EXHIBIT 1


                 STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.,
                                    DEPOSITOR

                         U.S. BANK NATIONAL ASSOCIATION,
                                     TRUSTEE

                     WELLS FARGO BANK, NATIONAL ASSOCIATION,
                  MASTER SERVICER AND SECURITIES ADMINISTRATOR

                                       and

                            EMC MORTGAGE CORPORATION
                               SELLER AND COMPANY



                         POOLING AND SERVICING AGREEMENT

                            Dated as of July 1, 2004



                  Structured Asset Mortgage Investments II Inc.
            Prime Mortgage Trust, Mortgage Pass-Through Certificates

                                  Series 2004-1


<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          Page
<S>                                                                                                       <C>
ARTICLE I
Definitions..................................................................................................2
Section 1.01     Calculation of LIBOR.......................................................................37
ARTICLE II
Conveyance of Mortgage Loans; Original Issuance of Certificates.............................................38
Section 2.01     Conveyance of Mortgage Loans to Trustee....................................................38
Section 2.02     Acceptance of Mortgage Loans by Trustee....................................................41
Section 2.03     Assignment of Interest in the Mortgage Loan Purchase Agreement.............................43
Section 2.04     Substitution of Mortgage Loans.............................................................44
Section 2.05     Issuance of Certificates...................................................................45
Section 2.06     Representations and Warranties Concerning the Depositor....................................46
ARTICLE III
Administration and Servicing of Mortgage Loans..............................................................48
Section 3.01     Master Servicer............................................................................48
Section 3.02     REMIC-Related Covenants....................................................................49
Section 3.03     Monitoring of Servicers....................................................................49
Section 3.04     Fidelity Bond..............................................................................50
Section 3.05     Power to Act; Procedures...................................................................50
Section 3.06     Due-on-Sale Clauses; Assumption Agreements.................................................51
Section 3.07     Release of Mortgage Files..................................................................51
Section 3.08     Documents, Records and Funds in Possession of Master Servicer To Be Held for Trustee.......52
Section 3.09     Standard Hazard Insurance and Flood Insurance Policies.....................................53
Section 3.10     Presentment of Claims and Collection of Proceeds...........................................54
Section 3.11     Maintenance of the Primary Mortgage Insurance Policies.....................................54
Section 3.12     Trustee to Retain Possession of Certain Insurance Policies and Documents...................54
Section 3.13     Realization Upon Defaulted Mortgage Loans..................................................55
Section 3.14     Compensation for the Master Servicer.......................................................55
Section 3.15     REO Property...............................................................................55
Section 3.16     Annual Officer's Certificate as to Compliance..............................................56
Section 3.17     Annual Independent Accountant's Servicing Report...........................................56
Section 3.18     Reports Filed with Securities and Exchange Commission......................................57
Section 3.19     The Company................................................................................58
Section 3.20     UCC........................................................................................58
Section 3.21     Optional Purchase of Defaulted Mortgage Loans..............................................58
ARTICLE IV
Accounts....................................................................................................59
Section 4.01     Protected Accounts.........................................................................59
Section 4.02     Master Servicer Collection Account.........................................................60
Section 4.03     Permitted Withdrawals and Transfers from the Master Servicer Collection Account............61
Section 4.04     Distribution Account.......................................................................62
Section 4.05     Permitted Withdrawals and Transfers from the Distribution Account..........................63
</TABLE>


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<TABLE>
<S>                                                                                                       <C>
ARTICLE V
Certificates................................................................................................65
Section 5.01     Certificates...............................................................................65
Section 5.02     Registration of Transfer and Exchange of Certificates......................................72
Section 5.03     Mutilated, Destroyed, Lost or Stolen Certificates..........................................75
Section 5.04     Persons Deemed Owners......................................................................75
Section 5.05     Transfer Restrictions on Residual Certificates.............................................76
Section 5.06     Restrictions on Transferability of Certificates............................................77
Section 5.07     ERISA Restrictions.........................................................................77
Section 5.08     Rule 144A Information......................................................................79
ARTICLE VI
Payments to Certificateholders..............................................................................80
Section 6.01     Distributions on the Certificates..........................................................80
Section 6.02     Allocation of Losses.......................................................................85
Section 6.03     Payments...................................................................................87
Section 6.04     Statements to Certificateholders...........................................................88
Section 6.05     Monthly Advances...........................................................................91
Section 6.06     Compensating Interest Payments.............................................................91
Section 6.07     Policy Matters.............................................................................91
Section 6.08     Reserve Fund...............................................................................94
Section 6.09     Rounding Account...........................................................................94
Section 6.10     Principal Distributions on the Insured Certificates........................................95
ARTICLE VII
The Master Servicer........................................................................................100
Section 7.01     Liabilities of the Master Servicer........................................................100
Section 7.02     Merger or Consolidation of the Master Servicer............................................100
Section 7.03     Indemnification of the Trustee, the Master Servicer and the Securities Administrator......100
Section 7.04     Limitations on Liability of the Master Servicer and Others................................101
Section 7.05     Master Servicer Not to Resign.............................................................102
Section 7.06     Successor Master Servicer.................................................................102
Section 7.07     Sale and Assignment of Master Servicing...................................................102
ARTICLE VIII
Default....................................................................................................104
Section 8.01     Events of Default.........................................................................104
Section 8.02     Trustee to Act; Appointment of Successor..................................................106
Section 8.03     Notification to Certificateholders........................................................107
Section 8.04     Waiver of Defaults........................................................................107
Section 8.05     List of Certificateholders................................................................107
ARTICLE IX
Concerning the Trustee and the Securities Administrator....................................................108
Section 9.01     Duties of Trustee.........................................................................108
Section 9.02     Certain Matters Affecting the Trustee and the Securities Administrator....................110
Section 9.03     Trustee and Securities Administrator Not Liable for Certificates or Mortgage Loans........112
Section 9.04     Trustee and Securities Administrator May Own Certificates.................................112
</TABLE>


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<TABLE>
<S>                                                                                                       <C>
Section 9.05     Trustee's and Securities Administrator's Fees and Expenses................................112
Section 9.06     Eligibility Requirements for Trustee and Securities Administrator.........................113
Section 9.07     Insurance.................................................................................113
Section 9.08     Resignation and Removal of the Trustee and Securities Administrator.......................114
Section 9.09     Successor Trustee and Successor Securities Administrator..................................115
Section 9.10     Merger or Consolidation of Trustee or Securities Administrator............................115
Section 9.11     Appointment of Co-Trustee or Separate Trustee.............................................115
Section 9.12     Federal Information Returns and Reports to Certificateholders; REMIC Administration.......117
ARTICLE X
Termination................................................................................................119
Section 10.01    Termination Upon Repurchase by the Depositor or its Designee or Liquidation of the
                 Mortgage Loans............................................................................119
Section 10.02    Additional Termination Requirements.......................................................121
ARTICLE XI
Miscellaneous Provisions...................................................................................123
Section 11.01    Intent of Parties.........................................................................123
Section 11.02    Amendment.................................................................................123
Section 11.03    Recordation of Agreement..................................................................124
Section 11.04    Limitation on Rights of Certificateholders................................................124
Section 11.05    Acts of Certificateholders................................................................125
Section 11.06    Governing Law.............................................................................126
Section 11.07    Notices...................................................................................126
Section 11.08    Severability of Provisions................................................................127
Section 11.09    Successors and Assigns....................................................................127
Section 11.10    Article and Section Headings..............................................................127
Section 11.11    Counterparts..............................................................................127
Section 11.12    Notice to Rating Agencies.................................................................127
Section 11.13    Radian Rights.............................................................................128
</TABLE>


                                    EXHIBITS

Exhibit A-1           -    Form of Class A Certificates
Exhibit A-2           -    Form of Class B Certificates
Exhibit A-3           -    Form of Class PO Certificates
Exhibit A-4           -    Form of Class II-X-1 Certificates
Exhibit A-5           -    Form of Class R Certificates
Exhibit B             -    Mortgage Loan Schedule
Exhibit C             -    [Reserved]
Exhibit D             -    Request for Release of Documents
Exhibit E             -    Form of Affidavit pursuant to Section 860E(e)(4)
Exhibit F-1           -    Form of Investment Letter
Exhibit F-2           -    Form of Rule 144A and Related Matters Certificate
Exhibit G             -    Form of Custodial Agreement
Exhibit H-1 to H-5    -    Servicing Agreements
Exhibit I             -    Assignment Agreements
Exhibit J             -    Mortgage Loan Purchase Agreement
Exhibit K             -    Certificate Guaranty Insurance Policy



                                     -iii-
<PAGE>


                         POOLING AND SERVICING AGREEMENT

      Pooling and Servicing Agreement dated as of July 1, 2004, among Structured
Asset Mortgage  Investments II Inc., a Delaware  corporation,  as depositor (the
"Depositor"),  U.S. Bank National  Association,  a national banking association,
not in its  individual  capacity  but solely as trustee (the  "Trustee"),  Wells
Fargo Bank,  National  Association,  as master  servicer (in such capacity,  the
"Master  Servicer")  and as  securities  administrator  (in such  capacity,  the
"Securities  Administrator"),  and EMC Mortgage Corporation,  as seller (in such
capacity, the "Seller") and as company (in such capacity, the "Company").

                              PRELIMINARY STATEMENT

      On or prior to the Closing Date, the Depositor acquired the Mortgage Loans
from the Seller. On the Closing Date, the Depositor will sell the Mortgage Loans
and  certain  other  property  to the Trust Fund and  receive  in  consideration
therefor Certificates evidencing the entire beneficial ownership interest in the
Trust Fund.

      The Trustee on behalf of the Trust  shall make an election  for the assets
constituting  REMIC I to be treated for federal  income tax purposes as a REMIC.
On the Startup Day, the REMIC I Regular  Interests  will be designated  "regular
interests" in such REMIC and the Class R-I  Certificate  will be designated  the
"residual interest" in such REMIC.

      The Trustee on behalf of the Trust  shall make an election  for the assets
constituting  REMIC II to be treated for federal income tax purposes as a REMIC.
On the Startup Day, the REMIC II Regular  Interests will be designated  "regular
interests" in such REMIC and the Class R-II  Certificate  will be designated the
"residual interest" in such REMIC.

      The Trustee on behalf of the Trust  shall make an election  for the assets
constituting REMIC III to be treated for federal income tax purposes as a REMIC.
On the  Startup  Day,  the REMIC III  Regular  Certificates  will be  designated
"regular  interests"  in such  REMIC and the  Class  R-III  Certificate  will be
designated the "residual interest" in such REMIC.

      The Mortgage  Loans will have an Outstanding  Principal  Balance as of the
Cut-off  Date,  after  deducting  all  Scheduled  Principal due on or before the
Cut-off Date, of approximately $294,347,747. The initial principal amount of the
Certificates will not exceed such Outstanding Principal Balance.

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


<PAGE>


                                    ARTICLE I
                                   Definitions

      Whenever used in this Agreement,  the following words and phrases,  unless
otherwise  expressly  provided or unless the context otherwise  requires,  shall
have the meanings specified in this Article.

      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 Trustee or the
Master Servicer  (except in its capacity as successor to a Servicer),  or (y) as
provided in the applicable Servicing Agreement,  to the extent applicable to any
Servicer, but in no event below the standard set forth in clause (x).

      ACCOUNT:  The Master Servicer Collection Account and the Protected Account
as the context may require.

      ACCRUED  CERTIFICATE  INTEREST:  For any Certificate for any  Distribution
Date,  the interest  accrued during the related  Interest  Accrual Period at the
applicable Pass-Through Rate on the Current Principal Amount, or Notional Amount
in the case of any Interest Only  Certificate,  of such Certificate  immediately
prior to such  Distribution  Date, on the basis of a 360-day year  consisting of
twelve  30-day  months,  less  (i) in the  case of a  Senior  Certificate,  such
Certificate's  share of any Net  Interest  Shortfall  from the related  Mortgage
Loans and,  after the  Cross-Over  Date,  the  interest  portion of any Realized
Losses on the  related  Mortgage  Loans  allocated  thereto in  accordance  with
Section  6.02(i)  and  (ii)  in the  case  of a  Subordinate  Certificate,  such
Certificate's  share of any Net  Interest  Shortfall  from the related  Mortgage
Loans and the interest  portion of any Realized  Losses on the related  Mortgage
Loans allocated thereto in accordance with Section 6.02(i).

      ADJUSTABLE RATE CERTIFICATES: The Class I-A-7 Certificates and Class I-A-8
Certificates.

      ADJUSTMENT  AMOUNT:  The amount,  if any, by which the Special Hazard Loss
Amount (without giving effect to the deduction of the Adjustment Amount for such
anniversary) exceeds the lesser of (A) an amount calculated by the Depositor and
approved by the Rating  Agencies,  which amount shall not be less than $500,000,
and (B) the greater of (x) 1.0% (or if greater than 1.0%, the highest percentage
of Mortgage Loans by principal  balance  secured by Mortgaged  Properties in any
California zip code) of the  outstanding  principal  balance of all the Mortgage
Loans on the Distribution  Date  immediately  preceding such anniversary and (y)
twice the  outstanding  principal  balance  of the  Mortgage  Loan which has the
largest  outstanding  principal  balance on the  Distribution  Date  immediately
preceding such anniversary.

      AFFILIATE:  As to any Person, any other Person controlling,  controlled by
or under common  control with such Person.  "Control"  means the power to direct
the management and policies of a Person, directly or indirectly, whether through
ownership  of voting  securities,  by contract or  otherwise.  "Controlled"  and
"Controlling" have meanings correlative to the foregoing. The


                                      -2-
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Trustee may  conclusively  presume  that a Person is not an Affiliate of another
Person unless a Responsible  Officer of the Trustee has actual  knowledge to the
contrary.

      AGREEMENT:  This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.

      ALLOCABLE SHARE: With respect to each Class of Subordinate Certificates:

      (a) as to any  Distribution  Date and  amounts  distributable  pursuant to
clauses (i) and (iv) of the definition of Subordinate  Optimal  Principal Amount
for each  Subgroup,  the fraction,  expressed as a percentage,  the numerator of
which is the Current Principal Amount of such Class and the denominator of which
is the  aggregate  Current  Principal  Amount of all Classes of the  Subordinate
Certificates; and

      (b) as to any  Distribution  Date and  amounts  distributable  pursuant to
clauses (ii), (iii) and (v) of the definition of Subordinate  Optimal  Principal
Amount, and as to each Class of Subordinate  Certificates  (other than the Class
of Subordinate  Certificates having the lowest numerical designation as to which
the Class Prepayment Distribution Trigger shall not be applicable) for which (x)
the related Class  Prepayment  Distribution  Trigger has been  satisfied on such
Distribution  Date,  the fraction,  expressed as a percentage,  the numerator of
which is the Current Principal Amount of such Class and the denominator of which
is the aggregate  Current  Principal  Amount of all such Classes of  Subordinate
Certificates and (y) the related Class Prepayment  Distribution  Trigger has not
been satisfied on such Distribution Date, 0%; provided that if on a Distribution
Date, the Current Principal Amount of any Class of Subordinate  Certificates for
which the related Class  Prepayment  Distribution  Trigger was satisfied on such
Distribution Date is reduced to zero, any amounts  distributed  pursuant to this
clause (b), to the extent of such Class's  remaining  Allocable Share,  shall be
distributed to the remaining Classes of Subordinate  Certificates  which satisfy
the  related  Class  Prepayment   Distribution  Trigger  and  to  the  Class  of
Subordinate  Certificates  having  the lowest  numerical  Class  designation  in
reduction of their respective  Current  Principal  Amounts in the order of their
numerical Class designations.

      APPLICABLE CREDIT RATING: For any long-term deposit or security,  a credit
rating of AAA in the case of each of S&P and Fitch Ratings or Aaa in the case of
Moody's. For any short-term deposit or security, or a rating of A-l+ in the case
of each of S&P and Fitch Ratings or P-1 in the case of Moody's.

      APPLICABLE  STATE LAW: For  purposes of Section  9.12(d),  the  Applicable
State Law shall be (a) the law of the State of New York and (b) such other state
law  whose  applicability  shall  have  been  brought  to the  attention  of the
Securities  Administrator,  Radian  and the  Trustee by either (i) an Opinion of
Counsel  reasonably  acceptable to the Securities  Administrator and the Trustee
delivered to it by the Master Servicer or the Depositor,  or (ii) written notice
from the appropriate taxing authority as to the applicability of such state law.

      APPRAISED  VALUE:  For any Mortgaged  Property related to a Mortgage Loan,
the amount set forth as the  appraised  value of such  Mortgaged  Property in an
appraisal made for the mortgage originator in connection with its origination of
the related Mortgage Loan.


                                      -3-
<PAGE>

      ASSIGNMENT  AGREEMENTS:  The  agreements  attached  hereto as  Exhibit  I,
whereby the Servicing Agreements were assigned to the Trustee for the benefit of
the Certificateholders.

      ASSIGNMENT OF PROPRIETARY  LEASE:  With respect to a Cooperative Loan, the
assignment of the related Cooperative Lease from the Mortgagor to the originator
of the Cooperative Loan.

      ASSUMED FINAL  DISTRIBUTION DATE: August 25, 2034, or if such day is not a
Business Day, the next succeeding Business Day.

      AVAILABLE FUNDS: With respect to any Distribution Date, an amount equal to
the aggregate of the following  amounts with respect to the Mortgage Loans:  (a)
all  previously  undistributed  payments on account of principal  (including the
principal portion of Scheduled Payments, Principal Prepayments and the principal
portion of Net Liquidation Proceeds) and all previously  undistributed  payments
on account of interest  received  after the Cut-off  Date and on or prior to the
related  Determination Date, (b) any Monthly Advances and Compensating  Interest
Payments  by  the  Servicers  or  the  Master  Servicer  with  respect  to  such
Distribution  Date and (c) any  reimbursed  amount in connection  with losses on
investments of deposits in an account, except:

            (i) all payments that were due on or before the Cut-off Date;

            (ii) all Principal  Prepayments  and Liquidation  Proceeds  received
after the applicable Prepayment Period;

            (iii) all payments, other than Principal Prepayments, that represent
early  receipt of Scheduled  Payments due on a date or dates  subsequent  to the
related Due Date;

            (iv) amounts received on particular  Mortgage Loans as late payments
of principal or interest and respecting which, and to the extent that, there are
any unreimbursed Monthly Advances;

            (v)  amounts   representing   Monthly  Advances   determined  to  be
Nonrecoverable Advances;

            (vi) any  investment  earnings  on  amounts on deposit in the Master
Servicer  Collection Account and the Distribution  Account and amounts permitted
to be withdrawn from the Master Servicer Collection Account and the Distribution
Account pursuant to this Agreement;

            (vii) amounts  needed to pay the Servicing  Fees or to reimburse any
Servicer or the Master  Servicer for amounts due under the applicable  Servicing
Agreement  and this  Agreement to the extent such amounts have not been retained
by, or paid previously to, such Servicer or the Master Servicer;

            (viii)   amounts  needed  to  pay  any  fees  with  respect  to  any
lender-paid primary mortgage insurance policy; and

            (ix) any expenses or other amounts  reimbursable to the Trustee, the
Securities  Administrator  and the  Custodian  pursuant  to  Section  7.04(c) or
Section 9.05.


                                      -4-
<PAGE>

      AVERAGE LOSS SEVERITY  PERCENTAGE:  With respect to any Distribution Date,
the  percentage  equivalent of a fraction,  the numerator of which is the sum of
the Loss Severity  Percentages  for each Mortgage Loan which had a Realized Loss
and the  denominator of which is the number of Mortgage Loans which had Realized
Losses.

      BANKRUPTCY CODE: The United States Bankruptcy Code, as amended as codified
in 11 U.S.C.ss.ss.101-1330.

      BANKRUPTCY COVERAGE TERMINATION DATE: The Distribution Date upon which the
Bankruptcy  Loss  Amount has been  reduced to zero or a negative  number (or the
Cross-Over Date, if earlier).

      BANKRUPTCY LOSS AMOUNT: On each  Distribution  Date,  $100,000,  minus the
aggregate amount of previous Bankruptcy Losses.

      BANKRUPTCY  LOSS:  With  respect  to  any  Mortgage  Loan,  any  Deficient
Valuation or Debt Service Reduction related to such Mortgage Loan as reported by
the applicable Servicer to the Master Servicer.

      BOOK-ENTRY CERTIFICATES: Initially, all Classes of Certificates other than
the Private Certificates and the Residual Certificates.

      BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which the New York Stock  Exchange  or Federal  Reserve is closed or on which
banking  institutions  in the  jurisdiction  in which the Trustee,  Radian,  the
Master  Servicer,  any Servicer or the Securities  Administrator  is located are
authorized or obligated by law or executive order to be closed.

      CALENDAR  QUARTER:  January 1 to March 31,  April 1 to June 30,  July 1 to
September 30, or October 1 to December 31, as applicable.

      CERTIFICATE: Any mortgage pass-through certificate evidencing a beneficial
ownership  interest in the Trust Fund signed and countersigned by the Trustee in
substantially  the forms  annexed  hereto as Exhibits A-1, A-2, A-3, A-4 and A-5
with the blanks therein appropriately completed.

      CERTIFICATE OWNER: Any Person who is the beneficial owner of a Certificate
registered in the name of the Depository or its nominee.

      CERTIFICATE REGISTER: The register maintained pursuant to Section 5.02.

      CERTIFICATEHOLDER: A Holder of a Certificate.

      CLASS:  With respect to the  Certificates,  I-A-1,  I-A-2,  I-A-3,  I-A-4,
I-A-5, I-A-6, I-A-7, I-A-8, I-PO, II-A-1,  II-A-2,  II-A-3,  II-PO, II-X-1, R-I,
R-II, R-III, B-1, B-2, B-3, B-4, B-5 and B-6.

      CLASS I-PO CERTIFICATE CASH SHORTFALL: As defined in Section 6.01(a)(vi).


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<PAGE>

      CLASS   II-PO   CERTIFICATE   CASH   SHORTFALL:   As  defined  in  Section
6.01(a)(vii).

      CLASS I-PO  CERTIFICATE  DEFERRED  AMOUNT:  As to each  Distribution  Date
through the  Cross-Over  Date,  the  aggregate of all amounts  allocable on such
dates to the Class I-PO  Certificates  in respect  of the  principal  portion of
Realized  Losses in respect of Discount  Mortgage  Loans in Subgroup I-1 and the
Class I-PO  Certificate Cash Shortfall and all amounts  previously  allocated in
respect of such losses and such shortfalls to the Class I-PO  Certificates,  and
not distributed on prior Distribution Dates.

      CLASS II-PO  CERTIFICATE  DEFERRED AMOUNT:  As to each  Distribution  Date
through the  Cross-Over  Date,  the  aggregate of all amounts  allocable on such
dates to the Class II-PO  Certificates  in respect of the  principal  portion of
Realized  Losses in respect of Discount  Mortgage Loans in Subgroup II-1 and the
Class II-PO Certificate Cash Shortfall and all amounts  previously  allocated in
respect of such losses and such shortfalls to the Class II-PO Certificates,  and
not distributed on prior Distribution Dates.

      CLASS  PO  CERTIFICATE   CASH  CERTIFICATE   SHORTFALL:   The  Class  I-PO
Certificate  Cash Shortfall or the Class II-PO  Certificate  Cash Shortfall,  as
applicable.

      CLASS  PO  CERTIFICATE  PRINCIPAL  DISTRIBUTION  AMOUNT:  The  Class  I-PO
Certificates and the Class II-PO Certificates shall be entitled to distributions
from Subgroup I-1 and Subgroup II-2, respectively.  For each Class of Class I-PO
Certificates  or  II-PO  Certificates,  as  applicable,  with  respect  to  each
Distribution Date will be an amount equal to the sum of:

            (i) the  applicable  PO  Percentage  of all  scheduled  payments  of
      principal  due on each Discount  Mortgage Loan in the related  Subgroup on
      the related Due Date as specified in the amortization schedule at the time
      applicable  thereto (after adjustment for previous  principal  prepayments
      but before any adjustment to such  amortization  schedule by reason of any
      bankruptcy or similar  proceeding or any  moratorium or similar  waiver or
      grace period);

            (ii) the applicable PO Percentage of the Scheduled Principal Balance
      of each Discount  Mortgage Loan in related  Subgroup which was the subject
      of a  prepayment  in full  received  by the  Master  Servicer  during  the
      applicable Prepayment Period;

            (iii) the  applicable PO Percentage  of all partial  prepayments  of
      principal of each Discount  Mortgage Loan in the related Subgroup received
      during the applicable Prepayment Period;

            (iv) the lesser of (a) the  applicable  PO  Percentage of the sum of
      (A) all Net Liquidation  Proceeds  allocable to principal on each Discount
      Mortgage Loan in the related  Subgroup which became a Liquidated  Mortgage
      Loan during the related  Prepayment Period (other than a Discount Mortgage
      Loan described in clause (B)) and (B) the Scheduled  Principal  Balance of
      each such Discount  Mortgage Loan in the related Subgroup  purchased by an
      insurer from the Trustee during the related  Prepayment Period pursuant to
      the related Primary Mortgage  Insurance Policy, if any, or otherwise;  and
      (b) the applicable PO Percentage of the sum of (A) the Scheduled Principal
      Balance of each


                                      -6-
<PAGE>

      Discount  Mortgage Loan in the related  Subgroup which became a Liquidated
      Mortgage Loan during the related  Prepayment Period (other than a Discount
      Mortgage  Loan  described in clause (B)) and (B) the  Scheduled  Principal
      Balance  of each  such  Mortgage  Loan in the  related  Subgroup  that was
      purchased  by an insurer  from the Trustee  during the related  Prepayment
      Period pursuant to the related Primary Mortgage  Insurance Policy, if any,
      or otherwise; and

            (v) the  applicable  PO  Percentage  of the sum of (a) the Scheduled
      Principal  Balance of each Discount  Mortgage Loan in the related Subgroup
      which was repurchased by the Seller in connection  with such  Distribution
      Date and (b) the  difference,  if any,  between  the  Scheduled  Principal
      Balance of a Discount  Mortgage Loan in the related Subgroup that has been
      replaced by the Seller with a substitute  Discount  Mortgage Loan pursuant
      to this  Agreement  in  connection  with  such  Distribution  Date and the
      Scheduled Principal Balance of such substitute Discount Mortgage Loan.

      CLASS  PREPAYMENT   DISTRIBUTION  TRIGGER:  For  a  Class  of  Subordinate
Certificates  for any  Distribution  Date,  the  Class  Prepayment  Distribution
Trigger is satisfied if the fraction (expressed as a percentage),  the numerator
of which is the aggregate  Current Principal Amount of such Class and each Class
of Subordinate  Certificates subordinate thereto, if any, and the denominator of
which is the Scheduled  Principal Balance of all of the Mortgage Loans as of the
related Due Date, equals or exceeds such percentage calculated as of the Closing
Date.

      CLASS  R  CERTIFICATES:   The  Class  R-I,  Class  R-II  and  Class  R-III
Certificates.

      CLOSING DATE: July 30, 2004.

      CODE: The Internal Revenue Code of 1986, as amended.

      COMPENSATING INTEREST PAYMENT: As defined in Section 6.06.

      COOPERATIVE:  A private,  cooperative  housing  corporation  which owns or
leases land and all or part of a building or  buildings,  including  apartments,
spaces used for commercial  purposes and common areas therein and whose board of
directors authorizes, among other things, the sale of Cooperative Stock.

      COOPERATIVE APARTMENT: A dwelling unit in a multi-dwelling  building owned
or leased by a Cooperative,  which unit the Mortgagor has an exclusive  right to
occupy pursuant to the terms of a proprietary lease or occupancy agreement.

      COOPERATIVE  LEASE:  With respect to a Cooperative  Loan, the  proprietary
lease or occupancy agreement with respect to the Cooperative  Apartment occupied
by the Mortgagor and relating to the related  Cooperative  Stock, which lease or
agreement  confers an exclusive right to the holder of such Cooperative Stock to
occupy such apartment.

      COOPERATIVE  LOAN:  Any  of  the  Mortgage  Loans  made  in  respect  of a
Cooperative  Apartment,  evidenced  by a  Mortgage  Note  and  secured  by (i) a
Security  Agreement,  (ii) the related  Cooperative Stock Certificate,  (iii) an
assignment of the Cooperative  Lease, (iv) financing  statements and (v) a stock
power (or other similar instrument), and ancillary thereto, a


                                      -7-
<PAGE>

recognition  agreement  between  the  Cooperative  and  the  originator  of  the
Cooperative  Loan,  each of which was  transferred  and  assigned to the Trustee
pursuant  to  Section  2.01 and are from  time to time held as part of the Trust
Fund.

      COOPERATIVE  STOCK:  With  respect  to  a  Cooperative  Loan,  the  single
outstanding class of stock,  partnership  interest or other ownership instrument
in the related Cooperative.

      COOPERATIVE  STOCK  CERTIFICATE:  With respect to a Cooperative  Loan, the
stock certificate or other instrument evidencing the related Cooperative Stock.

      CORRESPONDING  CERTIFICATES:   With  respect  to  each  REMIC  II  Regular
Interest, the Class with the same designation.

      CORPORATE  TRUST  OFFICE:  The  office  of the  Trustee  at  which  at any
particular time its corporate trust business is administered,  which office,  at
the date of the  execution of this  Agreement,  is located at US Bank  Corporate
Trust Services,  One Federal Street,  3rd Floor,  Boston,  Massachusetts  02110,
Attention:  Corporate Trust Services/PRIME  2004-1. For purposes of registration
and transfer and exchange only,  the Corporate  Trust Office shall be located at
U.S. Bank National  Association,  60 Livingston  Avenue,  Bond Drop Window,  St.
Paul, Minnesota 55107.

      CROSS-OVER  DATE:  The  first  Distribution  Date on which  the  aggregate
Current  Principal  Amount of the Subordinate  Certificates  has been reduced to
zero (giving effect to all distributions on such Distribution Date).

      CURRENT PRINCIPAL AMOUNT:  With respect to any Certificate  (other than an
Interest Only  Certificate) as of any Distribution  Date, the initial  principal
amount of such  Certificate,  and  reduced  by (i) all  amounts  distributed  on
previous Distribution Dates on such Certificate with respect to principal,  (ii)
the  principal   portion  of  all  Realized  Losses   allocated  prior  to  such
Distribution  Date to such  Certificate,  taking account of the Loss  Allocation
Limitation   and  (iii)  in  the  case  of  a  Subordinate   Certificate,   such
Certificate's pro rata share, if any, of the applicable Subordinate  Certificate
Writedown Amount for previous  Distribution  Dates. With respect to any Class of
Certificates  (other than an Interest Only  Certificate),  the Current Principal
Amount  thereof  will  equal the sum of the  Current  Principal  Amounts  of all
Certificates in such Class.  Notwithstanding the foregoing,  solely for purposes
of giving consents,  directions,  waivers, approvals,  requests and notices, the
Class R-I, Class R-II and Class R-III  Certificates  after the Distribution Date
on  which  they  each  receive  the  distribution  of the last  dollar  of their
respective  original  principal amount shall be deemed to have Current Principal
Amounts  equal  to  their  respective  Current  Principal  Amounts  on  the  day
immediately  preceding such  Distribution  Date.  Exclusively for the purpose of
determining any subrogation  rights of Radian arising under Section 6.07 hereof,
the  Current  Principal  Amount of the  Class  I-A-5  Certificates  shall not be
reduced by the amount of any payments  made by Radian in respect of principal on
such Certificates under the Policy, except to the extent such payment shall have
been reimbursed to Radian pursuant to the provisions of this Agreement.

      CUSTODIAL AGREEMENT: An agreement,  dated as of the Closing Date among the
Depositor,  the Master Servicer,  the Trustee and the Custodian in substantially
the form of Exhibit G hereto.


                                      -8-
<PAGE>

      CUSTODIAN:  Wells  Fargo  Bank,  National  Association,  or any  successor
custodian  appointed  pursuant  to the  provisions  hereof and of the  Custodial
Agreement.

      CUT-OFF DATE: July 1, 2004.

      Cut-off Date Balance: approximately $294,347,747.

      DEBT SERVICE  REDUCTION:  Any reduction of the Scheduled  Payments which a
Mortgagor is obligated to pay with respect to a Mortgage Loan as a result of any
proceeding  under the  Bankruptcy  Code or any other  similar state law or other
proceeding.

      DECEASED HOLDER: A Certificate  Owner of an Insured  Certificate who was a
natural  person  living  at the  time  such  interest  was  acquired  and  whose
authorized personal representative,  surviving tenant by the entirety, surviving
joint tenant or surviving  tenant in common or other person  empowered to act on
behalf of a deceased  Certificate Owner causes to be furnished to the Depository
Participant evidence of death satisfactory to the Depository Participant and any
tax waivers requested by the Depository Participant.

      DEFICIENCY AMOUNT: As of any Distribution Date, an amount equal to the sum
of:

            (a)  any   interest   shortfall   allocated   to  the  Class   I-A-5
            Certificates,  except for any Net Interest  Shortfalls  allocated to
            the Class I-A-5 Certificates;

            (b) the principal  portion of any Realized  Losses  allocated to the
            Class I-A-5 Certificates; and

            (c) the Current Principal Amount of the Class I-A-5  Certificates to
            the extent  unpaid on the  Assumed  Final  Distribution  Date (after
            taking into account all distributions on that date).

      DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of the
Mortgaged  Property by a court of competent  jurisdiction in an amount less than
the then  outstanding  indebtedness  under the Mortgage  Loan,  which  valuation
results  from a  proceeding  initiated  under the  Bankruptcy  Code or any other
similar state law or other proceeding.

      DEPOSITOR:  Structured  Asset  Mortgage  Investments  II Inc.,  a Delaware
corporation, or its successors in interest.

      DEPOSITORY:  The Depository Trust Company,  the nominee of which is Cede &
Co., or any successor thereto.

      DEPOSITORY AGREEMENT: The meaning specified in Subsection 5.01(a) hereof.

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


                                      -9-
<PAGE>

      DESIGNATED DEPOSITORY  INSTITUTION:  A depository institution  (commercial
bank, federal savings bank, mutual savings bank or savings and loan association)
or trust  company  (which may include the  Trustee),  the  deposits of which are
fully insured by the FDIC to the extent provided by law.

      DETERMINATION  DATE: With respect to each Mortgage Loan, the Determination
Date as defined in the related Servicing Agreement.

      DISCOUNT MORTGAGE LOAN: Any Group I Mortgage Loan with a Net Mortgage Rate
less than  5.2500% per annum and any Group II Mortgage  Loan with a Net Mortgage
Rate less than 4.5000% per annum.

      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 the Freddie Mac or any successor  thereto, 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 or (v) 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 REMIC  contained  in the Trust or any Person  having an  ownership
interest  in the  Residual  Certificate  (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
pursuant  to Section  4.04,  which  shall be  denominated  "U.S.  Bank  National
Association,  as Trustee f/b/o holders of Structured Asset Mortgage  Investments
II Inc., Prime Mortgage Trust, Mortgage Pass-Through Certificates, Series 2004-1
- Distribution Account." The Distribution Account shall be an Eligible Account.

      DISTRIBUTION  ACCOUNT  DEPOSIT  DATE:  The  Business  Day  prior  to  each
Distribution Date.

      DISTRIBUTION  DATE:  The 25th day of any month,  beginning in August 2004,
or,  if such  25th day is not a  Business  Day,  the  Business  Day  immediately
following.

      DTC  CUSTODIAN:  U.S.  Bank  National  Association,  or its  successors in
interest as custodian for the Depository.

      DUE DATE:  With respect to each Mortgage  Loan,  the date in each month on
which its Scheduled  Payment is due if such due date is the first day of a month
and otherwise is deemed to


                                      -10-
<PAGE>

be the first day of the  following  month or such  other date  specified  in the
related Servicing Agreement.

      DUE PERIOD:  With respect to any Distribution Date and each Mortgage Loan,
the period  commencing  on the second  day of the month  preceding  the month in
which the  Distribution  Date  occurs and ending at the close of business on the
first day of the month in which the Distribution Date occurs.

      ELIGIBLE  ACCOUNT:  Any  of (i) a  segregated  account  maintained  with a
federal or state chartered depository institution (A) the short-term obligations
of which are rated A-1 or better by S&P, F-1 by Fitch Ratings and P-1 by Moody's
at the time of any  deposit  therein  or (B)  insured by the FDIC (to the limits
established  by such the FDIC),  the  uninsured  deposits  in which  account are
otherwise  secured such that, as evidenced by an Opinion of Counsel (obtained by
the Person  requesting  that the  account be held  pursuant  to this clause (i))
delivered  to the  Trustee  prior  to the  establishment  of such  account,  the
Certificateholders  will have a claim with  respect to the funds in such account
and a perfected first priority  security  interest against any collateral (which
shall be limited to Permitted Investments,  each of which shall mature not later
than the Business Day immediately preceding the Distribution Date next following
the date of  investment  in such  collateral  or the  Distribution  Date if such
Permitted  Investment  is an obligation of the  institution  that  maintains the
Distribution  Account)  securing  such funds that is  superior  to claims of any
other depositors or general  creditors of the depository  institution with which
such  account  is  maintained,  (ii) a  segregated  trust  account  or  accounts
maintained  with a federal or state  chartered  depository  institution or trust
company with trust powers acting in its fiduciary capacity or (iii) a segregated
account  or  accounts  of a  depository  institution  acceptable  to the  Rating
Agencies (as  evidenced in writing by the Rating  Agencies  that use of any such
account  as the  Distribution  Account  will not have an  adverse  effect on the
then-current  ratings assigned to the Classes of Certificates  then rated by the
Rating Agencies determined without regard to the Policy).  Eligible Accounts may
bear interest.

      EMC: EMC Mortgage Corporation.

      EMC  SERVICING  AGREEMENT:  With respect to Mortgage  Loans  originated by
Wachovia,  the  Servicing  Agreement  dated  as of July  1,  2004,  between  the
Depositor and EMC, as attached  hereto as Exhibit H-1 as modified by the related
Assignment Agreement.

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

      EVENT OF DEFAULT: An event of default described in Section 8.01.

      EXCESS  BANKRUPTCY  LOSS:  Any  Bankruptcy  Loss,  or portion  thereof (i)
occurring after the Bankruptcy Coverage  Termination Date or (ii) if on or prior
to such date, in excess of the then-applicable Bankruptcy Loss Amount.

      EXCESS FRAUD LOSS: Any Fraud Loss or portion  thereof (i) occurring  after
the Fraud Coverage  Termination Date with respect thereto or (ii) if on or prior
to such date, in excess of the then-applicable Fraud Loss Amount.


                                      -11-
<PAGE>

      EXCESS LOSS: Any Excess Fraud Loss, Excess Bankruptcy Loss, Excess Special
Hazard Loss or Extraordinary Loss.

      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  Mortgage  Interest Rate through the last day
of the month in which the related  Liquidation  Date  occurs,  plus (ii) related
Liquidation Expenses.

      EXCESS SPECIAL  HAZARD LOSS:  Any Special Hazard Loss occurring  after the
Special Hazard Termination Date.

      EXTRAORDINARY  LOSS  :  Any  Realized  Loss  resulting  from  damage  to a
mortgaged  property that was  occasioned  by war,  civil  insurrection,  certain
governmental actions, nuclear reaction and certain other risks.

      FANNIE  MAE:  Federal  National  Mortgage  Association  or  any  successor
thereto.

      FITCH RATINGS: Fitch, Inc.

      FDIC: Federal Deposit Insurance Corporation or any successor thereto.

      FINAL  CERTIFICATION:  The  certification  substantially  in the  form  of
Exhibit Three to the Custodial Agreement.

      FRACTIONAL UNDIVIDED INTEREST:  With respect to any Class of Certificates,
the fractional undivided interest evidenced by any Certificate of such Class the
numerator of which is the Current  Principal  Amount,  or Notional Amount in the
case of the Interest Only Certificates,  of such Certificate and the denominator
of which is the Current  Principal Amount, or Notional Amount in the case of the
Interest Only  Certificates,  of such Class. With respect to the Certificates in
the aggregate,  the fractional undivided interest evidenced by (i) each class of
Residual Certificates will be deemed to equal 0.25%, (ii) each Class of Interest
Only  Certificates  will be deemed to equal 1.0%  multiplied by a fraction,  the
numerator  of  which  is  the  Notional  Amount  of  such  Certificate  and  the
denominator of which is the aggregate  Notional  Amount of its respective  Class
and (iii) a  Certificate  of any  other  Class  will be  deemed to equal  97.25%
multiplied by a fraction, the numerator of which is the Current Principal Amount
of such  Certificate  and the  denominator  of  which is the  aggregate  Current
Principal Amount of all the Certificates;  provided,  however, the percentage in
clause (iii) above shall be increased by 1.0% upon the  retirement of each Class
of Interest Only Certificates.

      FRAUD  COVERAGE  TERMINATION  DATE: The  Distribution  Date upon which the
Fraud  Loss  Amount  has  been  reduced  to zero or a  negative  number  (or the
Cross-Over Date, if earlier).

      FRAUD LOSS: Any Realized Loss  attributable to fraud in the origination of
the related Mortgage Loan, as reported by the applicable  Servicer to the Master
Servicer.


                                      -12-
<PAGE>

      FRAUD LOSS AMOUNT: Upon the initial issuance of the Certificates, 1.00% of
the aggregate  Scheduled  Principal  Balances of the Mortgage  Loans.  As of any
Distribution  Date during the first three  years  after the  Cut-off  Date,  the
initial Fraud Loss Amount minus the aggregate  amount of Fraud Losses that would
have been allocated to the  Subordinate  Certificates in the absence of the Loss
Allocation  Limit since the Cut-off Date. As of any  Distribution  Date from the
fourth and fifth year  following  the  Cut-off  Date,  (1) the lesser of (a) the
applicable  Fraud Loss Amount as of the most recent year  following  the Cut-off
Date  and (b)  0.50%  of the  aggregate  outstanding  principal  balance  of all
Mortgage  Loans as of the most recent year  following the Cut-off Date minus (2)
the Fraud Losses that would have been allocated to the Subordinate  Certificates
in the absence of the Loss Allocation Limit since the most recent year following
the Cut-off Date.  After the fifth year  following  the Cut-off Date,  the Fraud
Loss Amount shall be zero.

      FREDDIE  MAC:  Freddie  Mac,  formerly  the  Federal  Home  Loan  Mortgage
Corporation, or any successor thereto.

      GMAC: GMAC Mortgage Company.

      GMAC  SERVICING  AGREEMENT:  The Servicing  Agreement,  dated as of May 1,
2001,  between the Seller and GMAC,  attached hereto as Exhibit H-2, as modified
by the related Assignment Agreement.

      GLOBAL CERTIFICATE:  Any Private Certificate registered in the name of the
Depository  or its nominee,  beneficial  interests in which are reflected on the
books of the Depository or on the books of a Person  maintaining an account with
such Depository  (directly or as an indirect  participant in accordance with the
rules of such depository).

      GROUP I MORTGAGE LOAN: The Mortgage Loans with respect to the Class I-A-1,
Class I-A-2,  Class I-A-3,  Class I-A-4,  Class I-A-5, Class I-A-6, Class I-A-7,
Class I-A-8, Class I-PO, Clas R-I, Class R-II and Class R-III Certificates.

      GROUP II  MORTGAGE  LOAN:  The  Mortgage  Loans with  respect to the Class
II-A-1, Class II-A-2, Class II-A-3, Class II-PO and Class II-X-1 Certificates.

      HOLDER:  The  Person in whose  name a  Certificate  is  registered  in the
Certificate Register, except that, subject to Subsections 11.02(b) and 11.05(e),
solely for the purpose of giving any consent  pursuant  to this  Agreement,  any
Certificate registered in the name of the Depositor,  the Master Servicer or the
Trustee or any Affiliate  thereof shall be deemed not to be outstanding  and the
Fractional  Undivided Interest evidenced thereby shall not be taken into account
in  determining  whether  the  requisite   percentage  of  Fractional  Undivided
Interests  necessary to effect any such consent has been obtained.  With respect
to  the  Class  I-A-5   Certificates,   Radian  to  the  extent  of  any  Radian
Reimbursement Amount.

      INDEMNIFIED PERSONS:  The Trustee, the Master Servicer,  the Custodian and
the Securities Administrator and their officers, directors, agents and employees
and,  with respect to the Trustee,  any separate  co-trustee  and its  officers,
directors, agents and employees.


                                      -13-
<PAGE>

      INDEPENDENT:  When used with respect to any  specified  Person,  this term
means that such Person (a) is in fact independent of the Depositor or the Master
Servicer and of any Affiliate of the Depositor or the Master Servicer,  (b) does
not have any  direct  financial  interest  or any  material  indirect  financial
interest  in the  Depositor  or the  Master  Servicer  or any  Affiliate  of the
Depositor or the Master  Servicer and (c) is not connected with the Depositor or
the  Master  Servicer  or  any  Affiliate  as an  officer,  employee,  promoter,
underwriter, trustee, partner, director or person performing similar functions.

      INDIVIDUAL CERTIFICATE:  Any Private Certificate registered in the name of
the Holder other than the Depository or its nominee.

      INDIVIDUAL  INSURED  CERTIFICATE:  An Insured  Certificate  that evidences
$1,000 initial Current Principal Amount.

      INITIAL  CERTIFICATION:  The  certification  substantially  in the form of
Exhibit One to the Custodial Agreement.

      INSTITUTIONAL  ACCREDITED INVESTOR: Any Person meeting the requirements of
Rule 501(a)(l),  (2), (3) or (7) of Regulation D under the Securities Act or any
entity all of the equity holders in which come within such paragraphs.

      INDEMNIFICATION  AGREEMENT: The Indemnification Agreement dated as of July
30, 2004, among the Insurer,  the Depositor,  the Seller and Bear, Stearns & Co.
Inc.

      INSURANCE  POLICY:  With respect to any Mortgage Loan, any standard hazard
insurance policy, flood insurance policy or title insurance policy.

      INSURANCE PROCEEDS: Amounts paid by the insurer under any Insurance Policy
covering any Mortgage Loan or Mortgaged  Property other than amounts required to
be paid over to the  Mortgagor  pursuant to law or the related  Mortgage Note or
Security  Instrument  and other  than  amounts  used to repair  or  restore  the
Mortgaged Property or to reimburse insured expenses.

      INSURED CERTIFICATES: The Class I-A-5 Certificates.

      INSURED PAYMENT:  (a) As of any Distribution  Date, any Deficiency  Amount
and (b) any Preference Amount.

      INSURER: Radian Asset Assurance Inc.

      INTEREST ACCRUAL PERIOD:  With respect to each Distribution Date, for each
Class of  Certificates,  the one-month  period preceding the month in which such
Distribution  Date  occurs,  except for the Class I-A-7  Certificates  and Class
I-A-8  Certificates  which have an interest accrual period beginning on the 25th
day of the month preceding the month in which the  Distribution  Date occurs and
ending on the 24th day of the month in which the  Distribution  Date occurs,  in
each case commencing in August 2004.

      INTEREST  DETERMINATION  DATE: With respect to each Distribution Date, the
second LIBOR Business Day immediately  preceding the commencement of the related
Interest Accrual Period.


                                      -14-
<PAGE>

      INTEREST ONLY CERTIFICATES:  The Class I-A-8 Certificates and Class II-X-1
Certificates.

      INTEREST  SHORTFALL:  With  respect  to any  Distribution  Date  and  each
Mortgage  Loan that  during the related  Prepayment  Period was the subject of a
Principal  Prepayment  or  constitutes  a Relief Act  Mortgage  Loan,  an amount
determined as follows:

      (a) With  respect to partial  principal  prepayments  received  during the
relevant  Prepayment  Period: the difference between (i) one month's interest at
the applicable  Net Mortgage Rate on the amount of such  prepayment and (ii) the
amount of interest for the calendar  month of such  prepayment  (adjusted to the
applicable Net Mortgage Rate) received at the time of such prepayment;

      (b) With  respect to principal  prepayments  in full  received  during the
relevant  Prepayment  Period: the difference between (i) one month's interest at
the  applicable  Net Mortgage  Rate on the Scheduled  Principal  Balance of such
Mortgage  Loan  immediately  prior to such  prepayment  and (ii) the  amount  of
interest for the calendar month of such  prepayment  (adjusted to the applicable
Net Mortgage Rate) received at the time of such prepayment; and

      (c) With respect to Relief Act Mortgage Loans:  the excess of (i) 30 days'
interest  (or, in the case of a principal  prepayment  in full,  interest to the
date of prepayment) on the Scheduled  Principal Balance thereof (or, in the case
of a partial principal prepayment,  on the amount so prepaid) at the related Net
Mortgage  Rate  over  (ii) 30 days'  interest  (or,  in the case of a  principal
prepayment  in full,  interest  to the  date of  prepayment)  on such  Scheduled
Principal Balance (or, in the case of a partial principal prepayment in part, on
the amount so  prepaid)  at the Net  Mortgage  Rate  required  to be paid by the
Mortgagor as limited by application of the Relief Act.

      INTERIM  CERTIFICATION:  The  certification  substantially  in the form of
Exhibit Two to the Custodial Agreement.

      INVESTMENT  LETTER:  The  letter  to be  furnished  by each  Institutional
Accredited  Investor  which  purchases  any  of  the  Private   Certificates  in
connection  with such purchase,  substantially  in the form set forth as Exhibit
F-1 hereto.

      ISSUER: Prime Mortgage Trust 2004-1.

      LENDER-PAID  PMI RATE:  With  respect to each  Mortgage  Loan covered by a
lender-paid primary mortgage insurance policy, the amount payable to the related
insurer, as stated in the Mortgage Loan Schedule.

      LIBOR:  With respect to any Distribution  Date, the arithmetic mean of the
London  interbank  offered rate quotations for one-month U.S.  Dollar  deposits,
expressed on a per annum basis, determined in accordance with Section 1.02.

      LIBOR  BUSINESS DAY: Any day other than (i) a Saturday or Sunday or (ii) a
day on which  banking  institutions  in  London,  England  and New York City are
required or authorized by law to be closed.


                                      -15-
<PAGE>

      LIQUIDATED  MORTGAGE  LOAN:  Any  defaulted  Mortgage Loan as to which the
related  Servicer  or the Master  Servicer  has  determined  that all amounts it
expects to recover from or on account of such Mortgage Loan have been recovered.

      LIQUIDATION  DATE: With respect to any Liquidated  Mortgage Loan, the date
on which the Master  Servicer or the related  Servicer has  certified  that such
Mortgage Loan has become a Liquidated Mortgage Loan.

      LIQUIDATION  EXPENSES:  With  respect to a Mortgage  Loan in  liquidation,
unreimbursed  expenses  paid or  incurred  by or for the  account  of the Master
Servicer or the related  Servicers in connection  with the  liquidation  of such
Mortgage Loan and the related Mortgaged  Property,  such expenses  including (a)
property protection expenses,  (b) property sales expenses,  (c) foreclosure and
sale  costs,  including  court costs and  reasonable  attorneys'  fees,  and (d)
similar expenses reasonably paid or incurred in connection with liquidation.

      LIQUIDATION PROCEEDS:  Cash received in connection with the liquidation of
a defaulted  Mortgage Loan,  whether through  trustee's sale,  foreclosure sale,
Insurance Proceeds, condemnation proceeds or otherwise.

      LIVING OWNER: A Certificate  Owner of an Insured  Certificate other than a
Deceased Holder.

      LOAN-TO-VALUE  RATIO:  With respect to any Mortgage  Loan,  the  fraction,
expressed as a  percentage,  the  numerator  of which is the original  principal
balance  of the  related  Mortgage  Loan  and the  denominator  of  which is the
Original Value of the related Mortgaged Property.

      LOCKOUT CERTIFICATES: The Class I-A-6 Certificates.

      LOCKOUT PERCENTAGE:  On any Distribution Date occurring during the periods
set forth below will be as follows:


Period (dates inclusive)                         Lockout Prepayment Percentage

      August 25, 2004 - July 25, 2009                        0%
      August 25, 2009 - July 25, 2010                        30%
      August 25, 2010 - July 25, 2011                        40%
      August 25, 2011 - July 25, 2012                        60%
      August 25, 2012 - July 25, 2013                        80%
      August 25, 2013 and thereafter                         100%

      LOCKOUT  PRINCIPAL AMOUNT:  For any Distribution  Date, an amount equal to
the Lockout  Percentage  multiplied  by the Lockout Pro Rata  Optimal  Principal
Amount.

      LOCKOUT  PRO  RATA  OPTIMAL   PRINCIPAL   AMOUNT:   With  respect  to  any
Distribution  Date,  shall be an amount equal to the product of (x) the Subgroup
I-1 Principal  Distribution Amount for such Distribution Date (without regard to
the  Subgroup  I-1 Senior  Percentage  or the  Subgroup  I-1  Senior  Prepayment
Percentage) multiplied by (y) a fraction, the numerator of


                                      -16-
<PAGE>

which is the sum of the Current Principal Amount of the Class I-A-6 Certificates
immediately  prior to such distribution date and the denominator of which is the
sum  of the  Non-PO  Percentages  of the  Scheduled  Principal  Balances  of the
Mortgage Loans in Subgroup I-1.

      LOSS ALLOCATION LIMIT: The meaning specified in Section 6.02(e) hereof.

      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
Scheduled  Principal  Balance of such  Mortgage  Loan  immediately  prior to the
liquidation of such Mortgage Loan.

      LOST NOTES: The original  Mortgage Notes that have been lost, as indicated
on the Mortgage Loan Schedule.

      MASTER  SERVICER:  As of the Closing  Date,  Wells  Fargo  Bank,  National
Association and, thereafter,  its respective successors in interest who meet the
qualifications of the Servicing Agreements and this Agreement.

      MASTER SERVICER CERTIFICATION:  A written certification covering servicing
of the Mortgage  Loans by all  Servicers  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  Certification  shall be as agreed to by the
Master  Servicer  and the  Depositor  following a  negotiation  in good faith to
determine how to comply with any such new requirements.

      MASTER SERVICER COLLECTION ACCOUNT:  The trust account or accounts created
and maintained  pursuant to Section 4.02, which shall be denominated  "U.S. Bank
National  Association,  as Trustee f/b/o holders of  Structured  Asset  Mortgage
Investments II Inc., Prime Mortgage Trust, Mortgage  Pass-Through  Certificates,
Series  2004-1  - Master  Servicer  Collection  Account."  The  Master  Servicer
Collection Account shall be an Eligible Account.

      MASTER SERVICING COMPENSATION: The meaning specified in Section 3.14.

      MATERIAL DEFECT: The meaning specified in Section 2.02(a).

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


                                      -17-
<PAGE>

      MERS(R)   SYSTEM:   The  system  of   recording   transfers  of  Mortgages
electronically maintained by MERS.

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

      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, or as nominee
for any  subsequent  assignee of the  originator  pursuant to an  assignment  of
mortgage to MERS.

      MONTHLY ADVANCE:  An advance of principal or interest  required to be made
by the applicable  Servicer pursuant to the related  Servicing  Agreement or the
Master Servicer pursuant to Section 6.05.

      MOODY'S: Moody's Investors Service, Inc. or its successor in interest.

      MORTGAGE FILE: The mortgage documents listed in Section 2.01(b) pertaining
to a particular Mortgage Loan and any additional  documents required to be added
to the Mortgage File pursuant to this Agreement.

      MORTGAGE  INTEREST RATE:  The annual rate at which  interest  accrues from
time to time on any Mortgage Loan pursuant to the related  Mortgage Note,  which
rate is initially  equal to the "Mortgage  Interest Rate" set forth with respect
thereto on the Mortgage Loan Schedule.

      MORTGAGE  LOAN: A mortgage  loan  transferred  and assigned to the Trustee
pursuant to Section  2.01 or Section  2.04 and held as a part of the Trust Fund,
as  identified  in the Mortgage  Loan  Schedule  (which shall  include,  without
limitation,  (i) with respect to each  Cooperative  Loan,  the related  Mortgage
Note,  Security  Agreement,  Assignment of Proprietary Lease,  Cooperative Stock
Certificate,  Cooperative  Lease and Mortgage  File and all rights  appertaining
thereto,  and (ii) with respect to each  Mortgage  Loan other than a Cooperative
Loan,  each related  Mortgage  Note,  Mortgage and Mortgage  File and all rights
appertaining thereto), including a Mortgage Loan the property securing which has
become an REO Property.

      MORTGAGE LOAN  PURCHASE  AGREEMENT:  The Mortgage Loan Purchase  Agreement
dated as of July 30, 2004,  between EMC  Mortgage  Corporation,  as seller,  and
Structured Asset Mortgage Investments II Inc., as purchaser,  and all amendments
thereof and supplements thereto, attached as Exhibit J.

      MORTGAGE LOAN SCHEDULE:  The schedule,  attached  hereto as Exhibit B with
respect to the  Mortgage  Loans and as amended  from time to time to reflect the
repurchase or substitution of Mortgage Loans pursuant to this Agreement.

      MORTGAGE  NOTE:  The  originally  executed  note or other  evidence of the
indebtedness of a Mortgagor under the related Mortgage Loan.


                                      -18-
<PAGE>

      MORTGAGED PROPERTY:  Land and improvements  securing the indebtedness of a
Mortgagor under the related Mortgage Loan or, in the case of REO Property,  such
REO Property,  or, in the case of a Cooperative  Loan,  the related  Cooperative
Lease and Cooperative Stock.

      MORTGAGOR: The obligor on a Mortgage Note.

      NATIONAL CITY: National City Mortgage Company.

      NATIONAL CITY SERVICING AGREEMENT: The Purchase,  Warranties and Servicing
Agreement,  dated as of October 1, 2001,  between the Seller and National  City,
attached hereto as Exhibit H-4, as modified by the related Assignment Agreement.

      NET  INTEREST  SHORTFALL:  With  respect  to any  Distribution  Date,  the
Interest  Shortfall,  if any,  for such  Distribution  Date net of  Compensating
Interest Payments made with respect to such Distribution Date.

      NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,  Liquidation
Proceeds  net of (i)  Liquidation  Expenses  which are payable  therefrom to the
related Servicer or the Master Servicer in accordance with the related Servicing
Agreement  or this  Agreement  and (ii)  unreimbursed  advances  by the  related
Servicer or the Master Servicer and Monthly Advances.

      NET  MORTGAGE  RATE:  With  respect to each  Mortgage  Loan,  the Mortgage
Interest Rate in effect from time to time less the Servicing Fee.

      NEXSTAR: Nexstar Financial Corporation, or its successor in interest.

      NEXSTAR SERVICING AGREEMENT: With respect to the Mortgage Loans originated
by Nexstar, the Purchase,  Warranties and Servicing Agreement dated as of May 1,
2002 between the Seller and Nexstar,  attached hereto as Exhibit H-3 as modified
by the related Assignment Agreement.

      NON-DISCOUNT  MORTGAGE  LOAN:  Any Mortgage  Loan with a Net Mortgage Rate
higher than 5.500% per annum.

      NON-OFFERED SUBORDINATE  CERTIFICATES:  The Class B-4, Class B-5 and Class
B-6 Certificates.

      NON-PO  PERCENTAGE:  With respect to any Group I Mortgage  Loan with a Net
Mortgage  Rate  less  than  5.2500%  per  annum,  a  fraction,  expressed  as  a
percentage,  equal to (x) the Net Mortgage  Rate thereof  divided by (y) 5.2500%
per annum.  With respect to any Group II Mortgage  Loan with a Net Mortgage Rate
less than 4.5000% per annum, a fraction, expressed as a percentage, equal to (x)
the Net Mortgage Rate thereof divided by (y) 4.5000% per annum.

      NONRECOVERABLE  ADVANCE:  Any  advance  or Monthly  Advance  (i) which was
previously  made or is proposed to be made by the Master  Servicer,  the Trustee
(as successor Master Servicer) or the applicable Servicer and (ii) which, in the
good  faith  judgment  of the Master  Servicer,  the  Trustee or the  applicable
Servicer,  will not or, in the case of a proposed  advance  or Monthly  Advance,
would not, be ultimately  recoverable  by the Master  Servicer,  the Trustee (as
successor Master Servicer) or the applicable Servicer from Liquidation Proceeds,
Insurance


                                      -19-
<PAGE>

Proceeds  or future  payments  on the  Mortgage  Loan for which such  advance or
Monthly Advance was made or is proposed to be made.

      NOTIONAL AMOUNT: With respect to (1) the Class I-A-8  Certificates,  as of
any date of determination, is equal to the Current Principal Amount of the Class
I-A-7  Certificates  and (2) the Class  II-X-1  Certificates,  as of any date of
determination,  is equal to the  aggregate  Scheduled  Principal  Balance of the
group II Mortgage Loans with a Net Mortgage Rate greater than 5.2500%. Reference
to  the  Notional  Amount  of the  Interest  Only  Certificates  is  solely  for
convenience  in  calculations  and does not  represent  the right to receive any
distributions  allocable to  principal.  For federal  income tax  purposes,  the
equivalent of clause (1) shall be equal to the Uncertificated  Principal Balance
of REMIC II Regular  Interest A-7. For federal  income tax  purposes,  the Class
II-X-1  Certificates  will not have a Notional  Amount,  but will be entitled to
100% of amounts distributed on REMIC II Regular Interest II-X-1.

      OFFERED  CERTIFICATES:  The Senior  Certificates  and Offered  Subordinate
Certificates.

      OFFERED SUBORDINATE  CERTIFICATES:  The Class B-l, Class B-2 and Class B-3
Certificates.

      OFFICER'S CERTIFICATE:  A certificate signed by the Chairman of the Board,
the Vice Chairman of the Board,  the President or a Vice  President or Assistant
Vice  President  or other  authorized  officer  of the  Master  Servicer  or the
Depositor,  as  applicable,  and  delivered to the Trustee,  as required by this
Agreement.

      OPINION OF COUNSEL:  A written opinion of counsel who is or are acceptable
to the Trustee or Radian or the Master Servicer, as applicable,  and who, unless
required  to be  Independent  (an  "Opinion  of  Independent  Counsel"),  may be
internal counsel for the Company, the Master Servicer or the Depositor.

      ORIGINAL  SUBORDINATE  PRINCIPAL BALANCE: The sum of the aggregate Current
Principal  Amounts of each Class of Subordinate  Certificates  as of the Closing
Date.

      ORIGINAL  VALUE:  The value of a Mortgaged  Property based, in the case of
the  purchase of the  Mortgaged  Property,  on the lower of an  appraisal or the
sales price of such Mortgaged  Property or, in the case of a refinancing,  on an
appraisal.

      OUTSTANDING  MORTGAGE LOAN:  With respect to any Due Date, a Mortgage Loan
which, prior to such Due Date, was not the subject of a Principal  Prepayment in
full,  did not  become  a  Liquidated  Mortgage  Loan and was not  purchased  or
replaced.

      OUTSTANDING  PRINCIPAL BALANCE:  As of the time of any determination,  the
principal balance of a Mortgage Loan remaining to be paid by the Mortgagor,  or,
in the case of an REO Property,  the principal  balance of the related  Mortgage
Loan  remaining  to be paid by the  Mortgagor  at the  time  such  property  was
acquired  by the  Trust  Fund less any Net  Liquidation  Proceeds  with  respect
thereto to the extent applied to principal.

      PASS-THROUGH  RATE: As to each Class of Certificates,  the REMIC I Regular
Interests and the REMIC II Regular Interests, the rate of interest determined as
provided with respect thereto,


                                      -20-
<PAGE>

in Section 5.01(c).  Any monthly  calculation of interest at a stated rate shall
be based upon annual interest at such rate divided by twelve.

      PERMITTED  INVESTMENTS:  Any one or more of the following  obligations  or
securities   held  in  the  name  of  the   Trustee   for  the  benefit  of  the
Certificateholders:

            (i) direct  obligations  of, and  obligations  the timely payment of
which are fully  guaranteed  by the  United  States of  America or any agency or
instrumentality  of the United  States of America the  obligations  of which are
backed by the full faith and credit of the United States of America;

            (ii)  (a)  demand  or  time  deposits,  federal  funds  or  bankers'
acceptances issued by any depository  institution or trust company  incorporated
under the laws of the United States of America or any state  thereof  (including
the Trustee or the Master  Servicer or its  Affiliates  acting in its commercial
banking  capacity) and subject to supervision  and examination by federal and/or
state  banking  authorities,  provided  that the  commercial  paper  and/or  the
short-term debt rating and/or the long-term  unsecured debt  obligations of such
depository  institution  or  trust  company  at the time of such  investment  or
contractual  commitment providing for such investment have the Applicable Credit
Rating  or better  from  each  Rating  Agency  and (b) any other  demand or time
deposit or certificate of deposit that is fully insured by the FDIC;

            (iii)  repurchase  obligations  with  respect  to (a)  any  security
described in clause (i) above or (b) any other security  issued or guaranteed by
an agency or instrumentality of the United States of America, the obligations of
which are backed by the full faith and credit of the United  States of  America,
in either case  entered  into with a  depository  institution  or trust  company
(acting as principal)  described in clause (ii)(a) above where the Trustee holds
the security therefor;

            (iv) securities bearing interest or sold at a discount issued by any
corporation  (including  the Trustee or the Master  Servicer or its  Affiliates)
incorporated under the laws of the United States of America or any state thereof
that have the Applicable  Credit Rating or better from each Rating Agency at the
time of such investment or contractual commitment providing for such investment;
provided, however, that securities issued by any particular corporation will not
be Permitted  Investments to the extent that investments  therein will cause the
then outstanding  principal amount of securities  issued by such corporation and
held as part of the Trust to exceed 10% of the aggregate  Outstanding  Principal
Balances of all the Mortgage Loans and Permitted Investments held as part of the
Trust;

            (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 one year  after the date of  issuance  thereof)  having  the
Applicable  Credit  Rating or better from each Rating Agency at the time of such
investment;

            (vi) a Reinvestment  Agreement issued by any bank, insurance company
or other corporation or entity;


                                      -21-
<PAGE>

            (vii) any other demand,  money market or time  deposit,  obligation,
security or  investment  as may be acceptable to each Rating Agency as evidenced
in writing by each Rating Agency to the Trustee; and

            (viii) any money market or common  trust fund having the  Applicable
Credit  Rating or better from each Rating  Agency,  including  any such fund for
which the Trustee or Master  Servicer or any  affiliate of the Trustee or Master
Servicer acts as a manager or an advisor; provided,  however, that no instrument
or  security  shall be a Permitted  Investment  if such  instrument  or security
evidences  a right  to  receive  only  interest  payments  with  respect  to the
obligations  underlying such instrument or if such security provides for payment
of both principal and interest with a yield to maturity in excess of 120% of the
yield to maturity at par or if such  instrument  or security is  purchased  at a
price greater than par.

      PERMITTED TRANSFEREE: Any Person other than a Disqualified Organization or
an "electing large partnership" (as defined by Section 775 of the Code).

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

      PHYSICAL   CERTIFICATES:   The  Residual   Certificates  and  the  Private
Certificates.

      POLICY:   The  irrevocable   Financial   Guaranty  Insurance  Policy,  No.
FANI-0527-04212-NY,  including any endorsements  thereto,  issued by Radian with
respect to the Class I-A-5 Certificates,  in the form attached hereto as Exhibit
K.

