ACE SECURITIES CORP.
                                    Depositor


                            LITTON LOAN SERVICING LP
                                    Servicer


                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
                  Master Servicer and Securities Administrator



                               JPMORGAN CHASE BANK
                                     Trustee







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

                         POOLING AND SERVICING AGREEMENT

                             Dated as of May 1, 2003

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




          ACE Securities Corp. Home Equity Loan Trust, Series 2003-FM1
                     Asset Backed Pass-Through Certificates




<PAGE>




<TABLE>
<CAPTION>

                                                     ARTICLE I

                                                    DEFINITIONS
<S>                                                                                                             <C>
SECTION 1.01.     Defined Terms.................................................................................-5-
                           Accepted Master Servicing Practices..................................................-5-
                           Accepted Servicing Practices.........................................................-5-
                           Account  ............................................................................-5-
                           Accrued Certificate Interest.........................................................-5-
                           Adjustable Rate Mortgage Loan........................................................-6-
                           Adjustment Date......................................................................-6-
                           Administration Fees..................................................................-6-
                           Administration Fee Rate..............................................................-6-
                           Advance Facility.....................................................................-6-
                           Advance Facility Notice..............................................................-6-
                           Advance Financing Person.............................................................-6-
                           Advance Reimbursement Amounts........................................................-6-
                           Affiliate............................................................................-6-
                           Aggregate Loss Severity Percentage...................................................-6-
                           Agreement............................................................................-6-
                           Amounts Held for Future Distribution.................................................-6-
                           Assignment...........................................................................-7-
                           Available Distribution Amount........................................................-7-
                           Balloon Mortgage Loan................................................................-7-
                           Balloon Payment......................................................................-7-
                           Bankruptcy Code......................................................................-7-
                           Book-Entry Certificate...............................................................-8-
                           Book-Entry Custodian.................................................................-8-
                           Business Day.........................................................................-8-
                           Cap Contracts........................................................................-8-
                           Cash-Out Refinancing.................................................................-8-
                           Certificate..........................................................................-8-
                           Certificate Factor...................................................................-8-
                           Certificate Margin...................................................................-8-
                           Certificateholder" or "Holder........................................................-9-
                           Certificate Owner...................................................................-10-
                           Certificate Principal Balance.......................................................-10-
                           Certificate Register................................................................-10-
                           Class    ...........................................................................-10-
                           Class A Certificate.................................................................-10-
                           Class A Principal Distribution Amount...............................................-10-
                           Class A-1 Allocation Percentage.....................................................-10-
                           Class A-1 Certificate...............................................................-10-
                           Class A-1 Principal Distribution Amount.............................................-10-
                           Class A-2 Allocation Percentage.....................................................-11-


                                                       -ii-

<PAGE>



                           Class A-2 Certificate...............................................................-11-
                           Class A-2 Principal Distribution Amount.............................................-11-
                           Class A-IO Certificate..............................................................-11-
                           Class A-IO Pass-Through Rate........................................................-11-
                           Class CE Certificate................................................................-11-
                           Class M Certificates................................................................-12-
                           Class M-1 Certificate...............................................................-12-
                           Class M-1 Principal Distribution Amount.............................................-12-
                           Class M-2 Certificate...............................................................-12-
                           Class M-2 Principal Distribution Amount.............................................-12-
                           Class M-3 Certificate...............................................................-12-
                           Class M-3 Principal Distribution Amount.............................................-13-
                           Class M-4 Certificate...............................................................-13-
                           Class M-4 Principal Distribution Amount.............................................-13-
                           Class M-5 Certificate...............................................................-13-
                           Class M-5 Principal Distribution Amount.............................................-14-
                           Class M-6 Certificate...............................................................-14-
                           Class M-6 Principal Distribution Amount.............................................-14-
                           Class P Certificate.................................................................-15-
                           Class R Certificates................................................................-15-
                           Class R-I Interest..................................................................-15-
                           Class R-II Interest.................................................................-15-
                           Class R-III Interest................................................................-15-
                           Closing Date........................................................................-15-
                           Code     ...........................................................................-15-
                           Commission..........................................................................-15-
                           Corporate Trust Office..............................................................-15-
                           Corresponding Certificate...........................................................-15-
                           Credit Enhancement Percentage.......................................................-16-
                           Custodial Agreement.................................................................-16-
                           Custodian...........................................................................-16-
                           Cut-off Date........................................................................-16-
                           Debt Service Reduction..............................................................-16-
                           Deficient Valuation.................................................................-16-
                           Definitive Certificates.............................................................-16-
                           Deleted Mortgage Loan...............................................................-16-
                           Delinquency Percentage..............................................................-16-
                           Depositor...........................................................................-16-
                           Depository..........................................................................-17-
                           Depository Institution..............................................................-17-
                           Depository Participant..............................................................-17-
                           Determination Date..................................................................-17-
                           Directly Operate....................................................................-17-
                           Disqualified Organization...........................................................-17-
                           Distribution Account................................................................-18-
                           Distribution Date...................................................................-18-


                                                       -iii-

<PAGE>



                           Due Date ...........................................................................-18-
                           Due Period..........................................................................-18-
                           Eligible Account....................................................................-18-
                           ERISA    ...........................................................................-18-
                           Estate in Real Property.............................................................-18-
                           Excess Liquidation Proceeds.........................................................-18-
                           Expense Adjusted Mortgage Rate......................................................-18-
                           Extraordinary Trust Fund Expense....................................................-19-
                           Extra Principal Distribution Amount.................................................-19-
                           Fannie Mae..........................................................................-19-
                           FDIC     ...........................................................................-19-
                           Final Recovery Determination........................................................-19-
                           Fitch    ...........................................................................-19-
                           Freddie Mac.........................................................................-19-
                           Gross Margin........................................................................-19-
                           Group I Interest Remittance Amount..................................................-19-
                           Group I Mortgage Loans..............................................................-19-
                           Group I Principal Distribution Amount...............................................-19-
                           Group I Principal Remittance Amount.................................................-20-
                           Group II  Interest Remittance Amount................................................-20-
                           Group II Mortgage Loans.............................................................-20-
                           Group II Principal Distribution Amount..............................................-20-
                           Group II Principal Remittance Amount................................................-20-
                           Independent.........................................................................-20-
                           Independent Contractor..............................................................-21-
                           Index    ...........................................................................-21-
                           Insurance Proceeds..................................................................-21-
                           Interest Accrual Period.............................................................-21-
                           Interest Carry Forward Amount.......................................................-22-
                           Interest Determination Date.........................................................-22-
                           Interest Distribution Amount........................................................-22-
                           Interest Remittance Amount..........................................................-22-
                           Late Collections....................................................................-22-
                           Liquidation Event...................................................................-22-
                           Liquidation Proceeds................................................................-22-
                           Loan-to-Value Ratio.................................................................-23-
                           London Business Day.................................................................-23-
                           Loss Severity Percentage............................................................-23-
                           Marker Rate.........................................................................-23-
                           Master Servicer.....................................................................-23-
                           Master Servicer Event of Default....................................................-24-
                           Master Servicer Fee Rate............................................................-24-
                           Master Servicing Fee................................................................-24-
                           Maximum II-LTZZ Uncertificated Interest Deferral Amount.............................-24-
                           Maximum Mortgage Rate...............................................................-24-
                           MERS     ...........................................................................-24-


                                                       -iv-

<PAGE>



                           MERS(R)System........................................................................-24-
                           Mezzanine Certificate...............................................................-24-
                           MIN      ...........................................................................-24-
                           Minimum Mortgage Rate...............................................................-24-
                           MOM Loan ...........................................................................-25-
                           Monthly Payment.....................................................................-25-
                           Moody's  ...........................................................................-25-
                           Mortgage ...........................................................................-25-
                           Mortgage File.......................................................................-25-
                           Mortgage Loan.......................................................................-25-
                           Mortgage Loan Documents.............................................................-25-
                           Mortgage Loan Purchase Agreement....................................................-25-
                           Mortgage Loan Schedule..............................................................-25-
                           Mortgage Note.......................................................................-27-
                           Mortgage Rate.......................................................................-27-
                           Mortgaged Property..................................................................-28-
                           Mortgagor...........................................................................-28-
                           Net Monthly Excess Cashflow.........................................................-28-
                           Net Mortgage Rate...................................................................-28-
                           Net WAC Pass-Through Rate...........................................................-28-
                           Net WAC Rate Carryover Amount.......................................................-30-
                           New Lease...........................................................................-30-
                           Nonrecoverable P&I Advance..........................................................-30-
                           Nonrecoverable Servicing Advance....................................................-30-
                           Non-United States Person............................................................-30-
                           Notional Amount.....................................................................-30-
                           Offered Certificates................................................................-31-
                           Officers' Certificate...............................................................-31-
                           One-Month LIBOR.....................................................................-31-
                           One-Month LIBOR Pass-Through Rate...................................................-31-
                           Opinion of Counsel..................................................................-32-
                           Optional Termination Date...........................................................-32-
                           Originator..........................................................................-32-
                           Overcollateralization Amount........................................................-32-
                           Overcollateralization Increase Amount...............................................-33-
                           Overcollateralization Reduction Amount..............................................-33-
                           Ownership Interest..................................................................-33-
                           P&I Advance.........................................................................-33-
                           Pass-Through Rate...................................................................-33-
                           Percentage Interest.................................................................-34-
                           Periodic Rate Cap...................................................................-35-
                           Permitted Investments...............................................................-35-
                           Permitted Transferee................................................................-36-
                           Person   ...........................................................................-36-
                           Plan     ...........................................................................-36-
                           Prepayment Assumption...............................................................-36-


                                                        -v-

<PAGE>



                           Prepayment Charge...................................................................-36-
                           Prepayment Charge Schedule..........................................................-36-
                           Prepayment Interest Shortfall.......................................................-37-
                           Prepayment Period...................................................................-37-
                           Principal Prepayment................................................................-37-
                           Principal Distribution Amount.......................................................-37-
                           Principal Remittance Amount.........................................................-37-
                           Purchase Price......................................................................-37-
                           Qualified Substitute Mortgage Loan..................................................-38-
                           Rate/Term Refinancing...............................................................-38-
                           Rating Agency or Rating Agencies....................................................-39-
                           Realized Loss.......................................................................-39-
                           Record Date.........................................................................-40-
                           Reference Banks.....................................................................-40-
                           Refinanced Mortgage Loan............................................................-40-
                           Regular Certificate.................................................................-40-
                           Regular Interest....................................................................-40-
                           Relief Act..........................................................................-40-
                           Relief Act Interest Shortfall.......................................................-40-
                           REMIC    ...........................................................................-40-
                           REMIC I  ...........................................................................-41-
                           REMIC I Regular Interest............................................................-41-
                           REMIC I Regular Interest I-LT1......................................................-41-
                           REMIC I Regular Interest I-LT2".....................................................-41-
                           REMIC I Regular Interest I-LTIO-1...................................................-41-
                           REMIC I Regular Interest I-LTIO-2...................................................-42-
                           REMIC I Regular Interest I-LTP......................................................-42-
                           REMIC II ...........................................................................-42-
                           REMIC II Interest Loss Allocation Amount............................................-42-
                           REMIC II Overcollateralization Amount...............................................-42-
                           REMIC II Principal Loss Allocation Amount...........................................-43-
                           REMIC II Regular Interest...........................................................-43-
                           REMIC II Regular Interest II-LTAA...................................................-43-
                           REMIC II Regular Interest II-LTA....................................................-43-
                           REMIC II Regular Interest II-LTA2...................................................-43-
                           REMIC II Regular Interest II-LTIO-1A................................................-44-
                           REMIC II Regular Interest II-LTIO-1B................................................-44-
                           REMIC II Regular Interest II-LTIO-1C................................................-44-
                           REMIC II Regular Interest II-LTIO-2A................................................-44-
                           REMIC II Regular Interest II-LTIO-2B................................................-44-
                           REMIC II Regular Interest II-LTIO-2C................................................-44-
                           REMIC II Regular Interest II-LTM1...................................................-44-
                           REMIC II Regular Interest II-LTM2"..................................................-44-
                           REMIC II Regular Interest II-LTM3...................................................-45-
                           REMIC II Regular Interest II-LTM4...................................................-45-
                           REMIC II Regular Interest II-LTM5...................................................-45-


                                                       -vi-

<PAGE>



                           REMIC II Regular Interest II-LTM6...................................................-45-
                           REMIC II Regular Interest II-LTZZ...................................................-45-
                           REMIC II Regular Interest II-LTP....................................................-45-
                           REMIC II Required Overcollateralization Amount......................................-47-
                           REMIC III...........................................................................-48-
                           REMIC III Certificate...............................................................-48-
                           REMIC III Certificateholder.........................................................-48-
                           REMIC Provisions....................................................................-48-
                           Rents from Real Property............................................................-48-
                           REO Account.........................................................................-48-
                           REO Disposition.....................................................................-48-
                           REO Imputed Interest................................................................-48-
                           REO Principal Amortization..........................................................-48-
                           REO Property........................................................................-49-
                           Required Overcollateralization Amount...............................................-49-
                           Reserve Fund........................................................................-49-
                           Reserve Interest Rate...............................................................-49-
                           Residential Dwelling................................................................-49-
                           Residual Certificate................................................................-49-
                           Residual Interest...................................................................-49-
                           Responsible Officer.................................................................-49-
                           S&P      ...........................................................................-50-
                           Scheduled Principal Balance.........................................................-50-
                           Securities Administrator............................................................-50-
                           Seller   ...........................................................................-50-
                           Senior Interest Distribution Amount.................................................-50-
                           Servicer ...........................................................................-50-
                           Servicer's Assignee.................................................................-50-
                           Servicer Event of Default...........................................................-51-
                           Servicer Prepayment Charge Payment Amount...........................................-51-
                           Servicer Remittance Date............................................................-51-
                           Servicer Report.....................................................................-51-
                           Servicing Advances..................................................................-51-
                           Servicing Fee.......................................................................-51-
                           Servicing Fee Rate..................................................................-51-
                           Servicing Officer...................................................................-51-
                           Servicing Rights Pledgee............................................................-51-
                           Single Certificate..................................................................-51-
                           Startup Day.........................................................................-52-
                           Stated Principal Balance............................................................-52-
                           Stepdown Date.......................................................................-52-
                           Sub-Servicer........................................................................-52-
                           Sub-Servicing Agreement.............................................................-53-
                           Substitution Shortfall Amount.......................................................-53-
                           Tax Returns.........................................................................-53-
                           Telerate Page 3750..................................................................-53-


                                                       -vii-

<PAGE>



                           Termination Price...................................................................-53-
                           Terminator..........................................................................-53-
                           Transfer ...........................................................................-53-
                           Transferee..........................................................................-53-
                           Transferor..........................................................................-53-
                           Trigger Event.......................................................................-53-
                           Trust    ...........................................................................-54-
                           Trust REMIC.........................................................................-54-
                           Trustee  ...........................................................................-54-
                           Trust Fund..........................................................................-54-
                           Uncertificated Balance..............................................................-54-
                           Uncertificated Interest.............................................................-54-
                           Uncertificated Notional Amount......................................................-54-
                           Uncertificated REMIC Regular Interest...............................................-55-
                           Uninsured Cause.....................................................................-55-
                           United States Person................................................................-55-
                           Value    ...........................................................................-55-
                           Voting Rights.......................................................................-56-
                           Wells Fargo.........................................................................-56-
SECTION 1.02.              Allocation of Certain Interest Shortfalls...........................................-56-


                                                    ARTICLE II

                                           CONVEYANCE OF MORTGAGE LOANS;

SECTION 2.01.     Conveyance of the Mortgage Loans.............................................................-58-
SECTION 2.02.     Acceptance of REMIC I by Trustee.............................................................-58-
SECTION 2.03.     Repurchase or Substitution of Mortgage Loans.................................................-59-
SECTION 2.04.     Representations and Warranties of the Master Servicer........................................-61-
SECTION 2.05.     Representations, Warranties and Covenants of the Servicer....................................-63-
SECTION 2.06.     Issuance of the REMIC I Regular Interests and the Class R-I Interest.........................-65-
SECTION 2.07.     Conveyance of the REMIC I Regular Interests; Acceptance of REMIC II by the Trustee...........-65-
SECTION 2.08.     Conveyance of the REMIC II Regular Interests; Acceptance of REMIC III by the Trustee.........-65-
SECTION 2.09.     Issuance of Class R Certificates.............................................................-65-
SECTION 2.10.     Establishment of the Trust...................................................................-66-


                                                    ARTICLE III

                                           ADMINISTRATION AND SERVICING
                                          OF THE MORTGAGE LOANS; ACCOUNTS
SECTION 3.01.     Servicer to Act as Servicer..................................................................-66-


                                                      -viii-

<PAGE>



SECTION 3.02.     Sub-Servicing Agreements Between Servicer and Sub-Servicers..................................-68-
SECTION 3.03.     Successor Sub-Servicers......................................................................-69-
SECTION 3.04.     No Contractual Relationship Between Sub-Servicer, Trustee or the
                  Certificateholders...........................................................................-69-
SECTION 3.05.     Assumption or Termination of Sub-Servicing Agreement by Successor
                  Servicer.....................................................................................-69-
SECTION 3.06.     Collection of Certain Mortgage Loan Payments.................................................-70-
SECTION 3.07.     Collection of Taxes, Assessments and Similar Items; Servicing Accounts
                   ............................................................................................-70-
SECTION 3.08.     Collection Account and Distribution Account..................................................-71-
SECTION 3.09.     Withdrawals from the Collection Account and Distribution Account
                   ............................................................................................-73-
SECTION 3.10.     Investment of Funds in the Investment Accounts...............................................-75-
SECTION 3.11.     Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
                  Coverage.....................................................................................-76-
SECTION 3.12.     Enforcement of Due-on-Sale Clauses; Assumption Agreements....................................-78-
SECTION 3.13.     Realization Upon Defaulted Mortgage Loans....................................................-79-
SECTION 3.14.     Trustee to Cooperate; Release of Mortgage Files..............................................-81-
SECTION 3.15.     Servicing Compensation.......................................................................-82-
SECTION 3.16.     Reports to the Trustee; Collection Account Statements........................................-82-
SECTION 3.17.     Statement as to Compliance...................................................................-82-
SECTION 3.18.     Independent Public Accountants' Servicing Report.............................................-83-
SECTION 3.19      Annual Certification.........................................................................-83-
SECTION 3.20.     Access to Certain Documentation..............................................................-84-
SECTION 3.21.     Title, Management and Disposition of REO Property............................................-84-
SECTION 3.22.     Obligations of the Servicer in Respect of Prepayment Interest Shortfalls;
                  Relief Act Interest Shortfalls...............................................................-87-
SECTION 3.23.     Obligations of the Servicer in Respect of Mortgage Rates and  Monthly
                  Payments.....................................................................................-87-
SECTION 3.24.     Reserve Fund.................................................................................-88-
SECTION 3.25.     Advance Facility.............................................................................-89-
SECTION 3.26.     Obligations of the Servicer in Respect of Mortgage Rates and  Monthly
                  Payments; Servicer Indemnification...........................................................-91-


                                                    ARTICLE IV

                                        ADMINISTRATION AND MASTER SERVICING
                                   OF THE MORTGAGE LOANS BY THE MASTER SERVICER
SECTION 4.01.     Master Servicer..............................................................................-93-
SECTION 4.02.     REMIC-Related Covenants......................................................................-94-
SECTION 4.03.     Monitoring of Servicer.......................................................................-94-
SECTION 4.04.     Fidelity Bond................................................................................-95-
SECTION 4.05.     Power to Act; Procedures.....................................................................-95-
SECTION 4.06.     Due-on-Sale Clauses; Assumption Agreements...................................................-96-
SECTION 4.07.     Reserved.....................................................................................-96-


                                                       -ix-

<PAGE>



SECTION 4.08.     Documents, Records and Funds in Possession of Master Servicer To Be Held
for Trustee....................................................................................................-96-
SECTION 4.09.     Standard Hazard Insurance and Flood Insurance Policies.......................................-97-
SECTION 4.10.     Presentment of Claims and Collection of Proceeds.............................................-97-
SECTION 4.11.     Maintenance of the Primary Mortgage Insurance Policies.......................................-97-
SECTION 4.12.     Trustee to Retain Possession of Certain Insurance Policies and Documents
................................................................................................................-98-
SECTION 4.13.     Realization Upon Defaulted Mortgage Loans....................................................-98-
SECTION 4.14.     Compensation for the Master Servicer.........................................................-98-
SECTION 4.15.     REO Property.................................................................................-98-
SECTION 4.16.     Annual Officer's Certificate as to Compliance................................................-99-
SECTION 4.17.     Annual Independent Accountant's Servicing Report............................................-100-
SECTION 4.18.     UCC.........................................................................................-100-
SECTION 4.19.     Obligation of the Master Servicer in Respect of Prepayment Interest Shortfalls
...............................................................................................................-100-
SECTION 4.20.     Collection Account..........................................................................-100-
SECTION 4.21.     Prepayment Penalty Verification.............................................................-101-


                                                     ARTICLE V

                                          PAYMENTS TO CERTIFICATEHOLDERS
SECTION 5.01.     Distributions...............................................................................-102-
SECTION 5.02.     Statements to Certificateholders............................................................-115-
SECTION 5.04.     Allocation of Realized Losses...............................................................-120-
SECTION 5.05.     Compliance with Withholding Requirements....................................................-122-
SECTION 5.06.     Reports Filed with Securities and Exchange Commission.......................................-123-


                                                    ARTICLE VI

                                                 THE CERTIFICATES
SECTION 6.01.     The Certificates............................................................................-124-
SECTION 6.02.     Registration of Transfer and Exchange of Certificates.......................................-126-
SECTION 6.03.     Mutilated, Destroyed, Lost or Stolen Certificates...........................................-130-
SECTION 6.04.     Persons Deemed Owners.......................................................................-131-
SECTION 6.05.     Certain Available Information...............................................................-131-


                                                    ARTICLE VII

                                THE DEPOSITOR, THE SERVICER AND THE MASTER SERVICER
SECTION 7.01.     Liability of the Depositor, the Servicer and the Master Servicer............................-132-
SECTION 7.02.     Merger or Consolidation of the Depositor, the Servicer or the Master Servicer...............-132-


                                                        -x-

<PAGE>



SECTION 7.03.     Limitation on Liability of the Depositor, the Servicer, the Master Servicer and Others......-132-
SECTION 7.04.     Limitation on Resignation of the Servicer...................................................-133-
SECTION 7.05.     Limitation on Resignation of the Master Servicer............................................-134-
SECTION 7.06.     Assignment of Master Servicing..............................................................-134-


                                                   ARTICLE VIII

                                                      DEFAULT
SECTION 8.01.     Servicer Events of Default..................................................................-136-
SECTION 8.03.     Notification to Certificateholders..........................................................-141-
SECTION 8.04.     Waiver of Servicer Events of Default........................................................-142-


                                                    ARTICLE IX

                              CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR
SECTION 9.01.     Duties of Trustee and Securities Administrator..............................................-143-
SECTION 9.02.     Certain Matters Affecting Trustee and Securities Administrator..............................-144-
SECTION 9.03.     Trustee and Securities Administrator not Liable for Certificates or Mortgage Loans..........-146-
SECTION 9.04.     Trustee and Securities Administrator May Own Certificates...................................-146-
SECTION 9.05.     Fees and Expenses of Trustee and Securities Administrator...................................-147-
SECTION 9.06.     Eligibility Requirements for Trustee and Securities Administrator...........................-147-
SECTION 9.07.     Resignation and Removal of Trustee and Securities Administrator.............................-148-
SECTION 9.08.     Successor Trustee or Securities Administrator...............................................-149-
SECTION 9.09.     Merger or Consolidation of Trustee or Securities Administrator..............................-149-
SECTION 9.10.     Appointment of Co-Trustee or Separate Trustee...............................................-150-
SECTION 9.11.     Appointment of Office or Agency.............................................................-151-
SECTION 9.12.     Representations and Warranties..............................................................-151-
SECTION 10.01.    Termination Upon Repurchase or Liquidation of All Mortgage Loans............................-152-
SECTION 10.02.    Additional Termination Requirements.........................................................-154-


                                                    ARTICLE XI

                                                 REMIC PROVISIONS
SECTION 11.01.             REMIC Administration...............................................................-155-
SECTION 11.02.             Prohibited Transactions and Activities.............................................-157-
SECTION 11.03.             Indemnification....................................................................-158-




                                                       -xi-

<PAGE>



                                                    ARTICLE XII

                                             MISCELLANEOUS PROVISIONS
SECTION 12.01.             Amendment..........................................................................-159-
SECTION 12.02.             Recordation of Agreement; Counterparts.............................................-160-
SECTION 12.03.             Limitation on Rights of Certificateholders.........................................-160-
SECTION 12.04.             Governing Law......................................................................-161-
SECTION 12.05.             Notices............................................................................-161-
SECTION 12.06.             Severability of Provisions.........................................................-162-
SECTION 12.07.             Notice to Rating Agencies..........................................................-162-
SECTION 12.08.             Article and Section References.....................................................-163-
SECTION 12.09.             Grant of Security Interest.........................................................-163-
SECTION 12.10.             Survival of Indemnification........................................................-164-
</TABLE>



                                                       -xii-

<PAGE>



Exhibits
--------

Exhibit A-1       Form of Class A Certificate
Exhibit A-2       Form of Class A-IO Certificate
Exhibit A-3       Form of Class M Certificate
Exhibit A-4       Form of Class CE Certificate
Exhibit A-5       Form of Class P Certificate
Exhibit A-6       Form of Class R Certificate
Exhibit           B-1 Form of Transferor Representation Letter and Form of
                  Transferee Representation Letter in Connection with Transfer
                  of the Class P Certificates, Class CE Certificates and
                  Residual Certificates Pursuant to Rule 144A Under the 1933 Act
Exhibit           B-2 Form of Transferor Representation Letter and Form of
                  Transferee Representation Letter in Connection with Transfer
                  of the Class P Certificates, Class CE Certificates and
                  Residual Certificates Pursuant to Rule 501 (a) Under the 1933
                  Act
Exhibit B-3       Form of Transfer Affidavit and Agreement and Form of
                  Transferor Affidavit in Connection with Transfer of Residual
                  Certificates
Exhibit C         Form of Servicer Certification
Exhibit D         Form of Officer's Certificate with respect to Prepayments

Schedule 1        Mortgage Loan Schedule
Schedule 2        Prepayment Charge Schedule



                                     -xiii-

<PAGE>



                  This Pooling and Servicing Agreement, is dated and effective
as of May 1, 2003, among ACE SECURITIES CORP. as Depositor, LITTON LOAN
SERVICING LP as Servicer, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION as
Master Servicer and Securities Administrator and JPMORGAN CHASE BANK as Trustee.

                             PRELIMINARY STATEMENT:

                  The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest of the Trust Fund created hereunder. The
Trust Fund will consist of a segregated pool of assets comprised of the Mortgage
Loans and certain other related assets subject to this Agreement.

                                     REMIC I
                                     -------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement (other than the Reserve Fund) as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC I". The Class R-I Interest will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions (as defined
herein). The following table irrevocably sets forth the designation, the REMIC I
Remittance Rate, the initial Uncertificated Balance and, solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC I Regular Interests (as defined herein).
None of the REMIC I Regular Interests will be certificated.



<TABLE>
<CAPTION>
                                   REMIC I                    Initial                Latest Possible
       Designation             Remittance Rate        Uncertificated Balance        Maturity Date (1)
       -----------             ---------------        ----------------------        -----------------
<S>                              <C>                  <C>                          <C>
I-LT1                            Variable(2)          $    333,585,477.92          November 25, 2032
I-LTIO-1                         Variable(2)          $     37,065,000.00          November 25, 2032
I-LT2                            Variable(2)          $     75,418,727.94          November 25, 2032
I-LTIO-2                         Variable(2)          $      8,380,000.00          November 25, 2032
I-LTP                            Variable(2)          $            100.00          November 25, 2032
</TABLE>
___________________________

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC I
         Regular Interest.
(2)      Calculated in accordance with the definition of "REMIC I Remittance
         Rate" herein.






                                       -1-

<PAGE>




                                    REMIC II
                                    --------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II". The Class R-II Interest will be the sole class of
"residual interests" in REMIC II for purposes of the REMIC Provisions. The
following table irrevocably sets forth the designation, the REMIC II Remittance
Rate, the initial Uncertificated Balance and, solely for purposes of satisfying
Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible maturity
date" for each of the REMIC II Regular Interests (as defined herein). None of
the REMIC II Regular Interests will be certificated.


<TABLE>
<CAPTION>
                                   REMIC II                   Initial                Latest Possible
       Designation             Remittance Rate        Uncertificated Balance        Maturity Date (1)
       -----------             ---------------        ----------------------        -----------------
<S>                              <C>                  <C>                          <C>
II-LTAA                          Variable(2)             $222,680,110.87            November 25, 2032
II-LTA1                          Variable(2)               $1,491,870.00            November 25, 2032
II-LTA2                          Variable(2)                 $337,290.00            November 25, 2032
II-LTM1                          Variable(2)                 $136,335.00            November 25, 2032
II-LTM2                          Variable(2)                 $130,655.00            November 25, 2032
II-LTM3                          Variable(2)                  $22,720.00            November 25, 2032
II-LTM4                          Variable(2)                  $39,765.00            November 25, 2032
II-LTM5                          Variable(2)                  $45,445.00            November 25, 2032
II-LTM6                          Variable(2)                  $22,720.00            November 25, 2032
II-LTZZ                          Variable(2)               $2,317,692.06            November 25, 2032
II-LTIO-1A                       Variable(2)                         (3)            November 25, 2032
II-LTIO-1B                       Variable(2)                         (3)            November 25, 2032
II-LTIO-1C                       Variable(2)                         (3)            November 25, 2032
II-LTIO-2A                       Variable(2)                         (4)            November 25, 2032
II-LTIO-2B                       Variable(2)                         (4)            November 25, 2032
II-LTIO-2C                       Variable(2)                         (4)            November 25, 2032
II-LTP                           Variable(2)                     $100.00            November 25, 2032
II-LT1SUB                        Variable(2)                   $7,227.66            November 25, 2032
II-LT1GRP                        Variable(2)                  $37,065.06            November 25, 2032
II-LT2SUB                        Variable(2)                   $1,634.07            November 25, 2032
II-LT2GRP                        Variable(2)                   $8,379.87            November 25, 2032
II-LTXX                          Variable(2)             $227,170,296.27            November 25, 2032
</TABLE>
___________________________

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC II
         Regular Interest.


                                       -2-

<PAGE>



(2)      Calculated in accordance with the definition of "REMIC II Remittance
         Rate" herein.
(3)      REMIC II Regular Interests II-LTIO-1A, II-LTIO-1B and II-LTIO-1C will
         not have Initial Uncertificated Balances, but will accrue interest on
         their Uncertificated Notional Amount outstanding from time to time,
         each of which shall equal the Initial Uncertified Balance of REMIC I
         Regular Interest I-LTIO-1.
(4)      REMIC II Regular Interests II-LTIO-2A, II-LTIO-2B and II-LTIO-2C will
         not have Initial Uncertificated Balances, but will accrue interest on
         their Uncertificated Notional Amount outstanding from time to time,
         each of which shall equal the Initial Uncertified Balance of REMIC I
         Regular Interest I-LTIO-2.


                                    REMIC III
                                    ---------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC II Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III." The Class R-III Interest will evidence the sole
class of "residual interests" in REMIC III for purposes of the REMIC Provisions.
The following table irrevocably sets forth the designation, the Pass-Through
Rate, the initial aggregate Certificate Principal Balance and, solely for
purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for the indicated Classes of Certificates.


<TABLE>
<CAPTION>
                                                        Initial Aggregate
                                Pass-Through          Certificate Principal           Latest Possible
        Designation                 Rate                     Balance                 Maturity Date (1)
        -----------                 ----                     -------                 -----------------
<S>                             <C>                   <C>                            <C>
Class A-1                        Variable(2)             $ 298,374,000                November 25, 2032
Class A-2                        Variable(2)             $  67,458,000                November 25, 2032
Class A-IO                       Variable(2)                    N/A(3)                November 25, 2032
Class M-1                        Variable(2)             $  27,267,000                November 25, 2032
Class M-2                        Variable(2)             $  26,131,000                November 25, 2032
Class M-3                        Variable(2)             $   4,544,000                November 25, 2032
Class M-4                        Variable(2)             $   7,953,000                November 25, 2032
Class M-5                        Variable(2)             $   9,089,000                November 25, 2032
Class M-6                        Variable(2)             $   4,544,000                November 25, 2032
Class P                             N/A(4)               $      100.00                November 25, 2032
Class CE                            N/A(5)               $9,089,206.86                November 25, 2032
</TABLE>
_________________

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each Class of
         Certificates.
(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.
(3)      The Class A-IO Certificates do not have a Certificate Principal Balance
         but will receive all amounts distributed to REMIC II Regular Interest
         II-LTIO-1A , REMIC II Regular Interest II-LTIO-1B, REMIC II Regular
         Interest II-LTIO-1C, REMIC II Regular Interest II-LTIO-2A, REMIC II
         Regular Interest II-LTIO-2B and REMIC II Regular Interest II-LTIO-1C.
(4)      The Class P Certificates will not accrue interest.
(5)      The Class CE Certificates will accrue interest at their variable
         Pass-Through Rate on the Notional Amount of the Class CE Certificates
         outstanding from time to time which shall equal the Uncertificated
         Balance of the


                                       -3-

<PAGE>



         REMIC II Regular Interests. The Class CE Certificates will not accrue
         interest on their Certificate Principal Balance.

         As of the Cut-off Date, the Group I Mortgage Loans had an aggregate
Scheduled Principal Balance equal to $370,650,577.92 and the Group II Mortgage
Loans had an aggregate Scheduled Principal Balance equal to $83,798,727.94.

         In consideration of the mutual agreements herein contained, the
Depositor, the Servicer, the Master Servicer, the Securities Administrator and
the Trustee agree as follows:


                                       -4-

<PAGE>



                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.01.             Defined Terms.

                  Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.

                  "Accepted Master Servicing Practices": With respect to any
Mortgage Loan, as applicable, either (x) those customary mortgage servicing
practices of prudent mortgage servicing institutions that master service
mortgage loans of the same type and quality as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, to the extent
applicable to the Master Servicer (except in its capacity as successor to the
Servicer), or (y) as provided in Section 3.01 hereof, but in no event below the
standard set forth in clause (x).

                  "Accepted Servicing Practices": As defined in Section 3.01.

                  "Account": The Collection Account and the Distribution Account
as the context may require.

                  "Accrued Certificate Interest": With respect to any Class A
Certificate, Class A-IO Certificate, Mezzanine Certificate or Class CE
Certificate and each Distribution Date, interest accrued during the related
Interest Accrual Period at the Pass-Through Rate for such Certificate for such
Distribution Date on the Certificate Principal Balance, in the case of the Class
A Certificates and the Mezzanine Certificates, or on the Notional Amount in the
case of the Class A-IO Certificates and the Class CE Certificates, of such
Certificate immediately prior to such Distribution Date. The Class P
Certificates are not entitled to distributions in respect of interest and,
accordingly, will not accrue interest. All distributions of interest on the
Class A Certificates and the Mezzanine Certificates will be calculated on the
basis of a 360-day year and the actual number of days in the applicable Interest
Accrual Period. All distributions of interest on the Class A-IO Certificates and
the Class CE Certificates will be based on a 360-day year consisting of twelve
30-day months. Accrued Certificate Interest with respect to each Distribution
Date, as to any Class A Certificate, Class A-IO Certificate, Mezzanine
Certificate or Class CE Certificate shall be reduced by an amount equal to the
portion allocable to such Certificate pursuant to Section 1.02 hereof, if any,
of the sum of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by payments pursuant to Section 3.22
or Section 4.19 and (b) the aggregate amount of any Relief Act Interest
Shortfall, if any, for such Distribution Date. In addition, Accrued Certificate
Interest with respect to each Distribution Date, as to any Class CE Certificate,
shall be reduced by an amount equal to the portion allocable to such Class CE
Certificate of Realized Losses, if any, pursuant to Section 1.02 and Section
5.04 hereof. Notwithstanding the foregoing, for federal income tax purposes and
under the REMIC Provisions, the Accrued Certificate Interest for the Class A-IO
Certificates and any Distribution Date will be deemed to be 100% of the
Uncertificated Interest for REMIC II Regular Interest II-LTIO-1A , REMIC II
Regular Interest II-LTIO-1B, REMIC II Regular


                                       -5-

<PAGE>



Interest II-LTIO-1C, REMIC II Regular Interest II-LTIO-2A, REMIC II Regular
Interest II-LTIO-2B and REMIC II Regular Interest II-LTIO-1C for such
Distribution Date.

                  "Adjustable Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.

                  "Adjustment Date": With respect to each Adjustable Rate
Mortgage Loan, the first day of the month in which the Mortgage Rate of an
Adjustable Rate Mortgage Loan changes pursuant to the related Mortgage Note. The
first Adjustment Date following the Cut-off Date as to each Adjustable Rate
Mortgage Loan is set forth in the Mortgage Loan Schedule.

                  "Administration Fees": The sum of (i) the Servicing Fee and
(ii) the Master Servicing Fee.

                  "Administration Fee Rate": The sum of (i) the Servicing Fee
Rate and (ii) the Master Servicing Fee Rate.

                  "Advance Facility": As defined in Section 3.25(a).

                  "Advance Facility Notice":  As defined in Section 3.25(b).

                  "Advance Financing Person": As defined in Section 3.25(a).

                  "Advance Reimbursement Amounts": As defined in Section
3.25(b).

                  "Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

                  "Aggregate Loss Severity Percentage": With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Realized Losses incurred on any Mortgage Loans
from the Cut-off Date to the last day of the preceding calendar month and the
denominator of which is the aggregate principal balance of such Mortgage Loans
immediately prior to the liquidation of such Mortgage Loans.

                  "Agreement": This Pooling and Servicing Agreement, including
all exhibits and schedules hereto and all amendments hereof and supplements
hereto.

                  "Amounts Held for Future Distribution": As to any Distribution
Date, the aggregate amount held in the Collection Account at the close of
business on the immediately preceding Determination Date on account of (i) all
Monthly Payments or portions thereof received in respect of the Mortgage Loans
due after the related Due Period and (ii) Principal Prepayments and


                                       -6-

<PAGE>



Liquidation Proceeds received in respect of such Mortgage Loans after the last
day of the related Prepayment Period.

                  "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.

                  "Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account as of the
close of business on the related Servicer Remittance Date, (b) the aggregate of
any amounts deposited in the Distribution Account by the Servicer or the Master
Servicer in respect of Prepayment Interest Shortfalls for such Distribution Date
pursuant to Section 3.22 or Section 4.19, (c) the aggregate of any P&I Advances
for such Distribution Date made by the Servicer pursuant to Section 5.03 and (d)
the aggregate of any P&I Advances made by a successor Servicer (including the
Trustee or the Master Servicer) for such Distribution Date pursuant to Section
8.02, reduced (to not less than zero) by (2) the portion of the amount described
in clause (1)(a) above that represents (i) Amounts Held for Future Distribution,
(ii) Principal Prepayments on the Mortgage Loans received after the related
Prepayment Period (together with any interest payments received with such
Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Depositor, the Servicer, the Trustee, the
Master Servicer, the Securities Administrator or the Custodian pursuant to
Section 3.09 or 9.05 or otherwise payable in respect of Extraordinary Trust Fund
Expenses, (v) amounts deposited in the Collection Account or the Distribution
Account in error, (vi) the amount of any Prepayment Charges collected by the
Servicer and any Servicer Prepayment Charge Payment Amounts paid by the Servicer
in connection with the Principal Prepayment of any of the Mortgage Loans and
(viii) amounts reimbursable to a successor Servicer (including the Trustee or
the Master Servicer) pursuant to Section 8.02.

                  "Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.

                  "Balloon Payment": A payment of the unamortized principal
balance of a Mortgage Loan in a single payment at the maturity of such Mortgage
Loan that is substantially greater than the preceding Monthly Payment.

                  "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.



                                       -7-

<PAGE>



                  "Book-Entry Certificate": The Class A Certificates, the Class
A-IO Certificates and the Mezzanine Certificates for so long as the Certificates
of such Class shall be registered in the name of the Depository or its nominee.

                  "Book-Entry Custodian": The custodian appointed pursuant to
Section 6.01.

                  "Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the States of New York,
Texas, Maryland, Minnesota or in the city in which the Corporate Trust Office of
the Trustee is located, are authorized or obligated by law or executive order to
be closed.

                  "Cap Contracts": Shall mean (i) the Cap Contract between the
Trustee and the counterparty thereunder, for the benefit of the Holders of the
Class A-1 Certificates and (ii) the Cap Contract between the Trustee and the
counterparty thereunder, for the benefit of the Class A-2 Certificates.

                  "Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which are more than a nominal amount in excess of the principal
balance of any existing first mortgage plus any subordinate mortgage on the
related Mortgaged Property and related closing costs.

                  "Certificate": Any one of the Depositor's Asset Backed
Pass-Through Certificates, Series 2003-FM1, Class A-1, Class A-2, Class A-IO,
Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class P, Class
CE and Class R issued under this Agreement.

                  "Certificate Factor":With respect to any Class of Certificates
(other than the Residual Certificates) as of any Distribution Date, a fraction,
expressed as a decimal carried to six places, the numerator of which is the
aggregate Certificate Principal Balance (or Notional Amount, in the case of the
Class A-IO Certificates and the Class CE Certificates) of such Class of
Certificates on such Distribution Date (after giving effect to any distributions
of principal and allocations of Realized Losses resulting in reduction of the
Certificate Principal Balance (or Notional Amount, in the case of the Class A-IO
Certificates and the Class CE Certificates) of such Class of Certificates to be
made on such Distribution Date), and the denominator of which is the initial
aggregate Certificate Principal Balance (or Notional Amount, in the case of the
Class A-IO Certificates and the Class CE Certificates) of such Class of
Certificates as of the Closing Date.

                  "Certificate Margin": With respect to the Class A-1
Certificates and, for purposes of the definition of "Marker Rate", REMIC II
Regular Interest II-LTA1, 0.34% in the case of each Distribution Date through
and including the Optional Termination Date and 0.68% in the case of each
Distribution Date thereafter.

                  With respect to the Class A-2 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTA2, 0.37% in
the case of each Distribution Date through and including the Optional
Termination Date and 0.74% in the case of each Distribution Date thereafter.



                                       -8-

<PAGE>



                  With respect to the Class M-1 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTM1, 0.86% in
the case of each Distribution Date through and including the Optional
Termination Date and 1.29% in the case of each Distribution Date thereafter.

                  With respect to the Class M-2 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTM2, 1.85% in
the case of each Distribution Date through and including the Optional
Termination Date and 2.775% in the case of each Distribution Date thereafter.

                  With respect to the Class M-3 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTM3, 2.13% in
the case of each Distribution Date through and including the Optional
Termination Date and 3.195% in the case of each Distribution Date thereafter.

                  With respect to the Class M-4 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTM4, 3.50% in
the case of each Distribution Date through and including the Optional
Termination Date and 5.25% in the case of each Distribution Date thereafter.

                  With respect to the Class M-5 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTM5, 3.50% in
the case of each Distribution Date through and including the Optional
Termination Date and 5.25% in the case of each Distribution Date thereafter.

                  With respect to the Class M-6 Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LTM6, 3.50% in
the case of each Distribution Date through and including the Optional
Termination Date and 5.25% in the case of each Distribution Date thereafter.

                  "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof, and solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of or beneficially owned by the Depositor, the Seller, the Servicer, the
Master Servicer, the Securities Administrator, the Trustee or any Affiliate
thereof shall be deemed not to be outstanding and the Voting Rights to which it
is entitled shall not be taken into account in determining whether the requisite
percentage of Voting Rights necessary to effect any such consent has been
obtained, except as otherwise provided in Section 12.01. The Trustee may
conclusively rely upon a certificate of the Depositor, the Seller, the Master
Servicer, the Securities Administrator or the Servicer in determining whether a
Certificate is held by an Affiliate thereof. All references herein to "Holders"
or "Certificateholders" shall reflect the rights of Certificate Owners as they
may indirectly exercise such rights through the Depository and participating
members thereof, except as otherwise specified herein; provided, however, that
the Trustee shall be required to recognize as a "Holder" or "Certificateholder"
only the Person in whose name a Certificate is registered in the Certificate
Register.


                                      -9-

<PAGE>



                  "Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.

                  "Certificate Principal Balance": With respect to each Class A
Certificate, Mezzanine Certificate or Class P Certificate as of any date of
determination, the Certificate Principal Balance of such Certificate on the
Distribution Date immediately prior to such date of determination, minus all
distributions allocable to principal made thereon and Realized Losses allocated
thereto, if any, on such immediately prior Distribution Date (or, in the case of
any date of determination up to and including the first Distribution Date, the
initial Certificate Principal Balance of such Certificate, as stated on the face
thereof). With respect to each Class CE Certificate as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Uncertificated
Balances of the REMIC II Regular Interests over (B) the then aggregate
Certificate Principal Balances of the Class A Certificates, the Mezzanine
Certificates and the Class P Certificates then outstanding. The aggregate
initial Certificate Principal Balance of each Class of Regular Certificates is
set forth in the Preliminary Statement hereto.

                  "Certificate Register": The register maintained pursuant to
Section 6.02.

                  "Class": Collectively, all of the Certificates bearing the
same class designation.

                  "Class A Certificate": Any Class A-1 Certificate or Class A-2
Certificate.

                  "Class A Principal Distribution Amount": The Class A Principal
Distribution Amount is an amount equal to the sum of the Class A-1 Principal
Distribution Amount and the Class A-2 Principal Distribution Amount.

                  "Class A-1 Allocation Percentage": With respect to any
Distribution Date is the percentage equivalent of a fraction, the numerator of
which is (x) the Group I Principal Remittance Amount for such Distribution Date
and the denominator of which is (y) the Principal Remittance Amount for such
Distribution Date.

                  "Class A-1 Certificate": Any one of the Class A-1 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class A-1 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the Certificate Principal Balance of the Class
A-1 Certificates immediately prior to such Distribution Date over (y) the lesser
of (A) the product of (i) 61.00% and (ii) the aggregate Stated Principal Balance
of the Group I Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced and unscheduled collections of
principal received during the related Prepayment Period) and (B) the aggregate
Stated Principal Balance of the Group I Mortgage Loans as of the last day of the
related Due Period (after giving effect to scheduled payments of principal due
during the related


                                      -10-

<PAGE>



Due Period, to the extent received or advanced and unscheduled collections of
principal received during the related Prepayment Period) minus $1,853,253.

                  "Class A-2 Allocation Percentage": With respect to any
Distribution Date is the percentage equivalent of a fraction, the numerator of
which is (x) the Group II Principal Remittance Amount for such Distribution Date
and the denominator of which is (y) the Principal Remittance Amount for such
Distribution Date.

                  "Class A-2 Certificate": Any one of the Class A-2 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class A-2 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the Certificate Principal Balance of the Class
A-2 Certificates immediately prior to such Distribution Date over (y) the lesser
of (A) the product of (i) 61.00% and (ii) the aggregate Stated Principal Balance
of the Group II Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced and unscheduled collections of
principal received during the related Prepayment Period) and (B) the aggregate
Stated Principal Balance of the Group II Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced and
unscheduled collections of principal received during the related Prepayment
Period) minus $418,994.

                  "Class A-IO Certificate": Any one of the Class A-IO
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-2 and evidencing a Regular Interest in
REMIC III for purposes of the REMIC Provisions.

                  "Class A-IO Pass-Through Rate": With respect to component
A-IO-1 of the Class A- IO Certificates and each Interest Accrual Period, (i)
5.50% per annum for the June 2003 through March 2004 Distribution Dates, (ii)
4.50% per annum for the April 2004 through January 2005 Distribution Dates,
(iii) 3.50% per annum for the February 2005 through November 2005 Distribution
Dates and (iv) 0.00% per annum thereafter. With respect to component A-IO-2 of
the Class A-IO Certificates and each Interest Accrual Period, (i) 5.50% per
annum for the June 2003 through March 2004 Distribution Dates, (ii) 4.50% per
annum for the April 2004 through January 2005 Distribution Dates, (iii) 3.50%
per annum for the February 2005 through November 2005 Distribution Dates and
(iv) 0.00% per annum thereafter. For federal income tax purposes, the Class A-IO
Certificates will not have a Pass-Through Rate, but will be entitled to all
amounts distributed on REMIC II Regular Interest II-LTIO-1A, REMIC II Regular
Interest II-LTIO-1B, REMIC II Regular Interest II-LTIO-1C, REMIC II Regular
Interest II-LTIO-2A, REMIC II Regular Interest II- LTIO-2B and REMIC II Regular
Interest II-LTIO-2C.

                  "Class CE Certificate": Any one of the Class CE Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-4 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.



                                      -11-

<PAGE>



                  "Class M Certificates": The Class M-1, Class M-2, Class M-3,
Class M-4, Class M-5 and Class M-6 Certificates.

                  "Class M-1 Certificate": Any one of the Class M-1 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class M-1 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date) and (ii)
the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
73.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced and unscheduled collections of principal received during the related
Prepayment Period) and (B) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced and unscheduled collections of principal received
during the related Prepayment Period) minus $2,272,247.

                  "Class M-2 Certificate": Any one of the Class M-2 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class M-2 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (iii) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 84.50% and (ii) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced and unscheduled collections of principal
received during the related Prepayment Period) and (B) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced and unscheduled
collections of principal received during the related Prepayment Period) minus
$2,272,247.

                  "Class M-3 Certificate": Any one of the Class M-3 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.



                                      -12-

<PAGE>



                  "Class M-3 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date) and (iv) the Certificate
Principal Balance of the Class M-3 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 86.50% and (ii)
the aggregate Stated Principal Balance of the Mortgage Loans as of the last day
of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced
and unscheduled collections of principal received during the related Prepayment
Period) and (B) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced and unscheduled collections of principal received during the related
Prepayment Period) minus $2,272,247.

                  "Class M-4 Certificate": Any one of the Class M-4 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class M-4 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date), (iv) the Certificate Principal
Balance of the Class M-3 Certificates (after taking into account the payment of
the Class M-3 Principal Distribution Amount on such Distribution Date) and (v)
the Certificate Principal Balance of the Class M-4 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
90.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced and unscheduled collections of principal received during the related
Prepayment Period) and (B) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced and unscheduled collections of principal received
during the related Prepayment Period) minus $2,272,247.

                  "Class M-5 Certificate": Any one of the Class M-5 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.



                                      -13-

<PAGE>



                  "Class M-5 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date), (iv) the Certificate Principal
Balance of the Class M-3 Certificates (after taking into account the payment of
the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the
Certificate Principal Balance of the Class M-4 Certificates (after taking into
account the payment of the Class M-4 Principal Distribution Amount on such
Distribution Date) and (vi) the Certificate Principal Balance of the Class M-5
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 94.00% and (ii) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced and unscheduled collections of principal
received during the related Prepayment Period) and (B) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced and unscheduled
collections of principal received during the related Prepayment Period) minus
$2,272,247.

                  "Class M-6 Certificate": Any one of the Class M-6 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class M-6 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date), (iv) the Certificate Principal
Balance of the Class M-3 Certificates (after taking into account the payment of
the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the
Certificate Principal Balance of the Class M-4 Certificates (after taking into
account the payment of the Class M-4 Principal Distribution Amount on such
Distribution Date), (vi) the Certificate Principal Balance of the Class M-5
Certificates (after taking into account the payment of the Class M-5 Principal
Distribution Amount on such Distribution Date) and (vii) the Certificate
Principal Balance of the Class M-6 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 96.00% and (ii)
the aggregate Stated Principal Balance of the Mortgage Loans as of the last day
of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced
and unscheduled collections of principal received during the related Prepayment
Period) and (B) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during


                                      -14-

<PAGE>



the related Due Period, to the extent received or advanced and unscheduled
collections of principal received during the related Prepayment Period) minus
$2,272,247.

                  "Class P Certificate": Any one of the Class P Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-5 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class R Certificates": Any one of the Class R Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-6, and evidencing the Class R-I Interest, the Class
R-II Interest and the Class R-III Interest.

                  "Class R-I Interest": The uncertificated residual interest in
REMIC I.

                  "Class R-II Interest": The uncertificated residual interest in
REMIC II.

                  "Class R-III Interest": The uncertificated residual interest
in REMIC III.

                  "Closing Date": May 30, 2003.

                  "Code": The Internal Revenue Code of 1986 as amended from time
to time.

                  "Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Servicer pursuant to
Section 3.08(a), which shall be entitled "Litton Loan Servicing LP, as Servicer
for JPMorgan Chase Bank, as Trustee, in trust for the registered holders of ACE
Securities Corp., Home Equity Loan Trust, Series 2003-FM1, Asset Backed
Pass-Through Certificates." The Collection Account must be an Eligible Account.

                  "Commission": The Securities and Exchange Commission.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee which office at the date of the execution of this instrument is
located at 4 New York Plaza, 6th Floor, New York, New York 1004, Attention:
Institutional Trust Services/Structured Finance Services, ACE 2003-FM1, and for
purposes of certificate transfer or exchange only, 2001 Bryan Street, Dallas,
Texas 75201, Attention: ITS Transfer Services, ACE 2003-FM1 or at such other
address as the Trustee may designate from time to time by notice to the
Certificateholders, the Depositor, the Master Servicer, the Securities
Administrator and the Servicer.

                  "Corresponding Certificate": With respect to REMIC II Regular
Interest II-LTA1, REMIC II Regular Interest II-LTA2, REMIC II Regular Interest
II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3,
REMIC II Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II
Regular Interest II-LTM6 and REMIC II Regular Interest II- LTP, the Class A-1
Certificates, Class A-2 Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
Certificates, Class M-6 Certificates and Class P Certificates, respectively.



                                      -15-

<PAGE>



                  "Credit Enhancement Percentage": For any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the sum of
the aggregate Certificate Principal Balances of the Mezzanine Certificates and
the Class CE Certificates, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans, calculated after taking into account
distributions of principal on the Mortgage Loans and distribution of the
Principal Distribution Amount to the Certificates then entitled to distributions
of principal on such Distribution Date.

                  "Custodial Agreement": Shall mean the Custodial Agreement
dated as of May 1, 2003, among the Trustee, the Custodian and the Servicer as
such agreement may be amended or supplemented from time to time, or any other
custodial agreement entered into after the date hereof with respect to any
Mortgage Loan subject to this Agreement.

                  "Custodian": Shall mean Wells Fargo or any other custodian
appointed under any custodial agreement entered into after the date of this
Agreement.

                  "Cut-off Date": With respect to each Mortgage Loan, May 1,
2003. With respect to all Qualified Substitute Mortgage Loans, their respective
dates of substitution. References herein to the "Cut-off Date," when used with
respect to more than one Mortgage Loan, shall be to the respective Cut-off Dates
for such Mortgage Loans.

                  "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.

                  "Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.

                  "Definitive Certificates": As defined in Section 6.01(b).

                  "Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.

                  "Delinquency Percentage": As of the last day of the related
Due Period, the percentage equivalent of a fraction, the numerator of which is
the aggregate Stated Principal Balance of all Mortgage Loans that, as of the
last day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
the previous calendar month.

                  "Depositor": ACE Securities Corp., a Delaware corporation, or
its successor in interest.



                                      -16-

<PAGE>



                  "Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.

                  "Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated A-1 by S&P and P-1 by
Moody's (or, if such Rating Agencies are no longer rating the Offered
Certificates, comparable ratings by any other nationally recognized statistical
rating agency then rating the Offered Certificates).

                  "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": With respect to each Distribution Date,
shall mean the 10th day of the calendar month on which such Distribution Date
occurs, or, if such 10th day is not a Business Day, the Business Day immediately
preceding such 10th day.

                  "Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I other than
through an Independent Contractor; provided, however, that the Servicer, on
behalf of the Trustee, shall not be considered to Directly Operate an REO
Property solely because the Servicer establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes decisions
as to repairs or capital expenditures with respect to such REO Property.

                  "Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee based
upon an Opinion of Counsel that the holding of an Ownership Interest in a
Residual Certificate by such Person may cause any Trust REMIC or any Person
having an Ownership Interest


                                      -17-

<PAGE>



in any Class of Certificates (other than such Person) to incur a liability for
any federal tax imposed under the Code that would not otherwise be imposed but
for the Transfer of an Ownership Interest in a Residual Certificate to such
Person. The terms "United States," "State" and "international organization"
shall have the meanings set forth in Section 7701 of the Code or successor
provisions.

                  "Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.08(b) in the name of the
Trustee for the benefit of the Certificateholders and designated "JPMorgan Chase
Bank, in trust for registered holders of ACE Securities Corp. Home Equity Loan
Trust, Series 2003-FM1". Funds in the Distribution Account shall be held in
trust for the Certificateholders for the uses and purposes set forth in this
Agreement. The Distribution Account must be an Eligible Account.

