<PAGE>
 
                         CREDIT AND SECURITY AGREEMENT
                            (SYNDICATED AGREEMENT)

                                    BETWEEN

                              THE WMF GROUP, LTD,
                            a Delaware corporation

                        WMF WASHINGTON MORTGAGE CORP.,
                            a Delaware corporation

                    WMF/HUNTOON, PAIGE ASSOCIATES LIMITED,
                            a Delaware corporation

                               WMF PROCTOR LTD.,
                            a Michigan corporation

                         THE ROBERT C.WILSON COMPANY,
                              a Texas corporation

                     THE ROBERT C. WILSON COMPANY-ARIZONA,
                            an Arizona corporation

                        WMF CARBON MESA ADVISORS, INC.,
                            a Delaware corporation

                                      AND

                       RESIDENTIAL FUNDING CORPORATION,
                            a Delaware corporation

                                      AND

                      CERTAIN OTHER LENDERS PARTY THERETO





                         Dated as of February 10, 1999
<PAGE>
 
                               TABLE OF CONTENTS


                                                                          PAGE
                                                                          ----

1.       DEFINITIONS                                                         1

1.1      Defined Terms                                                       1

1.2      Other Definitional Provisions                                      25

2.       THE CREDIT                                                         25

2.1      The Warehousing Credit Limit                                       25

2.2      Swingline Commitment.                                              29

2.3      Procedures for Obtaining Warehousing Advances                      29

2.4      The Servicing Facility Commitment                                  32

2.5      Procedures for Obtaining Servicing Facility Advances               33

2.6      The Term Loan Commitment                                           35 

2.7      Funding of Advances; Non-Receipt of Funds by the Credit Agent      35

2.8      Notes                                                              36

2.9      Interest Payments                                                  37

2.10     Principal Payments                                                 39

2.11     Expiration of Commitments                                          44

2.12     Fees                                                               44

2.13     Miscellaneous Charges                                              47

2.14     Illegality                                                         47

2.15     Interest Limitation                                                48

2.16     Billing and Payment                                                48

3.       COLLATERAL.                                                        49

3.1      Appointment of Collateral Agent                                    49
<PAGE>
 
3.2      Delivery of Collateral                                             49

3.3      Grant of Security Interest                                         49

3.4      Release of Security Interest in Collateral                         52

3.5      Delivery of Additional Collateral or Mandatory Prepayment          55

3.6      Release of Collateral                                              55

3.7      Collection and Servicing Rights                                    56

3.8      Collection of Receivables                                          56

3.9      Return of Collateral at Maturity                                   57

4.       CONDITIONS PRECEDENT                                               57

4.1      Initial Advances                                                   57

4.2      Each Advance                                                       60

4.3      New Subsidiary Borrowers                                           61

4.4      New Fannie Mae Special Program Agreements                          63

5.       REPRESENTATIONS                                                    64

5.1      Organization; Good Standing; Subsidiaries                          64

5.2      Authorization and Enforceability                                   64

5.3      Approvals                                                          65 

5.4      Financial Condition                                                65 

5.5      Litigation                                                         66 

5.6      Compliance with Laws                                               66 

5.7      Regulation U                                                       66 

5.8      Investment Company Act                                             66 

5.9      Payment of Taxes                                                   66 

5.10     Agreements                                                         67 
<PAGE>
 
5.11     Title to Properties                                                67 

5.12     ERISA                                                              67 

5.13     Eligibility                                                        68 

5.14     Place of Business                                                  68 

5.15     Special Representations Concerning Warehousing Collateral          68 

5.16     Servicing                                                          71

5.17     Special Representations Concerning Servicing Collateral            72

5.18     No Adverse Selection                                               73 

5.19     Year 2000 Compliance                                               73 

6.       AFFIRMATIVE COVENANTS                                              73 

6.1      Payment of Notes                                                   73 

6.2      Financial Statements and Other Reports                             74

6.3      Maintenance of Existence; Conduct of Business                      76

6.4      Compliance with Applicable Laws                                    77

6.5      Inspection of Properties and Books                                 77

6.6      Notice                                                             77

6.7      Payment of Debt, Taxes, etc                                        78

6.8      Insurance                                                          79

6.9      Closing Instructions                                               79

6.10     Subordination of Certain Indebtedness                              79

6.11     Other Loan Obligations                                             79

6.12     Use of Proceeds of Advances                                        80

6.13     Special Affirmative Covenants Concerning Collateral                80

6.14     Repayment of Debt to PNC Bank, N.A.                                82

7.       NEGATIVE COVENANTS                                                 82
<PAGE>
 
7.1      Contingent Liabilities                                             82

7.2      Sale or Pledge of Servicing Contracts                              82

7.3      Merger; Sale of Assets; Acquisitions                               83

7.4      Defferal of Subordinated Debt                                      83

7.5      Loss of Eligibility                                                83

7.6      Debt to Adjusted Tangible Net Worth Ratio                          83

7.7      Non-Warehouse Debt to Adjusted Tangible Net Worth                  83

7.8      Minimum Adjusted Tangible Net Worth                                84

7.9      Liquidity                                                          84

7.10     Maximum Pass-Throughs                                              84

7.11     Minimum Nonrecourse Servicing Portfolio                            84

7.12     Debt Service Coverage Ratio                                        84

7.13     Minimum Income                                                     84

7.14     Debt Limitation                                                    84

7.15     Acquisition of Recourse Servicing Contracts                        85

7.16     Transactions with Affiliates                                       85

7.17     Gestation Facilities                                               85

7.18     Restricted Payments                                                85

7.19     Special Negative Covenants Concerning Collateral                   85

8.       DEFAULTS; REMEDIES                                                 86

8.1      Events of Default.                                                 86

8.2      Remedies.                                                          90

8.3      Application of Proceeds.                                           95

8.4      Credit Agent Appointed Attorney-in-Fact                            97

8.5      Right of Setoff                                                    98

8.6      Sharing of Payments                                                98
<PAGE>
 
9.       THE CREDIT AGENT.                                                  99

9.1      Appointment.                                                       99

9.2      Duties of Credit Agent.                                            99

9.3      Standard of Care.                                                  99

9.4      Delegation of Duties                                              100

9.5      Exculpatory Provisions                                            100

9.6      Reliance by Credit Agent                                          100

9.7      Non-Reliance on Credit Agent or Other Lenders                     101

9.8      Credit Agent in Individual Capacity                               102

9.9      Successor Credit Agent.                                           102

9.10     Agreements Regarding Servicing Collateral and Acknowledgment 
         Agreements                                                        102

10.      NOTICES                                                           103

11.      REIMBURSEMENT OF EXPENSES; INDEMNITY                              103

11.1     Reimbursement of Expenses and Indemnification by the Borrowers.   103

11.2     Indemnification by the Lenders.                                   104

12.      FINANCIAL INFORMATION                                             105

13.      MISCELLANEOUS                                                     105

13.1     Terms Binding Upon Successors; Survival of Representations        105

13.2     Lenders in Individual Capacity                                    105

13.3     Participation and Assignments                                     106

13.4     Commitment Increases                                              107

13.5     Amendments                                                        109

13.6     Operational Reviews                                               110
<PAGE>
 
13.7     Governing Law                                                     110

13.8     Relationship of the Parties                                       111

13.9     Severability                                                      111

13.10    Counterparts                                                      111

13.11    Consent to Credit References                                      111

13.12    Consent to Jurisdiction                                           112

13.13    Counterparts                                                      112

13.14    Confidentiality of Information                                    112

13.15    WAIVER OF JURY TRIAL                                              113

13.16    Entire Agreement                                                  113
<PAGE>
 
                                   EXHIBITS
                                   --------


Exhibit A-1                        Form of Warehousing Promissory Note
Exhibit A-2                        Form of Sublimit Note
Exhibit A-3                        Form of Swingline Promissory Note
Exhibit A-4                        Form of Servicing Facility Promissory Note
Exhibit A-5                        Form of Term Loan Promissory Note

Exhibit B                          (Intentionally Omitted)

Exhibit C-MF                       Request for Advance Against
                                   Mortgage Loans

Exhibit C-P&I                      P&I and Liquidity Advance Request

Exhibit C-SER                      Servicing Facility Advance Request

Exhibit D-MF/CONV/DUS              Procedures and Documentation for Warehousing
                                   Conventional Multifamily, Health Care,
                                   Commercial and Fannie Mae DUS Mortgage Loans

Exhibit D-MF/FHA                   Procedures and Documentation for Warehousing
                                   FHA Project Mortgage Loans and FHA
                                   Construction Mortgage Loans

Exhibit D-MF/SFNMA                 Procedures and Documentation for Warehousing
                                   Special Fannie Mae Loans

Exhibit E                          Schedule of Servicing Contracts

Exhibit F                          Subordination of Debt Agreement

Exhibit G                          Subsidiaries

Exhibit H                          Legal Opinion

Exhibit I-MF                       Officer's Certificate

Exhibit J                          Schedule of Other Credit Agreements

Exhibit K                          Funding Bank Agreement

Exhibit L                          Collateral Agency Agreement

Exhibit M                          Advance Certificate

Exhibit N                          Terms Applicable to Guaranteed Obligations
<PAGE>
 
Exhibit O                          Borrower Addition Agreement

Exhibit P                          Schedule of Subsidiary Borrowers

Exhibit Q                          Schedule of Special Fannie Mae Program
                                   Agreements

Exhibit R                          Schedule of Borrowers' Agency Approvals

Exhibit S                          FHA Construction Loan to be Refinanced

Exhibit T                          Litigation
<PAGE>
 
     THIS CREDIT AND SECURITY AGREEMENT, dated as of February 10, 1999 by and
among THE WMF GROUP, LTD., a Delaware corporation ("WMF Group"), WMF WASHINGTON
MORTGAGE CORP., a Delaware corporation ("Washington"), WMF/HUNTOON, PAIGE
ASSOCIATES LIMITED, a Delaware corporation ("Huntoon"), WMF PROCTOR, LTD., a
Michigan corporation ("Proctor"), THE ROBERT C. WILSON COMPANY, a Texas
corporation ("Wilson"), THE ROBERT C. WILSON COMPANY-ARIZONA, an Arizona
corporation ("Wilson-Arizona"), and WMF CARBON MESA ADVISORS, INC., a Delaware
corporation ("Carbon Mesa"; WMF Group, Washington, Huntoon, Proctor, Wilson,
Wilson-Arizona and Carbon Mesa are hereinafter collectively referred to as the
"Borrowers"), having their principal office at 1593 Spring Hill Road, Suite 400,
Vienna, VA 22182 and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
("RFC"), BANK UNITED, a federal savings bank ("Bank United") and LASALLE
NATIONAL BANK, a national banking association ("LaSalle"; RFC, Bank United,
LaSalle and any Additional Lender that may at any time hereafter become party
hereto are hereafter referred to individually as a "Lender" and collectively as
the "Lenders"), and RFC as credit agent for the Lenders (in such capacity, the
"Credit Agent").

     WHEREAS, the Borrowers and the Lenders desire to set forth herein the terms
and conditions upon which the Lenders shall provide financing to the Borrowers;

     NOW, THEREFORE, the parties hereto hereby agree as follows:

1.   DEFINITIONS.

          1.1  Defined Terms.  Capitalized terms defined below or elsewhere in
               -------------                                                  
     this Agreement (including the Exhibits hereto) shall have the following
     meanings:

          "Acknowledgment Agreement" has the meaning set forth in Section 8.2(j)
           ------------------------                                             
     hereof.

          "Additional Lender" means a Person admitted as a Lender under the
           -----------------                                               
     Agreement by an amendment hereto.

          "Adjusted Servicing Portfolio" means, for any Person, the Servicing
           ----------------------------                                      
     Portfolio of such Person, but excluding the principal balance of Mortgage
     Loans included in the Servicing Portfolio at such date, (a) which are past
     due for principal or interest for sixty (60) days or more, (b) which are
     Fannie Mae DUS Mortgage Loans or FHA co-insured Mortgage Loans, (c) which
     are serviced pursuant to Servicing Contracts that may be terminated without
     cause, (d) with respect to which such Person is obligated to repurchase or
     indemnify the holder of the Mortgage Loans as a result of defaults on the
     Mortgage Loans at any time during the term 
<PAGE>
 
     of such Mortgage Loans, (e) for which the Servicing Contracts are not owned
     by such Person free and clear of all Liens (other than in favor of the
     Lenders), or (f) which are serviced by the Borrowers for others under
     subservicing arrangements.

          "Adjusted Tangible Net Worth" means with respect to any Person at any
           ---------------------------                                         
     date, the Tangible Net Worth of such Person at such date, excluding
     capitalized excess servicing fees and capitalized servicing rights, plus 1%
                                                                         ----   
     of the Adjusted Servicing Portfolio, and plus deferred taxes arising from
                                              ----                            
     capitalized excess servicing fees and capitalized servicing rights.

          "Advance" means a disbursement by the Lenders under the Commitments
           -------                                                           
     pursuant to Article 2 of this Agreement.

          "Advance Certificate" has the meaning set forth in Section 2.2 hereof.
           -------------------                                                  

          "Advance Request" means a Servicing Facility Advance Request or a
           ---------------                                                 
     Warehousing Advance Request.

          "Affiliate" has the meaning set forth in Rule 12b-2 of the General
           ---------                                                        
     Rules and Regulations under the Exchange Act.

          "Agency Security" means a Mortgage-backed Security issued or
           ---------------                                            
     guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

          "Agreement" means this Credit and Security Agreement (Syndicated
           ---------                                                      
     Agreement), either as originally executed or as it may from time to time be
     supplemented, modified or amended.

          "Annual Debt Payments" means, as of the last day of any fiscal quarter
           --------------------                                                 
     of WMF Group and its Subsidiaries, the sum of (a) the aggregate amount of
     scheduled principal payments required under this Agreement on the Term Loan
     Advances in the 4 fiscal quarters following such date, (b) the aggregate
     amount of scheduled principal payments on other Debt of WMF Group (and its
     Subsidiaries, on a consolidated basis) in the 4 fiscal quarters following
     such date, and (c) the amount of interest expense deducted in calculating
     net income for the 4 fiscal quarters ending on such date incurred on Debt
     of WMF Group (and its Subsidiaries, on a consolidated basis), other than
     (i) the Warehousing Advances and (ii) other Debt secured by Multifamily
     Mortgage Loans, Commercial Mortgage Loans and/or Mortgage-backed Securities
     covered by Purchase Commitments issued by Investors, to the extent such
     Debt 
<PAGE>
 
     does not exceed the Committed Purchase Price of such Mortgage Loans.

          "Appraisal" means a certificate of independent certified public
           ---------                                                     
     accountants or independent financial consultants selected by the Borrowers
     and reasonably satisfactory to the Credit Agent as to the Appraisal Value
     of all of the Pledged Servicing Contracts or the Nonrecourse Servicing
     Contracts acquired in any Servicing Acquisition, which shall evaluate such
     Servicing Contracts based upon reasonably determined categories of the
     Mortgage Loans contained therein and give effect to any subservicing
     agreement to which any such Mortgage Loan is or will be subject, which
     certificate shall be in form, substance and detail reasonably satisfactory
     to the Credit Agent.

          "Appraisal Value" means, at any date of determination, with respect to
           ---------------                                                      
     all of the Pledged Servicing Contracts or the Nonrecourse Servicing
     Contracts acquired in any Servicing Acquisition, the fair market value of
     the Borrowers' right to service Mortgage Loans pursuant to such Servicing
     Contracts, calculated as a percentage of the unpaid principal amount of
     each Mortgage Loan serviced pursuant thereto, as set forth in the most
     recent Appraisal.

          "Approved Custodian" means a pool custodian or other Person which is
           ------------------                                                 
     deemed acceptable to the Credit Agent from time to time in its sole
     discretion to hold a Mortgage Loan for inclusion in a Mortgage Pool or to
     hold a Mortgage Loan as agent for an Investor who has issued a Purchase
     Commitment for such Mortgage Loan.

          "Balance Deficiency Fee" has the meaning set forth in Section 2.9(f)
           ----------------------                                             
     hereof.

          "Balance Funded Agreement" has the meaning set forth in Section 2.9(f)
           ------------------------                                             
     hereof.

          "Balance Funded Portion" has the meaning set forth in Section 2.9(f)
           ----------------------                                             
     hereof.

          "Balance Funded Rate" means, with respect to any Advance, the rate
           -------------------                                              
     provided for in the applicable Balance Funded Agreement.

          "Borrower Addition Agreement" means an agreement in the form of
           ---------------------------                                   
     Exhibit O attached hereto, pursuant to which a wholly-owned Subsidiary of
     ---------                                                                
     WMF Group becomes a Borrower hereunder.
<PAGE>
 
          "Borrowers" means WMF Group, Washington, Huntoon, Proctor, Wilson,
           ---------                                                        
     Wilson-Arizona, Carbon Mesa and any wholly-owned Subsidiaries of WMF Group
     listed on Exhibit P hereto.
               ---------        

          "Business Day" means any day excluding Saturday or Sunday and
           ------------                                                
     excluding any day on which national banking associations are closed for
     business.

          "Calendar Quarter" shall mean the 3 month period beginning on any
           ----------------                                                
     January 1, April 1, July 1 or October 1.

          "Cash Collateral Account" means a demand deposit account maintained at
           -----------------------                                              
     the Funding Bank in the name of the Credit Agent for the benefit of the
     Lenders, and designated for receipt of the proceeds of the sale or other
     disposition of the Collateral.

