency

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates the office of the Trustee's agent, located at DTC Transfer Agent
Services, 55 Water Street, Jeanette Park Entrance, New York, New York 10041,
Attention: Vinny Brown, for such purposes. The Trustee will give prompt written
notice to the Certificateholders of any change in such location of any such
office or agency.

                                   ARTICLE 6

                 THE DEPOSITOR, THE SERVICER AND MASTER SERVICER

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

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

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

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

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

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

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

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incidental to its respective duties hereunder and which in its opinion may
involve it in any expense or liability; provided, however, that any of the
Depositor, the Servicer or the Master Servicer may in its discretion undertake
any such action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties hereto and interests of the
Trustee and the Certificateholders hereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Fund, and the Depositor, the
Servicer and the Master Servicer shall be entitled to be reimbursed therefor out
of the Collection Account.

         Section 6.4    Limitation on Resignation of Servicer

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

                                   ARTICLE 7

                                SERVICER DEFAULT

         Section 7.1    Events of Default.

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

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

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

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

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

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

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

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

         Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a Scheduled Payment on a Mortgage Loan which was due prior to the notice
terminating such Servicer's rights and obligations as Servicer hereunder and
received after such notice, that portion thereof to which such Servicer

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would have been entitled pursuant to Sections 3.8(a)(i) through (viii), and any
other amounts payable to such Master Servicer hereunder the entitlement to which
arose prior to the termination of its activities hereunder.

         Section 7.2    Notification to Certificateholders

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

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

                                   ARTICLE 8

                             CONCERNING THE TRUSTEE

         Section 8.1    Duties of Trustee

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

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

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

               (i)    unless an Event of Default of which a Responsible Officer
         of the Trustee has actual knowledge shall have occurred and be
         continuing, the duties and obligations of the Trustee shall be
         determined solely by the express provisions of this Agreement, the

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         Trustee shall not be liable except for the performance of such duties
         and obligations as are specifically set forth in this Agreement, no
         implied covenants or obligations shall be read into this Agreement
         against the Trustee and the Trustee may conclusively rely, as to the
         truth of the statements and the correctness of the opinions expressed
         therein, upon any certificates or opinions furnished to the Trustee and
         conforming to the requirements of this Agreement which it believed in
         good faith to be genuine and to have been duly executed by the proper
         authorities respecting any matters arising hereunder;

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

               (iii)  the Trustee shall not be liable with respect to any
         action taken, suffered or omitted to be taken by it in good faith in
         accordance with the direction of Holders of Certificates evidencing not
         less than 25% of the Voting Rights of Certificates relating to the
         time, method and place of conducting any proceeding for any remedy
         available to the Trustee, or exercising any trust or power conferred
         upon the Trustee under this Agreement;

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

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

         Section 8.2    Certain Matters Affecting the Trustee.

         Except as otherwise provided in Section 8.1:

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

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

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

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

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

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

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

               (viii) the Trustee shall not be deemed to have knowledge of an
         Event of Default until a Responsible Officer of the Trustee shall have
         received written notice thereof and

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         in the absence of such notice, the Trustee may conclusively assume that
         there is no Event of Default;

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

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

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

         Section 8.3    Trustee Not Liable for Certificates or Mortgage Loans

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

         Section 8.4    Trustee May Own Certificates.

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

         Section 8.5    Trustee's Fees and Expenses.

         The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.1 hereunder, shall be entitled to deduct
from the Master Servicing Fee on each Distribution Date an amount equal to the
Trustee Fee and reasonable expenses for such Distribution Date. Saxon shall
indemnify and hold harmless the Trustee, the Paying Agent or the Custodian and
any director, officer, employee or agent thereof against any loss, liability or
expense, including reasonable attorney's fees, incurred in connection with or
arising out of or in connection with this Agreement, any custodial agreement or
the Certificates, including, but not limited to, any such loss, liability or
expense incurred in connection with any legal action against the Trust or the
Trustee, the Paying Agent or the Custodian or any director, officer, employee or

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agent thereof, or the performance of any of the duties of the Trustee or the
Paying Agent under this Agreement or the duties of the Custodian under any
custodial agreement (including, but not limited to, the execution and delivery
of documents in connection with a foreclosure sale, trustee's sale, or deed in
lieu of foreclosure of a Mortgage Loan, including, but not, limited to, any deed
of reconveyance, any substitution of trustee documents or any other documents to
release, satisfy, cancel or discharge any Mortgage Loan) other than any loss,
liability or expense incurred by reason of the willful misfeasance, bad faith or
negligence in the performance of the duties under this Agreement or by reason of
the willful misfeasance, bad faith or gross negligence of the Custodian under
any custodial agreement (including specifically any loss, liability or expense
incurred by the Custodian by reason of simple negligence under any custodial
agreement). The provisions of this Section 8.5 shall survive the resignation or
removal of the Trustee or the Paying Agent and the termination of this Agreement
and the resignation or removal of the Custodian under any custodial agreement.
The Trustee may receive an additional indemnity from a party acceptable to the
Trustee.

         Section 8.6    Eligibility Requirements for Trustee

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

         Section 8.7    Resignation and Removal of Trustee

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

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

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

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

         Section 8.8    Successor Trustee

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

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

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

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appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.

         Section 8.9    Merger or Consolidation of Trustee

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

         Section 8.10   Appointment of Co-Trustee or Separate Trustee

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

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

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

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         exercised and performed singly by such separate trustee or co-trustee,
         but solely at the direction of the Trustee;

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

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

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

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

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

         Section 8.11   Tax Matters

         It is intended that the assets with respect to which the REMIC
elections are to be made, as set forth in Schedule III, shall constitute, and
that the conduct of matters relating to such assets shall be such as to qualify
such assets as REMICs as defined in and in accordance with the REMIC Provisions.
In furtherance of such intention, the Trustee covenants and agrees that it shall
act as agent (and the Trustee is hereby appointed to act as agent) on behalf of
each such REMIC and that in such capacity it shall: (a) prepare and file, or
cause to be prepared and filed, in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066 or any successor form adopted by
the Internal Revenue Service) and prepare and file or cause to be prepared and
filed with the Internal Revenue Service and applicable state or local tax
authorities income tax or information returns for each taxable year with respect
to each such REMIC, containing such information and at the times and in the
manner as may be required by the Code or state or local tax laws, regulations,
or rules, and furnish or cause to be furnished to

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

         To enable the Trustee to perform its duties as set forth herein, the
Depositor shall provide, or cause to be provided, to the Trustee within ten (10)
days after the Closing Date all information or data that the Trustee requests in
writing and determines to be relevant for tax purposes to the valuations and
offering prices of the Certificates, including, without limitation,

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the price, yield, prepayment assumption and projected cash flows of the
Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide to
the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.

         Section 8.12   Periodic Filings

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

                                    ARTICLE 9

                                   TERMINATION

         Section 9.1    Termination upon Liquidation or Purchase of all Mortgage
         Loans

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

               (i)    the purchase by the Master Servicer or its designee of all
         Mortgage Loans (including REO Properties not otherwise disposed of
         pursuant to Section 3.11(i)) remaining in the Trust Fund at a price
         equal to the sum of (A) 100% of the Stated Principal Balance of each
         Mortgage Loan that is not a Nonrecoverable Mortgage Loan; (B) the
         Projected Net Liquidation Value of each Nonrecoverable Mortgage Loan
         (not including any REO), and (C) the lesser of (x) the appraised value
         of any REO Property as determined by a real estate broker meeting the
         qualifications, and applying broker's price opinion methodology,
         generally acceptable to residential mortgage servicers, or other
         property valuation opinion methodology customarily used by residential
         mortgage servicers with respect to defaulted loans and (y) the Stated
         Principal Balance of each Mortgage Loan related to any REO Property. In
         addition, such purchase price shall include with respect to the
         Mortgage Loans (including REO Properties) accrued and

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         unpaid interest thereon at the applicable Net Rate, except to the
         extent the Servicer was not or would not be required to make a P&I
         Advance hereunder; and


               (ii)   the later of (A) the maturity or other liquidation (or
         any Advance with respect thereto) of the last Mortgage Loan remaining
         in the Trust Fund and the disposition of all REO Property and (B) the
         distribution to Certificateholders of all amounts required to be
         distributed to them pursuant to this Agreement. In no event shall the
         trusts created hereby continue beyond the earlier of (i) the expiration
         of 21 years from the death of the survivor of the descendants of Joseph
         P. Kennedy, the late Ambassador of the United States to the Court of
         St. James's, living on the date hereof, and (ii) the Latest Possible
         Maturity Date.

         The right to purchase all Mortgage Loans and REO Properties pursuant to
clause (i) above shall be conditioned upon the Pool Principal Balance, at the
time of any such repurchase, aggregating less than ten percent of the aggregate
Cut Off Date Principal Balance of the Mortgage Loans.

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

         Section 9.2    Final Distribution on the Certificates

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

         Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 10th
day and no later than the 15th day of the month next preceding the month of such
final distribution. Any such notice shall specify (a) the Distribution Date upon
which final

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distribution on the Certificates will be made upon presentation and surrender of
Certificates at the office therein designated, (b) the amount of such final
distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.

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

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon (or on their Notional Amount, if applicable) in
the case of an interest bearing Certificate, and (ii) as to the Residual
Certificates, the amount, if any, which remains on deposit in the Distribution
Account (other than the amounts retained to meet claims) after application
pursuant to clause (i) above.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the holder of each of the
Class R Certificates shall be entitled to all unclaimed funds and other assets
of the REMICs held for distribution to such Certificateholders, which remain
subject hereto.

         Section 9.3    Additional Termination Requirements

         (a)   In the event the Master Servicer exercises its purchase option as
provided in Section 9.1, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the effect that
the failure to comply with the requirements of this Section 9.3 will not (i)
result in the imposition of taxes on "prohibited transactions" on any REMIC as

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defined in section 860F of the Code, or (ii) cause any REMIC to fail to qualify
as a REMIC at any time that any Certificates are outstanding:

               (i)    The Trustee shall sell all of the assets that constitute
         the Trust Fund for cash as provided in Section 9.01(a)(i), and, within
         90 days of such sale, shall distribute to (or credit to the account of)
         the Holders of the Certificates the proceeds of such sale together with
         other cash on hand (less amounts retained to meet claims) in complete
         liquidation of the Trust Fund and each REMIC created hereunder; and

               (ii)   The Trustee shall attach a statement to the final federal
         income tax return for each REMIC created hereunder stating that
         pursuant to Treasury Regulation ss. 1.860F-1, the first day of the
         90-day liquidation period for each such REMIC was the date on which the
         Trustee sold the assets of the Trust Fund pursuant to Section
         9.01(a)(i).

         (b)   By their acceptance of the Certificates, the Holders thereof
hereby authorize the Trustee to undertake the above-described actions.

                                   ARTICLE 10

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
                             BY THE MASTER SERVICER

         Section 10.1   Duties of the Master Servicer.

         (a)   The Certificateholders, by their purchase and acceptance of the
Certificates, appoint Saxon Mortgage, Inc. as Master Servicer. For and on behalf
of the Depositor, the Trustee and the Certificateholders, the Master Servicer
shall master service the Mortgage Loans in accordance with the provisions of
this Agreement.

         (b)   The Master Servicer shall supervise and provide oversight of the
Servicer's performance of its obligations hereunder. The Master Servicer shall,
for the benefit of Certificateholders, use its reasonable best efforts to
enforce the obligation of the Servicer hereunder, and, upon its obtaining actual
knowledge of an Event of Default, shall take such action as is required by
Section 7.1.

         (c)   To the extent the Servicer defaults in its obligation to timely
make an P&I Advance required hereunder, upon notice of such failure, the Master
Servicer shall be required to make such P&I Advance by the related Distribution
Date. All rights of reimbursement otherwise available to the Servicer hereunder
in respect of any Advance shall be fully available to the Master Servicer.

         (d)   The Master Servicer shall, in the manner and at such times
specified, prepare and furnish the reports described in Sections 4.4 and 4.5
hereof.

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         Section 10.2   Compensation to the Master Servicer.

         The Master Servicer shall be entitled to the Master Servicing Fee on
each Distribution Date from amounts on deposit in the Master Servicer Custodial
Account. If, on any Distribution Date such fee is not distributed as provided
herein, the Master Servicer shall be entitled to direct the Trustee to pay the
Master Servicing Fee to the Master Servicer by withdrawal from the Distribution
Account. The Master Servicer shall be entitled to deposit account earnings as
provided in Section 3.5 as additional master servicing compensation.

         Section 10.3   Termination of Master Servicer; Trustee to Act.

         Each of the following shall constitute an event of default by the
Master Servicer (a "Master Servicer Event of Default") of its obligations
hereunder:

         (a)   any failure of the Master Servicer to remit to the Trustee any
payment required to be made to the Trustee for the benefit of Certificateholders
under the terms of this Agreement within five days of the due date therefor;

         (b)   the Master Servicer shall fail duly to observe or perform in any
material respect any of its covenants or agreements (other than its obligation
to make an Advance) contained herein and such failure shall continue unremedied
for a period of 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master Servicer
by the Trustee or to the Master Servicer and the Trustee by the Holders of
Certificates entitled to at least 51% of the Voting Rights; or

         (c)   a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and 1iabilities or similar proceeding, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Master Servicer and such decree or order shall have remained in force
undischarged and unstayed for a period of 60 days; or

         (d)   the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceeding of or relating to the
Master Servicer or relating to all or substantially all its property; or

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

         The rights and obligations of the Master Servicer under this Agreement
may be terminated only upon the occurrence of a Master Servicer Event of
Default. If a Master Servicer Event of Default described in clauses (a) through
(d) of this Section 10.3 shall occur, then, and in

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each and every such case, so long as such Master Servicer Event of Default shall
not have been remedied, the Trustee may, and at the direction of the Holders of
Certificates entitled to at least 51% of the Voting Rights, the Trustee shall,
by notice in writing to the Master Servicer, terminate all the rights and
obligations of the Master Servicer hereunder, other than its rights as a
Certificateholder. If a Master Servicer Event of Default described in clause (e)
of this Section 10.3 shall occur, the Trustee may terminate, by notice in
writing to the Master Servicer, all the rights and obligations of the Master
Servicer hereunder, other than its rights as a Certificateholder. On and after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer hereunder, whether with respect to the Certificates
(other than as a Holder thereof) or the Mortgage Loans or otherwise, shall, to
the maximum extent permitted by law, pass to and be vested in the Trustee
pursuant to and under this Section 10.3 (provided, however, that the Master
Servicer shall continue to be entitled to receive all amounts accrued or owing
to it hereunder on or prior to the date of such termination. Without limiting
the generality of the foregoing, the Trustee is hereby authorized and empowered
to execute and deliver on behalf of and at the expense of the Master Servicer,
as the Master Servicer's attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things that in
the Trustee's sole and absolute judgment may be necessary or appropriate, to
effect such termination. Notwithstanding the foregoing, upon any such
termination the Master Servicer shall do all things reasonably requested by the
Trustee to effect the termination of the Master Servicer's responsibilities,
rights and powers hereunder, and the transfer thereof to the Trustee, including,
but not limited to, promptly providing to the Trustee (and in no event later
than ten Business Days subsequent to such notice) all documents and records
electronic and otherwise reasonably requested by the Trustee to enable the
Trustee or its designee to assume and carry out the duties and obligations that
otherwise were to have been performed and carried out by the Master Servicer but
for such termination.

         As successor Master Servicer, the Trustee shall be entitled to the fees
to which the Master Servicer would have been entitled if the Master Servicer had
continued to act as such. The Trustee shall also, as successor Master Servicer,
be entitled to all the protections and indemnification afforded to the Master
Servicer hereunder.

         Notwithstanding the above, upon the occurrence of a Master Servicer
Event of Default, if the Trustee shall be unwilling so to act, or shall, if it
is unable so to act or, if the Holders of Certificates entitled to at least 51%
of the Voting Rights so request in writing to the Trustee, promptly appoint, or
petition a court of competent jurisdiction to appoint, any established mortgage
loan servicing institution acceptable to each Rating Agency and having a net
worth of not less than $15,000,000 as the successor to the Master Servicer. No
appointment of a successor to the Master Servicer shall be effective until the
assumption by such successor of all future responsibilities, duties and
liabilities of the Master Servicer hereunder. Pending appointment of a successor
to the Master Servicer, the Trustee or an affiliate shall, to the maximum extent
permitted by law, act in such capacity as hereinabove provided.

         In connection with any such appointment and assumption described
herein, the Trustee may make such arrangements for the compensation of such
successor out of payments received on the assets included in .the Trust Fund as
it and such successor shall agree; provided, however,

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that no such compensation shall be in excess of that permitted the Master
Servicer hereunder. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.

         Section 10.4   Notification to Certificateholders

         Upon any termination pursuant to Section 10.3 hereof, or any
appointment of a successor to the Master Servicer, the Trustee shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register.

                                   ARTICLE 11

                            MISCELLANEOUS PROVISIONS

         Section 11.1   Amendment

         This Agreement may be amended from time to time by the Depositor,
Servicer, the Master Servicer and the Trustee without the consent of any of the
Certificateholders (i) to cure any ambiguity or mistake, (ii) to cause the
provisions herein to conform to or be consistent with or in furtherance of the
statements made with respect to the Certificates, the Trust Fund or this
Agreement in any disclosure document pursuant to which any Certificates were
offered; to correct any defective provision herein or to supplement any
provision herein which may be inconsistent with any other provision herein,
(iii) to add to the duties of the Depositor, the Servicer or the Master
Servicer, (iv) to add any other provisions with respect to matters or questions
arising hereunder or (v) to modify, alter, amend, add to or rescind any of the
terms or provisions contained in this Agreement; provided that any action
pursuant to clauses (iv) or (v) above shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund), adversely affect in any material
respect the interests of any Certificateholder; provided, however, that the
amendment shall not be deemed to adversely affect in any material respect the
interests of the Certificateholders if the Person requesting the amendment
obtains a letter from each Rating Agency stating that the amendment would not
result in the downgrading or withdrawal of the respective ratings then assigned
to the Certificates; it being understood and agreed that any such letter in and
of itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, Servicer, the Depositor and the Master
Servicer also may at any time and from time to time amend this Agreement without
the consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i) maintain the
qualification of each REMIC created hereunder as a REMIC under the Code, (ii)
avoid or minimize the risk of the imposition of any tax on any such REMIC
pursuant to the Code that would be a claim at any time prior to the final
redemption of the Certificates or (iii) comply with any other requirements of
the Code, provided that the Trustee have been provided an Opinion of Counsel,
which opinion shall be an expense of the party requesting such opinion but in
any case shall not be an expense of the Trustee or the Trust Fund, to the effect
that such action

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<PAGE>

is necessary or helpful to, as applicable, (i) maintain such qualification, (ii)
avoid or minimize the risk of the imposition of such a tax or (iii) comply with
any such requirements of the Code.

         This Agreement may also be amended from time to time by the Depositor,
Servicer, the Master Servicer and the Trustee with the consent of the Holders of
a Majority in Interest of each Class of Certificates affected thereby for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66%, or (iii) reduce the
aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.

         Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC created hereunder or the Certificateholders
or cause any REMIC created hereunder to fail to qualify as a REMIC at any time
that any Certificates are outstanding.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

         Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 11.1.

         Section 11.2   Recordation of Agreement; Counterparts

         This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or

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<PAGE>

elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction a majority of the Certificateholders to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders. However, the foregoing sentence notwithstanding, the
Servicer may provide copies hereof to counsel, judicial officers, and government
agencies, or may cause this Agreement to be recorded, in any jurisdiction in
which, in the Servicer's judgment, such disclosure or recording may facilitate
foreclosure or other recovery with respect to any one or more of the Mortgage
Loans.

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed (by
facsimile or otherwise) simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.

         Section 11.3   Governing Law

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

         Section 11.4   Intention of Parties

         It is the express intent of the parties hereto that the conveyance of
the Trust Fund by the Depositor to the Trustee be, and be construed as, absolute
sales thereof to the Trustee. It is, further, not the intention of the parties
that such conveyances be deemed a pledge thereof by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York and
(ii) the conveyance provided for in this Agreement shall be deemed to be an
assignment and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

         The Depositor, for the benefit of the Certificateholders, shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Trust Fund, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. The Depositor shall arrange for filing any
Uniform Commercial Code continuation statements in connection with any security
interest granted or assigned to the Trustee for the benefit of the
Certificateholders.

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<PAGE>

         Section 11.5   Notices

         (a)   The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency with respect to each of the following of which it has
actual knowledge:

               1.     any material change or amendment to this Agreement;

               2.     the occurrence of any Event of Default that has not been
         cured;

               3.     the resignation or termination of the Servicer, the Master
         Servicer or the Trustee and the appointment of any successor;

               4.     the repurchase or substitution of Mortgage Loans pursuant
         to Section 2.3 hereof;

               5.     the final payment to Certificateholders; and

               6.     any rating action involving the long-term credit rating of
         the Master Servicer, which notice shall be made by first-class mail
         within two Business Days after the Trustee gains actual knowledge
         thereof.

         In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

               1.     Each report to Certificateholders described in Section 4.6
         hereof;

               2.     Each annual statement as to compliance described in
         Section 3.16 hereof;

               3.     Each annual independent public accountants' servicing
         report described in Section 3.17 hereof; and

               4.     Any notice of a purchase of a Mortgage Loan pursuant to
         Section 2.2, 2.3 or 3.11 hereof.

         (b)   All directions, demands, authorizations, consents, waivers,
communications and notices hereunder shall be in writing and shall be deemed to
have been duly given when delivered by first class mail, facsimile or courier to
the applicable Notice Address, or in the case of the Rating Agencies, the
address specified therefor in the definition corresponding to the name of such
Rating Agency. Notices to Certificateholders shall be deemed given when mailed,
first class postage prepaid, to their respective addresses appearing in the
Certificate Register.

         Section 11.6   Severability of Provisions

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms

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<PAGE>

shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.

         Section 11.7   Assignment

         Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.

         Section 11.8   Limitation on Rights of Certificateholders

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 11.8, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

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         Section 11.9   Inspection and Audit Rights

         The Servicer agrees that, on reasonable prior notice, it will permit
and will cause each Subservicer to permit any representative of the Depositor or
the Trustee during the Servicer's normal business hours, to examine all the
books of account, records, reports and other papers of the Servicer relating to
the Mortgage Loans, to make copies and extracts therefrom, to cause such books
to be audited by independent certified public accountants selected by the
Depositor or the Trustee and to discuss its affairs, finances and accounts
relating to the Mortgage Loans with its officers, employees and independent
public accountants (and by this provision the Master Servicer hereby authorizes
said accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the Depositor
or the Trustee of any right under this Section 11.9 shall be borne by the party
requesting such inspection; all other such expenses shall be borne by the
Servicer or the related Subservicer.

         Section 11.10  Certificates Nonassessable and Fully Paid

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

         Section 11.11  Limitations on Actions; No Proceedings.

         (a)   Other than pursuant to this Agreement, or in connection with or
incidental to the provisions or purposes of this Agreement, the trust created
hereunder shall not (i) issue debt or otherwise borrow money, (ii) merge or
consolidate with any other entity reorganize, liquidate or transfer all or
substantially all of its assets to any other entity, or (iii) otherwise engage
in any activity or exercise any power not provided for in this Agreement.

         (b)   Notwithstanding any prior termination of this Agreement, the
Trustee, the Servicer, the Master Servicer and the Depositor shall not, prior to
the date which is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause any Person to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Depositor or the Trust Fund under any federal or
state bankruptcy, insolvency or other similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Depositor or the Trust Fund or any substantial part of their respective
property, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust Fund.

                                      * * *

                                      110
<PAGE>

         IN WITNESS WHEREOF, the Depositor, Master Servicer, Servicer and the
Trustee, have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.

                                     SAXON ASSET SECURITIES COMPANY


                                     By: /s/ BRADLEY D. ADAMS
                                         -------------------------------------
                                         Bradley D. Adams, Senior Vice President


                                     SAXON MORTGAGE, INC.


                                     By: /s/ BRADLEY D. ADAMS
                                         -------------------------------------
                                         Bradley D. Adams, Senior Vice President


                                     MERITECH MORTGAGE SERVICES, INC.


                                     By: /s/ ROBERT G. PARTLOW
                                         ---------------------------------------
                                         Robert G. Partlow, SVP, Treasurer & CFO


                                     BANKERS TRUST COMPANY


                                     By: /s/ BARBARA CAMPBELL
                                         ---------------------------------------
                                         Barbara Campbell, Assistant Secretary
<PAGE>

                                                                  Execution Copy




                         SAXON ASSET SECURITIES COMPANY,

                                    Depositor


                              SAXON MORTGAGE, INC.,

                                 Master Servicer


                        MERITECH MORTGAGE SERVICES, INC.,

                                    Servicer


                                       and


                              BANKERS TRUST COMPANY

                                     Trustee


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


                         POOLING AND SERVICING AGREEMENT

                          Dated as of September 1, 2001


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



                       SAXON ASSET SECURITIES TRUST 2001-3



             MORTGAGE LOAN ASSET BACKED CERTIFICATES, SERIES 2001-3
<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                                     Page
                                                                                                                     ----

ARTICLE 1 DEFINITIONS 14
<S>                                                                                                                   <C>
        Section 1.1     Defined Terms................................................................................ 14

ARTICLE 2 CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES............................................... 38
        Section 2.1     Conveyance of Mortgage Loans................................................................. 38
        Section 2.2     Acceptance by Trustee of the Mortgage Loans.................................................. 41
        Section 2.3     Representations, Warranties and Covenants of the Depositor and Servicer and Master Servicer.. 43
        Section 2.4     Delivery of Opinion of Counsel in Connection with Substitutions.............................. 49
        Section 2.5     Execution and Delivery of Certificates....................................................... 49
        Section 2.6     Purchase of Subsequent Mortgage Loans........................................................ 49
        Section 2.7     Pre-Funding Account.......................................................................... 51

ARTICLE 3 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS............................................................. 52
        Section 3.1     Servicer to Service Mortgage Loans........................................................... 52
        Section 3.2     Subservicing; Enforcement of the Obligations of Servicers.................................... 53
        Section 3.3     Rights of the Depositor and the Trustee in Respect of the Servicer........................... 54
        Section 3.4     Master Servicer to Act as Servicer........................................................... 54
        Section 3.5     Collection of Mortgage Loan Payments; Collection Account; Distribution Account............... 54
        Section 3.6     Collection of Taxes, Assessments and Similar Items; Escrow Accounts.......................... 57
        Section 3.7     Access to Certain Documentation and Information Regarding the Mortgage Loans................. 58
        Section 3.8     Permitted Withdrawals from the Collection Account, Master Servicer Custodial Account and
                        Distribution Account......................................................................... 58
        Section 3.9     Maintenance of Hazard Insurance; Maintenance of Primary Insurance Policies................... 60
        Section 3.10    Enforcement of Due-on-Sale Clauses; Assumption Agreements.................................... 61
        Section 3.11    Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans.............. 63
        Section 3.12    Trustee to Cooperate; Release of Mortgage Files.............................................. 66
        Section 3.13    Documents Records and Funds in Possession of Servicer to be Held for the Trustee............. 67
        Section 3.14    Servicing Compensation....................................................................... 67
        Section 3.15    Access to Certain Documentation.............................................................. 68
        Section 3.16    Annual Statement as to Compliance............................................................ 68
        Section 3.17    Annual Independent Public Accountants' Servicing Statement; Financial Statements............. 68
        Section 3.18    Errors and Omissions Insurance; Fidelity Bonds............................................... 69
        Section 3.19    Advances..................................................................................... 69
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                             <C>
        Section 3.20    Advance Facility........................................................................ 70
        Section 3.21    Prepayment Penalties.................................................................... 70

ARTICLE 4 DISTRIBUTIONS......................................................................................... 71
        Section 4.1     Priorities of Distribution.............................................................. 71
        Section 4.2     Method of Distribution.................................................................. 75
        Section 4.3     Allocation of Losses.................................................................... 76
        Section 4.4     Reports to the Depositor and the Trustee................................................ 76
        Section 4.5     Reports by or on Behalf of the Master Servicer.......................................... 77
        Section 4.6     Basis Risk Reserve Fund................................................................. 79
        Section 4.7     The Instrument.......................................................................... 79
        Section 4.8     The Calculation Agent................................................................... 80

ARTICLE 5 THE CERTIFICATES...................................................................................... 80
        Section 5.1     The Certificates........................................................................ 80
        Section 5.2     Certificate Register; Registration of Transfer and Exchange of Certificates............. 81
        Section 5.3     Mutilated, Destroyed, Lost or Stolen Certificates....................................... 85
        Section 5.4     Persons Deemed Owners................................................................... 86
        Section 5.5     Access to List of Certificateholders' Names and Addresses............................... 86
        Section 5.6     Maintenance of Office or Agency......................................................... 86

ARTICLE 6 THE DEPOSITOR, THE SERVICER AND MASTER SERVICER....................................................... 86
        Section 6.1     Respective Liabilities of the Depositor, Servicer and Master Servicer................... 86
        Section 6.2     Merger or Consolidation of the Depositor, Servicer and Master Servicer.................. 87
        Section 6.3     Limitation on Liability of the Depositor, the Servicer, the Master Servicer and Others.. 87
        Section 6.4     Limitation on Resignation of Servicer................................................... 88

ARTICLE 7 SERVICER DEFAULT...................................................................................... 88
        Section 7.1     Events of Default....................................................................... 88
        Section 7.2     Notification to Certificateholders...................................................... 90

ARTICLE 8 CONCERNING THE TRUSTEE................................................................................ 90
        Section 8.1     Duties of Trustee....................................................................... 90
        Section 8.2     Certain Matters Affecting the Trustee................................................... 91
        Section 8.3     Trustee Not Liable for Certificates or Mortgage Loans................................... 93
        Section 8.4     Trustee May Own Certificates............................................................ 93
        Section 8.5     Trustee's Fees and Expenses............................................................. 93
        Section 8.6     Eligibility Requirements for Trustee.................................................... 94
        Section 8.7     Resignation and Removal of Trustee...................................................... 94
        Section 8.8     Successor Trustee....................................................................... 95
        Section 8.9     Merger or Consolidation of Trustee...................................................... 96
        Section 8.10    Appointment of Co-Trustee or Separate Trustee........................................... 96
        Section 8.11    Tax Matters............................................................................. 97
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                                         <C>
        Section 8.12    Periodic Filings...................................................... 99

ARTICLE 9 TERMINATION ........................................................................ 99
        Section 9.1     Termination upon Liquidation or Purchase of all Mortgage Loans........ 99
        Section 9.2     Final Distribution on the Certificates................................100
        Section 9.3     Additional Termination Requirements...................................101

ARTICLE 10 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER..............102
        Section 10.1    Duties of the Master Servicer.........................................102
        Section 10.2    Compensation to the Master Servicer...................................103
        Section 10.3    Termination of Master Servicer; Trustee to Act........................103
        Section 10.4    Notification to Certificateholders....................................105

ARTICLE 11 MISCELLANEOUS PROVISIONS...........................................................105
        Section 11.1    Amendment.............................................................105
        Section 11.2    Recordation of Agreement; Counterparts................................106
        Section 11.3    Governing Law.........................................................107
        Section 11.4    Intention of Parties..................................................107
        Section 11.5    Notices...............................................................108
        Section 11.6    Severability of Provisions............................................108
        Section 11.7    Assignment............................................................109
        Section 11.8    Limitation on Rights of Certificateholders............................109
        Section 11.9    Inspection and Audit Rights...........................................110
        Section 11.10   Certificates Nonassessable and Fully Paid.............................110
        Section 11.11   Limitations on Actions; No Proceedings................................110
</TABLE>
<PAGE>

                                    SCHEDULES

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

                                    EXHIBITS

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

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

                                 WITNESSETH THAT

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

                              PRELIMINARY STATEMENT

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

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

                                       1
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                     Initial Class                Minimum Percentage              Integral Multiples in
     Class Designation            Certificate Balance            Interest/Denomination                Excess Minimum
     -----------------            -------------------            ---------------------                --------------
--------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                <C>                              <C>
Class AF-1                           $ 63,820,000                       $1,000                           $1,000
--------------------------------------------------------------------------------------------------------------------------
Class AF-2                             26,600,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class AF-3                             29,390,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class AF-4                             21,930,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class AF-5                             23,150,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class AF-6                             18,320,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class AV-1                            272,010,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class AV-2                            146,780,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class A-IO                               Notional                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class X-IO                               Notional                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class S-1                                Notional                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class S-2                                Notional                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class M-1                              49,000,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class M-2                              28,000,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class B                                21,000,000                        1,000                            1,000
--------------------------------------------------------------------------------------------------------------------------
Class C                                       N/A                          50%                              N/A
--------------------------------------------------------------------------------------------------------------------------
Class P                                       N/A                         100%                              N/A
--------------------------------------------------------------------------------------------------------------------------
Class R                                       N/A                         100%                              N/A
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

Assumed Investment Rate:                Not applicable.
-----------------------

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

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

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

Closing Date:                           October 11, 2001.
------------

Component Certificates:                 None.
----------------------

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

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                         Initial Component      Pass-Through
                                        Designation           Balance               Rate
                                        -----------           -------               ----
                                            <S>                 <C>                 <C>
                                            N/A                 N/A                 N/A
</TABLE>


Custodial Agreement:                    The Custodial Agreement between the
-------------------                     Custodian and Trustee dated as of
                                        September 1, 2001.

Custodian:                              Bankers Trust Company, and its
---------                               successors and assigns in such capacity.

Cut Off Date:                           September 1, 2001.
------------

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

ERISA-Restricted Certificates:          The Class R Certificates.
-----------------------------

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

                                        (x) the Interest Funds available after
                                            payment of the amounts set forth in
                                            Section 4.1(g)(i) through (v), and:

                                        (y) the excess of:

                                            (i)   the Required
                                                  Overcollateralization Amount
                                                  for such date, over

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

Funding Period Termination Date:        January 9, 2002.
-------------------------------

Group:                                  Either Group I or Group II.
-----

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

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

                                       3
<PAGE>

Group I Class A Certificate:            Any Group I Certificate.
---------------------------

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

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

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

Group II Class A Certificates:          Any Group II Certificate (other than
-----------------------------           Class S-1 and Class S-2 Certificates).

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

Initial Distribution Date:              October 25, 2001.
-------------------------

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

Interest Determination Date:            With respect to the first Accrual Period
---------------------------             for the Variable Rate Certificates,
                                        October 9, 2001, and with respect to any
                                        subsequent Accrual Period for the
                                        Variable Rate Certificates, the second
                                        London Business Day preceding such
                                        Accrual Period.

Interest Only Certificates:             The Class A-IO, Class S-1, Class S-2 and
--------------------------              Class X-IO Certificates.

Lower Tier Interest:                    Any interest created in REMIC 1, REMIC
-------------------                     2, REMIC 3 or REMIC 4.

Master Servicing Fee Rate:              0.05% per annum.
-------------------------

Maximum Cap Rate:                       For any Distribution Date, a per annum
----------------                        rate that would equal the Net WAC Cap
                                        for such date if such Net WAC Cap were
                                        determined under the assumption that (i)
                                        each

                                       4
<PAGE>

                                        Mortgage Loan in Group II had an
                                        interest rate equal to the maximum rate
                                        permitted under the terms of the related
                                        mortgage note, and (ii) each Mortgage
                                        Loan in Group I had an interest rate
                                        equal to its stated fixed rate.

Mortgage Loan Group:                    Either Group I or Group II.
-------------------

Net Pledged Prepayment Penalties:       For each Distribution Date means the
--------------------------------        Pledged Prepayment Penalties remaining
                                        after payment of any Cap Carryover
                                        Amounts for such date.

Net Rate:                               As to each Mortgage Loan and
--------                                Distribution Date, the related Mortgage
                                        Rate as of the Determination Date
                                        immediately preceding such Distribution
                                        Date less the sum of the related
                                        Servicing Fee Rate and Master Servicing
                                        Fee Rate with respect to each Mortgage
                                        Loan.

Net WAC Cap:                            For any Distribution Date, a per annum
-----------                             rate equal to the Weighted Average Net
                                        Rate of the Mortgage Loans less,

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

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

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

                                        (y) the Pass-Through Rate for the Class
                                            S-1 Certificates for such
                                            Distribution Date multiplied by a
                                            fraction equal to:

                                            (i)   the Notional Principal Balance
                                                  of the Class S-1 Certificates
                                                  prior to such Distribution
                                                  Date divided by

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

                                        (z) the Pass-Through Rate for the Class
                                            S-2 Certificates for such
                                            Distribution Date multiplied by a
                                            fraction equal to:

                                       5
<PAGE>

                                            (i)   the Notional Principal Balance
                                                  of the Class S-2 Certificates
                                                  prior to such Distribution
                                                  Date divided by

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

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

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

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

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

                                        Distribution Dates       Notional Amount
                                        ------------------       ---------------

                                         1 - 6                    $ 204,100,000
                                         7 - 9                      195,500,000
                                        10 - 12                     190,000,000
                                        13 - 15                     175,500,000
                                        16 - 18                     165,500,000
                                        19 - 21                     152,500,000
                                        22 - 24                     124,400,000
                                        25 - 27                      98,100,000
                                        28 - 31                      74,100,000
                                        32 and thereafter                     0


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

                                        With respect to each Distribution Date
                                        and the Class S-1 Certificates, the
                                        lesser of the Stated Principal Balance
                                        of the Group II Mortgage Loans and
                                        amounts of deposit in the Pre-Funding
                                        Account allocable to Group II for such

                                       6
<PAGE>

                                        Distribution Date and the amount
                                        determined with reference to the
                                        following schedule:

                                        Distribution Dates       Notional Amount
                                        ------------------       ---------------

                                         1                       $ 486,966,417
                                         2                          468,025,219
                                         3                          446,102,476
                                         4                          421,391,039
                                         5                          394,071,634
                                         6                          368,521,775
                                         7                          344,626,717
                                         8                          322,279,588
                                         9                          301,380,219
                                        10                          281,834,413
                                        11                          263,554,858
                                        12                          246,459,703
                                        13                          230,472,268
                                        14                          215,520,919
                                        15                          201,538,589
                                        16                          188,462,477
                                        17                          176,233,826
                                        18                          164,797,851
                                        19                          154,103,173
                                        20                          144,101,822
                                        21                          134,748,909
                                        22                          126,002,429
                                        23                          117,823,100
                                        24                          110,174,182
                                        25 and thereafter                     0

                                        With respect to each Distribution Date
                                        and the Class S-2 Certificates, the
                                        lesser of the Stated Principal Balance
                                        of the Group II Mortgage Loans and
                                        amounts on deposit in the Pre-Funding
                                        Account allocable to Group II for such
                                        Distribution Date and the amount
                                        determined with reference to the
                                        following schedule:

                                        Distribution Dates       Notional Amount
                                        ------------------       ---------------

                                         1                        $ 486,966,417
                                         2                          468,025,219
                                         3                          446,102,476
                                         4                          421,391,039
                                         5                          394,071,634

                                       7
<PAGE>

                                         6                          368,521,775
                                         7                          344,626,717
                                         8                          322,279,588
                                         9                          301,380,219
                                        10                          281,834,413
                                        11                          263,554,858
                                        12                          246,459,703
                                        13                          230,472,268
                                        14                          215,520,919
                                        15                          201,538,589
                                        16                          188,462,477
                                        17                          176,233,826
                                        18                          164,797,851
                                        19                          154,103,173
                                        20                          144,101,822
                                        21                          134,748,909
                                        22                          126,002,429
                                        23                          117,823,100
                                        24                          110,174,182
                                        25                          103,019,877
                                        26                           96,329,655
                                        27                           90,073,132
                                        28                           84,222,218
                                        29                           78,750,640
                                        30                           73,634,091
                                        31                           68,849,602
                                        32                           64,375,642
                                        33                           60,192,079
                                        34                           56,280,080
                                        35                           52,622,028
                                        36                           49,201,463
                                        37 and thereafter                     0

Non-Delay Certificates:                 The Class AV-1, Class AV-2, Class S-1,
----------------------                  Class S-2, Class M-1, Class M-2, Class B
                                        and Class AF-1 Certificates.

