SECOND SUPPLEMENTAL FUNDING 2 DEED OF CHARGE      EXHIBIT 4.5.1

                               21 NOVEMBER 2007

                       PERMANENT FUNDING (NO. 2) LIMITED
                                (AS FUNDING 2)

                                      AND

                          PERMANENT MASTER ISSUER PLC
                              (AS MASTER ISSUER)

                                      AND

                             THE BANK OF NEW YORK
      (AS FUNDING 2 SECURITY TRUSTEE AND MASTER ISSUER SECURITY TRUSTEE)

                                      AND

                             BANK OF SCOTLAND PLC
  (AS SELLER, CASH MANAGER, FUNDING 2 GIC PROVIDER, FUNDING 2 SWAP PROVIDER,
              FUNDING 2 START-UP LOAN PROVIDER AND ACCOUNT BANK)

                                      AND

                     STRUCTURED FINANCE MANAGEMENT LIMITED
                       (AS CORPORATE SERVICES PROVIDER)

                                      AND

                          PERMANENT MORTGAGES TRUSTEE
                            (AS MORTGAGES TRUSTEE)

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                                   CONTENTS

CLAUSE                                                                     PAGE

1.       Interpretation.......................................................2
2.       Amendment to Funding 2 Deed of Charge................................2
3.       Notices and Demands..................................................2
4.       Supplemental.........................................................2
5.       Choice of Law........................................................2
6.       Counterparts.........................................................2
7.       Third Party Rights...................................................2
8.       Submission to Jurisdiction...........................................3

Signatories...................................................................4

APPENDIX

1.       Amendments to Funding 2 Deed of Charge...............................6

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THIS SECOND SUPPLEMENTAL FUNDING 2 DEED OF CHARGE (this DEED) is made as a deed
on 21 November 2007

BETWEEN:

(1)      PERMANENT FUNDING (NO. 2) LIMITED, a company incorporated in England
         and Wales with limited liability (registered number 04441772) and
         having its registered office at 35 Great St Helen's London EC3A 6AP
         (FUNDING 2);

(2)      PERMANENT MASTER ISSUER PLC, a company incorporated in England and
         Wales with limited liability (registered number 5922774) and having
         its registered office at 35 Great St Helen's London EC3A 6AP (the
         MASTER ISSUER);

(3)      THE BANK OF NEW YORK, a national association acting through its
         offices at 48th Floor, One Canada Square, London E14 5AL (acting in
         its capacities as the FUNDING 2 SECURITY TRUSTEE, which expression
         includes such company and all other persons or companies for the time
         being acting as trustee and security trustee under the Funding 2 Deed
         of Charge and as the MASTER ISSUER SECURITY TRUSTEE, which expression
         includes such company and all other persons or companies for the time
         being acting as trustee and security trustee under the Master Issuer
         Deed of Charge);

(4)      BANK OF SCOTLAND PLC (registered number SC327000) (formerly The
         Governor and Company of the Bank of Scotland), a public limited
         company incorporated under the laws of Scotland and having its
         registered office at The Mound, Edinburgh, EH1 1YZ (acting in its
         capacities as the SELLER, the CASH MANAGER, the ACCOUNT BANK, the
         FUNDING 2 GIC PROVIDER, the FUNDING 2 SWAP PROVIDER and the FUNDING 2
         START-UP LOAN PROVIDER);

(5)      STRUCTURED FINANCE MANAGEMENT LIMITED, a company incorporated in
         England and Wales with limited liability (registered number 3853947)
         and having its registered office is at 35 Great St. Helen's London
         EC3A 6AP (acting in its capacity as the CORPORATE SERVICES PROVIDER);
         and

(6)      PERMANENT MORTGAGES TRUSTEE LIMITED, a private limited company
         incorporated under the laws of Jersey whose registered office is at 47
         Esplanade, St Helier, Jersey JE1 0BD, Channel Islands (in its capacity
         as the MORTGAGES TRUSTEE).

WHEREAS:

(A)      This Deed is supplemental to the Funding 2 Deed of Charge made between
         the parties hereto and dated 17 October 2006 as supplemented and
         amended by the First Supplemental Funding 2 Deed of Charge between the
         parties hereto and dated 1 March 2007 (herein after referred to as the
         FUNDING 2 DEED OF CHARGE).

(B)      On the Reorganisation Date, pursuant to the HBOS Group Reorganisation
         Act 2006, The Governor and Company of the Bank of Scotland was
         registered as a public company under the Companies Act 1985 and
         changed its name to Bank of Scotland plc and the business and all
         property and liabilities of Halifax (including its rights and
         obligations under the Funding 2 Agreements to which it is expressed to
         be a party) were transferred to Bank of Scotland.

(C)      The parties to this Deed have agreed to enter into this Deed to, among
         other things, permit the agreed changes to the Funding 2 Deed of
         Charge and any other amendment as may be required to give effect to
         this Deed.

                                       1

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NOW THIS DEED WITNESSES as follows:

1.       INTERPRETATION

         The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Deed and dated 21
         November 2007 (as the same may be amended, restated or supplemented
         from time to time with the consent of the parties to this Deed) (the
         MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE) and the amended and
         restated master issuer master definitions and construction schedule
         signed by, amongst others, the parties to this Deed on 21 November
         2007 (as the same may be amended, varied or supplemented from time to
         time with the consent of the parties to this Deed) (the MASTER ISSUER
         MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE) are expressly and
         specifically incorporated into this Deed and, accordingly, the
         expressions defined in the Master Definitions and Construction
         Schedule and the Master Issuer Master Definitions and Construction
         Schedule (as so amended, varied or supplemented from time to time)
         shall, except where the context otherwise requires and save where
         otherwise defined herein, have the meanings in this Deed, including
         the Recitals hereto, and this Deed shall be construed in accordance
         with the interpretation provisions set out in Clause 3 (Interpretation
         and Construction) of the Master Definitions and Construction Schedule
         and the Master Issuer Master Definitions and Construction Schedule.

2.       AMENDMENT TO FUNDING 2 DEED OF CHARGE

         The parties hereto agree to amend the Funding 2 Deed of Charge in
         accordance with Appendix 1 hereto.

3.       NOTICES AND DEMANDS

         Any notice or communication under or in connection with this Deed or
         the Funding 2 Deed of Charge shall be given in the manner and at the
         times set out in Clause 24 (Notices) of the Funding 2 Deed of Charge
         or at such other address as the recipient may have notified to the
         other parties hereto and/or thereto in writing.

4.       SUPPLEMENTAL

         Save as expressly amended by this Deed, the Funding 2 Deed of Charge
         shall remain in full force and effect and the security created under
         the Funding 2 Deed of Charge and all of the other rights, powers,
         obligations and immunities comprised therein and arising pursuant
         thereto shall remain in full force and effect notwithstanding this
         Deed. The Funding 2 Deed of Charge and this Deed shall henceforth be
         read and construed as one document and references in the Funding 2
         Deed of Charge to "this Deed" shall be read as references to the
         Funding 2 Deed of Charge as amended by this Deed.

5.       CHOICE OF LAW

         This Deed is governed by and shall be construed in accordance with
         English law.