          "Closing Date" means February 11, 1999.
           ------------                          

          "Collateral" means any property or assets in which the Credit Agent is
           ----------                                                           
     granted a Lien to secure the Obligations, including the property and assets
     of the Borrowers described in Section 3.3 hereof.

          "Collateral Agency Agreement" means the agreement dated as of the date
           ---------------------------                                          
     hereof between the Borrowers, the Credit Agent, and the Collateral Agent
     substantially in the form of Exhibit L hereto, as the same may be amended
                                  ---------                                   
     or modified from time to time.

          "Collateral Agent" means RFC, in its capacity as collateral agent for
           ----------------                                                    
     the Credit Agent under the Collateral Agency Agreement.

          "Collateral Documents" has the meaning set forth in Section 2.3(a)
           --------------------                                             
     hereof.

          "Collateral Value" means (a) with respect to any Mortgage Loan as of
           ----------------                                                   
     the date of determination, the lesser of (i) the amount of any Advance made
     against such Mortgage Loan under Section 2.1(c) hereof or (ii) the Fair
     Market Value of such Mortgage Loan; (b) in the event Pledged Mortgages have
     been exchanged for Agency Securities, the lesser of (i) the amount of any
     Advances outstanding against the Mortgage Loans backing such Agency
     Securities or (ii) the Fair Market Value of such Agency Securities; and (c)
     with respect to cash, the amount of such cash.

          "COMIT" means Commercial Mortgage Investment Trust, Inc., a Virginia
           -----                                                              
     corporation and an Affiliate of the Borrowers.
<PAGE>
 
          "Commercial Advance" means an Advance made against a Commercial
           ------------------                                            
     Mortgage Loan.

          "Commercial Mortgage Loan" means a Mortgage Loan secured by a Mortgage
           ------------------------                                             
     on a Commercial Property.

          "Commercial Property" means improved commercial real property that is
           -------------------                                                 
     an income-producing property but is not a Multifamily Property or a Health
     Care Facility.

          "Commitment Fee" means the Warehousing Commitment Fee, the Term Loan
           --------------                                                     
     Commitment Fee, or the Servicing Facility Commitment Fee.

          "Commitments" means, collectively, the Servicing Facility Commitments,
           -----------                                                          
     the Term Loan Commitments and the Warehousing Commitments.

          "Committed Purchase Price" means for a Mortgage Loan the product of
           ------------------------                                          
     the Mortgage Note Amount multiplied by (a) the price (expressed as a
     percentage) as set forth in a Purchase Commitment for such Mortgage Loan or
     (b) in the event such Mortgage Loan is to be used to back an Agency
     Security, the price (expressed as a percentage) as set forth in a Purchase
     Commitment for such Agency Security.

          "Conventional Mortgage Loan" means a Multifamily Mortgage Loan or a
           --------------------------                                        
     Health Care Mortgage Loan other than a Fannie Mae DUS Mortgage Loan, an FHA
     Project Mortgage Loan, or an FHA Construction Mortgage Loan.

          "Credit Agent" means RFC, in its capacity as credit agent for the
           ------------                                                    
     Lenders hereunder, and any successor pursuant to Section 9.9 hereof.

          "Debt" means, with respect to any Person, at any date (a) all
           ----                                                        
     indebtedness or other obligations of such Person which, in accordance with
     GAAP, would be included in determining total liabilities as shown on the
     liabilities side of a balance sheet of such Person at such date; and (b)
     all indebtedness or other obligations of such Person for borrowed money or
     for the deferred purchase price of property or services; provided that for
     purposes of this Agreement, there shall be excluded from Debt at any date
     Fannie Mae Loan Loss Reserves (to the extent included as a liability on
     such Person's balance sheet), Subordinated Debt not due within one year of
     such date, deferred taxes arising from capitalized excess servicing fees
     and capitalized servicing rights and the deferred portion of any purchase
<PAGE>
 
     price payable with respect to a Servicing Acquisition to the extent payment
     of said deferred portion by the Borrower is contingent upon the generation
     of minimum levels of income to the Borrower by the seller.

          "Debt Service Coverage Ratio" means, as of the last day of any fiscal
           ---------------------------                                         
     quarter of WMF Group and its Subsidiaries, the ratio of Funds From
     Operations to Annual Debt Payments.

          "Default" means the occurrence of any event or existence of any
           -------                                                       
     condition which, but for the giving of Notice, the lapse of time, or both,
     would constitute an Event of Default.

          "Default Rate" has the meaning set forth in Section 2.9(g) hereof.
           ------------                                                     

          "Designated Bank" means any bank(s) designated from time to time by
           ---------------                                                   
     any Lender to receive Eligible Balances for the benefit of such Lender for
     the purposes of Section 2.9(f) hereof.

          "DUS Program" means Fannie Mae's Delegated Underwriting and Servicing
           -----------                                                         
     Program.

          "Eligible Balances" means funds of or maintained by the Borrowers and
           -----------------                                                   
     their Subsidiaries in accounts at a Lender or a Designated Bank, less
     balances to support float, reserve requirements, and such other reductions
     as may be imposed by governmental authorities or agreed between the
     Borrowers and such Lender from time to time.

          "Eligible Commercial Mortgage Loan" means a Commercial Mortgage Loan
           ---------------------------------                                  
     which, unless otherwise agreed by the Credit Agent in sole and absolute
     discretion, satisfies each of the following conditions:

               (a)  it is a First Mortgage Loan;

               (b)  it is a Mortgage Loan as to which:

                    (1)  the Mortgage Note is payable or endorsed to the order
               of a Borrower;

                    (2)  each of the Mortgage Note and Mortgage is a legal,
               valid and binding obligation of the Borrower;

                    (3)  the Mortgage Note is an "instrument" within the meaning
               of Section 9-105 of the Uniform 
<PAGE>
 
               Commercial Code of all applicable jurisdictions; and

                    (4)  the Mortgage Note is denominated and payable only in
               United States dollars;

               (c)  a Borrower owns such Mortgage Loan free and clear of any
          Lien (other than the Lien created hereunder);

               (d)  neither such Mortgage Loan nor the related Collateral
          Documents contravene in any material respect any law, rule or
          regulation applicable thereto (including, without limitation, all
          laws, rules and regulations relating to usury) if any such
          contravention would impair the collectibility of such Mortgage Loan,
          and no party to the related Collateral Documents is in violation of
          any such law, rule or regulation (or procedures prescribed thereby) in
          any material respect if such violation would impair the collectibility
          of such Mortgage Loan or the performance by the Borrower or any
          obligor of its obligations with respect thereto;

               (e)  the Mortgage Loan is not subject to any rights of setoff,
          counterclaim or defense in favor of the Mortgage Borrower or any other
          obligor thereon;

               (f)  such Mortgage Loan complies with all representations and
          warranties set forth herein with respect thereto;

               (g)  such Mortgage Loan has been underwritten in accordance with
          the Underwriting Guidelines;

               (h)  the principal amount of such Mortgage Loan does not exceed
          Thirty Million Dollars ($30,000,000);

               (i)  the LTV of such Mortgage Loan does not exceed eighty percent
          (80%);

               (j)  the projected Property Debt Service Coverage Ratio of the
          related Mortgaged Property for the 12-month period beginning on the
          anticipated closing date thereof shall be not less than 1.20 to 1.00;

               (k)  such Mortgage Loan is not a graduated payment Mortgage Loan,
          does not have a shared appreciation or other contingent interest
          feature, and provides for 
<PAGE>
 
          periodic payments of all accrued interest thereon on at least a
          monthly basis;

               (l)  such Mortgage Loan has a final maturity of not more than 20
          years and provides for monthly payments of principal and interest
          sufficient to repay the original principal amount of such Mortgage
          Loan over a period of 30 years (subject to adjustment in accordance
          with industry standards in the case of an adjustable rate Mortgage
          Loan);

               (m)  the Commercial Property securing such Mortgage Loan is not a
          marina, golf course, automobile dealership, funeral home or other type
          of property specific to a particular business;

               (n)  if either (i) the principal amount of such Mortgage Loan
          exceeds $25,000,000 or (ii) the owners or sponsors of the Mortgage
          Borrower, or any Person owned or controlled by any of them, have
          previously been debtors under the United States Bankruptcy Code or
          defaulted on Debt, the Mortgage Borrower is a Single Purpose Entity;
          and

               (o)  neither the Borrowers nor any of their Affiliates has any
          ownership interest, right to acquire any ownership interest, or
          equivalent economic interest in such Commercial Property or the
          Mortgage Borrower.

          "Eligible Mortgage Pool" means a Mortgage Pool for which (a) an
           ----------------------                                        
     Approved Custodian has issued its initial certification (on the basis of
     which an Agency Security is to be issued), (b) there exists a Purchase
     Commitment covering such Agency Security, and (c) such Agency Security will
     be delivered to the Collateral Agent.

          "ERISA" means the Employee Retirement Income Security Act of 1974 and
           -----                                                               
     all rules and regulations promulgated thereunder, as amended from time to
     time and any successor statute.

          "Event of Default" means any of the conditions or events set forth in
           ----------------                                                    
     Section 8.1 hereof.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended
           ------------                                                       
     from time to time, and any successor statute.
<PAGE>
 
          "Existing Agreement Servicing Advances" means all "Advances" other
           -------------------------------------                            
     than "Warehousing Advances" outstanding under the Existing Credit
     Agreement.

          "Existing Agreement Warehousing Advances" means all "Warehousing
           ---------------------------------------                        
     Advances" outstanding under the Existing Credit Agreement.

          "Existing Credit Agreement" means the Credit and Security Agreement
           -------------------------                                         
     (Syndicated Agreement) dated as of December 5, 1997, as amended, between
     WMF Group, Washington, Huntoon, Proctor, Wilson, Wilson-Arizona and Carbon
     Mesa, as borrowers, Residential Funding Corporation, Bank United and PNC
     Bank, N.A., as lenders, and Residential Funding Corporation as credit agent
     for the lenders.

          "Fair Market Value" means at any time for a Mortgage Loan or the
           -----------------                                              
     related Agency Security (if such Mortgage Loan is to be used to back an
     Agency Security), (a) if such Mortgage Loan or the related Agency Security
     is covered by a Purchase Commitment, the Committed Purchase Price, or (b)
     otherwise, the market price for such Mortgage Loan or Agency Security,
     determined by the Lender based on market data for similar Mortgage Loans or
     Agency Securities and such other criteria as the Lender deems appropriate.

          "Fannie Mae" means Fannie Mae, a corporation created under the laws of
           ----------                                                           
     the United States, and any successor thereto.

          "Fannie Mae DUS Mortgage Loan" means a Multifamily Mortgage Loan under
           ----------------------------                                         
     Fannie Mae's DUS Program.

          "Fannie Mae Loan Loss Reserves" means reserves established by the
           -----------------------------                                   
     Borrowers to absorb estimated future losses related to Fannie Mae DUS
     Mortgage Loans sold by the Borrowers to Fannie Mae.

          "FHA" means the Federal Housing Administration and any successor
           ---                                                            
     thereto.

          "FHA Construction Mortgage Loan" means an FHA fully-insured Mortgage
           ------------------------------                                     
     Loan for the construction or substantial rehabilitation of a Multifamily
     Property or a Health Care Facility.

          "FHA Project Mortgage Loan" means an FHA fully insured Multifamily
           -------------------------                                        
     Mortgage Loan or an FHA fully insured Health Care Mortgage Loan.
<PAGE>
 
          "Freddie Mac" means the Federal Home Loan Mortgage Corporation and any
           -----------                                                          
     successor thereto.

          "FICA" means the Federal Insurance Contributions Act.
           ----                                                

          "FIRREA" means the Financial Institutions Reform, Recovery and
           ------                                                       
     Enforcement Act of 1989, as amended from time to time, and the regulations
     promulgated and rulings issued thereunder.

          "First Mortgage" means a Mortgage which constitutes a first Lien on
           --------------                                                    
     the property covered thereby.

          "First Mortgage Loan" means a Mortgage Loan secured by a First
           -------------------                                          
     Mortgage.

          "Freddie Mac" means Freddie Mac, a corporation created under the laws
           -----------                                                         
     of the United States, and any successor thereto.

          "Funding Bank" means The First National Bank of Chicago or any other
           ------------                                                       
     bank designated from time to time by the Credit Agent.

          "Funding Bank Agreement" means the letter agreement substantially in
           ----------------------                                             
     the form of Exhibit K-1 hereto, or the letter agreement substantially in
                 -----------                                                 
     the form of Exhibit K-2 hereto.
                 -----------        

          "Funds From Operations" means, as of the last day of any fiscal
           ---------------------                                         
     quarter of WMF Group and its Subsidiaries, the sum of (a) the net income of
     WMF Group (and its Subsidiaries on a consolidated basis) for the 4 fiscal
     quarters ending on such date, plus (b) the amount of income tax expense
                                   ----                                     
     deducted in calculating such net income, minus (c) the amount of income
                                              -----                         
     taxes actually paid by WMF Group and its Subsidiaries during such 4 fiscal
     quarters, plus (d) depreciation, amortization and other non-cash items
               ----                                                        
     deducted in calculating such net income, minus (e) non-cash revenue
                                              -----                     
     included in calculating such net income, minus (f) the amount of dividends
                                              -----                            
     paid and other distributions made on the capital stock of WMF Group during
     such 4 fiscal quarters, plus (g) the amount of interest expense deducted in
                             ----                                               
     calculating net income for the 4 fiscal quarters ending on such date
     incurred on Debt of WMF Group (and its Subsidiaries, on a consolidated
     basis), other than (i) the Warehousing Advances, and (ii) other Debt
     secured by Multifamily Mortgage Loans, Commercial Mortgage Loans and/or
     Mortgage-backed Securities covered by Purchase Commitments 
<PAGE>
 
     issued by Investors, to the extent such Debt does not exceed the Committed
     Purchase Price of such Mortgage Loans.

          "GAAP" means generally accepted accounting principles set forth in the
           ----                                                                 
     opinions and pronouncements of the Accounting Principles Board and the
     American Institute of Certified Public Accountants and statements and
     pronouncements of the Financial Accounting Standards Board or in such other
     statements by such other entity as may be approved by a significant segment
     of the accounting profession, which are applicable to the circumstances as
     of the date of determination.

          "Gestation Agreement" means an agreement under which the Borrowers
           -------------------                                              
     agree to sell or finance (a) a Pledged Mortgage prior to the date of
     purchase by an Investor, or (b) a Mortgage Pool prior to the date the
     Agency Security is issued.

          "Ginnie Mae" means the Government National Mortgage Association, an
           ----------                                                        
     agency of the United States government, and any successor thereto.

          "Government Servicing Contracts" means Servicing Contracts (a)
           ------------------------------                               
     pursuant to which the Borrowers service FHA Project Mortgage Loans or FHA
     Construction Mortgage Loans or (b) between Ginnie Mae or Fannie Mae and any
     of the Borrowers.

          "Health Care Facility" means a retirement service center, a board and
           --------------------                                                
     care facility, an intermediate care facility, a nursing home or a hospital.

          "Health Care Mortgage Loan" means a Mortgage Loan secured by a
           -------------------------                                    
     Mortgage on a Health Care Facility.

          "Hedging Arrangements" means, with respect to any Person, any
           --------------------                                        
     agreements or other arrangement (including, without limitation, interest
     rate swap agreements, interest rate cap agreements and forward sale
     agreements) entered into by such Person to protect itself against changes
     in interest rates or the market value of assets.

          "HUD" means the Department of Housing and Urban Development and any
           ---                                                               
     successor thereto.

          "HUD 241 Program" means federal loan insurance to finance
           ---------------                                         
     improvements, additions and equipment to multifamily rental housing and
     healthcare facilities pursuant to Section 241 of the National Housing Act,
     12 U.S.C. (S)1715z-6.
<PAGE>
 
          "HUD 241 Mortgage Loans" means Mortgage Loans that are insured by HUD
           ----------------------                                              
     under the HUD 241 Program and committed for purchase by an Investor
     pursuant to a Purchase Commitment.

          "Indemnified Liabilities" has the meaning set forth in Article 11
           -----------------------                                         
     hereof.

          "Internal Revenue Code" means the Internal Revenue Code of 1986, or
           ---------------------                                             
     any subsequent federal income tax law or laws, as any of the foregoing have
     been or may from time to time be amended.

          "Investor" means Fannie Mae, Freddie Mac or a financially responsible
           --------                                                            
     private institution which is deemed acceptable by the Credit Agent from
     time to time in its sole discretion.

          "Lender" has the meaning set forth in the first paragraph of this
           ------                                                          
     Agreement.

          "Letter of Credit" means a letter of credit issued by LaSalle for the
           ----------------                                                    
     account of the Borrowers, for the benefit of Fannie Mae with respect to
     Fannie Mae's Loan Loss Reserve requirement or for any other corporate
     purpose of the Borrowers, except to the extent (a) LaSalle is holding
     separate collateral for the Borrowers' reimbursement obligations in respect
     thereof, or (b) after giving effect to the issuance of such Letter of
     Credit either (i) the Servicing Secured Obligations would exceed sixty-five
     percent (65%) of the Servicing Collateral Value or (ii) the sum of the
     outstanding principal balance of the Servicing Facility Advances, the
     amount available to be drawn under all Letters of Credit and the Letter of
     Credit Obligations would exceed the Servicing Facility Credit Limit.  No
     letter of credit issued by LaSalle shall be a "Letter of Credit" hereunder
     unless the Credit Agent receives, within 1 Business Day after such letter
     of credit is issued, (A) a copy of such letter of credit, (B) a
     confirmation from LaSalle that LaSalle is not holding any separate
     collateral therefor, and (C) evidence satisfactory to the Credit Agent that
     the requirements of clause (b) above have been satisfied.