      PO  PERCENTAGE:  With  respect  to any  Group I  Mortgage  Loan with a Net
Mortgage  Rate less than  5.2500%  per annum,  5.2500%  per annum  minus the Net
Mortgage Rate thereof divided by 5.2500% per annum. With respect to any Group II
Mortgage Loan with a Net Mortgage Rate less than 4.5000% per annum,  4.5000% per
annum minus the Net Mortgage Rate thereof divided by 4.5000% per annum.

      PREFERENCE  AMOUNT:  Any amount  previously  distributed to Holders of the
Class I-A-5  Certificates  that is  recoverable  and sought to be recovered as a
voidable  preference  by a trustee in  bankruptcy  pursuant to the United States
Bankruptcy Code (11 U.S.C.),  as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.

      PREPAYMENT  CHARGE:  With  respect to any  Mortgage  Loan,  the charges or
premiums,  if any, due in connection  with a full or partial  prepayment of such
Mortgage Loan in accordance with the terms thereof.

      PREPAYMENT INTEREST SHORTFALL:  With respect to any Distribution Date, the
aggregate shortfall, if any, in collections of interest (adjusted to the related
Net Mortgage  Rates) on Mortgage Loans  resulting  from (a)  prepayments in full
received during the related  Prepayment  Period and (b) the partial  prepayments
received during the related Prepayment Period to the extent applied prior to the
Due Date in the month of the Distribution Date.


                                      -22-
<PAGE>

      PREPAYMENT  PERIOD:  With respect to any  Distribution  Date is the period
commencing  on the 16th day of the month prior to the month in which the related
Distribution  Date  occurs and ending on the 15th day of the month in which such
Distribution  Date occurs in the case of the Mortgage Loans for which EMC is the
servicer and such period as is provided in the related Servicing  Agreement with
respect to the other Servicers.

      PRIMARY MORTGAGE INSURANCE POLICY: Any primary mortgage guaranty insurance
policy issued in connection with a Mortgage Loan which provides  compensation to
a  Mortgage  Note  holder in the event of  default  by the  obligor  under  such
Mortgage  Note or the related  Security  Instrument,  if any or any  replacement
policy  therefor  through the  related  Interest  Accrual  Period for such Class
relating to a Distribution Date.

      PRINCIPAL  PREPAYMENT:  Any payment or other  recovery of  principal  on a
Mortgage  Loan which is  received  in advance of its  scheduled  Due Date to the
extent  that it is not  accompanied  by an  amount as to  interest  representing
scheduled interest due on any date or dates in any month or months subsequent to
the month of prepayment,  including Insurance Proceeds and Repurchase  Proceeds,
but excluding the principal portion of Net Liquidation  Proceeds received at the
time a Mortgage Loan becomes a Liquidated Mortgage Loan.

      PRIVATE CERTIFICATES: The Class B-4, Class B-5 and Class B-6 Certificates.

      PROTECTED ACCOUNT:  An account  established and maintained for the benefit
of  Certificateholders  by each  Servicer  with respect to the related  Mortgage
Loans and with  respect to REO  Property  pursuant to the  respective  Servicing
Agreements.

      QIB: A Qualified  Institutional  Buyer as defined in Rule 144A promulgated
under the Securities Act.

      QUALIFIED INSURER:  Any insurance company duly qualified as such under the
laws of the state or states in which the related Mortgaged Property or Mortgaged
Properties  is or are  located,  duly  authorized  and licensed in such state or
states to  transact  the type of  insurance  business in which it is engaged and
approved  as an  insurer by the Master  Servicer,  so long as the claims  paying
ability  of  which  is  acceptable  to  the  Rating  Agencies  for  pass-through
certificates  having  the same  rating as the  Certificates  rated by the Rating
Agencies as of the Closing Date.

      RADIAN:  Radian Asset  Assurance,  an indirect wholly owned  subsidiary of
Radian  Group Inc.,  organized  and  created  under the laws of the State of New
York, or any successor thereto.

      RADIAN CONTACT  PERSON:  The officer  designated by the Master Servicer to
provide information to Radian pursuant to Section 6.07(i).

      RADIAN DEFAULT: As defined in Section 6.07(l).

      RADIAN  REIMBURSEMENT  AMOUNT:  Shall  mean  the sum of (a) the  aggregate
unreimbursed  amount of any payments  made by Radian under the Policy,  together
with  interest on such  amount from the date of payment by Radian  until paid in
full,  (b) all costs and  expenses  of Radian  in  connection  with any  action,
proceeding  or  investigation   affecting  the  Trust  Fund  or  the  rights  or
obligations  of Radian under this  Agreement or under the Policy,  including any
judgment or


                                      -23-
<PAGE>

settlement  entered into affecting Radian or Radian's  interests,  together with
interest  thereon and (c) any other amounts owed to Radian under this  Agreement
or the Indemnification Agreement, together with interest thereon.

      RANDOM LOT: With respect to any Distribution Date, the method by which the
Depository will determine  which Insured  Certificates  will be paid,  using its
established random lot procedures or, if the Insured  Certificates are no longer
represented by a Book-Entry Certificate, using the Trustee's procedures.

      RATING AGENCIES: S&P and Fitch Ratings.

      REALIZED LOSS: With respect to a Mortgage Loan is (i) a Bankruptcy Loss or
(ii) as to any Liquidated  Mortgage Loan, the unpaid  principal  balance thereof
plus accrued and unpaid interest  thereon at the Mortgage  Interest Rate through
the last day of the month of liquidation less the Net Liquidation  Proceeds with
respect to such Mortgage Loan and the related Mortgaged  Property.  In addition,
to the extent the Master Servicer receives Subsequent Recoveries with respect to
any Mortgage Loan, the amount of the Realized Loss with respect to that Mortgage
Loan will be reduced to the extent  such  recoveries  are  applied to reduce the
Current Principal Amount of any class of Certificates on any Distribution Date.

      RECORD DATE:  With  respect to any  Distribution  Date,  for each Class of
Certificates,  will be the close of  business  on the last  Business  Day of the
month preceding the month in which such Distribution Date occurs, except for the
Class I-A-7  Certificates and Class I-A-8  Certificates which have a record date
of the Business Day prior to the Distribution Date.

      REINVESTMENT AGREEMENTS:  One or more reinvestment agreements,  acceptable
to the Rating Agencies,  from a bank,  insurance company or other corporation or
entity (including the Trustee).

      RELIEF ACT: The Servicemembers Civil Relief Act or similar state law.

      RELIEF ACT  MORTGAGE  LOAN:  Any Mortgage  Loan as to which the  Scheduled
Payment thereof has been reduced due to the application of the Relief Act.

      REMIC: A real estate mortgage investment conduit, as defined in the Code.

      REMIC I: That group of assets  contained in the Trust Fund designated as a
REMIC consisting of (i) the Mortgage Loans, (ii) the Master Servicer  Collection
Account,  (iii) any REO Property relating to the Mortgage Loans, (iv) the rights
with respect to any related Servicing Agreement,  (v) the rights with respect to
any related Assignment Agreement and (vi) any proceeds of the foregoing.

      REMIC I  INTERESTS:  The  REMIC I  Regular  Interests  and the  Class  R-I
Certificates.

      REMIC I REGULAR  INTERESTS:  REMIC I  Regular  Interests  I-1-A,  I-1-ZZZ,
I-2-A, I-2-ZZZ, I-PO, II-1-A,  II-1-ZZZ,  II-2-A,  II-2-ZZZ,  II-3-A,  II-3-ZZZ,
II-PO, II-IO


                                      -24-
<PAGE>

      REMIC I  SUBORDINATED  BALANCE RATIO:  The ratio among the  Uncertificated
Principal  Balances  of each of the REMIC I Regular  Interests  ending  with the
designation  "A," equal to the ratio  among,  with  respect to each such REMIC I
Regular Interest, the excess of (x) the aggregate Scheduled Principal Balance of
the Mortgage Loans in the related Subgroup over (y) the Current Principal Amount
of the Senior Certificates in the related Subgroup.

      REMIC II: That group of assets contained in the Trust Fund designated as a
REMIC consisting of the REMIC I Regular Interests.

      REMIC II  INTERESTS:  The REMIC II  Regular  Interests  and the Class R-II
Certificates.

      REMIC II REGULAR  INTERESTS:  REMIC II  Regular  Interests  I-A-1,  I-A-2,
I-A-3, I-A-4, I-A-5, I-A-6, I-A-7, I-PO, II-A-1,  II-A-2,  II-A-3, II-PO, II-IO,
R-III, B-1, B-2, B-3, B-4, B-5 and B-6.

      REMIC III: That group of assets  contained in the Trust Fund designated as
a REMIC consisting of the REMIC II Regular Interests.

      REMIC III  INTERESTS:  The REMIC III  Regular  Certificates  and the Class
R-III Certificates.

      REMIC III REGULAR CERTIFICATES: The Class I-A-1, Class I-A-2, Class I-A-3,
Class I-A-4 , Class I-A-5,  Class I-A-6,  Class I-A-7,  Class I-A-8, Class I-PO,
Class  B-1,  Class  B-2,  Class  B-3 ,  Class  B-4,  Class  B-5  and  Class  B-6
Certificates.

      REMIC OPINION:  An Opinion of Independent  Counsel, to the effect that the
proposed action  described  therein would not, under the REMIC  Provisions,  (i)
cause any REMIC to fail to qualify as a REMIC while any regular interest in such
REMIC is  outstanding,  (ii)  result in a tax on  prohibited  transactions  with
respect to any REMIC or (iii)  constitute  a taxable  contribution  to any REMIC
after the Startup Day.

      REMIC PROVISIONS: The provisions of the federal income tax law relating to
the REMIC,  which appear at Sections 860A through 860G of the Code,  and related
provisions and regulations  promulgated  thereunder,  as the foregoing may be in
effect from time to time.

      REO PROPERTY:  A Mortgaged  Property  acquired in the name of the Trustee,
for the  benefit  of  Certificateholders,  by  foreclosure  or  deed-in-lieu  of
foreclosure in connection with a defaulted Mortgage Loan.

      REPURCHASE  PRICE:  With  respect to any  Mortgage  Loan (or any  property
acquired with respect thereto) required to be repurchased by the Seller pursuant
to the Mortgage  Loan  Purchase  Agreement or Article II of this  Agreement,  an
amount equal to the sum of (i)(a) 100% of the Outstanding  Principal  Balance of
such  Mortgage Loan as of the date of  repurchase  (or if the related  Mortgaged
Property was acquired with respect  thereto,  100% of the Outstanding  Principal
Balance at the date of the acquisition), plus (b) accrued but unpaid interest on
the Outstanding Principal Balance at the related Mortgage Interest Rate, through
and including the last day of the month of repurchase, plus (c) any unreimbursed
Monthly Advances and servicing  advances payable to the Servicer of the Mortgage
Loan or to the Master Servicer and (ii) any


                                      -25-
<PAGE>

costs  and  damages  (if  any)  incurred  by the  Trust in  connection  with any
violation of such Mortgage Loan of any predatory lending laws.

      REPURCHASE   PROCEEDS:   The  Repurchase  Price  in  connection  with  any
repurchase  of a Mortgage  Loan by the Seller and any cash deposit in connection
with the substitution of a Mortgage Loan.

      REQUEST FOR RELEASE:  A request for release in the form attached hereto as
Exhibit D.

      REQUIRED  INSURANCE  POLICY:  With  respect  to  any  Mortgage  Loan,  any
insurance policy which is required to be maintained from time to time under this
Agreement with respect to such Mortgage Loan.

      RESERVE  FUND:  A fund  established  at the  time of the  issuance  of the
Certificates  solely  for the  benefit  of the Class  I-A-5  Certificates  by an
initial deposit into the Reserve Fund of $20,000 by Bear, Stearns & Co. Inc.

      RESIDUAL CERTIFICATES: Any of the Class R Certificates.

      RESPONSIBLE  OFFICER:  Any officer  assigned to the Corporate Trust Office
(or any  successor  thereto),  including  any  Vice  President,  Assistant  Vice
President,  Trust  Officer,  any Assistant  Secretary,  any trust officer or any
other officer of the Trustee customarily  performing  functions similar to those
performed  by  any  of  the  above   designated   officers  and  having   direct
responsibility for the  administration of this Agreement,  and any other officer
of the Trustee to whom a matter arising hereunder may be referred.

      ROUNDING ACCOUNT:  With respect to the Insured  Certificates,  the account
created and maintained for such Insured Certificates pursuant to Section 6.09.

      ROUNDING  AMOUNT:  With  respect to the  Rounding  Account,  the amount of
funds,  if any,  needed  to be  withdrawn  and used to round  the  amount of any
distributions  in  reduction  of the  Current  Principal  Amount of the  Insured
Certificates upward to the next higher integral multiple of $1,000.

      RULE 144A  CERTIFICATE:  The certificate to be furnished by each purchaser
of a Private  Certificate  (which  is also a  Physical  Certificate)  which is a
Qualified  Institutional  Buyer as defined under Rule 144A promulgated under the
Securities Act, substantially in the form set forth as Exhibit F-2 hereto.

      S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and
its successors in interest.

      SCHEDULED  PAYMENT:  With respect to any Mortgage Loan and any month,  the
scheduled payment or payments of principal and interest due during such month on
such  Mortgage  Loan which  either is payable by a Mortgagor in such month under
the related Mortgage Note or, in the case of REO Property,  would otherwise have
been payable under the related Mortgage Note.

      SCHEDULED PRINCIPAL: The principal portion of any Scheduled Payment.


                                      -26-
<PAGE>

      SCHEDULED  PRINCIPAL  BALANCE:  With respect to any  Mortgage  Loan on any
Distribution  Date, (i) the unpaid principal balance of such Mortgage Loan as of
the close of  business on the  related  Due Date  (i.e.,  taking  account of the
principal  payment  to be  made  on  such  Due  Date  and  irrespective  of  any
delinquency in its payment),  as specified in the  amortization  schedule at the
time relating  thereto (before any adjustment to such  amortization  schedule by
reason of any bankruptcy or similar proceeding  occurring after the Cut-off Date
(other than a Deficient  Valuation) or any moratorium or similar waiver or grace
period) and less (ii) any Principal Prepayments (including the principal portion
of Net Liquidation  Proceeds) received during or prior to the related Prepayment
Period;  provided that the Scheduled  Principal Balance of a Liquidated Mortgage
Loan is zero.

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

      SECURITIES ADMINISTRATOR:  Wells Fargo Bank, National Association,  or its
successor in interest,  or any successor securities  administrator  appointed as
herein provided.

      SECURITIES  LEGEND:  "THIS  CERTIFICATE  HAS  NOT  BEEN  AND  WILL  NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
OR UNDER ANY STATE  SECURITIES  LAWS.  THE HOLDER  HEREOF,  BY  PURCHASING  THIS
CERTIFICATE,  AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,  RESOLD, PLEDGED OR
OTHERWISE  TRANSFERRED  ONLY IN  COMPLIANCE  WITH THE  SECURITIES  ACT AND OTHER
APPLICABLE  LAWS AND ONLY (1)  PURSUANT  TO RULE 144A UNDER THE  SECURITIES  ACT
("RULE  144A") TO A PERSON  THAT THE HOLDER  REASONABLY  BELIEVES IS A QUALIFIED
INSTITUTIONAL  BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"),  PURCHASING  FOR
ITS OWN ACCOUNT OR A QIB  PURCHASING  FOR THE ACCOUNT OF A QIB,  WHOM THE HOLDER
HAS INFORMED,  IN EACH CASE, THAT THE REOFFER,  RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN  RELIANCE  ON RULE 144A,  (2)  PURSUANT  TO AN  EXEMPTION  FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3)
IN  CERTIFICATED  FORM TO AN  "INSTITUTIONAL  ACCREDITED  INVESTOR"  WITHIN  THE
MEANING THEREOF IN RULE 501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE ACT
OR ANY ENTITY IN WHICH ALL OF THE EQUITY  OWNERS  COME  WITHIN  SUCH  PARAGRAPHS
PURCHASING NOT FOR  DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,  SUBJECT TO
(A) THE RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN
THE POOLING AND  SERVICING  AGREEMENT AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH
OTHER EVIDENCE  ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER,  RESALE,  PLEDGE OR
TRANSFER IS IN COMPLIANCE  WITH THE SECURITIES ACT AND OTHER  APPLICABLE LAWS OR
IN EACH CASE IN ACCORDANCE  WITH ALL  APPLICABLE  SECURITIES  LAWS OF THE UNITED
STATES  AND ANY  OTHER  APPLICABLE  JURISDICTION.  THIS  CERTIFICATE  MAY NOT BE
ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR
OTHER  RETIREMENT  ARRANGEMENT  WHICH  IS  SUBJECT  TO  TITLE I OF THE  EMPLOYEE
RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED,  OR SECTION  4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED [in the case of a Residual Certificate
or a Private Certificate] UNLESS THE OPINION OF COUNSEL REQUIRED BY


                                      -27-
<PAGE>

SECTION 5.07 OF THE POOLING AND SERVICING  AGREEMENT IS PROVIDED [in the case of
the Class B-4,  Class B-5 and Class B-6  Certificates]:,  UNLESS THE  TRANSFEREE
CERTIFIES OR REPRESENTS THAT THE PROPOSED  TRANSFER AND HOLDING OF A CERTIFICATE
AND THE  SERVICING,  MANAGEMENT  AND OPERATION OF THE TRUST AND ITS ASSETS:  (I)
WILL NOT RESULT IN ANY  PROHIBITED  TRANSACTION  WHICH IS NOT  COVERED  UNDER AN
INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED
TO,  PROHIBITED  TRANSACTION  EXEMPTION  ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE
95-60 OR PTE  96-23  AND (II)  WILL NOT GIVE  RISE TO ANY  ADDITIONAL  FIDUCIARY
DUTIES ON THE PART OF THE DEPOSITOR,  THE SECURITIES  ADMINISTRATOR,  THE MASTER
SERVICER,  ANY SERVICER OR THE TRUSTEE,  WHICH WILL BE DEEMED  REPRESENTED BY AN
OWNER OF A BOOK-ENTRY  CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE EVIDENCED
BY A  REPRESENTATION  OR AN OPINION OF COUNSEL TO SUCH EFFECT BY OR ON BEHALF OF
AN INSTITUTIONAL ACCREDITED INVESTOR."

      SECURITY  AGREEMENT:  With respect to a  Cooperative  Loan,  the agreement
creating  a  security  interest  in  favor  of the  originator  in  the  related
Cooperative Stock.

      SECURITY INSTRUMENT: A written instrument creating a valid first lien on a
Mortgaged Property securing a Mortgage Note, which may be any applicable form of
mortgage,  deed of trust,  deed to secure debt or security  deed,  including any
riders or addenda thereto.

      SELLER:  EMC  Mortgage  Corporation,  as Mortgage  Loan  seller  under the
Mortgage Loan Purchase Agreement.

      SENIOR  CERTIFICATES:  The Class I-A-1,  Class I-A-2,  Class I-A-3,  Class
I-A-4,  Class I-A-5,  Class I-A-6,  Class I-A-7,  Class I-A-8, Class I-PO, Class
II-A-1,  Class II-A-2, Class II-A-3, Class II-PO, Class II-X-1, Class R-I, Class
R-II and Class R-III Certificates.

      SERVICER:  With respect to each Mortgage Loan,  EMC, GMAC,  National City,
WFBNA or Nexstar.

      SERVICER REMITTANCE DATE: With respect to each Mortgage Loan, the date set
forth in the related Servicing Agreement.

      SERVICING  AGREEMENTS:  The EMC  Servicing  Agreement,  Nexstar  Servicing
Agreement, National City Servicing Agreement, WFBNA Servicing Agreement and GMAC
Servicing Agreement.

      SERVICING  FEE: As to any Mortgage Loan and  Distribution  Date, an amount
equal to the product of (i) the  Scheduled  Principal  Balance of such  Mortgage
Loan as of the Due Date in the preceding  calendar month and (ii) the applicable
Servicing Fee Rate.

      SERVICING FEE RATE: As to any Mortgage Loan, a per annum rate as set forth
in the Mortgage Loan Schedule.


                                      -28-
<PAGE>

      SERVICING OFFICER:  Any officer of the related Servicer or Master Servicer
involved  in or  responsible  for the  administration  and  servicing  or master
servicing,  as applicable,  of the Mortgage Loans as to which officer  evidence,
reasonably  acceptable to the Trustee,  of due authorization of such officer, by
such  Servicer or Master  Servicer has been  furnished  from time to time to the
Trustee and Radian.

      SPECIAL  HAZARD LOSS: A Realized Loss  attributable  to damage or a direct
physical loss suffered by a Mortgaged Property  (including any Realized Loss due
to the presence or suspected  presence of hazardous  wastes or  substances  on a
Mortgaged  Property)  other  than any such  damage or loss  covered  by a hazard
policy or a flood insurance  policy required to be maintained in respect of such
Mortgaged  Property under this Agreement or any loss due to normal wear and tear
or certain other causes.

      SPECIAL HAZARD LOSS AMOUNT: Upon the initial issuance of the Certificates,
$2,943,477.  As of any  Distribution  Date,  the Special Hazard Loss Amount will
equal the initial Special Hazard Loss Amount, minus the sum of (i) the aggregate
amount of Special Hazard Losses that would have been previously allocated to the
Subordinate  Certificates in the absence of the Loss  Allocation  Limit and (ii)
the Adjustment Amount.

      SPECIAL  HAZARD  TERMINATION  DATE: The  Distribution  Date upon which the
Special Hazard Loss Amount has been reduced to zero or a negative number (or the
Cross-Over Date, if earlier).

      STARTUP DAY: July 30, 2004.

      SUBGROUP:  Any of Subgroup I-1, Subgroup I-2, Subgroup II-1, Subgroup II-2
and Subgroup II-3.

      SUBGROUP  I-1: All of the Group I Mortgage  Loans with a Net Mortgage Rate
of less than or equal to 5.2500% per annum,  plus the  Subgroup  I-1 Fraction of
the  principal  balance of any group I Mortgage  Loan with a Net  Mortgage  Rate
greater than 5.2500% per annum and less than 8.0000% per annum.

      SUBGROUP  I-1  CERTIFICATES:  The Class I-A-1,  Class I-A-2,  Class I-A-3,
Class  I-A-4,  Class  I-A-5,  Class I-A-6,  Class R-I,  Class R-II,  Class R-III
Certificates.

      SUBGROUP I-1  FRACTION:  With respect to any Group I Mortgage  Loan with a
Net  Mortgage  Rate of greater  than 5.2500% per annum and less than 8.0000% per
annum, a fraction,  (x) the numerator of which is equal to 8.0000% minus the Net
Mortgage Rate of such Mortgage Loan,  and (y) the  denominator of which is equal
to 2.750%.

      SUBGROUP  I-2: The Subgroup I-2 Fraction of the  principal  balance of any
Group I Mortgage Loan with a Net Mortgage Rate of greater than 5.2500% per annum
and less  than  8.0000%  per  annum  and any  Group I  Mortgage  Loan with a Net
Mortgage Rate of 8.0000% per annum.

      SUBGROUP I-2 CERTIFICATES: The Class I-A-7 Certificates.


                                      -29-
<PAGE>

      SUBGROUP I-2  FRACTION:  With respect to any Group I Mortgage  Loan with a
Net  Mortgage  Rate of greater  than 5.2500% per annum and less than 8.0000% per
annum, a fraction,  (x) the numerator of which is equal to the Net Mortgage Rate
of such Mortgage Loan minus 5.2500%,  and (y) the  denominator of which is equal
to 2.750%.

      SUBGROUP II-1: All of the Group II Mortgage Loans with a Net Mortgage Rate
of less than or equal to 4.5000% per annum plus the  Subgroup  II-1  Fraction of
the principal  balance of any Group II Mortgage Loan with a Net Mortgage Rate of
greater than 4.5000% per annum and less than 5.0000% per annum.

      SUBGROUP II-1 CERTIFICATES: The Class II-A-1 Certificates.

      SUBGROUP II-1 FRACTION:  With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 4.5000% per annum and less than 5.0000% per
annum, a fraction,  (x) the numerator of which is equal to 5.0000% minus the Net
Mortgage Rate of such Mortgage Loan,  and (y) the  denominator of which is equal
to 0.5000%.

      SUBGROUP II-2: All of the Group II Mortgage Loans with a Net Mortgage Rate
of 5.0000% per annum plus the Subgroup II-2A  Fraction of the principal  balance
of any Group II Mortgage  Loan with a Net Mortgage  Rate of greater than 4.5000%
per annum and less than 5.0000% per annum and the Subgroup II-2B Fraction of the
principal balance of any Group II Mortgage Loan with a Net Mortgage Rate greater
than 5.0000% per annum and less than 5.2500% per annum.

      SUBGROUP II-2 CERTIFICATES: The Class II-A-2 Certificates.

      SUBGROUP II-2A FRACTION: With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 4.5000% per annum and less than 5.0000% per
annum,  a fraction,  (x) the numerator of which is equal to Net Mortgage Rate of
such Mortgage Loan minus 4.5000%,  and (y) the  denominator of which is equal to
0.50000%.

      SUBGROUP II-2B FRACTION: With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 5.0000% per annum and less than 5.2500% per
annum, a fraction,  (x) the numerator of which is equal to 5.2500% minus the Net
Mortgage Rate of such Mortgage Loan,  and (y) the  denominator of which is equal
to 0.250%.

      SUBGROUP II-3: All of the Group II Mortgage Loans with a Net Mortgage Rate
of greater than or equal to 5.250% per annum, plus the Subgroup II-3 Fraction of
the principal balance of any Mortgage Loan with a Net Mortgage Rate greater than
5.0000% per annum and less than 5.2500% per annum.

      SUBGROUP II-3 CERTIFICATES: The Class II-A-3 Certificates.

      SUBGROUP II-3 FRACTION:  With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 5.0000% per annum and less than 5.2500% per
annum, a fraction,


                                      -30-
<PAGE>

(x) the  numerator of which is equal to the Net Mortgage  Rate of such  Mortgage
Loan minus 5.0000%, and (y) the denominator of which is equal to 0.250%.

      SUBGROUP PRINCIPAL  DISTRIBUTION AMOUNT: With respect to each Distribution
Date and each of Subgroup I-1,  Subgroup I-2,  Subgroup II-1,  Subgroup II-2 and
Subgroup II-3 Certificates,  an amount equal to the sum, without duplication, of
the  following  (but in no event greater than the  aggregate  Current  Principal
Amounts of each the Subgroup I-1, Subgroup I-2, Subgroup II-1, Subgroup II-2 and
Subgroup  II-3   Certificates,   as  applicable,   immediately   prior  to  such
Distribution Date):

            (1)  the  applicable   Subgroup  Senior  Percentage  of  the  Non-PO
      Percentage of the principal portion of all Scheduled  Payments due on each
      Outstanding  Mortgage Loan in the related Subgroup on the related Due Date
      as specified in the amortization  schedule at the time applicable  thereto
      (after  adjustments  for  previous  Principal  Prepayments  but before any
      adjustment to such  amortization  schedule by reason of any  bankruptcy or
      similar proceeding or any moratorium or similar waiver or grace period);

            (2) the  applicable  Subgroup  Senior  Prepayment  Percentage of the
      Non-PO Percentage of the Scheduled Principal Balance of each Mortgage Loan
      in the related Subgroup which was the subject of a Principal Prepayment in
      full received by the Master Servicer during the related Prepayment Period;

            (3) the  applicable  Subgroup  Senior  Prepayment  Percentage of the
      Non-PO  Percentage  of all Principal  Prepayments  in part received by the
      Master Servicer during the related  Prepayment Period with respect to each
      Mortgage Loan in the related Subgroup;

            (4) the  lesser of (a) the  applicable  Subgroup  Senior  Prepayment
      Percentage of the Non-PO  Percentage of the sum of (A) all Net Liquidation
      Proceeds  allocable to principal received in respect of each Mortgage Loan
      in the related Subgroup which became a Liquidated Mortgage Loan during the
      related  Prepayment  Period  (other than Mortgage  Loans  described in the
      immediately  following clause (B)) and all Subsequent  Recoveries received
      in respect of each Liquidated Mortgage Loan in the related Subgroup during
      the related  Due Period and (B) the  Scheduled  Principal  Balance of each
      such  Mortgage Loan in the related  Subgroup  purchased by an insurer from
      the Trustee during the related  Prepayment  Period pursuant to the related
      Primary  Mortgage  Insurance  Policy,  if any, or  otherwise;  and (b) the
      applicable  Subgroup Senior Percentage of the Non-PO Percentage of the sum
      of (A)  the  Scheduled  Principal  Balance  of each  Mortgage  Loan in the
      related  Subgroup  which  became a  Liquidated  Mortgage  Loan  during the
      related  Prepayment Period (other than the Mortgage Loans described in the
      immediately  following clause (B)) and all Subsequent  Recoveries received
      in respect of each Liquidated Mortgage Loan in the related Subgroup during
      the related  Due Period and (B) the  Scheduled  Principal  Balance of each
      such  Mortgage  Loan in the  related  Subgroup  that was  purchased  by an
      insurer from the Trust during the related  Prepayment  Period  pursuant to
      the related Primary Mortgage Insurance Policy, if any or otherwise; and


                                      -31-
<PAGE>

            (5) the applicable Subgroup Senior Prepayment  Percentage of the sum
      of (a)  the  Scheduled  Principal  Balance  of each  Mortgage  Loan in the
      related  Subgroup which was  repurchased by the Seller in connection  with
      such  Distribution  Date  and (b) the  excess,  if any,  of the  Scheduled
      Principal Balance of a Mortgage Loan in the related Subgroup that has been
      replaced by the Seller with a  substitute  Mortgage  Loan  pursuant to the
      Mortgage Loan Purchase Agreement in connection with such Distribution Date
      over the Scheduled Principal Balance of such substitute Mortgage Loan.

      SUBGROUP SENIOR PERCENTAGE:  With respect to each Subgroup,  the lesser of
(a) 100% and (b) the  percentage  (carried to six places rounded up) obtained by
dividing  the  Current  Principal  Amount  of the  Senior  Certificates  of such
Subgroup (other than any Principal Only Certificates), immediately prior to such
Distribution Date, by the aggregate  Scheduled Principal Balance of the Mortgage
Loans in the related Subgroup (other than the PO Percentage thereof with respect
to the related  Discount  Mortgage Loans) as of the beginning of the related Due
Period.   The  initial  Subgroup  Senior  Percentage  for  the  Group  I  Senior
Certificates  will  be  approximately   98.20%,   and  initial  Subgroup  Senior
Percentage for the Group II Senior Certificates will be approximately 98.19%.

      SUBGROUP SENIOR  PREPAYMENT  PERCENTAGE:  The Subgroup  Senior  Prepayment
Percentage for the Subgroup I-1, Subgroup I-2, Subgroup II-1,  Subgroup II-2 and
Subgroup  II-3  Certificates,  on any  Distribution  Date  occurring  during the
periods set forth below will be as follows:


Period (dates inclusive)                Subgroup Senior Prepayment Percentage

August 25, 2004 - July 25, 2009         100%

August  25, 2009 - July 25, 2010        Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 70%
                                        of the related Subordinate Percentage.

August 25, 2010 - July 25, 2011         Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 60%
                                        of the related Subordinate Percentage.

August 25, 2012 - July 25, 2012         Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 40%
                                        of the related Subordinate Percentage.

August 25, 2013 - July 25, 2013         Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 20%
                                        of the related Subordinate Percentage.

August 25, 2012 and thereafter          Subgroup   Senior   Percentage  for  the
                                        related Subgroup Certificates.


                                      -32-
<PAGE>


      Any scheduled  reduction to the Subgroup Senior Prepayment  Percentage for
the Subgroup I-1, Subgroup I-2,  Subgroup II-1,  Subgroup II-2 and Subgroup II-3
Certificates  shall not be made as of any  Distribution  Date unless,  as of the
last  day of the  month  preceding  such  Distribution  Date  (1) the  aggregate
Scheduled  Principal  Balance of the Mortgage  Loans  delinquent 60 days or more
(including  for this purpose any such  Mortgage  Loans in  foreclosure  and such
Mortgage  Loans with  respect to which the related  Mortgaged  Property has been
acquired by the trust) averaged over the last six months, as a percentage of the
aggregate  Current  Principal  Amount of the Subordinate  Certificates  does not
exceed  50% and (2)  cumulative  Realized  Losses on the  Mortgage  Loans do not
exceed  (a)  30% of the  aggregate  Current  Principal  Amount  of the  Original
Subordinate  Principal  Balance if such  Distribution  Date  occurs  between and
including  August  2009  and  July  2010,  (b) 35% of the  Original  Subordinate
Principal  Balance if such Distribution Date occurs between and including August
2010 and July 2011,  (c) 40% of the Original  Subordinate  Principal  Balance if
such  Distribution  Date occurs between and including August 2011 and July 2012,
(d) 45% of the Original Subordinate  Principal Balance if such Distribution Date
occurs  between  and  including  August  2012 and July 2013,  and (e) 50% of the
Original  Subordinate  Principal Balance if such Distribution Date occurs during
or after August 2013.

      Notwithstanding   the  foregoing,   if  on  any  Distribution   Date,  the
percentage,  the numerator of which is the aggregate Current Principal Amount of
the Senior  Certificates  immediately  preceding such Distribution Date, and the
denominator  of which is the Scheduled  Principal  Balance of the Mortgage Loans
(other than the PO  Percentage  thereof with  respect to the  Discount  Mortgage
Loans) as of the beginning of the related Due Period, exceeds such percentage as
of the Cut-off Date, then the Subgroup Senior Prepayment Percentage with respect
to the Senior  Certificates  of each  Subgroup for such  Distribution  Date will
equal 100%.

      SUBORDINATE CERTIFICATES:  The Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates.

      SUBORDINATE CERTIFICATE WRITEDOWN AMOUNT: As to any Distribution Date, the
amount  by  which  (a)  the  sum of the  Current  Principal  Amounts  of all the
Certificates  (after  giving  effect to the  distribution  of principal  and the
allocation of applicable  Realized Losses in reduction of the Current  Principal
Amounts of the Certificates on such Distribution Date) exceeds (b) the aggregate
Scheduled  Principal  Balances of the Mortgage  Loans on the Due Date related to
such Distribution Date.

      SUBORDINATE  OPTIMAL  PRINCIPAL  AMOUNT:  As to any Distribution  Date, an
amount  equal  to the sum,  without  duplication,  of the  following  from  each
Subgroup (but in no event greater than the aggregate Current Principal Amount of
the Subordinate Certificates immediately prior to such Distribution Date):

            (i) the applicable  Subordinate  Percentage of the Non-PO Percentage
      of the principal portion of all Scheduled Payments due on each Outstanding
      Mortgage Loan in the related Subgroup on the related Due Date as specified
      in  the  amortization  schedule  at the  time  applicable  thereto  (after
      adjustment for previous Principal Prepayments but before any adjustment to
      such amortization schedule


                                      -33-
<PAGE>

      by reason of any  bankruptcy or similar  proceeding  or any  moratorium or
      similar waiver or grace period);

            (ii) the applicable  Subordinate Prepayment Percentage of the Non-PO
      Percentage of the Scheduled Principal Balance of each Mortgage Loan in the
      related  Subgroup  that was the subject of a Principal  Prepayment in full
      received by the Master Servicer during the related Prepayment Period;

            (iii) the applicable Subordinate Prepayment Percentage of the Non-PO
      Percentage  of each  Principal  Prepayment  in part  received  during  the
      related  Prepayment  Period  with  respect  to each  Mortgage  Loan in the
      related Subgroup;

            (iv)  the  excess,  if  any,  of (a) all  Net  Liquidation  Proceeds
      allocable to principal  received during the related  Prepayment  Period in
      respect of each Liquidated  Mortgage Loan in the related Subgroup over (b)
      the   sum  of  the   amounts   distributable   to   the   related   Senior
      Certificateholders  pursuant to clause (4) of the  definition  of Subgroup
      Principal   Distribution   Amount  and  Class  PO  Certificate   Principal
      Distribution Amount on such Distribution Date;

            (v) the applicable  Subordinate  Prepayment Percentage of the Non-PO
      Percentage  of the  sum of (a) the  Scheduled  Principal  Balance  of each
      Mortgage Loan in the related  Subgroup which was repurchased by the Seller
      in  connection  with  respect  to  such  Distribution  Date  and  (b)  the
      difference,  if any, between the Scheduled Principal Balance of a Mortgage
      Loan in the related  Subgroup  that has been replaced by the Seller with a
      Substitute  Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement
      in connection  with such  Distribution  Date over the Scheduled  Principal
      Balance of such Substitute Mortgage Loan; and

            (vi) on the Distribution Date on which the Current Principal Amounts
      of  the  related  Senior   Certificates  (other  than  the  Interest  Only
      Certificates  and Class PO  Certificates),  have all been reduced to zero,
      100% of the related  Subgroup  Principal  Distribution  Amount.  After the
      aggregate  Current  Principal  Amount of the Subordinate  Certificates has
      been reduced to zero, the Subordinate  Optimal  Principal  Amount shall be
      zero.

      SUBORDINATE  PERCENTAGE:  As of any Distribution  Date and with respect to
any Subgroup,  100% minus the related Subgroup Senior  Percentage for the Senior
Certificates  related to such Subgroup.  The initial Subordinate  Percentage for
each of Subgroup  I-1 and  Subgroup  I-2 will be  approximately  1.80%,  and the
initial  Subordinate  Percentage  for each of Subgroup  II-1,  Subgroup II-2 and
Subgroup II-3 will be approximately 1.81%.

      SUBORDINATE  PREPAYMENT  PERCENTAGE:  As of any Distribution Date and with
respect to any  Subgroup,  100% minus the  related  Subgroup  Senior  Prepayment
Percentage for such  Subgroup,  except that on any  Distribution  Date after the
Current  Principal  Amount of each class of Senior  Certificates  have each been
reduced to zero,  the  Subordinate  Prepayment  Percentage  for the  Subordinate
Certificates with respect to such Subgroup will equal 100%.


                                      -34-
<PAGE>

      SUBSEQUENT  RECOVERIES:  Any amount  recovered by a Servicer or the Master
Servicer (net of reimburseable  expenses) with respect to a Liquidated  Mortgage
Loan with respect to which a Realized Loss was incurred after the liquidation or
disposition of such Mortgage Loan.

      SUBSTITUTE MORTGAGE LOAN: A mortgage loan tendered to the Trustee pursuant
to the related  Servicing  Agreement,  the Mortgage Loan  Purchase  Agreement or
Section 2.04 of this  Agreement,  as applicable,  in each case, (i) which has an
Outstanding  Principal Balance not greater nor materially less than the Mortgage
Loan for which it is to be substituted;  (ii) which has a Mortgage Interest Rate
and Net Mortgage  Rate not less than,  and not  materially  greater  than,  such
Mortgage Loan;  (iii) which has a maturity date not materially  earlier or later
than such  Mortgage  Loan and not later  than the  latest  maturity  date of any
Mortgage  Loan;  (iv) which is of the same property  type and occupancy  type as
such Mortgage  Loan;  (v) which has a  Loan-to-Value  Ratio not greater than the
Loan-to-Value  Ratio of such Mortgage Loan;  (vi) which is current in payment of
principal and interest as of the date of substitution; and (vii) as to which the
payment terms do not vary in any material  respect from the payment terms of the
Mortgage Loan for which it is to be substituted.

      TAX ADMINISTRATION AND TAX MATTERS PERSON: The Securities Administrator or
any  successor  thereto or assignee  thereof  shall  serve as tax  administrator
hereunder and as agent for the Tax Matters  Person.  The Holder of each Class of
Residual  Certificates shall be the Tax Matters Person for the related REMIC, as
more particularly set forth in Section 9.12 hereof.

      TERMINATION PURCHASE PRICE: The price,  calculated as set forth in Section
10.01,  to be paid in  connection  with the  repurchase  of the  Mortgage  Loans
pursuant to Section 10.01.

      TRUST FUND OR TRUST:  The corpus of the trust  created by this  Agreement,
consisting  of the  Mortgage  Loans and the other  assets  described  in Section
2.01(a).

      TRUSTEE: U.S. Bank National Association,  or its successor in interest, or
any successor trustee appointed as herein provided.

      UNCERTIFICATED  PRINCIPAL  BALANCE:  With  respect  to any REMIC I Regular
Interest or REMIC II Regular Interest (other than REMIC I Regular Interest II-IO
and REMIC II Regular  Interest II-IO) as of any  Distribution  Date, the initial
principal  amount  of  such  Regular  Interest,   reduced  by  (i)  all  amounts
distributed on previous Distribution Dates on such Regular Interest with respect
to principal,  and (ii) the principal  portion of all Realized Losses  allocated
prior to such Distribution Date to such Regular Interest,  taking account of the
Loss Allocation Limit.

      UNDERLYING SELLER:  With respect to each Mortgage Loan, EMC, National City
or GMAC, as indicated on the Mortgage Loan Schedule.

      UNINSURED  CAUSE:  Any cause of damage to a Mortgaged  Property or related
REO Property such that the complete  restoration of such  Mortgaged  Property or
related REO Property is not fully  reimbursable by the hazard insurance policies
required to be  maintained  pursuant the related  Servicing  Agreement,  without
regard to whether or not such policy is maintained.

      UNITED  STATES  PERSON:  A citizen or  resident  of the United  States,  a
corporation  or  partnership  (including an entity  treated as a corporation  or
partnership for federal income tax


                                      -35-
<PAGE>

purposes)  created or organized  in, or under the laws of, the United  States or
any  state  thereof  or the  District  of  Columbia  (except,  in the  case of a
partnership, to the extent provided in regulations), provided that, for purposes
solely of the Class R Certificates,  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 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 such  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 1 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.

      WFBNA:  Wells  Fargo  Bank,  National  Association,  or its  successor  in
interest.

      WFBNA SERVICING  AGREEMENT:  With respect to the Mortgage Loans originated
by WFBNA,  the Purchase,  Warranties and Servicing  Agreement dated as of May 1,
2002 between the Seller and WFBNA, attached hereto as Exhibit H-5 as modified by
the related Assignment Agreement.






                                      -36-
<PAGE>


      Section 1.01 Calculation of LIBOR.

      LIBOR  applicable  to the  calculation  of the  Pass-Through  Rate  on the
Adjustable Rate  Certificates for any Interest Accrual Period will be determined
on each Interest  Determination Date. On each Interest Determination Date, LIBOR
shall be  established by the  Securities  Administrator  and, as to any Interest
Accrual Period,  will equal the rate for one month United States dollar deposits
that appears on the Telerate Screen Page 3750 as of 11:00 a.m., London" time, on
such Interest  Determination Date. "Telerate Screen Page 3750" means the display
designated  as page 3750 on the  Telerate  Service  (or such  other  page as may
replace page 3750 on that service for the purpose of displaying London interbank
offered  rates of major  banks).  If such rate does not  appear on such page (or
such other page as may replace that page on that service,  or if such service is
no longer  offered,  LIBOR shall be so  established by use of such other service
for displaying  LIBOR or comparable  rates as may be reasonably  selected by the
Securities  Administrator),  the  rate  will be the  Reference  Bank  Rate.  The
"Reference  Bank  Rate"  will be  determined  on the basis of the rates at which
deposits in U.S.  Dollars are offered by the reference banks (which shall be any
three  major  banks that are  engaged in  transactions  in the London  interbank
market, selected by the Securities Administrator) as of 11:00 a.m., London time,
on the Interest Determination Date to prime banks in the London interbank market
for a  period  of one  month in  amounts  approximately  equal to the  aggregate
Current  Principal Amount of the Adjustable Rate  Certificates then outstanding.
The Securities Administrator will request the principal London office of each of
the  reference  banks to provide a quotation  of its rate.  If at least two such
quotations are provided,  the rate will be the arithmetic mean of the quotations
rounded up to the nearest whole multiple of 0.03125%. If on such date fewer than
two quotations are provided as requested,  the rate will be the arithmetic  mean
of the rates quoted by one or more major banks in New York City, selected by the
Securities Administrator, as of 11:00 a.m., New York City time, on such date for
loans in U.S.  Dollars  to leading  European  banks for a period of one month in
amounts  approximately  equal to the aggregate  Current  Principal Amount of the
Adjustable  Rate  Certificates  then  outstanding.  If no such quotations can be
obtained,  the rate  will be LIBOR  for the prior  Distribution  Date;  PROVIDED
HOWEVER, if, under the priorities described above, LIBOR for a Distribution Date
would be  based  on  LIBOR  for the  previous  Distribution  Date for the  third
consecutive  Distribution  Date,  the Securities  Administrator  shall select an
alternative  comparable index (over which the Securities  Administrator e 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 LIBOR by the  Securities  Administrator  on any  Interest
Determination Date and the Securities  Administrator's subsequent calculation of
the  Pass-Through  Rate applicable to the Adjustable Rate  Certificates  for the
relevant  Interest  Accrual Period,  in the absence of manifest  error,  will be
final and binding.  Promptly  following  each  Interest  Determination  Date the
Securities  Administrator  shall supply the Master  Servicer with the results of
its determination of LIBOR on such date.


                                      -37-
<PAGE>


                                   ARTICLE II
                          Conveyance of Mortgage Loans;
                        Original Issuance of Certificates

      Section 2.01 Conveyance of Mortgage Loans to Trustee.

      (a) The  Depositor  concurrently  with the  execution and delivery of this
Agreement,  sells,  transfers and assigns to the Trust without  recourse all its
right,  title and interest in and to (i) the Mortgage  Loans  identified  in the
Mortgage Loan Schedule, including all interest and principal due with respect to
the  Mortgage  Loans after the  Cut-off  Date,  but  excluding  any  payments of
principal and interest due on or prior to the Cut-off Date;  (ii) such assets as
shall  from  time to time be  credited  or are  required  by the  terms  of this
Agreement to be credited to the Master Servicer Collection  Account,  (iii) such
assets  relating to the  Mortgage  Loans as from time to time may be held by the
Servicers  in Protected  Accounts,  the Master  Servicer in the Master  Servicer
Collection  Account and the Trustee in the  Distribution  Account,  (iv) any REO
Property, (v) the Required Insurance Policies and any amounts paid or payable by
the insurer under any Insurance  Policy (to the extent the mortgagee has a claim
thereto),  (vi) the Mortgage Loan Purchase  Agreement to the extent  provided in
Subsection 2.03(a), (vii) the rights with respect to the Servicing Agreements as
assigned to the Trustee on behalf of the  Certificateholders  by the  Assignment
Agreements,  (viii) the Policy,  the Class I-A-5 Policy  Payments  Account,  the
Rounding  Account and the Reserve Fund and (ix) any  proceeds of the  foregoing.
Although it is the intent of the parties to this  Agreement  that the conveyance
of the  Depositor's  right,  title and interest in and to the Mortgage Loans and
other assets in the Trust Fund  pursuant to this  Agreement  shall  constitute a
purchase and sale and not a loan, in the event that such conveyance is deemed to
be a loan, it is the intent of the parties to this  Agreement that the Depositor
shall be deemed  to have  granted  to the  Trustee  a first  priority  perfected
security interest in all of the Depositor's right, title and interest in, to and
under  the  Mortgage  Loans and other  assets in the Trust  Fund,  and that this
Agreement  shall  constitute  a security  agreement  under  applicable  law. The
Depositor,  the Master  Servicer  and the Trustee  agree that it is not intended
that any mortgage  loan be conveyed to the Trust that is either (i) a "High-Cost
Home Loan" as defined in the New Jersey Home  Ownership Act  effective  November
27, 2003 or (ii) a "High-Cost  Home Loan" as defined in the New Mexico Home Loan
Protection Act effective January 1, 2004.

      (b) In connection  with the above transfer and  assignment,  the Depositor
hereby delivers to the Custodian,  as agent for the Trustee, with respect to (I)
each Mortgage Loan (other than a Cooperative Loan):

            (i) the original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the originator thereof to the Person endorsing it to the Trustee,  or lost
      note affidavit together with a copy of the related Mortgage Note;

            (ii) the original  Mortgage  and, if the related  Mortgage Loan is a
      MOM Loan, noting the presence of the MIN and language indicating that such
      Mortgage  Loan is a MOM Loan,  which shall have been  recorded  (or if the
      original  is not  available,  a copy),  with  evidence  of such  recording
      indicated thereon (or if clause (w) in the proviso below applies, shall be
      in recordable form);


                                      -38-
<PAGE>

            (iii)  unless the Mortgage  Loan is a MOM Loan, a certified  copy of
      the  assignment  (which  may be in the  form of a  blanket  assignment  if
      permitted in the jurisdiction in which the Mortgaged  Property is located)
      to  "U.S.  Bank  National  Association,  as  Trustee",  with  evidence  of
      recording  with respect to each  Mortgage  Loan in the name of the Trustee
      thereon (or if clause (w) in the  proviso  below  applies or for  Mortgage
      Loans with respect to which the related Mortgaged Property is located in a
      state other than  Maryland  or an Opinion of Counsel has been  provided as
      set forth in this Section 2.01(b), shall be in recordable form);

            (iv) all  intervening  assignments  of the Security  Instrument,  if
      applicable and only to the extent available to the Depositor with evidence
      of recording thereon;

            (v) the original or a copy of the policy or  certificate  of primary
      mortgage guaranty insurance, to the extent available, if any;

            (vi)  the  original   policy  of  title   insurance  or  mortgagee's
      certificate  of  title   insurance  or  commitment  or  binder  for  title
      insurance; and

            (vii) originals of all  modification  agreements,  if applicable and
      available.

and (II) with respect to each Cooperative Loan so assigned:

            (i) The original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the originator thereof to the Person endorsing it to the Trustee,  or lost
      note affidavit, together with a copy of the related Mortgage Note;

            (ii) A counterpart  of the  Cooperative  Lease and the Assignment of
      Proprietary   Lease  to  the  originator  of  the  Cooperative  Loan  with
      intervening  assignments  showing  an  unbroken  chain of title  from such
      originator to the Trustee;

            (iii) The related  Cooperative Stock  Certificate,  representing the
      related  Cooperative  Stock pledged with respect to such Cooperative Loan,
      together  with an  undated  stock  power  (or  other  similar  instrument)
      executed in blank;

            (iv) The original  recognition  agreement by the  Cooperative of the
      interests of the mortgagee  with respect to the related  Cooperative  Loan
      and any transfer documents related to the recognition agreement;

            (v) The Security Agreement;

            (vi)  Copies of the  original  UCC-1  financing  statement,  and any
      continuation statements,  filed by the originator of such Cooperative Loan
      as secured party, each with evidence of recording thereof,  evidencing the
      interest of the originator under the Security Agreement and the Assignment
      of Proprietary Lease;

            (vii) Copies of the filed UCC-3 assignments of the security interest
      referenced  in clause (vi) above  showing an unbroken  chain of title from
      the originator to the Trustee, each


                                      -39-
<PAGE>

      with  evidence  of  recording  thereof,  evidencing  the  interest  of the
      originator under the Security  Agreement and the Assignment of Proprietary
      Lease;

            (viii) An executed  assignment of the interest of the  originator in
      the Security  Agreement and  Assignment of Proprietary  Lease,  showing an
      unbroken chain of title from the originator to the Trustee; and

            (ix) The  original of each  modification,  assumption  agreement  or
      preferred loan agreement, if any, relating to such Cooperative Loan;

PROVIDED, HOWEVER, that in lieu of the foregoing, the Depositor may deliver to
the Custodian, as agent of the Trustee, the following documents, under the
circumstances set forth below: (w) in lieu of the original Security Instrument,
assignments to the Trustee or intervening assignments thereof which have been
delivered, are being delivered or will, upon receipt of recording information
relating to the Security Instrument required to be included thereon, be
delivered to recording offices for recording and have not been returned to the
Depositor in time to permit their delivery as specified above, the Depositor may
deliver a true copy thereof with a certification by the Depositor, on the face
of such copy, substantially as follows: "Certified to be a true and correct copy
of the original, which has been transmitted for recording"; (x) in lieu of the
Security Instrument, assignment to the Trustee or intervening assignments
thereof, if the applicable jurisdiction retains the originals of such documents
(as evidenced by a certification from the Depositor to such effect) the
Depositor may deliver photocopies of such documents containing an original
certification by the judicial or other governmental authority of the
jurisdiction where such documents were recorded; (y) in lieu of the Mortgage
Notes relating to the Mortgage Loans identified on Exhibit 5 to the Mortgage
Loan Purchase Agreement, the Depositor may deliver lost note affidavits from the
Seller; and (z) the Depositor shall not be required to deliver intervening
assignments or Mortgage Note endorsements between the related Underlying Seller
and the Seller, between the Seller and the Depositor, and between the Depositor
and the Trustee; and provided, further, however, that in the case of Mortgage
Loans which have been prepaid in full after the Cut-off Date and prior to the
Closing Date, the Depositor, in lieu of delivering the above documents, may
deliver to the Trustee or the Custodian, as its agent, a certification to such
effect and shall deposit all amounts paid in respect of such Mortgage Loans in
the Master Servicer Collection Account on the Closing Date. The Depositor shall
deliver such original documents (including any original documents as to which
certified copies had previously been delivered) to the Trustee or the Custodian,
as its agent, promptly after they are received. The Depositor shall cause the
Seller, at its expense, to cause each assignment of the Security Instrument to
the Trustee to be recorded not later than 180 days after the Closing Date,
unless (a) such recordation is not required by the Rating Agencies or an Opinion
of Counsel addressed to the Trustee and Radian has been provided to the Trustee
(with a copy to the Custodian) and Radian which states that recordation of such
Security Instrument is not required to protect the interests of the
Certificateholders in the related Mortgage Loans or (b) MERS is identified on
the Mortgage or on a properly recorded assignment of the Mortgage as the
mortgagee of record solely as nominee for the Seller and its successor and
assigns; provided, however, notwithstanding the foregoing, each assignment shall
be submitted for recording by the Seller in the manner described above, at no
expense to the Trust or the Trustee or the Custodian, as its agent, upon the
earliest to occur of: (i) reasonable direction by the Holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than 25% of the
Trust, (ii) the occurrence of an Event of Default, (iii) the occurrence of a
bankruptcy, insolvency or foreclosure relating to the Seller and (iv) the


                                      -40-
<PAGE>

occurrence of a servicing transfer as described in Section 8.02 hereof.
Notwithstanding the foregoing, if the Seller fails to pay the cost of recording
the assignments, such expense will be paid by the Trustee and the Trustee shall
be reimbursed for such expenses by the Trust in accordance with Section 9.05.

      Section 2.02 Acceptance of Mortgage Loans by Trustee.

      (a) The Trustee  acknowledges  the sale,  transfer and  assignment  of the
Trust Fund to it by the Depositor and receipt of,  subject to further review and
the exceptions  which may be noted pursuant to the procedures  described  below,
and  declares  that it  holds,  the  documents  (or  certified  copies  thereof)
delivered to the Custodian, as its agent, pursuant to Section 2.01, and declares
that it will continue to hold those documents and any  amendments,  replacements
or supplements thereto and all other assets of the Trust Fund delivered to it as
Trustee in trust for the use and benefit of all  present  and future  Holders of
the Certificates and Radian. On the Closing Date, the Custodian, with respect to
the Mortgage  Loans,  shall  acknowledge  with respect to each  Mortgage Loan by
delivery to the  Depositor,  Radian and the Trustee of an Initial  Certification
receipt of the Mortgage File,  but without review of such Mortgage File,  except
to the extent  necessary to confirm that such Mortgage File contains the related
Mortgage  Note or lost note  affidavit.  No later than 90 days after the Closing
Date (or, with respect to any  Substitute  Mortgage  Loan,  within five Business
Days after the receipt by the Trustee or Custodian thereof), the Trustee agrees,
for the benefit of the  Certificateholders  and Radian, to review or cause to be
reviewed by the Custodian on its behalf (under the  Custodial  Agreement),  each
Mortgage  File  delivered  to it and to  execute  and  deliver,  or  cause to be
executed  and  delivered,  to the  Depositor,  Radian and the Trustee an Interim
Certification.  In  conducting  such  review,  the  Trustee  or  Custodian  will
ascertain  whether all required  documents have been executed and received,  and
based on the Mortgage Loan Schedule,  whether those documents relate, determined
on the basis of the Mortgagor name,  original principal balance and loan number,
to the Mortgage  Loans it has  received,  as  identified  in the  Mortgage  Loan
Schedule.  In performing any such review,  the Trustee or the Custodian,  as its
agent, may  conclusively  rely on the purported due execution and genuineness of
any such document and on the purported  genuineness of any signature thereon. If
the Trustee or the Custodian, as its agent, finds any document constituting part
of the  Mortgage  File has not been  executed or received,  or to be  unrelated,
determined on the basis of the Mortgagor name,  original  principal  balance and
loan  number,  to the  Mortgage  Loans  identified  in  Exhibit  B or to  appear
defective on its face (a "Material  Defect"),  the Trustee or the Custodian,  as
its agent,  shall promptly  notify the Seller.  In accordance  with the Mortgage
Loan Purchase Agreement, the Seller shall correct or cure any such defect within
ninety (90) days from the date of notice from the Trustee or the  Custodian,  as
its agent,  of the defect and if the Seller  fails to correct or cure the defect
within  such  period,  and such  defect  materially  and  adversely  affects the
interests of the  Certificateholders  in the related  Mortgage Loan, the Trustee
shall enforce the Seller's obligation under the Mortgage Loan Purchase Agreement
to, within 90 days from the Trustee's or the Custodian's notification, provide a
Substitute  Mortgage  Loan (if within two years of the Closing Date) or purchase
such Mortgage Loan at the Repurchase Price;  provided that, if such defect would
cause the Mortgage  Loan to be other than a  "qualified  mortgage" as defined in
Section 860G(a)(3) of the Code, any such cure or repurchase must occur within 90
days from the date such breach was discovered;  provided,  however, that if such
defect  relates  solely to the  inability  of the Seller to deliver the original
Security Instrument or


                                      -41-
<PAGE>

intervening  assignments  thereof,  or a certified copy because the originals of
such  documents,  or a certified  copy have not been returned by the  applicable
jurisdiction, the Seller shall not be required to purchase such Mortgage Loan if
the Seller  delivers  such  original  documents or certified  copy promptly upon
receipt,  but in no event  later  than 360 days  after  the  Closing  Date.  The
foregoing  repurchase  obligation  shall not apply in the event  that the Seller
cannot deliver such original or copy of any document  submitted for recording to
the appropriate  recording  office in the applicable  jurisdiction  because such
document has not been  returned by such office;  provided  that the Seller shall
instead deliver a recording receipt of such recording office or, if such receipt
is not  available,  a  certificate  confirming  that  such  documents  have been
accepted for  recording,  and delivery to the Trustee or the  Custodian,  as its
agent,  shall be effected by the Seller within thirty days of its receipt of the
original recorded document.

      (b) No later  than 180 days after the  Closing  Date,  the  Trustee or the
Custodian,  as its agent, will review, for the benefit of the Certificateholders
and Radian,  the Mortgage Files  delivered to it and will execute and deliver or
cause to be executed and  delivered to the  Depositor,  Radian and the Trustee a
Final Certification. In conducting such review, the Trustee or the Custodian, as
its agent,  will ascertain  whether an original of each document  required to be
recorded has been returned from the recording  office with evidence of recording
thereon or a certified copy has been obtained from the recording  office. If the
Trustee or the Custodian,  as its agent, finds a Material Defect, the Trustee or
the  Custodian,  as its agent,  shall  promptly  notify  the  Seller  (provided,
however,   that  with  respect  to  those  documents  described  in  subsections
(b)(I)(iv),  (v),  and (vii) of Section  2.01,  the  Trustee's  and  Custodian's
obligations  shall  extend  only  to the  documents  actually  delivered  to the
Custodian  pursuant to such  subsections).  In accordance with the Mortgage Loan
Purchase  Agreement,  the Seller shall correct or cure any such defect within 90
days from the date of notice from the Trustee or the Custodian, as its agent, of
the Material  Defect and if the Seller is unable to cure such defect within such
period, and if such defect materially and adversely affects the interests of the
Certificateholders  in the related  Mortgage Loan, the Trustee shall enforce the
Seller's  obligation  under the Mortgage Loan  Purchase  Agreement to, within 90
days from the  Trustee's  or  Custodian's  notification,  provide  a  Substitute
Mortgage  Loan (if  within  two  years of the  Closing  Date) or  purchase  such
Mortgage Loan at the Repurchase Price, provided that, if such defect would cause
the Mortgage Loan to be other than a "qualified  mortgage" as defined in Section
860G(a)(3) of the Code,  any such cure,  repurchase or  substitution  must occur
within 90 days from the date such breach was discovered, provided, however, that
if such  defect  relates  solely to the  inability  of the Seller to deliver the
original Security Instrument or intervening  assignments thereof, or a certified
copy, because the originals of such documents or a certified copy, have not been
returned by the  applicable  jurisdiction,  the Seller  shall not be required to
purchase such Mortgage Loan, if the Seller  delivers such original  documents or
certified copy promptly upon receipt,  but in no event later than 360 days after
the Closing Date.  The foregoing  repurchase  obligation  shall not apply in the
event that the Seller  cannot  deliver  such  original  or copy of any  document
submitted for recording to the  appropriate  recording  office in the applicable
jurisdiction  because  such  document  has not  been  returned  by such  office;
provided  that the Seller  shall  instead  deliver a  recording  receipt of such
recording office or, if such receipt is not available,  a certificate confirming
that such  documents  have been  accepted  for  recording,  and  delivery to the
Trustee or the Custodian,  as its agent,  shall be effected by the Seller within
thirty days of its receipt of the original recorded document.


                                      -42-
<PAGE>

      (c) In the  event  that a  Mortgage  Loan is  purchased  by the  Seller in
accordance with Subsections  2.02(a) or (b) above, the Seller shall remit to the
Master  Servicer  the  Repurchase  Price  for  deposit  in the  Master  Servicer
Collection Account and the Seller shall provide to the Securities Administrator,
the Trustee and Radian  written  notification  detailing  the  components of the
Repurchase  Price.  Upon deposit of the Repurchase  Price in the Master Servicer
Collection Account, the Depositor shall notify the Trustee and the Custodian, as
agent of the  Trustee  (upon  receipt  of a Request  for  Release in the form of
Exhibit D attached hereto with respect to such Mortgage Loan),  shall release to
the Seller the related  Mortgage  File and the Trustee shall execute and deliver
all instruments of transfer or assignment,  without recourse,  representation or
warranty,  furnished to it by the Seller, as are necessary to vest in the Seller
title to and rights under the Mortgage  Loan.  Such purchase  shall be deemed to
have occurred on the date on which the Repurchase Price in immediately available
funds is received by the  Trustee.  The Trustee  shall amend the  Mortgage  Loan
Schedule, which was previously delivered to it by the Depositor in a form agreed
to between the Depositor and the Trustee,  to reflect such  repurchase and shall
promptly  notify the Rating  Agencies,  Radian and the Master  Servicer  of such
amendment.  The  obligation of the Seller to  repurchase  or substitute  for any
Mortgage  Loan a  Substitute  Mortgage  Loan  as to  which  such a  defect  in a
constituent  document  exists  shall be the sole remedy  respecting  such defect
available  to the  Certificateholders  and  Radian  or to the  Trustee  on their
behalf.

      Section  2.03  Assignment  of  Interest  in  the  Mortgage  Loan  Purchase
Agreement.

      (a)  The  Depositor  hereby  assigns  to the  Trustee,  on  behalf  of the
Certificateholders,  all of its right,  title and interest in the Mortgage  Loan
Purchase  Agreement,  including  but not limited to the  Depositor's  rights and
obligations  pursuant to the  Servicing  Agreements  (noting that the Seller has
retained the right in the event of breach of the representations, warranties and
covenants,  if any,  with respect to the related  Mortgage  Loans of the related
Servicer under the related Servicing Agreement to enforce the provisions thereof
and to seek all or any available  remedies).  The  obligations  of the Seller to
substitute or repurchase,  as applicable, a Mortgage Loan shall be the Trustee's
and the  Certificateholders'  sole remedy for any breach thereof. At the request
of the  Trustee,  the  Depositor  shall take such actions as may be necessary to
enforce  the above  right,  title and  interest  on behalf of the  Trustee,  the
Certificateholders  and Radian or shall  execute such  further  documents as the
Trustee may reasonably  require in order to enable the Trustee to carry out such
enforcement.

      (b)  If  the  Depositor,  the  Securities  Administrator  or  the  Trustee
discovers a breach of any of the representations and warranties set forth in the
Mortgage Loan Purchase Agreement,  which breach materially and adversely affects
the value of the interests of  Certificateholders  or the Trustee in the related
Mortgage Loan, the party discovering the breach shall give prompt written notice
of the breach to the other parties. The Seller,  within 90 days of its discovery
or receipt of notice that such breach has occurred  (whichever  occurs earlier),
shall cure the breach in all material  respects or, subject to the Mortgage Loan
Purchase  Agreement  or Section 2.04 of this  Agreement,  as  applicable,  shall
purchase the Mortgage Loan or any property  acquired  with respect  thereto from
the Trustee; provided,  however, that if there is a breach of any representation
set forth in the  Mortgage  Loan  Purchase  Agreement  or  Section  2.04 of this
Agreement, as applicable, and the Mortgage Loan or the related property acquired
with  respect  thereto has been sold,  then the Seller shall pay, in lieu of the
Repurchase Price, any excess of the


                                      -43-
<PAGE>

Repurchase Price over the Net Liquidation  Proceeds  received upon such sale. If
the Net Liquidation  Proceeds exceed the Repurchase  Price,  any excess shall be
paid to the Seller to the extent not required by law to be paid to the borrower.
Any such  purchase by the Seller  shall be made by  providing an amount equal to
the Repurchase  Price to the Master  Servicer for deposit in the Master Servicer
Collection  Account and written  notification  detailing the  components of such
Repurchase  Price.  The  Depositor  shall  notify the  Trustee and submit to the
Custodian,  as agent for the Trustee,  a Request for Release,  and the Custodian
shall  release,  or the Trustee  shall cause the  Custodian  to release,  to the
Seller the related  Mortgage  File and the Trustee shall execute and deliver all
instruments  of transfer or  assignment  furnished to it by the Seller,  without
recourse,  representation  or  warranty as are  necessary  to vest in the Seller
title to and  rights  under the  Mortgage  Loan or any  property  acquired  with
respect  thereto.  Such purchase shall be deemed to have occurred on the date on
which the Repurchase  Price in available  funds is received by the Trustee.  The
Master  Servicer  shall  amend  the  Mortgage  Loan  Schedule  to  reflect  such
repurchase and shall promptly notify the Trustee, Radian and the Rating Agencies
of such  amendment.  Enforcement of the obligation of the Seller to purchase (or
substitute a  Substitute  Mortgage  Loan for) any Mortgage  Loan or any property
acquired with respect  thereto (or pay the Repurchase  Price as set forth in the
above  proviso)  as to which a  breach  has  occurred  and is  continuing  shall
constitute   the  sole  remedy   respecting   such  breach   available   to  the
Certificateholders or the Trustee on their behalf.

      Section 2.04 Substitution of Mortgage Loans.