Notional Amount Certificates:           The Class A-IO, Class S-1, Class S-2 and
----------------------------            Class X-IO Certificates.

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

                                       8
<PAGE>

Original Pre-Funded Amount:             $238,366,905.39, $68,368,111.69 of which
--------------------------              may be applied to the purchase of
                                        additional fixed rate Mortgage Loans for
                                        Group I and $169,998,793.70 of which may
                                        be applied to the purchase of additional
                                        adjustable rate Mortgage Loans for Group
                                        II (with such latter amount being
                                        proportionately applied between the
                                        applicable subgroups).

Physical Certificates:                  The Private Certificates.
---------------------

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

Principal Only Certificates:            None.
---------------------------

Principal Percentage:                   With respect to each Distribution Date
--------------------                    and Group, the percentage equivalent of
                                        a fraction, the numerator of which is
                                        the Principal Funds for such Group and
                                        date, and the denominator of which is
                                        the Principal Funds for both Groups and
                                        such date.

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

                                        (x) the product of :

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

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

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

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                        Distribution Date                Percentage
                                        -----------------                ----------
                                        <S>                                 <C>
                                        October 2001 - September 2004         0%
                                        October 2004 - September 2006        45%
                                        October 2006 - September 2007        80%
                                        October 2007 - September 2008       100%
                                        October 2008 and thereafter         300%
</TABLE>


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

Rating Agencies:                        S&P, Moody's and Fitch.
---------------

Regular Certificates:                   Any of the Offered Certificates and the
--------------------                    Class C Certificates.

Required Overcollateralization
------------------------------
Amount:                                 With respect to any Distribution Date:
------

                                            (i)   prior to the Stepdown Date,
                                                  2.25% of the Assumed Principal
                                                  Balance of the Mortgage Loans
                                                  as of the Cut Off Date;

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

                                                  (x) the lesser of:

                                                      (I)  2.25% of the Assumed
                                                           Principal Balance for
                                                           the Mortgage Loans
                                                           as of  the Cut Off
                                                           Date, and

                                                      (II) 4.50% of the Assumed
                                                           Principal Balance of
                                                           the Mortgage Loans on
                                                           the preceding
                                                           Determination Date,
                                                           and

                                                  (y) 0.50% of the Assumed
                                                      Principal Balance of the
                                                      Mortgage Loans as of the
                                                      Cut Off Date; and

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

                                       10
<PAGE>

Required Reserve Fund Deposit:          For any Distribution Date on which the
-----------------------------           difference between (a) the excess of the
                                        Net WAC Cap over the rate payable on the
                                        Class X-IO Certificates for such date,
                                        and (b) the weighted average of the
                                        rates on the Offered Certificates, other
                                        than the Class A-IO, Class S-1, Class
                                        S-2 and Class X-IO Certificates, is less
                                        than 0.25%, an amount that would cause
                                        the balance held in the Basis Risk
                                        Reserve Fund to equal 0.50% of the
                                        Assumed Principal Balance of the
                                        Mortgage Loans for such date, and, for
                                        any other Distribution Date, the amount
                                        that would cause the balance held in the
                                        Basis Risk Reserve Fund to equal $1,000.

Residual Certificates:                  The Class R Certificates.
---------------------

Sales Agreement:                        The Sales Agreement dated October 11,
---------------                         2001, between the Depositor and SMI
                                        regarding the sale of the Mortgage
                                        Loans.

Senior Certificates:                    Any Class of Certificates including the
-------------------                     letter "A" or the letter "S" in its
                                        class designation.

Servicing Fee Rate:                     As set forth in the Mortgage Loan
------------------                      Schedule.

Stepdown Date:                          The earlier to occur of:
-------------

                                            (i)   the later to occur of:

                                                  (A) the Distribution Date in
                                                      October 2004, and

                                                  (B) the first Distribution
                                                      Date on which the Group I
                                                      Class A Certificate
                                                      Principal Balance and
                                                      Group II Class A
                                                      Certificate Principal
                                                      Balance immediately prior
                                                      to such Distribution Date
                                                      (less the Principal Funds
                                                      for such Distribution
                                                      Date) is less than or
                                                      equal to 67.50% of the
                                                      Assumed Principal Balance
                                                      on such date, and

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

                                       11
<PAGE>

Subgroup IIA Mortgage Loans:            Mortgage Loans in Group II identified in
---------------------------             the Mortgage Loan Schedule as having
                                        been assigned to subgroup IIA.

Subgroup IIB Mortgage Loans:            Mortgage Loans in Group II identified in
---------------------------             the Mortgage Loan Schedule as having
                                        been assigned to subgroup IIB.

Subordinate Certificates:               Any Class M-1, Class M-2 and Class B
------------------------                Certificate.

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

                                            (i)   shall have a weighted average
                                                  Mortgage Rate of not less than
                                                  10.00% per annum;

                                            (ii)  shall have a weighted average
                                                  combined loan to value ratio
                                                  not in excess of 76.50%;

                                            (iii) shall be Mortgage Loans no
                                                  more than 78.00% of which (by
                                                  Stated Principal Balance) were
                                                  made in connection with a cash
                                                  out refinancing;

                                            (iv)  shall be Mortgage Loans at
                                                  least 75.00% of which (by
                                                  Stated Principal Balance)
                                                  shall be classified by Saxon
                                                  Mortgage, Inc. as "A-" or
                                                  better;

                                            (v)   shall be Mortgage Loans at
                                                  least 77.50% of which (by
                                                  Stated Principal Balance) will
                                                  have been originated pursuant
                                                  to a full documentation
                                                  program; and

                                            (vi)  shall have a weighted average
                                                  credit score of not less than
                                                  597.

                                        (b) After giving effect to the
                                            acquisition of all the Subsequent
                                            Mortgage Loans, the Mortgage Loans
                                            in Group II (which shall all be
                                            first lien Mortgage Loans bearing
                                            interest at adjustable rates):

                                            (i)   shall have a weighted average
                                                  Mortgage Rate of not less than
                                                  9.65% per annum;

                                       12
<PAGE>

                                            (ii)  shall have a weighted average
                                                  Loan to Value Ratio not in
                                                  excess of 80.00%;

                                            (iii) shall be Mortgage Loans at
                                                  least 67.00% of which (by
                                                  Stated Principal Balance)
                                                  shall be classified by Saxon
                                                  Mortgage, Inc. as "A-" or
                                                  better; and

                                            (iv)  shall have a weighted average
                                                  credit score of not less than
                                                  572.

Target Percentage:                      For the Senior Certificates, 67.50%; for
-----------------                       the Class M-1 Certificates, 81.50%; for
                                        the Class M-2 Certificates, 89.50%; and
                                        for the Class B Certificates, 95.50%.

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

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

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

                                        equals or exceeds 50% of the Senior
                                        Credit Enhancement Percentage.

Trustee Fee Rate:                       0.00525% per annum.
----------------

Trustee Series Designation:             Saxon 2001-3(SX0103)
--------------------------

Underwriters:                           Credit Suisse First Boston Corporation,
------------                            Greenwich Capital Markets, Inc., First
                                        Union Securities, Inc. and J.P. Morgan
                                        Securities Inc.

Upper Tier REMIC:                       REMIC 5
----------------

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

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

                                       13
<PAGE>

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

                                            (ii)  0.50% to each of the Class S-1
                                                  and Class S-2 Certificates;

                                            (iii) 95% to the Group I
                                                  Certificates and Group II
                                                  Certificates (other than the
                                                  Class S-1 and Class S-2
                                                  Certificates) in proportion to
                                                  their respective outstanding
                                                  Certificate Principal
                                                  Balances; and

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

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


                                   ARTICLE 1

                                   DEFINITIONS

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

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

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

         Advance: Each P&I Advance and Servicing Advance.

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

         Allocable Portion: For each Group and Distribution Date, an amount
equal to the (i) Interest Funds for such Group and date; divided by (ii) the
Interest Funds for both groups and such date.

                                       14
<PAGE>

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

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

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

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

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

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

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

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

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

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

         Cap Carryover Amount: On any Distribution Date and as to any Class
whose Pass-Through Rate is subject to a cap equal to the Net WAC Cap, the sum
of:

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

                  (ii)     the excess of the amount described in clause (i)(A)
         above over the amount described in clause (i)(B) above for all prior
         Distribution Dates, together with interest

                                       15
<PAGE>

         thereon calculated at the applicable Pass-Through Rate (determined
         without regard to the Net WAC Cap), reduced by all amounts previously
         distributed with respect to such Class pursuant to Section 4.1(g) in
         respect of Cap Carryover Amounts on all such prior Distribution Dates.

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

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

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

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

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

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

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

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

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

                  (i)      the sum of:

                                       16
<PAGE>

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

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

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

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

                  (ii)     the lesser of:

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

                           (B)      the excess, if any, of:

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

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

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

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

                  (i)      the sum of:

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

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

                  (ii)     the lesser of:

                                       17
<PAGE>

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

                           (B)      the excess, if any, of:

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

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

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

                  (i)      the sum of:

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

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

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

                  (ii)     the lesser of:

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

                           (B)      the excess, if any, of:

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

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

                                       18
<PAGE>

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

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

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

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

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

         Coop Shares: Shares issued by a Cooperative Corporation.

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

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

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

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

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

         Current Interest: With respect to any Distribution Date and any Class
of Certificates, the interest accrued on the Class Certificate Balance (or
Notional Principal Balance) thereof immediately prior to such Distribution Date
during the related Accrual Period at the applicable Pass-Through Rate; provided,
however, that such Current Interest shall be reduced by such

                                       19
<PAGE>

Class's pro rata share (based on the amount of Current Interest distributable on
such Class) of any Net Prepayment Interest Shortfalls and Relief Act Shortfalls
for such Distribution Date. All calculations of interest on each Class of Delay
Certificates will be made on the basis of a 360-day year assumed to consist of
twelve 30-day months and all calculations of interest on each Class of Non-Delay
Certificates will be made on the basis of the actual number of days elapsed in
the related Accrual Period and a 360-day year.

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

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

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

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

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

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

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

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

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

                                       20
<PAGE>

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

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

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

         Distribution Account Deposit Date: As to any Distribution Date, the
Business Day immediately preceding such Distribution Date.

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

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

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

         Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the uninsured
deposits in which accounts are otherwise secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its fiduciary
capacity or (iv) any other account acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.

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

                                       21
<PAGE>

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

         Event of Default: As defined in Section 7.1 hereof.

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

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

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

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

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

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

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

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

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

                  (iii)    the Funding Period Termination Date.

                                       22
<PAGE>

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

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

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

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

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

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

                  (i)      the excess of:

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

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

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

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

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

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

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

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

                                       23
<PAGE>

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

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

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

         Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated by the
Servicer or Master Servicer in any manner, including but not limited to a
disposition pursuant to Section 3.11(i), in the Prepayment Period for such
Distribution Date and as to which the Servicer has determined (in accordance
with this Agreement) that it has received all amounts it expects to receive in
connection with the liquidation of such Mortgage Loan, including the final
disposition of an REO Property.

         Liquidation Proceeds: Amounts, including Insurance Proceeds, received
by the Servicer or Master Servicer in connection with the partial or complete
liquidation of defaulted Mortgage Loans, whether through trustee's sale,
foreclosure sale, disposition pursuant to Section 3.11(i), or otherwise or
amounts received in connection with any condemnation or partial release of a
Mortgaged Property and any other proceeds received in connection with an REO
Property, less the sum of related unreimbursed Servicing Fees, Servicing
Advances and P&I Advances.

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

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

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

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

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

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

                                       24
<PAGE>

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

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

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

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

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

         Moody's: Moody's Investors Service, Inc., or any successor thereto. If
Moody's is designated as a Rating Agency in the Preliminary Statement, the
address for notices to Moody's shall be Moody's Investors Service, Inc., 99
Church Street, New York, New York 10007, Attention: Residential Pass-Through
Monitoring, or such other address as Moody's may hereafter furnish to the
Depositor or the Master Servicer.

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

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

         Mortgage Loan Documents: As defined in Section 2.1 hereof.

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

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

                  (i)      the loan number;

                  (ii)     the Mortgagor's name;

                                       25
<PAGE>

                  (iii)    the original principal balance;

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

                  (v)      Mortgage Rate;

                  (vi)     Servicing Fee; and

                  (vii)    group or subgroup.



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

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

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

         Mortgagor: Any obligor on a Mortgage Note.

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

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

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

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

                                       26
<PAGE>

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


                  (i)      If to the Depositor:

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

                  (ii)     If to the Master Servicer:

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

                  (iii)    If to the Trustee:

                           Bankers Trust Company
                           1761 East St. Andrew Place
                           Santa Ana, California 92705
                           Attention: SX 0103

                  (iv)     If to the Servicer:

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

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

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

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

                                       27
<PAGE>

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

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

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

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

         OTS: The Office of Thrift Supervision.

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

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

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

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

                                       28
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                       29
<PAGE>

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

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

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

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

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

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

                                       30
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       31
<PAGE>

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

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

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

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

                  (i)      the sum of:

                           (A)      the Principal Funds for that Distribution
                                    Date and Group, and

                           (B)      the related Principal Percentage of any
                                    Extra Principal Distribution Amount for that
                                    Distribution Date over

                  (ii)     the related Principal Percentage of the Released
         Principal Amount for that Distribution Date.

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

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

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

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

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

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

                                       32
<PAGE>

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

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

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

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

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

         PUD: Planned Unit Development.

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

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

         Realized Loss: With respect to any Mortgage Loan (other than a
Nonrecoverable Mortgage Loan), the amount by which the unpaid principal balance
thereof exceeds the net amount recovered in liquidation thereof (after payment
of expenses of liquidation, unpaid Servicing Fees, and reimbursement of
Advances), after payment of accrued interest on such

                                       33
<PAGE>

Mortgage Loan and after application of any Insurance Proceeds with respect
thereto. With respect to any Nonrecoverable Mortgage Loan, the sum of (i) the
amount by which the unpaid principal balance thereof exceeds the Projected Net
Liquidation Value thereof and (ii) the amount, if any, by which the Projected
Net Liquidation Value thereof exceeds Liquidation Proceeds received in respect
thereof. The Realized Loss in respect of any Nonrecoverable Mortgage Loan
calculated pursuant to clause (i) of the preceding sentence shall be given
effect as of the Prepayment Period during which the Servicer or Master Servicer
classifies such loan as a Nonrecoverable Mortgage Loan.

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

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

         Reference Bank: Leading banks selected by the Master Servicer and
engaged in transactions in U.S. dollar deposits in the London interbank market.

         Refinancing Mortgage Loan: Any Mortgage Loan originated in connection
with the refinancing of an existing mortgage loan.

         Released Principal Amount: With respect to any Distribution Date, the
amount by which the Overcollateralization Amount (assuming for such purpose that
all Principal Funds for such Distribution Date are distributed as principal to
the Certificates) exceeds the Required Overcollateralization Amount for such
date.

         Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

         Relief Act Shortfall: With respect to any Mortgage Loan as to which
there has been a reduction in the amount of interest collectible thereon as a
result of application of the Relief Act, any amount by which interest
collectible on such Mortgage Loan for the Due Date in the related Due Period is
less than interest accrued thereon for the applicable one-month period at the
Net Rate without giving effect to such reduction.

         REMIC: A "real estate mortgage investment conduit" within the meaning
of section 860D of the Code.

         REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to REMICs and the REMIC Provisions issued after the
Closing Date.

         REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at sections 860A through
860G of subchapter M of chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.

                                       34
<PAGE>

         Remittance Agency Agreement: As defined in Section 2.2 hereof.

         REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.

         Request for Release: The Request for Release submitted by the Servicer
to the Trustee, substantially in the form of Exhibits I and J, as appropriate.

         Required Recordation States: The states of Florida and Mississippi.

         Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Agreement and also
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.

         S&P: Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, the address for notices to S&P shall be Standard & Poor's, 26
Broadway, 15th Floor, New York, New York 10004, Attention: Mortgage Surveillance
Monitoring, or such other address as S&P may hereafter furnish to the Depositor
and the Master Servicer.

         Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due
on any Due Date allocable to principal and/or interest on such Mortgage Loan
which, unless otherwise specified herein, shall give effect to any related Debt
Service Reduction and any Deficient Valuation that affects the amount of the
monthly payment due on such Mortgage Loan.

         Securities Act: The Securities Act of 1933, as amended.

         Security Release Certification: As defined in Section 2.2 hereof.

         Senior Principal Distribution Amount: With respect to each Group and
any Distribution Date before the Stepdown Date or as to which a Trigger Event
has occurred, 100% of the Principal Distribution Amount for such Group and
Distribution Date, and with respect to any Distribution Date on or after the
Stepdown Date and as to which a Trigger Event has not occurred, the related
Principal Percentage of the excess of:

                  (i)      the Group I and Group II Class A Certificate
         Principal Balances immediately prior to such Distribution Date over

                  (ii)     the lesser of:

                           (A)      the related Target Percentage of the Assumed
                                    Principal Balance of the Mortgage Loans on
                                    the preceding Determination Date, and

                           (B)      the excess, if any, of:

                                       35
<PAGE>

                                    (I)      the Assumed Principal Balance of
                                             the Mortgage Loans on the preceding
                                             Determination Date over

                                    (II)     the Assumed Principal Balance of
                                             the Mortgage Loans on the preceding
                                             Determination Date less 0.50% of
                                             the Assumed Principal Balance as of
                                             the Cut Off Date (but in no event
                                             less than zero).

         Senior Credit Enhancement Percentage: As of any Distribution Date is
equal to a fraction, expressed as a percentage, the numerator of which is the
sum of the aggregate Certificate Principal Balance of the Subordinate
Certificates for such Distribution Date and the Overcollateralization Amount for
such Distribution Date, and the denominator of which is the Assumed Principal
Balance of the Mortgage Loans as of such Distribution Date.

         Servicer: Meritech and its permitted successors and assigns.

         Servicer Deposit Date: The twenty-first day of each month, or if such
day is not a Business Day, the next succeeding day.

         Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations hereunder, including, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.1 and Section 3.9.

         Servicing Fee: As to each Mortgage Loan and any Distribution Date, an
amount payable out of each full payment of interest received on such Mortgage
Loan and equal to one-twelfth of the Servicing Fee Rate multiplied by the Stated
Principal Balance of such Mortgage Loan as of the Due Date in of the month prior
to the month of such Distribution Date (or, in the case of an Odd Due Date
Mortgage Loan, the Due Date occurring in the second month preceding the month of
such Distribution Date).

         Servicing Officer: Any of the President, any Vice President (however
denominated), or Assistant Vice President of the Servicer involved in, or
responsible for, the administration and servicing of one or more Mortgage Loans
at the time of performance of the relevant activity of the Servicer.

         SMI: Saxon Mortgage, Inc, a Virginia corporation, and its successor and
assigns.

         Startup Day: The Closing Date.

         Stated Principal Balance: As to any Mortgage Loan and Determination
Date, the unpaid principal balance of such Mortgage Loan as of the applicable
Due Date as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization

                                       36
<PAGE>

schedule by reason of any moratorium or similar waiver or grace period) after
giving effect to (i) any previous partial Principal Prepayments and Liquidation
Proceeds allocable to principal (other than with respect to any Liquidated
Mortgage Loan), (ii) the payment of principal due on such Due Date, and (iii) in
the case of any Nonrecoverable Mortgage Loan, the amount of any Realized Loss in
respect thereof (but otherwise determined, in each case, regardless of any
delinquency in payment by the related Mortgagor).

         Subservicer: Any person to whom the Servicer (or Master Servicer) has
contracted for the servicing of all or a portion of the Mortgage Loans pursuant
to Section 3.2 hereof.

         Subsequent Cut Off Date: The date specified in a Subsequent Sales
Agreement with respect to those Subsequent Mortgage Loans which are transferred
and assigned to the Trust Fund pursuant to the related Subsequent Sales
Agreement.

         Subsequent Mortgage Loans: The Mortgage Loans listed on a Mortgage Loan
Schedule attached to a Subsequent Sales Agreement.

         Subsequent Recoveries: As to any Nonrecoverable Mortgage Loan, the
excess of (i) any net Liquidation Proceeds received in respect of such loan;
over (ii) the Projected Net Liquidation Value thereof.

         Subsequent Sales Agreement: Each Subsequent Sales Agreement dated as of
a Subsequent Sales Date by which Subsequent Mortgage Loans are sold and assigned
to the Trust.

         Subsequent Sales Date: The date specified in each Subsequent Sales
Agreement.

         Substitute Mortgage Loan: A Mortgage Loan substituted by the Depositor
or Master Servicer for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the form
of Exhibit I, (i) have a Stated Principal Balance, after deduction of the
principal portion of the Scheduled Payment due in the month of substitution, not
in excess of, and not more than 10% less than the Stated Principal Balance of
the Deleted Mortgage Loan; (ii) accrue interest on the same basis as the Deleted
Mortgage Loan and be accruing interest at a rate no lower than and not more than
1% per annum higher than, that of the Deleted Mortgage Loan; (iii) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (iv) not
be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan;
and (v) comply with each representation and warranty set forth in Section 2.3
hereof. Any of the characteristics described above may be satisfied in the
aggregate by one or more Substitute Mortgage Loans.

         Substitution Adjustment Amount: The meaning ascribed to such term
pursuant to Section 2.3 hereof.

         Tax Matters Person: The person designated as "tax matters person" in
the manner provided under Treasury regulationss.1.860F-4(d) and Treasury
regulationss. 301.6231(a)(7)-1. Initially, the Tax Matters Person shall be the
Trustee.

                                       37
<PAGE>

         Tax Matters Person Certificate: The Class R Certificate with a
Denomination of 0.00001%.

         Telerate Page 3750: The display page currently so designated on the
Bridge Telerate Market Report (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).

         Transfer: Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.

         Trustee: Bankers Trust Company and its successors and, if a successor
trustee is appointed hereunder, such successor.

         Trustee Fee: As to any Distribution Date, an amount equal to
one-twelfth of the Trustee Fee Rate multiplied by the Pool Principal Balance
with respect to such Distribution Date, to be paid by the Master Servicer from
the Master Servicing Fee.

         Trust Fund: As described in Section 2.01 hereof.

         Unpaid Realized Loss Amount: As to any Distribution Date and any Class,
the excess of:

                  (i)      the Applied Realized Loss Amount for such Class over

                  (ii)     the sum of all distributions in reduction of such
                           Applied Realized Loss Amount on all previous
                           Distribution Dates.

         Weighted Average Net Rate: The weighted average of the Mortgage Rates
of the Mortgage Loans less the sum of the Servicing Fee Rate and the Master
Servicing Fee Rate, as applicable, provided, however, that for the first four
Distribution Dates, the Weighted Average Net Rate shall equal the product of (i)
the weighted average of the Mortgage Rates of only those Mortgage Loans
transferred to the Trust Fund on the Closing Date less the sum of the Servicing
Fee Rate and the Master Servicing Fee Rate, as applicable, multiplied by (ii) a
fraction, the numerator of which is the aggregate principal balance of the
Mortgage Loans transferred to the Trust Fund on the Closing Date and the
denominator of which is the Assumed Principal Balance.


                                   ARTICLE 2

                CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
                                   WARRANTIES

         Section 2.1    Conveyance of Mortgage Loans
                        ----------------------------

         (a) To provide for the distribution of the principal of and interest on
the Certificates in accordance with their terms, the distribution of all other
sums distributable hereunder with respect to the Certificates and the
performance of the covenants contained herein, the Depositor hereby bargains,
sells, conveys, assigns and transfers to the Trustee, in trust, without recourse

                                       38
<PAGE>

and for the exclusive benefit of the Certificateholders as their interests may
appear, all the Depositor's right, title and interest in and to any and all
benefits accruing to the Depositor from: (i) the Mortgage Loans, which the
Depositor is causing to be delivered to the Trustee (or the Custodian) herewith
(and all Substitute Mortgage Loans substituted therefor), together in each case
with the related Mortgage Files and the Depositor's interest in any collateral
that secured a Mortgage Loan but that is acquired by foreclosure or deed-in-lieu
of foreclosure after the Closing Date, and all Scheduled Payments due after the
Cut Off Date and all principal prepayments received with respect to the Mortgage
Loans paid by the borrower after the Cut Off Date and proceeds of the
conversion, voluntary or involuntary, of the foregoing; (ii) any Subsequent
Mortgage Loans; (iii) the Sales Agreement, except that the Depositor does not
assign to the Trustee any of its rights under Sections 9 and 12 of the Sales
Agreement; (iv) any Pre-Funding Account whether in the form of cash,
instruments, securities or other properties and (v) all proceeds of any of the
foregoing (including, but not limited to, all proceeds of any mortgage
insurance, hazard insurance, or title insurance policy relating to the Mortgage
Loans, cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other forms of obligations and receivables, which at any time
constitute all or part or are included in the proceeds of any of the foregoing)
to pay the Certificates as specified herein (items (i) through (v) above
collectively, the "Trust Fund").

         With respect to any Mortgage Loan that does not have a first payment
date on or before the last day of the Due Period immediately preceding the first
Distribution Date, the Depositor shall deposit into the Distribution Account on
or before the Distribution Account Deposit Date relating to the first
Distribution Date, an amount equal to one month's interest at the related Net
Rate on the Cut Off Date Principal Balance of such Mortgage Loan.

         (b) In connection with the transfer set forth in clause (a) above, the
Depositor has delivered or caused to be delivered to the Trustee or the
Custodian on its behalf for the benefit of the Certificateholders the following
documents or instruments (collectively, the "Mortgage Loan Documents") with
respect to each Mortgage Loan so transferred:

                  (i)      (A) the original Mortgage Note endorsed by manual or
         facsimile signature to the Trustee or the Custodian or in blank,
         without recourse, with all intervening endorsements showing a complete
         chain of endorsement from the originator to the Person endorsing the
         Mortgage Note (the "Last Endorsee") (each such endorsement being
         sufficient to transfer all right, title and interest of the party so
         endorsing, as noteholder or assignee thereof, in and to that Mortgage
         Note); or

                           (B) with respect to any Lost Mortgage Note, a lost
                  note affidavit from the Depositor stating that the original
                  Mortgage Note was lost or destroyed, together with a copy of
                  such Mortgage Note;

                  (ii)     except with respect to any Cooperative Loan, the
         original recorded Mortgage or a copy of such Mortgage certified by the
         Depositor, the originating lender, settlement agent, or escrow company
         as being a true and complete copy of the Mortgage;

                                       39
<PAGE>

                  (iii)    except with respect to any Mortgage Loan for which
         the related Mortgage names the Custodian as nominee for the originating
         lender (or similar designation satisfactory to the Custodian), as
         beneficiary or mortgagee, either (A) a duly executed assignment of the
         Mortgage in blank, or (B) an original recorded assignment of the
         Mortgage from the Last Endorsee to the Custodian or a copy of such
         assignment of Mortgage certified by the Depositor, the originating
         lender, settlement agent, or escrow company as being a true and
         complete copy thereof which in either case may be included in a blanket
         assignment or assignments;

                  (iv)     each interim recorded assignment of such Mortgage, or
         a copy of each such interim recorded assignment of Mortgage certified
         by the Depositor, the originating lender, settlement agent, or escrow
         company as being a true and complete copy thereof;

                  (v)      the original or copies of each assumption,
         modification, written assurance or substitution agreement, if any;

                  (vi)     except as to any second lien Mortgage Loan in the
         original principal amount of $50,000.00 or less, either the original or
         duplicate original title policy (including all riders thereto) with
         respect to the related Mortgaged Property, if available, provided that
         the title policy (including all riders thereto) will be delivered as
         soon as it becomes available, and if the title policy is not available,
         and to the extent required pursuant to the second paragraph below or
         otherwise in connection with the rating of the Certificates, a written
         commitment or interim binder or preliminary report of the title issued
         by the title insurance or escrow company with respect to the Mortgaged
         Property; and

                  (vii)    in the case of a Cooperative Loan, the originals of
         the following documents or instruments:

                           (a)      The Coop Shares, together with a stock power
                                    in blank;
                           (b)      The executed Security Agreement;
                           (c)      The executed Proprietary Lease;
                           (d)      The executed Recognition Agreement;
                           (e)      The executed UCC-1 financing statement with
                                    evidence of recording thereon which have
                                    been filed in all places required to perfect
                                    the Depositor's interest in the Coop Shares
                                    and the Proprietary Lease; and
                           (f)      Executed UCC-3 financing statements or other
                                    appropriate UCC financing statements
                                    required by state law, evidencing a complete
                                    and unbroken line from the mortgagee to the
                                    Trustee with evidence of recording thereon
                                    (or in a form suitable for recordation).

         In the event that in connection with any Mortgage Loan the Depositor
cannot deliver (a) the original recorded Mortgage or (b) any recorded
assignments or interim assignments satisfying the requirements of clause (ii) or
(iii) above, respectively, concurrently with the execution and delivery hereof
because such document or documents have not been returned from

                                       40
<PAGE>

the applicable public recording office, the Depositor shall deliver such
documents to the Trustee or the Custodian on its behalf as promptly as possible
upon receipt thereof and, in any event, within 720 days following the Closing
Date. The Depositor or Servicer shall forward or cause to be forwarded to the
Trustee or the Custodian on its behalf (a) from time to time additional original
documents evidencing an assumption or modification of a Mortgage Loan and (b)
any other documents required to be delivered by the Depositor or the Servicer to
the Trustee. In the case where a public recording office retains the original
recorded Mortgage or in the case where a Mortgage is lost after recordation in a
public recording office, the Depositor shall deliver to the Trustee a copy of
such Mortgage certified (to the extent such certification is reasonably
obtainable) by such public recording office to be a true and complete copy of
the original recorded Mortgage.

         In addition, in the event that in connection with any Mortgage Loan the
Depositor cannot deliver the original or duplicate original lender's title
policy (together with all riders thereto), satisfying the requirements of clause
(vi) above, concurrently with the execution and delivery hereof because the
related Mortgage or a related assignment has not been returned from the
applicable public recording office, the Depositor shall promptly deliver to the
Trustee or the Custodian on its behalf such original or duplicate original
lender's title policy (together with all riders thereto) upon receipt thereof
from the applicable title insurer, and in any event, within 720 days following
the Closing Date.

         Subject to the immediately following sentence, as promptly as
practicable subsequent to the transfer set forth in clause (a) of this Section
2.1, and in any event, within thirty (30) days thereafter, the Servicer shall as
to any Mortgage Loan with respect to which the Depositor delivers an assignment
of the Mortgage in blank pursuant to clause (b)(iii)(A) of this Section 2.1, (i)
complete each such assignment of Mortgage to conform to clause (b)(iii)(B) of
this Section 2.1, (ii) cause such assignment to be in proper form for recording
in the appropriate public office for real property records, and (iii) cause to
be delivered for recording in the appropriate public office for real property
records each such assignment of the Mortgages, except that, with respect to any
assignments of Mortgage as to which the Servicer has not received the
information required to prepare such assignments in recordable form, the
Servicer's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after receipt thereof. Notwithstanding the foregoing,
the Servicer need not cause to be recorded any assignment which relates to a
Mortgage Loan in any state other than the Required Recordation States.

         In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee or the Custodian on its behalf, will deposit in the Collection Account
the portion of such payment that is required to be deposited in the Collection
Account pursuant to Section 3.8 hereof.

         Section 2.2    Acceptance by Trustee of the Mortgage Loans
                        -------------------------------------------

         The Trustee or the Custodian, on behalf of the Trustee acknowledges
receipt of the documents identified in the initial certification in the form
annexed hereto as Exhibit C (the "Initial Certification") and declares that it
or the Custodian holds and will hold such documents

                                       41
<PAGE>

and the other documents delivered to it constituting the Mortgage Files, and
that it or the Custodian holds or will hold such other assets as are included in
the Trust Fund, in trust for the exclusive use and benefit of all present and
future Certificateholders.

         The Trustee agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Closing Date to the Depositor, the Master Servicer
and the Servicer an Initial Certification in the form annexed hereto as Exhibit
C. Based on its or the Custodian's review and examination, and only as to the
documents identified in such Initial Certification, the Custodian, on behalf of
the Trustee acknowledges that such documents appear regular on their face and
relate to such Mortgage Loan. Neither the Trustee nor the Custodian shall be
under any duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same are
genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded in the real estate records or that they are other
than what they purport to be on their face.

         Not later than 360 days after the Closing Date, the Trustee shall
deliver or shall cause the Custodian to deliver to the Depositor, the Master
Servicer and the Servicer a Final Certification in the form annexed hereto as
Exhibit D, with any applicable exceptions noted thereon.

         If, in the course of such review, the Trustee or the Custodian, on
behalf of the Trustee finds any document constituting a part of a Mortgage File
which does not meet the requirements of Section 2.1 hereof, the Trustee shall
list or shall cause the Custodian to list such as an exception in the Final
Certification; provided, however that neither the Trustee nor the Custodian
shall make any determination as to whether (i) any endorsement is sufficient to
transfer all right, title and interest of the party so endorsing, as noteholder
or assignee thereof, in and to that Mortgage Note or (ii) any assignment is in
recordable form or is sufficient to effect the assignment of and transfer to the
assignee thereof under the mortgage to which the assignment relates. SMI shall
promptly correct or cure such defect within 90 days from the date it was so
notified of such defect and, if SMI does not correct or cure such defect within
such period, SMI shall either (a) substitute for the related Mortgage Loan a
Substitute Mortgage Loan, which substitution shall be accomplished in the manner
and subject to the conditions set forth in Section 2.3 hereof, or (b) purchase
such Mortgage Loan from the Trustee within 90 days from the date SMI was
notified of such defect in writing at the Purchase Price of such Mortgage Loan;
provided, however, that in no event shall such substitution or purchase occur
more than 540 days from the Closing Date, except that if the substitution or
purchase of a Mortgage Loan pursuant to this provision is required by reason of
a delay in delivery of any documents by the appropriate recording office, and
there is a dispute between either the Servicer or SMI and the Trustee over the
location or status of the recorded document, then such substitution or purchase
shall occur within 720 days from the Closing Date. Any such substitution
pursuant to (a) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel required by Section 2.4 hereof, if any, and any
substitution pursuant to (a) above shall not be effected prior to the additional
delivery to the Trustee of a Request for Release substantially in the form of
Exhibit I. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. The Purchase Price for any such Mortgage
Loan shall be deposited by SMI in the Collection Account on or prior to the
Distribution Account Deposit Date for the Distribution

                                       42
<PAGE>

Date in the month following the month of repurchase and, upon receipt of such
deposit and certification with respect thereto in the form of Exhibit J hereto,
the Trustee shall cause the Custodian to release the related Mortgage File to
SMI and shall execute and deliver at SMI's request such instruments of transfer
or assignment prepared by SMI, in each case without recourse, as shall be
necessary to vest in SMI, or a designee, the Trustee's interest in any Mortgage
Loan released pursuant hereto.

         The Trustee shall retain or shall cause the Custodian to retain
possession and custody of each Mortgage File in accordance with and subject to
the terms and conditions set forth herein. The Servicer shall promptly deliver
to the Trustee or the Custodian on its behalf, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Mortgage File as come into the possession of the Servicer from time to time.

         It is understood and agreed that the obligation of SMI to substitute
for or to purchase any Mortgage Loan which does not meet the requirements of
Section 2.1 hereof shall constitute the sole remedy respecting such defect
available to the Trustee and any Certificateholder against the Depositor or SMI.

         In order to facilitate sales and deliveries of Mortgage Loans to the
Trust Fund, the Trustee may execute and deliver one or more remittance agency
agreements in substantially the form of Exhibit K hereto (each, a "Remittance
Agency Agreement"), and in such event the Trustee: (i) shall perform the duties
of Remittance Agent (as that term is defined in the related Remittance Agency
Agreement); and (ii) may accept as conclusive evidence of the release of the
related security interests one or more security release certifications in
substantially the form attached as Exhibit L hereto (each, a "Security Release
Certification").

         Section 2.3    Representations, Warranties and Covenants of the
                        ------------------------------------------------
                        Depositor and Servicer and Master Servicer
                        ------------------------------------------

         (a) The Servicer represents and warrants to the Trustee that, as of the
Closing Date:

                  (i)      the Servicer is a corporation licensed as a mortgage
         servicer duly organized, validly existing and in good standing under
         the laws of the state of its incorporation and has, and had at all
         relevant times, full corporate power to service the Mortgage Loans, to
         own its property, to carry on its business as presently conducted and
         to enter into and perform its obligations under this Agreement. The
         Servicer has all necessary licenses and is qualified to transact
         business in and is in good standing under the laws of each state where
         any Mortgaged Property is located or is otherwise exempt under
         applicable law from such qualification or is otherwise not required
         under applicable law to effect such qualification and no demand for
         such qualification has been made upon the Servicer by any state having
         jurisdiction;

                  (ii)     the execution and delivery of this Agreement by the
         Servicer and the performance by it of and compliance with the terms of
         this Agreement will not (A) violate the Servicer's articles of
         incorporation or by-laws or constitute a default (or an event which,
         with notice or lapse of time or both, would constitute a default)
         under, or

                                       43
<PAGE>

         result in the breach or acceleration of, any material contract,
         agreement or other instrument to which the Servicer is a party or which
         may be applicable to the Servicer or any of its assets or (B) result in
         the creation or imposition of any lien, charge or encumbrance upon any
         of its properties pursuant to the terms of any such contract, agreement
         or other instrument;

                  (iii)    the Servicer has the full power and authority to
         enter into and consummate all transactions contemplated by this
         Agreement to be consummated by it, has duly authorized the execution,
         delivery and performance of this Agreement, and has duly executed and
         delivered this Agreement. This Agreement, assuming due authorization,
         execution and delivery by the other parties hereto, constitutes a
         valid, legal and binding obligation of the Servicer, enforceable
         against it in accordance with the terms hereof, except as such
         enforcement may be limited by bankruptcy, insolvency, reorganization,
         receivership, moratorium or other similar laws relating to or affecting
         the rights of creditors generally, and by general equity principles
         (regardless of whether such enforcement is considered in a proceeding
         in equity or at law);

                  (iv)     the Servicer is not in violation of, and the
         execution and delivery of this Agreement by the Servicer and the
         performance by it and compliance with the terms of this Agreement will
         not constitute a violation with respect to, any order or decree of any
         court or any order or regulation of any federal, state, municipal or
         governmental agency having jurisdiction, which violation would
         materially and adversely affect the condition (financial or otherwise)
         or operations of the Servicer or any of its properties or materially
         and adversely affect the performance of any of its duties hereunder;
         and

                  (v)      there are no actions or proceedings against, or
         investigations of, the Servicer pending or, to the knowledge of the
         Servicer, threatened, before any court, administrative agency or other
         tribunal (A) that, if determined adversely, would prohibit its entering
         into this Agreement, (B) seeking to prevent the consummation of any of
         the transactions contemplated by this Agreement or (C) that, if
         determined adversely, would prohibit or materially and adversely affect
         the performance by the Servicer of any of its obligations under, or the
         validity or enforceability of, this Agreement.