6.       COUNTERPARTS

         This Deed may be signed (manually or by facsimile) and delivered in
         more than one counterpart all of which, taken together, shall
         constitute one and the same deed.

7.       THIRD PARTY RIGHTS

         This Deed does not create any right under the Contracts (Rights of
         Third Parties) Act 1999 which is enforceable by any person who is not
         a party to this Deed.

                                       2

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8.       SUBMISSION TO JURISDICTION

         Each party to this Deed hereby irrevocably submits to the exclusive
         jurisdiction of the English courts in any action or proceeding arising
         out of or relating to this Deed and hereby irrevocably agrees that all
         claims in respect of such action or proceeding may be heard and
         determined by such courts. Each party to this Deed hereby irrevocably
         waives, to the fullest extent it may possibly do so, any defence or
         claim that the English courts are inconvenient forum for the
         maintenance or hearing of such action or proceeding.

DULY EXECUTED AND DELIVERED AS A DEED by each of the parties hereto or on its
behalf on the date appearing on page 1.

                                       3

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                                  SIGNATORIES

FUNDING 2

EXECUTED as a DEED by                                  ) /S/ CLAUDIA WALLACE
PERMANENT FUNDING (NO. 2)                              )
LIMITED acting by two directors                        ) /S/ HELENA WHITAKER

MASTER ISSUER

EXECUTED as a DEED by                                  ) /S/ CLAUDIA WALLACE
PERMANENT MASTER ISSUER                                )
PLC acting by two directors                            ) /S/ HELENA WHITAKER

FUNDING 2 SECURITY TRUSTEE AND MASTER ISSUER SECURITY TRUSTEE

EXECUTED as a DEED                                     ) /S/ VINCENT GIRAUD
for and on behalf of                                   )
THE BANK OF NEW YORK                                   )
by its authorised signatory                            )
in the presence of:

Witness: /S/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         40 BANK STREET
         LONDON E14 5DU

SELLER, CASH MANAGER, ACCOUNT BANK, FUNDING 2 GIC PROVIDER, FUNDING 2 SWAP
PROVIDER AND FUNDING 2 START-UP LOAN PROVIDER

EXECUTED as a DEED by                                  ) /S/ IAN STEWART
BANK OF SCOTLAND PLC                                   )
acting by its attorney                                 ) /S/ DAVID WILKINSON
in the presence of:                                    )

Witness: /S/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         40 BANK STREET
         LONDON E14 5DU

                                       4

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CORPORATE SERVICES PROVIDER

EXECUTED as a DEED by                                  ) /S/ CLAUDIA WALLACE
STRUCTURED FINANCE                                     )
MANAGEMENT LIMITED                                     )
acting by two directors/a director
and the secretary

Director                                               ) /S/ CLAUDIA WALLACE

Director/Secretary                                     ) /S/ HELENA WHITAKER

MORTGAGES TRUSTEE

EXECUTED as a DEED on behalf of                        )
PERMANENT MORTGAGES TRUSTEE                            )
LIMITED, a company incorporated in Jersey,             ) /S/ ABU KAPADIA
Channel Islands, by                                    )
being a person who, in                                 )
accordance with the laws of that territory is acting   )
under the authority of the company,                    )
in the presence of:                                    )

Witness: /S/ CHRIS WALL

Name:

Address: ALLEN & OVERY LLP
         40 BANK STREET
         LONDON E14 5DU

                                       5

<PAGE>

                                  APPENDIX 1

                    AMENDMENTS TO FUNDING 2 DEED OF CHARGE

After Clause 19.8 the following clauses shall be inserted:

"19.9    RETAINED AMOUNTS

         Funding 2 represents to the Funding 2 Security Trustee that any
         amounts retained by Funding 2 (other than those retained by way of
         profit) will be reasonably required to provide for losses or expenses
         arising from Funding 2's business or to maintain or enhance its
         creditworthiness.

19.10    RECEIPTS AND PAYMENT OBLIGATIONS

         Funding 2 represents to the Funding 2 Security Trustee that (i) all
         receipts that may be received by Funding 2 and (ii) all of the payment
         obligations of Funding 2, are accurately reflected in Schedule 4 of
         this Deed."

Schedule 3 of the Funding 2 Deed of Charge shall be replaced it its entirety
by:

                                  SCHEDULE 3

                            FORM OF ACCESSION DEED

THIS DEED is made on [ ]

BETWEEN

(1)      PERMANENT FUNDING (NO. 2) LIMITED, a company incorporated in England
         and Wales with limited liability (registered number 04441772) and
         having its registered office at 35 Great St Helen's London EC3A 6AP
         (FUNDING 2);

(2)      PERMANENT MASTER ISSUER PLC, a company incorporated in England and
         Wales with limited liability (registered number 5922774) and having
         its registered office at 35 Great St Helen's London EC3A 6AP (the
         MASTER ISSUER);

(3)      THE BANK OF NEW YORK, a national association acting through its
         offices at 48th Floor, One Canada Square, London E14 5AL (acting in
         its capacity as FUNDING 2 SECURITY TRUSTEE which expression includes
         such company and all other persons or companies for the time being
         acting as trustee and security trustee under the Funding 2 Deed of
         Charge and as MASTER ISSUER SECURITY TRUSTEE which expression includes
         such company and all other persons or companies for the time being
         acting as trustee and security trustee under the Master Issuer Deed of
         Charge);

(4)      BANK OF SCOTLAND PLC (formerly the Governor and Company of the Bank of
         Scotland), a public company incorporated under the laws of Scotland
         (registered number SC327000) whose registered office is at The Mound,
         Edinburgh, EH1 1YZ (acting in its capacities as ACCOUNT BANK, SELLER,
         CASH MANAGER, FUNDING 2 GIC PROVIDER, FUNDING 2 SWAP PROVIDER and
         FUNDING 2 START-UP LOAN PROVIDER);

(5)      STRUCTURED FINANCE MANAGEMENT LIMITED, a company incorporated in
         England and Wales with limited liability (registered number 3853947)
         and having its registered office is at

                                       6

<PAGE>

         35 Great St. Helen's, London EC3A 6AP (acting in its capacity as the
         CORPORATE SERVICES PROVIDER);

(6)      PERMANENT MORTGAGES TRUSTEE LIMITED, a private limited company
         incorporated under the laws of Jersey (registered number 83116) whose
         registered office is at 47 Esplanade, St Helier, Jersey JE1 0BD,
         Channel Islands (acting in its capacity as MORTGAGEE TRUSTEE);

(7)      [Any other Funding 2 Secured Creditor]; and

(8)      [ ] (the NEW FUNDING 2 SECURED CREDITOR).

NOW THIS DEED WITNESSES AS FOLLOWS

WHEREAS

(A)      Pursuant to the terms of a [describe agreement] (the AGREEMENT) dated
         [ ] made between Funding 2 and the New Funding 2 Secured Creditor,
         Funding 2 has agreed to [describe nature of the obligations of Funding
         2 under the Agreement].

(B)      Funding 2 has agreed to provide the Funding 2 Security Trustee with
         the benefit of the security described in the Funding 2 Deed of Charge
         to secure Funding 2's obligations to the Funding 2 Secured Creditors.