          "Letter of Credit Obligations" means the obligations of the Borrower
           ----------------------------                                       
     to reimburse LaSalle with respect to draws made under a Letter of Credit.

          "LIBOR" means, for each calendar week, the rate of interest per annum
           -----                                                               
     which is equal to the arithmetic mean of the U.S. Dollar London Interbank
     Offered Rates for one (1) 
<PAGE>
 
     month periods of certain U.S. banks as of 11:00 a.m. London time on the
     first Business Day of each week on which the London Interbank market is
     open, as published by Bridge Information Services on its MoneyCenter
     system. LIBOR shall be rounded, if necessary, to the next higher one
     sixteenth of one percent (1/16)%. If such U.S. dollar LIBOR rates are not
     so offered or published for any period, then during such period LIBOR shall
     mean the London Interbank Offered Rate for one (1) month periods published
     on the first Business Day of each week on which the London Interbank market
     is open, in the Wall Street Journal in its regular column entitled "Money
                                                                         -----  
     Rates."
     -----

          "Lien" means any lien, mortgage, deed of trust, pledge, security
           ----                                                           
     interest, charge or encumbrance of any kind (including any conditional sale
     or other title retention agreement, any lease in the nature thereof, and
     any agreement to give any security interest).

          "Liquid Assets" means, with respect to any Person at any date, the
           -------------                                                    
     following unrestricted and unencumbered assets owned by such Person on such
     date:  cash, funds on deposit in any bank located in the United States,
     investment grade commercial paper, money market funds, marketable
     securities, the excess, if any, of Mortgage Loans and Agency Securities
     held for sale (valued in accordance with GAAP) over the outstanding
     aggregate principal amount of notes or other debt instruments against which
     such Mortgage Loans or Agency Securities are pledged as Collateral, and
     amounts available to be borrowed under the Servicing Facility (after giving
     effect to all applicable limitations set forth in Section 2.4(b) hereof)
     and other liquidity facilities available to the Borrowers.

          "Liquidity Advance" shall mean a Warehousing Advance used by the
           -----------------                                              
     Borrowers to fund advances required to be made by the Borrowers as master
     servicer of Mortgage-backed Securities (i) issued by Fannie Mae or (ii)
     backed by Commercial Mortgage Loans, provided such advance results in the
     creation of a Receivable pursuant to the applicable Servicing Contract.

          "Liquidity Rate" means a floating rate of interest equal to two
           --------------                                                
     percent (2.00%) per annum over LIBOR.  The Liquidity Rate shall be adjusted
     on and as of the effective date of each weekly change in LIBOR.  The Credit
     Agent's determination of the Liquidity Rate as of any date of determination
     shall be conclusive and binding, absent manifest error.
<PAGE>
 
          "Loan Documents" means this Agreement, the Notes, the Collateral
           --------------                                                 
     Agency Agreement, any agreement of the Borrowers relating to Subordinated
     Debt, and each other document, instrument or agreement executed by the
     Borrowers or any of their Subsidiaries in connection herewith or therewith,
     as any of the same may be amended, restated, renewed or replaced from time
     to time.

          "Majority Lenders" means at any date the Lenders holding not less than
           ----------------                                                     
     66.67% of the sum of the Term Loan Advances, the Servicing Facility Credit
     Limit or, if the Servicing Facility Commitments have expired or been
     terminated, the Servicing Facility Advances, and the Warehousing Credit
     Limit or, if the Warehousing Commitments have expired or been terminated,
     the Warehousing Advances.  Notwithstanding the foregoing, if there are only
     two (2) Lenders holding Commitments or Advances, the term "Majority
     Lenders" shall, except for purposes of Sections 8.2(c) and 8.2(d),
     including both such Lenders.

          "Majority Servicing Facility Lenders" means at any date the Lenders
           -----------------------------------                               
     holding not less than 66.67% of the Servicing Facility Credit Limit or, if
     the Servicing Facility Commitments have expired or been terminated, the
     Servicing Facility Advances.

          "Majority Term Loan Lenders" means at any date the Lenders holding not
           --------------------------                                           
     less than 66.67% of the outstanding principal balance of the Term Loan
     Advances.

          "Majority Warehousing Lenders" means at any date the Lenders holding
           ----------------------------                                       
     not less than 66.67% of the Warehousing Credit Limit or, if the Warehousing
     Commitments have expired or been terminated, the Warehousing Advances.
     Notwithstanding the foregoing, if there are only two (2) Lenders holding
     Warehousing Commitments or Warehousing Advances, the term "Majority
     Warehousing Lenders" shall, except for purposes of Section 3.8, include
     both such Lenders.

          "Maturity Date" means, for any Advance, the Warehousing Maturity Date,
           -------------                                                        
     the Servicing Facility Maturity Date or the Term Loan Maturity Date, as
     applicable.

          "Margin Stock" has the meaning assigned to that term in Regulation U
           ------------                                                       
     of the Board of Governors of the Federal Reserve System as in effect from
     time to time.

          "Maximum Servicing Facility Commitment" means, for any Lender at any
           -------------------------------------                              
     date, that dollar amount designated as such opposite such Lender's name on
     the signature pages hereof, 
<PAGE>
 
     as the same may be reduced pursuant to Section 2.10(o) hereof or amended
     from time to time in accordance with this Agreement.

          "Maximum Term Loan Commitment" means, for any Lender at any date, that
           ----------------------------                                         
     dollar amount designated as such opposite such Lender's name on the
     signature pages hereof, as the same may be amended from time to time in
     accordance with this Agreement.

          "Maximum Warehousing Commitment" means, for any Lender at any date,
           ------------------------------                                    
     that dollar amount designated as such opposite such Lender's name on the
     signature pages hereof, as the same may be amended from time to time in
     accordance with this Agreement.

          "Miscellaneous Charges" has the meaning set forth in Section 2.13
           ---------------------                                           
     hereof.

          "Mortgage" means a mortgage or deed of trust on improved real
           --------                                                    
     property.  A Mortgage may be a First Mortgage or a Second Mortgage.

          "Mortgage-backed Securities" means securities that are secured or
           --------------------------                                      
     otherwise backed by Mortgage Loans.

          "Mortgage Borrower" means, with respect to a Mortgage Loan, the Person
           -----------------                                                    
     to which such Mortgage Loan is made.

          "Mortgage Loan" means any loan evidenced by a Mortgage Note and
           -------------                                                 
     secured by a Mortgage.  The term "Mortgage Loan" shall include First
     Mortgage Loans and Second Mortgage Loans unless the context otherwise
     requires, and shall include each Special Fannie Mae Loan.

          "Mortgage Note" means a promissory note secured by one or more
           -------------                                                
     Mortgages.

          "Mortgage Note Amount" means, as of the date of determination, the
           --------------------                                             
     then outstanding unpaid principal amount of a Mortgage Note (whether or not
     an additional amount is available to be drawn thereunder).

          "Mortgage Pool" means a pool of one or more Pledged Mortgages on the
           -------------                                                      
     basis of which there is to be issued a Mortgage-backed Security.

          "Multiemployer Plan" means a "multiemployer plan" as defined in
           ------------------                                            
     Section 4001(a)(3) of ERISA which is maintained 
<PAGE>
 
     for employees of the Borrowers or any Subsidiary of the Borrowers.

          "Multifamily Mortgage Loan" means a Mortgage Loan secured by a
           -------------------------                                    
     Mortgage on improved Multifamily Property.

          "Multifamily Property" means real property containing or which will
           --------------------                                              
     contain more than four (4) dwelling units.

          "Net Aggregate Shortfall" means on any given date for which a
           -----------------------                                     
     regularly scheduled pass-through payment is required to be made by the
     Borrowers to an Investor or the holders of Mortgaged-backed Securities, the
     excess of all (i) principal and interest payments due the Investor or
     holders in such payment over (ii) all principal and interest received for
     such monthly payment on the related Mortgage Loans.

          "Net Proceeds" means, with respect to the Rights Offering, any other
           ------------                                                       
     issuance of Debt of any Borrower or equity securities of WMF Group after
     the Closing Date, or any sale of Servicing Contracts after the Closing
     Date, the aggregate amount of the proceeds thereof, net of the actual cash
     expenses paid by the Borrowers in connection therewith.

          "New Borrower" has the meaning set forth in Section 4.3 hereof.
           ------------                                                  

          "Nonrecourse Servicing Contract" means a Servicing Contract under
           ------------------------------                                  
     which the Borrowers are not obligated to repurchase or indemnify the holder
     of Mortgage Loans as a result of a default on the Mortgage Loans occurring
     more than six months after the date of such Mortgage Loan; provided, that
     the Borrowers may be obligated to repurchase or indemnify the holder as a
     result of a breach of any customary representation or warranty made in
     connection with the non-recourse sale or servicing of such Mortgage Loans.

          "Nonrecourse Servicing Portfolio" means, for any Person, the Adjusted
           -------------------------------                                     
     Servicing Portfolio of such Person, but excluding the principal balance of
     Mortgage Loans serviced pursuant to Servicing Contracts other than
     Government Servicing Contracts included in the Adjusted Servicing Portfolio
     at such date.

          "Notes" has the meaning set forth in Section 2.8 hereof.
           -----                                                  

          "Notices" has the meaning set forth in Article 10 hereof.
           -------                                                 
<PAGE>
 
          "Obligations" means any and all indebtedness, obligations and
           -----------                                                 
     liabilities of the Borrowers to the Lenders, the Credit Agent and the
     Collateral Agent (whether now existing or hereafter arising, voluntary or
     involuntary, whether or not jointly owed with others, direct or indirect,
     absolute or contingent, liquidated or unliquidated, and whether or not from
     time to time decreased or extinguished and later increased, created or
     incurred), whether or not arising out of or related to the Loan Documents.

          "Officer's Certificate" means a certificate executed on behalf of the
           ---------------------                                               
     Borrowers by the chief financial officer or the treasurer of WMF Group or
     by such other officer as may be acceptable to the Credit Agent and
     substantially in the form of Exhibit I-MF attached hereto.
                                  ------------                 

          "Operating Account" means a demand deposit account maintained at the
           -----------------                                                  
     Funding Bank in the name of the Borrowers and designated for funding that
     portion of each Mortgage Loan not funded by an Advance made against such
     Mortgage Loan and for returning any excess payment from an Investor for a
     Pledged Mortgage or Pledged Security.

          "Ordinary Warehousing Rate" means a floating rate of interest which is
           -------------------------                                            
     equal to one percent (1.00%) per annum over LIBOR.  The Ordinary
     Warehousing Rate will be adjusted as of the effective date of each weekly
     change in LIBOR.  The Credit Agent's determination of the Ordinary
     Warehousing Rate as of any date of determination shall be conclusive and
     binding, absent manifest error.

          "Participant" has the meaning set forth in Section 13.3 hereof.
           -----------                                                   

          "Participation Certificate" means a participation certificate issued
           -------------------------                                          
     by an Investor, a pool custodian satisfactory to the Lenders or the
     Borrowers evidencing an undivided interest in a Pledged Mortgage or a
     Mortgage Pool consisting of Pledged Mortgages.

          "Percentage Share" means Servicing Facility Percentage Share, Term
           ----------------                                                 
     Loan Percentage Share or Warehousing Percentage Share, as applicable.

          "Person" means and includes natural persons, corporations, limited
           ------                                                           
     liability companies, limited partnerships, general partnerships, joint
     stock companies, joint ventures, associations, companies, trusts, banks,
     trust companies, land trusts, business trusts or other 
<PAGE>
 
     organizations, whether or not legal entities, and governments and agencies
     and political subdivisions thereof.

          "P&I Advance" means a Warehousing Advance used by the Borrowers to
           -----------                                                      
     make a regularly scheduled pass-through payment on Ginnie Mae Mortgage-
     backed Securities for which the Borrowers have a Net Aggregate Shortfall.

          "P&I Rate" means a floating rate of interest equal to one and one-half
           --------                                                             
     percent (1.50%) per annum over LIBOR.  The P&I Rate shall be adjusted on
     and as of the effective date of each weekly change in LIBOR.  The Credit
     Agent's determination of the P&I Rate as of any date of determination shall
     be conclusive and binding, absent manifest error.

          "Plans" has the meaning set forth in Section 5.12 hereof.
           -----                                                   

          "Pledged Mortgages" has the meaning set forth in Section 3.3(a)
           -----------------                                             
     hereof.

          "Pledged Securities" has the meaning set forth in Section 3.3(b)
           ------------------                                             
     hereof.

          "Pledged Servicing Contracts" means all Servicing Contracts in which
           ---------------------------                                        
     the Credit Agent has a valid, perfected, first priority security interest
     to secure the Obligations, whether hereunder or under any other Loan
     Document.

          "Projected Net Operating Income" means, with respect to any Commercial
           ------------------------------                                       
     Property securing a Commercial Mortgage Loan, the following amount
     (determined for the 12 months following the date of the related Advance):

                            PNOI = PFOR - VR - NOE,

     where "PNOI" means Projected Net Operating Income, "PFOR" means the
            ----                                         ----           
     projected amount of rent that would be paid by tenants of such related
     property assuming (a) full occupancy thereof and (b) an average rental rate
     equal to the lower of the actual current average rental rate for such
     property or the current market rental rate for comparable properties, "VR"
                                                                            -- 
     means the projected amount of PFOR that will not be received as a result of
     vacancies, assuming a vacancy rate equal to the greater of the actual
     current vacancy rate for such property and the current market vacancy rate
     for comparable properties, and rent concessions agreed to with existing
     tenants, and "NOE" means the projected net 
                   ---                          
<PAGE>
 
     operating expenses (i.e., total expenses minus interest expense) for such
     related property.

          "Property" means a Multifamily Property, a Health Care Facility or
           --------                                                         
     other income-producing commercial property securing a Mortgage Loan.

          "Property Debt Service Coverage Ratio" means, at any date of
           ------------------------------------                       
     determination for any Commercial Property that secures a Mortgage Loan
     pledged or to be pledged hereunder, the ratio of (a) the Projected Net
     Operating Income of the Commercial Property, to (b) projected interest
     expense and scheduled payments in respect of the Commercial Mortgage Loan
     for the 12 months after such date of determination.

          "Purchase Commitment" means a written commitment, in form and
           -------------------                                         
     substance satisfactory to the Credit Agent, issued in favor of the
     Borrowers by an Investor pursuant to which that Investor commits to
     purchase Mortgage Loans or Agency Securities.

          "Rating Agency" means a nationally recognized statistical rating
           -------------                                                  
     organization that rates securities backed by Mortgage Loans.

          "Receivables" has the meaning set forth in Section 3.3(g) hereof.
           -----------                                                     

          "Regulation D" means Regulation D of the Board of Governors of the
           ------------                                                     
     Federal Reserve System as from time to time in effect and any successor to
     all or a portion thereof establishing reserve requirements.

          "Release Amount" has the meaning set forth in Section 3.4(g), 3.4(h)
           --------------                                                     
     hereof.

          "Restricted Payments" means, collectively, all dividends or other
           -------------------                                             
     distributions of any nature (cash, securities, assets or otherwise), and
     all payments, by virtue of redemption or otherwise, on any class of equity
     securities (including, without limitation, warrants, options or rights
     therefor) issued by WMF Group, whether such securities are now or may
     hereafter be authorized or outstanding and any distribution in respect of
     any of the foregoing, whether directly or indirectly.

          "RFC" means Residential Funding Corporation, a Delaware corporation,
           ---                                                                
     and any successor thereto.
<PAGE>
 
          "Rights Offering" means the rights to purchase common stock of WMF
           ---------------                                                  
     Group for $5.00 per share distributed to the holders of shares of Common
     Stock of WMF Group as of February 1, 1999, as described in the Prospectus
     filed on December 31, 1998, as amended through February 5, 1999, filed with
     the Securities and Exchange Commission.

          "Second Mortgage" means a Mortgage which constitutes a second Lien on
           ---------------                                                     
     the property covered thereby.

          "Second Mortgage Loan" means a Mortgage Loan secured by a Second
           --------------------                                           
     Mortgage.

          "Secured Parties" has the meaning set forth in Section 3.1 hereof.
           ---------------                                                  

          "Servicing Acquisition" means a transaction in which the Borrowers
           ---------------------                                            
     acquire (a) Nonrecourse Servicing Contracts with respect to Multifamily
     Mortgage Loans, Health Care Mortgage Loans and/or Commercial Mortgage Loans
     in a bulk purchase, (b) all of the issued and outstanding capital stock
     (and, if applicable, securities convertible into or other rights to acquire
     such capital stock) of a corporation (or equivalent interests in a limited
     liability company, partnership or other entity) that owns, as its primary
     asset, such Nonrecourse Servicing Contracts, or (c) all or substantially
     all of the assets of such a corporation or other entity.

          "Servicing Acquisition Documents" means, with respect to any Servicing
           -------------------------------                                      
     Acquisition, the Servicing Purchase Agreement and all agreements,
     documents, and instruments executed and delivered in connection therewith.