                  "Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in June 2003.

                  "Due Date": With respect to each Distribution Date, the day of
the month on which the Monthly Payment is due on a Mortgage Loan during the
related Due Period, exclusive of any days of grace.

                  "Due Period": With respect to any Distribution Date, the
period commencing on the second day of the month immediately preceding the month
in which such Distribution Date occurs and ending on the first day of the month
in which such Distribution Date occurs.

                  "Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the corporate trust department of a federal depository
institution or state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation Section 9.10(b), which, in either case, has corporate trust powers,
acting in its fiduciary capacity. Eligible Accounts may bear interest.

                  "ERISA": The Employee Retirement Income Security Act of 1974,
as amended from time to time.

                  "Estate in Real Property": A fee simple estate in a parcel of
land.

                  "Excess Liquidation Proceeds": To the extent that such amount
is not required by law to be paid to the related mortgagor, the amount, if any,
by which Liquidation Proceeds with respect to a liquidated Mortgage Loan exceed
the sum of (i) the outstanding principal balance of such Mortgage Loan and
accrued but unpaid interest at the related Net Mortgage Rate through the last
day of the month in which the related Liquidation Event occurs, plus (ii)
related liquidation expenses or other amounts to which the Servicer is entitled
to be reimbursed from Liquidation Proceeds with respect to such liquidated
Mortgage Loan pursuant to Section 3.09.

                  "Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan or REO Property, the then applicable Mortgage Rate thereon minus the
Administration Fee Rate.



                                      -18-

<PAGE>



                  "Extraordinary Trust Fund Expense": Any amounts payable or
reimbursable to the Trustee, the Master Servicer, the Securities Administrator,
the Custodian or any director, officer, employee or agent of any such Person
from the Trust Fund pursuant to the terms of this Agreement and any amounts
payable from the Distribution Account in respect of taxes pursuant to Section
11.01(g)(v).

                  "Extra Principal Distribution Amount": With respect to any
Distribution Date, the lesser of (i) the Net Monthly Excess Cashflow for such
Distribution Date and (ii) the Overcollateralization Increase Amount for such
Distribution Date.

                  "Fannie Mae": Fannie Mae, formerly known as the Federal
National Mortgage Association, or any successor thereto.

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

                  "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Originator, the Seller or the Terminator pursuant to or as
contemplated by Section 2.03 or Section 10.01), a determination made by the
Servicer that all Insurance Proceeds, Liquidation Proceeds and other payments or
recoveries which the Servicer, in its reasonable good faith judgment, expects to
be finally recoverable in respect thereof have been so recovered, which
determination shall be evidenced by a certificate of a Servicing Officer
delivered to the Master Servicer and maintained in its records.

                  "Fitch": Fitch Ratings or any successor in interest.

                  "Freddie Mac": Freddie Mac, formerly known as the Federal Home
Loan Mortgage Corporation, or any successor thereto.

                  "Gross Margin": With respect to each Adjustable Rate Mortgage
Loan, the fixed percentage set forth in the related Mortgage Note that is added
to the Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Adjustable Rate
Mortgage Loan.

                  "Group I Interest Remittance Amount": With respect to any
Distribution Date is that portion of the Available Distribution Amount for such
Distribution Date that represents interest received or advanced on the Group I
Mortgage Loans (after taking into account amounts payable or reimbursable to the
Trustee, the Custodian, the Securities Administrator, the Master Servicer or the
Servicer pursuant to this Agreement or the Custodial Agreement).

                  "Group I Mortgage Loans": Those Mortgage Loans identified on
the Mortgage Loan Schedule as Group I Mortgage Loans.

                  "Group I Principal Distribution Amount": With respect to any
Distribution Date will be the sum of (i) the principal portion of all Monthly
Payments on the Group I Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination Date; (ii) the
principal portion of all proceeds received in respect of the repurchase of a
Group I Mortgage


                                      -19-

<PAGE>



Loan or, in the case of a substitution, certain amounts representing a principal
adjustment, during the related Prepayment Period as required by Section 2.03;
(iii) the principal portion of all other unscheduled collections, including
Insurance Proceeds, Liquidation Proceeds and all Principal Prepayments in full
and in part, received during the related Prepayment Period, to the extent
applied as recoveries of principal on the Group I Mortgage Loans, net in each
case of payments or reimbursements to the Trustee, the Custodian, the Master
Servicer, the Securities Administrator and the Servicer and (iv) the Class A-1
Allocation Percentage of the amount of any Overcollateralization Increase Amount
for such Distribution Date MINUS (v) the Class A-1 Allocation Percentage of the
amount of any Overcollateralization Reduction Amount for such Distribution Date.

                  "Group I Principal Remittance Amount": With respect to any
Distribution Date will be the sum of the amounts described in clauses (i)
through (iii) of the definition of Group I Principal Distribution Amount.

                  "Group II Interest Remittance Amount": With respect to any
Distribution Date is that portion of the Available Distribution Amount for such
Distribution Date that represents interest received or advanced on the Group II
Mortgage Loans (after taking into account amounts payable or reimbursable to the
Trustee, the Custodian, the Securities Administrator, the Master Servicer or the
Servicer pursuant to this Agreement or the Custodial Agreement).

                  "Group II Mortgage Loans": Those Mortgage Loans identified on
the Mortgage Loan Schedule as Group II Mortgage Loans.

                  "Group II Principal Distribution Amount": With respect to any
Distribution Date will be the sum of (i) the principal portion of all Monthly
Payments on the Group II Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination Date; (ii) the
principal portion of all proceeds received in respect of the repurchase of a
Group II Mortgage Loan or, in the case of a substitution, certain amounts
representing a principal adjustment, during the related Prepayment Period as
required by Section 2.03; (iii) the principal portion of all other unscheduled
collections, including Insurance Proceeds, Liquidation Proceeds and all
Principal Prepayments in full and in part, received during the related
Prepayment Period, to the extent applied as recoveries of principal on the Group
II Mortgage Loans, net in each case of payments or reimbursements to the
Trustee, the Custodian, the Master Servicer, the Securities Administrator and
the Servicer and (iv) the Class A-2 Allocation Percentage of the amount of any
Overcollateralization Increase Amount for such Distribution Date MINUS (v) the
Class A-2 Allocation Percentage of the amount of any Overcollateralization
Reduction Amount for such Distribution Date.

                  "Group II Principal Remittance Amount": With respect to any
Distribution Date will be the sum of the amounts described in clauses (i)
through (iii) of the definition of Group II Principal Distribution Amount.

                  "Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer, the Securities Administrator, the Servicer, the Seller, the Originator
and their respective Affiliates, (b) does not have any direct financial interest
in or any material indirect financial interest in the Depositor, the Master
Servicer, the Securities Administrator, the Servicer, the Seller, the Originator
or any Affiliate thereof, and (c)


                                      -20-

<PAGE>



is not connected with the Depositor, the Master Servicer, the Securities
Administrator, the Servicer, the Seller, the Originator or any Affiliate thereof
as an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions; provided, however, that a Person shall not
fail to be Independent of the Depositor, the Master Servicer, the Securities
Administrator, the Servicer, the Seller, the Originator or any Affiliate thereof
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Depositor, the Master Servicer, the Securities
Administrator, the Servicer, the Seller, the Originator or any Affiliate
thereof, as the case may be.

                  "Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to REMIC I
within the meaning of Section 856(d)(3) of the Code if REMIC I were a real
estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35% or more of any Class of Certificates), so long as REMIC I does
not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including the Servicer) if the Trustee has received an Opinion of Counsel to
the effect that the taking of any action in respect of any REO Property by such
Person, subject to any conditions therein specified, that is otherwise herein
contemplated to be taken by an Independent Contractor will not cause such REO
Property to cease to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code), or cause any income
realized in respect of such REO Property to fail to qualify as Rents from Real
Property.

                  "Index": With respect to each Adjustable Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available either (a) as of the first
Business Day 45 days prior to such Adjustment Date or (b) as of the first
Business Day of the month preceding the month of such Adjustment Date, as
specified in the related Mortgage Note.

                  "Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with Accepted Servicing
Practices, subject to the terms and conditions of the related Mortgage Note and
Mortgage.

                  "Interest Accrual Period": With respect to any Distribution
Date and the Class A Certificates and the Mezzanine Certificates, the period
commencing on the Distribution Date of the month immediately preceding the month
in which such Distribution Date occurs (or, in the case of the first
Distribution Date, commencing on the Closing Date) and ending on the day
preceding such Distribution Date. With respect to any Distribution Date and the
Class A-IO Certificates, the one-month period ending on the last day of the
calendar month immediately preceding the month in which such Distribution Date
occurs.

                  "Interest Carry Forward Amount": With respect to any
Distribution Date and the Class A Certificates, the Class A-IO Certificates and
the Mezzanine Certificates, the sum of (i) the


                                      -21-

<PAGE>



amount, if any, by which (a) the Interest Distribution Amount for such Class of
Certificates as of the immediately preceding Distribution Date exceeded (b) the
actual amount distributed on such Class of Certificates in respect of interest
on such immediately preceding Distribution Date and (ii) the amount of any
Interest Carry Forward Amount for such Class of Certificates remaining unpaid
from the previous Distribution Date, plus accrued interest on such sum
calculated at the related Pass-Through Rate for the most recently ended Interest
Accrual Period.

                  "Interest Determination Date": With respect to the Class A
Certificates, the Mezzanine Certificates, REMIC II Regular Interest II-LTA1,
REMIC II Regular Interest II-LTA2, REMIC II Regular Interest II-LTM1, REMIC II
Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular
Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular Interest
II-LTM6 and any Interest Accrual Period therefor, the second London Business Day
preceding the commencement of such Interest Accrual Period.

                  "Interest Distribution Amount": With respect to any
Distribution Date and any Class A Certificates, any Mezzanine Certificates, any
Class A-IO Certificates and any Class CE Certificates, the aggregate Accrued
Certificate Interest on the Certificates of such Class for such Distribution
Date.

                  "Interest Remittance Amount": With respect to any Distribution
Date, the sum of the Group I Interest Remittance Amount and the Group II
Interest Remittance Amount.

                  "Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period with respect to such Mortgage Loan,
whether as late payments of Monthly Payments or as Insurance Proceeds,
Liquidation Proceeds or otherwise, which represent late payments or collections
of principal and/or interest due (without regard to any acceleration of payments
under the related Mortgage and Mortgage Note) but delinquent for such Due Period
and not previously recovered.

                  "Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan or (iii) such Mortgage
Loan is removed from REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03 or Section 10.01. With respect to
any REO Property, either of the following events: (i) a Final Recovery
Determination is made as to such REO Property or (ii) such REO Property is
removed from REMIC I by reason of its being purchased pursuant to Section 10.01.

                  "Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.13(c), Section 3.21 or Section
10.01.



                                      -22-

<PAGE>



                  "Loan-to-Value Ratio": As of 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 and the denominator of which
is the Value of the related Mortgaged Property.

                  "London Business Day": Any day on which banks in the Cities of
London and New York are open and conducting transactions in United States
dollars.

                  "Loss Severity Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
amount of Realized Losses incurred on a Mortgage Loan and the denominator of
which is the principal balance of such Mortgage Loan immediately prior to the
liquidation of such Mortgage Loan.

                  "Marker Rate": With respect to the Class CE Certificates and
any Distribution Date, a per annum rate equal to two (2) times the weighted
average of the REMIC II Remittance Rate for each of the REMIC II Regular
Interests (other than REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTP, REMIC II Regular Interest II-LTIO-1A, REMIC II Regular Interest
II-LTIO- 1B, REMIC II Regular Interest II-LTIO-1C, REMIC II Regular Interest
II-LTIO-2A, REMIC II Regular Interest II-LTIO-2B, REMIC II Regular Interest
II-LTIO-2C, REMIC II Regular Interest II- LT1SUB, REMIC II Regular Interest
II-LT1GRP, REMIC II Regular Interest II-LT2SUB, REMIC II Regular Interest
II-LT2GRP and REMIC II Regular Interest II-LTXX), with the rate on each such
REMIC II Regular Interest (other than REMIC II Regular Interest II-LTZZ) subject
to a cap equal to the lesser of (i) the related One-Month LIBOR Pass-Through
Rate and (ii) the Net WAC Pass-Through Rate for the purpose of this calculation
for such Distribution Date and with the rate on REMIC II Regular Interest
II-LTZZ subject to a cap of zero for the purpose of this calculation; provided
however, each such cap shall be multiplied by a fraction the numerator of which
is the actual number of days in the related Interest Accrual Period and the
denominator of which is 30.

                  "Master Servicer": As of the Closing Date, Wells Fargo Bank
Minnesota, National Association and thereafter, its respective successors in
interest who meet the qualifications of this Agreement. The Master Servicer and
the Securities Administrator shall at all times be the same Person.

                  "Master Servicer Certification": A written certification
covering servicing of the Mortgage Loans by the Servicer and signed by an
officer of the Master Servicer that complies with (i) the Sarbanes-Oxley Act of
2002, as amended from time to time, and (ii) the February 21, 2003 Statement by
the Staff of the Division of Corporation Finance of the Securities and Exchange
Commission Regarding Compliance by Asset-Backed Issuers with Exchange Act Rules
13a-14 and 15d-14, as in effect from time to time; provided that if, after the
Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the Statement
referred to in clause (ii) is modified or superceded by any subsequent
statement, rule or regulation of the Securities and Exchange Commission or any
statement of a division thereof, or (c) any future releases, rules and
regulations are published by the Securities and Exchange Commission from time to
time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects
the form or substance of the required certification and results in the required
certification being, in the reasonable judgment of the Master Servicer,
materially more onerous than the form of the required certification as of the
Closing Date, the Master Servicer


                                      -23-

<PAGE>



Certification shall be as agreed to by the Master Servicer, the Depositor and
the Seller following a negotiation in good faith to determine how to comply with
any such new requirements.

                  "Master Servicer Event of Default": One or more of the events
described in Section 8.01(b).

                  "Master Servicer Fee Rate": 0.0225% per annum.

                  "Master Servicing Fee": With respect to each Mortgage Loan and
for any calendar month, an amount equal to one twelfth of the product of the
Master Servicer Fee Rate multiplied by the Scheduled Principal Balance of the
Mortgage Loans as of the Due Date in the preceding calendar month.

                  "Maximum II-LTZZ Uncertificated Interest Deferral Amount":
With respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC II Remittance Rate applicable to REMIC II Regular Interest II-LTZZ for
such Distribution Date on a balance equal to the Uncertificated Balance of REMIC
II Regular Interest II-LTZZ minus the REMIC II Overcollateralization Amount, in
each case for such Distribution Date, over (ii) Uncertificated Interest on REMIC
II Regular Interest II-LTA1, REMIC II Regular Interest II-LTA2, REMIC II Regular
Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest
II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5
and REMIC II Regular Interest II-LTM6 for such Distribution Date, with the rate
on each such REMIC II Regular Interest subject to a cap equal to the lesser of
(i) the related One-Month LIBOR Pass-Through Rate and (ii) the Net WAC
Pass-Through Rate for the purpose of this calculation for such Distribution
Date; provided however, each such cap shall be multiplied by a fraction the
numerator of which is the actual number of days in the related Interest Accrual
Period and the denominator of which is 30.

                  "Maximum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.

                  "MERS": Mortgage Electronic Registration Systems, Inc., a
corporation organized and existing under the laws of the State of Delaware, or
any successor thereto.

                  "MERS(R) System": The system of recording transfers of
mortgages electronically maintained by MERS.

                  "Mezzanine Certificate": Any Class M-1 Certificate, Class M-2
Certificate, Class M- 3 Certificate, Class M-4 Certificate, Class M-5
Certificate or Class M-6 Certificate.

                  "MIN": The Mortgage Identification Number for Mortgage Loans
registered with MERS on the MERS(R) System.

                  "Minimum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
minimum Mortgage Rate thereunder.



                                      -24-

<PAGE>



                  "MOM Loan": With respect to any Mortgage Loan, MERS acting as
the mortgagee of such Mortgage Loan, solely as nominee for the originator of
such Mortgage Loan and its successors and assigns, at the origination thereof.

                  "Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act or similar state laws; (b) without giving effect to any extension
granted or agreed to by the Servicer pursuant to Section 3.01; and (c) on the
assumption that all other amounts, if any, due under such Mortgage Loan are paid
when due.

                  "Moody's:" Moody's Investors Service, Inc. or any successor
interest.

                  "Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on, or first or second priority security
interest in, a Mortgaged Property securing a Mortgage Note.

                  "Mortgage File": The Mortgage Loan Documents pertaining to a
particular Mortgage Loan.

                  "Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee and the Mortgage Loan Documents for which have been delivered to
the Custodian pursuant to Section 2.01 of this Agreement and pursuant to the
Custodial Agreement, as held from time to time as a part of the Trust Fund, the
Mortgage Loans so held being identified in the Mortgage Loan Schedule.

                  "Mortgage Loan Documents": The documents evidencing or
relating to each Mortgage Loan delivered to the Custodian under the Custodial
Agreement on behalf of the Trustee.

                  "Mortgage Loan Purchase Agreement": Shall mean the Mortgage
Loan Purchase Agreement dated as of May 30, 2003, between the Depositor and the
Seller.

                  "Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, separately identifying the Group I
Mortgage Loans and the Group II Mortgage Loans, attached hereto as Schedule 1.
The Depositor shall deliver or cause the delivery of the initial Mortgage Loan
Schedule to the Servicer, the Master Servicer, the Custodian and the Trustee on
the Closing Date. The Mortgage Loan Schedule shall set forth the following
information with respect to each Mortgage Loan:

                  (i) the Mortgage Loan identifying number;

                  (ii) the Mortgagor's first and last name;

                  (iii) the street address of the Mortgaged Property including
the state and zip code;



                                      -25-

<PAGE>



                  (iv) a code indicating whether the Mortgaged Property is
owner-occupied;

                  (v) the type of Residential Dwelling constituting the
Mortgaged Property;

                  (vi) the original months to maturity;

                  (vii) the original date of the Mortgage Loan and the remaining
months to maturity from the Cut-off Date, based on the original amortization
schedule;

                  (viii) the Loan-to-Value Ratio at origination;

                  (ix) the Mortgage Rate in effect immediately following the
Cut-off Date;

                  (x) the date on which the first Monthly Payment was due on the
Mortgage Loan;

                  (xi) the stated maturity date;

                  (xii) the amount of the Monthly Payment at origination;

                  (xiii) the amount of the Monthly Payment as of the Cut-off
Date;

                  (xiv) the last Due Date on which a Monthly Payment was
actually applied to the unpaid Stated Principal Balance;

                  (xv) the original principal amount of the Mortgage Loan;

                  (xvi) the Stated Principal Balance of the Mortgage Loan as of
the close of business on the Cut-off Date;

                  (xvii) with respect to each Adjustable Rate Mortgage Loan, the
first Adjustment Date;

                  (xviii) with respect to each Adjustable Rate Mortgage Loan,
the Gross Margin;

                  (xix) a code indicating the purpose of the loan (i.e.,
purchase financing, rate/term refinancing, cash-out refinancing);

                  (xx) with respect to each Adjustable Rate Mortgage Loan, the
Maximum Mortgage Rate under the terms of the Mortgage Note;

                  (xxi) with respect to each Adjustable Rate Mortgage Loan, the
Minimum Mortgage Rate under the terms of the Mortgage Note;

                  (xxii) the Mortgage Rate at origination;

                  (xxiii) with respect to each Adjustable Rate Mortgage Loan,
the Periodic Rate Cap;


                                      -26-

<PAGE>




                  (xxiv) with respect to each Adjustable Rate Mortgage Loan, the
first Adjustment Date immediately following the Cut-off Date;

                  (xxv) with respect to each Adjustable Rate Mortgage Loan, the
Index;

                  (xxvi) the date on which the first Monthly Payment was due on
the Mortgage Loan and, if such date is not consistent with the Due Date
currently in effect, such Due Date;

                  (xxvii) a code indicating whether the Mortgage Loan is an
Adjustable Rate Mortgage Loan or a fixed rate Mortgage Loan;

                  (xxviii) a code indicating the documentation style (i.e.,
full, stated or limited);

                  (xxix) a code indicating if the Mortgage Loan is subject to a
primary insurance policy or lender paid mortgage insurance policy;

                  (xxx) the Appraised Value of the Mortgaged Property;

                  (xxxi) the sale price of the Mortgaged Property, if
applicable;

                  (xxxii) a code indicating whether the Mortgage Loan is subject
to a Prepayment Charge, the term of such Prepayment Charge and the amount of
such Prepayment Charge; and

                  (xxxiii) the product type (e.g., 2/28, 15 year fixed, 30 year
fixed, 15/30 balloon, etc.); (xxxiv) the Mortgagor's debt to income ratio; and

                  (xxxv) the Servicer.

                      The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-off Date: (1) the number of Mortgage Loans; (2) the current principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans. The
Mortgage Loan Schedule shall be amended from time to time by the Depositor in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, the Cut-off Date shall refer to the related Cut-off
Date for such Mortgage Loan, determined in accordance with the definition of
Cut-off Date herein.

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

                      "Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate with
respect to each Adjustable Rate Mortgage Loan (A) as of any date of
determination until the first Adjustment Date following the Cut-off Date shall
be the rate set


                                      -27-

<PAGE>



forth in the Mortgage Loan Schedule as the Mortgage Rate in effect immediately
following the Cut-off Date and (B) as of any date of determination thereafter
shall be the rate as adjusted on the most recent Adjustment Date equal to the
sum, rounded to the nearest 0.125% as provided in the Mortgage Note, of the
Index, as most recently available as of a date prior to the Adjustment Date as
set forth in the related Mortgage Note, plus the related Gross Margin; provided
that the Mortgage Rate on such Adjustable Rate Mortgage Loan on any Adjustment
Date shall never be more than the lesser of (i) the sum of the Mortgage Rate in
effect immediately prior to the Adjustment Date plus the related Periodic Rate
Cap, if any, and (ii) the related Maximum Mortgage Rate, and shall never be less
than the greater of (i) the Mortgage Rate in effect immediately prior to the
Adjustment Date less the Periodic Rate Cap, if any, and (ii) the related Minimum
Mortgage Rate. With respect to each Mortgage Loan that becomes an REO Property,
as of any date of determination, the annual rate determined in accordance with
the immediately preceding sentence as of the date such Mortgage Loan became an
REO Property.

                      "Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.

                      "Mortgagor": The obligor on a Mortgage Note.

                      "Net Monthly Excess Cashflow": With respect to any
Distribution Date, the sum of (i) any Overcollateralization Reduction Amount for
such Distribution Date and (ii) the excess of (x) the Available Distribution
Amount for such Distribution Date over (y) the sum for such Distribution Date of
(A) the aggregate Senior Interest Distribution Amounts payable to the holders of
the Class A Certificates and the Class A-IO Certificates, (B) the aggregate
Interest Distribution Amounts payable to the holders of the Mezzanine
Certificates and (C) the Principal Remittance Amount.

                      "Net Mortgage Rate": With respect to any Mortgage Loan (or
the related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Administration Fee Rate.

                      "Net WAC Pass-Through Rate": With respect to the Class A-1
Certificates and any Distribution Date, a rate per annum equal to the product of
(x) (A) the weighted average of the Expense Adjusted Mortgage Rates on the then
outstanding Group I Mortgage Loans, weighted based on their Stated Principal
Balances as of the first day of the calendar month preceding the month in which
the Distribution Date occurs minus (B) the REMIC II Remittance Rate for REMIC II
Regular Interest II-LTIO-1A, REMIC II Regular Interest II-LTIO-1B and REMIC II
Regular Interest II-LTIO- 1C immediately for such Distribution Date multiplied
by a fraction, the numerator of which is the Notional Amount of REMIC II Regular
Interest II-LTIO-1A, REMIC II Regular Interest II-LTIO-1B and REMIC II Regular
Interest II-LTIO-1C immediately prior to such Distribution Date and the
denominator of which is the aggregate Stated Principal Balance of the Group I
Mortgage Loans as of the first day of the month preceding the month of such
Distribution Date and (y) a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days elapsed in the related
Interest Accrual Period. For federal income tax purposes, the economic
equivalent of such rate shall be expressed as the weighted average of the REMIC
II Remittance Rate on REMIC II


                                      -28-

<PAGE>



Regular Interest II-LT1GRP, weighted on the basis of the Uncertificated Balance
of such REMIC II Regular Interest.

                      With respect to the Class A-2 Certificates and any
Distribution Date, a rate per annum equal to the product of (x)(A) the weighted
average of the Expense Adjusted Mortgage Rates on the then outstanding Group II
Mortgage Loans, weighted based on their Stated Principal Balances as of the
first day of the calendar month preceding the month in which the Distribution
Date occurs minus (B) the REMIC II Remittance Rate for REMIC II Regular Interest
II-LTIO-2A, REMIC II Regular Interest II-LTIO-2B and REMIC II Regular Interest
II-LTIO-2C for such Distribution Date multiplied by a fraction, the numerator of
which is the Notional Amount for REMIC II Regular Interest II-LTIO-2A, REMIC II
Regular Interest II-LTIO-2B and REMIC II Regular Interest II-LTIO- 2C
immediately prior to such Distribution Date and the denominator of which is the
aggregate Stated Principal Balance of the Group II Mortgage Loans as of the
first day of the month preceding the month of such Distribution Date and (y) a
fraction, the numerator of which is 30 and the denominator of which is the
actual number of days elapsed in the related Interest Accrual Period. For
federal income tax purposes, the economic equivalent of such rate shall be
expressed as the weighted average of the REMIC II Remittance Rate on REMIC II
Regular Interest II-LT2GRP, weighted on the basis of the Uncertificated Balance
of such REMIC II Regular Interest.

                      With respect to REMIC II Regular Interest II-LTIO-1C, (A)
for the 1st through the 10th Distribution Date, the excess of (a) the REMIC I
Remittance Rate on REMIC I Regular Interest I-LTIO-1 over (b) 2.00%, (B) for the
11th through the 20th Distribution Date, the excess of (a) the REMIC I
Remittance Rate on REMIC I Regular Interest I-LTIO-1 over (b) 1.00% and (C) for
the 21st through the 30th Distribution Date, the REMIC I Remittance Rate on
REMIC I Regular Interest I-LTIO-1.

                      With respect to REMIC II Regular Interest II-LTIO-2C, (A)
for the 1st through the 10th Distribution Date, the excess of (a) the REMIC I
Remittance Rate on REMIC I Regular Interest I-LTIO-1 over (b) 2.00%, (B) for the
11th through the 20th Distribution Date, the excess of (a) the REMIC I
Remittance Rate on REMIC I Regular Interest I-LTIO-1 over (b) 1.00% and (C) for
the 21st through the 30th Distribution Date, the REMIC I Remittance Rate on
REMIC I Regular Interest I-LTIO-1.

                      With respect to the Mezzanine Certificates and any
Distribution Date, a rate per annum equal to the product of (x)(A) the weighted
average of the Expense Adjusted Mortgage Rates on the then outstanding Mortgage
Loans, weighted based on their Stated Principal Balances as of the first day of
the calendar month preceding the month in which the Distribution Date occurs
minus (B) the sum of (i) the REMIC II Remittance Rate for REMIC II Regular
Interest II-LTIO-1A, REMIC II Regular Interest II-LTIO-1B and REMIC II Regular
Interest II-LTIO-1C for such Distribution Date multiplied by a fraction, the
numerator of which is the Notional Amount for REMIC II Regular Interest
II-LTIO-1A, REMIC II Regular Interest II-LTIO-1B and REMIC II Regular Interest
II-LTIO- 1C immediately prior to such Distribution Date and the denominator of
which is the aggregate Stated Principal Balance of the Group I Mortgage Loans as
of the first day of the month preceding the month of such Distribution Date and
(ii) the REMIC II Remittance Rate for REMIC II Regular Interest II-LTIO-2A,
REMIC II Regular Interest II-LTIO-2B and REMIC II Regular Interest II- LTIO-2C
for such Distribution Date multiplied by a fraction, the numerator of which is
the Notional


                                      -29-

<PAGE>



Amount for REMIC II Regular Interest II-LTIO-2A, REMIC II Regular Interest
II-LTIO-2B and REMIC II Regular Interest II-LTIO-2C immediately prior to such
Distribution Date and the denominator of which is the aggregate Stated Principal
Balance of the Group II Mortgage Loans as of the first day of the month
preceding the month of such Distribution Date and (y) a fraction, the numerator
of which is 30 and the denominator of which is the actual number of days elapsed
in the related Interest Accrual Period. For federal income tax purposes, the
economic equivalent of such rate shall be expressed as the weighted average of
the REMIC II Remittance Rates on (a) REMIC II Regular Interest II-LT1SUB,
subject to a cap and a floor equal to the Expense Adjusted Net Mortgage Rates of
the Group I Mortgage Loans and (b) REMIC II Regular Interest II-LT2SUB, subject
to a cap and a floor equal to the Expense Adjusted Net Mortgage Rates of the
Group II Mortgage Loans, weighted on the basis of the Uncertificated Balance of
each such REMIC II Regular Interest.

                      "Net WAC Rate Carryover Amount": With respect to the Class
A Certificates and the Mezzanine Certificates and any Distribution Date on which
the Pass-Through Rate is limited to the applicable Net WAC Pass-Through Rate, an
amount equal to the sum of (i) the excess of (x) the amount of interest the
Class A Certificates or any Class of Mezzanine Certificates would have been
entitled to receive on such Distribution Date if the applicable Net WAC
Pass-Through Rate would not have been applicable to such Certificates on such
Distribution Date over (y) the amount of interest paid on such Distribution Date
at the applicable Net WAC Pass-Through Rate plus (ii) the related Net WAC Rate
Carryover Amount for the previous Distribution Date not previously distributed
together with interest thereon at a rate equal to the Pass-Through Rate for such
class of Certificates for the most recently ended Interest Accrual Period.

                      "New Lease": Any lease of REO Property entered into on
behalf of REMIC I, including any lease renewed or extended on behalf of REMIC I,
if REMIC I has the right to renegotiate the terms of such lease.

                      "Nonrecoverable P&I Advance": Any P&I Advance previously
made or proposed to be made in respect of a Mortgage Loan or REO Property that,
in the good faith business judgment of the Servicer or a successor Servicer
(including the Trustee or the Master Servicer) will not or, in the case of a
proposed P&I Advance, would not be ultimately recoverable from related Late
Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.

                      "Nonrecoverable Servicing Advance": Any Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan or REO
Property that, in the good faith business judgment of the Servicer, will not or,
in the case of a proposed Servicing Advance, would not be ultimately recoverable
from related Late Collections, Insurance Proceeds or Liquidation Proceeds on
such Mortgage Loan or REO Property as provided herein.

                      "Non-United States Person": Any Person other than a United
States Person.

                      "Notional Amount": With respect to the Class CE
Certificates and any Distribution Date, the Uncertificated Balance of the REMIC
II Regular Interests (other than REMIC II Regular Interest II-LTP, REMIC II
Regular Interest II-LTIO-1A, REMIC II Regular Interest II-



                                      -30-
<PAGE>

LTIO-1B, REMIC II Regular Interest II-LTIO-1C, REMIC II Regular Interest
II-LTIO-2A, REMIC II Regular Interest II-LTIO-2B and REMIC II Regular Interest
II-LTIO-2C) for such Distribution Date. With respect to the Class A-IO
Certificates an amount equal to the Uncertificated Notional Amount for REMIC I
Regular Interest I-LTIO-1 and REMIC I Regular Interest I-LTIO-2.

                      "Offered Certificates" shall mean the Class A
Certificates, the Class A-IO Certificates and the Mezzanine Certificates,
collectively.

                      "Officers' Certificate": A certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President or a vice
president (however denominated), or by the Treasurer, the Secretary, or one of
the assistant treasurers or assistant secretaries of the Servicer, the Seller or
the Depositor, as applicable.

                      "One-Month LIBOR": With respect to the Class A-1
Certificates, the Mezzanine Certificates, REMIC II Regular Interest II-LTA1A,
REMIC II Regular Interest II-LTA2, REMIC II Regular Interest II-LTM1, REMIC II
Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular
Interest II-LTM4, REMIC II Regular Interest II-LTM5 and REMIC II Regular
Interest II-LTM6 and any Interest Accrual Period therefor, the rate determined
by the Securities Administrator on the related Interest Determination Date on
the basis of the offered rate for one-month U.S. dollar deposits, as such rate
appears on Telerate Page 3750 as of 11:00 a.m. (London time) on such Interest
Determination Date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the offered
rates of the Reference Banks for one-month U.S. dollar deposits, as of 11:00
a.m. (London time) on such Interest Determination Date. In such event, the
Securities Administrator will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If on such Interest
Determination Date, two or more Reference Banks provide such offered quotations,
One-Month LIBOR for the related Interest Accrual Period shall be the arithmetic
mean of such offered quotations (rounded upwards if necessary to the nearest
whole multiple of 1/16). If on such Interest Determination Date, fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for the related
Interest Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest Rate.
Notwithstanding the foregoing, if, under the priorities described above, LIBOR
for an Interest Determination Date would be based on LIBOR for the previous
Interest Determination Date for the third consecutive Interest Determination
Date, the Securities Administrator shall select an alternative comparable index
(over which the Securities Administrator has no control), used for determining
one-month Eurodollar lending rates that is calculated and published (or
otherwise made available) by an independent party. The establishment of
One-Month LIBOR by the Securities Administrator and the Securities
Administrator's subsequent calculation of the One-Month LIBOR Pass-Through Rates
for the relevant Interest Accrual Period, shall, in the absence of manifest
error, be final and binding.

                      "One-Month LIBOR Pass-Through Rate": With respect to the
Class A-1 Certificates and, for purposes of the definition of "Marker Rate",
REMIC II Regular Interest II-LTA1, a per annum rate equal to One-Month LIBOR
plus the related Certificate Margin.





                                      -31-
<PAGE>

                      With respect to the Class A-2 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTA2,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      With respect to the Class M-1 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTM1,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      With respect to the Class M-2 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTM2,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      With respect to the Class M-3 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTM3,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      With respect to the Class M-4 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTM4,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      With respect to the Class M-5 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTM5,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      With respect to the Class M-6 Certificates and, for
purposes of the definition of "Marker Rate", REMIC II Regular Interest II-LTM6,
a per annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                      "Opinion of Counsel": A written opinion of counsel, who
may, without limitation, be salaried counsel for the Depositor, the Servicer,
the Securities Administrator or the Master Servicer, acceptable to the Trustee,
except that any opinion of counsel relating to (a) the qualification of any of
any REMIC as a REMIC or (b) compliance with the REMIC Provisions must be an
opinion of Independent counsel.

                      "Optional Termination Date": Shall mean the Distribution
Date on which the aggregate principal balance of the Mortgage Loans (and
properties acquired in respect thereof) remaining in the Trust Fund is reduced
to less than 10% of the aggregate principal balance of the Mortgage Loans as of
the Cut-off Date.

                      "Originator": Fremont Investment & Loan, a California
corporation.

                      "Overcollateralization Amount": With respect to any
Distribution Date, the excess, if any, of (a) the aggregate Stated Principal
Balances of the Mortgage Loans and REO Properties immediately following such
Distribution Date over (b) the sum of the aggregate Certificate Principal
Balances of the Class A Certificates, the Mezzanine Certificates and the Class




                                      -32-
<PAGE>

P Certificates as of such Distribution Date (after taking into account the
payment of the Principal Remittance Amount on such Distribution Date).

                      "Overcollateralization Increase Amount": With respect to
the Class A Certificates and the Mezzanine Certificates and any Distribution
Date is any amount of Net Monthly Excess Cashflow actually applied as an
accelerated payment of principal to the extent the Required
Overcollateralization Amount exceeds the Overcollateralization Amount.

                      "Overcollateralization Reduction Amount": With respect to
any Distribution Date, is the lesser of (i) the amount by which the
Overcollateralization Amount exceeds the Required Overcollateralization Amount
and (ii) the Principal Remittance Amount; provided however that on any
Distribution Date on which a Trigger Event is in effect, the
Overcollateralization Reduction Amount shall equal zero.

                      "Ownership Interest": As to any Certificate, any ownership
or security 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, as owner or as pledgee.

                      "P&I Advance": As to any Mortgage Loan or REO Property,
any advance made by the Servicer in respect of any Determination Date pursuant
to Section 5.03 or in respect of any Distribution Date by a successor Servicer
(including the Trustee or the Master Servicer)) pursuant to Section 8.02 (which
advances shall not include interest shortfalls due to bankruptcy proceedings or
application of the Relief Act or similar state laws.)

                      "Pass-Through Rate": With respect to the Class A
Certificates and the Mezzanine Certificates and any Distribution Date, a rate
per annum equal to the lesser of (i) the related One-Month LIBOR Pass-Through
Rate for such Distribution Date and (ii) the related Net WAC Pass-Through Rate
for such Distribution Date.

                      With respect to the Class CE Certificates and any
Distribution Date, a rate per annum equal to the percentage equivalent of a
fraction, the numerator of which is the sum of the amounts calculated pursuant
to clauses (i) through (xi) below, and the denominator of which is the aggregate
Uncertificated Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTA1, REMIC II Regular Interest II-LTA2, REMIC II Regular Interest
II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3,
REMIC II Regular Interest II- LTM4, REMIC II Regular Interest II-LTM5, REMIC II
Regular Interest LTM6 and REMIC II Regular Interest II-LTZZ. For purposes of
calculating the Pass-Through Rate for the Class CE Certificates, the numerator
is equal to the sum of the following components:

                  (i) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTAA minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II-LTAA;

                  (ii)the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTA1 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II-LTA1;




                                      -33-
<PAGE>

                  (iii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTA2 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTA2;

                  (iv) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM1 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM1;

                  (v) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTM2 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II-LTM2;

                  (vi) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM3 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM3;

                  (vii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM4 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM4;

                  (viii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM5 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM5;

                  (ix) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM6 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM6;

                  (x) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTZZ minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II-LTZZ; and

                  (xi) 100% of the interest on REMIC II Regular Interest II-LTP.

                      "Percentage Interest": With respect to any Class of
Certificates (other than the Residual Certificates), the undivided percentage
ownership in such Class evidenced by such Certificate, expressed as a
percentage, the numerator of which is the initial Certificate Principal Balance
represented by such Certificate and the denominator of which is the aggregate
initial Certificate Principal Balance or Notional Amount of all of the
Certificates of such Class. The Class A Certificates and the Mezzanine
Certificates are issuable only in minimum Percentage Interests corresponding to
minimum initial Certificate Principal Balances of $25,000 and integral multiples
of $1.00 in excess thereof. The Class A-IO Certificates are issuable only in
minimum Percentage Interests corresponding to minimum initial Notional Amounts
of $25,000 and integral multiples of $1.00 in excess thereof. The Class P
Certificates are issuable only in Percentage Interests corresponding to initial
Certificate Principal Balances of $20 and integral multiples thereof. The




                                      -34-
<PAGE>

Class CE Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $10,000 and
integral multiples of $1.00 in excess thereof; provided, however, that a single
Certificate of each such Class of Certificates may be issued having a Percentage
Interest corresponding to the remainder of the aggregate initial Certificate
Principal Balance of such Class or to an otherwise authorized denomination for
such Class plus such remainder. With respect to any Residual Certificate, the
undivided percentage ownership in such Class evidenced by such Certificate, as
set forth on the face of such Certificate. The Residual Certificates are
issuable in Percentage Interests of 20% and integral multiples of 5% in excess
thereof.

                      "Periodic Rate Cap": With respect to each Adjustable Rate
Mortgage Loan and any Adjustment Date therefor, the fixed percentage set forth
in the related Mortgage Note, which is the maximum amount by which the Mortgage
Rate for such Adjustable Rate Mortgage Loan may increase or decrease (without
regard to the Maximum Mortgage Rate or the Minimum Mortgage Rate) on such
Adjustment Date from the Mortgage Rate in effect immediately prior to such
Adjustment Date.

                      "Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Master
Servicer, the Trustee or any of their respective Affiliates:

                      (i) direct obligations of, or obligations fully guaranteed
         as to timely payment of principal and interest by, the United States or
         any agency or instrumentality thereof, provided such obligations are
         backed by the full faith and credit of the United States;

                      (ii) demand and time deposits in, certificates of deposit
         of, or bankers' acceptances issued by, any Depository Institution;

                      (iii) repurchase obligations with respect to any security
         described in clause (i) above entered into with a Depository
         Institution (acting as principal);

                      (iv) securities bearing interest or sold at a discount
         that are issued by any corporation incorporated under the laws of the
         United States of America or any state thereof and that are rated by
         each Rating Agency that rates such securities in its highest long-term
         unsecured rating categories at the time of such investment or
         contractual commitment providing for such investment;

                      (v) commercial paper (including both non-interest-bearing
         discount obligations and interest-bearing obligations payable on demand
         or on a specified date not more than 30 days after the date of
         acquisition thereof) that is rated by each Rating Agency that rates
         such securities in its highest short-term unsecured debt rating
         available at the time of such investment;

                      (vi) units of money market funds that have been rated
         "AAA" by Fitch (if rated by Fitch), and "AAAm" or "AAAm-G" by S&P or
         "Aaa" by Moody's including any such




                                      -35-
<PAGE>

         money market fund managed or advised by the Master Servicer, the
         Trustee or any of their Affiliates; and

                      (vii) if previously confirmed in writing to the Trustee,
         any other demand, money market or time deposit, or any other
         obligation, security or investment, as may be acceptable to the Rating
         Agencies as a permitted investment of funds backing securities having
         ratings equivalent to its highest initial rating of the Class A
         Certificates;

provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.

                      "Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.

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

                      "Plan": Any employee benefit plan or certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and bank collective investment funds and insurance
company general or separate accounts in which such plans, accounts or
arrangements are invested, that are subject to ERISA or Section 4975 of the
Code.

                      "Prepayment Assumption": A prepayment rate for the
Mortgage Loans of 28% CPR. The Prepayment Assumption is used solely for
determining the accrual of original issue discount on the Certificates for
federal income tax purposes. A CPR (or Constant Prepayment Rate) represents an
annualized constant assumed rate of prepayment each month of a pool of mortgage
loans relative to its outstanding principal balance for the life of such pool.

                      "Prepayment Charge": With respect to any Principal
Prepayment, any prepayment premium, penalty or charge payable by a Mortgagor in
connection with any Principal Prepayment on a Mortgage Loan pursuant to the
terms of the related Mortgage Note (other than any Servicer Prepayment Charge
Payment Amount).

                      "Prepayment Charge Schedule": As of any date, the list of
Mortgage Loans providing for a Prepayment Charge included in the Trust Fund on
such date, attached hereto as Schedule 2 (including the prepayment charge
summary attached thereto). The Depositor shall deliver or cause the delivery of
the Prepayment Charge Schedule to the Servicer, the Master Servicer and the
Trustee on the Closing Date. The Prepayment Charge Schedule shall set forth the
following information with respect to each Prepayment Charge:

                      (i) the Mortgage Loan identifying number;





                                      -36-
<PAGE>

                      (ii) a code indicating the type of Prepayment Charge;

                      (iii) the date on which the first Monthly Payment was due
                  on the related Mortgage Loan;

                      (iv) the term of the related Prepayment Charge;

                      (v) the original Stated Principal Balance of the related
                  Mortgage Loan; and

                      (vi) the Stated Principal Balance of the related Mortgage
                  Loan as of the Cut-off Date.

                      "Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment that was applied by the Servicer to
reduce the outstanding principal balance of such Mortgage Loan on a date
preceding the Due Date in the succeeding Prepayment Period, an amount equal to
interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Servicer and the Master Servicer in respect of any Prepayment
Interest Shortfall are set forth in Section 3.22 and Section 4.19, respectively.

                      "Prepayment Period": For any Distribution Date, the
calendar month immediately preceding the month in which the related Distribution
Date occurs.

                      "Principal Prepayment": Any payment of principal made by
the Mortgagor on a Mortgage Loan which is received in advance of its scheduled
Due Date and which is not accompanied by an amount of interest representing the
full amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.

                      "Principal Distribution Amount": With respect to any
Distribution Date is the sum of the Group I Principal Distribution Amount and
the Group II Principal Distribution Amount.

                      "Principal Remittance Amount": With respect to any
Distribution Date is the sum of the Group I Principal Remittance Amount and the
Group II Principal Remittance Amount.

                      "Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03 or
Section 10.01, and as confirmed by a certification of a Servicing Officer to the
Trustee, an amount equal to the sum of (i) 100% of the Stated Principal Balance
thereof as of the date of purchase (or such other price as provided in Section
10.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on such Stated
Principal Balance at the applicable Net Mortgage Rate in effect from time to
time from the Due Date as to which interest was last covered by a payment by the
Mortgagor or a P&I Advance by the Servicer, which payment or P&I Advance had as
of the date of purchase been distributed pursuant to Section 5.01, through the
end of the calendar month in which the purchase is to be effected and (y) an REO
Property, the sum of (1) accrued interest on such Stated Principal Balance at
the applicable Net Mortgage Rate in effect from time to time from the Due Date
as to which interest was last covered by a payment by




                                      -37-
<PAGE>

the Mortgagor or a P&I Advance by the Servicer through the end of the calendar
month immediately preceding the calendar month in which such REO Property was
acquired, plus (2) REO Imputed Interest for such REO Property for each calendar
month commencing with the calendar month in which such REO Property was acquired
and ending with the calendar month in which such purchase is to be effected, net
of the total of all net rental income, Insurance Proceeds, Liquidation Proceeds
and P&I Advances that as of the date of purchase had been distributed as or to
cover REO Imputed Interest pursuant to Section 5.01, (iii) any unreimbursed
Servicing Advances and P&I Advances (including Nonrecoverable P&I Advances and
Nonrecoverable Servicing Advances) and any unpaid Servicing Fees allocable to
such Mortgage Loan or REO Property and (iv) in the case of a Mortgage Loan
required to be purchased pursuant to Section 2.03, expenses reasonably incurred
or to be incurred by the Servicer or the Trustee in respect of the breach or
defect giving rise to the purchase obligation, any costs and expenses incurred
by the Trust Fund and the Trustee in connection with any violation by any such
Mortgage Loan of any predatory or abusive lending law.

                      "Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) have a Maximum Mortgage Rate not less
than the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) have a Minimum
Mortgage Rate not less than the Minimum Mortgage Rate of the Deleted Mortgage
Loan, (v) have a Gross Margin equal to the Gross Margin of the Deleted Mortgage
Loan, (vi) have a next Adjustment Date not more than two months later than the
next Adjustment Date on the Deleted Mortgage Loan, (vii) have a remaining term
to maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (viii) have the same Due Date as the Due Date on the
Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (x) have a lien priority equal to or higher than
the lien priority of the Deleted Mortgage Loan, (xi) have a credit grade at
least equal to the credit grading assigned on the Deleted Mortgage Loan, (xii)
is a "qualified mortgage" as defined in the REMIC Provisions and (xiii) conform
to each representation and warranty set forth in Section 6 of the Mortgage Loan
Purchase Agreement applicable to the Deleted Mortgage Loan. In the event that
one or more mortgage loans are substituted for one or more Deleted Mortgage
Loans, the amounts described in clause (i) hereof shall be determined on the
basis of aggregate principal balances, the Mortgage Rates described in clause
(ii) hereof shall be determined on the basis of weighted average Mortgage Rates,
the terms described in clause (vii) hereof shall be determined on the basis of
weighted average remaining term to maturity, the Loan-to-Value Ratios described
in clause (ix) hereof shall be satisfied as to each such mortgage loan, the
credit grades described in clause (x) hereof shall be satisfied as to each such
mortgage loan and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xii) hereof must be
satisfied as to each Qualified Substitute Mortgage Loan or in the aggregate, as
the case may be.

                      "Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than a nominal amount in excess of the existing
first mortgage loan and any subordinate




                                      -38-
<PAGE>

mortgage loan on the related Mortgaged Property and related closing costs, and
were used exclusively (except for such nominal amount) to satisfy the then
existing first mortgage loan and any subordinate mortgage loan of the Mortgagor
on the related Mortgaged Property and to pay related closing costs.

                      "Rating Agency or Rating Agencies": Moody's, Fitch and S&P
or their successors. If such agencies or their successors are no longer in
existence, "Rating Agencies" shall be such nationally recognized statistical
rating agencies, or other comparable Persons, designated by the Depositor,
notice of which designation shall be given to the Trustee and the Servicer.

                      "Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made, an amount (not less than
zero), as reported by the Servicer to the Master Servicer equal to (i) the
unpaid principal balance of such Mortgage Loan as of the commencement of the
calendar month in which the Final Recovery Determination was made, plus (ii)
accrued interest from the Due Date as to which interest was last paid by the
Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Section 3.09(a)(ix) and Section 3.13(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Servicer with respect to such Mortgage Loan
pursuant to Section 3.09(a)(iii).

                      With respect to any REO Property as to which a Final
Recovery Determination has been made, an amount (not less than zero) equal to
(i) the unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.09(a)(ix) and Section 3.13(b), minus
(v) the aggregate of all P&I Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the Servicer in respect of such REO Property or the related
Mortgage Loan for which the Servicer has been or, in connection with such Final
Recovery Determination, will be reimbursed pursuant to Section 3.21 out of
rental income, Insurance Proceeds and Liquidation Proceeds received in respect
of such REO Property, minus (vi) the total of all net rental income, Insurance
Proceeds and Liquidation Proceeds received in respect of such REO Property that
has been, or in connection




                                      -39-
<PAGE>

with such Final Recovery Determination, will be transferred to the Distribution
Account pursuant to Section 3.21.

                      With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.

                      With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.

                      "Record Date": With respect to each Distribution Date and
the Class A Certificates and the Mezzanine Certificates, the Business Day
immediately preceding such Distribution Date for so long as such Certificates
are Book-Entry Certificates. With respect to each Distribution Date and any
other Class of Certificates, including any Definitive Certificates, the last day
of the calendar month immediately preceding the month in which such Distribution
Date occurs.

                      "Reference Banks": Barclay's Bank PLC, The Tokyo
Mitsubishi Bank and National Westminster Bank PLC and their successors in
interest; provided, however, that if any of the foregoing banks are not suitable
to serve as a Reference Bank, then any leading banks selected by the Securities
Administrator which are engaged in transactions in Eurodollar deposits in the
International Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Depositor or any Affiliate thereof and (iii) which have been designated as
such by the Securities Administrator.

                      "Refinanced Mortgage Loan": A Mortgage Loan the proceeds
of which were not used to purchase the related Mortgaged Property.

                      "Regular Certificate": Any Class A Certificate, Class A-IO
Certificate, Mezzanine Certificate, Class CE Certificate or Class P Certificate.

                      "Regular Interest": A "regular interest" in a REMIC within
the meaning of Section 860G(a)(1) of the Code.

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

                      "Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended Due Period as a
result of the application of the Relief Act.

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





                                      -40-
<PAGE>

                      "REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans and Prepayment Charges as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof; (ii) any REO Property, together
with all collections thereon and proceeds thereof; (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof; (iv) the
Depositor's rights under the Mortgage Loan Purchase Agreement (including any
security interest created thereby); (v) the Collection Account (other than any
amounts representing any Servicer Prepayment Charge Payment Amount), the
Distribution Account and any REO Account, and such assets that are deposited
therein from time to time and any investments thereof, together with any and all
income, proceeds and payments with respect thereto. Notwithstanding the
foregoing, however, REMIC I specifically excludes (i) all payments and other
collections of principal and interest due on the Mortgage Loans on or before the
Cut-off Date and all Prepayment Charges payable in connection with Principal
Prepayments made before the Cut-off Date, (ii) the Reserve Fund and any amounts
on deposit therein from time to time and any proceeds thereof and (iii) the Cap
Contracts.

                      "REMIC I Regular Interest": Any of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I Regular Interests are set forth in the
Preliminary Statement hereto.

                      "REMIC I Regular Interest I-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC I Regular Interest I-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC I Regular Interest I-LTIO-1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTIO-1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.




                                      -41-
<PAGE>

                      "REMIC I Regular Interest I-LTIO-2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTIO-2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC I Regular Interest I-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTP
shall be entitled to the Prepayment Charges collected by the applicable
Servicer, shall accrue interest at the related REMIC I Remittance Rate in effect
from time to time, and shall be entitled to a distribution of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC I Remittance Rate": With respect to REMIC I Regular
Interest I-LT1, REMIC I Regular Interest I-LTIO-1 and REMIC I Regular Interest
I-LTP and any Distribution Date, the weighted average of the Expense Adjusted
Mortgage Rates on the then outstanding Group I Mortgage Loans weighted based on
their Stated Principal Balances as of the first day of the calendar month
preceding the month in which the Distribution Date occurs. With respect to REMIC
I Regular Interest I-LT2 and REMIC I Regular Interest I-LTIO-2 and any
Distribution Date, the weighted average of the Expense Adjusted Mortgage Rates
on the then outstanding Group II Mortgage Loans weighted based on their Stated
Principal Balances as of the first day of the calendar month preceding the month
in which the Distribution Date occurs.

                      "REMIC II": The segregated pool of assets consisting of
all of the REMIC I Regular Interests conveyed in trust to the Trustee, for the
benefit of REMIC III, as holder of the REMIC III Regular Interests, and the
Class R-III Interest pursuant to Section 2.07, and all amounts deposited
therein, with respect to which a separate REMIC election is to be made.

                      "REMIC II Interest Loss Allocation Amount": With respect
to any Distribution Date, an amount equal to (a) the product of (i) the
aggregate Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC II Remittance Rate for REMIC II Regular Interest
II-LTAA minus the Marker Rate, divided by (b) 12.

                      "REMIC II Marker Allocation Percentage": 0.50% of any
amount payable or loss attributable from the Mortgage Loans, which shall be
allocated to REMIC II Regular Interest II-LTAA, REMIC II Regular Interest
II-LTA1, REMIC II Regular Interest II-LTA2, REMIC II Regular Interest II-LTM1,
REMIC II Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II
Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular
Interest II-LTM6, REMIC II Regular Interest II-LTZZ and REMIC II Regular
Interest II-LTP.

                      "REMIC II Overcollateralization Amount": With respect to
any date of determination, (i) 0.50% of the aggregate Uncertificated Balances of
the REMIC II Regular Interests minus (ii) the aggregate of the Uncertificated
Balances of REMIC II Regular Interest II-LTA1, REMIC II Regular Interest
II-LTA2, REMIC II Regular Interest II-LTM1, REMIC II Regular Interest




                                      -42-
<PAGE>

II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular Interest II-LTM4,
REMIC II Regular Interest II-LTM5, REMIC II Regular Interest LTM6 and REMIC
Regular Interest II-LTP, in each case as of such date of determination.

                      "REMIC II Principal Loss Allocation Amount": With respect
to any Distribution Date, an amount equal to (a) the product of (i) 0.50% of the
aggregate Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
aggregate of the Uncertificated Balances of REMIC II Regular Interest II-LTA1,
REMIC II Regular Interest II-LTA2, REMIC II Regular Interest II-LTM1, REMIC II
Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular
Interest II-LTM4, REMIC II Regular Interest II-LTM5 and REMIC II Regular
Interest II-LTM6 and the denominator of which is the aggregate of the
Uncertificated Balances of REMIC II Regular Interest II-LTA, REMIC II Regular
Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest
II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5,
REMIC II Regular Interest II-LTM6 and REMIC II Regular Interest II-LTZZ.

                      "REMIC II Regular Interest": Any of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. Each REMIC II Regular Interest
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance or Uncertificated Notional Amount, as applicable, as set
forth in the Preliminary Statement hereto. The designations for the respective
REMIC II Regular Interests are set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTAA": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTAA
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTA1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II . REMIC II Regular Interest II-LTA1
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTA2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II . REMIC II Regular Interest II-LTA2
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.





                                      -43-
<PAGE>

                      "REMIC II Regular Interest II-LTIO-1A": One of the
separate non-certificated beneficial ownership interests in REMIC II issued
hereunder and designated as a Regular Interest in REMIC II. REMIC II Regular
Interest II-LTIO-1A shall accrue interest at the related REMIC II Remittance
Rate on its Uncertificated Notional Amount, as in effect from time to time.
REMIC II Regular Interest II-LTIO-1A has no principal balance and is not
entitled to distributions of principal.

                      "REMIC II Regular Interest II-LTIO-1B": One of the
separate non-certificated beneficial ownership interests in REMIC II issued
hereunder and designated as a Regular Interest in REMIC II. REMIC II Regular
Interest II-LTIO-1B shall accrue interest at the related REMIC II Remittance
Rate on its Uncertificated Notional Amount, as in effect from time to time.
REMIC II Regular Interest II-LTIO-1B has no principal balance and is not
entitled to distributions of principal.

                      "REMIC II Regular Interest II-LTIO-1C": One of the
separate non-certificated beneficial ownership interests in REMIC II issued
hereunder and designated as a Regular Interest in REMIC II. REMIC II Regular
Interest II-LTIO-1C shall accrue interest at the related REMIC II Remittance
Rate on its Uncertificated Notional Amount, as in effect from time to time.
REMIC II Regular Interest II-LTIO-1C has no principal balance and is not
entitled to distributions of principal.