(C)      The terms of the Funding 2 Deed of Charge permit Funding 2 to secure
         its obligations to a New Funding 2 Secured Creditor thereunder.

(D)      The New Funding 2 Secured Creditor has agreed to enter into this Deed
         to accede to the provisions of the Funding 2 Deed of Charge.

(E)      The Funding 2 Secured Creditors have agreed to enter into this Deed
         to, among other things, acknowledge and agree to such accession and to
         permit any consequential changes to the Funding 2 Priority of Payments
         set out in Part 1 Part 2 and Part 3 of Schedule 4 of the Funding 2
         Deed of Charge as are required and any other amendment as may be
         required to give effect to this Accession Undertaking.

1.       INTERPRETATION

         The amended and restated master definitions and construction schedule
         signed by, amongst others, the parties to this Agreement and dated 21
         November 2007 (as the same may be amended, varied or supplemented from
         time to time with the consent of the parties to this Agreement) (the
         MASTER DEFINITIONS AND CONSTRUCTION SCHEDULE) is expressly and
         specifically incorporated into this Agreement and, accordingly, the
         expressions defined in the Master Definitions and Construction
         Schedule (as so amended, varied or supplemented from time to time)
         shall, except where the context otherwise requires and save where
         otherwise defined herein, have the same meanings in this Agreement,
         including the Recitals hereto and this Agreement shall be construed in
         accordance with the interpretation provisions set out in clause 3 of
         the Master Definitions and Construction Schedule.

2.       REPRESENTATIONS AND WARRANTIES

         The New Funding 2 Secured Creditor hereby represents and warrants to
         the Funding 2 Security Trustee and each of the Funding 2 Secured
         Creditors in respect of itself that as of the date of this Deed:

                                       7

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         (a)     pursuant to the terms of the Agreement, Funding 2 has agreed
                 to pay to the New Funding 2 Secured Creditor the amount (if
                 any) [describe in relation to the Agreement]; and

         (b)     the Agreement expressly provides that all amounts due from
                 Funding 2 thereunder are to be secured by the Funding 2 Deed
                 of Charge.

3.       ACCESSION

         In consideration of the New Funding 2 Secured Creditor being accepted
         as a Funding 2 Secured Creditor for the purposes of the Funding 2 Deed
         of Charge by the parties thereto as from the date of this Deed, the
         New Funding 2 Secured Creditor:

         (a)     confirms that as from [date], it intends to be a party to the
                 Funding 2 Deed of Charge as a Funding 2 Secured Creditor;

         (b)     undertakes to comply with and be bound by all of the
                 provisions of the Master Definitions and Construction Schedule
                 (as the same may be amended, varied or restated from time to
                 time) and the Funding 2 Deed of Charge in its capacity as a
                 Funding 2 Secured Creditor, as if it had been an original
                 party thereto;

         (c)     undertakes to perform comply with and be bound by all of the
                 provisions of the Funding 2 Deed of Charge in its capacity as
                 a Funding 2 Secured Creditor, as if it had been an original
                 party thereto as provided in Clause 4.5 (New Funding 2 Secured
                 Creditors) (including without limitation Clauses 7.1
                 (Priorities of Payment - After Service of a Master
                 Intercompany Loan Acceleration Notice) and 7.2 (Application of
                 Monies Received After Master Intercompany Loan Acceleration
                 Notice)); and

         (d)     agrees that the Funding 2 Security Trustee shall be the
                 Funding 2 Security Trustee of the Funding 2 Deed of Charge for
                 all Funding 2 Secured Creditors upon and subject to the terms
                 set out in the Funding 2 Deed of Charge.

4.       SCOPE OF THE FUNDING 2 DEED OF CHARGE

         Funding 2, the New Funding 2 Secured Creditor and the Funding 2
         Security Trustee hereby agree that for relevant purposes under the
         Funding 2 Deed of Charge and the Master Definitions and Construction
         Schedule:

         (a)     the Agreement shall be treated as a Funding 2 Agreement; and

         (b)     the New Funding 2 Secured Creditor shall be treated as a
                 Funding 2 Secured Creditor.

5.       AMENDMENT TO THE FUNDING 2 PRIORITY OF PAYMENTS

         The Funding 2 Secured Creditors agree to amend and restate the Funding
         2 Priority of Payments set out in Part 1, Part 2 and Part 3 of
         Schedule 4 of the Funding 2 Deed of Charge in accordance with Appendix
         1 hereto.

6.       APPLICATION

         Prior to and following enforcement of the Funding 2 Security all
         amounts at any time held by Funding 2, the Cash Manager or the Funding
         2 Security Trustee in respect of the security created under this Deed
         shall be held and/or applied by such person subject to and in
         accordance with the relevant provisions of the Funding 2 Deed of
         Charge.

                                       8

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7.       NOTICES AND DEMANDS

         Any notice or communication under or in connection with this Deed, the
         Funding 2 Deed of Charge or the Master Definitions Schedule shall be
         given in the manner and at the times set out in Clause 24 (Notices) of
         the Funding 2 Deed of Charge to the addresses given in this Clause or
         at such other address as the recipient may have notified to the other
         parties hereto and/or thereto in writing.

         The address referred to in this Clause 7 for the New Funding 2 Secured
         Creditor is:

         [ ]

         For the attention of:                          [ ]
         Telephone:                                     [ ]
         Facsimile:                                     [ ]

         or such other address and/or numbers as the New Issuer may notify to
         the parties to the Funding 2 Deed of Charge in accordance with the
         provisions thereof.

8.       CHOICE OF LAW

         This Deed is governed by and shall be construed in accordance with
         English law.

DULY EXECUTED AND DELIVERED AS A DEED by each of the parties hereto or on its
behalf on the date appearing on page 1.

FUNDING 2

EXECUTED as a DEED by                                  )
PERMANENT FUNDING (NO. 2)                              )
LIMITED acting by two                                  )
Directors                                              )

MASTER ISSUER

EXECUTED as a DEED by                                  )
PERMANENT MASTER ISSUER                                )
PLC acting by two                                      )
Directors                                              )

                                       9

<PAGE>

Funding 2 SECURITY TRUSTEE AND MASTER ISSUER SECURITY TRUSTEE

EXECUTED as a DEED                                     )
for and on behalf of                                   )
THE BANK OF NEW YORK                                   )
by its authorised signatory                            )

Witness:

Name:

Address:

SELLER, CASH MANAGER, FUNDING 2 SWAP PROVIDER, FUNDING 2 GIC PROVIDER, FUNDING
2 START-UP LOAN PROVIDER AND ACCOUNT BANK

EXECUTED as a DEED by                                  )
BANK OF SCOTLAND PLC                                   )
acting by its attorney                                 )
in the presence of                                     )

Witness:

Name:

Address:

FUNDING 2 CORPORATE SERVICES PROVIDER

EXECUTED as a DEED by                                  )
STRUCTURED FINANCE                                     )
MANAGEMENT LIMITED                                     )
acting by two directors                                )

MORTGAGES TRUSTEE

EXECUTED as a DEED on behalf of                        )
PERMANENT MORTGAGES TRUSTEE                            )
LIMITED, a company incorporated in Jersey,             )

                                      10

<PAGE>

Channel Islands, by                                    )
being a person who, in                                 )
accordance with the laws of that territory is acting   )
under the authority of the company,                    )
in the presence of                                     )

Witness's:

Name:

Address:

[INSERT SIGNATURE BLOCK FOR NEW FUNDING 2 SECURED CREDITOR]

                                      11

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Schedule 4 of the Funding 2 Deed of Charge shall be replaced in its entirety by
the following:

                                  SCHEDULE 4

                        FUNDING 2 PRIORITY OF PAYMENTS

                                    PART 1

            FUNDING 2 PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS

1.       CALCULATION OF FUNDING 2 AVAILABLE REVENUE RECEIPTS

1.1      On the day falling four London Business Days prior to each Funding 2
         Interest Payment Date, the Cash Manager will calculate the amount of
         Funding 2 Available Revenue Receipts that are available to be applied
         on the next Funding 2 Interest Payment Date in accordance with the
         Funding 2 Pre-Enforcement Revenue Priority of Payments.