          "Servicing Collateral" means (a) the Pledged Servicing Contracts, all
           --------------------                                                
     Collateral described in Sections 3.1(e) and 3.1(f), all Collateral
     described in Sections 3.1(g), 3.1(i), 3.1(j) and 3.1(k) hereof that
     constitutes proceeds of, or is related to, such Collateral, and any other
     property related to Pledged Servicing Contracts in which the Credit Agent
     has a security interest to secure the Obligations.

          "Servicing Collateral Value" means, as of the date of any
           --------------------------                              
     determination, with respect to any Servicing Contracts, the Appraisal Value
     of such Servicing Contracts (adjusted to account for Servicing Contracts
     sold or Mortgage Loans repaid since the date of the most recent Appraisal
     in accordance with the methodology of such Appraisal); provided, that for
                                                            --------          
     purposes of calculating the Servicing Collateral Value, the following
     Mortgage Loans shall be 
<PAGE>
 
     excluded: (i) Mortgage Loans on which any payment is more than sixty (60)
     days past due, (ii) Mortgage Loans in respect of which the borrowers have
     commenced foreclosure proceedings, (iii) Mortgage Loans in respect of which
     any obligor is the subject of a bankruptcy proceeding, (iv) Mortgage Loans
     serviced pursuant to Servicing Contracts with Affiliates of the Borrowers,
     including without limitation, WMFCC, or with special purpose entities
     created by Affiliates in connection with the securitization of Mortgage
     Loans; and (v) Servicing Contracts excluded in calculating the Adjusted
     Servicing Portfolio, other than pursuant to clause (b) of the definition
     thereof.

          "Servicing Contract" means, with respect to any Person, the
           ------------------                                        
     arrangement, whether or not in writing, pursuant to which such Person has
     the right to service Mortgage Loans.

          "Servicing Facility Advance" means a disbursement by the Lenders under
           --------------------------                                           
     the Servicing Facility Commitments pursuant to Section 2.4 of this
     Agreement.

          "Servicing Facility Advance Request" has the meaning set forth in
           ----------------------------------                              
     Section 2.5 hereof.

          "Servicing Facility Commitment" has the meaning set forth in Section
           -----------------------------                                      
     2.4(a) hereof.

          "Servicing Facility Commitment Fee" means a fee payable by the
           ---------------------------------                            
     Borrowers in consideration of the Lenders' agreement to make their
     respective Servicing Facility Advances hereunder.  The amount of the
     Servicing Facility Commitment Fee is set forth in Section 2.12(b) hereof.

          "Servicing Facility Credit Limit" means at any date the sum of the
           -------------------------------                                  
     Maximum Servicing Facility Commitments of the Lenders at such date, with
     the initial Servicing Facility Credit Limit being Twenty-five Million
     Dollars ($25,000,000).

          "Servicing Facility Maturity Date" means the earliest of: (a) February
           --------------------------------                                     
     10, 2002, as such date may be extended from time to time in writing by all
     of the Lenders holding Servicing Facility Advances or a Servicing Facility
     Commitment, and (b) the date the Servicing Facility Advances become due and
     payable pursuant to Section 8.2 below.
 
          "Servicing Facility Percentage Share" means, for any Lender at any
           -----------------------------------                              
     date, that percentage which such Lender's Maximum Servicing Facility
     Commitment or, after the Servicing Facility Commitments have expired or
     been 
<PAGE>
 
     terminated, the aggregate outstanding principal balance of such Lender's
     Servicing Facility Advances, bears to the Servicing Facility Credit Limit
     or, after the Servicing Facility Commitments have expired or been
     terminated, the aggregate outstanding principal balance of all Servicing
     Facility Advances.

          "Servicing Facility Promissory Note" means the promissory note
           ----------------------------------                           
     evidencing the Borrowers' Obligations to any Lender with respect to
     Servicing Facility Advances.

          "Servicing Facility Rate" means a floating rate of interest per annum
           -----------------------                                             
     equal to two and one-half percent (2.50%) per annum over LIBOR.  The
     Servicing Facility Rate shall be adjusted on and as of the effective date
     of each weekly change in LIBOR.  The Credit Agent's determination of the
     Servicing Facility Rate as of any date of determination shall be conclusive
     and binding, absent manifest error.

          "Servicing Portfolio" means, as to any Person, the unpaid principal
           -------------------                                               
     balance of Mortgage Loans whose Servicing Contracts are owned by such
     Person.

          "Servicing Purchase Agreement" means the principal agreement or
           ----------------------------                                  
     agreements pursuant to which the Borrowers make any Servicing Acquisition.

          "Servicing Secured Advances" means P&I Advances, Liquidity Advances,
           --------------------------                                         
     Term Loan Advances and Servicing Facility Advances.

          "Servicing Secured Obligations" means the sum of the aggregate
           -----------------------------                                
     outstanding principal balance of all Servicing Secured Advances, the amount
     available to be drawn under all outstanding Letters of Credit and the
     Letter of Credit Obligations.

          "Single Purpose Entity" means a corporation, limited liability company
           ---------------------                                                
     or limited partnership the organizational documents of which provide that
     such Person (i) was formed or organized solely for the purpose of owning or
     operating the Commercial Property securing a Commercial Mortgage Loan, (ii)
     will not engage in any business other than the ownership, operating and
     financing of such Commercial Property, (iii) will not own any assets other
     than those related to such Commercial Property and its financing, (iv) will
     not incur any liabilities other than the related Commercial Mortgage Loan
     and other liabilities permitted thereunder, (v) will maintain its own
     books, records and accounts separate and apart from those of any other
     Person, 
<PAGE>
 
     and (vi) will hold itself out as being a legal entity separate and distinct
     from any other Person.

          "Special Fannie Mae Advance" means an Advance made to Washington
           --------------------------                                     
     against Special Fannie Mae Loans.

          "Special Fannie Mae Loans" means advances made by Washington under any
           ------------------------                                             
     Special Fannie Mae Program Agreement and evidenced by one or more
     promissory notes in the possession of (a) the Collateral Agent or (b)
     Fannie Mae, provided that Fannie Mae has entered into a bailee agreement
     with the Credit Agent, in form and substance satisfactory to the Credit
     Agent, with respect to the Credit Agent's security interest in Washington's
     interest in such promissory note(s).

          "Special Fannie Mae Program Agreement" means any agreement between
           ------------------------------------                             
     Washington and one or more borrowers and (if applicable) other obligors
     described on Exhibit Q hereto (as such Exhibit Q may be amended in
                  ---------                 ---------                  
     accordance with Section 4.4 hereof) pursuant to which Washington makes
     Special Fannie Mae Loans to such borrowers secured by Mortgages on Multi-
     family Properties, provided that Fannie Mae has agreed, on terms
     satisfactory to the Credit Agent, to issue a Mortgage-backed Security or
     Securities in exchange for a one hundred percent (100%) participation in
     each such Special Fannie Mae Loan.

          "Statement Date" means the date of the most recent financial
           --------------                                             
     statements of WMF Group and its Subsidiaries, on a consolidated basis,
     delivered to the Lenders under the terms of this Agreement.

          "Subordinated Debt" means (a) all indebtedness of the Borrowers for
           -----------------                                                 
     borrowed money which is effectively subordinated in right of payment to all
     other present and future Obligations either (i) pursuant to a Subordination
     of Debt Agreement in the form of Exhibit F hereto or (ii) otherwise on
                                      ---------                            
     terms acceptable to the Majority Lenders, and (b) solely for purposes of
     Section 7.4 hereof, all indebtedness of the Borrowers which is required to
     be subordinated by Section 4.1(b) or Section 6.10 hereof.

          "Subsidiary" means any corporation, association or other business
           ----------                                                      
     entity in which more than fifty percent (50%) of the total voting power or
     shares of stock entitled to vote in the election of directors, managers or
     trustees thereof is at the time owned or controlled, directly or
     indirectly, by any Person or one or more of the other Subsidiaries of that
     Person or a combination thereof.
<PAGE>
 
          "Swingline Advance" means Warehousing Advances made by the Swingline
           -----------------                                                  
     Lender under Section 2.2 hereof.

          "Swingline Facility Amount" means the maximum amount of Swingline
           -------------------------                                       
     Advances to be outstanding from time to time, not to exceed the lesser of
     (i) Fifty Million Dollars ($50,000,000) or (ii) the then undisbursed
     portion of the Warehousing Credit Limit.

          "Swingline Lender" means RFC.
           ----------------            

          "Swingline Note" means the promissory note evidencing the Borrowers'
           --------------                                                     
     Obligation to the Swingline Lender with respect to Swingline Advances.

          "Tangible Net Worth" means with respect to any Person at any date, the
           ------------------                                                   
     excess of the total assets over total liabilities of such Person on such
     date, each to be determined in accordance with GAAP consistent with those
     applied in the preparation of the financial statements referred to in
     Section 4.1(a)(7) hereof, plus Fannie Mae Loan Loss Reserves and that
     portion of Subordinated Debt not due within one year of such date, provided
     that, for purposes of this Agreement, there shall be excluded from total
     assets advances or loans to shareholders, officers, employees or
     Affiliates, investments in Affiliates, assets pledged to secure any
     liabilities not included in the Debt of such Person, intangible assets and
     those other assets which would be deemed by HUD to be non-acceptable in
     calculating adjusted net worth in accordance with its requirements in
     effect as of such date, as such requirements appear in the "Audit Guide for
     Audit of Approved Non-Supervised Mortgagees" and other assets deemed
     unacceptable by the Credit Agent in its sole discretion.

          "Term Loan Advance" means an Advance made on the Closing Date pursuant
           -----------------                                                    
     to Section 2.6 hereof.

          "Term Loan Credit Limit" means the sum of the Maximum Term Loan
           ----------------------                                        
     Commitments of the Lenders, which shall be Twenty-five Million Dollars
     ($25,000,000).

          "Term Loan Commitment Fee" means a fee payable by the Borrowers in
           ------------------------                                         
     consideration of the Lenders' making their respective Term Loan Advances
     hereunder.  The amount of the Term Loan Commitment Fee is set forth in
     Section 2.12(d) hereof.

          "Term Loan Maturity Date" means the earliest of:  (a) the close of
           -----------------------                                          
     business on February 10, 2004, as such date may 
<PAGE>
 
     be extended from time to time in writing by all of the Lenders holding Term
     Loan Advances, in their sole discretion, and (b) the date the Term Loan
     Advances become due and payable pursuant to Section 8.2 below.

          "Term Loan Percentage Share" means, for any Lender at any date, that
           --------------------------                                         
     percentage which such Lenders Maximum Term Loan Commitment or, after the
     Term Loan Advances have been made, the outstanding principal balance of
     such Lender's Term Loan Advance bears to the Term Loan Credit Limit or,
     after the Term Loan Advances have been made, the aggregate outstanding
     principal balance of all Term Loan Advances.

          "Term Loan Rate" means a floating rate of interest per annum equal to
           --------------                                                      
     three percent (3.00%) per annum over LIBOR.  The Term Loan Rate shall be
     adjusted on and as of the effective date of each weekly change in LIBOR.
     The Credit Agent's determination of the Term Loan Rate as of any date of
     determination shall be conclusive and binding, absent manifest error.

          "Trust Receipt" means a trust receipt in a form approved by the Credit
           -------------                                                        
     Agent and pursuant to which the Collateral Agent may deliver any document
     relating to the Collateral to the Borrowers for correction or completion.

          "Underwriting Guidelines" means any underwriting guidelines adopted by
           -----------------------                                              
     the sponsor of any program approved by the Credit Agent for Eligible
     Commercial Mortgage Loans, as in effect from time to time, provided such
     underwriting guidelines have been approved by, or conform to the standards
     of, at least two Rating Agencies.

          "VA" means the U.S. Department of Veterans Affairs and any successor
           --                                                                 
     thereto.

          "Warehousing Advance" shall mean a disbursement by the Lenders under
           -------------------                                                
     the Warehousing Commitments pursuant to Section 2.1(a) of this Agreement or
     a Swingline Advance.

          "Warehousing Advance Request" has the meaning set forth in Section
           ---------------------------                                      
     2.3(a) hereof.

          "Warehousing Collateral" means all of the Collateral other than the
           ----------------------                                            
     Servicing Collateral and the Receivables.

          "Warehousing Commitment" has the meaning set forth in Section 2.1(a)
           ----------------------                                             
     hereof.
<PAGE>
 
          "Warehousing Commitment Fee" means a fee payable by the Borrowers in
           --------------------------                                         
     consideration of the Lenders' issuance of their Warehousing Commitments.
     The amount of the Warehousing Commitment Fee, if any, is set forth in
     Section 2.12(a) hereof.

          "Warehousing Credit Limit" means at any date the sum of the Maximum
           ------------------------                                          
     Warehousing Commitments of the Lenders at such date, with the initial
     Warehousing Credit Limit being One Hundred Fifty Million Dollars
     ($150,000,000).

          "Warehousing Maturity Date" shall mean the earlier of: (a) the close
           -------------------------                                          
     of business on February 9, 2000, as such date may be extended from time to
     time in writing by all of the Lenders holding Warehousing Advances or a
     Warehousing Commitment, in their sole discretion, and (b) the date the
     Warehousing Advances become due and payable pursuant to Section 8.2 below.

          "Warehousing Percentage Share" means, for any Lender at any date, that
           ----------------------------                                         
     percentage which such Lender's Maximum Warehousing Commitment or, after the
     Warehousing Commitments have expired or been terminated, the aggregate
     outstanding principal balance of such Lender's Warehousing Advances, bears
     to the Warehousing Credit Limit or, after the Warehousing Commitments have
     expired or been terminated, the aggregate outstanding principal balance of
     all Warehousing Advances.

          "Warehousing Promissory Note" means the promissory note evidencing the
           ---------------------------                                          
     Borrowers' Obligations to any Lender with respect to Warehousing Advances
     other than Swingline Advances.

          "Wire Disbursement Account" means a demand deposit account maintained
           -------------------------                                           
     at the Funding Bank in the name of the Credit Agent for the clearing of
     wire transfers requested by the Borrowers to fund the closing of Pledged
     Mortgages.

          "WMFCC" means WMF Capital Corp., a Delaware corporation and a wholly-
           -----                                                              
     owned subsidiary of WMF Group.

          "Year 2000 Problem" means the risk that computer applications may not
           -----------------                                                   
     be able to properly perform date-sensitive functions after December 31,
     1999.

          1.2  Other Definitional Provisions.
               ----------------------------- 
<PAGE>
 
                       1.2(a)  Accounting terms not otherwise defined herein
          shall have the meanings given the terms under GAAP.

                       1.2(b)  Defined terms may be used in the singular or the
          plural, as the context requires.

                       1.2(c)  All references to time of day shall mean the then
          applicable time in Chicago, Illinois, unless expressly provided to the
          contrary.

2.   THE CREDIT.

          2.1  The Warehousing Credit Limit.
               ---------------------------- 

                    2.1(a)  Subject to the terms and conditions of this
          Agreement and provided no Default or Event of Default has occurred and
          is continuing, the Lenders agree, severally, and not jointly, from
          time to time during the period from the Closing Date, but not
          including, the Warehousing Maturity Date, to make Warehousing Advances
          to the Borrowers, pro rata in accordance with their respective
          Warehousing Percentage Shares, provided the total aggregate principal
          amount outstanding at any one time of all such Warehousing Advances
          shall not exceed the Warehousing Credit Limit.  The obligation of each
          Lender to make Warehousing Advances up to its Maximum Warehousing
          Commitment is hereafter referred to as such Lender's "Warehousing
          Commitment."  Within the Warehousing Credit Limit, the Borrowers may
          borrow, repay and reborrow. On the Closing Date, the Borrowers shall
          request, and the Lenders shall make, Warehousing Advances in an amount
          equal to the aggregate outstanding principal balance of the Existing
          Agreement Warehousing Advances, and such Warehousing Advances shall be
          applied to pay such Existing Agreement Warehousing Advances in full.
          All Warehousing Advances under this Agreement shall constitute a
          single indebtedness, and all of the Collateral shall be security for
          the Notes and for the performance of all the Obligations.  Warehousing
          Advances shall be made to any Borrower, as shall be requested by the
          Borrowers, but each Warehousing Advance shall be deemed made to or for
          the benefit of all of the Borrowers, and the Borrowers, jointly and
          severally, shall be obligated to repay all Warehousing Advances made
          hereunder.  With respect to its obligation to repay Warehousing
          Advances made to the other Borrowers, each Borrower agrees to the
          terms set 
<PAGE>
 
          forth in Exhibit N attached hereto and made a part hereof.
                   ---------                                        

                    2.1(b)  Warehousing Advances shall be used by the Borrowers
          solely for the purpose of funding the acquisition or origination of
          Commercial Mortgage Loans, Health Care Mortgage Loans and Multifamily
          Mortgage Loans, except (i) in the case of P&I Advances, which may be
          used for the purpose of funding the Borrowers' obligations to make
          principal or interest payments to the holders of Ginnie Mae Mortgage-
          backed Securities backed by Mortgage Loans serviced by the Borrowers
          and for which the Borrowers have a Net Aggregate Shortfall, and (ii)
          in the case of Liquidity Advances, which may be used for the purpose
          of funding the Borrowers' obligation, as a master servicer of
          Mortgage-backed Securities issued by Fannie Mae or backed by
          Commercial Mortgage Loans, provided such advance results in the
          creation of a Receivable pursuant to the applicable Servicing
          Contract.  All Warehousing Advances shall be made at the request of
          the Borrowers, in the manner hereinafter provided in Section 2.3, and
          all Warehousing Advances, except P&I Advances and Liquidity Advances,
          shall be made against the pledge of Mortgage Loans as Collateral
          therefor.  The following limitations on the use of the Warehousing
          Advances shall be applicable:

                    (1)  No Warehousing Advance shall be made against a Mortgage
               Loan other than a Mortgage Loan secured by a Mortgage on real
               property located in one of the states of the United States or the
               District of Columbia.