      Notwithstanding  anything to the  contrary in this  Agreement,  in lieu of
purchasing a Mortgage Loan  pursuant to the Mortgage Loan Purchase  Agreement or
Sections 2.02 or 2.03 of this Agreement,  the Seller may, no later than the date
by which such purchase by the Seller would otherwise be required,  tender to the
Trustee a Substitute Mortgage Loan accompanied by a certificate of an authorized
officer  of the  Seller  that such  Substitute  Mortgage  Loan  conforms  to the
requirements  set forth in the definition of "Substitute  Mortgage Loan" in this
Agreement;  provided,  however,  that substitution pursuant to the Mortgage Loan
Purchase Agreement or Section 2.04 of this Agreement, as applicable,  in lieu of
purchase shall not be permitted  after the  termination  of the two-year  period
beginning on the Startup Day; provided,  further, that if the breach would cause
the Mortgage Loan to be other than a "qualified  mortgage" as defined in Section
860G(a)(3) of the Code, any such cure or substitution  must occur within 90 days
from the  date the  breach  was  discovered.  The  Custodian,  as agent  for the
Trustee, shall examine the Mortgage File for any Substitute Mortgage Loan in the
manner set forth in Section  2.02(a)  and the Trustee or the  Custodian,  as its
agent,  shall notify the Seller,  in writing,  within five  Business  Days after
receipt,  whether or not the documents relating to the Substitute  Mortgage Loan
satisfy the requirements of the fifth sentence of Subsection 2.02(a). Within two
Business Days after such  notification,  the Seller shall provide to the Trustee
for  deposit  in the  Distribution  Account  the  amount,  if any,  by which the
Outstanding  Principal Balance as of the next preceding Due Date of the Mortgage
Loan for which  substitution is being made, after giving effect to the Scheduled
Principal due on such date, exceeds the Outstanding Principal Balance as of such
date of the Substitute Mortgage Loan, after giving effect to Scheduled Principal
due on such  date,  which  amount  shall be  treated  for the  purposes  of this
Agreement  as if it were the payment by the Seller of the  Repurchase  Price for
the purchase of a Mortgage Loan by the Seller.  After such  notification  to the
Seller and, if any such excess exists, upon receipt of such deposit, the Trustee
shall accept such Substitute  Mortgage Loan which shall  thereafter be deemed to
be a Mortgage


                                      -44-
<PAGE>

Loan  hereunder.  In the event of such a substitution,  accrued  interest on the
Substitute  Mortgage Loan for the month in which the substitution occurs and any
Principal  Prepayments  made thereon  during such month shall be the property of
the Trust Fund and  accrued  interest  for such month on the  Mortgage  Loan for
which the substitution is made and any Principal Prepayments made thereon during
such month shall be the  property of the Seller.  The  Scheduled  Principal on a
Substitute  Mortgage Loan due on the Due Date in the month of substitution shall
be the property of the Seller and the  Scheduled  Principal on the Mortgage Loan
for which the substitution is made due on such Due Date shall be the property of
the Trust Fund. Upon acceptance of the Substitute Mortgage Loan (and delivery to
the Custodian of a Request for Release for such Mortgage  Loan),  the Custodian,
as agent for the Trustee,  shall release to the Seller the related Mortgage File
related to any Mortgage  Loan  released  pursuant to the Mortgage  Loan Purchase
Agreement or Section 2.04 of this  Agreement,  as applicable,  and shall execute
and  deliver  all  instruments  of transfer  or  assignment,  without  recourse,
representation or warranty in form as provided to it as are necessary to vest in
the Seller title to and rights under any Mortgage Loan released  pursuant to the
Mortgage  Loan  Purchase  Agreement  or  Section  2.04  of  this  Agreement,  as
applicable.  The Seller shall deliver to the Custodian the documents  related to
the Substitute  Mortgage Loan in accordance  with the provisions of the Mortgage
Loan Purchase Agreement or Subsections 2.01(b) and 2.02(b) of this Agreement, as
applicable,  with the date of acceptance of the Substitute  Mortgage Loan deemed
to be the  Closing  Date for  purposes  of the time  periods  set forth in those
Subsections.  The  representations and warranties set forth in the Mortgage Loan
Purchase  Agreement shall be deemed to have been made by the Seller with respect
to each  Substitute  Mortgage Loan as of the date of acceptance of such Mortgage
Loan by the Trustee.  The Master Servicer shall amend the Mortgage Loan Schedule
to reflect such  substitution  and shall provide a copy of such amended Mortgage
Loan Schedule to the Trustee, Radian and the Rating Agencies.

      Section 2.05 Issuance of Certificates.

      (a) The Trustee  acknowledges  the  assignment to it of the Mortgage Loans
and the other assets comprising the Trust Fund and, concurrently therewith,  has
signed, and countersigned and delivered to the Depositor,  in exchange therefor,
Certificates  in such  authorized  denominations  representing  such  Fractional
Undivided  Interests as the Depositor has requested.  The Trustee agrees that it
will hold the  Mortgage  Loans and such other assets as may from time to time be
delivered to it  segregated on the books of the Trustee in trust for the benefit
of the Certificateholders.

      (b) The Depositor,  concurrently  with the execution and delivery  hereof,
does hereby  transfer,  assign,  set over and  otherwise  convey in trust to the
Trustee without  recourse all the right,  title and interest of the Depositor in
and to the REMIC I Regular  Interests,  and the other assets of REMIC II for the
benefit  of the  holders of the REMIC II  Interests.  The  Trustee  acknowledges
receipt  of the REMIC I Regular  Interests  (which are  uncertificated)  and the
other  assets of REMIC II and  declares  that it holds and will hold the same in
trust  for  the  exclusive  use and  benefit  of the  holders  of the  REMIC  II
Interests.

      (c) The Depositor,  concurrently  with the execution and delivery  hereof,
does hereby  transfer,  assign,  set over and  otherwise  convey in trust to the
Trustee without  recourse all the right,  title and interest of the Depositor in
and to the REMIC II Regular Interests, and the other


                                      -45-
<PAGE>

assets  of  REMIC  III  for  the  benefit  of  the  holders  of  the  REMIC  III
Certificates. The Trustee acknowledges receipt of the REMIC II Regular Interests
(which are  uncertificated)  and the other assets of REMIC III and declares that
it holds and will hold the same in trust for the  exclusive  use and  benefit of
the holders of the REMIC III Certificates.

      Section 2.06 Representations and Warranties Concerning the Depositor.

      The Depositor  hereby  represents and warrants to the Trustee,  the Master
Servicer and the Securities Administrator as follows:

            (i) the  Depositor  (a) is a  corporation  duly  organized,  validly
      existing and in good standing  under the laws of the State of Delaware and
      (b) is  qualified  and in good  standing  as a foreign  corporation  to do
      business  in each  jurisdiction  where such  qualification  is  necessary,
      except where the failure so to qualify would not reasonably be expected to
      have a material  adverse effect on the  Depositor's  business as presently
      conducted or on the  Depositor's  ability to enter into this Agreement and
      to consummate the transactions contemplated hereby;

            (ii) the Depositor has full corporate power to own its property,  to
      carry on its business as presently conducted and to enter into and perform
      its obligations under this Agreement;

            (iii) the execution and delivery by the Depositor of this  Agreement
      have been duly authorized by all necessary corporate action on the part of
      the Depositor;  and neither the execution and delivery of this  Agreement,
      nor  the  consummation  of  the  transactions  herein  contemplated,   nor
      compliance with the provisions  hereof,  will conflict with or result in a
      breach of, or  constitute a default  under,  any of the  provisions of any
      law, governmental rule, regulation,  judgment,  decree or order binding on
      the  Depositor  or its  properties  or the  articles of  incorporation  or
      by-laws of the  Depositor,  except those  conflicts,  breaches or defaults
      which would not  reasonably be expected to have a material  adverse effect
      on the Depositor's  ability to enter into this Agreement and to consummate
      the transactions contemplated hereby;

            (iv) the  execution,  delivery and  performance  by the Depositor of
      this  Agreement  and the  consummation  of the  transactions  contemplated
      hereby do not require the consent or approval of, the giving of notice to,
      the  registration  with,  or the taking of any other action in respect of,
      any state, federal or other governmental authority or agency, except those
      consents,  approvals,  notices,  registrations  or other  actions  as have
      already been obtained, given or made;

            (v) this  Agreement  has been duly  executed  and  delivered  by the
      Depositor and, assuming due  authorization,  execution and delivery by the
      other parties  hereto,  constitutes a valid and binding  obligation of the
      Depositor  enforceable against it in accordance with its terms (subject to
      applicable bankruptcy and insolvency laws and other similar laws affecting
      the enforcement of the rights of creditors generally);

            (vi) there are no actions,  suits or proceedings  pending or, to the
      knowledge of the Depositor, threatened against the Depositor, before or by
      any court, administrative agency,


                                      -46-
<PAGE>

      arbitrator  or   governmental   body  (i)  with  respect  to  any  of  the
      transactions  contemplated  by this  Agreement or (ii) with respect to any
      other  matter which in the judgment of the  Depositor  will be  determined
      adversely  to the  Depositor  and  will  if  determined  adversely  to the
      Depositor materially and adversely affect the Depositor's ability to enter
      into this Agreement or perform its obligations  under this Agreement;  and
      the  Depositor  is not in default  with respect to any order of any court,
      administrative agency, arbitrator or governmental body so as to materially
      and adversely affect the transactions contemplated by this Agreement; and

            (vii)  immediately  prior  to the  transfer  and  assignment  to the
      Trustee,  each  Mortgage  Note and each  Mortgage  were not  subject to an
      assignment or pledge,  and the Depositor had good and marketable  title to
      and was the sole owner  thereof  and had full right to  transfer  and sell
      such  Mortgage  Loan to the  Trustee  free and  clear of any  encumbrance,
      equity, lien, pledge, charge, claim or security interest.





                                      -47-
<PAGE>

                                   ARTICLE III
                 Administration and Servicing of Mortgage Loans

      Section 3.01 Master Servicer.

      The Master Servicer shall supervise, monitor and oversee the obligation of
the  Servicers to service and  administer  their  respective  Mortgage  Loans in
accordance with the terms of the applicable  Servicing Agreements 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 each  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 each  Servicer and shall cause each  Servicer to perform
and observe  the  covenants,  obligations  and  conditions  to be  performed  or
observed by such Servicer under its applicable Servicing  Agreement.  The Master
Servicer shall  independently and separately  monitor each 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 Servicers' and Master
Servicer's records, and based on such reconciled and corrected information,  the
Master Servicer shall provide such  information to the Securities  Administrator
as shall be  necessary  in order for it to prepare the  statements  specified in
Section 6.04, and prepare any other  information  and statements  required to be
forwarded by the Master Servicer hereunder.  The Master Servicer shall reconcile
the results of its Mortgage Loan monitoring  with the actual  remittances of the
Servicers pursuant to the applicable Servicing Agreements.

      The Trustee shall  furnish the Servicers and the Master  Servicer with any
powers of attorney  and other  documents  in form as provided to it necessary or
appropriate  to enable the  Servicers  and the Master  Servicer  to service  and
administer the related Mortgage Loans and REO Property.

      The Trustee  shall  provide  access to the records  and  documentation  in
possession of the Trustee  regarding the related Mortgage Loans and REO Property
and the servicing thereof to the  Certificateholders,  Radian, 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;  provided,  however,  that, unless otherwise  required by
law,  the Trustee  shall not 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 shall allow representatives of the above entities
to photocopy any of the records and  documentation  and shall provide  equipment
for that purpose at a charge that covers the Trustee's actual costs.

      The Trustee  shall  execute and  deliver to the related  Servicer  and the
Master  Servicer  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 Security  Instrument;
(iii) obtain a deficiency  judgment  against the Mortgagor;  or (iv) enforce any
other rights or remedies provided by the Mortgage Note or Security Instrument or
otherwise available at law or equity.


                                      -48-
<PAGE>

      Section 3.02 REMIC-Related Covenants.

      For as long as each REMIC shall  exist,  the  Trustee  and the  Securities
Administrator shall act in accordance herewith to assure continuing treatment of
such REMIC as a REMIC,  and the Trustee and the Securities  Administrator  shall
comply with any directions of the Depositor,  the related 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 and
Radian has received a REMIC Opinion addressed to the Trustee and Radian prepared
at the  expense  of the  Trust  Fund;  and (b)  other  than  with  respect  to a
substitution pursuant to the Mortgage Loan Purchase Agreement or Section 2.04 of
this Agreement,  as applicable,  accept any  contribution to any REMIC after the
Startup  Day without  receipt of a REMIC  Opinion  addressed  to the Trustee and
Radian.

      Section 3.03 Monitoring of Servicers.

      (a) The Master  Servicer shall be responsible for reporting to the Trustee
and the  Depositor  the  compliance  by each  Servicer with its duties under the
related Servicing Agreement.  In the review of each Servicer's  activities,  the
Master  Servicer  may rely upon an  officer's  certificate  of the  Servicer (or
similar  document  signed by an officer  of the  Servicer)  with  regard to such
Servicer's  compliance with the terms of its Servicing  Agreement.  In the event
that the Master Servicer, in its judgment,  determines that a Servicer should be
terminated in accordance with its Servicing  Agreement,  or that a notice should
be sent pursuant to such  Servicing  Agreement with respect to the occurrence of
an event that, unless cured, would constitute grounds for such termination,  the
Master  Servicer shall notify the Depositor,  Radian 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,   the
Certificateholders  and Radian,  shall enforce the  obligations of each Servicer
under the related Servicing  Agreement,  and shall, in the event that a Servicer
fails to perform  its  obligations  in  accordance  with the  related  Servicing
Agreement,  subject  to  the  preceding  paragraph,  terminate  the  rights  and
obligations  of such  Servicer  thereunder  and act as  servicer  of the related
Mortgage Loans or to cause the Trustee to enter in to a new Servicing  Agreement
with a successor Servicer selected by the Master Servicer; provided, however, 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 such successor  Servicer.  Such enforcement,  including,
without  limitation,  the legal prosecution of claims,  termination of Servicing
Agreements 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  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 any termination of a Servicer, appointment of a successor Servicer or
the transfer and assumption of


                                      -49-
<PAGE>

servicing  by the  Master  Servicer  with  respect  to any  Servicing  Agreement
(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 an event of default by such Servicer
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  service to service  the
Mortgage Loans in accordance with the related Servicing 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 Master  Servicer
Collection Account.

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

      (e) If the Master Servicer acts as Servicer,  it will not assume liability
for  the  representations  and  warranties  of the  Servicer,  if  any,  that it
replaces.

      Section 3.04 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 3.05 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  X  hereof,  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  and the related
Servicing Agreement, as applicable;  provided, however, that the Master Servicer
shall not (and,  consistent with its responsibilities  under Section 3.03, shall
not permit any 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  Provisions,  if taken or not taken,  as the case may be,  would cause any
REMIC 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 and
Radian have received an Opinion of Counsel (but not at the expense of the Master
Servicer)


                                      -50-
<PAGE>

to the effect that the contemplated  action would not cause any REMIC to fail to
qualify  as a REMIC or result in the  imposition  of a tax upon any  REMIC.  The
Trustee shall furnish the Master Servicer, upon written request from a Servicing
Officer,  with any powers of  attorney  empowering  the Master  Servicer  or any
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 the  applicable  Servicing  Agreement and this  Agreement,  and the Trustee
shall  execute and deliver  such other  documents,  as the Master  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
any Servicer). 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  9.11  hereof.  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 3.06 Due-on-Sale Clauses; Assumption Agreements.

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

      Section 3.07 Release of Mortgage Files.

      (a) Upon  becoming  aware of the payment in full of any Mortgage  Loan, or
the receipt by any  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, if required
under the  applicable  Servicing  Agreement  (or if the  Servicer  does not, the
Master  Servicer  may),  promptly  furnish  to the  Custodian,  on behalf of the
Trustee,  two copies of a certification  substantially  in the form of Exhibit D
hereto  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  Protected  Account  maintained by the  applicable  Servicer
pursuant to Section 4.01 or by the applicable Servicer pursuant to its Servicing
Agreement  have  been  or will be so  deposited)  and  shall  request  that  the
Custodian,  on behalf of the  Trustee,  deliver to the  applicable  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  applicable  Servicer  and the Trustee and  Custodian  shall have no
further responsibility with regard to such Mortgage File.


                                      -51-
<PAGE>

Upon any such payment in full,  each 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 Protected Account.

      (b) From time to time and as appropriate  for the servicing or foreclosure
of any Mortgage Loan and in accordance with the applicable  Servicing Agreement,
the Trustee shall  execute such  documents as shall be prepared and furnished to
the Trustee by a Servicer or the Master 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 a Servicer
or the Master 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 of Exhibit D (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 or the Master Servicer, as applicable.  Such request for
release  shall  obligate  the  Servicer  or the  Master  Servicer  to return the
Mortgage File to the Custodian on behalf of the Trustee,  when the need therefor
by the Servicer or the Master 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 or the
Master Servicer.

      Section 3.08 Documents, Records and Funds in Possession of Master Servicer
To Be Held for Trustee.

      (a) The Master  Servicer  shall  transmit and each Servicer (to the extent
required by the related  Servicing  Agreement)  shall transmit to the Trustee or
Custodian  such  documents  and  instruments  coming into the  possession of the
Master  Servicer or such Servicer from time to time as are required by the terms
hereof, or in the case of the Servicers,  the applicable Servicing Agreement, to
be  delivered  to the  Trustee or  Custodian.  Any funds  received by the Master
Servicer or by a Servicer in respect of any Mortgage Loan or which otherwise are
collected  by the Master  Servicer or by a Servicer as  Liquidation  Proceeds or
Insurance Proceeds in respect of any Mortgage Loan shall be held for the benefit
of the Trustee and the Certificateholders subject to the Master Servicer's right
to retain or withdraw  from the Master  Servicer  Collection  Account the Master
Servicing Compensation and other amounts provided in this Agreement,  and to the
right of each Servicer to retain its Servicing Fee and other amounts as provided
in the applicable  Servicing  Agreement.  The Master Servicer shall, and (to the
extent provided in the applicable Servicing Agreement) shall cause each 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,  Radian 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 the
Office of Trust  Supervision  and the FDIC 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


                                      -52-
<PAGE>

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 held by the Master Servicer for and on behalf of
the Trustee,  Radian and the Certificateholders and shall be and remain the sole
and  exclusive  property  of the  Trustee;  provided,  however,  that the Master
Servicer and each Servicer shall be entitled to setoff against, and deduct from,
any such  funds any  amounts  that are  properly  due and  payable to the Master
Servicer or such  Servicer  under this  Agreement  or the  applicable  Servicing
Agreement.

      Section 3.09 Standard Hazard Insurance and Flood Insurance Policies.

      (a) For  each  Mortgage  Loan,  the  Master  Servicer  shall  enforce  any
obligation of the Servicers under the related  Servicing  Agreements to maintain
or cause to be  maintained  standard  fire and  casualty  insurance  and,  where
applicable,  flood  insurance,  all in  accordance  with the  provisions  of the
related  Servicing  Agreements.  It is understood and agreed that such insurance
shall be with insurers  meeting the  eligibility  requirements  set forth in the
applicable  Servicing  Agreement  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.

      (b)  Pursuant  to Section  4.01 and 4.02,  any  amounts  collected  by the
Servicers  or the  Master  Servicer,  or by any  Servicer,  under any  insurance
policies  (other than amounts to be applied to the  restoration or repair of the
property  subject to the  related  Mortgage  or  released  to the  Mortgagor  in
accordance with the applicable  Servicing Agreement) shall be deposited into the
Master Servicer  Collection  Account,  subject to withdrawal pursuant to Section
4.02 and 4.03.  Any cost  incurred  by the Master  Servicer  or any  Servicer in
maintaining any such insurance if the Mortgagor defaults in its obligation to do
so shall be added to the amount owing under the Mortgage Loan where the terms of
the Mortgage Loan so permit;  provided,  however,  that the addition of any such
cost  shall  not  be  taken  into  account  for  purposes  of  calculating   the
distributions to be made to  Certificateholders  and shall be recoverable by the
Master Servicer or such Servicer pursuant to Section 4.02 and 4.03.

      Section 3.10 Presentment of Claims and Collection of Proceeds.

      The  Master  Servicer  shall (to the  extent  provided  in the  applicable
Servicing Agreement) cause the related Servicer to prepare and present on behalf
of the Trustee, Radian 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 (or  disbursed  to a Servicer  and remitted to the Master  Servicer) in
respect of such policies,  bonds or contracts shall be promptly deposited in the
Master Servicer Collection Account upon receipt,


                                      -53-
<PAGE>

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 deposited (or remitted).

      Section 3.11 Maintenance of the Primary Mortgage Insurance Policies.

      (a) The Master  Servicer  shall not take,  or permit any  Servicer (to the
extent such action is prohibited  under the applicable  Servicing  Agreement) to
take, any action that would result in noncoverage  under any applicable  Primary
Mortgage  Insurance  Policy of any loss which, but for the actions of the Master
Servicer  or such  Servicer,  would  have been  covered  thereunder.  The Master
Servicer  shall use its best  reasonable  efforts to cause each Servicer (to the
extent  required  under the related  Servicing  Agreement)  to keep in force and
effect (to the extent that the Mortgage  Loan requires the Mortgagor to maintain
such insurance),  primary mortgage insurance applicable to each Mortgage Loan in
accordance  with the  provisions  of this  Agreement  and the related  Servicing
Agreement,  as applicable.  The Master  Servicer shall not, and shall not permit
any Servicer (to the extent required under the related Servicing  Agreement) to,
cancel or refuse to renew any such 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 and the related Servicing Agreement, as applicable.

      (b) The Master Servicer  agrees to present,  or to cause each Servicer (to
the extent required under the related Servicing Agreement) to present, on behalf
of the Trustee, Radian 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.  Pursuant to
Section  4.01 and 4.02,  any  amounts  collected  by the Master  Servicer or any
Servicer under any Primary Mortgage Insurance Policies shall be deposited in the
Master Servicer Collection  Account,  subject to withdrawal pursuant to Sections
4.02 and 4.03.

      Section 3.12 Trustee to Retain  Possession of Certain  Insurance  Policies
and Documents.

      The Trustee (or the Custodian,  as directed by the Trustee),  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 have been distributed in full and the Master Servicer otherwise
has  fulfilled  its  obligations  under  this  Agreement,  the  Trustee  (or its
Custodian,  if any, as directed by the Trustee) shall also retain possession and
custody of each Mortgage  File in  accordance  with and subject to the terms and
conditions of this  Agreement.  The Master  Servicer shall  promptly  deliver or
cause to be  delivered  to the  Trustee  (or the  Custodian,  as directed by the
Trustee),  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 portions of the Mortgage File that come
into the possession of the Master Servicer from time to time.


                                      -54-
<PAGE>

      Section 3.13 Realization Upon Defaulted Mortgage Loans.

      The Master  Servicer  shall cause each  Servicer  (to the extent  required
under the related Servicing Agreement) 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 the applicable Servicing Agreement.

      Section 3.14 Compensation for the Master Servicer.

      The Master  Servicer will be entitled to all income and gain realized from
any  investment  of funds in the  Distribution  Account and the Master  Servicer
Collection  Account,  pursuant  to  Article  IV,  for  the  performance  of  its
activities hereunder.  Servicing compensation in the form of assumption fees, if
any, late payment charges, as collected, if any, or otherwise (but not including
any prepayment premium or penalty) shall be retained by the applicable  Servicer
and shall not be deposited in the Protected  Account.  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 3.15 REO Property.

      (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 and Radian. The Master Servicer shall, to the extent provided
in the applicable Servicing Agreement, cause the applicable Servicer to sell any
REO Property as  expeditiously as possible and in accordance with the provisions
of this Agreement and the related Servicing Agreement,  as applicable.  Pursuant
to its efforts to sell such REO Property,  the Master  Servicer  shall cause the
applicable Servicer to protect and conserve, such REO Property in the manner and
to the extent required by the applicable Servicing 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,  to the extent  required  by the  related
Servicing  Agreement,  cause  the  applicable  Servicer  to  deposit  all  funds
collected and received in  connection  with the operation of any REO Property in
the Protected Account.

      (c) The  Master  Servicer  and the  applicable  Servicer,  upon the  final
disposition  of any REO  Property,  shall be entitled to  reimbursement  for any
related unreimbursed Monthly Advances and other unreimbursed advances as well as
any unpaid Servicing Fees from Liquidation  Proceeds received in connection with
the final disposition of such REO Property; provided, that any such unreimbursed
Monthly Advances as well as any unpaid Servicing Fees may be reimbursed or paid,
as the case may be, prior to final disposition,  out of any net rental income or
other net amounts derived from such REO Property.

      (d)  To the  extent  provided  in the  related  Servicing  Agreement,  the
Liquidation Proceeds from the final disposition of the REO Property,  net of any
payment to the Master


                                      -55-
<PAGE>

Servicer and the applicable Servicer as provided above shall be deposited in the
Protected Account on or prior to the  Determination  Date in the month following
receipt thereof and be remitted by wire transfer in immediately  available funds
to the Master Servicer for deposit into the related Master  Servicer  Collection
Account on the next succeeding Servicer Remittance Date.

      Section 3.16 Annual Officer's Certificate as to Compliance.

      (a) The  Master  Servicer  shall  deliver to the  Trustee,  Radian and the
Rating  Agencies  on or before  August 1 of each year,  commencing  on August 1,
2005,  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 any Servicer
has failed to perform any of its duties,  responsibilities and obligations under
its Servicing  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).

      Section 3.17 Annual Independent Accountant's Servicing Report.

      If the Master Servicer has, during the course of any fiscal 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,  Radian,  the Rating Agencies
and the Depositor on or before March 1 of each year, commencing on March 1, 2005
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


                                      -56-
<PAGE>

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 3.18 Reports Filed with Securities and Exchange Commission.

      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 (or other
comparable  form  containing  the comparable  information  or other  information
mutually agreed upon) with a copy of the statement to the Certificateholders for
such Distribution  Date as an exhibit thereto.  Prior to January 30 in any year,
the Securities  Administrator  shall, in accordance with industry  standards and
only if  instructed  by the  Depositor,  file a Form 15  Suspension  Notice with
respect to the Trust Fund, if  applicable.  Prior to (i) March 15, 2005 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 of each Servicer
(or, in the case of U.S.  Central,  its  sub-servicers)  and annual statement of
compliance  of  each  Servicer   (and,  in  the  case  of  U.S.   Central,   its
sub-servicers),  in each case,  required to be delivered pursuant to the related
Servicing  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 3.16 and 3.17. Prior to (i) March 31, 2005,
or such  earlier  filing  date as may be required  by the  Commission,  and (ii)
unless and until a Form 15 Suspension Notice shall have been filed,  March 31 of
each year  thereafter,  or such  earlier  filing  date as may be required by the
Commission,  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  and 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
3.18; 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 3.18 shall not be  reimbursable
from the Trust Fund.

      Section 3.19 The Company.

      On the Closing Date, the Company will receive from the Depositor a payment
of $5,000.


                                      -57-
<PAGE>

      Section 3.20 UCC.

      The  Depositor  shall  inform  the  Trustee  in  writing  of  any  Uniform
Commercial  Code  financing  statements  that were filed on the Closing  Date in
connection  with the  Trust  with  stamped  recorded  copies  of such  financing
statements  to be  delivered  to  the  Trustee  promptly  upon  receipt  by  the
Depositor.  The  Trustee  agrees to  monitor  and notify  the  Depositor  if any
continuation  statements for such Uniform  Commercial Code financing  statements
need to be filed. If directed by the Depositor in writing, the Trustee will file
any such  continuation  statements  solely at the expense of the Depositor.  The
Depositor shall file any financing  statements or amendments thereto required by
any change in the Uniform Commercial Code.

      Section 3.21 Optional Purchase of Defaulted Mortgage Loans.

      (a) With  respect  to any  Mortgage  Loan  which as of the  first day of a
Calendar  Quarter  is  delinquent  in  payment  by 90  days or more or is an REO
Property,  the Company  shall have the right to purchase such Mortgage Loan from
the Trust at a price equal to the Repurchase  Price;  provided  however (i) that
such Mortgage Loan is still 90 days or more  delinquent or is an REO Property as
of the date of such purchase and (ii) this purchase  option,  if not theretofore
exercised,  shall  terminate  on the date  prior to the last day of the  related
Calendar  Quarter.  This  purchase  option,  if  not  exercised,  shall  not  be
thereafter  reinstated  unless the  delinquency  is cured and the Mortgage  Loan
thereafter  again becomes 90 days or more delinquent or becomes an REO Property,
in which case the option shall again become  exercisable  as of the first day of
the related Calendar Quarter.

      (b) If at any time the Company remits to the Master Servicer a payment for
deposit in the Master  Servicer  Collection  Account  covering the amount of the
Repurchase  Price for such a Mortgage  Loan,  and the  Company  provides  to the
Trustee a certification signed by a Servicing Officer stating that the amount of
such payment has been deposited in the Master Servicer Collection Account,  then
the Trustee shall execute the assignment of such Mortgage Loan to the Company at
the request of the Company without recourse,  representation or warranty and the
Company shall succeed to all of the Trustee's  right,  title and interest in and
to such Mortgage Loan,  and all security and documents  relative  thereto.  Such
assignment  shall be an assignment  outright and not for  security.  The Company
will thereupon own such Mortgage,  and all such security and documents,  free of
any further  obligation  to the Trustee or the  Certificateholders  with respect
thereto.


                                      -58-
<PAGE>


                                   ARTICLE IV
                                    Accounts

      Section 4.01 Protected Accounts.

      (a) The Master  Servicer  shall enforce the obligation of each Servicer to
establish  and maintain a Protected  Account in accordance  with the  applicable
Servicing Agreement,  with records to be kept with respect thereto on a Mortgage
Loan by Mortgage Loan basis,  into which accounts  shall be deposited  within 48
hours (or as of such other time specified in the related Servicing Agreement) of
receipt,  all collections of principal and interest on any Mortgage Loan and any
REO Property received by a Servicer, including Principal Prepayments,  Insurance
Proceeds,  Liquidation Proceeds, and advances made from the Servicer's own funds
(less servicing  compensation as permitted by the applicable Servicing Agreement
in the case of any  Servicer)  and all  other  amounts  to be  deposited  in the
Protected  Account.  The Servicer is hereby  authorized to make withdrawals from
and deposits to the related Protected Account for purposes required or permitted
by this Agreement.  To the extent provided in the related  Servicing  Agreement,
the Protected Account shall be held by a Designated  Depository  Institution and
segregated on the books of such  institution  in the name of the Trustee for the
benefit of Certificateholders and Radian.

      (b) To the extent provided in the related Servicing Agreement,  amounts on
deposit in a Protected  Account may be invested in Permitted  Investments in the
name of the  Trustee  for the  benefit  of  Certificateholders  and,  except  as
provided in the preceding  paragraph,  not commingled with any other funds. Such
Permitted  Investments  shall  mature,  or shall be  subject  to  redemption  or
withdrawal,  no later  than the date on which  such  funds  are  required  to be
withdrawn for deposit in the Master Servicer  Collection  Account,  and shall be
held  until  required  for  such  deposit.  The  income  earned  from  Permitted
Investments  made  pursuant  to this  Section  4.01 shall be paid to the related
Servicer  under  the  applicable  Servicing  Agreement,  and the risk of loss of
moneys required to be distributed to the Certificateholders  resulting from such
investments  shall  be borne by and be the  risk of the  related  Servicer.  The
related  Servicer  (to the extent  provided in the  Servicing  Agreement)  shall
deposit the amount of any such loss in the Protected Account within two Business
Days of  receipt  of  notification  of such loss but not later  than the  second
Business Day prior to the Distribution  Date on which the moneys so invested are
required to be distributed to the Certificateholders.

      (c) To the extent provided in the related Servicing  Agreement and subject
to this  Article IV, on or before each  Servicer  Remittance  Date,  the related
Servicer  shall  withdraw  or shall  cause to be  withdrawn  from its  Protected
Accounts  and shall  immediately  deposit or cause to be deposited in the Master
Servicer Collection Account amounts  representing the following  collections and
payments  (other than with  respect to  principal of or interest on the Mortgage
Loans due on or before the Cut-off Date):

            (i) Scheduled Payments on the Mortgage Loans received or any related
      portion  thereof  advanced  by such  Servicer  pursuant  to its  Servicing
      Agreement  which were due on or before the  related  Due Date,  net of the
      amount  thereof  comprising  its Servicing Fee or any fees with respect to
      any lender-paid primary mortgage insurance policy;


                                      -59-
<PAGE>

            (ii)  Full  Principal   Prepayments  and  any  Liquidation  Proceeds
      received  by such  Servicer  with  respect  to the  Mortgage  Loans in the
      related  Prepayment  Period,  with  interest to the date of  prepayment or
      liquidation, net of the amount thereof comprising its Servicing Fee;

            (iii) Partial  Principal  Prepayments  received by such Servicer for
      the Mortgage Loans in the related Prepayment Period; and

            (iv) Any amount to be used as a Monthly Advance.

      (d)  Withdrawals  may be made from an Account only to make  remittances as
provided in Section 4.01(c),  4.02 and 4.03; to reimburse the Master Servicer or
a  Servicer  for  Monthly  Advances  which  have been  recovered  by  subsequent
collections from the related Mortgagor; to remove amounts deposited in error; to
remove fees, charges or other such amounts deposited on a temporary basis; or to
clear  and  terminate  the  account  at the  termination  of this  Agreement  in
accordance  with  Section  10.01.  As provided  in Sections  4.01(a) and 4.02(b)
certain amounts  otherwise due to the Servicers may be retained by them and need
not be deposited in the Master Servicer Collection Account.

      Section 4.02 Master Servicer Collection Account.

      (a) The Master  Servicer  shall  establish and maintain in the name of the
Trustee,  for the  benefit  of the  Certificateholders  and  Radian,  the Master
Servicer  Collection  Account as a segregated  trust  account or  accounts.  The
Master  Servicer  Collection  Account shall be an Eligible  Account.  The Master
Servicer will deposit in the Master Servicer Collection Account as identified by
the Master  Servicer  and as  received  by the Master  Servicer,  the  following
amounts:

            (i) Any amounts withdrawn from a Protected Account;

            (ii) Any Monthly Advance and any Compensating Interest Payments;

            (iii) Any Insurance Proceeds or Net Liquidation Proceeds received by
      or on behalf of the  Master  Servicer  or which  were not  deposited  in a
      Protected Account;

            (iv)  The  Repurchase  Price  with  respect  to any  Mortgage  Loans
      purchased by the Seller  pursuant to the Mortgage Loan Purchase  Agreement
      or  Sections  2.02 or 2.03  hereof,  any  amounts  which are to be treated
      pursuant to Section 2.04 of this  Agreement as the payment of a Repurchase
      Price in connection  with the tender of a Substitute  Mortgage Loan by the
      Seller,  the Repurchase Price with respect to any Mortgage Loans purchased
      by the Company  pursuant to Section 3.21, and all proceeds of any Mortgage
      Loans  or  property  acquired  with  respect  thereto  repurchased  by the
      Depositor or its designee pursuant to Section 10.01;

            (v) Any amounts  required to be deposited  with respect to losses on
      investments of deposits in an Account; and


                                      -60-
<PAGE>

            (vi) Any  other  amounts  received  by or on  behalf  of the  Master
      Servicer and required to be  deposited in the Master  Servicer  Collection
      Account pursuant to this Agreement.

      (b) All amounts deposited to the Master Servicer  Collection Account shall
be held by the  Master  Servicer  in the name of the  Trustee  in trust  for the
benefit of the  Certificateholders  and Radian in accordance  with the terms and
provisions of this Agreement. The requirements for crediting the Master Servicer
Collection  Account or the  Distribution  Account shall be  exclusive,  it being
understood  and agreed that,  without  limiting the generality of the foregoing,
payments in the nature of (i) prepayment or late payment  charges or assumption,
tax service, statement account or payoff,  substitution,  satisfaction,  release
and other like fees and charges  and (ii) the items  enumerated  in  Subsections
4.05(a)(i),  (ii), (iii), (iv), (vi), (vii),  (viii), (ix), (x), (xi) and (xii),
need not be  credited  by the Master  Servicer  or the  related  Servicer to the
Distribution  Account or the Master Servicer  Collection Account, as applicable.
In the event that the Master  Servicer shall deposit or cause to be deposited to
the  Distribution  Account any amount not required to be credited  thereto,  the
Trustee,  upon  receipt  of a written  request  therefor  signed by a  Servicing
Officer of the Master  Servicer,  shall  promptly  transfer  such  amount to the
Master Servicer, any provision herein to the contrary notwithstanding.

      (c) The  amount at any time  credited  to the Master  Servicer  Collection
Account may be  invested,  in the name of the Trustee,  or its nominee,  for the
benefit  of the  Certificateholders,  in  Permitted  Investments  (which  may be
managed or advised by the Master  Servicer  or its  affiliate)  as  directed  by
Master  Servicer.  All  Permitted  Investments  shall  mature or be  subject  to
redemption  or  withdrawal  on or  before,  and  shall be held  until,  the next
succeeding Distribution Account Deposit Date. Any and all investment earnings on
amounts on deposit in the Master Servicer Account from time to time shall be for
the account of the Master Servicer.  The Master Servicer from time to time shall
be  permitted  to withdraw  or receive  distribution  of any and all  investment
earnings from the Master Servicer Collection Account. The risk of loss of moneys
required  to be  distributed  to  the  Certificateholders  resulting  from  such
investments shall be borne by and be the risk of the Master Servicer. The Master
Servicer  shall  deposit  the  amount  of any such loss in the  Master  Servicer
Collection  Account within two Business Days of receipt of  notification of such
loss but not later than the second Business Day prior to the  Distribution  Date
on  which  the  moneys  so  invested  are  required  to be  distributed  to  the
Certificateholders.

      Section 4.03 Permitted  Withdrawals and Transfers from the Master Servicer
Collection Account.

      (a) The Master Servicer will, from time to time on demand of a Servicer or
the  Securities  Administrator,  make or cause to be made  such  withdrawals  or
transfers from the Master Servicer Collection Account as the Master Servicer has
designated  for such transfer or withdrawal  pursuant to this  Agreement and the
related  Servicing  Agreement.  The Master  Servicer may clear and terminate the
Master Servicer  Collection Account pursuant to Section 10.01 and remove amounts
from time to time deposited in error.

      (b) On an ongoing  basis,  the Master  Servicer  shall  withdraw  from the
Master  Servicer  Collection  Account (i) any  expenses,  costs and  liabilities
recoverable by the Trustee, the Master Servicer or the Securities  Administrator
or the Custodian pursuant to Sections 3.03, 7.04 and


                                      -61-
<PAGE>

9.05 and (ii) any amounts payable to the Master Servicer as set forth in Section
3.14; provided however,  that the Master Servicer shall be obligated to pay from
its own funds any amounts which it is required to pay under Section 7.03(a).

      (c) In addition,  on or before each Distribution Account Deposit Date, the
Master  Servicer  shall  deposit in the  Distribution  Account  (or remit to the
Trustee for deposit  therein)  any Monthly  Advances  required to be made by the
Master Servicer with respect to the Mortgage Loans.

      (d) No later  than 3:00 p.m.  New York time on each  Distribution  Account
Deposit Date, the Master  Servicer will transfer all Available  Funds on deposit
in  the  Master  Servicer   Collection  Account  with  respect  to  the  related
Distribution Date to the Trustee for deposit in the Distribution Account.

      Section 4.04 Distribution Account.

      (a) The Trustee  shall  establish and maintain in the name of the Trustee,
for the benefit of the  Certificateholders  and Radian, the Distribution Account
as a segregated trust account or accounts.

      (b) All amounts deposited to the Distribution Account shall be held by the
Trustee  in  the  name  of  the   Trustee  in  trust  for  the  benefit  of  the
Certificateholders  and Radian in  accordance  with the terms and  provisions of
this Agreement.

      (c) The Distribution Account shall constitute a trust account of the Trust
Fund  segregated on the books of the Trustee and held by the Trustee in trust in
its Corporate Trust Office, and the Distribution Account and the funds deposited
therein shall not be subject to, and shall be protected from, all claims, liens,
and  encumbrances  of any  creditors or  depositors of the Trustee or the Master
Servicer (whether made directly,  or indirectly through a liquidator or receiver
of the Trustee or the Master  Servicer).  The  Distribution  Account shall be an
Eligible  Account.  The amount at any time credited to the Distribution  Account
shall be (i) held in cash and fully insured by the FDIC to the maximum  coverage
provided thereby or (ii) invested in the name of the Trustee,  in such Permitted
Investments  (which may be managed  or  advised  by the Master  Servicer  or its
affiliate)  as may be selected by the Master  Servicer  or  deposited  in demand
deposits  with such  depository  institutions  as may be  selected by the Master
Servicer, provided that time deposits of such depository institutions would be a
Permitted  Investment.  All Permitted  Investments shall mature or be subject to
redemption  or  withdrawal  on or  before,  and  shall be held  until,  the next
succeeding Distribution Date if the obligor for such Permitted Investment is the
Trustee or, if such obligor is any other Person, the Business Day preceding such
Distribution  Date.  All  investment  earnings  on  amounts  on  deposit  in the
Distribution  Account or benefit from funds uninvested therein from time to time
shall be for the account of the Master  Servicer.  The Master  Servicer shall be
permitted to withdraw or receive distribution of any and all investment earnings
from the Distribution Account on each Distribution Date. If there is any loss on
a Permitted  Investment or demand  deposit,  the Master Servicer shall remit the
amount  of the  loss  to the  Trustee  who  shall  deposit  such  amount  in the
Distribution  Account.  With respect to the  Distribution  Account and the funds
deposited  therein,  the  Master  Servicer  shall  take  such  action  as may be
necessary  to  ensure  that  the  Certificateholders  shall be  entitled  to the
priorities


                                      -62-
<PAGE>

afforded to such a trust  account (in addition to a claim  against the estate of
the Trustee) as provided by 12 U.S.C.  ss. 92a(e),  and  applicable  regulations
pursuant  thereto,  if applicable,  or any applicable  comparable  state statute
applicable to state chartered banking corporations.

      Section 4.05 Permitted  Withdrawals  and Transfers  from the  Distribution
Account.

      (a) The Trustee will,  from time to time on demand of the Master  Servicer
or the Securities  Administrator,  make or cause to be made such  withdrawals or
transfers from the  Distribution  Account as the Master  Servicer has designated
for such  transfer or  withdrawal  pursuant to this  Agreement and the Servicing
Agreements or as the Securities  Administrator has instructed  hereunder for the
following  purposes  (limited in the case of amounts due the Master  Servicer to
those not withdrawn from the Master  Servicer  Collection  Account in accordance
with the terms of this Agreement):

            (i) to reimburse the Master Servicer or any Servicer for any Monthly
      Advance of its own funds,  the right of the Master  Servicer or a Servicer
      to  reimbursement  pursuant to this subclause (i) being limited to amounts
      received on a particular Mortgage Loan (including,  for this purpose,  the
      Repurchase Price therefor,  Insurance  Proceeds and Liquidation  Proceeds)
      which  represent  late  payments  or  recoveries  of the  principal  of or
      interest on such Mortgage Loan  respecting  which such Monthly Advance was
      made;

            (ii) to reimburse the Master Servicer or any Servicer from Insurance
      Proceeds or Liquidation  Proceeds  relating to a particular  Mortgage Loan
      for amounts expended by the Master Servicer or such Servicer in good faith
      in connection with the restoration of the related Mortgaged Property which
      was damaged by an Uninsured Cause or in connection with the liquidation of
      such Mortgage Loan;

            (iii)  to  reimburse  the  Master  Servicer  or  any  Servicer  from
      Insurance  Proceeds  relating to a  particular  Mortgage  Loan for insured
      expenses  incurred with respect to such Mortgage Loan and to reimburse the
      Master  Servicer  or  such  Servicer  from  Liquidation  Proceeds  from  a
      particular Mortgage Loan for Liquidation Expenses incurred with respect to
      such  Mortgage  Loan;  provided  that the  Master  Servicer  shall  not be
      entitled to  reimbursement  for  Liquidation  Expenses  with  respect to a
      Mortgage  Loan to the extent  that (i) any  amounts  with  respect to such
      Mortgage Loan were paid as Excess Liquidation  Proceeds pursuant to clause
      (xi) of this  Subsection  4.03 (a) to the Master  Servicer;  and (ii) such
      Liquidation  Expenses were not included in the  computation of such Excess
      Liquidation Proceeds;

            (iv) to reimburse  the Master  Servicer or any Servicer for advances
      of funds (other than Monthly  Advances)  made with respect to the Mortgage
      Loans,  and the right to  reimbursement  pursuant to this subclause  being
      limited to amounts received on the related  Mortgage Loan (including,  for
      this  purpose,  the  Repurchase  Price  therefor,  Insurance  Proceeds and
      Liquidation  Proceeds) which represent late recoveries of the payments for
      which such advances were made;

            (v) to reimburse the Master Servicer or any Servicer for any Monthly
      Advance or advance,  after a Realized Loss has been allocated with respect
      to the related


                                      -63-
<PAGE>

      Mortgage  Loan if the Monthly  Advance or advance has not been  reimbursed
      pursuant to clauses (i) and (iv);

            (vi) to pay the Master Servicer as set forth in Section 3.14;

            (vii) to  reimburse  the Master  Servicer  for  expenses,  costs and
      liabilities  incurred by and reimbursable to it pursuant to Sections 3.03,
      7.04(c) and (d);

            (viii)  to pay to  the  Master  Servicer,  as  additional  servicing
      compensation,  any Excess Liquidation  Proceeds to the extent not retained
      by the related Servicer;

            (ix) to  reimburse  or pay any  Servicer any such amounts as are due
      thereto  under  the  applicable  Servicing  Agreement  and  have  not been
      retained by or paid to the Servicer, to the extent provided in the related
      Servicing Agreement;

            (x) to reimburse the Trustee,  the Securities  Administrator  or the
      Custodian for expenses,  costs and liabilities incurred by or reimbursable
      to it pursuant to this Agreement;

            (xi) to remove amounts deposited in error; and

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

      (b) The Master Servicer shall keep and maintain separate accounting,  on a
Mortgage  Loan by Mortgage  Loan basis,  for the purpose of  accounting  for any
reimbursement  from the Distribution  Account pursuant to subclauses (i) through
(iv) or with respect to any such  amounts  which would have been covered by such
subclauses  had the amounts not been  retained  by the Master  Servicer  without
being deposited in the Distribution Account under Section 4.02(b).

      (c) On each Distribution  Date, the Trustee shall distribute the Available
Funds to the extent on deposit in the Distribution Account to the Holders of the
Certificates and Radian in accordance with distribution instructions provided to
it by the Securities Administrator no later than two Business Days prior to such
Distribution  Date and determined by the Securities  Administrator in accordance
with Section 6.01.



                                      -64-
<PAGE>


                                    ARTICLE V
                                  Certificates

      Section 5.01 Certificates.

      (a) The  Depository,  the  Depositor  and the Trustee  have entered into a
Depository Agreement dated as of the Closing Date (the "Depository  Agreement").
Except  for  the  Residual  Certificates,   the  Private  Certificates  and  the
Individual  Certificates and as provided in Subsection 5.01(b), the Certificates
shall  at all  times  remain  registered  in the name of the  Depository  or its
nominee  and at all times:  (i)  registration  of such  Certificates  may not be
transferred  by the  Trustee  except  to a  successor  to the  Depository;  (ii)
ownership and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules  established by the Depository;
(iii) the  Depository  may collect  its usual and  customary  fees,  charges and
expenses from its Depository Participants;  (iv) the Trustee shall deal with the
Depository as representative of such Certificate  Owners of the respective Class
of  Certificates  for purposes of  exercising  the rights of  Certificateholders
under  this  Agreement,  and  requests  and  directions  for and  votes  of such
representative  shall  not be deemed  to be  inconsistent  if they are made with
respect to different  Certificate Owners; and (v) the Trustee may rely and shall
be fully protected in relying upon information  furnished by the Depository with
respect to its Depository Participants.

      The  Residual  Certificates  and the Private  Certificates  are  initially
Physical Certificates.  If at any time the Holders of all of the Certificates of
one or more such  Classes  request  that the Trustee  cause such Class to become
Global Certificates,  the Trustee and the Depositor will take such action as may
be reasonably  required to cause the  Depository to accept such Class or Classes
for trading if it may legally be so traded.

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

      (b) 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  within 30 days or (ii) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the  Depository,  the  Trustee  shall  request  that the  Depository  notify all
Certificate  Owners of the occurrence of any such event and of the  availability
of definitive,  fully registered  Certificates to Certificate  Owners requesting
the same.  Upon surrender to the Trustee of the  Certificates by the Depository,
accompanied by registration  instructions  from the Depository for registration,
the Trustee shall issue the definitive  Certificates.  Neither the Depositor nor
the Trustee shall be liable for any delay in delivery of such  instructions  and
may  conclusively   rely  on,  and  shall  be  protected  in  relying  on,  such
instructions.


                                      -65-
<PAGE>

      (c) (i) REMIC I will be  evidenced  by (x) the  REMIC I Regular  Interests
(designated below),  which will be uncertificated and  non-transferable  and are
hereby  designated as the "regular  interests" in REMIC I and have the principal
balances and accrue interest at the Pass-Through  Rates equal to those set forth
in this Section  5.01(c)(i) and (y) the Class R-I Certificates,  which is hereby
designated as the single "residual interest" in REMIC I.

  REMIC I INTEREST     INITIAL BALANCE     PASS-THROUGH RATE    RELATED SUBGROUP
  ----------------     ---------------     -----------------    ----------------
       I-1-A          $        2,218.00          5.25%            Subgroup I-1
      I-1-ZZZ         $  123,174,572.00          5.25%            Subgroup I-1
       I-2-A          $          236.97          8.00%            Subgroup I-2
      I-2-ZZZ         $   13,159,936.03          8.00%            Subgroup I-2
        I-PO          $       67,955.00          0.00%            Subgroup I-1
       II-1-A         $        1,687.64          4.50%            Subgroup II-1
      II-1-ZZZ        $   93,219,997.36          4.50%            Subgroup II-1
       II-2-A         $          890.07          5.00%            Subgroup II-2
      II-2-ZZZ        $   49,164,440.93          5.00%            Subgroup II-2
       II-3-A         $          266.07          5.25%            Subgroup II-3
      II-3-ZZZ        $   14,696,836.93          5.25%            Subgroup II-3
       II-PO          $      858,661.00          0.00%            Subgroup II-1
       II-X-1             (1)                     (2)             Subgroup II-3
        R-I           $           50.00          5.25%            Subgroup I-1

(1) REMIC II Regular  Interest  II-X-1 will have a Notional  Amount equal to the
aggregate  Scheduled Principal Balance of the Group II Mortgage Loans with a Net
Mortgage Rate greater than 5.25%.

(2) REMIC I Regular  Interest  II-X-1 will  accrue  interest at a per annum rate
equal to the excess,  if any, of (a) the weighted  average Net Mortgage  Rate on
each Group II Mortgage  Loans with a Net Mortgage Rate greater than 5.2500% over
(b) 5.2500% per annum.

      Distributions  of  principal  shall be  deemed  to be made to the  REMIC I
Regular Interests, in each case from the related Subgroup,  first, to each REMIC
I Regular Interest ending with the designation  "A," so that the  Uncertificated
Principal  Balance of each such REMIC I Regular Interest is equal to 0.1% of the
excess of (x) the aggregate Scheduled Principal Balance of the Mortgage Loans in
the  related  Subgroup  over (y) the  Current  Principal  Amount  of the  Senior
Certificate in such Subgroup  (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 I  Regular  Interests  such  that  the  REMIC I
Subordinated  Balance Ratio is maintained);  and second, any remaining principal
in each  Subgroup  to the  related  REMIC I  Regular  Interest  ending  with the
designation ZZZ (provided that a portion of the remaining principal equal to the
Class PO Certificate Principal  Distribution Amount attributable to the Discount
Mortgage  Loans will be distributed  to REMIC I Regular  Interest PO).  Realized
Losses from each  Subgroup  shall be applied after all  distributions  have been
made on each  Distribution  Date, first, to the related REMIC I Regular Interest
ending with the designation "A," so that the Uncertificated Principal Balance of
each such  REMIC I Regular  Interest  is equal to 0.1% of the  excess of (x) the
aggregate  Scheduled  Principal  Balance of the  Mortgage  Loans in the  related
Subgroup over (y) the Current Principal Amount of the Senior  Certificate in the
related  Subgroup (except that if any


                                      -66-
<PAGE>

such excess is a larger number than in the preceding  distribution  period,  the
least  amount  of  Realized  Losses  shall be  applied  to such  REMIC I Regular
Interests such that the REMIC I Subordinated  Balance Ratio is maintained);  and
second,  any remaining  Realized Losses from each Subgroup shall be allocated to
the related REMIC I Regular  Interests  ending with the  designation ZZZ (except
that if a Realized Loss is recognized with respect to a Discount  Mortgage Loan,
the  applicable  portion  of such  Realized  Loss will be  allocated  to REMIC I
Regular Interest PO).

            (ii)  REMIC  II  will  be  evidenced  by (x) the  REMIC  II  Regular
      Interests   (designated   below),   which  will  be   uncertificated   and
      non-transferable  and are hereby designated as the "regular  interests" in
      REMIC  II and have the  principal  balances  and  accrue  interest  at the
      Pass-Through  Rates equal to those set forth in this  Section  5.01(c)(ii)
      and (y) the Class  R-II  Certificate,  which is hereby  designated  as the
      single "residual interest" in REMIC II.

 REMIC II INTEREST    INITIAL BALANCE      PASS-THROUGH RATE    RELATED GROUP
 -----------------    ---------------      -----------------    -------------
       I-A-1         $    34,500,000.00         5.2500%            Group I
       I-A-2         $    56,390,000.00         5.2500%            Group I
       I-A-3         $       395,000.00         5.2500%            Group I
       I-A-4         $     7,577,692.00         5.2500%            Group I
       I-A-5         $    10,000,000.00         5.2500%            Group I
       I-A-6         $    12,096,000.00         5.2500%            Group I
       I-A-7         $    12,923,202.00         8.0000%            Group I
        I-PO         $        67,955.00         0.0000%            Group I
       II-A-1        $    91,534,041.00         4.5000%            Group II
       II-A-2        $    48,275,263.00         5.0000%            Group II
       II-A-3        $    14,431,033.00         5.2500%            Group II
       II-PO         $       858,661.00         0.0000%            Group II
       II-X-1        $    10,727,607.00           (2)              Group II
        R-I          $            50.00         5.2500%            Group I
        R-II         $            50.00         5.2500%            Group I
       R-III         $            50.00         5.2500%            Group I
        B-1          $     2,943,000.00           (2)                N/A
        B-2          $       884,000.00           (2)                N/A
         B-3         $       588,000.00           (2)                N/A
        B-4          $       295,000.00           (2)                N/A
        B-5          $       441,000.00           (2)                N/A
        B-6          $       147,747.00           (2)                N/A

(1) REMIC II Regular Interest II-X-1 will not have a Pass-Through Rate, but will
be entitled to 100% of amounts distributed on REMIC I Regular Interest II-X-1.

(2) The Pass-Through Rate on the Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates will be a per annum rate equal to the
weighted average of the Pass-Through Rates on REMIC I Regular Interests I-1-A,
I-2-A, II-1-A, II-2-A and II-3-A, weighted on the basis of the Uncertificated
Principal Balance of each such REMIC I Regular Interest.


      Interest  shall be  payable  to the  REMIC  II  Regular  Interests  at the
applicable  Pass-Through Rate on the related  Uncertificated  Principal Balance.
Principal shall be payable to, and


                                      -67-
<PAGE>

shortfalls,  losses  and  prepayments  are  allocable  to,  the REMIC II Regular
Interests  as such  amounts  are  payable  and  allocable  to the  Corresponding
Certificates.

            (iii) The  Classes  of the  Certificates  shall  have the  following
      designations, initial principal amounts and Pass-Through Rates:

           DESIGNATION        INITIAL PRINCIPAL AMOUNT      PASS-THROUGH RATE
           -----------        ------------------------      -----------------
              I-A-1            $34,500,000                       5.2500%
              I-A-2            $56,390,000                       5.2500%
              I-A-3            $395,000                          5.2500%
              I-A-4            $7,577,692                        5.2500%
              I-A-5            $10,000,000                       5.2500%
              I-A-6            $12,096,000                       5.2500%
              I-A-7            $12,923,202                         (1)
              I-A-8                 (2)                            (3)
              I-PO             $67,955                           0.0000%
             II-A-1            $91,534,041                       4.5000%
             II-A-2            $48,275,263                       5.0000%
             II-A-3            $14,431,033                       5.2500%
              II-PO            $858,661                          0.0000%
             II-X-1                (4)                           0.2949%
               R-I             $50                               5.2500%
              R-II             $50                               5.2500%
              R-III            $50                               5.2500%
               B-1             $2,943,000                          (7)
               B-2             $884,000                            (7)
               B-3             $588,000                            (7)
               B-4             $295,000                            (7)
               B-5             $441,000                            (7)
               B-6             $147,747                            (7)

      (1)   The Class I-A-7  Certificates  will bear interest at a  Pass-Through
            Rate  equal  to  approximately   1.850%  per  annum  for  the  first
            Distribution Date, and thereafter at an adjustable Pass-Through Rate
            equal to 0.500% per annum plus LIBOR,  subject to a minimum  rate of
            0.500% per annum and a maximum rate equal to 8.0000% per annum.

      (2)   The  Class  I-A-8  Certificates  do  not  have  an  initial  Current
            Principal  Amount.  The Class  I-A-8  Certificates  have an  initial
            Notional Amount of $12,923,202. For federal income tax purposes, the
            Class I-A-8  Certificates will have a Notional Amount equal to REMIC
            II Regular Interest I-A-7.

      (3)   The Class I-A-8  Certificates  will bear interest at a  Pass-Through
            Rate  equal  to  approximately   6.150%  per  annum  for  the  first
            Distribution Date, and thereafter at an adjustable Pass-Through Rate
            equal to 7.500% per annum minus LIBOR,  subject to a minimum rate of
            0.0000% per annum and a maximum rate equal to 7.500% per annum.

      (4)   The  Class  II-X-1  Certificates  do not  have  an  initial  Current
            Principal  Amount.  The Class  I-X-1  Certificates  have an  initial
            Notional Amount equal to the aggregate  Scheduled  Principal Balance
            of the Group II Mortgage Loans with a Net Mortgage Rate greater than
            5.2500% per annum.  The initial  Notional Amount of the Class II-X-1
            Certificates  is  equal  to  $10,727,607.  For  federal  income  tax
            purposes,  the Class  II-X-1  Certificates  will not have a Notional
            Amount, but will be entitled to 100% of amounts distributed on REMIC
            I Regular Interest II-X-1.


                                      -68-
<PAGE>

      (5)   The Class II-X-1  Certificates  will bear interest each Distribution
            Date on their notional amount at a variable  pass-through rate equal
            to the excess,  if any,  of (a) the  weighted  average Net  Mortgage
            Rates on the  Group  II  Mortgage  Loans  with a Net  Mortgage  Rate
            greater than 5.2500%  over (b) 5.2500% per annum.  The  pass-through
            rate  for the  initial  interest  accrual  period  is  approximately
            0.2949% per annum. For federal income tax purposes, the Class II-X-1
            Certificates will not have a Pass-Through Rate, but will be entitled
            to 100% of amounts distributed on REMIC I Regular Interest II-X-1.

      (6)   The Class B Certificates  will each will bear interest at a variable
            pass-through rate equal to the weighted average of 5.2500%,  8.0000%
            , 4.5000%,  5.0000% and 5.2500% per annum,  weighted on the basis of
            the  aggregate  Scheduled  Principal  Balance of the Mortgage  Loans
            included in Subgroup I-1, Subgroup I-2, Subgroup II-1, Subgroup II-2
            and Subgroup II-3, respectively (other than the PO Percentage of the
            Scheduled  Principal  Balance  of such  Mortgage  Loans),  minus the
            aggregate  Current  Principal  Amount of the Subgroup I-1,  Subgroup
            I-2,  Subgroup II-1,  Subgroup II-2 and Subgroup II-3  Certificates,
            respectively. The pass-through rate for the initial interest accrual
            period is  approximately  5.0921% per annum.  For federal income tax
            purposes,  however, the Class B Certificates will bear interest at a
            variable  Pass-Through  Rate  equal to the  weighted  average of the
            Pass-Through Rates on REMIC II Regular Interests B-1, B-2, B-3, B-4,
            B-5 and B-6, weighted on the basis of the  Uncertificated  Principal
            Balance of each such REMIC II Regular Interest immediately preceding
            the related Distribution Date.

      (d) 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 in the Trust  Fund has been
designated  as the  "latest  possible  maturity  date"  for the  REMIC I Regular
Interests, REMIC II Regular Interests and the Certificates.

      (e) With respect to each  Distribution  Date,  each Class of  Certificates
shall accrue interest during the related Interest  Accrual Period.  With respect
to each Distribution Date and each such Class of Certificates, interest shall be
calculated,  on the basis of a 360-day year  comprised of twelve 30-day  months,
based  upon  the  respective  Pass-Through  Rate set  forth,  or  determined  as
provided, above and the Current Principal Amount (or Notional Amount in the case
of the Interest Only Certificates) of such Class applicable to such Distribution
Date.

      (f) The  Certificates  shall be  substantially  in the  forms set forth in
Exhibits  A-1,  A-2 and A-3.  On  original  issuance,  the  Trustee  shall sign,
countersign  and  shall  deliver  the  Certificates  at  the  direction  of  the
Depositor.  Pending the preparation of definitive Certificates of any Class, the
Trustee  may sign  and  countersign  temporary  Certificates  that are  printed,
lithographed or typewritten,  in authorized  denominations  for  Certificates of
such Class, substantially of the tenor of the definitive Certificates in lieu of
which  they  are  issued  and  with  such  appropriate  insertions,   omissions,
substitutions  and other  variations as the officers or  authorized  signatories
executing such  Certificates  may determine,  as evidenced by their execution of
such  Certificates.  If temporary  Certificates  are issued,  the Depositor will
cause definitive  Certificates to be prepared without  unreasonable delay. After
the preparation of definitive Certificates,  the temporary Certificates shall be
exchangeable  for  definitive  Certificates  upon  surrender  of  the  temporary
Certificates  at the office of the Trustee,  without charge to the Holder.  Upon
surrender  for  cancellation  of any one or  more  temporary  Certificates,  the
Trustee  shall sign and  countersign  and  deliver in  exchange  therefor a like
aggregate  principal  amount,  in authorized  denominations  for such Class,  of
definitive Certificates of the same Class.


                                      -69-
<PAGE>

Until  so  exchanged,  such  temporary  Certificates  shall in all  respects  be
entitled to the same benefits as definitive Certificates.

      (g) Each Class of Book-Entry  Certificates  will be registered as a single
Certificate  of  such  Class  held by a  nominee  of the  Depository  or the DTC
Custodian,  and  beneficial  interests  will be held by  investors  through  the
book-entry  facilities of the Depository in minimum  denominations of (i) in the
case of the Senior  Certificates  (other than the Class I-A-5  Certificates  and
Residual  Certificates),  $1,000 and in each case  increments of $1.00 in excess
thereof, (ii) in the case of the Class I-A-5 Certificates, $1,000 and increments
of $1,000 in excess  thereof  and (iii) in the case of the  Offered  Subordinate
Certificates, $25,000 and increments of $1.00 in excess thereof, except that one
Certificate  of each such Class may be issued in a different  amount so that the
sum of the  denominations  of all  outstanding  Certificates of such Class shall
equal the Current  Principal  Amount of such Class on the Closing  Date.  On the
Closing Date, the Trustee shall execute and  countersign  Physical  Certificates
all in an  aggregate  principal  amount that shall  equal the Current  Principal
Amount of such Class on the  Closing  Date.  The Private  Certificates  shall be
issued in certificated  fully-registered form in minimum dollar denominations of
$25,000  and  integral  multiples  of $1.00 in excess  thereof,  except that one
Private  Certificate  of each Class may be issued in a different  amount so that
the sum of the  denominations  of all outstanding  Private  Certificates of such
Class  shall  equal the  Current  Principal  Amount of such Class on the Closing
Date. The Class R-I, Class R-II and Class R-III Certificate shall each be issued
in certificated  fully-registered  form,  each, in the denomination of $50. Each
Class of Global  Certificates,  if any, shall be issued in fully registered form
in minimum dollar  denominations  of $50,000 and integral  multiples of $1.00 in
excess thereof,  except that one Certificate of each Class may be in a different
denomination  so  that  the  sum  of  the   denominations   of  all  outstanding
Certificates  of such Class  shall equal the  Current  Principal  Amount of such
Class on the Closing Date.  On the Closing  Date,  the Trustee shall execute and
countersign  (i)  in the  case  of  each  Class  of  Offered  Certificates,  the
Certificate in the entire Current  Principal  Amount of the respective Class and
(ii) in the case of each Class of Private Certificates,  Individual Certificates
all in an  aggregate  principal  amount that shall  equal the Current  Principal
Amount of each such  respective  Class on the  Closing  Date.  The  Certificates
referred  to in  clauses  (i) or (ii) and if at any time  there are to be Global
Certificates, the Global Certificates shall be delivered by the Depositor to the
Depository or pursuant to the Depository's  instructions,  shall be delivered by
the  Depositor  on  behalf  of the  Depository  to and  deposited  with  the DTC
Custodian.  The  Trustee  shall sign the  Certificates  by  facsimile  or manual
signature and countersign  them by manual  signature on behalf of the Trustee by
one or more authorized  signatories,  each of whom shall be Responsible Officers
of the Trustee or its agent.  A  Certificate  bearing  the manual and  facsimile
signatures of individuals who were the authorized  signatories of the Trustee or
its agent at the time of issuance shall bind the Trustee,  notwithstanding  that
such  individuals or any of them have ceased to hold such positions prior to the
delivery of such Certificate.

      (h) No Certificate  shall be entitled to any benefit under this Agreement,
or be valid for any  purpose,  unless  there  appears  on such  Certificate  the
manually  executed  countersignature  of the  Trustee  or its  agent,  and  such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence,  that such Certificate has been duly executed and delivered hereunder.
All Certificates issued on the Closing Date shall be dated the Closing Date. All
Certificates   issued   thereafter   shall   be   dated   the   date  of   their
countersignature.


                                      -70-
<PAGE>

      (i) The Closing Date is hereby  designated  as the  "startup"  day of each
REMIC within the meaning of Section 860G(a)(9) of the Code.

      (j) For federal income tax purposes, each REMIC shall have a tax year that
is a calendar year and shall report income on an accrual basis.

      (k) The  Trustee on behalf of the Trust  shall  cause each REMIC to timely
elect  to  be  treated  as  a  REMIC  under  Section  860D  of  the  Code.   Any
inconsistencies or ambiguities in this Agreement or in the administration of any
Trust  established  hereby  shall be  resolved in a manner  that  preserves  the
validity of such elections.