1.2      Subject to paragraph 1.3 below, if there would be insufficient Funding
         2 Available Revenue Receipts to meet Funding 2's obligations on the
         next Funding 2 Interest Payment Date under the Funding 2
         Pre-Enforcement Revenue Priority of Payments, then Funding 2 (or the
         Cash Manager on its behalf) shall pay or provide for that deficit by
         applying amounts then standing to the credit of (i) the Funding 2
         Principal Ledger, if any, and (ii) any amounts standing to the credit
         of the Funding 2 Cash Accumulation Ledger after first applying the
         amounts in (i) above (if any), and the Cash Manager shall make a
         corresponding entry in the relevant Funding 2 Principal Deficiency
         Ledger.

1.3      Funding 2 Principal Receipts may not be used to pay interest on any
         Loan Tranche if and to the extent that would result in a deficiency
         being recorded or an existing deficiency being increased, on a Funding
         2 Principal Deficiency Sub-Ledger relating to a higher ranking Loan
         Tranche.

2.       DISTRIBUTION OF FUNDING 2 AVAILABLE REVENUE RECEIPTS PRIOR TO THE
         SERVICE OF A MASTER INTERCOMPANY LOAN ACCELERATION NOTICE ON FUNDING 2

2.1      This section sets out the order of priority of payments of Funding 2
         Available Revenue Receipts as at the date of the Second Supplemental
         Funding 2 Deed of Charge.

2.2      Except for amounts due to third parties by the Master Issuer and/or
         Funding 2 under paragraph (a) below or amounts due to the Account
         Bank, or the Master Issuer Account Bank, or amounts payable to any
         replacement swap provider using any termination payment received by
         Funding 2 in respect of the Funding 2 Swap Agreement or amounts
         payable to the Funding 2 Swap Provider (other than amounts pursuant to
         the first bullet point in item (s) below) using any premium recovered
         from any replacement swap provider which shall be paid when due on
         each Funding 2 Interest Payment Date prior to the service of a Master
         Intercompany Loan Acceleration Notice, the Cash Manager will apply the
         Funding 2 Available Revenue Receipts for such date and if Funding 2
         Available Revenue Receipts for such date are insufficient to pay items
         (a) to (d), (f), (h), (j), and (l) below amounts standing to the
         credit of the Funding 2 Principal Ledger and the Funding 2 Cash
         Accumulation Ledger, in the following order of priority (being the
         FUNDING 2 PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS):

         (a)     without priority among them, but in proportion to the
                 respective amounts due, to pay amounts due to:

                 (i)     the Funding 2 Security Trustee (together with interest
                         and any amount in respect of VAT on those amounts) and
                         to provide for any amounts due or to become due in the

                                      12

<PAGE>

                         immediately following Funding 2 Interest Period to the
                         Funding 2 Security Trustee under the Funding 2 Deed of
                         Charge;

                 (ii)    to pay (by way of the fee payable pursuant to Clause
                         7.5 of the Master Issuer Intercompany Loan Agreement)
                         amounts due to the Master Issuer in respect of the
                         Master Issuer's obligations by way of payment of the
                         Senior Fee, in respect of the master issuer's
                         obligations specified in items (a) to (c) inclusive of
                         the Master Issuer Pre-Enforcement Revenue Priority of
                         Payments or, as the case may be, items (a) and (b) of
                         the Master Issuer Post-Enforcement Priority of
                         Payments; and

                 (iii)   any third party creditors of Funding 2 (other than
                         those referred to later in this paragraph 2.2, which
                         amounts have been incurred without breach by Funding 2
                         of the Transaction Documents to which it is a party
                         and to provide for any of these amounts expected to
                         become due and payable in the immediately following
                         Funding 2 Interest Period by Funding 2 and to pay or
                         discharge any liability of Funding 2 for corporation
                         tax on any chargeable income or gain of Funding 2;

         (b)     without priority among them but in proportion to the
                 respective amounts due, towards payment of amounts (if any) by
                 Funding 2 to the Account Bank under the terms of the Bank
                 Account Agreement, to the Cash Manager under the terms of the
                 Cash Management Agreement and to the Corporate Services
                 Provider under the Corporate Services Agreement;

         (c)     towards payment of amounts (if any) due to the Funding 2 Swap
                 Provider under the Funding 2 Swap Agreement (including
                 termination payments but excluding any Funding 2 Swap Excluded
                 Termination Amount;

         (d)     without priority among them, but in proportion to the
                 respective amounts due, towards payments of interest due and
                 payable on the AAA Loan Tranches;

         (e)     towards a credit to the Funding 2 AAA Principal Deficiency
                 Sub-Ledger in an amount sufficient to eliminate any debit on
                 that ledger;

         (f)     without priority among them, but in proportion to the
                 respective amounts due, towards payments of interest due and
                 payable on the AA Loan Tranches;

         (g)     towards a credit to the Funding 2 AA Principal Deficiency
                 Sub-Ledger in an amount sufficient to eliminate any debit on
                 that ledger;

         (h)     without priority among them, but in proportion to the
                 respective amounts due, towards payments of interest due and
                 payable on the A Loan Tranches;

         (i)     towards a credit to the Funding 2 A Principal Deficiency
                 Sub-Ledger in an amount sufficient to eliminate any debit on
                 that ledger;

         (j)     without priority among them, but in proportion to the
                 respective amounts due, towards payments of interest due and
                 payable on the BBB Loan Tranches;

         (k)     towards a credit to the Funding 2 BBB Principal Deficiency
                 Sub-Ledger in an amount sufficient to eliminate any debit on
                 that ledger;

         (l)     without priority among them, but in proportion to the
                 respective amounts due, towards payments of interest due and
                 payable on the BB Loan Tranches;

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<PAGE>

         (m)     towards a credit to the Funding 2 BB Principal Deficiency
                 Sub-Ledger in an amount sufficient to eliminate any debit on
                 that ledger;

         (n)     by way of payment of the Senior Fee towards payment of any
                 amounts due to the Master Issuer in respect of the Master
                 Issuer's obligations (if any) to make a termination payment to
                 an Master Issuer Swap Provider (but excluding any Master
                 Issuer Swap Excluded Termination Amount);