                      "REMIC II Regular Interest II-LTIO-2A": One of the
separate non-certificated beneficial ownership interests in REMIC II issued
hereunder and designated as a Regular Interest in REMIC II. REMIC II Regular
Interest II-LTIO-2A shall accrue interest at the related REMIC II Remittance
Rate on its Uncertificated Notional Amount, as in effect from time to time.
REMIC II Regular Interest II-LTIO-2A has no principal balance and is not
entitled to distributions of principal.

                      "REMIC II Regular Interest II-LTIO-2B": One of the
separate non-certificated beneficial ownership interests in REMIC II issued
hereunder and designated as a Regular Interest in REMIC II. REMIC II Regular
Interest II-LTIO-2B shall accrue interest at the related REMIC II Remittance
Rate on its Uncertificated Notional Amount, as in effect from time to time.
REMIC II Regular Interest II-LTIO-2B has no principal balance and is not
entitled to distributions of principal.

                      "REMIC II Regular Interest II-LTIO-2C": One of the
separate non-certificated beneficial ownership interests in REMIC II issued
hereunder and designated as a Regular Interest in REMIC II. REMIC II Regular
Interest II-LTIO-2C shall accrue interest at the related REMIC II Remittance
Rate on its Uncertificated Notional Amount, as in effect from time to time.
REMIC II Regular Interest II-LTIO-2C has no principal balance and is not
entitled to distributions of principal.

                      "REMIC II Regular Interest II-LTM1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTM1
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTM2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTM2
shall accrue interest at the related REMIC II




                                      -44-
<PAGE>

Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTM3": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTM3
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTM4": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTM4
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTM5": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTM5
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTM6": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTM6
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTZZ": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTZZ
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTP
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.





                                      -45-
<PAGE>

                      "REMIC II Regular Interest II-LT1SUB": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest
II-LT1SUB shall accrue interest at the related REMIC II Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LT1GRP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest
II-LT1GRP shall accrue interest at the related REMIC II Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LT2SUB": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest
II-LT2SUB shall accrue interest at the related REMIC II Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LT2GRP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest
II-LT2GRP shall accrue interest at the related REMIC II Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Regular Interest II-LTXX": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTXX
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                      "REMIC II Remittance Rate": With respect to REMIC II
Regular Interest II-LTAA, REMIC II Regular Interest II-LTA1, REMIC II Regular
Interest II-LTA2, REMIC II Regular Interest II-LTM1, REMIC II Regular Interest
II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular Interest II-LTM4,
REMIC II Regular Interest II-LTM5, REMIC II Regular Interest II-LTM6, REMIC II
Regular Interest II-LTZZ, REMIC II Regular Interest II-LTP, REMIC II Regular
Interest II-LT1SUB, REMIC II Regular Interest II-LT2SUB and REMIC II Regular
Interest II-LTXX, the weighted average of (i) the REMIC I Remittance Rate on
REMIC I Regular Interest I-LT1, (ii) the excess, if any, of (x) the REMIC I
Remittance Rate on REMIC I Regular Interest I-LTIO-1 over (y) (A) for the 1st
through the 10th Distribution Date, 5.50%, (B) for the 11th through the 20th
Distribution Date, 4.50%, (C) for the 21st through the 30th Distribution Date,
3.50% and (D) thereafter, 0.00%, (iii) the REMIC I Remittance Rate on REMIC I
Regular Interest I-LT2 and




                                      -46-
<PAGE>

(iv) the excess, if any, of (x) the REMIC I Remittance Rate on REMIC I Regular
Interest I-LTIO-2 over (y) (A) for the 1st through the 10th Distribution Date,
5.50%, (B) for the 11th through the 20th Distribution Date, 4.50%, (C) for the
21st through the 30th Distribution Date, 3.50% and (D) thereafter, 0.00%, in
each case weighted on the basis of each such REMIC I Regular Interest's
Uncertificated Balance.

                      With respect to REMIC II Regular Interest II-LTIO-1A and
REMIC II Regular Interest II-LTIO-2A, (i) from the 1st through the 10th
Distribution Date, 1.00% per annum and (ii) thereafter, 0.00%.

                      With respect to REMIC II Regular Interest II-LTIO-1B and
REMIC II Regular Interest II-LTIO-2B, (i) from the 1st through the 20th
Distribution Date, 1.00% per annum and (ii) thereafter, 0.00%.

                      With respect to REMIC II Regular Interest II-LTIO-1C and
REMIC II Regular Interest II-LTIO-2C, (i) the lesser of from the 1st through the
30th Distribution Date, (A) 3.50% per annum and (B) the applicable Net WAC
Pass-Through Rate and (ii) thereafter, 0.00%.

                      With respect to REMIC II Regular Interest II-LT1GRP, the
weighted average of (i) the REMIC I Remittance Rate on REMIC I Regular Interest
I-LT1 and (ii) the excess, if any, of (x) the REMIC I Remittance Rate on REMIC I
Regular Interest I-LTIO-1 over (y) (A) for the 1st through the 10th Distribution
Date, 5.50%, (B) for the 11th through the 20th Distribution Date, 4.50%, (C) for
the 21st through the 30th Distribution Date, 3.50% and (D) thereafter, 0.00%, in
each case weighted on the basis of each such REMIC II Regular Interest's
Uncertificated Balance.

                      With respect to REMIC II Regular Interest II-LT2GRP, the
weighted average of (i) the REMIC I Remittance Rate on REMIC I Regular Interest
I-LT2 and (ii) the excess, if any, of (x) the REMIC I Remittance Rate on REMIC I
Regular Interest I-LTIO-2 over (y) (A) for the 1st through the 10th Distribution
Date, 5.50%, (B) for the 11th through the 20th Distribution Date, 4.50%, (C) for
the 21st through the 30th Distribution Date, 3.50% and (D) thereafter, 0.00%, in
each case weighted on the basis of each such REMIC II Regular Interest's
Uncertificated Balance.

                      "REMIC II Sub WAC Allocation Percentage": 0.50% of any
amount payable or loss attributable from the Mortgage Loans, which shall be
allocated to REMIC II Regular Interest II-LT1SUB, REMIC II Regular Interest
II-LT1GRP, REMIC II Regular Interest II-LT2SUB, REMIC II Regular Interest
II-LT2GRP and REMIC II Regular Interest II-LTXX.

                      "REMIC II Subordinated Balance Ratio": The ratio among the
Uncertificated Balances of each REMIC II Regular Interest ending with the
designation "SUB,", equal to the ratio among, with respect to each such REMIC II
Regular Interest, the excess of (x) the aggregate Stated Principal Balance of
the Group I Mortgage Loans or Group II Mortgage Loans, as applicable over (y)
the current Certificate Principal Balance of related Class A Certificates.

                      "REMIC II Required Overcollateralization Amount": 1% of
the Required Overcollateralization Amount.





                                      -47-
<PAGE>

                      "REMIC III": The segregated pool of assets consisting of
all of the REMIC II Regular Interests conveyed in trust to the Trustee, for the
benefit of the REMIC III Certificateholders pursuant to Section 2.09, and all
amounts deposited therein, with respect to which a separate REMIC election is to
be made.

                      "REMIC III Certificate": Any Regular Certificate or Class
R Certificate.

                      "REMIC III Certificateholder": The Holder of any REMIC III
Certificate.

                      "REMIC Provisions": Provisions of the federal income tax
law relating to real estate mortgage investment conduits, which appear at
Section 860A through 860G of the Code, and related provisions, and proposed,
temporary and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.

                      "Remittance Report": A report by the Securities
Administrator pursuant to Section 5.03(f).

                      "Rents from Real Property": With respect to any REO
Property, gross income of the character described in Section 856(d) of the Code
as being included in the term "rents from real property."

                      "REO Account": The account or accounts maintained, or
caused to be maintained, by the Servicer in respect of an REO Property pursuant
to Section 3.21.

                      "REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.

                      "REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of REMIC I,
one month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan, if appropriate) as of the close of business on the
Distribution Date in such calendar month.

                      "REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable in respect of the proper operation, management and
maintenance of such REO Property or (ii) payable or reimbursable to the Servicer
pursuant to Section 3.21(d) for unpaid Servicing Fees in respect of the related
Mortgage Loan and unreimbursed Servicing Advances and P&I Advances in respect of
such REO Property or the related Mortgage Loan, over (b) the REO Imputed
Interest in respect of such REO Property for such calendar month.





                                      -48-
<PAGE>

                      "REO Property": A Mortgaged Property acquired by the
Servicer on behalf of REMIC I through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.21.

                      "Required Overcollateralization Amount": With respect to
any Distribution Date (i) prior to the Stepdown Date, $9,089,206, (ii) on or
after the Stepdown Date provided a Trigger Event is not in effect, the greater
of (x) 4.00% of the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (y) $2,272,247, and (iii) on or
after the Stepdown Date and a Trigger Event is in effect, the Required
Overcollateralization Amount for the immediately preceding Distribution Date.

                      "Reserve Fund": A fund created pursuant to Section 3.24
which shall be an asset of the Trust Fund but which shall not be an asset of any
Trust REMIC.

                      "Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Securities Administrator
determines to be either (i) the arithmetic mean (rounded upwards if necessary to
the nearest whole multiple of 1/16%) of the one-month U.S. dollar lending rates
which New York City banks selected by the Securities Administrator, after
consultation with the Depositor, are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Securities Administrator
can determine no such arithmetic mean, the lowest one-month U.S. dollar lending
rate which New York City banks selected by the Securities Administrator are
quoting on such Interest Determination Date to leading European banks.

                      "Residential Dwelling": Any one of the following: (i) an
attached, detached or semi-detached one-family dwelling, (ii) an attached,
detached or semi-detached two- to four-family dwelling, (iii) a one-family
dwelling unit in a Fannie Mae eligible condominium project, or (iv) an attached,
detached or semi-detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).

                      "Residual Certificate": Any one of the Class R
Certificates.

                      "Residual Interest": The sole class of "residual
interests" in a REMIC within the meaning of Section 860G(a)(2) of the Code.

                      "Responsible Officer": When used with respect to the
Trustee, the Chairman or Vice Chairman of the Board of Directors (however
denominated), the Chairman or Vice Chairman of any Committee of the Board of
Directors, the President, the Chairman of any Committee on trust matters, any
vice president, any assistant vice president, the Secretary, any assistant
secretary, the Treasurer, any assistant treasurer, the Cashier, any assistant
cashier, any trust officer or assistant trust officer, the Controller and any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
in each case having direct responsibility for the administration of this
Agreement and, with respect to a particular matter, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.





                                      -49-
<PAGE>

                      "S&P": Standard and Poor's, a division of the McGraw-Hill
Companies, Inc.

                      "Scheduled Principal Balance": With respect to any
Mortgage Loan: (a) as of the Cut-off Date, the outstanding principal balance of
such Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any Realized Loss incurred with respect thereto as a result of a Deficient
Valuation occurring before such Due Date, but only to the extent such Realized
Loss represents a reduction in the portion of principal of such Mortgage Loan
not yet due (without regard to any acceleration of payments under the related
Mortgage and Mortgage Note) as of the date of such Deficient Valuation; and (c)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such Mortgage Loan, zero. With respect to any REO Property: (a) as of
any Due Date subsequent to the date of its acquisition on behalf of the Trust
Fund up to and including the Due Date in the calendar month in which a
Liquidation Event occurs with respect to such REO Property, an amount (not less
than zero) equal to the Scheduled Principal Balance of the related Mortgage Loan
as of the Due Date in the calendar month in which such REO Property was
acquired, minus the aggregate amount of REO Principal Amortization, if any, in
respect of such REO Property for all previously ended calendar months; and (b)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such REO Property, zero.

                      "Securities Administrator": As of the Closing Date, Wells
Fargo Bank Minnesota, National Association and thereafter, its respective
successors in interest that meet the qualifications of this Agreement. The
Securities Administrator and the Master Servicer shall at all times be the same
Person.

                      "Seller": Deutsche Bank AG New York Branch or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.

                      "Senior Interest Distribution Amount": With respect to any
Distribution Date, an amount equal to the sum of (i) the Interest Distribution
Amount for such Distribution Date for the Class A Certificates and the Class
A-IO Certificates and (ii) the Interest Carry Forward Amount, if any, for such
Distribution Date for the Class A Certificates and the Class A-IO Certificates.

                      "Servicer": Litton Loan Servicing LP or any successor
servicer appointed as herein provided, in its capacity as Servicer hereunder.

                      "Servicer's Assignee": As defined in Section 3.25(b).







                                      -50-
<PAGE>

                      "Servicer Event of Default": One or more of the events
described in Section 8.01(a).

                      "Servicer Prepayment Charge Payment Amount": The amounts
payable by the Servicer in respect of any waived Prepayment Charges pursuant to
Section 3.01.

                      "Servicer Remittance Date": With respect to any
Distribution Date, by 3:00 p.m. New York time on the Business Day preceding the
related Distribution Date.

                      "Servicer Report": A report in form and substance
acceptable to the Master Servicer and Securities Administrator on an electronic
data file or tape prepared by the Servicer pursuant to Section 5.03(a) with such
additions, deletions and modifications as agreed to by the Master Servicer, the
Securities Administrator and the Servicer.

                      "Servicing Advances": The reasonable "out-of-pocket" costs
and expenses incurred by the Servicer in connection with a default, delinquency
or other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including but not limited to foreclosures, in respect of a
particular Mortgage Loan, including any expenses incurred in relation to any
such proceedings that result from the Mortgage Loan being registered on the
MERS(R) System, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property and (iv) the performance of its
obligations under Section 3.01, Section 3.07, Section 3.11, Section 3.13 and
Section 3.21. The Servicer shall not be required to make any Nonrecoverable
Servicing Advances.

                      "Servicing Fee": With respect to each Mortgage Loan and
for any calendar month, an amount equal to one twelfth of the product of the
Servicing Fee Rate multiplied by the Scheduled Principal Balance of the Mortgage
Loans as of the Due Date in the preceding calendar month. The Servicing Fee is
payable solely from collections of interest on the Mortgage Loans.

                      "Servicing Fee Rate": 0.50% per annum.

                      "Servicing Officer": Any officer of the Servicer involved
in, or responsible for, the administration and servicing or master servicing of
Mortgage Loans, whose name and specimen signature appear on a list of Servicing
Officers furnished by the Servicer to the Trustee, the Master Servicer, the
Securities Administrator and the Depositor on the Closing Date, as such list may
from time to time be amended.

                      "Servicing Rights Pledgee": One or more lenders, selected
by the Servicer, to which the Servicer will pledge and assign all of its right,
title and interest in, to and under this Agreement, including Wachovia Bank,
National Association, as the representative of certain lenders.

                      "Single Certificate": With respect to any Class of
Certificates (other than the Residual Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance of $1,000. With respect to the




                                      -51-
<PAGE>

Residual Certificates, a hypothetical Certificate of such Class evidencing a
100% Percentage Interest in such Class.

                      "Startup Day": With respect to each Trust REMIC, the day
designated as such pursuant to Section 11.01(b) hereof.

                      "Stated Principal Balance": With respect to any Mortgage
Loan: (a) as of any date of determination up to but not including the
Distribution Date on which the proceeds, if any, of a Liquidation Event with
respect to such Mortgage Loan would be distributed, the Scheduled Principal
Balance of such Mortgage Loan as of the Cut-off Date, as shown in the Mortgage
Loan Schedule, minus the sum of (i) the principal portion of each Monthly
Payment due on a Due Date subsequent to the Cut-off Date, to the extent received
from the Mortgagor or advanced by the Servicer or a successor Servicer
(including the Trustee or the Master Servicer) and distributed pursuant to
Section 5.01 on or before such date of determination, (ii) all Principal
Prepayments received after the Cut-off Date, to the extent distributed pursuant
to Section 5.01 on or before such date of determination, (iii) all Liquidation
Proceeds and Insurance Proceeds applied by the Servicer as recoveries of
principal in accordance with the provisions of Section 3.13, to the extent
distributed pursuant to Section 5.01 on or before such date of determination,
and (iv) any Realized Loss incurred with respect thereto as a result of a
Deficient Valuation made during or prior to the Prepayment Period for the most
recent Distribution Date coinciding with or preceding such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of determination up to but
not including the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, an
amount (not less than zero) equal to the Stated Principal Balance of the related
Mortgage Loan as of the date on which such REO Property was acquired on behalf
of REMIC I, minus the sum of (i) if such REO Property was acquired before the
Distribution Date in any calendar month, the principal portion of the Monthly
Payment due on the Due Date in the calendar month of acquisition, to the extent
advanced by the Servicer or a successor Servicer (including the Trustee or the
Master Servicer) and distributed pursuant to Section 5.01 on or before such date
of determination, and (ii) the aggregate amount of REO Principal Amortization in
respect of such REO Property for all previously ended calendar months, to the
extent distributed pursuant to Section 4.01 on or before such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.

                      "Stepdown Date": The earlier to occur of (i) the later to
occur of (a) the Distribution Date occurring in June 2006 and (b) the first
Distribution Date on which the Credit Enhancement Percentage (calculated for
this purpose only after taking into account distributions of principal on the
Mortgage Loans but prior to any distribution of the Principal Distribution
Amount to the Certificates then entitled to distributions of principal on such
Distribution Date) is equal to or greater than 39.00% and (ii) the first
Distribution Date on which the aggregate Certificate Principal Balance of the
Class A Certificates has been reduced to zero.

                      "Sub-Servicer": Any Person with which the Servicer has
entered into a Sub- Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.




                                      -52-
<PAGE>

                      "Sub-Servicing Agreement": The written contract between
the Servicer and a Sub- Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02. "Substitution Shortfall
Amount": As defined in Section 2.03.

                      "Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust REMICs under the REMIC Provisions, together
with any and all other information reports or returns that may be required to be
furnished to the Certificateholders or filed with the Internal Revenue Service
or any other governmental taxing authority under any applicable provisions of
federal, state or local tax laws.

                      "Telerate Page 3750": The display designated as page
"3750" on the Dow Jones Telerate Capital Markets Report (or such other page as
may replace page 3750 on that report for the purpose of displaying London
interbank offered rates of major banks).

                      "Termination Price": As defined in Section 10.01.

                      "Terminator": As defined in Section 10.01.

                      "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.

                      "Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.

                      "Transferor": Any Person who is disposing by Transfer of
any Ownership Interest in a Certificate.

                      "Trigger Event": A Trigger Event has occurred with respect
to a Distribution Date if either (x) the Delinquency Percentage exceeds 41% of
the Credit Enhancement Percentage or (y) the aggregate amount of Realized Losses
incurred since the Cut-off Date through the last day of the related Due Period
divided by the aggregate principal balance of the Mortgage Loans as of the
Cut-off exceeds the applicable percentages set forth below with respect to such
Distribution Date:

<TABLE>
<CAPTION>
                      Distribution Date                       Percentage
                      -----------------                       ----------
<S>                                                           <C>
                      June 2006 to May 2007                   3.25%, plus 1/12 of 1.50% for each month
                                                              after June 2006
                      June 2007 to May 2008                   4.75%, plus 1/12 of 1.00% for each month
                                                              after June 2007
                      June 2008 to May 2009                   5.75%, plus 1/12 of 1.00% for each month
                                                              after June 2008
                      June 2009 to May 2010                   6.75%, plus 1/12 of 0.25% for each month
                                                              after June 2009
                      June 2010 and thereafter                7.00%
</TABLE>




                                      -53-
<PAGE>

                      "Trust": ACE Securities Corp., Home Equity Loan Trust,
Series 2003-FM1, the trust created hereunder.

                      "Trust REMIC": REMIC I, REMIC II or REMIC III.

                      "Trustee": JPMorgan Chase Bank, a New York banking
corporation, or its successor in interest, or any successor trustee appointed as
herein provided.

                      "Trust Fund": Collectively, all of the assets of REMIC I,
REMIC II, REMIC III and the Reserve Fund and any amounts on deposit therein and
any proceeds thereof, the Prepayment Charges and the Cap Contracts.

                      "Uncertificated Balance": The amount of the Uncertificated
REMIC Regular Interests outstanding as of any date of determination. As of the
Closing Date, the Uncertificated Balance of each Uncertificated REMIC Regular
Interest shall equal the amount set forth in the Preliminary Statement hereto as
its initial uncertificated balance. On each Distribution Date, the
Uncertificated Balance of the Uncertificated REMIC Regular Interest shall be
reduced by all distributions of principal made on such Uncertificated REMIC
Regular Interest on such Distribution Date pursuant to Section 5.01 and, if and
to the extent necessary and appropriate, shall be further reduced on such
Distribution Date by Realized Losses as provided in Section 5.04 and the
Uncertificated Balance of REMIC II Regular Interest II-LTZZ shall be increased
by interest deferrals as provided in Section 5.01(a)(1)(B). The Uncertificated
Balance of each Uncertificated REMIC Regular Interest shall never be less than
zero.

                      "Uncertificated Interest": With respect to any REMIC I
Regular Interest or REMIC II Regular Interest for any Distribution Date, one
month's interest at the REMIC II Remittance Rate applicable to such REMIC I
Regular Interest or REMIC II Regular Interest for such Distribution Date,
accrued on the Uncertificated Balance or Uncertificated Notional Amount, as
applicable, thereof immediately prior to such Distribution Date. Uncertificated
Interest in respect of the REMIC I Regular Interests or REMIC II Regular
Interests shall accrue on the basis of a 360-day year consisting of twelve
30-day months. Uncertificated Interest with respect to each Distribution Date,
as to any Uncertificated REMIC Regular Interest, shall be reduced by an amount
equal to the sum of (a) the aggregate Prepayment Interest Shortfall, if any, for
such Distribution Date to the extent not covered by payments pursuant to Section
3.22 or Section 4.19 and (b) the aggregate amount of any Relief Act Interest
Shortfall, if any allocated, in each case, to such REMIC I Regular Interest or
REMIC II Regular Interest pursuant to Section 1.02. In addition, Uncertificated
Interest with respect to each Distribution Date, as to any Uncertificated REMIC
Regular Interest, shall be reduced by Realized Losses, if any, allocated to such
Uncertificated REMIC Regular Interest pursuant to Section 1.02 and Section 5.04.

                      "Uncertificated Notional Amount:" With respect to REMIC II
Regular Interest II-LTIO-1A, REMIC II Regular Interest II-LTIO-1B and REMIC II
Regular Interest II-LTIO-1C, an amount equal to the Uncertificated Balance of
REMIC I Regular Interest I-LTIO-1. With respect to REMIC II Regular Interest
II-LTIO-2A, REMIC II Regular Interest II-LTIO-2B and REMIC II Regular Interest
II-LTIO-2C, an amount equal to the Uncertificated Balance of REMIC I Regular
Interest I-LTIO-2.




                                      -54-
<PAGE>

                      "Uncertificated REMIC Regular Interest": A REMIC I Regular
Interest or a REMIC II Regular Interest.

                      "Uninsured Cause": Any cause of damage to a Mortgaged
Property such that the complete restoration of such property is not fully
reimbursable by the hazard insurance policies required to be maintained pursuant
to Section 3.11.

                      "United States Person": A citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in, or under the laws of, the United States or any political subdivision thereof
(except, in the case of a partnership, to the extent provided in regulations)
provided that, for purposes solely of the restrictions on the transfer of any
Class R Certificate, no partnership or other entity treated as a partnership for
United States federal income tax purposes shall be treated as a United States
Person unless all persons that own an interest in such partnership either
directly or through any entity that is not a corporation for United States
federal income tax purposes are required to be United States Persons, or an
estate whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust. To the extent prescribed in regulations by the Secretary of the Treasury,
which have not yet been issued, a trust which was in existence on August 20,
1996 (other than a trust treated as owned by the grantor under subpart E of part
I of subchapter J of chapter I of the Code), and which was treated as a United
States person on August 20, 1996 may elect to continue to be treated as a United
States person notwithstanding the previous sentence. The term "United States"
shall have the meaning set forth in Section 7701 of the Code.

                    "Value": With respect to any Mortgaged Property, the lesser
of (i) the lesser of (a) the value thereof as determined by an appraisal made
for the originator of the Mortgage Loan at the time of origination of the
Mortgage Loan by an appraiser who met the minimum requirements of Fannie Mae and
Freddie Mac and (b) the value thereof as determined by a review appraisal
conducted by the originator of the Mortgage Loan in accordance with such
originator's underwriting guidelines, and (ii) the purchase price paid for the
related Mortgaged Property by the Mortgagor with the proceeds of the Mortgage
Loan; provided, however, (A) in the case of a Refinanced Mortgage Loan, such
value of the Mortgaged Property is based solely upon the lesser of (1) the value
determined by an appraisal made for the originator of the Mortgage Loan of such
Refinanced Mortgage Loan at the time of origination of such Refinanced Mortgage
Loan by an appraiser who met the minimum requirements of Fannie Mae and Freddie
Mac and (2) the value thereof as determined by a review appraisal conducted by
the originator of the Mortgage Loan in accordance with such originator's
underwriting guidelines, and (B) in the case of a Mortgage Loan originated in
connection with a "lease-option purchase," such value of the Mortgaged Property
is based on the lower of the value determined by an appraisal made for the
originator of such Mortgage Loan at the time of origination or the sale price of
such Mortgaged Property if the "lease option purchase price" was set less than
12 months prior to origination, and is based on the value determined by an
appraisal made for the originator of such Mortgage Loan at the time of
origination if the "lease option purchase price" was set 12 months or more prior
to origination.





                                      -55-
<PAGE>

                    "Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any such Certificate. With respect to any
date of determination, 97% of all Voting Rights will be allocated among the
holders of the Class A Certificates, the Mezzanine Certificates and the Class CE
Certificates in proportion to the then outstanding Certificate Principal
Balances of their respective Certificates, 1% of all Voting Rights will be
allocated to the holders of the Class A-IO Certificates in proportion to the
then outstanding Notional Amount of their Certificates, 1% of all Voting Rights
will be allocated to the holders of the Class P Certificates and 1/3 of 1% of
all Voting Rights will be allocated among the holders of each Class of Residual
Certificates. The Voting Rights allocated to each Class of Certificate shall be
allocated among Holders of each such Class in accordance with their respective
Percentage Interests as of the most recent Record Date.

                      "Wells Fargo": Wells Fargo Bank Minnesota, National
Association or any successor thereto.

                    SECTION 1.02. Allocation of Certain Interest Shortfalls.

                    For purposes of calculating the amount of Accrued
Certificate Interest and the amount of the Interest Distribution Amount for the
Class A Certificates, the Mezzanine Certificates, the Class A-IO Certificates
and the Class CE Certificates for any Distribution Date, (1) the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the Servicer pursuant to Section 3.22 or the Master Servicer
pursuant to Section 4.19 and any Relief Act Interest Shortfalls incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, to the Class CE Certificates based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the Notional
Amount thereof and, thereafter, among the Class M-6 Certificates, Class M-5
Certificates, the Class M-4 Certificates, the Class M-3 Certificates, the Class
M-2 Certificates, the Class M-1 Certificates and the Class A Certificates, in
that order, in each case on a PRO RATA basis based on, and to the extent of, one
month's interest at the then applicable respective Pass-Through Rate on the
respective Certificate Principal Balance or Notional Amount, as applicable of
each such Certificate and (2) the aggregate amount of any Realized Losses
allocated to the Mezzanine Certificates and Net WAC Rate Carryover Amounts paid
to the Class A Certificates and the Mezzanine Certificates incurred for any
Distribution Date shall be allocated to the Class CE Certificates on a PRO RATA
basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Notional Amount
thereof.

                    For purposes of calculating the amount of Uncertificated
Interest for the REMIC I Regular Interests for any Distribution Date, the
aggregate amount of any Prepayment Interest Shortfalls to the extent not covered
by payments pursuant to Section 3.22 or Section 4.19 and any Relief Act Interest
Shortfalls incurred in respect of the Mortgage Loans for any Distribution Date
shall be allocated (i) with respect to the Group I Mortgage Loans, first, to
REMIC I Regular Interest I-LT1 and then to REMIC I Regular Interest I-LTIO-1, in
each case to the extent of one month's interest at the then applicable
respective REMIC I Remittance Rate on the respective Uncertificated Principal
Balance of each such Uncertificated REMIC I Interest; and (ii) with respect to
the Group II Mortgage Loans, first, to REMIC I Regular Interest I-LT2 and then
to REMIC I Regular Interest I-LTIO-2, in each case to the extent of one month's
interest at the then applicable respective REMIC I Remittance Rate on the
respective Uncertificated Balance of each such Uncertificated REMIC I Interest.




                                      -56-
<PAGE>

                    For purposes of calculating the amount of Uncertificated
Interest for the REMIC II Regular Interests for any Distribution Date:

                    (A) The REMIC II Marker Allocation Percentage of the
aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Servicer pursuant to Section 3.22 or the Master
Servicer pursuant to Section 4.19) and the REMIC II Marker Allocation Percentage
of any Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans
for any Distribution Date shall be allocated first, to Uncertificated Interest
payable to REMIC II Regular Interest II-LTAA and REMIC II Regular Interest
II-LTZZ up to an aggregate amount equal to the REMIC II Interest Loss Allocation
Amount, 98% and 2%, respectively, and thereafter among REMIC II Regular Interest
II-LTA1, REMIC II Regular Interest, REMIC II Regular Interest II-LTM1, REMIC II
Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular
Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular Interest
II-LTM6 and REMIC II Regular Interest II-LTZZ PRO RATA based on, and to the
extent of, one month's interest at the then applicable respective REMIC II
Remittance Rate on the respective Uncertificated Balance of each such REMIC II
Regular Interest; and

                    (B) The REMIC II Sub WAC Allocation Percentage of the
aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Servicer pursuant to Section 3.22 or the Master
Servicer pursuant to Section 4.19) and the REMIC II Sub WAC Allocation
Percentage of any Relief Act Interest Shortfalls incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated first, to
Uncertificated Interest payable to REMIC II Regular Interest II-LT1SUB, REMIC II
Regular Interest II-LT1GRP, REMIC II Regular Interest II-LT2SUB, REMIC II
Regular Interest II-LT2GRP, and REMIC II Regular Interest II-LTXX, pro rata
based on, and to the extent of, one month's interest at the then applicable
respective REMIC II Remittance Rate on the respective Uncertificated Balance of
each such REMIC II Regular Interest.




                                      -57-
<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

                    SECTION 2.01. Conveyance of the Mortgage Loans.

                    The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, on behalf of the Trust, without recourse, for the benefit of the
Certificateholders, all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of
the Depositor under the Mortgage Loan Purchase Agreement (including, without
limitation the right to enforce the obligations of the other parties thereto
thereunder), and all other assets included or to be included in REMIC I. Such
assignment includes all interest and principal received by the Depositor or the
Servicer on or with respect to the Mortgage Loans (other than payments of
principal and interest due on such Mortgage Loans on or before the Cut-off
Date). The Depositor herewith delivers to the Trustee and the Servicer an
executed copy of the Mortgage Loan Purchase Agreement.

                    In connection with such transfer and assignment, the
Depositor does hereby deliver to, and deposit with the Custodian pursuant to the
Custodial Agreement the documents with respect to each Mortgage Loan as
described under Section 2 of the Custodial Agreement (the "Mortgage Loan
Documents"). In connection with such delivery and as further described in the
Custodial Agreement, the Custodian will be required to review such Mortgage Loan
Documents and deliver to the Trustee, the Depositor, the Servicer and the Seller
certifications (in the forms attached to the Custodial Agreement) with respect
to such review with exceptions noted thereon. In addition, under the Custodial
Agreement the Depositor will be required to cure certain defects with respect to
the Mortgage Loan Documents for the related Mortgage Loans after the delivery
thereof by the Depositor to the Custodian as more particularly set forth
therein.

                    Notwithstanding anything to the contrary contained herein,
the parties hereto acknowledge that the functions of the Trustee with respect to
the custody, acceptance, inspection and release of the Mortgage Files,
including, but not limited to certain insurance policies and documents
contemplated by Section 4.12, and preparation and delivery of the certifications
shall be performed by the Custodian pursuant to the terms and conditions of the
Custodial Agreement.

                    SECTION 2.02. Acceptance of REMIC I by Trustee.

                    The Trustee acknowledges receipt, subject to the provisions
of Section 2.01 hereof and Section 2 of the Custodial Agreement, of the Mortgage
Loan Documents and all other assets included in the definition of "REMIC I"
under clauses (i), (iii), (iv) and (v) (to the extent of amounts deposited into
the Distribution Account) and declares that it holds (or the Custodian on its
behalf holds) and will hold such documents and the other documents delivered to
it constituting a Mortgage Loan Document, and that it holds (or the Custodian on
its behalf holds) or will hold all such assets and such other assets included in
the definition of "REMIC I" in trust for the exclusive use and benefit of all
present and future Certificateholders.




                                      -58-
<PAGE>

                    SECTION 2.03. Repurchase or Substitution of Mortgage Loans.

                    (a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
a breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan that materially
and adversely affects the value of such Mortgage Loan or the interest therein of
the Certificateholders, the Trustee shall promptly notify the Seller and the
Servicer of such defect, missing document or breach and request that the Seller
deliver such missing document, cure such defect or breach within 60 days from
the date the Seller was notified of such missing document, defect or breach, and
if the Seller does not deliver such missing document or cure such defect or
breach in all material respects during such period, the Trustee shall enforce
the obligations of the Seller under the Mortgage Loan Purchase Agreement to
repurchase such Mortgage Loan from REMIC I at the Purchase Price within 90 days
after the date on which the Seller was notified of such missing document, defect
or breach, if and to the extent that the Seller is obligated to do so under the
Mortgage Loan Purchase Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be remitted to the Servicer for deposit in the Collection
Account and the Trustee, upon receipt of written certification from the Servicer
of such deposit, shall release or cause the Custodian (upon receipt of a request
for release in the form attached to the Custodial Agreement) to release to the
Seller the related Mortgage File and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty, as the Seller shall furnish to it and as shall be
necessary to vest in the Seller any Mortgage Loan released pursuant hereto, and
the Trustee shall not have any further responsibility with regard to such
Mortgage File. In lieu of repurchasing any such Mortgage Loan as provided above,
if so provided in the Mortgage Loan Purchase Agreement, the Seller may cause
such Mortgage Loan to be removed from REMIC I (in which case it shall become a
Deleted Mortgage Loan) and substitute one or more Qualified Substitute Mortgage
Loans in the manner and subject to the limitations set forth in Section 2.03(b).
It is understood and agreed that the obligation of the Seller to cure or to
repurchase (or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Trustee and the
Certificateholders.

                    In addition, promptly upon the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of the
representation or covenant of the Seller set forth in Section 5(xiv) of the
Mortgage Loan Purchase Agreement which materially and adversely affects the
interests of the Holders of the Class P Certificates in any Prepayment Charge,
the Servicer shall promptly notify the Seller and the Trustee of such breach.
The Trustee shall enforce the obligations of the Seller under the Mortgage Loan
Purchase Agreement to remedy such breach to the extent and in the manner set
forth in the Mortgage Loan Purchase Agreement.

                    (b) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a) must be effected
prior to the date which is two years after the Startup Day for REMIC I.

                    As to any Deleted Mortgage Loan for which the Seller,
substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution
shall be effected by the Seller delivering to




                                      -59-
<PAGE>

the Trustee or the Custodian on behalf of the Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2 of the Custodial
Agreement, as applicable, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Custodian on behalf of the Trustee
shall acknowledge receipt of such Qualified Substitute Mortgage Loan or Loans
and, within ten Business Days thereafter, review such documents and deliver to
the Depositor, the Trustee and the Servicer, with respect to such Qualified
Substitute Mortgage Loan or Loans, an initial certification pursuant to the
Custodial Agreement, with any applicable exceptions noted thereon. Within one
year of the date of substitution, the Custodian on behalf of the Trustee shall
deliver to the Depositor, the Trustee and the Servicer a final certification
pursuant to the Custodial Agreement with respect to such Qualified Substitute
Mortgage Loan or Loans, with any applicable exceptions noted thereon. Monthly
Payments due with respect to Qualified Substitute Mortgage Loans in the month of
substitution are not part of REMIC I and will be retained by the Seller. For the
month of substitution, distributions to Certificateholders will reflect the
Monthly Payment due on such Deleted Mortgage Loan on or before the Due Date in
the month of substitution, and the Seller shall thereafter be entitled to retain
all amounts subsequently received in respect of such Deleted Mortgage Loan. The
Depositor shall give or cause to be given written notice to the
Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee and the Servicer. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall constitute part of the Trust Fund and
shall be subject in all respects to the terms of this Agreement and the Mortgage
Loan Purchase Agreement including all applicable representations and warranties
thereof included herein or in the Mortgage Loan Purchase Agreement.

                    For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate of, as to each such Qualified Substitute Mortgage Loan,
the Scheduled Principal Balance thereof as of the date of substitution, together
with one month's interest on such Scheduled Principal Balance at the applicable
Net Mortgage Rate, plus all outstanding P&I Advances and Servicing Advances
(including Nonrecoverable P&I Advances and Nonrecoverable Servicing Advances)
related thereto. On the date of such substitution, the Seller will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Shortfall Amount, if any, and the Trustee or
the Custodian on behalf of the Trustee, upon receipt of the related Qualified
Substitute Mortgage Loan or Loans, upon receipt of a request for release in the
form attached to the Custodial Agreement and certification by the Servicer of
such deposit, shall release to the Seller the related Mortgage File or Files and
the Trustee shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, representation or warranty, as the
Seller shall deliver to it and as shall be necessary to vest therein any Deleted
Mortgage Loan released pursuant hereto.





                                      -60-
<PAGE>

                    In addition, the Seller shall obtain at its own expense and
deliver to the Trustee an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on any Trust
REMIC, including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the startup date" under Section 860G(d)(1) of the Code, or (b) any Trust REMIC
to fail to qualify as a REMIC at any time that any Certificate is outstanding.

                    (c) Upon discovery by the Depositor, the Seller, the
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 within two Business Days give written notice thereof
to the other parties. In connection therewith, the Seller shall repurchase or
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Such repurchase or
substitution shall be made by (i) the Seller if the affected Mortgage Loan's
status as a non-qualified mortgage is or results from a breach of any
representation, warranty or covenant made by the Seller under the Mortgage Loan
Purchase Agreement or (ii) the Depositor, if the affected Mortgage Loan's status
as a non-qualified mortgage is a breach of no representation or warranty. Any
such repurchase or substitution shall be made in the same manner as set forth in
Section 2.03(a). The Trustee shall reconvey to the Seller 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.

                    (d) With respect to a breach of the representations made
pursuant to Section 5(xiv) of the Mortgage Loan Purchase Agreement that
materially and adversely affects the value of such Mortgage Loan or the interest
therein of the Certificateholders, the Seller shall be required to take the
actions set forth in this Section 2.03.

                    (e) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section 2.05
which materially and adversely affects the interests of the Certificateholders
in any Mortgage Loan or Prepayment Charge, the Servicer shall cure such breach
in all material respects.

                    SECTION 2.04. Representations and Warranties of the Master
                                  Servicer.

                    The Master Servicer hereby represents, warrants and
covenants to the Servicer, the Depositor and the Trustee, for the benefit of
each of the Trustee and the Certificateholders, that as of the Closing Date or
as of such date specifically provided herein:

                    (i) The Master Servicer is a national banking association
duly formed, validly existing and in good standing under the laws of the United
States of America and is duly authorized and qualified to transact any and all
business contemplated by this Agreement to be conducted by the Master Servicer;

                    (ii) The Master Servicer has the full power and authority to
conduct its business as presently conducted by it and to execute, deliver and
perform, and to enter into and consummate, all transactions contemplated by this
Agreement. The Master Servicer has duly authorized the




                                      -61-
<PAGE>

execution, delivery and performance of this Agreement, has duly executed and
delivered this Agreement, and this Agreement, assuming due authorization,
execution and delivery by the Depositor and the Trustee, constitutes a legal,
valid and binding obligation of the Master Servicer, enforceable against it in
accordance with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity;

                    (iii) The execution and delivery of this Agreement by the
Master Servicer, the consummation by the Master Servicer of any other of the
transactions herein contemplated, and the fulfillment of or compliance with the
terms hereof are in the ordinary course of business of the Master Servicer and
will not (A) result in a breach of any term or provision of charter and by-laws
of the Master Servicer or (B) conflict with, result in a breach, violation or
acceleration of, or result in a default under, the terms of any other material
agreement or instrument to which the Master Servicer is a party or by which it
may be bound, or any statute, order or regulation applicable to the Master
Servicer of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Master Servicer; and the Master Servicer is
not a party to, bound by, or in breach or violation of any indenture or other
agreement or instrument, or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or governmental
body having jurisdiction over it, which materially and adversely affects or, to
the Master Servicer's knowledge, would in the future materially and adversely
affect, (x) the ability of the Master Servicer to perform its obligations under
this Agreement or (y) the business, operations, financial condition, properties
or assets of the Master Servicer taken as a whole;

                    (iv) The Master Servicer does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and every covenant
made by it and contained in this Agreement;

                    (v) No litigation is pending against the Master Servicer
that would materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Master Servicer to
perform any of its other obligations hereunder in accordance with the terms
hereof,

                    (vi) There are no actions or proceedings against, or
investigations known to it of, the Master Servicer before any court,
administrative or other tribunal (A) that might prohibit its entering into this
Agreement, (B) seeking to prevent the consummation of the transactions
contemplated by this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Master Servicer of its obligations
under, or validity or enforceability of, this Agreement; and

                    (vii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution, delivery and
performance by the Master Servicer of, or compliance by the Master Servicer
with, this Agreement or the consummation by it of the transactions contemplated
by this Agreement, except for such consents, approvals, authorizations or
orders, if any, that have been obtained prior to the Closing Date.





                                      -62-
<PAGE>

                    It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.04 shall survive the
resignation or termination of the parties hereto and the termination of this
Agreement and shall inure to the benefit of the Trustee, the Depositor and the
Certificateholders.

                    SECTION 2.05. Representations, Warranties and Covenants of
                                  the Servicer.

                           The Servicer hereby represents, warrants and
covenants to the Master Servicer, the Securities Administrator, the Depositor
and the Trustee, for the benefit of each of such Persons and the
Certificateholders that as of the Closing Date or as of such date specifically
provided herein:

                    (i) The Servicer is a limited partnership duly formed,
                  validly existing and in good standing as a limited partnership
                  under the laws of the State of Delaware and is duly authorized
                  and qualified to transact any and all business contemplated by
                  this Agreement to be conducted by the Servicer in any state in
                  which a Mortgaged Property is located or is otherwise not
                  required under applicable law to effect such qualification
                  and, in any event, is in compliance with the doing business
                  laws of any such State, to the extent necessary to ensure its
                  ability to enforce each Mortgage Loan and to service the
                  Mortgage Loans in accordance with the terms of this Agreement;

                    (ii) The Servicer has the full power and authority to
                  conduct its business as presently conducted by it and to
                  execute, deliver and perform, and to enter into and
                  consummate, all transactions contemplated by this Agreement.
                  The Servicer has duly authorized the execution, delivery and
                  performance of this Agreement, has duly executed and delivered
                  this Agreement, and this Agreement, assuming due
                  authorization, execution and delivery by the Depositor and the
                  Trustee, constitutes a legal, valid and binding obligation of
                  the Servicer, enforceable against it in accordance with its
                  terms except as the enforceability thereof may be limited by
                  bankruptcy, insolvency, reorganization or similar laws
                  affecting the enforcement of creditors' rights generally and
                  by general principles of equity;

                    (iii) The execution and delivery of this Agreement by the
                  Servicer, the servicing of the Mortgage Loans by the Servicer
                  hereunder, the consummation by the Servicer of any other of
                  the transactions herein contemplated, and the fulfillment of
                  or compliance with the terms hereof are in the ordinary course
                  of business of the Servicer and will not (A) result in a
                  breach of any term or provision of the limited partnership
                  agreement of the Servicer or (B) conflict with, result in a
                  breach, violation or acceleration of, or result in a default
                  under, the terms of any other material agreement or instrument
                  to which the Servicer is a party or by which it may be bound,
                  or any statute, order or regulation applicable to the Servicer
                  of any court, regulatory body, administrative agency or
                  governmental body having jurisdiction over the Servicer; and
                  the Servicer is not a party to, bound by, or in breach or
                  violation of any indenture or other agreement or instrument,
                  or subject to or in violation of any statute, order or
                  regulation of any court, regulatory body, administrative
                  agency or governmental body having jurisdiction over it, which
                  materially and adversely affects or, to the Servicer's
                  knowledge, would in the future materially and adversely
                  affect, (x) the ability of the Servicer to perform its
                  obligations under this Agreement, (y) the business,
                  operations, financial condition, properties or assets of the
                  Servicer taken as a whole or (z) the legality, validity or
                  enforceability of this Agreement;





                                      -63-
<PAGE>

                    (iv) The Servicer is a HUD approved mortgagee pursuant to
                  Section 203 and Section 211 of the National Housing Act. No
                  event has occurred, including but not limited to a change in
                  insurance coverage, that would make the Servicer unable to
                  comply with HUD eligibility requirements or that would require
                  notification to HUD;

                    (v) The Servicer does not believe, nor does it have any
                  reason or cause to believe, that it cannot perform each and
                  every covenant made by it and contained in this Agreement;

                    (vi) No litigation is pending against the Servicer that
                  would materially and adversely affect the execution, delivery
                  or enforceability of this Agreement or the ability of the
                  Servicer to service the Mortgage Loans or to perform any of
                  its other obligations hereunder in accordance with the terms
                  hereof;

                    (vii) There are no actions or proceedings against, or
                  investigations known to it of, the Servicer before any court,
                  administrative or other tribunal (A) that might prohibit its
                  entering into this Agreement, (B) seeking to prevent the
                  consummation of the transactions contemplated by this
                  Agreement or (C) that might prohibit or materially and
                  adversely affect the performance by the Servicer of its
                  obligations under, or the validity or enforceability of, this
                  Agreement;

                    (viii) No consent, approval, authorization or order of any
                  court or governmental agency or body is required for the
                  execution, delivery and performance by the Servicer of, or
                  compliance by the Servicer with, this Agreement or the
                  consummation by it of the transactions contemplated by this
                  Agreement, except for such consents, approvals, authorizations
                  or orders, if any, that have been obtained prior to the
                  Closing Date;

                    (ix) The Servicer does and will continue to accurately
                  report its borrower credit files for each Mortgage Loan to the
                  three major credit bureaus in existence as of the Closing Date
                  in a timely manner; and

                    (x) The Servicer is a member of MERS in good standing, and
                  will comply in all material respects with the rules and
                  procedures of MERS in connection with the servicing of the
                  Mortgage Loans that are registered with MERS.

                    It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive the
resignation or termination of the parties hereto, the termination of this
Agreement and the delivery of the Mortgage Files to the Custodian and shall
inure to the benefit of the Trustee, the Master Servicer, the Securities
Administrator, the Depositor and the Certificateholders. Upon discovery by any
such Person or the Servicer of a breach of any of the foregoing representations,
warranties and covenants which materially and adversely affects the value of any
Mortgage Loan, Prepayment Charge or the interests therein of the
Certificateholders, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the Trustee. Subject to Section 8.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of the Servicer set forth in
Section 2.03(c) to cure breaches shall constitute the sole remedy against the
Servicer available to the Certificateholders, the Depositor or the Trustee on
behalf of the Certificateholders respecting a breach of the representations,
warranties and covenants contained in this Section 2.05.




                                      -64-
<PAGE>

                    SECTION 2.06. Issuance of the REMIC I Regular Interests and
                                  the Class R-I Interest.

                    The Trustee acknowledges the assignment to it of the
Mortgage Loans and the delivery to the Custodian on its behalf of the Mortgage
Loan Documents, subject to the provisions of Section 2.01 and Section 2.02
hereof and Section 2 of the Custodial Agreement, together with the assignment to
it of all other assets included in REMIC I, the receipt of which is hereby
acknowledged. The interests evidenced by the Class R-I Interest, together with
the REMIC I Regular Interests, constitute the entire beneficial ownership
interest in REMIC I. The rights of the Holders of the Class R-I Interest and
REMIC II (as holder of the REMIC I Regular Interests) to receive distributions
from the proceeds of REMIC I in respect of the Class R-I Interest and the REMIC
I Regular Interests, respectively, and all ownership interests evidenced or
constituted by the Class R-I Interest and the REMIC I Regular Interests, shall
be as set forth in this Agreement.

                    SECTION 2.07. Conveyance of the REMIC I Regular Interests;
                                  Acceptance of REMIC II by the Trustee.

                    The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests for the benefit of the Class R-II Interest
and REMIC II (as holder of the REMIC I Regular Interests). The Trustee
acknowledges receipt of the REMIC I Regular Interests and declares that it holds
and will hold the same in trust for the exclusive use and benefit of all present
and future Holders of the Class R-II Interest and REMIC II (as holder of the
REMIC I Regular Interests). The rights of the Holders of the Class R-II Interest
and REMIC II (as holder of the REMIC I Regular Interests) to receive
distributions from the proceeds of REMIC II in respect of the Class R-II
Interest and REMIC II Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-II Interest and the REMIC II
Regular Interests, shall be as set forth in this Agreement.

                    SECTION 2.08. Conveyance of the REMIC II Regular Interests;
                                  Acceptance of REMIC III by the Trustee.

                    The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC II Regular Interests for the benefit of the Class R-III
Interest and REMIC III (as holder of the REMIC II Regular Interests). The
Trustee acknowledges receipt of the REMIC II Regular Interests and declares that
it holds and will hold the same in trust for the exclusive use and benefit of
all present and future Holders of the Class R-III Interest and REMIC III (as
holder of the REMIC II Regular Interests). The rights of the Holder of the Class
R-III Interest and REMIC III (as holder of the REMIC II Regular Interests) to
receive distributions from the proceeds of REMIC III in respect of the Class
R-III Interest and REMIC III Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-III Interest and the REMIC III
Regular Interests, shall be as set forth in this Agreement. The Class R-III
Interest and the REMIC III Regular Interests shall constitute the entire
beneficial ownership interest in REMIC III.

                    SECTION 2.09. Issuance of Class R Certificates.




                                      -65-
<PAGE>

                    The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and the REMIC II Regular Interests and, concurrently therewith
and in exchange therefor, pursuant to the written request of the Depositor
executed by an officer of the Depositor, the Trustee has executed, authenticated
and delivered to or upon the order of the Depositor, the Class R Certificates in
authorized denominations. The Class R Certificates evidence ownership in the
Class R-I Interest, the Class R-II Interest and the Class R-III Interest.

                    SECTION 2.10. Establishment of the Trust.

                    The Depositor does hereby establish, pursuant to the further
provisions of this Agreement and the laws of the State of New York, an express
trust to be known, for convenience, as "ACE Securities Corp., Home Equity Loan
Trust, Series 2003-FM1" and does hereby appoint JPMorgan Chase Bank, as Trustee
in accordance with the provisions of this Agreement.


                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                         OF THE MORTGAGE LOANS; ACCOUNTS

                  SECTION 3.01. Servicer to Act as Servicer.

                  The Servicer shall service and administer the Mortgage Loans
on behalf of the Trust Fund and in the best interests of and for the benefit of
the Certificateholders (as determined by the Servicer in its reasonable
judgment) in accordance with the terms of this Agreement and the respective
Mortgage Loans and all applicable law and regulations and, to the extent
consistent with such terms, in the same manner in which it services and
administers similar mortgage loans for its own portfolio, giving due
consideration to customary and usual standards of practice of prudent mortgage
lenders and loan servicers administering similar mortgage loans but without
regard to:

                  (i) any relationship that the Servicer or any Affiliate of the
         Servicer may have with the related Mortgagor;

                  (ii) the ownership of any Certificate by the Servicer or any
         Affiliate of the Servicer;

                  (iii) the Servicer's obligation to make P&I Advances or
         Servicing Advances; or

                  (iv) the Servicer's right to receive compensation for its
         services hereunder.

                  To the extent consistent with the foregoing, the Servicer
shall also seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes. Subject only to the above-described servicing
standards (the "Accepted Servicing Practices") and the terms of this Agreement
and of the respective Mortgage Loans, the Servicer shall have full power and
authority, to do or cause to be done any and all things in connection with such
servicing and administration




                                      -66-
<PAGE>

which it may deem necessary or desirable. Without limiting the generality of the
foregoing, the Servicer in its own name is hereby authorized and empowered by
the Trustee when the Servicer believes it appropriate in its best judgment, to
execute and deliver, on behalf of the Trust Fund, the Certificateholders and the
Trustee or any of them, and upon written notice to the Trustee, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Mortgage
Loans and the Mortgaged Properties and to institute foreclosure proceedings or
obtain a deed-in-lieu of foreclosure so as to convert the ownership of such
properties, and to hold or cause to be held title to such properties, on behalf
of the Trustee, for the benefit of the Trust Fund and the Certificateholders.
The Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby. The Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.14, the
Trustee shall execute, at the written request of the Servicer, and furnish to
the Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder and furnished to the Trustee by the Servicer,
and the Trustee shall not be liable for the actions of the Servicer under such
powers of attorney and shall be indemnified by the Servicer for any cost,
liability or expense incurred by the Trustee in connection with the Servicer's
use or misuse of any such power of attorney.

                  In accordance with Accepted Servicing Practices, the Servicer
shall make or cause to be made Servicing Advances as necessary for the purpose
of effecting the payment of taxes and assessments on the Mortgaged Properties,
which Servicing Advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.07, and further as
provided in Section 3.09; provided, however, the Servicer shall only make such
Servicing Advance if the Mortgagor has not made such payment, if the failure to
make such Servicing Advance would result in the loss of the Mortgaged Property
due to a tax sale or foreclosure as result of a tax lien. Any cost incurred by
the Servicer in effecting the payment of taxes and assessments on a Mortgaged
Property shall not, for the purpose of calculating the Stated Principal Balance
of a Mortgage Loan or distributions to Certificateholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit.

                  The Servicer further is authorized and empowered by the
Trustee, on behalf of the Certificateholders and the Trustee, in its own name or
in the name of the Sub-Servicer, when the Servicer or the Sub-Servicer, as the
case may be, believes it is appropriate in its best judgment to register any
Mortgage Loan on the MERS(R) System, or cause the removal from the registration
of any Mortgage Loan on the MERS(R) System, to execute and deliver, on behalf of
the Trustee and the Certificateholders or any of them, any and all instruments
of assignment and other comparable instruments with respect to such assignment
or re-recording of a Mortgage in the name of MERS, solely as nominee for the
Trustee and its successors and assigns. Any reasonable expenses incurred in
connection with the actions described in the preceding sentence or as a result
of MERS discontinuing or becoming unable to continue operations in connection
with the MERS(R) System, shall be subject to withdrawal by the Servicer from the
Collection Account.

                  Notwithstanding anything in this Agreement to the contrary,
the Servicer may not make any future advances with respect to a Mortgage Loan
and the Servicer shall not permit any




                                      -67-
<PAGE>

modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan (unless, as provided in Section 3.06, the Mortgagor is in default
with respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable) or any modification, waiver or amendment of
any term of any Mortgage Loan that would both (A) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or final,
temporary or proposed Treasury regulations promulgated thereunder) and (B) cause
any Trust REMIC created hereunder to fail to qualify as a REMIC under the Code
or the imposition of any tax on "prohibited transactions" or "contributions
after the startup date" under the REMIC Provisions.

                  Notwithstanding anything in this Agreement to the contrary, in
the event of a Principal Prepayment in full of a Mortgage Loan, the Servicer may
not waive any Prepayment Charge or portion thereof required by the terms of the
related Mortgage Note unless (i) the Servicer determines that such waiver would
maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into
account the value of such Prepayment Charge, (ii)(A) the enforceability thereof
is limited (1) by bankruptcy, insolvency, moratorium, receivership, or other
similar law relating to creditors' rights generally or (2) due to acceleration
in connection with a foreclosure or other involuntary payment, or (B) the
enforceability is otherwise limited or prohibited by applicable law or (iii) the
Servicer has not been provided with information sufficient to enable it to
collect the Prepayment Charge. If a Prepayment Charge is waived as permitted by
meeting the standard described in clause (iii) above, then the Servicer shall
enforce the obligation of the Seller to pay the amount of such waived Prepayment
Charge to the Servicer for deposit in the Collection Account (to the extent paid
by the Seller) for the benefit of the Holders of the Class P Certificates.

                  Promptly upon the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of the covenant of the Servicer
set forth above which materially and adversely affects the interests of the
Holders of the Class P Certificates in any Prepayment Charge, the Servicer shall
promptly pay the amount of such waived Prepayment Charge (or such portion
thereof as had been waived), (the "Servicer Prepayment Charge Payment Amount")
for the benefit of the holders of the Class P Certificates by depositing such
amount into the Collection Account for distribution in accordance with the terms
of this Agreement. The foregoing shall not, however, limit any remedies
available to the Certificateholders, the Depositor or the Trustee on behalf of
the Trust Fund and for the benefit of the Certificateholders, pursuant to the
Mortgage Loan Purchase Agreement, respecting a breach of the representations,
warranties and covenants of the Seller contained in the Mortgage Loan Purchase
Agreement.