         (b) The Master Servicer represents and warrants to the Trustee that, as
of the Closing Date:

                  (i)      the Master Servicer is a corporation licensed as a
         mortgage banker duly organized, validly existing and in good standing
         under the laws of the state of its incorporation and has, and had at
         all relevant times, full corporate power to service the Mortgage Loans,
         to own its property, to carry on its business as presently conducted
         and to enter into and perform its obligations under this Agreement. The
         Master Servicer has all necessary licenses and is qualified to transact
         business in and is in good standing under the laws of each state where
         a Mortgaged Property is located or is otherwise exempt under applicable
         law from such qualification or is otherwise not required under
         applicable law to effect such qualification and no demand for such
         qualification has been made upon the Master Servicer by any state
         having jurisdiction;

                                       44
<PAGE>

                  (ii)     the execution and delivery of this Agreement by the
         Master Servicer and the performance by it of and compliance with the
         terms of this Agreement will not (A) violate the Master Servicer's
         articles of incorporation or by-laws or constitute a default (or an
         event which, with notice or lapse of time or both, would constitute a
         default) under, or result in the breach or acceleration of, any
         material contract, agreement or other instrument to which the Master
         Servicer is a party or which may be applicable to the Master Servicer
         or any of its assets or (B) result in the creation or imposition of any
         lien, charge or encumbrance upon any of its properties pursuant to the
         terms of any such contract, agreement or other instrument;

                  (iii)    the Master Servicer has the full power and authority
         to enter into and consummate all transactions contemplated by this
         Agreement to be consummated by it, has duly authorized the execution,
         delivery and performance of this Agreement, and has duly executed and
         delivered this Agreement. This Agreement, assuming due authorization,
         execution and delivery by the other parties hereto, constitutes a
         valid, legal and binding obligation of the Master Servicer, enforceable
         against it in accordance with the terms hereof, except as such
         enforcement may be limited by bankruptcy, insolvency, reorganization,
         receivership, moratorium or other similar laws relating to or affecting
         the rights of creditors generally, and by general equity principles
         (regardless of whether such enforcement is considered in a proceeding
         in equity or at law);

                  (iv)     the Master Servicer is not in violation of, and the
         execution and delivery of this Agreement by the Master Servicer and the
         performance by it and compliance with the terms of this Agreement will
         not constitute a violation with respect to, any order or decree of any
         court or any order or regulation of any federal, state, municipal or
         governmental agency having jurisdiction, which violation would
         materially and adversely affect the condition (financial or otherwise)
         or operations of the Master Servicer or any of its properties or
         materially and adversely affect the performance of any of its duties
         hereunder; and

                  (v)      there are no actions or proceedings against, or
         investigations of, the Master Servicer pending or, to the knowledge of
         the Master Servicer, threatened, before any court, administrative
         agency or other tribunal (A) that, if determined adversely, would
         prohibit its entering into this Agreement, (B) seeking to prevent the
         consummation of any of the transactions contemplated by this Agreement
         or (C) that, if determined adversely, would prohibit or materially and
         adversely affect the performance by the Master Servicer of any of its
         obligations under, or the validity or enforceability of, this
         Agreement.

         (c) The Depositor represents and warrants to the Trustee that, as of
the Closing Date:

                  (i)      the Depositor is a corporation, duly organized,
         validly existing and in good standing under the laws of the state of
         its incorporation and has, and had at all relevant times, full
         corporate power to own its property, to carry on its business as
         presently conducted and to enter into and perform its obligations under
         this Agreement;

                                       45
<PAGE>

                  (ii)     the execution and delivery of this Agreement by the
         Depositor and the performance by it of and compliance with the terms of
         this Agreement will not (A) violate the Depositor's articles of
         incorporation or by-laws or constitute a default (or an event which,
         with notice or lapse of time or both, would constitute a default)
         under, or result in the breach or acceleration of, any material
         contract, agreement or other instrument to which the Depositor is a
         party or which may be applicable to the Depositor or any of its assets
         or (B) result in the creation or imposition of any lien, charge or
         encumbrance upon any of its properties pursuant to the terms of any
         such contract, agreement or other instrument;

                  (iii)    the Depositor has the full power and authority to
         enter into and consummate all transactions contemplated by this
         Agreement to be consummated by it, has duly authorized the execution,
         delivery and performance of this Agreement, and has duly executed and
         delivered this Agreement. This Agreement, assuming due authorization,
         execution and delivery by the other parties hereto, constitutes a
         valid, legal and binding obligation of the Depositor, enforceable
         against it in accordance with the terms hereof, except as such
         enforcement may be limited by bankruptcy, insolvency, reorganization,
         receivership, moratorium or other similar laws relating to or affecting
         the rights of creditors generally, and by general equity principles
         (regardless of whether such enforcement is considered in a proceeding
         in equity or at law);

                  (iv)     the Depositor is not in violation of, and the
         execution and delivery of this Agreement by the Depositor and the
         performance by it and compliance with the terms of this Agreement will
         not constitute a violation with respect to, any order or decree of any
         court or any order or regulation of any federal, state, municipal or
         governmental agency having jurisdiction, which violation would
         materially and adversely affect the condition (financial or otherwise)
         or operations of the Depositor or any of its properties or materially
         and adversely affect the performance of any of its duties hereunder;
         and

                  (v)      there are no actions or proceedings against, or
         investigations of, the Depositor pending or, to the knowledge of the
         Depositor, threatened, before any court, administrative agency or other
         tribunal (A) that, if determined adversely, would prohibit its entering
         into this Agreement, (B) seeking to prevent the consummation of any of
         the transactions contemplated by this Agreement or (C) that, if
         determined adversely, would prohibit or materially and adversely affect
         the performance by the Depositor of any of its obligations under, or
         the validity or enforceability of, this Agreement.

         (d) Pursuant to Section 2.1(a)(iii) hereof, the Depositor has assigned
to the Trustee, for the benefit of Certificateholders, its rights under the
Sales Agreement, including each representation and warranty of SMI set forth in
such Sales Agreement in respect of the Mortgage Loans.

         Upon discovery by any of the parties hereto of a breach of a
representation or warranty made by SMI in respect of the Mortgage Loans that
materially and adversely affects the interests of the Certificateholders in any
such Mortgage Loan, the party discovering such breach shall give prompt notice
thereof to the other parties. SMI hereby covenants that within 90 days of the

                                       46
<PAGE>

earlier of its discovery or its receipt of written notice from any party of a
breach such of any representation or warranty which materially and adversely
affects the interests of the Certificateholders in any Mortgage Loan (it being
understood that any such breach shall be deemed to materially and adversely
affect the value of such Mortgage Loan or the interest of the Trust Fund
therein, if the Trust Fund incurs a loss as the result of such breach), it shall
cure such breach in all material respects, and if such breach is not so cured,
shall, (i) if such 90-day period expires prior to the second anniversary of the
Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from the
Trust Fund and substitute in its place a Substitute Mortgage Loan, in the manner
and subject to the conditions set forth in this Section; or (ii) repurchase the
affected Mortgage Loan or Mortgage Loans from the Trustee at the Purchase Price
in the manner set forth below; provided, however, that any such substitution
pursuant to (i) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel required by Section 2.4(a) hereof, if any, and any
such substitution pursuant to (i) above shall not be effected prior to the
additional delivery to the Trustee or the Custodian on its behalf of a Request
for Release substantially in the form of Exhibit J and the Mortgage File for any
such Substitute Mortgage Loan. SMI shall promptly reimburse the Servicer and the
Trustee for any expenses reasonably incurred by the Servicer or the Trustee in
respect of enforcing the remedies for such breach. With respect to the
representations and warranties described in this Section which are made to the
best of SMI's knowledge, if it is discovered by either the Servicer or the
Trustee that the substance of such representation and warranty is inaccurate and
such inaccuracy materially and adversely affects the value of the related
Mortgage Loan or the interests of the Certificateholders therein,
notwithstanding SMI's lack of knowledge with respect to the substance of such
representation or warranty, such inaccuracy shall be deemed a breach of the
applicable representation or warranty.

         With respect to any Substitute Mortgage Loan or Loans, SMI shall
deliver to the Trustee or the Custodian on its behalf for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.1. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Fund and will be retained by SMI on the next succeeding Distribution Date.
For the month of substitution, distributions to Certificateholders will include
the monthly payment due on any Deleted Mortgage Loan for such month and
thereafter SMI shall be entitled to retain all amounts received in respect of
such Deleted Mortgage Loan. The Servicer shall amend the Mortgage Loan Schedule
for the benefit of the Certificateholders to reflect the removal of such Deleted
Mortgage Loan and the substitution of the Substitute Mortgage Loan or Loans and
the Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee.
Upon such substitution, the Substitute Mortgage Loan or Loans shall be subject
to the terms of this Agreement in all respects, and SMI shall be deemed to have
made with respect to such Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties made by SMI pursuant to the
Sales Agreement with respect to such Mortgage Loan. Upon any such substitution
and the deposit to the Collection Account of the amount required to be deposited
therein in connection with such substitution as described in the following
paragraph, the Trustee shall release or shall

                                       47
<PAGE>

cause the Custodian to release the Mortgage File held for the benefit of the
Certificateholders relating to such Deleted Mortgage Loan to SMI and shall
execute and deliver at SMI's direction such instruments of transfer or
assignment prepared by SMI , in each case without recourse, as shall be
necessary to vest title in SMI, or its designee, the Trustee's interest in any
Deleted Mortgage Loan substituted for pursuant to this Section 2.3.

         For any month in which SMI substitutes one or more Substitute Mortgage
Loans for one or more Deleted Mortgage Loans, the Servicer will determine the
amount (if any) by which the aggregate principal balance of all such Substitute
Mortgage Loans as of the date of substitution is less than the aggregate Stated
Principal Balance of all such Deleted Mortgage Loans (after application of the
scheduled principal portion of the monthly payments due in the month of
substitution). The amount of such shortage (the "Substitution Adjustment
Amount") plus an amount equal to the aggregate of any unreimbursed Advances with
respect to such Deleted Mortgage Loans shall be deposited in the Collection
Account by SMI on or before the Distribution Account Deposit Date for the
Distribution Date in the month succeeding the calendar month during which the
related Mortgage Loan became required to be purchased or replaced hereunder.

         In the event that SMI shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Distribution Account prior to
the Distribution Date in the month following the month during which SMI became
obligated hereunder to repurchase or replace such Mortgage Loan and upon such
deposit of the Purchase Price, the delivery of the Opinion of Counsel required
by Section 2.4 hereof and receipt of a Request for Release in the form of
Exhibit J hereto, the Trustee shall release or shall cause the Custodian to
release the related Mortgage File held for the benefit of the Certificateholders
to SMI, and the Trustee shall execute and deliver or shall cause the Custodian
to execute and deliver at SMI's direction such instruments of transfer or
assignment prepared by such Person, in each case without recourse, as shall be
necessary to transfer title from the Trustee. It is understood and agreed that
the obligation under this Agreement of SMI to cure, repurchase or replace any
Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on their behalf.

         The representations and warranties made pursuant to this Section 2.3
(and the representations and warranties with respect to the Mortgage Loans made
in the Sales Agreement) shall survive delivery of the respective Mortgage Files
to the Trustee or the Custodian for the benefit of the Certificateholders.

         (e) Upon discovery by the Depositor, the Servicer, the Master Servicer
or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party discovering such
fact shall promptly (and in any event within five (5) Business Days of
discovery) give written notice thereof to the other parties. In connection
therewith, the Trustee shall require SMI, at SMI's option, to either (i)
substitute, if the conditions in Section 2.3(c) with respect to substitutions
are satisfied, a Substitute Mortgage Loan for the affected Mortgage Loan, or
(ii) repurchase the affected Mortgage Loan within 90 days of such discovery in
the same manner as it would a Mortgage Loan for a breach of

                                       48
<PAGE>

representation or warranty made pursuant to this Section 2.3. The Trustee shall
reconvey or shall cause the Custodian to reconvey to SMI the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in this Section 2.3.

         Section 2.4    Delivery of Opinion of Counsel in Connection with
                        -------------------------------------------------
                        Substitutions
                        -------------

         (a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be made more than 90
days after the Closing Date unless the Depositor or SMI delivers to the Trustee
an Opinion of Counsel, which Opinion of Counsel shall not be at the expense of
either the Trustee or the Trust Fund, addressed to the Trustee, to the effect
that such substitution will not (i) result in the imposition of the tax on
"prohibited transactions" on the Trust Fund or contributions after the Startup
Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively,
or (ii) cause any REMIC created hereunder to fail to qualify as a REMIC at any
time that any Certificates are outstanding.

         Section 2.5    Execution and Delivery of Certificates
                        --------------------------------------

         The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.

         Section 2.6    Purchase of Subsequent Mortgage Loans.
                        --------------------------------------

         (a) Subject to the satisfaction of the conditions set forth in
paragraph (b) below in consideration of the delivery on a Subsequent Sales Date
to or upon the order of the Depositor of all or a portion of the Pre-Funded
Amount, as the case may be, the Depositor shall on such Subsequent Sales Date
sell, transfer, assign, set over and otherwise convey without recourse, to the
Trust Fund, and the Trustee shall purchase on behalf of the Trust Fund, all the
Depositor's right, title and interest in and to the Subsequent Mortgage Loans,
together with the related Mortgage Loan Files, covered by the Subsequent Sales
Agreement delivered on such date.

         (b) The obligation of the Trust to acquire Subsequent Mortgage Loans is
subject to the satisfaction of each of the following conditions on or prior to
the related Subsequent Sales Date:

                  (i)      the Depositor shall have delivered to the Trustee
         with a copy to the Master Servicer a duly executed written Subsequent
         Sales Agreement, which shall include a Schedule of Subsequent Mortgage
         Loans, and specifying the amount to be withdrawn from the Pre-Funding
         Account;

                                       49
<PAGE>

                  (ii)     the remaining term to maturity of each Subsequent
         Mortgage Loan may not exceed 30 years;

                  (iii)    no Subsequent Mortgage Loan will have been selected
         in a manner adverse to the interests of Certificateholders;

                  (iv)     the addition of the Subsequent Mortgage Loans will
         not result in the reduction, qualification or withdrawal of the then
         current ratings of the Certificates;

                  (v)      no Subsequent Mortgage Loan may have a Loan-to-Value
         Ratio greater than 100.00%;

                  (vi)     each Subsequent Mortgage Loan will be underwritten in
         accordance with the Depositor's underwriting guidelines;

                  (vii)    after giving effect to the acquisition of all the
         Subsequent Mortgage Loans, the Mortgage Loans in the applicable Group
         shall conform to the applicable Subsequent Delivery Requirements;

                  (viii)   the Depositor shall have provided the Master Servicer
         and the Trustee any information reasonably requested by any of them
         with respect to the Subsequent Mortgage Loans then to be sold to the
         Trust Fund;

                  (ix)     the Depositor shall have delivered to the Trustee a
         letter from an independent accountant stating whether or not the
         characteristics of the Subsequent Mortgage Loans conform to the
         characteristics of the Mortgage Loans required in Section 2.6(b);

                  (x)      as of each Subsequent Sales Date, neither the
         Depositor nor SMI shall be insolvent, nor will either of them be made
         insolvent by such transfer;

                  (xi)     the Funding Period shall not have ended; and

                  (xii)    the Depositor and SMI each shall have delivered to
         the Master Servicer and the Trustee an Officer's Certificate confirming
         the satisfaction of each condition precedent specified in this
         paragraph (b) and in the related Subsequent Sales Agreement and
         opinions of counsel with respect to corporate, bankruptcy and tax
         matters relating to the transfer of Subsequent Mortgage Loans in the
         forms substantially similar to those delivered on the Closing Date.

         (c) Pursuant to Section 2.6(b) hereof, the Trustee shall remit on each
Subsequent Sales Date to or upon the order of the Depositor from the Pre-Funding
Account the amount specified by the Master Servicer only upon the Trustee's
receipt of:

                  (i)      a fully executed Subsequent Sales Agreement;

                  (ii)     the two Officer's Certificates required by Section
         2.6(b) hereof;

                                       50
<PAGE>

                  (iii)    an Opinion or Opinions of Counsel from each of the
         Depositor and SMI required by Section 2.6(b);

                  (iv)     a letter from each Rating Agency on the final
         Subsequent Sale Date confirming the condition provided in Section
         2.6(b);

                  (v)      a letter from an independent accountant as required
         by Section 2.6(b); and

                  (vi)     the written instruction from the Master Servicer
         setting forth the amounts to be paid as required by Section 2.6(b)
         hereof. The Trustee may rely and shall be protected in relying on all
         such Officer's Certificates as evidencing full compliance with all
         conditions precedent specified in Section 2.6(b), without any further
         duty of inquiry with respect thereto.

         (d) On each Subsequent Sales Date and on the Determination Date
immediately following the end of the Funding Period, the Master Servicer shall
determine:

                  (i)      the amount and correct disposition of the Pre-Funded
         Amount, and

                  (ii)     any other necessary matters in connection with the
         administration of the Pre-Funding Account. If any amounts are released
         as a result of an error in calculation to the Holders or the Depositor
         from the Pre-Funding Account, the Depositor shall immediately repay
         such amounts to the Master Servicer.

         (e) the Depositor shall deliver (or cause to be delivered) to the
Master Servicer for deposit in the Master Servicer Custodial Account on the
related Servicer Deposit Date all principal and interest due in respect of such
Subsequent Mortgage Loans after the related Subsequent Cut Off Date;

         Section 2.7    Pre-Funding Account
                        -------------------

         (a) The Trustee shall establish and maintain the Pre-Funding Account to
be held in trust for the benefit of the Certificateholders. The Pre-Funding
Account shall be an Eligible Account. On the Closing Date, the Depositor will
cause to be deposited in the Pre-Funding Account the Original Pre-Funded Amount.

         (b) On any Subsequent Sales Date, the Master Servicer shall instruct
the Trustee, with a copy to the Depositor,

                  (i)      to withdraw from the Pre-Funded Amount in the
         Pre-Funding Account an amount equal to 100% of the aggregate Stated
         Principal Balances of the Subsequent Mortgage Loans as of the
         applicable Subsequent Cut Off Date sold to the Trust on such Subsequent
         Sales Date, and

                  (ii)     to pay such amounts to or upon the order of the
         Depositor upon satisfaction of the conditions set forth in Section
         2.6(c) hereof with respect thereto. In no

                                       51
<PAGE>

         event shall the Trustee withdraw from the Pre-Funding Account an amount
         in excess of the Original Pre-Funded Amount.

         (c) On the Business Day immediately following the end of the Funding
Period, the Master Servicer shall instruct the Trustee to transfer the
Pre-Funded Amount to the Distribution Account for distribution to the Holders of
the Certificates in accordance with Article 4. The Pre-Funded Amount shall not
be invested during the time such Pre-Funded Amount is held in the Distribution
Account.

         (d) The Pre-Funding Account shall not be an asset of any REMIC created
pursuant to this Agreement.


                                   ARTICLE 3

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

         Section 3.1    Servicer to Service Mortgage Loans
                        ----------------------------------

         For and on behalf of the Certificateholders, the Servicer shall service
and administer the Mortgage Loans in accordance with the terms of this Agreement
and customary and usual standards of practice of prudent mortgage loan
servicers. In connection with such servicing and administration, the Servicer
shall have full power and authority, acting alone and/or through Subservicers as
provided in Section 3.2 hereof, to do or cause to be done any and all things
that it may deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Servicer shall not take any action that is
inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Servicer shall represent and protect the interests of the Trust Fund in the same
manner as it protects its own interests in mortgage loans in its own portfolio
in any claim, proceeding or litigation regarding a Mortgage Loan, provided,
however, that unless (x) the Mortgagor is in default with respect to the
Mortgage Loan, or such default is, in the judgment of the Servicer, imminent or
(y) in the absence of default or imminent default, any such waiver,
modification, postponement or indulgence would not cause any REMIC created
hereunder to be disqualified or result in the imposition of any tax under
Section 860F(a) or Section 860G(d) of the Code, the Servicer may not permit any
modification with respect to any Mortgage Loan. Without limiting the generality
of the foregoing, the Servicer, in its own name or in the name of the Depositor
and the Trustee, is hereby authorized and empowered by the Depositor and the
Trustee, when the Servicer believes it appropriate in its reasonable judgment,
to execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other

                                       52
<PAGE>

comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Certificateholders. The
Servicer shall prepare and deliver to the Depositor and/or the Trustee such
documents requiring execution and delivery by either or both of them as are
necessary or appropriate to enable the Servicer to service and administer the
Mortgage Loans to the extent that the Servicer is not permitted to execute and
deliver such documents pursuant to the preceding sentence. Upon receipt of such
documents, the Depositor and/or the Trustee shall promptly execute such
documents and deliver them to the Servicer.

         In accordance with the standards of the preceding paragraph, the
Servicer shall make Servicing Advances as necessary for the purpose of effecting
the payment of taxes and assessments on the Mortgaged Properties, which advances
shall be reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 3.6 hereof, and further as provided in Section
3.8 hereof. The costs incurred by the Servicer, if any, in effecting the timely
payments of taxes and assessments on the Mortgaged Properties and related
insurance premiums shall not, for the purpose of calculating monthly
distributions to the Certificateholders, be added to the Stated Principal
Balances of the related Mortgage Loans, notwithstanding that the terms of such
Mortgage Loans so permit.

         Upon request of the Servicer, the Trustee and the Custodian shall
furnish the Servicer with any powers of attorney necessary or appropriate to
enable Servicer to execute in the name of the Trustee or the Custodian, as
applicable, all documents reasonably required to perform the servicing functions
described in this Article 3.

         Section 3.2    Subservicing; Enforcement of the Obligations of
                        -----------------------------------------------
                        Servicers
                        ---------

         (a) The Servicer may arrange for the subservicing of any Mortgage Loan
by a Subservicer pursuant to a subservicing agreement; provided, however, that
such subservicing arrangement and the terms of the related subservicing
agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder. Unless the
context otherwise requires, references in this Agreement to actions taken or to
be taken by the Servicer in servicing the Mortgage Loans include actions taken
or to be taken by a Subservicer on behalf of the Servicer. Notwithstanding the
provisions of any subservicing agreement, any of the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and liable to the Depositor, the Trustee and
the Certificateholders for the servicing and administration of the Mortgage
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such subservicing agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Mortgage Loans. All actions of each
Subservicer performed pursuant to the related subservicing agreement shall be
performed as an agent of the Servicer with the same force and effect as if
performed directly by the Servicer.

         (b) For purposes of this Agreement, the Servicer shall be deemed to
have received any collections, recoveries or payments with respect to the
Mortgage Loans that are received by

                                       53
<PAGE>

a Subservicer regardless of whether such payments are remitted by the
Subservicer to the Servicer.

         Section 3.3    Rights of the Depositor and the Trustee in Respect of
                        -----------------------------------------------------
                        the Servicer
                        ------------

         The Depositor may, but is not obligated to, enforce the obligations of
the Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of the Servicer hereunder and in
connection with any such defaulted obligation to exercise the related rights of
the Servicer hereunder; provided that the Servicer shall not be relieved of any
of its obligations hereunder by virtue of such performance by the Depositor or
its designee. Neither the Trustee nor the Depositor shall have any
responsibility or liability for any action or failure to act by the Servicer nor
shall the Trustee or the Depositor be obligated to supervise the performance of
the Servicer hereunder or otherwise.

         Section 3.4    Master Servicer to Act as Servicer
                        ----------------------------------

         In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default), the Master
Servicer or its successor shall thereupon assume all of the rights and
obligations of the Servicer hereunder arising thereafter (except that the Master
Servicer shall not be (i) liable for losses of the Servicer pursuant to Section
3.9 hereof or any acts or omissions of the predecessor Servicer hereunder, (ii)
obligated to make Advances if it is prohibited from doing so by applicable law,
(iii) obligated to effectuate repurchases or substitutions of Mortgage Loans
hereunder including, but not limited to, repurchases or substitutions of
Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv) responsible for
expenses of the Servicer pursuant to Section 2.3 hereof or (v) deemed to have
made any representations and warranties of the Servicer hereunder). If the
Servicer shall for any reason no longer be the Servicer (including by reason of
any Event of Default), the Master Servicer or its successor shall succeed to any
rights and obligations of the Servicer under each subservicing agreement.

         The Servicer shall, upon request of the Master Servicer, but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to each subservicing agreement or substitute subservicing agreement and
the Mortgage Loans then being serviced thereunder and an accounting of amounts
collected or held by it and otherwise use its best efforts to effect the orderly
and efficient transfer of the substitute subservicing agreement to the assuming
party.

         Section 3.5    Collection of Mortgage Loan Payments; Collection
                        ------------------------------------------------
                        Account; Distribution Account
                        -----------------------------

         (a) The Servicer shall make reasonable efforts in accordance with the
customary and usual standards of practice of prudent mortgage servicers to
collect all payments called for under the terms and provisions of the Mortgage
Loans to the extent such procedures shall be consistent with this Agreement.
Consistent with the foregoing, and subject to the provisions of Section 3.1
hereof, the Servicer may in its discretion (i) waive any late payment charge or
penalty interest and (ii) extend the due dates for payments due on a Mortgage
Note for a period not greater than

                                       54
<PAGE>

180 days; provided, however, that the Servicer cannot extend the maturity of any
such Mortgage Loan past the date on which the final payment is due on the latest
maturing Mortgage Loan as of the Cut Off Date. In the event of any such
arrangement, any P&I Advance required to be made by the Servicer on the related
Mortgage Loan in accordance with the provisions hereof (i) with respect to the
Prepayment Period in which such arrangement became effective shall be made in
accordance with the amortization schedule of such Mortgage Loan without giving
effect to the modification thereof by reason of such arrangements and (ii) with
respect to any Prepayment Period thereafter shall be made in accordance with the
amortization schedule of such Mortgage Loan as so modified. The Servicer shall
not be required to institute or join in litigation with respect to collection of
any payment (whether under a Mortgage, Mortgage Note or otherwise or against any
public or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.

         The Servicer shall comply with the provisions of Section 3.21 hereof
with respect to each Prepayment Penalty related to the Mortgage Loans.

         (b) The Servicer shall establish and maintain a Collection Account into
which the Servicer shall deposit or cause to be deposited as soon as practicable
following receipt but in no event no later than two Business Days after receipt,
except as otherwise specifically provided herein, the following payments and
collections remitted by Subservicers or received by it in respect of Mortgage
Loans subsequent to the Cut Off Date (other than in respect of principal and
interest due on the Mortgage Loans on or before the Cut Off Date) and the
following amounts required to be deposited hereunder:

                  (i)      all payments on account of principal on the Mortgage
         Loans, including Principal Prepayments;

                  (ii)     all payments on account of interest on the Mortgage
         Loans, net of the related Servicing Fee and any Prepayment Interest
         Excess;

                  (iii)    each Prepayment Penalty required to be deposited by
         the Servicer hereunder;

                  (iv)     all Insurance Proceeds and Liquidation Proceeds,
         other than proceeds to be applied to the restoration or repair of the
         Mortgaged Property or released to the Mortgagor in accordance with the
         Servicer's normal servicing procedures;

                  (v)      any amount required to be deposited by the Servicer
         pursuant to Section 3.5(e) in connection with any losses on Permitted
         Investments;

                  (vi)     any amounts required to be deposited by the Servicer
         pursuant to Section 3.9(b) and (d) hereof, and in respect of net
         monthly rental income from REO Property pursuant to Section 3.11
         hereof;

                  (vii)    all Substitution Adjustment Amounts; and

                                       55
<PAGE>

                  (viii)   all P&I Advances made by the Servicer pursuant to
         Section 3.19 hereof.

         In addition, with respect to any Mortgage Loan that is subject to a
buydown agreement, on each Due Date for such Mortgage Loan, in addition to the
monthly payment remitted by the Mortgagor, the Servicer shall cause funds to be
deposited into the Collection Account in an amount required to cause an amount
of interest to be paid with respect to such Mortgage Loan equal to the amount of
interest that has accrued on such Mortgage Loan from the preceding Due Date at
the related Mortgage Rate (net of the Servicing Fee Rate) on such date.

         The foregoing requirements for remittance by the Servicer shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges, assumption
fees or amounts attributable to reimbursements of Advances, if collected, need
not be remitted by the Servicer. In the event that the Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct the
institution maintaining the Collection Account to withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice thereof
to the Trustee or such other institution maintaining the Collection Account
which describes the amounts deposited in error in the Collection Account. The
Servicer shall maintain adequate records with respect to all withdrawals made
pursuant to this Section. All funds deposited in the Collection Account shall be
held in trust for the Certificateholders until withdrawn in accordance with
Section 3.8.

         (c) The Master Servicer shall establish and maintain, for the benefit
of Certificateholders, a Master Servicer Custodial Account. On each Servicer
Deposit Date, the Servicer shall remit to the Master Servicer for deposit in the
Master Servicer Custodial Account, the Available Funds for such date. In
addition, the Master Servicer shall deposit any amounts pursuant to Section
3.5(e) in connection with losses on Permitted Investments in the Master Servicer
Custodial Account.

         (d) The Trustee shall establish and maintain, on behalf of
Certificateholders, the Distribution Account. On each Distribution Account
Deposit Date, the Master Servicer shall remit to the Trustee for deposit in the
Distribution Account the Available Funds for such date. In addition, the Trustee
shall deposit any amounts received from the Master Servicer pursuant to Section
3.5(e) in connection with losses on permitted Investments in the Distribution
Account.

         In the event that the Servicer or Master Servicer shall remit any
amount not required to be remitted, it may at any time direct the Trustee to
withdraw such amount from the Distribution Account, any provision herein to the
contrary notwithstanding. Such direction may be accomplished by delivering an
Officer's Certificate to the Trustee which describes the amounts deposited in
error in the Distribution Account. All funds deposited in the Distribution
Account shall be held by the Trustee in trust for the Certificateholders until
disbursed in accordance with this Agreement or withdrawn in accordance with
Section 3.8. In no event shall the Trustee incur liability for withdrawals from
the Distribution Account at the direction of the Servicer.

         (e) The institutions at which the Collection Account, Master Servicer
Custodial Account and Distribution Account are maintained shall invest funds as
directed by the Master

                                       56
<PAGE>

Servicer in Permitted Investments which in each case shall mature not later than
(i) in the case of the Collection Account, the second Business Day next
preceding the related Servicer Deposit Date (except that if such Permitted
Investment is an obligation of the institution that maintains such account, then
such Permitted Investment shall mature not later than the Business Day next
preceding such Servicer Deposit Date), (ii) in the case of the Master Servicer
Custodial Account, the second Business Day next preceding the related
Distribution Account Deposit Date (except that if such Permitted Investment is
an obligation of the institution that maintains such account, then such
Permitted Investment shall mature not later than the Business Day next preceding
such Distribution Account Deposit Date), and (iii) in the case of the
Distribution Account, the Business Day next preceding the related Distribution
Date (except that if such Permitted Investment is an obligation of the
institution that maintains such fund or account, then such Permitted Investment
shall mature not later than such Distribution Date) and, in each case, shall not
be sold or disposed of prior to its maturity. All such Permitted Investments
shall be made in the name of the Trustee, for the benefit of the
Certificateholders. All income and gain net of any losses realized from any such
investment of funds on deposit in the Collection Account shall be for the
benefit of the Servicer as servicing compensation and all income and gain net of
any losses realized from any such investment of funds on deposit in the Master
Servicer Custodial Account and the Distribution Account shall be for the benefit
of the Master Servicer. The amount of any realized losses in the Collection
Account in respect of any such investments shall promptly be deposited by the
Servicer in the Collection Account and the amount of any realized losses in the
Master Servicer Custodial Account and the Distribution Account in respect of any
such investments shall promptly be deposited therein by the Master Servicer. The
Trustee in its fiduciary capacity shall not be liable for the amount of any loss
incurred in respect of any investment or lack of investment of funds held in the
Collection Account or the Master Servicer Custodial Account and made in
accordance with this Section 3.5.

         Section 3.6    Collection of Taxes, Assessments and Similar Items;
                        ---------------------------------------------------
                        Escrow Accounts
                        ---------------

         (a) To the extent required by the related Mortgage Note and not
violative of current law, the Servicer shall establish and maintain one or more
accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Servicer) for the payment of
taxes, assessments, hazard insurance premiums or comparable items for the
account of the Mortgagors. Nothing herein shall require the Servicer to compel a
Mortgagor to establish an Escrow Account in violation of applicable law.

         (b) Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Servicer out of related collections for any payments made pursuant to
Sections 3.1 hereof (with respect to taxes and assessments and insurance
premiums) and 3.9 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums determined to be overages, to pay interest, if required by
law or the terms of the related Mortgage or Mortgage Note, to Mortgagors on
balances in the Escrow Account or to clear and terminate the Escrow Account at
the termination of this Agreement in accordance with Section 9.1 hereof. The
Escrow Accounts shall not be a part of the Trust Fund.

                                       57
<PAGE>

         (c) The Servicer shall advance, as Servicing Advances, any payments
referred to in Section 3.6(a) that are not timely paid by the Mortgagors on the
date when the tax, premium or other cost for which such payment is intended is
due, provided, however that the Servicer shall not be required to make any such
advance if such advance, in the good faith judgment of the Servicer, would
constitute a Nonrecoverable Advance.

         Section 3.7    Access to Certain Documentation and Information
                        -----------------------------------------------
                        Regarding the Mortgage Loans
                        ----------------------------

         The Servicer shall afford the Depositor and the Trustee reasonable
access to all records and documentation regarding the Mortgage Loans and all
accounts, insurance information and other matters relating to this Agreement,
such access being afforded without charge, but only upon reasonable request and
during normal business hours at the office designated by the Servicer.

         Upon reasonable advance notice in writing, the Servicer will provide to
each Certificateholder which is a savings and loan association, bank or
insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the Servicer in providing such
reports and access.

         Section 3.8    Permitted Withdrawals from the Collection Account,
                        --------------------------------------------------
                        Master Servicer Custodial Account and Distribution
                        --------------------------------------------------
                        Account.
                        -------


         (a) The Servicer may from time to time make withdrawals from the
Collection Account for the following purposes:

                  (i)      to the extent not previously retained by the
         Servicer, to pay to the Servicer the servicing compensation to which it
         is entitled pursuant to Section 3.14, and earnings on or investment
         income with respect to funds in or credited to the Collection Account
         as additional servicing compensation;

                  (ii)     to the extent not previously retained by the
         Servicer, to reimburse the Servicer for unreimbursed Advances made by
         it, such right of reimbursement pursuant to this subclause (ii) being
         limited to amounts received on the Mortgage Loan(s) in respect of which
         any such Advance was made;

                  (iii)    to reimburse the Servicer for any Nonrecoverable
         Advance previously made;

                  (iv)     to reimburse the Servicer for Insured Expenses from
         the related Insurance Proceeds;

                                       58
<PAGE>

                  (v)      to reimburse the Servicer for unpaid Servicing Fees
         as provided in Section 3.11 hereof;

                  (vi)     to pay to the purchaser, with respect to each
         Mortgage Loan or property acquired in respect thereof that has been
         purchased pursuant to Section 2.2, 2.3 or 3.11, all amounts received
         thereon after the date of such purchase;

                  (vii)    to reimburse the Master Servicer, the Servicer or the
         Depositor for expenses incurred by any of them and reimbursable
         pursuant to Section 6.3 hereof;

                  (viii)   to pay to the Master Servicer any accrued and
         compensation to which it is entitled hereunder (and any amount to which
         it is entitled to reimbursement herewith);

                  (ix)     to withdraw any amount deposited in the Collection
         Account and not required to be deposited therein;

                  (x)      on or prior to each Servicer Deposit Date, to
         withdraw an amount equal to the related Available Funds and remit such
         amount to the Master Servicer for deposit in the Master Servicer
         Custodial Account; and

                  (xi)     to clear and terminate the Collection Account upon
         termination of this Agreement pursuant to Section 9.1 hereof.

         The Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account pursuant to such subclauses (i), (ii), (iv), (v) and
(vi). Prior to making any withdrawal from the Collection Account pursuant to
subclause (iii), the Servicer shall deliver to the Master Servicer an Officer's
Certificate of a Servicing Officer indicating the amount of any previous Advance
determined by the Servicer to be a Nonrecoverable Advance and identifying the
related Mortgage Loan(s), and their respective portions of such Nonrecoverable
Advance.

         (b) The Master Servicer may from time to time make withdrawals from the
Master Servicer Custodial Account for the following purposes:

                  (i)      to pay to itself any compensation due it hereunder;

                  (ii)     to pay to itself earnings or investment income with
         respect to funds in the Master Servicer Custodial Account;

                  (iii)    on each Distribution Account Deposit Date, to
         withdraw the Available Funds for such date and remit such amount to the
         Trustee for deposit in the Distribution Account; and

                  (iv)     to clear and terminate the Master Servicer Custodial
         Account upon termination of the Agreement pursuant to Section 9.1
         hereof.

                                       59
<PAGE>

         (c) The Trustee shall withdraw funds from the Distribution Account for
distributions to Certificateholders in the manner specified in this Agreement.
In addition, the Trustee may prior to making the distribution pursuant to
Section 4.1 from time to time make withdrawals from the Distribution Account for
the following purposes:

                  (i)      to pay to itself the Trustee Fee for the related
         Distribution Date (allocated pro rata by Group, if applicable);

                  (ii)     to pay to the Master Servicer earnings on or
         investment income with respect to funds in the Distribution Account;

                  (iii)    to withdraw and return to the Servicer or Master
         Servicer any amount deposited in the Distribution Account and not
         required to be deposited therein; and

                  (iv)     to clear and terminate the Distribution Account upon
         termination of the Agreement pursuant to Section 9.1 hereof.