                    (2)  No Warehousing Advance shall be made to any Borrower
               against Mortgage Loans other than Mortgage Loans of a type for
               which such Borrower has been approved by the Credit Agent.

                    (3)  No Warehousing Advance shall be made against a Mortgage
               Loan which is not covered by a Purchase Commitment for either the
               Mortgage Loan or the Agency Securities to be created on the basis
               of such Mortgage Loan.

                    (4)  No Warehousing Advance (other than Warehousing Advances
               made on the Closing Date to refinance Existing Agreement
               Warehousing Advances) shall be made against any Mortgage Loan
               other than an FHA Construction
<PAGE>
 
               Mortgage Loan which was closed more than thirty (30) days prior
               to the date of the requested Advance.

                           (5)  Except for Warehousing Advances made against the
               Mortgage Loans described on Exhibit S hereto, no Warehousing
                                           ---------                       
               Advance shall be made against an FHA Construction Mortgage Loan
               or a Special Fannie Mae Loan unless (a) no lender other than the
               Lenders have made loans to the Borrowers against such FHA
               Construction Mortgage Loan or loans made under the related
               Special Fannie Mae Program Agreement, (b) the Collateral Agent
               has at one time had or will (as provided in Exhibit D-MF/FHA or
                                                           ----------------   
               Exhibit D-MF/SFNMA, as applicable) obtain possession of the
               ------------------                                         
               related Mortgage Note and Collateral Documents, and (c) the
               related Mortgage Note is in the possession of a Person other than
               the Borrowers or an Affiliate of the Borrowers.

                           (6)  No Warehousing Advance shall be made against a
               Mortgage Loan, other than a HUD 241 Mortgage Loan or a Fannie Mae
               DUS Mortgage Loan, that is not a First Mortgage Loan.

                           (7)  The aggregate amount of Warehousing Advances
               outstanding at any one time against Second Mortgage Loans shall
               not exceed Fifteen Million Dollars ($15,000,000).

                           (8)  The aggregate amount of Warehousing Advances
               outstanding at any one time against Commercial Mortgage Loans
               shall not exceed Fifty Million Dollars ($50,000,000).

                           (9)  The aggregate amount of P&I Advances outstanding
               at any one time shall not exceed Five Million Dollars
               ($5,000,000).

                           (10) The aggregate amount of Liquidity Advances
               outstanding at any one time shall not exceed Five Million Dollars
               ($5,000,000).

                    2.1(c) No Warehousing Advance shall exceed the following
          amount applicable to the type of Collateral at the time it is pledged:
<PAGE>
 
                    (1)  A Warehousing Advance made against a Conventional
               Mortgage Loan pledged hereunder that is committed for purchase by
               Fannie Mae or Freddie Mac or against a Fannie Mae DUS Mortgage
               Loan pledged hereunder, the lesser of (i) the Mortgage Note
               Amount or (ii) the Committed Purchase Price.

                    (2)  A Warehousing Advance made against a Conventional
               Mortgage Loan pledged hereunder that is committed for purchase by
               an Investor other than Fannie Mae or Freddie Mac, ninety-eight
               percent (98%) of the lesser of (i) the Mortgage Note Amount or
               (ii) the Committed Purchase Price.

                    (3)  A Warehousing Advance made against an FHA Project
               Mortgage Loan, an FHA Construction Mortgage Loan or a HUD 241
               Mortgage Loan pledged hereunder, the lesser of (i) the Mortgage
               Note Amount or (ii) the Committed Purchase Price.

                    (4)  A Warehousing Advance made against a Commercial
               Mortgage Loan pledged hereunder that is subject to a Purchase
               Commitment, ninety-five percent (95%) of the lesser of (i) the
               Mortgage Note Amount, or (ii) the Committed Purchase Price.

                    (5)  A Warehousing Advance made against a Special Fannie Mae
               Loan pledged hereunder, the lesser of (i) the Mortgage Note
               Amount or (ii) the Committed Purchase Price.

                    (6)  A P&I Advance made hereunder or a Liquidity Advance
               made hereunder to fund principal or interest payments under
               Mortgage-backed Securities, ninety percent (90%) of the related
               Net Aggregate Shortfall.

                    (7)  A Liquidity Advance made hereunder, other than a
               Liquidity Advance made to fund principal or interest payments
               under Mortgage-backed Securities, ninety (90%) of the amount of
               the Receivable that will be created by the related payment.

                    (8)  No P&I Advance or Liquidity Advance shall be made
               hereunder if, after giving effect to 
<PAGE>
 
               such Advance, the aggregate outstanding principal balance of the
               Servicing Secured Obligations would exceed sixty-five (65%) of
               the Servicing Collateral Value.

          2.2  Swingline Commitment.   On the terms and subject to the
               --------------------                                   
     conditions set forth herein, the Swingline Lender agrees that it may, from
     time to time to, but not including, the Maturity Date, agree to make
     Warehousing Advances requested by the Borrowers in amounts not to exceed
     the Swingline Facility Amount.  Such Swingline Advances shall be evidenced
     by the Swingline Note.  A Swingline Advance shall bear interest, from the
     date of such Swingline Advance, until paid in full, at the Ordinary
     Warehousing Rate.  The Lenders hereby agree to purchase from the Swingline
     Lender an undivided participation interest in all outstanding Swingline
     Advances held by the Swingline Lender at any time in an amount equal to
     each Lender's Warehousing Percentage Share of such Swingline Advances.  The
     Swingline Lender may at any time in its sole and absolute discretion (and
     shall no less frequently than weekly and upon the acceleration of the
     Obligations following an Event of Default) request the Lenders to make
     Warehousing Advances (each in principal amounts equal to their Warehousing
     Percentage Shares thereof) in the aggregate amount necessary to repay the
     outstanding Swingline Advances, and each Lender absolutely and
     unconditionally agrees to fund such Warehousing Advances, regardless of any
     Default or Event of Default or other condition which would otherwise excuse
     such Lender from funding Warehousing Advances; provided that no Lender
     shall be required to make Warehousing Advances to repay Swingline Advances
     which would cause such Lender's aggregate Warehousing Advances then
     outstanding to exceed the amount of such Lender's Maximum Warehousing
     Commitment.  Each Lender's Warehousing Advances made pursuant to the
     preceding sentence shall be delivered directly to the Swingline Lender in
     immediately available funds at the office of the Credit Agent by 12:00 noon
     on the day of the request therefor by the Swingline Lender if such request
     is made on or before 11:00 a.m. or by 9:00 a.m. on the first (1st) Business
     Day following such request therefor if such request is made after 11:00
     a.m. and shall be promptly applied against the outstanding Swingline
     Advances.  At any time following the receipt of funds from all the Lenders,
     and no less than weekly, the Credit Agent shall deliver to each Lender a
     certificate in the form of Exhibit M attached hereto (the "Advance
                                ---------                              
     Certificate"), certified by the Credit Agent.

          2.3  Procedures for Obtaining Warehousing Advances.
               --------------------------------------------- 
<PAGE>
 
                    2.3(a)    The Borrowers may obtain Warehousing Advances
          hereunder, subject to the satisfaction of the conditions set forth in
          Sections 4.1 and 4.2 hereof, upon compliance with the procedures set
          forth in this Section 2.3 and in the following described Exhibits,
          attached hereto and made a part hereof including the delivery of all
          documents listed in the following described Exhibits (the "Collateral
          Documents") to the Collateral Agent, as applicable to the type of
          Collateral being financed:

                    (1)  Conventional Mortgage Loans, Fannie Mae DUS Mortgage
               Loans and Commercial Mortgage Loans, as set forth in Exhibit D-
                                                                    ----------
               MF/CONV/DUS hereto.
               -----------

                    (2)  FHA Project Mortgage Loans, FHA Construction Mortgage
               Loans and HUD 241 Mortgage Loans, as set forth in Exhibit D-
                                                                 ----------
               MF/FHA hereto.
               ------        

                    (3)  Special Fannie Mae Loans, as set forth in Exhibit D-
                                                                   ---------
               MF/SFNMA.
               -------- 

                    Requests for Warehousing Advances shall be initiated by the
          Borrowers by delivering to the Credit Agent, with a copy to the
          Collateral Agent, no later than one (1) Business Day prior to any
          Business Day that the Borrowers desire to borrow hereunder, a
          completed and signed request for a Warehousing Advance (a "Warehousing
          Advance Request") on the then current form approved by the Credit
          Agent.  The current forms in use by the Credit Agent are Exhibit C-MF
                                                                   ------------
          for Warehousing Advances, other than P&I Advances and Liquidity
          Advances, and Exhibit C-P&I for P&I Advances and Liquidity Advances.
                        -------------                                          
          The Credit Agent shall have the right, on not less than three (3)
          Business Days' prior Notice to the Borrowers, to modify any of said
          Exhibits to conform to current legal requirements or Collateral Agent
          practices, and, as so modified, said Exhibits shall be deemed a part
          hereof.

                    2.3(b)  The Collateral Agent shall have one (1) Business Day
          under ordinary circumstances to (i) examine the Collateral Documents
          (ii) reject Collateral that does not meet the requirements of this
          Agreement or, if applicable, the related Purchase Commitment and (iii)
          verify the Warehousing Advance amount.  Before the Credit Agent funds
          any requested Warehousing Advance, the Credit Agent shall have
<PAGE>
 
          received from the Collateral Agent Notice (telephonic followed by
          written notice) of the amount that may be advanced pursuant to Section
          2.1(c).

                    2.3(c)  The Borrowers shall hold in trust for the Lenders,
          and the Borrowers shall deliver to the Collateral Agent promptly upon
          request, or if the recorded Collateral Documents have not yet been
          returned from the recording office, immediately upon receipt by the
          Borrowers of such recorded Collateral Documents, and the Pledged
          Mortgage is not being held by an Investor for purchase or has not been
          redeemed from pledge, the following: (1) originals of the Collateral
          Documents for which copies are required to be delivered to the
          Collateral Agent pursuant to Exhibit D-MF/CONV/DUS,  Exhibit D-MF/FHA
                                       ---------------------   ----------------
          or Exhibit D-MF/SFNMA, (2) the original lender's ALTA Policy of Title
             ------------------                                                
          Insurance or an equivalent thereto, (3) the environmental assessment,
          and (4) any other documents relating to a Pledged Mortgage which the
          Collateral Agent may request including, without limitation,
          certificates of casualty or hazard insurance, credit information on
          the maker of each such Mortgage Note, and other documents of all kinds
          which are customarily desired for inspection or transfer incidental to
          the purchase of any Mortgage Loan by an Investor or the issuance of a
          Mortgage-backed Security and any additional documents which are
          customarily executed by the seller of a Mortgage Note to an Investor.

                    2.3(d)  Neither the Credit Agent nor any Lender shall incur
          any liability to the Borrowers in acting upon any telephonic notice
          referred to in this Agreement which the Credit Agent or such Lender
          believes in good faith to have been given by a duly authorized officer
          or other Person authorized to borrow on behalf of the Borrowers or for
          otherwise acting in good faith under this Section.  Upon the funding
          of Warehousing Advances by the Lenders in accordance with this
          Agreement pursuant to any telephonic notice, the Borrowers shall have
          effected borrowings hereunder.  A Warehousing Advance Request shall be
          irrevocable and the Borrowers shall be bound to accept a Warehousing
          Advance in accordance herewith, if such Warehousing Advance Request is
          not revoked prior to 10:00 a.m. on the date the Warehousing Advance is
          to be disbursed.

                    2.3(e)  To make an Advance, the Credit Agent shall cause the
          Funding Bank to credit the Wire Disbursement Account upon compliance
          by the Borrowers 
<PAGE>
 
          with the terms of the Loan Documents. The Credit Agent shall determine
          in its sole discretion the method by which Advances and other amounts
          on deposit in the Wire Disbursement Account are disbursed by the
          Funding Bank to or for the account of the Borrowers.

               2.3(f)  If, pursuant to the authorization given by the Borrowers
          in the Funding Bank Agreement, for the purpose of financing a Mortgage
          Loan against which a Warehousing Advance has been made in accordance
          with a Warehousing Advance Request, the Credit Agent debits the
          Borrowers' Operating Account at the Funding Bank to the extent
          necessary to cover a wire to be initiated by the Credit Agent, and
          such debit or direction results in an overdraft, the Swingline Lender
          may make an additional Swingline Advance to fund such overdraft.

               2.3(g)  Upon an Event of Default, and without the necessity of
          prior demand or notice from the Credit Agent, the Borrowers authorizes
          the Credit Agent to cause the Funding Bank to charge the Borrowers'
          account for any Obligations due and owing the Lenders.

          2.4  The Servicing Facility Commitment.
               --------------------------------- 

                    2.4(a)  Subject to the terms and conditions of this
          Agreement and provided no Default or Event of Default has occurred and
          is continuing, the Lenders agree from time to time during the period
          from the Closing Date, to, but not including, the Servicing Facility
          Maturity Date, to make Servicing Facility Advances to the Borrowers,
          provided the sum of (i) the total aggregate principal amount
          outstanding at any one time of all such Servicing Facility Advances,
          (ii) the amount available to be drawn under Letters of Credit, and
          (iii) the Letter of Credit Obligations, shall not exceed the Servicing
          Facility Credit Limit.  The obligation of each Lender to make
          Servicing Facility Advances hereunder up to its Maximum Servicing
          Facility Commitment is hereinafter referred to as such Lender's
          "Servicing Facility Commitment."  Within the Servicing Facility Credit
          Limit, the Borrowers may borrow, repay and reborrow.  All Servicing
          Facility Advances under this Agreement shall constitute a single
          indebtedness, and all of the Collateral shall be security for the
          Servicing Facility Promissory Notes and for the performance of all the
          Obligations.  Servicing Facility Advances shall be made to each
          Borrower, as shall be requested by the Borrowers, but each Servicing
          Facility Advance shall be deemed made to or for the benefit of 
<PAGE>
 
          all of the Borrowers, and all of the Borrowers, jointly and severally,
          shall be obligated to repay any Servicing Facility Advances made under
          the Servicing Facility Commitments. With respect to its obligation to
          repay Servicing Facility Advances made to the other Borrowers, each
          Borrower agrees to the terms set forth in Exhibit N attached hereto
                                                    ---------                
          and made a part hereof.

                    2.4(b)  Servicing Facility Advances shall be used by the
          Borrowers solely for the purpose of (i) financing a part of the cost
          of a Servicing Acquisition; (ii) general working capital purposes;
          (iii) meeting Fannie Mae's Loan Loss Reserve requirements; or (iv)
          other corporate needs.  Each Servicing Facility Advance shall be made
          at the request of the Borrowers, in the manner hereinafter provided in
          Section 2.5 hereof.  The following limitations on Servicing Facility
          Advances shall be applicable:

                            (1) No Servicing Facility Advance shall be made if,
               after giving effect thereto, (i) the aggregate outstanding
               principal balance of all Servicing Facility Advances, the amount
               available to be drawn under all Letters of Credit and the Letters
               of Credit Obligations would exceed the Servicing Facility Credit
               Limit, or (ii) the Servicing Secured Obligations would exceed
               sixty-five percent (65%) of the Servicing Collateral Value.

                            (2) In calculating the Servicing Collateral Value
               for purposes of the foregoing clause (i), no Servicing Contracts
               being acquired in a Servicing Acquisition may be included unless
               the Collateral Agent shall have reviewed the documents and
               information described in Section 2.5(b) in connection with such
               Servicing Acquisition, and the same shall be in all respects
               satisfactory to the Collateral Agent.

          2.5  Procedures for Obtaining Servicing Facility Advances.
               ---------------------------------------------------- 

                    2.5(a)  The Borrowers may obtain Servicing Facility Advances
          hereunder, subject to the satisfaction of the conditions set forth in
          Sections 4.1 and 4.2 hereof, upon compliance with the procedures set
          forth in this Section 2.5.  Requests for Servicing Facility Advances
          shall be initiated by the Borrowers delivering to the Credit Agent, no
          later than two (2) 
<PAGE>
 
          Business Day prior to any Business Day on which the Borrowers desire
          to borrow hereunder, a completed and signed request for Servicing
          Facility Advances (a "Servicing Facility Advance Request") on the then
          current form approved by the Credit Agent. The current form in use by
          the Credit Agent is Exhibit C-SA attached hereto and made a part 
                              ------------         
          hereof. The Credit Agent shall have the right, on not less than three
          (3) Business Days' prior Notice to the Borrowers, to modify such
          Exhibits to conform to current legal requirements or Credit Agent
          practices, and, as so modified, said Exhibit shall be deemed a part
          hereof.