                  As part of its servicing activities hereunder, the Servicer,
for the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of the Seller under the Mortgage Loan Purchase Agreement, including,
without limitation, any obligation of the Seller to purchase a Mortgage Loan on
account of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.03(a).

                  SECTION 3.02. Sub-Servicing Agreements Between Servicer and
                                Sub-Servicers.





                                      -68-
<PAGE>

                  The Servicer may arrange for the subservicing of any Mortgage
Loan by a Sub- Servicer pursuant to a Sub-Servicing Agreement; provided that
such sub-servicing arrangement and the terms of the related Sub-Servicing
Agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder.
Notwithstanding the provisions of any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or a Sub-Servicer or reference to actions taken through a Servicer 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 Sub-Servicing
Agreements or arrangements or by virtue of indemnification from the Sub-Servicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Mortgage Loans. Every Sub-
Servicing Agreement entered into by the Servicer shall contain a provision
giving the successor Servicer the option to terminate such agreement in the
event a successor Servicer is appointed. All actions of each Sub-Servicer
performed pursuant to the related Sub-Servicing Agreement shall be performed as
an agent of the Servicer with the same force and effect as if performed directly
by the Servicer.

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

                  SECTION 3.03. Successor Sub-Servicers.

                  Any Sub-Servicing Agreement shall provide that Servicer shall
be entitled to terminate any Sub-Servicing Agreement and to either itself
directly service the related Mortgage Loans or enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02. Any
Sub-Servicing Agreement shall include the provision that such agreement may be
immediately terminated by the successor Servicer (which may be the Trustee or
the Master Servicer) without fee, in accordance with the terms of this
Agreement, in the event that the Servicer (or any successor Servicer) shall, for
any reason, no longer be the Servicer (including termination due to a Servicer
Event of Default).

                  SECTION 3.04. No Contractual Relationship Between
                                Sub-Servicer, Trustee or the Certificateholders.

                  Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and the Trustee and the
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to any Sub-Servicer
except as set forth in Section 3.05.

                  SECTION 3.05. Assumption or Termination of Sub-Servicing
                                Agreement by Successor Servicer.





                                      -69-
<PAGE>

                  In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by a successor Servicer (which may be the Trustee or the Master
Servicer) pursuant to Section 8.02, it is understood and agreed that the
Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Servicer and a Sub-Servicer shall be assumed simultaneously by
such successor Servicer without act or deed on the part of such successor
Servicer; provided, however, that any successor Servicer may terminate the
Sub-Servicer.

                  The Servicer shall, upon the reasonable request of the Master
Servicer, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub- Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.

                  SECTION 3.06. Collection of Certain Mortgage Loan Payments.

                  The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
Accepted Servicing Practices, follow such collection procedures as it would
follow with respect to mortgage loans comparable to the Mortgage Loans and held
for its own account. Consistent with the foregoing, the Servicer may in its
discretion (i) waive any late payment charge or, if applicable, penalty interest
or (ii) extend the due dates for the Monthly Payments due on a Mortgage Note for
a period of not greater than 180 days; provided that any extension pursuant to
this clause shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder. Notwithstanding the foregoing, in the
event that any Mortgage Loan is in default or, in the judgment of the Servicer,
such default is reasonably foreseeable, the Servicer, consistent with Accepted
Servicing Practices may waive, modify or vary any term of such Mortgage Loan
(including modifications that change the Mortgage Rate, forgive the payment of
principal or interest or extend the final maturity date of such Mortgage Loan),
accept payment from the related Mortgagor of an amount less than the Stated
Principal Balance in final satisfaction of such Mortgage Loan, or consent to the
postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor if in the Servicer's determination such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Certificateholders (taking into account any estimated Realized
Loss that might result absent such action).

                  SECTION 3.07. Collection of Taxes, Assessments and Similar
                                Items; Servicing Accounts.

                  To the extent the terms of a Mortgage provide for Escrow
Payments, the Servicer shall establish and maintain one or more accounts (the
"Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
fire, flood, and hazard insurance premiums, and comparable items for the account
of the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Servicer shall deposit in the Servicing
Accounts on a daily basis and in no event later than the second Business Day
after receipt, and retain therein, all Escrow Payments




                                      -70-
<PAGE>

collected on account of the Mortgage Loans, for the purpose of effecting the
timely payment of any such items as required under the terms of this Agreement.
Withdrawals of amounts from a Servicing Account may be made only to (i) effect
timely payment of taxes, assessments, fire, flood, and hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer out of related
collections for any advances made pursuant to Section 3.01 (with respect to
taxes and assessments) and Section 3.11 (with respect to fire, flood and hazard
insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article
IX. As part of its servicing duties, the Servicer shall pay to the Mortgagors
interest on funds in Servicing Accounts, to the extent required by law and, to
the extent that interest earned on funds in the Servicing Accounts is
insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. Notwithstanding the foregoing, the Servicer shall not be
obligated to collect Escrow Payments if the related Mortgage Loan does not
require such payments but the Servicer shall nevertheless be obligated to make
Servicing Advances as provided in Section 3.01 and Section 3.11. In the event
the Servicer shall deposit in the Servicing Accounts any amount not required to
be deposited therein, it may at any time withdraw such amount from the Servicing
Accounts, any provision to the contrary notwithstanding.

                  To the extent that a Mortgage does not provide for Escrow
Payments, the Servicer (i) shall determine whether any such payments are made by
the Mortgagor in a manner and at a time that is necessary to avoid the loss of
the Mortgaged Property due to a tax sale or the foreclosure as a result of a tax
lien and (ii) shall ensure that all insurance required to be maintained on the
Mortgaged Property pursuant to this Agreement is maintained. If any such payment
has not been made and the Servicer receives notice of a tax lien with respect to
the Mortgage Loan being imposed, the Servicer shall, promptly and to the extent
required to avoid loss of the Mortgaged Property, advance or cause to be
advanced funds necessary to discharge such lien on the Mortgaged Property. The
Servicer assumes full responsibility for the payment of all such bills and shall
effect payments of all such bills irrespective of the Mortgagor's faithful
performance in the payment of same or the making of the Escrow Payments and
shall make Servicing Advances to effect such payments subject to its
determination of recoverability.

                  SECTION 3.08. Collection Account and Distribution Account.

                  (a) On behalf of the Trust Fund, the Servicer shall establish
and maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Trustee and the
Certificateholders. On behalf of the Trust Fund, the Servicer shall deposit or
cause to be deposited in the Collection Account on a daily basis and in no event
later than two Business Days after receipt, as and when received or as otherwise
required hereunder, the following payments and collections received or made by
it on or subsequent to the Cut-off Date:

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

                           (ii) all payments on account of interest (net of the
                  related Servicing Fee) on each Mortgage Loan;




                                      -71-
<PAGE>

                           (iii) all Insurance Proceeds and Liquidation Proceeds
                  (other than proceeds collected in respect of any particular
                  REO Property and amounts paid by the Servicer in connection
                  with a purchase of Mortgage Loans and REO Properties pursuant
                  to Section 9.01);

                           (iv) any amounts required to be deposited pursuant to
                  Section 3.10 in connection with any losses realized on
                  Permitted Investments with respect to funds held in the
                  Collection Account;

                           (v) any amounts required to be deposited by the
                  Servicer pursuant to the second paragraph of Section 3.11(a)
                  in respect of any blanket policy deductibles;

                           (vi) any Purchase Price or Substitution Shortfall
                  Amount delivered to the Servicer and all proceeds (net of
                  amounts payable or reimbursable to the Servicer, the Master
                  Servicer, the Trustee, the Custodian or the Securities
                  Administrator) of Mortgage Loans purchased in accordance with
                  Section 10.01 or pursuant to any other provision of this
                  Agreement; and

                           (vii) any Prepayment Charges or amounts required to
                  be deposited by the Servicer in connection with a breach of
                  its obligations under Section 3.01 with respect to the waiver
                  of Prepayment Charges or any amounts paid by the Seller in
                  respect of any waived Prepayment Charges as described in
                  Section 3.01.

                  The foregoing requirements for deposit in the Collection
Account 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 other similar fees need not be deposited by the
Servicer in the Collection Account. In the event the Servicer shall deposit in
the Collection Account any amount not required to be deposited therein, it may
at any time withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding.

                  (b) On behalf of the Trust Fund, the Trustee shall establish
and maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Trustee, the Trust Fund and the
Certificateholders. On behalf of the Trust Fund, the Servicer shall deliver to
the Trustee in immediately available funds for deposit in the Distribution
Account (i) on or before 3:00 p.m. New York time on the Servicer Remittance
Date, that portion of the Available Distribution Amount (calculated without
regard to the references in clause (2) of the definition thereof to amounts that
may be withdrawn from the Distribution Account) for the related Distribution
Date then on deposit in the Collection Account and the amount of all Prepayment
Charges collected by the Servicer in connection with the Principal Prepayment of
any of the Mortgage Loans (including any Servicer Prepayment Charge Payment
Amount) then on deposit in the Collection Account and the amount of any funds
reimbursable to an Advance Financing Person pursuant to Section 3.25, and (ii)
on each Business Day as of the commencement of which the balance on deposit in
the Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of




                                      -72-
<PAGE>

business on any Business Day and the Collection Account constitutes an Eligible
Account solely pursuant to clause (ii) of the definition of "Eligible Account,"
the Servicer shall, on or before 5:00 p.m. New York time on such Business Day,
withdraw from the Collection Account any and all amounts payable or reimbursable
to the Depositor, the Servicer, the Trustee or the Seller pursuant to Section
3.09 and shall pay such amounts to the Persons entitled thereto.

                  (c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.10. The Servicer shall give notice to the
Trustee and the Master Servicer of the location of the Collection Account
maintained by it when established and prior to any change thereof. The Trustee
shall give notice to the Servicer and the Depositor of the location of the
Distribution Account when established and prior to any change thereof.

                  (d) Funds held in the Collection Account at any time may be
delivered by the Servicer in immediately available funds to the Trustee for
deposit in the Distribution Account. In the event the Servicer shall deliver to
the Trustee for deposit in the Distribution Account any amount not required to
be deposited therein, it may at any time request that the Trustee withdraw such
amount from the Distribution Account and remit to it any such amount, any
provision herein to the contrary notwithstanding. In no event shall the Trustee
incur liability as a result of withdrawals from the Distribution Account at the
direction of the Servicer in accordance with the immediately preceding sentence.
In addition, the Servicer shall deliver to the Trustee no later than the
Servicer Remittance Date the amounts set forth in clauses (i) through (iv)
below:

                           (i) any P&I Advances, as required pursuant to Section
                  5.03;

                           (ii) any amounts required to be deposited pursuant to
                  Section 3.21(d) or 3.21(f) in connection with any REO
                  Property;

                           (iii) any amounts to be paid in connection with a
                  purchase of Mortgage Loans and REO Properties pursuant to
                  Section 10.01; and

                           (iv) any amounts required to be deposited pursuant to
                  Section 3.22 in connection with any Prepayment Interest
                  Shortfalls.

                  SECTION 3.09. Withdrawals from the Collection Account and
                                Distribution Account.

                           (a) The Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 5.03:

                           (i) to remit to the Trustee for deposit in the
                  Distribution Account the amounts required to be so remitted
                  pursuant to Section 3.08(b) or permitted to be so remitted
                  pursuant to the first sentence of Section 3.08(d);

                           (ii) subject to Section 3.13(d), to reimburse the
                  Servicer (including any successor Servicer) for P&I Advances
                  made by it, but only to the extent of amounts




                                      -73-
<PAGE>

                  received which represent Late Collections (net of the related
                  Servicing Fees) of Monthly Payments on Mortgage Loans with
                  respect to which such P&I Advances were made in accordance
                  with the provisions of Section 5.03;

                           (iii) subject to Section 3.13(d), to pay the Servicer
                  any unpaid Servicing Fees and reimburse the Servicer any
                  unreimbursed Servicing Advances with respect to each Mortgage
                  Loan, but only to the extent of any Liquidation Proceeds and
                  Insurance Proceeds received with respect to such Mortgage
                  Loan;

                           (iv) to pay to the Servicer as servicing compensation
                  (in addition to the Servicing Fee) on the Servicer Remittance
                  Date any interest or investment income earned on funds
                  deposited in the Collection Account;

                           (v) to pay to the Servicer or the Seller, as the case
                  may be, with respect to each Mortgage Loan that has previously
                  been purchased or replaced pursuant to Section 2.03 or Section
                  3.13(c) all amounts received thereon not included in the
                  Purchase Price or the Substitution Shortfall Amount;

                           (vi) to reimburse the Servicer (including any
                  successor Servicer) for any P&I Advance or Servicing Advance
                  previously made by it which the Servicer has determined to be
                  a Nonrecoverable P&I Advance or a Nonrecoverable Servicing
                  Advance in accordance with the provisions of Section 5.03;

                           (vii) to reimburse the Servicer or the Depositor for
                  expenses incurred by or reimbursable to the Servicer or the
                  Depositor, as the case may be, pursuant to Section 3.01 or
                  Section 7.03;

                           (viii) to reimburse the Servicer or the Trustee, as
                  the case may be, for expenses reasonably incurred in respect
                  of the breach or defect giving rise to the purchase obligation
                  under Section 2.03 of this Agreement that were included in the
                  Purchase Price of the Mortgage Loan, including any expenses
                  arising out of the enforcement of the purchase obligation;

                           (ix) to pay, or to reimburse the Servicer for
                  advances in respect of, expenses incurred in connection with
                  any Mortgage Loan pursuant to Section 3.13(b); and

                           (x) to clear and terminate the Collection Account
                  pursuant to Section 10.01.

                  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, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The
Servicer shall provide written notification to the Trustee on or prior to the
next succeeding Servicer Remittance Date, upon making any withdrawals from the
Collection Account pursuant to subclauses (vi) and (vii) above.




                                      -74-
<PAGE>

                           (b) The Trustee shall, from time to time, make
withdrawals from the Distribution Account, for any of the following purposes,
without priority:

                           (i) to make distributions to Certificateholders in
                  accordance with Section 5.01;

                           (ii) to pay to itself, the Custodian, the Master
                  Servicer and the Securities Administrator amounts to which it
                  is entitled pursuant to Section 9.05 or any other provision of
                  this Agreement and any Extraordinary Trust Fund Expenses;

                           (iii) to reimburse itself pursuant to Section 8.02;

                           (v) to pay to an Advance Financing Person
                  reimbursements for P&I Advances and/or Servicing Advances
                  pursuant to Section 3.25;

                           (vi) to pay any amounts in respect of taxes pursuant
                  to Section 11.01(g)(vi);

                           (vii) to pay the Master Servicing Fee to the Master
                  Servicer; and

                           (viii) to clear and terminate the Distribution
                  Account pursuant to Section 10.01.

                  SECTION 3.10. Investment of Funds in the Investment Accounts.

                           (a) The Servicer may direct, by means of written
directions (which may be standing directions), any depository institution
maintaining the Collection Account to invest the funds in the Collection Account
(for purposes of this Section 3.10, an "Investment Account") in one or more
Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Trustee is the
obligor thereon, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Trustee is the obligor thereon. Amounts in the Distribution Account shall be
invested in Permitted Investments as directed in writing by the Master Servicer.
All such Permitted Investments shall be held to maturity, unless payable on
demand. Any investment of funds shall be made in the name of the Trustee (in its
capacity as such) or in the name of a nominee of the Trustee. The Trustee shall
be entitled to sole possession over each such investment and, subject to
subsection (b) below, the income thereon, and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Trustee or its agent, together with any document of transfer necessary to
transfer title to such investment to the Trustee or its nominee. In the event
amounts on deposit in the Collection Account are at any time invested in a
Permitted Investment payable on demand, the party with investment discretion
over such Investment Account shall:

                           (x) consistent with any notice required to be given
                  thereunder, demand that payment thereon be made on the last
                  day such Permitted Investment may




                                      -75-
<PAGE>

                  otherwise mature hereunder in an amount equal to the lesser of
                  (1) all amounts then payable thereunder and (2) the amount
                  required to be withdrawn on such date; and

                           (y) demand payment of all amounts due thereunder
                  promptly upon determination by a Responsible Officer of the
                  Trustee that such Permitted Investment would not constitute a
                  Permitted Investment in respect of funds thereafter on deposit
                  in the Investment Account.

                           (b) All income and gain realized from the investment
of funds deposited in the Collection Account held by or on behalf of the
Servicer or the Trustee, shall be for the benefit of the Servicer and shall be
subject to its withdrawal in accordance with Section 3.09. The Servicer shall
deposit in the Collection Account the amount of any loss incurred in respect of
any such Permitted Investment made with funds in such account immediately upon
realization of such loss. All earnings and gain realized from the investment of
funds deposited in the Distribution Account shall be for the benefit of the
Master Servicer. The Master Servicer shall remit from its own funds for deposit
into the Distribution Account the amount of any loss incurred on Permitted
Investments in the Distribution Account.

                           (c) Except as otherwise expressly provided in this
Agreement, if any default occurs in the making of a payment due under any
Permitted Investment, or if a default occurs in any other performance required
under any Permitted Investment, the Trustee may and, subject to Section 9.01 and
Section 9.02(v), shall, at the written direction of the Servicer, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate proceedings.

                           (d) The Trustee, the Master Servicer or their
respective Affiliates are permitted to receive additional compensation that
could be deemed to be in the Trustee's or the Master Servicer's economic
self-interest for (i) serving as investment adviser, administrator, shareholder
servicing agent, custodian or sub-custodian with respect to certain of the
Permitted Investments, (ii) using Affiliates to effect transactions in certain
Permitted Investments and (iii) effecting transactions in certain Permitted
Investments. Such compensation shall not be considered an amount that is
reimbursable or payable to the Trustee or the Master Servicer pursuant to
Section 3.09 or 3.10 or otherwise payable in respect of Extraordinary Trust Fund
Expenses.

                  SECTION 3.11. Maintenance of Hazard Insurance and Errors and
                                Omissions and Fidelity Coverage.

                  (a) The terms of each Mortgage Note require the related
Mortgagor to maintain fire, flood and hazard insurance policies. To the extent
such policies are not maintained, the Servicer shall cause to be maintained for
each Mortgaged Property fire and hazard insurance with extended coverage as is
customary in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of the current principal balance of such
Mortgage Loan and the amount necessary to compensate fully for any damage or
loss to the improvements which are a part of such property on a replacement cost
basis, in each case in an amount not less than such amount as is necessary to
avoid the application of any coinsurance clause contained in the related hazard
insurance policy. The Servicer shall also cause to be maintained fire and hazard
insurance on each




                                      -76-
<PAGE>

REO Property with extended coverage as is customary in the area where the
Mortgaged Property is located in an amount which is at least equal to the lesser
of (i) the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage Loan
at the time it became an REO Property. The Servicer will comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any such hazard policies. Any amounts to be collected by the
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the property subject to the related Mortgage or amounts
to be released to the Mortgagor in accordance with Accepted Servicing Practices,
subject to the terms and conditions of the related Mortgage and Mortgage Note)
shall be deposited in the Collection Account, subject to withdrawal pursuant to
Section 3.09, if received in respect of a Mortgage Loan, or in the REO Account,
subject to withdrawal pursuant to Section 3.21, if received in respect of an REO
Property. Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Certificateholders,
be added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit. It is understood
and agreed that no earthquake or other additional insurance is to be required of
any Mortgagor 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 or REO Property is at any time in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, the Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in such
program).

                  In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of B:VI or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its obligations to
cause fire and hazard insurance to be maintained on the Mortgaged Properties, it
being understood and agreed that such policy may contain a deductible clause, in
which case the Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property or REO Property a policy complying
with the first two sentences of this Section 3.11, and there shall have been one
or more losses which would have been covered by such policy, deposit to the
Collection Account from its own funds the amount not otherwise payable under the
blanket policy because of such deductible clause. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Servicer
agrees to prepare and present, on behalf of itself, the Trustee, the Trust Fund
and the Certificateholders, claims under any such blanket policy in a timely
fashion in accordance with the terms of such policy.

                  (b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of its respective obligations under this Agreement,
which policy or policies shall be in such form and amount that would meet the
requirements of Fannie Mae or Freddie Mac if it were the purchaser of the
Mortgage Loans, unless the Servicer, has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The Servicer shall each also maintain a fidelity
bond in the form and amount that would meet the requirements of Fannie Mae or
Freddie Mac, unless the Servicer, has obtained a waiver of such




                                      -77-
<PAGE>

requirements from Fannie Mae or Freddie Mac. The Servicer shall be deemed to
have complied with this provision if an Affiliate of the Servicer, has such
errors and omissions and fidelity bond coverage and, by the terms of such
insurance policy or fidelity bond, the coverage afforded thereunder extends to
the Servicer. Any such errors and omissions policy and fidelity bond shall by
its terms not be cancelable without thirty days' prior written notice to the
Trustee.

                  SECTION 3.12. Enforcement of Due-on-Sale Clauses; Assumption
                                Agreements.

                  The Servicer shall, to the extent it has knowledge of any
conveyance of any Mortgaged Property by any Mortgagor (whether by absolute
conveyance or by contract of sale, and whether or not the Mortgagor remains or
is to remain liable under the Mortgage Note and/or the Mortgage), exercise its
rights to accelerate the maturity of such Mortgage Loan under the "due-on- sale"
clause, if any, applicable thereto; provided, however, that the Servicer shall
not exercise any such rights if prohibited by law from doing so. If the Servicer
reasonably believes it is unable under applicable law to enforce such
"due-on-sale" clause, or if any of the other conditions set forth in the proviso
to the preceding sentence apply, the Servicer shall enter into an assumption and
modification agreement from or with the person to whom such property has been
conveyed or is proposed to be conveyed, pursuant to which such person becomes
liable under the Mortgage Note and, to the extent permitted by applicable state
law, the Mortgagor remains liable thereon. The Servicer is also authorized 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 the Mortgagor and becomes liable under the Mortgage Note,
provided that no such substitution shall be effective unless such person
satisfies the then current underwriting criteria of the Servicer for mortgage
loans similar to the Mortgage Loans. In connection with any assumption or
substitution, the Servicer shall apply such underwriting standards and follow
such practices and procedures as shall be normal and usual in its general
mortgage servicing activities and as it applies to other mortgage loans owned
solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate and the amount of the
Monthly Payment) may be amended or modified, except as otherwise required
pursuant to the terms thereof. The Servicer shall notify the Trustee (or the
Custodian) that any such substitution or assumption agreement has been completed
by forwarding to the Trustee the executed original of such substitution or
assumption agreement, which document 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.

                  Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.12, the term "assumption" is
deemed to also




                                      -78-
<PAGE>

include a sale (of the Mortgaged Property) subject to the Mortgage that is not
accompanied by an assumption or substitution of liability agreement.

                  SECTION 3.13. Realization Upon Defaulted Mortgage Loans.

                  (a) The Servicer shall use its best efforts, consistent with
         Accepted Servicing Practices, 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 pursuant
         to Section 3.06. The Servicer shall be responsible for all costs and
         expenses incurred by it in any such proceedings; provided, however,
         that such costs and expenses will be recoverable as Servicing Advances
         by the Servicer as contemplated in Sections 3.09 and 3.21. The
         foregoing is subject to the provision that, in any case in which a
         Mortgaged Property shall have suffered damage from an Uninsured Cause,
         the Servicer shall not be required to expend its own funds toward the
         restoration of such property unless it shall determine in its
         discretion that such restoration will increase the proceeds of
         liquidation of the related Mortgage Loan after reimbursement to itself
         for such expenses.

                  (b) Notwithstanding the foregoing provisions of this Section
         3.13 or any other provision of this Agreement, with respect to any
         Mortgage Loan as to which the Servicer has received actual notice of,
         or has actual knowledge of, the presence of any toxic or hazardous
         substance on the related Mortgaged Property, the Servicer shall not, on
         behalf of the Trust Fund, either (i) obtain title to such Mortgaged
         Property as a result of or in lieu of foreclosure or otherwise, or (ii)
         otherwise acquire possession of, or take any other action with respect
         to, such Mortgaged Property, if, as a result of any such action, the
         Trust Fund, the Trustee or the Certificateholders would be considered
         to hold title to, to be a "mortgagee-in-possession" of, or to be an
         "owner" or "operator" of such Mortgaged Property within the meaning of
         the Comprehensive Environmental Response, Compensation and Liability
         Act of 1980, as amended from time to time, or any comparable law,
         unless the Servicer has also previously determined, based on its
         reasonable judgment and a prudent report prepared by an Independent
         Person who regularly conducts environmental audits using customary
         industry standards, that:

                  (1) such Mortgaged Property is in compliance with applicable
         environmental laws or, if not, that it would be in the best economic
         interest of the Trust Fund to take such actions as are necessary to
         bring the Mortgaged Property into compliance therewith; and

                  (2) there are no circumstances present at such Mortgaged
         Property relating to the use, management or disposal of any hazardous
         substances, hazardous materials, hazardous wastes or petroleum-based
         materials for which investigation, testing, monitoring, containment,
         clean-up or remediation could be required under any federal, state or
         local law or regulation, or that if any such materials are present for
         which such action could be required, that it would be in the best
         economic interest of the Trust Fund to take such actions with respect
         to the affected Mortgaged Property.

                  The cost of the environmental audit report contemplated by
this Section 3.13 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.09(a)(ix), such right of reimbursement being prior to




                                      -79-
<PAGE>

the rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.

                  If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Sections 3.09(a)(iii) or 3.09(a)(ix), such right of reimbursement
being prior to the rights of Certificateholders to receive any amount in the
Collection Account received in respect of the affected Mortgage Loan or other
Mortgage Loans.

                  (c) The Servicer shall have the right to purchase from REMIC I
any defaulted Mortgage Loan that is 90 days or more delinquent, which the
Servicer determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee, in form and substance satisfactory to the Servicer and the Trustee
prior to purchase), at a price equal to the Purchase Price. The Purchase Price
for any Mortgage Loan purchased hereunder shall be deposited in the Collection
Account, and the Trustee, upon receipt of written certification from the
Servicer of such deposit, shall release or cause to be released to the Servicer
the related Mortgage File and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty, as the Servicer shall furnish and as shall be
necessary to vest in the Servicer title to any Mortgage Loan released pursuant
hereto.

                  (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer for any related unreimbursed Servicing Advances and P&I Advances,
pursuant to Section 3.09(a)(ii) or (a)(iii); second, to accrued and unpaid
interest on the Mortgage Loan, to the date of the Final Recovery Determination,
or to the Due Date prior to the Distribution Date on which such amounts are to
be distributed if not in connection with a Final Recovery Determination; and
third, as a recovery of principal of the Mortgage Loan. If the amount of the
recovery so allocated to interest is less than the full amount of accrued and
unpaid interest due on such Mortgage Loan, the amount of such recovery will be
allocated by the Servicer as follows: first, to unpaid Servicing Fees; and
second, to the balance of the interest then due and owing. The portion of the
recovery so allocated to unpaid Servicing Fees shall be reimbursed to the
Servicer pursuant to Section 3.09(a)(iii). The portion of the recovery allocated
to interest (net of unpaid Servicing Fees) and the portion of the recovery
allocated to principal of the Mortgage Loan shall be applied as follows: first,
to reimburse the Servicer for any related unreimbursed Advances in accordance
with Section 3.09(a)(ii) and any other amounts reimbursable to the Servicer
pursuant to Section 3.09, and second, as part of the amounts to be transferred
to the Distribution Account in accordance with Section 3.08(b).





                                      -80-
<PAGE>

                  SECTION 3.14. Trustee to Cooperate; Release of Mortgage Files.

                  (a) Upon becoming aware of the payment in full of any Mortgage
Loan, or the receipt by the Servicer of a notification that payment in full has
been escrowed in a manner customary for such purposes for payment to
Certificateholders on the next Distribution Date, the Servicer will promptly
furnish to the Custodian, on behalf of the Trustee, two copies of a request for
release substantially in the form attached to the Custodial Agreement signed by
a Servicing Officer or in a mutually agreeable electronic format which will, in
lieu of a signature on its face, originate from a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payment that are required to be deposited in the
Collection Account have been or will be so deposited) and shall request that the
Custodian, on behalf of the Trustee, deliver to the Servicer the related
Mortgage File. Upon receipt of such certification and request, the Custodian, on
behalf of the Trustee, shall promptly release the related Mortgage File to the
Servicer and the Trustee and Custodian shall have no further responsibility with
regard to such Mortgage File. Upon any such payment in full, the Servicer is
authorized, to give, as agent for the Trustee, as the mortgagee under the
Mortgage that secured the Mortgage Loan, an instrument of satisfaction (or
assignment of mortgage without recourse) regarding the Mortgaged Property
subject to the Mortgage, which instrument of satisfaction or assignment, as the
case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of such payment, it being understood and agreed that no
expenses incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Collection Account.

                  (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Trustee shall execute such documents as
shall be prepared and furnished to the Trustee by the Servicer (in form
reasonably acceptable to the Trustee) and as are necessary to the prosecution of
any such proceedings. The Custodian, on behalf of the Trustee, shall, upon the
request of the Servicer, and delivery to the Custodian, on behalf of the
Trustee, of two copies of a request for release signed by a Servicing Officer
substantially in the form attached to the Custodial Agreement (or in a mutually
agreeable electronic format which will, in lieu of a signature on its face,
originate from a Servicing Officer), release the related Mortgage File held in
its possession or control to the Servicer. Such trust receipt shall obligate the
Servicer to return the Mortgage File to the Custodian on behalf of the Trustee,
when the need therefor by the Servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of a certificate of a Servicing
Officer similar to that hereinabove specified, the Mortgage File shall be
released by the Custodian, on behalf of the Trustee, to the Servicer.

                  Notwithstanding the foregoing, in connection with a Principal
Prepayment in full of any Mortgage Loan, the Master Servicer may request release
of the related Mortgage File from the Custodian, in accordance with the
provisions of the Custodial Agreement, in the event the Servicer fails to do so.

                  Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer, any court pleadings, requests for
trustee's sale or other documents necessary to the foreclosure or trustee's sale
in respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Mortgage Note or Mortgage or




                                      -81-
<PAGE>

otherwise available at law or in equity. Each such certification shall include a
request that such pleadings or documents be executed by the Trustee and a
statement as to the reason such documents or pleadings are required and that the
execution and delivery thereof by the Trustee will not invalidate or otherwise
affect the lien of the Mortgage, except for the termination of such a lien upon
completion of the foreclosure or trustee's sale. So long as no Servicing
Termination Event shall have occurred and be continuing, the Servicer shall have
the right to execute any and all such court pleadings, requests and other
documents as attorney-in-fact for, and on behalf of the Trustee.

                  SECTION 3.15. Servicing Compensation.

                  As compensation for the activities of the Servicer, hereunder,
the Servicer shall be entitled to the Servicing Fee with respect to each
Mortgage Loan payable solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.22. In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.09(a)(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.21. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement to the
extent permitted herein.

                  Additional servicing compensation in the form of assumption
fees, late payment charges and other miscellaneous fees (other than Prepayment
Charges) shall be retained by the Servicer only to the extent such fees or
charges are received by the Servicer. The Servicer shall also be entitled
pursuant to Section 3.09(a)(iv) to withdraw from the Collection Account and
pursuant to Section 3.21(b) to withdraw from any REO Account, as additional
servicing compensation, interest or other income earned on deposits therein,
subject to Section 3.10. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided
herein.

                  SECTION 3.16. Reports to the Trustee; Collection Account
                                Statements.

                  Not later than fifteen days after each Distribution Date, the
Servicer shall forward to the Master Servicer, the Trustee and the Depositor a
statement prepared by the institution at which the Collection Account is
maintained setting forth the status of the Collection Account as of the close of
business on such Distribution Date and showing, for the period covered by such
statement, the aggregate amount of deposits into and withdrawals from the
Collection Account of each category of deposit specified in Section 3.08(a) and
each category of withdrawal specified in Section 3.09. Copies of such statement
shall be provided by the Trustee to any Certificateholder and to any Person
identified to the Trustee as a prospective transferee of a Certificate, upon
request at the expense of the requesting party, provided such statement is
delivered by the Servicer to the Trustee.

                  SECTION 3.17. Statement as to Compliance.

                  Not later than March 15th of each calendar year commencing in
2004, the Servicer shall deliver to the Trustee, the Master Servicer and the
Depositor an Officers' Certificate (upon which the Master Servicer can
conclusively rely in connection with its obligations under Section 5.06)
stating, as to each signatory thereof, that (i) a review of the activities of
the Servicer during the




                                      -82-
<PAGE>

preceding year and of performance under this Agreement has been made under such
officers' supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all of its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Copies of any such statement shall be
provided by the Trustee to any Certificateholder, upon request at the expense of
the requesting party, provided such statement is delivered by the Servicer to
the Trustee.

                  SECTION 3.18. Independent Public Accountants' Servicing
                                Report.

                  Not later than March 15th of each calendar year commencing in
2004, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer has complied with certain minimum residential mortgage loan servicing
standards, identified in the Uniform Single Attestation Program for Mortgage
Bankers established by the Mortgage Bankers Association of America, with respect
to the servicing of residential mortgage loans during the most recently
completed fiscal year and (ii) on the basis of an examination conducted by such
firm in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Master Servicer, the Trustee and each
Rating Agency. Copies of such statement shall be provided by the Trustee to any
Certificateholder upon request at the Servicer's expense, provided that such
statement is delivered by the Servicer to the Trustee.

                  SECTION 3.19 Annual Certification.

                  (a) The Servicer shall deliver to the Master Servicer, on or
before March 15 of each calendar year beginning March 15, 2004 (or, if any such
day is not a Business Day, the immediately preceding Business Day), or on any
alternative date reasonably specified by the Master Servicer upon thirty (30)
days written request, a certification in the form attached hereto as Exhibit C.
Such certification shall be signed by the senior officer in charge of servicing
of the Servicer. In addition, the Servicer shall provide such other information
with respect to the Mortgage Loans and the servicing and administration thereof
within the control of the Servicer which shall be required to enable the Master
Servicer to comply with the reporting requirements of the Securities and
Exchange Act of 1934, as amended pursuant to Section 5.06 hereof.

                  (b) The Servicer shall indemnify and hold harmless the Master
Servicer, the Trustee, the Depositor and their respective officers, directors,
agents and affiliates from and against any losses, damages, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments and other costs
and expenses arising out of or based upon a breach by the Servicer or any of its
officers, directors, agents or affiliates of its obligations under this Section
3.19 or the Servicer's negligence, bad faith or willful misconduct in connection
therewith. Such indemnity shall survive the termination or resignation of the
parties hereto or the termination of this Agreement. If the indemnification
provided for herein is unavailable or insufficient to hold harmless the Master
Servicer, the Trustee and the Depositor, then the Servicer agrees that it shall
contribute to the amount




                                      -83-
<PAGE>

paid or payable by the Master Servicer, the Trustee and the Depositor as a
result of the losses, claims, damages or liabilities of the Master Servicer, the
Trustee and the Depositor in such proportion as is appropriate to reflect the
relative fault of the Master Servicer, the Trustee and the Depositor on the one
hand and the Servicer on the other in connection with a breach of the Servicer's
obligations under this Section 3.19.

                  SECTION 3.20. Access to Certain Documentation.

                  The Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificate Owner,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificate Owner, the Trustee and to
any Person identified to the Servicer, as a prospective transferee of a
Certificate, upon reasonable request during normal business hours at the offices
of the Servicer designated by it at the expense of the Person requesting such
access.

                  SECTION 3.21. Title, Management and Disposition of REO
                                Property.

                  (a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, on behalf of the Trust Fund
and for the benefit of the Certificateholders. The Servicer, on behalf of REMIC
I, shall either sell any REO Property by the close of the third calendar year
following the calendar year in which REMIC I acquires ownership of such REO
Property for purposes of Section 860(a)(8) of the Code or request from the
Internal Revenue Service, no later than 60 days before the day on which the
three-year grace period would otherwise expire an extension of the three-year
grace period, unless the Servicer had delivered to the Trustee an Opinion of
Counsel, addressed to the Trustee and the Depositor, to the effect that the
holding by REMIC I of such REO Property subsequent to three years after its
acquisition will not result in the imposition on any Trust REMIC created
hereunder of taxes on "prohibited transactions" thereof, as defined in Section
860F of the Code, or cause any Trust REMIC hereunder to fail to qualify as a
REMIC under Federal law at any time that any Certificates are outstanding. The
Servicer shall manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by any Trust REMIC created hereunder of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.

                  (b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain
with respect to REO Properties an account held in trust for the Trustee, on
behalf of the Trust Fund and for the benefit of the Certificateholders (the "REO
Account"), which shall be an Eligible Account. The Servicer shall be permitted
to allow the Collection Account to serve as the REO Account, subject to separate
ledgers for each REO Property.




                                      -84-
<PAGE>

The Servicer shall be entitled to retain or withdraw any interest income paid on
funds deposited in the REO Account.

                  (c) The Servicer shall have full power and authority, subject
         only to the specific requirements and prohibitions of this Agreement,
         to do any and all things in connection with any REO Property as are
         consistent with the manner in which the Servicer manages and operates
         similar property owned by the Servicer or any of its Affiliates, all on
         such terms and for such period as the Servicer deems to be in the best
         interests of Certificateholders. In connection therewith, the Servicer
         shall deposit, or cause to be deposited, on a daily basis in the REO
         Account all revenues received by it with respect to an REO Property and
         shall withdraw therefrom funds necessary for the proper operation,
         management and maintenance of such REO Property including, without
         limitation:

                  (i) all insurance premiums due and payable in respect of such
         REO Property;

                  (ii) all real estate taxes and assessments in respect of such
         REO Property that may result in the imposition of a lien thereon; and

                  (iii) all costs and expenses necessary to maintain such REO
         Property.

                  To the extent that amounts on deposit in the REO Account with
respect to an REO Property are insufficient for the purposes set forth in
clauses (i) through (iii) above with respect to such REO Property, the Servicer
shall advance from its own funds such amount as is necessary for such purposes
if, but only if, the Servicer would make such advances if the Servicer owned the
REO Property and if in the Servicer's judgment, the payment of such amounts will
be recoverable from the rental or sale of the REO Property.

                  Subject to compliance with applicable laws and regulations as
shall at any time be in force, and notwithstanding the foregoing, the Servicer,
on behalf of the Trust Fund, shall not:

                  (i) enter into, renew or extend any New Lease with respect to
         any REO Property, if the New Lease by its terms will give rise to any
         income that does not constitute Rents from Real Property;

                  (ii) permit any amount to be received or accrued under any New
         Lease other than amounts that will constitute Rents from Real Property;

                  (iii) authorize or permit any construction on any REO
         Property, other than the completion of a building or other improvement
         thereon, and then only if more than ten percent of the construction of
         such building or other improvement was completed before default on the
         related Mortgage Loan became imminent, all within the meaning of
         Section 856(e)(4)(B) of the Code; or

                  (iv) allow any Person to Directly Operate any REO Property on
         any date more than 90 days after its date of acquisition by the Trust
         Fund;





                                      -85-
<PAGE>

unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Servicer and the Trustee, to the effect that such action will
not cause such REO Property to fail to qualify as "foreclosure property" within
the meaning of Section 860G(a)(8) of the Code at any time that it is held by
REMIC I, in which case the Servicer may take such actions as are specified in
such Opinion of Counsel.

                  The Servicer may contract with any Independent Contractor for
the operation and management of any REO Property, provided that:

                  (i) the terms and conditions of any such contract shall not be
         inconsistent herewith;

                  (ii) any such contract shall require, or shall be administered
         to require, that the Independent Contractor pay all costs and expenses
         incurred in connection with the operation and management of such REO
         Property, including those listed above and remit all related revenues
         (net of such costs and expenses) to the Servicer as soon as
         practicable, but in no event later than thirty days following the
         receipt thereof by such Independent Contractor;

                  (iii) none of the provisions of this Section 3.21(c) relating
         to any such contract or to actions taken through any such Independent
         Contractor shall be deemed to relieve the Servicer of any of its duties
         and obligations to the Trustee on behalf of the Trust Fund and for the
         benefit of the Certificateholders with respect to the operation and
         management of any such REO Property; and

                  (iv) the Servicer shall be obligated with respect thereto to
         the same extent as if it alone were performing all duties and
         obligations in connection with the operation and management of such REO
         Property.

                  The Servicer shall be entitled to enter into any agreement
with any Independent Contractor performing services for it related to its duties
and obligations hereunder for indemnification of the Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Servicer shall be solely liable for all fees
owed by it to any such Independent Contractor, irrespective of whether the
Servicer's compensation pursuant to Section 3.15 is sufficient to pay such fees.
Any such agreement shall include a provision that such agreement may be
immediately terminated by the Trustee (as successor Servicer) or any other
successor Servicer (including the Master Servicer) without fee, in the event the
Servicer shall for any reason, no longer be the Servicer (including termination
due to a Servicer Event of Default).

                  (d) In addition to the withdrawals permitted under Section
3.21(c), the Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself unpaid Servicing Fees in respect
of the related Mortgage Loan; and (ii) to reimburse itself or any Sub-Servicer
for unreimbursed Servicing Advances and Advances made in respect of such REO
Property or the related Mortgage Loan. On the Servicer Remittance Date, the
Servicer shall withdraw from each REO Account maintained by it and deposit into
the Distribution Account in accordance with Section 3.08(d)(ii), for
distribution on the related Distribution Date in accordance with Section




                                      -86-
<PAGE>

4.01, the income from the related REO Property received during the prior
calendar month, net of any withdrawals made pursuant to Section 3.21(c) or this
Section 3.21(d).

                  (e) Subject to the time constraints set forth in Section
3.21(a), each REO Disposition shall be carried out by the Servicer at such price
and upon such terms and conditions as the Servicer shall deem necessary or
advisable, as shall be normal and usual in accordance with Accepted Servicing
Practices.

                  (f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer as provided above, shall
be deposited in the Distribution Account in accordance with Section 3.08(d)(ii)
on the Servicer Remittance Date in the month following the receipt thereof for
distribution on the related Distribution Date in accordance with Section 4.01.
Any REO Disposition shall be for cash only (unless changes in the REMIC
Provisions made subsequent to the Startup Day allow a sale for other
consideration).

                  (g) The Servicer shall file information returns (and shall
provide a certification of a Servicing Officer to the Master Servicer that such
filings have been made) with respect to the receipt of mortgage interest
received in a trade or business, reports of foreclosures and abandonments of any
Mortgaged Property and cancellation of indebtedness income with respect to any
Mortgaged Property as required by Sections 6050H, 6050J and 6050P of the Code,
respectively. Such reports shall be in form and substance sufficient to meet the
reporting requirements imposed by such Sections 6050H, 6050J and 6050P of the
Code.

                  SECTION 3.22. Obligations of the Servicer in Respect of
                                Prepayment Interest Shortfalls; Relief Act
                                Interest Shortfalls.

                  The Servicer shall deliver to the Trustee for deposit into the
Distribution Account on or before 5:00 p.m. New York time on the Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls attributable to prepayments in
full for the related Distribution Date resulting solely from voluntary Principal
Prepayments received by the Servicer during the related Prepayment Period and
(ii) 50% of its aggregate Servicing Fee for the most recently ended Prepayment
Period. The Servicer shall not have the right to reimbursement for any amounts
remitted to the Trustee in respect of this Section 3.22. The Servicer shall not
be obligated to pay the amounts set forth in this Section 3.22 with respect to
shortfalls resulting from the application of the Relief Act.

                  SECTION 3.23. Obligations of the Servicer in Respect of
                                Mortgage Rates and Monthly Payments.

                  In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Trustee for deposit
in the Distribution Account from its own funds the amount of any such shortfall
and shall indemnify and hold harmless the Trust




                                      -87-
<PAGE>

Fund, the Trustee, the Depositor and any successor Servicer in respect of any
such liability. Such indemnities shall survive the termination or discharge of
this Agreement.

                  SECTION 3.24. Reserve Fund.

                  (a) No later than the Closing Date, the Trustee shall
establish and maintain a separate, segregated trust account titled, "Reserve
Fund, JPMorgan Chase Bank, in trust for the registered holders of ACE Securities
Corp. Home Equity Loan Trust, Series 2003-FM1, Asset Backed Pass-Through
Certificates." On the Closing Date, the Depositor will deposit, or cause to be
deposited, into the Reserve Fund $1,000. In addition, the amount deposited in
the Reserve Fund shall be increased by any payments received by the Trustee
under the Cap Contracts and deposited into Reserve Fund the for the benefit of
the Class A-1 Certificates and Class A-2 Certificates.

                  (b) On each Distribution Date as to which there is a Net WAC
Rate Carryover Amount payable to the Class A Certificates or the Mezzanine
Certificates, the Trustee will deposit, based on the instructions received by it
from the Securities Administrator, into the Reserve Fund the amounts described
in Section 5.01(a)(7)(xv), rather than distributing such amounts to the Class CE
Certificateholders. On each such Distribution Date, the Trustee shall hold all
such amounts for the benefit of the Holders of the Class A Certificates and the
Mezzanine Certificates, and will distribute such amounts to the Holders of the
Class A Certificates and the Mezzanine Certificates in the amounts and
priorities set forth in Section 5.01(a). If no Net WAC Rate Carryover Amounts
are payable on a Distribution Date, the Trustee shall deposit, based on the
instructions received by it from the Securities Administrator, into the Reserve
Fund on behalf of the Class CE Certificateholders, from amounts otherwise
distributable to the Class CE Certificateholders, an amount such that when added
to other amounts already on deposit in the Reserve Fund, the aggregate amount on
deposit therein is equal to $1,000.

                  (c) For federal and state income tax purposes, the Class CE
Certificateholders will be deemed to be the owners of the Reserve Fund and all
amounts deposited into the Reserve Fund (other than the initial deposit therein
of $1,000) shall be treated as amounts distributed by REMIC III to the Holders
of the Class CE Certificates. Upon the termination of the Trust Fund, or the
payment in full of the Class A Certificates and the Mezzanine Certificates, all
amounts remaining on deposit in the Reserve Fund will be released by the Trust
Fund and distributed to the Class CE Certificateholders or their designees. The
Reserve Fund will be part of the Trust Fund but not part of any REMIC and any
payments to the Holders of the Class A Certificates or the Mezzanine
Certificates of Net WAC Rate Carryover Amounts will not be payments with respect
to a "regular interest" in a REMIC within the meaning of Code Section
860(G)(a)(1).

                  (d) By accepting a Class CE Certificate, each Class CE
Certificateholder hereby agrees that the Trustee will deposit into the Reserve
Fund the amounts described above on each Distribution Date rather than
distributing such amounts to the Class CE Certificateholders. By accepting a
Class CE Certificate, each Class CE Certificateholder further agrees that its
agreement to such action by the Trustee is given for good and valuable
consideration, the receipt and sufficiency of which is acknowledged by such
acceptance.





                                      -88-
<PAGE>

                  (e) At the direction of the Holders of a majority in
Percentage Interest in the Class CE Certificates, the Trustee shall direct any
depository institution maintaining the Reserve Fund to invest the funds in such
account in one or more Permitted Investments bearing interest or sold at a
discount, and maturing, unless payable on demand, (i) no later than the Business
Day immediately preceding the date on which such funds are required to be
withdrawn from such account pursuant to this Agreement, if a Person other than
the Trustee or an Affiliate manages or advises such investment, and (ii) no
later than the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if the Trustee or an Affiliate manages or
advises such investment. The Trustee shall invest amounts on deposit in the
Reserve Fund in JPMorgan Prime Money Market Fund. All income and gain earned
upon such investment shall be deposited into the Reserve Fund. In no event shall
the Trustee be liable for any investments made pursuant to this clause (e).

                  (f) For federal tax return and information reporting, the
right of the Class A Certificateholders and the Mezzanine Certificateholders to
receive payments from the Reserve Fund in respect of any Net WAC Rate Carryover
Amount shall be assigned a value of zero.

                  SECTION 3.25. Advance Facility.

                  (a) The Servicer is hereby authorized to enter into a
financing or other facility (any such arrangement, an "Advance Facility"), the
documentation for which complies with Section 3.25(e) below, under which (1) the
Servicer assigns or pledges its rights under this Agreement to be reimbursed for
any or all P&I Advances and/or Servicing Advances to (i) a Person, which may be
a special-purpose bankruptcy-remote entity (an "SPV"), (ii) a Person, which may
simultaneously assign or pledge such rights to an SPV or (iii) a lender (a
"Lender"), which, in the case of any Person or SPV of the type described in
either of the preceding clauses (i) or (ii), may directly or through other
assignees and/or pledgees, assign or pledge such rights to a Person, which may
include a trustee acting on behalf of holders of debt instruments (any such
Person or any such Lender, an "Advance Financing Person"), and/or (2) an Advance
Financing Person agrees to fund all the P&I Advances and/or Servicing Advances
required to be made by the Servicer pursuant to this Agreement. No consent of
the Trustee, Certificateholders or any other party shall be required before the
Servicer may enter into an Advance Facility nor shall the Trustee or the
Certificateholders be a third party beneficiary of any obligation of an Advance
Financing Person to the Servicer. Notwithstanding the existence of any Advance
Facility under which an Advance Financing Person agrees to fund P&I Advances
and/or Servicing Advances, (A) the Servicer (i) shall remain obligated pursuant
to this Agreement to make P&I Advances and/or Servicing Advances pursuant to and
as required by this Agreement and (ii) shall not be relieved of such obligations
by virtue of such Advance Facility and (B) neither the Advance Financing Person
nor any Servicer's Assignee (as hereinafter defined) shall have any right to
proceed against or otherwise contact any Mortgagor for the purpose of collecting
any payment that may be due with respect to any related Mortgage Loan or
enforcing any covenant of such Mortgagor under the related Mortgage Loan
documents.

                  (b) If the Servicer enters into an Advance Facility, the
Servicer and the related Advance Financing Person shall deliver to the Trustee
at the address set forth in Section 12.05 a written notice (an "Advance Facility
Notice"), stating (a) the identity of the Advance Financing Person and (b) the
identity of the Person (the "Servicer's Assignee") that will, subject to Section




                                      -89-
<PAGE>

3.25(c), have the right to receive amounts available from the Collection Account
pursuant to Section 3.09(a) to reimburse previously unreimbursed P&I Advances
and/or Servicing Advances ("Advance Reimbursement Amounts"). Advance
Reimbursement Amounts (i) shall consist solely of amounts in respect of P&I
Advances and/or Servicing Advances for which the Servicer would be permitted to
reimburse itself in accordance with Section 3.09(a), assuming the Servicer had
made the related P&I Advance(s) and/or Servicing Advance(s) and (ii) shall not
consist of amounts payable to a successor Servicer in accordance with Section
3.09(a) to the extent permitted under Section 3.25(d).

                  (c) Notwithstanding the existence of an Advance Facility, the
Servicer, on behalf of the Advance Financing Person and the Servicer's Assignee,
shall be entitled to receive reimbursements of P&I Advances and/or Servicing
Advances in accordance with Section 3.09(a), which entitlement may be terminated
by the Advance Financing Person identified in the Advance Facility Notice
pursuant to a written notice to the Trustee, the Master Servicer and the
Servicer in the manner set forth in Section 12.05. Upon receipt of such written
notice, the Servicer shall no longer be entitled to receive reimbursement for
any Advance Reimbursement Amounts and the Servicer's Assignee shall immediately
have the right to receive from the Collection Account all Advance Reimbursement
Amounts. Notwithstanding the foregoing, a Servicer's Assignee shall only be
entitled to reimbursement of Advance Reimbursement Amounts from the Collection
Account pursuant to Section 3.09(a) to the extent of and from the funds that the
Servicer would have been entitled to reimbursement hereunder and shall not
otherwise be entitled to receive amounts designated for distribution to
Certificateholders. None of the Trustee or the Certificateholders shall have any
right to, or otherwise be entitled to, receive any amounts which constitute
Advance Reimbursement Amounts. An Advance Facility may be terminated by the
joint written direction of the Servicer and the related Advance Financing
Person. Written notice of such termination shall be delivered to the Trustee and
the Master Servicer in the manner set forth in Section 12.05 hereof. None of the
Depositor, the Master Servicer or the Trustee shall, as a result of the
existence of any Advance Facility, have any additional duty or liability with
respect to the calculation or payment of any Advance Reimbursement Amount, nor,
as a result of the existence of any Advance Facility, shall the Depositor, the
Master Servicer or the Trustee have any additional responsibility to track or
monitor the administration of the Advance Facility or the payment of Advance
Reimbursement Amounts to the Servicer's Assignee. The Servicer shall indemnify
the Depositor, the Trustee, the Master Servicer, any successor Servicer and the
Trust Fund for any claim, loss, liability or damage resulting from any claim by
the related Advance Financing Person or the Servicer's Assignee, except to the
extent that such claim, loss, liability or damage resulted from or arose out of
the gross negligence, recklessness or willful misconduct on the part of the
Depositor, the Trustee, the Master Servicer or any successor Servicer, as the
case may be, or the breach of any obligations under this Agreement by the
successor Servicer, the Master Servicer or the Trustee, as the case may be. The
Servicer shall maintain and provide to any successor Servicer and, upon request,
the Trustee and the Master Servicer a detailed accounting on a loan-by-loan
basis as to amounts advanced by, pledged or assigned to, and reimbursed to any
Advance Financing Person. The successor Servicer shall be entitled to rely on
any such information provided by the predecessor Servicer, and the successor
Servicer (including the Trustee or the Master Servicer) shall not be liable for
any errors in such information.

                  (d) As between a predecessor Servicer and its Advance
Financing Person, on the one hand, and a successor Servicer and its Advance
Financing Person, if any, on the other hand,




                                      -90-
<PAGE>

Advance Reimbursement Amounts on a loan-by-loan basis with respect to each
Mortgage Loan as to which an Advance and/or Servicing Advance shall have been
made and be outstanding shall be allocated on a "first-in, first out" basis. In
the event the Servicer's Assignee shall have received some or all of an Advance
Reimbursement Amount related to Advances and/or Servicing Advances that were
made by a Person other than such predecessor Servicer or its related Advance
Financing Person in error, then such Servicer's Assignee shall be required to
remit any portion of such Advance Reimbursement Amount to each Person entitled
to such portion of such Advance Reimbursement Amount. Without limiting the
generality of the foregoing, the Servicer shall remain entitled to be reimbursed
by the Advance Financing Person for all Advances and/or Servicing Advances
funded by the Servicer to the extent the related Advance Reimbursement Amounts
have not been assigned or pledged to such Advance Financing Person or Servicer's
Assignee.

                  (e) For purposes of any Officer's Certificate of the Servicer
made pursuant to Section 4.03(d), any Nonrecoverable P&I Advance or
Nonrecoverable Servicing Advance referred to therein may have been made by such
Servicer or any predecessor Servicer. In making its determination that any P&I
Advance or Servicing Advance theretofore made has become a Nonrecoverable P&I
Advance or Nonrecoverable Servicing Advance, as applicable, the Servicer shall
apply the same criteria in making such determination regardless of whether such
P&I Advance or Servicing Advance shall have been made by the Servicer or any
predecessor Servicer.

                  (f) Any amendment to this Section 3.25 or to any other
provision of this Agreement that may be necessary or appropriate to effect the
terms of an Advance Facility as described generally in this Section 3.25, may be
entered into by the Trustee, the Depositor and the Servicer without the consent
of any Certificateholder, provided such amendment complies with Section 12.01.
All reasonable costs and expenses (including attorneys' fees and disbursements)
of each party hereto of any such amendment shall be borne solely by the Servicer
without reimbursement from the Trust Fund. The parties hereto hereby acknowledge
and agree that: (a) the P&I Advances and/or Servicing Advances financed by
and/or pledged to an Advance Financing Person under any Advance Facility are
obligations owed to the Servicer payable only from the cash flows and proceeds
received under this Agreement for reimbursement of P&I Advances and/or Servicing
Advances only to the extent provided herein, and the Trustee and the Trust are
not, as a result of the existence of any Advance Facility, obligated or liable
to repay any P&I Advances and/or Servicing Advances financed by the Advance
Financing Person; (b) the Servicer will be responsible for remitting to the
Advance Financing Person the applicable amounts collected by it as reimbursement
for P&I Advances and/or Servicing Advances funded by the Advance Financing
Person, subject to the provisions of this Agreement; and (c) the Trustee shall
not have any responsibility to track or monitor the administration of the
financing arrangement between the Servicer and any Advance Financing Person.

                  SECTION 3.26. Obligations of the Servicer in Respect of
                                Mortgage Rates and Monthly Payments; Servicer
                                Indemnification.