         Section 3.9    Maintenance of Hazard Insurance; Maintenance of Primary
                        -------------------------------------------------------
                        Insurance Policies
                        ------------------

         (a) The Servicer shall cause to be maintained, for each Mortgage Loan,
hazard insurance with extended coverage in an amount that is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan; (ii) the outstanding principal balance of the Mortgage Loan and
(iii) the maximum amount available in the locality of the related Mortgaged
Property from insurers generally acceptable to institutional residential
mortgage lenders without payment of extraordinary premium. Each such policy of
standard hazard insurance shall contain, or have an accompanying endorsement
that contains, a standard mortgagee clause. Any amounts collected by the
Servicer under any such policies (other than the amounts to be applied to the
restoration or repair of the related Mortgaged Property or amounts released to
the Mortgagor in accordance with the Servicer's normal servicing procedures)
shall be deposited in the Collection Account. Any cost incurred by the Servicer
in maintaining any such insurance shall not, for the purpose of calculating
monthly distributions to the Certificateholders or remittances to the Trustee
for their benefit, be added to the principal balance of the Mortgage Loan,
notwithstanding that the terms of the Mortgage Loan so permit. Such costs shall
be recoverable by the Servicer as Servicing Advances or, if applicable, as
Nonrecoverable Advances. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor or maintained on
property acquired in respect of a Mortgage other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Mortgaged Property is located at the
time of origination of the Mortgage Loan in a federally designated special flood
hazard area and such area is participating in the national flood insurance
program, the Servicer shall cause flood insurance to be maintained with respect
to such Mortgage Loan. Such flood insurance shall be in an amount equal to the
least of (i) the original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements which are part of such Mortgaged
Property, and (iii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program.

                                       60
<PAGE>

         (b) In the event that the Servicer shall obtain and maintain a blanket
policy insuring against hazard losses on any or all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section with respect to all of the Mortgage Loans so
covered, it being understood and agreed that such policy may contain a
deductible clause on terms substantially equivalent to those commercially
available and maintained by comparable servicers. If such policy contains a
deductible clause, the Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property a policy complying with the
first sentence of this Section, and there shall have been a loss that would have
been covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause. In
connection with its activities as Servicer of the Mortgage Loans, the Servicer
agrees to present, on behalf of itself, the Depositor, and the Trustee for the
benefit of the Certificateholders, claims under any such blanket policy.

         (c) The Servicer shall not take any action which would result in
non-coverage under any applicable Primary Insurance Policy of any loss which,
but for the actions of the Servicer, would have been covered thereunder. The
Servicer shall not cancel or refuse to renew any such Primary Insurance Policy
that is in effect at the date of the initial issuance of the Certificates and is
required to be kept in force hereunder unless the replacement Primary Insurance
Policy for such canceled or non-renewed policy is maintained with a Qualified
Insurer.

         The Servicer shall not be required to maintain any Primary Insurance
Policy (i) with respect to any Mortgage Loan with a Loan-to-Value Ratio less
than or equal to 80% (or such lower Loan-to-Value Ratio as may be provided by
applicable law) as of any date of determination or, based on a new appraisal,
the principal balance of such Mortgage Loan represents 80% or less of the new
appraised value (or other method of determination as may be provided by
applicable law) or (ii) if maintaining such Primary Insurance Policy is
otherwise prohibited by applicable law.

         The Servicer agrees to effect the timely payment of the premiums on
each Primary Insurance Policy, and such costs not otherwise recoverable shall be
recoverable by the Servicer as Servicing Advances or, if applicable, as
Nonrecoverable Advances.

         (d) In connection with its activities as Servicer of the Mortgage
Loans, the Servicer agrees to present on behalf of itself, the Trustee and
Certificateholders, claims to the insurer under any Primary Insurance Policies
and, in this regard, to take such reasonable action as shall be necessary to
permit recovery under any Primary Insurance Policies respecting defaulted
Mortgage Loans. Any amounts collected by the Servicer under any Primary
Insurance Policies shall be deposited in the Collection Account.

         Section 3.10   Enforcement of Due-on-Sale Clauses; Assumption
                        ----------------------------------------------
                        Agreements
                        ----------

         (a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Servicer shall to
the extent that it has knowledge of such conveyance enforce any due-on-sale
clause contained in any Mortgage Note or Mortgage, to the extent, in the
Servicer's reasonable judgment, enforcement is permitted

                                       61
<PAGE>

under applicable law and governmental regulations. Notwithstanding the
foregoing, the Servicer is not required to exercise such rights with respect to
a Mortgage Loan if the Person to whom the related Mortgaged Property has been
conveyed or is proposed to be conveyed satisfies the terms and conditions
contained in the Mortgage Note and Mortgage related thereto and the consent of
the mortgagee under such Mortgage Note or Mortgage is not otherwise so required
under such Mortgage Note or Mortgage as a condition to such transfer. In the
event that the Servicer is prohibited by law from enforcing any such due-on-sale
clause, or if nonenforcement is otherwise permitted hereunder, the Servicer is
authorized, subject to Section 3.10(b), to take or enter into an assumption and
modification agreement from or with the person to whom such property has been or
is about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if so covered before the Servicer enters such agreement) by the
applicable Required Insurance Policies. The Servicer, subject to Section
3.10(b), is also authorized with the prior approval of the insurers under any
Required Insurance Policies to enter into a substitution of liability agreement
with such Person, pursuant to which the original Mortgagor is released from
liability and such Person is substituted as Mortgagor and becomes liable under
the Mortgage Note. Notwithstanding the foregoing, the Servicer shall not be
deemed to be in default under this Section by reason of any transfer or
assumption which the Servicer reasonably believes it is restricted by law from
preventing, for any reason whatsoever.

         (b) Subject to the Servicer's duty to enforce any due-on-sale clause to
the extent set forth in Section 3.10(a) hereof, in any case in which a Mortgaged
Property has been conveyed to a Person by a Mortgagor, and such Person is to
enter into an assumption agreement or modification agreement or supplement to
the Mortgage Note or Mortgage that requires the signature of the Trustee, or if
an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Servicer shall prepare and
deliver or cause to be prepared and delivered to the Trustee for signature and
shall direct, in writing, the Trustee to execute the assumption agreement with
the Person to whom the Mortgaged Property is to be conveyed and such
modification agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
may be changed. In addition, the substitute Mortgagor and the Mortgaged Property
must be acceptable to the Servicer in accordance with its underwriting standards
as then in effect. Together with each such substitution, assumption or other
agreement or instrument delivered to the Trustee for execution by it, the
Servicer shall deliver an Officer's Certificate signed by a Servicing Officer
stating that the requirements of this subsection have been met in connection
therewith. The Servicer shall notify the Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Trustee the
original of such substitution or assumption agreement, which in the case of the
original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Servicer for entering into an

                                       62
<PAGE>

assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation.

         Section 3.11   Realization Upon Defaulted Mortgage Loans; Repurchase of
                        --------------------------------------------------------
                        Certain Mortgage Loans
                        ----------------------

         (a) Subject to the limitations set forth in Sections 3.5(a), 3.11(b),
3.11(f), and 3.11(i), the Servicer shall use reasonable efforts to foreclose
upon or otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general mortgage servicing activities;
provided, however, that the Servicer shall not be required to expend its own
funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (i) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Collection Account). The Servicer
shall be responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the Liquidation Proceeds with respect to the related Mortgaged
Property, as Servicing Advances or, if applicable, as Nonrecoverable Advances.

         (b) If the Servicer has actual knowledge that a Mortgaged Property
which the Servicer is contemplating acquiring in foreclosure or by deed in lieu
of foreclosure is located within a one mile radius of any site with material
environmental or hazardous waste risks known to the Servicer, the Servicer will,
prior to acquiring the Mortgaged Property, consider such risks and shall proceed
with such in foreclosure or by deed in lieu of foreclosure only if the Servicer
reasonably determines that doing so shall more like than not be in the best
interests of the Trust Fund, considering all relevant factors including such
environmental matters. For the purpose of this Section, actual knowledge of the
Servicer means actual knowledge of a Servicing Officer involved in the servicing
of the relevant Mortgage Loan at the time such knowledge was acquired. Actual
knowledge of the Servicer does not include knowledge imputable by virtue of the
availability of or accessibility to information relating to environmental or
hazardous waste sites or the locations thereof.

         (c) With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders,
provided that the Servicers may cause title to be placed in the name of the
Custodian or the Servicer if the Servicer reasonably determines that such manner
of holding title is required or advisable in order to facilitate the foreclosure
process as to any one or more particular Mortgage Loans. The Trustee's name
shall be placed on the title to such REO Property solely as the Trustee
hereunder and not in its individual capacity. The Servicer shall ensure that the
title to such REO Property references this Agreement and the Trustee's capacity
thereunder. Pursuant to its efforts to sell such REO Property, the Servicer
shall either itself or

                                       63
<PAGE>

through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Certificateholders, in its sole discretion, rent or decline
to rent the same, or any part thereof, as the Servicer deems to be in the best
interest of the Certificateholders for the period prior to the sale of such REO
Property. The Servicer shall prepare for and deliver to the Trustee a statement
with respect to any REO Property that has been rented showing the aggregate
rental income received and all expenses incurred in connection with the
management and maintenance of such REO Property at such times as is necessary to
enable the Trustee to comply with the reporting requirements of the REMIC
Provisions. The net monthly rental income, if any, from such REO Property shall
be deposited in the Collection Account no later than the close of business on
each Determination Date. The Servicer shall perform the tax reporting and
withholding required by Sections 1445 and 6050J of the Code with respect to
foreclosures and abandonments, the tax reporting required by Section 6050H of
the Code with respect to the receipt of mortgage interest from individuals and
any tax reporting required by Section 6050P of the Code with respect to the
cancellation of indebtedness by certain financial entities, by preparing such
tax and information returns as may be required, in the form required, and
delivering the same to the Trustee for filing.

         (d) In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer shall dispose of such Mortgaged Property prior to
the close of the third taxable year after its acquisition by the Trust Fund
unless the Trustee shall have been supplied with an Opinion of Counsel to the
effect that the holding by the Trust Fund of such Mortgaged Property subsequent
to such three-year period will not result in the imposition of taxes on
"prohibited transactions" of any REMIC created hereunder as defined in section
860F of the Code or cause any REMIC created hereunder to fail to qualify as a
REMIC at any time that any Certificates are outstanding, in which case the Trust
Fund may continue to hold such Mortgaged Property (subject to any conditions
contained in such Opinion of Counsel). Notwithstanding any other provision of
this Agreement, no Mortgaged Property acquired by the Trust Fund shall be rented
(or allowed to continue to be rented) or otherwise used for the production of
income by or on behalf of the Trust Fund in such a manner or pursuant to any
terms that would (i) cause such Mortgaged Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
(ii) subject any REMIC created hereunder to the imposition of any federal, state
or local income taxes on the income earned from such Mortgaged Property, unless
the Servicer has agreed to indemnify and hold harmless the Trust Fund with
respect to the imposition of any such taxes.

         (e) In the event of a default on a Mortgage Loan one or more of whose
obligor is not a "United States Person," as that term is defined in Section
7701(a)(30) of the Code, in connection with any foreclosure or acquisition of a
deed in lieu of foreclosure (together, "foreclosure") in respect of such
Mortgage Loan, the Servicer will cause compliance with the provisions of
Treasury Regulation Section 1.1445-2(d)(3) (or any successor thereto) necessary
to assure that no withholding tax obligation arises with respect to the proceeds
of such foreclosure except to the extent, if any, that proceeds of such
foreclosure are required to be remitted to the obligor on such Mortgage Loan.

                                       64
<PAGE>

         (f) The decision of the Servicer to foreclose, or to continue the
foreclosure process, on a defaulted Mortgage Loan shall be subject to a
determination by the Servicer that the proceeds of such foreclosure would more
likely than not exceed the costs and expenses of bringing such a proceeding and
liquidating the REO expected to be obtained through such foreclosure. Promptly
upon making any determination in accordance with the preceding sentence not to
foreclose, or to discontinue the foreclosure process, as to any Mortgage Loan,
the Servicer shall deliver to the Master Servicer an Officer's Certificate
signed by a Servicing Officer identifying the Mortgage Loans as to which such
determination has been made (each such Mortgage Loan, upon acceptance of such
Officer's Certificate by the Master Servicer, a "Nonrecoverable Mortgage Loan")
setting forth the basis for such determination in a form acceptable to the
Master Servicer.

         (g) The income earned from the management of any REO Properties, net of
reimbursement to the Servicer for expenses incurred (including any property or
other taxes) in connection with such management and net of unreimbursed Master
Servicing Fees, Advances and Servicing Advances, shall be applied to the payment
of principal of and interest on the related defaulted Mortgage Loans (with
interest accruing as though such Mortgage Loans were still current) and all such
income shall be deemed, for all purposes in this Agreement, to be payments on
account of principal and interest on the related Mortgage Notes and shall be
deposited into the Collection Account. To the extent the net income received
during any calendar month is in excess of the amount attributable to amortizing
principal and accrued interest at the related Mortgage Rate on the related
Mortgage Loan for such calendar month, such excess shall be considered to be a
partial prepayment of principal of the related Mortgage Loan.

         (h) The proceeds from any liquidation of a Mortgage Loan, as well as
any income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Servicer for any related unreimbursed
Servicing Advances and Servicing Fees; second, to reimburse the Servicer for any
unreimbursed Advances; third, to reimburse the Collection Account for any
Nonrecoverable Advances (or portions thereof) that were previously withdrawn by
the Servicer pursuant to Section 3.8(a)(iii) that related to such Mortgage Loan;
fourth, to accrued and unpaid interest (to the extent no Advance has been made
for such amount or any such Advance has been reimbursed) on the Mortgage Loan or
related REO Property, at the Mortgage Rate (net of the Servicing Fee Rate) to
the Due Date occurring in the month in which such amounts are required to be
distributed; and fifth, as a recovery of principal of the Mortgage Loan. Excess
Proceeds, if any, from the liquidation of a Liquidated Mortgage Loan will be
retained by the Servicer as additional servicing compensation pursuant to
Section 3.14.

         (i) Notwithstanding any provision hereof, in connection with the
foreclosure or other conversion of defaulted assets, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable in its
sole discretion, and as shall be normal and usual in its general mortgage
servicing activities. In connection therewith, the Master Servicer shall have
the sole discretion to determine whenever an immediate sale of any REO or
Nonrecoverable Mortgage Loan, or continued management of such REO or
Nonrecoverable Mortgage Loan, is in the best interest of certificateholders to
maximize recoveries. Any such disposition (including by means of a "whole loan
sale") shall be conducted by the Servicer on terms and conditions approved by

                                       65
<PAGE>

the Master Servicer in its sole discretion. The foregoing notwithstanding, the
Master Servicer shall not approve any such disposition that would (i) result in
the imposition of the tax on "prohibited transactions" on the Trust Fund, as
defined in Sections 860F(a)(2) of the Code, or (ii) cause any REMIC created
hereunder to fail to qualify as a REMIC at any time that any Certificates are
outstanding.

         (j) The Master Servicer, in its sole discretion, shall have the right
to purchase for its own account from the Trust Fund any Mortgage Loan which is
91 days or more Delinquent at a price equal to the Purchase Price; provided
however, that for any such Mortgage Loan that is a Nonrecoverable Mortgage Loan,
such purchase shall be at a price equal to the Nonrecoverable Mortgage Loan
Purchase Price, and provided further that any REO Property may be disposed of
pursuant to the preceding Section 3.11(i). The total price calculated pursuant
to the preceding sentence for any Mortgage Loan purchased hereunder shall be
deposited in the Collection Account and the Trustee, upon receipt of the Request
for Release from the Servicer in the form of Exhibit J hereto, shall release or
cause to be released to the purchaser of such Mortgage Loan the related Mortgage
File and shall execute and deliver such instruments of transfer or assignment
prepared by the purchaser of such Mortgage Loan, in each case without recourse,
as shall be necessary to vest in the purchaser of such Mortgage Loan any
Mortgage Loan released pursuant hereto and the purchaser of such Mortgage Loan
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The purchaser of such
Mortgage Loan shall thereupon own such Mortgage Loan, and all security and
documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

         Section 3.12   Trustee to Cooperate; Release of Mortgage Files.
                        ------------------------------------------------

         Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Trustee by
delivering, or causing to be delivered a Request for Release substantially in
the form of Exhibit J. Upon receipt of such request, the Trustee shall or shall
cause the Custodian to promptly release the related Mortgage File to the
Servicer, and the Trustee shall at the Servicer's direction execute and deliver
to the Servicer the request for reconveyance, deed of reconveyance or release or
satisfaction of mortgage or such instrument releasing the lien of the Mortgage,
in each case as provided by the Servicer, together with the Mortgage Note with
written evidence of cancellation thereon. In lieu of the document execution
process described in the preceding two sentences, the Servicer shall be
authorized to execute each such Request for Release, request for reconveyance,
deed of reconveyance, and release, satisfaction of mortgage, or such instrument
releasing the lien of the Mortgage as attorney in fact for the Trustee (or the
Custodian, if applicable) pursuant to the powers of attorney described in
Section 3.1. Expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to the related Mortgagor. From time
to time and as shall be appropriate for the servicing or foreclosure of any
Mortgage Loan, including for such purpose, collection under any policy of flood
insurance, any fidelity bond or errors or omissions policy, or for the purposes
of effecting a partial release of any Mortgaged Property from the lien of the
Mortgage or the making of any corrections to the Mortgage Note or the Mortgage
or any of the

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other documents included in the Mortgage File, the Trustee shall, upon delivery
to the Trustee of a Request for Release in the form of Exhibit K signed by a
Servicing Officer, release the Mortgage File to the Servicer. Subject to the
further limitations set forth below, the Servicer shall cause the Mortgage File
or documents so released to be returned to the Trustee or its Custodian when the
need therefor by the Servicer no longer exists, unless the Mortgage Loan is
liquidated and the proceeds thereof are deposited in the Collection Account, in
which case the Servicer shall deliver to the Trustee a Request for Release in
the form of Exhibit L, signed by a Servicing Officer.

         If the Servicer at any time seeks to initiate a foreclosure proceeding
in respect of any Mortgaged Property as authorized by this Agreement, the
Servicer shall deliver or cause to be delivered to the Trustee, for signature,
as appropriate, any court pleadings, requests for trustee's sale or other
documents necessary to effectuate such foreclosure or any legal action brought
to obtain judgment against the Mortgagor on the Mortgage Note or the Mortgage or
to obtain a deficiency judgment or to enforce any other remedies or rights
provided by the Mortgage Note or the Mortgage or otherwise available at law or
in equity.

         Section 3.13   Documents Records and Funds in Possession of Servicer to
                        --------------------------------------------------------
                        be Held for the Trustee.
                        ------------------------

         Notwithstanding any other provisions of this Agreement, the Servicer
shall transmit to the Trustee, or the Custodian on its behalf, all documents and
instruments described in Section 2.1(b), and shall hold as Servicer and agent of
the Trustee all other documents, in respect of a Mortgage Loan coming into the
possession of the Servicer from time to time and shall account fully to the
Trustee for any funds received by the Servicer or which otherwise are collected
by the Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan. All Mortgage Files and funds collected or held by, or under the
control of, the Servicer in respect of any Mortgage Loans, whether from the
collection of principal and interest payments or from Liquidation Proceeds,
including but not limited to, any funds on deposit in the Collection Account,
shall be held by the Servicer for and on behalf of the Trustee and shall be and
remain the sole and exclusive property of the Trustee, subject to the applicable
provisions of this Agreement. The Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Collection Account, Distribution Account or any Escrow Account, or any funds
that otherwise are or may become due or payable to the Trustee for the benefit
of the Certificateholders, to any claim, lien, security interest, judgment,
levy, writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that the
Servicer shall be entitled to set off against and deduct from any such funds any
amounts that are properly due and payable to the Servicer under this Agreement.

         Section 3.14   Servicing Compensation.
                        -----------------------

         As compensation for its activities hereunder, the Servicer shall be
entitled to retain or withdraw from the Collection Account an amount equal to
the Servicing Fee for each Mortgage Loan, provided that the aggregate Servicing
Fee with respect to any Distribution Date shall be reduced (i) by the amount of
any Compensating Interest paid by the Servicer with respect to

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such Distribution Date, and (ii) with respect to the first Distribution Date, an
amount equal to any amount to be deposited into the Distribution Account by the
Depositor pursuant to Section 2.1(a) and not so deposited.

         Additional servicing compensation in the form of (i) Prepayment
Interest Excess and all income and gain net of any losses realized from
Permitted Investments and (ii) assumption fees, late payment charges, and other
receipts not required to be deposited to the Collection Account pursuant to
Section 3.5 hereof, including any Excess Proceeds, shall be retained by the
Servicer as additional servicing compensation. The Servicer and Master Servicer
shall be required to pay all expenses incurred by them respectively in
connection with their respective activities hereunder to the extent such
expenses do not constitute Advances or Nonrecoverable Advances as defined in
this Agreement and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement.

         Section 3.15   Access to Certain Documentation
                        -------------------------------

         The Servicer shall provide to the OTS and the FDIC and to comparable
regulatory authorities supervising Holders of Subordinate Certificates and the
examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices designated by the Servicer. Nothing in this
Section shall limit the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.

         Section 3.16   Annual Statement as to Compliance
                        ---------------------------------

         The Servicer shall deliver to the Depositor and the Trustee on or
before 120 days after the end of the Servicer's fiscal year, commencing with its
2002 fiscal year, an Officer's Certificate stating, as to the signer thereof,
that (i) a review of the activities of the Servicer during the preceding fiscal
year and of the performance of the Servicer under this Agreement has been made
under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all of its material
obligations under this Agreement throughout such year, or, if there has been a
material default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. The Trustee
shall forward a copy of each such statement to each Rating Agency.

         Section 3.17   Annual Independent Public Accountants' Servicing
                        ------------------------------------------------
                        Statement; Financial Statements.
                        --------------------------------

         On or before 120 days after the end of the Servicer's fiscal year,
commencing with its 2002 fiscal year, the Servicer at its expense shall cause a
nationally or regionally recognized firm of independent public accountants (who
may also render other services to the Servicer, the Depositor or any affiliate
thereof) which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Trustee and the Depositor to the
effect that such

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<PAGE>

firm has examined certain documents and records relating to the servicing of the
Mortgage Loans under this Agreement or of mortgage loans under pooling and
servicing agreements substantially similar to this Agreement (such statement to
have attached thereto a schedule setting forth the pooling and servicing
agreements covered thereby) substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or alternatively, if the Master
Servicer has so elected, the Audit Program for Mortgages serviced for FNMA and
FHLMC, and setting forth such firm's conclusions relating thereto in accordance
with the applicable attestation program or audit program. In rendering such
statement, such firm may rely, as to matters relating to direct servicing of
mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and FHLMC (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon request
at the Servicer's expense, provided such statement is delivered by the Servicer
to the Trustee.

         Section 3.18   Errors and Omissions Insurance; Fidelity Bonds
                        ----------------------------------------------

         The Servicer shall for so long as it acts as Servicer under this
Agreement, obtain and maintain in force (a) a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and (b) a fidelity bond in respect of its officers, employees and
agents. Each such policy or policies and bond shall, together, comply with the
requirements from time to time of FNMA or FHLMC for persons performing servicing
for mortgage loans purchased by FNMA or FHLMC. In the event that any such policy
or bond ceases to be in effect, the Servicer shall obtain a comparable
replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement.

         Section 3.19   Advances
                        --------

         The Servicer shall determine on or before each Determination Date
whether it is required to make a P&I Advance pursuant to the definition thereof.
If the Servicer determines it is required to make a P&I Advance, it shall,
before the Distribution Account Deposit Date, deposit into the Master Servicer
Custodial Account an amount equal to the P&I Advance. The Servicer shall be
entitled to be reimbursed for all P&I Advances of its own funds made pursuant to
this Section as provided in Section 3.8 hereof. The obligation to make P&I
Advances with respect to any Mortgage Loan shall continue if such Mortgage Loan
has been foreclosed or otherwise terminated and the related Mortgaged Property
has not been liquidated, provided that in no event shall the Servicer be
required to make any proposed Advance that, if made, would in the good faith
judgment of the Servicer to be a Nonrecoverable Advance.

         The Servicer shall deliver to the Master Servicer on the related
Servicer Deposit Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance that, if made, would in the good faith
judgment of the Servicer be a Nonrecoverable Advance.

                                       69
<PAGE>

         Section 3.20   Advance Facility
                        ----------------

         (a) The Servicer is hereby authorized to enter into any facility with
any Person (any such Person, an "Advance Facility Counterparty") which provides
that the Servicer may pledge or sell its rights to receive reimbursement of
Advances pursuant to this Agreement ("Advance Reimbursement Rights") pursuant to
credit facilities, repurchase facilities, or similar facilities providing
liquidity for the funding of Advances, including facilities providing that such
Advance Facility Counterparty may make all or a portion of the Advances (any
such facility, an "Advance Facility"), although no Advance Facility shall reduce
or otherwise affect the Servicer's obligations to fund such Advances. If so
required pursuant to the terms of an Advance Facility, to the extent that an
Advance Facility Counterparty makes all or a portion of any Advance and the
Advance Facility Counterparty and the Servicer provide the Trustee with notice
acknowledged by the Servicer that such Advancing Servicer is entitled to
reimbursement, such Advancing Servicer shall be entitled to receive
reimbursement pursuant to this Agreement for such amount to the extent provided.
Such notice from the Advance Facility Counterparty and the Servicer must specify
the amount of the reimbursement and must specify which Section of this Agreement
permits the Advance to be reimbursed. The Trustee shall be entitled to rely
without independent investigation on the Advance Facility Counterparty's
statement with respect to the amount of any reimbursement pursuant to this
Section 3.20 and with respect to the Advance Facility Counterparty's statement
with respect to the Section of this Agreement permits the Advance to be
reimbursed. An Advance Facility Counterparty whose obligations are limited to
the making of Advances will not be deemed to be a Subservicer under this
Agreement.

         (b) If so required pursuant to the terms of an Advance Facility, the
Servicer may direct, and if so directed the Trustee is hereby authorized to and
shall pay to the Advance Facility Counterparty (i) reimbursements for Advances;
and (ii) all or such portion of the Servicing Fee as may be so specified in the
Advance Facility, that would otherwise be payable to the Servicer pursuant to
this Agreement or the Servicing Agreement.

         (c) Upon request of the Servicer, the Trustee agrees to execute such
acknowledgments, certificates, and other documents recognizing the interests of
any Advance Facility Counterparty in such Advance Reimbursement Rights and
Servicing Fees as the Servicer may cause to be made subject to Advance
Facilities pursuant to this Section 3.20, and such other documents in connection
with such Advance Facilities as may be reasonably requested from time to time by
any Advance Facility Counterparty. The implementation of the arrangement
described in this Section shall not require the consent of Certificateholders or
the Trustee.

         Section 3.21   Prepayment Penalties.
                        --------------------

         The Servicer will not waive any Prepayment Penalty or part of a
Prepayment Penalty unless (i) such waiver would, in the reasonable judgment of
the Servicer, maximize recovery of total net proceeds taking into account the
value of such Prepayment Penalty and related Mortgage Loan and, if such waiver
is made in connection with a refinancing of the related Mortgage Loan, such
refinancing is related to a default or a reasonably foreseeable default; (ii)
the related Mortgage Loan indebtedness has been accelerated; or (iii) the
Servicer obtains an Opinion of Counsel, which may be in-house counsel for the
Servicer, opining that the

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<PAGE>

Prepayment Penalty is not legally enforceable in the circumstances under which
the related prepayment occurs. In no event will the Servicer waive a Prepayment
Penalty in connection with a refinancing of a Mortgage Loan that is not related
to a default or a reasonably foreseen default.


                                   ARTICLE 4

                                  DISTRIBUTIONS

         Section 4.1    Priorities of Distribution
                        --------------------------

         (a) On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of an amount equal to the Interest
Funds for each Group in the following order of priority:

                  (i)      from the Interest Funds for each Group, to the
         related Senior Certificates, the Current Interest and any Interest
         Carry Forward Amount for the such Certificates (or, in the case of the
         Class A-IO Certificates, the applicable Allocable Portion thereof);
         provided, however, that any Group II Interest Funds distributable to
         the Class AV-1 Certificates shall be derived solely from the Subgroup
         IIA Mortgage Loans, and any such funds distributable to the Class AV-2
         Certificates shall be derived solely from the Subgroup IIB Mortgage
         Loans; provided further, that any shortfall in available amounts in
         respect of each Group shall be applied, pro rata, among the Senior
         Certificates of such Group.

                  (ii)     any remaining amounts from both the Interest Funds
         for Group I and Group II shall be combined and distributed pursuant to
         Section 4.1(b) hereof.

         (b) On each Distribution Date, the Trustee shall apply all amounts
remaining pursuant to Section 4.1(a)(ii) in the following order of priority:

                  (i)      to the Class M-1 Certificates, the Current Interest
         thereon;

                  (ii)     to the Class M-2 Certificates, Current Interest
         thereon;

                  (iii)    to the Class B Certificates, Current Interest
         thereon;

                  (iv)     to the Class X-IO Certificates, Current Interest
         thereon; and

                  (v)      any remaining amounts pursuant to Section 4.1(g)
         hereof.

         (c) On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of an amount equal to the Principal
Distribution Amount for each Group as follows:

                  o        From the Principal Distribution Amount for Group I,
                           in an amount up to the Senior Principal Distribution
                           Amount for such Group as follows: (x) the Class AF-6
                           Principal Distribution Amount to the Class AF-6
                           Certificates until

                                       71
<PAGE>

                           the Class Certificate Balance thereof has been
                           reduced to zero, and (y) the balance of the Senior
                           Principal Distribution Amount for Group I
                           sequentially to the Class AF-1, Class AF-2, Class
                           AF-3, Class AF-4, Class AF-5 and Class AF-6
                           Certificates, in that order, so that no such
                           distribution pursuant to this clause (y) will be made
                           to any such Class until the Certificate Principal
                           Balances of all Group I Class A Certificates with a
                           lower numeral designation shall have been reduced to
                           zero; provided, however, that, on any Distribution
                           Date on or after the Credit Support Depletion Date,
                           the Senior Principal Distribution Amount for Group I
                           will be distributed pro rata and not sequentially to
                           the Group I Class A Certificates;

                  o        From the Principal Distribution Amount for Group II,
                           in an amount up to the Senior Principal Distribution
                           Amount for such Group as follows: (x) amounts
                           constituting Principal Funds for the Subgroup IIA
                           Mortgage Loans will be distributed to the Class AV-1
                           Certificates until the Class Certificate Balance
                           thereof has been reduced to zero; and (y) amounts
                           constituting Principal Funds for the Subgroup IIB
                           Mortgage Loans will be distributed to the Class AV-2
                           Certificates until the Class Certificate Balance
                           thereof has been reduced to zero; provided that any
                           excess interest (representing the allocable portion
                           of any Extra Principal Distribution Amount for such
                           date) included in the Senior Principal Distribution
                           Amount for Group II will be distributed to the Class
                           AV-1 and Class AV-2 Certificate pro rata, based on
                           the Principal Funds received for each subgroup; and

                  o        In the event the Certificate Principal Balance of one
                           or more of the (A) Group I Class A Certificates, (B)
                           the Class AV-1 Certificates or (C) the Class AV-2
                           Certificates has been reduced to zero, on each
                           Distribution Date thereafter principal distributions
                           otherwise distributable to such retired Certificates
                           will be applied to such remaining Classes, pro rata,
                           on the basis of their Class Certificate Balances. Any
                           such distributions in respect of the Group I Class A
                           Certificates will be distributed to such Classes in
                           the manner provided in the first subparagraph of this
                           subsection.

         (d) On each Distribution Date, the Trustee shall distribute the
Principal Distribution Amount for each Group remaining after distributions
pursuant to Section 4.1(c) in the following order of priority:

                  (i)      to the Class M-1 Certificates, the Class M-1
         Principal Distribution Amount, until the Class Certificate Balance
         thereof has been reduced to zero;

                  (ii)     to the Class M-2 Certificates, the Class M-2
         Principal Distribution Amount, until the Class Certificate Balance
         thereof has been reduced to zero; and

                  (iii)    to the Class B Certificates, the Class B Principal
         Distribution Amount, until the Class Certificate Balance thereof has
         been reduced to zero.

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<PAGE>

         (e) Notwithstanding Section 4.1(c) and (d) hereof, before the Stepdown
Date or if a Trigger Event is in effect on any Distribution Date each Principal
Distribution Amount shall be distributed in the following order of priority:

                  (i)      to the related Class A Certificates in the manner
         described in Section 4.1(c) until the Certificate Principal Balance of
         such Class A Certificates has been reduced to zero;

                  (ii)     after the Certificate Principal Balance of the Class
         A Certificates has been reduced to zero, the remaining combined
         Principal Distribution Amounts shall be distributed to the Class M-1
         Certificates until the Class Certificate Balance of the Class M-1
         Certificates has been reduced to zero;

                  (iii)    after the Class Certificate Balance of the Class M-1
         Certificates has been reduced to zero, the remaining combined Principal
         Distribution Amounts shall be distributed to the Class M-2 Certificates
         until the Class Certificate Balance of the Class M-2 Certificates has
         been reduced to zero, and

                  (iv)     after the Class Certificate Balance of the Class M-2
         Certificates has been reduced to zero, the remaining combined Principal
         Distribution Amounts shall be distributed to the Class B Certificates
         until the Class Certificate Balance of the Class B Certificates has
         been reduced to zero.

         (f) On each Distribution Date, the Trustee shall distribute Pledged
Prepayment Penalties for such Distribution Date in accordance with the
priorities set forth in clauses (xv) through (xviii) of Section 4.1(g) hereof
(without regard to references to the Basis Risk Reserve Fund).

         (g) On each Distribution Date, the Trustee shall make the following
distributions from the Distribution Account of any remaining amounts pursuant to
Sections 4.1(b)(v) hereof, together with any Net Pledged Prepayment Penalties
for such Distribution Date, in the following order of priority:

                  (i)      on each of the first four Distribution Dates only, to
                           the Basis Risk Reserve Fund, any Basis Risk Payment
                           for such date;

                  (ii)     on each of the first four Distribution Dates only,
                           from and to the extent of amounts held in the Basis
                           Risk Reserve Fund, to the Class A Certificates, on a
                           pro rata basis any applicable Cap Carryover Amount;

                  (iii)    on each of the first four Distribution Dates only,
                           from and to the extent of amounts held in the Basis
                           Risk Reserve Fund, to the Class M-1 Certificates, any
                           applicable Cap Carryover Amount;

                                       73
<PAGE>

                  (iv)     on each of the first four Distribution Dates only,
                           from and to the extent of amounts held in the Basis
                           Risk Reserve Fund, to the Class M-2 Certificates, any
                           applicable Cap Carryover Amount;

                  (v)      on each of the first four Distribution Dates only,
                           from and to the extent of amounts held in the Basis
                           Risk Reserve Fund, to the Class B Certificates, any
                           applicable Cap Carryover Amount;

                  (vi)     the related Principal Percentage of the Extra
                           Principal Distribution Amount will be added to the
                           Principal Distribution Amount for Group I; and the
                           related Principal Percentage of the Extra Principal
                           Distribution Amount will be added to the Principal
                           Distribution Amount for Group II;

                  (vii)    to the Class X-IO Certificates, any related Interest
                           Carry Forward Amount;

                  (viii)   to the Class M-1 Certificates, any related Interest
                           Carry Forward Amount;

                  (ix)     to the Class M-1 Certificates, any related Unpaid
                           Realized Loss Amount;

                  (x)      to the Class M-2 Certificates, any related Interest
                           Carry Forward Amount;

                  (xi)     to the Class M-2 Certificates, any related Unpaid
                           Realized Loss Amount;

                  (xii)    to the Class B Certificates, any related Interest
                           Carry Forward Amount;

                  (xiii)   to the Class B Certificates, any related Unpaid
                           Realized Loss Amount;

                  (xiv)    to the Basis Risk Reserve Fund, any Basis Risk
                           Payment for such date;

                  (xv)     on any Distribution Date on or before the
                           Distribution Date on which the Class Certificate
                           Balance thereof has been reduced to zero, from and to
                           the extent of amounts held in the Basis Risk Reserve
                           Fund, to the Class A Certificates, on a pro rata
                           basis any applicable Cap Carryover Amount;

                  (xvi)    on any Distribution Date on or before the
                           Distribution Date on which the Class Certificate
                           Balance of the Class M-1 Certificates has been
                           reduced to zero, from and to the extent of amounts
                           held in the Basis Risk Reserve Fund, to the Class M-1
                           Certificates, any applicable Cap Carryover Amount;

                  (xvii)   on any Distribution Date on or before the
                           Distribution Date on which the Class Certificate
                           Balance of the Class M-2 Certificates has been
                           reduced to zero, from and to the extent of amounts
                           held in the Basis Risk Reserve Fund, to the Class M-2
                           Certificates, any applicable Cap Carryover Amount;

                                       74
<PAGE>

                  (xviii)  on any Distribution Date on or before the
                           Distribution Date on which the Class Certificate
                           Balance of the Class B Certificates has been reduced
                           to zero, from and to the extent of amounts held in
                           the Basis Risk Reserve Fund, to the Class B
                           Certificates, any applicable Cap Carryover Amount;
                           and

                  (xix)    the remainder pursuant to Section 4.1(i) hereof.

         (h) On each Distribution Date, the Trustee shall distribute an amount
equal to the Class P Prepayment Amount for such Distribution Date to the Class P
Certificates.

         (i) On each Distribution Date, the Trustee shall distribute to the
Class C Certificates any remaining amounts pursuant to Section 4.1(g)(xix)
hereof, to the extent of the sum of the interest accrued thereon at the rate
described in Schedule III and that has not been distributed thereon on prior
Distribution Dates (amounts deposited in the Basis Risk Reserve Fund under
Section 4.1(g)(xiv) are treated as distributed for this purpose), amounts
representing earnings on the Basis Risk Reserve Fund, and any amounts released
from the Basis Risk Reserve Fund.

         (j) On each Distribution date, to the extent the Servicer or Master
Servicer shall have collected any Subsequent Recoveries during the related
Prepayment Period, the Trustee shall apply such amounts as follows:

                  first, sequentially, in order of priority, to each Class of
                  Subordinate Certificates then outstanding, in reduction of any
                  amounts previously applied to such Class to reduce the Class
                  Certificate Balance thereof pursuant to Section 4.3 hereof
                  (provided, however, that any such amounts distributed pursuant
                  to this clause first to a Class of Subordinate Certificates
                  shall not reduce the Class Certificate Balance thereof); and

                  second, as part of the related Interest Funds for such
                  Distribution Date for application pursuant to Section 4.1(a).

         (k) On each Distribution Date the Trustee shall distribute to the Class
R Certificates any remaining amounts.

         Section 4.2    Method of Distribution
                        ----------------------

         (a) All distributions with respect to each Class of Certificates on
each Distribution Date shall be made pro rata among the outstanding Certificates
of such Class, based on the Percentage Interest in such Class represented by
each Certificate. Payments to the Certificateholders on each Distribution Date
shall be made by the Trustee to the Certificateholders of record on the related
Record Date by check or money order mailed to a Certificateholder at the address
appearing in the Certificate Register, or upon written request by such
Certificateholder to the Trustee made not later than the applicable Record Date,
by wire transfer to a U.S. depository institution acceptable to the Trustee, or
by such other means of payment as such Certificateholder and the Trustee shall
agree.

                                       75
<PAGE>

         (b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each financial
intermediary for which it acts as agent. Each such financial intermediary shall
be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the applicable Certificates. Neither the
Trustee nor the Master Servicer shall have any responsibility therefor except as
otherwise provided by applicable law.