               2.5(b)  If the Servicing Contracts being acquired in a Servicing
          Acquisition will be included in calculating the Servicing Collateral
          Value for purposes of Section 2.4(b)(1) hereof, the Borrowers shall
          deliver the following documents, certificates and opinions related to
          any Servicing Acquisition to the Credit Agent on or prior to the date
          of any Servicing Facility Advance requested to finance such Servicing
          Acquisition:

                    (1)  the following documents with respect to the Nonrecourse
               Servicing Contracts to be acquired in such Servicing Acquisition:
               a counterpart of the Servicing Purchase Agreement and all other
               Servicing Acquisition Documents, duly executed by each party
               thereto;

                    (2)  an Appraisal of the Nonrecourse Servicing Contracts to
               be acquired in such Servicing Acquisition;

                    (3)  evidence satisfactory to the Credit Agent that all
               consents from and notices to Fannie Mae, Ginnie Mae, FHA, VA and
               other governmental agencies or Investors required for the
               Borrowers to assume the Servicing Contracts to be acquired and
               continue its business after the closing of such Servicing
               Acquisition, or for the Borrowers to acquire the Person to be
               acquired and for such Person (or the Borrowers, if such Person is
               to be merged with one of the Borrowers) to continue such Person's
               business after the closing of such Servicing Acquisition, have
               been obtained and given;

                    (4)  evidence satisfactory to the Credit Agent that such
               Servicing Facility Advances in 
<PAGE>
 
               such Servicing Acquisition and any additional funds delivered
               simultaneously to the sellers in such Servicing Acquisition will
               be sufficient to pay the purchase price under such Servicing
               Purchase Agreement in full;

                    (5)  Such UCC Financing statements or amendments as the
               Credit Agent, in its sole discretion, may request to perfect or
               continue the perfection of its security interest;

                    (6)  UCC, tax lien and judgment searches in the appropriate
               public records for the seller(s) in such Servicing Acquisition
               and any Person to be acquired in such Servicing Acquisition,
               which shall not have disclosed the existence of any prior Lien on
               the Servicing Contracts to be acquired by, or owned by the Person
               to be acquired by, the Borrowers; and

                    (7)  such further documents, instruments, opinions,
               certificates and evidence as the Credit Agent may reasonably
               request.

                    Before any Servicing Facility Advances to fund any Servicing
          Acquisition are funded, the Collateral Agent shall have a reasonable
          time to examine the documents delivered to it hereunder in connection
          with the Servicing Acquisition to be funded, and may reject such of
          them as are not reasonably satisfactory to the Collateral Agent.

                         2.5(c)  To make Servicing Facility Advances to fund a
          Servicing Acquisition, the Credit Agent shall cause the Funding Bank
          to disburse the amount thereof to the seller(s) in the Servicing
          Acquisition to be funded in accordance with the Servicing Facility
          Advance Request, together with any other funds required to pay the
          purchase price under such Servicing Purchase Agreement in full (other
          than any portion thereof to be paid after the effective date of
          transfer), upon compliance by the Borrowers with the terms of this
          Agreement.

          2.6  The Term Loan Commitment.
               ------------------------ 

          Term Loan Advances shall be made on the Closing Date, without any
     further action by the Borrowers, in an amount equal to the Term Loan Credit
     Limit, and applied to repay the Existing Agreement Servicing Advances.  No
     Term Loan Advances shall be made after the Closing Date.
<PAGE>
 
          2.7  Funding of Advances; Non-Receipt of Funds by the Credit Agent.
               ------------------------------------------------------------- 
     Except to the extent any requested Warehousing Advances are to be funded as
     Swingline Advances, the Credit Agent shall notify each Lender obligated to
     make an Advance no later than 11:00 a.m. on the date of the requested
     Advances of its receipt of the Advance Request and of its Percentage Share
     of such Advances.  To make an Advance, each Lender shall, except as
     otherwise provided in Section 2.2, credit an account of the Credit Agent
     with the Funding Bank prior to 12:00 noon on the date of such Advance, and
     the Credit Agent shall make such Advance available to the Borrowers as
     provided in this Agreement. If the Credit Agent receives notice from a
     Lender that such Lender does not intend to make its Percentage Share of any
     Advance, neither the Credit Agent nor any other Lender shall have any
     obligation to fund such Lender's Percentage Share.  Notwithstanding the
     foregoing, unless a Lender notifies the Credit Agent by 12:00 noon on the
     date of a proposed Advance that it does not intend to make its Percentage
     Share of such Advance at such time and on such date available to the Credit
     Agent, the Credit Agent may assume that such Lender will make such amount
     available to the Credit Agent to be advanced to the Borrowers, and in
     reliance on such assumption, the Credit Agent may, at its option, make a
     corresponding amount available to the Borrowers.

                    2.7(a)    If the Credit Agent makes such corresponding
          amount available to the Borrowers and such amount is not made
          available to the Credit Agent by such Lender by close of business on
          the date of the Advance, such Lender shall pay such amount to the
          Credit Agent upon demand plus interest to the date of payment at the
          rate per annum equal to one percent (1%) per annum over the Federal
          Funds Rate.

                    2.7(b)    If such Lender fails to pay as provided herein,
          the Borrowers shall pay such amount to the Credit Agent upon demand
          plus interest (at the rate applicable to the Borrowers for such
          Advance) to the date of repayment.

                    2.7(c)    Nothing in this Subsection shall relieve any
          Lender from its obligation to fund its Percentage Share of any
          Advance, or prejudice any rights the Borrowers may have against any
          Lender as a result of such Lender's failure to make its Percentage
          Share of any Advance available to the Borrowers.

                    2.7(d)    Any Lender failing to make an Advance when
          required pursuant to this Agreement shall,
<PAGE>
 
          if no Default has occurred and is continuing, upon the request of the
          Borrowers delivered to such Lender and the Credit Agent, assign,
          pursuant to and in accordance with the provisions of Section 13.3
          hereof, all of its rights and obligations under this Agreement and
          under the Notes to an assignee selected by the Borrowers in
          consideration for (i) the payment by such assignee to the assigning
          Lender of the principal of, and interest accrued and unpaid to the
          date of such assignment on, the Notes of such Lender, and (ii) the
          payment by the Borrowers to the assigning Lender of any and all other
          amounts owing to such Lender under any provision of this Agreement
          accrued and unpaid to the date of such assignment. The processing and
          recordation fee required under Section 13.3 hereof for such assignment
          shall be paid by the Borrowers. Notwithstanding anything to the
          contrary in this Section 2.7(d), in no event shall the replacement of
          any Lender result in a decrease or reallocation of the aggregate
          Commitments without the written consent of the Majority Lenders.

          2.8  Notes.
               ----- 

               2.8(a)  The Borrowers' Obligations in respect of Warehousing
          Advances other than P&I Advances, Liquidity Advances and Swingline
          Advances shall be evidenced by Warehousing Promissory Notes of the
          Borrowers in favor of each Lender holding a Warehousing Commitment,
          substantially in the form of Exhibit A-1 attached hereto.  The
                                       -----------                      
          Borrowers' Obligations in respect of P&I Advances and Liquidity
          Advances shall be evidenced by Sublimit Promissory Notes of the
          Borrowers' in favor of each Lender holding a Warehousing Commitment,
          substantially in the form of Exhibit A-2 attached hereto.  The
                                       -----------                      
          Borrowers' Obligations in respect of Swingline Advances shall be
          evidenced by a Swingline Note of the Borrowers in favor of the
          Swingline Lender in the form of Exhibit A-3 attached hereto.  The
                                          -----------                      
          Borrowers' Obligations in respect of the Servicing Facility Advances
          shall be evidenced by Servicing Facility Promissory Notes of the
          Borrowers in favor of each Lender holding a Servicing Facility
          Commitment, substantially in the form of Exhibit A-4 attached hereto.
                                                   -----------                  
          The Borrowers' Obligations in respect of the Term Loan Advances shall
          be evidenced by Term Loan Promissory Notes of the Borrowers in favor
          of each Lender, substantially in the form of Exhibit A-5 attached
                                                       -----------         
          hereto.  The Warehousing Promissory Notes, Sublimit Promissory Notes,
          Swingline Note, Servicing Facility Promissory Notes and Term Loan
          Promissory 
<PAGE>
 
          Notes are hereinafter collectively referred to as the "Notes." The
          terms "Warehousing Promissory Note," "Sublimit Promissory Note,"
          "Servicing Facility Promissory Note," "Term Loan Promissory Note,"
          "Swingline Note", "Note" or "Notes" shall include all extensions,
          renewals and modifications of the Notes and all substitutions
          therefor. All terms and provisions of the Notes are hereby
          incorporated herein.

                    2.8(b)  Each Borrower, other than WMF Group, by its
          execution and delivery of this Agreement or, in the case of a New
          Borrower, a Borrower Addition Agreement, hereby (i) authorizes WMF
          Group to execute and deliver, and appoints WMF Group as its true and
          lawful attorney-in-fact for the purpose of executing and delivering,
          Notes on its behalf, and (ii) agrees to be bound by, and obligated
          pursuant to, each Note executed by WMF Group pursuant to this
          Agreement or any amendment hereto. The foregoing appointment of WMF
          Group is for the benefit of the Lenders and coupled with an interest,
          and shall be irrevocable for as long as any Commitment remains
          outstanding or any of the Obligations have not been irrevocably paid
          and discharged in full.

          2.9  Interest Payments.
               ----------------- 

                    2.9(a)  Except as provided in Section 2.9(f) or Section
          2.9(g), the unpaid amount of each Warehousing Advance, other than a
          P&I Advance and a Liquidity Advance, shall bear interest, from the
          date of such Advance until paid in full, at the Ordinary Warehousing
          Rate.

                    2.9(b)  Except as provided in Section 2.9(f) or Section
          2.9(g) hereof, the unpaid amount of each Term Loan Advance shall bear
          interest, from the date of such Advance until paid in full, at the
          Term Loan Rate.

                    2.9(c)  Except as provided in Section 2.9(f) or Section
          2.9(g) hereof, the unpaid amount of the Servicing Facility Advance
          shall bear interest, from the date of such Advance until paid in full,
          at the Servicing Facility Rate.

                    2.9(d)  Except as provided in Section 2.9(f) or Section
          2.9(g) hereof, the unpaid amount of each P&I Advance shall bear
          interest, from the date of such Advance until paid in full, at the P&I
          Rate.
<PAGE>
 
                    2.9(e)  Except as provided in Section 2.9(f) or Section
          2.9(g) hereof, the unpaid amount of each Liquidity Advance shall bear
          interest, from the date of such Advance until paid in full, at the
          Liquidity Rate.

                    2.9(f)  The Borrowers and any Lender may enter into an
          agreement (the "Balance Funded Agreement") pursuant to which the
          Borrowers agree to maintain Eligible Balances  on deposit with such
          Lender or a Designated Bank in consideration of the funding of all or
          a portion of such Lender's Advances at a Balance Funded Rate.  Prior
          to the end of any calendar month, the Borrowers may give written
          notice to any Lender with which it has a Balance Funded Agreement of
          the Borrowers' election to have a portion (the "Balance Funded
          Portion") of the principal amount of the Lender's Advances bear
          interest at a Balance Funded Rate during the next succeeding calendar
          month.  In the event the Borrowers elect to have all or a portion of
          any Lender's Advances bear interest at a Balance Funded Rate, such
          Lender shall notify the Credit Agent no later than the first Business
          Day of the next succeeding month of the Balance Funded Portion of such
          Lender's Advances during such month and the Balance Funded Rate(s)
          applicable thereto.  If the Eligible Balances maintained by the
          Borrowers with such Lender or Designated Bank during such month are
          less than the Balance Funded Portion, such Lender may charge and
          separately bill the Borrowers a deficiency fee (a "Balance Deficiency
          Fee"), the amount of which shall be set forth in the Balance Funded
          Agreement between the Borrowers and such Lender.

                    2.9(g)  Upon Notice to the Borrowers, after the occurrence
          and during the continuation of an Event of Default, the Credit Agent
          may give Notice to the Borrowers that the unpaid amount of each
          Advance shall bear interest, until paid in full, at a rate of interest
          (the "Default Rate") equal to four percent (4%) per annum over the
          applicable rate provided in the applicable subsection of this Section
          2.9 or, if no rate is applicable, the highest rate then applicable to
          any outstanding Advance.

                    2.9(h)  If, for any reason, no interest is due on a
          Warehousing Advance, the Borrowers agree to pay to the Swingline
          Lender or the Lenders, as applicable, an administrative fee equal to
          one (1) day of interest on such Advance at the rate of one and 
<PAGE>
 
          one-half percent (1-1/2%) per annum. Administrative fees shall be due
          and payable in the same manner as interest is due and payable
          hereunder.

                         2.9(i)  The floating rates of interest provided for in
          this Section 2.9 will be adjusted as of the effective date of each
          change in the applicable index. The Lender's determination of such
          rates as of any date of determination shall be conclusive and binding,
          absent manifest error.

                         2.9(j)  All interest shall be computed on the basis of
          a 360-day year for the actual number of days elapsed.

               2.10  Principal Payments.
                     ------------------ 

                         2.10(a) The outstanding principal amount of all
          Warehousing Advances shall be payable in full on the Warehousing
          Maturity Date.

                         2.10(b) The outstanding principal amount of all
          Servicing Facility Advances shall be payable in full on the Servicing
          Facility Maturity Date.

                         2.10(c) The principal amount of each Lender's Term Loan
          Advance shall be payable in quarterly installments, due on the first
          day of each Calendar Quarter beginning April 1, 1999, in an amount
          equal to such Lender's Term Loan Percentage Share of Six Hundred
          Twenty-Five Thousand Dollars ($625,000). The remaining principal
          balance of the Term Loan Advances shall be payable on the Term Loan
          Maturity Date.

                         2.10(d) The Borrowers shall have the right to prepay
          the outstanding Advances in whole or in part, from time to time,
          without premium or penalty. Amounts prepaid on Warehousing Advances
          prior to the Warehousing Maturity Date and on Servicing Facility
          Advances prior to the Servicing Facility Maturity Date may be
          reborrowed, subject to the terms and conditions set forth in this
          Agreement. All prepayments of the Term Loan Advances shall be applied
          to the installments due thereon in the inverse order of their
          maturities.

                         2.10(e) All payments of outstanding Advances from the
          proceeds of the sale or other disposition of Pledged Mortgages and
          Pledged Securities shall be paid directly by the Investor to the Cash
<PAGE>
 
          Collateral Account to be applied against any Obligations then due and
          payable.

                         2.10(f) The Borrowers shall be obligated to pay to the
          Credit Agent for the pro rata benefit of the Lenders, without the
          necessity of prior demand or notice from the Credit Agent, and the
          Borrowers authorize the Credit Agent to cause the Funding Bank to
          charge the Borrowers' Operating Account for the amount of, any
          outstanding Advance against a specific Pledged Mortgage upon the
          earliest occurrence of any of the following events:

                                 (1) For an FHA Construction Mortgage Loan,
               ninety (90) days elapse from the date of each Advance made
               against such Pledged Mortgage, and for any other Mortgage Loan
               other than a Pledged Mortgage to be exchanged for a Fannie Mae
               Mortgage-backed Security, ninety (90) days elapse from the date
               of the initial Advance made by the Credit Agent against such
               Pledged Mortgage, whether or not such Pledged Mortgage is
               included in an Eligible Mortgage Pool.

                                 (2) For Mortgage Loans other than Fannie Mae
               DUS Mortgage Loans to be exchanged for a Fannie Mae Mortgage-
               backed Security, forty-five (45) days elapse from the date the
               Pledged Mortgage was delivered to an Investor or an Approved
               custodian for examination and purchase, without the purchase
               being made or the Eligible Mortgage Pool being initially
               certified, or upon rejection of the Pledged Mortgage as
               unsatisfactory by an Investor or an Approved Custodian.

                                 (3) For a Fannie Mae DUS Mortgage Loan to be
               exchanged for a Fannie Mae Mortgage-backed Security, seventy-five
               (75) days elapse from the date such Fannie Mae DUS Mortgage Loan
               was delivered to Fannie Mae for examination and the issuance of a
               Pledged Security without the Pledged Security being issued, or
               upon rejection of the Pledged Mortgages as unsatisfactory by
               Fannie Mae.

                                 (4) On the date an Advance was made and the
               Pledged Mortgage which was to have been funded by such Advance is
               not closed and funded.
<PAGE>
 
                                 (5) For a Conventional Multifamily Mortgage
               Loan, Fannie Mae DUS Mortgage Loan, FHA Project Mortgage Loan,
               HUD 241 Mortgage Loan, FHA Construction Mortgage Loan,
               Conventional Health Care Mortgage Loan, Commercial Mortgage Loan,
               or Special Fannie Mae Loan, one (1) Business Day elapses from the
               date an Advance was made against any Mortgage Loan, without
               receipt of those Collateral Documents relating to such Mortgage
               Loan required to be delivered on such date under Exhibit D-
                                                                ---------
               MF/CONV/DUS, Exhibit D-MF/FHA or Exhibit D-MF SFNMA,  or such
               -----------  ----------------    ------------------          
               Collateral Documents, upon examination by the Lender, are found
               not to be in compliance with the requirements of this Agreement
               or the related Purchase Commitment.

                                 (6) Ten (10) Business Days elapse from the date
               a Collateral Document was delivered to the Borrowers for
               correction or completion under a Trust Receipt, without being
               returned to the Lender.

                                (7)  Three (3) Business Days after the date on
               which the Credit Agent notifies the Borrowers that a Pledged
               Mortgage is determined to have been originated based on untrue,
               incomplete or inaccurate information, whether or not the
               Borrowers had knowledge of such misrepresentation or incorrect
               information, or that a Pledged Mortgage is defaulted and has
               remained in default for a period of sixty (60) days or more.