                  (a) In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of




                                      -91-
<PAGE>

notice thereof, immediately shall deliver to the Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Fund, the Trustee, the Master
Servicer, the Securities Administrator, the Depositor and any successor Servicer
in respect of any such liability. Such indemnities shall survive the termination
or resignation of the Servicer or discharge of this Agreement.

                  (b) The Servicer agrees to indemnify the Trustee, Master
Servicer and the Securities Administrator, from, and hold the Trustee, Master
Servicer and the Securities Administrator harmless against, any loss, liability
or expense (including reasonable attorney's fees and expenses) incurred by any
such Person by reason of the Servicer's willful misfeasance, bad faith or gross
negligence in the performance of its duties under this Agreement or by reason of
the Servicer's reckless disregard of its obligations and duties under this
Agreement. Such indemnity shall survive the termination or discharge of this
Agreement and the resignation or removal of the Servicer, the Trustee, the
Master Servicer and the Securities Administrator. Any payment hereunder made by
the Servicer to any such Person shall be from the Servicer's own funds, without
reimbursement from REMIC I therefor.




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<PAGE>

                                   ARTICLE IV

                       ADMINISTRATION AND MASTER SERVICING
                  OF THE MORTGAGE LOANS BY THE MASTER SERVICER

                  SECTION 4.01. Master Servicer.

                  The Master Servicer shall supervise, monitor and oversee the
obligation of the Servicer to service and administer the Mortgage Loans in
accordance with the terms of the Agreement and shall have full power and
authority to do any and all things which it may deem necessary or desirable in
connection with such master servicing and administration. In performing its
obligations hereunder, the Master Servicer shall act in a manner consistent with
Accepted Master Servicing Practices. Furthermore, the Master Servicer shall
oversee and consult with the Servicer as necessary from time-to-time to carry
out the Master Servicer's obligations hereunder, shall receive, review and
evaluate all reports, information and other data provided to the Master Servicer
by the Servicer and shall cause the Servicer to perform and observe the
covenants, obligations and conditions to be performed or observed by the
Servicer under this Agreement. The Master Servicer shall independently and
separately monitor the Servicer's servicing activities with respect to each
related Mortgage Loan, reconcile the results of such monitoring with such
information provided in the previous sentence on a monthly basis and coordinate
corrective adjustments to the Servicer's and Master Servicer's records, and
based on such reconciled and corrected information, prepare the statements
specified in Section 5.03 and any other information and statements required to
be provided by the Master Servicer hereunder. The Master Servicer shall
reconcile the results of its Mortgage Loan monitoring with the actual
remittances of the Servicer to the Distribution Account pursuant to the terms
hereof based on information provided to the Master Servicer by the Trustee
pursuant to the fourth paragraph of Section 9.01.

                  The Trustee shall furnish the Servicer and the Master Servicer
with any limited powers of attorney and other documents in form as provided to
it necessary or appropriate to enable the Servicer and the Master Servicer to
service and administer the related Mortgage Loans and REO Property. The Trustee
shall have no responsibility for any action of the Master Servicer or any
Servicer pursuant to any such limited power of attorney and shall be indemnified
by the Master Servicer or the Servicer, as applicable, for any cost, liability
or expense incurred by the Trustee in connection with such Person's use or
misuse of any such power of attorney.

                  The Trustee, the Custodian and the Securities Administrator
shall provide access to the records and documentation in possession of the
Trustee, the Custodian or the Securities Administrator regarding the related
Mortgage Loans and REO Property and the servicing thereof to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC, such access being afforded only upon reasonable prior written request and
during normal business hours at the office of the Trustee, the Custodian or the
Securities Administrator; provided, however, that, unless otherwise required by
law, none of the Trustee, the Custodian or the Securities Administrator shall be
required to provide access to such records and documentation if the provision
thereof would violate the legal right to privacy of any Mortgagor. The Trustee,
the Custodian and the Securities Administrator shall allow representatives of
the above entities to photocopy any of the records and




                                      -93-
<PAGE>

documentation and shall provide equipment for that purpose at a charge that
covers the Trustee's, the Custodian's or the Securities Administrator's actual
costs.

                  The Trustee shall execute and deliver to the Servicer or the
Master Servicer upon request any court pleadings, requests for trustee's sale or
other documents necessary or desirable to (i) the foreclosure or trustee's sale
with respect to a Mortgaged Property; (ii) any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or any other Mortgage Loan
Document; (iii) obtain a deficiency judgment against the Mortgagor; or (iv)
enforce any other rights or remedies provided by the Mortgage Note or any other
Mortgage Loan Document or otherwise available at law or equity.

                  SECTION 4.02. REMIC-Related Covenants.

                  For as long as each REMIC shall exist, the Trustee and the
Securities Administrator shall act in accordance herewith to treat such REMIC as
a REMIC, and the Trustee and the Securities Administrator shall comply with any
directions of the Seller, the Servicer or the Master Servicer to assure such
continuing treatment. In particular, the Trustee shall not (a) sell or permit
the sale of all or any portion of the Mortgage Loans or of any investment of
deposits in an Account unless such sale is as a result of a repurchase of the
Mortgage Loans pursuant to this Agreement or the Trustee has received a REMIC
Opinion prepared at the expense of the Trust Fund; and (b) other than with
respect to a substitution pursuant to the Mortgage Loan Purchase Agreements or
Section 2.03 of this Agreement, as applicable, accept any contribution to any
REMIC after the Startup Day without receipt of a Opinion of Counsel stating that
such contribution will not result in an Adverse REMIC Event as deferred in
Section 11.01(f).

                  SECTION 4.03. Monitoring of Servicer.

                  (a) The Master Servicer shall be responsible for monitoring
the compliance by the Servicer with its duties under this Agreement. In the
review of the Servicer's activities, the Master Servicer may rely upon an
officer's certificate of the Servicer with regard to the Servicer's compliance
with the terms of this Agreement. In the event that the Master Servicer, in its
judgment, determines that the Servicer should be terminated in accordance with
the terms hereof, or that a notice should be sent pursuant to the terms hereof
with respect to the occurrence of an event that, unless cured, would constitute
an Event of Default, the Master Servicer shall notify the Seller and the Trustee
thereof and the Master Servicer shall issue such notice or take such other
action as it deems appropriate.

                  (b) The Master Servicer, for the benefit of the Trustee and
the Certificateholders, shall enforce the obligations of the Servicer under this
Agreement, and shall, in the event that the Servicer fails to perform its
obligations in accordance with this Agreement, subject to the preceding
paragraph and Article VIII, cause the Trustee to terminate the rights and
obligations of the Servicer hereunder in accordance with the provisions of
Article VIII. Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Master Servicer shall pay the costs of such
enforcement at its own expense, provided that the Master




                                      -94-
<PAGE>

Servicer shall not be required to prosecute or defend any legal action except to
the extent that the Master Servicer shall have received reasonable indemnity for
its costs and expenses in pursuing such action.

                  (c) To the extent that the costs and expenses of the Master
Servicer related to the termination of the Servicer, appointment of a successor
Servicer or the transfer and assumption of the servicing by the Master Servicer
(including, without limitation, (i) all legal costs and expenses and all due
diligence costs and expenses associated with an evaluation of the potential
termination of the Servicer as a result of a Servicer Event of Default and (ii)
all costs and expenses associated with the complete transfer of servicing,
including all servicing files and all servicing data and the completion,
correction or manipulation of such servicing data as may be required by the
successor servicer to correct any errors or insufficiencies in the servicing
data or otherwise to enable the successor servicer to service the Mortgage Loans
in accordance with this Agreement) are not fully and timely reimbursed by the
terminated Servicer, the Master Servicer shall be entitled to reimbursement of
such costs and expenses from the Distribution Account.

                  (d) The Master Servicer shall require the Servicer to comply
with the remittance requirements and other obligations set forth in this
Agreement.

                  (e) If the Master Servicer acts as successor Servicer, it will
not assume liability for the representations and warranties of the terminated
Servicer.

                  SECTION 4.04. Fidelity Bond.

                  The Master Servicer, at its expense, shall maintain in effect
a blanket fidelity bond and an errors and omissions insurance policy, affording
coverage with respect to all directors, officers, employees and other Persons
acting on such Master Servicer's behalf, and covering errors and omissions in
the performance of the Master Servicer's obligations hereunder. The errors and
omissions insurance policy and the fidelity bond shall be in such form and
amount generally acceptable for entities serving as master servicers or
trustees.

                  SECTION 4.05. Power to Act; Procedures.

                  The Master Servicer shall master service the Mortgage Loans
and shall have full power and authority, subject to the REMIC Provisions and the
provisions of Article XI, to do any and all things that it may deem necessary or
desirable in connection with the master servicing and administration of the
Mortgage Loans, including but not limited to the power and authority (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, (iii) to collect any Insurance Proceeds and
Liquidation Proceeds, and (iv) to effectuate foreclosure or other conversion of
the ownership of the Mortgaged Property securing any Mortgage Loan, in each
case, in accordance with the provisions of this Agreement; provided, however,
that the Master Servicer shall not (and, consistent with its responsibilities
under Section 4.03, shall not permit the Servicer to) knowingly or intentionally
take any action, or fail to take (or fail to cause to be taken) any action
reasonably within its control and the scope of duties more specifically set
forth herein, that, under the REMIC




                                      -95-
<PAGE>

Provisions, if taken or not taken, as the case may be, would cause REMIC I,
REMIC II or REMIC III to fail to qualify as a REMIC or result in the imposition
of a tax upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) unless the
Master Servicer has received an Opinion of Counsel (but not at the expense of
the Master Servicer) to the effect that the contemplated action will not would
cause REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC or result in
the imposition of a tax upon REMIC I, REMIC II or REMIC III, as the case may be.
The Trustee shall furnish the Master Servicer, upon written request from a
Servicing Officer, with any powers of attorney empowering the Master Servicer or
the Servicer to execute and deliver instruments of satisfaction or cancellation,
or of partial or full release or discharge, and to foreclose upon or otherwise
liquidate Mortgaged Property, and to appeal, prosecute or defend in any court
action relating to the Mortgage Loans or the Mortgaged Property, in accordance
with this Agreement, and the Trustee shall execute and deliver such other
documents, as the Master Servicer or the Servicer may request, to enable the
Master Servicer to master service and administer the Mortgage Loans and carry
out its duties hereunder, in each case in accordance with Accepted Master
Servicing Practices (and the Trustee shall have no liability for misuse of any
such powers of attorney by the Master Servicer or the Servicer and shall be
indemnified by the Master Servicer or the Servicer, as applicable, for any cost,
liability or expense incurred by the Trustee in connection with such Person's
use or misuse of any such power of attorney). If the Master Servicer or the
Trustee has been advised that it is likely that the laws of the state in which
action is to be taken prohibit such action if taken in the name of the Trustee
or that the Trustee would be adversely affected under the "doing business" or
tax laws of such state if such action is taken in its name, the Master Servicer
shall join with the Trustee in the appointment of a co-trustee pursuant to
Section 9.10. In the performance of its duties hereunder, the Master Servicer
shall be an independent contractor and shall not, except in those instances
where it is taking action in the name of the Trustee, be deemed to be the agent
of the Trustee.

                  SECTION 4.06. Due-on-Sale Clauses; Assumption Agreements.

                  To the extent Mortgage Loans contain enforceable due-on-sale
clauses, the Master Servicer shall cause the Servicer to enforce such clauses in
accordance with this Agreement. If applicable law prohibits the enforcement of a
due-on-sale clause or such clause is otherwise not enforced in accordance with
this Agreement, and, as a consequence, a Mortgage Loan is assumed, the original
Mortgagor may be released from liability in accordance with this Agreement.

                  SECTION 4.07. Reserved.

                  SECTION 4.08. Documents, Records and Funds in Possession of
                                Master Servicer To Be Held for Trustee.

                  (a) The Master Servicer shall transmit to the Trustee or
Custodian such documents and instruments coming into the possession of the
Master Servicer from time to time as are required by the terms hereof to be
delivered to the Trustee or Custodian. Any funds received by the Master Servicer
in respect of any Mortgage Loan or which otherwise are collected by the Master
Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan shall be remitted to the Trustee for deposit in the Distribution
Account. The Master Servicer shall, and shall




                                      -96-
<PAGE>

cause the Servicer to, provide access to information and documentation regarding
the Mortgage Loans to the Trustee, its agents and accountants at any time upon
reasonable request and during normal business hours, and to Certificateholders
that are savings and loan associations, banks or insurance companies, the Office
of Thrift Supervision, the FDIC and the supervisory agents and examiners of such
Office and Corporation or examiners of any other federal or state banking or
insurance regulatory authority if so required by applicable regulations of the
Office of Thrift Supervision or other regulatory authority, such access to be
afforded without charge but only upon reasonable request in writing and during
normal business hours at the offices of the Master Servicer designated by it. In
fulfilling such a request the Master Servicer shall not be responsible for
determining the sufficiency of such information.

                  (b) All Mortgage Files and funds collected or held by, or
under the control of, the Master Servicer, in respect of any Mortgage Loans,
whether from the collection of principal and interest payments or from
Liquidation Proceeds or Insurance Proceeds, shall be remitted to the Trustee for
deposit in the Distribution Account.

                  SECTION 4.09. Standard Hazard Insurance and Flood Insurance
                                Policies.

                  For each Mortgage Loan, the Master Servicer shall enforce the
obligation of the Servicer under this Agreement to maintain or cause to be
maintained standard fire and casualty insurance and, where applicable, flood
insurance, all in accordance with the provisions of this Agreement. It is
understood and agreed that such insurance shall be with insurers meeting the
eligibility requirements set forth in Section 3.11 and that no earthquake or
other additional insurance is to be required of any Mortgagor or to be
maintained on property acquired in respect of a defaulted loan, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance.

                  SECTION 4.10. Presentment of Claims and Collection of
                                Proceeds.

                  The Master Servicer shall enforce the Servicer's obligations
under this Agreement to, prepare and present on behalf of the Trustee and the
Certificateholders all claims under the Insurance Policies and take such actions
(including the negotiation, settlement, compromise or enforcement of the
insured's claim) as shall be necessary to realize recovery under such policies.
Any proceeds disbursed to the Master Servicer in respect of such policies, bonds
or contracts shall be promptly remitted to the Trustee for deposit in the
Distribution Account upon receipt, except that any amounts realized that are to
be applied to the repair or restoration of the related Mortgaged Property as a
condition precedent to the presentation of claims on the related Mortgage Loan
to the insurer under any applicable insurance policy need not be so or remitted.

                  SECTION 4.11. Maintenance of the Primary Mortgage Insurance
                                Policies.

                  (a) The Master Servicer shall not take, or permit the Servicer
to take (to the extent such action is prohibited by this Agreement), any action
that would result in noncoverage under any primary mortgage insurance policy of
any loss which, but for the actions of the Master Servicer or the Servicer,
would have been covered thereunder. The Master Servicer shall use its best
reasonable efforts to cause the Servicer to keep in force and effect (to the
extent that the Mortgage Loan requires




                                      -97-
<PAGE>

the Mortgagor to maintain such insurance), primary mortgage insurance applicable
to each Mortgage Loan in accordance with the provisions of this Agreement. The
Master Servicer shall not, and shall not permit the Servicer to, cancel or
refuse to renew any primary mortgage insurance policy that is in effect at the
date of the initial issuance of the Mortgage Note and is required to be kept in
force hereunder except in accordance with the provisions of this Agreement.

                  (b) The Master Servicer agrees to cause the Servicer to
present, on behalf of the Trustee and the Certificateholders, claims to the
insurer under any primary mortgage insurance policies and, in this regard, to
take such reasonable action as shall be necessary to permit recovery under any
primary mortgage insurance policies respecting defaulted Mortgage Loans.

                  SECTION 4.12. Trustee to Retain Possession of Certain
                                Insurance Policies and Documents.

                  The Trustee or the applicable Custodian, shall retain
possession and custody of the originals (to the extent available) of any primary
mortgage insurance policies, or certificate of insurance if applicable, and any
certificates of renewal as to the foregoing as may be issued from time to time
as contemplated by this Agreement. Until all amounts distributable in respect of
the Certificates has been distributed in full and the Master Servicer and the
Servicer have otherwise fulfilled their respective obligations under this
Agreement, the Trustee or the Custodian shall also retain possession and custody
of each Mortgage File in accordance with and subject to the terms and conditions
of this Agreement and the Custodial Agreement. The Master Servicer shall
promptly deliver or cause to be delivered to the Trustee or the Custodian, upon
the execution or receipt thereof the originals of any primary mortgage insurance
policies, any certificates of renewal, and such other documents or instruments
that constitute Mortgage Loan Documents that come into the possession of the
Master Servicer from time to time.

                  SECTION 4.13. Realization Upon Defaulted Mortgage Loans.

                  The Master Servicer shall cause the Servicer to foreclose
upon, repossess or otherwise comparably convert the ownership of Mortgaged
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, all in accordance with this Agreement.

                  SECTION 4.14. Compensation for the Master Servicer.

                  As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Master Servicing Fee and
the income from investment of or earnings on the funds from time to time in the
Distribution Account, as provided in Section 3.10. The Master Servicing Fee
payable to the Master Servicer in respect of any Distribution Date shall be
reduced in accordance with Section 4.19. The Master Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder
and shall not be entitled to reimbursement therefor except as provided in this
Agreement.

                  SECTION 4.15. REO Property.





                                      -98-
<PAGE>

                  (a) In the event the Trust Fund acquires ownership of any REO
Property in respect of any related Mortgage Loan, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of the related
Certificateholders. The Master Servicer shall cause the Servicer to sell, any
REO Property as expeditiously as possible and in accordance with the provisions
of this Agreement. Further, the Master Servicer shall cause the Servicer to sell
any REO Property prior to three years after the end of the calendar year of its
acquisition by REMIC I unless (i) the Trustee shall have been supplied by the
Servicer with an Opinion of Counsel to the effect that the holding by the Trust
Fund of such REO Property subsequent to such three-year period will not result
in the imposition of taxes on "prohibited transactions" of any REMIC hereunder
as defined in section 860F of the Code or cause any REMIC 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) or (ii) the Servicer shall have
applied for, prior to the expiration of such three-year period, an extension of
such three-year period in the manner contemplated by Section 856(e)(3) of the
Code, in which case the three-year period shall be extended by the applicable
extension period. The Master Servicer shall cause the Servicer to protect and
conserve, such REO Property in the manner and to the extent required by this
Agreement, in accordance with the REMIC Provisions and in a manner that does not
result in a tax on "net income from foreclosure property" or cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code.

                  (b) The Master Servicer shall cause the Servicer to deposit
all funds collected and received in connection with the operation of any REO
Property in the Collection Account.

                  SECTION 4.16. Annual Officer's Certificate as to Compliance.

                  (a) The Master Servicer shall deliver to the Trustee and the
Rating Agencies on or before March 15 of each year, commencing on March 15,
2004, an Officer's Certificate, certifying that with respect to the period
ending December 31 of the prior year: (i) such Servicing Officer has reviewed
the activities of such Master Servicer during the preceding calendar year or
portion thereof and its performance under this Agreement, (ii) to the best of
such Servicing Officer's knowledge, based on such review, such Master Servicer
has performed and fulfilled its duties, responsibilities and obligations under
this Agreement in all material respects throughout such year, or, if there has
been a default in the fulfillment of any such duties, responsibilities or
obligations, specifying each such default known to such Servicing Officer and
the nature and status thereof, (iii) nothing has come to the attention of such
Servicing Officer to lead such Servicing Officer to believe that the Servicer
has failed to perform any of its duties, responsibilities and obligations under
this Agreement in all material respects throughout such year, or, if there has
been a material default in the performance or fulfillment of any such duties,
responsibilities or obligations, specifying each such default known to such
Servicing Officer and the nature and status thereof.

                  (b) Copies of such statements shall be provided to any
Certificateholder upon request, by the Master Servicer or by the Trustee at the
Master Servicer's expense if the Master Servicer failed to provide such copies
(unless (i) the Master Servicer shall have failed to provide the Trustee with
such statement or (ii) the Trustee shall be unaware of the Master Servicer's
failure to provide such statement).





                                      -99-
<PAGE>

                  SECTION 4.17. Annual Independent Accountant's Servicing
                                Report.

                  If the Master Servicer has, during the course of any calendar
year, directly serviced any of the Mortgage Loans, then the Master Servicer at
its expense shall cause a nationally recognized firm of independent certified
public accountants to furnish a statement to the Trustee, the Rating Agencies
and the Seller on or before March 15 of each year, commencing on March 15, 2004
to the effect that, with respect to the most recently ended fiscal year, such
firm has examined certain records and documents relating to the Master
Servicer's performance of its servicing obligations under this Agreement and
pooling and servicing and trust agreements in material respects similar to this
Agreement and to each other and that, on the basis of such examination conducted
substantially in compliance with the audit program for mortgages serviced for
Freddie Mac or the Uniform Single Attestation Program for Mortgage Bankers, such
firm is of the opinion that the Master Servicer's activities have been conducted
in compliance with this Agreement, or that such examination has disclosed no
material items of noncompliance except for (i) such exceptions as such firm
believes to be immaterial, (ii) such other exceptions as are set forth in such
statement and (iii) such exceptions that the Uniform Single Attestation Program
for Mortgage Bankers or the Audit Program for Mortgages Serviced by Freddie Mac
requires it to report. Copies of such statements shall be provided to any
Certificateholder upon request by the Master Servicer, or by the Trustee at the
expense of the Master Servicer if the Master Servicer shall fail to provide such
copies. If such report discloses exceptions that are material, the Master
Servicer shall advise the Trustee whether such exceptions have been or are
susceptible of cure, and will take prompt action to do so.

                  SECTION 4.18. UCC.

                  The Depositor agrees to file continuation statements for any
Uniform Commercial Code financing statements which the Seller has informed the
Depositor were filed on the Closing Date in connection with the Trust. The
Depositor shall file any financing statements or amendments thereto required by
any change in the Uniform Commercial Code.

                  SECTION 4.19. Obligation of the Master Servicer in Respect of
                                Prepayment Interest Shortfalls.

                  In the event of a Prepayment Interest Shortfall, the Master
Servicer shall remit to the Trustee not later than the Distribution Date an
amount equal to the lesser of (i) the aggregate amounts required to be paid by
the Servicer with respect to Prepayment Interest Shortfalls attributable to
Principal Prepayments on the related Mortgage Loans for the related Distribution
Date, and not so paid by the Servicer and (ii) the Master Servicing Fee for such
Distribution Date, without reimbursement therefor.

                  SECTION 4.20. Collection Account.

                  The Master Servicer shall enforce the obligation of the
Servicer to establish and maintain a Collection Account in accordance with this
Agreement, with records to be kept with respect thereto on a Mortgage Loan by
Mortgage Loan basis, into which accounts shall be deposited within two Business
Days of receipt all collections of principal and interest on any Mortgage Loan
and with respect to any REO Property received by the Servicer, including
Principal Prepayments,




                                     -100-
<PAGE>

Insurance Proceeds, Liquidation Proceeds, and advances made from the Servicer's
own funds (less servicing compensation as permitted by Section 3.15) and all
other amounts to be deposited in the Collection Account.

                  SECTION 4.21. Prepayment Penalty Verification.

                  On or prior to each Servicer Remittance Date, the Servicer
shall provide in an electronic format acceptable to the Master Servicer the data
necessary for the Master Servicer to perform its verification duties set forth
in this Section 4.21. The Master Servicer or a third party reasonably acceptable
to the Master Servicer and the Depositor (the "Verification Agent") will perform
such verification duties and will use its best efforts to issue its findings in
a report (the "Verification Report") delivered to the Master Servicer and the
Depositor within ten (10) Business Days following the related Distribution Date;
provided, however, that if the Verification Agent is unable to issue the
Verification Report within ten (10) Business Days following the Distribution
Date, the Verification Agent may issue and deliver to the Master Servicer and
the Depositor the Verification Report upon the completion of its verification
duties. The Master Servicer shall forward the Verification Report to the
Servicer and shall notify the Servicer if the Master Servicer has determined
that such Servicer did not deliver the appropriate Prepayment Charge to the
Trustee or the appropriate Servicer Prepayment Charge Payment Amount in
accordance with this Agreement. Such written notification from the Master
Servicer shall include the loan number, prepayment penalty code and prepayment
penalty amount as calculated by the Master Servicer or the Verification Agent,
as applicable, of each Mortgage Loan for which there is a discrepancy. If the
Servicer agrees with the verified amounts, the Servicer shall adjust the
immediately succeeding Servicer Report and the amount remitted to the Trustee
with respect to prepayments accordingly. If the Servicer disagrees with the
determination of the Master Servicer, the Servicer shall, within five (5)
Business Days of its receipt of the Verification Report, notify the Master
Servicer of such disagreement and provide the Master Servicer with detailed
information to support such Servicer's position. The Servicer and the Master
Servicer shall cooperate to resolve any discrepancy on or prior to the
immediately succeeding Servicer Remittance Date, and the Servicer will indicate
the effect of such resolution on the related Servicer Report and shall adjust
the amount remitted with respect to prepayments on such Servicer Remittance Date
accordingly.

                  During such time as the Servicer and the Master Servicer are
resolving discrepancies with respect to the Prepayment Charges, no payments in
respect of any disputed Prepayment Charges will be remitted to the Trustee for
deposit in the Distribution Account and the Master Servicer shall not be
obligated to remit such payments, unless otherwise required pursuant to Section
8.01 hereof. In connection with such duties, the Master Servicer shall be able
to rely solely on the information provided to it by the Servicer in accordance
with this Section. The Master Servicer shall not be responsible for verifying
the accuracy of any of the information provided to it by the Servicer.

                  In the event of a Principal Prepayment in full with respect to
any Mortgage Loan, the Servicer shall deliver to the Master Servicer a
certification of a Servicing Officer substantially in the form of Exhibit D no
later than the third Business Day following the immediately succeeding
Determination Date with a copy to the Class CE Certificateholder.




                                     -101-
<PAGE>

                                    ARTICLE V

                         PAYMENTS TO CERTIFICATEHOLDERS

                  SECTION 5.01. Distributions.

                  (a)(1)(A) On each Distribution Date, the following amounts, in
         the following order of priority, shall be distributed by REMIC I to
         REMIC II on account of the REMIC I Regular Interests or withdrawn from
         the Distribution Account and distributed to the holders of the Class R
         Certificates, in respect of the Class R-I Interest, as the case may be:

                  (i) first, to the Holders of REMIC I Regular Interest I-LTIO-1
         and REMIC I Regular Interest I-LTIO-2 in an amount equal to (A) the
         Uncertificated Interest for such Distribution Date, plus (B) any
         amounts in respect thereof remaining unpaid from previous Distribution
         Dates and second, to the Holders of REMIC I Regular Interest I-LT1,
         REMIC I Regular Interest I-LT2 and I-LTP, in an amount equal to (A) the
         Uncertificated Interest for such Distribution Date, plus (B) any
         amounts in respect thereof remaining unpaid from previous Distribution
         Dates;

                  (ii) to the Holders of the REMIC I Regular Interest I-LTP, on
         the Distribution Date immediately following the expiration of the
         latest Prepayment Charge term as identified on the Mortgage Loan
         Schedule or any Distribution Date thereafter until $100 has been
         distributed pursuant to this clause;

                  (iii) on each Distribution Date, the remainder of the
         Available Distribution Amount for such Distribution Date after the
         distributions made pursuant to clause (i) and clause (ii) above to the
         Holders of REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
         I-LT2 until the Uncertificated Balance of REMIC I Regular Interest
         I-LT1 and REMIC I Regular Interest I-LT2 is reduced to zero; and

                  (iv) to the Holders of the Class R Certificates, in respect of
         the Class R-I Interest, any amounts remaining after the distributions
         pursuant to clauses (i) through (iii) above.

                  On each Distribution Date, all amounts representing Prepayment
Charges in respect of the Mortgage Loans received during the related Prepayment
Period will be distributed by REMIC I to the Holders of REMIC I Regular Interest
I-LTP. The payment of the foregoing amounts to the Holders of REMIC I Regular
Interest I-LTP shall not reduce the Uncertificated Balance thereof.

                  (B) On each Distribution Date, the following amounts, in the
         following order of priority, shall be distributed by REMIC II to REMIC
         III on account of the REMIC II Regular Interests or withdrawn from the
         Distribution Account and distributed to the holders of the Class R
         Certificates, in respect of the Class R-II Interest, as the case may
         be:

                  (i) to the Holders of REMIC II Regular Interest II-LTIO-1A,
         REMIC II Regular Interest II-LTIO-1B, REMIC II Regular Interest
         II-LTIO-1C, REMIC II Regular Interest II- LTIO-2A, REMIC II Regular
         Interest II-LTIO-2B and REMIC II Regular Interest II-LTIO-





                                     -102-
<PAGE>

         2C, PRO RATA, in an amount equal to (A) the Uncertificated Interest for
         each such REMIC II Regular Interest for such Distribution Date, plus
         (B) any amounts in respect thereof remaining unpaid from previous
         Distribution Dates and then to Holders of REMIC II Regular Interest
         II-LTAA, REMIC Regular Interest II-LTA1, REMIC II Regular Interest
         II-LTA2, REMIC II Regular Interest II-LTM1, REMIC II Regular Interest
         II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular Interest
         II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular Interest
         II-LTM6, REMIC II Regular Interest II-LTZZ and REMIC II Regular
         Interest II-LTP, PRO RATA, in an amount equal to (A) the Uncertificated
         Interest for such Distribution Date, plus (B) any amounts in respect
         thereof remaining unpaid from previous Distribution Dates. Amounts
         payable as Uncertificated Interest in respect of REMIC II Regular
         Interest II-LTZZ shall be reduced when the REMIC II
         Overcollateralization Amount is less than the REMIC II Required
         Overcollateralization Amount, by the lesser of (x) the amount of such
         difference and (y) the Maximum II-LTZZ Uncertificated Interest Deferral
         Amount and such amount will be payable to the Holders of REMIC II
         Regular Interest II-LTA1, REMIC II Regular Interest II-LTA2, REMIC II
         Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II
         Regular Interest II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II
         Regular Interest II-LTM5 and REMIC II Regular Interest II- LTM6 in the
         same proportion as the Overcollateralization Increase Amount is
         allocated to the Corresponding Certificates;

                  (ii) to Holders of REMIC II Regular Interest II-LT1SUB, REMIC
         II Regular Interest II-LT1GRP, REMIC II Regular Interest II-LT2SUB,
         REMIC II Regular Interest II-LT2GRP and REMIC II Regular Interest
         II-LTXX, pro rata, in an amount equal to (A) the Uncertificated
         Interest for such Distribution Date, plus (B) any amounts in respect
         thereof remaining unpaid from previous Distribution Dates

                  (iii) to the Holders of REMIC II Regular Interests, in an
         amount equal to the remainder of the REMIC II Marker Allocation
         Percentage of the Available Funds for such Distribution Date after the
         distributions made pursuant to clause (i) above, allocated as follows:

                  (a) to the Holders of REMIC II Regular Interest II-LTAA,
         98.00% of such remainder, until the Uncertificated Balance of such
         Uncertificated REMIC II Regular Interest is reduced to zero;

                  (b) to the Holders of REMIC II Regular Interest II-LTA1, REMIC
         II Regular Interest II-LTA2, REMIC II Regular Interest II-LTM1, REMIC
         II Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3 REMIC II
         Regular Interest II-LTM4, REMIC II Regular Interest II- LTM5 and REMIC
         II Regular Interest II-LTM6, 1.00% of such remainder, in the same
         proportion as principal payments are allocated to the Corresponding
         Certificates, until the Uncertificated Balances of such REMIC II
         Regular Interests are reduced to zero;

                  (c) to the Holders of REMIC II Regular Interest II-LTZZ, 1.00%
         of such remainder, until the Uncertificated Balance of such REMIC II
         Regular Interest is reduced to zero;







                                     -103-
<PAGE>

                  (d) to the Holders of REMIC II Regular Interest II-LTP, on the
         Distribution Date immediately following the expiration of the latest
         Prepayment Charge as identified on the Prepayment Charge Schedule or
         any Distribution Date thereafter until $100 has been distributed
         pursuant to this clause; then

                  (e) any remaining amount to the Holders of the Class R-II
         Interest, in respect of the Class R-II Interest; and

                  (iv) to REMIC II Regular Interest II-LTP, 100% of the amount
         paid in respect of REMIC I Regular Interest I-LTP;

provided, however, that 98.00% and 2.00% of any principal payments that are
attributable to an Overcollateralization Reduction Amount shall be allocated to
Holders of REMIC II Regular Interest II-LTAA and REMIC II Regular Interest
II-LTZZ, respectively.

                  (v) to the Holders of REMIC II Regular Interests, in an amount
         equal to the remainder of the REMIC II Sub WAC Allocation Percentage of
         Available Funds for such Distribution Date after the distributions made
         pursuant to clause (i) above, such that distributions of principal
         shall be deemed to be made to the REMIC II Regular Interests first, so
         as to keep the Uncertificated Balance of each REMIC II Regular Interest
         ending with the designation "GRP" equal to 0.01% of the aggregate
         Stated Principal Balance of the Mortgage Loans in the related Loan
         Group; second, to each REMIC II Regular Interest ending with the
         designation "SUB," so that the Uncertificated Balance of each such
         REMIC II Regular Interest is equal to 0.01% of the excess of (x) the
         aggregate Stated Principal Balance of the Mortgage Loans in the related
         Loan Group over (y) the current Certificate Principal Balance of the
         Class A Certificate in the related Loan Group (except that if any such
         excess is a larger number than in the preceding distribution period,
         the least amount of principal shall be distributed to such REMIC II
         Regular Interests such that the REMIC II Subordinated Balance Ratio is
         maintained); and third, any remaining principal to REMIC II Regular
         Interest II-LTXX.

                  (2) On each Distribution Date, based solely on the
         instructions of the Securities Administrator, the Trustee shall
         withdraw from the Distribution Account to the extent on deposit therein
         an amount equal to the Group I Interest Remittance Amount and make the
         following disbursements and transfers in the order of priority
         described below, in each case to the extent of the Group I Interest
         Remittance Amount remaining for such Distribution Date:

         FIRST, concurrently to the Holders of the Class A-1 Certificates and
         the Class A-IO Certificates (in respect of REMIC II Regular Interest
         II-LTIO-1A, REMIC II Regular Interest II-LTIO-1B and REMIC II Regular
         Interest II-LTIO-1C), the Senior Interest Distribution Amount allocable
         to each such Class, on a PRO RATA basis based on the entitlement of
         each such Class; and

         SECOND, to the Holders of the Class A-2 Certificates and the Class A-IO
         Certificates (in respect of REMIC II Regular Interest II-LTIO-2A, REMIC
         II Regular Interest II-LTIO-2B and REMIC II Regular Interest
         II-LTIO-2C), the Senior Interest Distribution Amount




                                     -104-
<PAGE>

         allocable to each such Class, on a PRO RATA basis based on the
         entitlement of each such Class, to the extent remaining unpaid after
         the distribution of the Group II Interest Remittance Amount as set
         forth in clause FIRST of Section 5.01(a)(3) below.

                  (3) On each Distribution Date, based solely on the
instructions of the Securities Administrator, the Trustee shall withdraw from
the Distribution Account to the extent on deposit therein an amount equal to the
Group II Interest Remittance Amount and make the following disbursements and
transfers in the order of priority described below, in each case to the extent
of the Group II Interest Remittance Amount remaining for such Distribution Date:

         FIRST, concurrently to the Holders of the Class A-2 Certificates and
         Class A-IO Certificates (in respect of REMIC II Regular Interest
         II-LTIO-2A, REMIC II Regular Interest II-LTIO-2B and REMIC II Regular
         Interest II-LTIO-2C), the Senior Interest Distribution Amount allocable
         to each such Class, on a PRO RATA basis based on the entitlement of
         each such Class; and

         SECOND, to the Holders of the Class A-1 Certificates and the Class A-IO
         Certificates (in respect of REMIC II Regular Interest II-LTIO-1A, REMIC
         II Regular Interest II-LTIO-1B and REMIC II Regular Interest
         II-LTIO-1C), the Senior Interest Distribution Amount allocable to each
         such Class, on a PRO RATA basis based on the entitlement of each such
         Class, to the extent remaining unpaid after the distribution of the
         Group I Interest Remittance Amount as set forth in clause FIRST of
         Section 5.01(a)(2) above.

                  (4) On each Distribution Date, based solely on the
instructions of the Securities Administrator, the Trustee shall withdraw from
the Distribution Account to the extent on deposit therein an amount equal to the
Group I Interest Remittance Amount and the Group II Interest Remittance Amount
remaining and make the following disbursements and transfers in the order of
priority described below, in each case to the extent of the Group I Interest
Remittance Amount and Group II Interest Remittance Amount remaining for such
Distribution Date:

         FIRST, to the Holders of the Class M-1 Certificates, the Interest
         Distribution Amount allocable to the Class M-1 Certificates;

         SECOND, to the Holders of the Class M-2 Certificates, the Interest
         Distribution Amount allocable to the Class M-2 Certificates;

         THIRD, to the Holders of the Class M-3 Certificates, the Interest
         Distribution Amount allocable to the Class M-3 Certificates;

         FOURTH, to the Holders of the Class M-4 Certificates, the Interest
         Distribution Amount allocable to the Class M-4 Certificates;

         FIFTH, to the Holders of the Class M-5 Certificates, the Interest
         Distribution Amount allocable to the Class M-5 Certificates; and





                                     -105-
<PAGE>

         SIXTH, to the Holders of the Class M-6 Certificates, the Interest
         Distribution Amount allocable to the Class M-6 Certificates.

                  (5) On each Distribution Date (a) prior to the Stepdown Date
or (b) on which a Trigger Event is in effect, based solely on the instructions
of the Securities Administrator, the Trustee shall withdraw from the
Distribution Account to the extent on deposit therein an amount equal to the
Group I Principal Distribution Amount and the Group II Principal Distribution
Amount and distribute to the Certificateholders the following amounts, in the
following order of priority:

**                         (i) The Group I Principal Distribution Amount shall
         be distributed in the following order of priority:

                           FIRST, to the Holders of the Class A-1 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero; and

                           SECOND, to the Holders of the Class A-2 Certificates
                           after taking into account the distribution of the
                           Group II Principal Distribution Amount pursuant to
                           clause FIRST of Section 5.01(a)(5)(ii) below, until
                           the Certificate Principal Balance of such Class has
                           been reduced to zero.

                           (ii) The Group II Principal Distribution Amount shall
         be distributed in the following order of priority:

                           FIRST, to the Holders of the Class A-2 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero; and

                           SECOND, to the Holders of the Class A-1 Certificates,
                           after taking into account the distribution of the
                           Group I Principal Distribution Amount pursuant to
                           clause FIRST of Section 5.01(a)(5)(i) above, until
                           the Certificate Principal Balance of such Class has
                           been reduced to zero.

                           (iii) The Group I Principal Distribution Amount and
         Group II Principal Distribution Amount remaining after distributions
         pursuant to Section 5.01(a)(5)(i) and (ii) above shall be distributed
         in the following order of priority:

                           FIRST, to the Holders of the Class M-1 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           SECOND, to the Holders of the Class M-2 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           THIRD, to the Holders of the Class M-3 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           FOURTH, to the Holders of the Class M-4 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;




                                     -106-
<PAGE>

                           FIFTH, to the Holders of the Class M-5 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero; and

                           SIXTH, to the Holders of the Class M-6 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero.

                  (6) On each Distribution Date (a) on or after the Stepdown
         Date and (b) on which a Trigger Event is not in effect, based solely on
         the instructions of the Securities Administrator, the Trustee shall
         withdraw from the Distribution Account to the extent on deposit therein
         an amount equal to the Group I Principal Distribution Amount and the
         Group II Principal Distribution Amount and distribute to the
         Certificateholders the following amounts, in the following order of
         priority:

                  (i) The Group I Principal Distribution Amount shall be
         distributed in the following order of priority:

                           FIRST, to the Holders of the Class A-1 Certificates,
                           the Class A-1 Principal Distribution Amount, until
                           the Certificate Principal Balance of such Class has
                           been reduced to zero;

                           SECOND, to the extent of the portion, if any, of the
                           Class A-1 Principal Distribution Amount remaining
                           undistributed pursuant to clause FIRST of Section
                           5.01(a)(6)(i) above, to the Holders of the Class A-2
                           Certificates, after taking into account the
                           distribution of the Group II Principal Distribution
                           Amount pursuant to clause FIRST of Section
                           5.01(a)(6)(ii) below, until the Certificate Principal
                           Balance of such Class has been reduced to zero; and

                           THIRD, to the Holders of the Class A-2 Certificates,
                           after taking into account the distribution of the
                           Group II Principal Distribution Amount pursuant to
                           clause FIRST of Section 5.01(a)(6)(ii) below, up to
                           the amount, if any, of the Class A-2 Principal
                           Distribution Amount remaining unpaid on such
                           Distribution Date, until the Certificate Principal
                           Balance of such Class has been reduced to zero.

                  (ii) The Group II Principal Distribution Amount shall be
         distributed in the following order of priority:

                           FIRST, to the Holders of the Class A-2 Certificates,
                           the Class A-2 Principal Distribution Amount, until
                           the Certificate Principal Balance of such Class has
                           been reduced to zero;

                           SECOND, to the extent of the portion, if any, of the
                           Class A-2 Principal Distribution Amount remaining
                           undistributed pursuant to clause FIRST of Section
                           5.01(a)(6)(ii) above, to the Holders of the Class A-1
                           Certificates, after taking into account the
                           distribution of the Group I Principal Distribution
                           Amount pursuant to clause FIRST of Section
                           5.01(a)(6)(i) above, until the Certificate Principal
                           Balance of such Class has been reduced to zero; and




                                     -107-
<PAGE>

                           THIRD, to the holders of the Class A-1 Certificates,
                           after taking into account the distribution of the
                           Group I Principal Distribution Amount pursuant to
                           clause FIRST of Section 5.01(a)(6)(i) above, up to
                           the amount, if any, of the Class A-1 Principal
                           Distribution Amount remaining unpaid on such
                           Distribution Date, until the Certificate Principal
                           Balance of such Class has been reduced to zero.

                  (iii) The Principal Distribution Amount remaining after
distributions pursuant to Section 5.01(a)(6)(i) and (ii) above shall be
distributed in the following order of priority:

                           FIRST, to the Class M-1 Certificates, the lesser of
                           (x) the remaining Principal Distribution Amount and
                           (y) the Class M-1 Principal Distribution Amount,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           SECOND, to the Class M-2 Certificates, the lesser of
                           (x) the excess of (i) the remaining Principal
                           Distribution Amount over (ii) the amount distributed
                           to the Holders of the Class M-1 Certificates pursuant
                           to clause FIRST of this Section 5.01(a)(6)(iii) and
                           (y) the Class M-2 Principal Distribution Amount until
                           the Certificate Principal Balance of such Class has
                           been reduced to zero;

                           THIRD, to the Class M-3 Certificates, the lesser of
                           (x) the excess of (i) the remaining Principal
                           Distribution Amount over (ii) the sum of the amounts
                           distributed to the Holders of the Class M-1
                           Certificates pursuant to clause FIRST of this Section
                           5.01(a)(6)(iii) and to the Holders of the Class M-2
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(a)(6)(iii) and (y) the Class M-3
                           Principal Distribution Amount, until the Certificate
                           Principal Balance of such Class has been reduced to
                           zero;

                           FOURTH, to the Class M-4 Certificates, the lesser of
                           (x) the excess of (i) the remaining Principal
                           Distribution Amount over (ii) the sum of the amounts
                           distributed to the Holders of the Class M-1
                           Certificates pursuant to clause FIRST of this Section
                           5.01(a)(6)(iii), to the Holders of the Class M-2
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(a)(6)(iii) and to the Holders of the
                           Class M-3 Certificates pursuant to clause THIRD of
                           this Section 5.01(a)(6)(iii) and (y) the Class M-4
                           Principal Distribution Amount, until the Certificate
                           Principal Balance of such Class has been reduced to
                           zero;

                           FIFTH, to the Class M-5 Certificates, the lesser of
                           (x) the excess of (i) the remaining Principal
                           Distribution Amount over (ii) the sum of the amounts
                           distributed to the Holders of the Class M-1
                           Certificates pursuant to clause FIRST of this Section
                           5.01(a)(6)(iii), to the Holders of the Class M-2
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(a)(6)(iii), to the Holders of the Class
                           M-3 Certificates pursuant to clause THIRD of this
                           Section 5.01(a)(6)(iii) and to the Holders of the
                           Class M-4 Certificates pursuant to clause FOURTH of
                           this Section 5.01(a)(6)(iii) and (y) the Class M-5
                           Principal




                                     -108-
<PAGE>

                           Distribution Amount, until the Certificate Principal
                           Balance of such Class has been reduced to zero; and

                           SIXTH, to the Class M-6 Certificates, the lesser of
                           (x) the excess of (i) the remaining Principal
                           Distribution Amount over (ii) the sum of the amounts
                           distributed to the Holders of the Class M-1
                           Certificates pursuant to clause FIRST of this Section
                           5.01(a)(6)(iii), to the Holders of the Class M-2
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(a)(6)(iii), to the Holders of the Class
                           M-3 Certificates pursuant to clause THIRD of this
                           Section 5.01(a)(6)(iii), to the Holders of the Class
                           M-4 Certificates pursuant to clause FOURTH of this
                           Section 5.01(a)(6)(iii) and to the Holders of the
                           Class M-5 Certificates pursuant to clause FIFTH of
                           this Section 5.01(a)(6)(iii) and (y) the Class M-6
                           Principal Distribution Amount, until the Certificate
                           Principal Balance of such Class has been reduced to
                           zero.

                  (7) On each Distribution Date, the Net Monthly Excess Cashflow
(or, in the case of clause (i) below, the Net Monthly Excess Cashflow exclusive
of any Overcollateralization Reduction Amount) shall be distributed as follows
based solely on the instructions of the Securities Administrator:

                           (i) to the Holders of the Class or Classes of
                           Certificates then entitled to receive distributions
                           in respect of principal, in an amount equal to any
                           Extra Principal Distribution Amount, payable to such
                           Holders in accordance with the priorities set forth
                           in Section 5.01(b) below;

                           (ii) to the Holders of the Class M-1 Certificates, in
                           an amount equal to the Interest Carry Forward Amount
                           allocable to such Class of Certificates;

                           (iii) to the Holders of the Class M-2 Certificates,
                           in an amount equal to the Interest Carry Forward
                           Amount allocable to such Class of Certificates;

                           (iv) to the Holders of the Class M-3 Certificates, in
                           an amount equal to the Interest Carry Forward Amount
                           allocable to such Class of Certificates;

                           (v) to the Holders of the Class M-4 Certificates, in
                           an amount equal to the Interest Carry Forward Amount
                           allocable to such Class of Certificates;

                           (vi) to the Holders of the Class M-5 Certificates, in
                           an amount equal to the Interest Carry Forward Amount
                           allocable to such Class of Certificates;

                           (vii) to the Holders of the Class M-6 Certificates,
                           in an amount equal to the Interest Carry Forward
                           Amount allocable to such Class of Certificates;

                           (viii) to the Holders of the Class A Certificates and
                           the Class A-IO Certificates, in an amount equal to
                           the aggregate of any Prepayment Interest Shortfalls
                           (to the extent not covered by payments pursuant to
                           Section 3.22 or




                                     -109-
<PAGE>

                           Section 4.19) and any Relief Act Interest Shortfall,
                           in each case that were allocated to such Class for
                           such Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed
                           pursuant to Section 1.02;

                           (ix) to the Holders of the Class M-1 Certificates, in
                           an amount equal to the aggregate of any Prepayment
                           Interest Shortfalls (to the extent not covered by
                           payments pursuant to Section 3.22 or Section 4.19)
                           and any Relief Act Interest Shortfall, in each case
                           that were allocated to such Class for such
                           Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed,
                           pursuant to Section 1.02;

                           (x) to the Holders of the Class M-2 Certificates, in
                           an amount equal to the aggregate of any Prepayment
                           Interest Shortfalls (to the extent not covered by
                           payments pursuant to Section 3.22 or Section 4.19)
                           and any Relief Act Interest Shortfall, in each case
                           that were allocated to such Class for such
                           Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed
                           pursuant to Section 1.02;

                           (xi) to the Holders of the Class M-3 Certificates, in
                           an amount equal to the aggregate of any Prepayment
                           Interest Shortfalls (to the extent not covered by
                           payments pursuant to Section 3.22 or Section 4.19)
                           and any Relief Act Interest Shortfall, in each case
                           that were allocated to such Class for such
                           Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed
                           pursuant to Section 1.02;

                           (xii) to the Holders of the Class M-4 Certificates,
                           in an amount equal to the aggregate of any Prepayment
                           Interest Shortfalls (to the extent not covered by
                           payments pursuant to Section 3.22 or Section 4.19)
                           and any Relief Act Interest Shortfall, in each case
                           that were allocated to such Class for such
                           Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed,
                           pursuant to Section 1.02;

                           (xiii) to the Holders of the Class M-5 Certificates,
                           in an amount equal to the aggregate of any Prepayment
                           Interest Shortfalls (to the extent not covered by
                           payments pursuant to Section 3.22 or Section 4.19)
                           and any Relief Act Interest Shortfall, in each case
                           that were allocated to such Class for such
                           Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed
                           pursuant to Section 1.02;

                           (xiv) to the Holders of the Class M-6 Certificates,
                           in an amount equal to the aggregate of any Prepayment
                           Interest Shortfalls (to the extent not covered by
                           payments pursuant to Section 3.22 or Section 4.19)
                           and any Relief Act Interest Shortfall, in each case
                           that were allocated to such Class for such
                           Distribution Date and for any prior Distribution
                           Date, to the extent not previously reimbursed
                           pursuant to Section 1.02;




                                     -110-
<PAGE>

                           (xv) to the Reserve Fund from amounts otherwise
                           payable to the Class CE Certificates, and then from
                           the Reserve Fund to the Class A, Class M-1, Class
                           M-2, Class M-3, Class M-4, Class M-5 and Class M-6
                           Certificates, in that order, in an amount equal to
                           the unpaid amount of any Net WAC Rate Carryover
                           Amount for each such Class for such Distribution Date
                           and any unpaid Net WAC Rate Carryover Amount for each
                           such Class for such Distribution Date;

                           (xvi) to the Reserve Fund, the amount required by
                           Section 3.25(b), after taking into account amounts
                           received under the Cap Contracts;

                           (xvii) to the Holders of the Class CE Certificates,
                           the Interest Distribution Amount and any
                           Overcollateralization Reduction Amount for such
                           Distribution Date; and

                           (xviii) to the Holders of the Class R Certificates,
                           in respect of the Class R-III Interest, any remaining
                           amounts; provided that if such Distribution Date is
                           the Distribution Date immediately following the
                           expiration of the latest Prepayment Charge term as
                           identified on the Mortgage Loan Schedule or any
                           Distribution Date thereafter, then any such remaining
                           amounts will be distributed first, to the Holders of
                           the Class P Certificates, until the Certificate
                           Principal Balance thereof has been reduced to zero;
                           and second, to the Holders of the Class R
                           Certificates.

         On each Distribution Date, after making the distributions of the
Available Distribution Amount as set forth above, the Trustee, based solely on
the instructions of the Securities Administrator, will FIRST, withdraw from the
Reserve Fund all income from the investment of funds in the Reserve Fund and
distribute such amount to the Holders of the Class CE Certificates, and SECOND,
withdraw from the Reserve Fund, to the extent of amounts remaining on deposit
therein, the amount of any Net WAC Rate Carryover Amount for such Distribution
Date and distribute such amount first, to the Class A Certificates; second, to
the Class M-1 Certificates, third, to the Class M- 2 Certificates, fourth, to
the Class M-3 Certificates, fifth, to the Class M-4 Certificates, sixth, to the
Class M-5 Certificates and seventh, to the Class M-6 Certificates, in each case
to the extent to the extent any Net WAC Rate Carryover Amount is allocable to
each such Class.

                  (b) (i) On each Distribution Date (a) prior to the Stepdown
Date or (b) on which a Trigger Event is in effect, the Extra Principal
Distribution Amount shall be distributed, based solely on the instructions of
the Securities Administrator, in the following order of priority;

                           FIRST, to the Holders of the Class A Certificates,
                           until the Certificate Principal Balance of each such
                           Class has been reduced to zero;

                           SECOND, to the Holders of the Class M-1 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;





                                     -111-
<PAGE>

                           THIRD, to the Holders of the Class M-2 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           FOURTH, to the Holders of the Class M-3 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           FIFTH, to the Holders of the Class M-4 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero;

                           SIXTH, to the Holders of the Class M-5 Certificates,
                           until the Certificate Principal Balance of such Class
                           has been reduced to zero; and

                           SEVENTH, to the Holders of the Class M-6
                           Certificates, until the Certificate Principal Balance
                           of such Class has been reduced to zero.

                           (ii) On each Distribution Date (a) on or after the
                  Stepdown Date and (b) on which a Trigger Event is not in
                  effect, distributions of principal to the extent of the Extra
                  Principal Distribution Amount shall be distributed, based
                  solely on the instructions of the Securities Administrator, in
                  the following order of priority;

                           FIRST, (A) the lesser of (x) the Group I Principal
                           Distribution Amount and (y) the Class A-1 Principal
                           Distribution Amount, shall be distributed to the
                           Holders of the Class A-1 Certificates, until the
                           Certificate Principal Balance of such Class has been
                           reduced to zero, and (B) the lesser of (x) the Group
                           II Principal Distribution Amount and (y) the Class
                           A-2 Principal Distribution Amount, shall be
                           distributed to the Holders of the Class A-2
                           Certificates, until the Certificate Principal Balance
                           of such Class has been reduced to zero;

                           SECOND, the lesser of (x) the excess of (i) the
                           Principal Distribution Amount over (ii) the amount
                           distributed to the Holders of the Class A
                           Certificates pursuant to clause FIRST of this Section
                           5.01(b)(ii) and (y) the Class M-1 Principal
                           Distribution Amount, shall be distributed to the
                           Holders of the Class M-1 Certificates, until the
                           Certificate Principal Balance of such Class has been
                           reduced to zero;

                           THIRD, the lesser of (x) the excess of (i) the
                           Principal Distribution Amount over (ii) the sum of
                           the amounts distributed to the Holders of the Class A
                           Certificates pursuant to clause FIRST of this Section
                           5.01(b)(ii) and to the Holders of the Class M-1
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(b)(ii) and (y) the Class M-2 Principal
                           Distribution Amount, shall be distributed to the
                           Holders of the Class M-2 Certificates, until the
                           Certificate Principal Balance of such Class has been
                           reduced to zero;

                           FOURTH, the lesser of (x) the excess of (i) the
                           Principal Distribution Amount over (ii) the sum of
                           the amounts distributed to the Holders of the Class A
                           Certificates pursuant to clause FIRST of this Section
                           5.01(b)(ii), to the Holders




                                     -112-
<PAGE>

                           of the Class M-1 Certificates pursuant to clause
                           SECOND of this Section 5.01(b)(ii) and to the Holders
                           of the Class M-2 Certificates pursuant to clause
                           THIRD of this Section 5.01(b)(ii) and (y) the Class
                           M-3 Principal Distribution Amount, shall be
                           distributed to the Holders of the Class M-3
                           Certificates, until the Certificate Principal Balance
                           of such Class has been reduced to zero;

                           FIFTH, the lesser of (x) the excess of (i) the
                           Principal Distribution Amount over (ii) the sum of
                           the amounts distributed to the Holders of the Class A
                           Certificates pursuant to clause FIRST of this Section
                           5.01(b)(ii), to the Holders of the Class M-1
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(b)(ii), to the Holders of the Class M-2
                           Certificates pursuant to clause THIRD of this Section
                           5.01(b)(ii) and to the Holders of the Class M-3
                           Certificates pursuant to clause FOURTH of this
                           Section 5.01(b)(ii) and (y) the Class M-4 Principal
                           Distribution Amount, shall be distributed to the
                           Holders of the Class M-4 Certificates, until the
                           Certificate Principal Balance of such Class has been
                           reduced to zero;

                           SIXTH, the lesser of (x) the excess of (i) the
                           Principal Distribution Amount over (ii) the sum of
                           the amounts distributed to the Holders of the Class A
                           Certificates pursuant to clause FIRST of this Section
                           5.01(b)(ii), to the Holders of the Class M-1
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(b)(ii), to the Holders of the Class M-2
                           Certificates pursuant to clause THIRD of this Section
                           5.01(b)(ii), to the Holders of the Class M-3
                           Certificates pursuant to clause FOURTH of this
                           Section 5.01(b)(ii) and to the Holders of the Class
                           M-4 Certificates pursuant to clause FIFTH of this
                           Section 5.01(b)(ii) and (y) the Class M-5 Principal
                           Distribution Amount, shall be distributed to the
                           Holders of the Class M-5 Certificates, until the
                           Certificate Principal Balance of such Class has been
                           reduced to zero; and

                           SEVENTH, the lesser of (x) the excess of (i) the
                           Principal Distribution Amount over (ii) the sum of
                           the amounts distributed to the Holders of the Class A
                           Certificates pursuant to clause FIRST of this Section
                           5.01(b)(ii), to the Holders of the Class M-1
                           Certificates pursuant to clause SECOND of this
                           Section 5.01(b)(ii), to the Holders of the Class M-2
                           Certificates pursuant to clause THIRD of this Section
                           5.01(b)(ii), to the Holders of the Class M-3
                           Certificates pursuant to clause FOURTH of this
                           Section 5.01(b)(ii), to the Holders of the Class M-4
                           Certificates pursuant to clause FIFTH of this Section
                           5.01(b)(ii) and to the Holders of the Class M-5
                           Certificates pursuant to clause SIXTH of this Section
                           5.01(b)(ii) and (y) the Class M-6 Principal
                           Distribution Amount, shall be distributed to the
                           Holders of the Class M-6 Certificates, until the
                           Certificate Principal Balance of such Class has been
                           reduced to zero.