         (c) The Trustee shall withhold or cause to be withheld such amounts as
it reasonably determines are required by the Code (giving full effect to any
exemptions from withholding and related certifications required to be furnished
by Certificateholders or Certificate Owners and any reductions to withholding by
virtue of any bilateral tax treaties and any applicable certification required
to be furnished by Certificateholders or Certificate Owners with respect
thereto) from distributions to be made to a "Foreign Person" as defined in
Section 1445(f)(3) of the Code.

         Section 4.3    Allocation of Losses
                        --------------------

         On each Distribution Date, the Trustee shall allocate any excess of the
aggregate Certificate Principal Balance of the Certificates over the Assumed
Principal Balance to reduce the Class Certificate Balances of the Subordinate
Certificates in the following order of priority:

                  (i)      to the Class B Certificates until the Class
         Certificate Balance thereof is reduced to zero;

                  (ii)     to the Class M-2 Certificates until the Class
         Certificate Balance thereof is reduced to zero; and

                  (iii)    to the Class M-1 Certificates until the Class
         Certificate Balance thereof is reduced to zero.

         Section 4.4    Reports to the Depositor and the Trustee
                        ----------------------------------------

         On or before the Business Day preceding each Distribution Date, based
on information provided by the Servicer at such times and in form and content,
as acceptable to the Master Servicer in its reasonable discretion, the Master
Servicer shall notify, or cause to be notified, the Depositor and the Trustee of
the following information with respect to the next Distribution Date (which
notification may be given by facsimile, electronic transmission or by telephone
promptly confirmed in writing):

         (a) the aggregate amount then on deposit in the Distribution Account
and the source thereof (identified as interest, scheduled principal or
unscheduled principal);

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<PAGE>

         (b) the amount of any Realized Losses, Applied Realized Loss Amounts
and Unpaid Realized Loss Amounts;

         (c) the application of the amounts distributed on such Distribution
Date pursuant to Section 4.1 hereof (including the distribution of any
Subsequent Recoveries);

         (d) whether a Trigger Event has occurred; and

         (e) For each Distribution Date during the Funding Period,

                  (i)      the Pre-Funded Amount for each Group previously used
         to acquire Subsequent Mortgage Loans;

                  (ii)     the Pre-Funding Account Earnings for each Group
         transferred to the Distribution Account; and

                  (iii)    the Pre-Funded Amount and for the Distribution Date
         following the end of the Funding Period, the Pre-Funded Amount
         distributed to Certificateholders.

         Section 4.5    Reports by or on Behalf of the Master Servicer
                        ----------------------------------------------

         (a) On or as soon as practicable following each Distribution Date,
based on information provided by the Servicer at such times and in form and
content, as acceptable to the Master Servicer in its reasonable discretion, the
Master Servicer shall report or cause to be published on the Trustee's website
located at http://www.apps.gis.deutsche-bank.com/invr, or such other website
designated by the Master Servicer as may be set forth in a notice provided to
the Holder of each of the Certificates and each Rating Agency, the following
information:

                  (i)      with respect to each Class of Certificates (other
                           than Class C and Class R) (based on a Certificate in
                           the original principal amount of $1,000):

                           (A)      the amount of the distributions on such
                                    Distribution Date;

                           (B)      the amount of such distribution allocable to
                                    interest;

                           (C)      the amount of such distributions allocable
                                    to principal, separately identifying the
                                    aggregate amount of any prepayments,
                                    Substitution Adjustment Amounts, repurchase
                                    amounts pursuant to Article 2 or other
                                    recoveries of principal included therein,
                                    any Extra Principal Distribution Amount and
                                    any Class M-1, Class M-2, Class B, Applied
                                    Realized Loss Amount with respect to, and
                                    any Class M-1, Class M-2, and Class B,
                                    Unpaid Realized Loss Amount at, such
                                    Distribution Date;

                           (D)      the Class Certificate Balance after giving
                                    effect to any distribution allocable to
                                    principal; and

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<PAGE>

                           (E)      any Interest Carry Forward Amount and any
                                    Cap Carryover Amount;

                  (ii)     the Net WAC Cap and the Maximum Cap Rate;

                  (iii)    any Subsequent Recoveries and Realized Losses for
                           Group I and Group II for the period and since the Cut
                           Off Date;

                  (iv)     the largest Mortgage Loan balance outstanding in each
                           Group;

                  (v)      the Prepayment Penalties owed by borrowers and (if
                           different) collected by the Servicer or the Master
                           Servicer;

                  (vi)     the Servicing Fees and Master Servicing Fees
                           allocable to each Group;

                  (vii)    One-Month LIBOR on the most recent Interest
                           Determination Date;

                  (viii)   the Pass-Through Rates for the Certificates for the
                           current Accrual Period and whether such rates have
                           been capped;

                  (ix)     for each Distribution Date during the Funding Period,
                           the Pre-Funded Amount allocable to each Group;

                  (x)      the number and aggregate principal balances of
                           Mortgage Loans in each Group (a) 30-59 days
                           Delinquent, (b) 60-89 days Delinquent and (c) 90 or
                           more days Delinquent, as of the close of business as
                           of the end of the related prepayment period;

                  (xi)     the percentage that each of the Stated Principal
                           Balances set forth pursuant to clauses (a), (b) and
                           (c) of paragraph (i) above represent with respect to
                           all Mortgage Loans in each Group;

                  (xii)    the number and Stated Principal Balance of all
                           Mortgage Loans in each Group in foreclosure
                           proceedings as of the close of business as of the end
                           of the related Prepayment Period and in the
                           immediately preceding Prepayment Period;

                  (xiii)   the number of Mortgagors and the Stated Principal
                           Balances of Mortgage Loans in each Group involved in
                           bankruptcy proceedings as of the close of business as
                           of the end of the related Prepayment Period;

                  (xiv)    the aggregate number and aggregate book value of any
                           REO Property in each Group as of the close of
                           business as of the end of the related Prepayment
                           Period; and

                                       78
<PAGE>

                  (xv)     the number and amount by principal balance of 60+ Day
                           Delinquent Loans in each Group, in each case by
                           Servicer and as of the end of the related Prepayment
                           Period.

         (b) All allocations made by the Trustee shall be based on information
the Trustee receives from the Master Servicer which the Trustee shall be
protected in relying on.

         Section 4.6    Basis Risk Reserve Fund
                        -----------------------

         (a) On the Closing Date, the Trustee shall establish and maintain in
its name, in trust for the benefit of the holders of the Certificates, other
than the Class A-IO, Class S-1, Class S-2, Class X-IO, Class P, and Class R
Certificates, the Basis Risk Reserve Fund, into which the Depositor shall
deposit $1,000. The Basis Risk Reserve Fund shall be an Eligible Account, and
funds on deposit therein shall be held separate and apart from, and shall not be
commingled with, any other moneys, including, without limitation, other moneys
of the Trustee held pursuant to this Agreement.

         (b) The Trustee shall make withdrawals from the Basis Risk Reserve Fund
to make distributions pursuant to Section 4.1(g) hereof.

         (c) Funds in the Basis Risk Reserve Fund shall be invested in Eligible
Investments. Any earnings on such amounts shall be distributed to the Class C
Certificateholder pursuant to Section 4.1(i). The Class C Certificate shall
evidence ownership of the Basis Risk Reserve Fund for federal income tax
purposes and the Holder thereof shall direct the Trustee, in writing, as to
investment of amounts on deposit therein. The Class C Certificateholder shall be
liable for any losses incurred on such investments. In the absence of written
instructions from the Class C Certificateholder as to investment of funds on
deposit in the Basis Risk Reserve Fund, such funds shall be invested in the
Wells Fargo Prime Investment Money Market Fund or comparable investment vehicle.
Any amounts on deposit in the Basis Risk Reserve Fund in excess of the Required
Reserve Fund Deposit on any Distribution Date shall be distributed to the Class
C Certificateholder on the following Distribution Date. For all Federal income
tax purposes, amounts transferred by REMIC 5 to the Basis Risk Reserve Fund
shall be treated as amounts distributed by REMIC 5 to the Class C
Certificateholder.

         (d) Upon termination of the Trust Fund, any amounts remaining in the
Basis Risk Reserve Fund shall be distributed to the Class C Certificateholder
pursuant to Section 4.1(i).

         Section 4.7    The Instrument
                        --------------

         At any time on or after the Closing Date, the Depositor shall have the
right to deposit into the Trust Fund, solely for the benefit of the Holder of
the Class C Certificates, a derivative contract or comparable instrument. Any
such instrument shall constitute a fully prepaid agreement. All collections,
proceeds and other amounts in respect of such an instrument shall be distributed
to the Class C Certificates on the Distribution Date following receipt thereof
by the Trustee. In no event shall such an instrument constitute a part of any
REMIC created hereunder. In addition, in the event any such instrument is
deposited, the Trust Fund shall be deemed to be

                                       79
<PAGE>

divided into two separate and discrete sub-Trusts. The assets of one such
sub-Trust shall consist of all the assets of the Trust other than the instrument
and the assets of the other sub-Trust shall consist solely of such instrument.

         Section 4.8    The Calculation Agent
                        ---------------------

         (a) The Calculation Agent, as agent for the Master Servicer, shall
timely and accurately (i) perform and provide to the Trustee calculations of all
amounts of principal and interest required to be distributed on each
Distribution Date pursuant to this Article 4; (ii) in connection with such
calculations, determine the appropriate One Month LIBOR with respect to each
Interest Determination Date in accordance with the definition of "One Month
LIBOR" set forth in Section 1.1, and (iii) with respect to each Distribution
Date, determine the Pre-Funding Account Earnings in accordance with the
definition of "Pre-Funding Account Earnings" set forth in Section 1.1. The
Calculation Agent shall not resign from its capacity as the Calculation Agent on
fewer than sixty (60) prior written days notice to the Master Servicer.

         (b) The compensation of the Calculation Agent shall be the
responsibility of the Master Servicer, payable from the Master Servicing Fee.

         (c) The Master Servicer may terminate the Calculation Agent, in its
capacity as the Calculation Agent, at any time, with or without cause, upon
thirty (30) days notice in writing to the Calculation Agent. No fee shall be
payable to the Calculation Agent in connection with any such termination.


                                   ARTICLE 5

                                THE CERTIFICATES

         Section 5.1    The Certificates
                        ----------------

         The Certificates shall be substantially in the forms attached as
exhibits hereto. The Certificates shall be issuable in registered form, in the
minimum denominations, integral multiples in excess thereof (except that one
Certificate in each Class may be issued in a different amount which must be in
excess of the applicable minimum denomination) and aggregate denominations per
Class set forth in the Preliminary Statement.

         Subject to Section 9.2 hereof respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance
of any Class of Certificates or (B) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000 or (y) by check mailed by
first class mail to such Certificateholder at the address of such Holder
appearing in the Certificate Register.

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<PAGE>

         The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and delivered hereunder.
All Certificates shall be dated the date of their countersignature. On the
Closing Date, the Trustee shall countersign the Certificates to be issued at the
direction of the Depositor, or any affiliate thereof.

         The Depositor shall provide, or cause to be provided, to the Trustee on
a continuous basis, an adequate inventory of Certificates to facilitate
transfers.

         Section 5.2    Certificate Register; Registration of Transfer and
                        --------------------------------------------------
                        Exchange of Certificates.
                        -------------------------

         (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.6 hereof, a Certificate Register for the Trust
Fund in which, subject to the provisions of subsections (b) and (c) below and to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. Upon surrender for registration of transfer of any
Certificate, the Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and aggregate Percentage Interest.

         At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, authenticate, and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing.

         No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates may be required.

         All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.

         (b) No Person shall transfer a Private Certificate unless such transfer
(i) is made pursuant to an effective registration statement under the Securities
Act and any applicable state

                                       81
<PAGE>

securities laws, or (ii) is exempt from the registration requirements under said
Act and such state securities laws. In the event that a transfer is to be made
in reliance upon an exemption from the Securities Act and such laws, in order to
assure compliance with the Securities Act and such laws, the Certificateholder
desiring to effect such transfer and such Certificateholder's prospective
transferee shall each certify to the Trustee in writing the facts surrounding
the transfer in substantially the forms set forth in Exhibit F (the "Transferor
Certificate") and (i) deliver a letter in substantially the form of either
Exhibit G (the "Investment Letter") or Exhibit H (the "Rule 144A Letter") or
(ii) there shall be delivered to the Trustee at the expense of the transferor an
Opinion of Counsel that such transfer may be made pursuant to an exemption from
the Securities Act. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Master Servicer shall
cooperate with the Depositor in providing the Rule 144A information referenced
in the preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the Depositor, the Depositor and the Master Servicer against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.

         No transfer of an ERISA-Restricted Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee (in the event such Certificate is a Private Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit G or Exhibit H),
to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan or arrangement subject to
Section 4975 of the Code, nor a person acting on behalf of any such plan or
arrangement, nor using the assets of any such plan or arrangement to effect such
transfer, (ii) in the case of a Private Certificate, if the purchaser is an
insurance company, a representation that the purchaser is an insurance company
which is purchasing such Certificates with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and
holding of such Certificates are covered under PTCE 95-60 or (iii) in the case
of any such ERISA-Restricted Certificate presented for registration in the name
of an employee benefit plan subject to ERISA, or a plan or arrangement subject
to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel
shall not be an expense of either the Trustee or the Trust Fund, addressed to
the Trustee to the effect that the purchase or holding of such ERISA-Restricted
Certificate will not result in the assets of the Trust Fund being deemed to be
"plan assets" and subject to the prohibited transaction provisions of ERISA and
the Code and will not subject the Trustee to any obligation in addition to those

                                       82
<PAGE>

expressly undertaken in this Agreement or to any liability. Notwithstanding
anything else to the contrary herein, any purported transfer of an
ERISA-Restricted Certificate to or on behalf of an employee benefit plan subject
to ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above shall be void and of no
effect.

         To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not permitted by this Section 5.2(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.

         (c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

                  (i)      Each Person holding or acquiring any Ownership
         Interest in a Residual Certificate shall be a Permitted Transferee.

                  (ii)     No Ownership Interest in a Residual Certificate may
         be registered on the Closing Date or thereafter transferred, and the
         Trustee shall not register the Transfer of any Residual Certificate
         unless, in addition to the certificates required to be delivered to the
         Trustee under subparagraph (b) above, the Trustee shall have been
         furnished with an affidavit (a "Transfer Affidavit") of the initial
         owner or the proposed transferee in the form attached hereto as Exhibit
         E.

                  (iii)    Each Person holding or acquiring any Ownership
         Interest in a Residual Certificate shall agree (A) to obtain a Transfer
         Affidavit from any other Person to whom such Person attempts to
         Transfer its Ownership Interest in a Residual Certificate, (B) to
         obtain a Transfer Affidavit from any Person for whom such Person is
         acting as nominee, trustee or agent in connection with any Transfer of
         a Residual Certificate and (C) not to Transfer its Ownership Interest
         in a Residual Certificate or to cause the Transfer of an Ownership
         Interest in a Residual Certificate to any other Person if it has actual
         knowledge that such Person is not a Permitted Transferee.

                  (iv)     Any attempted or purported Transfer of any Ownership
         Interest in a Residual Certificate in violation of the provisions of
         this Section 5.2(c) shall be absolutely null and void and shall vest no
         rights in the purported Transferee. If any purported transferee shall
         become a Holder of a Residual Certificate in violation of the
         provisions of this Section 5.2(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Residual
         Certificate. The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Residual Certificate that is in fact
         not permitted by Section 5.2(b) and this Section 5.2(c) or for making
         any payments due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the

                                       83
<PAGE>

         provisions of this Agreement so long as the Transfer was registered
         after receipt of the related Transfer Affidavit, Transferor Certificate
         and either the Rule 144A Letter or the Investment Letter. The Trustee
         shall be entitled but not obligated to recover from any Holder of a
         Residual Certificate that was in fact not a Permitted Transferee at the
         time it became a Holder or, at such subsequent time as it became other
         than a Permitted Transferee, all payments made on such Residual
         Certificate at and after either such time. Any such payments so
         recovered by the Trustee shall be paid and delivered by the Trustee to
         the last preceding Permitted Transferee of such Certificate.

                  (v)      The Depositor shall use its best efforts to make
         available, upon receipt of written request from the Trustee, all
         information necessary to compute any tax imposed under Section 860E(e)
         of the Code as a result of a Transfer of an Ownership Interest in a
         Residual Certificate to any Holder who is not a Permitted Transferee.

         The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.2(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trust Fund, the Trustee, the Depositor
or the Master Servicer, to the effect that the elimination of such restrictions
will not cause any REMIC created hereunder to fail to qualify as a REMIC at any
time that the Certificates are outstanding or result in the imposition of any
tax on the Trust Fund. Each Person holding or acquiring any Ownership Interest
in a Residual Certificate hereby consents to any amendment of this Agreement
which, based on an Opinion of Counsel furnished to the Trustee, is reasonably
necessary (a) to ensure that the record ownership of, or any beneficial interest
in, a Residual Certificate is not transferred, directly or indirectly, to a
Person that is not a Permitted Transferee and (b) to provide for a means to
compel the Transfer of a Residual Certificate which is held by a Person that is
not a Permitted Transferee to a Holder that is a Permitted Transferee.

         (d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.2 in connection with transfer shall be at
the expense of the parties to such transfers.

         (e) Except as provided below, the Book-Entry Certificates shall at all
times remain registered in the name of the Depository or its nominee and at all
times: (i) registration of the Certificates may not be transferred by the
Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository, Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of exercising the rights of holders under this Agreement, and requests
and directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the

                                       84
<PAGE>

Depository Participants with respect to indirect participating firms and persons
shown on the books of such indirect participating firms as direct or indirect
Certificate Owners.

         All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.

         If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository, or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Class Certificate Balance of the
Book-Entry Certificates together advise the Trustee and the Depository through
the Depository Participants in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the
Certificate Owners, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
definitive, fully-registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
related Class of Certificates by the Depository, accompanied by the instructions
from the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee shall
be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such instructions.
The Master Servicer shall provide the Trustee with an adequate inventory of
certificates to facilitate the issuance and transfer of Definitive Certificates.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder; provided
that the Trustee shall not by virtue of its assumption of such obligations
become liable to any party for any act or failure to act of the Depository.

         Section 5.3    Mutilated, Destroyed, Lost or Stolen Certificates
                        -------------------------------------------------

         If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.3, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.

                                       85
<PAGE>

Any replacement Certificate issued pursuant to this Section 5.3 shall constitute
complete and indefeasible evidence of ownership, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.

         Section 5.4    Persons Deemed Owners
                        ---------------------

         The Trustee and any agent of the Trustee may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions as provided in this Agreement and for all
other purposes whatsoever, and neither the Trustee nor any agent of the Trustee
shall be affected by any notice to the contrary.

         Section 5.5    Access to List of Certificateholders' Names and
                        -----------------------------------------------
                        Addresses
                        ---------

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of such Trust Fund held by the Trustee, if any. The Depositor
and every Certificateholder, by receiving and holding a Certificate, agree that
the Trustee shall not be held accountable by reason of the disclosure of any
such information as to the list of the Certificateholders hereunder, regardless
of the source from which such information was derived.

         Section 5.6    Maintenance of Office or Agency
                        -------------------------------

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates the office of the Trustee's agent, located at DTC Transfer Agent
Services, 55 Water Street, Jeanette Park Entrance, New York, New York 10041,
Attention: Vinny Brown, for such purposes. The Trustee will give prompt written
notice to the Certificateholders of any change in such location of any such
office or agency.


                                   ARTICLE 6

                 THE DEPOSITOR, THE SERVICER AND MASTER SERVICER

         Section 6.1    Respective Liabilities of the Depositor, Servicer and
                        -----------------------------------------------------
                        Master Servicer
                        ---------------

         The Depositor, Servicer and Master Servicer shall each be liable in
accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by them herein.

                                       86
<PAGE>

         Section 6.2    Merger or Consolidation of the Depositor, Servicer and
                        ------------------------------------------------------
                        Master Servicer
                        ---------------

         The Depositor, Servicer and Master Servicer will each keep in full
effect its existence, rights and franchises as a corporation under the laws of
the United States or under the laws of one of the states thereof and will each
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.

         Any Person into which the Depositor, Servicer or the Master Servicer
may be merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor, Servicer or the Master Servicer shall be a
party, or any person succeeding to the business of the Depositor, Servicer or
the Master Servicer, shall be the successor of the Depositor, Servicer or the
Master Servicer, as the case may be, hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person to the Servicer shall be qualified to sell
mortgage loans to, and to service mortgage loans on behalf of, FNMA or FHLMC.

         Section 6.3    Limitation on Liability of the Depositor, the Servicer,
                        -------------------------------------------------------
                        the Master Servicer and Others
                        ------------------------------

         None of the Depositor, the Servicer, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Servicer or the
Master Servicer shall be under any liability to the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Servicer, the Master
Servicer or any such Person against any breach of representations or warranties
made by it herein or protect the Depositor, the Servicer, the Master Servicer or
any such Person from any liability which would otherwise be imposed by reasons
of willful misfeasance, bad faith or negligence in the performance of duties or
by reason of reckless disregard of obligations and duties hereunder. The
Depositor, the Servicer, the Master Servicer and any director, officer, employee
or agent of the Depositor, the Servicer or the Master Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor, the
Servicer, the Master Servicer and any director, officer, employee or agent of
the Depositor, the Servicer or the Master Servicer shall be indemnified by the
Trust Fund and held harmless against any loss, liability or expense incurred in
connection with any audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the performance thereof, or the Certificates, other than any loss, liability or
expense related to any specific Mortgage Loan or Mortgage Loans (except as any
such loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. None of the
Depositor, the Servicer or the Master Servicer shall be under any obligation to
appear in, prosecute or defend any legal action that is not

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incidental to its respective duties hereunder and which in its opinion may
involve it in any expense or liability; provided, however, that any of the
Depositor, the Servicer or the Master Servicer may in its discretion undertake
any such action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties hereto and interests of the
Trustee and the Certificateholders hereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Fund, and the Depositor, the
Servicer and the Master Servicer shall be entitled to be reimbursed therefor out
of the Collection Account.

         Section 6.4    Limitation on Resignation of Servicer
                        -------------------------------------

         The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) upon appointment of a successor servicer and receipt by
the Trustee of a letter from each Rating Agency that such a resignation and
appointment will not result in a downgrading of the rating of any of the
Certificates, or (b) upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination under clause (b)
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee. No such resignation shall
become effective until the Trustee or a successor master servicer shall have
assumed the Servicer's responsibilities, duties, liabilities and obligations
hereunder.


                                   ARTICLE 7

                                SERVICER DEFAULT

         Section 7.1    Events of Default.
                        -----------------

         "Event of Default," wherever used herein, means any one of the
following events:

                  (i)      any failure by the Servicer to deposit in the
         Collection Account or remit to the Trustee any payment required to be
         made under the terms of this Agreement, which failure shall continue
         unremedied for five days after the date upon which written notice of
         such failure shall have been given to the Servicer by the Trustee or
         the Depositor or to the Master Servicer and the Trustee by the Holders
         of Certificates having not less than 51% of the Voting Rights evidenced
         by the Certificates; or

                  (ii)     any failure by the Servicer to observe or perform in
         any material respect any other of the covenants or agreements on the
         part of the Servicer contained in this Agreement, which failure
         materially affects the rights of Certificateholders, which failure
         continues unremedied for a period of 60 days after the date on which
         written notice of such failure shall have been given to the Servicer by
         the Trustee, the Master Servicer, or the Depositor, or to the Servicer
         and the Trustee by the Holders of Certificates evidencing not less than
         51% of the Voting Rights evidenced by the Certificates; provided,
         however, that the 60-day cure period shall not apply to the initial
         delivery of the Mortgage File for Delay Delivery Mortgage Loans nor the
         failure to substitute or repurchase in lieu thereof; or

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<PAGE>

                  (iii)    a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings, or for
         the winding-up or liquidation of its affairs, shall have been entered
         against the Servicer and such decree or order shall have remained in
         force undischarged or unstayed for a period of 60 consecutive days; or

                  (iv)     the Servicer shall consent to the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings of or
         relating to the Servicer or all or substantially all of the property of
         the Servicer; or

                  (v)      the Servicer shall admit in writing its inability to
         pay its debts generally as they become due, file a petition to take
         advantage of, or commence a voluntary case under, any applicable
         insolvency or reorganization statute, make an assignment for the
         benefit of its creditors, or voluntarily suspend payment of its
         obligations.

         Upon its obtaining actual knowledge of the occurrence of an Event of
Default, the Master Servicer shall promptly deliver to the Trustee, an Officer's
Certificate that an event has occurred that may justify termination of the
Servicer hereunder and describing the circumstances surrounding such event. Upon
determination by the Master Servicer that an Event of Default has occurred, the
Master Servicer shall promptly deliver to the Trustee an Officer's Certificate
to that effect, and the Master Servicer (a) may terminate the Servicer
hereunder, if in its judgment such termination is in the best interests of the
Trust Fund; or (b) shall terminate the Servicer hereunder, if instructed to do
so by the Trustee. The Trustee shall so instruct the Master Servicer if directed
to do so by the Holders of Certificates evidencing not less than 51% of the
Voting Rights evidenced by the Certificates exercised in writing following
delivery to such Holders by the Trustee of notice of the occurrence of such
Event of Default pursuant to Section 7.2(b).

         Upon any such termination, the Master Servicer shall enter into a
substitute servicing arrangement with another mortgage loan servicing company
acceptable to the Master Servicer and Rating Agency under which such mortgage
loan servicing company shall assume, satisfy, perform and carry out all
liabilities, duties, responsibilities and obligations that are to be, or
otherwise were to have been, satisfied, performed and carried out by the
terminated Servicer hereunder. Until such time as the Master Servicer enters
into a substitute servicing agreement with respect to the Mortgage Loans, the
Master Servicer shall assume, satisfy, perform and carry out all obligations
which otherwise were to have been satisfied, performed and carried out by the
terminated Servicer. As compensation to the Master Servicer for any servicing
obligations fulfilled or assumed by the Master Servicer, the Master Servicer
shall be entitled to any servicing compensation to which the terminated Servicer
would have been entitled if such Servicer had not been terminated.

         Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a Scheduled Payment on a Mortgage Loan which was due prior to the notice
terminating such Servicer's rights and obligations as Servicer hereunder and
received after such notice, that portion thereof to which such Servicer

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<PAGE>

would have been entitled pursuant to Sections 3.8(a)(i) through (viii), and any
other amounts payable to such Master Servicer hereunder the entitlement to which
arose prior to the termination of its activities hereunder.

         Section 7.2    Notification to Certificateholders
                        ----------------------------------

         (a) Upon any termination of or appointment of a successor to the
Servicer or Master Servicer, the Trustee shall give prompt written notice
thereof to Certificateholders and to each Rating Agency.

         (b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.


                                   ARTICLE 8

                             CONCERNING THE TRUSTEE

         Section 8.1    Duties of Trustee
                        -----------------

         The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default that may have occurred, shall undertake to perform such
duties and only such duties as are specifically set forth in this Agreement. In
case an Event of Default of which a Responsible Officer of the Trustee has
actual knowledge has occurred and remains uncured, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.

         The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected instrument.

         No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:

                  (i)      unless an Event of Default of which a Responsible
         Officer of the Trustee has actual knowledge shall have occurred and be
         continuing, the duties and obligations of the Trustee shall be
         determined solely by the express provisions of this Agreement, the

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<PAGE>

         Trustee shall not be liable except for the performance of such duties
         and obligations as are specifically set forth in this Agreement, no
         implied covenants or obligations shall be read into this Agreement
         against the Trustee and the Trustee may conclusively rely, as to the
         truth of the statements and the correctness of the opinions expressed
         therein, upon any certificates or opinions furnished to the Trustee and
         conforming to the requirements of this Agreement which it believed in
         good faith to be genuine and to have been duly executed by the proper
         authorities respecting any matters arising hereunder;

                  (ii)     the Trustee shall not be liable for an error of
         judgment made in good faith by a Responsible Officer or Responsible
         Officers of the Trustee, unless it shall be finally proven that the
         Trustee was negligent in ascertaining the pertinent facts;

                  (iii)    the Trustee shall not be liable with respect to any
         action taken, suffered or omitted to be taken by it in good faith in
         accordance with the direction of Holders of Certificates evidencing not
         less than 25% of the Voting Rights of Certificates relating to the
         time, method and place of conducting any proceeding for any remedy
         available to the Trustee, or exercising any trust or power conferred
         upon the Trustee under this Agreement;

                  (iv)     the Trustee shall not be required to expend or risk
         its own funds or otherwise incur financial liability in the performance
         of any of its duties hereunder or the exercise of any of its rights or
         powers if there is reasonable ground for believing that the repayment
         of such funds or adequate indemnity against such risk or liability is
         not assured to it, and none of the provisions contained in this
         Agreement shall in any event require the Trustee to perform, or be
         responsible for the manner of performance of, any of the obligations of
         the Master Servicer under this Agreement except during such time, if
         any, as the Trustee shall be the successor to, and be vested with the
         rights, duties, powers and privileges of, the Master Servicer; and

                  (v)      without limiting the generality of this Section 8.1,
         the Trustee shall have no duty (A) to see to any recording, filing, or
         depositing of this Agreement or any agreement referred to herein or any
         financing statement or continuation statement evidencing a security
         interest, or to see to the maintenance of any such recording or filing
         or deposit or to any rerecording, refiling or redepositing of any
         thereof, (B) to see to any insurance, (C) to see to the payment or
         discharge of any tax, assessment, or other governmental charge or any
         lien or encumbrance of any kind owing with respect to, assessed or
         levied against, any part of the Trust Fund other than from funds
         available in the Distribution Account (D) to confirm or verify the
         contents of any reports or certificates of the Servicer delivered to
         the Trustee pursuant to this Agreement believed by the Trustee to be
         genuine and to have been signed or presented by the proper party or
         parties.

         Section 8.2    Certain Matters Affecting the Trustee.
                        -------------------------------------

         Except as otherwise provided in Section 8.1:

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<PAGE>

                  (i)      the Trustee may request and rely upon and shall be
         protected in acting or refraining from acting upon any resolution,
         Officers' Certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, appraisal, bond or other paper or document believed by
         it to be genuine and to have been signed or presented by the proper
         party or parties and the Trustee shall have no responsibility to
         ascertain or confirm the genuineness of any signature of any such party
         or parties;

                  (ii)     the Trustee may consult with counsel, financial
         advisers or accountants and the advice of any such counsel, financial
         advisers or accountants and any Opinion of Counsel shall be full and
         complete authorization and protection in respect of any action taken or
         suffered or omitted by it hereunder in good faith and in accordance
         with such Opinion of Counsel;

                  (iii)    the Trustee shall not be liable for any action taken,
         suffered or omitted by it in good faith and believed by it to be
         authorized or within the discretion or rights or powers conferred upon
         it by this Agreement;

                  (iv)     the Trustee shall not be bound to make any
         investigation into the facts or matters stated in any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, approval, bond or other paper or document, unless
         requested in writing so to do by Holders of Certificates evidencing not
         less than 25% of the Voting Rights allocated to each Class of
         Certificates; provided, however, that if the payment within a
         reasonable time to the Trustee of the costs, expenses or liabilities
         likely to be incurred by it in the making of such investigation is, in
         the opinion of the Trustee, not assured to the Trustee by the security
         afforded to it by the terms of this Agreement, the Trustee may require
         indemnity satisfactory to the Trustee against such cost, expense or
         liability as a condition to taking any such action.

                  (v)      the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents, accountants or attorneys and the Trustee shall not be
         responsible for any misconduct or negligence on the part of such agent,
         accountant or attorney appointed by the Trustee with due care;

                  (vi)     the Trustee shall not be required to risk or expend
         its own funds or otherwise incur any financial liability in the
         performance of any of its duties or in the exercise of any of its
         rights or powers hereunder if it shall have reasonable grounds for
         believing that repayment of such funds or adequate indemnity against
         such risk or liability is not assured to it;

                  (vii)    the Trustee shall not be liable for any loss on any
         investment of funds pursuant to this Agreement (other than as issuer of
         the investment security);

                  (viii)   the Trustee shall not be deemed to have knowledge of
         an Event of Default until a Responsible Officer of the Trustee shall
         have received written notice thereof and

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<PAGE>

         in the absence of such notice, the Trustee may conclusively assume that
         there is no Event of Default;

                  (ix)     the Trustee shall be under no obligation to exercise
         any of the trusts, rights or powers vested in it by this Agreement or
         to institute, conduct or defend any litigation hereunder or in relation
         hereto at the request, order or direction of any of the
         Certificateholders, pursuant to the provisions of this Agreement,
         unless such Certificateholders shall have offered to the Trustee
         reasonable security or indemnity satisfactory to the Trustee against
         the costs, expenses and liabilities which may be incurred therein or
         thereby;

                  (x)      the right of the Trustee to perform any discretionary
         act enumerated in this Agreement shall not be construed as a duty, and
         the Trustee shall not be answerable for other than its negligence or
         willful misconduct in the performance of such act; and

                  (xi)     the Trustee shall not be required to give any bond or
         surety in respect of the execution of the Trust Fund created hereby or
         the powers granted hereunder.

         Section 8.3    Trustee Not Liable for Certificates or Mortgage Loans
                        -----------------------------------------------------

         The recitals contained herein and in the Certificates shall be taken as
the statements of the Depositor, the Depositor or Master Servicer, as the case
may be, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates or of any Mortgage Loan or related document
other than with respect to the Trustee's execution and counter-signature of the
Certificates. The Trustee shall not be accountable for the use or application by
the Depositor or the Master Servicer of any funds paid to the Depositor or the
Master Servicer in respect of the Mortgage Loans or deposited in or withdrawn
from the Collection Account by the Depositor or the Master Servicer.

         Section 8.4    Trustee May Own Certificates.
                        -----------------------------

         The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.

         Section 8.5    Trustee's Fees and Expenses.
                        ----------------------------

         The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.1 hereunder, shall be entitled to deduct
from the Master Servicing Fee on each Distribution Date an amount equal to the
Trustee Fee and reasonable expenses for such Distribution Date. Saxon shall
indemnify and hold harmless the Trustee, the Paying Agent or the Custodian and
any director, officer, employee or agent thereof against any loss, liability or
expense, including reasonable attorney's fees, incurred in connection with or
arising out of or in connection with this Agreement, any custodial agreement or
the Certificates, including, but not limited to, any such loss, liability or
expense incurred in connection with any legal action against the Trust or the
Trustee, the Paying Agent or the Custodian or any director, officer, employee or

                                       93
<PAGE>

agent thereof, or the performance of any of the duties of the Trustee or the
Paying Agent under this Agreement or the duties of the Custodian under any
custodial agreement (including, but not limited to, the execution and delivery
of documents in connection with a foreclosure sale, trustee's sale, or deed in
lieu of foreclosure of a Mortgage Loan, including, but not, limited to, any deed
of reconveyance, any substitution of trustee documents or any other documents to
release, satisfy, cancel or discharge any Mortgage Loan) other than any loss,
liability or expense incurred by reason of the willful misfeasance, bad faith or
negligence in the performance of the duties under this Agreement or by reason of
the willful misfeasance, bad faith or gross negligence of the Custodian under
any custodial agreement (including specifically any loss, liability or expense
incurred by the Custodian by reason of simple negligence under any custodial
agreement). The provisions of this Section 8.5 shall survive the resignation or
removal of the Trustee or the Paying Agent and the termination of this Agreement
and the resignation or removal of the Custodian under any custodial agreement.
The Trustee may receive an additional indemnity from a party acceptable to the
Trustee.

         Section 8.6    Eligibility Requirements for Trustee
                        ------------------------------------

         The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to super-vision or examination by federal or state authority and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current ratings of the Certificates (or having provided such
security from time to time as is sufficient to avoid such reduction). If such
corporation or association publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 8.6 the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 8.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.7 hereof.
The entity serving as Trustee may have normal banking and trust relationships
with the Depositor and its affiliates or the Master Servicer and its affiliates;
provided, however, that such entity cannot be an affiliate of the Master
Servicer other than the Trustee in its role as successor to the Master Servicer.

         Section 8.7    Resignation and Removal of Trustee
                        ----------------------------------

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor and the
Master Servicer and each Rating Agency not less than 60 days before the date
specified in such notice when, subject to Section 8.8, such resignation is to
take effect, and acceptance by a successor trustee in accordance with Section
8.8 meeting the qualifications set forth in Section 8.6. If no successor trustee
meeting such qualifications shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice or resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.

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<PAGE>

         If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.6 hereof and shall fail to resign after written
request thereto by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.

         The Holders of Certificates entitled to at least 51% of the Voting
Rights may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer, one complete
set to the Trustee so removed and one complete set to the successor so
appointed. Notice of any removal of the Trustee shall be given to each Rating
Agency by the Successor Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.7 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.8 hereof.

         Section 8.8    Successor Trustee
                        -----------------

         Any successor trustee appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties, and obligations.

         No successor trustee shall accept appointment as provided in this
Section 8.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.6 hereof and its appointment shall
not adversely affect the then current rating of the Certificates.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.8, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 10 days after acceptance of

                                       95
<PAGE>

appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.

         Section 8.9    Merger or Consolidation of Trustee
                        ----------------------------------

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 8.6 hereof without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.

         Section 8.10   Appointment of Co-Trustee or Separate Trustee
                        ---------------------------------------------

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 8.6 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.8.

         Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

                  (i)      To the extent necessary to effectuate the purposes of
         this Section 8.10, all rights, powers, duties and obligations conferred
         or imposed upon the Trustee shall be conferred or imposed upon and
         exercised or performed by the Trustee and such separate trustee or
         co-trustee jointly (it being understood that such separate trustee or
         co-trustee is not authorized to act separately without the Trustee
         joining in such act), except to the extent that under any law of any
         jurisdiction in which any particular act or acts are to be performed
         (whether as Trustee hereunder or as successor to the Master Servicer
         hereunder), the Trustee shall be incompetent or unqualified to perform
         such act or acts, in which event such rights, powers, duties and
         obligations (including the holding of title to the applicable Trust
         Fund or any portion thereof in any such jurisdiction) shall be

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<PAGE>

         exercised and performed singly by such separate trustee or co-trustee,
         but solely at the direction of the Trustee;

                  (ii)     No trustee hereunder shall be held personally liable
         by reason of any act or omission of any other trustee hereunder and
         such appointment shall not, and shall not be deemed to, constitute any
         such separate trustee or co-trustee as agent of the Trustee;

                  (iii)    The Trustee may at any time accept the resignation of
         or remove any separate trustee or co-trustee; and

                  (iv)     The Master Servicer, and not the Trustee, shall be
         liable for the payment of reasonable compensation, reimbursement and
         indemnification to any such separate trustee or co-trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

         Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

         Section 8.11   Tax Matters
                        -----------

         It is intended that the assets with respect to which the REMIC
elections are to be made, as set forth in Schedule III, shall constitute, and
that the conduct of matters relating to such assets shall be such as to qualify
such assets as REMICs as defined in and in accordance with the REMIC Provisions.
In furtherance of such intention, the Trustee covenants and agrees that it shall
act as agent (and the Trustee is hereby appointed to act as agent) on behalf of
each such REMIC and that in such capacity it shall: (a) prepare and file, or
cause to be prepared and filed, in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066 or any successor form adopted by
the Internal Revenue Service) and prepare and file or cause to be prepared and
filed with the Internal Revenue Service and applicable state or local tax
authorities income tax or information returns for each taxable year with respect
to each such REMIC, containing such information and at the times and in the
manner as may be required by the Code or state or local tax laws, regulations,
or rules, and furnish or cause to be furnished to

                                       97
<PAGE>

Certificateholders the schedules, statements or information at such times and in
such manner as may be required thereby; (b) within thirty days of the Closing
Date, furnish or cause to be furnished to the Internal Revenue Service, on Forms
8811 or as otherwise may be required by the Code, the name, title, address, and
telephone number of the person that the Holders of the Certificates may contact
for tax information relating thereto, together with such additional information
as may be required by such Form, and update such information at the time or
times in the manner required by the Code; (c) make or cause to be made REMIC
elections as directed in Schedule III on the federal tax returns for each such
REMIC's first taxable year (and, if necessary, under applicable state law); (d)
prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders and to the Internal Revenue Service and, if necessary, state
tax authorities, all information returns and reports as and when required to be
provided to them in accordance with the REMIC Provisions, including without
limitation, the calculation of any original issue discount using the prepayment
assumption; (e) provide information necessary for the computation of tax imposed
on the transfer of a Residual Certificate to a Person that is not a Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and furnishing such information may be charged to the Person liable for such
tax); (f) to the extent that they are under its control conduct matters relating
to such assets at all times that any Certificates are outstanding so as to
maintain the status of each REMIC created hereunder under the REMIC Provisions;
(g) not knowingly or intentionally take any action or omit to take any action
that would cause the termination of REMIC status or result in the imposition of
tax on any REMIC; (h) pay, from the sources specified in the last paragraph of
this Section 8.11, the amount of any federal or state tax, including prohibited
transaction taxes as described below, imposed on any such REMIC prior to its
termination when and as the same shall be due and payable (but such obligation
shall not prevent the Trustee or any other appropriate Person from contesting
any such tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings); (i) ensure that federal, state or local income tax or
information returns shall be signed by the Trustee or such other person as may
be required to sign such returns by the Code or state or local laws, regulations
or rules; (j) maintain records relating to any such REMIC, including but not
limited to the income, expenses, assets and liabilities thereof and the fair
market value and adjusted basis of the assets determined at such intervals as
may be required by the Code, as may be necessary to prepare the foregoing
returns, schedules, statements or information; and (k) as and when necessary and
appropriate, represent any such REMIC in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to any taxable year of any
such REMIC, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any such
REMIC, and otherwise act on behalf of any such REMIC in relation to any tax
matter or controversy involving it.

         To enable the Trustee to perform its duties as set forth herein, the
Depositor shall provide, or cause to be provided, to the Trustee within ten (10)
days after the Closing Date all information or data that the Trustee requests in
writing and determines to be relevant for tax purposes to the valuations and
offering prices of the Certificates, including, without limitation,

                                       98
<PAGE>

the price, yield, prepayment assumption and projected cash flows of the
Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide to
the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.

         Section 8.12   Periodic Filings
                        ----------------

         The Trustee shall prepare, execute and file all periodic reports
required under the Securities Exchange Act of 1934 in conformity with the terms
of the "no-action" relief granted by the SEC to issuers of asset-backed
securities such as the Certificates. In connection with the preparation and
filing of such periodic reports, the Depositor and the Master Servicer shall
timely provide to the Trustee all material information available to them which
is required to be included in such reports and not known to them to be in the
possession of the Trustee and such other information as the Trustee reasonably
may request from either of them and otherwise reasonably shall cooperate with
the Trustee. The Trustee shall have no liability with respect to any failure to
properly prepare or file such periodic reports resulting from or relating to the
Trustee's inability or failure to obtain any information not resulting from its
own negligence or willful misconduct.

                                    ARTICLE 9

                                   TERMINATION

         Section 9.1    Termination upon Liquidation or Purchase of all Mortgage
                        --------------------------------------------------------
                        Loans.
                        -----

         (a) Subject to Section 9.3, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of:

                  (i)      the purchase by the Master Servicer or its designee
         of all Mortgage Loans (including REO Properties not otherwise disposed
         of pursuant to Section 3.11(i)) remaining in the Trust Fund at a price
         equal to the sum of (A) 100% of the Stated Principal Balance of each
         Mortgage Loan that is not a Nonrecoverable Mortgage Loan; (B) the
         Projected Net Liquidation Value of each Nonrecoverable Mortgage Loan
         (not including any REO), and (C) the lesser of (x) the appraised value
         of any REO Property as determined by a real estate broker meeting the
         qualifications, and applying broker's price opinion methodology,
         generally acceptable to residential mortgage servicers, or other
         property valuation opinion methodology customarily used by residential
         mortgage servicers with respect to defaulted loans and (y) the Stated
         Principal Balance of each Mortgage Loan related to any REO Property. In
         addition, such purchase price shall include with respect to the
         Mortgage Loans (including REO Properties) accrued and

                                       99
<PAGE>

unpaid interest thereon at the applicable Net Rate, except to the extent the
Servicer was not or would not be required to make a P&I Advance hereunder; and

                  (ii)     the later of (A) the maturity or other liquidation
         (or any Advance with respect thereto) of the last Mortgage Loan
         remaining in the Trust Fund and the disposition of all REO Property and
         (B) the distribution to Certificateholders of all amounts required to
         be distributed to them pursuant to this Agreement. In no event shall
         the trusts created hereby continue beyond the earlier of (i) the
         expiration of 21 years from the death of the survivor of the
         descendants of Joseph P. Kennedy, the late Ambassador of the United
         States to the Court of St. James's, living on the date hereof, and (ii)
         the Latest Possible Maturity Date.

         The right to purchase all Mortgage Loans and REO Properties pursuant to
clause (i) above shall be conditioned upon the Pool Principal Balance, at the
time of any such repurchase, aggregating less than ten percent of the aggregate
Cut Off Date Principal Balance of the Mortgage Loans.

         (b) With respect to any purchase pursuant to subsection (a), upon
deposit of the price determined pursuant to subsection (a)(i) in the
Distribution Account, the Trustee shall release or cause to be released to the
purchaser of each such Mortgage Loan the related Mortgage File and shall execute
and deliver such instruments of transfer or assignment prepared by the purchaser
of such Mortgage Loan (including appropriate instruments with respect to any REO
Property), in each case without recourse, as shall be necessary to vest in the
purchaser of such Mortgage Loan any Mortgage Loan sold pursuant hereto, and the
purchaser of such Mortgage Loan shall succeed to all the Trustee's right, title
and interest in and to such Mortgage Loan and all security and documents related
thereto. Such assignment shall be an assignment outright and not for security.
The purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and
all security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

         Section 9.2    Final Distribution on the Certificates
                        --------------------------------------

         If on any Determination Date, the Master Servicer determines that there
are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Collection Account, the Master Servicer shall direct
the Trustee promptly to send a final distribution notice to each
Certificateholder. If the Master Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.1, at least 20 days prior to the date notice
is to be mailed to the affected Certificateholders, the Master Servicer shall
notify the Depositor and the Trustee of the date the Master Servicer intends to
terminate the Trust Fund and of the applicable repurchase price of the Mortgage
Loans and REO Properties.

         Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 10th
day and no later than the 15th day of the month next preceding the month of such
final distribution. Any such notice shall specify (a) the Distribution Date upon
which final

                                      100
<PAGE>

distribution on the Certificates will be made upon presentation and surrender of
Certificates at the office therein designated, (b) the amount of such final
distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.

         In the event such notice is given, the Master Servicer shall cause all
funds in the Collection Account to be remitted to the Trustee for deposit in the
Distribution Account on the Business Day prior to the applicable Distribution
Date in an amount equal to the final distribution in respect of the
Certificates. Upon such final deposit with respect to the Trust Fund and the
receipt by the Trustee of a Request for Release therefor, the Trustee shall
promptly release to the Master Servicer the Mortgage Files for the Mortgage
Loans.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon (or on their Notional Amount, if applicable) in
the case of an interest bearing Certificate, and (ii) as to the Residual
Certificates, the amount, if any, which remains on deposit in the Distribution
Account (other than the amounts retained to meet claims) after application
pursuant to clause (i) above.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the holder of each of the
Class R Certificates shall be entitled to all unclaimed funds and other assets
of the REMICs held for distribution to such Certificateholders, which remain
subject hereto.

         Section 9.3    Additional Termination Requirements
                        -----------------------------------

         (a) In the event the Master Servicer exercises its purchase option as
provided in Section 9.1, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the effect that
the failure to comply with the requirements of this Section 9.3 will not (i)
result in the imposition of taxes on "prohibited transactions" on any REMIC as

                                      101
<PAGE>

defined in section 860F of the Code, or (ii) cause any REMIC to fail to qualify
as a REMIC at any time that any Certificates are outstanding:

                  (i)      The Trustee shall sell all of the assets that
         constitute the Trust Fund for cash as provided in Section 9.01(a)(i),
         and, within 90 days of such sale, shall distribute to (or credit to the
         account of) the Holders of the Certificates the proceeds of such sale
         together with other cash on hand (less amounts retained to meet claims)
         in complete liquidation of the Trust Fund and each REMIC created
         hereunder; and

                  (ii)      The Trustee shall attach a statement to the final
         federal income tax return for each REMIC created hereunder stating that
         pursuant to Treasury Regulation ss. 1.860F-1, the first day of the
         90-day liquidation period for each such REMIC was the date on which the
         Trustee sold the assets of the Trust Fund pursuant to Section
         9.01(a)(i).

         (b) By their acceptance of the Certificates, the Holders thereof hereby
authorize the Trustee to undertake the above-described actions.


                                   ARTICLE 10

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
                             BY THE MASTER SERVICER

         Section 10.1   Duties of the Master Servicer.
                        -----------------------------

         (a) The Certificateholders, by their purchase and acceptance of the
Certificates, appoint Saxon Mortgage, Inc. as Master Servicer. For and on behalf
of the Depositor, the Trustee and the Certificateholders, the Master Servicer
shall master service the Mortgage Loans in accordance with the provisions of
this Agreement.

         (b) The Master Servicer shall supervise and provide oversight of the
Servicer's performance of its obligations hereunder. The Master Servicer shall,
for the benefit of Certificateholders, use its reasonable best efforts to
enforce the obligation of the Servicer hereunder, and, upon its obtaining actual
knowledge of an Event of Default, shall take such action as is required by
Section 7.1.

         (c) To the extent the Servicer defaults in its obligation to timely
make an P&I Advance required hereunder, upon notice of such failure, the Master
Servicer shall be required to make such P&I Advance by the related Distribution
Date. All rights of reimbursement otherwise available to the Servicer hereunder
in respect of any Advance shall be fully available to the Master Servicer.

         (d) The Master Servicer shall, in the manner and at such times
specified, prepare and furnish the reports described in Sections 4.4 and 4.5
hereof.

                                      102
<PAGE>

         Section 10.2   Compensation to the Master Servicer.
                        -----------------------------------

         The Master Servicer shall be entitled to the Master Servicing Fee on
each Distribution Date from amounts on deposit in the Master Servicer Custodial
Account. If, on any Distribution Date such fee is not distributed as provided
herein, the Master Servicer shall be entitled to direct the Trustee to pay the
Master Servicing Fee to the Master Servicer by withdrawal from the Distribution
Account. The Master Servicer shall be entitled to deposit account earnings as
provided in Section 3.5 as additional master servicing compensation.

         Section 10.3   Termination of Master Servicer; Trustee to Act.
                        ----------------------------------------------

         Each of the following shall constitute an event of default by the
Master Servicer (a "Master Servicer Event of Default") of its obligations
hereunder:

         (a) any failure of the Master Servicer to remit to the Trustee any
payment required to be made to the Trustee for the benefit of Certificateholders
under the terms of this Agreement within five days of the due date therefor;

         (b) the Master Servicer shall fail duly to observe or perform in any
material respect any of its covenants or agreements (other than its obligation
to make an Advance) contained herein and such failure shall continue unremedied
for a period of 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master Servicer
by the Trustee or to the Master Servicer and the Trustee by the Holders of
Certificates entitled to at least 51% of the Voting Rights; or

         (c) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and 1iabilities or similar proceeding, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Master Servicer and such decree or order shall have remained in force
undischarged and unstayed for a period of 60 days; or

         (d) the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceeding of or relating to the
Master Servicer or relating to all or substantially all its property; or

         (e) the Master Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations.

         The rights and obligations of the Master Servicer under this Agreement
may be terminated only upon the occurrence of a Master Servicer Event of
Default. If a Master Servicer Event of Default described in clauses (a) through
(d) of this Section 10.3 shall occur, then, and in


                                      103
<PAGE>

each and every such case, so long as such Master Servicer Event of Default shall
not have been remedied, the Trustee may, and at the direction of the Holders of
Certificates entitled to at least 51% of the Voting Rights, the Trustee shall,
by notice in writing to the Master Servicer, terminate all the rights and
obligations of the Master Servicer hereunder, other than its rights as a
Certificateholder. If a Master Servicer Event of Default described in clause (e)
of this Section 10.3 shall occur, the Trustee may terminate, by notice in
writing to the Master Servicer, all the rights and obligations of the Master
Servicer hereunder, other than its rights as a Certificateholder. On and after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer hereunder, whether with respect to the Certificates
(other than as a Holder thereof) or the Mortgage Loans or otherwise, shall, to
the maximum extent permitted by law, pass to and be vested in the Trustee
pursuant to and under this Section 10.3 (provided, however, that the Master
Servicer shall continue to be entitled to receive all amounts accrued or owing
to it hereunder on or prior to the date of such termination. Without limiting
the generality of the foregoing, the Trustee is hereby authorized and empowered
to execute and deliver on behalf of and at the expense of the Master Servicer,
as the Master Servicer's attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things that in
the Trustee's sole and absolute judgment may be necessary or appropriate, to
effect such termination. Notwithstanding the foregoing, upon any such
termination the Master Servicer shall do all things reasonably requested by the
Trustee to effect the termination of the Master Servicer's responsibilities,
rights and powers hereunder, and the transfer thereof to the Trustee, including,
but not limited to, promptly providing to the Trustee (and in no event later
than ten Business Days subsequent to such notice) all documents and records
electronic and otherwise reasonably requested by the Trustee to enable the
Trustee or its designee to assume and carry out the duties and obligations that
otherwise were to have been performed and carried out by the Master Servicer but
for such termination.

         As successor Master Servicer, the Trustee shall be entitled to the fees
to which the Master Servicer would have been entitled if the Master Servicer had
continued to act as such. The Trustee shall also, as successor Master Servicer,
be entitled to all the protections and indemnification afforded to the Master
Servicer hereunder.

         Notwithstanding the above, upon the occurrence of a Master Servicer
Event of Default, if the Trustee shall be unwilling so to act, or shall, if it
is unable so to act or, if the Holders of Certificates entitled to at least 51%
of the Voting Rights so request in writing to the Trustee, promptly appoint, or
petition a court of competent jurisdiction to appoint, any established mortgage
loan servicing institution acceptable to each Rating Agency and having a net
worth of not less than $15,000,000 as the successor to the Master Servicer. No
appointment of a successor to the Master Servicer shall be effective until the
assumption by such successor of all future responsibilities, duties and
liabilities of the Master Servicer hereunder. Pending appointment of a successor
to the Master Servicer, the Trustee or an affiliate shall, to the maximum extent
permitted by law, act in such capacity as hereinabove provided.

         In connection with any such appointment and assumption described
herein, the Trustee may make such arrangements for the compensation of such
successor out of payments received on the assets included in .the Trust Fund as
it and such successor shall agree; provided, however,

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<PAGE>

that no such compensation shall be in excess of that permitted the Master
Servicer hereunder. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.

         Section 10.4   Notification to Certificateholders
                        ----------------------------------

         Upon any termination pursuant to Section 10.3 hereof, or any
appointment of a successor to the Master Servicer, the Trustee shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register.


                                   ARTICLE 11

                            MISCELLANEOUS PROVISIONS

         Section 11.1   Amendment
                        ---------

         This Agreement may be amended from time to time by the Depositor,
Servicer, the Master Servicer and the Trustee without the consent of any of the
Certificateholders (i) to cure any ambiguity or mistake, (ii) to cause the
provisions herein to conform to or be consistent with or in furtherance of the
statements made with respect to the Certificates, the Trust Fund or this
Agreement in any disclosure document pursuant to which any Certificates were
offered; to correct any defective provision herein or to supplement any
provision herein which may be inconsistent with any other provision herein,
(iii) to add to the duties of the Depositor, the Servicer or the Master
Servicer, (iv) to add any other provisions with respect to matters or questions
arising hereunder or (v) to modify, alter, amend, add to or rescind any of the
terms or provisions contained in this Agreement; provided that any action
pursuant to clauses (iv) or (v) above shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund), adversely affect in any material
respect the interests of any Certificateholder; provided, however, that the
amendment shall not be deemed to adversely affect in any material respect the
interests of the Certificateholders if the Person requesting the amendment
obtains a letter from each Rating Agency stating that the amendment would not
result in the downgrading or withdrawal of the respective ratings then assigned
to the Certificates; it being understood and agreed that any such letter in and
of itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, Servicer, the Depositor and the Master
Servicer also may at any time and from time to time amend this Agreement without
the consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i) maintain the
qualification of each REMIC created hereunder as a REMIC under the Code, (ii)
avoid or minimize the risk of the imposition of any tax on any such REMIC
pursuant to the Code that would be a claim at any time prior to the final
redemption of the Certificates or (iii) comply with any other requirements of
the Code, provided that the Trustee have been provided an Opinion of Counsel,
which opinion shall be an expense of the party requesting such opinion but in
any case shall not be an expense of the Trustee or the Trust Fund, to the effect
that such action

                                      105
<PAGE>

is necessary or helpful to, as applicable, (i) maintain such qualification, (ii)
avoid or minimize the risk of the imposition of such a tax or (iii) comply with
any such requirements of the Code.

         This Agreement may also be amended from time to time by the Depositor,
Servicer, the Master Servicer and the Trustee with the consent of the Holders of
a Majority in Interest of each Class of Certificates affected thereby for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66%, or (iii) reduce the
aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.

         Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC created hereunder or the Certificateholders
or cause any REMIC created hereunder to fail to qualify as a REMIC at any time
that any Certificates are outstanding.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

         Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 11.1.

         Section 11.2   Recordation of Agreement; Counterparts
                        --------------------------------------

         This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or

                                      106
<PAGE>

elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction a majority of the Certificateholders to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders. However, the foregoing sentence notwithstanding, the
Servicer may provide copies hereof to counsel, judicial officers, and government
agencies, or may cause this Agreement to be recorded, in any jurisdiction in
which, in the Servicer's judgment, such disclosure or recording may facilitate
foreclosure or other recovery with respect to any one or more of the Mortgage
Loans.

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed (by
facsimile or otherwise) simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.

         Section 11.3   Governing Law
                        -------------

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

         Section 11.4   Intention of Parties
                        --------------------

         It is the express intent of the parties hereto that the conveyance of
the Trust Fund by the Depositor to the Trustee be, and be construed as, absolute
sales thereof to the Trustee. It is, further, not the intention of the parties
that such conveyances be deemed a pledge thereof by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York and
(ii) the conveyance provided for in this Agreement shall be deemed to be an
assignment and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

         The Depositor, for the benefit of the Certificateholders, shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Trust Fund, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. The Depositor shall arrange for filing any
Uniform Commercial Code continuation statements in connection with any security
interest granted or assigned to the Trustee for the benefit of the
Certificateholders.

                                      107
<PAGE>

         Section 11.5   Notices
                        -------

         (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency with respect to each of the following of which it has
actual knowledge:

                  1.       any material change or amendment to this Agreement;

                  2.       the occurrence of any Event of Default that has not
         been cured;

                  3.       the resignation or termination of the Servicer, the
         Master Servicer or the Trustee and the appointment of any successor;

                  4.       the repurchase or substitution of Mortgage Loans
         pursuant to Section 2.3 hereof;

                  5.       the final payment to Certificateholders; and

                  6.       any rating action involving the long-term credit
         rating of the Master Servicer, which notice shall be made by
         first-class mail within two Business Days after the Trustee gains
         actual knowledge thereof.

         In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

                  1.       Each report to Certificateholders described in
         Section 4.6 hereof;

                  2.       Each annual statement as to compliance described in
         Section 3.16 hereof;

                  3.       Each annual independent public accountants' servicing
         report described in Section 3.17 hereof; and

                  4.       Any notice of a purchase of a Mortgage Loan pursuant
         to Section 2.2, 2.3 or 3.11 hereof.

         (b) All directions, demands, authorizations, consents, waivers,
communications and notices hereunder shall be in writing and shall be deemed to
have been duly given when delivered by first class mail, facsimile or courier to
the applicable Notice Address, or in the case of the Rating Agencies, the
address specified therefor in the definition corresponding to the name of such
Rating Agency. Notices to Certificateholders shall be deemed given when mailed,
first class postage prepaid, to their respective addresses appearing in the
Certificate Register.

         Section 11.6   Severability of Provisions
                        --------------------------

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms

                                      108

<PAGE>

of this Agreement and shall in no way affect the validity or enforceability of
the other provisions of this Agreement or of the Certificates or the rights of
the Holders thereof.

         Section 11.7   Assignment
                        ----------

         Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.

         Section 11.8   Limitation on Rights of Certificateholders
                        ------------------------------------------

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 11.8, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

                                      109
<PAGE>

         Section 11.9   Inspection and Audit Rights
                        ---------------------------

         The Servicer agrees that, on reasonable prior notice, it will permit
and will cause each Subservicer to permit any representative of the Depositor or
the Trustee during the Servicer's normal business hours, to examine all the
books of account, records, reports and other papers of the Servicer relating to
the Mortgage Loans, to make copies and extracts therefrom, to cause such books
to be audited by independent certified public accountants selected by the
Depositor or the Trustee and to discuss its affairs, finances and accounts
relating to the Mortgage Loans with its officers, employees and independent
public accountants (and by this provision the Master Servicer hereby authorizes
said accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the Depositor
or the Trustee of any right under this Section 11.9 shall be borne by the party
requesting such inspection; all other such expenses shall be borne by the
Servicer or the related Subservicer.

         Section 11.10  Certificates Nonassessable and Fully Paid
                        -----------------------------------------

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

         Section 11.11  Limitations on Actions; No Proceedings.
                        --------------------------------------

         (a) Other than pursuant to this Agreement, or in connection with or
incidental to the provisions or purposes of this Agreement, the trust created
hereunder shall not (i) issue debt or otherwise borrow money, (ii) merge or
consolidate with any other entity reorganize, liquidate or transfer all or
substantially all of its assets to any other entity, or (iii) otherwise engage
in any activity or exercise any power not provided for in this Agreement.

         (b) Notwithstanding any prior termination of this Agreement, the
Trustee, the Servicer, the Master Servicer and the Depositor shall not, prior to
the date which is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause any Person to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Depositor or the Trust Fund under any federal or
state bankruptcy, insolvency or other similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Depositor or the Trust Fund or any substantial part of their respective
property, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust Fund.

                                      * * *

                                      110

<PAGE>

         IN WITNESS WHEREOF, the Depositor, Master Servicer, Servicer and the
Trustee, have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.

                                       SAXON ASSET SECURITIES COMPANY


                                       By:  /s/ BRADLEY D. ADAMS
                                            ------------------------------------
                                            Bradley D. Adams,
                                            Senior Vice President


                                       SAXON MORTGAGE, INC.


                                       By:  /s/ BRADLEY D. ADAMS
                                            ------------------------------------
                                            Bradley D. Adams,
                                            Senior Vice President


                                       MERITECH MORTGAGE SERVICES, INC.


                                       By:  /s/ DENNIS STOWE
                                            ------------------------------------
                                            Dennis Stowe


                                       BANKERS TRUST COMPANY


                                       By:  /s/ BARBARA CAMPBELL
                                            ------------------------------------
                                            Barbara Campbell,
                                            Assistant Secretary




<PAGE>


                                                                      Schedule I


                        MORTGAGE LOAN SCHEDULE (BY GROUP)

                 (retained in a separate closing binder entitled
                      "SAXON 2001-3 Mortgage Loan Schedule"
                              at McKee Nelson LLP)




                                      I-1
<PAGE>

                                                                     Schedule II


                           PASS-THROUGH RATE SCHEDULE

         Set forth below are the Pass-Through Rates for each interest bearing
Class of Certificates:

         Class AF-1 Pass-Through Rate: With respect to any Distribution Date,
         the least of :

                  (x)      One Month LIBOR, plus 0.18% per annum;

                  (y)      the Net WAC Cap for such Distribution Date; and

                  (z)      the Maximum Cap Rate for such Distribution Date.

         Class AF-2 Pass-Through Rate: With respect to each Distribution Date,
         the lesser of:

                  (x)      4.00% per annum; and

                  (y)      the Net WAC Cap for such Distribution Date.

         Class AF-3 Pass-Through Rate: With respect to each Distribution Date,
         the lesser of:

                  (x)      4.49% per annum; and

                  (y)      the Net WAC Cap for such Distribution Date.

         Class AF-4 Pass-Through Rate: With respect to each Distribution Date,
         the lesser of:

                  (x)      5.30% per annum; and

                  (y)      the Net WAC Cap for such Distribution Date.

         Class AF-5 Pass-Through Rate: With respect to each Distribution Date,
         the lesser of:

                  (x)      5.91% per annum plus, after the Initial Optional
                           Termination Date, 0.50%; and

                  (y)      the Net WAC Cap for such Distribution Date.

         Class AF-6 Pass-Through Rate: With respect to each Distribution Date,
         the lesser of:

                  (x)      5.49% per annum plus, after the Initial Optimal
                           Termination Date, 0.50%; and

                  (y)      the Net WAC Cap for such Distribution Date.

                                      II-1
<PAGE>

         Class A-IO Pass-Through Rate: With respect to each Distribution Date,
         6.25% per annum.

         Class AV-1 Pass-Through Rate: With respect to each Distribution Date,
         the least of:

                  (x)      One Month LIBOR plus, in the case of any Distribution
                           Date on or prior to the Initial Optional Termination
                           Date, 0.270% per annum, or in the case of any
                           Distribution Date that occurs after the Initial
                           Optional Termination Date, plus 0.540% per annum;

                  (y)      the Net WAC Cap for such Distribution Date; and

                  (z)      the Maximum Cap Rate for such Distribution Date.

         Class AV-2 Pass-Through Rate: With respect to each Distribution Date,
         the least of :

                  (x)      One Month LIBOR plus, in the case of any Distribution
                           Date on or prior to the Initial Optional Termination
                           Date, 0.280% per annum, or in the case of any
                           Distribution Date that occurs after the Initial
                           Optional Termination Date, plus 0.560% per annum;

                  (y)      the Net WAC Cap for such Distribution Date; and

                  (z)      the Maximum Cap Rate for such Distribution Date.

         Class X-IO Pass-Through Rate: With respect to each Distribution Date,
         the lesser of (i) up to and including the Distribution Date in
         September 2003, 0.275% per annum, and thereafter, 0.10% per annum; and
         (ii) the excess of (a) the Net WAC Cap over (b) the weighted average of
         the Pass-Through Rates of the Class A Certificates (other than the
         Class A-IO, Class S-1 and Class S-2 Certificates) and the Subordinate
         Certificates (other than the Class X-IO Certificates), after adjusting
         the Pass-Through Rate on each Class of Non-Delay Certificates to
         reflect a 30/360 day count convention.

         Class S-1 Pass-Through Rate: With respect to each Distribution Date
         through the Distribution Date in September 2003, the greater of:

                  (y)      2.25% minus One Month LIBOR, and

                  (z)      0.00%.

         Thereafter, 0.00%.

         Class S-2 Pass-Through Rate: With respect to each Distribution Date
         through the Distribution Date in September 2003, 0.00%. Thereafter,
         with respect to each Distribution Date through the Distribution Date in
         September 2004, the greater of:

                  (y)      2.25% minus One Month LIBOR; and

                                      II-2
<PAGE>

                  (z)      0.00%.

         Thereafter, 0.00%.

         Class B Pass-Through Rate: With respect to each Distribution Date, the
         least of:

                  (x)      One Month LIBOR plus, in the case of any Distribution
                           Date on or prior to the Initial Optional Termination
                           Date, 1.85% per annum, or in the case of any
                           Distribution Date that occurs after the Initial
                           Optional Termination Date, plus 2.775% per annum;

                  (y)      the Net WAC Cap for such Distribution Date; and

                  (z)      the Maximum Cap Rate for such Distribution Date.

         Class M-1 Pass-Through Rate: With respect to each Distribution Date,
         the least of:

                  (x)      One Month LIBOR plus, in the case of any Distribution
                           Date on or prior to the Initial Optional Termination
                           Date, 0.78% per annum, or in the case of any
                           Distribution Date that occurs after the Initial
                           Optional Termination Date, plus 1.170% per annum;

                  (y)      the Net WAC Cap for such Distribution Date; and

                  (z)      the Maximum Cap Rate for such Distribution Date.

         Class M-2 Pass-Through Rate: With respect to each Distribution Date,
         the least of:

                  (x)      One Month LIBOR plus, in the case of any Distribution
                           Date on or prior to the Initial Optional Termination
                           Date, 1.20% per annum, or in the case of any
                           Distribution Date that occurs after the Initial
                           Optional Termination Date, plus 1.800% per annum;

                  (y)      the Net WAC Cap for such Distribution Date; and

                  (z)      the Maximum Rate Cap for such Distribution Date.




                                      II-3
<PAGE>

                                                                    Schedule III


                                 REMIC STRUCTURE

         The Trustee shall make elections to treat each of the segregated pools
of assets described below as a real estate mortgage investment conduit (each a
"REMIC" or, in the alternative, "REMIC 1", "REMIC 2", "REMIC 3", "REMIC 4", and
"REMIC 5", REMIC 5 also being referred to as the Upper-Tier REMIC). The
Certificates, other than the Class R Certificate and the Class P Certificate,
represent ownership of the regular interests in the Upper-Tier REMIC for
purposes of the REMIC Provisions. The Class P Certificate represents an interest
in the Trust Fund but does not represent an interest in any REMIC created
hereunder. The Class P Certificate shall be entitled to distributions of
prepayment penalties received by the Trustee with respect to the Mortgage Loans
to the extent such prepayment penalties do not represent Pledged Prepayment
Penalties. In addition, the Offered Certificates, other than the Class A-IO,
Class S-1, Class S-2, and Class X-IO Certificates, represent the right to
receive payments from the Basis Risk Reserve Fund. The Class R Certificates
represents ownership of the sole class of residual interest in each of REMIC 1,
REMIC 2, REMIC 3, REMIC 4 and the Upper-Tier REMIC for purposes of the REMIC
Provisions. The Upper-Tier REMIC shall hold as its assets the several classes of
uncertificated Lower Tier Interests in REMIC 4, other than the Class LT4-R
Interest, and each such Lower Tier Interest is hereby designated as a regular
interest in REMIC 4 for purposes of the REMIC Provisions. REMIC 4 shall hold as
its assets the several classes of uncertificated Lower Tier Interests in REMIC
3, other than the Class LT3-R Interest, and each such Lower Tier Interest is
hereby designated as a regular interest in REMIC 3. REMIC 3 shall hold as its
assets the several classes of uncertificated Lower Tier Interests in REMIC 2,
other than the Class LT2-R Interest, and each such Lower Tier Interest is hereby
designated as a regular interest in REMIC 2. REMIC 2 shall hold as its assets
the several classes of uncertificated Lower Tier Interests in REMIC 1, other
than the Class LT1-R Interest, and each such Lower Tier Interest is hereby
designated as a regular interest in REMIC 1. REMIC 1 shall hold as its assets
the property of the Trust Fund other than the Lower Tier Interests in REMIC 1,
REMIC 2, REMIC 3, and REMIC 4, the Prefunding Account, and the Basis Risk
Reserve Fund. The startup day for each REMIC created hereby for purposes of the
REMIC Provisions is the Closing Date. In addition, for purposes of the REMIC
Provisions, the latest possible maturity date for each regular interest in each
REMIC created hereby is the Latest Possible Maturity Date.

Definitions

         Capitalized terms used in this Schedule III but not otherwise defined
herein or in the Agreement shall have the meaning set forth below:

         Adjusted Net Rate: For any Distribution Date (and the related Accrual
Period), the product of (i) 2, multiplied by, (ii) the weighted average of the
interest rates on each of the Corresponding REMIC 4 P&I Interests and the Class
LT4-D Interest, computed for this purpose by subjecting the interest rate
payable on the Class LT4-D Interest to a cap equal to a per annum rate of 0% and
the rate payable on each of the Corresponding REMIC 4 P&I Interests to a cap

                                     III-1
<PAGE>

that corresponds to the per annum rate payable for such Distribution Date on its
Corresponding Class of Certificates.

         Corresponding Class: With respect to any Class of REMIC 4 Lower Tier
Interest, the Class of Certificates having the same alphanumeric designation as
described in the table set out in this Schedule III for REMIC 4.

         Corresponding REMIC 3 S Interest: With respect to any REMIC 2 Fixed
Rate Interest, the Class of REMIC 3 S Interest having the same numeric
designation.

         Corresponding REMIC 4-AIO: With respect to any REMIC 3 AI Interest, the
Class of REMIC 4 AIO Interest having the same numeric designation.

         Corresponding REMIC 4 P&I Interests: With respect to any Class of
Certificates other than the Class A-IO, Class S-1, Class S-2, Class X-IO, Class
C, Class R, and Class P Certificates the class of REMIC 4 Lower Tier Interests
having the same alphanumeric designation.

         F/V Pair: Each pair of REMIC 2 Lower Tier Interests having the same
numeric designation. For instance, the Class LT2-SF1 and the Class LT2-SV1
Interests constitute such a pair.

         REMIC 2 Fixed Rate Interest: Each REMIC 2 Lower Tier Interest bearing
interest at a per annum fixed rate of 4.50%.

         REMIC 3 AI Interest: Each of the REMIC 3 Lower Tier Interests having
"AI" in their class designation.

         REMIC 3 S Interest: Each of the REMIC 3 Lower Tier Interests having an
"S" in their class designation.

         REMIC 4 AIO Interest: Each of the REMIC 4 Lower Tier Interests having
an "AIO" in their class designation.

REMIC 1

         The following table sets forth (or describes) the class designation,
interest rate, and initial principal amount for each class of interests in REMIC
1, each such Class a "REMIC 1 Lower Tier Interest".



        REMIC 1                 REMIC 1
       Lower Tier              Lower Tier           Initial Class
   Class Designation          Interest Rate        Principal Amount
   -----------------          -------------      ------------------
     Class LT1-F                  (1)            $   144,665,471.41
     Class LT1-FPF                (2)            $    68,368,111.69
     Class LT1-V                  (1)            $   316,967,623.30

                                     III-2
<PAGE>

     Class LT1-VPF                (2)            $   169,998,793.70
     Class LT1-CIO                (3)                         (3)
     Class LT1-R                  (4)                         (4)


(1)      The interest rate for the Class LT1-F and Class LT1-V Interests for
         each of the first four Distribution Dates (and the related Accrual
         Periods) is a per annum rate equal to the weighted average of the Net
         Rates for the related Due Period for the Mortgage Loans that are not
         Subsequent Mortgage Loans, and for each Distribution Date (and the
         related Accrual period) thereafter, is a per annum rate equal to the
         Weighted Average Net Rate.

(2)      The interest rate for the Class LT1-FPF and Class LT1-VPF Interests for
         each of the first four Distribution Dates (and the related Accrual
         Periods) is a per annum rate of 0%, and for each Distribution Date (and
         the related Accrual Period) thereafter, is per annum rate equal to the
         Weighted Average Net Rate for such date.

(3)      The Class LT1-CIO Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For each of the first four
         Distribution Dates, the Class LT1-CIO Interest shall be entitled to
         100% of the interest payable on the Subsequent Mortgage Loans for the
         related Due Period, and for each Distribution Date thereafter, shall
         not be entitled to any distributions.

(4)      The Class LT1-R Interest is the sole class of residual interest in
         REMIC 1. It does not have an interest rate or a principal balance.

         On each Distribution Date, the Interest Funds for Group 1 and Group II,
in each case determined without regard to Pledged Prepayment Penalties, shall be
distributed with respect to the REMIC 1 Lower Tier Interests at the rates
described above.

         On each Distribution Date, the Principal Funds for Group I shall be
distributed first to the Class LT1-F Interest until its principal balance equals
the aggregate of the Stated Principal Balances as of the related Determination
Date of the Group I Mortgage Loans that are not Subsequent Mortgage Loans, and
then to the Class LT1-FPF Interest until the principal balances of the Class
LT1-F Interest and the Class LT1-FPF Interest are reduced to zero. All Realized
Losses attributable to Group I shall be allocated between the Class LT1-F and
Class LT1-FPF Interests, and all Pledged Prepayment Penalties attributable to
Group I shall be distributed between the Class LT1-F and Class LT1-FPF
Interests, in that same proportion.

         On each Distribution Date the Principal Funds for Group II shall be
distributed first to the Class LT1-V Interest until its principal balance equals
the aggregate of the Stated Principal Balances as of the related Determination
Date of the Group II Mortgage Loans that are not Subsequent Mortgage Loans, and
then to the Class LT1-VPF Interest until the principal balances of the Class
LT1-V Interest and the Class LT1-VPF Interest are reduced to zero. All Realized
Losses attributable to Group II shall be allocated between the Class LT1-V and
Class LT1-VPF Interests, and all Pledged Prepayment Penalties attributable to
Group II shall be distributed between the Class LT1-V and Class LT1-VPF
Interests, in that same proportion.

                                     III-3
<PAGE>

REMIC 2

         The following table sets forth (or describes) the class designation,
interest rate, and initial principal amount for each class of interest in REMIC
2, each such class a "REMIC 2 Lower Tier Interest".