                                 (8) For a Pledged Mortgage against which an
               Advance was made on the basis of a Purchase Commitment, on the
               mandatory delivery date of the related Purchase Commitment if the
               specific Pledged Mortgage was not delivered under the Purchase
               Commitment prior to such mandatory delivery date, or if the
               Purchase Commitment is terminated.

                                 (9) Payment of any Lien prior to a Second
               Mortgage Loan is delinquent, and remains delinquent, for a period
               of sixty (60) days or more.
<PAGE>
 
                    (10)  Upon sale, maturity or other disposition of the
               Pledged Mortgage or, if a Pledged Mortgage is included in an
               Eligible Mortgage Pool, upon sale or other disposition of the
               related Agency Securities.

                    (11) On the date on which the Borrowers know, or have reason
               to know, or receives notice from the Credit Agent, that one or
               more of the representations and warranties set forth in Section
               5.15 were inaccurate or incomplete in any material respect on any
               date when made or deemed made.

                    (12) For a Warehousing Advance made to Washington against a
               Special Fannie Mae Loan, [30] days elapse from the date of the
               initial Advance made by the Credit Agent without the Pledged
               Security to be exchanged for a 100% participation in such Special
               Fannie Mae Loan having been issued, or upon any determination by
               Fannie Mae not to purchase such 100% participation.

                         2.10(g)  The outstanding amount of any Advance made
          pursuant to Section 2.3(f) shall be payable in full within 1 Business
          Day after the date of such Advance .

                         2.10(h)  The Borrowers shall give Notice to the
          Collateral Agent (telephonically, to be followed by written notice) of
          the Pledged Mortgages or Pledged Securities for which proceeds have
          been received. Upon receipt of such Notice, the Warehousing Advances
          against such Pledged Mortgages or the Pledged Securities shall be
          repaid and such Pledged Mortgages or Pledged Securities shall be
          considered to have been redeemed from pledge. The Credit Agent is
          entitled to rely upon the Borrowers' affirmation that deposits in the
          Cash Collateral Account represent payment from Investors for the
          purchase of Pledged Mortgages or Pledged Securities as specified by
          the Borrowers. In the event that the payment from an Investor for the
          purchase of Pledged Mortgages or Pledged Securities is less than the
          outstanding Warehousing Advances against such Pledged Mortgages or the
          Mortgage Loans backing Pledged Securities, the Credit Agent is
          authorized to cause the Funding Bank to charge the Borrowers' account
          for an amount equal to such deficiency. Provided no Default or Event
          of Default exists, the Credit Agent shall return any excess payment
          from an Investor for
<PAGE>
 
          Pledged Mortgages or Pledged Securities to the Borrowers.

               2.10(i)  In addition to the payments required pursuant to Section
          2.9(g), the Borrowers shall be obligated to pay to the Credit Agent,
          for the account of the Lenders, without the necessity of prior demand
          or notice from the Credit Agent, and the Borrowers authorize the
          Credit Agent to cause the Funding Bank to charge the Borrowers'
          Operating Account, if the principal amount of any Pledged Mortgage is
          prepaid in whole or in part while an Advance is outstanding against
          such Pledged Mortgage, for the amount of such prepayment, to be
          applied to such Advance.

               2.10(j)  For a period of not less than seven (7) consecutive days
          in each calendar month, there shall be no P&I Advances outstanding;
          and the Borrowers shall make such prepayments of the P&I Advances, and
          shall refrain from requesting P&I Advances, as necessary to comply
          with the foregoing requirement.

               2.10(k)  For a period of not less than seven (7) consecutive days
          in each one hundred eighty (180) day period, there shall be no
          Liquidity Advances outstanding; and the Borrowers shall make such
          prepayments of the Liquidity Advances, and shall refrain from
          requesting Liquidity Advances, as necessary to comply with the
          foregoing requirement.

               2.10(l)  If at any time the aggregate outstanding principal
          balance of all Servicing Secured Obligations exceeds sixty-five
          percent (65%) of the Servicing Collateral Value, the Borrowers shall
          prepay (i) first, the outstanding Servicing Facility Advances, (ii)
          second, the outstanding P&I Advances and Liquidity Advances, and (iii)
          third, the outstanding Term Loan Advances, in the amount of such
          excess.

               2.10(m)  Prior to the occurrence of an Event of Default and
          acceleration of all Warehousing Advances outstanding hereunder or
          termination of the Warehousing Commitments hereunder, amounts received
          by the Credit Agent as proceeds of the sale or other disposition of
          Pledged Mortgages or Pledged Securities, including without limitation,
          all such amounts from time to time deposited in the Cash Collateral
          Account, shall be applied:
<PAGE>
 
                              (1)  in an amount equal to the Release Amount for
                    such Pledged Mortgages or the Mortgage Loans backing such
                    Pledged Securities, first, to the Swingline Advances until
                    the same have been repaid in full, and second, to the other
                    Warehousing Advances; and

                              (2) the balance, if any, to the Borrowers.

                    The application of funds allocated among the Lenders as set
          forth above shall be deemed to constitute (1) repayment, in part or in
          full, as applicable, of the Advances outstanding against the Pledged
          Mortgages or Pledged Securities sold, and (ii) a refunding of an
          amount of Swingline Advances equal to the portion of such proceeds
          applied to Swingline Advances (other than any Swingline Advances made
          against the Pledged Mortgages or Pledged Securities sold) as Advances
          made by the Lenders pursuant to Section 2.1.

                    2.10(n)  Following the occurrence of an Event of Default and
          acceleration of any Obligations outstanding hereunder or termination
          of the commitments of the Lenders to make Advances hereunder, all
          amounts received by the Credit Agent on account of the Obligations
          shall be disbursed by the Credit Agent in accordance with the
          provisions of Section 8.3 hereof.

                    2.10(o)  Upon the closing of the Rights Offering, the
          Company shall repay the outstanding Servicing Facility Advances in an
          amount equal to the sum of (i) the amount previously repaid to COMIT
          on Subordinated Debt, as permitted by Section 7.4 hereof, plus (ii)
                                                                    ----     
          twenty-five percent (25%) of the amount by which the Net Proceeds of
          the Rights Offering exceeds $20,000,000.  Upon the closing of any
          other issuance of Debt of any Borrower or equity securities of WMF
          Group, or sale of any Servicing Contracts by any Borrower, the Company
          shall repay the outstanding Servicing Facility Advances in an amount
          equal to twenty-five percent (25%) of the Net Proceeds thereof.

          2.11  Expiration of Commitments.  Unless extended or terminated
                -------------------------                                
     earlier as permitted hereunder, the Warehousing Commitments shall expire of
     their own term, and without the necessity of action by the Credit Agent or
     any Lender, at the close of business on the Warehousing Maturity Date,the
<PAGE>
 
     Servicing Facility Commitments shall expire of their own term, and without
     the necessity of action by the Credit Agent or any Lender, at the close of
     business on the later to occur of the Servicing Facility Maturity Date, and
     the Term Loan Facility Commitments shall expire of their own term, and
     without the necessity of action by the Credit Agent or any Lender, at the
     close of business on the Closing Date.

          2.12  Fees.  The Borrowers shall pay the following fees:
                ----                                              

                    2.12(a)   To each Lender, through the Credit Agent, a
          Warehousing Commitment Fee in the amount of 1/8% per annum of the
          amount of such Lender's Maximum Warehousing Commitment, which
          Warehousing Commitment Fee shall be paid quarterly in advance and
          shall be computed on the basis of a 365-day year and applied to the
          actual number of days elapsed in each Calendar Quarter. On the Closing
          Date, the Borrowers shall pay the prorated portion of the quarterly
          Warehousing Commitment Fee due from the Closing Date to the last day
          of the current Calendar Quarter.  If any Lender increases its Maximum
          Warehousing Commitment, or if an Additional Lender becomes a party
          hereto, the Borrowers shall pay the Warehousing Commitment Fee on the
          amount of such increase or the amount of such Additional Lender's
          Maximum Warehousing Commitment from the effective date thereof to the
          last day of the current Calendar Quarter.  In all other cases, the
          Borrowers shall make payments of the Warehousing Commitment Fee on the
          1st day of each Calendar Quarter.  If the Warehousing Maturity Date is
          other than the last day of a Calendar Quarter, the Borrowers shall pay
          the prorated portion of the Warehousing Commitment Fee due from the
          beginning of the then current Calendar Quarter to and including the
          Warehousing Maturity Date.  The Borrowers shall not be entitled to a
          reduction in the amount of the Warehousing Commitment Fee in the event
          the amount of any Lender's Maximum Warehousing Commitment is reduced
          at the request of the Borrowers, or in the event that any Lender's
          Maximum Warehousing Commitment is terminated prior to its stated
          expiration date as a result of an Event of Default hereunder.  If the
          commitments of the Lenders hereunder terminate prior to the
          Warehousing Maturity Date, the unpaid balance of the Warehousing
          Commitment Fee shall be due and payable in full on the date of such
          termination.

                    2.12(b)   To each Lender, through the Credit Agent, a
          Servicing Facility Commitment Fee in 
<PAGE>
 
          the amount of (i) one-fourth of one percent (1/4%) per annum of such
          Lender's Percentage Share of the Servicing Facility Commitment, which
          Servicing Facility Commitment Fee shall be payable quarterly in
          advance until the Servicing Facility Maturity Date. Servicing Facility
          Commitment Fees shall be computed on the basis of a 365-day year and
          applied to the actual number of days elapsed in each Calendar Quarter.
          On the Closing Date, the Borrowers shall pay the prorated portion of
          the quarterly Servicing Facility Commitment Fee due from the Closing
          Date to the last day of the current Calendar Quarter. In all other
          cases, the Borrowers shall make quarterly payments of the Servicing
          Facility Commitment Fee on the first (1st) day of each Calendar
          Quarter. If the Servicing Facility Maturity Date is other than the
          last day of a Calendar Quarter, the Borrowers shall pay the prorated
          portion of the quarterly Servicing Facility Commitment Fee due from
          the beginning of the then current Calendar Quarter to and including
          the Servicing Facility Maturity Date, as applicable. The Borrowers
          shall not be entitled to a reduction in the amount of the Servicing
          Facility Commitment Fee in the event the amount of the Servicing
          Facility Credit Limit is reduced at the request of the Borrowers, or
          in the event that any Lender's Servicing Facility Commitment is
          terminated prior to its stated expiration date as a result of an Event
          of Default hereunder. If the Servicing Facility Commitments of the
          Lenders hereunder terminate prior to the Servicing Facility Maturity
          Date, the unpaid balance of the Servicing Facility Commitment Fee
          shall be due and payable in full on the date of such termination.

                    2.12(c)  If the Servicing Facility Commitment is at any time
          reduced or terminated prior to the date set forth in clause (a) of the
          definition of Servicing Facility Maturity Date at the request of the
          Borrowers, the Borrowers shall pay to the Credit Agent, for the
          account of the Lenders holding Servicing Facility Commitments, a fee
          in the amount of one percent (1%) per annum (from the date of such
          termination or reduction until the date set forth in clause (a) of the
          definition of Servicing Facility Maturity Date herein) of the sum of
          the Servicing Facility Commitments or, if less, the amount of such
          reduction.  The foregoing fee shall be due and payable on the
          effective date of such reduction or termination.

                    2.12(d)  To each Lender, through the Credit Agent, a Term
          Loan Commitment Fee in the amount 
<PAGE>
 
          of one-fourth of one percent (1/4%) per annum of (i) on the Closing
          Date, such Lender's Maximum Term Loan Commitment, and (ii) thereafter,
          the unpaid principal amount of such Lender's Term Loan Advance
          outstanding on each annual anniversary of the Closing Date, which Term
          Loan Commitment Fee shall be computed on the basis of a 365-day year
          and applied to the actual number of days elapsed in each year. On the
          Closing Date, the Borrowers shall pay the Term Loan Commitment Fee due
          from the Closing Date to the day before the first annual anniversary
          thereof. Thereafter, the Borrowers shall pay the Term Loan Commitment
          Fee due for the following year, calculated as of each annual
          anniversary date, on the first Business Day of each Calendar Quarter.
          The Borrowers shall not be entitled to a refund of any portion of the
          Term Loan Commitment Fee in the event the Term Loan Advances are
          prepaid, either voluntarily by the Borrowers or as a result of an
          Event of Default.

                    2.12(e)  To LaSalle, for its own account, fees in respect of
          each Letter of Credit in an amount not to exceed two percent (2.00%)
          per annum.

                    2.12(f)  To the Credit Agent, for its own account, such fees
          as shall be separately agreed between the Borrowers and the Credit
          Agent.

          2.13  Miscellaneous Charges.  In addition to all fees payable pursuant
                ---------------------                                           
     to Section 2.12 hereof, the Borrowers agree to reimburse the Credit Agent
     for miscellaneous charges and expenses (collectively, "Miscellaneous
     Charges") incurred by or on behalf of the Credit Agent in connection with
     the handling and administration of Advances, and to reimburse the
     Collateral Agent for Miscellaneous Charges incurred by or on behalf of the
     Collateral Agent in connection with the handling and administration of the
     Collateral.  For the purposes hereof, Miscellaneous Charges shall include,
     but not be limited to, costs for UCC, tax lien and judgment searches
     conducted by the Credit Agent, filing fees, charges for wire transfers,
     check processing charges, charges for security delivery fees, charges for
     overnight delivery of Collateral, the Funding Bank's service charges and
     Designated Bank Charges.  Miscellaneous Charges are due when incurred, but
     shall not be delinquent if paid within thirty (30) days after receipt of an
     invoice or an account analysis statement from the Credit Agent or the
     Collateral Agent, as the case may be.
<PAGE>
 
          2.14  Illegality.  In the event that any Lender shall have determined
                ----------                                                     
     (which determination shall be conclusive and binding absent manifest error)
     at any time that the introduction of, or any change in, any applicable law,
     rule, regulation, order or decree or in the interpretation or the
     administration thereof by any Person charged with the interpretation or
     administration thereof, or compliance by such Lender with any request or
     directive (whether or not having the force of law) of any such Person,
     shall make it unlawful or impossible for such Lender to charge interest at
     the Balance Funded Rate based on the Borrowers' Eligible Balances as
     contemplated by this Agreement, then such Lender shall forthwith give
     Notice thereof to the Credit Agent and the Borrowers describing such
     illegality in reasonable detail.  Upon the giving of such Notice, the
     obligation of such Lender to charge interest at the Balance Funded Rate
     based on the Borrowers' Eligible Balances shall be immediately suspended
     for the duration of such illegality, and with respect to Advances bearing
     interest at the Balance Funded Rate, each such Advance of such Lender shall
     bear interest at the applicable rate set forth in Section 2.9(a), (b), (c),
     (d), (e) or (g).  If and when such illegality ceases to exist, such Lender
     shall notify the Credit Agent and the Borrowers thereof and such suspension
     shall cease.

          2.15 Interest Limitation.  All agreements between the Borrowers and
               -------------------                                           
     the Lenders are hereby expressly limited so that in no contingency or event
     whatsoever, whether by reason of acceleration of maturity of this Agreement
     or the Notes or otherwise, shall the amount paid or agreed to be paid to
     the Lenders for the use, forbearance, loaning or retention of the Advances
     exceed the maximum permissible under applicable law.  If from any
     circumstances whatsoever, fulfillment of any provisions hereof, of the
     Notes, or of any other document securing this Agreement at any time given
     shall involve transcending the limit of validity prescribed by law, then,
     the obligation to be fulfilled shall automatically be reduced to the limit
     of such validity, and if from any circumstances the Lenders should ever
     receive as interest an amount which would exceed the highest lawful rate of
     interest, such amount which would be in excess of interest shall be applied
     to the reduction of the principal balance secured by the Notes and not to
     the payment of interest thereunder.  This provision shall control every
     other provision of all agreements between the Borrowers and Lenders and
     shall also be binding upon and available to any subsequent holder of the
     Notes.

          2.16  Billing and Payment.
                ------------------- 
<PAGE>
 
                    2.16(a)  The Credit Agent shall on or before the fifth (5th)
          Business Day of each month deliver to the Borrowers billings for
          interest due and payable for the immediately preceding month on
          Advances.  On or before the tenth (10th) Business Day of each month,
          the Borrowers shall pay to the Credit Agent the full amount of
          interest and fees billed for the immediately preceding month.

                    2.16(b)  All payments made on account of the Obligations
          shall be made by the Borrowers to the Credit Agent for distribution to
          the Lenders, except for Balance Deficiency Fees, which shall be made
          directly to the applicable Lender, fees payable to the Credit Agent
          for its own account or for the account of the Collateral Agent, and
          Letter of Credit fees payable to LaSalle.  All payments made on
          account of the Obligations shall be made without setoff or
          counterclaim, free and clear of and without deduction for any taxes,
          fees or other charges of any nature whatsoever imposed by any taxing
          authority, and must be received by the Credit Agent by 12:00 noon on
          the day of payment, it being expressly agreed and understood that if a
          payment is received after 12:00 noon by the Credit Agent such payment
          will be considered to have been made on the next succeeding Business
          Day and interest thereon shall be payable by the Borrowers at the then
          applicable rate during such extension.  No principal payments
          resulting from the sale of Pledged Mortgages or Pledged Securities
          shall be deemed to have been received by the Credit Agent until the
          Collateral Agent has also received the Notice required under Section
          2.9(i) hereof.  All payments shall be made in lawful money of the
          United States of America in immediately available funds transferred
          via wire to accounts designated by the Credit Agent from time to time.
          If any payment required to be made by the Borrowers hereunder becomes
          due and payable on a day other than a Business Day, the due date
          thereof shall be extended to the next succeeding Business Day and
          interest shall be payable on Advances so extended at the then
          applicable rate during such extension.