      (l) The  following  legend shall be placed on the  Residual  Certificates,
whether upon original  issuance or upon issuance of any other Certificate of any
such Class in exchange therefor or upon transfer thereof:

            THIS  CERTIFICATE MAY NOT BE ACQUIRED  DIRECTLY OR INDIRECTLY BY, OR
      ON BEHALF OF, AN EMPLOYEE  BENEFIT  PLAN OR OTHER  RETIREMENT  ARRANGEMENT
      WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
      AS AMENDED,  UNLESS THE PROPOSED  TRANSFEREE  PROVIDES THE TRUSTEE WITH AN
      OPINION OF COUNSEL  ADDRESSED TO THE DEPOSITOR,  TRUSTEE,  MASTER SERVICER
      AND  SECURITIES   ADMINISTRATOR  AND  ON  WHICH  THEY  MAY  RELY  THAT  IS
      SATISFACTORY TO THE TRUSTEE THAT THE PURCHASE OF CERTIFICATES ON BEHALF OF
      SUCH  PERSON  WILL NOT  RESULT IN OR  CONSTITUTE  A  NONEXEMPT  PROHIBITED
      TRANSACTION, IS PERMISSIBLE UNDER APPLICABLE LAW AND WILL NOT GIVE RISE TO
      ANY  ADDITIONAL  OBLIGATIONS  ON THE  PART OF THE  DEPOSITOR,  THE  MASTER
      SERVICER, THE SECURITIES ADMINISTRATOR OR THE TRUSTEE.

The following legend shall be placed upon the Private Certificates, whether upon
original issuance or upon issuance of any other Certificate of any such Class in
exchange therefor or upon transfer thereof:

      THIS  CERTIFICATE  MAY NOT BE ACQUIRED  DIRECTLY OR  INDIRECTLY  BY, OR ON
BEHALF OF, AN EMPLOYEE  BENEFIT PLAN OR OTHER  RETIREMENT  ARRANGEMENT  WHICH IS
SUBJECT TO TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME  SECURITY ACT OF 1974, AS
AMENDED,  OR SECTION  4975 OF THE  INTERNAL  REVENUE  CODE OF 1986,  AS AMENDED,
UNLESS THE  TRANSFEREE  CERTIFIES OR REPRESENTS  THAT THE PROPOSED  TRANSFER AND
HOLDING OF A  CERTIFICATE  AND THE  SERVICING,  MANAGEMENT  AND OPERATION OF THE
TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS
NOT COVERED  UNDER AN  INDIVIDUAL  OR CLASS  PROHIBITED  TRANSACTION  EXEMPTION,
INCLUDING,  BUT NOT LIMITED TO, PROHIBITED  TRANSACTION EXEMPTION ("PTE") 84-14,
PTE 91-38, PTE 90-1, PTE 95-


                                      -71-
<PAGE>

60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL OBLIGATIONS ON THE
PART OF THE DEPOSITOR, THE SECURITIES ADMINISTRATOR,  THE MASTER SERVICER OR THE
TRUSTEE,  WHICH  WILL  BE  DEEMED  REPRESENTED  BY  AN  OWNER  OF  A  BOOK-ENTRY
CERTIFICATE OR A GLOBAL  CERTIFICATE OR UNLESS THE OPINION  SPECIFIED IN SECTION
5.07 OF THE AGREEMENT IS PROVIDED.

      Section 5.02 Registration of Transfer and Exchange of Certificates.

      (a) The Trustee shall maintain at its Corporate Trust Office a Certificate
Register 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)  Subject  to  Subsection  5.01(a)  and,  in the  case  of  any  Global
Certificate or Physical  Certificate upon the satisfaction of the conditions set
forth below,  upon surrender for  registration of transfer of any Certificate at
any office or agency of the Trustee  maintained  for such  purpose,  the Trustee
shall  sign,  countersign  and  shall  deliver,  in the  name of the  designated
transferee  or  transferees,  a new  Certificate  of a like Class and  aggregate
Fractional Undivided Interest, but bearing a different number.

      (c) By  acceptance  of an  Individual  Certificate,  whether upon original
issuance or subsequent transfer, each holder of such a Certificate  acknowledges
the restrictions on the transfer of such Certificate set forth in the Securities
Legend and agrees  that it will  transfer  such a  Certificate  only as provided
herein.  In addition to the  provisions  of  Subsection  5.02(h),  the following
restrictions  shall  apply with  respect to the  transfer  and  registration  of
transfer of an Individual Certificate to a transferee that takes delivery in the
form of an Individual Certificate:

            (i)  The  Trustee  shall  register  the  transfer  of an  Individual
      Certificate  if the requested  transfer is being made to a transferee  who
      has  provided  the  Trustee  with a Rule 144A  Certificate  or  comparable
      evidence as to its QIB status.

            (ii) The Trustee  shall  register  the  transfer  of any  Individual
      Certificate  if (x) the transferor has advised the Trustee in writing that
      the  Certificate  is  being  transferred  to an  Institutional  Accredited
      Investor;  and (y) prior to the transfer the  transferee  furnishes to the
      Trustee an Investment  Letter (and the Trustee shall be fully protected in
      so doing), provided that, if based upon an Opinion of Counsel addressed to
      the Trustee to the effect  that the  delivery of (x) and (y) above are not
      sufficient to confirm that the proposed transfer is being made pursuant to
      an exemption  from, or in a transaction  not subject to, the  registration
      requirements of the Securities Act and other  applicable laws, the Trustee
      shall as a condition of the  registration of any such transfer require the
      transferor to furnish such other  certifications,  legal opinions or other
      information prior to registering the transfer of an Individual Certificate
      as shall be set forth in such Opinion of Counsel.

      (d) Subject to Subsection 5.02(h), so long as a Global Certificate of such
Class is outstanding and is held by or on behalf of the Depository, transfers of
beneficial  interests  in such Global  Certificate,  or  transfers by holders of
Individual Certificates of such Class to transferees


                                      -72-
<PAGE>

that  take  delivery  in  the  form  of  beneficial   interests  in  the  Global
Certificate,  may be made only in accordance with this Subsection 5.02(d) and in
accordance with the rules of the Depository:

            (i) In the case of a beneficial  interest in the Global  Certificate
      being transferred to an Institutional Accredited Investor, such transferee
      shall  be  required  to  take  delivery  in  the  form  of  an  Individual
      Certificate or  Certificates  and the Trustee shall register such transfer
      only upon compliance with the provisions of Subsection 5.02(c)(ii).

            (ii) In the  case of a  beneficial  interest  in a Class  of  Global
      Certificates  being transferred to a transferee that takes delivery in the
      form of an Individual Certificate or Certificates of such Class, except as
      set forth in clause (i) above,  the Trustee  shall  register such transfer
      only upon compliance with the provisions of Subsection 5.02(c)(i).

            (iii)  In the case of an  Individual  Certificate  of a Class  being
      transferred  to  a  transferee  that  takes  delivery  in  the  form  of a
      beneficial  interest in a Global  Certificate  of such Class,  the Trustee
      shall  register such transfer if the  transferee  has provided the Trustee
      with a Rule 144A Certificate or comparable evidence as to its QIB status.

            (iv) No  restrictions  shall apply with  respect to the  transfer or
      registration   of  transfer  of  a  beneficial   interest  in  the  Global
      Certificate of a Class to a transferee  that takes delivery in the form of
      a beneficial  interest in the Global  Certificate of such Class;  provided
      that   each   such   transferee   shall  be   deemed  to  have  made  such
      representations  and warranties  contained in the Rule 144A Certificate as
      are sufficient to establish that it is a QIB.

      (e) Subject to Subsection 5.02(h), an exchange of a beneficial interest in
a Global Certificate of a Class for an Individual Certificate or Certificates of
such Class, an exchange of an Individual  Certificate or Certificates of a Class
for a  beneficial  interest  in the  Global  Certificate  of such  Class  and an
exchange of an Individual  Certificate  or  Certificates  of a Class for another
Individual  Certificate or Certificates of such Class (in each case,  whether or
not such exchange is made in  anticipation of subsequent  transfer,  and, in the
case of the Global  Certificate  of such Class,  so long as such  Certificate is
outstanding  and is held by or on behalf of the  Depository) may be made only in
accordance with this Subsection  5.02(e) and in accordance with the rules of the
Depository:

            (i) A holder of a beneficial  interest in a Global  Certificate of a
      Class may at any time exchange such beneficial  interest for an Individual
      Certificate or Certificates of such Class.

            (ii) A holder of an  Individual  Certificate  or  Certificates  of a
      Class may  exchange  such  Certificate  or  Certificates  for a beneficial
      interest in the Global  Certificate of such Class if such holder furnishes
      to the Trustee a Rule 144A  Certificate  or comparable  evidence as to its
      QIB status.

            (iii) A holder of an Individual  Certificate of a Class may exchange
      such  Certificate  for an equal aggregate  principal  amount of Individual
      Certificates of such Class in different authorized  denominations  without
      any certification.


                                      -73-
<PAGE>

      (f)(i)  Upon   acceptance  for  exchange  or  transfer  of  an  Individual
Certificate of a Class for a beneficial interest in a Global Certificate of such
Class as provided herein,  the Trustee shall cancel such Individual  Certificate
and shall (or shall request the Depository  to) endorse on the schedule  affixed
to the applicable  Global  Certificate  (or on a  continuation  of such schedule
affixed to the Global  Certificate and made a part thereof) or otherwise make in
its  books and  records  an  appropriate  notation  evidencing  the date of such
exchange or transfer  and an increase in the  certificate  balance of the Global
Certificate  equal to the  certificate  balance of such  Individual  Certificate
exchanged or transferred therefor.

            (ii) Upon  acceptance  for  exchange  or  transfer  of a  beneficial
      interest in a Global Certificate of a Class for an Individual  Certificate
      of such Class as provided herein,  the Trustee shall (or shall request the
      Depository to) endorse on the schedule affixed to such Global  Certificate
      (or on a continuation of such schedule affixed to such Global  Certificate
      and made a part  thereof)  or  otherwise  make in its books and records an
      appropriate  notation evidencing the date of such exchange or transfer and
      a decrease in the certificate  balance of such Global Certificate equal to
      the certificate balance of such Individual  Certificate issued in exchange
      therefor or upon transfer thereof.

      (g) The Securities  Legend shall be placed on any  Individual  Certificate
issued in exchange for or upon transfer of another Individual  Certificate or of
a beneficial interest in a Global Certificate.

      (h) Subject to the restrictions on transfer and exchange set forth in this
Section 5.02, the holder of any Individual  Certificate may transfer or exchange
the same in whole or in part (in an  initial  certificate  balance  equal to the
minimum  authorized  denomination  set  forth in  Section  5.01(g)  above or any
integral  multiple of $1.00 in excess thereof) by surrendering  such Certificate
at the Corporate Trust Office, or at the office of any transfer agent,  together
with an executed instrument of assignment and transfer  satisfactory in form and
substance  to the  Trustee in the case of  transfer  and a written  request  for
exchange  in the case of  exchange.  The holder of a  beneficial  interest  in a
Global  Certificate  may, subject to the rules and procedures of the Depository,
cause the  Depository  (or its  nominee)  to notify the  Trustee in writing of a
request for transfer or exchange of such  beneficial  interest for an Individual
Certificate  or  Certificates.  Following  a  proper  request  for  transfer  or
exchange,  the Trustee shall,  within five Business Days of such request made at
the Corporate Trust Office, sign, countersign and deliver at the Corporate Trust
Office,  to the  transferee  (in the case of transfer) or holder (in the case of
exchange) or send by first class mail at the risk of the transferee (in the case
of  transfer)  or  holder  (in the  case of  exchange)  to such  address  as the
transferee or holder, as applicable,  may request, an Individual  Certificate or
Certificates, as the case may require, for a like aggregate Fractional Undivided
Interest  and  in  such  authorized  denomination  or  denominations  as  may be
requested.   The  presentation  for  transfer  or  exchange  of  any  Individual
Certificate  shall not be valid unless made at the Corporate Trust Office by the
registered holder in person, or by a duly authorized attorney-in-fact.

      (i) At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of authorized denominations of a like Class and aggregate
Fractional  Undivided  Interest,  upon  surrender  of  the  Certificates  to  be
exchanged at the Corporate Trust Office; provided,  however, that no Certificate
may be exchanged for new Certificates unless the original


                                      -74-
<PAGE>

Fractional Undivided Interest represented by each such new Certificate (i) is at
least equal to the minimum authorized  denomination or (ii) is acceptable to the
Depositor as indicated to the Trustee in writing.  Whenever any Certificates are
so  surrendered  for exchange,  the Trustee shall sign and  countersign  and the
Trustee shall deliver the Certificates  which the  Certificateholder  making the
exchange is entitled to receive.

      (j) If the Trustee so requires, every Certificate presented or surrendered
for  transfer or exchange  shall be duly  endorsed  by, or be  accompanied  by a
written instrument of transfer, with a signature guarantee, in form satisfactory
to the Trustee,  duly executed by the holder thereof or his or her attorney duly
authorized in writing.

      (k) No  service  charge  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.

      (l) The Trustee shall cancel all Certificates  surrendered for transfer or
exchange  but shall retain such  Certificates  in  accordance  with its standard
retention policy or for such further time as is required by the record retention
requirements of the Securities Exchange Act of 1934, as amended,  and thereafter
may destroy such Certificates.

      Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.

      (a) 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 (ii) there is delivered to the Trustee (and with respect
to any Class I-A-5 Certificates, to Radian) such security or indemnity as it may
require to save it harmless,  and (iii) the Trustee has not received notice that
such  Certificate  has been acquired by a third Person,  the Trustee shall sign,
countersign  and  deliver,  in  exchange  for or in lieu of any such  mutilated,
destroyed,  lost or stolen  Certificate,  a new  Certificate  of like  tenor and
Fractional  Undivided  Interest but in each case bearing a different number. The
mutilated,  destroyed, lost or stolen Certificate shall thereupon be canceled of
record by the Trustee and shall be of no further effect and evidence no rights.

      (b) Upon the issuance of any new Certificate  under this Section 5.03, 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 duplicate  Certificate issued pursuant to this Section 5.03 shall constitute
complete  and  indefeasible  evidence  of  ownership  in the Trust  Fund,  as if
originally  issued,  whether or not the lost,  stolen or  destroyed  Certificate
shall be found at any time.

      Section 5.04 Persons Deemed Owners.

      Prior to due  presentation of a Certificate for  registration of transfer,
the Depositor, the Trustee or Radian and any agent of the Depositor, the Trustee
or Radian 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  6.01 and for all other  purposes  whatsoever.  None of the
Depositor,  the Trustee,  Radian or any agent of the  Depositor,  the Trustee or
Radian  shall be affected by notice to the  contrary.  No  Certificate  shall be
deemed duly presented for a transfer


                                      -75-
<PAGE>

effective  on any  Record  Date  unless the  Certificate  to be  transferred  is
presented  no later  than the  close  of  business  on the  third  Business  Day
preceding such Record Date.

      Section 5.05 Transfer Restrictions on Residual Certificates.

      (a) Residual  Certificates,  or interests therein,  may not be transferred
without the prior  express  written  consent of the Tax  Matters  Person and the
Depositor.  As a  prerequisite  to such consent,  the proposed  transferee  must
provide the Tax Matters Person,  the Depositor and the Trustee with an affidavit
that the proposed transferee is a Permitted Transferee (and an affidavit that it
is a U.S. Person) as provided in Subsection 5.05(b).

      (b) No  transfer,  sale or other  disposition  of a  Residual  Certificate
(including a  beneficial  interest  therein)  may be made  unless,  prior to the
transfer,  sale or other  disposition  of a Residual  Certificate,  the proposed
transferee  (including  the  initial  purchasers  thereof)  delivers  to the Tax
Matters Person,  the Trustee and the Depositor an affidavit in the form attached
hereto as Exhibit E stating,  among  other  things,  that as of the date of such
transfer  (i) such  transferee  is a  Permitted  Transferee  and that  (ii) such
transferee is not acquiring  such  Residual  Certificate  for the account of any
person who is not a  Permitted  Transferee.  The Tax  Matters  Person  shall not
consent to a transfer of a Residual  Certificate if it has actual knowledge that
any statement made in the affidavit issued pursuant to the preceding sentence is
not true.  Notwithstanding any transfer, sale or other disposition of a Residual
Certificate to any Person who is not a Permitted Transferee, such transfer, sale
or  other  disposition  shall  be  deemed  to be of no  legal  force  or  effect
whatsoever  and such  Person  shall not be  deemed to be a Holder of a  Residual
Certificate  for any  purpose  hereunder,  including,  but not  limited  to, the
receipt  of  distributions  thereon.  If  any  purported  transfer  shall  be in
violation of the provisions of this  Subsection  5.05(b),  then the prior Holder
thereof shall, upon discovery that the transfer of such Residual Certificate was
not in fact permitted by this Subsection 5.05(b), be restored to all rights as a
Holder thereof  retroactive to the date of the purported  transfer.  None of the
Trustee, the Tax Matters Person or the Depositor shall be under any liability to
any Person for any  registration or transfer of a Residual  Certificate  that is
not  permitted  by this  Subsection  5.05(b) or for making  payments due on such
Residual  Certificate to the purported Holder thereof or taking any other action
with respect to such purported  Holder under the provisions of this Agreement so
long as the written  affidavit  referred to above was  received  with respect to
such transfer,  and the Tax Matters  Person,  the Trustee and the Depositor,  as
applicable,  had no  knowledge  that it was untrue.  The prior  Holder  shall be
entitled to recover from any purported Holder of a Residual Certificate that was
in fact not a permitted  transferee under this Subsection 5.05(b) at the time it
became a Holder all payments made on such Residual Certificate. Each Holder of a
Residual Certificate, by acceptance thereof, shall be deemed for all purposes to
have consented to the provisions of this Subsection 5.05(b) and to any amendment
of this Agreement  deemed  necessary  (whether as a result of new legislation or
otherwise) by counsel of the Tax Matters  Person or the Depositor to ensure that
the  Residual  Certificates  are  not  transferred  to any  Person  who is not a
Permitted  Transferee and that any transfer of such Residual  Certificates  will
not cause the  imposition  of a tax upon the Trust or cause any REMIC to fail to
qualify as a REMIC.

      (c) The Residual  Certificates  (including a beneficial  interest therein)
may not be purchased by or  transferred to any person who is not a United States
Person.


                                      -76-
<PAGE>

      (d) By accepting a Residual  Certificate,  the purchaser thereof agrees to
be a Tax Matters Person, and appoints the Securities Administrator to act as its
agent with respect to all matters concerning the tax obligations of the Trust.

      Section 5.06 Restrictions on Transferability of Certificates.

      (a) No offer,  sale,  transfer or other disposition  (including pledge) of
any Certificate  shall be made by any Holder thereof unless registered under the
Securities  Act,  or an  exemption  from the  registration  requirements  of the
Securities  Act and any  applicable  state  securities  or  "Blue  Sky"  laws is
available  and the  prospective  transferee  (other than the  Depositor) of such
Certificate  signs and  delivers to the  Trustee an  Investment  Letter,  if the
transferee is an  Institutional  Accredited  Investor,  in the form set forth as
Exhibit F-l hereto, or a Rule 144A  Certificate,  if the transferee is a QIB, in
the form set forth as Exhibit F-2 hereto.  Notwithstanding the provisions of the
immediately  preceding sentence, no restrictions shall apply with respect to the
transfer or registration of transfer of a beneficial interest in any Certificate
that is a Global  Certificate of a Class to a transferee  that takes delivery in
the form of a  beneficial  interest  in the  Global  Certificate  of such  Class
provided  that  each  such  transferee   shall  be  deemed  to  have  made  such
representations  and  warranties  contained in the Rule 144A  Certificate as are
sufficient to establish that it is a QIB. In the case of a proposed  transfer of
any  Certificate  to a  transferee  other than a QIB, the Trustee may require an
Opinion of Counsel addressed to the Trustee that such transaction is exempt from
the  registration  requirements  of the Securities Act. The cost of such opinion
shall not be an expense of the Trustee or the Trust Fund.

      (b) The Private Certificates shall each bear a Securities Legend.

      Section 5.07 ERISA Restrictions.

      (a) Subject to the provisions of subsection (b), no Residual  Certificates
or Private  Certificates may be acquired directly or indirectly by, or on behalf
of, an employee benefit plan or other retirement arrangement which is subject to
Title I of ERISA or Section  4975 of the Code,  unless the  proposed  transferee
provides  either (i) the  Trustee,  with an Opinion of Counsel  addressed to the
Depositor,  the Trustee,  the Master  Servicer and the Securities  Administrator
(upon which they may rely) which is satisfactory  to the Trustee,  which opinion
will not be at the expense of the Depositor, the Trustee, the Master Servicer or
the Securities  Administrator,  that the purchase of such  Certificates by or on
behalf of such Plan is permissible  under applicable law, will not constitute or
result in a nonexempt prohibited  transaction under ERISA or Section 4975 of the
Code and will not subject the  Depositor,  the Master  Servicer,  the Securities
Administrator  or the Trustee to any obligation in addition to those  undertaken
in the  Agreement or (ii) in the case of the Class B-4,  Class B-5 and Class B-6
Certificates,  a representation  or certification to the Trustee (upon which the
Trustee is  authorized  to rely) to the effect that the  proposed  transfer  and
holding of such a Certificate and the servicing, management and operation of the
Trust:  (I) will not result in a  prohibited  transaction  under  Section 406 of
ERISA or Section 4975 of the Code which is not covered  under an  individual  or
class prohibited  transaction  exemption including but not limited to Department
of Labor  Prohibited  Transaction  Exemption  ("PTE") 84-14 (Class Exemption for
Plan Asset Transactions  Determined by Independent Qualified  Professional Asset
Managers);  PTE 91-38 (Class Exemption for Certain


                                      -77-
<PAGE>

Transactions  Involving  Bank  Collective  Investment  Funds);  PTE 90-1  (Class
Exemption for Certain  Transactions  Involving Insurance Company Pooled Separate
Accounts),  PTE  95-60  (Class  Exemption  for  Certain  Transactions  Involving
Insurance  Company General  Accounts),  and PTCE 96-23 (Class Exemption for Plan
Asset  Transactions  Determined  by In-House  Asset  Managers  and (II) will not
subject the Depositor, the Securities Administrator,  the Master Servicer or the
Trustee to any obligation in addition to those undertaken in the Agreement.

      (b) Any Person  acquiring an interest in a Global  Certificate  which is a
Private Certificate, by acquisition of such Certificate, shall be deemed to have
represented  to the  Trustee  that in the case of the Class  B-4,  Class B-5 and
Class B-6  Certificates,  either:  (i) it is not  acquiring  an interest in such
Certificate directly or indirectly by, or on behalf of, an employee benefit plan
or other retirement  arrangement which is subject to Title I of ERISA or Section
4975 of the Code,  or (ii) the  transfer  and  holding  of an  interest  in such
Certificate  to  that  Person  and  the  subsequent  servicing,  management  and
operation  of the Trust and its  assets:  (I) will not result in any  prohibited
transaction  which is not  covered  under  an  individual  or  class  prohibited
transaction exemption,  including, but not limited to, PTE 84-14, PTE 91-38, PTE
90-1,  PTE  95-60 or PTE  96-23 and (II) will not  subject  the  Depositor,  the
Securities  Administrator,  the Master Servicer or the Trustee to any obligation
in addition to those undertaken in the Agreement.

      (c)  Each  beneficial  owner  of a  Class  B-1,  Class  B-2 or  Class  B-3
Certificate  or any interest  therein  shall be deemed to have  represented,  by
virtue of its  acquisition or holding of that  certificate or interest  therein,
that either (i) it is not a Plan or investing  with "Plan  Assets",  (ii) it has
acquired and is holding such  certificate in reliance on Prohibited  Transaction
Exemption  90-30,  as amended from time to time (the  "Exemption"),  and that it
understands  that  there  are  certain  conditions  to the  availability  of the
Exemption,  including  that  the  certificate  must  be  rated,  at the  time of
purchase,  not lower than "BBB-" (or its  equivalent)  by S&P,  Fitch Ratings or
Moody's Investors Service, Inc., and the certificate is so rated or (iii) (1) it
is an  insurance  company,  (2) the  source of funds used to acquire or hold the
certificate or interest  therein is an "insurance  company general  account," as
such term is defined in Prohibited  Transaction Class Exemption  ("PTCE") 95-60,
and (3) the conditions in Sections I and III of PTCE 95-60 have been satisfied.

      (d)  Neither  the  Trustee,   the  Master   Servicer  nor  the  Securities
Administrator will be required to monitor, determine or inquire as to compliance
with the  transfer  restrictions  with respect to the Global  Certificates.  Any
attempted  or  purported  transfer  of  any  Certificate  in  violation  of  the
provisions  of  Subsections  (a) or (b) above  shall be void ab initio  and such
Certificate  shall be  considered  to have been held  continuously  by the prior
permitted  Certificateholder.  Any transferor of any Certificate in violation of
such provisions,  shall indemnify and hold harmless the Trustee,  the Securities
Administrator  and the Master Servicer from and against any and all liabilities,
claims, costs or expenses incurred by the Trustee, the Securities  Administrator
or the Master Servicer as a result of such attempted or purported transfer.  The
Trustee shall have no liability for transfer of any such Global  Certificates in
or  through  book-entry  facilities  of  any  Depository  or  between  or  among
Depository  Participants or Certificate Owners made in violation of the transfer
restrictions set forth herein.


                                      -78-
<PAGE>

      Section 5.08 Rule 144A Information.

      For so long  as any  Certificates  are  outstanding  and  are  "restricted
securities"  within the meaning of Rule 144(a)(3) of the Securities Act, (1) the
Depositor  will  provide  or  cause  to  be  provided  to  any  holder  of  such
Certificates and any prospective  purchaser thereof designated by such a holder,
upon the  request  of such  holder or  prospective  purchaser,  the  information
required  to be  provided  to  such  holder  or  prospective  purchaser  by Rule
144A(d)(4)  under the  Securities  Act; and (2) the Depositor  shall update such
information from time to time in order to prevent such information from becoming
false and misleading and will take such other actions as are necessary to ensure
that  the  safe  harbor  exemption  from the  registration  requirements  of the
Securities  Act under  Rule 144A is and will be  available  for  resales of such
Certificates conducted in accordance with Rule 144A.




                                      -79-
<PAGE>


                                   ARTICLE VI
                         Payments to Certificateholders

      Section 6.01 Distributions on the Certificates.

      (a) Interest and principal (as  applicable)  on the  Certificates  will be
distributed monthly on each Distribution Date,  commencing in August 2004, in an
amount equal to the Available Funds on deposit in the  Distribution  Account for
such  Distribution  Date. On each  Distribution  Date,  the  Available  Funds on
deposit in the Distribution Account shall be distributed as follows:

            (i) on each  Distribution  Date, the Group I Available Funds will be
distributed to the Group I Senior Certificates as follows:

      FIRST, to the Class I-A-1,  Class I-A-2,  Class I-A-3,  Class I-A-4, Class
I-A-5,  Class I-A-6,  Class I-A-7,  Class I-A-8, Class R-I, Class R-II and R-III
Certificates,  on a pro rata  basis,  the Accrued  Certificate  Interest on such
classes for such  Distribution  Date. As described  below,  Accrued  Certificate
Interest on the Class I-A-1, Class I-A-2, Class I-A-3, Class I-A-4, Class I-A-5,
Class I-A-6,  Class I-A-7,  Class I-A-8,  Class R-I,  Class R-II and Class R-III
Certificates  is  subject to  reduction  in the event of  certain  Net  Interest
Shortfalls allocable thereto;

      SECOND, to the Class I-A-1,  Class I-A-2,  Class I-A-3, Class I-A-4, Class
I-A-5,  Class  I-A-6,  Class I-A-7 and Class I-A-8  Certificates,  on a pro rata
basis, any Accrued  Certificate  Interest thereon remaining  undistributed  from
previous Distribution Dates, to the extent of remaining Group I Available Funds;
and

      THIRD, concurrently as follows:

            (I)   to the extent of the remaining Group I Available Funds related
                  to Subgroup I-1, to the Class I-A-1, Class I-A-2, Class I-A-3,
                  Class I-A-4,  Class I-A-5,  Class I-A-6, Class R-I, Class R-II
                  and Class R-III Certificates,  as principal,  the Subgroup I-1
                  Principal Distribution Amount as follows:  FIRST, to the Class
                  R-I,  Class R-II and Class R-III,  in that order,  and in each
                  case in reduction  of the Current  Principal  Amount  thereof,
                  until the Current Principal Amount of each such class has been
                  reduced to zero; SECOND, to the Class I-A-6  Certificates,  in
                  reduction of the Current  Principal Amount thereof,  until the
                  Current  Principal Amount thereof has been reduced to zero, in
                  an amount equal to the Lockout Principal Amount;  THIRD, up to
                  an  amount  of  $10,000,  to  the  Class  I-A-5  Certificates,
                  commencing  on  the  distribution  date  in  August  2007,  in
                  reduction of the Current  Principal Amount thereof,  until the
                  Current  Principal Amount thereof has been reduced by $10,000;
                  FOURTH,  to the Class  I-A-1,  Class  I-A-2  and  Class  I-A-3
                  Certificates,  on a  pro  rata  basis  based  on  the  Current
                  Principal  Amount  of each such  class,  in  reduction  of the
                  Current Principal Amounts thereof, until the Current Principal
                  Amount of each such class has been


                                      -80-
<PAGE>

                  reduced to zero;  FIFTH, to the Class I-A-4  Certificates,  in
                  reduction of the current  Principal Amount thereof,  until the
                  Current  Principal  Amount  thereof has been  reduced to zero;
                  SIXTH,  to the Class I-A-5  Certificates,  in reduction of the
                  Current Principal Amount thereof,  until the Current Principal
                  Amount thereof has been reduced to zero;  and SEVENTH,  to the
                  Class  I-A-6   Certificates,   in  reduction  of  the  Current
                  Principal Amount thereof,  until the Current  Principal Amount
                  thereof has been reduced to zero.

            (II)  to the extent of the remaining Group I Available Funds related
                  to  Subgroup  I-2,  to  the  Class  I-A-7   Certificates,   as
                  principal,  the Subgroup  I-2  Principal  Distribution  Amount
                  thereof,  in reduction of the Current Principal Amount,  until
                  the Current Principal Amount thereof has been reduced to zero;

      FOURTH, to the Class I-PO  Certificates,  the related Class PO Certificate
Principal  Distribution  Amount for such  Distribution Date to the extent of the
remaining Group I Available  Funds,  until the Current  Principal Amount thereof
has been reduced to zero;

      FIFTH, to the Class I-PO Certificates, the Class I-PO Certificate Deferred
Amount,  provided, that (i) on any Distribution Date,  distributions pursuant to
this  priority  FIFTH  shall  not  exceed  the  excess,  if any,  of (x) Group I
Available  Funds  remaining  after giving  effect to  distributions  pursuant to
priority  FIRST  through  FOURTH above over (y) the sum of the amount of Accrued
Certificate Interest for such Distribution Date and Accrued Certificate Interest
remaining  undistributed  from  previous  Distribution  Dates on all  classes of
Subordinate  Certificates then outstanding,  (ii) such  distributions  shall not
reduce the Current  Principal Amount of the Class I-PO Certificates and (iii) no
distribution  will be made in  respect of the Class  I-PO  Certificate  Deferred
Amount on or after the Cross-Over Date; and

      SIXTH, to the Insurer, any amounts due and owing to the Insurer under this
Agreement.

            (ii) on each Distribution Date, the Group II Available Funds will be
distributed to the Group II Senior Certificates as follows:

      FIRST,  to the Group II Senior  Certificates  (other  than the Class II-PO
Certificates),  on a pro rata basis,  the Accrued  Certificate  Interest on such
classes for such  Distribution  Date. As described  below,  Accrued  Certificate
Interest on the Class  II-A-1,  Class  II-A-2 and Class II-A-3  Certificates  is
subject to reduction in the event of certain Net Interest  Shortfalls  allocable
thereto;

      SECOND,  to the Group II Senior  Certificates  (other than the Class II-PO
Certificates),  on a pro rata basis,  any Accrued  Certificate  Interest thereon
remaining  undistributed  from  previous  Distribution  Dates,  to the extent of
remaining Group II Available Funds; and


                                      -81-
<PAGE>

      THIRD, concurrently as follows:

            (I)   to the  extent  of the  remaining  Group  II  Available  Funds
                  related to Subgroup II-1, to the Class II-A-1 Certificates, as
                  principal,  the Subgroup II-1 Principal  Distribution  Amount,
                  until the Current Principal Amount thereof has been reduced to
                  zero;

            (II)  to the  extent  of the  remaining  Group  II  Available  Funds
                  related to Subgroup II-2, to the Class II-A-2 Certificates, as
                  principal,  the Subgroup II-2  Principal  Distribution  Amount
                  until the Current Principal Amount thereof has been reduced to
                  zero;

            (III) to the  extent  of the  remaining  Group  II  Available  Funds
                  related to Subgroup II-3, to the Class II-A-3 Certificates, as
                  principal,  the Subgroup II-2 Principal  Distribution  Amount,
                  until the Current Principal Amount thereof has been reduced to
                  zero.

      FOURTH, to the Class II-PO Certificates,  the related Class PO Certificate
Principal  Distribution  Amount for such  Distribution Date to the extent of the
remaining Group II Available Funds,  until the Current  Principal Amount thereof
has been reduced to zero; and

      FIFTH,  to the  Class  II-PO  Certificates,  the Class  II-PO  Certificate
Deferred  Amount,  provided,  that (i) on any Distribution  Date,  distributions
pursuant to this  priority  FIFTH  shall not exceed the  excess,  if any, of (x)
Group II Available Funds remaining after giving effect to distributions pursuant
to priority FIRST through FOURTH above over (y) the sum of the amount of Accrued
Certificate Interest for such Distribution Date and Accrued Certificate Interest
remaining  undistributed  from  previous  Distribution  Dates on all  classes of
Subordinate  Certificates then outstanding,  (ii) such  distributions  shall not
reduce the Current Principal Amount of the Class II-PO Certificates and (iii) no
distribution  will be made in respect of the Class  II-PO  Certificate  Deferred
Amount on or after the Cross-Over Date.

      (iii)  Except  as  provided  in  paragraphs  (iv) and (v)  below,  on each
Distribution Date on or prior to the Cross-Over Date, an amount equal to the sum
of the remaining  Group I Available Funds and Group II Available Funds after the
distributions in paragraphs (i) and (ii) above will be distributed sequentially,
in the following order, to the Class B-1, Class B-2, Class B-3, Class B-4, Class
B-5 and Class B-6 Certificates, in each case up to an amount equal to and in the
following  order:  (a)  the  Accrued  Certificate   Interest  thereon  for  such
Distribution  Date,  (b) any  Accrued  Certificate  Interest  thereon  remaining
undistributed  from previous  Distribution  Dates and (c) such class'  Allocable
Share for such  Distribution  Date, in each case, to the extent of the remaining
Group I Available Funds and Group II Available Funds.

      (iv) On each  Distribution Date prior to the Cross-Over Date but after the
reduction  of  the  Current  Principal  Amount  of any of  the  Group  I  Senior
Certificates  or Group II Senior  Certificates  (other than the  Interest  Only,
Class I-PO and Class II-PO Certificates) to zero, the remaining class or classes
of Senior Certificates (other than the Interest Only, Class I-PO and Class II-PO
Certificates)  will be  entitled  to  receive  in  reduction  of  their  Current
Principal


                                      -82-
<PAGE>

Amounts,  pro rata based upon their Current Principal Amounts  immediately prior
to such Distribution Date, in addition to any Principal  Prepayments  related to
such remaining  Senior  Certificates'  respective  Loan Group  allocated to such
Senior Certificates,  100% of the Non-PO Percentage of the Principal Prepayments
on any  Mortgage  Loan in the Loan Group  relating to such fully repaid class or
classes of Senior  Certificates;  provided,  however,  that if (A) the  weighted
average of the  Subordinate  Percentages  on such  Distribution  Date  equals or
exceeds two times the initial  weighted  average of the Subordinate  Percentages
and  (B)  the  aggregate  Scheduled  Principal  Balance  of the  Mortgage  Loans
delinquent 60 days or more  (including  for this purpose any such Mortgage Loans
in foreclosure  and Mortgage  Loans with respect to which the related  Mortgaged
Property has been acquired by the Trust),  averaged over the last six months, as
a  percentage  of the  sum of the  aggregate  Current  Principal  Amount  of the
Subordinate  Certificates does not exceed 50% and (C) with respect to Loan Group
I, no amounts are due to the Insurer in accordance with priority SIXTH of clause
(i) above,  then the  additional  allocation  of Principal  Prepayments  to such
remaining class or classes of Senior Certificates in accordance with this clause
(iv)  will  not be made  and  100% of the  Non-PO  Percentage  of the  Principal
Prepayments  on any  Mortgage  Loan in the Loan  Group  relating  to such  fully
prepaid  class or  classes  of  Senior  Certificates  will be  allocated  to the
Subordinate  Certificates.  If any amounts are due to the Insurer in  accordance
with priority SIXTH of clause (i) above,  Principal Prepayments not allocated to
the fully  prepaid  class or classes  Group I Senior  Certificates  as described
above shall be paid to the Insurer to the extent of amounts due.

      (v) If on any Distribution  Date on which the aggregate  Current Principal
Amount of the Group I Senior Certificates or Group II Senior Certificates (other
than the  Interest  Only,  Class  I-PO and Class  II-PO  Certificates)  would be
greater than the aggregate  Scheduled Principal Balance of the Mortgage Loans in
its related Loan Group  (other than the PO  Percentage  of the related  Discount
Mortgage Loans) or any amounts are due to the Insurer pursuant to priority SIXTH
of clause (i) above and any Subordinate  Certificates are still outstanding,  in
each case, after giving effect to distributions to be made on such  Distribution
Date, (i) 100% of amounts otherwise allocable to the Subordinate Certificates in
respect of principal will be distributed to the Group I Senior  Certificates and
Group II Senior Certificates (other than the Interest Only, Class I-PO and Class
II-PO  Certificates),  as  applicable,  in  reduction  of the Current  Principal
Amounts thereof,  until the aggregate  Current Principal Amount of such class or
classes of Senior  Certificates,  as applicable  (other than the Interest  Only,
Class I-PO and Class II-PO  Certificates),  is equal to the aggregate  Scheduled
Principal  Balance of the  Mortgage  Loans in its related Loan Group (other than
the PO Percentage of the related Discount  Mortgage Loans) and to payment to the
Insurer  of  all  amounts  due  under  this  Agreement,  and  (ii)  the  Accrued
Certificate Interest otherwise allocable to the Subordinate Certificates on such
Distribution Date will be reduced,  if necessary,  and distributed to such class
or classes of Senior  Certificates in an amount equal to the Accrued Certificate
Interest for such  Distribution  Date on the excess of (x) the aggregate Current
Principal  Amount of such class or classes of Senior  Certificates  over (y) the
aggregate  Scheduled Principal Balance of the Mortgage Loans in the related Loan
Group (other than the PO Percentage of the related Discount  Mortgage Loans) and
to payment to the  Insurer of all  amounts  due under this  Agreement.  Any such
reduction in the Accrued  Certificate  Interest on the Subordinate  Certificates
will be allocated in reverse order of the  Subordinate  Certificates'  numerical
designations, commencing with the Class B-6 Certificates.


                                      -83-
<PAGE>

      (vi) If, after  distributions  have been made pursuant to priorities FIRST
and SECOND of clause (i) above on any  Distribution  Date, the remaining Group I
Available  Funds is less than the sum of the Subgroup I-1,  Subgroup I-2 and the
related Class PO Certificate Principal  Distribution Amounts, such amounts shall
be reduced,  and such remaining  funds will be distributed to the Group I Senior
Certificates,  other  than the  Class  I-A-8  Certificates  on the basis of such
reduced amounts. Notwithstanding any reduction in principal distributable to the
Class I-PO Certificates pursuant to this paragraph, the Current Principal Amount
of the  Class  I-PO  Certificates  shall be  reduced  not only by  principal  so
distributed but also by the difference  between (i) principal  distributable  to
the Class I-PO  Certificates  in accordance  with  priority  FIFTH of clause (i)
above, and (ii) principal  actually  distributed to the Class I-PO  Certificates
after  giving  effect to this  clause (vi) (such  difference  for the Class I-PO
Certificates,  the "Class  I-PO  Certificate  Cash  Shortfall").  The Class I-PO
Certificate Cash Shortfall with respect to any  Distribution  Date will be added
to the Class I-PO Certificate Deferred Amount.

      (vii) If, after  distributions have been made pursuant to priorities FIRST
and SECOND of clause (ii) above on any Distribution Date, the remaining Group II
Available  Funds  is less  than the sum of the  Subgroup  II-1,  Subgroup  II-2,
Subgroup  II-3 and the  related  Class  PO  Certificate  Principal  Distribution
Amounts,  such  amounts  shall be  reduced,  and such  remaining  funds  will be
distributed  to the Group II Senior  Certificates,  other than the Class  II-X-I
Certificates,  on  the  basis  of  such  reduced  amounts.  Notwithstanding  any
reduction in principal distributable to the Class II-PO Certificates pursuant to
this clause (vii), the Current Principal Amount of the Class II-PO  Certificates
shall be reduced not only by principal so distributed but also by the difference
between  (i)  principal   distributable  to  the  Class  II-PO  Certificates  in
accordance with priority FIFTH of clause (ii) above, and (ii) principal actually
distributed  to the  Class  II-PO  Certificates  after  giving  effect  to  this
paragraph (such  difference for the Class II-PO  Certificates,  the "Class II-PO
Certificate Cash  Shortfall").  The Class II-PO  Certificate Cash Shortfall with
respect to any  Distribution  Date will be added to the Class II-PO  Certificate
Deferred Amount.

      (viii) On each  Distribution  Date, any Available  Funds  remaining  after
payment of  interest  and  principal  to the  Classes of  Certificates  entitled
thereto  and  payment  of amounts  due and owing to the  Insurer in each case as
described above, will be distributed to the Class R-III Certificates;  provided,
that if on any Distribution  Date there are any Group I Available Funds or Group
II Available  Funds remaining after payment of interest and principal to a Class
or Classes of Certificates entitled thereto and payment of amounts due and owing
to the Insurer,  such amounts will be distributed to the other classes of Senior
Certificates,  pro rata, based upon their Current Principal Amounts,  and to the
Insurer,  until all amounts due to all classes of Senior Certificates and to the
Insurer have been paid in full,  before any amounts are distributed to the Class
R-III Certificates.

      (ix) Notwithstanding the priorities relating to distributions of principal
among the  Insured  Certificates  described  above,  on any  Distribution  Date,
distributions  in respect  of  principal  on the  Insured  Certificates  will be
allocated among the Holders of the Insured  Certificates as set forth in Section
6.10. On each Distribution Date on which amounts are available for distributions
in  reduction  of the  Current  Principal  Amount  of the  Insured  Certificates
(including,  for purposes of this paragraph,  the portion of any Insured Payment
allocable to principal) the aggregate  amount  available for such  distributions
will  be  rounded


                                      -84-
<PAGE>

upward by the Rounding  Amount.  Such rounding will be accomplished on the first
Distribution  Date on which  distributions in reduction of the Current Principal
Amount of the Insured  Certificates  are made by  withdrawing  from the Rounding
Account the Rounding Amount for deposit into the Distribution  Account, and such
Rounding Amount will be added to the amount that is available for  distributions
in reduction of the Current  Principal  Amount of the Insured  Certificates.  On
each succeeding  Distribution  Date on which  distributions  in reduction of the
Current  Principal  Amount of the  Insured  Certificates  are made,  first,  the
aggregate  amount  available  for  distribution  in  reduction  of  the  Current
Principal  Amount  of the  Insured  Certificates  will be  applied  to repay the
Rounding Amount  withdrawn from the Rounding  Account on the prior  Distribution
Date and then, the remainder of such allocable amount, if any, will be similarly
rounded upward through  another  withdrawal  from the Rounding  Account and such
determined  Rounding  Amount will be added to the amount that is  available  for
distribution  in  reduction  of the  Current  Principal  Amount  of the  Insured
Certificates.  Any funds  remaining  in the Rounding  Account  after the Current
Principal  Amount  of the  Insured  Certificates  is  reduced  to zero  shall be
distributed to the Class R-III Certificateholders.

      Section 6.02 Allocation of Losses.

      (a) On or prior to each  Determination  Date,  the Master  Servicer  shall
determine  the amount of any Realized Loss in respect of each Mortgage Loan that
occurred during the immediately  preceding  calendar month, based on information
provided by the related Servicer.

      (b) Realized Losses with respect to a Mortgage Loan will be allocated on a
pro rata basis between the PO Percentage of the Scheduled  Principal  Balance of
such  Mortgage  Loan  and the  Non-PO  Percentage  of such  Scheduled  Principal
Balance.

      (c) On each Distribution  Date, the PO Percentage of the principal portion
of any Realized Loss on a Discount  Mortgage  Loan and any Class PO  Certificate
Cash Shortfall will be allocated to the Principal  Only  Certificates  until the
Current  Principal Amount of the Principal Only Certificates is reduced to zero.
With respect to any Distribution Date through the Cross-Over Date, the aggregate
of all amounts so allocable to a class of Principal  Only  Certificates  on such
date in respect of any Realized Losses and any related Class PO Certificate Cash
Shortfall  and all  amounts  previously  allocated  in respect of such  Realized
Losses or Class PO  Certificate  Cash  Shortfall  and not  distributed  on prior
Distribution  Dates will be the "Class PO Certificate  Deferred  Amount." To the
extent  funds are  available  therefor  on any  Distribution  Date  through  the
Cross-Over Date,  distributions in respect of the Class PO Certificate  Deferred
Amount for the Class PO  Certificates  will be made in accordance  with priority
FIFTH of Section 6.01(a)(i) or (a)(ii) as applicable. No interest will accrue on
the Class PO Certificate  Deferred Amount. On each Distribution Date through the
Cross-Over  Date,  the Current  Principal  Amount of the lowest ranking Class of
Subordinate  Certificates  then outstanding will be reduced by the amount of any
distributions  in respect of any Class PO  Certificate  Deferred  Amount on such
Distribution Date in accordance with the priorities set forth above, through the
operation of the Subordinate  Certificate Writedown Amount. After the Cross-Over
Date, no more distributions will be made in respect of, and applicable  Realized
Losses and Class PO Certificate Cash Shortfalls  allocable to the Principal Only
Certificates will not be added to, the Class PO Certificate Deferred Amount.


                                      -85-
<PAGE>

      (d) The Non-PO  Percentage of the principal  portion of Realized Losses on
the Mortgage Loans will be allocated on any Distribution Date as follows: first,
to the Class B-6 Certificates;  second, to the Class B-5 Certificates; third, to
the Class B-4 Certificates; fourth, to the Class B-3 Certificates; fifth, to the
Class B-2 Certificates;  and sixth, to the Class B-1 Certificates,  in each case
until the Current  Principal  Amount of such class has been reduced to zero. The
applicable Non-PO Percentage of the principal portion of any Excess Loss for any
Distribution  Date will be allocated pro rata among all  outstanding  Classes of
Certificates  (other than the Principal Only  Certificates and the Interest Only
Certificates) based on their Current Principal Amounts in each until the Current
Principal  Amount of such class has been reduced to zero;  provided however that
the  amount  of  any  Excess  Loss  otherwise   allocable  to  the  Class  I-A-2
Certificates  will be allocated to the Class I-A-3 Certificate until the Current
Principal  Amount of such  Class has been  reduced to zero and then to the Class
I-A-2 Certificates.  Thereafter,  the Non-PO Percentage of the principal portion
of Realized  Losses on the  Mortgage  Loans in a Loan Group will be allocated on
any Distribution Date to the Class or Classes of Senior Certificates (other than
the Interest Only  Certificates  and the  Principal  Only  Certificates)  of the
related Senior  Certificate Group, pro rata, based upon their respective Current
Principal  Amounts;  provided  however  that the amount of any  Realized  Losses
otherwise  allocable to the Class I-A-2  Certificates  shall be allocated to the
Class I-A-3  Certificates  until the Current  Principal  Amount thereof has been
reduced to zero and then to the Class I-A-2  Certificates.  Once the Subordinate
Certificates  have been reduced to zero, the Non-PO  Percentage of the principal
portion of Realized Losses on the Mortgage Loans (if any) will be allocated on a
pro rata basis to the  remaining  Senior  Certificates  (other than the Interest
Only Certificates).

      (e)  Notwithstanding  the foregoing  clause (d), no such allocation of any
Realized Loss shall be made on a Distribution  Date to any Class of Certificates
to the  extent  that  such  allocation  would  result  in the  reduction  of the
aggregate  Current  Principal  Amounts  of  all  the  Certificates  as  of  such
Distribution   Date,  after  giving  effect  to  all   distributions  and  prior
allocations  of Realized  Losses or Excess Losses on the Mortgage  Loans on such
date, to an amount less than the aggregate Scheduled Principal Balance of all of
the Mortgage  Loans as of the first day of the month of such  Distribution  Date
(such limitation, the "Loss Allocation Limit").

      (f)  Any  Realized   Losses  or  Excess  Loss  allocated  to  a  Class  of
Certificates shall be allocated among the Certificates of such Class (other than
the Interest  Only  Certificates)  in  proportion  to their  respective  Current
Principal  Amounts.  Any allocation of Realized  Losses shall be accomplished by
reducing the Current Principal Amount of the related Certificates on the related
Distribution Date.

      (g)  Realized  Losses  or  an  Excess  Loss  shall  be  allocated  on  the
Distribution  Date in the  month  following  the  month in which  such  loss was
incurred and, in the case of the principal portion thereof,  after giving effect
to distributions made on such Distribution Date.

      (h)  On  each  Distribution  Date,  the  Securities   Administrator  shall
determine  and  notify  the  Trustee of the  Subordinate  Certificate  Writedown
Amount.   Any   Subordinate   Certificate   Writedown   Amount  shall  effect  a
corresponding  reduction in the Current  Principal Amount of (i) if prior to the
Cross-Over Date, the Current Principal Amounts of the Subordinate  Certificates,
in the reverse order of their  numerical  Class  designations  and (ii) from and
after  the  Cross-Over  Date,  the  Senior  Certificates,   in  accordance  with
priorities set forth in clause (b)


                                      -86-
<PAGE>

above, which reduction shall occur on such Distribution Date after giving effect
to distributions made on such Distribution Date.

      (i) Any Net  Interest  Shortfall  will be  allocated  among the Classes of
Certificates  in proportion  to the  respective  amounts of Accrued  Certificate
Interest  that would  have been  allocated  thereto  in the  absence of such Net
Interest  Shortfall  for such  Distribution  Date.  The interest  portion of any
Realized  Losses with respect to the Mortgage Loans occurring on or prior to the
Cross-Over  Date will not be allocated among any  Certificates,  but will reduce
the amount of Available Funds on the related  Distribution  Date. As a result of
the subordination of the Subordinate Certificates in right of distribution, such
Realized  Losses  on the  Mortgage  Loans  will  be  borne  by  the  Subordinate
Certificates, in inverse order of their numerical Class designations.  Following
the  Cross-Over  Date, the interest  portion of Realized  Losses on the Mortgage
Loans will be  allocated to the Senior  Certificates  to the extent not covered,
with respect to the Class I-A-5 Certificates, by the Reserve Fund.

      (j) Any Deficient  Valuation will on each  Distribution  Date be allocated
solely to the Subordinate Certificates until the Bankruptcy Coverage Termination
Date. The Bankruptcy Loss Amount and the related  coverage levels may be reduced
or modified upon written confirmation from the related Rating Agencies that such
reduction or modification  will not adversely affect the then current ratings of
the Senior  Certificates  by the related  Rating  Agencies  (determined  without
regard to the Policy). Such reduction may adversely affect the coverage provided
by subordination  with respect to Bankruptcy Losses. Any Fraud Loss will on each
Distribution Date be allocated solely to the Subordinate  Certificates until the
Fraud  Coverage   Termination  Date.  Any  Special  Hazard  Loss  will  on  each
Distribution   Date  be  allocated   solely  to  the   outstanding   Subordinate
Certificates until the Special Hazard Termination Date.

      Section 6.03 Payments.

      (a) On each Distribution Date, other than the final Distribution Date, the
Trustee  shall  distribute  to  each  Certificateholder  of  record  as  of  the
immediately preceding Record Date the  Certificateholder's pro rata share of its
Class (based on the aggregate  Fractional Undivided Interest represented by such
Holder's  Certificates)  of all  amounts  required  to be  distributed  on  such
Distribution Date to such Class, based on information provided to the Trustee by
the Securities  Administrator.  The Securities Administrator shall calculate the
amount  to be  distributed  to  each  Class  and,  based  on such  amounts,  the
Securities  Administrator  shall  determine the amount to be distributed to each
Certificateholder.   All  of  the  Securities  Administrator's  calculations  of
payments  shall  be based  solely  on  information  provided  to the  Securities
Administrator by the Master Servicer.  Neither the Securities  Administrator nor
the  Trustee  shall  be  required  to  confirm,  verify  or  recompute  any such
information but shall be entitled to rely conclusively on such information.

      (b) Payment of the above amounts to each  Certificateholder  shall be made
(i) by check mailed to each  Certificateholder  entitled  thereto at the address
appearing in the Certificate  Register or (ii) upon receipt by the Trustee on or
before the fifth Business Day preceding the Record Date of written  instructions
from a  Certificateholder  by wire transfer to a United  States  dollar  account
maintained  by the  payee  at any  United  States  depository  institution  with
appropriate  facilities for receiving such a wire transfer;  provided,  however,
that the final


                                      -87-
<PAGE>

payment  in  respect  of each  Class  of  Certificates  will be made  only  upon
presentation  and  surrender of such  respective  Certificates  at the office or
agency of the  Trustee  specified  in the notice to  Certificateholders  of such
final payment.

      Section 6.04 Statements to Certificateholders.

      (a)  Concurrently  with  each  distribution  to  Certificateholders,   the
Securities  Administrator shall make available to the parties hereto, Radian and
each  Certificateholder via the Securities  Administrator's  internet website as
set forth below,  the following  information,  expressed with respect to clauses
(i)  through  (vii) in the  aggregate  and as a  Fractional  Undivided  Interest
representing an initial Current  Principal  Amount of $1,000,  or in the case of
the Residual Certificates, an initial Current Principal Amount of $50:

            (i) the Current  Principal Amount (or Notional Amount) of each Class
      of Certificates immediately prior to such Distribution Date;

            (ii) the amount of the  distribution  allocable to principal on each
      applicable Class of Certificates;

            (iii)  the  aggregate  amount of  interest  accrued  at the  related
      Pass-Through  Rate with respect to each Class during the related  Interest
      Accrual Period;

            (iv)  the Net  Interest  Shortfall  and  any  other  adjustments  to
      interest at the related  Pass-Through  Rate  necessary  to account for any
      difference  between  interest accrued and aggregate  interest  distributed
      with respect to each Class of Certificates;

            (v) the amount of the  distribution  allocable  to  interest on each
      Class of Certificates;

            (vi) the  Pass-Through  Rates for each  Class of  Certificates  with
      respect to such Distribution Date;

            (vii) the  Current  Principal  Amount (or  Notional  Amount) of each
      Class of Certificates after such Distribution Date;

            (viii) the amount of any  Monthly  Advances,  Compensating  Interest
      Payments and outstanding  unreimbursed  advances by the Master Servicer or
      the Servicers included in such distribution;

            (ix) the aggregate amount of any Realized Losses (listed  separately
      for each category of Realized Loss) during the related  Prepayment  Period
      and  cumulatively  since  the  Cut-off  Date  and the  amount  and  source
      (separately identified) of any distribution in respect thereof included in
      such distribution;

            (x) with  respect to each  Mortgage  Loan which  incurred a Realized
      Loss during the related Prepayment  Period, (i) the loan number,  (ii) the
      Scheduled  Principal Balance of such Mortgage Loan as of the Cut-off Date,
      (ii) the  Scheduled  Principal  Balance  of such  Mortgage  Loan as of the
      beginning of the related Due Period, (iii) the Net Liquidation


                                      -88-
<PAGE>

      Proceeds  with  respect to such  Mortgage  Loan and (iv) the amount of the
      Realized Loss with respect to such Mortgage Loan;

            (xi) the amount of Scheduled  Principal and  Principal  Prepayments,
      (including but separately  identifying  the principal  amount of Principal
      Prepayments, Insurance Proceeds, the purchase price in connection with the
      purchase of Mortgage Loans, cash deposits in connection with substitutions
      of  Mortgage  Loans  and Net  Liquidation  Proceeds)  and the  number  and
      principal  balance of Mortgage Loans  purchased or substituted  for during
      the relevant period and cumulatively since the Cut-off Date;

            (xii)  the  number  of  Mortgage  Loans   (excluding  REO  Property)
      remaining  in the  Trust  Fund  as of the  end of the  related  Prepayment
      Period;

            (xiii)  information  regarding any Mortgage Loan delinquencies as of
      the end of the related Prepayment  Period,  including the aggregate number
      and  aggregate   Outstanding  Principal  Balance  of  Mortgage  Loans  (a)
      delinquent 30 to 59 days on a contractual  basis,  (b) delinquent 60 to 89
      days on a  contractual  basis,  and (c)  delinquent  90 or more  days on a
      contractual  basis,  in each case as of the close of  business on the last
      Business Day of the immediately preceding month;

            (xiv) the number of Mortgage Loans in the foreclosure  process as of
      the end of the related Due Period and the aggregate  Outstanding Principal
      Balance of such Mortgage Loans;

            (xv) the number and aggregate  Outstanding  Principal Balance of all
      Mortgage  Loans as to which the Mortgaged  Property was REO Property as of
      the end of the related Due Period;

            (xvi)  the  book  value  (the sum of (A) the  Outstanding  Principal
      Balance of the Mortgage  Loan,  (B) accrued  interest  through the date of
      foreclosure  and (C) foreclosure  expenses) of any REO Property;  provided
      that,  in  the  event  that  such  information  is  not  available  to the
      Securities  Administrator on the Distribution Date, such information shall
      be furnished promptly after it becomes available;

            (xvii)  the amount of  Realized  Losses  allocated  to each Class of
      Certificates  since the prior  Distribution  Date and in the aggregate for
      all prior Distribution Dates; and

            (xviii) the Average Loss Severity Percentage;

            (xix) the amount of Special Hazard Losses, Fraud Losses,  Bankruptcy
      Losses  and  Extraordinary  Losses  on such  Distribution  Date and in the
      aggregate for all prior Distribution Dates; and

            (xx) the then applicable Subgroup Senior Percentage, Subgroup Senior
      Prepayment  Percentage,  Subordinate Percentage and Subordinate Prepayment
      Percentage for each Subgroup.


                                      -89-
<PAGE>

      The  information  set forth above shall be calculated or reported,  as the
case may be, by the Securities Administrator, based solely on, and to the extent
of, information provided to the Securities Administrator by the Master Servicer.
The Securities Administrator may conclusively rely on such information and shall
not be required to confirm, verify or recalculate any such information.

      The  Securities  Administrator  may  make  available  each  month,  to any
interested party, the monthly statement to Certificateholders via the Securities
Administrator's  website initially located at  "www.ctslink.com."  Assistance in
using the website can be  obtained  by calling  the  Securities  Administrator's
customer  service  desk at (301)  815-6600.  Parties  that are unable to use the
above  distribution  option are entitled to have a paper copy mailed to them via
first class mail by calling the Securities Administrator's customer service desk
and indicating such. The Securities Administrator shall have the right to change
the way such reports are  distributed  in order to make such  distribution  more
convenient   and/or  more   accessible  to  the  parties,   and  the  Securities
Administrator  shall  provide  timely and adequate  notification  to all parties
regarding any such change.

      To the extent  timely  received  from the  Securities  Administrator,  the
Trustee   will  also  make   monthly   statements   available   each   month  to
Certificateholders  and Radian via the Trustee's internet website. The Trustee's
internet       website       will       initially       be       located      at
"https://trustinvestorreporting.usbank.com".  Assistance  in using the Trustee's
website service can be obtained by calling the Trustee's  customer  service desk
at (800) 934-6802.

      (b) By April 30 of each year  beginning in 2005,  the Trustee will furnish
such report to each Holder of the  Certificates of record at any time during the
prior  calendar  year  as to the  aggregate  of  amounts  reported  pursuant  to
subclauses  (a)(ii)  and (a)(v)  above with  respect to the  Certificates,  plus
information with respect to the amount of servicing  compensation and such other
customary information as the Securities  Administrator may determine and advises
the  Trustee to be  necessary  and/or to be  required  by the  Internal  Revenue
Service  or by a federal  or state law or rules or  regulations  to enable  such
Holders to prepare their tax returns for such calendar  year.  Such  obligations
shall  be  deemed  to have  been  satisfied  to the  extent  that  substantially
comparable information shall be provided by the Securities  Administrator or the
Trustee pursuant to the requirements of the Code.

      Section 6.05 Monthly Advances.

      If the Scheduled  Payment on a Mortgage Loan that was due on a related Due
Date is delinquent  other than as a result of  application of the Relief Act and
for which the related  Servicer was required to make an advance  pursuant to the
related Servicing  Agreement exceeds the amount deposited in the Master Servicer
Collection  Account  which  will be used for an  advance  with  respect  to such
Mortgage  Loan,  the  Master  Servicer  will  deposit  in  the  Master  Servicer
Collection  Account  not  later  than  the  Distribution  Account  Deposit  Date
immediately  preceding  the related  Distribution  Date an amount  equal to such
deficiency, net of the Servicing Fee for such Mortgage Loan except to the extent
the Master Servicer determines any such advance to be a Nonrecoverable  Advance.
Subject  to the  foregoing,  the Master  Servicer  shall  continue  to make such
advances  through the date that the related  Servicer is required to do so under
its  Servicing  Agreement.  If the  Master  Servicer  deems an  advance  to be a
Nonrecoverable


                                      -90-
<PAGE>

Advance,  on the  Distribution  Account  Deposit Date, the Master Servicer shall
present an Officer's  Certificate to the Trustee and Radian (i) stating that the
Master Servicer elects not to make a Monthly Advance in a stated amount and (ii)
detailing the reason it deems the advance to be a Nonrecoverable Advance.

      Section 6.06 Compensating Interest Payments.

      The  Master  Servicer  shall  deposit in the  Master  Servicer  Collection
Account not later than each Distribution Account Deposit Date an amount equal to
the lesser of (i) the sum of the  aggregate  amounts  required to be paid by the
Servicers under the Servicing  Agreements with respect to subclauses (a) and (b)
of the  definition of Interest  Shortfall with respect to the Mortgage Loans for
the related Distribution Date, and not so paid by the related Servicers and (ii)
the Master Servicer  Compensation for such Distribution  Date (such amount,  the
"Compensating  Interest Payment").  The Master Servicer shall not be entitled to
any reimbursement of any Compensating Interest Payment.

      Section 6.07 Policy Matters.

      (a) If, on the third  Business  Day  before  any  Distribution  Date,  the
Securities Administrator notifies the Trustee that a Deficiency Amount exists on
such  Distribution  Date, the Trustee shall give notice to Radian and the Fiscal
Agent (as defined in the Policy), if any, by telephone or telecopy of the amount
of such Deficiency Amount,  confirmed in writing by notice  substantially in the
form of Exhibit A to the Policy by 12:00 noon,  New York City time on such third
Business Day. The Trustee's  responsibility  for delivering the notice to Radian
as  provided  in the  preceding  sentence  is  contingent  upon its  receipt  of
available, timely and accurate information from the Master Servicer.

      (b) In the event the Trustee  receives a certified copy of an order of the
appropriate  court  regarding any Preference  Amount (as defined in the Policy),
the Trustee shall (i) promptly  notify Radian and the Fiscal Agent,  if any, and
(ii) comply  with the  provisions  of the Policy to obtain  payment by Radian of
such  Preference  Amount.  In  addition,  the  Trustee  shall mail notice to all
Holders of the Class I-A-5  Certificates so affected that, in the event that any
such  Holder's  scheduled  payment is a Preference  Amount,  such Holder will be
entitled to payment  pursuant to the terms of the Policy,  a copy of which shall
be made  available to such Holders by the Trustee.  The Trustee shall furnish to
Radian and the Fiscal  Agent,  if any,  its records  listing the payments on the
affected  Class I-A-5  Certificates,  if any, that have been made by the Trustee
and  subsequently  recovered from the affected  Holders,  and the dates on which
such payments were made by the Trustee.

      (c) At the time of the execution hereof,  and for the purposes hereof, the
Trustee shall establish a separate  special purpose trust account in the name of
the  Trustee for the  benefit of Holders of the Class  I-A-5  Certificates  (the
"Class  I-A-5  Policy  Payments  Account")  over  which the  Trustee  shall have
exclusive control and sole right of withdrawal.  The Class I-A-5 Policy Payments
Account shall be an Eligible Account.  The Trustee shall deposit any amount paid
under the Policy into the Class I-A-5  Policy  Payments  Account and  distribute
such amount only for the purposes of making the payments to Holders of the Class
I-A-5 Certificates in respect of the Insured Payment for which the related claim
was made under the Policy. Such amounts shall


                                      -91-
<PAGE>

be allocated by the Trustee to Holders of Class I-A-5  Certificates  affected by
such shortfalls in the same manner as interest and principal  payments are to be
allocated with respect to such  Certificates  pursuant to Section 6.01. It shall
not be  necessary  for such  payments  to be made by  checks  or wire  transfers
separate  from  the  checks  or wire  transfers  used to make  regular  payments
hereunder  with funds  withdrawn from the  Distribution  Account.  However,  any
payments  made on the Class I-A-5  Certificates  from funds in the I-A-5  Policy
Payments Account shall be noted as provided in subsection (e) below.  Funds held
in the Class I-A-5 Policy Payments Account shall not be invested by the Trustee.

      (d) Any funds received from Radian for deposit into the Class I-A-5 Policy
Payments  Account  pursuant to the Policy in respect of a  Distribution  Date or
otherwise  as a result of any claim  under the  Policy  shall be  applied by the
Trustee directly to the payment in full (i) of the Deficiency Amount due on such
Distribution  Date on the Class  I-A-5  Certificates,  or (ii) of other  amounts
payable under the Policy. Funds received by the Trustee as a result of any claim
under the Policy  shall be used  solely for  payment to the Holders of the Class
I-A-5  Certificates  and may not be applied  for any other  purpose,  including,
without  limitation,  satisfaction of any costs,  expenses or liabilities of the
Trustee, the Depositor, the Seller, any Servicer, the Securities  Administrator,
the Master  Servicer or the Trust Fund.  Any funds  remaining in the Class I-A-5
Policy Payments Account on the first Business Day after each  Distribution  Date
shall be remitted  promptly to Radian  pursuant  to the written  instruction  of
Radian.

      (e) The Trustee shall keep complete and accurate records in respect of (i)
all funds  remitted to it by Radian and  deposited  into the Class I-A-5  Policy
Payments  Account  and (ii) the  allocation  of such  funds to (A)  payments  of
interest on and principal in respect of any Class I-A-5 Certificates and (B) the
amount of funds available to make  distributions on the Class I-A-5 Certificates
pursuant to Section 6.01. Radian shall have the right to inspect such records at
reasonable  times during normal  business  hours upon three Business Days' prior
notice to the Trustee.