        REMIC 2                 REMIC 2
       Lower Tier              Lower Tier           Initial Class
   Class Designation          Interest Rate        Principal Amount
   -----------------          -------------      ------------------

    Class LT2-A                     (1)          $   213,033,583.00
    Class LT2-SF1                 4.50%          $     9,470,599.00
    Class LT2-SV1                   (2)          $     9,470,599.00
    Class LT2-SF2                 4.50%          $    10,961,371.50
    Class LT2-SV2                   (2)          $    10,961,371.50
    Class LT2-SF3                 4.50%          $    12,355,718.50
    Class LT2-SV3                   (2)          $    12,355,718.50
    Class LT2-SF4                 4.50%          $    13,659,702.50
    Class LT2-SV4                   (2)          $    13,659,702.50
    Class LT2-SF5                 4.50%          $    12,774,929.50
    Class LT2-SV5                   (2)          $    12,774,929.50
    Class LT2-SF6                 4.50%          $    11,947,529.00
    Class LT2-SV6                   (2)          $    11,947,529.00
    Class LT2-SF7                 4.50%          $    11,173,564.50
    Class LT2-SV7                   (2)          $    11,173,564.50
    Class LT2-SF8                 4.50%          $    10,449,684.50
    Class LT2-SV8                   (2)          $    10,449,684.50
    Class LT2-SF9                 4.50%          $     9,772,903.00
    Class LT2-SV9                   (2)          $     9,772,903.00
    Class LT2-SF10                4.50%          $     9,139,777.50
    Class LT2-SV10                  (2)          $     9,139,777.50
    Class LT2-SF11                4.50%          $     8,547,577.50
    Class LT2-SV11                  (2)          $     8,547,577.50
    Class LT2-SF12                4.50%          $     7,993,717.50
    Class LT2-SV12                  (2)          $     7,993,717.50
    Class LT2-SF13                4.50%          $     7,475,674.50
    Class LT2-SV13                  (2)          $     7,475,674.50
    Class LT2-SF14                4.50%          $     6,991,165.00
    Class LT2-SV14                  (2)          $     6,991,165.00
    Class LT2-SF15                4.50%          $     6,538,056.00
    Class LT2-SV15                  (2)          $     6,538,056.00
    Class LT2-SF16                4.50%          $     6,114,325.50
    Class LT2-SV16                  (2)          $     6,114,325.50
    Class LT2-SF17                4.50%          $     5,717,987.50
    Class LT2-SV17                  (2)          $     5,717,987.50

                                     III-4
<PAGE>

    Class LT2-SF18                4.50%          $     5,347,339.00
    Class LT2-SV18                  (2)          $     5,347,339.00
    Class LT2-SF19                4.50%          $     5,000,675.50
    Class LT2-SV19                  (2)          $     5,000,675.50
    Class LT2-SF20                4.50%          $     4,676,456.50
    Class LT2-SV20                  (2)          $     4,676,456.50
    Class LT2-SF21                4.50%          $     4,373,240.00
    Class LT2-SV21                  (2)          $     4,373,240.00
    Class LT2-SF22                4.50%          $     4,089,664.50
    Class LT2-SV22                  (2)          $     4,089,664.50
    Class LT2-SF23                4.50%          $     3,824,459.00
    Class LT2-SV23                  (2)          $     3,824,459.00
    Class LT2-SF24                4.50%          $     3,577,152.50
    Class LT2-SV24                  (2)          $     3,577,152.50
    Class LT2-SF25                4.50%          $     3,345,111.00
    Class LT2-SV25                  (2)          $     3,345,111.00
    Class LT2-SF26                4.50%          $     3,128,261.50
    Class LT2-SV26                  (2)          $     3,128,261.50
    Class LT2-SF27                4.50%          $     2,925,457.00
    Class LT2-SV27                  (2)          $     2,925,457.00
    Class LT2-SF28                4.50%          $     2,735,789.00
    Class LT2-SV28                  (2)          $     2,735,789.00
    Class LT2-SF29                4.50%          $     2,558,274.50
    Class LT2-SV29                  (2)          $     2,558,274.50
    Class LT2-SF30                4.50%          $     2,392,244.50
    Class LT2-SV30                  (2)          $     2,392,244.50
    Class LT2-SF31                4.50%          $     2,236,980.00
    Class LT2-SV31                  (2)          $     2,236,980.00
    Class LT2-SF32                4.50%          $     2,091,781.50
    Class LT2-SV32                  (2)          $     2,091,781.50
    Class LT2-SF33                4.50%          $     1,955,999.50
    Class LT2-SV33                  (2)          $     1,955,999.50
    Class LT2-SF34                4.50%          $     1,829,026.00
    Class LT2-SV34                  (2)          $     1,829,026.00
    Class LT2-SF35                4.50%          $     1,710,282.50
    Class LT2-SV35                  (2)          $     1,710,282.50
    Class LT2-SF36                4.50%          $    24,600,731.50
    Class LT2-SV36                  (2)          $    24,600,731.50
    Class LT2-CIO                   (3)                       (3)
    Class LT2-R                     (4)                       (4)


(1)      The interest rate for the Class LT2-A Interest for any Distribution
         Date (and the related Accrual Period) is a per annum rate equal to the
         weighted average of the rates at which interest accrues on the Lower
         Tier Interests in REMIC I, other than the Class LT1-CIO Interest, for
         the related Accrual Period.

                                     III-5
<PAGE>


(2)      The interest rate for these classes of Lower Tier Interests for any
         Distribution Date (and the related Accrual Period) is a per annum rate
         equal to the positive difference, if any, between (i) the product of
         (a) 2, multiplied by, (b) the weighted average of the rates at which
         interest accrues on the Lower Tier Interests in REMIC I, other than the
         Class LT1-CIO Interest, for the related Accrual Period, minus, (ii)
         4.50%.

(3)      The Class LT2-CIO Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For each Distribution Date, the
         Class LT2-CIO shall be entitled to all amounts distributed with respect
         to the Class LT1-CIO Interest.

(4)      The Class LT2-R Interest is the sole class of residual interest in
         REMIC 2. It does not have an interest rate or a principal balance.

         On each Distribution Date, interest distributed with respect to the
REMIC 1 Lower Tier Interests shall be distributed on the REMIC 2 Lower Tier
Interests at the rates described above.

         On each Distribution Date, the principal distributed with respect to
the Class LT1-F and Class LT1-FPF Interests shall be distributed, and all
Realized Losses attributable to those REMIC 1 Lower Tier Interests shall be
allocated, to the Class LT2-A Interest until its principal balance is reduced to
zero.

         On each Distribution Date, the principal distributed with respect to
the Class LT1-V and Class LT1-VPF Interests shall be distributed, and all
Realized Losses attributable to those REMIC 1 Lower Tier Interests shall be
allocated, first to and between the Class LT2-SF1 and Class LT2-SV1 Interests in
proportion to their relative principal balances immediately before such
Distribution Date until their principal balances are reduced to zero, and then,
sequentially to the remaining F/V Pairs of REMIC 2 Lower Tier Interests in
descending order of their numeric designation (i.e., pay the Class LT2-SF2/Class
LT2-SV2 F/V Pair to zero before distributing principal to the Class
LT2-SF3/Class LT2-SV3 F/V Pair), distributing principal between the REMIC 2
Lower Tier Interests constituting each F/V Pair in proportion to their principal
balances immediately before such Distribution Date.

         On each Distribution Date, Pledged Prepayment Penalties distributed on
the REMIC 1 Lower Tier Interests shall be allocated proportionally among the
REMIC 2 Lower Tier Interests in accordance with their relative principal
balances immediately before such Distribution Date.

REMIC 3

         The following table sets forth (or describes) the class designation,
interest rate, and principal amount for each class interest in REMIC 3, each
such class a "REMIC 3 Lower Tier Interest".

                                      III-6
<PAGE>

        REMIC 3                 REMIC 3
       Lower Tier              Lower Tier             Initial Class
   Class Designation          Interest Rate          Principal Amount
   -----------------          -------------      ----------------------
    Class LT3-A                     (1)          $       350,000,000.00
    Class LT3-B                     (2)          $       145,900,000.00
    Class LT3-AI-1                  (2)          $         8,600,000.00
    Class LT3-AI-2                  (2)          $         5,500,000.00
    Class LT3-AI-3                  (2)          $        14,500,000.00
    Class LT3-AI-4                  (2)          $        10,000,000.00
    Class LT3-AI-5                  (2)          $        13,000,000.00
    Class LT3-AI-6                  (2)          $        28,100,000.00
    Class LT3-AI-7                  (2)          $        26,300,000.00
    Class LT3-AI-8                  (2)          $        24,000,000.00
    Class LT3-AI-9                  (2)          $        74,100,000.00
    Class LT3-S-1                   (3)                           (3)
    Class LT3-S-2                   (4)                           (4)
    Class LT3-S-3                   (5)                           (5)
    Class LT3-S-4                   (6)                           (6)
    Class LT3-S-5                   (7)                           (7)
    Class LT3-S-6                   (8)                           (8)
    Class LT3-S-7                   (9)                           (9)
    Class LT3-S-8                  (10)                          (10)
    Class LT3-S-9                  (11)                          (11)
    Class LT3-S-10                 (12)                          (12)
    Class LT3-S-11                 (13)                          (13)
    Class LT3-S-12                 (14)                          (14)
    Class LT3-S-13                 (15)                          (15)
    Class LT3-S-14                 (16)                          (16)
    Class LT3-S-15                 (17)                          (17)
    Class LT3-S-16                 (18)                          (18)
    Class LT3-S-17                 (19)                          (19)
    Class LT3-S-18                 (20)                          (20)
    Class LT3-S-19                 (21)                          (21)
    Class LT3-S-20                 (22)                          (22)
    Class LT3-S-21                 (23)                          (23)
    Class LT3-S-22                 (24)                          (24)
    Class LT3-S-23                 (25)                          (25)
    Class LT3-S-24                 (26)                          (26)
    Class LT3-S-25                 (27)                          (27)
    Class LT3-S-26                 (28)                          (28)
    Class LT3-S-27                 (29)                          (29)
    Class LT3-S-28                 (30)                          (30)
    Class LT3-S-29                 (31)                          (31)
    Class LT3-S-30                 (32)                          (32)


                                III-7
<PAGE>

    Class LT3-S-31                 (33)                          (33)
    Class LT3-S-32                 (34)                          (34)
    Class LT3-S-33                 (35)                          (35)
    Class LT3-S-34                 (36)                          (36)
    Class LT3-S-35                 (37)                          (37)
    Class LT3-S-36                 (38)                          (38)
    Class LT3-CIO                  (39)                          (39)
    Class LT3-R                    (40)                          (40)


(1)      The interest rate for the Class LT3-A Interest for each of the first
         four Distribution Dates (and the related Accrual Periods) is a per
         annum rate of 0%, and for each Distribution Date (and the related
         Accrual Period) thereafter is a per annum rate equal to the weighted
         average of the rates at which interest accrues on the REMIC 2 Lower
         Tier Interests, computed after first subjecting the rate at which
         interest accrues on REMIC 2 Fixed Rate Interests to a cap equal to the
         product of (i) 2, multiplied by (ii) LIBOR, provided however, that such
         cap shall only apply to a REMIC 2 Fixed Rate Interest for those
         Distribution Dates for which interest is distributable with respect to
         a Corresponding REMIC 3 S Interest.

(2)      The interest rate for these REMIC 3 Lower Tier Interests for each of
         the first four Distribution Dates (and the related Accrual Periods) is
         a per annum rate equal to the product of (i) 2, multiplied by (ii) the
         weighted average of the rates at which interest accrues on the REMIC 2
         Lower Tier Interests, other than the Class LT2-CIO Interest, and
         computed after first subjecting the rate at which interest accrues on
         REMIC 2 Fixed Rate Interests to a cap equal to the product of (a) 2,
         multiplied by (b) LIBOR, provided however, that such cap shall only
         apply to a REMIC 2 Fixed Rate Interest for those Distribution Dates for
         which interest is distributable with respect to a Corresponding REMIC 3
         S Interest, and for each Distribution Date (and the related Accrual
         Period) thereafter is a per annum rate equal to the weighted average of
         the rates at which interest accrues on the REMIC 2 Lower Tier
         Interests, computed after first subjecting the rate at which interest
         accrues on REMIC 2 Fixed Rate Interests to a cap equal to the product
         of (i) 2, multiplied by (ii) LIBOR, provided however, that such cap
         shall only apply to a REMIC 2 Fixed Rate Interest for those
         Distribution Dates for which interest is distributable with respect to
         a Corresponding REMIC 3 S Interest.

(3)      The Class LT3-S-1 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first Distribution Date
         only, the Class LT3-S-1 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF1 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR, and shall
         not be entitled thereafter to any distributions.

                                     III-8
<PAGE>

(4)      The Class LT3-S-2 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first two Distribution
         Dates only, the Class LT3-S-2 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF2 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR, and shall
         not be entitled thereafter to any distributions.

(5)      The Class LT3-S-3 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first three Distribution
         Dates only, the Class LT3-S-3 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF3 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(6)      The Class LT3-S-4 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first four Distribution
         Dates only, the Class LT3-S-4 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF4 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(7)      The Class LT3-S-5 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first five Distribution
         Dates only, the Class LT3-S-5 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF5 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(8)      The Class LT3-S-6 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first six Distribution
         Dates only, the Class LT3-S-6 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF6 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(9)      The Class LT3-S-7 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first seven Distribution
         Dates only, the Class LT3-S-7 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF7 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.


                                III-9
<PAGE>

(10)     The Class LT3-S-8 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first eight Distribution
         Dates only, the Class LT3-S-8 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF8 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(11)     The Class LT3-S-9 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first nine Distribution
         Dates only, the Class LT3-S-9 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF9 Interest for the
         related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(12)     The Class LT3-S-10 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first ten Distribution
         Dates only, the Class LT3-S-10 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF10 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(13)     The Class LT3-S-11 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first eleven Distribution
         Dates only, the Class LT3-S-11 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF11 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(14)     The Class LT3-S-12 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first twelve Distribution
         Dates only, the Class LT3-S-12 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF12 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(15)     The Class LT3-S-13 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 13 Distribution
         Dates only, the Class LT3-S-13 Interest shall be entitled to receive
         distributions of interest

                                     III-10
<PAGE>

         accrued on the Class LT2-SF13 Interest for the related Accrual Period
         in excess of interest accrued at a per annum rate equal to the product
         of (i) 2, multiplied by (ii) LIBOR and shall not be entitled thereafter
         to any distributions.

(16)     The Class LT3-S-14 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 14 Distribution
         Dates only, the Class LT3-S-14 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF14 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(17)     The Class LT3-S-15 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 15 Distribution
         Dates only, the Class LT3-S-15 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF15 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(18)     The Class LT3-S-16 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 16 Distribution
         Dates only, the Class LT3-S-16 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF16 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(19)     The Class LT3-S-17 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 17 Distribution
         Dates only, the Class LT3-S-17 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF17 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(20)     The Class LT3-S-18 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 18 Distribution
         Dates only, the

                                     III-11
<PAGE>

         Class LT3-SF18 Interest shall be entitled to receive distributions of
         interest accrued on the Class LT2-SF Interest for the related Accrual
         Period in excess of interest accrued at a per annum rate equal to the
         product of (i) 2, multiplied by (ii) LIBOR and shall not be entitled
         thereafter to any distributions.

(21)     The Class LT3-S-19 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 19 Distribution
         Dates only, the Class LT3-S-19 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF19 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(22)     The Class LT3-S-20 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 20 Distribution
         Dates only, the Class LT3-S-20 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF20 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(23)     The Class LT3-S-21 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 21 Distribution
         Dates only, the Class LT3-S-21 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF21 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(24)     The Class LT3-S-22 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 22 Distribution
         Dates only, the Class LT3-S-22 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF22 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(25)     The Class LT3-S-23 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 23 Distribution
         Dates only, the Class LT3-S-23 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF23 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(26)     The Class LT3-S-24 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 24 Distribution
         Dates only, the Class LT3-S-24 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF24 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

                                     III-12
<PAGE>

(27)     The Class LT3-S-25 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 25 Distribution
         Dates only, the Class LT3-S-25 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF25 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(28)     The Class LT3-S-26 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 26 Distribution
         Dates only, the Class LT3-S-26 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF26 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(29)     The Class LT3-S-27 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 27 Distribution
         Dates only, the Class LT3-S-27 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF27 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(30)     The Class LT3-S-28 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 28 Distribution
         Dates only, the Class LT3-S-28 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF28 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(31)     The Class LT3-S-29 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 29 Distribution
         Dates only, the Class LT3-S-29 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF29 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(32)     The Class LT3-S-30 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 30 Distribution
         Dates only, the Class LT3-S-30 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF30 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2,

                                     III-13
<PAGE>

         multiplied by (ii) LIBOR and shall not be entitled thereafter to any
         distributions.

(33)     The Class LT3-S-31 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 31 Distribution
         Dates only, the Class LT3-S-31 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF31 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(34)     The Class LT3-S-32 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 32 Distribution
         Dates only, the Class LT3-S-32 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF32 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(35)     The Class LT3-S-33 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 33 Distribution
         Dates only, the Class LT3-S-33 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF33 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(36)     The Class LT3-S-34 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 34 Distribution
         Dates only, the Class LT3-S-34 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF34 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(37)     The Class LT3-S-35 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 35 Distribution
         Dates only, the Class LT3-S-35 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT2-SF35 Interest for
         the related Accrual Period in excess of interest accrued at a per annum
         rate equal to the product of (i) 2, multiplied by (ii) LIBOR and shall
         not be entitled thereafter to any distributions.

(38)     The Class LT3-S-36 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For the first 36 Distribution
         Dates only, the Class LT3-S-36 Interest shall be entitled to receive
         distributions of interest


                                     III-14
<PAGE>

         accrued on the Class LT2-SF36 Interest for the related Accrual Period
         in excess of interest accrued at a per annum rate equal to the product
         of (i) 2, multiplied by (ii) LIBOR and shall not be entitled thereafter
         to any distributions.

(39)     The Class LT3-CIO Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. For each Distribution Date, the
         Class LT3-CIO shall be entitled to all amounts distributed with respect
         to the Class LT2-CIO Interest.

(40)     The Class LT3-R Interest is the sole class of residual interest in
         REMIC 3. It does not have an interest rate or a principal balance.

         On each Distribution Date, interest distributed with respect to the
REMIC 2 Lower Tier Interests shall be distributed on the REMIC 3 Lower Tier
Interests at the rates described above.

         For the first four Distribution Dates only, one-half of all principal
distributions received by REMIC 3 with respect to the REMIC 2 Lower Tier
Interests shall be distributed to the Class LT3-A Interests and one-half of such
amounts shall be distributed to the Class LT3-B Interests. For each Distribution
Date thereafter, all principal distributions received by REMIC 3 with respect to
the REMIC 2 Lower Tier Interests shall be distributed sequentially, first to the
Class LT3-A Interest until its principal balance is reduced to zero, then to the
Class LT3-B Interest until its balance is reduced to zero, and then to each of
the REMIC 3 AI Interests in ascending order of their numerical designations.

         Realized Losses sustained by REMIC 3 with respect to the REMIC 2 Lower
Tier Interests shall be allocated among the REMIC 3 Lower Tier Interests in the
same manner in which principal is distributed among the REMIC 3 Lower Tier
Interests.

         On each Distribution Date, Pledged Prepayment Penalties distributed on
the REMIC 2 Lower Tier Interests shall be allocated proportionally among the
REMIC 3 Lower Tier Interests in accordance with their relative principal
balances immediately before such Distribution Date.

REMIC 4


         The following table sets forth (or describes) the class designation,
interest rate, and principal amount for each class of interest in REMIC 4, each
such class a "REMIC 4 Lower Tier Interest".

<TABLE>
<CAPTION>


      REMIC 4                      REMIC 4                               Corresponding
     Lower Tier                  Lower Tier         Initial Class            Class
    Class Designation           Interest Rate      Principal Amount     of Certificates
    -----------------           -------------    --------------------   ----------------
<S>                                 <C>          <C>                      <C>
    Class LT4-D                     (1)          $     350,000,000.00        N/A
    Class LT4-AF-1                  (1)          $      31,910,000.00     Class AF-1
    Class LT4-AF-2                  (1)          $      13,300,000.00     Class AF-2

</TABLE>

                                     III-15
<PAGE>
<TABLE>
<CAPTION>

<S>                                <C>           <C>                      <C>
    Class LT4-AF-3                  (1)          $      14,695,000.00     Class AF-3
    Class LT4-AF-4                  (1)          $      10,965,000.00     Class AF-4
    Class LT4-AF-5                  (1)          $      11,575,000.00     Class AF-5
    Class LT4-AF-6                  (1)          $       9,160,000.00     Class AF-6
    Class LT4-AV-1                  (1)          $     136,005,000.00     Class AV-1
    Class LT4-AV-2                  (1)          $      73,390,000.00     Class AV-2
    Class LT4-M-1                   (1)          $      24,500,000.00     Class M-1
    Class LT4-M-2                   (1)          $      14,000,000.00     Class M-2
    Class LT4-B                     (1)          $      10,500,000.00      Class B
    Class LT4-AIO-1                 (2)                         (2)       Class A-IO
    Class LT4-AIO-2                 (3)                         (3)       Class A-IO
    Class LT4-AIO-3                 (4)                         (4)       Class A-IO
    Class LT4-AIO-4                 (5)                         (5)       Class A-IO
    Class LT4-AIO-5                 (6)                         (6)       Class A-IO
    Class LT4-AIO-6                 (7)                         (7)       Class A-IO
    Class LT4-AIO-7                 (8)                         (8)       Class A-IO
    Class LT4-AIO-8                 (9)                         (9)       Class A-IO
    Class LT4-AIO-9                (10)                        (10)       Class A-IO
    Class LT4-S-1                  (11)                        (11)       Class S-1
    Class LT4-S-2                  (12)                        (12)       Class S-2
    Class LT4-CIO                  (13)                        (13)        Class C
    Class LT4-R                    (14)                        (14)           R

</TABLE>

(1)      The interest rate for these REMIC 4 Lower Tier Interests for any
         Distribution Date (and the related Accrual Period) is a per annum rate
         equal to the weighted average of the rates at which interest accrues on
         the REMIC 3 Lower Tier Interests, other than the Class LT3-CIO
         Interests and REMIC 3 S Interests, and computed after first reducing
         the rate at which interest accrues on each REMIC 3 AI Interests by a
         per annum rate of 6.25%, provided however, that the rate on a REMIC
         3-AI Interest shall be so reduced only for those Distribution Dates for
         which interest is distributable with respect to a Corresponding REMIC 4
         AIO Interest. (Stated differently, the interest rate for these REMIC 4
         Lower Tier Interests will equal the Net WAC Cap applicable to the Group
         I Certificates other than the Class AF-1 Certificates).

(2)      The Class LT4-AIO-1 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first six
         Distribution Dates only, the Class LT4-AIO-1 Interest shall be entitled
         to receive distributions of interest accrued on the Class LT3-AI-1
         Interest for the related Accrual Period at a per annum rate equal to
         6.25%, and shall not be entitled thereafter to any distributions.

(3)      The Class LT4-AIO-2 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first nine
         Distribution Dates, the Class LT4-AIO-2 Interest

                                     III-16
<PAGE>

         shall be entitled to receive distributions of interest accrued on the
         Class LT3-AI-2 Interest for the related Accrual Period at a per annum
         rate equal to 6.25%, and shall not be entitled thereafter to any
         distributions.

(4)      The Class LT4-AIO-3 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first twelve
         Distribution Dates, the Class LT4-AIO-3 Interest shall be entitled to
         receive distributions of interest accrued on the Class LT3-AI-3
         Interest for the related Accrual Period at a per annum rate equal to
         6.25%, and shall not be entitled thereafter to any distributions.

(5)      The Class LT4-AIO-4 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first 15 Distribution
         Dates, the Class LT4-AIO-4 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT3-AI-4 Interest for
         the related Accrual Period at a per annum rate equal to 6.25%, and
         shall not be entitled thereafter to any distributions.

(6)      The Class LT4-AIO-5 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first 18 Distribution
         Dates, the Class LT4-AIO-5 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT3-AI-5 Interest for
         the related Accrual Period at a per annum rate equal to 6.25%, and
         shall not be entitled thereafter to any distributions.

(7)      The Class LT4-AIO-6 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first 21 Distribution
         Dates, the Class LT4-AIO-6 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT3-AI-6 Interest for
         the related Accrual Period at a per annum rate equal to 6.25%, and
         shall not be entitled thereafter to any distributions.

(8)      The Class LT4-AIO-7 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first 24 Distribution
         Dates, the Class LT4-AIO-7 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT3-AI-7 Interest for
         the related Accrual Period at a per annum rate equal to 6.25%, and
         shall not be entitled thereafter to any distributions.

(9)      The Class LT4-AIO-8 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first 27 Distribution
         Dates, the Class LT4-AIO-8 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT3-AI-8 Interest for
         the related Accrual Period at a per annum rate equal to 6.25%, and
         shall not be entitled thereafter to any distributions.

(10)     The Class LT4-AIO-9 Interest is an interest only Lower Tier Interest
         and it does not have a principal balance. For the first 31 Distribution
         Dates, the Class LT4-AIO-9 Interest shall be entitled to receive
         distributions of interest accrued on the Class LT3-AI-9 Interest for
         the related Accrual Period at a per annum rate equal to 6.25%, and
         shall not be entitled thereafter to any distributions.

                                     III-17
<PAGE>

(11)     The Class LT4-S1 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. The Class LT4-S1 Interest shall
         be entitled to all amounts distributed with respect to the REMIC 3 S
         Interests having numerical designations 1 through 24 inclusive of 1 and
         24.

(12)     The Class LT4-S2 Interest is an interest only Lower Tier Interest and
         it does not have a principal balance. The Class LT4-S2 Interest shall
         be entitled to all amounts distributed with respect to the REMIC 3 S
         Interests having numerical designations 25 through 36 inclusive of 25
         and 36.

(13)     The Class LT4-CIO is an interest only interest and does not have a
         principal balance. For each Distribution Date, the Class LT4-CIO shall
         be entitled to all amounts distributed with respect to the Class
         LT3-CIO Interest.

(14)     The Class LT4-R Interest is the sole class of residual interest in
         REMIC 4. It does not have an interest rate or a principal balance.

         On each Distribution Date, interest distributed with respect to the
REMIC 3 Lower Tier Interests shall be distributed on the REMIC 4 Lower Tier
Interests at the rates described above, provided however, that a portion of the
interest that accrues at the rate described above on the Class LT4-D Interest
shall be deferred and added to the principal balance of the Class LT4-D
Interest. For any Distribution Date, the portion so deferred shall equal 50% of
the increase occurring on such Distribution Date in the Overcollateralization
Amount. Interest so deferred shall be applied to make principal payments on the
other Lower Tier Interests in REMIC 4.

         On each Distribution Date principal distributed with respect to the
REMIC 3 Lower Tier Interests, and any interest deferred on the Class LT4-D
Interest, shall be distributed, and any Realized Losses shall be allocated,
among the REMIC 4 Lower Tier Interests in a manner such that immediately
following such Distribution Date:

         (a)      the principal balance of the Class LT4-AF-1 Interest equals
                  50% of the Class AF-1 Certificate Principal Balance;

         (b)      the principal balance of the Class LT4-AF-2 Interest equals
                  50% of the Class AF-2 Certificate Principal Balance;

         (c)      the principal balance of the Class LT4-AF-3 Interest equals
                  50% of the Class AF-3 Certificate Principal Balance;

         (d)      the principal balance of the Class LT4-AF-4 Interest equals
                  50% of the Class AF-4 Certificate Principal Balance;

         (e)      the principal balance of the Class LT4-AF-5 Interest equals
                  50% of the Class AF-5 Certificate Principal Balance;

                                     III-18
<PAGE>

         (f)      the principal balance of the Class LT4-AF-6 Interest equals
                  50% of the Class AF-6 Certificate Principal Balance;

         (g)      the principal balance of the Class LT4-AV-1 Interest equals
                  50% of the Class AV-1 Certificate Principal Balance;

         (h)      the principal balance of the Class LT4-AV-2 Interest equals
                  50% of the Class AV-2 Certificate Principal Balance;

         (i)      the principal balance of the Class LT4-M-1 Interest equals 50%
                  of the Class M-1 Certificate Principal Balance;

         (j)      the principal balance of the Class LT4-M-2 Interest equals 50%
                  of the Class M-2 Certificate Principal Balance;

         (k)      the principal balance of the Class LT4-B Interest equals 50%
                  of the sum of the Class B-1 Certificate Principal Balance; and

         (l)      the principal balance of the Class LT4-D Interest equals the
                  excess of the Assumed Principal Balance over the sum of the
                  balances of the Class LT4-AF-1, Class LT4-AF-2, Class
                  LT4-AF-3, Class LT4-AF-4, Class LT-4-AF-5, Class LT4-AF-6,
                  Class LT4-AV-1, Class LT4-AV-2, Class LT4-M-1, Class LT4-M-2
                  and Class LT4-B Interests.

         On each Distribution Date, Pledged Prepayment Penalties distributed on
the REMIC 3 Lower Tier Interests shall be distributed proportionally among the
REMIC 4 Lower Tier Interests in accordance with their relative principal
balances immediately before such Distribution Date.

REMIC 5

         The following table sets forth (or describes) the class designation,
interest rate, and principal amount for each class of the REMIC 5 Interests.

       REMIC 5                  REMIC 5
     Certificate               Certifcate             Initial Class
   Class Designation          Interest Rate          Principal Amount
   -----------------          -------------      ----------------------
    Class AF-1                      (1)          $      63,820,000.00
    Class AF-2                      (2)          $      26,600,000.00
    Class AF-3                      (3)          $      29,390,000.00
    Class AF-4                      (4)          $      21,930,000.00
    Class AF-5                      (5)          $      23,150,000.00
    Class AF-6                      (6)          $      18,320,000.00
    Class AV-1                      (7)          $     272,010,000.00
    Class AV-2                      (8)          $     146,780,000.00
    Class M-1                       (9)          $      49,000,000.00

                                     III-19
<PAGE>

    Class M-2                      (10)          $      28,000,000.00
    Class B                        (11)          $      21,000,000.00
    Class S-1                      (12)                        (12)
    Class S-2                      (13)                        (13)
    Class A-IO                     (14)                        (14)
    Class X-IO                     (15)                        (15)
    Class C                        (16)                        (16)
    Class R                        (17)                        (17)


(1)      The Class AF-1 Pass-Through Rate.

(2)      The Class AF-2 Pass-Through Rate.

(3)      The Class AF-3 Pass-Through Rate.

(4)      The Class AF-4 Pass-Through Rate.

(5)      The Class AF-5 Pass-Through Rate.

(6)      The Class AF-6 Pass-Through Rate.

(7)      The Class AV-1 Pass-Through Rate.

(8)      The Class AV-2 Pass-Through Rate.

(9)      The Class M-1 Pass-Through Rate.

(10)     The Class M-2 Pass-Through Rate.

(11)     The Class B Pass-Through Rate.

(12)     The Class S-1 Certificates are interest only certificates and do not
         have a principal balance. For each Distribution Date, the Class S-1
         Certificates shall be entitled to all interest distributed with respect
         to the Class LT4-S-1 Interest.

(13)     The Class S-2 Certificates are interest only certificates and do not
         have a principal balance. For each Distribution Date, the Class S-2
         Certificates shall be entitled to all interest distributed with respect
         to the Class LT4-S-2 Interest.

(14)     The Class A-IO Certificates are interest only certificates and do not
         have a principal balance. For each Distribution Date, the Class A-IO
         Certificate shall be entitled to all interest distributed with respect
         to the REMIC 4 AIO Interests.

                                     III-20
<PAGE>

(15)     The Class X-IO Certificates are interest only certificates and do not
         have a principal balance. For each Distribution Date the Class X-IO
         Certificates shall be entitled to a specified portion of the interest
         that accrued during the related Accrual Period on each of the
         Corresponding REMIC 4 P&I Interests and the Class LT4-D Interest at a
         per annum rate equal to the lesser of (i) for the first 24 Dates,
         0.275%, and for each Distribution Date thereafter, 0.10%, and (ii) the
         positive difference, if any, between (a) the weighted average of the
         rates on the Corresponding REMIC 4 P&I Interests, minus (b) the
         weighted average of the rates on the Corresponding REMIC 4 P&I
         Interests if the rate on each such Corresponding REMIC P&I Interest
         were subject to a cap equal to the pass-through rate on the
         Corresponding Class of Certificate.

(16)     The Class C Certificate is an interest only certificate and does not
         have a principal balance. For each Distribution Date the Class C
         Certificate shall be entitled to (i) all amounts distributed with
         respect to the Class LT4-CIO Interest, and (ii) a specified portion of
         the interest accrued during the related Accrual Period on each
         Corresponding REMIC 4 P&I Interest and the Class LT4-D Interest at a
         per annum rate equal to:

         (a)      for each of the first 24 Distribution Dates, the positive
                  difference, if any, between (I) the weighted average of the
                  interest rates on the Corresponding REMIC 4 P&I Interests,
                  minus (II) the sum of (A) the Adjusted Net Rate, plus (B)
                  0.275%; and

         (b)      for each Distribution Date thereafter, the positive
                  difference, if any, between (I) the weighted average of the
                  interest rates on the Corresponding REMIC 4 P&I Interests,
                  minus (II) the sum of (A) the Adjusted Net Rate, plus (B)
                  0.10%.

         For each Distribution Date, interest accrued on the Class C Certificate
         during the related Accrual Period shall be deferred to the extent of
         the increase in the Overcollateralization Amount for such Distribution
         Date. Any interest so deferred shall not itself bear interest.

(17)     The Class R Certificate evidences ownership of the Class LT1-R, Class
         LT2-R, and Class LT3-R Interests and also represents the sole class of
         residual interest in REMIC 4. It does not have an interest rate or a
         principal balance.

         For any Distribution Date, distributions shall be made and realized
losses shall be allocated among the Certificates in the manner provided in the
Agreement.


                                     III-21

<PAGE>

                                    EXHIBIT A

THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SELLER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.



                       SAXON ASSET SECURITIES TRUST 2001-3

             MORTGAGE LOAN ASSET BACKED CERTIFICATES, SERIES 2001-3

                             CLASS A__-1 CERTIFICATE

THE PRINCIPAL OF THIS CERTIFICATE IS SUBJECT TO PREPAYMENT FROM TIME TO TIME
WITHOUT SURRENDER OF OR NOTATION ON THIS CERTIFICATE. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE LESS THAN THAT SET
FORTH BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT
CERTIFICATE PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE.

THIS CERTIFICATE REPRESENTS A REMIC REGULAR INTEREST FOR FEDERAL INCOME TAX
PURPOSES.



DENOMINATION: $                           INITIAL PRINCIPAL BALANCE: $
               -----------                                            ----------

PASS-THROUGH RATE:


REGISTERED HOLDER: CEDE & CO.


Certificate No. A_-1-1                    CUSIP No: 805564 ___

         This Certificate evidences a beneficial ownership interest in a Trust
consisting primarily of a pool of Mortgage Loans (collectively, the "Mortgage
Loans") formed and sold by

                         SAXON ASSET SECURITIES COMPANY

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SAXON ASSET SECURITIES COMPANY, THE MASTER SERVICER, ANY SERVICER, THE TRUSTEE
OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

         The Registered Holder named above is the owner of the Percentage
Interest calculated as set forth below in the above mentioned Class of
Certificates issued by the Trust (the "Trust") created pursuant to a Pooling and
Servicing Agreement dated as of September 1, 2001 (the "Pooling and Servicing
Agreement"), among Saxon Asset Securities Company (herein called the
"Depositor," which term includes any successor entity under the Pooling and
Servicing Agreement), Saxon Mortgage, Inc., as Master Servicer, Meritech
Mortgage Services, Inc., as Servicer, and Bankers Trust Company, as Trustee, a
summary of certain of the pertinent provisions of which is set forth herein. To
the extent not defined herein, capitalized terms used herein have the meanings
assigned in the Pooling and Servicing Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Pooling and

                                      A-1
<PAGE>

Servicing Agreement to which Pooling and Servicing Agreement the Holder of this
Certificate, by virtue of the acceptance hereof, assents and by which such
Holder is bound.

         This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Loan Asset Backed Certificates, Series 2001-3 (herein
called the "Certificates") and represents a Percentage Interest in the above
mentioned Class of Certificates equal to the quotient, expressed as a
percentage, obtained by dividing the Denomination of this Certificate specified
above by the Initial Principal Balance specified above of the above mentioned
Class of Certificates. The Certificates are issued in multiple Classes
designated as specifically set forth in the Pooling and Servicing Agreement. The
Certificates will evidence in the aggregate 100% of the beneficial ownership of
the Trust.

         To the extent and subject to the limitations set forth in the Pooling
and Servicing Agreement, the Person in whose name this Certificate is registered
at the close of business on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date") is entitled to
receive an amount equal to the product of such Person's Percentage Interest and
the Distribution Amount (as defined in the Pooling and Servicing Agreement) with
respect to the above mentioned Class of Certificates on the 25th day of each
month or, if such 25th day is not a Business Day, the next succeeding Business
Day (each a "Distribution Date"), commencing in October 2001. All amounts
distributable with respect to this Certificate are payable in the coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts.

         The Certificates are limited in right of payment to certain collections
and recoveries respecting the Mortgage Loans, all as more specifically set forth
in the Pooling and Servicing Agreement. As provided in the Pooling and Servicing
Agreement, withdrawals from the Distribution Account and related accounts shall
be made from time to time for purposes other than distributions to Holders of
the Certificates, such purposes including reimbursement of Advances made, or
certain expenses incurred, with respect to the Mortgage Loans and administration
of the Trust Fund.

         So long as this Certificate is registered in the name of a clearing
agency or its nominee, the Paying Agent will make distributions on this
Certificate by wire transfer of immediately available funds to the Clearing
agency or its nominee. Otherwise, all distributions under the Pooling and
Servicing Agreement will be made by the Paying Agent either (i) by check mailed
to the address of the Holder as it appears on the Certificate Register on the
related Record Date or (ii) upon request to the Paying Agent in writing by the
Record Date immediately prior to the Distribution Date of any Holder of
Certificates of this Class having an aggregate initial principal amount equal to
or in excess of $1,000,000, by wire transfer of immediately available funds to
the account of such Holder. A fee may be charged by the Paying Agent to a
Certificateholder for any payment made by wire transfer. Notwithstanding the
above, the final distribution on this Certificate will be made after due notice
by the Paying Agent of a pendency of such distribution and only upon
presentation and surrender of this Certificate at its principal Corporate Trust
Office or such other offices or agencies appointed by the Paying Agent for that
purpose and such other locations provided in the Pooling and Servicing
Agreement.

         The Trustee will duly and punctually make distributions with respect to
this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code by any Person from
a distribution to any Holder shall be considered as having been distributed to
such Holder for all purposes of the Pooling and Servicing Agreement.

         The Pooling and Servicing Agreement permits, with certain exceptions
therein provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the Holders of
the Certificates under the Pooling and Servicing Agreement at any time by the
Depositor, the Master Servicer and the Trustee with consent of the Holders of
Certificates entitled to at least 66% of the Voting Rights. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Pooling and
Servicing Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

         As provided in the Pooling and Servicing Agreement and subject to any
limitations on transfer of this Certificate by a clearing agency or its nominee
and certain limitations set forth in the Pooling and Servicing Agreement, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the principal
Corporate Trust Office of the Trustee or such other offices or agencies

                                      A-2
<PAGE>

appointed by the Trustee for that purpose and such other locations provided in
the Pooling and Servicing Agreement, duly endorsed by or accompanied by an
assignment in the form below or other written instrument of transfer in form
satisfactory to the Trustee and duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in the same aggregate principal balance will be
issued to the designated transferee or transferees.

         Subject to the terms of the Pooling and Servicing Agreement, the
Certificates of this Class will be registered as one or more certificates held
by a clearing agency or its nominee and beneficial interests will be held by
Beneficial Owners through the book-entry facilities of such Clearing agency or
its nominee in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof.