         (o)     towards a credit to the Funding 2 General Reserve Ledger to
                 the extent the amount standing to the credit thereof is less
                 than the Funding 2 Reserve Required Amount, taking into
                 account any net replenishment of the Funding 2 General Reserve
                 Fund on that Funding 2 Interest Payment Date from the Funding
                 2 Available Principal Receipts;

         (p)     if the Liquidity Reserve Fund Rating Event has occurred and is
                 continuing, towards a credit to the Funding 2 Liquidity
                 Reserve Ledger to the extent the amount standing to the credit
                 thereof is less than the Funding 2 Liquidity Reserve Fund
                 Required Amount, taking into account any net replenishment of
                 the Funding 2 Liquidity Reserve Fund on that Funding 2
                 Interest Payment Date from the Funding 2 Available Principal
                 Receipts;

         (q)     without priority among them, but in proportion to the
                 respective amounts due, towards payment of interest due and
                 payable on the Master Issuer Subordinated Loan Tranches;

         (r)     towards a credit to the Master Issuer Subordinated Loan
                 Principal Deficiency Sub-Ledger in an amount sufficient to
                 eliminate any debit on that ledger;

         (s)     without priority among them but in proportion to the
                 respective amounts due, to pay (without double counting):

                 (i)     after the occurrence of a Funding 2 Swap Provider
                         Default or a Funding 2 Swap Provider Downgrade
                         Termination Event, any Funding 2 Swap Excluded
                         Termination Amount;

                 (ii)    by way of payment of the Senior Fee to the Master
                         Issuer in respect of its obligations (if any) to pay
                         any Master Issuer Swap Excluded Termination Amount;
                         and

                 (iii)   by way of payment of the Senior Fee any other amounts
                         due to the Master Issuer under the Master Intercompany
                         Loan Agreement and not otherwise provided for in this
                         priority of payments;;

         (t)     towards payment to Funding 2 of an amount equal to the sum of:

                 (i)     0.01 per cent. of the Funding 2 Available Revenue
                         Receipts; and

                 (ii)    an amount equal to the aggregate of 0.01 per cent of
                         the Funding 2 Available Revenue Receipts in respect of
                         each previously occurring Funding 2 Interest Payment
                         Date less an amount equal to the sum of (i) the
                         aggregate of amounts previously paid in accordance
                         with this paragraph (t) on such Funding 2 Interest
                         Payment Date or any subsequently occurring Funding 2
                         Interest Payment Date; and (ii) the aggregate of
                         amounts previously applied pursuant to the third
                         bullet point of paragraph (a) above to pay or
                         discharge corporation tax on any chargeable income or
                         gain of Funding 2;

         (u)     without priority among them but in proportion to the
                 respective amounts due, towards:

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                 (i)     payments of amounts due on the Master Issuer Start-Up
                         Loan Tranches; and

                 (ii)    payment of amounts due to the Funding 2 Start-Up Loan
                         Provider under each Funding 2 Start-Up Loan Agreement;

         (v)     towards payment to the Seller of any Deferred Consideration;
                 and

         (w)     the balance (if any) to Funding 2.

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                                    PART 2

                  FUNDING 2 PRINCIPAL PRIORITIES OF PAYMENTS

1.       DUE AND PAYABLE DATES OF LOAN TRANCHE

1.1      A Loan Tranche shall become DUE AND PAYABLE on the earlier to occur
         of:

         (a)     any date specified in relation to such Loan Tranche in the
                 applicable Loan Tranche Supplement;

         (b)     the date upon which a Trigger Event occurs;

         (c)     the date upon which the Funding 2 Security Trustee serves a
                 Note Acceleration Notice on the Master Issuer; and

         (d)     the date upon which the Funding 2 Security Trustee serves a
                 Master Intercompany Loan Acceleration Notice on Funding 2.

1.2      If there are insufficient Funding 2 Available Principal Receipts
         available to repay a Loan Tranche when that Loan Tranche is due and
         payable (either in full or up to its Scheduled Amortisation Amount),
         then the shortfall will be repaid on subsequent Funding 2 Interest
         Payment Dates from Funding 2 Available Principal Receipts until that
         Loan Tranche is fully repaid or, as applicable, the Scheduled
         Amortisation Amount is fully repaid.

2.       REPAYMENT OF LOAN TRANCHES (OTHER THAN START-UP LOAN TRANCHES) PRIOR
         TO THE OCCURRENCE OF A TRIGGER EVENT AND PRIOR TO THE SERVICE ON
         FUNDING 2 OF A MASTER INTERCOMPANY LOAN ACCELERATION NOTICE OR THE
         SERVICE ON THE MASTER ISSUER OF A NOTE ACCELERATION NOTICE

2.1      On each Funding 2 Interest Payment date prior to the occurrence of a
         Trigger Event or the service on Funding 2 of a Master Intercompany
         Loan Acceleration Notice or the service on the Master Issuer of a Note
         Acceleration Notice, the Cash Manager shall apply Funding 2 Available
         Principal Receipts in the following priority:

         (A)     to the extent only that monies have been drawn from the
                 Funding 2 General Reserve Fund to make Funding 2 Reserve
                 Principal Payments, towards a credit to the Funding 2 General
                 Reserve Ledger to the extent the amount standing to the credit
                 thereof is less than the Funding 2 Reserve Required Amount;

         (B)     if a Liquidity Reserve Fund Rating Event has occurred and is
                 continuing, (i) to the extent only that monies have been drawn
                 from the Funding 2 Liquidity Reserve Fund in order to make
                 Funding 2 Liquidity Reserve Principal Payments or (ii) to the
                 extent that the Funding 2 Liquidity Reserve Fund has not been
                 fully funded, and the Funding 2 Available Revenue Receipts on
                 such Funding 2 Interest Payment Date are insufficient to do
                 so, towards a credit to the Funding 2 Liquidity Reserve Ledger
                 to the extent the amount standing to the credit thereof is
                 less than the Funding 2 Liquidity Reserve Fund Required
                 Amount;

         (C)     in order of their Final Repayment Dates, beginning with the
                 earliest such date (and, if two or more AAA Loan Tranches have
                 the same Final Repayment Date, in proportion to the respective
                 amounts due) to repay the principal amounts due (if any) on
                 such Funding 2 Interest Payment Date on the AAA Loan Tranches,
                 in each case subject to Rules (1) and (2) below;

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<PAGE>

         (D)     in no order of priority among them, but in proportion to the
                 respective amounts due, to repay the principal amounts due (if
                 any) on such Funding 2 Interest Payment Date on the AA Loan
                 Tranches, in each case subject to Rules (1) and (2) below;

         (E)     in no order of priority among them, but in proportion to the
                 respective amounts due, to repay the principal amounts due (if
                 any) on such Funding 2 Interest Payment Date on the A Rated
                 Loan Tranches, in each case subject to Rules (1) and (2)
                 below;

         (F)     in no order of priority among them, but in proportion to the
                 respective amounts due, to repay the principal amounts due (if
                 any) on such Funding 2 Interest Payment Date on the BBB Loan
                 Tranches, in each case subject to Rules (1) and (2) below;

         (G)     in no order of priority among them, but in proportion to the
                 respective amounts due, to repay the principal amounts due (if
                 any) on such Funding 2 Interest Payment Date on the BB Loan
                 Tranches, in each case subject to Rules (1) and (2) below;

         (H)     towards a credit to the Funding 2 Cash Accumulation Ledger
                 until the balance is equal to Funding 2's Cash Accumulation
                 Liability (as calculated after any payments are made at item
                 (C) of this priority of payments);

         (I)     in no order of priority among them, but in proportion to the
                 respective amounts due, to repay the principal amounts due (if
                 any) on such Funding 2 Interest Payment Date on the Master
                 Issuer Subordinated Loan Tranches, in each case subject to
                 Rule (1); and

         (J)     in no order of priority among them, the remainder to be
                 credited to the Funding 2 Principal Ledger.