      (f) The Trustee acknowledges, and each Holder of a Class I-A-5 Certificate
by its acceptance of the Class I-A-5 Certificate agrees,  that, without the need
for any further action on the part of Radian or the Trustee to the extent Radian
makes payments,  directly or indirectly,  on account of principal of or interest
on any Class I-A-5  Certificates,  Radian will be fully subrogated to the rights
of the Holders of such Class I-A-5  Certificates  to receive such  principal and
interest from the Trust Fund.  The Holders of the Class I-A-5  Certificates,  by
acceptance  of the Class I-A-5  Certificates,  assign their rights as Holders of
the I-Class A-5 Certificates to the extent of Radian's  interest with respect to
amounts paid under the Policy. Anything herein to the contrary  notwithstanding,
solely for purposes of determining  Radian's rights, as applicable,  as subrogee
for payments distributable pursuant to Section 6.01, any payment with respect to
distributions to the Class I-A-5  Certificates which is made with funds received
pursuant  to the terms of the  Policy,  shall not be  considered  payment of the
Class  I-A-5  Certificates  from the  Trust  Fund and  shall  not  result in the
distribution  or the provision for the  distribution in reduction of the Current
Principal  Amount of the Class I-A-5  Certificates  as described in this Article
VI.

      The Trustee,  the Seller,  the  Depositor  and the Master  Servicer  shall
cooperate in all respects  with any  reasonable  request by Radian for action to
preserve or enforce Radian's rights


                                      -92-
<PAGE>

or interests under this Agreement  without  limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.

      (g)  Upon a  Responsible  Officer  of the  Trustee  becoming  aware of the
occurrence of an Event of Default,  the Trustee shall promptly  notify Radian of
such Event of Default.

      (h) The Trustee shall promptly notify Radian of either of the following as
to which a Responsible Officer has actual knowledge: (A) the commencement of any
proceeding by or against the Seller commenced under the United States bankruptcy
code   or   any   other   applicable   bankruptcy,   insolvency,   receivership,
rehabilitation or similar law (an "Insolvency Proceeding") and (B) the making of
any  claim  in  connection  with  any  proceeding  seeking  the  avoidance  as a
preferential  transfer  (a  "Preference  Claim") of any  distribution  made with
respect to the Class  I-A-5  Certificates  as to which it has actual  knowledge.
Each  Holder  of a Class  I-A-5  Certificate,  by its  purchase  of Class  I-A-5
Certificates,  and the Trustee  hereby  agrees that Radian (so long as no Radian
Default (as defined  below) exists) may at any time during the  continuation  of
any  proceeding  relating to a Preference  Claim direct all matters  relating to
such Preference Claim, including,  without limitation,  (i) the direction of any
appeal of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, Radian shall be subrogated to the rights of
the Trustee and each Holder of a Class I-A-5  Certificate  in the conduct of any
Preference Claim, including,  without limitation,  all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.

      (i) The Master  Servicer shall designate a Radian Contact Person who shall
be available to Radian to provide reasonable access to information regarding the
Mortgage  Loans.  The  initial  Radian  Contact  Person is to the  attention  of
Secondary Marketing.

      (j) The  Trustee  shall  promptly  surrender  the  Policy  to  Radian  for
cancellation  upon the  reduction of the Current  Principal  Amount of the Class
I-A-5 Certificates to zero.

      (k) The Trustee shall send to Radian any statements or communications sent
by the Trustee to Holders of the Class  I-A-5  Certificates  including,  without
limitation, statements prepared pursuant to Section 6.04, 8.03 and 9.12, in each
case at the same time such reports,  statements and communications are otherwise
sent.

      (l) For so long as there is not a  continuing  default by Radian under its
obligations under the Policy (a "Radian Default"),  each Holder of a Class I-A-5
Certificate  agrees that Radian shall be treated by the Seller,  the  Depositor,
the Master Servicer,  the Securities  Administrator and the Trustee as if Radian
were the Holder of all Class I-A-5  Certificates for the purpose (and solely for
the  purpose) of the giving of any consent,  the making of any  direction or the
exercise of any voting or other control  rights  otherwise  given the Holders of
the Class  I-A-5  Certificates  hereunder  without  any  further  consent of the
Holders of the Class I-A-5 Certificates and such holders shall not exercise such
rights without the prior written consent of Radian.

      With respect to this Section 6.07, (i) the terms  "Receipt" and "Received"
shall mean actual delivery to Radian and Radian's Fiscal Agent, if any, received
prior to 12:00 noon, New


                                      -93-
<PAGE>

York  City  time,  on a  Business  Day;  delivery  either on a day that is not a
Business  Day or after  12:00  noon,  New York City time,  shall be deemed to be
Received on the next succeeding Business Day. If any notice or certificate given
under  the  Policy  by the  Trustee  is not in  proper  form or is not  properly
completed,  executed or delivered, it shall be deemed not to have been Received.
Radian or its Fiscal Agent, if any, shall promptly so advise the Trustee and the
Trustee may submit an amended notice and (ii) "Business Day" means any day other
than (A) a Saturday or Sunday,  (B) a day on which Radian is closed or (C) a day
on which banking institutions in the City of New York, New York, or in which the
Corporate Trust Office of the Trustee is located, are authorized or obligated by
law or executive order to be closed.

      Section 6.08 Reserve Fund.

      The Reserve Fund will be maintained by the Trustee in a separate  account.
The Reserve Fund will be beneficially owned by Bear, Stearns & Co. Inc. and will
not be an asset of the  REMICs.  The  Trustee  shall make a  withdrawal  on each
Distribution  Date from  amounts on deposit in the Reserve  Fund,  to the extent
funds  are  available  therein,  to cover  any  Prepayment  Interest  Shortfalls
allocated to the Class I-A-5  Certificates  that were not offset by Compensating
Interest Payments and any Interest Shortfalls relating to the application of the
Relief Act allocated to the Insured  Certificates.  The Trustee shall distribute
such   amounts   withdrawn   from  the   Reserve   Fund  to  the   Class   I-A-5
Certificateholders  on such  Distribution  Date in the same  manner as  interest
payments  are to be  allocated  with  respect  to the Class  I-A-5  Certificates
pursuant to Section  6.01.  The balance of any amount  remaining  in the Reserve
Fund on the Distribution Date on which the Current Principal Amount of the Class
I-A-5 Certificates has been reduced to zero will be distributed to Bear, Stearns
& Co. Inc. Section 6.09 Rounding Account.

      (a) No later  than the  Closing  Date,  the  Trustee  will  establish  and
maintain  with itself a segregated  trust  account that is an Eligible  Account,
which shall be titled  "Rounding  Account,  U.S. Bank National  Association,  as
trustee for the  registered  holders of Prime  Mortgage  Trust 2004-1,  Mortgage
Pass-Through  Certificates,  Series  2004-1,  Class I-A-5." On the Closing Date,
Bear,  Stearns & Co. Inc. shall deposit with the Trustee,  and the Trustee shall
deposit into the Rounding Account, cash in an amount equal to $999.99.

      (b) The Trustee on each  Distribution  Date shall,  based upon information
provided  to it by the  Master  Servicer  for  the  related  Distribution  Date,
withdraw  funds  from the  Rounding  Account to pay the  Rounding  Amount to the
Certificate Owners of the Insured Certificates  pursuant to Section 6.01(ix). In
addition,  the Trustee on each Distribution  Date shall,  based upon information
provided  to it by the  Master  Servicer  for  the  related  Distribution  Date,
withdraw funds from the  Distribution  Account to repay to the Rounding  Account
the Rounding Amount from the prior  Distribution Date as contemplated in Section
6.01(ix).

      Section 6.10 Principal Distributions on the Insured Certificates.

      Distributions in reduction of the Current  Principal Amount of the Insured
Certificates will be made in integral  multiples of $1,000 at the request of the
appropriate representatives of Deceased Holders of such Insured Certificates and
at the request of Living Owners of such


                                      -94-
<PAGE>

Insured  Certificates or by mandatory  distributions by Random Lot,  pursuant to
clauses (a) and (d) below, or on a pro rata basis pursuant to clause (e) below.

      (a) On each Distribution  Date on which  distributions in reduction of the
Current   Principal   Amount  of  the  Insured   Certificates   are  made,  such
distributions  will be made in the  following  priority  among  the  Certificate
Owners of the Insured Certificates:

            (i) any request by the personal representatives of a Deceased Holder
      or by a surviving  tenant by the entirety,  by a surviving joint tenant or
      by a surviving tenant in common,  but not exceeding an aggregate amount of
      $100,000 per request; and

            (ii) any request by a Living  Owner,  but not exceeding an aggregate
      amount of $10,000 per request.

      Thereafter,  distributions  will be  made,  with  respect  to the  Insured
Certificates,  as provided in clauses (i) and (ii) above up to a second $100,000
and $10,000, respectively. This sequence of priorities will be repeated for each
request  for  principal  distributions  made by the  Certificate  Owners  of the
Insured Certificates until all such requests have been honored.

      Requests for distributions in reduction of the Current Principal Amount of
the Insured  Certificates  presented on behalf of Deceased Holders in accordance
with the  provisions  of clause  (i) above  will be  accepted  in order of their
receipt by the  Depository.  Requests  for  distributions  in  reduction  of the
Current Principal Amount of the Insured Certificate presented in accordance with
the  provisions  of clause  (ii)  above will be  accepted  in the order of their
receipt by the Depository after all requests presented in accordance with clause
(i) above have been honored.  All requests for distributions in reduction of the
Current  Principal  Amount  of the  Insured  Certificates  will be  accepted  in
accordance  with the provisions set forth in Section  6.10(c).  All requests for
distributions  in  reduction  of the  Current  Principal  Amount of the  Insured
Certificates  with  respect to any  Distribution  Date must be  received  by the
Depository and on the Depository's "participant terminal system" and received by
the  Trustee no later than the close of business  on the  related  Record  Date.
Requests for  distributions  that are on the Depository's  participant  terminal
system and received by the Trustee  after the related  Record Date and requests,
in either case, for  distributions not accepted with respect to any Distribution
Date, will be treated as requests for  distributions in reduction of the Current
Principal  Amount of Insured  Certificates on the next  succeeding  Distribution
Date, and each succeeding  Distribution  Date thereafter,  until such request is
accepted or is withdrawn as provided in Section  6.10(c).  Such  requests as are
not so withdrawn  shall retain their order of priority  without the need for any
further action on the part of the appropriate  Certificate  Owner of the related
Insured Certificate, all in accordance with the procedures of the Depository and
the  Trustee.  Upon the  transfer  of the  beneficial  ownership  of the Insured
Certificate,  any distribution request previously submitted with respect to such
Certificate  will be deemed to have been  withdrawn only upon the receipt by the
Trustee on or before the Record Date for such  Distribution Date of notification
of  such  withdrawal  in  the  manner  set  forth  in  Section  6.10(c)  on  the
Depository's participant terminal system.

      Distributions in reduction of the Current  Principal Amount of the Insured
Certificates  will be  applied  in an  amount  equal to the  Subgroup  Principal
Distribution Amount allocable to such


                                      -95-
<PAGE>

Class  pursuant  to  Section  6.01(a)(i),  plus,  with  respect  to the  Insured
Certificates,  any amounts  available for distribution from the Rounding Account
established   as  provided  in  Section   6.09,   provided  that  the  aggregate
distribution  in  reduction  of the  Current  Principal  Amount  of the  Insured
Certificates on any Distribution  Date shall be made in an integral  multiple of
$1,000.

      To the extent  that the  portion of the  Subgroup  Principal  Distribution
Amount allocable to  distributions in reduction of the Current  Principal Amount
of the Insured  Certificates  on any  Distribution  Date  exceeds the  aggregate
Current  Principal  Amount of the  Insured  Certificates  with  respect to which
distribution  requests, as set forth above, have been received (plus any amounts
required to be distributed  pursuant to the Rounding Account with respect to the
Insured  Certificates),  distributions  in  reduction  of the Current  Principal
Amount  of the  Insured  Certificates  will be made  by  mandatory  distribution
pursuant to Section 6.10(d).

      (b) An Insured Certificate shall be deemed to be held by a Deceased Holder
for purposes of this Section 6.10 if the death of the Certificate  Owner thereof
is deemed to have occurred.  Insured Certificates  beneficially owned by tenants
by the  entirety,  joint  tenants or tenants in common will be  considered to be
beneficially  owned by a single  owner.  The death of a tenant by the  entirety,
joint  tenant  or  tenant  in  common  will be  deemed  to be the  death  of the
Certificate  Owner, and the Insured  Certificates so beneficially  owned will be
eligible for priority with respect to  distributions in reduction of the Current
Principal  Amount  thereof,  subject to the  limitations  stated above.  Insured
Certificates beneficially owned by a trust will be considered to be beneficially
owned by each  beneficiary  of the  trust to the  extent  of such  beneficiary's
beneficial  interest  therein,  but in no  event  will a  trust's  beneficiaries
collectively  be deemed  to be  Certificate  Owners  of a number  of  Individual
Insured  Certificates  of  which  such  trust  is  the  owner.  The  death  of a
beneficiary of a trust will be deemed to be the death of a Certificate  Owner of
the Insured  Certificates,  as  applicable,  owned by the trust to the extent of
such beneficiary's beneficial interest in such trust. The death of an individual
who was a tenant by the entirety,  joint tenant or tenant in common in a tenancy
which  is the  beneficiary  of a trust  will be  deemed  to be the  death of the
beneficiary  of such  trust.  The  death  of a  person  who,  during  his or her
lifetime,  was  entitled  to  substantially  all  of  the  beneficial  ownership
interests in Individual  Insured  Certificates will be deemed to be the death of
the Certificate Owner of the Insured Certificates regardless of the registration
of ownership, if such beneficial interest can be established to the satisfaction
of the Depository Participant.  Such beneficial interest will be deemed to exist
in typical  cases of street name or nominee  ownership,  ownership by a trustee,
ownership under the Uniform Gifts to Minors Act and community  property or other
joint ownership  arrangements between a husband and wife. Certificate beneficial
interests shall include the power to sell,  transfer or otherwise  dispose of an
Insured Certificate and the right to receive the proceeds therefrom,  as well as
interest and  distributions in reduction of the Current  Principal Amount of the
Insured Certificates,  as applicable,  payable with respect thereto. The Trustee
shall not be under any duty to determine  independently  the  occurrence  of the
death of any deceased  Certificate  Owner.  The Trustee may rely  entirely  upon
documentation  delivered to it pursuant to Section 6.10(c) in  establishing  the
eligibility of any Certificate  Owner to receive the priority  accorded Deceased
Holders in Section 6.10(a).

      (c) Requests  for  distributions  in  reduction  of the Current  Principal
Amount of Insured  Certificates  must be made by  delivering  a written  request
therefor to the Depository  Participant or Indirect Depository  Participant that
maintains the account evidencing such Certificate


                                      -96-
<PAGE>

Owner's interest in Insured Certificates.  In the case of a request on behalf of
a  Deceased  Holder,  appropriate  evidence  of death  and any tax  waivers  are
required to be forwarded to the Depository Participant under separate cover. The
Depository  Participant  shall  forward  a  certification,  satisfactory  to the
Trustee,  certifying  the death of the  Deceased  Holder and the  receipt of the
appropriate  death and tax waivers.  The Depository  Participant  should in turn
make the request of the  Depository  (or, in the case of an Indirect  Depository
Participant,  such  Indirect  Depository  Participant  must  notify the  related
Depository Participant of such request, which Depository Participant should make
the request of the Depository) on the Depository's  participant terminal system.
The Depository  may establish such  procedures as it deems fair and equitable to
establish the order of receipt of requests for such distributions received by it
on the same day. None of the Depositor, the Seller, the Master Servicer,  Radian
or the  Trustee  shall be  liable  for any delay in  delivery  of  requests  for
distributions  or withdrawals of such requests by the  Depository,  a Depository
Participant or any Indirect Depository Participant.

      The  Depository  shall  maintain a list of those  Depository  Participants
representing the appropriate  Certificate  Owners of Insured  Certificates  that
have submitted  requests for distributions in reduction of the Current Principal
Amount of  Insured  Certificates,  together  with the order of  receipt  and the
amounts of such requests on the Depository's  participant  terminal system.  The
Depository will honor requests for  distributions  in the order of their receipt
(subject to the  priorities  described in Section  6.10(a)  above).  The Trustee
shall  notify  the  Depository  as to which  requests  should be honored on each
Distribution  Date at least two Business  Days prior to such  Distribution  Date
based on the report  received  by the Trustee  pursuant  to Section  4.05(c) and
shall  notify  the  Depository  as to  the  amount  of  the  Subgroup  Principal
Distribution Amount to be distributed to the Insured  Certificates by Random Lot
pursuant to Section  6.10(d).  Requests  shall be honored by the  Depository  in
accordance with the procedures,  and subject to the priorities and  limitations,
described  in this  Section  6.10.  The exact  procedures  to be followed by the
Trustee and the  Depository  for purposes of  determining  such  priorities  and
limitations  will be those  established  from time to time by the Trustee or the
Depository,  as the case may be. The decisions of the Trustee and the Depository
concerning such matters will be final and binding on all affected persons.

      Individual Insured Certificates that have been accepted for a distribution
shall be due and payable on the applicable  Distribution Date. Such Certificates
shall cease to bear interest after the last day of the month preceding the month
in which such Distribution Date occurs.

      Any  Certificate  Owner of an Insured  Certificate  that has  requested  a
distribution  may withdraw its request by so notifying in writing the Depository
Participant or Indirect  Depository  Participant that maintains such Certificate
Owner's  account.  In the event that such account is  maintained  by an Indirect
Depository  Participant,  such Indirect  Depository  Participant must notify the
related Depository Participant which in turn must forward the withdrawal of such
request on the Depository's participant terminal system. If such withdrawal of a
request for distribution  has not been received on the Depository's  participant
terminal system on or before the Record Date for the next Distribution Date, the
previously made request for distribution will be irrevocable with respect to the
making of  distributions  in  reduction of the Current  Principal  Amount of the
Insured Certificates on such Distribution Date.


                                      -97-
<PAGE>

      In the event any  requests for  distributions  in reduction of the Current
Principal  Amount of the Insured  Certificates  are  rejected by the Trustee for
failure to comply with the  requirements of this Section 6.10, the Trustee shall
return such request to the appropriate Depository Participant with a copy to the
Depository with an explanation as to the reason for such rejection.

      (d) To the extent, if any, that  distributions in reduction of the Current
Principal Amount of the Insured  Certificates on a Distribution  Date exceed the
outstanding Current Principal Amount of the Insured Certificates with respect to
which  distribution  requests have been received by the related  Record Date, as
provided in Section 6.10(a) above, the additional  distributions in reduction of
the  Current  Principal  Amount  of the  Insured  Certificates  will  be made by
mandatory  distributions in reduction thereof.  Such mandatory  distributions on
Individual  Insured  Certificates  will be made by Random Lot in accordance with
the  then-applicable  Random Lot  procedures of the  Depository,  the Depository
Participants  and  the  Indirect   Depository   Participants   representing  the
Certificate  Owners.  The Trustee  shall notify the  Depository of the aggregate
amount of the  mandatory  distribution  in  reduction  of the Current  Principal
Amount of the Insured Certificates to be made on any such Distribution Date. The
Depository  shall then  allocate  such  aggregate  amount  among its  Depository
Participants on a Random Lot basis.  Each Depository  Participant  and, in turn,
each Indirect  Depository  Participant will then select,  in accordance with its
own procedures,  Individual  Insured  Certificates  from among those held in its
accounts  to  receive  mandatory  distributions  in  reduction  of  the  Current
Principal  Amount of the  Insured  Certificates,  such that the total  amount so
selected  is equal  to the  aggregate  amount  of such  mandatory  distributions
allocated to such Depository  Participant by the Depository and to such Indirect
Depository  Participant by its related Depository  Participant,  as the case may
be.  Depository  Participants  and Indirect  Depository  Participants  that hold
Insured  Certificates  selected for mandatory  distributions in reduction of the
Current  Principal  Amount  thereof  are  required  to  provide  notice  of such
mandatory  distributions to the affected Certificate Owners. The Master Servicer
agrees to notify the Trustee of the amount of  distributions in reduction of the
Current  Principal  Amount  of the  Insured  Certificates  to be  made  on  each
Distribution  Date in a timely  manner  such that the  Trustee  may  fulfill its
obligations  pursuant to the letter of  representations  dated the Closing  Date
among the Company, the Trustee and the Depository.

      (e)  Notwithstanding  any  provisions  herein  to  the  contrary,  on  any
Distribution  Date on which (i) any Realized Losses are allocated to the Insured
Certificates  and (ii) a Radian  Default  has  occurred  and/or  is  continuing,
distributions  in  reduction  of the  Current  Principal  Amount of the  Insured
Certificates  will be made pro rata on the basis of their respective  percentage
interests  with the respect to the Insured  Certificates  among the  Certificate
Owners of the Insured Certificates and will not be made in integral multiples of
$1,000 nor  pursuant to requests for  distribution  as permitted by this Section
6.10 or mandatory distributions by Random Lot.

      (f) In the event that  Definitive  Certificates  representing  the Insured
Certificates  are  issued  pursuant  to  Section  5.01,  an  amendment  to  this
Agreement,  which may be approved without the consent of any Certificateholders,
shall  establish  procedures  relating to the manner in which  distributions  in
reduction of the Current Principal Amount of such Insured Certificates are to be
made;  provided  that  such  procedures  shall  be  consistent,  to  the  extent
practicable and


                                      -98-
<PAGE>

customary  for  certificates  similar  to the  Insured  Certificates,  with  the
provisions of this Section 6.10.






                                      -99-
<PAGE>

                                   ARTICLE VII
                               The Master Servicer

      Section 7.01 Liabilities of the Master Servicer.

      The Master  Servicer  shall be liable in  accordance  herewith only to the
extent of the obligations specifically imposed upon and undertaken by it herein.

      Section 7.02 Merger or Consolidation of the Master Servicer.

      (a) The Master  Servicer will keep in full force and effect its existence,
rights  and  franchises  as a  corporation  under  the laws of the  state of its
incorporation,  and 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 duties under
this Agreement.

      (b)  Any  Person  into  which  the  Master   Servicer  may  be  merged  or
consolidated,  or any corporation  resulting from any merger or consolidation to
which the Master  Servicer  shall be a party,  or any Person  succeeding  to the
business of the Master  Servicer,  shall be the successor of the Master Servicer
hereunder,  without the  execution  or filing of any paper or further act on the
part  of  any  of  the  parties   hereto,   anything   herein  to  the  contrary
notwithstanding.

      Section 7.03  Indemnification of the Trustee,  the Master Servicer and the
Securities Administrator.

      (a) The Master Servicer  agrees to indemnify the Indemnified  Persons for,
and to hold them harmless  against,  any loss,  liability or expense  (including
reasonable legal fees and  disbursements of counsel) incurred on their part that
may be sustained in connection  with,  arising out of, or relating to, any claim
or legal action  (including  any pending or  threatened  claim or legal  action)
relating to this Agreement, the Servicing Agreements,  the Assignment Agreements
or the Certificates or the powers of attorney delivered by the Trustee hereunder
(i) related to the Master Servicer's failure to perform its duties in compliance
with this  Agreement  (except as any such loss,  liability  or expense  shall be
otherwise reimbursable pursuant to this Agreement) or (ii) incurred by reason of
the Master Servicer's willful misfeasance,  bad faith or gross negligence in the
performance  of  duties  hereunder  or  by  reason  of  reckless   disregard  of
obligations and duties hereunder,  provided,  in each case, that with respect to
any such claim or legal action (or pending or threatened claim or legal action),
the  Trustee  shall have given the Master  Servicer  and the  Depositor  written
notice thereof  promptly after the Trustee shall have with respect to such claim
or legal action knowledge thereof.  The Master Servicer's failure to receive any
such notice shall not affect the Trustee's right to  indemnification  hereunder,
except to the  extent the  Master  Servicer  is  materially  prejudiced  by such
failure to give notice.  This indemnity shall survive the resignation or removal
of  the  Trustee,  Master  Servicer  or the  Securities  Administrator  and  the
termination of this Agreement.


                                     -100-
<PAGE>

      (b) The  Depositor  will  indemnify any  Indemnified  Person for any loss,
liability  or expense of any  Indemnified  Person not  otherwise  covered by the
Master Servicer's indemnification pursuant to Subsection (a) above.

      Section 7.04 Limitations on Liability of the Master Servicer and Others.

      Subject  to the  obligation  of  the  Master  Servicer  to  indemnify  the
Indemnified Persons pursuant to Section 7.03:

      (a)  Neither  the  Master  Servicer  nor any of the  directors,  officers,
employees or agents of the Master  Servicer  shall be under any liability to the
Indemnified Persons, the Depositor, the Trust Fund or the Certificateholders for
taking  any  action or for  refraining  from  taking  any  action in good  faith
pursuant to this Agreement, or for errors in judgment;  provided,  however, that
this provision  shall not protect the Master Servicer or any such Person against
any breach of warranties or  representations  made herein or any liability which
would otherwise be imposed by reason of such Person's willful  misfeasance,  bad
faith or gross  negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.

      (b) The Master  Servicer and any director,  officer,  employee or agent of
the Master  Servicer  may rely in good faith on any  document  of any kind prima
facie  properly  executed  and  submitted by any Person  respecting  any matters
arising hereunder.

      (c) The Master Servicer, the Custodian and any director, officer, employee
or agent of the Master  Servicer or the Custodian  shall be  indemnified  by the
Trust  and  held  harmless  thereby  against  any  loss,  liability  or  expense
(including reasonable legal fees and disbursements of counsel) incurred on their
part that may be sustained in  connection  with,  arising out of, or related to,
any claim or legal action  (including  any pending or threatened  claim or legal
action) relating to this Agreement,  the Certificates or any Servicing Agreement
(except to the extent that the Master  Servicer is  indemnified  by the Servicer
thereunder),  other than (i) any such loss,  liability or expense related to the
Master  Servicer's  failure  to  perform  its  duties  in  compliance  with this
Agreement  (except as any such loss,  liability  or expense  shall be  otherwise
reimbursable  pursuant  to this  Agreement),  or to the  Custodian's  failure to
perform its duties under the Custodial Agreement, respectively, or (ii) any such
loss,  liability or expense  incurred by reason of the Master  Servicer's or the
Custodian's  willful   misfeasance,   bad  faith  or  gross  negligence  in  the
performance of duties hereunder or under the Custodial Agreement, as applicable,
or by reason of reckless  disregard of obligations and duties hereunder or under
the Custodial Agreement, as applicable.

      (d) The Master  Servicer  shall not be under any  obligation to appear in,
prosecute or defend any legal action that is not  incidental to its duties under
this  Agreement  and  that in its  opinion  may  involve  it in any  expense  or
liability;  provided,  however, the Master Servicer may in its discretion,  with
the consent of the Trustee (which consent shall not be  unreasonably  withheld),
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  shall  be
expenses, costs and liabilities of the Trust Fund, and the Master Servicer shall
be entitled to be  reimbursed  therefor  out of the Master  Servicer  Collection


                                     -101-
<PAGE>

Account as provided by Section 4.03.  Nothing in this  Subsection  7.04(d) shall
affect the Master Servicer's obligation to supervise, or to take such actions as
are necessary to ensure,  the servicing and administration of the Mortgage Loans
pursuant to Subsection 3.01(a).

      (e) In taking or  recommending  any  course  of  action  pursuant  to this
Agreement, unless specifically required to do so pursuant to this Agreement, the
Master  Servicer shall not be required to  investigate  or make  recommendations
concerning potential liabilities which the Trust might incur as a result of such
course of action by reason of the  condition  of the  Mortgaged  Properties  but
shall give notice to the Trustee if it has notice of such potential liabilities.

      (f) The Master  Servicer  shall not be liable for any acts or omissions of
any Servicer, except as otherwise expressly provided herein.

      Section 7.05 Master Servicer Not to Resign.

      Except as provided in Section 7.07,  the Master  Servicer shall not resign
from the obligations and duties hereby imposed on it except upon a determination
that any such duties  hereunder are no longer  permissible  under applicable law
and such impermissibility cannot be cured. Any such determination permitting the
resignation  of  the  Master  Servicer  shall  be  evidenced  by an  Opinion  of
Independent Counsel addressed to the Trustee and Radian to such effect delivered
to the Trustee and Radian.  No such  resignation  by the Master  Servicer  shall
become  effective  until the Company or the Trustee or a successor to the Master
Servicer  reasonably   satisfactory  to  the  Trustee  shall  have  assumed  the
responsibilities  and  obligations  of the Master  Servicer in  accordance  with
Section 8.02 hereof.  The Trustee shall notify the Rating Agencies and Radian of
the resignation of the Master Servicer.

      Section 7.06 Successor Master Servicer.

      In connection with the appointment of any successor master servicer or the
assumption of the duties of the Master Servicer,  the Company or the Trustee may
make such  arrangements  for the  compensation of such successor master servicer
out of  payments  on the  Mortgage  Loans as the Company or the Trustee and such
successor master servicer shall agree. If the successor master servicer does not
agree that such market value is a fair price,  such  successor  master  servicer
shall obtain two quotations of market value from third parties  actively engaged
in the servicing of single-family mortgage loans. Notwithstanding the foregoing,
the  compensation  payable to a  successor  master  servicer  may not exceed the
compensation which the Master Servicer would have been entitled to retain if the
Master Servicer had continued to act as Master Servicer hereunder.

      Section 7.07 Sale and 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 and the
Company may terminate the Master Servicer  without cause and select a new Master
Servicer;  provided,  however,  that: (i) the purchaser or transferee  accepting
such assignment and delegation (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 $10,000,000  (unless  otherwise  approved by each Rating Agency
pursuant


                                     -102-
<PAGE>

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 and
Radian  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  (determined  without  regard to the Policy) 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  Servicer  and the Trustee;
(iii) the Master  Servicer  assigning  and  selling the master  servicing  shall
deliver to the Trustee  and Radian an  Officer's  Certificate  and an Opinion of
Independent  Counsel addressed to the Trustee and Radian,  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;  and
(iv) in the  event  the  Master  Servicer  is  terminated  without  cause by the
Company,  the Company shall pay the terminated Master Servicer a termination fee
equal to 0.25% of the  aggregate  Scheduled  Principal  Balance of the  Mortgage
Loans at the time the master  servicing of the Mortgage  Loans is transferred to
the successor Master Servicer. No such assignment or delegation shall affect any
liability of the Master Servicer arising prior to the effective date thereof.





                                     -103-
<PAGE>

                                  ARTICLE VIII
                                     Default

      Section 8.01 Events of Default.

      "Event of Default,"  wherever used herein,  means any one of the following
events  (whatever  the reason for such Event of Default  and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment,  decree or order of any court or any order,  rule or regulation of any
administrative  or  governmental  body) and only with respect to the  defaulting
Master Servicer:

            (i) The  Master  Servicer  fails  to cause  to be  deposited  in the
      Distribution  Account any amount so required to be  deposited  pursuant to
      this Agreement (other than a Monthly Advance),  and such failure continues
      unremedied  for a period of three  Business Days after the date upon which
      written notice of such failure,  requiring the same to be remedied,  shall
      have been given to the Master Servicer; or

            (ii) The Master Servicer fails to observe or perform in any material
      respect any other  material  covenants  and  agreements  set forth in this
      Agreement to be performed by it, which covenants and agreements materially
      affect  the  rights  of  Certificateholders,  and such  failure  continues
      unremedied  for a period of 60 days after the date on which written notice
      of such failure,  properly  requiring the same to be remedied,  shall have
      been given to the Master Servicer by the Trustee or to the Master Servicer
      and the  Trustee by the  Holders  of  Certificates  evidencing  Fractional
      Undivided Interests aggregating not less than 25% of the Trust Fund; or

            (iii) There is entered against the Master Servicer a decree or order
      by a court or agency or supervisory  authority having  jurisdiction in the
      premises for the  appointment of a conservator,  receiver or liquidator in
      any insolvency, readjustment of debt, marshaling of assets and liabilities
      or  similar  proceedings,  or for the  winding  up or  liquidation  of its
      affairs,  and the  continuance of any such decree or order is unstayed and
      in effect for a period of 60 consecutive  days, or an involuntary  case is
      commenced  against the Master Servicer under any applicable  insolvency or
      reorganization  statute and the petition is not  dismissed  within 60 days
      after the commencement of the case; or

            (iv)  The  Master   Servicer   consents  to  the  appointment  of  a
      conservator or receiver or liquidator in any  insolvency,  readjustment of
      debt,  marshaling of assets and  liabilities or similar  proceedings of or
      relating to the Master Servicer or substantially  all of its property;  or
      the Master  Servicer  admits in  writing  its  inability  to pay its debts
      generally  as they become due,  files a petition to take  advantage of any
      applicable insolvency or reorganization  statute,  makes an assignment for
      the  benefit of its  creditors,  or  voluntarily  suspends  payment of its
      obligations;

            (v) The Master  Servicer  assigns or delegates  its duties or rights
      under this Agreement in  contravention  of the provisions  permitting such
      assignment or delegation under Sections 7.05 or 7.07; or


                                     -104-
<PAGE>

            (vi) The Master Servicer fails to deposit, or cause to be deposited,
      in  the   Distribution   Account  any  Monthly   Advance   (other  than  a
      Nonrecoverable   Advance)  by  5:00  p.m.   New  York  City  time  on  the
      Distribution Account Deposit Date.

In each and every such case, so long as such Event of Default with respect to
the Master Servicer shall not have been remedied, either the Trustee or the
Holders of Certificates evidencing Fractional Undivided Interests aggregating
not less than 51% of the principal of the Trust Fund, by notice in writing to
the Master Servicer (and to the Trustee if given by such Certificateholders),
with a copy to the Rating Agencies and Radian, and with the consent of the
Company, may terminate all of the rights and obligations (but not the
liabilities) of the Master Servicer under this Agreement and in and to the
Mortgage Loans and/or the REO Property serviced by the Master Servicer and the
proceeds thereof. Upon the receipt by the Master Servicer of the written notice,
all authority and power of the Master Servicer under this Agreement, whether
with respect to the Certificates, the Mortgage Loans, REO Property or under any
other related agreements (but only to the extent that such other agreements
relate to the Mortgage Loans or related REO Property) shall, subject to Section
8.02, automatically and without further action pass to and be vested in the
Trustee pursuant to this Section 8.01; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer as attorney-in-fact or otherwise, 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 to cooperate with
the Trustee in effecting the termination of the Master Servicer's rights and
obligations hereunder, including, without limitation, the transfer to the
Trustee of (i) the property and amounts which are then or should be part of the
Trust or which thereafter become part of the Trust; and (ii) originals or copies
of all documents of the Master Servicer reasonably requested by the Trustee to
enable it to assume the Master Servicer's duties thereunder. In addition to any
other amounts which are then, or, notwithstanding the termination of its
activities under this Agreement, may become payable to the Master Servicer under
this Agreement, the Master Servicer shall be entitled to receive, out of any
amount received on account of a Mortgage Loan or related REO Property, that
portion of such payments which it would have received as reimbursement under
this Agreement if notice of termination had not been given. The termination of
the rights and obligations of the Master Servicer shall not affect any
obligations incurred by the Master Servicer prior to such termination.

      Notwithstanding the foregoing,  if an Event of Default described in clause
(vi) of this Section 8.01 shall occur,  the Trustee shall,  by notice in writing
to  the  Master  Servicer,  which  may be  delivered  by  telecopy,  immediately
terminate all of the rights and  obligations of the Master  Servicer  thereafter
arising under this Agreement, but without prejudice to any rights it may have as
a  Certificateholder  or to reimbursement of Monthly Advances and other advances
of its own funds, and the Trustee shall act as provided in Section 8.02 to carry
out the duties of the Master  Servicer,  including  the  obligation  to make any
Monthly  Advance the  nonpayment  of which was an Event of Default  described in
clause (vi) of this Section  8.01.  Any such action taken by the Trustee must be
prior to the distribution on the relevant Distribution Date.


                                     -105-
<PAGE>

      Section 8.02 Trustee to Act; Appointment of Successor.

      (a) Upon the  receipt by the Master  Servicer  of a notice of  termination
pursuant  to Section  8.01 or an  Opinion of  Independent  Counsel  pursuant  to
Section 7.05 to the effect that the Master  Servicer is legally unable to act or
to delegate  its duties to a Person  which is legally  able to act,  the Trustee
shall automatically  become the successor in all respects to the Master Servicer
in its capacity under this Agreement and the  transactions set forth or provided
for herein and shall thereafter be subject to all the responsibilities,  duties,
liabilities and limitations on liabilities relating thereto placed on the Master
Servicer by the terms and provisions  hereof  (including the requirement to make
Monthly Advances pursuant to Section 6.05); provided,  however, that the Company
shall have the right to either (a)  immediately  assume the duties of the Master
Servicer or (b) select a successor Master Servicer;  provided further,  however,
that the  Trustee  shall  have no  obligation  whatsoever  with  respect  to any
liability  (other than advances  deemed  recoverable  and not  previously  made)
incurred  by the  Master  Servicer  at or prior to the time of  termination.  As
compensation  therefor,  but  subject  to Section  7.06,  the  Trustee  shall be
entitled to  compensation  which the Master Servicer would have been entitled to
retain if the Master  Servicer had continued to act hereunder,  except for those
amounts due the Master Servicer as reimbursement  permitted under this Agreement
for advances  previously made or expenses previously  incurred.  Notwithstanding
the above,  the Trustee may, if it shall be unwilling so to act, or shall, if it
is  legally  unable  so to  act,  appoint  or  petition  a  court  of  competent
jurisdiction to appoint,  any established  housing and home finance  institution
which is a Fannie Mae- or Freddie Mac-approved  servicer,  and with respect to a
successor  to the  Master  Servicer  only,  having a net  worth of not less than
$10,000,000, as the successor to the Master Servicer hereunder in the assumption
of all or any part of the responsibilities,  duties or liabilities of the Master
Servicer hereunder;  provided,  that the Trustee shall obtain a letter from each
Rating Agency that the ratings, if any, on each of the Certificates  (determined
without  regard to the Policy) will not be lowered as a result of the  selection
of the successor to the Master Servicer.  Pending  appointment of a successor to
the  Master  Servicer  hereunder,  the  Trustee  shall act in such  capacity  as
hereinabove  provided.  In connection with such appointment and assumption,  the
Trustee may make such arrangements for the compensation of such successor out of
payments on the Mortgage Loans as it and such successor  shall agree;  provided,
however, that the provisions of Section 7.06 shall apply, the compensation shall
not be in excess of that which the Master  Servicer  would have been entitled to
if the Master  Servicer had continued to act hereunder,  and that such successor
shall undertake and assume the obligations of the Trustee to pay compensation to
any third Person acting as an agent or independent contractor in the performance
of master servicing  responsibilities  hereunder. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.

      (b) If the  Trustee  shall  succeed to any  duties of the Master  Servicer
respecting the Mortgage Loans as provided  herein,  it shall do so in a separate
capacity and not in its capacity as Trustee and, accordingly,  the provisions of
Article IX shall be  inapplicable  to the Trustee in its duties as the successor
to the Master  Servicer in the servicing of the Mortgage  Loans  (although  such
provisions  shall  continue to apply to the Trustee in its capacity as Trustee);
the  provisions  of Article VII,  however,  shall apply to it in its capacity as
successor master servicer.


                                     -106-
<PAGE>

      Section 8.03 Notification to Certificateholders.

      Upon any termination or appointment of a successor to the Master Servicer,
the Trustee shall give prompt written notice  thereof to  Certificateholders  at
their  respective  addresses  appearing in the  Certificate  Register and to the
Rating Agencies and Radian.

      Section 8.04 Waiver of Defaults.

      The Trustee shall  transmit by mail to all  Certificateholders,  within 60
days  after  the  occurrence  of  any  Event  of  Default  actually  known  to a
Responsible Officer of the Trustee, unless such Event of Default shall have been
cured,  notice  of each such  Event of  Default.  The  Holders  of  Certificates
evidencing  Fractional Undivided Interests  aggregating not less than 51% of the
Trust Fund may,  on behalf of all  Certificateholders,  waive any default by the
Master  Servicer  in  the  performance  of its  obligations  hereunder  and  the
consequences  thereof,  except a default in the  making of or the  causing to be
made any required  distribution on the  Certificates,  which default may only be
waived by Holders of  Certificates  evidencing  Fractional  Undivided  Interests
aggregating 100% of the Trust Fund. Upon any such waiver of a past default, such
default  shall be  deemed to cease to exist,  and any Event of  Default  arising
therefrom shall be deemed to have been timely remedied for every purpose of this
Agreement.  No such waiver shall extend to any  subsequent  or other  default or
impair any right  consequent  thereon except to the extent  expressly so waived.
The  Trustee  shall give notice of any such  waiver to the Rating  Agencies  and
Radian.

      Section 8.05 List of Certificateholders.

      Upon written request of three or more  Certificateholders  of record,  for
purposes of communicating  with other  Certificateholders  with respect to their
rights under this  Agreement,  the Trustee  will afford such  Certificateholders
access during business hours to the most recent list of Certificateholders  held
by the Trustee.


                                     -107-
<PAGE>


                                   ARTICLE IX
             Concerning the Trustee and the Securities Administrator

      Section 9.01 Duties of the Trustee and the Securities Administrator.

      (a) The Trustee,  prior to the occurrence of an Event of Default and after
the curing or waiver of all 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.  If an Event of  Default  has
occurred and has not been cured or waived,  the Trustee  shall  exercise such of
the rights and powers  vested in it by this  Agreement,  and  subject to Section
8.02(b)  use the same degree of care and skill in their  exercise,  as a prudent
person would exercise under the circumstances in the conduct of his own affairs.

      (b) Upon receipt of all resolutions,  certificates,  statements, opinions,
reports,  documents, orders or other instruments which are specifically required
to be furnished to the Trustee and the Securities  Administrator pursuant to any
provision  of this  Agreement,  the  Trustee and the  Securities  Administrator,
respectively,  shall  examine  them to  determine  whether  they are in the form
required by this Agreement;  provided, however, that neither the Trustee nor the
Securities Administrator shall be responsible for the accuracy or content of any
resolution,  certificate,  statement,  opinion, report, document, order or other
instrument furnished hereunder;  provided, further, that neither the Trustee nor
the  Securities   Administrator   shall  be  responsible  for  the  accuracy  or
verification of any calculation provided to it pursuant to this Agreement.

      (c)  On  each   Distribution   Date,   the  Trustee   shall  make  monthly
distributions and the final distribution to the Certificateholders from funds in
the  Distribution  Account as provided in Sections  6.01 and 10.01  herein based
solely on the report of the Securities Administrator.

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

            (i) Prior to the  occurrence  of an Event of Default,  and after the
      curing or waiver of all such  Events of Default  which may have  occurred,
      the duties and obligations of the Trustee and the Securities Administrator
      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 their  respective  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, and conforming to the requirements
      of this Agreement;

            (ii) Neither the Trustee nor the Securities  Administrator  shall be
      liable in its  individual  capacity for an error of judgment  made in good
      faith by a Responsible Officer or


                                     -108-
<PAGE>

      Responsible  Officers  of the  Trustee  or an  officer  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;

            (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  directions of the Holders of
      Certificates  evidencing  Fractional  Undivided Interests  aggregating not
      less than 25% of the Trust Fund, if such action or  non-action  relates to
      the time,  method and place of conducting  any  proceeding  for any remedy
      available to the Trustee or the Securities Administrator, respectively, or
      exercising  any trust or other  power  conferred  upon the  Trustee or the
      Securities Administrator, respectively, under this Agreement;

            (iv) The  Trustee  shall not be required to take notice or be deemed
      to have notice or  knowledge  of any default or Event of Default  unless a
      Responsible  Officer of the  Trustee's  Corporate  Trust Office shall have
      actual knowledge  thereof.  In the absence of such notice, the Trustee may
      conclusively assume there is no such default or Event of Default;

            (v) The  Trustee  shall  not in any way be  liable  by reason of any
      insufficiency  in any Account held by or in the name of Trustee  unless it
      is  determined  by a court of competent  jurisdiction  that the  Trustee's
      gross  negligence  or willful  misconduct  was the  primary  cause of such
      insufficiency  (except to the extent  that the  Trustee is obligor and has
      defaulted thereon);

            (vi) Anything in this Agreement to the contrary notwithstanding,  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 the Trustee or the
      Securities Administrator, respectively, has been advised of the likelihood
      of such loss or damage and regardless of the form of action;

            (vii)  None of the  Securities  Administrator,  the  Depositor,  the
      Company or the Trustee shall be  responsible  for the acts or omissions of
      the other, it being  understood that this Agreement shall not be construed
      to render them partners, joint venturers or agents of one another and

            (viii) Neither the Trustee nor the Securities Administrator shall be
      required  to  expend or risk its own funds or  otherwise  incur  financial
      liability in the  performance  of any of its duties  hereunder,  or in the
      exercise of any of its rights or powers, if there is reasonable ground for
      believing that the repayment of such funds or adequate  indemnity  against
      such risk or  liability is not  reasonably  assured to it, and none of the
      provisions  contained  in this  Agreement  shall in any event  require the
      Trustee or the Securities  Administrator to perform, or be responsible for
      the  manner  of  performance  of,  any of the  obligations  of the  Master
      Servicer under the Servicing Agreements,  except during such time, if any,
      as the Trustee  shall be the  successor to, and be vested with the rights,
      duties,  powers and privileges of, the Master  Servicer in accordance with
      the terms of this Agreement.


                                     -109-
<PAGE>

      (e) All funds received by the Master Servicer and the Trustee and required
to be  deposited  in the Master  Servicer  Collection  Account  or  Distribution
Account  pursuant to this  Agreement will be promptly so deposited by the Master
Servicer and the Trustee.

      (f)  Except  for  those  actions  that  the  Trustee  or  the   Securities
Administrator  is  required  to take  hereunder,  neither  the  Trustee  nor the
Securities  Administrator  shall have any  obligation  or  liability to take any
action or to refrain from taking any action  hereunder in the absence of written
direction as provided hereunder.

      Section  9.02 Certain  Matters  Affecting  the Trustee and the  Securities
Administrator.

      Except as otherwise provided in Section 9.01:

            (i) The Trustee and the Securities  Administrator may rely and shall
      be  protected  in acting or  refraining  from  acting in  reliance  on any
      resolution,  certificate  of  the  Depositor,  the  Master  Servicer  or a
      Servicer,  certificate  of auditors or any other  certificate,  statement,
      instrument,  opinion, report, notice, request,  consent, order, appraisal,
      bond or other paper or  document  believed by it to be genuine and to have
      been signed or presented by the proper party or parties;

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

            (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,  other than its obligation to give notices  pursuant to
      this  Agreement,  or  to  institute,  conduct  or  defend  any  litigation
      hereunder or in relation hereto at the request,  order or direction of any
      of the  Certificateholders  pursuant to the provisions of this  Agreement,
      unless  such   Certificateholders   shall  have  offered  to  the  Trustee
      reasonable   security  or  indemnity  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 an Event of Default of which a  Responsible  Officer of the
      Trustee  has actual  knowledge  (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 under the  circumstances  in the conduct of his own
      affairs;

            (iv) Prior to the  occurrence  of an Event of Default  hereunder and
      after  the  curing  or waiver  of all  Events  of  Default  which may have
      occurred,  neither the Trustee nor the Securities  Administrator  shall be
      liable in its  individual  capacity  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) 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


                                     -110-
<PAGE>

      document,  unless requested in writing to do so by Holders of Certificates
      evidencing Fractional Undivided Interests aggregating not less than 25% of
      the Trust Fund and provided that the payment  within a reasonable  time to
      the Trustee or the Securities Administrator,  as applicable, 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,  reasonably  assured to the Trustee or the
      Securities Administrator, as applicable, by the security afforded to it by
      the terms of this Agreement.  The Trustee or the Securities  Administrator
      may require  reasonable  indemnity  against such expense or liability as a
      condition to taking any such action.  The reasonable expense of every such
      examination  shall  be  paid  by  the  Certificateholders  requesting  the
      investigation;

            (vi) The Trustee and the Securities Administrator may execute any of
      the trusts or powers  hereunder  or perform  any duties  hereunder  either
      directly or through Affiliates,  agents or attorneys;  provided,  however,
      that the  Trustee  may not  appoint  any agent to  perform  its  custodial
      functions  with  respect to the Mortgage  Files or paying agent  functions
      under this  Agreement  without the express  written  consent of the Master
      Servicer,  which consent will not be  unreasonably  withheld.  Neither the
      Trustee nor the  Securities  Administrator  shall be liable or responsible
      for the misconduct or negligence of any of the Trustee's or the Securities
      Administrator's  agents  or  attorneys  or a  custodian  or  paying  agent
      appointed  hereunder by the Trustee or the Securities  Administrator  with
      due care and, when required, with the consent of the Master Servicer;

            (vii) Should the Trustee or the  Securities  Administrator  deem the
      nature of any  action  required  on its  part,  other  than a  payment  or
      transfer  under  Subsection  4.01(b) or Section 4.02,  to be unclear,  the
      Trustee or the Securities Administrator,  respectively,  may require prior
      to such  action  that it be  provided  by the  Depositor  with  reasonable
      further instructions;

            (viii) The right of the Trustee or the Securities  Administrator  to
      perform any  discretionary  act enumerated in this Agreement  shall not be
      construed  as  a  duty,   and  neither  the  Trustee  nor  the  Securities
      Administrator  shall be  accountable  for  other  than its  negligence  or
      willful misconduct in the performance of any such act;

            (ix) Neither the Trustee nor the Securities  Administrator  shall be
      required to give any bond or surety with  respect to the  execution of the
      trust created hereby or the powers granted  hereunder,  except as provided
      in Subsection 9.07; and

            (x) Neither the Trustee nor the Securities  Administrator shall have
      any duty to conduct any affirmative  investigation as to the occurrence of
      any condition  requiring the repurchase of any Mortgage Loan by the Seller
      pursuant to this  Agreement or the Mortgage  Loan Purchase  Agreement,  as
      applicable,  or the  eligibility of any Mortgage Loan for purposes of this
      Agreement.


                                     -111-
<PAGE>

      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  and  countersignature  of the Trustee on the  Certificates)  shall be
taken as the  statements  of the  Depositor,  and  neither the  Trustee,  or the
Custodian  on its  behalf,  nor the  Securities  Administrator  shall  have  any
responsibility  for their  correctness.  Neither the Trustee nor the  Securities
Administrator  makes any representation as to the validity or sufficiency of the
Certificates  (other than the signature and  countersignature  of the Trustee on
the  Certificates)  or of any  Mortgage  Loan  except as  expressly  provided in
Sections 2.02 and 2.05 hereof;  provided,  however, that the foregoing shall not
relieve the Trustee, or the Custodian on its behalf, of the obligation to review
the Mortgage Files  pursuant to Sections 2.02 and 2.04. The Trustee's  signature
and  countersignature  (or  countersignature  of its agent) on the  Certificates
shall be  solely in its  capacity  as  Trustee  and  shall  not  constitute  the
Certificates  an  obligation of the Trustee in any other  capacity.  Neither the
Trustee or the  Securities  Administrator  shall 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  with  respect to the  Mortgage  Loans.  Neither  the  Trustee nor the
Securities  Administrator  shall be responsible  for the legality or validity of
this  Agreement or any document or instrument  relating to this  Agreement,  the
validity of the  execution  of this  Agreement  or of any  supplement  hereto or
instrument  of further  assurance,  or the  validity,  priority,  perfection  or
sufficiency of the security for the Certificates issued hereunder or intended to
be issued hereunder.  Neither the Trustee nor the Securities Administrator shall
at any time have any  responsibility  or  liability  for or with  respect to the
legality,  validity and  enforceability of any Mortgage or any Mortgage Loan, or
the  perfection  and  priority of any  Mortgage or the  maintenance  of any such
perfection and priority,  or for or with respect to the sufficiency of the Trust
Fund  or  its  ability  to  generate   the   payments  to  be   distributed   to
Certificateholders, under this Agreement. Neither the Trustee nor the Securities
Administrator  shall have any responsibility for filing any financing  statement
or  continuation  statement  in any  public  office at any time or to  otherwise
perfect or maintain the  perfection of any security  interest or lien granted to
it hereunder or to record this Agreement.

      Section 9.04 Trustee and Securities Administrator May Own Certificates.

      The Trustee and the Securities Administrator in its individual capacity or
in any capacity other than as Trustee  hereunder may become the owner or pledgee
of any Certificates with the same rights it would have if it were not Trustee or
the Securities  Administrator,  as  applicable,  and may otherwise deal with the
parties hereto.

      Section 9.05 Trustee's and Securities Administrator's Fees and Expenses.

      The fees and  expenses  of the Trustee  and the  Securities  Administrator
shall be paid in accordance with a side letter agreement between the Trustee and
the Master Servicer. In addition,  the Trustee and the Securities  Administrator
will be entitled to recover from the Master Servicer Collection Account pursuant
to Section  4.03(b) all reasonable  out-of-pocket  expenses,  disbursements  and
advances  and the  expenses  of the Trustee  and the  Securities  Administrator,
respectively,  in  connection  with any  Event of  Default,  any  breach of this
Agreement  or any claim or legal  action  (including  any pending or  threatened
claim or legal action) incurred or made by


                                     -112-
<PAGE>

the Trustee or the Securities Administrator, respectively, in the administration
of the trusts  hereunder  (including the reasonable  compensation,  expenses and
disbursements  of its counsel) except any such expense,  disbursement or advance
as may arise  from its  negligence  or  intentional  misconduct  or which is the
responsibility  of the  Certificateholders.  If  funds  in the  Master  Servicer
Collection  Account are  insufficient  therefor,  the Trustee and the Securities
Administrator  shall  recover such expenses from the Depositor and the Depositor
hereby agrees to pay such expenses,  disbursements or advances upon demand. Such
compensation and reimbursement  obligation shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust.

      Section  9.06   Eligibility   Requirements   for  Trustee  and  Securities
Administrator.

      The Trustee and any successor Trustee and the Securities Administrator and
any successor Securities  Administrator shall during the entire duration of this
Agreement  be a state bank or trust  company or a national  banking  association
organized and doing  business  under the laws of such state or the United States
of America,  authorized  under such laws to  exercise  corporate  trust  powers,
having  a  combined  capital  and  surplus  and  undivided  profits  of at least
$40,000,000  or, in the case of a  successor  Trustee,  $50,000,000,  subject to
supervision or examination by federal or state authority and, in the case of the
Trustee,  rated "BBB" or higher by S&P or Fitch  Ratings  with  respect to their
long-term rating and rated "BBB" or higher by S&P or Fitch Ratings and "Baa2" or
higher  by  Moody's  with  respect  to  any  outstanding   long-term   unsecured
unsubordinated  debt,  and,  in the case of a  successor  Trustee  or  successor
Securities  Administrator  other than pursuant to Section 9.10,  rated in one of
the two highest  long-term debt categories of, or otherwise  acceptable to, each
of the Rating Agencies.  If the Trustee  publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining  authority,  then for the  purposes of this  Section 9.06 the combined
capital and surplus of such  corporation  shall be deemed to be its total equity
capital (combined capital and surplus) as set forth in its most recent report of
condition  so  published.  In case at any time  the  Trustee  or the  Securities
Administrator  shall cease to be eligible in accordance  with the  provisions of
this Section  9.06,  the Trustee or the  Securities  Administrator  shall resign
immediately in the manner and with the effect specified in Section 9.08.

      Section 9.07 Insurance.

      The Trustee and the Securities Administrator,  at their own expense, shall
at all times maintain and keep in full force and effect: (i) fidelity insurance,
(ii) theft of documents  insurance  and (iii)  forgery  insurance  (which may be
collectively  satisfied  by a  "Financial  Institution  Bond" and/or a "Bankers'
Blanket Bond").  All such insurance shall be in amounts,  with standard coverage
and subject to deductibles,  as are customary for insurance typically maintained
by banks or their affiliates which act as custodians for investor-owned mortgage
pools.   A  certificate   of  an  officer  of  the  Trustee  or  the  Securities
Administrator   as  to  the   Trustee's  or  the   Securities   Administrator's,
respectively,  compliance  with this  Section  9.07  shall be  furnished  to any
Certificateholder upon reasonable written request.


                                     -113-
<PAGE>

      Section  9.08  Resignation  and  Removal  of the  Trustee  and  Securities
Administrator.

      (a) 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 and the Master  Servicer,  with a copy to the Rating  Agencies.
Upon receiving such notice of resignation,  the Depositor shall promptly appoint
a successor Trustee or successor  Securities  Administrator,  as applicable,  by
written  instrument,  in  triplicate,  one  copy of  which  instrument  shall be
delivered  to each of the  resigning  Trustee or  Securities  Administrator,  as
applicable, the successor Trustee or Securities Administrator, as applicable. If
no successor  Trustee or 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 may petition any
court of competent  jurisdiction  for the appointment of a successor  Trustee or
Securities Administrator.

      (b) 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 a bankrupt or  insolvent,  or a receiver of the Trustee or the
Securities Administrator,  as applicable, or of its property shall be appointed,
or any  public  officer  shall  take  charge or  control  of the  Trustee or the
Securities  Administrator,  as applicable, or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then the Depositor shall
promptly  remove the  Trustee,  or shall be  entitled  to remove the  Securities
Administrator,  as  applicable,  and appoint a successor  Trustee or  Securities
Administrator,  as applicable, by written instrument, in triplicate, one copy of
which  instrument  shall  be  delivered  to each of the  Trustee  or  Securities
Administrator,  as applicable,  so removed,  the successor Trustee or Securities
Administrator, as applicable.

      (c) The Holders of Certificates  evidencing Fractional Undivided Interests
aggregating  not less  than 51% of the  Trust  Fund may at any time  remove  the
Trustee or the  Securities  Administrator  and  appoint a  successor  Trustee or
Securities Administrator by written instrument or instruments, in quadruplicate,
signed by such Holders or their attorneys-in-fact duly authorized,  one complete
set of which  instruments  shall  be  delivered  to the  Depositor,  the  Master
Servicer, the Securities  Administrator (if the Trustee is removed), the Trustee
(if the  Securities  Administrator  is removed),  and the Trustee or  Securities
Administrator  so removed and the successor so appointed.  In the event that the
Trustee or Securities Administrator is removed by the Holders of Certificates in
accordance with this Section 9.08(c),  the Holders of such Certificates shall be
responsible  for  paying any  compensation  payable  to a  successor  Trustee or
successor  Securities  Administrator,  in  excess  of  the  amount  paid  to the
predecessor Trustee or predecessor Securities Administrator, as applicable.

      (d)  No   resignation   or  removal  of  the  Trustee  or  the  Securities
Administrator and appointment of a successor Trustee or Securities Administrator
pursuant to any of the  provisions  of this Section 9.08 shall become  effective
except upon  appointment of and acceptance of such  appointment by the successor
Trustee or Securities Administrator as provided in Section 9.09.


                                     -114-
<PAGE>

      Section 9.09 Successor Trustee and Successor Securities Administrator.

      (a)  Any  successor  Trustee  or  Securities  Administrator  appointed  as
provided in Section 9.08 shall execute, acknowledge and deliver to the Depositor
and to  its  predecessor  Trustee  or  Securities  Administrator  an  instrument
accepting  such  appointment  hereunder.  The  resignation  or  removal  of  the
predecessor Trustee or Securities  Administrator shall then become effective and
such  successor  Trustee or 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 like effect as if
originally named as Trustee or Securities  Administrator herein. The predecessor
Trustee or Securities  Administrator shall after payment of its outstanding fees
and  expenses   promptly   deliver  to  the  successor   Trustee  or  Securities
Administrator,  as  applicable,  all assets and  records of the Trust held by it
hereunder,   and  the  Depositor  and  the  predecessor  Trustee  or  Securities
Administrator,  as applicable, 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 Securities Administrator,  as
applicable, all such rights, powers, duties and obligations.

      (b)  No  successor  Trustee  or  Securities   Administrator  shall  accept
appointment  as  provided  in  this  Section  9.09  unless  at the  time of such
acceptance such successor Trustee or Securities  Administrator shall be eligible
under the provisions of Section 9.06.

      (c) Upon  acceptance of appointment  by a successor  Trustee or Securities
Administrator  as  provided  in this  Section  9.09,  the  successor  Trustee or
Securities  Administrator shall mail notice of the succession of such Trustee or
Securities  Administrator hereunder to all Certificateholders at their addresses
as shown in the Certificate  Register and to the Rating Agencies and Radian. The
Company shall pay the cost of any mailing by the successor Trustee or Securities
Administrator.

      Section   9.10   Merger  or   Consolidation   of  Trustee  or   Securities
Administrator.

      Any state bank or trust company or national banking association into which
the Trustee or the Securities  Administrator  may be merged or converted or with
which it may be  consolidated  or any state bank or trust  company  or  national
banking  association  resulting from any merger,  conversion or consolidation to
which the  Trustee or the  Securities  Administrator,  respectively,  shall be a
party,  or any state  bank or trust  company  or  national  banking  association
succeeding to all or  substantially  all of the corporate  trust business of the
Trustee or the Securities Administrator, respectively, shall be the successor of
the Trustee or the Securities Administrator,  respectively,  hereunder, provided
such  state bank or trust  company  or  national  banking  association  shall be
eligible under the provisions of Section 9.06.  Such  succession  shall be valid
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 9.11 Appointment of Co-Trustee or Separate Trustee.

      (a)  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 Trust or property  constituting the same may at the time be located,  the
Depositor and the Trustee acting jointly


                                     -115-
<PAGE>

shall have the power and shall  execute and deliver all  instruments  to appoint
one or  more  Persons  approved  by the  Trustee  and  the  Depositor  to act as
co-trustee  or  co-trustees,  jointly with the Trustee,  or separate  trustee or
separate  trustees,  of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity, such title to the Trust, or any part thereof, and,
subject to the other  provisions  of this Section  9.11,  such  powers,  duties,
obligations,  rights and trusts as the  Depositor  and the Trustee may  consider
necessary or desirable.

      (b) If the Depositor shall not have joined in such  appointment  within 15
days after the receipt by it of a written  request so to do, the  Trustee  shall
have the power to make such appointment without the Depositor.

      (c) 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  Certificateholders of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 9.08 hereof.

      (d) In the case of any  appointment  of a co-trustee  or separate  trustee
pursuant to this  Section  9.11,  all  rights,  powers,  duties and  obligations
conferred  or imposed  upon the Trustee and  required  to be  conferred  on such
co-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  (whether as Trustee  hereunder  or as  successor to the Master
Servicer hereunder),  the Trustee shall be incompetent or unqualified to perform
such act or acts,  in which event such rights,  powers,  duties and  obligations
(including the holding of title to the Trust 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.

      (e) 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 trusts conferred,  shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be  provided  therein,  subject  to all the  provisions  of this  Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording  protection to, the Trustee.  Every
such instrument shall be filed with the Trustee.

      (f) To  the  extent  not  prohibited  by  law,  any  separate  trustee  or
co-trustee may, at any time, request the Trustee, its agent or attorney-in-fact,
with full power and  authority,  to do any  lawful act under or with  respect to
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.

      (g) No trustee under this Agreement  shall be personally  liable by reason
of any act or omission of another  trustee under this  Agreement.  The Depositor
and the Trustee  acting  jointly may at any time  accept the  resignation  of or
remove any separate trustee or co-trustee.


                                     -116-
<PAGE>

      Section    9.12    Federal    Information    Returns    and   Reports   to
Certificateholders; REMIC Administration.

      (a) For federal income tax purposes,  the taxable year of each REMIC shall
be a calendar year and the Securities  Administrator shall maintain or cause the
maintenance of the books of each such REMIC on the accrual method of accounting.

      (b) The  Securities  Administrator  shall  prepare and file or cause to be
filed with the Internal Revenue Service, and the Trustee shall sign, Federal tax
information  returns or elections  required to be made hereunder with respect to
each REMIC, the Trust Fund, if applicable,  and the Certificates containing such
information and at the times and in the manner as may be required by the Code or
applicable   Treasury   regulations,   and  shall  furnish  to  each  Holder  of
Certificates  at any time  during the  calendar  year for which such  returns or
reports are made such  statements or  information at the times and in the manner
as may be required thereby, including,  without limitation,  reports relating to
interest,  original  issue  discount  and market  discount  or premium  (using a
constant prepayment  assumption of 250% PSA). The Securities  Administrator will
apply for an Employee  Identification Number from the IRS under Form SS-4 or any
other acceptable method for all tax entities.  In connection with the foregoing,
the  Securities  Administrator  shall timely  prepare and file,  and the Trustee
shall  sign,  IRS Form 8811,  which  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 (the "REMIC Reporting  Agent").  The
Trustee  shall make  elections to treat each REMIC as a REMIC  (which  elections
shall apply to the taxable  period  ending  December 31, 2004 and each  calendar
year thereafter) in such manner as the Code or applicable  Treasury  regulations
may  prescribe,  and as described by the Securities  Administrator.  The Trustee
shall sign all tax  information  returns filed  pursuant to this Section and any
other  returns  as may be  required  by the  Code.  The  Holder of the Class R-I
Certificate is hereby designated as the "Tax Matters Person" (within the meaning
of Treas.  Reg.  ss.ss.1.860F-4(d))  for REMIC I, the  Holder of the Class  R-II
Certificate  is hereby  designated as the "Tax Matters  Person" for REMIC II and
the  Holder of the Class  R-III  Certificate  is hereby  designated  as the "Tax
Matters Person" for REMIC III. The Securities Administrator is hereby designated
and  appointed  as the agent of each such Tax  Matters  Person.  Any Holder of a
Residual   Certificate  will  by  acceptance   thereof  appoint  the  Securities
Administrator  as agent and  attorney-in-fact  for the  purpose of acting as Tax
Matters Person for each REMIC during such time as the  Securities  Administrator
does  not own any  such  Residual  Certificate.  In the  event  that the Code or
applicable  Treasury  regulations  prohibit  the  Trustee  from  signing  tax or
information  returns or other statements,  or the Securities  Administrator from
acting as agent for the Tax  Matters  Person,  the  Trustee  and the  Securities
Administrator shall take whatever action that in its sole good faith judgment is
necessary for the proper filing of such information returns or for the provision
of a tax  matters  person,  including  designation  of the  Holder of a Residual
Certificate to sign such returns or act as tax matters person.  Each Holder of a
Residual Certificate shall be bound by this Section.

      (c) The Securities Administrator shall provide upon request and receipt of
reasonable  compensation,  such information as required in Section 860D(a)(6)(B)
of the  Code to the  Internal  Revenue  Service,  to any  Person  purporting  to
transfer a Residual Certificate to a Person other than a transferee permitted by
Section 5.05(b), and to any regulated investment company, real estate investment
trust, common trust fund, partnership,  trust, estate, organization described in


                                     -117-
<PAGE>

Section  1381 of the Code,  or nominee  holding an  interest  in a  pass-through
entity  described in Section  860E(e)(6) of the Code, any record holder of which
is not a transferee  permitted by Section 5.05(b) (or which is deemed by statute
to be an entity with a disqualified member).

      (d) The  Securities  Administrator  shall  prepare and file or cause to be
filed,  and the Trustee shall sign, any state income tax returns  required under
Applicable State Law with respect to each REMIC or the Trust Fund.

      (e) Notwithstanding any other provision of this Agreement, the Trustee and
the  Securities   Administrator   shall  comply  with  all  federal  withholding
requirements  respecting payments to  Certificateholders of interest or original
issue  discount  on the  Mortgage  Loans,  that the  Trustee  or the  Securities
Administrator  reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding.  In the event the
Trustee or the  Securities  Administrator  withholds any amount from interest or
original issue discount  payments or advances  thereof to any  Certificateholder
pursuant to federal  withholding  requirements,  the  Trustee or the  Securities
Administrator    shall,    together   with   its   monthly    report   to   such
Certificateholders, indicate such amount withheld.