                  (c) On each Distribution Date, the Trustee shall withdraw,
based solely on the instructions of the Securities Administrator, any amounts
then on deposit in the Distribution Account that represent Prepayment Charges
and shall distribute such amounts to the Class P Certificateholders as described
above.




                                     -113-
<PAGE>

                  (d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 5.01(e) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office of
the Trustee or such other location specified in the notice to Certifcateholders
of such final distribution.

                  Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting 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 indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Depositor, the Servicer, the Securities Administrator or the Master Servicer
shall have any responsibility therefor except as otherwise provided by this
Agreement or applicable law.

                  (e) The rights of the Certificateholders to receive
         distributions in respect of the Certificates, and all interests of the
         Certificateholders in such distributions, shall be as set forth in this
         Agreement. None of the Holders of any Class of Certificates, the
         Trustee, the Servicer, the Securities Administrator or the Master
         Servicer shall in any way be responsible or liable to the Holders of
         any other Class of Certificates in respect of amounts properly
         previously distributed on the Certificates.

                  (f) Except as otherwise provided in Section 10.01, whenever
         the Trustee expects that the final distribution with respect to any
         Class of Certificates will be made on the next Distribution Date, the
         Trustee shall, no later than three (3) days before the related
         Distribution Date, mail to each Holder on such date of such Class of
         Certificates a notice to the effect that:

                  (i) the Trustee expects that the final distribution with
         respect to such Class of Certificates will be made on such Distribution
         Date but only upon presentation and surrender of such Certificates at
         the office of the Trustee therein specified, and

                  (ii) no interest shall accrue on such Certificates from and
         after the end of the related Interest Accrual Period.




                                     -114-
<PAGE>

                  Any funds not distributed to any Holder or Holders of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust by the Trustee and credited to the account of the
appropriate non-tendering Holder or Holders. If any Certificates as to which
notice has been given pursuant to this Section 5.01(e) shall not have been
surrendered for cancellation within six months after the time specified in such
notice, the Trustee shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall, directly or through an agent, mail a final
notice to the remaining non-tendering Certificateholders concerning surrender of
their Certificates but shall continue to hold any remaining funds for the
benefit of non-tendering Certificateholders. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in such trust fund. If within one year after
the final notice any such Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to the Depositor all such amounts, and all
rights of non-tendering Certificateholders in or to such amounts shall thereupon
cease. No interest shall accrue or be payable to any Certificateholder on any
amount held in trust by the Trustee as a result of such Certificateholder's
failure to surrender its Certificate(s) on the final Distribution Date for final
payment thereof in accordance with this Section 5.01(e). Any such amounts held
in trust by the Trustee shall be held uninvested in an Eligible Account.

                  (g) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate or a
Mezzanine Certificate be reduced more than once in respect of any particular
amount both (a) allocated to such Certificate in respect of Realized Losses
pursuant to Section 5.04 and (b) distributed to the Holder of such Certificate
in reduction of the Certificate Principal Balance thereof pursuant to this
Section 5.01 from Net Monthly Excess Cashflow and (ii) in no event shall the
Uncertificated Balance of a REMIC Regular Interest be reduced more than once in
respect of any particular amount both (a) allocated to such REMIC Regular
Interest in respect of Realized Losses pursuant to Section 5.04 and (b)
distributed on such REMIC Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 5.01.

                  SECTION 5.02. Statements to Certificateholders.

                  On each Distribution Date, the Securities Administrator (based
on the information set forth in the Servicer Report for such Distribution Date)
shall make available to each Holder of the Certificates, a statement as to the
distributions made on such Distribution Date setting forth:

                  (i) the amount of the distribution made on such Distribution
         Date to the Holders of the Certificates of each Class allocable to
         principal, and the amount of the distribution made on such Distribution
         Date to the Holders of the Class P Certificates allocable to Prepayment
         Charges;

                  (ii) the amount of the distribution made on such Distribution
         Date to the Holders of the Certificates of each Class allocable to
         interest;




                                     -115-
<PAGE>

                  (iii) the aggregate Servicing Fee received by the Servicer and
         Master Servicing Fee received by the Master Servicer during the related
         Due Period;

                  (iv) the aggregate amount of P&I Advances for such
         Distribution Date;

                  (v) Reserved;

                  (vi) the number, aggregate principal balance, weighted average
         remaining term to maturity and weighted average Mortgage Rate of the
         Mortgage Loans as of the related Due Date;

                  (vii) the number and aggregate unpaid principal balance of
         Mortgage Loans (a) delinquent 30 to 59 days, (b) delinquent 60 to 89
         days, (c) delinquent 90 or more days, in each case, as of the last day
         of the preceding calendar month, (d) as to which foreclosure
         proceedings have been commenced and (e) with respect to which the
         related Mortgagor has filed for protection under applicable bankruptcy
         laws, with respect to whom bankruptcy proceedings are pending or with
         respect to whom bankruptcy protection is in force;

                  (viii) with respect to any Mortgage Loan that became an REO
         Property during the preceding calendar month, the loan number of such
         Mortgage Loan, the unpaid principal balance and the Scheduled Principal
         Balance of such Mortgage Loan;

                  (ix) if available, the book value of any REO Property as of
         the close of business on the last Business Day of the calendar month
         preceding the Distribution Date;

                  (x) the aggregate amount of Principal Prepayments made during
         the related Prepayment Period and the aggregate amount of any
         Prepayment Charges (or Servicer Prepayment Charge Payment Amounts
         payments by the Servicer in respect of any waived Prepayment Charges)
         received in respect thereof;

                  (xi) the aggregate amount of Realized Losses incurred during
         the related Prepayment Period and the aggregate amount of Realized
         Losses incurred since the Closing Date;

                  (xii) the aggregate amount of Extraordinary Trust Fund
         Expenses withdrawn from the Distribution Account for such Distribution
         Date;

                  (xiii) the aggregate Certificate Principal Balance of each
         Class of Certificates, after giving effect to the distributions, and
         allocations of Realized Losses, made on such Distribution Date,
         separately identifying any reduction thereof due to allocations of
         Realized Losses;

                  (xiv) the Certificate Factor for each such Class of
         Certificates applicable to such Distribution Date;





                                     -116-
<PAGE>

                  (xv) the Interest Distribution Amount in respect of the Class
         A Certificates, the Class A-IO Certificates, the Mezzanine Certificates
         and the Class CE Certificates for such Distribution Date and the
         Interest Carry Forward Amount, if any, with respect to the Class A
         Certificates, the Class A-IO Certificates and the Mezzanine
         Certificates on such Distribution Date, and in the case of the Class A
         Certificates, the Class A-IO Certificates and the Mezzanine
         Certificates, separately identifying any reduction thereof due to
         allocations of Realized Losses, Prepayment Interest Shortfalls, Relief
         Act Interest Shortfalls and Net WAC Rate Carryover Amounts;

                  (xvi) the aggregate amount of any Prepayment Interest
         Shortfall for such Distribution Date, to the extent not covered by
         payments by the Servicer pursuant to Section 3.22 or the Master
         Servicer pursuant to Section 4.19;

                  (xvii) the aggregate amount of Relief Act Interest Shortfalls
         for such Distribution Date;

                  (xviii) the Required Overcollateralization Amount and the
         Credit Enhancement Percentage for such Distribution Date;

                  (xix) the Overcollateralization Increase Amount, if any, for
         such Distribution Date;

                  (xx) the Overcollateralization Reduction Amount, if any, for
         such Distribution Date;

                  (xxi) the Net WAC Rate Carryover Amount, if any, for such
         Distribution Date;

                  (xxii) the Net WAC Rate Carryover Amount, if any, outstanding
         after reimbursements therefor on such Distribution Date and any amounts
         received under the Cap Contracts;

                  (xxiii) the respective Pass-Through Rates applicable to the
         Class A Certificates, the Mezzanine Certificates and the Class CE
         Certificates for such Distribution Date;

                  (xxiv) the amount of any deposit to the Reserve Fund
         contemplated by Section 3.24(b);

                  (xxv) the balance of the Reserve Fund prior to the deposit or
         withdrawal of any amounts on such Distribution Date;

                  (xxvi) the amount of any withdrawal from the Reserve Fund
         pursuant to Section 5.01(a)(7)(xv);

                  (xxvii) the balance of the Reserve Fund after all deposits and
         withdrawals on such Distribution Date;

                  (xxviii) the Loss Severity Percentage with respect to each
         Mortgage Loan; and




                                     -117-
<PAGE>

                  (xxix) the Aggregate Loss Severity Percentage.

                  The Securities Administrator will make such statement (and, at
its option, any additional files containing the same information in an
alternative format) available each month to the Certificateholders and the
Rating Agencies via the Securities Administrator's internet website. The
Securities Administrator's internet website shall initially be located at
http:\\www.ctslink.com and assistance in using the website can be obtained by
calling the Securities Administrator's customer service desk at 1-301-815-6600.
Parties that are unable to use the above distribution options are entitled to
have a paper copy mailed to them via first class mail by calling the customer
service desk and indicating such. The Securities Administrator shall have the
right to change the way such statements are distributed in order to make such
distribution more convenient and/or more accessible to the above parties and the
Securities Administrator shall provide timely and adequate notification to all
above parties regarding any such changes.

                  To the extent timely received from the Securities
Administrator, the Trustee will also make monthly statements available each
month to Certificateholders via the Trustee's internet website. The Trustee's
internet website will initially be located at www.jpmorgan.com/absmbs.
Assistance in using the Trustee's internet website service can be obtained by
calling the Trustee's customer service desk at 1-877-722-1095.

                  In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.

                  Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish upon request to each Person who at any
time during the calendar year was a Holder of a Regular Certificate a statement
containing the information set forth in subclauses (i) through (iii) above,
aggregated for such calendar year or applicable portion thereof during which
such person was a Certificateholder. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code as from time to time are in force.

                  Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish upon request to each Person who at any
time during the calendar year was a Holder of a Residual Certificate a statement
setting forth the amount, if any, actually distributed with respect to the
Residual Certificates, as appropriate, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.

                  The Securities Administrator shall, upon request, furnish to
each Certificateholder, during the term of this Agreement, such periodic,
special, or other reports or information, whether or not provided for herein, as
shall be reasonable with respect to the Certificateholder, as applicable, or
otherwise with respect to the purposes of this Agreement, all such reports or
information to be provided at the expense of the Certificateholder, in
accordance with such reasonable and explicit instructions and directions as the
Certificateholder may provide.





                                     -118-
<PAGE>

                  On each Distribution Date the Securities Administrator shall
provide Bloomberg Financial Markets, L.P. ("Bloomberg") CUSIP level factors for
each class of Certificates as of such Distribution Date, using a format and
media mutually acceptable to the Securities Administrator and Bloomberg.

                  SECTION 5.03. Servicer Reports; P&I Advances.

                  (a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Master Servicer and the Securities Administrator
by telecopy (or by such other means as the Servicer, the Master Servicer and the
Securities Administrator may agree from time to time) a Servicer Report with
respect to the related Distribution Date, in a form mutually acceptable to the
Servicer, the Master Servicer and the Securities Administrator. On the same
date, the Servicer shall electronically transmit to the Master Servicer and the
Securities Administrator, a data file containing the information set forth in
such Servicer Report with respect to the related Distribution Date. Such
Servicer Report shall include (i) the amount of P&I Advances to be made by the
Servicer in respect of the related Distribution Date, the aggregate amount of
P&I Advances outstanding after giving effect to such P&I Advances, and the
aggregate amount of Nonrecoverable P&I Advances in respect of such Distribution
Date and (ii) such other information with respect to the Mortgage Loans as the
Securities Administrator may reasonably require to perform the calculations
necessary to make the distributions contemplated by Section 5.01 and to prepare
the statements to Certificateholders contemplated by Section 5.02. The
Securities Administrator shall not be responsible to recompute, recalculate or
verify any information provided to it by the Servicer.

                  (b) The amount of P&I Advances to be made by the Servicer on
any Distribution Date shall equal, subject to Section 5.03(d), (i) the aggregate
amount of Monthly Payments (net of the related Servicing Fee), due during the
related Due Period in respect of the Mortgage Loans, which Monthly Payments were
delinquent as of the close of business on the related Determination Date and
(ii) with respect to each REO Property, which REO Property was acquired during
or prior to the related Prepayment Period and as to which such REO Property an
REO Disposition did not occur during the related Prepayment Period, an amount
equal to the excess, if any, of only the interest portion of the Monthly
Payments (net of the related Servicing Fee) that would have been due on the
related Due Date in respect of the related Mortgage Loans, over the net income
from such REO Property deposited in the Collection Account pursuant to Section
3.21 for distribution on such Distribution Date. For purposes of the preceding
sentence, the Monthly Payment on each Balloon Mortgage Loan with a delinquent
Balloon Payment is equal to the assumed monthly payment that would have been due
on the related Due Date based on the original principal amortization schedule
for such Balloon Mortgage Loan.

                  By 3:00 p.m. New York time on the Servicer Remittance Date,
the Servicer shall remit in immediately available funds to the Trustee for
deposit in the Distribution Account an amount equal to the aggregate amount of
P&I Advances, if any, to be made in respect of the Mortgage Loans for the
related Distribution Date either (i) from its own funds or (ii) from the
Collection Account, to the extent of any Amounts Held For Future Distribution on
deposit therein (in which case it will cause to be made an appropriate entry in
the records of the Collection Account that Amounts Held For Future Distribution
have been, as permitted by this Section 4.03, used by the Servicer in discharge
of any such P&I Advance) or (iii) in the form of any combination of (i) and (ii)




                                     -119-
<PAGE>

aggregating the total amount of P&I Advances to be made by the Servicer with
respect to the Mortgage Loans. In addition, the Servicer shall have the right to
reimburse itself for any outstanding P&I Advance made by it from its own funds
from Amounts Held for Future Distribution. Any Amounts Held For Future
Distribution used by the Servicer to make P&I Advances or to reimburse itself
for outstanding P&I Advances shall be appropriately reflected in the Servicer's
records and replaced by the Servicer by deposit in the Collection Account no
later than the close of business on the Servicer Remittance Date immediately
following the Due Period or Prepayment Period for which such amounts relate. The
Trustee will notify the Servicer and the Master Servicer by the close of
business on the Business Day prior to the Distribution Date in the event that
the amount remitted by the Servicer to the Trustee on such date is less than the
P&I Advances required to be made by the Servicer for the related Distribution
Date.

                  (c) The obligation of the Servicer to make such P&I Advances
is mandatory, notwithstanding any other provision of this Agreement but subject
to (d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section.

                  (d) Notwithstanding anything herein to the contrary, no P&I
Advance or Servicing Advance shall be required to be made hereunder by the
Servicer if such P&I Advance or Servicing Advance would, if made, constitute a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance, respectively.
The determination by the Servicer that it has made a Nonrecoverable P&I Advance
or a Nonrecoverable Servicing Advance or that any proposed P&I Advance or
Servicing Advance, if made, would constitute a Nonrecoverable P&I Advance or
Nonrecoverable Servicing Advance, respectively, shall be evidenced by a
certification of a Servicing Officer delivered to the Depositor, the Master
Servicer and the Trustee.

                  (e) Subject to and in accordance with the provisions of
Article VIII, in the event the Servicer fails to make any such P&I Advance, then
the Trustee (in its capacity as successor servicer) or any other successor
Servicer (including the Master Servicer) shall be required to make such P&I
Advance on the Distribution Date on which the Servicer was required to make such
Advance, subject to its determination of recoverability.

                  (f) Two Business Days prior to each Distribution Date, the
Securities Administrator shall deliver to the Trustee by telecopy (or by such
other means as the Securities Administrator and the Trustee may agree from time
to time) a Remittance Report with respect to the related Distribution Date in
form and substance acceptable to the Trustee which shall contain the
instructions of the Securities Administrator with respect to all distributions,
allocations, deposits, withdrawals and other actions to be taken by the Trustee
on such Distribution Date as set forth in this Article V. The Trustee shall not
be obligated to recompute, recalculate or verify any information provided to it
by the Securities Administrator.

                  SECTION 5.04. Allocation of Realized Losses.

                  (a) Prior to the Determination Date, the Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in




                                     -120-
<PAGE>

connection with any Final Recovery Determinations made during the related
Prepayment Period; and (ii) the respective portions of such Realized Losses
allocable to interest and allocable to principal. Prior to each Determination
Date, the Servicer shall also determine as to each Mortgage Loan: (i) the total
amount of Realized Losses, if any, incurred in connection with any Deficient
Valuations made during the related Prepayment Period; and (ii) the total amount
of Realized Losses, if any, incurred in connection with Debt Service Reductions
in respect of Monthly Payments due during the related Due Period. The
information described in the two preceding sentences that is to be supplied by
the Servicer shall be evidenced by an Officers' Certificate delivered to the
Trustee by the Servicer prior to the Determination Date immediately following
the end of the Prepayment Period during which any such Realized Loss was
incurred.

                  (b) All Realized Losses on the Mortgage Loans allocated to any
REMIC I Regular Interest pursuant to Section 4.04(c) on the Mortgage Loans shall
be allocated by the Trustee, based solely on the instructions of the Securities
Administrator on each Distribution Date as follows: first, to Net Monthly Excess
Cashflow; second, to the Class CE Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; third, to the Class M-6 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero;
fourth, to the Class M-5 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; fifth, to the Class M-4 Certificates, until
the Certificate Principal Balance thereof has been reduced to zero sixth, to the
Class M-3 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; seventh, to the Class M-2 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and eighth, to the Class M-1
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero. All Realized Losses to be allocated to the Certificate Principal
Balances of all Classes on any Distribution Date shall be so allocated after the
actual distributions to be made on such date as provided above. All references
above to the Certificate Principal Balance of any Class of Certificates shall be
to the Certificate Principal Balance of such Class immediately prior to the
relevant Distribution Date, before reduction thereof by any Realized Losses, in
each case to be allocated to such Class of Certificates, on such Distribution
Date.

                  Any allocation of Realized Losses to a Mezzanine Certificate
on any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated; any allocation of Realized Losses to
a Class CE Certificates shall be made by reducing the amount otherwise payable
in respect thereof pursuant to Section 5.01(a)(7)(xvii). No allocations of any
Realized Losses shall be made to the Certificate Principal Balances of the Class
A Certificates or the Class P Certificates.

                  As used herein, an allocation of a Realized Loss on a "pro
rata basis" among two or more specified Classes of Certificates means an
allocation on a pro rata basis, among the various Classes so specified, to each
such Class of Certificates on the basis of their then outstanding Certificate
Principal Balances prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the, Certificates of such
Class in proportion to the Percentage Interests evidenced thereby.

                  (c) All Realized Losses on the Mortgage Loans shall be
allocated by the Trustee, based solely on the instructions of the Securities
Administrator on each Distribution Date to REMIC




                                     -121-
<PAGE>

I Regular Interest I-LT1 and REMIC I Regular Interest I-LT2 until the
Uncertificated Balances thereof have been reduced to zero.

                  (d)(i) The REMIC II Marker Percentage of all Realized Losses
on the Mortgage Loans shall be allocated by the Trustee, based solely on the
instructions of the Securities Administrator, on each Distribution Date to the
following REMIC II Regular Interests in the specified percentages, as follows:
first, to Uncertificated Interest payable to the REMIC II Regular Interest
II-LTAA and REMIC II Regular Interest II-LTZZ up to an aggregate amount equal to
the REMIC II Interest Loss Allocation Amount, 98% and 2%, respectively; second,
to the Uncertificated Balances of the REMIC II Regular Interest II-LTAA and
REMIC II Regular Interest II-LTZZ up to an aggregate amount equal to the REMIC
II Principal Loss Allocation Amount, 98% and 2%, respectively; third, to the
Uncertificated Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTM6 and REMIC II Regular Interest II-LTZZ, 98%, 1.00% and 1%,
respectively, until the Uncertificated Balances of REMIC II Regular Interest
II-LTM6 has been reduced to zero; fourth to the Uncertificated Balances of REMIC
II Regular Interest II-LTAA, REMIC II Regular Interest II-LTM5 and REMIC II
Regular Interest II-LTZZ, 98%, 1.00%, and 1%, respectively, until the
Uncertificated Balance of REMIC II Regular Interest II-LTM5 has been reduced to
zero; fifth to the Uncertificated Balances of REMIC II Regular Interest II-LTAA,
REMIC II Regular Interest II-LTM4 and REMIC II Regular Interest II-LTZZ, 98%, 1%
and 1%, respectively, until the Uncertificated Balance of REMIC II Regular
Interest II-LTM4 has been reduced to zero; sixth to the Uncertificated Balances
of REMIC II Regular Interest II-LTAA, REMIC II Regular Interest II-LTM3 and
REMIC II Regular Interest II-LTZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Balance of REMIC II Regular Interest II-LTM3 has been reduced to
zero; seventh to the Uncertificated Balances of REMIC II Regular Interest
II-LTAA, REMIC II Regular Interest II-LTM2 and REMIC II Regular Interest
II-LTZZ, 98%, 1% and 1%, respectively, until the Uncertificated Balance of REMIC
II Regular Interest II-LTM2 has been reduced to zero; and eighth, to the
Uncertificated Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTM1 and REMIC II Regular Interest II-LTZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC II Regular Interest
II-LTM1 has been reduced to zero.

                  (ii) The REMIC II Sub WAC Allocation Percentage of all
Realized Losses shall be applied after all distributions have been made on each
Distribution Date first, so as to keep the Uncertificated Balance of each REMIC
II Regular Interest ending with the designation "GRP" equal to 0.01% of the
aggregate Stated Principal Balance of the Mortgage Loans in the related Loan
Group; second, to each REMIC II Regular Interest ending with the designation
"SUB," so that the Uncertificated Balance of each such REMIC II Regular Interest
is equal to 0.01% of the excess of (x) the aggregate Stated Principal Balance of
the Mortgage Loans in the related Loan Group over (y) the current Certificate
Principal Balance of the Class A Certificate in the related Loan Group (except
that if any such excess is a larger number than in the preceding distribution
period, the least amount of Realized Losses shall be applied to such REMIC II
Regular Interests such that the REMIC II Subordinated Balance Ratio is
maintained); and third, any remaining Realized Losses shall be allocated to
REMIC II Regular Interest II-LTXX.

                  SECTION 5.05. Compliance with Withholding Requirements.





                                     -122-
<PAGE>

                  Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.

                  SECTION 5.06. Reports Filed with Securities and Exchange
                                Commission.

                  The Depositor shall prepare or cause to be prepared the
initial current report on Form 8-K. Within 15 days after each Distribution Date,
the Securities Administrator shall, in accordance with industry standards, file
with the Commission via the Electronic Data Gathering and Retrieval System
("EDGAR"), a Form 8-K with a copy of the statement to be furnished to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30 in each year, the Securities Administrator shall, in accordance with
industry standards, file a Form 15 Suspension Notice with respect to the Trust
Fund, if applicable. Prior to (i) March 15, 2004 and (ii) unless and until a
Form 15 Suspension Notice shall have been filed, prior to March 15 of each year
thereafter, the Master Servicer shall provide the Securities Administrator with
a Master Servicer Certification, together with a copy of the annual independent
accountant's servicing report and annual statement of compliance of the Servicer
to be delivered pursuant to this Agreement, and, if applicable, the annual
independent accountant's servicing report and annual statement of compliance to
be delivered by the Master Servicer pursuant to Sections 4.16 and 4.17. Prior to
(i) March 31, 2004 and (ii) unless and until a Form 15 Suspension Notice shall
have been filed, March 31 of each year thereafter, the Securities Administrator
shall file a Form 10-K, in substance conforming to industry standards, with
respect to the Trust. Such Form 10-K shall include the Master Servicer
Certification and other documentation provided by the Master Servicer pursuant
to the second preceding sentence. The Depositor hereby grants to the Securities
Administrator a limited power of attorney to execute and file each such document
on behalf of the Depositor. Such power of attorney shall continue until either
the earlier of (i) receipt by the Securities Administrator from the Depositor of
written termination of such power of attorney and (ii) the termination of the
Trust Fund. The Depositor agrees to promptly furnish to the Securities
Administrator, from time to time upon request, such further information, reports
and financial statements within its control related to this Agreement, the
Mortgage Loans as the Securities Administrator reasonably deems appropriate to
prepare and file all necessary reports with the Commission. The Securities
Administrator shall have no responsibility to file any items other than those
specified in this Section 5.06; provided, however, the Securities Administrator
will cooperate with the Depositor in connection with any additional filings with
respect to the Trust Fund as the Depositor deems necessary under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Fees and expenses
incurred by the Securities Administrator in connection with this Section 5.06
shall not be reimbursable from the Trust Fund.




                                     -123-
<PAGE>

                                   ARTICLE VI

                                THE CERTIFICATES

                  SECTION 6.01. The Certificates.

                  (a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.

                  The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-6. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.

                  Upon original issue, the Certificates shall be executed,
authenticated and delivered by the Trustee to and upon the order of the
Depositor. The Certificates shall be executed by manual or facsimile signature
on behalf of the Trust by the Trustee by an authorized signatory. Certificates
bearing the manual or facsimile signatures of individuals who were at any time
the proper officers of the Trustee shall bind the Trust, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
herein executed by the Trustee by manual signature, and such certificate of
authentication shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.

                  (b) The Class A Certificates, the Class A-IO Certificates and
the Mezzanine Certificates shall initially be issued as one or more Certificates
held by the Book-Entry Custodian or, if appointed to hold such Certificates as
provided below, the Depository and registered in the name of the Depository or
its nominee and, except as provided below, registration of such Certificates may
not be transferred by the Trustee except to another Depository that agrees to
hold such Certificates for the respective Certificate Owners with Ownership
Interests therein. The Certificate Owners shall hold their respective Ownership
Interests in and to such Certificates through the book-entry facilities of the
Depository and, except as provided below, shall not be entitled to definitive,
fully registered Certificates ("Definitive Certificates") in respect of such
Ownership Interests. All transfers by Certificate Owners of their respective
Ownership Interests in the 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 the Ownership Interests in the 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. The Trustee is hereby
initially appointed as the Book-Entry Custodian and hereby agrees to act as such
in accordance herewith and in accordance with the agreement that it has with the
Depository authorizing it to act as such. The Book-Entry Custodian may, and, if
it is no longer qualified to act as such, the Book-Entry Custodian shall,
appoint, by a written instrument delivered to the Depositor, the Servicer and,
if the Trustee is not the Book-Entry




                                     -124-
<PAGE>

Custodian, the Trustee, any other transfer agent (including the Depository or
any successor Depository) to act as Book-Entry Custodian under such conditions
as the predecessor Book-Entry Custodian and the Depository or any successor
Depository may prescribe, provided that the predecessor Book-Entry Custodian
shall not be relieved of any of its duties or responsibilities by reason of any
such appointment of other than the Depository. If the Trustee resigns or is
removed in accordance with the terms hereof, the successor Trustee or, if it so
elects, the Depository shall immediately succeed to its predecessor's duties as
Book-Entry Custodian. The Depositor shall have the right to inspect, and to
obtain copies of, any Certificates held as Book-Entry Certificates by the
Book-Entry Custodian.

                  The Trustee, the Servicer, the Securities Administrator, the
Master Servicer and the Depositor may for all purposes (including the making of
payments due on the Book-Entry Certificates) deal with the Depository as the
authorized representative of the Certificate Owners with respect to the
Book-Entry Certificates for the purposes of exercising the rights of
Certificateholders hereunder. The rights of Certificate Owners with respect to
the Book-Entry Certificates shall be limited to those established by law and
agreements between such Certificate Owners and the Depository Participants and
brokerage firms representing such Certificate Owners. Multiple requests and
directions from, and votes of, the Depository as Holder of the Book-Entry
Certificates with respect to any particular matter shall not be deemed
inconsistent if they are made with respect to different Certificate Owners. The
Trustee may establish a reasonable record date in connection with solicitations
of consents from or voting by Certificateholders and shall give notice to the
Depository of such record date.

                  If (i)(A) the Depositor advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Servicer Event of Default, Certificate Owners
representing in the aggregate not less than 51% of the Ownership Interests of
the Book-Entry Certificates advise the Trustee through the Depository, 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 Certificates to Certificate
Owners requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Book-Entry Custodian or the Depository, as applicable,
accompanied by registration instructions from the Depository for registration of
transfer, the Trustee shall cause the Definitive Certificates to be issued. Such
Definitive Certificates will be issued in minimum denominations of $10,000
except that any beneficial ownership that was represented by a Book-Entry
Certificate in an amount less than $10,000 immediately prior to the issuance of
a Definitive Certificate shall be issued in a minimum denomination equal to the
amount represented by such Book-Entry Certificate. None of the Depositor, the
Servicer, the Master Servicer or the Trustee shall be liable for any delay in
the delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. 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.




                                     -125-
<PAGE>

                  SECTION 6.02. Registration of Transfer and Exchange of
                                Certificates.

                  (a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 9.11, a Certificate Register for the Certificates in which, subject 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.

                  (b) No transfer of any Class CE Certificate, Class P
Certificate or Residual Certificate shall be made unless that transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and effective registration or qualification
under applicable state securities laws, or is made in a transaction that does
not require such registration or qualification. In the event that such a
transfer of a Class CE Certificate, Class P Certificate or Residual Certificate
is to be made without registration or qualification (other than in connection
with the initial transfer of any such Certificate by the Depositor), the Trustee
shall require receipt of: (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the form attached
hereto as Exhibit B-1; (ii) if such transfer is purportedly being made in
reliance upon Rule 501(a) under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the form attached
hereto as Exhibit B-2 and (iii) in all other cases, an Opinion of Counsel
satisfactory to the Trustee that such transfer may be made without such
registration or qualification (which Opinion of Counsel shall not be an expense
of the Trust Fund or of the Depositor, the Trustee, the Master Servicer, the
Securities Administrator or the Servicer), together with copies of the written
certification(s) of the Certificateholder desiring to effect the transfer and/or
such Certificateholder's prospective transferee upon which such Opinion of
Counsel is based, if any. Neither of the Depositor nor the Trustee is obligated
to register or qualify any such Certificates under the 1933 Act or any other
securities laws or to take any action not otherwise required under this
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Certificateholder desiring to effect the transfer of any such
Certificate shall, and does hereby agree to, indemnify the Trustee, the
Depositor, the Master Servicer, the Securities Administrator and the 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.

                  (c) No transfer of a Class CE Certificate, Class P Certificate
or a Residual Certificate or any interest therein shall be made to any Plan
subject to ERISA or Section 4975 of the Code, any Person acting, directly or
indirectly, on behalf of any such Plan or any Person acquiring such Certificates
with "Plan Assets" of a Plan within the meaning of the Department of Labor
regulation promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan Assets") unless the
Depositor, the Trustee, and the Servicer are provided with an Opinion of Counsel
which establishes to the satisfaction of the Depositor, the Trustee, the Master
Servicer, the Securities Administrator and the Servicer that the purchase of
such Certificates is permissible under applicable law, will not constitute or
result in any prohibited transaction under ERISA or Section 4975 of the Code and
will not subject the Depositor, the Servicer, the Trustee, the Master Servicer,
the Securities Administrator or the Trust Fund to any obligation or liability
(including obligations or liabilities under ERISA or Section 4975 of the Code)






                                     -126-
<PAGE>

in addition to those undertaken in this Agreement, which Opinion of Counsel
shall not be an expense of the Depositor, the Servicer, the Trustee, the Master
Servicer, the Securities Administrator or the Trust Fund. An Opinion of Counsel
will not be required in connection with the initial transfer of any such
Certificate by the Depositor to an affiliate of the Depositor (in which case,
the Depositor or any affiliate thereof shall have deemed to have represented
that such affiliate is not a Plan or a Person investing Plan Assets) and the
Trustee shall be entitled to conclusively rely upon a representation (which,
upon the request of the Trustee, shall be a written representation) from the
Depositor of the status of such transferee as an affiliate of the Depositor.

                  Each Transferee of a Mezzanine Certificate will be deemed to
have represented by virtue of its purchase or holding of such Certificate (or
interest therein) that either (a) such Transferee is not a Plan or purchasing
such Certificate with Plan Assets, (b) it has acquired and is holding such
Certificate in reliance on Prohibited Transaction Exemption ("PTE") 94-84 or FAN
97-03E, as amended by PTE 97-34, 62 Fed. Reg. 39021 (July 21, 1997), PTE
2000-58, 65 Fed. Reg. 67765 (November 13, 2000) and PTE 2002-41, 67 Fed. Reg.
54487 (August 22, 2002) (the "Exemption"), and that it understands that there
are certain conditions to the availability of the Exemption including that such
Certificate must be rated, at the time of purchase, not lower than "BBB-" (or
its equivalent) by a Rating Agency or (c) the following conditions are
satisfied: (i) such Transferee is an insurance company, (ii) the source of funds
used to purchase or hold such Certificate (or interest therein) is an "insurance
company general account" (as defined in U.S. Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60, and (iii) the conditions set forth
in Sections I and III of PTCE 95-60 have been satisfied. If any Mezzanine
Certificate or any interest therein is acquired or held in violation of the
conditions described in this paragraph, the next preceding permitted beneficial
owner will be treated as the beneficial owner of that Mezzanine Certificate,
retroactive to the date of transfer to the purported beneficial owner. Any
purported beneficial owner whose acquisition or holding of any such certificate
or interest therein was effected in violation of the conditions described in
this paragraph shall indemnify and hold harmless the Depositor, the Trustee, the
Servicer, the Master Servicer, the Securities Administrator and the Trust Fund
from and against any and all liabilities, claims, costs or expenses incurred by
those parties as a result of that acquisition or holding.

                  (d) (i) 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 to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:

                                    (A) Each Person holding or acquiring any
                           Ownership Interest in a Residual Certificate shall be
                           a Permitted Transferee and shall promptly notify the
                           Trustee of any change or impending change in its
                           status as a Permitted Transferee.







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<PAGE>

                                    (B) In connection with any proposed Transfer
                           of any Ownership Interest in a Residual Certificate,
                           the Trustee shall require delivery to it, and shall
                           not register the Transfer of any Residual Certificate
                           until its receipt of, an affidavit and agreement (a
                           "Transfer Affidavit and Agreement," in the form
                           attached hereto as Exhibit B-3) from the proposed
                           Transferee, in form and substance satisfactory to the
                           Trustee, representing and warranting, among other
                           things, that such Transferee is a Permitted
                           Transferee, that it is not acquiring its Ownership
                           Interest in the Residual Certificate that is the
                           subject of the proposed Transfer as a nominee,
                           trustee or agent for any Person that is not a
                           Permitted Transferee, that for so long as it retains
                           its Ownership Interest in a Residual Certificate, it
                           will endeavor to remain a Permitted Transferee, and
                           that it has reviewed the provisions of this Section
                           6.02(d) and agrees to be bound by them.

                                    (C) Notwithstanding the delivery of a
                           Transfer Affidavit and Agreement by a proposed
                           Transferee under clause (B) above, if a Responsible
                           Officer of the Trustee who is assigned to this
                           transaction has actual knowledge that the proposed
                           Transferee is not a Permitted Transferee, no Transfer
                           of an Ownership Interest in a Residual Certificate to
                           such proposed Transferee shall be effected.

                                    (D) Each Person holding or acquiring any
                           Ownership Interest in a Residual Certificate shall
                           agree (x) to require a Transfer Affidavit and
                           Agreement from any other Person to whom such Person
                           attempts to transfer its Ownership Interest in a
                           Residual Certificate and (Y) not to transfer its
                           Ownership Interest unless it provides a Transferor
                           Affidavit (in the form attached hereto as Exhibit
                           B-2) to the Trustee stating that, among other things,
                           it has no actual knowledge that such other Person is
                           not a Permitted Transferee.

                                    (E) Each Person holding or acquiring an
                           Ownership Interest in a Residual Certificate, by
                           purchasing an Ownership Interest in such Certificate,
                           agrees to give the Trustee written notice that it is
                           a "pass-through interest holder" within the meaning
                           of temporary Treasury regulation Section
                           1.67-3T(a)(2)(i)(A) immediately upon acquiring an
                           Ownership Interest in a Residual Certificate, if it
                           is, or is holding an Ownership Interest in a Residual
                           Certificate on behalf of, a "pass-through interest
                           holder."

                           (ii) The Trustee will register the Transfer of any
                  Residual Certificate only if it shall have received the
                  Transfer Affidavit and Agreement and all of such other
                  documents as shall have been reasonably required by the
                  Trustee as a condition to such registration. In addition, no
                  Transfer of a Residual Certificate shall be made unless the
                  Trustee shall have received a representation letter from the
                  Transferee of such Certificate to the effect that such
                  Transferee is a Permitted Transferee.





                                     -128-
<PAGE>

                           (iii) (A) If any purported Transferee shall become a
                  Holder of a Residual Certificate in violation of the
                  provisions of this Section 6.02(d), then the last preceding
                  Permitted Transferee shall be restored, to the extent
                  permitted by law, to all rights as holder thereof retroactive
                  to the date of registration of such 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 this Section
                  6.02(d) or for making any payments due on such Certificate to
                  the holder thereof or for taking any other action with respect
                  to such holder under the provisions of this Agreement.

                                    (B) If any purported Transferee shall become
                           a holder of a Residual Certificate in violation of
                           the restrictions in this Section 6.02(d) and to the
                           extent that the retroactive restoration of the rights
                           of the holder of such Residual Certificate as
                           described in clause (iii)(A) above shall be invalid,
                           illegal or unenforceable, then the Trustee shall have
                           the right, without notice to the holder or any prior
                           holder of such Residual Certificate, to sell such
                           Residual Certificate to a purchaser selected by the
                           Trustee on such terms as the Trustee may choose. Such
                           purported Trustee shall promptly endorse and deliver
                           each Residual Certificate in accordance with the
                           instructions of the Trustee. Such purchaser may be
                           the Trustee itself or any Affiliate of the Trustee.
                           The proceeds of such sale, net of the commissions
                           (which may include commissions payable to the Trustee
                           or its Affiliates), expenses and taxes due, if any,
                           will be remitted by the Trustee to such purported
                           Transferee. The terms and conditions of any sale
                           under this clause (iii)(B) shall be determined in the
                           sole discretion of the Trustee, and the Trustee shall
                           not be liable to any Person having an Ownership
                           Interest in a Residual Certificate as a result of its
                           exercise of such discretion.

                           (iv) The Trustee shall make available to the Internal
                  Revenue Service and those Persons specified by the REMIC
                  Provisions all information necessary to compute any tax
                  imposed (A) as a result of the Transfer of an Ownership
                  Interest in a Residual Certificate to any Person who is a
                  Disqualified Organization, including the information described
                  in Treasury regulations sections 1.860D-1(b)(5) and
                  1.860E-2(a)(5) with respect to the "excess inclusions" of such
                  Residual Certificate and (B) as a result of any regulated
                  investment company, real estate investment trust, common trust
                  fund, partnership, trust, estate or organization described in
                  Section 1381 of the Code that holds an Ownership Interest in a
                  Residual Certificate having as among its record holders at any
                  time any Person which is a Disqualified Organization.
                  Reasonable compensation for providing such information may be
                  charged or collected by the Trustee.

                           (v) The provisions of this Section 6.02(d) set forth
                  prior to this subsection (v) may be modified, added to or
                  eliminated, provided that there shall have been delivered to
                  the Trustee at the expense of the party seeking to modify, add
                  to or eliminate any such provision the following:





                                     -129-
<PAGE>

                                    (A) written notification from each Rating
                           Agency to the effect that the modification, addition
                           to or elimination of such provisions will not cause
                           such Rating Agency to downgrade its then-current
                           ratings of any Class of Certificates; and

                                    (B) an Opinion of Counsel, in form and
                           substance satisfactory to the Trustee, to the effect
                           that such modification of, addition to or elimination
                           of such provisions will not cause any Trust REMIC to
                           cease to qualify as a REMIC and will not cause any
                           Trust REMIC, as the case may be, to be subject to an
                           entity-level tax caused by the Transfer of any
                           Residual Certificate to a Person that is not a
                           Permitted Transferee or a Person other than the
                           prospective transferee to be subject to a REMIC-tax
                           caused by the Transfer of a Residual Certificate to a
                           Person that is not a Permitted Transferee.

                  (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 9.11, the Trustee shall
execute, authenticate and deliver, in the name of the designated Transferee or
Transferees, one or more new Certificates of the same Class of a like aggregate
Percentage Interest.

                  (f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose pursuant to Section 9.11. 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 transfer or exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in the form satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing.

                  (g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trustee may require
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.

                  (h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trustee in accordance with its customary
procedures.

                  SECTION 6.03. Mutilated, Destroyed, Lost or Stolen
                                Certificates.

                  If (i) 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 of the ownership thereof, and
(ii) there is delivered to Trustee such security or indemnity as may be required
by it to save it harmless, then, in the absence of actual knowledge by the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee, shall execute, authenticate and deliver, in




                                     -130-
<PAGE>

exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of the same Class and of like denomination and
Percentage Interest. Upon the issuance of any new Certificate under this
Section, the Trustee may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. Any replacement Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the applicable
REMIC created hereunder, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.

                  SECTION 6.04. Persons Deemed Owners.

                  The Depositor, the Servicer, the Trustee, the Master Servicer,
the Securities Administrator and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 4.01 and for all
other purposes whatsoever, and none of the Depositor, the Servicer, the Trustee,
the Master Servicer, the Securities Administrator or any agent of any of them
shall be affected by notice to the contrary.

                  SECTION 6.05. Certain Available Information.

                  On or prior to the date of the first sale of any Class CE
Certificate, Class P Certificate or Residual Certificate to an Independent third
party, the Depositor shall provide to the Securities Administrator ten copies of
any private placement memorandum or other disclosure document used by the
Depositor in connection with the offer and sale of such Certificate. In
addition, if any such private placement memorandum or disclosure document is
revised, amended or supplemented at any time following the delivery thereof to
the Securities Administrator, the Depositor promptly shall inform the Securities
Administrator of such event and shall deliver to the Securities Administrator
ten copies of the private placement memorandum or disclosure document, as
revised, amended or supplemented. The Securities Administrator shall maintain at
its office as set forth in Section 12.05 hereof and shall make available free of
charge during normal business hours for review by any Holder of a Certificate or
any Person identified to the Securities Administrator as a prospective
transferee of a Certificate, originals or copies of the following items: (i) in
the case of a Holder or prospective transferee of a Class CE Certificate, Class
P Certificate or Residual Certificate, the related private placement memorandum
or other disclosure document relating to such Class of Certificates, in the form
most recently provided to the Securities Administrator; and (ii) in all cases,
(A) this Agreement and any amendments hereof entered into pursuant to Section
11.01, (B) all monthly statements required to be delivered to Certificateholders
of the relevant Class pursuant to Section 4.02 since the Closing Date, and all
other notices, reports, statements and written communications delivered to the
Certificateholders of the relevant Class pursuant to this Agreement since the
Closing Date and (C) any copies of all officers' certificates of the Servicer
since the Closing Date delivered to the Master Servicer to evidence such
Person's determination that any P&I Advance or Servicing Advance was, or if
made, would be a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance.
Copies and mailing of any and all of the foregoing items will be available from
the Securities Administrator upon request at the expense of the Person
requesting the same.





                                     -131-
<PAGE>

                                   ARTICLE VII

               THE DEPOSITOR, THE SERVICER AND THE MASTER SERVICER

                  SECTION 7.01. Liability of the Depositor, the Servicer and the
                                Master Servicer.

                  The Depositor, the Servicer and the Master Servicer each shall
be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement upon them in their respective capacities
as Depositor, Servicer and Master Servicer and undertaken hereunder by the
Depositor, the Servicer and the Master Servicer herein.

                  SECTION 7.02. Merger or Consolidation of the Depositor, the
                                Servicer or the Master Servicer.

                  Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Servicer will keep in full effect its existence, rights and franchises as a
limited partnership under the laws of the jurisdiction of its formation. Subject
to the following paragraph, the Master Servicer will keep in full effect its
existence, rights and franchises as a corporation under the laws of the
jurisdiction of its formation. The Depositor, the Servicer and the Master
Servicer each will 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, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.

                  The Depositor, the Servicer or the Master Servicer may be
merged or consolidated with or into any Person, or transfer all or substantially
all of its assets to any Person, in which case any Person resulting from any
merger or consolidation to which the Depositor, the Servicer or the Master
Servicer shall be a party, or any Person succeeding to the business of the
Depositor, the Servicer or the Master Servicer, shall be the successor of the
Depositor, the 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, the Rating Agencies' ratings of the Class A Certificates, the
Class A-IO Certificates and the Mezzanine Certificates in effect immediately
prior to such merger or consolidation will not be qualified, reduced or
withdrawn as a result thereof (as evidenced by a letter to such effect from the
Rating Agencies) and any successor of the Servicer or the Master Servicer shall
meet the eligibility requirements set forth in Section 8.02 or Section 7.06, as
applicable.

                  SECTION 7.03. 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 Trust Fund
or 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




                                     -132-
<PAGE>

such person against any breach of warranties, representations or covenants made
herein or against any specific liability imposed on any such Person pursuant
hereto or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties hereunder. The
Depositor, the Servicer, the Master Servicer and any director, officer, employee
or agent of the Depositor, the Servicer and the Master Servicer may rely in good
faith on any document of any kind which, PRIMA FACIE, is 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 and
held harmless by the Trust Fund against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the
Certificates or any loss, liability or expense incurred other than by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. None of the Depositor, the Servicer or the Master Servicer shall be
under any obligation to appear in, prosecute or defend any legal action unless
such action is related to its respective duties under this Agreement and, in its
opinion, does not involve it in any expense or liability; provided, however,
that each of the Depositor, the Servicer and the Master Servicer may in its
discretion undertake any such action which it may deem necessary or desirable
with respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Certificateholders hereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom (except
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder) 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 from the Collection
Account or the Distribution Account as and to the extent provided in Article III
and Article IV, any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account and the
Distribution Account.

                  Notwithstanding anything to the contrary contained herein, the
Servicer shall not be liable for any actions or inactions of any prior servicer
of the Mortgage Loans.

                  SECTION 7.04. Limitation on Resignation of the Servicer.

                  (a) The Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law or as provided in Section
7.04(c). Any such determination pursuant to the preceding sentence permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel to
such effect obtained at the expense of the Servicer and delivered to the Trustee
and the Rating Agencies. No resignation of the Servicer shall become effective
until the Trustee or a successor Servicer shall have assumed the Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.

                  (b) Except as expressly provided herein, the Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. The foregoing prohibition on assignment
shall not




                                     -133-
<PAGE>

prohibit the Servicer from designating a Sub-Servicer as payee of any
indemnification amount payable to the Servicer hereunder; provided, however,
that as provided in Section 3.02, no Sub- Servicer shall be a third-party
beneficiary hereunder and the parties hereto shall not be required to recognize
any Subservicer as an indemnitee under this Agreement.

                  (c) The Trustee and the Depositor hereby specifically (i)
consent to the pledge and assignment by the Servicer of all of the Servicer's
right, title and interest in, to and under this Agreement to the Servicing
Rights Pledgee, for the benefit of certain lenders and (ii) provided that no
Servicer Event of Default exists, agree that upon delivery to the Trustee by the
Servicing Rights Pledgee of a letter signed by the Servicer whereunder the
Servicer shall resign as Servicer under this Agreement, the Trustee shall
appoint the Servicing Rights Pledgee or its designee as successor Servicer,
provided that at the time of such appointment, the Servicing Rights Pledgee or
such designee meets the requirements of a successor Servicer pursuant to Section
8.02(c)(2) hereof and agrees to be subject to the terms of this Agreement. If,
pursuant to any provision hereof, the duties of the Servicer are transferred to
a successor servicer, the entire amount of the Servicing Fee and other
compensation payable to the Servicer pursuant hereto shall thereafter be payable
to such successor servicer.

                  SECTION 7.05. Limitation on Resignation of the Master
                                Servicer.

                  The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination pursuant
to the preceding sentence permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect obtained at the
expense of the Master Servicer and delivered to the Trustee and the Rating
Agencies. No resignation of the Master Servicer shall become effective until the
Trustee or a successor Master Servicer shall have assumed the Master Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.

                  SECTION 7.06. Assignment of Master Servicing.

                  The Master Servicer may sell and assign its rights and
delegate its duties and obligations in its entirety as Master Servicer under
this Agreement; provided, however, that: (i) the purchaser or transferee accept
in writing such assignment and delegation and assume the obligations of the
Master Servicer hereunder (a) shall be a Person which shall be qualified to
service mortgage loans for Fannie Mae or Freddie Mac; (b) shall have a net worth
of not less than $15,000,000 (unless otherwise approved by each Rating Agency
pursuant to clause (ii) below); (c) shall be reasonably satisfactory to the
Trustee (as evidenced in a writing signed by the Trustee); and (d) shall execute
and deliver to the Trustee an agreement, in form and substance reasonably
satisfactory to the Trustee, which contains an assumption by such Person of the
due and punctual performance and observance of each covenant and condition to be
performed or observed by it as master servicer under this Agreement, any
custodial agreement from and after the effective date of such agreement; (ii)
each Rating Agency shall be given prior written notice of the identity of the
proposed successor to the Master Servicer and each Rating Agency's rating of the
Certificates in effect immediately prior to such assignment, sale and delegation
will not be downgraded, qualified or withdrawn as a result of such assignment,
sale and delegation, as evidenced by a letter to such effect delivered to the
Master




                                     -134-
<PAGE>

Servicer and the Trustee; and (iii) the Master Servicer assigning and selling
the master servicing shall deliver to the Trustee an officer's certificate and
an Opinion of Independent counsel, each stating that all conditions precedent to
such action under this Agreement have been completed and such action is
permitted by and complies with the terms of this Agreement. No such assignment
or delegation shall affect any liability of the Master Servicer arising out of
acts or omissions prior to the effective date thereof.

                  SECTION 7.07. Rights of the Depositor in Respect of the
                                Servicer.

                  Each of the Master Servicer and the Servicer shall afford (and
any Sub-Servicing Agreement shall provide that each Sub-Servicer shall afford)
the Depositor and the Trustee, upon reasonable notice, during normal business
hours, access to all records maintained by the Master Servicer or the Servicer
(and any such Sub-Servicer) in respect of the Servicer's rights and obligations
hereunder and access to officers of the Master Servicer or the Servicer (and
those of any such Sub-Servicer) responsible for such obligations. Upon request,
each of the Master Servicer and the Servicer shall furnish to the Depositor and
the Trustee its (and any such Sub-Servicer's) most recent financial statements
and such other information relating to the Master Servicer's or Servicer's
capacity to perform its obligations under this Agreement as it possesses (and
that any such Sub- Servicer possesses). To the extent such information is not
otherwise available to the public, the Depositor and the Trustee shall not
disseminate any information obtained pursuant to the preceding two sentences
without the Master Servicer's or the Servicer's written consent, except as
required pursuant to this Agreement or to the extent that it is appropriate to
do so (i) to its legal counsel, auditors, taxing authorities or other
governmental agencies and the Certificateholders, (ii) pursuant to any law,
rule, regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor and the Trustee or
the Trust Fund, and in any case, the Depositor or the Trustee, (iii) disclosure
of any and all information that is or becomes publicly known, or information
obtained by the Trustee from sources other than the Depositor, the Servicer or
the Master Servicer, (iv) disclosure as required pursuant to this Agreement or
(v) disclosure of any and all information (A) in any preliminary or final
offering circular, registration statement or contract or other document
pertaining to the transactions contemplated by the Agreement approved in advance
by the Depositor, the Servicer or the Master Servicer or (B) to any affiliate,
independent or internal auditor, agent, employee or attorney of the Trustee
having a need to know the same, provided that the Trustee advises such recipient
of the confidential nature of the information being disclosed, shall use its
best efforts to assure the confidentiality of any such disseminated non-public
information. The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer and the Servicer under this Agreement and may, but is not
obligated to, perform, or cause a designee to perform, any defaulted obligation
of the Master Servicer or the Servicer under this Agreement or exercise the
rights of the Master Servicer or the Servicer under this Agreement; provided
that neither the Master Servicer nor the Servicer shall be relieved of any of
its obligations under this Agreement by virtue of such performance by the
Depositor or its designee. The Depositor shall not have any responsibility or
liability for any action or failure to act by the Master Servicer or the
Servicer and is not obligated to supervise the performance of the Master
Servicer or the Servicer under this Agreement or otherwise.





                                     -135-
<PAGE>

                                  ARTICLE VIII

                                     DEFAULT

                  SECTION 8.01. Servicer Events of Default.

                  (a) "Servicer Event of Default," wherever used herein, means
any one of the following events:

                           (i) any failure by the Servicer to remit to the
         Trustee for distribution to the Certificateholders any payment (other
         than a P&I Advance required to be made from its own funds on any
         Servicer Remittance Date pursuant to Section 5.03) required to be made
         under the terms of the Certificates and this Agreement which continues
         unremedied for a period of one Business Day after the date upon which
         written notice of such failure, requiring the same to be remedied,
         shall have been given to the Servicer by the Depositor or the Trustee
         (in which case notice shall be provided by telecopy), or to the
         Servicer, the Depositor, the Trustee and by the Holders of Certificates
         entitled to at least 25% of the Voting Rights; or

                           (ii) any failure on the part of the Servicer duly 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,
         or the breach by the Servicer of any representation and warranty
         contained in Section 2.05, which continues 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
         Servicer by the Depositor or the Trustee or to the Servicer, the
         Depositor and the Trustee by the Holders of Certificates entitled to at
         least 25% of the Voting Rights; or

                           (iii) 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, marshalling of assets and liabilities or similar proceeding,
         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 90 days; or

                           (iv) the Servicer shall consent to the appointment of
         a conservator or receiver or liquidator in any insolvency, readjustment
         of debt, marshalling of assets and liabilities or similar proceedings
         of or relating to it or of or relating to all or substantially all of
         its property; 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 any applicable insolvency or reorganization statute, make
         an assignment for the benefit of its creditors, or voluntarily suspend
         payment of its obligations;





                                     -136-
<PAGE>

                           (vi) failure by the Servicer to duly perform, within
         the required time period, its obligations under Section 3.17, 3.18 or
         3.19 which failure continues unremedied for a period of thirty (30)
         days after the date on which written notice of such failure, requiring
         the same to be remedied, shall have been given to the Servicer by any
         party to this Agreement; or

                           (vii) any failure of the Servicer to make any P&I
         Advance on any Servicer Remittance Date required to be made from its
         own funds pursuant to Section 5.03 which continues unremedied until
         3:00 p.m. New York time on the Business Day immediately following the
         Servicer Remittance Date.

If a Servicer Event of Default described in clauses (i) through (vi) of this
Section shall occur, then, and in each and every such case, so long as such
Servicer Event of Default shall not have been remedied, the Depositor or the
Trustee may, and at the written direction of the Holders of Certificates
entitled to at least 51% of Voting Rights, the Trustee shall, by notice in
writing to the Servicer (and to the Depositor if given by the Trustee or to the
Trustee if given by the Depositor) with a copy to each Rating Agency, terminate
all of the rights and obligations of the Servicer in its capacity as Servicer
under this Agreement, to the extent permitted by law, and in and to the Mortgage
Loans and the proceeds thereof. If a Servicer Event of Default described in
clause (vii) hereof shall occur, the Trustee shall, by notice in writing to the
Servicer and the Depositor, terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof. Subject to Section 8.02(b), on or after
the receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Certificates
(other than as a Holder of any Certificate) or the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to and under this Section,
and, without limitation, the Trustee is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the Servicer, any and all documents and other instruments and to do
or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Servicer agrees promptly (and in any event no later than ten
Business Days subsequent to such notice) to provide the Trustee with all
documents and records requested by it to enable it to assume the Servicer's
functions under this Agreement, and to cooperate with the Trustee in effecting
the termination of the Servicer's responsibilities and rights under this
Agreement, including, without limitation, the transfer within one Business Day
to the Trustee for administration by it of all cash amounts which at the time
shall be or should have been credited by the Servicer to the Collection Account
held by or on behalf of the Servicer or thereafter be received with respect to
the Mortgage Loans or any REO Property (provided, however, that the Servicer
shall continue to be entitled to receive all amounts accrued or owing to it
under this Agreement on or prior to the date of such termination, whether in
respect of P&I Advances or otherwise, and shall continue to be entitled to the
benefits of Section 6.03, notwithstanding any such termination, with respect to
events occurring prior to such termination). For purposes of this Section
8.01(a), the Trustee shall not be deemed to have knowledge of a Servicer Event
of Default unless a Responsible Officer of the Trustee assigned to and working
in the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a Servicer Event of Default is
received by the Trustee and such notice references the Certificates, the Trust
or this Agreement. The Trustee shall promptly notify the Rating




                                     -137-
<PAGE>

Agencies of the occurrence of a Servicer Event of Default of which it has
knowledge as provided above.