2.2      In the applicable circumstances, the following Rules apply in
         determining the amounts to be paid under items (C), (D), (E), (F) and
         (G) of the priority of payments set out above and below:

RULE (1) -REPAYMENT DEFERRALS

(A)      If on a Funding 2 Interest Payment Date:

(1)      there is a debit balance on the BB Principal Deficiency Sub-Ledger,
         the BBB Principal Deficiency Sub-Ledger, the A Principal Deficiency
         Sub-Ledger or the AA Principal Deficiency Sub-Ledger, after
         application of the Funding 2 Available Revenue Receipts on that
         Funding 2 Interest Payment Date; or

(2)      the Adjusted Funding 2 General Reserve Fund Level is less than the
         Funding 2 General Reserve Fund Threshold; or

(3)      the aggregate Outstanding Principal Balance of Loans in the Mortgages
         Trust, in respect of which the aggregate amount in arrears is more
         than three times the Monthly Payment then due, is more than 5 per
         cent. of the aggregate Outstanding Principal Balance of Loans in the
         Mortgages Trust,

         then until the relevant circumstance as described in sub-paragraphs
         (1), (2) or (3) above has been cured or otherwise ceases to exist, if:

         (a)     any AAA Loan Tranche (whether or not such AAA Loan Tranche is
                 then due and payable) remains outstanding after making the
                 payments under item (C) of the above priority of payments,
                 then the AA Loan Tranches will not be entitled to principal
                 repayments under item (D) of the above priority of payments;

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<PAGE>

         (b)     any AAA Loan Tranche or any AA Loan Tranche (whether or not
                 such AAA Loan Tranche or AA Loan Tranche is then due and
                 payable) remains outstanding after making the payments under
                 items (C) and/or (D) of the above priority of payments, then
                 the A Loan Tranches will not be entitled to principal
                 repayments under item (E) of the priority of payments set out
                 above;

         (c)     any AAA Loan Tranche, any AA Loan Tranche or any A Loan
                 Tranche (whether or not such AAA Loan Tranche, AA Loan Tranche
                 or A Loan Tranche is then due and payable) remains outstanding
                 after making the payments under items (C), (D) and/or (E) of
                 the above priority of payments, then the BBB Loan Tranches
                 will not be entitled to principal repayments under item (F) of
                 the priority of payments set out above;

         (d)     any AAA Loan Tranche, any AA Loan Tranche, any A Loan Tranche
                 or any BBB Loan Tranche (whether or not such AAA Loan Tranche,
                 AA Loan Tranche, A Loan Tranche or BBB Loan Tranche is then
                 due and payable) remains outstanding after making the payments
                 under items (C), (D), (E) and/or (F) of the above priority of
                 payments, then the BB Loan Tranches will not be entitled to
                 principal repayments under item (G) of the priority of
                 payments set out above; and/or

         (e)     any AAA Loan Tranche, any AA Loan Tranche, any BBB Loan
                 Tranche or any BB Loan Tranche (whether or not such AAA Loan
                 Tranche, AA Loan Tranche, A Loan Tranche, BBB Loan Tranche or
                 B Loan Tranche is then due and payable) remains outstanding
                 after making the payments under items (C), (D), (E), (F)
                 and/or (G) of the above Funding 2 Pre-Enforcement Principal
                 Priority of Payments, then the Master Issuer Subordinated Loan
                 Tranches will not be entitled to principal repayments under
                 item (I) of the above Funding 2 Pre-Enforcement Principal
                 Priority of Payments.

(B)      If on a Funding 2 Interest Payment Date:

(1)      one or more Bullet Loan Tranches are within a Cash Accumulation Period
         at that time; and

(2) either:

         (a)     the Quarterly CPR is less than 10 per cent.; or

         (b)     both:

                 (i)     the Quarterly CPR is equal to or greater than 10 per
                         cent., but less than 15 per cent., and

                 (ii)    the Annualised CPR is less than 10 per cent.;

then on or before their Step-Up Dates, the Scheduled Amortisation Loan Tranches
will be entitled to principal repayments under items (C), (D), (E), (F) and (G)
of the priority of payments set out above only to the extent permitted under
the Scheduled Amortisation Repayment Restrictions.

(C)      If on a Funding 2 Interest Payment Date:

(1)      one or more Bullet Loan Tranches and/or Scheduled Amortisation
         Instalments are within a Cash Accumulation Period at that time;

(2)      the Quarterly CPR is less than 15 per cent.; and

(3)      there is a Cash Accumulation Shortfall at that time,

                                      18

<PAGE>

then, on or before their Step-Up Dates, the Original Pass-Through Loan Tranches
will be entitled to principal repayments under items (C), (D), (E), (F) and (G)
of the priority of payments above only to the extent permitted under the
Pass-Through Repayment Restrictions.

RULE (2) - REPAYMENT OF PAYABLE PASS-THROUGH LOAN TRANCHES AFTER A STEP-UP DATE

Following the occurrence of the Step-Up Date under a Rated Loan Tranche
corresponding to a particular issuance of Notes (SERIES A RATED LOAN TRANCHE)
and provided that the Funding 2 Share of the Trust Property is greater than
zero, the aggregate amount repaid on a Funding 2 Interest Payment Date in
relation to Rated Loan Tranches (other than Bullet Loan Tranches or Scheduled
Amortisation Instalments) comprising those Series A Rated Loan Tranches under
items (C), (D), (E), (F) and (G) of the priority of payments set out above
shall be limited to an amount calculated as follows:

Funds Principal 2 Funding x Outstanding Principal Balance of Series Loan
Tranche/Aggregate Outstanding Principal Balance of all Loan Tranches

where FUNDING 2 PRINCIPAL FUNDS means in respect of any Funding 2 Interest
Payment Date the sum of:

(A)      the aggregate of the following amount for each Calculation Period
         which has ended in the period from the previous Funding 2 Interest
         Payment Date to the most recent Normal Calculation Date, such amount
         being the product of:

         (1)     the Funding 2 Share Percentage as calculated at the start of
                 the relevant Calculation Period; and

         (2)     the aggregate amount of Principal Receipts received by the
                 Mortgages Trustee in the relevant Calculation Period;

(B)      the amount credited to the Funding 2 Principal Deficiency Ledger on
         the relevant Funding 2 Interest Payment Date; and

(C)      the amount, if any, credited to the Funding 2 Principal Ledger
         pursuant to item (I) of the above Funding 2 Pre-Enforcement Principal
         Priority Of Payments on the immediately preceding Funding 2 Interest
         Payment Date.