      (f) The Trustee and the  Securities  Administrator  agree to indemnify the
Trust  Fund  and the  Depositor  for any  taxes  and  costs  including,  without
limitation,  any  reasonable  attorneys fees imposed on or incurred by the Trust
Fund,  the  Depositor  or the  Master  Servicer,  as a result of a breach of the
Trustee's covenants and the Securities Administrator's covenants,  respectively,
set forth in this Section 9.12; provided, however, such liability and obligation
to  indemnify in this  paragraph  shall not be joint and several and neither the
Trustee nor the  Securities  Administrator  shall be liable or be  obligated  to
indemnify  the Trust Fund for the failure by the other to perform any duty under
this Agreement or the breach by the other of any covenant in this Agreement.





                                     -118-
<PAGE>


                                    ARTICLE X
                                   Termination

      Section 10.01 Termination Upon Repurchase by the Depositor or its Designee
or Liquidation of the Mortgage Loans.

      (a)   Subject  to  Section   10.02,   the   respective   obligations   and
responsibilities  of the  Depositor,  the Trustee,  the Master  Servicer and the
Securities  Administrator  created  hereby,  other  than the  obligation  of the
Trustee to make payments to  Certificateholders  as hereinafter  set forth shall
terminate upon:

            (i) the  repurchase  by or at the  direction of the Depositor or its
      designee  of all of the  Mortgage  Loans  and  all  related  REO  Property
      remaining in the Trust at a price (in each case, the "Termination Purchase
      Price") equal to the sum of (a) 100% of the Outstanding  Principal Balance
      of each Mortgage Loan (other than a Mortgage Loan related to REO Property)
      as of  the  date  of  repurchase,  net  of the  principal  portion  of any
      unreimbursed  Monthly  Advances  made  by  the  purchaser,  together  with
      interest at the applicable  Mortgage  Interest Rate accrued but unpaid to,
      but not  including,  the  first day of the  month of  repurchase,  (b) the
      appraised value of any related REO Property,  less the good faith estimate
      of the Depositor of liquidation expenses to be incurred in connection with
      its disposal thereof (but not more than the Outstanding  Principal Balance
      of the related  Mortgage  Loan,  together with interest at the  applicable
      Mortgage  Interest  Rate  accrued on that  balance  but unpaid to, but not
      including, the first day of the month of repurchase), such appraisal to be
      calculated by an appraiser  mutually  agreed upon by the Depositor and the
      Trustee at the  expense of the  Depositor  plus  payment due Radian of all
      Radian Reimbursement  Amounts, (c) unreimbursed out-of pocket costs of the
      Master  Servicer,   including  unreimbursed  servicing  advances  and  the
      principal  portion  of any  unreimbursed  Monthly  Advances,  made  on the
      Mortgage Loans prior to the exercise of such repurchase  right and (d) any
      unreimbursed  costs  and  expenses  of  the  Trustee  and  the  Securities
      Administrator payable pursuant to Section 9.05; or

            (ii)  the  later  of  the  making  of the  final  payment  or  other
      liquidation,  or any advance with respect  thereto,  of the last  Mortgage
      Loan  remaining  in the  Trust  Fund or the  disposition  of all  property
      acquired with respect to any Mortgage Loan; provided, however, that in the
      event that an advance has been made, but not yet recovered, at the time of
      such termination, the Person having made such advance shall be entitled to
      receive,   notwithstanding   such   termination,   any  payments  received
      subsequent thereto with respect to which such advance was made; or

            (iii)  the  payment  to the  Certificateholders  and  Radian  of all
      amounts required to be paid to them pursuant to this Agreement.

      (b) In no event,  however,  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's, living on the date of this Agreement.


                                     -119-
<PAGE>

      (c) The right of the  Depositor  or its  designee  to  repurchase  all the
assets of the Trust Fund as described in Subsection  10.01(a)(i)  above shall be
exercisable  only  if (i)  the  aggregate  Scheduled  Principal  Balance  of the
Mortgage  Loans  at the  time of any  such  repurchase  is less  than 10% of the
Cut-Off Date Balance,  or (ii) the  Depositor,  based upon an Opinion of Counsel
addressed to the Depositor,  the Trustee and the Securities  Administrator,  has
determined that the REMIC status of REMIC I, REMIC II or REMIC III has been lost
or that a  substantial  risk exists that such REMIC  status will be lost for the
then-current  taxable year. At any time  thereafter,  in the case of (i) or (ii)
above,  the Depositor may elect to terminate  REMIC I, REMIC II and REMIC III at
any  time,  and  upon  such  election,  the  Depositor  or its  designee,  shall
repurchase all the assets of the Trust Fund described in Subsection  10.01(a)(i)
above.

      (d)  The   Trustee   shall  give   notice  of  any   termination   to  the
Certificateholders,   with  a  copy  to  the  Master  Servicer,  the  Securities
Administrator, Radian and the Rating Agencies, upon which the Certificateholders
shall  surrender  their  Certificates  to the  Trustee  for payment of the final
distribution and cancellation.  Such notice shall be given by letter, mailed not
earlier  than the l5th day and not  later  than the 25th day of the  month  next
preceding  the  month of such  final  distribution,  and shall  specify  (i) the
Distribution Date upon which final payment of the Certificates will be made upon
presentation  and  surrender  of the  Certificates  at the office of the Trustee
therein designated, (ii) the amount of any such final payment and (iii) 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 therein specified.

      (e) If the option of the Depositor to  repurchase or cause the  repurchase
of all the  assets in the Trust  Fund as  described  in  Subsection  10.01(a)(i)
above,  is  exercised,  the Depositor  and/or its designee  shall deliver to the
Trustee for deposit in the  Distribution  Account,  by the Business Day prior to
the applicable  Distribution  Date, an amount equal to the Termination  Purchase
Price.   Upon   presentation   and   surrender  of  the   Certificates   by  the
Certificateholders,  the Trustee shall distribute to such  Certificateholders as
directed by the  Securities  Administrator  in writing an amount  determined  as
follows:  with  respect  to each  Certificate  (other  than  the  Interest  Only
Certificates and the Class R Certificates),  the outstanding  Current  Principal
Amount,  plus  with  respect  to  each  Certificate  (other  than  the  Class  R
Certificates), one month's interest thereon at the applicable Pass-Through Rate;
and with respect to the Class R Certificates,  the percentage interest evidenced
thereby  multiplied  by the  difference,  if any,  between  the above  described
repurchase  price and the aggregate  amount to be  distributed to the Holders of
the  Certificates  (other than the Class R  Certificates).  If the proceeds with
respect  to the  Mortgage  Loans  are not  sufficient  to pay all of the  Senior
Certificates  in full,  any such  deficiency  shall be allocated  first,  to the
Subordinate  Certificates,  in inverse order of their numerical designations and
then to the  Senior  Certificates  on a pro  rata  basis.  Upon  deposit  of the
Termination  Purchase  Price and following  such final  Distribution  Date,  the
Trustee shall release promptly to the Depositor and/or its designee the Mortgage
Files for the remaining  Mortgage  Loans,  and the Accounts with respect thereto
shall terminate, subject to the Trustee's obligation to hold any amounts payable
to the  Certificateholders in trust without interest pending final distributions
pursuant to Subsection  10.01(g).  Any other  amounts  remaining in the Accounts
will belong to the Depositor.

      (f) In the  event  that  this  Agreement  is  terminated  by reason of the
payment or liquidation of all Mortgage Loans or the  disposition of all property
acquired with respect to all Mortgage Loans under Subsection 10.01(a)(ii) above,
the Master Servicer shall deliver to the


                                     -120-
<PAGE>

Trustee  for  deposit in the  Distribution  Account  all  distributable  amounts
remaining in the Master Servicer Collection  Account.  Upon the presentation and
surrender of the  Certificates,  the Trustee  shall  distribute to the remaining
Certificateholders,   pursuant  to  the  written  direction  of  the  Securities
Administrator   and  in  accordance  with  their   respective   interests,   all
distributable amounts remaining in the Distribution Account. Upon deposit by the
Master  Servicer  of  such  distributable  amounts,  and  following  such  final
Distribution  Date,  the Trustee shall release  promptly to the Depositor or its
designee the Mortgage  Files for the remaining  Mortgage  Loans,  and the Master
Servicer  Collection  Account  and the  Distribution  Account  shall  terminate,
subject  to  the  Trustee's  obligation  to  hold  any  amounts  payable  to the
Certificateholders   in  trust  without  interest  pending  final  distributions
pursuant to this Subsection 10.01(f).

      (g)  If  not  all  of  the   Certificateholders   shall   surrender  their
Certificates for cancellation  within six months after the time specified in the
above-mentioned  written notice,  the Trustee shall give a second written notice
to  the  remaining   Certificateholders  to  surrender  their  Certificates  for
cancellation and receive the final distribution with respect thereto.  If within
six months after the second  notice,  not all the  Certificates  shall have been
surrendered for cancellation, the Trustee may take appropriate steps, or appoint
any agent to take appropriate steps, to contact the remaining Certificateholders
concerning  surrender of their Certificates,  and the cost thereof shall be paid
out of the funds and other assets which remain subject to this Agreement.

      Section 10.02 Additional Termination Requirements.

      (a) If the option of the Depositor to repurchase all of the Mortgage Loans
under Subsection  10.01(a)(i) above is exercised,  the Trust Fund and each REMIC
shall be terminated in accordance  with the following  additional  requirements,
unless the  Trustee and Radian  have been  furnished  with an Opinion of Counsel
addressed  to the Trustee and Radian to the effect that the failure of the Trust
to comply with the requirements of this Section 10.02 will not (i) result in the
imposition of taxes on "prohibited  transactions"  as defined in Section 860F of
the Code on any REMIC or (ii)  cause any REMIC to fail to  qualify as a REMIC at
any time that any Regular Certificates are outstanding:

            (i)  within 90 days  prior to the final  Distribution  Date,  at the
      written  direction  of the  Depositor,  the  Trustee,  as  agent  for  the
      respective Tax Matters Persons, shall adopt a plan of complete liquidation
      of each REMIC in the case of a termination  under Subsection  10.01(a)(i),
      provided  to it by  the  Depositor,  which  meets  the  requirements  of a
      "qualified liquidation" under Section 860F of the Code and any regulations
      thereunder;

            (ii) the Depositor  shall notify the Trustee at the  commencement of
      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 or otherwise
      dispose of all of the  remaining  assets of the Trust  Fund in  accordance
      with the terms hereof; and

            (iii) at or after the time of  adoption  of such a plan of  complete
      liquidation of each REMIC, and at or prior to the final  Distribution Date
      relating thereto, the Trustee shall sell for cash all of the assets of the
      Trust  to or at the  direction  of the  Depositor,  and each  REMIC  shall
      terminate at such time.


                                     -121-
<PAGE>

      (b) By their acceptance of the Residual Certificates,  the Holders thereof
hereby (i) agree to adopt such a plan of  complete  liquidation  of the  related
REMIC upon the  written  request of the  Depositor,  and to take such  action in
connection  therewith as may be  reasonably  requested by the Depositor and (ii)
appoint  the   Depositor   as  their   attorney-in-fact,   with  full  power  of
substitution,  for purposes of adopting such a plan of complete liquidation. The
Trustee shall adopt such plan of liquidation by filing the appropriate statement
on the final tax  return  of each  REMIC.  Upon  complete  liquidation  or final
distribution  of all of the  assets of the Trust  Fund,  the Trust Fund and each
REMIC shall terminate.




                                     -122-
<PAGE>


                                   ARTICLE XI
                            Miscellaneous Provisions

      Section 11.01 Intent of Parties.

      The  parties  intend that each of REMIC I, REMIC II and REMIC III shall be
treated as a REMIC for federal  income tax purposes and that the  provisions  of
this Agreement should be construed in furtherance of this intent.

      Section 11.02 Amendment.

      (a) This  Agreement  may be amended from time to time by the Company,  the
Depositor,  the Master Servicer,  the Securities  Administrator and the Trustee,
with the  consent of Radian but  without  notice to or the consent of any of the
Certificateholders,  to  cure  any  ambiguity,  to  correct  or  supplement  any
provisions  herein or therein  that may be defective  or  inconsistent  with any
other provisions herein or therein, to comply with any changes in the Code or 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,  however,  that such action  shall not, as evidenced by an
Opinion of Independent Counsel,  addressed to the Trustee and Radian,  adversely
affect  in  any  material   respect  the  interests  of  any   Certificateholder
(determined without regard to the Policy).

      (b) This  Agreement  may also be amended from time to time by the Company,
the  Master  Servicer,  the  Depositor,  the  Securities  Administrator  and the
Trustee,  with the consent of Radian and the Holders of Certificates  evidencing
Fractional  Undivided Interests  aggregating not less than 51% of the Trust Fund
or of the applicable Class or Classes, if such amendment affects only such Class
or  Classes,  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 Certificateholders; 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) reduce
the aforesaid  percentage of  Certificates  the Holders of which are required to
consent  to any such  amendment,  without  the  consent  of the  Holders  of all
Certificates then outstanding,  or (iii) cause any REMIC to fail to qualify as a
REMIC for federal income tax purposes, as evidenced by an Opinion of Independent
Counsel  addressed  to the  Trustee  and Radian  which  shall be provided to the
Trustee and Radian  other than at the  Trustee's  expense or  Radian's  expense.
Notwithstanding  any other  provision  of this  Agreement,  for  purposes of the
giving  or   withholding  of  consents   pursuant  to  this  Section   11.02(b),
Certificates registered in the name of or held for the benefit of the Depositor,
the  Securities  Administrator,  the  Master  Servicer,  or the  Trustee  or any
Affiliate thereof shall be entitled to vote their Fractional Undivided Interests
with respect to matters affecting such Certificates.

      (c) Promptly after the execution of any such amendment,  the Trustee shall
furnish a copy of such  amendment or written  notification  of the  substance of
such amendment to each Certificateholder, with a copy to the Rating Agencies and
Radian.


                                     -123-
<PAGE>

      (d) In the case of an amendment under Subsection  11.02(b) above, it shall
not be necessary for the  Certificateholders  to approve the particular  form of
such an amendment.  Rather,  it shall be  sufficient  if the  Certificateholders
approve the substance of the  amendment.  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.

      (e) Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive  and rely upon an Opinion of Counsel  addressed  to
the Trustee  stating that the  execution  of such  amendment  is  authorized  or
permitted by this Agreement.  The Trustee and the Securities  Administrator may,
but shall not be obligated to, enter into any such  amendment  which affects the
Trustee's or the Securities  Administrator's  own respective  rights,  duties or
immunities under this Agreement.

      Section 11.03 Recordation of Agreement.

      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
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere. The Depositor shall effect such recordation, at the expense
of the Trust upon the  request in  writing of a  Certificateholder,  but only if
such direction is accompanied by an Opinion of Counsel  (provided at the expense
of the  Certificateholder  requesting  recordation)  to  the  effect  that  such
recordation  would  materially  and  beneficially  affect the  interests  of the
Certificateholders or is required by law.

      Section 11.04 Limitation on Rights of Certificateholders.

      (a) The death or incapacity of any  Certificateholder  shall not terminate
this  Agreement  or  the  Trust,  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,  nor
otherwise  affect the rights,  obligations and liabilities of the parties hereto
or any of them.

      (b) Except as expressly provided in this Agreement,  no Certificateholders
shall have any right to vote or in any manner  otherwise  control the  operation
and management of the Trust, or the obligations of the parties hereto, nor shall
anything  herein set forth,  or contained in the terms of the  Certificates,  be
construed  so as to  establish  the  Certificateholders  from  time  to  time as
partners or members of an association; nor shall any Certificateholders 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.

      (c) 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,  under or with respect to this Agreement  against the  Depositor,  the
Securities  Administrator,  the Master  Servicer  or any  successor  to any such
parties  unless (i) such  Certificateholder  previously  shall have given to the
Trustee a written notice of a continuing default,  as herein provided,  (ii) the
Holders of Certificates  evidencing  Fractional Undivided Interests  aggregating
not less than 51%


                                     -124-
<PAGE>

of the Trust Fund 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 and expenses and  liabilities to be incurred  therein or thereby,  and
(iii) the  Trustee,  for 60 days after its receipt of such  notice,  request and
offer of  indemnity,  shall have  neglected  or refused  to  institute  any such
action, suit or proceeding.

      (d) No one or more  Certificateholders  shall  have any right by virtue of
any   provision   of  this   Agreement   to  affect  the  rights  of  any  other
Certificateholders  or to obtain or seek to obtain  priority or preference  over
any other such Certificateholder,  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  11.04,  each and every  Certificateholder  and the
Trustee  shall be entitled  to such  relief as can be given  either at law or in
equity.

      Section 11.05 Acts of Certificateholders.

      (a) Any request, demand, authorization, direction, notice, consent, waiver
or  other  action   provided  by  this   Agreement  to  be  given  or  taken  by
Certificateholders  may be embodied in and evidenced by one or more  instruments
of substantially similar tenor signed by such Certificateholders in person or by
an agent  duly  appointed  in  writing.  Except  as herein  otherwise  expressly
provided, such action shall become effective when such instrument or instruments
are  delivered  to the  Trustee  and,  where it is  expressly  required,  to the
Depositor.  Proof of execution of any such instrument or of a writing appointing
any such  agent  shall be  sufficient  for any  purpose  of this  Agreement  and
conclusive  in favor of the  Trustee  and the  Depositor,  if made in the manner
provided in this Section 11.05.

      (b)  The  fact  and  date  of the  execution  by any  Person  of any  such
instrument  or  writing  may be proved  by the  affidavit  of a witness  of such
execution or by a certificate of a notary public or other officer  authorized by
law to take  acknowledgments  of deeds,  certifying that the individual  signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity  other than his or her  individual
capacity,  such certificate or affidavit shall also constitute  sufficient proof
of his or her  authority.  The  fact  and  date  of the  execution  of any  such
instrument or writing,  or the authority of the  individual  executing the same,
may also be proved in any other manner which the Trustee deems sufficient.

      (c)  The  ownership  of  Certificates  (notwithstanding  any  notation  of
ownership  or other  writing  on such  Certificates,  except an  endorsement  in
accordance with Section 5.02 made on a Certificate  presented in accordance with
Section  5.04)  shall be proved by the  Certificate  Register,  and  neither the
Trustee, the Securities  Administrator,  the Depositor,  the Master Servicer nor
any  successor  to any such  parties  shall be  affected  by any  notice  to the
contrary.

      (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action of the holder of any Certificate  shall bind every future holder
of the same  Certificate  and the holder of every  Certificate  issued  upon the
registration of transfer or exchange thereof, if applicable,  or in lieu thereof
with respect to anything done, omitted or suffered to be done by the


                                     -125-
<PAGE>

Trustee, the Securities Administrator, the Depositor, the Master Servicer or any
successor to any such party in reliance thereon, whether or not notation of such
action is made upon such Certificates.

      (e) In  determining  whether the Holders of the  requisite  percentage  of
Certificates  evidencing  Fractional Undivided Interests have given any request,
demand,   authorization,   direction,   notice,  consent  or  waiver  hereunder,
Certificates owned by the Trustee, the Securities Administrator,  the Depositor,
the Master  Servicer or any Affiliate  thereof shall be  disregarded,  except as
otherwise  provided in Section 11.02(b) and except that, in determining  whether
the  Trustee  shall be  protected  in  relying  upon any such  request,  demand,
authorization,  direction,  notice, consent or waiver, only Certificates which a
Responsible  Officer of the  Trustee  actually  knows to be so owned shall be so
disregarded.  Certificates which have been pledged in good faith to the Trustee,
the  Securities  Administrator,  the  Depositor,  the  Master  Servicer  or  any
Affiliate  thereof may be regarded as outstanding if the pledgor  establishes to
the  satisfaction of the Trustee the pledgor's right to act with respect to such
Certificates  and that the  pledgor  is not an  Affiliate  of the  Trustee,  the
Securities Administrator, the Depositor, or the Master Servicer, as the case may
be.

      Section 11.06 Governing Law.

      THIS AGREEMENT AND THE CERTIFICATES  SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK  WITHOUT  REFERENCE  TO ITS  CONFLICT  OF LAWS
RULES (OTHER THAN  SECTIONS  5-1401 AND 5-1402 OF THE GENERAL  OBLIGATIONS  LAW,
WHICH THE PARTIES  HERETO  EXPRESSLY  RELY UPON IN THE CHOICE OF SUCH LAW AS THE
GOVERNING LAW HEREUNDER) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

      Section 11.07 Notices.

      All demands and notices  hereunder shall be in writing and shall be deemed
given  when  delivered  at  (including  delivery  by  facsimile)  or  mailed  by
registered mail,  return receipt  requested,  postage prepaid,  or by recognized
overnight courier, to (i) in the case of the Depositor,  383 Madison Avenue, New
York, New York 10179, Attention:  Vice  President-Servicing,  telecopier number:
(212)  272-5591,  or to such other  address as may hereafter be furnished to the
other  parties  hereto  in  writing;  (ii) in the  case of the  Trustee,  at its
Corporate  Trust Office,  or such other address as may hereafter be furnished to
the other  parties  hereto in  writing;  (iii) in the case of the  Company,  383
Madison Avenue, New York, New York 10179, Attention:  Vice  President-Servicing,
telecopier number: (212) 272-5591,  or to such other address as may hereafter be
furnished to the other parties hereto in writing; (iv) in the case of the Master
Servicer or Securities  Administrator,  Wells Fargo Bank, National  Association,
P.O. Box 98, Columbia  Maryland 21046 (or, in the case of overnight  deliveries,
9062 Old Annapolis Road, Columbia,  Maryland 21045) (Attention:  Corporate Trust
Services - Prime 2004-1),  facsimile no.: (410) 715-2380,  or such other address
as may hereafter be furnished to the other parties hereto in writing; (v) in the
case of the Rating  Agencies,  Fitch,  Inc.  [address] and Standard & Poor's,  a
division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York
10041,  or (vi) in the case of Radian,  Radian Asset Assurance Inc., 335 Madison
Avenue, New York, New


                                     -126-
<PAGE>

York  10017,  AMSRM@radian.biz,  Attention:  Chief Risk  Officer and Chief Legal
Officer (Prime  Mortgage Trust 2004-1) or such other address as hereafter may be
furnished  to  the  other  parties  in  writing.  Any  notice  delivered  to the
Depositor,  the Master  Servicer,  the Securities  Administrator  or the Trustee
under this Agreement  shall be effective only upon receipt.  Any notice required
or  permitted to be mailed to a  Certificateholder,  unless  otherwise  provided
herein,  shall be given by first-class mail, postage prepaid,  at the address of
such  Certificateholder  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.

      Section 11.08 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  severed  from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or  enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the holders thereof.

      Section 11.09 Successors and Assigns.

      The  provisions of this  Agreement  shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.

      Section 11.10 Article and Section Headings.

      The article and section  headings  herein are for convenience of reference
only, and shall not limit or otherwise affect the meaning hereof.

      Section 11.11 Counterparts.

      This Agreement may be executed in two or more  counterparts  each of which
when so executed and  delivered  shall be an original but all of which  together
shall constitute one and the same instrument.

      Section 11.12 Notice to Rating Agencies.

      The article and section  headings  herein are for convenience of reference
only, and shall not limited or otherwise affect the meaning hereof.  The Trustee
shall  promptly  provide notice to each Rating Agency and Radian with respect to
each of the following of which a  Responsible  Officer of the Trustee has actual
knowledge:

      1. Any material  change or amendment  to this  Agreement or the  Servicing
Agreements;

      2. The occurrence of any Event of Default that has not been cured;

      3. The resignation or termination of the Master  Servicer,  the Trustee or
the Securities Administrator;


                                     -127-
<PAGE>

      4. The repurchase or substitution of Mortgage Loans;

      5. The final payment to Certificateholders; and

      6. Any change in the location of the Master Servicer Collection Account or
the Distribution Account.

      Section 11.13 Radian Rights.

      (a) All  notices,  statements,  reports,  certificates,  lists or opinions
required by this Agreement to be sent to the parties hereto, the Rating Agencies
or the Class I-A-5  Certificateholders shall also be sent at such time to Radian
at the notice address set forth in Section 11.07.

      (b) Radian shall be an express third party  beneficiary  of this Agreement
for the purpose of  enforcing  the  provisions  hereof to the extent of Radian's
rights explicitly specified herein as if a party hereto.

      (c) All references  herein to the ratings assigned to the Certificates and
to the  interests  of any  Certificateholders  shall be  without  regard  to the
Policy.



                                     -128-
<PAGE>


      IN WITNESS WHEREOF,  the Depositor,  the Trustee,  the Master Servicer and
the  Securities  Administrator  have caused  their names to be signed  hereto by
their respective officers thereunto duly authorized as of the day and year first
above written.

                                   STRUCTURED ASSET MORTGAGE
                                   INVESTMENTS II INC., as Depositor


                                   By: /S/ BARON SILVERSTEIN
                                   ----------------------------------------
                                   Name: Baron Silverstein
                                   Title: Vice President


                                   U.S. BANK NATIONAL ASSOCIATION, as Trustee


                                   By: /S/ VANETA I BERNARD
                                   ----------------------------------------
                                   Name: Venata I. Bernard
                                   Title: Senior Vice President


                                   WELLS FARGO BANK, NATIONAL
                                   ASSOCIATION, as Master Servicer


                                   By: /S/ STACEY TAYLOR
                                   ----------------------------------------
                                   Name: Stacey Taylor
                                   Title: Assistant Vice President


                                   WELLS FARGO BANK, NATIONAL ASSOCIATION,
                                   as Securities Administrator


                                   By: /S/ STACEY TAYLOR
                                   ----------------------------------------
                                   Name: Stacey Taylor
                                   Title: Assistant Vice President


                                   EMC MORTGAGE CORPORATION


                                   By: /S/ DANA DILLARD
                                   ----------------------------------------
                                   Name:  Dana Dillard
                                   Title: Senior Vice President


                                     -129-
<PAGE>


Accepted and Agreed as to
Sections 2.01, 2.02, 2.03, 2.04 and 9.09(c)

in its capacity as Seller

EMC MORTGAGE CORPORATION

By:   /S/ DANA DILLARD
   ----------------------------
Name: Dana Dillard
Title: Senior Vice President





                                     -130-
<PAGE>


STATE OF NEW YORK            )
                             ) ss.:
COUNTY OF NEW YORK           )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally  appeared  Baron  Silverstein,  known  to me to be a(n)  Vice
President of Structured Asset Mortgage Investments II Inc., the corporation 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]



                                     -131-
<PAGE>


STATE OF MASSACHUSETTS           )
                                 ) ss.:
COUNTY OF SUFFOLK                )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally appeared Vaneta I Bernard, known to me to be a Vice President
of  U.S.  Bank  National  Association,  the  entity  that  executed  the  within
instrument,  and also known to me to be the person who  executed it on behalf of
said  entity,  and  acknowledged  to me that such  entity  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]




                                     -132-
<PAGE>

STATE OF MARYLAND             )
                              ) ss.:
COUNTY OF HOWARD              )

      On the 30th day of  December,  2004 before me, a notary  public in and for
said State,  personally  appeared Stacey Taylor,  known to me to be an Assistant
Vice  President  of Wells  Fargo  Bank,  National  Association,  the entity that
executed  the  within  instrument,  and also  known to me to be the  person  who
executed it on behalf of said entity,  and  acknowledged  to me that such entity
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]




                                     -133-
<PAGE>


STATE OF MARYLAND          )
                           ) ss.:
COUNTY OF HOWARD           )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally appeared Stacey Taylor, known to me to be a(n) Assistant Vice
President of Wells Fargo Bank,  National  Association,  the entity that executed
the within instrument,  and also known to me to be the person who executed it on
behalf of said  entity,  and  acknowledged  to me that such entity  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]




                                     -134-
<PAGE>


STATE OF TEXAS                )
                              ) ss.:
COUNTY OF DALLAS              )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally  appeared Sherri Lauritsen,  known to me to be Executive Vice
President of EMC Mortgage Corporation,  the corporation 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]




                                     -135-
<PAGE>


STATE OF TEXAS                 )
                               ) ss.:
COUNTY OF DALLAS               )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally  appeared Sherri Lauritsen,  known to me to be Executive Vice
President of EMC Mortgage Corporation,  the corporation 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]




                                     -136-
<PAGE>


                                                                     EXHIBIT A-1

                       FORM OF CLASS [_]-A-[_] 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").

      [THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL  PAYMENTS HEREON AND REALIZED LOSSES  ALLOCABLE  HERETO.  ACCORDINGLY,
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW.  ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY
OF THE TRUSTEE NAMED HEREIN.]

      UNLESS THIS  CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF
THE  DEPOSITORY  TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED WILL BE 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 WILL BE 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.




                                      A-1-1
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           [Adjustable][Fixed] Pass-Through Rate

Class [_-[A]-[_] Senior

Date of Pooling and Servicing Agreement                    Aggregate Initial [Current Principal][Notional] Amount
and Cut-off Date:
July 1, 2004                                               of this Senior Certificate as of the Cut-off Date:
                                                           $[_____________]

First Distribution Date:                                   Initial [Current Principal][Notional] Amount of this
August 25, 2004                                            Senior Certificate as of the Cut-off Date:
                                                           $[_____________]

Master Servicer:                                           CUSIP: [____________]
Wells Fargo Bank, National Association

Assumed Final Distribution Date:
August 25, 2034
</TABLE>

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to  the  Class  [_-[A]-[_]  Certificates  with  respect  to a  Trust  Fund
      consisting  primarily of a pool of fixed rate  mortgage  loans  secured by
      first  liens  on  one-to-four  family   residential   properties  sold  by
      STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee referred to below or any
of their  affiliates  or any other  person.  Neither  this  Certificate  nor the
underlying  Mortgage Loans are guaranteed or insured by any governmental  entity
or by Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II Inc., the Master  Servicer or any of their  affiliates
will have any obligation  with respect to any  certificate  or other  obligation
secured by or payable from payments on the Certificates.

      This certifies  that Cede & Co. is the registered  owner of the Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage


                                      A-1-2
<PAGE>

Loans") sold by Structured  Asset Mortgage  Investments II Inc. ("SAMI II"). The
Mortgage Loans were sold by EMC Mortgage  Corporation  ("EMC") to SAMI II. Wells
Fargo Bank, National  Association ("Wells Fargo") will act as master servicer of
the Mortgage  Loans (the "Master  Servicer",  which term includes any successors
thereto  under the  Agreement  referred  to below).  The Trust Fund was  created
pursuant to the Pooling and  Servicing  Agreement  dated as of the Cut-off  Date
specified above (the "Agreement"), among EMC Mortgage Corporation, as seller and
company (the  "Seller"),  SAMI II, as depositor (the  "Depositor"),  Wells Fargo
Bank, National  Association as master servicer and securities  administrator (in
such  capacity,   the  "Securities   Administrator")   and  U.S.  Bank  National
Association,  as trustee (the "Trustee"),  a summary of certain of the pertinent
provisions of which is set forth  hereafter.  To the extent not defined  herein,
capitalized  terms used herein  shall have the  meaning  ascribed to them 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 its  acceptance  hereof assents and by which such
Holder is bound.

      [[Interest on this  Certificate  will accrue during the month prior to the
month in  which a  Distribution  Date (as  hereinafter  defined)  occurs  on the
Current  Principal  Amount hereof at a per annum rate equal to the  Pass-Through
Rate set forth above and as further  described  in the  Agreement.]  The Trustee
will  distribute  on the 25th day of each  month,  or, if such 25th day is not a
Business Day, the  immediately  following  Business Day (each,  a  "Distribution
Date"), commencing on the First Distribution Date specified above, to the Person
in whose name this  Certificate  is  registered  at the close of business on the
last Business Day of the calendar month preceding the month of such Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  Interest
evidenced by this Certificate and the amount [(of interest and]  principal[,  if
any)]  required to be  distributed  to the Holders of  Certificates  of the same
Class  as  this  Certificate.   The  Assumed  Final  Distribution  Date  is  the
Distribution  Date in the month  immediately  following  the month of the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the date on
which the Current Principal Amount of this Class of Certificates will be reduced
to zero.]

      [Interest on this  Certificate will accrue from and including the 25th day
of the  calendar  month  preceding  the month in which a  Distribution  Date (as
hereinafter  defined) occurs (or, with respect to the first accrual period,  the
Closing Date) to and including the 24th day of the calendar  month in which that
Distribution Date occurs on the [Current Principal][Notional] Amount hereof at a
per annum rate  equal to the  Pass-Through  Rate set forth  above and as further
described in the Agreement.  The Trustee will distribute on the 25th day of each
month,  or, if such 25th day is not a Business  Day, the  immediately  following
Business Day (each, a "Distribution Date"), commencing on the First Distribution
Date specified above, to the Person in whose name this Certificate is registered
at the  close  of  business  on the  Business  Day  immediately  preceding  such
Distribution  Date, an amount equal to the product of the  Fractional  Undivided
Interest  evidenced  by  this  Certificate  and  the  amount  (of  interest  and
principal,  if any) required to be distributed to the Holders of Certificates of
the same Class as this Certificate.  The Assumed Final  Distribution Date is the
Distribution  Date in the month  immediately  following  the month of the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the date on
which the  [Current  Principal][Notional]  Amount of this Class of  Certificates
will be reduced to zero.]


                                     A-1-3
<PAGE>

      Distributions  on this  Certificate  will be made by the  Trustee by check
mailed to the  address of the Person  entitled  thereto as such name and address
shall  appear on the  Certificate  Register  or, if such  Person so  requests by
notifying the Trustee in writing as specified in the Agreement by wire transfer.
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 and  designated  in such notice.  The
Initial  [Current  Principal][Notional]  Amount of this Certificate is set forth
above.  [The Current  Principal  Amount  hereof will be reduced to the extent of
distributions  allocable to principal  hereon and any Realized Losses  allocable
hereto.]

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

      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  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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 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 with the Trustee upon
surrender of this  Certificate  for  registration  of transfer at the offices or
agencies  maintained  by the Trustee for such  purposes,  duly  endorsed  by, or
accompanied  by a 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 in authorized
denominations  representing a like aggregate  Fractional Undivided Interest will
be issued to the designated transferee.

      The  Certificates  are issuable  only as registered  Certificates  without
coupons in the Classes and denominations specified in the Agreement. As provided
in the Agreement and


                                     A-1-4
<PAGE>

subject  to  certain   limitations   therein  set  forth,  this  Certificate  is
exchangeable for one or more new  Certificates  evidencing the same Class and in
the same aggregate  Fractional  Undivided  Interest,  as requested by the Holder
surrendering the same.

      No  service  charge  will be made to the  Certificateholders  for any such
registration  of  transfer,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith.  The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes,  and none of the Depositor,  the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

      The  obligations  created  by the  Agreement  and the Trust  Fund  created
thereby (other than the obligations to make payments to Certificateholders  with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding
Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.



                                     A-1-5
<PAGE>

      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated: __________, 20__                      U.S. BANK NATIONAL ASSOCIATION
                                             Not in its individual capacity
                                             but solely as Trustee


                                             By:
                                                -------------------------------
                                                   Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION

      This  is one of  the  Class  [_-[A]-[_]  Certificates  referred  to in the
within-mentioned Agreement.

                                             U.S. BANK NATIONAL ASSOCIATION
                                             Authorized signatory of U.S. Bank
                                             National Association, not in its
                                             individual capacity but solely
                                             as Trustee

                                             By:
                                                -------------------------------
                                                   Authorized Signatory



                                     A-1-6
<PAGE>


                                   ASSIGNMENT

      FOR  VALUE  RECEIVED,  the  undersigned  hereby  sell(s),   assign(s)  and
transfer(s) unto  __________________________________  (Please print or typewrite
name and address  including postal zip code of assignee) a Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  Certificate and hereby
authorizes  the  transfer of  registration  of such  interest to assignee on the
Certificate Register of the Trust Fund.

      I (We) further direct the Certificate Registrar to issue a new Certificate
of a like  denomination  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



                            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.



                                     A-1-7
<PAGE>


                                                                     EXHIBIT A-2

                         FORM OF CLASS [B-_] CERTIFICATE

      THIS  CERTIFICATE  IS  SUBORDINATED  IN RIGHT  OF  PAYMENT  TO THE  SENIOR
CERTIFICATES, [AND THE CLASS B-[_] CERTIFICATES] , AS DESCRIBED IN THE AGREEMENT
(AS DEFINED BELOW).

      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").

      THE CURRENT  PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL PAYMENTS HEREON AND ANY REALIZED LOSSES ALLOCABLE HERETO. ACCORDINGLY,
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW.  ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY
OF THE TRUSTEE NAMED HEREIN.

      [FOR  CLASS B-1,  CLASS B-2 AND CLASS B-3]  [UNLESS  THIS  CERTIFICATE  IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE
TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF  TRANSFER,  EXCHANGE OR PAYMENT,  ANY
CERTIFICATE  ISSUED WILL BE  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 WILL BE 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.]

      [FOR CLASS B-1,  CLASS B-2 AND CLASS B-3] [EACH  BENEFICIAL  OWNER OF THIS
CERTIFICATE  OR ANY  INTEREST  HEREIN  SHALL BE DEEMED TO HAVE  REPRESENTED,  BY
VIRTUE OF ITS  ACQUISITION OR HOLDING OF THIS  CERTIFICATE  OR INTEREST  HEREIN,
THAT  EITHER (I) IT IS NOT AN  EMPLOYEE  BENEFIT  PLAN  SUBJECT TO THE  EMPLOYEE
RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  OR  SECTION  4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED ("PLAN"),  OR INVESTING WITH ASSETS OF
A PLAN OR (II) IT HAS ACQUIRED AND IS HOLDING  SUCH  CERTIFICATE  IN RELIANCE ON
PROHIBITED   TRANSACTION   EXEMPTION   90-30,  AS  AMENDED  FROM  TIME  TO  TIME
("EXEMPTION"),  AND THAT IT UNDERSTANDS THAT THERE ARE CERTAIN CONDITIONS TO THE
AVAILABILITY OF THE EXEMPTION,  INCLUDING THAT THE CERTIFICATE MUST BE RATED, AT
THE TIME OF PURCHASE,  NOT LOWER THAN "BBB-" (OR ITS  EQUIVALENT)  BY STANDARD &
POOR'S,  FITCH, INC. OR MOODY'S INVESTORS SERVICE,  INC., AND THE CERTIFICATE IS
SO RATED OR (III) (1) IT


                                     A-2-1
<PAGE>

IS AN  INSURANCE  COMPANY,  (2) THE  SOURCE OF FUNDS USED TO ACQUIRE OR HOLD THE
CERTIFICATE OR INTEREST  HEREIN IS AN "INSURANCE  COMPANY GENERAL  ACCOUNT",  AS
SUCH TERM IS DEFINED IN PROHIBITED  TRANSACTION CLASS EXEMPTION  ("PTCE") 95-60,
AND (3) THE CONDITIONS IN SECTIONS I AND III OF PTCE 95-60 HAVE BEEN SATISFIED.]

      [FOR CLASS B-4, CLASS B-5 AND CLASS B-6][THIS CERTIFICATE HAS NOT BEEN AND
WILL NOT BE  REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE
"SECURITIES  ACT"), OR UNDER ANY STATE  SECURITIES  LAWS. THE HOLDER HEREOF,  BY
PURCHASING  THIS  CERTIFICATE,  AGREES THAT THIS  CERTIFICATE  MAY BE REOFFERED,
RESOLD,  PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER  APPLICABLE  LAWS AND ONLY (1)  PURSUANT  TO RULE  144A  UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY  BELIEVES IS
A  QUALIFIED  INSTITUTIONAL  BUYER  WITHIN  THE  MEANING OF RULE 144A (A "QIB"),
PURCHASING  FOR ITS OWN  ACCOUNT OR A QIB  PURCHASING  FOR THE ACCOUNT OF A QIB,
WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER,  RESALE, PLEDGE OR
OTHER  TRANSFER  IS BEING MADE IN  RELIANCE  ON RULE 144A,  (2)  PURSUANT  TO AN
EXEMPTION  FROM  REGISTRATION  PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED INVESTOR"
WITHIN THE MEANING  THEREOF IN RULE  501(A)(1),  (2), (3) OR (7) OF REGULATION D
UNDER THE ACT OR ANY ENTITY IN WHICH ALL OF THE EQUITY  OWNERS  COME WITHIN SUCH
PARAGRAPHS  PURCHASING NOT FOR  DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER  SUBSTANTIALLY IN THE FORM
PROVIDED  IN THE  AGREEMENT  AND (B) THE  RECEIPT  BY THE  TRUSTEE OF SUCH OTHER
EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER
IS IN COMPLIANCE  WITH THE SECURITIES ACT AND OTHER  APPLICABLE  LAWS OR IN EACH
CASE IN ACCORDANCE WITH ALL APPLICABLE  SECURITIES LAWS OF THE UNITED STATES AND
ANY OTHER APPLICABLE JURISDICTION.]

      [FOR CLASS B-4,  CLASS B-5 AND CLASS  B-6]  [THIS  CERTIFICATE  MAY NOT BE
ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR
OTHER  RETIREMENT  ARRANGEMENT  WHICH  IS  SUBJECT  TO  TITLE I OF THE  EMPLOYEE
RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED,  OR SECTION  4975 OF THE
INTERNAL  REVENUE CODE OF 1986, AS AMENDED,  UNLESS THE TRANSFEREE  CERTIFIES OR
REPRESENTS  THAT THE  PROPOSED  TRANSFER  AND HOLDING OF A  CERTIFICATE  AND THE
SERVICING,  MANAGEMENT  AND OPERATION OF THE TRUST AND ITS ASSETS:  (I) WILL NOT
RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR
CLASS  PROHIBITED  TRANSACTION  EXEMPTION,   INCLUDING,   BUT  NOT  LIMITED  TO,
PROHIBITED  TRANSACTION  EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60
OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY  ADDITIONAL  OBLIGATIONS  ON THE
PART OF THE DEPOSITOR, THE SECURITIES ADMINISTRATOR, THE MASTER SERVICER



                                     A-2-2
<PAGE>

OR THE  TRUSTEE,  WHICH WILL BE DEEMED  REPRESENTED  BY AN OWNER OF A BOOK-ENTRY
CERTIFICATE OR A GLOBAL  CERTIFICATE OR UNLESS THE OPINION  SPECIFIED IN SECTION
5.07 OF THE AGREEMENT IS PROVIDED.]





                                     A-2-3
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           Pass-Through Rate: ____%

Class [B-_] Subordinate

Date of Pooling and Servicing Agreement and                Aggregate Initial Current Principal Amount of this
Cut-off Date: July 1, 2004                                 Subordinate Certificate as of the Cut-off Date:
                                                           $[___________]

First Distribution Date:                                   Initial Current Principal Amount of this Subordinate
August 25, 2004                                            Certificate as of the Cut-off Date: $[_________]

Master Servicer:                                           CUSIP: [____________]
Wells Fargo Bank, National Association

Assumed Final Distribution Date:
August 25, 2034
</TABLE>

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to the Class [B-_]  Certificates  with respect to a Trust Fund  consisting
      primarily of a pool of fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee referred to below or any
of their  affiliates  or any other  person.  Neither  this  Certificate  nor the
underlying  Mortgage Loans are guaranteed or insured by any governmental  entity
or by Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II Inc., the Master  Servicer or any of their  affiliates
will have any obligation  with respect to any  certificate  or other  obligation
secured by or payable from payments on the Certificates.

      This certifies  that  [_______] is the registered  owner of the Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage Loans") sold
by Structured Asset Mortgage Investments II Inc. ("SAMI II"). The Mortgage


                                     A-2-4
<PAGE>

Loans were sold by EMC  Mortgage  Corporation  ("EMC") to SAMI II.  Wells  Fargo
Bank,  National  Association  ("Wells Fargo") will act as master servicer of the
Mortgage  Loans (the  "Master  Servicer",  which term  includes  any  successors
thereto  under the  Agreement  referred  to below).  The Trust Fund was  created
pursuant to the Pooling and  Servicing  Agreement  dated as of the Cut-off  Date
specified  above  (the  "Agreement"),  among  EMC as  seller  and  company  (the
"Seller"),  SAMI II, as depositor (the "Depositor"),  Wells Fargo Bank, National
Association as master servicer and securities  administrator  (in such capacity,
the "Securities Administrator"),  and U.S. Bank National Association, as trustee
(the  "Trustee"),  a summary of certain of the pertinent  provisions of which is
set forth hereafter.  To the extent not defined herein,  capitalized  terms used
herein  shall  have  the  meaning  ascribed  to  them  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 its acceptance hereof assents and by which such Holder is bound.

      Interest on this  Certificate  will  accrue  during the month prior to the
month in  which a  Distribution  Date (as  hereinafter  defined)  occurs  on the
Current  Principal  Amount hereof at a per annum rate equal to the  Pass-Through
Rate set forth above and as further described in the Agreement. The Trustee will
distribute on the 25th day of each month, or, if such 25th day is not a Business
Day, the  immediately  following  Business Day (each,  a  "Distribution  Date"),
commencing on the First  Distribution  Date  specified  above,  to the Person in
whose name this  Certificate  is registered at the close of business on the last
Business  Day of the calendar  month  preceding  the month of such  Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  Interest
evidenced by this Certificate and the amount (of interest and principal, if any)
required to be distributed to the Holders of  Certificates  of the same Class as
this Certificate.  The Assumed Final  Distribution Date is the Distribution Date
in the month  immediately  following the month of the latest scheduled  maturity
date of any Mortgage  Loan and is not likely to be the date on which the Current
Principal Amount of this Class of Certificates will be reduced to zero.

      Distributions  on this  Certificate  will be made by the  Trustee by check
mailed to the  address of the Person  entitled  thereto as such name and address
shall  appear on the  Certificate  Register  or, if such  Person so  requests by
notifying the Trustee in writing as specified in the Agreement by wire transfer.
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 and  designated  in such notice.  The
Initial Current  Principal  Amount of this  Certificate is set forth above.  The
Current  Principal  Amount hereof will be reduced to the extent of distributions
allocable to principal hereon and any Realized Losses allocable hereto.

      [For Class B-4,  Class B-5 and Class B-6][No  transfer of this Class [B-_]
Certificate   will  be  made  unless  such  transfer  is  (i)  exempt  from  the
registration  requirements  of the Securities  act of 1933, as amended,  and any
applicable state securities laws or is made in accordance with said Act and laws
and (ii) made in  accordance  with Section 5.02 of the  Agreement.  In the event
that such  transfer is to be made the Trustee  shall  register such transfer if,
(i) made to a transferee  who has  provided the Trustee with  evidence as to its
QIB status;  or (ii) (A) the  transferor has advised the Trustee in writing that
the Certificate is being transferred to an Institutional Accredited Investor and
(B) prior to such transfer the transferee furnishes to the


                                     A-2-5
<PAGE>

Trustee an Investment Letter;  provided that if based upon an Opinion of Counsel
to the effect  that (A) and (B) above are met  sufficient  to confirm  that such
transfer is being made pursuant to an exemption  from,  or in a transaction  not
subject  to,  the  registration  requirements  of the  Securities  Act and other
applicable laws.]

      [For Class B-1,  Class B-2 and Class B-3] [Each  beneficial  owner of this
Certificate  or any  interest  herein  shall be deemed to have  represented,  by
virtue of its  acquisition or holding of this  certificate  or interest  herein,
that  either (i) it is not an  employee  benefit  plan  subject to the  Employee
Retirement  Income  Security  Act of 1974,  as amended  or  section  4975 of the
Internal Revenue Code of 1986, as amended ("Plan"),  or investing with assets of
a Plan or (ii) it has acquired and is holding  such  certificate  in reliance on
Prohibited   Transaction   Exemption   90-30,  as  amended  from  time  to  time
("Exemption"),  and that it understands that there are certain conditions to the
availability of the Exemption,  including that the certificate must be rated, at
the time of purchase,  not lower than "BBB-" (or its  equivalent)  by Standard &
Poor's,  Fitch, Inc. or Moody's Investors Service,  Inc., and the certificate is
so rated or (iii) (1) it is an insurance  company,  (2) the source of funds used
to acquire or hold the certificate or interest therein is an "insurance  company
general  account",  as such term is  defined  in  Prohibited  Transaction  Class
Exemption  ("PTCE") 95-60,  and (3) the conditions in Sections I and III of PTCE
95-60 have been satisfied.]

      [For Class B-4,  Class B-5 and Class  B-6]  [This  Certificate  may not be
acquired directly or indirectly by, or on behalf of, an employee benefit plan or
other  retirement  arrangement  which  is  subject  to  Title I of the  Employee
Retirement  Income  Security  Act of 1974,  as amended,  or Section  4975 of the
Internal  Revenue Code of 1986, as amended,  unless the transferee  certifies or
represents  that the  proposed  transfer  and holding of a  Certificate  and the
servicing,  management  and operation of the trust and its assets:  (i) will not
result in any prohibited transaction which is not covered under an individual or
class  prohibited  transaction  exemption,   including,   but  not  limited  to,
Prohibited  Transaction  Exemption ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60
or PTE 96-23 and (ii) will not give rise to any  additional  obligations  on the
part of the Depositor, the Securities Administrator,  the Master Servicer or the
Trustee,  which  will  be  deemed  represented  by  an  owner  of  a  Book-Entry
Certificate or a Global  Certificate or unless the opinion  specified in section
5.07 of the Agreement is provided.]

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.


                                     A-2-6
<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  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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 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 with the Trustee upon
surrender of this  Certificate  for  registration  of transfer at the offices or
agencies  maintained  by the Trustee for such  purposes,  duly  endorsed  by, or
accompanied  by a 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 in authorized
denominations  representing a like aggregate  Fractional Undivided Interest will
be issued to the designated transferee.

      The  Certificates  are issuable  only as registered  Certificates  without
coupons in the Classes and denominations specified in the Agreement. As provided
in the  Agreement  and subject to certain  limitations  therein set forth,  this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional  Undivided Interest,  as requested by
the Holder surrendering the same.

      No  service  charge  will be made to the  Certificateholders  for any such
registration  of  transfer,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith.  The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes,  and none of the Depositor,  the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

      The  obligations  created  by the  Agreement  and the Trust  Fund  created
thereby (other than the obligations to make payments to Certificateholders  with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding
Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.


                                     A-2-7
<PAGE>

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.





                                     A-2-8
<PAGE>


      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated: __________, 20__                      U.S. BANK NATIONAL ASSOCIATION
                                             Not in its individual capacity
                                             but solely as Trustee


                                             By:
                                                -------------------------------
                                                   Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION

      This  is  one  of  the  Class  [B-_]  Certificates   referred  to  in  the
within-mentioned Agreement.

                                             U.S. BANK NATIONAL ASSOCIATION
                                             Authorized signatory of U.S. Bank
                                             National Association, not in its
                                             individual capacity but solely
                                             as Trustee

                                             By:
                                                -------------------------------
                                                   Authorized Signatory




                                     A-2-9
<PAGE>


                                   ASSIGNMENT

      FOR  VALUE  RECEIVED,  the  undersigned  hereby  sell(s),   assign(s)  and
transfer(s) unto  __________________________________  (Please print or typewrite
name and address  including postal zip code of assignee) a Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  Certificate and hereby
authorizes  the  transfer of  registration  of such  interest to assignee on the
Certificate Register of the Trust Fund.

      I (We) further direct the Certificate Registrar to issue a new Certificate
of a like  denomination  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



                            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.



                                     A-2-10
<PAGE>

                                                                     EXHIBIT A-3

                       FORM OF CLASS [__]- PO 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").

      THE CURRENT  PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL  PAYMENTS HEREON AND REALIZED LOSSES  ALLOCABLE  HERETO.  ACCORDINGLY,
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW.  ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY
OF THE TRUSTEE NAMED HEREIN.

      UNLESS THIS  CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF
THE  DEPOSITORY  TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED WILL BE 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 WILL BE 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.



                                     A-3-1
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           Fixed Pass-Through Rate

Class [_]- PO Senior

Date of Pooling and Servicing Agreement and                Aggregate Initial Current Principal Amount of this
Cut-off Date: July 1, 2004                                 Senior Certificate as of the Cut-off Date:
                                                           $[_____________]

First Distribution Date:                                   Initial Current Principal Amount of this Senior
August 25, 2004                                            Certificate as of the Cut-off Date: $[_____________]

Master Servicer:                                           CUSIP: [____________]
Wells Fargo Bank, National Association

Assumed Final Distribution Date:
August 25, 2034
</TABLE>

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to the Class [_]-PO  Certificates  with respect to a Trust Fund consisting
      primarily of a pool of fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee referred to below or any
of their  affiliates  or any other  person.  Neither  this  Certificate  nor the
underlying  Mortgage Loans are guaranteed or insured by any governmental  entity
or by Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II Inc., the Master  Servicer or any of their  affiliates
will have any obligation  with respect to any  certificate  or other  obligation
secured by or payable from payments on the Certificates.

      This certifies  that Cede & Co. is the registered  owner of the Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage Loans") sold
by Structured Asset Mortgage Investments II Inc. ("SAMI II"). The Mortgage


                                     A-3-2
<PAGE>

Loans were sold by EMC  Mortgage  Corporation  ("EMC") to SAMI II.  Wells  Fargo
Bank,  National  Association  ("Wells Fargo") will act as master servicer of the
Mortgage  Loans (the  "Master  Servicer",  which term  includes  any  successors
thereto  under the  Agreement  referred  to below).  The Trust Fund was  created
pursuant to the Pooling and  Servicing  Agreement  dated as of the Cut-off  Date
specified above (the "Agreement"), among EMC Mortgage Corporation, as seller and
company (the  "Seller"),  SAMI II, as depositor (the  "Depositor"),  Wells Fargo
Bank, National  Association as master servicer and securities  administrator (in
such  capacity,   the  "Securities   Administrator")   and  U.S.  Bank  National
Association,  as trustee (the "Trustee"),  a summary of certain of the pertinent
provisions of which is set forth  hereafter.  To the extent not defined  herein,
capitalized  terms used herein  shall have the  meaning  ascribed to them 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 its  acceptance  hereof assents and by which such
Holder is bound.

      The Trustee  will  distribute  on the 25th day of each month,  or, if such
25th day is not a Business Day, the immediately  following Business Day (each, a
"Distribution Date"), commencing on the First Distribution Date specified above,
to the  Person in whose  name this  Certificate  is  registered  at the close of
business on the last Business Day of the calendar  month  preceding the month of
such  Distribution  Date,  an  amount  equal to the  product  of the  Fractional
Undivided  Interest  evidenced  by this  Certificate  and the  amount  principal
required to be distributed to the Holders of  Certificates  of the same Class as
this Certificate.  The Assumed Final  Distribution Date is the Distribution Date
in the month  immediately  following the month of the latest scheduled  maturity
date of any Mortgage  Loan and is not likely to be the date on which the Current
Principal Amount of this Class of Certificates will be reduced to zero.

      Distributions  on this  Certificate  will be made by the  Trustee by check
mailed to the  address of the Person  entitled  thereto as such name and address
shall  appear on the  Certificate  Register  or, if such  Person so  requests by
notifying the Trustee in writing as specified in the Agreement by wire transfer.
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 and  designated  in such notice.  The
Initial Current  Principal  Amount of this  Certificate is set forth above.  The
Current  Principal  Amount hereof will be reduced to the extent of distributions
allocable to principal hereon and any Realized Losses allocable hereto.

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.


                                     A-3-3
<PAGE>

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

      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  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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 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 with the Trustee upon
surrender of this  Certificate  for  registration  of transfer at the offices or
agencies  maintained  by the Trustee for such  purposes,  duly  endorsed  by, or
accompanied  by a 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 in authorized
denominations  representing a like aggregate  Fractional Undivided Interest will
be issued to the designated transferee.

      The  Certificates  are issuable  only as registered  Certificates  without
coupons in the Classes and denominations specified in the Agreement. As provided
in the  Agreement  and subject to certain  limitations  therein set forth,  this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional  Undivided Interest,  as requested by
the Holder surrendering the same.

      No  service  charge  will be made to the  Certificateholders  for any such
registration  of  transfer,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith.  The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes,  and none of the Depositor,  the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

      The  obligations  created  by the  Agreement  and the Trust  Fund  created
thereby (other than the obligations to make payments to Certificateholders  with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding


                                     A-3-4
<PAGE>

Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of 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: __________, 20__                      U.S. BANK NATIONAL ASSOCIATION
                                             Not in its individual capacity
                                             but solely as Trustee


                                             By:
                                                -------------------------------
                                                   Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION

      This  is  one  of  the  Class  [_]-PO  Certificates  referred  to  in  the
within-mentioned Agreement.

                                             U.S. BANK NATIONAL ASSOCIATION
                                             Authorized signatory of U.S. Bank
                                             National Association, not in its
                                             individual capacity but solely
                                             as Trustee

                                             By:
                                                -------------------------------
                                                   Authorized Signatory



                                     A-3-6
<PAGE>


                                   ASSIGNMENT

      FOR  VALUE  RECEIVED,  the  undersigned  hereby  sell(s),   assign(s)  and
transfer(s) unto  __________________________________  (Please print or typewrite
name and address  including postal zip code of assignee) a Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  Certificate and hereby
authorizes  the  transfer of  registration  of such  interest to assignee on the
Certificate Register of the Trust Fund.

      I (We) further direct the Certificate Registrar to issue a new Certificate
of a like  denomination  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



                            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.


                                     A-3-7
<PAGE>

                                                                     EXHIBIT A-4

                        FORM OF CLASS II-X-1 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 TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED WILL BE 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 WILL BE 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.



                                     A-4-1
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           [Fixed] Pass-Through Rate

Class I-X-1 Senior

Date of Pooling and Servicing Agreement and                Aggregate Initial Notional Amount of this Senior
Cut-off Date:  July 1, 2004                                Certificate as of the Cut-off Date:
                                                           $[_____________]

First Distribution Date:                                   Initial  Notional  Amount of this Senior  Certificate as
August 25, 2004                                            of the Cut-off Date: $[__________]

Master Servicer:
Wells Fargo Bank, National Association                     CUSIP: [____________]

Final Scheduled Distribution Date:
August 25, 2034
</TABLE>

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to the Class II-X-1  Certificates  with respect to a Trust Fund consisting
      primarily of a pool of fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee referred to below or any
of their  affiliates  or any other  person.  Neither  this  Certificate  nor the
underlying  Mortgage Loans are guaranteed or insured by any governmental  entity
or by Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II Inc., the Master  Servicer or any of their  affiliates
will have any obligation  with respect to any  certificate  or other  obligation
secured by or payable from payments on the Certificates.

      This certifies  that Cede & Co. is the registered  owner of the Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage Loans") sold
by Structured Asset Mortgage Investments II Inc. ("SAMI II"). The Mortgage


                                     A-4-2
<PAGE>

Loans were sold by EMC  Mortgage  Corporation  ("EMC") to SAMI II.  Wells  Fargo
Bank,  National  Association  ("Wells Fargo") will act as master servicer of the
Mortgage  Loans (the  "Master  Servicer",  which term  includes  any  successors
thereto  under the  Agreement  referred  to below).  The Trust Fund was  created
pursuant to the Pooling and  Servicing  Agreement  dated as of the Cut-off  Date
specified   above  (the   "Agreement"),   among  SAMI  II,  as  depositor   (the
"Depositor"),  Wells Fargo Bank,  National  Association  as Master  Servicer and
securities administrator (in such capacity, the "Securities Administrator"), EMC
Mortgage Corporation, as seller and company, and U.S. Bank National Association,
as trustee (the "Trustee") , a summary of certain of the pertinent provisions of
which is set forth  hereafter.  To the extent not  defined  herein,  capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

      Interest on this  Certificate  will  accrue  during the month prior to the
month in  which a  Distribution  Date (as  hereinafter  defined)  occurs  on the
Notional  Amount hereof at a per annum rate equal to the  Pass-Through  Rate set
forth  above  and as  further  described  in the  Agreement.  The  Trustee  will
distribute on the 25th day of each month, or, if such 25th day is not a Business
Day, the  immediately  following  Business Day (each,  a  "Distribution  Date"),
commencing on the First  Distribution  Date  specified  above,  to the Person in
whose name this  Certificate  is registered at the close of business on the last
Business  Day of the calendar  month  preceding  the month of such  Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  Interest
evidenced by this  Certificate and the amount (of interest,  if any) required to
be  distributed  to the  Holders  of  Certificates  of the  same  Class  as this
Certificate.

      Distributions  on this  Certificate  will be made by the  Trustee by check
mailed to the  address of the Person  entitled  thereto as such name and address
shall  appear on the  Certificate  Register  or, if such  Person so  requests by
notifying the Trustee in writing as specified in the Agreement by wire transfer.
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 and  designated  in such notice.  The
Notional Amount of this Certificate is set forth above.

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.


                                     A-4-3
<PAGE>

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

      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  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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 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 with the Trustee upon
surrender of this  Certificate  for  registration  of transfer at the offices or
agencies  maintained  by the Trustee for such  purposes,  duly  endorsed  by, or
accompanied  by a 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 in authorized
denominations  representing a like aggregate  Fractional Undivided Interest will
be issued to the designated transferee.

      The  Certificates  are issuable  only as registered  Certificates  without
coupons in the Classes and denominations specified in the Agreement. As provided
in the  Agreement  and subject to certain  limitations  therein set forth,  this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional  Undivided Interest,  as requested by
the Holder surrendering the same.

      No  service  charge  will be made to the  Certificateholders  for any such
registration  of  transfer,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith.  The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes,  and none of the Depositor,  the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

      The  obligations  created  by the  Agreement  and the Trust  Fund  created
thereby (other than the obligations to make payments to Certificateholders  with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution Date on which the aggregate unpaid


                                     A-4-4
<PAGE>

principal  balance  of the  Mortgage  Loans is less than the  percentage  of the
aggregate  Outstanding  Principal  Balance  specified  in the  Agreement  of the
Mortgage  Loans at the Cut-off Date.  The exercise of such right will effect the
early retirement of the Certificates.  In no event, however, will the Trust Fund
created by the Agreement  continue  beyond the  expiration of 21 years after the
death of certain persons identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.




                                     A-4-5
<PAGE>


      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated: __________, 20__                      U.S. BANK NATIONAL ASSOCIATION
                                             Not in its individual capacity
                                             but solely as Trustee


                                             By:
                                                -------------------------------
                                                   Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION

      This  is  one  of  the  Class  II-X-1  Certificates  referred  to  in  the
within-mentioned Agreement.

                                             U.S. BANK NATIONAL ASSOCIATION
                                             Authorized signatory of U.S. Bank
                                             National Association, not in its
                                             individual capacity but solely
                                             as Trustee

                                             By:
                                                -------------------------------
                                                   Authorized Signatory



                                     A-4-6
<PAGE>

                                   ASSIGNMENT

      FOR  VALUE  RECEIVED,  the  undersigned  hereby  sell(s),   assign(s)  and
transfer(s) unto  __________________________________  (Please print or typewrite
name and address  including postal zip code of assignee) a Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  Certificate and hereby
authorizes  the  transfer of  registration  of such  interest to assignee on the
Certificate Register of the Trust Fund.

      I (We) further direct the Certificate Registrar to issue a new Certificate
of a like  denomination  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



                            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.



                                     A-4-7
<PAGE>

                                                                     EXHIBIT A-5

                         FORM OF CLASS R-[_] CERTIFICATE

      THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED  STATES
PERSON, A PUBLICLY TRADED PARTNERSHIP OR A DISQUALIFIED ORGANIZATION (AS DEFINED
BELOW).

      SOLELY  FOR U.S.  FEDERAL  INCOME  TAX  PURPOSES,  THIS  CERTIFICATE  IS A
"RESIDUAL  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  MAY NOT BE ACQUIRED  DIRECTLY OR  INDIRECTLY  BY, OR ON
BEHALF OF, AN EMPLOYEE  BENEFIT PLAN OR OTHER  RETIREMENT  ARRANGEMENT  WHICH IS
SUBJECT TO TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME  SECURITY ACT OF 1974, AS
AMENDED,  AND/OR SECTION 4975 OF THE INTERNAL  REVENUE CODE OF 1986, AS AMENDED,
UNLESS THE PROPOSED  TRANSFEREE  PROVIDES THE TRUSTEE WITH AN OPINION OF COUNSEL
ADDRESSED   TO  THE  TRUSTEE,   DEPOSITOR,   MASTER   SERVICER  AND   SECURITIES
ADMINISTRATOR  AND ON WHICH THEY MAY RELY THAT IS  SATISFACTORY  TO THE  TRUSTEE
THAT THE PURCHASE OF CERTIFICATES ON BEHALF OF SUCH PERSON WILL NOT RESULT IN OR
CONSTITUTE A NONEXEMPT PROHIBITED  TRANSACTION,  IS PERMISSIBLE UNDER APPLICABLE
LAW AND WILL  NOT GIVE  RISE TO ANY  ADDITIONAL  OBLIGATIONS  ON THE PART OF THE
DEPOSITOR, THE MASTER SERVICER, THE SECURITIES ADMINISTRATOR OR THE TRUSTEE.

      ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE
ONLY IF THE PROPOSED  TRANSFEREE OBTAINS THE PRIOR WRITTEN CONSENT OF STRUCTURED
ASSET MORTGAGE INVESTMENTS II INC. AND THE SECURITIES ADMINISTRATOR AND PROVIDES
A TRANSFER  AFFIDAVIT TO STRUCTURED  ASSET  MORTGAGE  INVESTMENTS  II INC.,  THE
SECURITIES ADMINISTRATOR AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE
UNITED  STATES,  ANY  STATE  OR  POLITICAL   SUBDIVISION  THEREOF,  ANY  FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION,  OR ANY AGENCY OR INSTRUMENTALITY OF
ANY OF THE FOREGOING,  (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE  DESCRIBED
IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF
THE CODE UNLESS SUCH  ORGANIZATION  IS SUBJECT TO THE TAX IMPOSED BY SECTION 511
OF THE CODE,  (C) ANY  ORGANIZATION  DESCRIBED IN SECTION  1381(A)(2)(C)  OF THE
CODE, (ANY SUCH PERSON DESCRIBED IN THE FOREGOING  CLAUSES (A), (B) OR (C) BEING
HEREIN  REFERRED  TO AS A  "DISQUALIFIED  ORGANIZATION")  OR (D) AN  AGENT  OF A
DISQUALIFIED ORGANIZATION, (2) NO PURPOSE OF SUCH


                                     A-5-1
<PAGE>

TRANSFER  IS TO  IMPEDE  THE  ASSESSMENT  OR  COLLECTION  OF TAX  AND  (3)  SUCH
TRANSFEREE  SATISFIES CERTAIN  ADDITIONAL  CONDITIONS  RELATING TO THE FINANCIAL
CONDITION OF THE PROPOSED  TRANSFEREE.  NOTWITHSTANDING  THE REGISTRATION IN THE
CERTIFICATE  REGISTER  OR 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
OF THIS CERTIFICATE  SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH.