         As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for a
new Certificate of the same Class in the same denomination. No service charge
will be made for any such registration of transfer or exchange, but the Trustee
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

         The Depositor, the Master Servicer, the Trustee and the Paying Agent
and any agent of the Depositor, the Master Servicer, the Trustee and the Paying
Agent may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

         The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Holders of all
Certificates of all amounts held by the Trustee and required to be paid to such
Holders pursuant to the Pooling and Servicing Agreement or the last to occur of
(a) the final payment or other liquidation (or any advance made with respect
thereto) of the last Mortgage Loan in the Trust Fund, (b) the disposition of all
property acquired in respect of any Mortgage Loan remaining in the Trust Fund
and (c) at any time when a qualified liquidation of the Trust Fund is effected
as described in the Pooling and Servicing Agreement.

         The Pooling and Servicing Agreement also provides that (i) on and after
the Initial Optional Termination Date, the Master Servicer may purchase the
Mortgage Loans then remaining in the Trust Fund and apply the proceeds of such
sale to effect early retirement of the Certificates and (ii) under certain
circumstances relating to the qualification of any REMIC as a REMIC under the
Code the Mortgage Loans may be sold, thereby effecting the early retirement of
the Certificates.

         Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Pooling and Servicing Agreement or be valid for any purpose.

         THIS CERTIFICATE AND THE POOLING AND SERVICING AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK.

         The Trustee has executed this Certificate on behalf of the Trust not in
its individual capacity but solely as Trustee under the Pooling and Servicing
Agreement, and the Trustee shall be liable hereunder only in respect of the
assets of the Trust.




                                      A-3

<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.

Dated: October    , 2001
              ---
                                       BANKERS TRUST COMPANY

                                       AS TRUSTEE


                                       BY:
                                           -------------------------------------
                                       Authorized Officer

[SEAL]

ATTEST:



                          CERTIFICATE OF AUTHENTICATION



THIS IS ONE OF THE CLASS A__-1 CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED
POOLING AND SERVICING AGREEMENT.



Dated: October    , 2001               BANKERS TRUST COMPANY
              ---
                                       AS TRUSTEE



                                       BY:
                                           -------------------------------------
                                       Authorized Signatory




                                      A-4
<PAGE>



                                FORM OF TRANSFER

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
     ---------------------------------------------------------------------------

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
            (Please print or typewrite name and address of assignee)

the within Certificate and does hereby irrevocably constitute and appoint
_________________________ (Attorney) to transfer the said Certificate in the
Certificate Register of the within-named Trust, with full power of substitution
in the premises.

Dated:
      -----------------

------------------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of this Certificate in every particular without alteration
or enlargement or any change whatever.

------------------------------------------

SIGNATURE GUARANTEED: The signature must be guaranteed by a commercial bank or
trust company or by a member firm of the New York Stock Exchange or another
national securities exchange. Notarized or witnessed signatures are not
acceptable.

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:



TEN COM  as tenants in common              UNIF GIFT MIN ACT   Custodian........
                                                                   (Cus)(Minors)

TEN ENT. as tenants by the entireties          Under Uniform Gifts to Minors Act
                                               .........................
JT TEN.  as joint tenants with rights                                   [State]

         of survivorship and not as

         Tenants in Common

     Additional abbreviations may also be used though not in the above list.

                            DISTRIBUTION INSTRUCTIONS

   The assignee should include the following for purposes of distribution:

   Distributions shall be made, by wire transfer or otherwise, in immediately
available funds, to         , for the account of                , account
                   --------                      ---------------
number                , or, if mailed by check, to              . Applicable
      ---------------                             -------------
reports and statements should be mailed to           . This information is
                                          -----------
provided by                    , the assignee named above, or                  ,
            ------------------                               ------------------
 as its agent.


                                      A-5
<PAGE>

                                    EXHIBIT B

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SELLER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.


                       SAXON ASSET SECURITIES TRUST 2001-3

             MORTGAGE LOAN ASSET BACKED CERTIFICATES, SERIES 2001-3

                               CLASS B CERTIFICATE

THE PRINCIPAL OF THIS CERTIFICATE IS SUBJECT TO PREPAYMENT FROM TIME TO TIME
WITHOUT SURRENDER OF OR NOTATION ON THIS CERTIFICATE. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE LESS THAN THAT SET
FORTH BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT
CERTIFICATE PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE.

THIS CERTIFICATE REPRESENTS A REMIC REGULAR INTEREST FOR FEDERAL INCOME TAX
PURPOSES.

THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT AS DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.





DENOMINATION: $                           INITIAL PRINCIPAL BALANCE: $
               ---------------                                        ----------

PASS-THROUGH RATE:


REGISTERED HOLDER: CEDE & CO.


Certificate No. B-1                       CUSIP No: 805564


         This Certificate evidences a beneficial ownership interest in a Trust
consisting primarily of a pool of Mortgage Loans (collectively, the "Mortgage
Loans") formed and sold by

                         SAXON ASSET SECURITIES COMPANY

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SAXON ASSET SECURITIES COMPANY, THE MASTER SERVICER, ANY SERVICER, THE TRUSTEE
OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

         The Registered Holder named above is the owner of the Percentage
Interest calculated as set forth below in the above mentioned Class of
Certificates issued by the Trust (the "Trust") created pursuant to a Pooling and

                                      B-1
<PAGE>


Servicing Agreement dated as of September 1, 2001 (the "Pooling and Servicing
Agreement"), among Saxon Asset Securities Company (herein called the
"Depositor," which term includes any successor entity under the Pooling and
Servicing Agreement), Saxon Mortgage, Inc., as Master Servicer, Meritech
Mortgage Services, Inc., as Servicer, and Bankers Trust Company, as Trustee, a
summary of certain of the pertinent provisions of which is set forth herein. To
the extent not defined herein, capitalized terms used herein have the meanings
assigned in the Pooling and Servicing Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement to which Pooling and Servicing Agreement the Holder of this
Certificate, by virtue of the acceptance hereof, assents and by which such
Holder is bound.

         This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Loan Asset Backed Certificates, Series 2001-3 (herein
called the "Certificates") and represents a Percentage Interest in the above
mentioned Class of Certificates equal to the quotient, expressed as a
percentage, obtained by dividing the Denomination of this Certificate specified
above by the Initial Principal Balance specified above of the above mentioned
Class of Certificates. The Certificates are issued in multiple Classes
designated as specifically set forth in the Pooling and Servicing Agreement. The
Certificates will evidence in the aggregate 100% of the beneficial ownership of
the Trust.

         To the extent and subject to the limitations set forth in the Pooling
and Servicing Agreement, the Person in whose name this Certificate is registered
at the close of business on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date") is entitled to
receive an amount equal to the product of such Person's Percentage Interest and
the Distribution Amount (as defined in the Pooling and Servicing Agreement) with
respect to the above mentioned Class of Certificates on the 25th day of each
month or, if such 25th day is not a Business Day, the next succeeding Business
Day (each a "Distribution Date"), commencing in October 2001. All amounts
distributable with respect to this Certificate are payable in the coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts.

         The Certificates are limited in right of payment to certain collections
and recoveries respecting the Mortgage Loans, all as more specifically set forth
in the Pooling and Servicing Agreement. As provided in the Pooling and Servicing
Agreement, withdrawals from the Distribution Account and related accounts shall
be made from time to time for purposes other than distributions to Holders of
the Certificates, such purposes including reimbursement of Advances made, or
certain expenses incurred, with respect to the Mortgage Loans and administration
of the Trust Fund.

         So long as this Certificate is registered in the name of a clearing
agency or its nominee, the Paying Agent will make distributions on this
Certificate by wire transfer of immediately available funds to the Clearing
agency or its nominee. Otherwise, all distributions under the Pooling and
Servicing Agreement will be made by the Paying Agent either (i) by check mailed
to the address of the Holder as it appears on the Certificate Register on the
related Record Date or (ii) upon request to the Paying Agent in writing by the
Record Date immediately prior to the Distribution Date of any Holder of
Certificates of this Class having an aggregate initial principal amount equal to
or in excess of $1,000,000, by wire transfer of immediately available funds to
the account of such Holder. A fee may be charged by the Paying Agent to a
Certificateholder for any payment made by wire transfer. Notwithstanding the
above, the final distribution on this Certificate will be made after due notice
by the Paying Agent of a pendency of such distribution and only upon
presentation and surrender of this Certificate at its principal Corporate Trust
Office or such other offices or agencies appointed by the Paying Agent for that
purpose and such other locations provided in the Pooling and Servicing
Agreement.

         The Trustee will duly and punctually make distributions with respect to
this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code by any Person from
a distribution to any Holder shall be considered as having been distributed to
such Holder for all purposes of the Pooling and Servicing Agreement.

         The Pooling and Servicing Agreement permits, with certain exceptions
therein provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the Holders of
the Certificates under the Pooling and Servicing Agreement at any time by the
Depositor, the Master Servicer and the Trustee with consent of the Holders of
Certificates entitled to at least 66% of the Voting Rights. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all


                                      B-2
<PAGE>

future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Pooling and Servicing
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Certificates.

         As provided in the Pooling and Servicing Agreement and subject to any
limitations on transfer of this Certificate by a clearing agency or its nominee
and certain limitations set forth in the Pooling and Servicing Agreement, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the principal
Corporate Trust Office of the Trustee or such other offices or agencies
appointed by the Trustee for that purpose and such other locations provided in
the Pooling and Servicing Agreement, duly endorsed by or accompanied by an
assignment in the form below or other written instrument of transfer in form
satisfactory to the Trustee and duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in the same aggregate principal balance will be
issued to the designated transferee or transferees.

         Subject to the terms of the Pooling and Servicing Agreement, the
Certificates of this Class will be registered as one or more certificates held
by a clearing agency or its nominee and beneficial interests will be held by
Beneficial Owners through the book-entry facilities of such Clearing agency or
its nominee in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof.

         As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for a
new Certificate of the same Class in the same denomination. No service charge
will be made for any such registration of transfer or exchange, but the Trustee
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

         The Depositor, the Master Servicer, the Trustee and the Paying Agent
and any agent of the Depositor, the Master Servicer, the Trustee and the Paying
Agent may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

         The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Holders of all
Certificates of all amounts held by the Trustee and required to be paid to such
Holders pursuant to the Pooling and Servicing Agreement or the last to occur of
(a) the final payment or other liquidation (or any advance made with respect
thereto) of the last Mortgage Loan in the Trust Fund, (b) the disposition of all
property acquired in respect of any Mortgage Loan remaining in the Trust Fund
and (c) at any time when a qualified liquidation of the Trust Fund is effected
as described in the Pooling and Servicing Agreement.

         The Pooling and Servicing Agreement also provides that (i) on and after
the Initial Optional Termination Date, the Master Servicer may purchase the
Mortgage Loans then remaining in the Trust Fund and apply the proceeds of such
sale to effect early retirement of the Certificates and (ii) under certain
circumstances relating to the qualification of any REMIC as a REMIC under the
Code the Mortgage Loans may be sold, thereby effecting the early retirement of
the Certificates.

         Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Pooling and Servicing Agreement or be valid for any purpose.

         THIS CERTIFICATE AND THE POOLING AND SERVICING AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK.

         The Trustee has executed this Certificate on behalf of the Trust not in
its individual capacity but solely as Trustee under the Pooling and Servicing
Agreement, and the Trustee shall be liable hereunder only in respect of the
assets of the Trust.

                                      B-3
<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal. Dated: October    , 2001 BANKERS TRUST COMPANY
AS TRUSTEE                                      ---


                                       BY:
                                          --------------------------------------
                                          Authorized Officer

[SEAL]
ATTEST:

                          CERTIFICATE OF AUTHENTICATION

THIS IS ONE OF THE CLASS B CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED
POOLING AND SERVICING AGREEMENT.

Dated: October    , 2001               BANKERS TRUST COMPANY
              ---                      AS TRUSTEE

                                       BY:
                                          --------------------------------------
                                          Authorized Signatory

                                      B-4

<PAGE>

                                FORM OF TRANSFER

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
     ---------------------------------------------------------------------------

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
            (Please print or typewrite name and address of assignee)

the within Certificate and does hereby irrevocably constitute and appoint
                 (Attorney) to transfer the said Certificate in the
----------------
Certificate Register of the within-named Trust, with full power of substitution
in the premises.

Dated:
      -----------------

------------------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of this Certificate in every particular without alteration
or enlargement or any change whatever.

------------------------------------------

SIGNATURE GUARANTEED: The signature must be guaranteed by a commercial bank or
trust company or by a member firm of the New York Stock Exchange or another
national securities exchange. Notarized or witnessed signatures are not
acceptable.

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:



TEN COM  as tenants in common              UNIF GIFT MIN ACT   Custodian........
                                                                   (Cus)(Minors)

TEN ENT. as tenants by the entireties          Under Uniform Gifts to Minors Act
                                               .........................
JT TEN.  as joint tenants with rights                                   [State]

         of survivorship and not as

         Tenants in Common

     Additional abbreviations may also be used though not in the above list.

                            DISTRIBUTION INSTRUCTIONS

   The assignee should include the following for purposes of distribution:

   Distributions shall be made, by wire transfer or otherwise, in immediately
available funds, to         , for the account of                , account
                   --------                      ---------------
number                , or, if mailed by check, to              . Applicable
      ---------------                             -------------
reports and statements should be mailed to           . This information is
                                          -----------
provided by                    , the assignee named above, or                  ,
            ------------------                               ------------------
 as its agent.


                                      B-5
<PAGE>

                                    EXHIBIT C

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                               October      , 2001
                                      -----



Bankers Trust Company, as Trustee
1761 East St. Andrew Place
Santa Ana, California 92705

Saxon Asset Securities Company
4880 Cox Road
Glen Allen, Virginia 23060
Attention:  President

Saxon Mortgage, Inc., as Master
Servicer
4880 Cox Road
Glen Allen, Virginia 23060
Attention:  President

                         SAXON ASSET SECURITIES COMPANY
                           MORTGAGE LOAN ASSET BACKED
                            SECURITIES, SERIES 2001-3

Ladies and Gentlemen:

         In accordance with Section 2.3(a) of the Standard Terms of Custody
Agreement (June 2000 Edition) (the "Standard Terms") incorporated into the
Custody Agreement dated as of September 1, 2001 (together with the Standard
Terms, the "Custody Agreement") between Bankers Trust Company, as trustee (the
"Trustee"), and Bankers Trust Company, as custodian (the "Custodian"), the
Custodian hereby certifies that it has received and is holding a Mortgage File
with respect to each Mortgage Loan (other than any Mortgage Loan listed on the
schedule of exceptions attached hereto) listed on Schedule I (a copy of which is
attached hereto) to the Custody Agreement.

         In connection therewith, the Custodian has examined each Mortgage File
to confirm that:

         (i)      no Note, on the face or the reverse side(s) thereof, contains
evidence, except for the endorsement to the Custodian, of any unsatisfied
claims, liens, security interests, encumbrances or restrictions on transfer;

         (ii)     the Note bears an endorsement that appears to be an original
either in blank or to the Custodian, as set forth substantially as follows
"Without Recourse, pay to the order of Bankers Trust Company , as Custodian or
Trustee";

                                      C-1
<PAGE>

         (iii)    all documents required to be contained in the Mortgage File
are in its possession;

         (iv)     such documents have been reviewed by it and appear to relate
to such Mortgage Loan and are not torn or mutilated; and

         (v)      based on its examination and only as to the foregoing
documents, the mortgage information set forth on the Mortgage Loan Schedule
accurately reflects information set forth in the Mortgage File and each balance
listed as the "Original Balance" on Schedule I to the Custody Agreement is
identical to the original principal amount of the corresponding Note (or, if
applicable, the amount set forth in a lost note affidavit).

         The Custodian further certifies that the Custodian's review of each
Mortgage File included each of the procedures set forth in Section 2.3(a) of the
Standard Terms.

         The Custodian has not (1) inspected, reviewed or examined any such
documents, instruments, securities or other papers to determine that they or the
signatures thereon are genuine, enforceable, or appropriate for the represented
purpose, any such documents, instruments, securities or other papers have
actually been recorded or that any document that appears to be an original is in
fact an original, or (2) determined whether any Mortgage File should include any
surety or guaranty, Note Assumption Rider, buydown agreement, assumption
agreement, modification agreement, written assurance or substitution agreement.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Custody Agreement.

                                       BANKERS TRUST COMPANY, as Custodian


                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                      C-2
<PAGE>

                                    EXHIBIT D

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                               October     , 2001
                                       ----


Bankers Trust Company, as Trustee
1761 East St. Andrew Place
Santa Ana, California 92705

Saxon Asset Securities Company
4880 Cox Road
Glen Allen, Virginia 23060
Attention:  President

Saxon Mortgage, Inc., as Master
Servicer
4880 Cox Road
Glen Allen, Virginia 23060
Attention:  President

Meritech Mortgage Services, Inc.
4708 Mercantile Drive
Fort Worth, Texas 76137
Attention:  President


                         SAXON ASSET SECURITIES COMPANY
                           MORTGAGE LOAN ASSET BACKED
                            SECURITIES, SERIES 2001-3

Ladies and Gentlemen:

         In accordance with (i) Section 2.02 of the Pooling and Servicing
Agreement among Saxon Asset Securities Company, as depositor, Saxon Mortgage,
Inc., as master servicer, Meritech Mortgage Services, Inc., as servicer and
Bankers Trust Company, N.A. as trustee (the "Trustee") and (ii) Section 2.3(a)
of the Standard Terms of Custody Agreement (June 2000 Edition) (the "Standard
Terms") incorporated into the Custody Agreement dated as of September 1, 2001
(together with the Standard Terms, the "Custody Agreement") between the Trustee,
and Bankers Trust Company, as custodian (the "Custodian"), the Custodian hereby
certifies that it has received and is holding a Mortgage File with respect to
each Mortgage Loan (other than any Mortgage Loan listed on the schedule of
exceptions attached hereto) listed on Schedule I (a copy of which is attached
hereto) to the Custody Agreement.

         In connection therewith, the Custodian has examined each Mortgage File
to confirm that:

                                      D-1
<PAGE>


         (vi)      no Note, on the face or the reverse side(s) thereof, contains
evidence, except for the endorsement to the Custodian, of any unsatisfied
claims, liens, security interests, encumbrances or restrictions on transfer;

         (vii)    the Note bears an endorsement that appears to be an original
either in blank or to the Custodian, as set forth substantially as follows
"Without Recourse, pay to the order of Bankers Trust Company , as Custodian or
Trustee";

         (viii)   all documents required to be contained in the Mortgage File
are in its possession;

         (ix)     such documents have been reviewed by it and appear to relate
to such Mortgage Loan and are not torn or mutilated; and

         (x)      based on its examination and only as to the foregoing
documents, the mortgage information set forth on the Mortgage Loan Schedule
accurately reflects information set forth in the Mortgage File and each balance
listed as the "Original Balance" on Schedule I to the Custody Agreement is
identical to the original principal amount of the corresponding Note (or, if
applicable, the amount set forth in a lost note affidavit).

         The Custodian further certifies that the Custodian's review of each
Mortgage File included each of the procedures set forth in Section 2.3(a) of the
Standard Terms.

         The Custodian has not (1) inspected, reviewed or examined any such
documents, instruments, securities or other papers to determine that they or the
signatures thereon are genuine, enforceable, or appropriate for the represented
purpose, any such documents, instruments, securities or other papers have
actually been recorded or that any document that appears to be an original is in
fact an original, or (2) determined whether any Mortgage File should include any
surety or guaranty, Note Assumption Rider, buydown agreement, assumption
agreement, modification agreement, written assurance or substitution agreement.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Custody Agreement.

                                       BANKERS TRUST COMPANY OF CALIFORNIA,
                                         N.A., as Custodian

                                       By:
                                           -------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



                                      D-2
<PAGE>


                                    EXHIBIT E

                              U.S. PERSON AFFIDAVIT
                PURSUANT TO SECTIONS 860D(a)(6)(A) and 860E(e)(4)
                OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED

Re: Saxon Asset Securities Company
Series 2001-3 Trust (the "Trust")
Mortgage Loan Asset Backed Certificates, Class R

STATE OF NORTH CAROLINA
                                            ss:
CITY OF CHARLOTTE

   Under penalties of perjury, I, the undersigned, declare that to the best of
my knowledge and belief, the following representations are true, correct and
complete:

1.       I am a duly authorized officer of FIRST UNION NATIONAL BANK, a national
banking association (the "Transferee") and on behalf of which I have the
authority to make this affidavit.

2.       The Transferee is acquiring all or a portion of the Class R
Certificates (the "Residual Certificates"), which represent a residual interest
in one or more real estate mortgage investment conduits (each, a "REMIC") for
which elections are to be made under Section 860D of the Internal Revenue Code
of 1986, as amended (the "Code").

3.       The Transferee either is (i) a citizen or resident of the United
States, (ii) a domestic partnership or corporation, (iii) an estate or trust
that is subject to United States federal income tax regardless of the source of
its income, or (iv) a foreign person who would be subject to United States
income taxation on a net basis on income derived from the Residual Certificates
(a "U.S. Person").

4.       The Transferee is not a "Disqualified Organization" (as defined below),
and the Transferee is not acquiring a Residual Certificate for the account of,
or as agent or nominee of, or with a view to the transfer of direct or indirect
record or beneficial ownership to, a Disqualified Organization. For the purposes
hereof, a Disqualified Organization is any of the following: (i) the United
States, any state or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing; (ii) any organization (other than a farmer's cooperative as defined
in section 521 of the Code) that is exempt from federal income taxation
(including taxation under the unrelated business taxable income provisions of
the Code); (iii) any rural telephone or electrical service cooperative described
in section 1381(a)(2)(C) of the Code; or (iv) any other entity so designated by
Treasury rulings or regulations promulgated or otherwise in effect as of the
date hereof. In addition, a corporation will not be treated as an
instrumentality of the United States or of any state or political subdivision
thereof if all its activities are subject to tax and, with the exception of the
Federal Home Loan Mortgage Corporation, a majority of its board of directors is
not selected by such governmental unit.

                                      E-1
<PAGE>

5.       The Transferee agrees to consent to any amendment of the Trust
Agreement that shall be deemed necessary by Saxon (upon the advice of counsel to
Saxon) to constitute a reasonable arrangement to ensure that no interest in a
Residual Certificate will be owned directly or indirectly by a Disqualified
Organization.

6.       The Transferee acknowledges that Section 860E(e) of the Code would
impose a substantial tax on the transferor or, in certain circumstances, on an
agent for the Transferee, with respect to any transfer of any interest in any
Residual Certificate to a Disqualified Organization.

   Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement, dated as of
September 1, 2001, by and among Saxon Asset Securities Company, the Master
Servicer and the Trustee.

   IN WI1NESS WHEREOF, the undersigned has caused this instrument to be executed
by its duly authorized representative as of the [  ] day of October, 2001.
                                                 --

                           FIRST UNION NATIONAL BANK, a national banking
                           association

                           By:
                               -----------------------------

                           Name:
                                ----------------------------

                           Title:
                                 ---------------------------

   Personally appeared before me [                   ], known or proved to me
                                  -------------------
to be the same person who executed the foregoing instrument and to be a
[                 ] of the Transferee, and acknowledged to me that he or she
 ----------------
executed the same as his or her free act and deed and as the free act and deed
of the Transferee.

   Subscribed and sworn before me this [  ] day of October, 2001.
                                        --

                                  Notary Public

         My commission expires the [    ] day of [        ], 200[  ].
                                    ----          --------       --

                                      E-2
<PAGE>


                                    EXHIBIT F

                         FORM OF TRANSFEROR CERTIFICATE

                                                                          [date]


Saxon Asset Securities Company
4880 Cox Road
Glen Allen, Virginia 23060

Bankers Trust Company of California, N.A.
1761 E. St. Andrews Place
Santa Ana, California 92705


                 Re:      Saxon Asset Securities Trust 2001-3,
                          Mortgage Loan Pass-Through Certificates, Series 2001-3
                          ------------------------------------------------------


Ladies and Gentlemen:

         In connection with our disposition of the above Certificates we certify
that (a) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action which would result in, a violation of Section 5 of the Act, (b)
to the extent we are disposing of a Class     Certificate, we have no knowledge
                                         ----
the Transferee is not a Permitted Transferee and (c) no purpose of the proposed
disposition of a Class     Certificate is to impede the assessment or collection
                       ---
of tax.

                                                     Very truly yours,


                                                     [                    ]
                                                      -------------------

                                                     By:
                                                        -----------------------
                                      F-1
<PAGE>

                                    EXHIBIT G

                    FORM OF INVESTMENT LETTER [NON-RULE 144A]

                                                                          [date]


Saxon Asset Securities Company
4880 Cox Road
Glen Allen, Virginia 23060

Bankers Trust Company of California, N.A.
1761 E. St. Andrew Place
Santa Ana, California 92705


                 Re:      Saxon Asset Securities Trust 2001-3,
                          Mortgage Loan Pass-Through Certificates, Series 2001-3
                          ------------------------------------------------------


Ladies and Gentlemen:

                  In connection with our acquisition of the above-captioned
Certificates, we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a transaction that
is exempt from the registration requirements of the Act and any such laws, (b)
we are an "accredited investor", as defined in Regulation D under the Act, and
have such knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of investments in the Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan that is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, nor are we acting on behalf of any such plan, (e) we are acquiring the
Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all
times to sell or otherwise dispose of the Certificates in accordance with clause
(g) below), (f) we have not offered or sold any Certificates to, or solicited
offers to buy any Certificates from, any person, or otherwise approached or
negotiated with any person with respect thereto, or taken any other action which
would result in a violation of Section 5 of the Act, and (g) we will not sell,
transfer or otherwise dispose of any Certificates unless (1) such sale, transfer
or other disposition is made pursuant to an effective registration statement
under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this Certificate that such sale, transfer or other disposition
may be made

                                      G-1

<PAGE>

pursuant to an exemption from the Act, (2) the purchaser or transferee of such
Certificate has executed and delivered to you a certificate to substantially the
same effect as this certificate, and (3) the purchaser or transferee has
otherwise complied with any conditions for transfer set forth in the Pooling and
Servicing Agreement.

                                       Very truly yours,

                                       [NAME OF TRANSFEREE]

                                       By:
                                          --------------------------------------
                                             Authorized Officer




                                      G-2
<PAGE>

                                    EXHIBIT H


                  FORM OF RULE 144A AGREEMENT-QIB CERTIFICATION
                         SAXON ASSET SECURITIES COMPANY
         MORTGAGE LOAN ASSET BACKED CERTIFICATES, SERIES 2001-3, CLASS _



                                October   , 2001
                                       --


Bankers Trust Company, as Trustee
1761 East St. Andrew Place
Santa Ana, California 92705
Attention:  Barbara Campell

Bankers Trust Company, as Certificate Registrar
1761 East St. Andrew Place
Santa Ana, California 92705
Attention:  Barbara Campell

Saxon Mortgage, Inc., as Master Servicer
4880 Cox Road
Glen Allen, Virginia 23060
Attention:  Ernie Bretana

Saxon Asset Securities Company, as Depositor
4880 Cox Road
Glen Allen, Virginia 23060
Attention:  Ernie Bretana

Ladies and Gentlemen:

         In connection with the purchase on the date hereof of the captioned
Certificates (the "Purchased Certificates"), the undersigned (the "Transferee")
hereby certifies and covenants to the transferor, Saxon, the Master Servicer,
the Certificate Registrar, the Trustee and the Trust as follows:

1.       The Transferee is a "qualified institutional buyer" as that term is
         defined in Rule 144A ("Rule 144A") promulgated under the Securities Act
         of 1933, as amended (the "Securities Act") and has completed the form
         of certification to that effect attached hereto as Annex A. The
         Transferee is aware that the sale to it is being made in reliance on
         Rule 144A.

2.       The Transferee understands that the Purchased Certificates have not
         been registered under the Securities Act or registered or qualified
         under any state securities laws and that no transfer may be made unless
         the Purchased Certificates are registered under the Securities Act and
         under applicable state law or unless an exemption from such

                                      H-1
<PAGE>


         registration is available. The Transferee further understands that
         neither Saxon, the Master Servicer, the Certificate Registrar, the
         Paying Agent, the Calculation Agent, the Trustee nor the Trust is under
         any obligation to register the Purchased Certificates or make an
         exemption from such registration available.

3.       The Transferee is acquiring the Purchased Certificates for its own
         account or for the account of a "qualified institutional buyer," and
         understands that such Purchased Certificates may be resold, pledged or
         transferred only (a) to a person reasonably believed to be such a
         qualified institutional buyer that purchases for its own account or for
         the account of a qualified institutional buyer to whom notice is given
         that the resale, pledge or transfer is being made in reliance on Rule
         144A, or (b) pursuant to another exemption from registration under the
         Securities Act and under applicable state securities laws. In addition,
         such transfer may be subject to additional restrictions, as set forth
         in Section 5.2 of the Pooling and Servicing Agreement.

4.       The Transferee has been furnished with all information that it
         requested regarding (a) the Purchased Certificates and distributions
         thereon and (b) the Pooling and Servicing Agreement referred to below.

5.       If applicable, the Transferee has complied or will comply in all
         material respects with applicable regulatory guidelines relating to the
         ownership of mortgage derivative products.

         All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of September 1, 2001, by and among Saxon Asset Securities Company, the
Master Servicer, the Certificate Registrar and the Trustee, pursuant to which
the Purchased Certificates were issued.

         IN WITNESS WHEREOF, the undersigned has caused this Rule 144A
Agreement--QIB Certification to be executed by a duly authorized representative
this [  ] day of October, 2001.
      --
                                       FIRST UNION NATIONAL BANK,
                                       a national banking association


                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------


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<PAGE>


                                    EXHIBIT I


                  REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT


                                                             ------------
                                                                 Date


[Addressed to Trustee
or, if applicable, custodian]



         In connection with the administration of the mortgages held by you as
Trustee under a certain Pooling and Servicing Agreement dated as of September 1,
2001 among Saxon Asset Securities Company, as Depositor, Saxon Mortgage, Inc.,
as Master Servicer, Meritech Mortgage Services, Inc., as Servicer, and you, as
Trustee (the "Pooling and Servicing Agreement"), the undersigned Master Servicer
hereby requests a release of the Mortgage File held by you as Trustee with
respect to the following described Mortgage Loan for the reason indicated below.

         Mortgagor's Name:

         Address:

         Loan No.:

         Reason for requesting file:

         1.       Mortgage Loan paid in full. (The Master Servicer hereby
certifies that all amounts received in connection with the loan have been or
will be credited to the Collection Account to the Pooling and Servicing
Agreement.)

         2.       The Mortgage Loan is being foreclosed.

         3.       Mortgage Loan substituted. (The Master Servicer hereby
certifies that a Qualifying Substitute Mortgage Loan has been assigned and
delivered to you along with the related Mortgage File pursuant to the Pooling
and Servicing Agreement.)

         4.       Mortgage Loan repurchased. (The Master Servicer hereby
certifies that the Purchase Price has been credited to the Collection Account
pursuant to the Pooling and Servicing Agreement.)

         5.       Other. (Describe)

         6.       California Mortgage Loan expected to be paid in full.

         The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Pooling and
Servicing Agreement and will


                                      I-1
<PAGE>

be returned to you within ten (10) days of our receipt of the Mortgage File,
except if the Mortgage Loan has been paid in full, or repurchased or substituted
for a Qualifying Substitute Mortgage Loan (in which case the Mortgage File will
be retained by us permanently) and except if the Mortgage Loan is being
foreclosed or is a California Mortgage Loan specified in #6 above (in which case
the Mortgage File will be returned when no longer required by us for such
purpose).

         Capitalized terms used herein shall have the meanings ascribed to them
in the Pooling and Servicing Agreement.

                                          -------------------------------------
                                                 [Name of Master Servicer]



                                       By:
                                          -------------------------------------
                                          Name:
                                          Title: Servicing Officer




                                      I-2

<PAGE>

                                    EXHIBIT J


                  REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT

                                                                -------------
                                                                    Date


[Addressed to Trustee
or, if applicable, custodian]



         In connection with the administration of the mortgages held by you as
Trustee under a certain Pooling and Servicing Agreement dated as of September 1,
2001 among Saxon Asset Securities Company, as Depositor, Saxon Mortgage, Inc.,
as Master Servicer, Meritech Mortgage Services, Inc., as Servicer, and you, as
Trustee (the "Pooling and Servicing Agreement"), the undersigned Master Servicer
hereby requests a release of the Mortgage File held by you as Trustee with
respect to the following described Mortgage Loan for the reason indicated below.

         Mortgagor's Name:

         Address:

         Loan No.:

         Reason for requesting file:

         7.       Mortgage Loan paid in full. (The Master Servicer hereby
certifies that all amounts received in connection with the loan have been or
will be credited to the Collection Account to the Pooling and Servicing
Agreement.)

         8.       The Mortgage Loan is being foreclosed.

         9.       Mortgage Loan substituted. (The Master Servicer hereby
certifies that a Qualifying Substitute Mortgage Loan has been assigned and
delivered to you along with the related Mortgage File pursuant to the Pooling
and Servicing Agreement.)

         10.      Mortgage Loan repurchased. (The Master Servicer hereby
certifies that the Purchase Price has been credited to the Collection Account
pursuant to the Pooling and Servicing Agreement.)

         11.      Other. (Describe)

         12.      California Mortgage Loan expected to be paid in full.

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<PAGE>

         The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Pooling and
Servicing Agreement and will be returned to you within ten (10) days of our
receipt of the Mortgage File, except if the Mortgage Loan has been paid in full,
or repurchased or substituted for a Qualifying Substitute Mortgage Loan (in
which case the Mortgage File will be retained by us permanently) and except if
the Mortgage Loan is being foreclosed or is a California Mortgage Loan specified
in #6 above (in which case the Mortgage File will be returned when no longer
required by us for such purpose).

         Capitalized terms used herein shall have the meanings ascribed to them
in the Pooling and Servicing Agreement.

                                            ------------------------------------
                                                 [Name of Master Servicer]



                                         By:
                                            ------------------------------------
                                            Name:
                                            Title: Servicing Officer


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<PAGE>

                                    EXHIBIT K

                       FORM OF REMITTANCE AGENCY AGREEMENT

         This Remittance Agency Agreement dated as of October   , 2001, is made
                                                             --
by and among, Saxon Asset Securities Company, as [[buyer]] (the "Counterparty"),
Saxon Asset Securities Company ("SASCO") and Bankers Trust Company (the
"Remittance Agent").

         The Counterparty hereby appoints the Remittance Agent, and the
Remittance Agent hereby accepts its appointment as agent of the Counterparty in
connection with the receipt of $[[ ]] (the "Remitted Amount") in connection with
the sale of mortgage-backed securities by Saxon Asset Securities Trust, Series
2001-3 in immediately available funds on the date hereof. The Counterparty
delivers herewith to the Remittance Agent, in escrow pending wire transfer of
the Remitted Amount as provided herein, a security release certification (the
"Security Release Certification") referencing the above-mentioned Saxon Asset
Securities Trust, Series 2001-3. Upon receipt by the Remittance Agent of the
Remitted Amount on the Counterparty's behalf, the Counterparty hereby authorizes
the Remittance Agent to release the Counterparty's right, title, interest or
claim of any kind with respect to the Mortgage Loans and the related collateral
and assets identified in the Security Release Certification by delivering the
Security Release Certification to SASCO and such other parties as SASCO may
designate.

         The Remittance Agent shall wire the Remitted Amount s promptly as
reasonably possible pursuant to the Counterparty's wiring instructions set forth
below:

                  [[                          ]]
                  Bank:  [[                   ]]
                  ABA:   [[                   ]]
                  Acct:  [[                   ]]
                  Re:  Saxon Mortgage, Inc.
                  Attn:  [[                   ]]

         In no event shall the Remitted Amount be remitted to SASCO, Saxon
Mortgage, Inc. or any party other than the Counterparty.

         The parties agree that if for reasons not arising from the Remittance
Agent's negligence or willful misconduct, the Remittance Agent is unable to wire
the Remitted Amount, then the Remittance Agent shall incur no liability for any
reasonable delay; provided that the Remittance Agent shall make commercially
reasonable efforts to invest such funds on the Counterparty's behalf, and shall
remit the Remitted Amount together with any investment earnings thereof as soon
as possible thereafter, and in any event, within 1 Business Day.

         In consideration of the execution and delivery of this Remittance
Agency Agreement by the Counterparty, SASCO hereby represents and warrants to
the Counterparty that the Remitted Amount includes the total amount to which the
Counterparty is entitled to receive pursuant to the terms of any and all
existing

                                      K-1
<PAGE>

agreements between the Counterparty and SASCO prior to delivering the
release set forth in the Security Release Certification (such total amount, the
"Required Amount"). In the event that upon final audit by the Counterparty the
Remitted Amount is determined to be less than the Required Amount, SASCO shall
pay the difference between the Remitted Amount and the Required Amount to the
Counterparty in immediately available funds within two Business Days following
notice thereof.

         IN WITNESS WHEREOF, the Remittance Agent, the Counterparty and SASCO
have caused this Remittance Agency Agreement to be executed and delivered by its
duly authorized officer as of the date first set forth above.

                                                 BANKERS TRUST COMPANY,
                                                     as Remittance Agent

                                                 By
                                                   -----------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------
                                                 Telephone:
                                                           ---------------------


                                                 [[                           ]]
                                                     as Counterparty

                                                 By
                                                   -----------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------
                                                 Telephone:
                                                           ---------------------



                                                 SAXON ASSET SECURITIES COMPANY

                                                 By
                                                   -----------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------
                                                 Telephone:
                                                           ---------------------


                                       K-2
<PAGE>


                                    EXHIBIT L

                     FORM OF SECURITY RELEASE CERTIFICATION

         Definitions. As used in this Security Release Certification, the term
"Remittance Agency Agreement" shall mean the Remittance Agency Agreement dated
as of [[ ]], 2001 among the undersigned financial institution (the
"Counterparty"), Saxon Asset Securities Company ("SASCO"), and Bankers Trust
Company (the "Remittance Agent") relating to Saxon Asset Securities Trust
2001-3. The term "Pooling and Servicing Agreement" shall mean the Pooling and
Servicing Agreement among Saxon Asset Securities Company ("Saxon"), Saxon
Mortgage, Inc. ("SMI") as Master Servicer, Meritech Mortgage Services, Inc.
("Meritech"), as Servicer, and the Trustee named therein relating to the said
Saxon Asset Securities Trust.

         Release. Simultaneously with receipt by wire transfer of the Remitted
Amount as defined in the Remittance Agency Agreement, the Counterparty hereby,
without further act, releases any and all right, title, interest, or security
interest in the Mortgage Loans identified in the Pooling and Servicing
Agreement, together with all of the Counterparty's rights and interests in and
to the related loan files, rights, assets of any kind, and proceeds thereof,
related to the Mortgage Loans. Until payment for such Mortgage Loans is received
by the Remittance Agent, the Counterparty's aforesaid ownership interest therein
will remain in full force and effect.

         The Counterparty agrees that upon receipt by the Remittance Agent of
the Remitted Amount it shall execute and deliver to SMI and such other parties
as SMI may designate such further release documents, and file with the
appropriate filing officials, as required, any and all documents appropriate to
further evidence such release and to reflect such release in appropriate public
records.

         IN WITNESS WHEREOF, the Counterparty has caused this Security Release
Certification to be executed and delivered by its duly authorized officer as of
the date first set forth above.

                                                 [[                           ]]

                                                 By
                                                   -----------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------
                                                 Telephone:
                                                           ---------------------


                                      L-1