ALLOCATIONS INVOLVING RULE (2)

Where Rule (2) applies at a level of any priority of payments, the funds
available for making payments at that level shall first be allocated without
reference to Rule (2). However, if the amount so allocated to one or more Loan
Tranches exceeds the amount permitted under Rule (2) to be paid in respect of
those Loan Tranches (the CAPPED LOAN TRANCHES), the excess shall then be
reallocated among any other relevant Loan Tranches at that level using the
method of allocation as applies at that level but without reference to the
Capped Loan Tranches in calculating such reallocation. If a further such excess
arises as a result of the reallocation process, the reallocation process shall
be repeated at that level in relation to each such further excess that arises
until no further funds can be allocated at that level following which the
remaining excess shall then be applied at the next level of that priority of
payments.

3.       REPAYMENT OF LOAN TRANCHES (OTHER THAN START-UP LOAN TRANCHES)
         FOLLOWING THE OCCURRENCE OF A NON-ASSET TRIGGER EVENT BUT PRIOR TO THE
         SERVICE ON FUNDING 2 OF MASTER INTERCOMPANY LOAN ACCELERATION NOTICE
         OR THE SERVICE ON THE MASTER ISSUER OF A NOTE ACCELERATION NOTICE.

Following the occurrence of a Non-Asset Trigger Event (where no Asset Trigger
Event has occurred) under the Mortgages Trust Deed but prior to the service on
Funding 2 of a Master Intercompany Loan Acceleration Notice or the service on
the Master Issuer of a Note Acceleration Notice, the Bullet Loan Tranches and
the
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<PAGE>

Scheduled Amortisation Loan Tranches will be deemed to be Pass-Through Loan
Tranches and on each Funding 2 Interest Payment Date Funding 2 will be required
to apply Funding 2 Available Principal Receipts in the following priority:

(A)      to the extent only that monies have been drawn from the Funding 2
         General Reserve Fund to make Funding 2 Reserve Principal Payments,
         towards a credit to the Funding 2 General Reserve Ledger to the extent
         that the amount standing to the credit thereof is less than the
         Funding 2 Reserve Required Amount;

(B)      if a Liquidity Reserve Fund Rating Event has occurred and is
         continuing, (i) to the extent only that monies have been drawn from
         the Funding 2 Liquidity Reserve Fund in order to make Funding 2
         Liquidity Reserve Principal Payments or (ii) to the extent that the
         Funding 2 Liquidity Reserve Fund has not been fully funded, towards a
         credit to the Funding 2 Liquidity Reserve Ledger to the extent the
         amount standing to the credit thereof is less than the Funding 2
         Liquidity Reserve Fund Required Amount;

(C)      in order of their Final Repayment Dates, beginning with the earliest
         such date (and if two or more AAA Loan Tranches have the same final
         repayment date, in proportion to the respective amounts due) to repay
         the AAA Loan Tranches until the AAA Loan Tranches are fully repaid;

(D)      in order of their Final Repayment Dates, beginning with the earliest
         such date (and if two or more AA Loan Tranches have the same final
         repayment date, in proportion to the respective amounts due) to repay
         the AA Loan Tranches until the AA Loan Tranches are fully repaid;

(E)      in order of their Final Repayment Dates, beginning with the earliest
         such date (and if two or more A Loan Tranches have the same Final
         Repayment Date, in proportion to the respective amounts due) to repay
         the A Loan Tranches until the A Loan Tranches are fully repaid;

(F)      in order of their Final Repayment Dates, beginning with the earliest
         such date (and if two or more BBB Loan Tranches have the same Final
         Repayment Date, in proportion to the respective amounts due) to repay
         the BBB Loan Tranches until the BBB Loan Tranches are fully repaid;

(G)      in order of their Final Repayment Dates, beginning with the earliest
         such date (and if two or more BB Loan Tranches have the same Final
         Repayment Date, in proportion to the respective amounts due) to repay
         the BB Loan Tranches until the BB Loan Tranches are fully repaid; and

(H)      in order of their Final Repayment Dates, beginning with the earliest
         such date (and if two or more Subordinated Loan Tranches have the same
         Final Repayment Date, in proportion to the respective amounts due, to
         repay the Subordinated Loan Tranches until the Subordinated Loan
         Tranches are fully repaid).

4.       REPAYMENT OF LOAN TRANCHES (OTHER THAN START-UP LOAN TRANCHES)
         FOLLOWING THE OCCURRENCE OF AN ASSET TRIGGER EVENT BUT PRIOR TO THE
         SERVICE ON FUNDING 2 OF A MASTER INTERCOMPANY LOAN ACCELERATION NOTICE
         OR THE SERVICE ON THE MASTER ISSUER OF A NOTE ACCELERATION NOTICE

Following the occurrence of an Asset Trigger Event (whether or not a Non-Asset
Trigger Event occurs or has occurred) but prior to the service on Funding 2 of
a Master Intercompany Loan Acceleration Notice or the service on the Master
Issuer of a Note Acceleration Notice, the Bullet Loan Tranches and the
Scheduled Amortisation Loan Tranches will be deemed to be Pass-Through Loan
Tranches and on each Funding 2 Interest Payment Date Funding 2 will be required
to apply Funding 2 Available Principal Receipts in the following priority:

(A)      to the extent only that monies have been drawn from the Funding 2
         General Reserve Fund to make Funding 2 Reserve Principal Payments,
         towards a credit to the Funding 2 General Reserve Ledger to

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<PAGE>

         the extent the amount standing to the credit thereof is less than the
         Funding 2 Reserve Required Amount;

(B)      if a Liquidity Reserve Fund Rating Event has occurred and is
         continuing, (i) to the extent only that monies have been drawn from
         the Funding 2 Liquidity Reserve Fund in order to make Funding 2
         Liquidity Reserve Principal Payments or (ii) to the extent that the
         Funding 2 Liquidity Reserve Fund has not been fully funded, towards a
         credit to the Funding 2 Liquidity Reserve Ledger to the extent the
         amount standing to the credit thereof is less than the Funding 2
         Liquidity Reserve Fund Required Amount;

(C)      without priority among them, but in proportion to the amounts due, to
         repay the AAA Loan Tranches until the AAA Loan Tranches are fully
         repaid;

(D)      without priority among them, but in proportion to the amounts due, to
         repay the AA Loan Tranches until the AA Loan Tranches are fully
         repaid;

(E)      without priority among them, but in proportion to the amounts due, to
         repay the A Loan Tranches until the A Loan Tranches are fully repaid;

(F)      without priority among them, but in proportion to the amounts due, to
         repay the BBB Loan Tranches until the BBB Loan Tranches are fully
         repaid;

(G)      without priority among them, but in proportion to the amounts due, to
         repay the BB Loan Tranches until the BB Loan Tranches are fully
         repaid; and

(H)      without priority among them, but in proportion to the amounts due, to
         repay the Subordinated Loan Tranches, until the Master Issuer
         Subordinated Loan Tranches are fully repaid.