                                     A-5-2
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           Pass-Through Rate: _____%

Class R-[_]

Date of Pooling and Servicing Agreement and                Aggregate Initial Current Principal Amount of this
Cut-off Date:  July 1, 2004                                Certificate as of the Cut-off Date:
                                                           $____________

First Distribution Date:                                   Initial Current Principal Amount of this Certificate as
August 25, 2004                                            of the Cut-off Date: $_________

Master Servicer:                                           CUSIP: [_____________]
Wells Fargo Bank, National Association

Assumed Final Distribution Date:
August 25, 2034
</TABLE>

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to the Class R-[_]  Certificates  with respect to a Trust Fund  consisting
      primarily of a pool of fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee referred to below or any
of their  affiliates  or any other  person.  Neither  this  Certificate  nor the
underlying  Mortgage Loans are guaranteed or insured by any governmental  entity
or by Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II Inc., the Master  Servicer or any of their  affiliates
will have any obligation  with respect to any  certificate  or other  obligation
secured by or payable from payments on the Certificates.

      This certifies that Bear, Stearns Securities Corp. is the registered owner
of  the  Fractional  Undivided  Interest  evidenced  hereby  in  the  beneficial
ownership  interest of Certificates  of the same Class as this  Certificate in a
trust (the "Trust  Fund")  primarily  consisting of fixed rate  mortgages  loans
secured  by  first  liens  on  one-  to  four-  family  residential   properties
(collectively,   the  "Mortgage   Loans")  sold  by  Structured  Asset  Mortgage
Investments  II Inc.  ("SAMI II").  The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to SAMI


                                     A-5-3
<PAGE>

II. Wells Fargo Bank,  National  Association  ("Wells Fargo") will act as master
servicer of the Mortgage Loans (the "Master  Servicer",  which term includes any
successors  thereto under the Agreement  referred to below).  The Trust Fund was
created pursuant to the Pooling and Servicing  Agreement dated as of the Cut-off
Date specified above (the "Agreement'), among EMC Mortgage Corporation as seller
and company (the "Seller"), SAMI II, as depositor(the "Depositor"),  Wells Fargo
Bank, National  Association as master servicer and securities  administrator (in
such  capacity,  the  "Securities   Administrator"),   and  U.S.  Bank  National
Association,  as trustee (the "Trustee"),  a summary of certain of the pertinent
provisions of which is set forth  hereafter.  To the extent not defined  herein,
capitalized  terms used herein  shall have the  meaning  ascribed to them 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 its  acceptance  hereof assents and by which such
Holder is bound.

      Interest on this  Certificate  will  accrue  during the month prior to the
month in  which a  Distribution  Date (as  hereinafter  defined)  occurs  on the
Current  Principal  Amount hereof at a per annum rate equal to the  Pass-Through
Rate set forth above and as further  described in the Agreement The Trustee will
distribute on the 25th day of each month, or, if such 25th day is not a Business
Day, the  immediately  following  Business Day (each,  a  "Distribution  Date"),
commencing on the First  Distribution  Date  specified  above,  to the Person in
whose name this  Certificate  is registered at the close of business on the last
Business  Day of the calendar  month  preceding  the month of such  Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  Interest
evidenced by this Certificate and the amount (of interest and principal, if any)
required to be distributed to the Holders of  Certificates  of the same Class as
this Certificate.  The Assumed Final  Distribution Date is the Distribution Date
in the month  immediately  following the month of the latest scheduled  maturity
date of any Mortgage  Loan and is not likely to be the date on which the Current
Principal Amount of this Class of Certificates will be reduced to zero.

      Distributions  on this  Certificate  will be made by the  Trustee by check
mailed to the  address of the Person  entitled  thereto as such name and address
shall  appear on the  Certificate  Register,  or if such  Person so  requests by
notifying the Trustee in writing as specified in the Agreement by wire transfer.
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 and  designated  in such notice.  The
Initial Current  Principal  Amount of this  Certificate is set forth above.  The
Current  Principal  Amount hereof will be reduced to the extent of distributions
allocable to principal hereon and any Realized Losses allocable hereto.

      Each Holder of this  Certificate will be deemed to have agreed to be bound
by the  restrictions  set forth in the  Agreement  to the  effect  that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
United  States  Person and a  Permitted  Transferee,  (ii) the  transfer  of any
Ownership  Interest in this Certificate will be conditioned upon the delivery to
SAMI II, the Trustee and the Securities Administrator of, among other things, an
affidavit  to the  effect  that  it is a  United  States  Person  and  Permitted
Transferee,  (iii) any attempted or purported transfer of any Ownership Interest
in this  Certificate in violation of such  restrictions  will be absolutely null
and void and will vest no rights in the  purported  transferee,  and (iv) if any
person other than a United States Person and a Permitted Transferee acquires any


                                     A-5-4
<PAGE>

Ownership Interest in this Certificate in violation of such  restrictions,  then
the Depositor will have the right,  in its sole discretion and without notice to
the Holder of this Certificate, to sell this Certificate to a purchaser selected
by the Depositor,  which purchaser may be the Depositor, or any affiliate of the
Depositor, on such terms and conditions as the Depositor may choose.

      This  certificate  may not be acquired  directly or  indirectly  by, or on
behalf of, an employee  benefit plan or other  retirement  arrangement  which is
subject to title I of the Employee  Retirement  Income  Security Act of 1974, as
amended,  and/or section 4975 of the Internal  Revenue Code of 1986, as amended,
unless the proposed  transferee  provides the Trustee with an opinion of counsel
addressed to the Trustee,  Master Servicer and the Securities  Administrator and
on which they may rely (which shall not be at the expense of the Trustee, Master
Servicer or the  Securities  Administrator)  which is acceptable to the Trustee,
that the  purchase  of this  Certificate  will not  result  in or  constitute  a
nonexempt prohibited  transaction,  is permissible under applicable law and will
not  give  rise  to any  additional  fiduciary  obligations  on the  part of the
Depositor, the Master Servicer or the Trustee.

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

      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  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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 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 with the Trustee upon
surrender of this  Certificate  for  registration  of transfer at the offices or
agencies  maintained  by the Trustee for such  purposes,  duly  endorsed  by, or
accompanied  by a 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,


                                     A-5-5
<PAGE>

and  thereupon  one  or  more  new  Certificates  in  authorized   denominations
representing a like aggregate  Fractional  Undivided  Interest will be issued to
the designated transferee.

      The  Certificates  are issuable  only as registered  Certificates  without
coupons in the Classes and denominations specified in the Agreement. As provided
in the  Agreement  and subject to certain  limitations  therein set forth,  this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional  Undivided Interest,  as requested by
the Holder surrendering the same.

      No  service  charge  will be made to the  Certificateholders  for any such
registration  of  transfer,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith.  The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes,  and none of the Depositor,  the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

      The  obligations  created  by the  Agreement  and the Trust  Fund  created
thereby (other than the obligations to make payments to Certificateholders  with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding
Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.



                                     A-5-6
<PAGE>


      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated: __________, 20__                      U.S. BANK NATIONAL ASSOCIATION
                                             Not in its individual capacity
                                             but solely as Trustee


                                             By:
                                                -------------------------------
                                                   Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION

      This  is  one  of  the  Class  R-[_]  Certificates   referred  to  in  the
within-mentioned Agreement.

                                             U.S. BANK NATIONAL ASSOCIATION
                                             Authorized signatory of U.S. Bank
                                             National Association, not in its
                                             individual capacity but solely
                                             as Trustee

                                             By:
                                                -------------------------------
                                                   Authorized Signatory



                                     A-5-7
<PAGE>


                                   ASSIGNMENT

      FOR  VALUE  RECEIVED,  the  undersigned  hereby  sell(s),   assign(s)  and
transfer(s) unto  __________________________________  (Please print or typewrite
name and address  including postal zip code of assignee) a Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  Certificate and hereby
authorizes  the  transfer of  registration  of such  interest to assignee on the
Certificate Register of the Trust Fund.

      I (We) further direct the Certificate Registrar to issue a new Certificate
of a like  denomination  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



                            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.


                                     A-5-8
<PAGE>

                                                                       EXHIBIT B

                             MORTGAGE LOAN SCHEDULE

      The  Preliminary  and Final  Mortgage Loan  Schedules  shall set forth the
following information with respect to each Mortgage Loan:

(a)   the loan number;

(b)   the Mortgagor's name;

(c)   the street address (including city, state and zip code) of the Mortgaged
      Property;

(d)   the property type;

(e)   the Mortgage Rate;

(f)   the Servicer;

(g)   the Servicing Rate;

(h)   the Net Rate;

(i)   the original term;

(j)   the maturity date;

(k)   the stated remaining term to maturity;

(l)   the original principal balance;

(m)   the first payment date;

(n)   the principal and interest payment in effect as of the Cut-off Date;

(o)   the unpaid principal balance as of the Cut-off Date;

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

(q)   paid-through date;

(r)   the insurer of any Primary Mortgage Insurance Policy;

(s)   the Gross Margin, if applicable;

(t)   the Maximum Lifetime Mortgage Rate, if applicable;

(u)   the Minimum Lifetime Mortgage Rate, if applicable;


                                       B-1
<PAGE>

(v)   the Periodic Rate Cap, if applicable;

(w)   the number of days delinquent, if any;

(x)   which Mortgage Loans adjust after an initial fixed-rate period of three,
      five, seven or ten years;

(y)   The Loan Group; and

(z)   The Prepayment Charge Loans.

Such  schedule  also shall set forth for all of the  Mortgage  Loans,  the total
number of Mortgage Loans,  the total of each of the amounts  described under (k)
and (n) above, the weighted average by principal  balance as of the Cut-off Date
of each of the rates  described  under (e), (f) and (g) above,  and the weighted
average remaining term to maturity by unpaid principal balance as of the Cut-off
Date.



                                       B-2
<PAGE>

                                                                       EXHIBIT C

                                   [RESERVED]





                                       C-1
<PAGE>


                                                                       EXHIBIT D

                        REQUEST FOR RELEASE OF DOCUMENTS

To:   U.S. Bank National Association
      One Federal Street, 3rd Floor
      Boston, Massachusetts 02110

RE:   Pooling and Servicing Agreement dated as of
      July 1, 2004, among SAMI II,
      Wells Fargo Bank,
      National Association, as Master Servicer
       and Securities Administrator,
      EMC Mortgage Corporation, as Seller
      and company and U.S. Bank National Association, as Trustee

      In connection  with the  administration  of the Mortgage Loans held by you
pursuant to the above-captioned  Pooling and Servicing Agreement, we request the
release,  and hereby acknowledge  receipt, of the Mortgage File for the Mortgage
Loan described below, for the reason indicated.

Mortgage Loan Number:

Mortgagor Name, Address & Zip Code:

Reason for Requesting Documents (check one):

_____       1.    Mortgage Paid in Full and proceeds have been deposited into
                  the Custodial Account

_____       2.    Foreclosure

_____       3.    Substitution

_____       4.    Other Liquidation

_____       5.    Nonliquidation                  Reason:_______________________

_____       6.    California Mortgage Loan paid in full


                                             By:________________________________
                                                      (authorized signer)

                                             Issuer:____________________________
                                             Address:___________________________
                                             Date:______________________________



                                      D-1
<PAGE>


                                                                       EXHIBIT E

                                FORM OF AFFIDAVIT

                                              Affidavit   pursuant   to  Section
                                              860E(e)(4) of the Internal Revenue
                                              Code of  1986, as amended, and for
                                              other purposes

STATE OF              )
                      ) ss:
COUNTY OF             )

      [NAME OF OFFICER], being first duly sworn, deposes and says:

      1. That he is [Title of Officer] of [Name of Investor] (the "Investor"), a
[savings  institution]  [corporation] duly organized and existing under the laws
of [the  State of ] [the  United  States],  on  behalf  of  which he makes  this
affidavit.

      2. That (i) the Investor is not a "disqualified  organization"  as defined
in Section  860E(e)(5)  of the Internal  Revenue  Code of 1986,  as amended (the
"Code"), and will not be a disqualified  organization as of [Closing Date] [date
of purchase]; (ii) it is not acquiring the Structured Asset Mortgage Investments
II Inc., Prime Mortgage Trust, Mortgage Pass-Through Certificates, Series 2004-1
Class R-I, Class R-II, and R-III Certificates (the "Residual  Certificates") for
the account of a disqualified  organization;  (iii) it consents to any amendment
of the  Pooling  and  Servicing  Agreement  that  shall be deemed  necessary  by
Structured  Asset  Mortgage  Investments  II Inc.  (upon  advice of  counsel) to
constitute a  reasonable  arrangement  to ensure that the Residual  Certificates
will not be owned  directly or indirectly by a  disqualified  organization;  and
(iv) it will not transfer such Residual  Certificates unless (a) it has received
from  the  transferee  an  affidavit  in  substantially  the  same  form as this
affidavit  containing these same four  representations and (b) as of the time of
the transfer, it does not have actual knowledge that such affidavit is false.

      3. That the Investor is one of the following: (i) a citizen or resident of
the United  States,  (ii) a  corporation  or  partnership  (including  an entity
treated as a corporation or partnership for federal income tax purposes) created
or organized in, or under the laws of, the United States or any state thereof or
the District of Columbia  (except,  in the case of a partnership,  to the extent
provided in  regulations),  provided that 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 United States  Persons,  (iii) an
estate whose income is subject to United States federal income tax regardless of
its source,  or (iv) a trust other than a "foreign trust," as defined in Section
7701 (a)(31) of the Code.

      4. That the Investor's taxpayer identification number is ________________.


                                       E-1
<PAGE>

      5. That no purpose of the  acquisition of the Residual  Certificates is to
avoid or impede the assessment or collection of tax.

      6. That the  Investor  understands  that,  as the  holder of the  Residual
Certificates, the Investor may incur tax liabilities in excess of any cash flows
generated by such Residual Certificates.

      7. That the  Investor  intends to pay taxes  associated  with  holding the
Residual Certificates as they become due.

      IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to authority of its Board of Directors, by its [Title of
Officer] this ____ day of _________, 20__.

                                            [NAME OF INVESTOR]


                                            By:
                                               -------------------------------
                                               [Name of Officer]
                                               [Title of Officer]
                                               [Address of Investor for receipt
                                               of distributions]

                                               Address of Investor for receipt
                                               of tax information:



                                       E-2
<PAGE>


      Personally appeared before me the above-named [Name of Officer],  known or
proved to me to be the same person who executed the foregoing  instrument and to
be the  [Title of  Officer]  of the  Investor,  and  acknowledged  to me that he
executed  the  same as his  free  act and  deed and the free act and deed of the
Investor.

      Subscribed and sworn before me this ___ day of _________, 20___.

NOTARY PUBLIC

COUNTY OF

STATE OF

My commission expires the ___ day of ___________________, 20___.




                                       E-3
<PAGE>


                                                                     EXHIBIT F-1

                            FORM OF INVESTMENT LETTER

                                                                          [Date]
[SELLER]

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, Massachusetts 02110

Structured Asset Mortgage Investments II Inc.
383 Madison Avenue
New York, New York 10179

      Re:   Structured Asset Mortgage Investments II Inc., Prime Mortgage Trust,
            Series 2004-1 Mortgage Pass-Through Certificates (the
            "Certificates"), including the Class B-4, Class B-5 and Class B-6
            Certificates (the "Privately Offered Certificates")

Dear Ladies and Gentlemen:

      In  connection  with our purchase of Privately  Offered  Certificates,  we
confirm that:

            (i)   we understand that the Privately Offered  Certificates are not
                  being  registered under the Securities Act of 1933, as amended
                  (the "Act") or any applicable  state  securities or "Blue Sky"
                  laws, and are being sold to us in a transaction that is exempt
                  from the registration requirements of such laws;

            (ii)  any  information  we  desired   concerning  the  Certificates,
                  including the  Privately  Offered  Certificates,  the trust in
                  which  the  Certificates   represent  the  entire   beneficial
                  ownership interest (the "Trust") or any other matter we deemed
                  relevant  to  our  decision  to  purchase   Privately  Offered
                  Certificates has been made available to us;

            (iii) we are  able to  bear  the  economic  risk  of  investment  in
                  Privately  Offered  Certificates;   we  are  an  institutional
                  "accredited   investor"  as  defined  in  Section   501(a)  of
                  Regulation  D  promulgated  under the Act and a  sophisticated
                  institutional investor;

            (iv)  we are acquiring  Privately  Offered  Certificates for our own
                  account,  not as nominee for any other person,  and not with a
                  present view to any  distribution or other  disposition of the
                  Privately Offered Certificates;

            (v)   we  agree  the  Privately  Offered  Certificates  must be held
                  indefinitely by us (and may not be sold, pledged, hypothecated
                  or in any way disposed of)


                                     F-1-1
<PAGE>

                  unless   subsequently   registered   under  the  Act  and  any
                  applicable state securities or "Blue Sky" laws or an exemption
                  from  the  registration   requirements  of  the  Act  and  any
                  applicable state securities or "Blue Sky" laws is available;

            (vi)  we agree that in the event that at some future time we wish to
                  dispose  of  or  exchange   any  of  the   Privately   Offered
                  Certificates (such disposition or exchange not being currently
                  foreseen or  contemplated),  we will not  transfer or exchange
                  any of the Privately Offered Certificates unless:

                        (A) (1) the sale is to an Eligible Purchaser (as defined
                  below), (2) if required by the Pooling and Servicing Agreement
                  (as defined below) a letter to  substantially  the same effect
                  as either  this  letter  or, if the  Eligible  Purchaser  is a
                  Qualified  Institutional  Buyer as defined  under Rule 144A of
                  the Act, the Rule 144A and Related Matters  Certificate in the
                  form  attached  to the  Pooling and  Servicing  Agreement  (as
                  defined  below)  (or  such  other   documentation  as  may  be
                  acceptable  to  the  Trustee)  is  executed  promptly  by  the
                  purchaser and delivered to the  addressees  hereof and (3) all
                  offers or solicitations  in connection with the sale,  whether
                  directly  or  through  any  agent  acting on our  behalf,  are
                  limited only to Eligible  Purchasers and are not made by means
                  of any form of general  solicitation  or  general  advertising
                  whatsoever; and

                        (B)  if  the  Privately   Offered   Certificate  is  not
                  registered  under the Act (as to which we acknowledge you have
                  no obligation), the Privately Offered Certificate is sold in a
                  transaction that does not require  registration  under the Act
                  and any applicable state securities or "blue sky" laws and, if
                  U.S. Bank National  Association (the "Trustee") so requests, a
                  satisfactory  Opinion of Counsel is  furnished to such effect,
                  which Opinion of Counsel shall be an expense of the transferor
                  or the transferee;

            (vii) we  agree to be bound  by all of the  terms  (including  those
                  relating  to  restrictions  on  transfer)  of the  Pooling and
                  Servicing,  pursuant  to which the Trust was  formed;  we have
                  reviewed carefully and understand the terms of the Pooling and
                  Servicing Agreement;

            (viii)we  either:  (i)  are  not  acquiring  the  Privately  Offered
                  Certificate  directly  or  indirectly  by, or on behalf of, an
                  employee benefit plan or other retirement arrangement which is
                  subject to Title I of the Employee  Retirement Income Security
                  Act of 1974,  as  amended,  or  section  4975 of the  Internal
                  Revenue  Code of 1986,  as  amended,  or (ii) are  providing a
                  representation  to the effect that the  proposed  transfer and
                  holding of a Privately Offered  Certificate and the servicing,
                  management and operation of the Trust and its assets: (I) will
                  not result in any prohibited  transaction which is not covered
                  under an individual or class prohibited transaction exemption,
                  including,   but  not  limited  to,   Prohibited   Transaction
                  Exemption  ("PTE") 84-14,  PTE 91-38,  PTE 90-1, PTE 95-60, or
                  PTE 96-23 and (II) will not


                                     F-1-2
<PAGE>

                  give  rise to any  additional  obligations  on the part of the
                  Depositor,  the Master Servicer, the Securities  Administrator
                  or the  Trustee or (iii)  have  attached  hereto  the  opinion
                  specified in Section 5.07 of the Agreement.

            (ix)  We understand that each of the Privately Offered  Certificates
                  bears, and will continue to bear, a legend to substantiate the
                  following effect:  "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT
                  BE  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
                  (THE  "SECURITIES  ACT"), OR UNDER ANY STATE  SECURITIES LAWS.
                  THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT
                  THIS  CERTIFICATE  MAY  BE  REOFFERED,   RESOLD,   PLEDGED  OR
                  OTHERWISE  TRANSFERRED  ONLY IN COMPLIANCE WITH THE SECURITIES
                  ACT AND OTHER  APPLICABLE  LAWS AND ONLY (1)  PURSUANT TO RULE
                  144A UNDER THE  SECURITIES  ACT ("RULE 144A") TO A PERSON THAT
                  THE HOLDER  REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL
                  BUYER  WITHIN THE  MEANING OF RULE 144A (A "QIB"),  PURCHASING
                  FOR ITS OWN ACCOUNT OR A QIB  PURCHASING  FOR THE ACCOUNT OF A
                  QIB,  WHOM THE HOLDER  HAS  INFORMED,  IN EACH CASE,  THAT THE
                  REOFFER,  RESALE,  PLEDGE OR OTHER  TRANSFER  IS BEING MADE IN
                  RELIANCE  ON RULE 144A,  (2)  PURSUANT  TO AN  EXEMPTION  FROM
                  REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
                  AVAILABLE) OR (3) IN  CERTIFICATED  FORM TO AN  "INSTITUTIONAL
                  ACCREDITED  INVESTOR"  WITHIN  THE  MEANING  THEREOF  IN  RULE
                  501(a)(1),  (2),  (3) or (7) OF  REGULATION D UNDER THE ACT OR
                  ANY ENTITY IN WHICH ALL OF THE EQUITY  OWNERS COME WITHIN SUCH
                  PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF THE
                  SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
                  LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
                  (B)  THE  RECEIPT  BY  THE  TRUSTEE  OF  SUCH  OTHER  EVIDENCE
                  ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR
                  TRANSFER IS IN COMPLIANCE  WITH THE  SECURITIES  ACT AND OTHER
                  APPLICABLE  LAWS  OR IN  EACH  CASE  IN  ACCORDANCE  WITH  ALL
                  APPLICABLE  SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER
                  APPLICABLE JURISDICTION.  THIS CERTIFICATE MAY NOT BE ACQUIRED
                  DIRECTLY  OR  INDIRECTLY  BY,  OR ON BEHALF  OF,  AN  EMPLOYEE
                  BENEFIT PLAN OR OTHER RETIREMENT  ARRANGEMENT WHICH IS SUBJECT
                  TO TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME SECURITY ACT OF
                  1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
                  OF 1986, AS AMENDED,  UNLESS THE PROPOSED TRANSFER AND HOLDING
                  OF A CERTIFICATE  AND THE SERVICING,  MANAGEMENT AND OPERATION
                  OF THE  TRUST


                                     F-1-3
<PAGE>

                  AND  ITS  ASSETS:  (1)  WILL  NOT  RESULT  IN  ANY  PROHIBITED
                  TRANSACTION  WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS
                  PROHIBITED TRANSACTION EXEMPTION,  INCLUDING,  BUT NOT LIMITED
                  TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38,
                  PTE  90-1,  PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE
                  TO ANY  ADDITIONAL  OBLIGATIONS  ON THE PART OF THE DEPOSITOR,
                  THE  MASTER  SERVICER,  THE  SECURITIES  ADMINISTRATOR  OR THE
                  TRUSTEE,  WHICH  WILL BE DEEMED  REPRESENTED  BY AN OWNER OF A
                  BOOK-ENTRY  CERTIFICATE OR A GLOBAL  CERTIFICATE OR UNLESS THE
                  OPINION   PROVIDED  IN  SECTION  5.07  OF  THE   AGREEMENT  IS
                  PROVIDED."

      "Eligible  Purchaser"  means a  corporation,  partnership  or other entity
which  we have  reasonable  grounds  to  believe  and do  believe  (i) can  make
representations  with respect to itself to substantially  the same effect as the
representations  set forth herein, and (ii) is either a Qualified  Institutional
Buyer as  defined  under  Rule 144A of the Act or an  institutional  "Accredited
Investor" as defined under Rule 501 of the Act.

      Terms not  otherwise  defined  herein shall have the meanings  assigned to
them in the Pooling and  Servicing  Agreement,  dated as of July 1, 2004,  among
Structured  Asset  Mortgage  Investments  II Inc.,  Wells Fargo  Bank,  National
Association  as master  servicer  and  securities  administrator,  EMC  Mortgage
Corporation,  as seller and  company  and U.S.  Bank  National  Association,  as
Trustee (the "Pooling and Servicing Agreement').

      If the Purchaser  proposes that its Certificates be registered in the name
of a nominee on its behalf, the Purchaser has identified such nominee below, and
has caused such  nominee to complete  the Nominee  Acknowledgment  at the end of
this letter.

Name of Nominee (if any):________________________



                                     F-1-4
<PAGE>


      IN WITNESS WHEREOF, this document has been executed by the undersigned who
is duly authorized to do so on behalf of the undersigned  Eligible  Purchaser on
the ___ day of ________, 20___.

                                        Very truly yours,

                                        [PURCHASER]

                                        By:
                                             -----------------------------------
                                                   (Authorized Officer)

                                        [By:
                                            ------------------------------------
                                                    Attorney-in-fact]




                                     F-1-5
<PAGE>


                             Nominee Acknowledgment

      The undersigned hereby acknowledges and agrees that as to the Certificates
being  registered in its name, the sole beneficial owner thereof is and shall be
the Purchaser identified above, for whom the undersigned is acting as nominee.

                                        [NAME OF NOMINEE]

                                        By:
                                             -----------------------------------
                                                   (Authorized Officer)

                                        [By:
                                            ------------------------------------
                                                    Attorney-in-fact]



                                     F-1-6
<PAGE>

                                                                       EXHIBIT G

                           FORM OF CUSTODIAL AGREEMENT


                               CUSTODIAL AGREEMENT

      THIS CUSTODIAL  AGREEMENT (as amended and supplemented  from time to time,
the  "Agreement'),  dated as of July 30, 2004,  by and among U.S.  BANK NATIONAL
ASSOCIATION,  not  individually  but solely as  trustee  under the  Pooling  and
Servicing  Agreement  defined below  (including its successors under the Pooling
and Servicing Agreement defined below, the "Trustee"), STRUCTURED ASSET MORTGAGE
INVESTMENTS II INC., as depositor (together with any successor in interest,  the
"Depositor"),  WELLS FARGO BANK,  NATIONAL  ASSOCIATION,  as master servicer and
securities  administrator  (together with any successor in interest or successor
under the  Pooling  and  Servicing  Agreement  referred  to below,  the  "Master
Servicer") and WELLS FARGO BANK,  NATIONAL  ASSOCIATION,  as custodian (together
with any  successor  in  interest  or any  successor  appointed  hereunder,  the
"Custodian").

                                WITNESSETH THAT:

      WHEREAS, the Depositor,  the Master Servicer, the Trustee and EMC Mortgage
Corporation (the "Seller") have entered into a Pooling and Servicing  Agreement,
dated as of July 1, 2004,  relating  to the  issuance  of Prime  Mortgage  Trust
2004-1, Mortgage Pass-Through  Certificates,  Series 2004-1 (as in effect on the
date of this agreement,  the "Original Pooling and Servicing  Agreement," and as
amended  and  supplemented  from  time  to  time,  the  "Pooling  and  Servicing
Agreement'); and

      WHEREAS,  the Custodian has agreed to act as agent for the Trustee for the
purposes  of  receiving  and holding  certain  documents  and other  instruments
delivered  by the  Depositor  or the  Master  Servicer  under  the  Pooling  and
Servicing   Agreement  and  the  Servicers  under  their  respective   Servicing
Agreements,  all upon the terms and  conditions  and subject to the  limitations
hereinafter set forth;

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
and agreements  hereinafter set forth,  the Trustee,  the Depositor,  the Master
Servicer and the Custodian hereby agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      Capitalized terms used in this Agreement and not defined herein shall have
the meanings  assigned in the Original Pooling and Servicing  Agreement,  unless
otherwise required by the context herein.


                                      G-1
<PAGE>

                                   ARTICLE II.
                          CUSTODY OF MORTGAGE DOCUMENTS

      Section 2.1 Custodian to Act as Agent:  Acceptance of Mortgage Files.  The
Custodian,  as the duly  appointed  custodial  agent of the  Trustee  for  these
purposes,   acknowledges  (subject  to  any  exceptions  noted  in  the  Initial
Certification  referred to in Section  2.3(a)),  receipt of the  Mortgage  Files
relating to the Mortgage Loans  identified on the schedule  attached hereto (the
"Mortgage  Files") and declares that it holds and will hold such Mortgage  Files
as agent for the Trustee,  in trust,  for the use and benefit of all present and
future Certificateholders and MBIA Insurance Corporation.

      Section 2.2 Recordation of Assignments.  If any Mortgage File includes one
or more  assignments of Mortgage to the Trustee in a state which is specifically
excluded from the Opinion of Counsel  delivered by the Seller to the Trustee and
the  Custodian  pursuant to the  provisions  of Section  2.01 of the Pooling and
Servicing Agreement, each such assignment shall be delivered by the Custodian to
the Depositor for the purpose of recording it in the  appropriate  public office
for real property  records,  and the Depositor,  at no expense to the Custodian,
shall  promptly cause to be recorded in the  appropriate  public office for real
property records each such assignment of Mortgage and, upon receipt thereof from
such  public  office,  shall  return  each such  assignment  of  Mortgage to the
Custodian.

      Section 2.3 Review of Mortgage Files.

      (a) On or prior to the Closing Date,  in  accordance  with Section 2.02 of
the Pooling and Servicing Agreement,  the Custodian shall deliver to the Trustee
an Initial  Certification  in the form annexed  hereto as Exhibit One evidencing
receipt (subject to any exceptions noted therein) of a Mortgage File for each of
the Mortgage  Loans listed on the Schedule  attached  hereto (the "Mortgage Loan
Schedule").

      (b) Within 90 days of the Closing  Date,  the  Custodian  agrees,  for the
benefit of  Certificateholders  and Radian Asset Assurance  Inc., to review,  in
accordance  with the  provisions  of Section  2.02 of the Pooling and  Servicing
Agreement,  each such  document,  and shall  deliver  to the  Depositor  and the
Trustee an Interim  Certification  in the form annexed  hereto as Exhibit Two to
the effect that all such documents have been executed and received and that such
documents relate to the Mortgage Loans identified on the Mortgage Loan Schedule,
except  for any  exceptions  listed  on  Schedule  A  attached  to such  Interim
Certification.  The  Custodian  shall be under no duty or obligation to inspect,
review or examine said documents,  instruments,  certificates or other papers to
determine  that  the same  are  genuine,  enforceable,  or  appropriate  for the
represented  purpose or that they have  actually  been recorded or that they are
other than what they purport to be on their face.

      (c) Not later than 180 days after the Closing Date,  the  Custodian  shall
review the  Mortgage  Files as  provided  in  Section  2.02 of the  Pooling  and
Servicing  Agreement  and  deliver  to the  Depositor  and the  Trustee  a Final
Certification  in the form  annexed  hereto  as  Exhibit  Three  evidencing  the
completeness of the Mortgage Files.


                                      G-2
<PAGE>

      (d) In reviewing the Mortgage Files as provided  herein and in the Pooling
and Servicing  Agreement,  the Custodian shall make no  representation as to and
shall not be responsible to verify (i) the validity,  legality,  enforceability,
due  authorization,  recordability,  sufficiency  or  genuineness  of any of the
documents   included  in  any   Mortgage   File  or  (ii)  the   collectibility,
insurability,  effectiveness  or  suitability  of any of  the  documents  in any
Mortgage File.

      Upon receipt of written  request from the Trustee,  the Custodian shall as
soon as  practicable  supply  the  Trustee  with a list of all of the  documents
relating to the Mortgage Loans missing from the Mortgage Files.

      Section 2.4  Notification of Breaches of  Representations  and Warranties.
Upon  discovery by the Custodian of a breach of any  representation  or warranty
made by the Depositor as set forth in the Pooling and Servicing  Agreement  with
respect to a Mortgage Loan relating to a Mortgage File, the Custodian shall give
prompt written notice to the Depositor, the related Servicer and the Trustee.

      Section  2.5  Custodian  to  Cooperate:  Release of Mortgage  Files.  Upon
receipt of written  notice from the Trustee  that the Seller has  repurchased  a
Mortgage Loan pursuant to Article II of the Pooling and Servicing Agreement, and
that the purchase  price  therefore  has been  deposited in the Master  Servicer
Collection  Account or the  Distribution  Account,  then the Custodian agrees to
promptly release to the Seller the related Mortgage File.

      Upon the  Custodian's  receipt of a request for  release (a  "Request  for
Release")  substantially  in the form of Exhibit D to the Pooling and  Servicing
Agreement signed by a Servicing  Officer of the related Servicer stating that it
has received  payment in full of a Mortgage Loan or that payment in full will be
escrowed in a manner customary for such purposes,  the Custodian agrees promptly
to release to the related  Servicer the related  Mortgage  File.  The  Depositor
shall deliver to the  Custodian and the Custodian  agrees to accept the Mortgage
Note and other  documents  constituting  the  Mortgage  File with respect to any
Substitute Mortgage Loan.

      From time to time as is  appropriate  for the servicing or  foreclosure of
any Mortgage Loan,  including,  for this purpose,  collection  under any Primary
Insurance Policy,  the related Servicer (or if the Servicer does not, the Master
Servicer)  shall  deliver to the  Custodian a Request  for  Release  signed by a
Servicing  Officer  requesting  that  possession  of all of the Mortgage File be
released  to the  related  Servicer  and  certifying  as to the  reason for such
release  and that  such  release  will not  invalidate  any  insurance  coverage
provided in respect of the Mortgage  Loan under any of the  Insurance  Policies.
Upon receipt of the foregoing,  the Custodian shall deliver the Mortgage File to
the related Servicer. The related Servicer shall cause each Mortgage File or any
document  therein so  released to be  returned  to the  Custodian  when the need
therefore by the related Servicer no longer exists, unless (i) the Mortgage Loan
has been liquidated and the Liquidation  Proceeds  relating to the Mortgage Loan
have  been  deposited  in  the  Master  Servicer   Collection   Account  or  the
Distribution  Account  or (ii)  the  Mortgage  File or such  document  has  been
delivered to an  attorney,  or to a public  trustee or other public  official as
required by law, for purposes of  initiating  or pursuing  legal action or other
proceedings for the foreclosure of the Mortgaged  Property either  judicially or
non-judicially, and the related Servicer


                                      G-3
<PAGE>

has delivered to the Custodian a certificate of a Servicing  Officer  certifying
as to the name and  address of the Person to which  such  Mortgage  File or such
document was delivered and the purpose or purposes of such delivery.

      At any time that a Servicer  is  required  to deliver to the  Custodian  a
Request for Release,  the Servicer  shall  deliver two copies of the Request for
Release if  delivered  in hard copy or the Servicer may furnish such Request for
Release  electronically  to the Custodian,  in which event the Servicing Officer
transmitting the same shall be deemed to have signed the Request for Release. In
connection  with any  Request  for  Release  of a  Mortgage  File  because  of a
repurchase of a Mortgage Loan,  such Request for Release shall be followed by an
assignment of mortgage,  without  recourse,  representation or warranty from the
Trustee to the Seller and the related  Mortgage  Note shall be endorsed  without
recourse by the Trustee and be returned to the Seller.  In  connection  with any
Request  for  Release of a  Mortgage  File  because of the  payment in full of a
Mortgage Loan, such Request for Release shall be accompanied by a certificate of
satisfaction  or other similar  instrument to be executed by or on behalf of the
Trustee and returned to the related Servicer.


                                      G-4
<PAGE>

      Section  2.6  Assumption  Agreements.  In the  event  that any  assumption
agreement, substitution of liability agreement or sale of servicing agreement is
entered  into with respect to any  Mortgage  Loan  subject to this  Agreement in
accordance with the terms and provisions of the Pooling and Servicing Agreement,
the Master Servicer,  to the extent provided in the related Servicing Agreement,
shall cause the related Servicer to notify the Custodian that such assumption or
substitution  agreement  has been  completed by  forwarding to the Custodian the
original of such assumption or substitution  agreement,  which shall be added to
the related  Mortgage File and, for all purposes,  shall be considered a part of
such  Mortgage File to the same extent as all other  documents  and  instruments
constituting parts thereof.

                                  ARTICLE III.
                            CONCERNING THE CUSTODIAN

      Section 3.1 Custodian as Bailee and Agent of the Trustee.  With respect to
each Mortgage Note, Mortgage and other documents constituting each Mortgage File
which are delivered to the Custodian,  the Custodian is  exclusively  the bailee
and custodial  agent of the Trustee and has no instructions to hold any Mortgage
Note or Mortgage for the benefit of any person  other than the  Trustee,  Radian
Asset Assurance Inc. and the  Certificateholders  and undertakes to perform such
duties and only such duties as are  specifically set forth in this Agreement and
in the  Pooling  and  Servicing  Agreement.  Except  upon  compliance  with  the
provisions  of Section  2.5 of this  Agreement,  no Mortgage  Note,  Mortgage or
Mortgage  File  shall  be  delivered  by the  Custodian  to the  Depositor,  the
Servicers or the Master  Servicer or otherwise  released from the  possession of
the Custodian.

      Section 3.2 Reserved.

      Section  3.3  Custodian  May  Own  Certificates.   The  Custodian  in  its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Custodian.

      Section 3.4 Master  Servicer to Pay  Custodian's  Fees and  Expenses.  The
Master Servicer  covenants and agrees to pay to the Custodian from time to time,
and the Custodian shall be entitled to, reasonable compensation for all services
rendered by it in the exercise and  performance  of any of the powers and duties
hereunder of the  Custodian,  and the Master  Servicer will pay or reimburse the
Custodian  upon its  request  for all  reasonable  expenses,  disbursements  and
advances  incurred  or made  by the  Custodian  in  accordance  with  any of the
provisions of this  Agreement  (including the  reasonable  compensation  and the
expenses and  disbursements  of its counsel and of all persons not  regularly in
its employ), except any such expense,  disbursement or advance as may arise from
its  negligence  or bad faith or to the  extent  that such  cost or  expense  is
indemnified by the Depositor pursuant to the Pooling and Servicing Agreement.

      Section 3.5  Custodian  May  Resign;  Trustee  May Remove  Custodian.  The
Custodian may resign from the  obligations  and duties hereby imposed upon it as
such  obligations  and duties  relate to its acting as Custodian of the Mortgage
Loans.  Upon  receiving such written  notice of  resignation,  the Trustee shall
either take custody of the Mortgage  Files itself and give prompt written notice
thereof to the Depositor,  the Master Servicer,  Radian Asset Assurance Inc.


                                      G-5
<PAGE>

and the  Custodian,  or  promptly  appoint  a  successor  Custodian  by  written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning  Custodian  and one copy to the  successor  Custodian.  If the Trustee
shall not have taken  custody of the Mortgage  Files and no successor  Custodian
shall have been so appointed and have accepted  appointment within 30 days after
the giving of such written notice of  resignation,  the resigning  Custodian may
petition any court of competent  jurisdiction for the appointment of a successor
Custodian.

      The Trustee may remove the  Custodian  at any time with the consent of the
Master Servicer.  In such event, the Trustee shall appoint,  or petition a court
of competent  jurisdiction  to appoint,  a successor  Custodian  hereunder.  Any
successor Custodian shall be a depository  institution subject to supervision or
examination  by federal or state  authority,  shall be able to satisfy the other
requirements  contained  in  Section  3.7 and  shall  be  unaffiliated  with the
Servicer or the Depositor.

      Any resignation or removal of the Custodian and appointment of a successor
Custodian  pursuant to any of the  provisions  of this  Section 3.5 shall become
effective upon acceptance of appointment by the successor Custodian. The Trustee
shall give prompt notice to the Depositor,  MBIA Insurance  Corporation  and the
Master  Servicer of the  appointment  of any successor  Custodian.  No successor
Custodian  shall be appointed by the Trustee  without the prior  approval of the
Depositor and the Master Servicer.

      Section 3.6 Merger or  Consolidation  of Custodian.  Any Person into which
the Custodian  may be merged or converted or with which it may be  consolidated,
or any Person  resulting from any merger,  conversion or  consolidation to which
the Custodian shall be a party, or any Person  succeeding to the business of the
Custodian,  shall be the  successor  of the  Custodian  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.

      Section  3.7  Representations  of  the  Custodian.  The  Custodian  hereby
represents  that  it is a  depository  institution  subject  to  supervision  or
examination by a federal or state authority,  has a combined capital and surplus
of at least  $15,000,000 and is qualified to do business in the jurisdictions in
which it will hold any Mortgage File.

                                   ARTICLE IV.
                            MISCELLANEOUS PROVISIONS

      Section 4.1 Notices. All notices, requests, consents and demands and other
communications required under this Agreement or pursuant to any other instrument
or  document  delivered  hereunder  shall be in writing  and,  unless  otherwise
specifically provided, may be delivered personally,  by telegram or telex, or by
registered or certified mail, postage prepaid,  return receipt requested, at the
addresses  specified  on  the  signature  page  hereof  (unless  changed  by the
particular  party whose address is stated herein by similar  notice in writing),
or in the case of Radian Asset Assurance Inc., to 335 Madison Avenue,  New York,
New York 10017 or by email at ABSRM@radian.biz, in which case the notice will be
deemed delivered when received.

      Section 4.2  Amendments.  No modification or amendment of or supplement to
this  Agreement  shall be valid or  effective  unless the same is in writing and
signed by all parties


                                      G-6
<PAGE>

hereto,  and neither the  Depositor,  the Master  Servicer nor the Trustee shall
enter into any amendment hereof except as permitted by the Pooling and Servicing
Agreement.  The  Trustee  shall  give  prompt  notice  to the  Custodian  of any
amendment or supplement  to the Pooling and Servicing  Agreement and furnish the
Custodian with written copies thereof.

      Section 4.3 GOVERNING LAW. THIS AGREEMENT  SHALL BE DEEMED A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE  CONSTRUED  AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

      Section  4.4  Recordation  of  Agreement.   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 and at the Trust's expense, but
only upon direction accompanied by an Opinion of Counsel reasonably satisfactory
to the  Depositor to the effect that the failure to effect such  recordation  is
likely   to   materially   and   adversely   affect   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  4.5  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.



                                      G-7
<PAGE>

      IN WITNESS WHEREOF,  this Agreement is executed as of the date first above
written.


Address:                                  U.S. BANK NATIONAL ASSOCIATION, not
                                          individually but solely as Trustee
One Federal Street, 3rd Floor
Boston, Massachusetts 02110
                                          By:__________________________________
Attention:                                Name: Vaneta I. Bernard
Telecopy:                                 Title: Vice President
Confirmation:
Address:                                  STRUCTURED ASSET MORTGAGE
                                          INVESTMENTS II INC.
383 Madison Avenue
New York, New York 10179                  By:__________________________________
                                          Name:  Baron Silverstein
                                          Title: Vice President

Address:                                  WELLS FARGO BANK, NATIONAL
                                          ASSOCIATION, as Master Servicer
9062 Old Annapolis Road
Columbia, Maryland 21045
                                          By:__________________________________
                                          Name:  Stacey Taylor
                                          Title: Assistant Vice President

Address:                                  WELLS FARGO BANK,
                                          NATIONAL ASSOCIATION, as Custodian
9062 Old Annapolis Road
Columbia, Maryland 21045                  By:__________________________________
                                          Name:  Stacey Taylor
                                          Title: Assistant Vice President



                                      G-8
<PAGE>


STATE OF MASSACHUSETTS       )
                             )ss.:
COUNTY OF BOSTON             )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State, personally appeared Vaneta I. Bernard, known to me to be a Vice President
of U.S. Bank National Association,  a national banking association 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


[SEAL]


                                      G-9
<PAGE>


STATE OF MARYLAND                   )
                                    ) ss.:
COUNTY OF HOWARD                    )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State,  personally  appeared Stacey Taylor,  known to me to be an Assistant Vice
President  of  Wells  Fargo  Bank,  National  Association,  a  national  banking
association that executed the within instrument,  and also known to me to be the
person who  executed  it on behalf of said  national  banking  association,  and
acknowledged to me that such national  banking  association  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

[SEAL]


                                      G-10
<PAGE>

STATE OF NEW YORK              )
                               )ss.:
COUNTY OF NEW YORK             )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State, personally appeared Baron Silverstein, known to me to be a Vice President
of Structured Asset Mortgage  Investments II Inc., 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]


                                      G-11
<PAGE>


STATE OF MARYLAND                   )
                                    )ss.:
COUNTY OF HOWARD                    )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State,  personally  appeared Stacey Taylor,  known to me to be an Assistant Vice
President of Wells Fargo Bank,  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]



                                      G-12
<PAGE>

                                   EXHIBIT ONE

                     FORM OF CUSTODIAN INITIAL CERTIFICATION


                                                       July __, 2004


U.S. Bank National Association                    Structured Asset Mortgage
One Federal Street, 3rd Floor                     Investments II Inc.
Boston, Massachusetts 02110                       383 Madison Avenue
                                                  New York, New York 10179

Radian Asset Assurance Inc.
335 Madison Avenue
New York, New York 10017

Attention: Structured Asset Mortgage Investments II Inc.
Prime Mortgage Trust 2004-1, Mortgage Pass-Through Certificates, Series 2004-1

            Re:   Custodial  Agreement,  dated as of July 30, 2004, by and among
                  U.S.  Bank National  Association,  Structured  Asset  Mortgage
                  Investments II Inc. and Wells Fargo Bank, National Association
                  relating to Prime Mortgage Trust 2004-1, Mortgage Pass-Through
                  Certificates, Series 2004-1

Ladies and Gentlemen:

      In  accordance  with  Section  2.3(a)  of  the  above-captioned  Custodial
Agreement,  and  subject  to  Section  2.02(a)  of  the  Pooling  and  Servicing
Agreement, the undersigned,  as Custodian, hereby certifies that it has received
a  Mortgage  File  (which  contains  an  original  Mortgage  Note or  lost  note
affidavit)  to the extent  required in Section 2.01 of the Pooling and Servicing
Agreement  with  respect  to each  Mortgage  Loan  listed in the  Mortgage  Loan
Schedule, with any exceptions listed on Schedule A attached hereto.

      Capitalized  words and  phrases  used  herein  shall  have the  respective
meanings assigned to them in the above-captioned Custodial Agreement.

                                           WELLS FARGO BANK,
                                           NATIONAL ASSOCIATION


                                           By:
                                              ----------------------------------
                                           Name:
                                           Title:



                                      G-13
<PAGE>

                                   EXHIBIT TWO

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                     ___________, 20__


U.S. Bank National Association                    Structured Asset Mortgage
One Federal Street, 3rd Floor                     Investments II Inc.
Boston, Massachusetts 02110                       383 Madison Avenue
                                                  New York, New York 10179

Radian Asset Assurance Inc.
335 Madison Avenue
New York, New York 10017

Attention:  Structured Asset Mortgage Investments II Inc.
Prime Mortgage Trust 2004-1, Mortgage Pass-Through Certificates, Series 2004-1

            Re:   Custodial  Agreement,  dated as of July 30, 2004, by and among
                  U.S.  Bank National  Association,  Structured  Asset  Mortgage
                  Investments II Inc. and Wells Fargo Bank, National Association
                  relating to Prime Mortgage Trust 2004-1, Mortgage Pass-Through
                  Certificates, Series 2004-1

Ladies and Gentlemen:

      In  accordance  with  Section  2.3(b)  of  the  above-captioned  Custodial
Agreement,  and  subject  to  Section  2.02(a)  of  the  Pooling  and  Servicing
Agreement, the undersigned,  as Custodian, hereby certifies that it has received
a Mortgage File to the extent  required  pursuant to Section 2.01 of the Pooling
and  Servicing  Agreement  with  respect  to each  Mortgage  Loan  listed in the
Mortgage Loan  Schedule,  and it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: all required documents have been executed
and received and that such documents  relate to the Mortgage Loans identified on
the Mortgage Loan Schedule,  with any  exceptions  listed on Schedule A attached
hereto.

      Capitalized  words and  phrases  used  herein  shall  have the  respective
meanings assigned to them in the above-captioned Custodial Agreement.

                                           WELLS FARGO BANK,
                                           NATIONAL ASSOCIATION


                                           By:
                                              ----------------------------------
                                           Name:
                                           Title:


                                      G-14
<PAGE>

                                  EXHIBIT THREE

                      FORM OF CUSTODIAN FINAL CERTIFICATION


                                                 _______, 20__


U.S. Bank National Association                    Structured Asset Mortgage
One Federal Street, 3rd Floor                     Investments II Inc.
Boston, Massachusetts 02110                       383 Madison Avenue
                                                  New York, New York 10179

Radian Asset Assurance Inc.
335 Madison Avenue
New York, New York 10017

Attention: Structured Asset Mortgage Investments II Inc.
Prime Mortgage Trust 2004-1, Mortgage Pass-Through Certificates, Series 2004-1

            Re:   Custodial  Agreement,  dated as of July 30, 2004, by and among
                  U.S.  Bank National  Association,  Structured  Asset  Mortgage
                  Investments II Inc. and Wells Fargo Bank, National Association
                  relating to Prime Mortgage Trust 2004-1, Mortgage Pass-Through
                  Certificates, Series 2004-1

Ladies and Gentlemen:

      In accordance with Section 2.3 of the above-captioned  Custodial Agreement
and  subject to Section  2.02(b) of the  Pooling and  Servicing  Agreement,  the
undersigned, as Custodian, hereby certifies that it has received a Mortgage File
to the extent  required  pursuant to Section  2.01 of the Pooling and  Servicing
Agreement  with  respect  to each  Mortgage  Loan  listed in the  Mortgage  Loan
Schedule,  and it has reviewed the Mortgage  File and the Mortgage Loan Schedule
and has determined  that all required  documents have been executed and received
and that such documents  relate to the Mortgage Loans identified in the Mortgage
Loan Schedule, with any exceptions listed on Schedule A attached hereto.

      Capitalized  words and  phrases  used  herein  shall  have the  respective
meanings assigned to them in the  above-captioned  Custodial Agreement or in the
Pooling and Servicing Agreement, as applicable.

W                                          ELLS FARGO BANK, NATIONAL ASSOCIATION


                                           By:
                                              ----------------------------------
                                           Name:
                                           Title:


                                      G-15
<PAGE>

                                                                     EXHIBIT H-1

                               SERVICING AGREEMENT

                                   COUNTRYWIDE

                             [provided upon request]





                                     H-1-1
<PAGE>

                                                                     EXHIBIT H-2

                               SERVICING AGREEMENT

                                       EMC

                             [provided upon request]





                                     H-2-1
<PAGE>

                                                                     EXHIBIT H-3

                               SERVICING AGREEMENT

                                NEXSTAR FINANCIAl

                             [provided upon request]





                                     H-3-1
<PAGE>

                                                                     EXHIBIT H-4

                               SERVICING AGREEMENT

                                 Bank of America

                             [provided upon request]





                                     H-4-1
<PAGE>

                                                                     EXHIBIT H-5

                               SERVICING AGREEMENT

                                  national city

                             [provided upon request]





                                     H-5-1
<PAGE>

                                                                     EXHIBIT H-6

                               SERVICING AGREEMENT

                                     CENDANT

                             [provided upon request]





                                     H-6-1
<PAGE>

                                                                     EXHIBIT H-7

                               SERVICING AGREEMENT

                                      GMAC

                             [provided upon request]






                                     H-7-1
<PAGE>

                                                                     EXHIBIT H-8

                               SERVICING AGREEMENT

                                 CHASE MANHATTAN

                             [provided upon request]





                                     H-8-1
<PAGE>

                                                                     EXHIBIT H-9

                               SERVICING AGREEMENT

                                  CITIMORTGAGE

                             [provided upon request]





                                     H-9-1
<PAGE>

                                                                    EXHIBIT H-10

                               SERVICING AGREEMENT

                                      WFHM

                             [provided upon request]






                                     H-10-1
<PAGE>

                                                                       EXHIBIT I

                              ASSIGNMENT AGREEMENTS

                             [provided upon request]





                                       I-1
<PAGE>


                                                                       EXHIBIT J

                    FORM OF MORTGAGE LOAN PURCHASE AGREEMENT

      MORTGAGE  LOAN PURCHASE  AGREEMENT,  dated as of July 30, 2004, as amended
and  supplemented  by  any  and  all  amendments   hereto   (collectively,   the
"Agreement"),  by and between EMC MORTGAGE  CORPORATION,  a Delaware corporation
(the "Mortgage Loan Seller"), and STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.,
a Delaware corporation (the "Purchaser").

      Upon the  terms and  subject  to the  conditions  of this  Agreement,  the
Mortgage  Loan Seller  agrees to sell,  and the  Purchaser  agrees to  purchase,
certain  conventional,  first lien mortgage  loans secured  primarily by one- to
four-family  residential   properties,   an  interest  in  shares  issued  by  a
cooperative   apartment  corporation  and  the  related  proprietary  lease  and
individual  condominium units (collectively,  the "Mortgage Loans") as described
herein.  The Purchaser  intends to deposit the Mortgage  Loans into a trust fund
(the "Trust Fund") and create Prime Mortgage Trust 2004-1, Mortgage Pass-Through
Certificates, Series 2004-1 (the "Certificates"),  under a pooling and servicing
agreement,  to be  dated  as  of  July  1,  2004  (the  "Pooling  and  Servicing
Agreement"),  among the  Purchaser,  as  depositor,  Wells Fargo Bank,  National
Association, as master servicer and securities administrator, U.S. Bank National
Association,  as trustee (the "Trustee") and EMC Mortgage Corporation, as seller
and company.

      The Purchaser has filed with the Securities and Exchange  Commission  (the
"Commission") a registration  statement on Form S-3 (Number 333-115122) relating
to its Mortgage  Pass-Through  Certificates  and the offering of certain  series
thereof  (including  certain classes of the  Certificates)  from time to time in
accordance  with Rule 415 under the Securities Act of 1933, as amended,  and the
rules and regulations of the Commission  promulgated thereunder (the "Securities
Act").  Such  registration  statement,   when  it  became  effective  under  the
Securities  Act, and the prospectus  relating to the public  offering of certain
classes of the  Certificates by the Purchaser (the "Public  Offering"),  as each
may be amended or supplemented  from time to time pursuant to the Securities Act
or otherwise,  are referred to herein as the  "Registration  Statement"  and the
"Prospectus,"   respectively.   The  "Prospectus  Supplement"  shall  mean  that
supplement,  dated July 29, 2004 to the Prospectus, dated May 14, 2004, relating
to certain classes of the  Certificates.  With respect to the Public Offering of
certain classes of the Certificates,  the Purchaser and Bear, Stearns & Co. Inc.
("Bear  Stearns") have entered into a terms  agreement dated as of July 29, 2004
to an underwriting agreement dated July 29, 2003, between the Purchaser and Bear
Stearns (collectively, the "Underwriting Agreement").

      Now, therefore, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:

      SECTION 1.  Definitions.  Certain  terms are defined  herein.  Capitalized
terms used herein but not defined  herein shall have the  meanings  specified in
the Pooling and Servicing  Agreement.  The following  other terms are defined as
follows:


                                      J-1
<PAGE>

      Acquisition  Price:  Cash in an amount equal to $______  (plus  $______ in
accrued interest)(1).

      Bear Stearns: Bear, Stearns & Co. Inc.

      Closing Date: July 30, 2004.

      Cut-off Date: July 1, 2004.

      Cut-off Date Balance: approximately $294,347,747.

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

      Due Date:  With respect to each Mortgage  Loan,  the date in each month on
which its scheduled  payment is due if such due date is the first day of a month
and otherwise is deemed to be the first day of the following month or such other
date specified in the related Servicing Agreement.

      Fitch: Fitch, Inc. or its successor in interest.

      Master Servicer: Wells Fargo Bank, National Association.

      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.

      Mortgage:  The  mortgage  or deed of  trust  creating  a first  lien on an
interest in real property securing a Mortgage Note.

      Mortgage  File:  The  items  referred  to in  Exhibit  1  pertaining  to a
particular  Mortgage Loan and any additional  documents  required to be added to
such documents pursuant to this Agreement.

      Mortgage  Interest  Rate:  The annual rate of interest borne by a Mortgage
Note as stated therein.

      Mortgagor: The obligor(s) on a Mortgage Note.

      Net Rate:  For each  Mortgage  Loan,  the Mortgage  Interest Rate for such
Mortgage  Loan  less the  Servicing  Fee Rate and the  Lender-Paid  PMI Rate (if
applicable).

      Opinion of Counsel:  A written opinion of counsel,  who may be counsel for
the Mortgage Loan Seller or the Purchaser, reasonably acceptable to the Trustee.

----------
(1)   Please contact Bear, Stearns & Co. Inc. for Purchase Price.


                                      J-2
<PAGE>

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

      Purchase  Price:  With  respect  to any  Mortgage  Loan  (or any  property
acquired with respect  thereto)  required to be repurchased by the Mortgage Loan
Seller  pursuant to this  Agreement  or Article II of the Pooling and  Servicing
Agreement,  an  amount  equal  to the  sum of  (i)(a)  100%  of the  Outstanding
Principal  Balance of such Mortgage Loan as of the date of repurchase (or if the
related  Mortgaged  Property was  acquired  with  respect  thereto,  100% of the
Outstanding Principal Balance at the date of the acquisition),  plus (b) accrued
but unpaid interest on the Outstanding Principal Balance at the related Mortgage
Interest  Rate,  through and including the last day of the month of  repurchase,
plus (c) any unreimbursed Monthly Advances and servicing advances payable to the
Servicer of the Mortgage  Loan and (ii) any costs and damages (if any)  incurred
by the Trust in  connection  with any  violation  of such  Mortgage  Loan of any
predatory lending laws.

      Rating Agencies: Standard & Poor's and Fitch, each a "Rating Agency."

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

      Security Instrument: A written instrument creating a valid first lien on a
Mortgaged Property securing a Mortgage Note, which may be any applicable form of
mortgage,  deed of trust,  deed to secure debt or security  deed,  including any
riders or addenda thereto.

      Servicing Agreements:  Shall have the meaning assigned to such term in the
Pooling and Servicing Agreement.

      Standard  & Poor's:  Standard  & Poor's,  a  division  of The  McGraw-Hill
Companies, Inc. or its successors in interest.

      Substitute  Mortgage  Loan:  A  mortgage  loan  substituted  for a Deleted
Mortgage Loan which must meet on the date of such  substitution the requirements
stated   herein  and  in  the  Pooling  and  Servicing   Agreement;   upon  such
substitution, such mortgage loan shall be a "Mortgage Loan" hereunder.

      Value:  The value of the Mortgaged  Property at the time of origination of
the related  Mortgage Loan, such value being the lesser of (i) the value of such
property set forth in an appraisal accepted by the applicable  originator of the
Mortgage  Loan  or  (ii)  the  sales  price  of  such  property  at the  time of
origination.

      SECTION 2. Purchase and Sale of the Mortgage Loans and Related Rights. (a)
Upon satisfaction of the conditions set forth in Section 10 hereof, the Mortgage
Loan Seller agrees to sell, and the Purchaser agrees to purchase  Mortgage Loans
having an aggregate  outstanding  principal balance as of the Cut-off Date equal
to the Cut-off Date Balance.


                                      J-3
<PAGE>

      (b) The closing for the purchase  and sale of the  Mortgage  Loans and the
closing for the issuance of the Certificates will take place on the Closing Date
at the office of the  Purchaser's  counsel  in New York,  New York or such other
place as the parties shall agree.

      (c) Upon the  satisfaction  of the  conditions  set  forth in  Section  10
hereof, on the Closing Date, the Purchaser shall pay to the Mortgage Loan Seller
the Acquisition  Price for the Mortgage Loans in immediately  available funds by
wire transfer to such account or accounts as shall be designated by the Mortgage
Loan Seller.

      (d) In addition to the  foregoing,  on the Closing Date the Mortgage  Loan
Seller  assigns to the  Purchaser  all of its right,  title and  interest in the
Servicing  Agreements (other than its right to enforce the  representations  and
warranties set forth therein).

      SECTION 3.  Mortgage  Loan  Schedules.  The Mortgage Loan Seller agrees to
provide to the  Purchaser  as of the date  hereof a  preliminary  listing of the
Mortgage  Loans (the  "Preliminary  Mortgage Loan  Schedule")  setting forth the
information  listed on Exhibit 2 to this  Agreement  with respect to each of the
Mortgage  Loans being sold by the Mortgage Loan Seller.  If there are changes to
the Preliminary  Mortgage Loan Schedule,  the Mortgage Loan Seller shall provide
to the Purchaser as of the Closing Date a final  schedule  (the "Final  Mortgage
Loan  Schedule")  setting  forth the  information  listed  on  Exhibit 2 to this
Agreement  with respect to each of the Mortgage Loans being sold by the Mortgage
Loan  Seller  to the  Purchaser.  The  Final  Mortgage  Loan  Schedule  shall be
delivered  to the  Purchaser  on the  Closing  Date,  shall  be  attached  to an
amendment  to this  Agreement  to be executed on the Closing Date by the parties
hereto and shall be in form and  substance  mutually  agreed to by the  Mortgage
Loan Seller and the Purchaser (the "Amendment").  If there are no changes to the
Preliminary Mortgage Loan Schedule, the Preliminary Mortgage Loan Schedule shall
be the Final Mortgage Loan Schedule for all purposes hereof.

      SECTION 4. Mortgage Loan Transfer.

      (a) The Purchaser will be entitled to all scheduled  payments of principal
and interest on the Mortgage  Loans due after the Cut-off  Date  (regardless  of
when  actually  collected)  and  all  payments  thereon,  other  than  scheduled
principal and interest due on or before the Cut-off Date but received  after the
Cut-off  Date.  The  Mortgage  Loan Seller  will be  entitled  to all  scheduled
payments of principal  and  interest on the Mortgage  Loans due on or before the
Cut-off  Date  (including  payments  collected  after the Cut-off  Date) and all
payments  thereon,  other than  scheduled  principal  and interest due after the
Cut-off Date but received on or before the Cut-off Date. Such principal  amounts
and any interest  thereon  belonging  to the  Mortgage  Loan Seller as described
above will not be included in the aggregate outstanding principal balance of the
Mortgage  Loans as of the Cut-off Date as set forth on the Final  Mortgage  Loan
Schedule.

      (b)  Pursuant  to various  conveyancing  documents  to be  executed on the
Closing Date and pursuant to the Pooling and Servicing Agreement,  the Purchaser
will assign on the Closing  Date all of its right,  title and interest in and to
the Mortgage Loans to the Trustee for the benefit of the  Certificateholders and
Radian Asset  Assurance  Inc.. In connection with the transfer and assignment of
the Mortgage Loans, the Mortgage Loan Seller has delivered or will


                                      J-4
<PAGE>

deliver or cause to be  delivered  to the  Trustee by the  Closing  Date or such
later date as is agreed to by the  Purchaser  and the Mortgage Loan Seller (each
of the  Closing  Date and such later date is  referred  to as a  "Mortgage  File
Delivery Date"),  the items of each Mortgage File,  provided,  however,  that in
lieu of the  foregoing,  the  Mortgage  Loan Seller may  deliver  the  following
documents,  under the circumstances set forth below: (w) in lieu of the original
Security  Instrument,  assignments  to the  Trustee or  intervening  assignments
thereof which have been delivered,  are being delivered or will, upon receipt of
recording  information  relating  to  the  Security  Instrument  required  to be
included  thereon,  be delivered to recording offices for recording and have not
been  returned to the Mortgage  Loan Seller in time to permit their  delivery as
specified above, the Mortgage Loan Seller may deliver a true copy thereof with a
certification  by  the  Mortgage  Loan  Seller,   on  the  face  of  such  copy,
substantially  as  follows:  "Certified  to be a true  and  correct  copy of the
original, which has been transmitted for recording"; (x) in lieu of the Security
Instrument,  assignments to the Trustee or intervening  assignments  thereof, if
the  applicable  jurisdiction  retains  the  originals  of  such  documents  (as
evidenced by a  certification  from the Mortgage Loan Seller to such effect) the
Mortgage Loan Seller may deliver  photocopies  of such  documents  containing an
original  certification by the judicial or other  governmental  authority of the
jurisdiction  where such documents  were  recorded;  (y) in lieu of the Mortgage
Notes relating to the Mortgage  Loans,  each identified in the list delivered by
the Purchaser to the Trustee on the Closing Date and attached  hereto as Exhibit
5, the Mortgage Loan Seller may deliver lost note  affidavits and indemnities of
the Mortgage Loan Seller; and (z) the Mortgage Loan Seller shall not be required
to deliver  intervening  assignments or Mortgage Note  endorsements  between the
related  Underlying  Seller and the Mortgage  Loan Seller,  between the Mortgage
Loan Seller and the  Depositor,  and between the Depositor and the Trustee;  and
provided  further,  however,  that in the case of Mortgage Loans which have been
prepaid  in full  after the  Cut-off  Date and prior to the  Closing  Date,  the
Mortgage Loan Seller, in lieu of delivering the above documents,  may deliver to
the Trustee a  certification  by the Mortgage Loan Seller or the Master Servicer
to such effect and shall  deposit all amounts  paid in respect of such  Mortgage
Loans in the  Master  Servicer  Collection  Account  on the  Closing  Date.  The
Mortgage  Loan Seller  shall  deliver such  original  documents  (including  any
original  documents as to which certified  copies had previously been delivered)
or such certified  copies to the Trustee  promptly after they are received.  The
Mortgage Loan Seller shall cause the Mortgage and  intervening  assignments,  if
any, and the assignment of the Security Instrument to be recorded not later than
180 days after the Closing  Date,  unless such  assignment is not required to be
recorded under the terms set forth in Section 6(a) hereof.

      (c) In connection  with the assignment of any Mortgage Loan  registered on
the MERS(R) System,  the Mortgage Loan Seller further agrees that it will cause,
at the Mortgage  Loan  Seller's  own  expense,  within 30 days after the Closing
Date, the MERS(R) System to indicate that such Mortgage Loans have been assigned
by the Mortgage Loan Seller to the Purchaser and by the Purchaser to the Trustee
in accordance with this Agreement for the benefit of the  Certificateholders  by
including (or deleting,  in the case of Mortgage Loans which are  repurchased in
accordance with this Agreement) in such computer files (a) the code in the field
which identifies the specific Trustee and (b) the code in the field "Pool Field"
which identifies the series of the  Certificates  issued in connection with such
Mortgage  Loans.  The Mortgage Loan Seller  further agrees that it will not, and
will not permit any Servicer or the Master  Servicer to, and the Master Servicer
agrees that it will not, alter the codes referenced in this paragraph


                                      J-5
<PAGE>

with respect to any Mortgage  Loan during the term of the Pooling and  Servicing
Agreement  unless and until such Mortgage Loan is repurchased in accordance with
the terms of the Pooling and Servicing Agreement.

      (d) The Mortgage Loan Seller and the Purchaser  acknowledge hereunder that
all of the Mortgage Loans and the related  servicing will ultimately be assigned
to U.S. Bank National Association, as Trustee for the Certificateholders, on the
date hereof.

      SECTION 5. Examination of Mortgage Files.

