EXECUTION COPY

                            AMENDMENT NUMBER THREE TO
                     AMENDED AND RESTATED SECURITY AGREEMENT

         This Amendment, dated as of January 8, 2001 (this "Amendment),  is made
by  UNION  ACCEPTANCE  FUNDING  CORPORATION,  as  Seller  (the  "Seller"),  UAFC
CORPORATION,   as  debtor  (the   "Debtor"),   UNION   ACCEPTANCE   CORPORATION,
individually ("UAC") and as collection agent (in such capacity,  the "Collection
Agent"),   ENTERPRISE  FUNDING  CORPORATION  (the  "Company"),   MBIA  INSURANCE
CORPORATION,  as financial guaranty insurer (the "Insurer") and BANK OF AMERICA,
N.A.  individually  ("Bank of America") and as collateral agent for the Company,
the Bank Investors,  and the Insurer (in such capacity,  the "Collateral Agent")
pursuant to Section 9.2 of the Security  Agreement (as defined  below) among the
Seller, the Debtor, UAC, the Collection Agent, the Company, the Insurer, Bank of
America and the Collateral Agent.

         WHEREAS,  the Seller,  the  Debtor,  UAC,  the  Collection  Agent,  the
Company,  the Insurer,  Bank of America and the Collateral  Agent are parties to
the Amended and  Restated  Security  Agreement  dated as of May 12, 2000 (as the
same may be amended,  supplemented or otherwise  modified from time to time, the
"Security Agreement");

         WHEREAS,  the parties  have agreed to amend the  Security  Agreement as
hereinafter provided;

         NOW THEREFORE the parties hereto agree as follows:

         Capitalized  terms used and not otherwise defined herein shall have the
meanings assigned to them in the Security Agreement.

1.       Amendment.

            (i) The definition of "Noteholder's Percentage" set forth in Section
1.1 of the Security  Agreement  shall be amended,  solely for the  Determination
Date  occurring on January 8, 2001, by deleting it in its entirety and restating
it as follows:

                 "The Noteholder's Percentage shall mean 98.25%."

2.       Full  Force  and Effect.  Except  as  specifically  set  forth  herein,
the Security Agreement is and shall continue to be, in full force and effect and
are hereby in all respects ratified and confirmed.

3.       Counterparts.   This  Amendment  may  be  executed  in  any  number  of
counterparts   and  by  any  combination  of  the  parties  hereto  in  separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same Amendment.

4.       Effectiveness.  This Amendment  shall become  effective as of the  date
first written above when counterparts of this Amendment shall have been executed
by each of the Seller, the Debtor,  UAC, the Collection Agent, the Company,  the
Insurer, Bank of America and the Collateral Agent.


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         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.

                                       ENTERPRISE FUNDING CORPORATION,
                                         as Company


                                       By: /s/ Kevin P. Burns
                                           ------------------------------
                                           Name:   Kevin P. Burns
                                           Title:  Vice President



                                       UAFC CORPORATION, as Debtor



                                       By: /s/ Leeanne W. Graziani
                                           ------------------------------
                                           Name:   Leeanne W. Graziani
                                           Title:  President



                                       UNION ACCEPTANCE FUNDING
                                       CORPORATION, as Seller


                                       By: /s/ Rick A. Brown
                                           ------------------------------
                                           Name:   Rick A. Brown
                                           Title:  Vice President



                                       UNION ACCEPTANCE CORPORATION,
                                         individually and as Collection Agent



                                       By: /s/ Melanie S. Otto
                                           ------------------------------
                                           Name:   Melanie S. Otto
                                           Title:  Vice President





                                       BANK OF AMERICA, N.A.,
                                         individually and as Collateral Agent


                                       By: /s/ Christopher G. Young
                                           ------------------------------
                                           Name:   Christopher G. Young
                                           Title:  Vice President



                                       MBIA INSURANCE CORPORATION, as
                                       as Insurer


                                       By: /s/ Theresa Murray
                                           ------------------------------
                                           Name:   Theresa Murray
                                           Title:  Director