5.       REPAYMENT OF LOAN TRANCHES (OTHER THAN START-UP LOAN TRANCHES) AFTER
         ACCELERATION OF THE NOTES BUT PRIOR TO MASTER INTERCOMPANY LOAN
         ACCELERATION

If a Note Acceleration Notice is served on the Master Issuer, then that will
not result in automatic enforcement of the Funding 2 Security under the Funding
2 Deed Of Charge. In those circumstances, however, the Bullet Loan Tranches and
any Scheduled Amortisation Loan Tranches will be deemed to be Pass-Through Loan
Tranches and on each Funding 2 Interest Payment Date Funding 2 will be required
to apply Funding 2 Available Principal Receipts in the following priority:

(A)      to the extent only that monies have been drawn from the Funding 2
         General Reserve Fund to make Funding 2 Reserve Principal Payments,
         towards a credit to the Funding 2 General Reserve Ledger to the extent
         the amount standing to the credit thereof is less than the Funding 2
         Reserve Required Amount;

(B)      if a Liquidity Reserve Fund Rating Event has occurred and is
         continuing, (i) to the extent only that monies have been drawn from
         the Funding 2 Liquidity Reserve Fund in order to make the Funding 2
         Liquidity Reserve Principal Payments or (ii) to the extent that the
         Funding 2 Liquidity Reserve Fund has not been fully funded, towards a
         credit to the Funding 2 Liquidity Reserve Ledger to the extent the
         amount standing to the credit thereof is less than the Funding 2
         Liquidity Reserve Fund Required Amount;

(C)      without priority among them, but in proportion to the amounts due, to
         repay the AAA Loan Tranches until the AAA Loan Tranches are fully
         repaid;

(D)      without priority among them, but in proportion to the amounts due, to
         repay the AA Loan Tranches until the AA Loan Tranches are fully
         repaid;

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<PAGE>

(E)      without priority among them, but in proportion to the amounts due, to
         repay the A Loan Tranches until the A Loan Tranches are fully repaid;

(F)      without priority among them, but in proportion to the amounts due, to
         repay the BBB Loan Tranches until the BBB Loan Tranches are fully
         repaid;

(G)      without priority among them, but in proportion to the amounts due, to
         repay the BB Loan Tranches until the BB Loan Tranches are fully
         repaid; and

(H)      without priority among them, but in proportion to the amounts due, to
         repay the Subordinated Loan Tranches until the Subordinated Loan
         Tranches are fully repaid.

6.       REPAYMENT OF LOAN TRANCHES (OTHER THAN START-UP LOAN TRANCHES) WHEN
         FUNDING 2 RECEIVES AN AMOUNT OUTSTANDING UNDER THE MASTER INTERCOMPANY
         LOAN

If either:

(A)      Funding 2 receives a payment from the Seller and/or Funding 1 in the
         circumstances set out in clause 7 of the Mortgages Trust Deed; or

(B)      the proceeds of a New Loan Tranche (other than a Start-Up Loan
         Tranche) or a New Intercompany Loan are to be used to refinance
         another Loan Tranche in the circumstances set out in clause 4 of the
         Master Intercompany Loan Agreement,

then Funding 2 will not apply the relevant payment as described in paragraphs 2
to 5 above. Instead, Funding 2 will apply the full repayment amount to repay
the relevant Loan Tranche.

                                    PART 3

                FUNDING 2 POST-ENFORCEMENT PRIORITY OF PAYMENTS

All monies received or recovered by the Funding 2 Security Trustee or the
Receiver in respect of the Funding 2 Security subsequent to the Funding 2
Security Trustee serving a Master Intercompany Loan Acceleration Notice on
Funding 2, will be applied (save to the extent required by law) by the Funding
2 Security Trustee or the Receiver on each Funding 2 Interest Payment Date in
accordance with the following order of priority (in each case only and to the
extent that payments or provision of a higher priority have been made in full):

(A)      without priority among them, but in proportion to the respective
         amounts due, to pay amounts due to:

         (i)     the Funding 2 Security Trustee and any Receiver appointed by
                 the Funding 2 Security Trustee, together with interest and any
                 amount in respect of VAT on those amounts, and to provide for
                 any amounts due or to become due to the Funding 2 Security
                 Trustee and the Receiver in the following Funding 2 Interest
                 Period under the Funding 2 Deed Of Charge; and

         (ii)    the Master Issuer in respect of the Master Issuer's
                 obligations specified in items (A) and (B) of the Master
                 Issuer Post-Enforcement Priority of Payments;

(B)      without priority among them but in proportion to the respective
         amounts due, towards payment of amounts (if any) due by Funding 2 to
         the Account Bank under the terms of the Bank Account Agreement, to the
         Cash Manager under the terms of the Cash Management Agreement and to
         the Corporate Services Provider under the Corporate Services
         Agreement;

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<PAGE>

(C)      towards payment of amounts (if any) due to the Funding 2 Swap Provider
         under the Funding 2 Swap Agreement (including any termination payment
         but excluding any Funding 2 Swap Excluded Termination Amount);

(D)      without priority among them, but in proportion to the respective
         amounts due, towards payments of interest, principal and fees due and
         payable on the AAA Loan Tranches;

(E)      without priority among them, but in proportion to the respective
         amounts due, towards payments of interest, principal and fees due and
         payable on the AA Loan Tranches;

(F)      without priority among them, but in proportion to the respective
         amounts due, towards payments of interest, principal and fees due and
         payable on the A Loan Tranches;

(G)      without priority among them, but in proportion to the respective
         amounts due, towards payments of interest, principal and fees due and
         payable on the BBB Loan Tranches;

(H)      without priority among them, but in proportion to the respective
         amounts due, towards payments of interest, principal and fees due and
         payable on the BB Loan Tranches;

(I)      without priority among them, but in proportion to the respective
         amounts due, towards payments of interest, principal and fees due and
         payable on the Subordinated Loan Tranches;

(J)      by way of payment of the Senior Fee towards payment of any amounts due
         to the Master Issuer in respect of its obligations (if any) to make a
         termination payment to the Master Issuer Swap Provider (but excluding
         any Master Issuer Swap Excluded Termination Amount);

(K)      without priority among them but in proportion to the respective
         amounts due, to pay (without double counting):

         (i)     by way of payment of the Senior Fee the Master Issuer in
                 respect of the Master Issuer's obligations (if any) to pay any
                 Master Issuer Swap Excluded Termination Amount to a Master
                 Issuer Swap Provider as a result of a Master Issuer Swap
                 Provider Default or a Master Issuer Swap Provider Downgrade
                 Termination Event (as appropriate);

         (ii)    by way of payment of the Senior Fee the Master Issuer in
                 respect of any other amounts due and payable under the Master
                 Intercompany Loan Agreement and not otherwise provided for in
                 this priority of payments; and

         (iii)   after the occurrence of the Funding 2 Swap Provider Default or
                 the Funding 2 Swap Provider Downgrade Termination Event, any
                 termination amount due to and payable to the Funding 2 Swap
                 Provider by Funding 2 under the Funding 2 Swap Agreement;

(L)      without priority among them but in proportion to the amounts then due,
         towards payment of:

         (i)     amounts due towards payment of interest, principal and fees
                 due and payable on the Start-Up Loan Tranches; and

         (ii)    amounts due to the Funding 2 Start-Up Loan Provider under each
                 Funding 2 Start-Up Loan Agreement; and

(M)      towards payment to the Seller of any Deferred Consideration.

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