      (a) On or before the Mortgage File Delivery Date, the Mortgage Loan Seller
will have made the Mortgage  Files  available to the  Purchaser or its agent for
examination  which may be at the  offices of the  Trustee or the  Mortgage  Loan
Seller and/or the Mortgage Loan Seller's custodian.  The fact that the Purchaser
or its agent has  conducted  or has failed to conduct  any  partial or  complete
examination  of the Mortgage  Files shall not affect the  Purchaser's  rights to
demand  cure,  repurchase,  substitution  or other  relief as  provided  in this
Agreement. In furtherance of the foregoing,  the Mortgage Loan Seller shall make
the Mortgage Files  available to the Purchaser or its agent from time to time so
as to permit the Purchaser to confirm the Mortgage Loan Seller's compliance with
the delivery and recordation  requirements of this Agreement and the Pooling and
Servicing Agreement.  In addition,  upon request of the Purchaser,  the Mortgage
Loan  Seller  agrees  to  provide  to the  Purchaser,  Bear  Stearns  and to any
investors or prospective investors in the Certificates information regarding the
Mortgage Loans and their servicing,  to make the Mortgage Files available to the
Purchaser,  Bear Stearns and to such investors or prospective  investors  (which
may be at the offices of the  Mortgage  Loan  Seller  and/or the  Mortgage  Loan
Seller's  custodian) and to make  available  personnel  knowledgeable  about the
Mortgage  Loans  for  discussions  with the  Purchaser,  Bear  Stearns  and such
investors or  prospective  investors,  upon  reasonable  request  during regular
business  hours,  sufficient  to permit the  Purchaser,  Bear  Stearns  and such
investors or potential investors to conduct such due diligence as any such party
reasonably believes is appropriate.

      (b) Pursuant to the Pooling and Servicing  Agreement,  on the Closing Date
the   Custodian,   on  behalf  of  the   Trustee,   for  the   benefit   of  the
Certificateholders  and Radian Asset Assurance Inc., will acknowledge receipt of
each Mortgage  Loan, by delivery to the Mortgage Loan Seller,  the Purchaser and
the Trustee of an initial  certification  in the form attached as Exhibit One to
the Custodial Agreement.

      (c) Pursuant to the Pooling and Servicing Agreement, within 90 days of the
Closing Date (or,  with respect to any  Substitute  Mortgage  Loan,  within five
Business  Days after the  receipt  by the  Trustee or  Custodian  thereof),  the
Trustee will review or shall cause the Custodian to review items of the Mortgage
Files as set forth on Exhibit 1 and will  deliver to the  Mortgage  Loan Seller,
the Purchaser and the Trustee an interim certification substantially in the form
of Exhibit Two to the Custodial Agreement.  If the Trustee or Custodian,  as its
agent,  finds any  document  listed on  Exhibit 1 not to have been  executed  or
received,  or to be unrelated,  determined  on the basis of the Mortgagor  name,
original  principal balance and loan number, to the Mortgage Loans identified in
the Final Mortgage Loan Schedule or to appear defective on its face (a "Material
Defect"), the Trustee or the Custodian,  as its agent, shall promptly notify the


                                      J-6
<PAGE>

Mortgage  Loan Seller of such  Material  Defect.  The Mortgage Loan Seller shall
correct or cure any such Material  Defect within 90 days from the date of notice
from the Trustee or the Custodian,  as its agent,  of the Material Defect and if
the Mortgage  Loan Seller fails to correct or cure such  Material  Defect within
such period and such defect  materially  and adversely  affects the interests of
the  Certificateholders  in the related  Mortgage Loan, the Mortgage Loan Seller
will,  in  accordance  with the terms of the  Pooling and  Servicing  Agreement,
within 90 days of the date of notice,  provide  the  Trustee  with a  Substitute
Mortgage  Loan (if within two years of the Closing Date) or purchase the related
Mortgage Loan at the applicable  Purchase  Price;  provided that, if such defect
would cause the Mortgage Loan to be other than a "qualified mortgage" as defined
in Section  860G(a)(3) of the Code,  any such cure,  repurchase or  substitution
must occur  within 90 days from the date such breach was  discovered;  provided,
however,  that if such defect  relates  solely to the  inability of the Mortgage
Loan  Seller  to  deliver  the  original  Security   Instrument  or  intervening
assignments  thereof,  or  a  certified  copy  because  the  originals  of  such
documents,  or a  certified  copy,  have not  been  returned  by the  applicable
jurisdiction,  the Mortgage  Loan Seller shall not be required to purchase  such
Mortgage  Loan if the Mortgage Loan Seller  delivers such original  documents or
certified copy promptly upon receipt,  but in no event later than 360 days after
the Closing Date.  The foregoing  repurchase  obligation  shall not apply in the
event that the Mortgage Loan Seller cannot  deliver such original or copy of any
document  submitted for  recording to the  appropriate  recording  office in the
applicable  jurisdiction  because such  document  has not been  returned by such
office; provided that the Mortgage Loan Seller shall instead deliver a recording
receipt  of such  recording  office  or, if such  receipt  is not  available,  a
certificate confirming that such documents have been accepted for recording, and
delivery to the Trustee or the Custodian, as its agent, shall be effected by the
Mortgage Loan Seller within thirty days of its receipt of the original  recorded
document.

      (d) Pursuant to the Pooling and  Servicing  Agreement,  within 180 days of
the Closing Date (or, with respect to any Substitute  Mortgage Loan, within five
Business Days after the receipt by the Trustee or Custodian thereof) the Trustee
will review or cause the Custodian to review items of the Mortgage  Files as set
forth on Exhibit 1 and will deliver to the Mortgage  Loan Seller,  the Purchaser
and the Trustee a final certification substantially in the form of Exhibit Three
to the Custodial Agreement.  If the Trustee or Custodian,  as its agent, finds a
Material  Defect,  the Trustee or the  Custodian,  as its agent,  shall promptly
notify the Mortgage  Loan Seller of such  Material  Defect.  The  Mortgage  Loan
Seller shall  correct or cure any such  Material  Defect within 90 days from the
date of notice from the Trustee or the Custodian,  as its agent, of the Material
Defect and if the Mortgage  Loan Seller  fails to correct or cure such  Material
Defect within such period and such defect  materially and adversely  affects the
interests of the  Certificateholders  in the related Mortgage Loan, the Mortgage
Loan Seller  will,  in  accordance  with the terms of the Pooling and  Servicing
Agreement,  within 90 days of the date of notice,  provide  the  Trustee  with a
Substitute  Mortgage  Loan (if within two years of the Closing Date) or purchase
the related  Mortgage Loan at the applicable  Purchase Price;  provided that, if
such  defect  would  cause  the  Mortgage  Loan to be  other  than a  "qualified
mortgage"  as  defined  in  Section  860G(a)(3)  of the  Code,  any  such  cure,
repurchase or  substitution  must occur within 90 days from the date such breach
was  discovered;  provided,  however,  that if such defect relates solely to the
inability  of  the  Mortgage  Loan  Seller  to  deliver  the  original  Security
Instrument or intervening  assignments  thereof, or a certified copy because the
originals of such documents,  or a certified copy, have not been returned by the
applicable jurisdiction, the Mortgage Loan Seller


                                      J-7
<PAGE>

shall not be required to purchase such Mortgage Loan if the Mortgage Loan Seller
delivers such original documents or certified copy promptly upon receipt, but in
no event later than 360 days after the Closing Date.  The  foregoing  repurchase
obligation  shall not apply in the event that the  Mortgage  Loan Seller  cannot
deliver such  original or copy of any document  submitted  for  recording to the
appropriate  recording  office  in  the  applicable  jurisdiction  because  such
document has not been  returned by such office;  provided that the Mortgage Loan
Seller shall instead deliver a recording receipt of such recording office or, if
such receipt is not available, a certificate confirming that such documents have
been accepted for recording,  and delivery to the Trustee or the  Custodian,  as
its agent,  shall be effected by the Mortgage  Loan Seller within thirty days of
its receipt of the original recorded document.

      (e) At the  time of any  substitution,  the  Mortgage  Loan  Seller  shall
deliver or cause to be  delivered  the  Substitute  Mortgage  Loan,  the related
Mortgage File and any other  documents and payments  required to be delivered in
connection with a substitution  pursuant to the Pooling and Servicing Agreement.
At the time of any purchase or substitution,  the Trustee in accordance with the
terms of the Pooling and  Servicing  Agreement  shall (i) assign to the Mortgage
Loan Seller and cause the Custodian to release the documents (including, but not
limited to, the Mortgage, Mortgage Note and other contents of the Mortgage File)
in the  possession  of the Custodian  relating to the Deleted  Mortgage Loan and
(ii) execute and deliver such  instruments  of transfer or  assignment,  in each
case without recourse, as shall be necessary to vest in the Mortgage Loan Seller
title to such Deleted Mortgage Loan.

      SECTION 6. Recordation of Assignments of Mortgage.

      (a) The Mortgage  Loan Seller shall cause each  assignment of the Security
Instrument from the Mortgage Loan Seller to the Trustee to be recorded not later
than 180 days  after  the  Closing  Date,  unless  (a) such  recordation  is not
required by the Rating  Agencies  or an Opinion of Counsel has been  provided to
the Trustee (with a copy to the Custodian)  which states that the recordation of
such   assignments   is  not   necessary   to  protect  the   interests  of  the
Certificateholders  in the related  Mortgage  Loans or (b) MERS is identified on
the Mortgage or a properly recorded assignment of the Mortgage, as the Mortgagee
of record solely as nominee for the Mortgage Loan Seller and its  successors and
assigns; provided, however, notwithstanding the foregoing, each assignment shall
be submitted for  recording by the Mortgage Loan Seller in the manner  described
above, at no expense to the Trust or Trustee,  upon the earliest to occur of (i)
reasonable  direction  by the  Holders  of  Certificates  evidencing  Fractional
Undivided  Interests  aggregating  not  less  than  25% of the  Trust,  (ii) the
occurrence  of a  Event  of  Default,  (iii)  the  occurrence  of a  bankruptcy,
insolvency  or  foreclosure  relating to the  Mortgage  Loan Seller and (iv) the
occurrence  of a servicing  transfer as described in Section 8.02 of the Pooling
and Servicing Agreement.

      While each such Mortgage or assignment  is being  recorded,  if necessary,
the  Mortgage  Loan  Seller  shall  leave or cause to be left with the Trustee a
certified copy of such Mortgage or assignment.  All customary recording fees and
reasonable  expenses  relating to the recordation of the assignments of mortgage
to the Trustee or the Opinion of Counsel,  as the case may be, shall be borne by
the Mortgage Loan Seller.


                                      J-8
<PAGE>

      (b) It is the express  intent of the parties hereto that the conveyance of
the Mortgage Loans by the Mortgage Loan Seller to the Purchaser, as contemplated
by this  Agreement  be,  and be  treated  as, a sale.  It is,  further,  not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the  Mortgage  Loan Seller to the  Purchaser  to secure a debt or other
obligation   of  the  Mortgage  Loan  Seller.   However,   in  the  event  that,
notwithstanding  the intent of the  parties,  the  Mortgage  Loans are held by a
court to  continue to be property of the  Mortgage  Loan  Seller,  then (a) this
Agreement shall also be deemed to be a security  agreement within the meaning of
Articles 8 and 9 of the applicable  Uniform Commercial Code; (b) the transfer of
the  Mortgage  Loans  provided  for herein  shall be deemed to be a grant by the
Mortgage  Loan  Seller to the  Purchaser  of a security  interest  in all of the
Mortgage Loan Seller'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,  to the
extent the Purchaser  would otherwise be entitled to own such Mortgage Loans and
proceeds  pursuant  to  Section 4 hereof,  including  all  amounts,  other  than
investment earnings,  from time to time held or invested in any accounts created
pursuant to the Pooling and  Servicing  Agreement,  whether in the form of cash,
instruments,  securities or other property;  (c) the possession by the Purchaser
or the Trustee of Mortgage  Notes and such other items of property as constitute
instruments,  money, negotiable documents or chattel paper shall be deemed to be
"possession  by the secured  party" for  purposes  of  perfecting  the  security
interest  pursuant to Section 9-313 (or comparable  provision) of the applicable
Uniform Commercial Code; and (d) 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  Purchaser for the purpose of perfecting  such  security  interest  under
applicable law. Any assignment of the interest of the Purchaser  pursuant to any
provision  hereof or pursuant to the Pooling and Servicing  Agreement shall also
be deemed to be an  assignment  of any security  interest  created  hereby.  The
Mortgage Loan Seller and the Purchaser shall, to the extent consistent with this
Agreement,  take such actions as may be reasonably  necessary to ensure that, if
this Agreement were deemed to create a security  interest in the Mortgage Loans,
such security  interest would be deemed to be a perfected  security  interest of
first  priority under  applicable law and will be maintained as such  throughout
the term of the Pooling and Servicing Agreement.

      SECTION  7.   Representations  and  Warranties  of  Mortgage  Loan  Seller
Concerning the Mortgage  Loans.  The Mortgage Loan Seller hereby  represents and
warrants to the  Purchaser  as of the Closing  Date or such other date as may be
specified below with respect to each Mortgage Loan being sold by it:

            (i) the  information  set forth in the Mortgage Loan Schedule hereto
      is true and correct in all material respects and the information  provided
      to the Rating Agencies,  including the Mortgage Loan level detail, is true
      and correct according to the Rating Agency requirements;

            (ii)  immediately  prior  to  the  transfer  to the  Purchaser,  the
      Mortgage Loan Seller was the sole owner of beneficial  title and holder of
      each  Mortgage and  Mortgage  Note  relating to the Mortgage  Loans and is
      conveying the same free and clear


                                      J-9
<PAGE>

      of any and  all  liens,  claims,  encumbrances,  participation  interests,
      equities,  pledges,  charges or security  interests  of any nature and the
      Mortgage  Loan Seller has full right and  authority  to sell or assign the
      same pursuant to this Agreement;

            (iii) Each  Mortgage  Loan at the time it was made  complied  in all
      material  respects with all applicable  laws and  regulations,  including,
      without  limitation,  usury,  equal  credit  opportunity,  disclosure  and
      recording laws and all predatory  lending laws; and each Mortgage Loan has
      been serviced in all material  respects in accordance  with all applicable
      laws and regulations,  including, without limitation,  usury, equal credit
      opportunity,  disclosure and recording laws and all predatory lending laws
      and the terms of the related  Mortgage  Note,  the Mortgage and other loan
      documents;

            (iv) there is no monetary default existing under any Mortgage or the
      related  Mortgage  Note and there is no  material  event  which,  with the
      passage  of time or with  notice and the  expiration  of any grace or cure
      period, would constitute a default,  breach or event of acceleration;  and
      neither the Mortgage Loan Seller,  any of its  affiliates nor any servicer
      of any related  Mortgage  Loan has taken any action to waive any  default,
      breach or event of  acceleration;  no foreclosure  action is threatened or
      has been commenced with respect to the Mortgage Loan;

            (v) the terms of the Mortgage  Note and the  Mortgage  have not been
      impaired,  waived,  altered or modified in any respect,  except by written
      instruments,  (i)  if  required  by  law in  the  jurisdiction  where  the
      Mortgaged  Property is located,  or (ii) to protect the  interests  of the
      Trustee on behalf of the Certificateholders;

            (vi) no selection procedure reasonably believed by the Mortgage Loan
      Seller  to be  adverse  to the  interests  of the  Certificateholders  was
      utilized in selecting the Mortgage Loans;

            (vii) each  Mortgage  is a valid and  enforceable  first lien on the
      property securing the related Mortgage Note and each Mortgaged Property is
      owned by the Mortgagor in fee simple  (except with respect to common areas
      in the case of condominiums, PUDs and de minimis PUDs) or by leasehold for
      a term longer than the term of the related  Mortgage,  subject only to (i)
      the lien of current real property taxes and  assessments,  (ii) covenants,
      conditions and restrictions, rights of way, easements and other matters of
      public  record  as of  the  date  of  recording  of  such  Mortgage,  such
      exceptions being acceptable to mortgage lending institutions  generally or
      specifically  reflected in the appraisal  obtained in connection  with the
      origination  of the related  Mortgage  Loan or referred to in the lender's
      title insurance policy delivered to the originator of the related Mortgage
      Loan and (iii) other matters to which like properties are commonly subject
      which do not  materially  interfere  with  the  benefits  of the  security
      intended to be provided by such Mortgage;

            (viii)  there is no  mechanics'  lien or claim  for  work,  labor or
      material affecting the premises subject to any Mortgage which is or may be
      a lien prior to, or


                                      J-10
<PAGE>

      equal  with,  the lien of such  Mortgage  except  those  which are insured
      against by the title insurance policy referred to in (xiiii) below;

            (ix)  as of the  Cut-off  Date,  to the  best of the  Mortgage  Loan
      Seller's knowledge, there was no delinquent tax or assessment lien against
      the  property  subject to any  Mortgage,  except where such lien was being
      contested in good faith and a stay had been granted against levying on the
      property;

            (x)  there  is no  valid  offset,  defense  or  counterclaim  to any
      Mortgage Note or Mortgage,  including  the  obligation of the Mortgagor to
      pay the unpaid principal and interest on such Mortgage Note;

            (xi) to the best of the Mortgage Loan Seller's knowledge,  except to
      the  extent  insurance  is in place  which will  cover  such  damage,  the
      physical  property  subject to any Mortgage is free of material damage and
      is in good repair and there is no proceeding pending or threatened for the
      total or partial condemnation of any Mortgaged Property;

            (xii) to the  best of the  Mortgage  Loan  Seller's  knowledge,  the
      Mortgaged   Property  and  all   improvements   thereon  comply  with  all
      requirements of any applicable zoning and subdivision laws and ordinances;

            (xiii) a lender's title  insurance  policy (on an ALTA or CLTA form)
      or  binder,  or  other  assurance  of  title  customary  in  the  relevant
      jurisdiction  therefor in a form  acceptable to Fannie Mae or Freddie Mac,
      was  issued on the date that each  Mortgage  Loan was  created  by a title
      insurance  company  which,  to the  best  of the  Mortgage  Loan  Seller's
      knowledge,  was  qualified  to do business in the  jurisdiction  where the
      related Mortgaged  Property is located,  insuring the Mortgage Loan Seller
      and its  successors and assigns that the Mortgage is a first priority lien
      on the related Mortgaged  Property in the original principal amount of the
      Mortgage  Loan.  The Mortgage  Loan Seller is the sole insured  under such
      lender's title insurance policy,  and such policy,  binder or assurance is
      valid and remains in full force and effect,  and each such policy,  binder
      or  assurance  shall  contain  all  applicable  endorsements  including  a
      negative amortization endorsement, if applicable;

            (xiv) at the time of  origination,  each Mortgaged  Property was the
      subject of an appraisal which conformed to the  underwriting  requirements
      of the  originator  of the Mortgage  Loan and, the  appraisal is in a form
      acceptable to Fannie Mae or FHLMC;

            (xv) as of the Closing  Date,  the  improvements  on each  Mortgaged
      Property  securing a  Mortgage  Loan is  insured  (by an insurer  which is
      acceptable  to the  Mortgage  Loan  Seller)  against loss by fire and such
      hazards as are covered under a standard extended  coverage  endorsement in
      the locale in which the Mortgaged Property is located,  in an amount which
      is not  less  than  the  lesser  of the  maximum  insurable  value  of the
      improvements  securing  such Mortgage  Loan or the  outstanding  principal
      balance of the  Mortgage  Loan,  but in no event in an amount less than an
      amount that is required


                                      J-11
<PAGE>

      to prevent the Mortgagor from being deemed to be a co-insurer  thereunder;
      if the improvement on the Mortgaged  Property is a condominium unit, it is
      included  under  the  coverage  afforded  by  a  blanket  policy  for  the
      condominium project; if upon origination of the related Mortgage Loan, the
      improvements  on the Mortgaged  Property  were in an area  identified as a
      federally  designated flood area, a flood insurance policy is in effect in
      an  amount  representing  coverage  not  less  than  the  least of (i) the
      outstanding  principal  balance of the Mortgage Loan,  (ii) the restorable
      cost of  improvements  located  on such  Mortgaged  Property  or (iii) the
      maximum coverage  available under federal law; and each Mortgage obligates
      the Mortgagor  thereunder  to maintain the insurance  referred to above at
      the Mortgagor's cost and expense;

            (xvi) each Mortgage Loan  constitutes a "qualified  mortgage"  under
      Section   860G(a)(3)(A)  of  the  Code  and  Treasury  Regulation  Section
      1.860G-2(a)(1);

            (xvii) each Mortgage Loan was  originated or funded by (a) a savings
      and  loan  association,  savings  bank,  commercial  bank,  credit  union,
      insurance company or similar  institution which is supervised and examined
      by a federal or state  authority (or originated by (i) a subsidiary of any
      of the foregoing  institutions which subsidiary is actually supervised and
      examined by  applicable  regulatory  authorities  or (ii) a mortgage  loan
      correspondent of any of the foregoing and that was originated  pursuant to
      the  criteria  established  by any of the  foregoing)  or (b) a  mortgagee
      approved by the  Secretary  of Housing and Urban  Development  pursuant to
      sections 203 and 211 of the National Housing Act, as amended;

            (xviii) none of the Mortgage  Loans are (a) loans  subject to 12 CFR
      Part 226.31, 12 CFR Part 226.32 or 12 CFR Part 226.34 of Regulation Z, the
      regulation  implementing  TILA,  which  implements  the Home Ownership and
      Equity Protection Act of 1994, as amended or (b) classified and/or defined
      as a "high  cost  home  loan"  under  any  federal,  state or  local  law,
      including, but not limited to, the States of Georgia or North Carolina;

            (xix) no loan is a  High-Cost  Home Loan under the New  Jersey  Home
      Ownership Security Act of 2002;

            (xx)  no loan  in the  transaction  originated  in New  Mexico  is a
      High-Cost Home Loan under the New Mexico Home Loan Protection Act;

            (xxi) the  information  set forth in  Schedule  A of the  Prospectus
      Supplement  with respect to the Mortgage  Loans is true and correct in all
      material respects;

            (xxii) no  Mortgage  Loan is a High Cost Loan or  Covered  Loan,  as
      applicable  (as such  terms are  defined in  Standard  & Poor's  LEVELS(R)
      Glossary,  Version 5.6 Revised,  Appendix E, attached hereto as Exhibit 6)
      and no Mortgage Loan  originated on or after October 1, 2002 through March
      6, 2003 is governed by the "Georgia Fair Lending Act";


                                      J-12
<PAGE>

            (xxiii) each  Mortgage Loan was  originated  in accordance  with the
      underwriting guidelines of the related originator;

            (xxiv) each original Mortgage has been recorded or is in the process
      of being recorded in accordance  with the  requirements of Section 2.01 of
      the Pooling  and  Servicing  Agreement  in the  appropriate  jurisdictions
      wherein such  recordation  is required to perfect the lien thereof for the
      benefit of the Trust Fund;

            (xxv) the related  Mortgage  File contains each of the documents and
      instruments listed in Section 2.01 of the Pooling and Servicing Agreement,
      subject to any exceptions,  substitutions  and  qualifications  as are set
      forth in such Section;

            (xxvi) the Mortgage Loans are currently being serviced in accordance
      with accepted servicing practices; and

            (xxvii) at the time of origination,  each Mortgaged Property was the
      subject of an appraisal which conformed to the  underwriting  requirements
      of the  originator  of the Mortgage  Loan,  and the appraisal is in a form
      which was acceptable to Fannie Mae or FHLMC at the time of origination.

      It is understood  and agreed that the  representations  and warranties set
forth  in this  Section  7 will  inure  to the  benefit  of the  Purchaser,  its
successors and assigns, notwithstanding any restrictive or qualified endorsement
on any  Mortgage  Note or  assignment  of  Mortgage  or the  examination  of any
Mortgage File. Upon any  substitution  for a Mortgage Loan, the  representations
and  warranties  set forth above shall be deemed to be made by the Mortgage Loan
Seller as to any Substitute Mortgage Loan as of the date of substitution.

      Upon  discovery  or receipt of notice by the  Mortgage  Loan  Seller,  the
Purchaser  or the Trustee of a breach of any  representation  or warranty of the
Mortgage Loan Seller set forth in this Section 7 which  materially and adversely
affects the value of the interests of the Purchaser,  the  Certificateholders or
the Trustee in any of the Mortgage Loans delivered to the Purchaser  pursuant to
this Agreement,  the party  discovering or receiving notice of such breach shall
give prompt  written  notice to the others.  In the case of any such breach of a
representation  or warranty set forth in this Section 7, within 90 days from the
date of  discovery by the Mortgage  Loan Seller,  or the date the Mortgage  Loan
Seller is notified by the party  discovering or receiving  notice of such breach
(whichever  occurs earlier),  the Mortgage Loan Seller will (i) cure such breach
in all  material  respects,  (ii)  purchase the  affected  Mortgage  Loan at the
applicable  Purchase  Price or (iii) if within  two years of the  Closing  Date,
substitute a qualifying  Substitute  Mortgage Loan in exchange for such Mortgage
Loan.  The  obligations  of the  Mortgage  Loan  Seller  to  cure,  purchase  or
substitute  a  qualifying   Substitute   Mortgage  Loan  shall   constitute  the
Purchaser's, the Trustee's and the Certificateholder's sole and exclusive remedy
under this  Agreement or otherwise  respecting  a breach of  representations  or
warranties  hereunder  with  respect  to the  Mortgage  Loans,  except  for  the
obligation  of the Mortgage  Loan Seller to  indemnify  the  Purchaser  for such
breach as set forth in and limited by Section 13 hereof.


                                      J-13
<PAGE>

      Any cause of action  against  the  Mortgage  Loan Seller or relating to or
arising out of a breach by the Mortgage Loan Seller of any  representations  and
warranties  made in this Section 7 shall accrue as to any Mortgage Loan upon (i)
discovery  of such breach by the Mortgage  Loan Seller or notice  thereof by the
party  discovering  such breach and (ii) failure by the Mortgage  Loan Seller to
cure such  breach,  purchase  such  Mortgage  Loan or  substitute  a  qualifying
Substitute Mortgage Loan pursuant to the terms hereof.

      SECTION 8.  Representations  and  Warranties  Concerning the Mortgage Loan
Seller.  As of the date hereof and as of the Closing  Date,  the  Mortgage  Loan
Seller  represents  and  warrants to the  Purchaser as to itself in the capacity
indicated as follows:

      (a) the Mortgage Loan Seller (i) is a corporation duly organized,  validly
existing and in good  standing  under the laws of the State of Delaware and (ii)
is qualified and in good standing to do business in each jurisdiction where such
qualification  is  necessary,  except where the failure so to qualify  would not
reasonably  be expected to have a material  adverse  effect on the Mortgage Loan
Seller's business as presently conducted or on the Mortgage Loan Sellers ability
to enter into this  Agreement and to consummate  the  transactions  contemplated
hereby;

      (b) the Mortgage Loan Seller has full power to own its property,  to carry
on its  business  as  presently  conducted  and to enter  into and  perform  its
obligations under this Agreement;

      (c) the  execution  and  delivery  by the  Mortgage  Loan  Seller  of this
Agreement have been duly  authorized by all necessary  action on the part of the
Mortgage Loan Seller;  and neither the execution and delivery of this Agreement,
nor the consummation of the  transactions  herein  contemplated,  nor compliance
with the  provisions  hereof,  will  conflict  with or result in a breach of, or
constitute a default under, any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Mortgage Loan Seller or its
properties or the charter or by-laws of the Mortgage  Loan Seller,  except those
conflicts, breaches or defaults which would not reasonably be expected to have a
material adverse effect on the Mortgage Loan Seller's ability to enter into this
Agreement and to consummate the transactions contemplated hereby;

      (d) the execution, delivery and performance by the Mortgage Loan Seller of
this Agreement and the consummation of the transactions  contemplated  hereby do
not  require  the  consent  or  approval  of,  the  giving  of  notice  to,  the
registration  with,  or the taking of any other action in respect of, any state,
federal or other  governmental  authority  or  agency,  except  those  consents,
approvals,  notices,  registrations  or  other  actions  as  have  already  been
obtained,  given  or  made  and,  in  connection  with  the  recordation  of the
Mortgages, powers of attorney or assignments of Mortgages not yet completed;

      (e) this  Agreement  has been duly  executed and delivered by the Mortgage
Loan Seller and,  assuming  due  authorization,  execution  and  delivery by the
Purchaser,  constitutes  a valid and binding  obligation  of the  Mortgage  Loan
Seller enforceable against it in


                                      J-14
<PAGE>

accordance with its terms (subject to applicable  bankruptcy and insolvency laws
and other  similar laws  affecting  the  enforcement  of the rights of creditors
generally);

      (f)  there  are no  actions,  suits  or  proceedings  pending  or,  to the
knowledge of the  Mortgage  Loan Seller,  threatened  against the Mortgage  Loan
Seller,  before  or  by  any  court,   administrative   agency,   arbitrator  or
governmental  body (i) with respect to any of the  transactions  contemplated by
this Agreement or (ii) with respect to any other matter which in the judgment of
the Mortgage  Loan Seller will be  determined  adversely  to the  Mortgage  Loan
Seller and will if determined  adversely to the Mortgage Loan Seller  materially
and  adversely  affect  the  Mortgage  Loan  Seller's  ability  to  perform  its
obligations under this Agreement; and the Mortgage Loan Seller is not in default
with respect to any order of any court,  administrative  agency,  arbitrator  or
governmental  body so as to  materially  and adversely  affect the  transactions
contemplated by this Agreement; and

      (g) the Mortgage  Loan Seller's  Information  (as defined in Section 13(a)
hereof)  does not include  any untrue  statement  of a material  fact or omit to
state a material fact necessary in order to make the  statements  made, in light
of the circumstances under which they were made, not misleading.

      SECTION 9. Representations and Warranties Concerning the Purchaser.  As of
the date  hereof  and as of the  Closing  Date,  the  Purchaser  represents  and
warrants to the Mortgage Loan Seller as follows:

      (a) the Purchaser (i) is a corporation  duly organized,  validly  existing
and in good  standing  under  the  laws of the  State  of  Delaware  and (ii) is
qualified and in good standing as a foreign  corporation  to do business in each
jurisdiction where such qualification is necessary,  except where the failure so
to qualify would not reasonably be expected to have a material adverse effect on
the Purchaser's business as presently conducted or on the Purchaser's ability to
enter  into this  Agreement  and to  consummate  the  transactions  contemplated
hereby;

      (b) the Purchaser has full corporate  power to own its property,  to carry
on its  business  as  presently  conducted  and to enter  into and  perform  its
obligations under this Agreement;

      (c) the  execution and delivery by the  Purchaser of this  Agreement  have
been  duly  authorized  by all  necessary  corporate  action  on the part of the
Purchaser;  and neither the  execution and delivery of this  Agreement,  nor the
consummation of the transactions  herein  contemplated,  nor compliance with the
provisions hereof,  will conflict with or result in a breach of, or constitute a
default under, any of the provisions of any law, governmental rule,  regulation,
judgment,  decree or order  binding on the  Purchaser or its  properties  or the
articles of incorporation  or by-laws of the Purchaser,  except those conflicts,
breaches or defaults  which would not  reasonably be expected to have a material
adverse  effect on the  Purchaser's  ability to enter into this Agreement and to
consummate the transactions contemplated hereby;

      (d) the  execution,  delivery  and  performance  by the  Purchaser of this
Agreement and the  consummation of the transactions  contemplated  hereby do not
require the


                                      J-15
<PAGE>

consent or approval of, the giving of notice to, the  registration  with, or the
taking  of any  other  action  in  respect  of,  any  state,  federal  or  other
governmental  authority or agency,  except those consents,  approvals,  notices,
registrations or other actions as have already been obtained, given or made;

      (e) this  Agreement  has been duly executed and delivered by the Purchaser
and,  assuming due  authorization,  execution  and delivery by the Mortgage Loan
Seller,  constitutes a valid and binding obligation of the Purchaser enforceable
against it in accordance  with its terms  (subject to applicable  bankruptcy and
insolvency  laws and other similar laws affecting the  enforcement of the rights
of creditors generally);

      (f)  there  are no  actions,  suits  or  proceedings  pending  or,  to the
knowledge of the Purchaser,  threatened against the Purchaser,  before or by any
court,  administrative agency,  arbitrator or governmental body (i) with respect
to any of the  transactions  contemplated by this Agreement or (ii) with respect
to any other matter which in the judgment of the  Purchaser  will be  determined
adversely to the  Purchaser  and will if  determined  adversely to the Purchaser
materially  and  adversely  affect  the  Purchaser's   ability  to  perform  its
obligations  under this  Agreement;  and the  Purchaser  is not in default  with
respect  to any  order  of  any  court,  administrative  agency,  arbitrator  or
governmental  body so as to  materially  and adversely  affect the  transactions
contemplated by this Agreement; and

      (g) the Purchaser's  Information (as defined in Section 13(b) hereof) does
not include any untrue  statement of a material fact or omit to state a material
fact  necessary  in  order  to  make  the  statements  made,  in  light  of  the
circumstances under which they were made, not misleading.

      SECTION 10. Conditions to Closing.

      (a) The  obligations of the Purchaser under this Agreement will be subject
to  the  satisfaction,  on or  prior  to the  Closing  Date,  of  the  following
conditions:

            (i) Each of the  obligations of the Mortgage Loan Seller required to
      be performed at or prior to the Closing Date pursuant to the terms of this
      Agreement shall have been duly performed and complied with in all material
      respects;  all of the  representations and warranties of the Mortgage Loan
      Seller  under this  Agreement  shall be true and correct as of the date or
      dates specified in all material respects; and no event shall have occurred
      which,  with notice or the  passage of time,  would  constitute  a default
      under this  Agreement,  or the Pooling and  Servicing  Agreement;  and the
      Purchaser  shall  have  received  certificates  to that  effect  signed by
      authorized officers of the Mortgage Loan Seller.

            (ii) The Purchaser shall have received all of the following  closing
      documents,  in such forms as are agreed upon and reasonably  acceptable to
      the Purchaser, duly executed by all signatories (other than the Purchaser)
      as required pursuant to the respective terms thereof:


                                      J-16
<PAGE>

                  (1) If required  pursuant to Section 3 hereof,  the  Amendment
            dated as of the Closing Date and any documents referred to therein;

                  (2) If  required  pursuant  to  Section  3  hereof,  the Final
            Mortgage  Loan  Schedule  containing  the  information  set forth on
            Exhibit 2 hereto, one copy to be attached to each counterpart of the
            Amendment;

                  (3) The Pooling and Servicing Agreement, in form and substance
            reasonably  satisfactory  to the Trustee and the Purchaser,  and all
            documents required thereby duly executed by all signatories;

                  (4) A  certificate  of an officer of the Mortgage  Loan Seller
            dated as of the Closing Date, in a form reasonably acceptable to the
            Purchaser, and attached thereto the resolutions of the Mortgage Loan
            Seller authorizing the transactions  contemplated by this Agreement,
            together with copies of the charter and by-laws of the Mortgage Loan
            Seller;

                  (5) One or more  opinions of counsel  from the  Mortgage  Loan
            Seller's  counsel   otherwise  in  form  and  substance   reasonably
            satisfactory to the Purchaser, the Trustee and each Rating Agency;

                  (6) A letter  from each of the  Rating  Agencies  giving  each
            Class of  Certificates  set forth on Schedule A the rating set forth
            on Schedule A; and

                  (7) Such other documents,  certificates  (including additional
            representations  and  warranties)  and opinions as may be reasonably
            necessary to secure the intended ratings from each Rating Agency for
            the Certificates.

            (iii) The  Certificates  to be sold to Bear Stearns  pursuant to the
      Underwriting  Agreement and the Purchase  Agreement shall have been issued
      and sold to Bear Stearns.

            (iv) The Mortgage Loan Seller shall have  furnished to the Purchaser
      such other certificates of its officers or others and such other documents
      and  opinions of counsel to evidence  fulfillment  of the  conditions  set
      forth in this Agreement and the  transactions  contemplated  hereby as the
      Purchaser and its counsel may reasonably request.

      (b) The obligations of the Mortgage Loan Seller under this Agreement shall
be  subject  to the  satisfaction,  on or  prior  to the  Closing  Date,  of the
following conditions:

            (i) The obligations of the Purchaser  required to be performed by it
      on or prior to the Closing  Date  pursuant to the terms of this  Agreement
      shall have been duly performed and complied with in all material respects,
      and all of the  representations and warranties of the Purchaser under this
      Agreement  shall be true and  correct in all  material  respects as of the
      date hereof and as of the Closing Date, and no event shall have


                                      J-17
<PAGE>

      occurred  which  would  constitute  a  breach  by it of the  terms of this
      Agreement,  and the Mortgage Loan Seller shall have received a certificate
      to that effect signed by an authorized officer of the Purchaser.

            (ii) The Mortgage Loan Seller shall have  received  copies of all of
      the  following  closing  documents,  in such forms as are agreed  upon and
      reasonably  acceptable to the Mortgage  Loan Seller,  duly executed by all
      signatories  other than the Mortgage  Loan Seller as required  pursuant to
      the respective terms thereof:

                  (1) If required  pursuant to Section 3 hereof,  the  Amendment
            dated as of the Closing Date and any documents referred to therein;

                  (2) The Pooling and Servicing Agreement, in form and substance
            reasonably  satisfactory  to  the  Mortgage  Loan  Seller,  and  all
            documents required thereby duly executed by all signatories;

                  (3) A certificate  of an officer of the Purchaser  dated as of
            the Closing  Date, in a form  reasonably  acceptable to the Mortgage
            Loan Seller,  and attached  thereto the resolutions of the Purchaser
            authorizing the transactions  contemplated by this Agreement and the
            Pooling  and  Servicing  Agreement,  together  with  copies  of  the
            Purchaser's  articles of incorporation,  and evidence as to the good
            standing of the Purchaser dated as of a recent date;

                  (4) One or more  opinions  of  counsel  from  the  Purchaser's
            counsel  in  form  and  substance  reasonably  satisfactory  to  the
            Mortgage Loan Seller;

                  (5) Such other documents,  certificates  (including additional
            representations  and  warranties)  and opinions as may be reasonably
            necessary to secure the intended  rating from each Rating Agency for
            the Certificates;

      SECTION 11. Fees and Expenses.  Subject to Section 16 hereof, the Mortgage
Loan Seller shall pay on the Closing Date or such later date as may be agreed to
by the  Purchaser  (i) the fees  and  expenses  of the  Mortgage  Loan  Seller's
attorneys and the  reasonable  fees and expenses of the  Purchaser's  attorneys,
(ii) the fees and  expenses of Deloitte & Touche LLP,  (iii) the fee for the use
of Purchaser's  Registration Statement based on the aggregate original principal
amount of the  Certificates and the filing fee of the Commission as in effect on
the date on which the Registration  Statement was declared  effective,  (iv) the
fees and expenses  including  counsel's fees and expenses in connection with any
"blue  sky" and  legal  investment  matters,  (v) the fees and  expenses  of the
Trustee  which shall  include  without  limitation  the fees and expenses of the
Trustee  (and the fees and  disbursements  of its  counsel)  with respect to (A)
legal  and  document  review  of  this  Agreement,  the  Pooling  and  Servicing
Agreement,  the  Certificates  and related  agreements,  (B)  attendance  at the
Closing and (C) review of the Mortgage  Loans to be performed by the  Custodian,
(vi) the expenses for printing or otherwise  reproducing the  Certificates,  the
Prospectus  and the Prospectus  Supplement,  (vii) the fees and expenses of each
Rating Agency (both initial and ongoing),  (viii) the fees and expenses relating
to the preparation


                                      J-18
<PAGE>

and recordation of mortgage assignments (including intervening  assignments,  if
any and if available,  to evidence a complete chain of title from the originator
to the  Trustee)  from the  Mortgage  Loan Seller to the Trustee or the expenses
relating to the Opinion of Counsel  referred to in Section 6(a)  hereof,  as the
case  may  be,  and  (ix)  Mortgage  File  due  diligence   expenses  and  other
out-of-pocket expenses incurred by the Purchaser in connection with the purchase
of the  Mortgage  Loans and by Bear Stearns in  connection  with the sale of the
Certificates.  The Mortgage Loan Seller  additionally  agrees to pay directly to
any third party on a timely basis the fees  provided for above which are charged
by such third party and which are billed periodically.

      SECTION 12. Accountants' Letters.

      (a) Deloitte & Touche LLP will review the  characteristics  of a sample of
the  Mortgage  Loans  described  in the Final  Mortgage  Loan  Schedule and will
compare those characteristics to the description of the Mortgage Loans contained
in  the  Prospectus   Supplement  under  the  captions  "Summary  of  Prospectus
Supplement   -  The  Mortgage   Loans",   "The   Mortgage   Pool"  and  "Certain
Characteristics of the Mortgage Loans" in Schedule A thereto.  The Mortgage Loan
Seller will cooperate with the Purchaser in making available all information and
taking all steps reasonably necessary to permit such accountants to complete the
review and to  deliver  the  letters  required  of them  under the  Underwriting
Agreement.  Deloitte & Touche LLP will also confirm certain  calculations as set
forth  under  the  caption  "Yield  On  The   Certificates"  in  the  Prospectus
Supplement.

      (b) To the  extent  statistical  information  with  respect  to the Master
Servicer's  or a Servicer's  servicing  portfolio is included in the  Prospectus
Supplement  under the caption "The Master  Servicer and the Servicers," a letter
from the certified  public  accountant for the Master Servicer and such Servicer
or Servicers will be delivered to the Purchaser dated the date of the Prospectus
Supplement, in the form previously agreed to by the Mortgage Loan Seller and the
Purchaser, with respect to such statistical information.

      SECTION 13. Indemnification.

      (a) The  Mortgage  Loan  Seller  shall  indemnify  and hold  harmless  the
Purchaser and its  directors,  officers and  controlling  persons (as defined in
Section 15 of the Securities  Act) from and against any loss,  claim,  damage or
liability or action in respect thereof,  to which they or any of them may become
subject,  under the  Securities Act or otherwise,  insofar as such loss,  claim,
damage,  liability  or action  arises  out of, or is based  upon (i) any  untrue
statement of a material fact contained in the Mortgage Loan Seller's Information
as identified in Exhibit 3, the omission to state in the  Prospectus  Supplement
or Prospectus (or any amendment  thereof or supplement  thereto  approved by the
Mortgage Loan Seller and in which additional Mortgage Loan Seller's  Information
is  identified),  in reliance upon and in conformity with Mortgage Loan Seller's
Information a material  fact required to be stated  therein or necessary to make
the statements  therein in light of the  circumstances  in which they were made,
not  misleading,  (ii) any  representation  or warranty  assigned or made by the
Mortgage Loan Seller in Section 7 or Section 8 hereof  being,  or alleged to be,
untrue or incorrect, or (iii) any failure by the Mortgage Loan Seller to perform
its  obligations  under this  Agreement;  and the  Mortgage  Loan  Seller  shall
reimburse the Purchaser and each other indemnified party for any legal and


                                      J-19
<PAGE>

other expenses  reasonably  incurred by them in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action.

      The foregoing  indemnity  agreement is in addition to any liability  which
the Mortgage  Loan Seller  otherwise may have to the Purchaser or any other such
indemnified party.

      (b) The  Purchaser  shall  indemnify  and hold  harmless the Mortgage Loan
Seller and its  respective  directors,  officers  and  controlling  persons  (as
defined in Section 15 of the Securities  Act) from and against any loss,  claim,
damage or liability or action in respect  thereof,  to which they or any of them
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim,  damage,  liability  or action  arises  out of, or is based  upon (i) any
untrue statement of a material fact contained in the Purchaser's  Information as
identified in Exhibit 4, the omission to state in the  Prospectus  Supplement or
Prospectus  (or any  amendment  thereof or  supplement  thereto  approved by the
Purchaser and in which  additional  Purchaser's  Information is identified),  in
reliance upon and in conformity  with the  Purchaser's  Information,  a material
fact required to be stated therein or necessary to make the  statements  therein
in light of the circumstances in which they were made, not misleading,  (ii) any
representation  or warranty made by the Purchaser in Section 9 hereof being,  or
alleged to be,  untrue or  incorrect,  or (iii) any failure by the  Purchaser to
perform its obligations under this Agreement;  and the Purchaser shall reimburse
the Mortgage  Loan Seller,  and each other  indemnified  party for any legal and
other expenses  reasonably  incurred by them in connection with investigating or
defending  or  preparing to defend any such loss,  claim,  damage,  liability or
action. The foregoing  indemnity agreement is in addition to any liability which
the Purchaser  otherwise may have to the Mortgage Loan Seller, or any other such
indemnified party,

      (c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action,  such  indemnified  party
shall,  if a claim in respect  thereof is to be made  against  the  indemnifying
party under such subsection,  notify each party against whom  indemnification is
to be sought in  writing  of the  commencement  thereof  (but the  failure so to
notify an  indemnifying  party shall not relieve it from any liability  which it
may have under this Section 13 except to the extent that it has been  prejudiced
in any material  respect by such failure or from any liability which it may have
otherwise).  In case any such action is brought against any  indemnified  party,
and  it  notifies  an  indemnifying  party  of  the  commencement  thereof,  the
indemnifying party will be entitled to participate therein and, to the extent it
may elect by written notice delivered to the indemnified party promptly (but, in
any event,  within 30 days)  after  receiving  the  aforesaid  notice  from such
indemnified  party,  to assume  the  defense  thereof  with  counsel  reasonably
satisfactory  to such  indemnified  party.  Notwithstanding  the foregoing,  the
indemnified  party or  parties  shall  have the right to employ its or their own
counsel in any such case,  but the fees and expenses of such counsel shall be at
the expense of such  indemnified  party or parties  unless (i) the employment of
such counsel shall have been  authorized  in writing by one of the  indemnifying
parties in  connection  with the defense of such action,  (ii) the  indemnifying
parties  shall not have  employed  counsel to have charge of the defense of such
action within a reasonable time after notice of  commencement of the action,  or
(iii) such  indemnified  party or parties shall have  reasonably  concluded that
there  is  a  conflict  of  interest   between  itself  or  themselves  and  the
indemnifying  party  in the  conduct  of the  defense  of any  claim or that the
interests of the indemnified party or parties are not


                                      J-20
<PAGE>

substantially  co-extensive with those of the indemnifying  party (in which case
the indemnifying  parties shall not have the right to direct the defense of such
action on behalf of the  indemnified  party or parties),  in any of which events
such fees and expenses  shall be borne by the  indemnifying  parties  (provided,
however,  that the  indemnifying  party  shall be  liable  only for the fees and
expenses of one counsel in  addition  to one local  counsel in the  jurisdiction
involved.  Anything  in this  subsection  to the  contrary  notwithstanding,  an
indemnifying party shall not be liable for any settlement or any claim or action
effected without its written consent;  provided,  however, that such consent was
not unreasonably withheld.

      (d) If the indemnification  provided for in paragraphs (a) and (b) of this
Section  13 shall  for any  reason be  unavailable  to an  indemnified  party in
respect  of any loss,  claim,  damage or  liability,  or any  action in  respect
thereof, referred to in Section 13, then the indemnifying party shall in lieu of
indemnifying  the indemnified  party contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability,  or
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative  benefits  received by the Mortgage Loan Seller on the one hand and
the Purchaser on the other from the purchase and sale of the Mortgage Loans, the
offering of the Certificates and the other transactions  contemplated hereunder.
No person found liable for a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution  from any
person who is not also found liable for such fraudulent misrepresentation.

      (e) The parties hereto agree that reliance by an indemnified  party on any
publicly available  information or any information or directions furnished by an
indemnifying  party  shall  not  constitute  negligence,  bad  faith or  willful
misconduct by such indemnified party.

      SECTION 14. Notices.  All demands,  notices and  communications  hereunder
shall be in writing but may be delivered by facsimile transmission  subsequently
confirmed in writing.  Notices to the Mortgage  Loan Seller shall be directed to
EMC Mortgage  Corporation,  Mac Arthur  Ridge II, 909 Hidden Ridge Drive,  Suite
200,  Irving,  Texas  75038  (Telecopy:  (972-444-2880)),  and  notices  to  the
Purchaser  shall be directed to Structured  Asset Mortgage  Investments II Inc.,
383  Madison  Avenue,  New  York,  New York  10179  (Telecopy:  (212-272-7206)),
Attention:  Baron  Silverstein;  or to any other  address  as may  hereafter  be
furnished  by one  party to the other  party by like  notice.  Any such  demand,
notice or  communication  hereunder shall be deemed to have been received on the
date  received at the premises of the addressee  (as  evidenced,  in the case of
registered or certified mail, by the date noted on the return receipt)  provided
that it is  received  on a business  day during  normal  business  hours and, if
received after normal business hours,  then it shall be deemed to be received on
the next business day.

      SECTION 15. Transfer of Mortgage Loans. The Purchaser retains the right to
assign the Mortgage Loans and any or all of its interest under this Agreement to
the Trustee  without the consent of the  Mortgage  Loan Seller,  and,  upon such
assignment,  the Trustee shall succeed to the applicable  rights and obligations
of the  Purchaser  hereunder;  provided,  however,  the  Purchaser  shall remain
entitled  to the  benefits  set forth in  Sections  11, 13 and 17 hereto  and as
provided in Section 2(a).  Notwithstanding the foregoing, the sole and exclusive
right and remedy of the Trustee  with respect to a breach of  representation  or
warranty of the Mortgage


                                      J-21
<PAGE>

Loan Seller shall be the purchase or  substitution  obligations  of the Mortgage
Loan Seller contained in Sections 5 and 7 hereof.

      SECTION 16.  Termination.  This  Agreement  may be  terminated  (a) by the
mutual  consent of the  parties  hereto  prior to the Closing  Date,  (b) by the
Purchaser,  if the conditions to the  Purchaser's  obligation to close set forth
under  Section  10(a)  hereof  are not  fulfilled  as and  when  required  to be
fulfilled or (c) by the Mortgage Loan Seller,  if the conditions to the Mortgage
Loan  Seller's  obligation to close set forth under Section 10(b) hereof are not
fulfilled  as and when  required to be  fulfilled.  In the event of  termination
pursuant to clause (b), the Mortgage  Loan Seller shall pay, and in the event of
termination  pursuant to clause (c), the  Purchaser  shall pay,  all  reasonable
out-of-pocket expenses incurred by the other in connection with the transactions
contemplated by this Agreement. In the event of a termination pursuant to clause
(a), each party shall be responsible for its own expenses.

      SECTION  17.   Representations,   Warranties  and  Agreements  to  Survive
Delivery.  All  representations,  warranties  and  agreements  contained in this
Agreement,  or contained in certificates of officers of the Mortgage Loan Seller
submitted  pursuant hereto,  shall remain operative and in full force and effect
and shall survive  delivery of the Mortgage  Loans to the Purchaser  (and by the
Purchaser to the Trustee).  Subsequent to the delivery of the Mortgage  Loans to
the  Purchaser,  the  Mortgage  Loan  Seller's  representations  and  warranties
contained herein with respect to the Mortgage Loans shall be deemed to relate to
the Mortgage Loans actually delivered to the Purchaser and included in the Final
Mortgage  Loan  Schedule  and any  Substitute  Mortgage  Loan  and not to  those
Mortgage Loans deleted from the Preliminary  Mortgage Loan Schedule  pursuant to
Section 3 hereof prior to the Closing.

      SECTION 18.  Severability.  If any  provision of this  Agreement  shall be
prohibited or invalid under  applicable  law, the Agreement shall be ineffective
only to such extent, without invalidating the remainder of this Agreement.

      SECTION 19. Counterparts.  This Agreement may be executed in counterparts,
each of which will be an original,  but which together shall  constitute one and
the same agreement.

      SECTION 20. Amendment. This Agreement cannot be amended or modified in any
manner without the prior written consent of each party.

      SECTION 21.  GOVERNING  LAW. THIS  AGREEMENT  SHALL BE DEEMED TO HAVE BEEN
MADE  AND  PERFORMED  IN THE  STATE OF NEW YORK  AND  SHALL  BE  INTERPRETED  IN
ACCORDANCE  WITH THE LAWS OF SUCH  STATE,  WITHOUT  REGARD TO  CONFLICT  OF LAWS
PRINCIPLES OF SUCH STATE.

      SECTION 22. Further Assurances.  Each of the parties agrees to execute and
deliver such  instruments  and take such actions as another party may, from time
to time,  reasonably request in order to effectuate the purpose and to carry out
the  terms of this  Agreement  including  any  amendments  hereto  which  may be
required by either Rating Agency.

      SECTION 23. Successors and Assigns.


                                      J-22
<PAGE>

      This  Agreement  shall bind and inure to the benefit of and be enforceable
by the Mortgage Loan Seller and the Purchaser and their permitted successors and
assigns and, to the extent  specified in Section 13 hereof,  Bear  Stearns,  and
their directors, officers and controlling persons (within the meaning of federal
securities  laws).  The Mortgage  Loan Seller  acknowledges  and agrees that the
Purchaser  may assign  its  rights  under  this  Agreement  (including,  without
limitation,  with  respect to the Mortgage  Loan  Seller's  representations  and
warranties  respecting the Mortgage Loans) to the Trustee. Any person into which
the Mortgage Loan Seller may be merged or consolidated  (or any person resulting
from any merger or consolidation involving the Mortgage Loan Seller), any person
resulting  from a change  in form of the  Mortgage  Loan  Seller  or any  person
succeeding to the business of the Mortgage Loan Seller,  shall be considered the
"successor"  of the Mortgage  Loan Seller  hereunder  and shall be  considered a
party hereto  without the execution or filing of any paper or any further act or
consent on the part of any party hereto. Except as provided in the two preceding
sentences, this Agreement cannot be assigned,  pledged or hypothecated by either
party hereto without the written  consent of the other parties to this Agreement
and any such assignment or purported assignment shall be deemed null and void.

      SECTION 24. The Mortgage  Loan Seller.  The Mortgage Loan Seller will keep
in  full  effect  all  rights  as are  necessary  to  perform  their  respective
obligations under this Agreement.

      SECTION 25. Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to the subject matter hereof,
and  supersedes  all  prior  and  contemporaneous  agreements,   understandings,
inducements and conditions,  express or implied,  oral or written, of any nature
whatsoever with respect to the subject matter hereof.

      SECTION 26. No  Partnership.  Nothing herein  contained shall be deemed or
construed to create a partnership or joint venture between the parties hereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                      J-23
<PAGE>


      IN WITNESS  WHEREOF,  the parties  hereto  have  caused  their names to be
signed hereto by their respective duly authorized  officers as of the date first
above written.

                                       EMC MORTGAGE CORPORATION


                                       By:
                                              --------------------------------
                                       Name:  Dana Dillard
                                       Title: Senior Vice President



                                       STRUCTURED ASSET MORTGAGE
                                       INVESTMENTS II INC.


                                       By:
                                              --------------------------------
                                       Name:  Baron Silverstein
                                       Title: Vice President



                                      J-24
<PAGE>

                                    EXHIBIT 1

                            CONTENTS OF MORTGAGE FILE

      With respect to each Mortgage  Loan,  the Mortgage File shall include each
of the following items, which shall be available for inspection by the Purchaser
or its  designee,  and which shall be delivered to the Purchaser or its designee
pursuant to the terms of the Agreement.

      Section 4.6 with respect to each  Mortgage  Loan (other than a Cooperative
Loan):

            (a) The original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the  originator  thereof to the Person  endorsing it to the Trustee,  or a
      lost note affidavit together with a copy of the related Mortgage Note;

            (b) The original Mortgage and, if the related Mortgage Loan is a MOM
      Loan,  noting the  presence of the MIN and language  indicating  that such
      Mortgage  Loan is a MOM Loan,  which shall have been  recorded  (or if the
      original  is not  available,  a copy),  with  evidence  of such  recording
      indicated  thereon (or if the  original is not  available,  a copy),  with
      evidence of such recording  indicated thereon (or if the original Security
      Instrument,  assignments to the Trustee or intervening assignments thereof
      which have been  delivered,  are being  delivered or will, upon receipt of
      recording  information  relating to the Security Instrument required to be
      included thereon, be delivered to recording offices for recording and have
      not been  returned  to the  Seller in time to permit  their  recording  as
      specified in Section 2.01(b) of the Pooling and Servicing Agreement, shall
      be in recordable form);

            (c) unless the Mortgage Loan is a MOM Loan, a certified  copy of the
      assignment (which may be in the form of a blanket  assignment if permitted
      in the  jurisdiction in which the Mortgaged  Property is located) to "U.S.
      Bank National  Association,  as Trustee",  with evidence of recording with
      respect to each  Mortgage  Loan in the name of the Trustee  thereon (or if
      (A) the  original  Security  Instrument,  assignments  to the  Trustee  or
      intervening  assignments  thereof  which  have been  delivered,  are being
      delivered or will, upon receipt of recording  information  relating to the
      Security  Instrument  required to be included  thereon,  be  delivered  to
      recording  offices for  recording and have not been returned to the Seller
      in time to permit their  delivery as  specified in Section  2.01(b) of the
      Pooling  and  Servicing  Agreement,  the  Seller  may  deliver a true copy
      thereof  with a  certification  by the  Seller,  on the face of such copy,
      substantially as follows:  "Certified to be a true and correct copy of the
      original,  which has been  transmitted  for  recording" or (B) the related
      Mortgaged  Property  is located  in a state  other  than  Maryland  and an
      Opinion of Counsel has been  provided  as set forth in Section  2.01(b) of
      the Pooling and Servicing Agreement, shall be in recordable form);

            (d) all  intervening  assignments  of the  Security  Instrument,  if
      applicable  and only to the extent  available to the Mortgage  Loan Seller
      with evidence of recording thereon;


                                      J-25
<PAGE>

            (e) the original or a copy of the policy or  certificate  of primary
      mortgage guaranty insurance, to the extent available, if any;

            (f)  the  original   policy  of  title   insurance  or   mortgagee's
      certificate  of  title   insurance  or  commitment  or  binder  for  title
      insurance; and

            (g) originals of all  modification  agreements,  if  applicable  and
      available.

      Section 4.7 with respect to each Cooperative Loan so assigned:

            (a) The original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the originator thereof to the Person endorsing it to the Trustee,  or lost
      note affidavit, together with a copy of the related Mortgage Note;

            (b) A counterpart  of the  Cooperative  Lease and the  Assignment of
      Proprietary   Lease  to  the  originator  of  the  Cooperative  Loan  with
      intervening  assignments  showing  an  unbroken  chain of title  from such
      originator to the Trustee;

            (c) The related  Cooperative  Stock  Certificate,  representing  the
      related  Cooperative  Stock pledged with respect to such Cooperative Loan,
      together  with an  undated  stock  power  (or  other  similar  instrument)
      executed in blank;

            (d) The original  recognition  agreement by the  Cooperative  of the
      interests of the mortgagee  with respect to the related  Cooperative  Loan
      and any transfer documents related to the recognition agreement;

            (e) The Security Agreement;

            (f)  Copies  of the  original  UCC-1  financing  statement,  and any
      continuation statements,  filed by the originator of such Cooperative Loan
      as secured party, each with evidence of recording thereof,  evidencing the
      interest of the originator under the Security Agreement and the Assignment
      of Proprietary Lease;

            (g) Copies of the filed UCC-3  assignments of the security  interest
      referenced  in clause (vi) above  showing an unbroken  chain of title from
      the  originator to the Trustee,  each with evidence of recording  thereof,
      evidencing the interest of the originator under the Security Agreement and
      the Assignment of Proprietary Lease;

            (h) An executed  assignment of the interest of the originator in the
      Security  Agreement  and  Assignment  of  Proprietary  Lease,  showing  an
      unbroken chain of title from the originator to the Trustee; and

            (i) The  original  of each  modification,  assumption  agreement  or
      preferred loan agreement, if any, relating to such Cooperative Loan.


                                      J-26
<PAGE>

                                    EXHIBIT 2

                       MORTGAGE LOAN SCHEDULE INFORMATION

      The  Preliminary  and Final  Mortgage Loan  Schedules  shall set forth the
following information with respect to each Mortgage Loan:

            (a) the loan number;

            (b) [the Mortgagor's name];

            (c) the city, state and zip code of the Mortgaged Property;

            (d) the property type;

            (e) the Mortgage Interest Rate;

            (f) the Servicing Rate;

            (g) the Net Rate;

            (h) the original term;

            (i) the maturity date;

            (j) the stated remaining term to maturity;

            (k) the original principal balance;

            (l) the first payment date;

            (m) the principal  and interest  payment in effect as of the Cut-off
      Date;

            (n) the unpaid principal balance as of the Cut-off Date;

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

            (p) paid-through date;

            (q) the insurer of any Primary Mortgage Insurance Policy;

            (r) the Gross Margin, if applicable;

            (s) the Maximum Lifetime Mortgage Rate, if applicable;

            (t) the Minimum Lifetime Mortgage Rate, if applicable;

            (u) the Periodic Rate Cap, if applicable;

            (v) the number of days delinquent, if any;


                                      J-27
<PAGE>

            (w) which Mortgage Loans adjust after an initial  fixed-rate  period
      of three, five, seven or ten years;

            (x) the Loan Group;

            (y) the Prepayment Charge Loans; and

            (z) the Servicer.

Such schedule also shall set forth for all of the Mortgage Loans, the total
number of Mortgage Loans, the total of each of the amounts described under (k)
and (n) above, the weighted average by principal balance as of the Cut-off Date
of each of the rates described under (e), (f) and (g) above, and the weighted
average remaining term to maturity by unpaid principal balance as of the Cut-off
Date.



                                      J-28
<PAGE>


                                    EXHIBIT 3

                       MORTGAGE LOAN SELLER'S INFORMATION

      All information in the Prospectus Supplement described under the following
Sections:  "SUMMARY  OF  PROSPECTUS  SUPPLEMENT  -- The  Mortgage  Loans,"  "THE
MORTGAGE  POOL" and  "SCHEDULE  A --  CERTAIN  CHARACTERISTICS  OF THE  MORTGAGE
LOANS."



                                      J-29
<PAGE>

                                    EXHIBIT 4

                             PURCHASER'S INFORMATION

      All information in the Prospectus  Supplement and the  Prospectus,  except
the Mortgage Loan Seller's Information.



                                      J-30
<PAGE>


                                    EXHIBIT 5

                             SCHEDULE OF LOST NOTES

                             Available Upon Request






                                      J-31
<PAGE>

                                    EXHIBIT 6

         APPENDIX E: Standard & Poor's Predatory Lending Categorization

      Standard & Poor's has categorized loans governed by anti-predatory lending
laws in the  Jurisdictions  listed  below  into  three  categories  based upon a
combination  of factors that include (a) the risk exposure  associated  with the
assignee  liability  and (b) the tests and  thresholds  set forth in those laws.
Note that  certain  loans  classified  by the  relevant  statute as Covered  are
included in  Standard & Poor's High Cost Loan  Category  because  they  included
thresholds and tests that are typical of what is generally  considered High Cost
by the industry.

<TABLE>
------------------------------------------------------------------------------------------------------------------
                               STANDARD & POOR'S HIGH-COST LOAN CATEGORIZATION

------------------------------------------------------------------------------------------------------------------
<S>                                                <C>
STATE/JURISDICTION                                 CATEGORY UNDER APPLICABLE ANTI-PREDATORY LENDING LAW
------------------------------------------------------------------------------------------------------------------
Arkansas                                           High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Cleveland Heights, Ohio                            Covered Loan
------------------------------------------------------------------------------------------------------------------
Colorado                                           Covered Loan
------------------------------------------------------------------------------------------------------------------
Connecticut                                        High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
District of Columbia                               Covered Loan
------------------------------------------------------------------------------------------------------------------
Florida                                            High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002 - March 6, 2003)             High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Georgia as amended (March 7, 2003 - current)       High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
HOEPA Section 32                                   High Cost Loan
------------------------------------------------------------------------------------------------------------------
Illinois                                           High Risk Home Loan
------------------------------------------------------------------------------------------------------------------
Kansas                                             High Loan-to-Value Consumer Loans and High APR Consumer Loans
------------------------------------------------------------------------------------------------------------------
Kentucky                                           High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Los Angeles, Calif.                                High Cost Refinance Home Loan
------------------------------------------------------------------------------------------------------------------
Maine                                              High Rate High Fee Mortgage
------------------------------------------------------------------------------------------------------------------
Massachusetts                                      High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Nevada                                             Home Loan
------------------------------------------------------------------------------------------------------------------
New Jersey                                         High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
New York                                           High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
New Mexico                                         High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
North Carolina                                     High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Oakland, Calif.                                    High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Ohio                                               Covered Loan
------------------------------------------------------------------------------------------------------------------
Oklahoma                                           Subsection 10 Mortgage
------------------------------------------------------------------------------------------------------------------
South Carolina                                     High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
West Virginia                                      West Virginia Mortgage Loan Act Loan
------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      J-32
<PAGE>

<TABLE>
------------------------------------------------------------------------------------------------------------------
                                STANDARD & POOR'S COVERED LOAN CATEGORIZATION

------------------------------------------------------------------------------------------------------------------
<S>                                                <C>
STATE/JURISDICTION                                 CATEGORY UNDER APPLICABLE ANTI-PREDATORY LENDING LAW
------------------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002-March 6, 2003)               Covered Loan
------------------------------------------------------------------------------------------------------------------
New Jersey                                         Covered Home Loan
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
                                 STANDARD & POOR'S HOME LOAN CATEGORIZATION
------------------------------------------------------------------------------------------------------------------
STATE/JURISDICTION                                 CATEGORY UNDER APPLICABLE ANTI-PREDATORY LENDING LAW
------------------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002-March 6, 2003)               Home Loan
------------------------------------------------------------------------------------------------------------------
New Jersey                                         Home Loan
------------------------------------------------------------------------------------------------------------------
New Mexico                                         Home Loan
------------------------------------------------------------------------------------------------------------------
North Carolina                                     Consumer Home Loan
------------------------------------------------------------------------------------------------------------------
Oakland, Calif.                                    Home Loan
------------------------------------------------------------------------------------------------------------------
South Carolina                                     Consumer Home Loan
------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      J-33
<PAGE>


                                   SCHEDULE A

                 REQUIRED RATINGS FOR EACH CLASS OF CERTIFICATES

                               Public Certificates

                 Class                            S&P                 Fitch
-------------------------------------         -----------          -----------
Class I-A-1..........................             AAA                  AAA
Class I-A-2..........................             AAA                  AAA
Class I-A-3..........................             AAA                  AAA
Class I-A-4..........................             AAA                  AAA
Class I-A-5..........................             AAA                  AAA
Class I-A-6..........................             AAA                  AAA
Class I-A-7..........................             AAA                  AAA
Class I-A-8..........................             AAA                  AAA
Class I-PO...........................             AAA                  AAA
Class II-A-1.........................             AAA                  AAA
Class II-A-2.........................             AAA                  AAA
Class II-A-3.........................             AAA                  AAA
Class II-PO..........................             AAA                  AAA
Class II-X-1.........................             AAA                  AAA
Class R-I............................             AAA                   NR
Class R-II...........................             AAA                   NR
Class R-III..........................             AAA                   NR
Class B-1............................             AA                    NR
Class B-2............................              A                    NR
Class B-3............................             BBB                   NR

None of the above ratings have been lowered since the respective dates of such
letters.

                              Private Certificates

                 Class                            S&P                 Fitch
-------------------------------------         -----------          -----------
Class B-4............................             BB                    NR
Class B-5............................              B                    NR
Class B-6............................             NR                    NR


                                      J-34
<PAGE>


None of the above ratings have been lowered since the respective dates of such
letters.





                                      J-35
<PAGE>


                                   SCHEDULE B

                             MORTGAGE LOAN SCHEDULE

                             [Provided upon request]








                                      J-36