                  To the extent that the costs and expenses of the Trustee
related to the termination of the Servicer, appointment of a successor Servicer
or the transfer and assumption of the servicing by the Trustee (including,
without limitation, (i) all legal costs and expenses and all due diligence costs
and expenses associated with an evaluation of the potential termination of the
Servicer as a result of a Servicer Event of Default and (ii) all costs and
expenses associated with the complete transfer of servicing, including all
servicing files and all servicing data and the completion, correction or
manipulation of such servicing data as may be required by the successor servicer
to correct any errors or insufficiencies in the servicing data or otherwise to
enable the successor servicer to service the Mortgage Loans in accordance with
this Agreement) are not fully and timely reimbursed by the terminated Servicer,
the Trustee shall be entitled to reimbursement of such costs and expenses from
the Distribution Account.

                  (b) "Master Servicer Event of Default," wherever used herein,
means any one of the following events:

                           (i) any failure on the part of the Master Servicer
         duly to observe or perform in any material respect any other of the
         covenants or agreements on the part of the Master Servicer contained in
         this Agreement, or the breach by the Master Servicer of any
         representation and warranty contained in Section 2.04, which continues
         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 Depositor or the Trustee or to
         the Master Servicer, the Depositor and the Trustee by the Holders of
         Certificates entitled to at least 25% of the Voting Rights; or

                           (ii) 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, marshalling of assets and liabilities 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 or unstayed for a period of 90 days; or

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

                           (iv) 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.





                                     -138-
<PAGE>

If a Master Servicer Event of Default shall occur, then, and in each and every
such case, so long as such Master Servicer Event of Default shall not have been
remedied, the Depositor or the Trustee may, and at the written direction of the
Holders of Certificates entitled to at least 51% of Voting Rights, the Trustee
shall, by notice in writing to the Master Servicer (and to the Depositor if
given by the Trustee or to the Trustee if given by the Depositor) with a copy to
each Rating Agency, terminate all of the rights and obligations of the Master
Servicer in its capacity as Master Servicer under this Agreement, to the extent
permitted by law, and in and to the Mortgage Loans and the proceeds thereof. On
or after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer under this Agreement, whether with
respect to the Certificates (other than as a Holder of any Certificate) or the
Mortgage Loans or otherwise including, without limitation, the compensation
payable to the Master Servicer under this Agreement, shall pass to and be vested
in the Trustee pursuant to and under this Section, and, without limitation, the
Trustee is hereby authorized and empowered, as attorney-in-fact or otherwise, to
execute and deliver, on behalf of and at the expense of the Master Servicer, any
and all documents and other instruments and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. The Master Servicer
agrees promptly (and in any event no later than ten Business Days subsequent to
such notice) to provide the Trustee with all documents and records requested by
it to enable it to assume the Master Servicer's functions under this Agreement,
and to cooperate with the Trustee in effecting the termination of the Master
Servicer's responsibilities and rights under this Agreement (provided, however,
that the Master Servicer shall continue to be entitled to receive all amounts
accrued or owing to it under this Agreement on or prior to the date of such
termination and shall continue to be entitled to the benefits of Section 7.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 8.01(b), the Trustee shall not
be deemed to have knowledge of a Master Servicer Event of Default unless a
Responsible Officer of the Trustee assigned to and working in the Trustee's
Corporate Trust Office has actual knowledge thereof or unless written notice of
any event which is in fact such a Master Servicer Event of Default is received
by the Trustee and such notice references the Certificates, the Trust or this
Agreement. The Trustee shall promptly notify the Rating Agencies of the
occurrence of a Master Servicer Event of Default of which it has knowledge as
provided above.

                  To the extent that the costs and expenses of the Trustee
related to the termination of the Master Servicer, appointment of a successor
Master Servicer or the transfer and assumption of the master servicing by the
Trustee (including, without limitation, (i) all legal costs and expenses and all
due diligence costs and expenses associated with an evaluation of the potential
termination of the Master Servicer as a result of a Master Servicer Event of
Default and (ii) all costs and expenses associated with the complete transfer of
the master servicing, including all servicing files and all servicing data and
the completion, correction or manipulation of such servicing data as may be
required by the successor Master Servicer to correct any errors or
insufficiencies in the servicing data or otherwise to enable the successor
Master Servicer to master service the Mortgage Loans in accordance with this
Agreement) are not fully and timely reimbursed by the terminated Master
Servicer, the Trustee shall be entitled to reimbursement of such costs and
expenses from the Distribution Account.

                  SECTION 8.02. Trustee to Act; Appointment of Successor.




                                     -139-
<PAGE>

                  (a) On and after the time the Servicer receives a notice of
termination, the Trustee shall be the successor in all respects to the Servicer
in its capacity as Servicer under this Agreement and the transactions set forth
or provided for herein, and all the responsibilities, duties and liabilities
relating thereto and arising thereafter shall be assumed by the Trustee (except
for any representations or warranties of the Servicer under this Agreement, the
responsibilities, duties and liabilities contained in Section 2.03 and the
obligation to deposit amounts in respect of losses pursuant to Section 3.23(c))
by the terms and provisions hereof including, without limitation, the Servicer's
obligations to make P&I Advances pursuant to Section 5.03; provided, however,
that if the Trustee is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Trustee shall not be
obligated to make P&I Advances pursuant to Section 5.03; and provided further,
that any failure to perform such duties or responsibilities caused by the
Servicer's failure to provide information required by Section 7.01 shall not be
considered a default by the Trustee as successor to the Servicer hereunder. As
compensation therefor, the Trustee shall be entitled to the Servicing Fee and
all other compensation to which the Servicer would have been entitled if it had
continued to act hereunder.

                  (b)(1) All servicing transfer costs (including, without
limitation, servicing transfer costs of the type described in Section 8.02(a)
and incurred by the Trustee, the Master Servicer and any successor Servicer
under paragraph (b)(2) below) shall be paid by the terminated Servicer upon
presentation of reasonable documentation of such costs, and if such predecessor
or initial Servicer, as applicable, defaults in its obligation to pay such
costs, the successor Servicer, the Master Servicer and the Trustee shall be
entitled to reimbursement therefor from the assets of the Trust Fund.

                  (2) No appointment of a successor to the Servicer under this
Agreement shall be effective until the assumption by the successor of all of the
Servicer's responsibilities, duties and liabilities hereunder. In connection
with such appointment and assumption described herein, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer as such
hereunder. The Depositor, the Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Pending appointment of a successor to the Servicer under this
Agreement, the Trustee shall act in such capacity as hereinabove provided.

                  (c) (1) In the event of a Servicer Event of Default,
notwithstanding anything to the contrary above, the Trustee and the Depositor
hereby agree that upon delivery to the Trustee by the Servicing Rights Pledgee
of a letter signed by the Servicer within ten Business Days of when notification
of such event shall have been provided to the Trustee, whereunder the Servicer
shall resign as Servicer under this Agreement, the Trustee shall appoint the
Servicing Rights Pledgee or its designee as successor Servicer, provided that at
the time of such appointment, the Servicing Rights Pledgee or such designee
meets the requirements of a successor Servicer set forth in paragraph (c)(2)
below and the Servicing Rights Pledgee or such designee agrees to be subject to
the terms of this Agreement.

                  (2) In the event that the Servicing Rights Pledgee does not
deliver to the Trustee the letter described in preceding paragraph within the
time period specified therein, the Trustee shall




                                     -140-
<PAGE>

give notice thereof in writing to the Master Servicer and upon receipt of such
notice, the Master Servicer shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and the transactions
set forth or provided for herein, and all the responsibilities, duties and
liabilities relating thereto and arising thereafter shall be assumed by the
Master Servicer (except for any representations or warranties of the Servicer
under this Agreement, the responsibilities, duties and liabilities contained in
Section 2.03 and the obligation to deposit amounts in respect of losses pursuant
to Section 3.23(c)) by the terms and provisions hereof including, without
limitation, the Servicer's obligations to make P&I Advances pursuant to Section
5.03; provided, however, that (1) it is understood and acknowledged by the
parties hereto that there will be a period of transition (not to exceed 90 days)
before the actual servicing functions can be fully transferred to the Master
Servicer or any successor Servicer appointed in accordance with the following
provisions and (2) any failure to perform such duties or responsibilities caused
by the Servicer's failure to provide information required by Section 8.01 shall
not be considered a default by the Master Servicer as successor to the Servicer
hereunder. As compensation therefor, the Master Servicer shall be entitled to
the Servicing Fee and all funds relating to the Mortgage Loans to which the
Servicer would have been entitled if it had continued to act hereunder.
Notwithstanding the above and subject to the immediately following paragraph,
the Master Servicer may, if it shall be unwilling to so act, or shall, if it is
unable to so act promptly appoint or petition a court of competent jurisdiction
to appoint, an 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 Servicer under this Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer under this
Agreement.

                  (d) In connection with the termination or resignation of the
Servicer hereunder, (i) the successor Servicer, including the Trustee or the
Master Servicer, if the Trustee or the Master Servicer is acting as successor
Servicer, shall represent and warrant that it is a member of MERS in good
standing and shall agree to comply in all material respects with the rules and
procedures of MERS in connection with the servicing of the Mortgage Loans that
are registered with MERS, in which case the predecessor Servicer shall cooperate
with the successor Servicer in causing MERS to revise its records to reflect the
transfer of servicing to the successor Servicer as necessary under MERS' rules
and regulations, and (ii) the predecessor Servicer shall cooperate with the
successor Servicer in causing MERS to transfer the servicing of such Mortgage
Loan on the MERS(R) System to the successor Servicer. The predecessor Servicer
shall file or cause to be filed any such assignment in the appropriate recording
office. The predecessor Servicer shall bear any and all fees of MERS, costs of
preparing any assignments of Mortgage, and fees and costs of filing any
assignments of Mortgage that may be required under this Section 8.02(d).

                  SECTION 8.03. Notification to Certificateholders.

                  (a) Upon any termination of the Servicer or the Master
Servicer pursuant to Section 7.01(a) or (b) above or any appointment of a
successor to the Servicer or the Master Servicer pursuant to Section 7.02 above,
the Trustee shall give prompt written notice thereof to the Certificateholders
at their respective addresses appearing in the Certificate Register.

                  (b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Servicer Event of




                                     -141-
<PAGE>

Default or a Master Servicer Event of Default or five days after a Responsible
Officer of the Trustee becomes aware of the occurrence of such an event, the
Trustee shall transmit by mail to all Holders of Certificates notice of each
such occurrence, unless such default or Servicer Event of Default or Master
Servicer Event of Default shall have been cured or waived.

                  SECTION 8.04. Waiver of Servicer Events of Default.

                  The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Certificates affected by any default, Servicer Event
of Default or Master Servicer Event of Default hereunder may waive such default,
Servicer Event of Default or Master Servicer Event of Default; provided,
however, that a default, Servicer Event of Default under clause (i) or (vi) of
Section 7.01 may be waived only by all of the Holders of the Regular
Certificates. Upon any such waiver of a default, Servicer Event of Default or
Master Servicer Event of Default, such default, Servicer Event of Default or
Master Servicer Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose hereunder. No such waiver shall extend to
any subsequent or other default, Servicer Event of Default or Master Servicer
Event of Default or impair any right consequent thereon except to the extent
expressly so waived.






                                     -142-
<PAGE>

                                   ARTICLE IX

             CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR

                  SECTION 9.01. Duties of Trustee and Securities Administrator.

                  The Trustee, prior to the occurrence of a Master Servicer
Event of Default and after the curing or waiver of all Master Servicer Events of
Default which may have occurred, and the Securities Administrator each undertake
to perform such duties and only such duties as are specifically set forth in
this Agreement as duties of the Trustee and the Securities Administrator,
respectively. During the continuance of a Master Servicer Event of Default, 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 its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.

                  Each of the Trustee and the Securities Administrator, upon
receipt of all resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to it, which are specifically
required to be furnished pursuant to any provision of this Agreement, shall
examine them to determine whether they conform to the requirements of this
Agreement. If any such instrument is found not to conform to the requirements of
this Agreement in a material manner, the Trustee or the Securities
Administrator, as the case may be, shall take such action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to its satisfaction, the Securities Administrator will provide notice
to the Trustee thereof and the Trustee will provide notice to the
Certificateholders.

                  The Trustee shall promptly remit to the Servicer any
complaint, claim, demand, notice or other document (collectively, the "Notices")
delivered to the Trustee as a consequence of the assignment of any Mortgage Loan
hereunder and relating to the servicing of the Mortgage Loans; provided than any
such notice (i) is delivered to the Trustee at is Corporate Trust Office, (ii)
contains information sufficient to permit the Trustee to make a determination
that the real property to which such document relates is a Mortgaged Property.
The Trustee shall have no duty hereunder with respect to any Notice it may
receive or which may be alleged to have been delivered to or served upon it
unless such Notice is delivered to it or served upon it at its Corporate Trust
Office and such Notice contains the information required pursuant to clause (ii)
of the preceding sentence.

                  The Trustee agrees to notify the Master Servicer in writing no
later than 5:00 pm (Eastern Time) on each Servicer Remittance Date of the
aggregate dollar amount of the funds received by the Trustee from the Servicer
on such Servicer Remittance Date and any other information reasonably requested
by the Master Servicer, so as to enable the Master Servicer to make the
reconciliations and verifications required to be made by it pursuant to Sections
4.01 and 4.21.

                  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 misconduct; provided, HOWEVER, that:





                                     -143-
<PAGE>

                           (i) Prior to the occurrence of a Master Servicer
                  Event of Default, and after the curing or waiver of all such
                  Master Servicer Events of Default which may have occurred with
                  respect to the Trustee and at all times with respect to the
                  Securities Administrator, the duties and obligations of the
                  Trustee shall be determined solely by the express provisions
                  of this Agreement, neither the Trustee nor the Securities
                  Administrator shall 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 or the Securities
                  Administrator and, in the absence of bad faith on the part of
                  the Trustee or the Securities Administrator, respectively, the
                  Trustee or the Securities Administrator, respectively, 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 or the
                  Securities Administrator, respectively, that conform to the
                  requirements of this Agreement;

                           (ii) Neither the Trustee nor the Securities
                  Administrator shall be liable for an error of judgment made in
                  good faith by a Responsible Officer or Responsible Officers of
                  the Trustee or an officer or officers of the Securities
                  Administrator, respectively, unless it shall be proved that
                  the Trustee or the Securities Administrator, respectively, was
                  negligent in ascertaining the pertinent facts; and

                           (iii) Neither the Trustee nor the Securities
                  Administrator shall 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 the Holders of Certificates
                  entitled to at least 25% of the Voting Rights relating to the
                  time, method and place of conducting any proceeding for any
                  remedy available to the Trustee or the Securities
                  Administrator or exercising any trust or power conferred upon
                  the Trustee or the Securities Administrator under this
                  Agreement.

                  SECTION 9.02. Certain Matters Affecting Trustee and Securities
                                Administrator.

                  (a) Except as otherwise provided in Section 8.01:

                           (i) The Trustee and the Securities Administrator 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
                  reasonably believed by it to be genuine and to have been
                  signed or presented by the proper party or parties;

                           (ii) The Trustee and the Securities Administrator may
                  consult with counsel of its selection and any advice of such
                  counsel or 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 advice or Opinion of Counsel;




                                     -144-
<PAGE>

                           (iii) Neither the Trustee nor the Securities
                  Administrator shall be under any obligation to exercise any of
                  the trusts 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 or the Securities Administrator, as the case
                  may be, reasonable security or indemnity satisfactory to it
                  against the costs, expenses and liabilities which may be
                  incurred therein or thereby; nothing contained herein shall,
                  however, relieve the Trustee of the obligation, upon the
                  occurrence of a Master Servicer Event of Default (which has
                  not been cured or waived), to exercise such of the rights and
                  powers vested in it by this Agreement, and to 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;

                           (iv) Neither the Trustee nor the Securities
                  Administrator shall 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;

                           (v) Prior to the occurrence of a Master Servicer
                  Event of Default hereunder and after the curing or waiver of
                  all Master Servicer Events of Default which may have occurred
                  with respect to the Trustee and at all times with respect to
                  the Securities Administrator, neither the Trustee nor the
                  Securities Administrator shall 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 to do so
                  by the Holders of Certificates entitled to at least 25% of the
                  Voting Rights; provided, however, that if the payment within a
                  reasonable time to the Trustee or the Securities Administrator
                  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 or the Securities Administrator, as applicable,
                  not reasonably assured to the Trustee or the Securities
                  Administrator by such Certificateholders, the Trustee or the
                  Securities Administrator, as applicable, may require
                  reasonable indemnity satisfactory to it against such expense,
                  or liability from such Certificateholders as a condition to
                  taking any such action;

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

                           (vii) The Trustee shall not be liable for any loss
                  resulting from the investment of funds held in the Collection
                  Account at the direction of the Servicer pursuant to Section
                  3.23(c), for any loss resulting from the investment of funds
                  held in the Reserve Fund at the direction of the Holder of the
                  Class CE Certificate or for




                                     -145-
<PAGE>

                  any loss resulting from the redemption or sale of any such
                  investment as therein authorized;

                           (viii) the Trustee shall not be deemed to have notice
                  of any default, Master Servicer Event of Default or Servicer
                  Event of Default unless a Responsible Officer of the Trustee
                  has knowledge thereof or unless written notice of any event
                  which is in fact such a default is received by the Trustee at
                  the Corporate Trust Office of the Trustee, and such notice
                  references the Certificates and this Agreement; and

                           (ix) the rights, privileges, protections, immunities
                  and benefits given to the Trustee, including, without
                  limitation, its right to be indemnified, are extended to, and
                  shall be enforceable by, each agent, custodian and other
                  Person employed to act hereunder.

                  (b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.

                  (c) The Trustee is hereby directed by the Depositor to execute
the Cap Contracts on behalf of the Trust Fund in the form presented to it by the
Depositor and shall have no responsibility for the contents of such Cap
Contracts, including, without limitation, the representations and warranties
contained therein. Any funds payable by the Trustee under the Cap Contracts at
closing shall be paid by the Depositor. Notwithstanding anything to the contrary
contained herein or in the Cap Contracts, the Trustee shall not be required to
make any payments to the counterparty under the Cap Contracts.

                  SECTION 9.03. Trustee and Securities Administrator not Liable
                                for Certificates or Mortgage Loans.

                  The recitals contained herein and in the Certificates (other
than the signature of the Trustee, the authentication of the Trustee on the
Certificates, the acknowledgments of the Trustee contained in Article II and the
representations and warranties of the Trustee in Section 9.12) shall be taken as
the statements of the Depositor and neither the Trustee nor the Securities
Administrator assumes any responsibility for their correctness. Neither the
Trustee nor the Securities Administrator makes any representations or warranties
as to the validity or sufficiency of this Agreement (other than as specifically
set forth in Section 9.12) or of the Certificates (other than the signature of
the Trustee and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application 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 Servicer, other
than any funds held by or on behalf of the Trustee in accordance with Section
3.23 and 3.24.

                  SECTION 9.04. Trustee and Securities Administrator May Own
                                Certificates.




                                     -146-
<PAGE>

                  Each of the Trustee and the Securities Administrator in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates and may transact business with other interested parties and their
Affiliates with the same rights it would have if it were not Trustee or the
Securities Administrator.

                  SECTION 9.05. Fees and Expenses of Trustee and Securities
                                Administrator.

                  The fees of the Trustee and the Securities Administrator
hereunder and of Wells Fargo under the Custodial Agreement shall be paid in
accordance with a side letter agreement with the Master Servicer and at the sole
expense of the Master Servicer. In addition, the Trustee, the Securities
Administrator, the Custodian and any director, officer, employee or agent of the
Trustee, the Securities Administrator and the Custodian shall be indemnified by
the Trust and held harmless against any loss, liability or expense (including
reasonable attorney's fees and expenses) incurred by the Trustee, the Custodian
or the Securities Administrator in connection with any claim or legal action or
any pending or threatened claim or legal action arising out of or in connection
with the acceptance or administration of its respective obligations and duties
under this Agreement, including the Cap Contracts and any and all other
agreements related hereto, other than any loss, liability or expense (i) for
which the Trustee is indemnified by the Master Servicer or the Servicer, (ii)
that constitutes a specific liability of the Trustee or the Securities
Administrator pursuant to Section 11.01(g) or (iii) any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder by the Trustee or the Securities
Administrator reason of reckless disregard of obligations and duties hereunder.
In no event shall the Trustee or the Securities Administrator be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if it has been advised of the
likelihood of such loss or damage and regardless of the form of action. The
Master Servicer agrees to indemnify the Trustee, from, and hold the Trustee
harmless against, any loss, liability or expense (including reasonable
attorney's fees and expenses) incurred by the Trustee by reason of the Master
Servicer's willful misfeasance, bad faith or gross negligence in the performance
of its duties under this Agreement or by reason of the Master Servicer's
reckless disregard of its obligations and duties under this Agreement. Such
indemnity shall survive the termination or discharge of this Agreement and the
resignation or removal of the Trustee. Any payment hereunder made by the Master
Servicer to the Trustee shall be from the Master Servicer's own funds, without
reimbursement from REMIC I therefor.

                  SECTION 9.06. Eligibility Requirements for Trustee and
                                Securities Administrator.

                  The Trustee and the Securities Administrator shall at all
times be a corporation or an association (other than the Depositor, the Seller,
the Master Servicer or any Affiliate of the foregoing) organized and doing
business under the laws of any 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 (or a member of a bank holding company whose
capital and surplus is at least $50,000,000) and subject to supervision or
examination by federal or state authority. If such corporation or association
publishes reports of conditions at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this




                                     -147-
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Section 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 conditions so published. In case at any time the Trustee or the
Securities Administrator, as applicable, shall cease to be eligible in
accordance with the provisions of this Section, the Trustee or the Securities
Administrator, as applicable, shall resign immediately in the manner and with
the effect specified in Section 9.07.

                  SECTION 9.07. Resignation and Removal of Trustee and
                                Securities Administrator.

                  The Trustee and the Securities Administrator may at any time
resign and be discharged from the trust hereby created by giving written notice
thereof to the Depositor, to the Master Servicer, to the Securities
Administrator (or the Trustee, if the Securities Administrator resigns) and to
the Certificateholders. Upon receiving such notice of resignation, the Depositor
shall promptly appoint a successor trustee or successor securities administrator
by written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee or Securities Administrator, as applicable, and to the
successor trustee or successor securities administrator, as applicable. A copy
of such instrument shall be delivered to the Certificateholders, the Trustee,
the Securities Administrator and the Master Servicer by the Depositor. If no
successor trustee or successor securities administrator shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee or Securities Administrator, as the
case may be, may, at the expense of the Trust Fund, petition any court of
competent jurisdiction for the appointment of a successor trustee, successor
securities administrator, Trustee or Securities Administrator, as applicable.

                  If at any time the Trustee or the Securities Administrator
shall cease to be eligible in accordance with the provisions of Section 9.06 and
shall fail to resign after written request therefor by the Depositor, or if at
any time the Trustee or the Securities Administrator shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee
or the Securities Administrator or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or the Securities
Administrator or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Depositor may remove the Trustee or the
Securities Administrator, as applicable and appoint a successor trustee or
successor securities administrator, as applicable, by written instrument, in
duplicate, which instrument shall be delivered to the Trustee or the Securities
Administrator so removed and to the successor trustee or successor securities
administrator. A copy of such instrument shall be delivered to the
Certificateholders, the Trustee, the Securities Administrator and the Master
Servicer by the Depositor.

                  The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee or the Securities Administrator
and appoint a successor trustee or successor securities administrator 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 to the Depositor, one complete set to the Trustee or the Securities
Administrator so removed and one complete set to the successor so appointed. A
copy of such instrument shall be delivered to the Certificateholders, the
Trustee (in the case of the removal of the Securities Administrator), the
Securities Administrator (in the case of the removal of the Trustee) and the
Master Servicer by the Depositor.




                                     -148-
<PAGE>

                  Any resignation or removal of the Trustee or the Securities
Administrator and appointment of a successor trustee or successor securities
administrator pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor trustee or successor
securities administrator, as applicable, as provided in Section 8.08.

                  Notwithstanding anything to the contrary contained herein, the
Master Servicer and the Securities Administrator shall at all times be the same
Person.

                  SECTION 9.08. Successor Trustee or Securities Administrator.

                  Any successor trustee or successor securities administrator
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Depositor and its predecessor trustee or predecessor securities
administrator an instrument accepting such appointment hereunder, and thereupon
the resignation or removal of the predecessor trustee or predecessor securities
administrator shall become effective and such successor trustee or successor
securities administrator 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 or
securities administrator herein. The predecessor trustee or predecessor
securities administrator shall deliver to the successor trustee or successor
securities administrator all Mortgage Loan Documents and related documents and
statements to the extent held by it hereunder, as well as all moneys, held by it
hereunder, and the Depositor and the predecessor trustee or predecessor
securities administrator 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 or successor securities administrator
all such rights, powers, duties and obligations.

                  No successor trustee or successor securities administrator
shall accept appointment as provided in this Section unless at the time of such
acceptance such successor trustee or successor securities administrator shall be
eligible under the provisions of Section 8.06 and the appointment of such
successor trustee or successor securities administrator shall not result in a
downgrading of any Class of Certificates by any Rating Agency, as evidenced by a
letter from each Rating Agency.

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

                  SECTION 9.09. Merger or Consolidation of Trustee or Securities
                                Administrator.

                  Any corporation or association into which the Trustee or the
Securities Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Securities Administrator
shall be a party, or any corporation or association succeeding to the business
of the Trustee or the Securities Administrator shall be the successor of the
Trustee or the Securities




                                     -149-
<PAGE>

Administrator hereunder, provided such corporation or association shall be
eligible under the provisions of Section 8.06, 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.

                  SECTION 9.10. Appointment of Co-Trustee or Separate Trustee.

                  Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the REMIC I or property securing the same may at the time be located,
the Trustee 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 REMIC I, and to vest in such Person or Persons, in such
capacity, and for the benefit of the Holders of the Certificates, such title to
REMIC I, or any part thereof, and, subject to the other provisions of this
Section 9.10, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 9.06 hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.08 hereof.

                  In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10 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, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting 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 REMIC I or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee or co-trustee at the direction
of the Trustee.

                  Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trust 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.

                  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 or co-trustee.





                                     -150-
<PAGE>

                  SECTION 9.11. Appointment of Office or Agency.

                  The Certificates may be surrendered for registration of
transfer or exchange at the Trustee's office located at 2001 Bryan Street, 8th
Floor, Dallas, Texas 75201, Attention: ITS Transfer Dept. - ACE 2003-FM1, and
presented for final distribution at the Corporate Trust Office where notices and
demands to or upon the Trustee in respect of the Certificates and this Agreement
may be served.

                  SECTION 9.12. Representations and Warranties.

                  The Trustee hereby represents and warrants to the Master
Servicer, the Securities Administrator and the Depositor as applicable, as of
the Closing Date, that:

                  (i) It is a banking corporation duly organized, validly
         existing and in good standing under the laws of the State of New York.

                  (ii) The execution and delivery of this Agreement by it, and
         the performance and compliance with the terms of this Agreement by it,
         will not violate its articles of association or bylaws 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 of, any
         material agreement or other instrument to which it is a party or which
         is applicable to it or any of its assets.

                  (iii) It has the full power and authority to enter into and
         consummate all transactions contemplated by this Agreement, has duly
         authorized the execution, delivery and performance of this Agreement,
         and has duly executed and delivered this Agreement.

                  (iv) This Agreement, assuming due authorization, execution and
         delivery by the other parties hereto, constitutes a valid, legal and
         binding obligation of it, enforceable against it in accordance with the
         terms hereof, subject to (A) applicable bankruptcy, insolvency,
         receivership, reorganization, moratorium and other laws affecting the
         enforcement of creditors' rights generally, and (B) general principles
         of equity, regardless of whether such enforcement is considered in a
         proceeding in equity or at law.

                  (v) It is not in violation of, and its execution and delivery
         of this Agreement and its performance and compliance with the terms of
         this Agreement will not constitute a violation of, any law, any order
         or decree of any court or arbiter, or any order, regulation or demand
         of any federal, state or local governmental or regulatory authority,
         which violation, in its good faith and reasonable judgment, is likely
         to affect materially and adversely either the ability of it to perform
         its obligations under this Agreement or its financial condition.

                  (vi) No litigation is pending or, to the best of its
         knowledge, threatened against it, which would prohibit it from entering
         into this Agreement or, in its good faith reasonable judgment, is
         likely to materially and adversely affect either the ability of it to
         perform its obligations under this Agreement or its financial
         condition.





                                     -151-
<PAGE>

                                    ARTICLE X

                                   TERMINATION

                  SECTION 10.01. Termination Upon Repurchase or Liquidation of
                                 All Mortgage Loans.

                  (a) Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicer and the
Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 9.05 and of the Servicer to make remittances to the Trustee
and the Trustee to make payments in respect of the REMIC I Regular Interests,
REMIC II Regular Interests or the Classes of Certificates as hereinafter set
forth) shall terminate upon payment to the Certificateholders and the deposit of
all amounts held by or on behalf of the Trustee and required hereunder to be so
paid or deposited on the Distribution Date coinciding with or following the
earlier to occur of (i) the purchase by the Terminator (as defined below) of all
Mortgage Loans and each REO Property remaining in REMIC I and (ii) the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan or REO Property remaining in REMIC I; PROVIDED, HOWEVER, that in
no event shall the trust created hereby continue beyond the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof. The purchase by the Terminator of all Mortgage Loans
and each REO Property remaining in REMIC I shall be at a price (the "Termination
Price") equal to the sum of (i) the greater of (A) the aggregate Purchase Price
of all the Mortgage Loans included in REMIC I, plus the appraised value of each
REO Property, if any, included in REMIC I, such appraisal to be conducted by an
appraiser mutually agreed upon by the Terminator and the Trustee in their
reasonable discretion and (B) the aggregate fair market value of all of the
assets of REMIC I (as determined by the Terminator and the Trustee, as of the
close of business on the third Business Day next preceding the date upon which
notice of any such termination is furnished to Certificateholders pursuant to
the third paragraph of this Section 9.01) plus (ii) any amounts due the Servicer
and the Master Servicer in respect of unpaid Servicing Fees, Master Servicing
Fees and outstanding P&I Advances and Servicing Advances.

                  (b) The Servicer shall have the right (the party exercising
such right, the "Terminator"), to purchase all of the Mortgage Loans and each
REO Property remaining in REMIC I pursuant to clause (i) of the preceding
paragraph no later than the Determination Date in the month immediately
preceding the Distribution Date on which the Certificates will be retired;
PROVIDED, HOWEVER, that the Terminator may elect to purchase all of the Mortgage
Loans and each REO Property remaining in REMIC I pursuant to clause (i) above
only if the aggregate Stated Principal Balance of the Mortgage Loans and each
REO Property remaining in the Trust Fund at the time of such election is reduced
to less than 10% of the aggregate Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date. By acceptance of the Residual Certificates, the Holder
of the Residual Certificates agrees, in connection with any termination
hereunder, to assign and transfer any portion of the Termination Price in excess
of par, and to the extent received in respect of such termination, to pay any
such amounts to the Holders of the Class CE Certificates.

                  (c) Notice of the liquidation of the Certificates shall be
given promptly by the Trustee by letter to the Certificateholders mailed (a) in
the event such notice is given in connection




                                     -152-
<PAGE>

with the purchase of the Mortgage Loans and each REO Property by the Terminator,
not earlier than the 15th day and not later than the 25th day of the month next
preceding the month of the final distribution on the Certificates or (b)
otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and the final payment in respect
of the REMIC I Regular Interests, REMIC II Regular Interests or the Certificates
will be made upon presentation and surrender of the related Certificates at the
office of the Trustee therein designated, (ii) the amount of any such final
payment, (iii) that no interest shall accrue in respect of the REMIC I Regular
Interests, REMIC II Regular Interests or Certificates from and after the
Interest Accrual Period relating to the final Distribution Date therefor and
(iv) that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Trustee. In the event such notice is given in
connection with the purchase of all of the Mortgage Loans and each REO Property
remaining in REMIC I by the Terminator, the Terminator shall deliver to the
Trustee for deposit in the Distribution Account not later than the Business Day
prior to the Distribution Date on which the final distribution on the
Certificates an amount in immediately available funds equal to the
above-described Termination Price. The Trustee shall remit to the Servicer, the
Master Servicer, the Securities Administrator and the Custodian from such funds
deposited in the Distribution Account (i) any amounts which the Servicer would
be permitted to withdraw and retain from the Collection Account pursuant to
Sections 3.22 and 3.23 and (ii) any other amounts otherwise payable by the
Trustee to the Master Servicer, the Securities Administrator, the Custodian and
the Servicer from amounts on deposit in the Distribution Account pursuant to the
terms of this Agreement prior to making any final distributions pursuant to
Section 11.01(d) below. Upon certification to the Trustee by a Servicing Officer
of the making of such final deposit, the Trustee shall promptly release to the
Terminator the Mortgage Files for the remaining Mortgage Loans, and Trustee
shall execute all assignments, endorsements and other instruments necessary to
effectuate such transfer.

                  (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 5.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificates as to which notice has been given pursuant to this Section
10.01 shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, mail a final notice to the remaining non-tendering Certificateholders
concerning surrender of their Certificates. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in the trust funds. If within one year after
the final notice any such Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to the Depositor all such amounts, and all
rights of non-tendering Certificateholders in or to such amounts shall thereupon
cease. No interest shall accrue or be payable to any Certificateholder on any
amount held in trust by the Trustee




                                     -153-
<PAGE>

as a result of such Certificateholder's failure to surrender its Certificate(s)
on the final Distribution Date for final payment thereof in accordance with this
Section 10.01. Any such amounts held in trust by the Trustee shall be held
uninvested in an Eligible Account.

                  SECTION 10.02. Additional Termination Requirements.

                  (a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property or the final payment on or other
liquidation of the last Mortgage Loan or REO Property remaining in REMIC I
pursuant to Section 10.01, the Trust Fund shall be terminated in accordance with
the following additional requirements:

                           (i) The Trustee shall specify the first day in the
         90-day liquidation period in a statement attached to each Trust REMIC's
         final Tax Return pursuant to Treasury regulation Section 1.860F-1 and
         shall satisfy all requirements of a qualified liquidation under Section
         860F of the Code and any regulations thereunder, as evidenced by an
         Opinion of Counsel obtained by and at the expense of the Terminator;

                           (ii) During such 90-day liquidation period and, at or
         prior to the time of making of the final payment on the Certificates,
         the Trustee shall sell all of the assets of REMIC I to the Terminator
         for cash; and

                           (iii) At the time of the making of the final payment
         on the Certificates, the Trustee shall distribute or credit, or cause
         to be distributed or credited, to the Holders of the Residual
         Certificates all cash on hand in the Trust Fund (other than cash
         retained to meet claims), and the Trust Fund shall terminate at that
         time.

                  (b) At the expense of the requesting Terminator (or, if the
Trust Fund is being terminated as a result of the occurrence of the event
described in clause (ii) of the first paragraph of Section 10.01, at the expense
of the Trust Fund), the Terminator shall prepare or cause to be prepared the
documentation required in connection with the adoption of a plan of liquidation
of each Trust REMIC pursuant to this Section 10.02.

                  (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each Trust REMIC, which authorization shall be binding upon all successor
Certificateholders.





                                     -154-
<PAGE>

                                   ARTICLE XI

                                REMIC PROVISIONS

                  SECTION 11.01. REMIC Administration.

                  (a) The Trustee shall elect to treat each Trust REMIC as a
REMIC under the Code and, if necessary, under applicable state law. Each such
election will be made by the Securities Administrator on Form 1066 or other
appropriate federal tax or information return or any appropriate state return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC election in respect of
REMIC I, the REMIC I Regular Interests shall be designated as the Regular
Interests in REMIC I and the Class R-I Interest shall be designated as the
Residual Interests in REMIC I. The REMIC II Regular Interests shall be
designated as Regular Interests in REMIC II and the Class R-II Interest shall be
designated as the Residual Interests in REMIC II. The Class A Certificates, the
Class A-IO Certificates, the Mezzanine Certificates, the Class P Certificates
and the Class CE Certificates shall be designated as the Regular Interests in
REMIC III and the Class R-III Interest shall be designated as the Residual
Interests in REMIC III. The Trustee shall not permit the creation of any
"interests" in each Trust REMIC (within the meaning of Section 860G of the Code)
other than the REMIC I Regular Interests, the REMIC II Regular Interests and the
interests represented by the Certificates.

                  (b) The Closing Date is hereby designated as the "Startup Day"
of each Trust REMIC within the meaning of Section 860G(a)(9) of the Code.

                  (c) The Securities Administrator shall be reimbursed for any
and all expenses relating to any tax audit of the Trust Fund (including, but not
limited to, any professional fees or any administrative or judicial proceedings
with respect to each Trust REMIC that involve the Internal Revenue Service or
state tax authorities), including the expense of obtaining any tax related
Opinion of Counsel except as specified herein. The Securities Administrator, as
agent for each Trust REMIC's tax matters person shall (i) act on behalf of the
Trust Fund in relation to any tax matter or controversy involving any Trust
REMIC and (ii) represent the Trust Fund in any administrative or judicial
proceeding relating to an examination or audit by any governmental taxing
authority with respect thereto. The holder of the largest Percentage Interest of
each class of Residual Certificates shall be designated, in the manner provided
under Treasury regulations section 1.860F-4(d) and Treasury regulations section
301.6231(a)(7)-1, as the tax matters person of the related REMIC created
hereunder. By their acceptance thereof, the holder of the largest Percentage
Interest of the Residual Certificates hereby agrees to irrevocably appoint the
Securities Administrator or an Affiliate as its agent to perform all of the
duties of the tax matters person for the Trust Fund.

                  (d) The Securities Administrator shall prepare and file and
the Trustee shall sign all of the Tax Returns in respect of each REMIC created
hereunder. The expenses of preparing and filing such returns shall be borne by
the Securities Administrator without any right of reimbursement therefor.

                  (e) The Securities Administrator shall perform on behalf of
each Trust REMIC all reporting and other tax compliance duties that are the
responsibility of such REMIC under the




                                     -155-
<PAGE>

Code, the REMIC Provisions or other compliance guidance issued by the Internal
Revenue Service or any state or local taxing authority. Among its other duties,
as required by the Code, the REMIC Provisions or other such compliance guidance,
the Securities Administrator shall provide (i) to any Transferor of a Residual
Certificate such information as is necessary for the application of any tax
relating to the transfer of a Residual Certificate to any Person who is not a
Permitted Transferee upon receipt of additional reasonable compensation, (ii) to
the Certificateholders such information or reports as are required by the Code
or the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of each
Trust REMIC. The Depositor shall provide or cause to be provided to the
Securities Administrator, within ten (10) days after the Closing Date, all
information or data that the Securities Administrator reasonably determines to
be relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.

                  (f) To the extent in the control of the Trustee or the
Securities Administrator, each such Person (i) shall take such action and shall
cause each REMIC created hereunder to take such action as shall be necessary to
create or maintain the status thereof as a REMIC under the REMIC Provisions,
(ii) shall not take any action, cause the Trust Fund to take any action or fail
to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (A) endanger the
status of each Trust REMIC as a REMIC or (B) result in the imposition of a tax
upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless such action or inaction is permitted
under this Agreement or the Trustee and the Securities Administrator have
received an Opinion of Counsel, addressed to the them (at the expense of the
party seeking to take such action but in no event at the expense of the Trustee
or the Securities Administrator) to the effect that the contemplated action will
not, with respect to any Trust REMIC, endanger such status or result in the
imposition of such a tax, nor (iii) shall the Securities Administrator take or
fail to take any action (whether or not authorized hereunder) as to which the
Trustee has advised it in writing that it has received an Opinion of Counsel to
the effect that an Adverse REMIC Event could occur with respect to such action;
provided that the Securities Administrator may conclusively rely on such Opinion
of Counsel and shall incur no liability for its action or failure to act in
accordance with such Opinion of Counsel. In addition, prior to taking any action
with respect to any Trust REMIC or the respective assets of each, or causing any
Trust REMIC to take any action, which is not contemplated under the terms of
this Agreement, the Securities Administrator will consult with the Trustee or
its designee, in writing, with respect to whether such action could cause an
Adverse REMIC Event to occur with respect to any Trust REMIC, and the Securities
Administrator shall not take any such action or cause any Trust REMIC to take
any such action as to which the Trustee has advised it in writing that an
Adverse REMIC Event could occur. The Trustee may consult with counsel to make
such written advice, and the cost of same shall be home by the party seeking to
take the action not permitted by this Agreement, but in no event shall such cost
be an expense of the Trustee.

                  (g) In the event that any tax is imposed on "prohibited
transactions" of any REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from




                                     -156-
<PAGE>

foreclosure property" of such REMIC as defined in Section 860G(c) of the Code,
on any contributions to any such REMIC after the Startup Day therefor pursuant
to Section 860G(d) of the Code, or any other tax is imposed by the Code or any
applicable provisions of state or local tax laws, such tax shall be charged (i)
to the Trustee pursuant to Section 11.03, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Article X,
(ii) to the Securities Administrator pursuant to Section 11.03, if such tax
arises out of or results from a breach by the Securities Administrator of any of
its obligations under this Article XI, (iii) to the Master Servicer pursuant to
Section 11.03, if such tax arises out of or results from a breach by the Master
Servicer of any of its obligations under Article IV or under this Article XI,
(iv) to the Servicer pursuant to Section 11.03, if such tax arises out of or
results from a breach by the Servicer of any of its obligations under Article
III or under this Article XI, or (v) in all other cases, against amounts on
deposit in the Distribution Account and shall be paid by withdrawal therefrom.

                  (h) The Securities Administrator shall, for federal income tax
purposes, maintain books and records with respect to each Trust REMIC on a
calendar year and on an accrual basis.

                  (i) Following the Startup Day, neither the Securities
Administrator nor the Trustee shall accept any contributions of assets to any
Trust REMIC other than in connection with any Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.03 unless it shall have received an
Opinion of Counsel to the effect that the inclusion of such assets in the Trust
Fund will not cause the related REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding or subject such REMIC to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.

                  (j) Neither the Trustee nor the Securities Administrator shall
knowingly enter into any arrangement by which any Trust REMIC will receive a fee
or other compensation for services nor permit either REMIC to receive any income
from assets other than "qualified mortgages" as defined in Section 860G(a)(3) of
the Code or "permitted investments" as defined in Section 860G(a)(5) of the
Code.

                  (k) The Securities Administrator shall apply for an employer
identification number with the Internal Revenue Service via a Form SS-4 or other
comparable method for each REMIC. In connection with the foregoing, the
Securities Administrator shall provide the name and address of the person who
can be contacted to obtain information required to be reported to the holders of
Regular Interests in each REMIC as required by IRS Form 8811.

                  SECTION 11.02. Prohibited Transactions and Activities.

                  None of the Depositor, the Servicer, the Securities
Administrator, the Master Servicer or the Trustee shall sell, dispose of or
substitute for any of the Mortgage Loans (except in connection with (i) the
foreclosure of a Mortgage Loan, including but not limited to, the acquisition or
sale of a Mortgaged Property acquired by deed in lieu of foreclosure, (ii) the
bankruptcy of REMIC I, (iii) the termination of REMIC I pursuant to Article X of
this Agreement, (iv) a substitution pursuant to Article II of this Agreement or
(v) a purchase of Mortgage Loans pursuant to Article II of this Agreement), nor
acquire any assets for any Trust REMIC (other than REO Property acquired in
respect of a defaulted Mortgage Loan), nor sell or dispose of any investments in
the Collection




                                     -157-
<PAGE>

Account or the Distribution Account for gain, nor accept any contributions to
any Trust REMIC after the Closing Date (other than a Qualified Substitute
Mortgage Loan delivered in accordance with Section 2.03), unless it has received
an Opinion of Counsel, addressed to the Trustee and the Trustee (at the expense
of the party seeking to cause such sale, disposition, substitution, acquisition
or contribution but in no event at the expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of any Trust REMIC as a REMIC or (b) cause any Trust REMIC
to be subject to a tax on "prohibited transactions" or "contributions" pursuant
to the REMIC Provisions.

                  SECTION 11.03. Indemnification.

                  (a) The Trustee agrees to be liable for any taxes and costs
incurred by the Trust Fund, the Depositor, the Master Servicer, the Securities
Administrator or the Servicer including, without limitation, any reasonable
attorneys fees imposed on or incurred by the Trust Fund, the Depositor, the
Master Servicer, the Securities Administrator or the Servicer as a result of the
Trustee's failure to perform its covenants set forth in this Article XI in
accordance with the standard of care of the Trustee set forth in this Agreement.

                  (b) The Servicer agrees to indemnify the Trust Fund, the
Depositor, the Master Servicer, the Securities Administrator and the Trustee for
any taxes and costs including any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Master Servicer, the Securities
Administrator or the Trustee, as a result of the Servicer's failure to perform
its covenants set forth in Article III in accordance with the standard of care
of the Servicer set forth in this Agreement.

                  (c) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, the Servicer and the Trustee for any taxes and costs including
any reasonable attorneys' fees imposed on or incurred by the Trust Fund, the
Depositor, the Servicer or the Trustee, as a result of the Master Servicer's
failure to perform its covenants set forth in Article IV in accordance with the
standard of care of the Master Servicer set forth in this Agreement.

                  (d) The Securities Administrator agrees to be liable for any
taxes and costs incurred by the Trust Fund, the Depositor or the Trustee
including any reasonable attorneys fees imposed on or incurred by the Trust
Fund, the Depositor or the Trustee as a result of the Securities Administrator's
failure to perform its covenants set forth in this Article XI in accordance with
the standard of care of the Securities Administrator set forth in this
Agreement.





                                     -158-
<PAGE>

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

                  SECTION 12.01. Amendment.

                  This Agreement may be amended from time to time by the
Depositor, the Servicer, the Master Servicer, the Securities Administrator and
the Trustee, but without the consent of any of the Certificateholders, (i) to
cure any ambiguity or defect, (ii) to correct, modify or supplement any
provisions herein (including to give effect to the expectations of
Certificateholders), or (iii) to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee,
adversely affect in any material respect the interests of any Certificateholder.
No amendment shall be deemed to adversely affect in any material respect the
interests of any Certificateholder who shall have consented thereto, and no
Opinion of Counsel shall be required to address the effect of any such amendment
on any such consenting Certificateholder.

                  This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Master Servicer, the Securities Administrator and
the Trustee with the consent of the Holders of Certificates entitled to at least
66% of the Voting Rights 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 received on Mortgage Loans which are 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
at least 66% of the Voting Rights allocated to such Class, or (iii) modify the
consents required by the immediately preceding clauses (i) and (ii) without the
consent of the Holders of all Certificates then outstanding. Notwithstanding any
other provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 12.01, Certificates registered in the name of
the Depositor or the Servicer or any Affiliate thereof shall be entitled to
Voting Rights with respect to matters affecting such Certificates. Without
limiting the generality of the foregoing, any amendment to this Agreement
required in connection with the compliance with or the clarification of any
reporting obligations described in Section 5.06 hereof shall not require the
consent of any Certificateholder and without the need for any Opinion of Counsel
or Rating Agency confirmation.

                  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 to the effect that such amendment is
permitted hereunder and will not result in the imposition of any tax on any
Trust REMIC pursuant to the REMIC Provisions or cause any Trust REMIC to fail to
qualify as a REMIC at any time that any Certificates are outstanding and that
such amendment is authorized or permitted by this Agreement.





                                     -159-
<PAGE>

                  Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.

                  It shall not be necessary for the consent of
Certificateholders under this Section 12.01 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.

                  The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee .

                  The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

                  SECTION 12.02. Recordation of Agreement; Counterparts.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Depositor at the expense of the Certificateholders, but only
upon direction of the Trustee accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Certificateholders.

                  For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed 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 12.03. Limitation on Rights of Certificateholders.

                  The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor 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
expressly provided for 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 any 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 person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.




                                     -160-
<PAGE>

                  No Certificateholder shall have any right by virtue of any
provision 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 default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon 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 15 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 is
understood and intended, and 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 whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such 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 equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

                  SECTION 12.04. Governing Law.

                  This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws without regard to
conflicts of laws principles thereof.

                  SECTION 12.05. Notices.

                  All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if sent by
facsimile, receipt confirmed, if personally delivered at or mailed by first
class mail, postage prepaid, or by express delivery service or delivered in any
other manner specified herein, to (a) in the case of the Depositor, ACE
Securities Corp., AMACAR GROUP, 6525 Morrison Boulevard, Suite 318, Charlotte,
North Carolina 2821, Attention: Juliana Johnson (telecopy number:(704)
365-1362), or such other address or telecopy number as may hereafter be
furnished to the Servicer, the Master Servicer, the Securities Administrator and
the Trustee in writing by the Depositor, (b) in the case of the Servicer, 4828
Loop Central Drive, Houston, Texas 77081, Attention: Janice McClure (telecopy
number: (713) 960-0539)), or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Master Servicer, the Securities
Administrator and the Depositor in writing by the Servicer, (c) in the case of
the Master Servicer and the Securities Administrator, P.O. Box 98, Columbia,
Maryland 21046 and for overnight delivery to 9062 Old Annapolis Road, Columbia,
Maryland 21045, Attention: Ace Securities Corp., 2003-FM1 (telecopy number:
(410) 715-2380), or such other address or telecopy number as may hereafter be
furnished to the Trustee, the Depositor and the Servicer in writing by the
Master Servicer or the Securities Administrator and (d) in the case of the
Trustee, at the Corporate Trust Office or such other address or telecopy number
as the Trustee may hereafter be furnish to the Servicer, the Master Servicer,
the Securities Administrator and the Depositor in writing by the Trustee. Any
notice required or permitted to be given to a Certificateholder shall be given
by




                                     -161-
<PAGE>

first class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder also shall be mailed to the appropriate
party in the manner set forth above.

                  SECTION 12.06. Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

                  SECTION 12.07. Notice to Rating Agencies.

                  The Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies with respect to each of the following of which a
Responsible Officer has actual knowledge:

                  1.       Any material change or amendment to this Agreement;

                  2.       The occurrence of any Servicer Event of Default or
                           Master Servicer Event of Default that has not been
                           cured or waived;

                  3.       The resignation or termination of the Servicer, the
                           Master Servicer or the Trustee;

                  4.       The repurchase or substitution of Mortgage Loans
                           pursuant to or as contemplated by Section 2.03;

                  5.       The final payment to the Holders of any Class of
                           Certificates;

                  6.       Any change in the location of the Collection Account
                           or the Distribution Account; and

                  7.       Any event that would result in the inability of the
                           Trustee as successor Servicer to make advances
                           regarding delinquent Mortgage Loans.





                                     -162-
<PAGE>

                  In addition, the Trustee shall promptly make available to each
Rating Agency copies of each report to Certificateholders described in Section
5.02.

                  The Servicer shall make available to each Rating Agency copies
of the following:

                  1.       Each annual statement as to compliance described in
                           Section 3.17; and

                  2.       Each annual independent public accountants' servicing
                           report described in Section 3.18.

                  Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Standard & Poor's, a division of the McGraw-Hill Companies, Inc., 55 Water
Street, New York, New York 10041, to Moody's Investors Service, Inc., 99 Church
Street, New York, New York 10007 and to Fitch Ratings, 1 State Street Plaza, New
York, New York 10004 or such other addresses as the Rating Agencies may
designate in writing to the parties hereto.

                  SECTION 12.08.            Article and Section References.

                  All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.

                  SECTION 12.09.            Grant of Security Interest.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee, on behalf of
the Trust and for the benefit of the Certificateholders, be, and be construed
as, a sale of the Mortgage Loans by the Depositor and not a pledge of the
Mortgage Loans to secure a debt or other obligation of the Depositor. However,
in the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Depositor, then, (a) it is the
express intent of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Depositor to the Trustee, on behalf of the Trust and for
the benefit of the Certificateholders, to secure a debt or other obligation of
the Depositor and (b)(1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code
as in effect from time to time in the State of New York; (2) the conveyance
provided for in Section 2.01 shall be deemed to be a grant by the Depositor to
the Trustee, on behalf of the Trust and for the benefit of the
Certificateholders, of a security interest in all of the Depositor's right,
title and interest in and to the Mortgage Loans and all amounts payable to the
holders of the Mortgage Loans in accordance with the terms thereof and all
proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time




                                     -163-
<PAGE>

held or invested in the Collection Account and the Distribution Account, whether
in the form of cash, instruments, securities or other property; (3) the
obligations secured by such security agreement shall be deemed to be all of the
Depositor's obligations under this Agreement, including the obligation to
provide to the Certificateholders the benefits of this Agreement relating to the
Mortgage Loans and the Trust Fund; and (4) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trustee for the purpose of perfecting such security interest under
applicable law. Accordingly, the Depositor hereby grants to the Trustee, on
behalf of the Trust and for the benefit of the Certificateholders, a security
interest in the Mortgage Loans and all other property described in clause (2) of
the preceding sentence, for the purpose of securing to the Trustee the
performance by the Depositor of the obligations described in clause (3) of the
preceding sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute and unconditional
sale of the Mortgage Loans and assets constituting the Trust Fund by the
Depositor to the Trustee, on behalf of the Trust and for the benefit of the
Certificateholders.

                  SECTION 12.10.            Survival of Indemnification.

                  Any and all indemnities to be provided by any party to this
Agreement shall survive the termination and resignation of any party hereto and
the termination of this Agreement.






                                     -164-
<PAGE>

                  IN WITNESS WHEREOF, the Depositor, the Servicer, the Master
Servicer, the Securities Administrator and the Trustee have caused their names
to be signed hereto by their respective officers thereunto duly authorized, in
each case as of the day and year first above written.

                                            ACE SECURITIES CORP.,
                                            as Depositor

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:


                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:

                                            LITTON LOAN SERVICING LP,
                                            as Servicer

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:

                                            JPMORGAN CHASE BANK,
                                            not in its individual capacity
                                            but solely as Trustee

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:

                                            WELLS FARGO BANK MINNESOTA, NATIONAL
                                            ASSOCIATION
                                            as Master Servicer and Securities
                                            Administrator

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:




<PAGE>



STATE OF                )
                        ) ss.:
COUNTY OF               )

                  On the ___ day of May 2003, before me, a notary public in and
for said State, personally appeared _____________________ known to me to be a
_____________________ of ACE Securities Corp., one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                        ________________________
                                                              Notary Public

[Notarial Seal]                                         My commission expires




<PAGE>



STATE OF                )
                        ) ss.:
COUNTY OF               )

                  On the __ day of May 2003, before me, a notary public in and
for said State, personally appeared ___________________________ known to me to
be a ____________________ of ACE Securities Corp., one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                        ________________________
                                                              Notary Public

[Notarial Seal]                                         My commission expires




<PAGE>



STATE OF                )
                        ) ss.:
COUNTY OF               )

                  On the ___ day of May, 2003, before me, a notary public in and
for said State, personally appeared _______________ known to me to be a
_______________ of ________________, Litton Loan Servicing LP, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                        ________________________
                                                              Notary Public

[Notarial Seal]                                         My commission expires




<PAGE>



STATE OF                )
                        ) ss.:
COUNTY OF               )


                  On the ___ day of May, 2003, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
__________________ of Wells Fargo Bank Minnesota, National Association, one of
the corporations that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                        ________________________
                                                              Notary Public

[Notarial Seal]




<PAGE>


STATE OF                )
                        ) ss.:
COUNTY OF               )


                  On the ___ day of May, 2003, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
__________________ of JPMorgan Chase Bank, one of the corporations that executed
the within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                        ________________________
                                                              Notary Public

[Notarial Seal]

<PAGE>

                                   EXHIBIT A-1
                                   -----------

                       FORM OF CLASS A-[1][2] CERTIFICATE

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE").

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.


<TABLE>
<CAPTION>
<S>                                                       <C>
Series 2003-FM1, Class A-[1][2]                           Aggregate Certificate Principal Balance of
                                                          the Class A-[1][2] Certificates as of the
                                                          Issue Date:

Pass-Through Rate: Variable                               $

Date of Pooling and Servicing Agreement and               Denomination: $
Cut-off Date: May 1, 2003
                                                          Master Servicer: Wells Fargo Bank Minnesota,
                                                          National Association
First Distribution Date:
June 25, 2003                                             Trustee: JPMorgan Chase Bank

No.__                                                     Issue Date: May 30, 2003

                                                          CUSIP:________________
</TABLE>

DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS CERTIFICATE.



<PAGE>



          ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2003-FM1
                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family, fixed and
adjustable-rate first and second lien mortgage loans (the "Mortgage Loans")
formed and sold by

                              ACE SECURITIES CORP.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ACE
SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES ADMINISTRATOR, THE
SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ________________ is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class A-[1][2]
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class A-[1][2] Certificates in REMIC III created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among ACE Securities Corp., as depositor (hereinafter called the
"Depositor", which term includes any successor entity under the Agreement),
Wells Fargo Bank Minnesota, National Association as master servicer (the "Master
Servicer") and securities administrator (the "Securities Administrator"), Litton
Loan Servicing LP as servicer (the "Servicer") and JPMorgan Chase Bank, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the Business Day immediately
preceding such Distribution Date (the "Record Date"), in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the amount
required to be distributed to the Holders of Class A- [1][2] Certificates on
such Distribution Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class A-[1][2] Certificates the aggregate initial
Certificate Principal Balance of which is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the aggregate initial Certificate


                                      A-1-2

<PAGE>



Principal Balance of the Class A-[1][2] Certificates, or otherwise by check
mailed by first class mail to the address of the Person entitled thereto, as
such name and address shall appear on the Certificate Register. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose as provided in the Agreement.

                  The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) One-Month LIBOR plus [_____]%,
in the case of each Distribution Date through and including the Distribution
Date on which the aggregate principal balance of the Mortgage Loans (and
properties acquired in respect thereof) remaining in the Trust Fund is reduced
to less than 10% of the aggregate principal balance of the Mortgage Loans as of
the Cut-off Date, or One-Month LIBOR plus [_____]% per annum, in the case of any
Distribution Date thereafter and (ii) the applicable Net WAC Pass-Through Rate
for such Distribution Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Depositor, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the 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 herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The 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 Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the 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 duly executed by, the Holder hereof or such Holders attorney duly
authorized in writing, and thereupon one or more new Certificates of the same


                                      A-1-3

<PAGE>



Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

                  No service charge will be made for any such registration of
transfer or exchange of Certificates, 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, the
Securities Administrator, the Servicer and any agent of the Depositor, the
Master Servicer, the Trustee, the Securities Administrator or the Servicer 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, the Securities Administrator, the Servicer nor any such agent shall be
affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee does not assume responsibility for their
correctness.

                  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 Agreement or be valid for any purpose.




                                      A-1-4

<PAGE>



                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: May 30, 2003

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                        Authorized Officer




                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class A-[1][2] Certificates referred to in
the within-mentioned Agreement.

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                         Authorized Signatory




<PAGE>



                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:


<TABLE>
<CAPTION>
<S>                                                       <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       Custodian
                                                                                                 --------------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                          ------------------------
                     survivorship and not as tenants in                     (State)
                     common
</TABLE>

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Asset Backed
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Trustee to issue a
new Certificate of a like Percentage Interest and Class to the above named
assignee and deliver such Certificate to the following address:_________________
_______________________________________________________________________________.

Dated:

                                        ______________________________________
                                        Signature by or on behalf of assignor


                                        ______________________________________
                                        Signature Guaranteed




<PAGE>



                            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 statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.



<PAGE>



                                  EXHIBIT A-2
                                  -----------

                             CLASS A-IO CERTIFICATE

         SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
         "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
         THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
         INTERNAL REVENUE CODE OF 1986 (THE "CODE").

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.



<TABLE>
<CAPTION>
<S>                                                        <C>
Series 2003-FM1                                            Aggregate Notional Amount of the Class A-
                                                           IO Certificates as of the Issue Date:

Pass-Through Rate: Variable                                $___________

Cut-off Date and date of Pooling and                       Denomination: $___________
Servicing Agreement: May 1, 2003

First Distribution Date: June 25, 2003                     Master Servicer: Wells Fargo Bank
                                                           Minnesota, National Association
No. __
                                                           Trustee: JPMorgan Chase Bank

                                                           Issue Date: May 30, 2003

                                                           CUSIP:_________________
</TABLE>







<PAGE>



          ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2003-FM1
                      ASSET BACKED PASS-THROUGH CERTIFICATE


evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family, fixed and
adjustable-rate and fixed-rate, first and second lien mortgage loans (the
"Mortgage Loans") formed and sold by

                              ACE SECURITIES CORP.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ACE
         SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES ADMINISTRATOR,
         THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
         NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
         GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that __________________ is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Notional Amount of the Class A-IO Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class A-IO Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among ACE
Securities Corp., as depositor (hereinafter called the "Depositor", which term
includes any successor entity under the Agreement), Wells Fargo Bank Minnesota,
National Association as master servicer (the "Master Servicer") and securities
administrator (the "Securities Administrator"), Litton Loan Servicing LP as
servicer (the "Servicer") and JPMorgan Chase Bank, as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the last Business Day of the
calendar month immediately preceding the month in which the related Distribution
Date occurs (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to the Holders of Class A-IO Certificates on such Distribution Date
pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the


                                      A-2-2

<PAGE>



registered owner of Class A-IO Certificates the aggregate initial Notional
Amount of which is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds
of the aggregate initial Notional Amount of the Class A-IO Certificates, or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                  The Pass-Through Rate on the Class A-IO-1 Component of the
Class A-IO Certificates is equal to the lesser of (a) the weighted average of
the Expense Adjusted Mortgage Rate of the Group I Mortgage Loans and (b) (i)
____% per annum from the first Distribution Date to and including the tenth
Distribution Date, (ii) ____% per annum from the eleventh Distribution Date to
and including the twentieth Distribution Date, (iii) ____% per annum from the
twenty-first Distribution Date to and including the thirtieth Distribution Date
and (iv) 0.00% per annum thereafter.

                  The Pass-Through Rate on the Class A-IO-2 Component of the
Class A-IO Certificates is equal to the lesser of (a) the weighted average of
the Expense Adjusted Mortgage Rate of the Group II Mortgage Loans and (b) (i)
____% per annum from the first Distribution Date to and including the tenth
Distribution Date, (ii) ____% per annum from the eleventh Distribution Date to
and including the twentieth Distribution Date, (iii) ____% per annum from the
twenty-first Distribution Date to and including the thirtieth Distribution Date
and (iv) 0.00% per annum thereafter.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Notional Amount of the Class of Certificates specified on the face hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Depositor, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the 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 herefor or in lieu hereof whether or not
notation of such


                                     A-2-3

<PAGE>



consent is made upon this Certificate. The 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 Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the 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 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 authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, 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, the
Securities Administrator, the Servicer and any agent of the Depositor, the
Master Servicer, the Trustee, the Securities Administrator or the Servicer 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, the Securities Administrator, the Servicer nor any such agent shall be
affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  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 Agreement or be valid for any purpose.


                                      A-2-4

<PAGE>



                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: May 30, 2003

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                        Authorized Officer




                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class A-IO Certificates referred to in the
within-mentioned Agreement.

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                         Authorized Signatory




<PAGE>



                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:


<TABLE>
<CAPTION>
<S>                                                       <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       Custodian
                                                                                                 --------------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                          ------------------------
                     survivorship and not as tenants in                     (State)
                     common
</TABLE>

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Asset Backed
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Trustee to issue a
new Certificate of a like Percentage Interest and Class to the above named
assignee and deliver such Certificate to the following address:_________________
_______________________________________________________________________________.

Dated:

                                        ______________________________________
                                        Signature by or on behalf of assignor


                                        ______________________________________
                                        Signature Guaranteed




<PAGE>



                            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 statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.




<PAGE>



                                   EXHIBIT A-3
                                   -----------

                 FORM OF CLASS M-[1][2][3][4][5][6] CERTIFICATE

             SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
             "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
             AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
             OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

             UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
             REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR
             ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
             ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
             SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
             DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
             TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
             TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
             CO., HAS AN INTEREST HEREIN.

             THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A[,/ AND] THE CLASS
             A-IO CERTIFICATES[[,/AND] CLASS M-1 CERTIFICATES[,/AND] CLASS M-2
             CERTIFICATES[,/AND] CLASS M-3 CERTIFICATES[,/AND] CLASS M-4
             CERTIFICATES [AND CLASS M-5 CERTIFICATES]] TO THE EXTENT DESCRIBED
             IN THE AGREEMENT REFERRED TO HEREIN.

             ANY TRANSFEREE OF THIS CERTIFICATE SHALL BE DEEMED TO MAKE THE
             REPRESENTATIONS SET FORTH IN SECTION 6.02(C) OF THE AGREEMENT
             REFERRED TO HEREIN.




<PAGE>





<TABLE>
<CAPTION>
<S>                                                       <C>
Series 2003-FM1, Class M-[1][2][3][4][5][6]               Aggregate Certificate Principal Balance of the
                                                          Class M-[1][2][3][4][5][6] Certificates as of the
Pass-Through Rate: Variable                               Issue Date: $______________

Date of Pooling and Servicing Agreement and               Denomination: $______________
Cut-off Date: May 1, 2003
                                                          Master Servicer: Wells Fargo Bank Minnesota,
                                                          National Association
First Distribution Date:
June 25, 2003                                             Trustee: JPMorgan Chase Bank

No.___                                                    Issue Date: May 30, 2003

                                                          CUSIP:_________________
</TABLE>

             DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
             THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
             ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
             AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE
             DENOMINATION OF THIS CERTIFICATE.




                                      A-3-2

<PAGE>



          ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2003-FM1
                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family, fixed and
adjustable-rate first and second lien mortgage loans (the "Mortgage Loans")
formed and sold by

                              ACE SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             ACE SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES
             ADMINISTRATOR, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
             AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
             LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
             STATES.

                  This certifies that _____________________ is the registered
owner of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class
M-[1][2][3][4][5][6] Certificates as of the Issue Date) in that certain
beneficial ownership interest evidenced by all the Class M-[1][2][3][4][5][6]
Certificates in REMIC III created pursuant to a Pooling and Servicing Agreement,
dated as specified above (the "Agreement"), among ACE Securities Corp., as
depositor (hereinafter called the "Depositor", which term includes any successor
entity under the Agreement), Wells Fargo Bank Minnesota, National Association as
master servicer (the "Master Servicer") and securities administrator (the
"Securities Administrator"), Litton Loan Servicing LP as servicer (the
"Servicer") and JPMorgan Chase Bank, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the Business Day immediately
preceding such Distribution Date (the "Record Date"), in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the amount
required to be distributed to the Holders of Class M-[1][2][3][4][5][6]
Certificates on such Distribution Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class M-[1][2][3][4][5][6] Certificates the aggregate
initial Certificate Principal Balance of which is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the aggregate initial


                                      A-3-3

<PAGE>



Certificate Principal Balance of the Class M-[1][2][3][4][5][6] Certificates, or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                  The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) One-Month LIBOR plus ____%, in
the case of each Distribution Date through and including the Distribution Date
on which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One-Month LIBOR plus ____ % per annum, in the case of any Distribution
Date thereafter and (ii) the applicable Net WAC Pass-Through Rate for such
Distribution Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Depositor, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the 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 herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The 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 Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the 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 duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the


                                      A-3-4

<PAGE>



same Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

                  Any transferee of this Certificate shall be deemed to make the
representations set forth in Section 6.02(c) of the Agreement.

                  No service charge will be made for any such registration of
transfer or exchange of Certificates, 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, the
Securities Administrator, the Servicer and any agent of the Depositor, the
Master Servicer, the Trustee, the Securities Administrator or the Servicer 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, the Securities Administrator, the Servicer nor any such agent shall be
affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee does no assume responsibility for their
correctness.

                  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 Agreement or be valid for any purpose.




                                      A-3-5

<PAGE>



                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: May 30, 2003

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                        Authorized Officer




                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class M-[1][2][3][4][5][6] Certificates
referred to in the within-mentioned Agreement.

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                         Authorized Signatory




<PAGE>



                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:


<TABLE>
<CAPTION>
<S>                                                       <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       Custodian
                                                                                                 --------------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                          ------------------------
                     survivorship and not as tenants in                     (State)
                     common
</TABLE>

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Asset Backed
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Trustee to issue a
new Certificate of a like Percentage Interest and Class to the above named
assignee and deliver such Certificate to the following address:_________________
_______________________________________________________________________________.

Dated:

                                        ______________________________________
                                        Signature by or on behalf of assignor


                                        ______________________________________
                                        Signature Guaranteed




<PAGE>



                            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 statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.



<PAGE>



                                   EXHIBIT A-4
                                   -----------


                          FORM OF CLASS CE CERTIFICATE

             SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
             "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
             AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
             OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

             THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE
             CLASS A-IO CERTIFICATES, THE CLASS M-1 CERTIFICATES, THE CLASS M-2
             CERTIFICATES, THE CLASS M-3 CERTIFICATES, THE CLASS M-4
             CERTIFICATES, THE CLASS M-5 CERTIFICATES AND THE CLASS M-6
             CERTIFICATES TO THE EXTENT DESCRIBED IN THE AGREEMENT REFERRED TO
             HEREIN.

             THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
             SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
             STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
             PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
             TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
             UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
             THE PROVISIONS OF SECTION 6.02 OF THE AGREEMENT.

             NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
             OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
             INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
             REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
             HEREIN.




<PAGE>





<TABLE>
<CAPTION>
<S>                                                        <C>
Series 2003-FM1                                            Aggregate Certificate Principal Balance of the
                                                           Class CE Certificates as of the Issue Date:
Pass-Through Rate: Variable                                $_____________

Cut-off Date and date of Pooling and                       Denomination: $_________________
Servicing Agreement: May 1, 2003
                                                           Master Servicer: Wells Fargo Bank
First Distribution Date: June 25, 2003                     Minnesota, National Association

No. __ Trustee: JPMorgan Chase Bank

Aggregate Notional Amount of the Class                     Issue Date: May 30, 2003
CE Certificates as of the Issue Date:
$_____________

Notional Amount: $_______________
</TABLE>

             DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
             THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
             ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
             AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE
             DENOMINATION OF THIS CERTIFICATE.




                                      A-4-2

<PAGE>



          ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2003-FM1
                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family, fixed and
adjustable-rate and fixed-rate, first and second lien mortgage loans (the
"Mortgage Loans") formed and sold by

                              ACE SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             ACE SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES
             ADMINISTRATOR, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
             AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
             LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
             STATES.

                  This certifies that ________________ is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class CE
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class CE Certificates in REMIC III created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among ACE Securities Corp., as depositor (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), Wells Fargo Bank
Minnesota, National Association, as master servicer (the "Master Servicer") and
securities administrator (the "Securities Administrator"), Litton Loan Servicing
LP, as servicer (the "Servicer") and JPMorgan Chase Bank, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the last Business Day of the
calendar month immediately preceding the month in which the related Distribution
Date occurs (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to the Holders of Class CE Certificates on such Distribution Date
pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class CE Certificates the aggregate initial Certificate
Principal Balance of which


                                      A-4-3

<PAGE>



is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class CE Certificates, or otherwise
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose as provided in the Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Depositor, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the 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 herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The 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 Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the 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 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 authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt


                                      A-4-4

<PAGE>



of (i) if such transfer is purportedly being made in reliance upon Rule 144A
under the 1933 Act, written certifications from the Holder of the Certificate
desiring to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit B-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Master Servicer or the Securities Administrator in their respective capacities
as such), together with copies of the written certification(s) of the Holder of
the Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. Neither the Depositor
nor the Trustee is obligated to register or qualify the Class of Certificates
specified on the face hereof under the 1933 Act or any other securities law or
to take any action not otherwise required under the Agreement to permit the
transfer of such Certificates without registration or qualification. Any Holder
desiring to effect a transfer of this Certificate shall be required to indemnify
the Trustee, the Depositor, the Master Servicer and the Securities Administrator
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 this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 6.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, 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, the
Securities Administrator, the Servicer and any agent of the Depositor, the
Master Servicer, the Trustee, the Securities Administrator or the Servicer 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, the Securities Administrator, the Servicer nor any such agent shall be
affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the


                                      A-4-5

<PAGE>



aggregate Stated Principal Balance of the Mortgage Loans at the time of purchase
being less than 10% of the aggregate principal balance of the Mortgage Loans as
of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  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 Agreement or be valid for any purpose.



                                      A-4-6

<PAGE>



                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: May 30, 2003

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                        Authorized Officer




                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                         Authorized Signatory




<PAGE>



                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:


<TABLE>
<CAPTION>
<S>                                                       <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       Custodian
                                                                                                 --------------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                          ------------------------
                     survivorship and not as tenants in                     (State)
                     common
</TABLE>

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Asset Backed
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Trustee to issue a
new Certificate of a like Percentage Interest and Class to the above named
assignee and deliver such Certificate to the following address:_________________
_______________________________________________________________________________.

Dated:

                                        ______________________________________
                                        Signature by or on behalf of assignor


                                        ______________________________________
                                        Signature Guaranteed




<PAGE>



                            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 statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.




<PAGE>



                                   EXHIBIT A-5
                                   -----------

                               CLASS P CERTIFICATE

             SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
             "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
             AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
             OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

             THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
             SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
             STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
             PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
             TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
             UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
             THE PROVISIONS OF SECTION 6.02 OF THE AGREEMENT.

             NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
             OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
             INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
             REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
             HEREIN.




<PAGE>





<TABLE>
<CAPTION>
<S>                                                        <C>
Series 2003-FM1                                            Aggregate Certificate Principal Balance of the
                                                           Class P Certificates as of the Issue Date:
                                                           $100.00
Cut-off Date and date of Pooling and
Servicing Agreement: May 1, 2003                           Denomination: $100.00

First Distribution Date: June 25, 2003                     Master Servicer: Wells Fargo Bank
                                                           Minnesota, National Association
No. __
                                                           Trustee: JPMorgan Chase Bank

                                                           Issue Date: May 30, 2003
</TABLE>



             DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
             THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
             ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
             AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE
             DENOMINATION OF THIS CERTIFICATE.




                                      A-5-2

<PAGE>



          ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2003-FM1
                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family, fixed and
adjustable-rate and fixed-rate, first and second lien mortgage loans (the
"Mortgage Loans") formed and sold by

                              ACE SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             ACE SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES
             ADMINISTRATOR, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
             AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
             LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
             STATES.

                  This certifies that____________________ is the registered
owner of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class P
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class P Certificates in REMIC III created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among ACE Securities Corp., as depositor (hereinafter called the "Depositor",
which term includes any successor entity under the Agreement), Wells Fargo Bank
Minnesota, National Association, as master servicer (the "Master Servicer"), and
securities administrator (the "Securities Administrator"), Litton Loan Servicing
LP as servicer (the "Servicer") and JPMorgan Chase Bank, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the last Business Day of the
calendar month immediately preceding the month in which the related Distribution
Date occurs (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to the Holders of Class P Certificates on such Distribution Date
pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class P Certificates the aggregate initial Certificate
Principal Balance of which


                                      A-5-3

<PAGE>



is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class P Certificates, or otherwise
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose as provided in the Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Depositor, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the 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 herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The 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 Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the 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 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 authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt


                                      A-5-4

<PAGE>



of (i) if such transfer is purportedly being made in reliance upon Rule 144A
under the 1933 Act, written certifications from the Holder of the Certificate
desiring to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit B-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Master Servicer or the Securities Administrator in their respective capacities
as such), together with copies of the written certification(s) of the Holder of
the Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. Neither the Depositor
nor the Trustee is obligated to register or qualify the Class of Certificates
specified on the face hereof under the 1933 Act or any other securities law or
to take any action not otherwise required under the Agreement to permit the
transfer of such Certificates without registration or qualification. Any Holder
desiring to effect a transfer of this Certificate shall be required to indemnify
the Trustee, the Depositor, the Master Servicer and the Securities Administrator
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 this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 6.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, 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, the
Securities Administrator, the Servicer and any agent of the Depositor, the
Master Servicer, the Trustee, the Securities Administrator or the Servicer 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, the Securities Administrator, the Servicer nor any such agent shall be
affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the


                                      A-5-5

<PAGE>



aggregate Stated Principal Balance of the Mortgage Loans at the time of purchase
being less than 10% of the aggregate principal balance of the Mortgage Loans as
of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  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 Agreement or be valid for any purpose.





<PAGE>



                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: May 30, 2003

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                        Authorized Officer




                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class P Certificates referred to in the
within-mentioned Agreement.

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                         Authorized Signatory




<PAGE>



                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:


<TABLE>
<CAPTION>
<S>                                                       <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       Custodian
                                                                                                 --------------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                          ------------------------
                     survivorship and not as tenants in                     (State)
                     common
</TABLE>

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Asset Backed
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Trustee to issue a
new Certificate of a like Percentage Interest and Class to the above named
assignee and deliver such Certificate to the following address:_________________
_______________________________________________________________________________.

Dated:

                                        ______________________________________
                                        Signature by or on behalf of assignor


                                        ______________________________________
                                        Signature Guaranteed




<PAGE>



                            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 statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.




<PAGE>



                                   EXHIBIT A-6
                                   -----------

                           FORM OF CLASS R CERTIFICATE

             THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON- UNITED STATES
             PERSON.

             SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
             REPRESENTS THE SOLE "RESIDUAL INTEREST" IN EACH OF THREE "REAL
             ESTATE MORTGAGE INVESTMENT CONDUITS" ("REMIC"), AS THOSE TERMS ARE
             DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
             REVENUE CODE OF 1986 (THE "CODE").

             ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
             BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.02 OF
             THE AGREEMENT REFERRED TO HEREIN.

             THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
             SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
             STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
             PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
             TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
             UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
             THE PROVISIONS OF SECTION 6.02 OF THE AGREEMENT.

             NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
             OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
             INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
             REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
             HEREIN.

             ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
             BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT
             TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED
             STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
             SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
             ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
             FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED
             IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE



<PAGE>



             TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS
             SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
             ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY
             SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3)
             SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED ORGANIZATION")
             OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE
             OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX,
             AND (II) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS
             RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE.
             NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY
             TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
             DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
             ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL
             FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO
             BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT
             NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
             EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE
             DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND
             THE PROVISIONS OF SECTION 6.02(D) OF THE AGREEMENT REFERRED TO
             HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS
             PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.


<TABLE>
<CAPTION>
<S>                                                    <C>
Series 2003-FM1, Class R                               Aggregate Percentage Interest of the Class R
                                                       Certificates as of the Issue Date: 100.00%
Date of Pooling and Servicing Agreement
 and Cut-off Date: May 1, 2003                         Master Servicer: Wells Fargo Bank Minnesota,
                                                       National Association

First Distribution Date:                               Trustee: JPMorgan Chase Bank
June 25, 2003
No __                                                  Issue Date: May 30, 2003
</TABLE>





                                     A-6-2

<PAGE>



          ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2003-FM1
                      ASSET BACKED PASS-THROUGH CERTIFICATE


evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family, fixed and
adjustable-rate first and second lien mortgage loans (the "Mortgage Loans")
formed and sold by

                              ACE SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             ACE SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES
             ADMINISTRATOR, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
             AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
             LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
             STATES.



                                      A-6-3

<PAGE>




                  This certifies that _______________ is the registered owner of
a Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class R Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among ACE
Securities Corp., as depositor (hereinafter called the "Depositor", which term
includes any successor entity under the Agreement), Wells Fargo Bank Minnesota,
National Association, as master servicer (the "Master Servicer") and securities
administrator (the "Securities Administrator"), Litton Loan Servicing LP as
servicer (the "Servicer") and JPMorgan Chase Bank, as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class R Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.



                                      A-6-4

<PAGE>



                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Depositor, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the 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 herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The 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 Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the 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 duly executed by, the Holder hereof or such Holders attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit B-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Master Servicer or the Securities Administrator in their respective capacities
as such), together with copies of the written certification(s) of the Holder of
the Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. Neither the Depositor
nor the Trustee is obligated to register or qualify the Class of Certificates
specified on the face hereof under the 1933 Act or any other securities law or
to take any action not otherwise required under the Agreement to permit the
transfer of such Certificates without registration or qualification. Any Holder
desiring to effect a transfer of this Certificate shall be required to indemnify
the Trustee, the Depositor, the Master Servicer and the Securities Administrator
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.


                                      A-6-5

<PAGE>



                  No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 6.02 of the Agreement.

                  Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R Certificates have been designated as
representing the beneficial ownership of the residual interests in each of REMIC
I, REMIC II and REMIC III, (B) it will include in its income a PRO RATA share of
the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

                  The Holder of this Certificate, by its acceptance hereof,
shall be deemed to have consented to the provisions of Section 6.02 of the
Agreement and to any amendment of the Agreement deemed necessary by counsel of
the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause any portion
of the Trust Fund to cease to qualify as a REMIC or cause the imposition of a
tax upon any REMIC.

                  No service charge will be made for any such registration of
transfer or exchange of Certificates, 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, the
Securities Administrator, the Servicer and any agent of the Depositor, the
Master Servicer, the Trustee, the Securities Administrator or the Servicer 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, the Securities Administrator, the Servicer nor any such agent shall be
affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the


                                      A-6-6

<PAGE>



Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee does not assume responsibility for their
correctness.

                  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 Agreement or be valid for any purpose.




                                      A-6-7

<PAGE>



                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: May 30, 2003

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                        Authorized Officer




                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class R Certificates referred to in the
within-mentioned Agreement.

                                                JPMORGAN CHASE BANK
                                                as Trustee


                                                By:_____________________________
                                                         Authorized Signatory




<PAGE>



                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:


<TABLE>
<CAPTION>
<S>                                                       <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       Custodian
                                                                                                 --------------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                          ------------------------
                     survivorship and not as tenants in                     (State)
                     common
</TABLE>

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Asset Backed
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Trustee to issue a
new Certificate of a like Percentage Interest and Class to the above named
assignee and deliver such Certificate to the following address:_________________
_______________________________________________________________________________.

Dated:

                                        ______________________________________
                                        Signature by or on behalf of assignor


                                        ______________________________________
                                        Signature Guaranteed




<PAGE>



                            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 statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.




<PAGE>



                                   EXHIBIT B-1
                                   -----------


                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                     [Date]


JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2477


                  Re:  ACE Securities Corp. Home Equity Loan Trust, Series
                       2003-FM1 Asset Backed Pass-Through Certificates, Class
                       CE, Class P and Class R Certificates
                       ------------------------------------------------------

Ladies and Gentlemen:

                  In connection with the transfer by ______________________ (the
"Transferor") to ___________________ (the "Transferee") of the captioned
mortgage pass-through certificates (the "Certificates"), the Transferor hereby
certifies as follows:

                  Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of May
1, 2003, among ACE Securities Corp. as Depositor, Litton Loan Servicing LP as
Servicer, Wells Fargo Bank Minnesota, National Association as Master Servicer
and Securities Administrator and JPMorgan Chase Bank as trustee (the "Pooling
and Servicing Agreement"), pursuant to which Pooling and Servicing Agreement the
Certificates were issued.





<PAGE>



                  Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.

                                                Very truly yours,

                                                [Transferor]

                                                By:
                                                   -----------------------------
                                                Name:
                                                Title:



                                      B-1-2

<PAGE>



                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                                 [Date]



JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2477

                  Re:  ACE Securities Corp. Home Equity Loan Trust,
                       Series 2003-FM1 Asset Backed Pass-Through Certificates,
                       Class CE, Class P and Class R Certificates
                       -------------------------------------------------------


Ladies and Gentlemen:

                  In connection with the purchase from ________________________
(the "Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), (the "Transferee") hereby certifies as follows:

                  1. The Transferee is a "qualified institutional buyer" as that
             term is defined in Rule 144A ("Rule 144A") under the Securities Act
             of 1933 (the "1933 Act") and has completed either of the forms of
             certification to that effect attached hereto as Annex 1 or Annex 2.
             The Transferee is aware that the sale to it is being made in
             reliance on Rule 144A. The Transferee is acquiring the Certificates
             for its own account or for the account of a qualified institutional
             buyer, and understands that such Certificate may be resold, pledged
             or transferred only (i) to a person reasonably believed to be 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 (ii) pursuant to another exemption from
             registration under the 1933 Act.

                  2. The Transferee has been furnished with all information
             regarding (a) the Certificates and distributions thereon, (b) the
             nature, performance and servicing of the Mortgage Loans, (c) the
             Pooling and Servicing Agreement referred to below, and (d) any
             credit enhancement mechanism associated with the Certificates, that
             it has requested.

                  3. The Transferee: (a) is not an employee benefit or other
             plan subject to the prohibited transaction provisions of the
             Employee Retirement Income Security Act of 1974, as amended
             ("ERISA), or Section 4975 of the Internal Revenue Code of 1986, as
             amended ("Plan"), or any other person (including an investment
             manager, a named fiduciary or a trustee of any Plan) acting,
             directly or indirectly, on behalf of or purchasing any Certificate
             with "plan assets" of any Plan within the meaning of the Department
             of Labor ("DOL") regulation at 29 C.F.R. ss.2510.3-101 or (b) has
             provided the Trustee, the Depositor and the Servicer with an
             opinion of counsel acceptable to and in form and


                                      B-1-3

<PAGE>



             substance satisfactory to such parties to the effect that the
             purchase of Certificates is permissible under applicable law, will
             not constitute or result in any non-exempt prohibited transaction
             under ERISA or Section 4975 of the Code and will not subject the
             Trustee, the Depositor or the Servicer to any obligation or
             liability (including obligations or liabilities under ERISA or
             Section 4975 of the Code) in addition to those undertaken in the
             Pooling and Servicing Agreement.

             In addition, the Transferee hereby certifies, represents and
warrants to, and covenants with, the Depositor, the Trustee and the Servicer
that the Transferee will not transfer such Certificates to any Plan or person
unless such Plan or person meets the requirements set forth in either 3(a) or
(b) above.

             All capitalized terms used but not otherwise defined herein have
the respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of May 1, 2003, among ACE Securities Corp. as Depositor, Wells Fargo
Bank Minnesota, National Association as Master Servicer and Securities
Administrator, Litton Loan Servicing LP as Servicer and JPMorgan Chase Bank as
Trustee, pursuant to which the Certificates were issued.

                                                [TRANSFEREE]


                                                By:
                                                   -----------------------------
                                                Name:
                                                Title:



                                      B-1-4

<PAGE>



                                                          ANNEX 1 TO EXHIBIT B-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

                  The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Wells Fargo Bank Minnesota, National
Association, as Trustee, with respect to the asset backed pass-through
certificates (the "Certificates") described in the Transferee Certificate to
which this certification relates and to which this certification is an Annex:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").

                  2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Transferee
owned and/or invested on a discretionary basis $________________1 in securities
(except for the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated in accordance
with Rule 144A) and (ii) the Transferee satisfies the criteria in the category
marked below.

             ___  CORPORATION, ETC. The Transferee is a corporation (other than
                  a bank, savings and loan association or similar institution),
                  Massachusetts or similar business trust, partnership, or any
                  organization described in Section 501(c)(3) of the Internal
                  Revenue Code of 1986.

             ___  BANK. The Transferee (a) is a national bank or banking
                  institution organized under the laws of any State, territory
                  or the District of Columbia, the business of which is
                  substantially confined to banking and is supervised by the
                  State or territorial banking commission or similar official or
                  is a foreign bank or equivalent institution, and (b) has an
                  audited net worth of at least $25,000,000 as demonstrated in
                  its latest annual financial statements, A COPY OF WHICH IS
                  ATTACHED HERETO.

             ___  SAVINGS AND LOAN. The Transferee (a) is a savings and loan
                  association, building and loan association, cooperative bank,
                  homestead association or similar institution, which is
                  supervised and examined by a State or Federal authority having
                  supervision over any such institutions or is a foreign savings
                  and loan association or equivalent institution and (b) has an
                  audited net worth of at least $25,000,000 as demonstrated in
                  its latest annual financial statements, A COPY OF WHICH IS
                  ATTACHED HERETO.

--------

1            Transferee must own and/or invest on a discretionary basis at least
             $100,000,000 in securities unless Transferee is a dealer, and, in
             that case, Transferee must own and/or invest on a discretionary
             basis at least $10,000,000 in securities.


                                      B-1-5

<PAGE>



             ___  BROKER-DEALER. The Transferee is a dealer registered pursuant
                  to Section 15 of the Securities Exchange Act of 1934.

             ___  INSURANCE COMPANY. The Transferee is an insurance company
                  whose primary and predominant business activity is the writing
                  of insurance or the reinsuring of risks underwritten by
                  insurance companies and which is subject to supervision by the
                  insurance commissioner or a similar official or agency of a
                  State, territory or the District of Columbia.

             ___  STATE OR LOCAL PLAN. The Transferee is a plan established and
                  maintained by a State, its political subdivisions, or any
                  agency or instrumentality of the State or its political
                  subdivisions, for the benefit of its employees.

             ___  ERISA PLAN. The Transferee is an employee benefit plan within
                  the meaning of Title I of the Employee Retirement Income
                  Security Act of 1974.

             ___  INVESTMENT ADVISOR. The Transferee is an investment advisor
                  registered under the Investment Advisers Act of 1940.

                  3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.

                  4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority-owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the Securities Exchange Act of 1934.

                  5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.

             ___  ___               Will the Transferee be purchasing the
                                    Certificates Yes No only for the
                                    Transferee's own account?



                                      B-1-6

<PAGE>



                  6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.

                  7. The Transferee will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Transferee's purchase of the
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.

Dated:

                                                ________________________________
                                                Print Name of Transferee


                                                By:_____________________________
                                                Name:
                                                Title:



                            B-1-7

<PAGE>



                                                          ANNEX 2 TO EXHIBIT B-1
                                                          ----------------------


            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That Are Registered Investment Companies]


                  The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Wells Fargo Bank Minnesota, National
Association, as Trustee, with respect to the asset backed pass-through
certificates (the "Certificates") described in the Transferee Certificate to
which this certification relates and to which this certification is an Annex:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").

                  2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as defined in Rule 144A because
(i) the Transferee is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Transferee alone, or the
Transferee's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year. For purposes of determining the
amount of securities owned by the Transferee or the Transferee's Family of
Investment Companies, the cost of such securities was used.

             ___  The Transferee owned $________________________ in securities
                  (other than the excluded securities referred to below) as of
                  the end of the Transferee's most recent fiscal year (such
                  amount being calculated in accordance with Rule 144A).

             ___  The Transferee is part of a Family of Investment Companies
                  which owned in the aggregate $_______________ in securities
                  (other than the excluded securities referred to below) as of
                  the end of the Transferee's most recent fiscal year (such
                  amount being calculated in accordance with Rule 144A).

                  3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).

                  4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi) securities owned but subject to a repurchase agreement and
(vii) currency, interest rate and commodity swaps.


                                      B-1-8

<PAGE>



                  5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.

                  6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.

                                        Dated:


                                        ________________________________________
                                        Print Name of Transferee or Advisor


                                        By:_____________________________________
                                        Name:
                                        Title:


                                        IF AN ADVISER:

                                        ________________________________________
                                        Print Name of Transferee



                                      B-1-9

<PAGE>



                    FORM OF TRANSFEREE REPRESENTATION LETTER

                  The undersigned hereby certifies on behalf of the purchaser
named below (the "Purchaser") as follows:

                       1. I am an executive officer of the Purchaser.

                       2. The Purchaser is a "qualified institutional buyer", as
             defined in Rule 144A, ("Rule 144A") under the Securities Act of
             1933, as amended.

                       3. As of the date specified below (which is not earlier
             than the last day of the Purchaser's most recent fiscal year), the
             amount of "securities", computed for purposes of Rule 144A, owned
             and invested on a discretionary basis by the Purchaser was in
             excess of $100,000,000.

Name of Purchaser_______________________________________________________________

By: (Signature)_________________________________________________________________

Name of Signatory_______________________________________________________________

Title___________________________________________________________________________

Date of this certificate________________________________________________________

Date of information provided in paragraph 3_____________________________________



                                     B-1-10

<PAGE>



                                   EXHIBIT B-2
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER


                                              ____________, 20__

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2477

                  Re:  ACE Securities Corp. Home Equity Loan Trust,
                       Series 2003-FM1 Asset Backed Pass-Through Certificates,
                       Class CE, Class P and Class R Certificates
                       -------------------------------------------------------

Ladies and Gentlemen:

                  In connection with the transfer by ________________ (the
"Transferor") to __________________________ (the "Transferee") of the captioned
mortgage pass-through certificates (the "Certificates"), the Transferor hereby
certifies as follows:

                  Neither the Seller nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, or (e) has taken any other action, that (as to any of (a) through
(e) above) would constitute a distribution of the Certificates under the
Securities Act of 1933 (the "Act'), that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities law, or
that would require registration or qualification pursuant thereto. The Seller
will not act, in any manner set forth in the foregoing sentence with respect to
any Certificate. The Seller has not and will not sell or otherwise transfer any
of the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.

                                        Very truly yours,

                                        ________________________________________
                                        (Transferor)

                                        By:_____________________________________
                                        Name:
                                        Title:



<PAGE>



                            FORM OF TRANSFEREE LETTER


                                            _______________, 20__

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2477


              Re:  ACE Securities Corp. Home Equity Loan Trust,
                   Series 2003-FM1 Asset Backed Pass-Through Certificates,
                   Class CE, Class P and Class R Certificates
                   -------------------------------------------------------


Ladies and Gentlemen:

                  In connection with the transfer by ______________________ (the
"Transferor") to __________________________ (the "Transferee") of the captioned
mortgage pass-through certificates (the "Certificates"), the Transferee hereby
certifies as follows:

                  1. The Transferee understands that (a) the Certificates have
             not been and will not be registered or qualified under the
             Securities Act of 1933, as amended (the "Act") or any state
             securities law, (b) the Depositor is not required to so register or
             qualify the Certificates, (c) the Certificates may be resold only
             if registered and qualified pursuant to the provisions of the Act
             or any state securities law, or if an exemption from such
             registration and qualification is available, (d) the Pooling and
             Servicing Agreement contains restrictions regarding the transfer of
             the Certificates and (e) the Certificates will bear a legend to the
             foregoing effect.

                  2. The Transferee is acquiring the Certificates for its own
             account for investment only and not with a view to or for sale in
             connection with any distribution thereof in any manner that would
             violate the Act or any applicable state securities laws.

                  3. The Transferee is (a) a substantial, sophisticated
             institutional investor having such knowledge and experience in
             financial and business matters, and, in particular, in such matters
             related to securities similar to the Certificates, such that it is
             capable of evaluating the merits and risks of investment in the
             Certificates, (b) able to bear the economic risks of such an
             investment and (c) an "accredited investor" within the meaning of
             Rule 501(a) promulgated pursuant to the Act.

                  4. The Transferee has been furnished with, and has had an
             opportunity to review (a) a copy of the Pooling and Servicing
             Agreement and (b) such other information concerning the
             Certificates, the Mortgage Loans and the Depositor as has been
             requested by the Transferee from the Depositor or the Transferor
             and is relevant to the Transferee's decision to purchase the
             Certificates. The Transferee has had any questions arising from


                                      B-2-2

<PAGE>



             such review answered by the Depositor or the Transferor to the
             satisfaction of the Transferee.

                  5. The Transferee has not and will not nor has it authorized
             or will it authorize any person to (a) offer, pledge, sell, dispose
             of or otherwise transfer any Certificate, any interest in any
             Certificate or any other similar security to any person in any
             manner, (b) solicit any offer to buy or to accept a pledge,
             disposition of other transfer of any Certificate, any interest in
             any Certificate or any other similar security from any person in
             any manner, (c) otherwise approach or negotiate with respect to any
             Certificate, any interest in any Certificate or any other similar
             security with any person in any manner, (d) make any general
             solicitation by means of general advertising or in any other manner
             or (e) take any other action, that (as to any of (a) through (e)
             above) would constitute a distribution of any Certificate under the
             Act, that would render the disposition of any Certificate a
             violation of Section 5 of the 1933 Act or any state securities law,
             or that would require registration or qualification pursuant
             thereto. The Transferee will not sell or otherwise transfer any of
             the Certificates, except in compliance with the provisions of the
             Pooling and Servicing Agreement.

                  6. The Transferee: (a) is not an employee benefit or other
             plan subject to the prohibited transaction provisions of the
             Employee Retirement Income Security Act of 1974, as amended
             ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
             amended ("Plan"), or any other person (including an investment
             manager, a named fiduciary or a trustee of any Plan) acting,
             directly or indirectly, on behalf of or purchasing any Certificate
             with "plan assets" of any Plan within the meaning of the Department
             of Labor ("DOL") regulation at 29 C.F.R. ss.2510.3-101 or (b) has
             provided the Trustee, the Depositor and the Servicer with an
             opinion of counsel acceptable to and in form and substance
             satisfactory to such parties to the effect that the purchase of
             Certificates is permissible under applicable law, will not
             constitute or result in any non-exempt prohibited transaction under
             ERISA or Section 4975 of the Code and will not subject the Trustee,
             the Master Servicer, the Securities Administrator, the Depositor or
             the Servicer to any obligation or liability (including obligations
             or liabilities under ERISA or Section 4975 of the Code) in addition
             to those undertaken in the Pooling and Servicing Agreement.

             In addition, the Transferee hereby certifies, represents and
warrants to, and covenants with, the Depositor, the Trustee and the Servicer
that the Transferee will not transfer such Certificates to any Plan or person
unless such Plan or person meets the requirements set forth in either 6(a) or
(b) above.

                                                Very truly yours,


                                                By:_____________________________
                                                Name:
                                                Title:


                                      B-2-3

<PAGE>



                                   EXHIBIT B-3
                                   -----------

                        TRANSFER AFFIDAVIT AND AGREEMENT



STATE OF NEW YORK               )
                                ss.:
COUNTY OF NEW YORK              )



             ___________________________ being duly sworn, deposes, represents
and warrants as follows:

             1.   I am a _____________________ of
                  _______________________________ (the "Owner") a corporation
                  duly organized and existing under the laws of
                  _________________________, the record owner of ACE Securities
                  Corp. Home Equity Loan Trust, Series 2003-FM1, Asset Backed
                  Pass-Through Certificates, Series 2003-FM1, Class R
                  Certificates (the "Class R Certificates"), on behalf of whom I
                  make this affidavit and agreement. Capitalized terms used but
                  not defined herein have the respective meanings assigned
                  thereto in the Pooling and Servicing Agreement pursuant to
                  which the Class R Certificates were issued.

             2.   The Owner (i) is and will be a "Permitted Transferee" as of
                  ____________________. ____ and (ii) is acquiring the Class R
                  Certificates for its own account or for the account of another
                  Owner from which it has received an affidavit in substantially
                  the same form as this affidavit. A "Permitted Transferee" is
                  any person other than a "disqualified organization" or a
                  possession of the United States. For this purpose, a
                  "disqualified organization" means the United States, any state
                  or political subdivision thereof, any agency or
                  instrumentality of any of the foregoing (other than an
                  instrumentality all of the activities of which are subject to
                  tax and, except for the Federal Home Loan Mortgage
                  Corporation, a majority of whose board of directors is not
                  selected by any such governmental entity) or any foreign
                  government, international organization or any agency or
                  instrumentality of such foreign government or organization,
                  any real electric or telephone cooperative, or any
                  organization (other than certain farmers' cooperatives) that
                  is generally exempt from federal income tax unless such
                  organization is subject to the tax on unrelated business
                  taxable income.

             3.   The Owner is aware (i) of the tax that would be imposed on
                  transfers of the Class R Certificates to disqualified
                  organizations under the Internal Revenue Code of 1986 that
                  applies to all transfers of the Class R Certificates after
                  March 31, 1988; (ii) that such tax would be on the transferor
                  or, if such transfer is through an agent (which person
                  includes a broker, nominee or middleman) for a non-Permitted
                  Transferee, on the agent; (iii) that the person otherwise
                  liable for the tax shall be relieved of liability



<PAGE>



                  for the tax if the transferee furnishes to such person an
                  affidavit that the transferee is a Permitted Transferee and,
                  at the time of transfer, such person does not have actual
                  knowledge that the affidavit is false; and (iv) that each of
                  the Class R Certificates may be a "noneconomic residual
                  interest" within the meaning of proposed Treasury regulations
                  promulgated under the Code and that the transferor of a
                  "noneconomic residual interest" will remain liable for any
                  taxes due with respect to the income on such residual
                  interest, unless no significant purpose of the transfer is to
                  impede the assessment or collection of tax.

             4.   The Owner is aware of the tax imposed on a "pass-through
                  entity" holding the Class R Certificates if, at any time
                  during the taxable year of the pass-through entity, a
                  non-Permitted Transferee is the record holder of an interest
                  in such entity. (For this purpose, a "pass-through entity"
                  includes a regulated investment company, a real estate
                  investment trust or common trust fund, a partnership, trust or
                  estate, and certain cooperatives.)

             5.   The Owner is aware that the Trustee will not register the
                  transfer of any Class R Certificate unless the transferee, or
                  the transferee's agent, delivers to the Trustee, among other
                  things, an affidavit in substantially the same form as this
                  affidavit. The Owner expressly agrees that it will not
                  consummate any such transfer if it knows or believes that any
                  of the representations contained in such affidavit and
                  agreement are false.

             6.   The Owner consents to any additional restrictions or
                  arrangements that shall be deemed necessary upon advice of
                  counsel to constitute a reasonable arrangement to ensure that
                  the Class R Certificates will only be owned, directly or
                  indirectly, by an Owner that is a Permitted Transferee.

             7.   The Owner's taxpayer identification number is
                  ________________.

             8.   The Owner has reviewed the restrictions set forth on the face
                  of the Class R Certificates and the provisions of Section
                  6.02(d) of the Pooling and Servicing Agreement under which the
                  Class R Certificates were issued (in particular, clauses
                  (iii)(A) and (iii)(B) of Section 6.02(d) which authorize the
                  Trustee to deliver payments to a person other than the Owner
                  and negotiate a mandatory sale by the Trustee in the event
                  that the Owner holds such Certificate in violation of Section
                  6.02(d)); and that the Owner expressly agrees to be bound by
                  and to comply with such restrictions and provisions.

             9.   The Owner is not acquiring and will not transfer the Class R
                  Certificates in order to impede the assessment or collection
                  of any tax.

             10.  The Owner anticipates that it will, so long as it holds the
                  Class R Certificates, have sufficient assets to pay any taxes
                  owed by the holder of such Class R Certificates, and hereby
                  represents to and for the benefit of the person from whom it
                  acquired the Class R Certificates that the Owner intends to
                  pay taxes associated with holding such


                                      B-3-2

<PAGE>



                  Class R Certificates as they become due, fully understanding
                  that it may incur tax liabilities in excess of any cash flows
                  generated by the Class R Certificates.

             11.  The Owner has no present knowledge that it may become
                  insolvent or subject to a bankruptcy proceeding for so long as
                  it holds the Class R Certificates.

             12.  The Owner has no present knowledge or expectation that it will
                  be unable to pay any United States taxes owed by it so long as
                  any of the Certificates remain outstanding.

             13.  The Owner is not acquiring the Class R Certificates with the
                  intent to transfer the Class R Certificates to any person or
                  entity that will not have sufficient assets to pay any taxes
                  owed by the holder of such Class R Certificates, or that may
                  become insolvent or subject to a bankruptcy proceeding, for so
                  long as the Class R Certificates remain outstanding.

             14.  The Owner will, in connection with any transfer that it makes
                  of the Class R Certificates, obtain from its transferee the
                  representations required by Section 6.02(d) of the Pooling and
                  Servicing Agreement under which the Class R Certificate were
                  issued and will not consummate any such transfer if it knows,
                  or knows facts that should lead it to believe, that any such
                  representations are false.

             15.  The Owner will, in connection with any transfer that it makes
                  of the Class R Certificates, deliver to the Trustee an
                  affidavit, which represents and warrants that it is not
                  transferring the Class R Certificates to impede the assessment
                  or collection of any tax and that it has no actual knowledge
                  that the proposed transferee: (i) has insufficient assets to
                  pay any taxes owed by such transferee as holder of the Class R
                  Certificates; (ii) may become insolvent or subject to a
                  bankruptcy proceeding for so long as the Class R Certificates
                  remains outstanding; and (iii) is not a "Permitted
                  Transferee".

             16.  The Owner is a citizen or resident of the United States, a
                  corporation, partnership or other entity created or organized
                  in, or under the laws of, the United States or any political
                  subdivision thereof, or an estate or trust whose income from
                  sources without the United States may be included in gross
                  income for United States federal income tax purposes
                  regardless of its connection with the conduct of a trade or
                  business within the United States.

             17.  The Owner of the Class R Certificate, hereby agrees that in
                  the event that the Trust Fund created by the Pooling and
                  Servicing Agreement is terminated pursuant to Section 10.01
                  thereof, the undersigned shall assign and transfer to the
                  Holders of the Class CE and the Class P Certificates any
                  amounts in excess of par received in connection with such
                  termination. Accordingly, in the event of such termination,
                  the Trustee is hereby authorized to withhold any such amounts
                  in excess of par and to pay such amounts directly to the
                  Holders of the Class CE and the Class P Certificates. This
                  agreement shall bind and be enforceable against any successor,
                  transferee or assigned of the undersigned in the Class R
                  Certificate. In connection


                                      B-3-3

<PAGE>



                  with any transfer of the Class R Certificate, the Owner shall
                  obtain an agreement substantially similar to this clause from
                  any subsequent owner.



                                      B-3-4

<PAGE>



                  IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
_________________, ____.

                                                [OWNER]

                                                By:_____________________________
                                                Name:
        q                                       Title:     [Vice] President


ATTEST:


By:__________________________________
Name:
Title:    [Assistant] Secretary


                  Personally appeared before me the above-named
__________________, known or proved to me to be the same person who executed the
foregoing instrument and to be a [Vice] President of the Owner, and acknowledged
to me that [he/she] executed the same as [his/her] free act and deed and the
free act and deed of the Owner.

                  Subscribed and sworn before me this ______________ day of
__________, ____.


                                                ________________________________
                                                          Notary Public

                                                County of ______________________
                                                State of _______________________

                                                My Commission expires:



                                      B-3-5

<PAGE>



                          FORM OF TRANSFEROR AFFIDAVIT



STATE OF NEW YORK               )
                                : ss.:
COUNTY OF NEW YORK              )


                  _________________________, being duly sworn, deposes,
represents and warrants as follows:

                  1. I am a ____________________ of _________________________
(the "Owner"), a corporation duly organized and existing under the laws of
_____________, on behalf of whole I make this affidavit.

                  2. The Owner is not transferring the Class R Certificates (the
"Residual Certificates") to impede the assessment or collection of any tax.

                  3. The Owner has no actual knowledge that the Person that is
the proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.

                  4. The Owner understands that the Purchaser has delivered to
the Trustee or a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit B-2. The Owner does not know or
believe that any representation contained therein is false.

                  5. At the time of transfer, the Owner has conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Owner has determined that the Purchaser has
historically paid its debts as they became due and has found no significant
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Owner understands that the transfer of a
Residual Certificate may not be respected for United States income tax purposes
(and the Owner may continue to be liable for United States income taxes
associated therewith) unless the Owner has conducted such an investigation.

                  6. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Pooling and Servicing Agreement.




                                      B-3-6

<PAGE>



                  IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________________, ____.

                                                [OWNER]

                                                By:_____________________________
                                                Name:
                                                Title:   [Vice] President

ATTEST:


By:_______________________________
Name:
Title.   [Assistant] Secretary


                  Personally appeared before me the above-named
_________________, known or proved to me to be the same person who executed the
foregoing instrument and to be a [Vice] President of the Owner, and acknowledged
to me that [he/she] executed the same as [his/her] free act and deed and the
free act and deed of the Owner.

                  Subscribed and sworn before me this ______ day of
_____________, ____.



                                                ________________________________
                                                Notary Public



                                                County of ______________________
                                                State of _______________________

                                                My Commission expires:





<PAGE>



                                    EXHIBIT C

                         FORM OF SERVICER CERTIFICATION


Re:          ACE Securities Corp. Home Equity Loan Trust, Series 2003-FM1
             Asset Backed Pass-Through Certificates

             I, [identify the certifying individual], certify to ACE Securities
Corp. (the "Depositor"), JPMorgan Chase Bank (the "Trustee") and Wells Fargo
Bank Minnesota, National Association (the "Master Servicer"), and their
respective officers, directors and affiliates, and with the knowledge and intent
that they will rely upon this certification, that:


             1. Based on my knowledge, the information in the Annual Statement
of Compliance, the Annual Independent Public Accountant's Servicing Report and
all servicing reports, officer's certificates and other information relating to
the servicing of the Mortgage Loans submitted to the Master Servicer taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact constituting information required to be provided by the Servicer
under the Pooling and Servicing Agreement necessary to make the statements made,
in light of the circumstances under which such statements were made, not
misleading as of the date of this certification.

             2. Based on my knowledge, the servicing information required to be
provided to the Master Servicer by the Servicer under the Pooling and Servicing
Agreement has been provided to the Master Servicer.

             3. I am responsible for reviewing the activities performed by the
Servicer under the Pooling and Servicing Agreement and based upon my knowledge
and the review required by the Pooling and Servicing Agreement, and except as
disclosed in the Annual Statement of Compliance or the Annual Independent Public
Accountant's Servicing Report submitted to the Master Servicer, the Servicer has
fulfilled its obligations under the Pooling and Servicing Agreement; and

             4. I have disclosed to the Master Servicer all significant
deficiencies relating to the Servicer's compliance with the minimum servicing
standards in accordance with a review conducted in compliance with the Uniform
Single Attestation Program for Mortgage Bankers or similar standard as set forth
in the Pooling and Servicing Agreement.



                                      C-1

<PAGE>




             Capitalized terms used and not otherwise defined herein have the
meanings assigned thereto in the Pooling and Servicing Agreement, dated as of
May 1, 2003, among ACE Securities Corp., Litton Loan Servicing LP, Wells Fargo
Bank Minnesota, National Association and JPMorgan Chase Bank.

Date: _________________________

_______________________________
[Signature] [Title]



                                       C-2

<PAGE>



                                    EXHIBIT D

            FORM OF OFFICER'S CERTIFICATE WITH RESPECT TO PREPAYMENTS

                              Officer's Certificate

         ACE Securities Corp., Home Equity Loan Trust, Series 2003-FM1,
                     Asset Backed Pass-Through Certificates


Wells Fargo Bank Minnesota, National Association
9062 Old Annapolis Road
Columbia, Maryland 21045

             Re:  Prepayments

Dear Sir or Madam:

                  __________________ hereby certifies that he/she is an officer
of the Servicer, holding the office set forth beneath his/her name and hereby
further certifies as follows:

                  Each of the Mortgage Loans, as the term is defined in the
Pooling and Servicing Agreement, dated as of May 1, 2003 (the "Pooling and
Servicing Agreement"), among ACE Securities Corp. as depositor (the
"Depositor"), Litton Loan Servicing LP as servicer (the "Servicer"), Wells Fargo
Bank Minnesota, National Association as master servicer (the "Master Servicer")
and securities Administrator (the "Securities Administrator") and JPMorgan Chase
Bank as trustee (the "Trustee"), listed on the attached schedule was subject to
a Principal Prepayment in full during the related Prepayment Period and such
schedule also contains the following information with respect to each such
Mortgage Loan:

                  (1) The amount of the Prepayment Charge collected by the
                  Servicer; and

                  (2) One of the following codes indicating the reason for a
                  waiver of a Prepayment Charge by the Servicer:

                       1: Servicer's determination that such waiver would
                       maximize recovery of Liquidation Proceeds for such
                       Mortgage Loan, taking into account the value of such
                       Prepayment Charge;

                       2: the enforceability of the Prepayment Charge is limited
                       (1) by bankruptcy insolvency, moratorium, receivership,
                       or other similar law relating to creditors' rights
                       generally or (2) due to acceleration in connection with a
                       foreclosure or other involuntary payment; or

                       3: the enforceability of the Prepayment Charge is
                       otherwise limited or prohibited by applicable law.


                                       D-1

<PAGE>


                       4: Servicer has not been provided with sufficient
                       information to enable to collect the Prepayment Charge.

                       5: Servicer has not been provided with sufficient
                       information to enable it to determine whether a
                       Prepayment Charge was collected or waived by a prior
                       servicer.

                  (3) The amount of any Servicer Prepayment Charge Payment
Amount required to be remitted to the Master Servicer for deposit in the
Distribution Account in connection with the waiver of a Prepayment Charge other
than as permitted pursuant to Section 3.01 of the Pooling and Servicing
Agreement.

                  (4) The amount, if any, collected from the Seller in respect
of any waived Prepayment Charge permitted to be waived by the Servicer under
Section 3.01 of the Pooling and Servicing Agreement.

                                                By:_________________________
                                                Name:
                                                Title:



                                       E-1