                    2.16(c)  All amounts received by Credit Agent on account of
          the Obligations (except amounts received in respect of fees or
          expenses payable hereunder to the Credit Agent or the Collateral Agent
          for their own accounts or amounts payable to the Swingline Lender for
          Swingline Advances) shall be disbursed to the Lenders by wire transfer
          on the date 
<PAGE>
 
          of receipt if received by the Credit Agent by the applicable deadlines
          for payment thereof as specified in Section 2.16(b) hereof, or if
          received later, by 12:00 noon on the next succeeding Business Day,
          without any interest payable by the Credit Agent thereon.

3.   COLLATERAL.

          3.1  Appointment of Collateral Agent.  Pursuant to the Collateral
               -------------------------------                             
     Agency Agreement, RFC has been appointed as Collateral Agent to act as
     agent, bailee, and custodian for the exclusive benefit of itself, the
     Lenders, the Credit Agent and LaSalle, as issuer of the Letters of Credit
     (collectively, the "Secured Parties"), with respect to the Collateral.

          3.2  Delivery of Collateral.  As described in Section 2.3 hereof, and
               ----------------------                                          
     in the Collateral Agency Agreement, from time to time the Borrowers shall
     deliver Collateral or cause Collateral to be delivered to the Collateral
     Agent hereunder.

          3.3  Grant of Security Interest.  As security for the payment of the
               --------------------------                                     
     Notes, for the payment of the Letter of Credit Obligations and for the
     payment and performance of all of the other Obligations, the Borrowers
     hereby assign and transfer to the Credit Agent, for the benefit of the
     Secured Parties, all right, title and interest in and to, and grant a
     security interest to the Credit Agent, for the benefit of the Secured
     Parties, in, the following described property:

                    3.3(a)  All Mortgage Loans, including all Mortgage Notes and
          Mortgages evidencing or securing such Mortgage Loans, which from time
          to time are delivered or caused to be delivered to the Collateral
          Agent (including delivery to a third party on behalf of the Collateral
          Agent), come into the possession, custody or control of any of the
          Lenders, the Credit Agent or the Collateral Agent for the purpose of
          assignment or pledge or in respect of which an Advance has been made
          by the Lenders hereunder, and with respect to the Special Fannie Mae
          Loans, the promissory notes evidencing the same and all of
          Washington's right, title and interest in and to the Special Fannie
          Mae Program Agreements, and all promissory notes and other agreements,
          documents and instruments executed and delivered pursuant thereto or
          in connection therewith, or otherwise relating thereto and referenced
          therein (the "Pledged Mortgages").
<PAGE>
 
                    3.3(b)  All Mortgage-backed Securities and Participation
          Certificates which are from time to time created in whole or in part
          on the basis of the Pledged Mortgages or are delivered or caused to be
          delivered to, or are otherwise in the possession of the Collateral
          Agent or its agent, bailee or custodian as assignee, or pledged to the
          Collateral Agent, or for such purpose are registered by book-entry in
          the name of, the Collateral Agent (including delivery to or
          registration in the name of a third party on behalf of the Collateral
          Agent, the Credit Agent or any Lender) hereunder or in respect of
          which from time to time an Advance has been made by the Lenders
          hereunder (the "Pledged Securities").

                    3.3(c)  All commitments issued by the FHA to insure or
          guarantee any Mortgage Loans included in the Pledged Mortgages; all
          guaranties related to Pledged Securities; all Purchase Commitments
          held by the Borrowers covering the Pledged Mortgages or the Pledged
          Securities and all proceeds resulting from the sale thereof to
          Investors pursuant thereto; and all personal property, contract
          rights, servicing and servicing fees and income or other proceeds,
          amounts and payments payable to the Borrowers as compensation or
          reimbursement, accounts and general intangibles of whatsoever kind
          relating to the Pledged Mortgages, the Pledged Securities, said FHA
          commitments and the Purchase Commitments, and all other documents or
          instruments relating to the Pledged Mortgages and the Pledged
          Securities, including, without limitation, any interest of the
          Borrowers in any fire, casualty or hazard insurance policies and any
          awards made by any public body or decreed by any court of competent
          jurisdiction for a taking or for degradation of value in any eminent
          domain proceeding as the same relate to the Pledged Mortgages.

                    3.3(d)  All Servicing Contracts now owned or hereafter
          created or acquired by the Borrowers, other than Servicing Contracts
          pursuant to which any Borrower Services Mortgage Loans for WMFCC.

                    3.3(e)  All rights of the Borrowers to receive payments
          under or by virtue of the Servicing Contracts described in Section
          3.3(d) and the related Acknowledgment Agreements, whether as servicing
          fees, servicing income, damages, amounts payable upon the 
<PAGE>
 
          cancellation or termination of any such Servicing Contract, interests
          on the foregoing, or otherwise.

               3.3(f)  Any agreement pursuant to which any Servicing Contract
          described in Section 3.3(d) or the stock of any Person that owned (at
          the time of acquisition or at any time thereafter) or owns any such
          Servicing Contract was acquired or is sold by the Borrowers, and all
          documents executed or delivered in connection with any such
          acquisition or sale.

               3.3(g)  All accounts or general intangibles owned by the Company
          for the payment of money against (i) FHA under an FHA mortgage
          insurance policy insuring payment of, or any other Person under any
          other agreement (including a Servicing Contract) relating to, all or
          part of a defaulted Mortgage Loan repurchased by the Company from an
          investor or out of a pool of Mortgage Loans serviced by the Company or
          being serviced by the Company, (ii) obligors and their accounts,
          Fannie Mae, Freddie Mac, Ginnie Mae or any other investor under a
          Servicing Contract covering, or out of the proceeds of any sale of or
          foreclosure sale in respect of, any Mortgage Loan (A) repurchased by
          the Company out of a pool of Mortgage Loans serviced by the Company,
          or (B) being serviced by the Company, for the reimbursement of real
          estate taxes or assessments, or casualty or liability insurance
          premiums, paid by the Company in connection with Mortgage Loans, and
          (iii) obligors and their accounts, or Fannie Mae, Freddie Mac, Ginnie
          Mae, or any other investor under or in respect of any Mortgage Loans
          serviced by the Company for repayment of advances made by the Company
          to cover shortages in principal and interest payments.

                    3.3(h)  All right, title and interest of the Company in and
          to any Hedging Arrangements entered into to protect the Company
          against changes in the value of the Collateral, including, without
          limitation, all rights to payment arising under such Hedging
          Arrangements.

                    3.3(i)  All right, title and interest of the Borrowers in
          and to all escrow accounts, documents, instruments, files, surveys,
          certificates, correspondence, appraisals, computer programs, tapes,
          discs, cards, accounting records (including all information, records,
          tapes, data, programs, discs and cards necessary or helpful in the
          administration or servicing of the Collateral) and other information
          and data of the Borrowers relating to the Collateral.
<PAGE>
 
                    3.3(j)  All now existing or hereafter acquired cash
          delivered to or otherwise in the possession of the Credit Agent, the
          Collateral Agent, any Lender or their agents, bailee or custodian or
          designated on the books and records of the Borrowers as assigned and
          pledged to the Credit Agent, including, without limitation, all cash
          deposited in the Cash Collateral Account.

                    3.3(k)  All cash and non-cash proceeds of the Collateral,
          including all dividends, distributions and other rights in connection
          with, and all additions to, modifications of and replacements for, the
          Collateral, and all products and proceeds of the Collateral, together
          with whatever is receivable or received when the Collateral or
          proceeds thereof are sold, collected, exchanged or otherwise disposed
          of, whether such disposition is voluntary or involuntary, including,
          without limitation, all rights to payment with respect to any cause of
          action affecting or relating to the Collateral or proceeds thereof.

          The grant of the security interest under Sections 3.3(d) and 3.3(e)
          above is subject and subordinate to the rights of Fannie Mae or Ginnie
          Mae, as applicable, in and to any Servicing Contracts to which Fannie
          Mae or Ginnie Mae is a party.  The Lenders acknowledge that (i) each
          Borrower is entitled to servicing income with respect to a given
          Mortgage Pool only as long as such Borrower is an issuer in good
          standing, (ii) upon either Borrower's loss of issuer status, the
          Lenders' rights to servicing income related to the affected Mortgage
          Pool(s) also terminate, and (iii) the pledge of rights to servicing
          income conveys no rights (such as the right to become a substitute
          servicer or issuer) that are not otherwise specifically provided for
          in the applicable Ginnie Mae or Investor guide.

          3.4  Release of Security Interest in Collateral.
               ------------------------------------------ 

                    3.4(a)  Pledged Mortgages shall be released from the Credit
          Agent's security interest only against payment to the Credit Agent of
          the Release Amount in connection with such Pledged Mortgages.

                    3.4(b)  If Pledged Mortgages are to be transferred to a pool
          custodian or to Freddie Mac or Fannie Mae for inclusion in a Mortgage
          Pool, the Credit Agent's security interest in such Pledged Mortgages
<PAGE>
 
          shall be released only against payment to the Credit Agent of the
          Release Amount in connection with such Pledged Mortgages.  If the
          Credit Agent's security interest in the Pledged Mortgages comprising
          the Mortgage Pool is not released prior to the issuance of the
          Mortgage-backed Security or Participation Certificate, then the
          Mortgage-backed Security or Participation Certificate, when issued,
          shall be a Pledged Security.  The Credit Agent's security interest
          shall continue in such Pledged Mortgages and the Pledged Security.
          The Credit Agent shall be entitled to possession of such Pledged
          Security in the manner provided below.

                    3.4(c)  If Pledged Mortgages are transferred to an Approved
          Custodian and included in an Eligible Mortgage Pool, the Credit
          Agent's security interest in the Pledged Mortgages comprising the
          Eligible Mortgage Pool shall be released upon the issuance of the
          Agency Security, which shall be a Pledged Security.  The Credit
          Agent's security interest in such Pledged Security shall be released
          only against payment to the Credit Agent of the Release Amount in
          connection with the Pledged Mortgages backing such Pledged Security.
          The Credit Agent shall be entitled to possession of such Pledged
          Security in the manner provided below.

                    3.4(d)  The Collateral Agent shall have the exclusive right
          to the possession of the Pledged Securities or, if the Pledged
          Securities are issued in book-entry form or issued in certificated
          form and delivered to a clearing corporation (as such term is defined
          in the Uniform Commercial Code of Minnesota) or its nominee, the
          Credit Agent shall have the right to have the Pledged Securities
          registered in the name of a securities intermediary (as such term is
          defined in the Uniform Commercial Code of Minnesota) in an account
          containing only customer securities and credited to an account of the
          Credit Agent, and the Credit Agent shall have the right to cause
          delivery of the Pledged Securities to be made to the Investor or the
          Pledged Securities credited to the account of the Investor or the
          Investor's designee only against payment therefor.  The Borrowers
          acknowledge that the Credit Agent may enter into one or more standing
          arrangements with other financial institutions with respect to Pledged
          Securities issued in book entry form or issued in certificated form
          and delivered to a clearing corporation, pursuant to which such
          Pledged 
<PAGE>
 
          Securities are registered in the name of such financial institution,
          as agent or securities intermediary for the Credit Agent, and the
          Borrowers agree upon request of the Lender, to execute and deliver to
          such other financial institutions the Borrowers' written concurrence
          in any such standing arrangements.

                    3.4(e)  Prior to the occurrence of an Event of Default, the
          Borrowers may redeem a Pledged Mortgage or Pledged Security from the
          Credit Agent's security interest by notifying the Credit Agent of its
          intention to redeem such Pledged Mortgage or Pledged Security from
          pledge and either (a) paying, or causing an Investor to pay, to the
          Credit Agent, for application to prepayment of the principal balance
          of the Notes, the Release Amount in connection with such Pledged
          Mortgage or Pledged Security, or (b) delivering substitute Collateral
          which, in addition to being acceptable to the Collateral Agent in its
          sole discretion will, when included with the Collateral, result in a
          Collateral Value of all Warehousing Collateral held by the Collateral
          Agent which is at least equal to the aggregate outstanding Warehousing
          Advances (other than P&I Advances and Liquidity Advances).

                    3.4(f)  Following the occurrence of a Default or Event of
          Default, unless otherwise instructed by the Majority Lenders, the
          Credit Agent may, with no liability to the Borrowers, the Secured
          Parties or any Person, continue to release its security interest in
          any Pledged Mortgage or Pledged Security against payment of the
          Release Amount in connection with such Pledged Mortgage or Pledged
          Security.  Following the occurrence of a Default or Event of Default,
          at the direction of all the Lenders and with no liability to
          Borrowers, the Secured Parties or any Person, the Credit Agent shall
          refuse to release its security interest in any item of Collateral and
          shall instruct the Collateral Agent to cease the delivery of
          Collateral to the Borrowers or any Person.

                    3.4(g)  The Release Amount in connection with any Pledged
          Mortgage shall be (i) prior to the occurrence of an Event of Default
          and the receipt by the Credit Agent of instructions from the Majority
          Lenders to exercise its remedies as provided in Section 8.2(c) hereof,
          the principal amount of the Warehousing Advances made against such
          Pledged Mortgage, and (ii) from and after the occurrence and 
<PAGE>
 
          during the continuance of an Event of Default and receipt by the
          Credit Agent of instructions from the Majority Lenders to exercise its
          remedies as provided in Section 8.2(c) hereof, the Committed Purchase
          Price of such Pledged Mortgage or, if there is no Purchase Commitment
          therefor, the amount paid to the Credit Agent in a commercially
          reasonable disposition thereof.

                    3.4(h)  Servicing Contracts included in the Servicing
          Collateral (but not the proceeds thereof) shall be released from the
          Credit Agent's security interest in connection with any sale of such
          Servicing Contracts permitted pursuant to Section 7.2 hereof.

          3.5  Delivery of Additional Collateral or Mandatory Prepayment.  At
               ---------------------------------------------------------     
     any time that the aggregate Collateral Value of the Pledged Mortgages and
     Pledged Securities then pledged hereunder is less than the aggregate amount
     of the Warehousing Advances then outstanding hereunder, the Credit Agent
     may request, and the Borrowers shall within two (2) Business Days after
     Notice by the Credit Agent (a) deliver to the Collateral Agent for pledge
     hereunder additional Mortgage Loans and/or cash, with a Collateral Value
     sufficient to cover the difference between the Collateral Value of the
     Pledged Mortgages and Pledged Securities and the aggregate amount of
     Warehousing Advances outstanding hereunder, and/or (b) repay the
     Warehousing Advances in an amount sufficient to reduce the aggregate
     balance thereof outstanding to or below the Collateral Value of the Pledged
     Mortgages and Pledged Securities hereunder.

          3.6  Release of Collateral.
               --------------------- 

                    3.6(a)  The Collateral Agent may deliver documents relating
          to the Collateral to the Borrowers for correction or completion
          pursuant to a Trust Receipt and Section 4.3 of the Collateral Agency
          Agreement.

                    3.6(b)  Prior to the occurrence of an Event of Default, upon
          delivery by the Borrowers to the Collateral Agent of shipping
          instructions pursuant to Exhibit D-MF/CONV/DUS, Exhibit D-MF/FHA or
                                   ---------------------  ----------------   
          Exhibit D-MF/SFNMA, the Collateral Agent will transmit Pledged
          ------------------                                            
          Mortgages or Pledged Securities and all related loan documents or pool
          documents to the applicable Investor, Approved Custodian or other
          party in accordance with Section 4.4 of the Collateral Agency
          Agreement.
<PAGE>
 
                    3.6(c)  Upon receipt of Notice from the Borrowers under
          Section 2.9(i) hereof, and repayment of the Release Amount with
          respect to a Pledged Mortgage or a Mortgage Loan backing a Pledged
          Security identified by the Borrowers, any Collateral Documents
          relating to the redeemed Pledged Mortgage or Mortgage Loan backing a
          Pledged Security which have not been delivered to an Investor or
          Approved Custodian shall be released by the Collateral Agent to the
          Borrowers.

          3.7  Collection and Servicing Rights.  So long as no Event of Default
               -------------------------------                                 
     shall have occurred and be continuing, the Borrowers shall be entitled to
     service and receive and collect directly all sums payable to the Borrowers
     in respect of the Collateral other than proceeds of any Purchase Commitment
     or proceeds of the sale of any Collateral.  Following the occurrence of any
     Event of Default, the Credit Agent or its designee shall thereafter be
     entitled to service and receive and collect all sums payable to the
     Borrowers in respect of the Collateral, and in such case (a) the Credit
     Agent or its designee in its sole discretion may, in its own name, in the
     name of the Borrowers or otherwise, demand, sue for, collect or receive any
     money or property at any time payable or receivable on account of or in
     exchange for any of the Collateral, but shall be under no obligation to do
     so, (b) the Borrowers shall, if the Credit Agent so requests, forthwith pay
     to the Credit Agent at its office designated by Notice hereunder, all
     amounts thereafter received by the Borrowers upon or in respect of any of
     the Collateral, advising the Credit Agent as to the source of such funds,
     and (c) all amounts so received and collected by the Credit Agent shall be
     held by it in the Cash Collateral Account as part of the Collateral.

          3.8  Collection of Receivables.
               ------------------------- 

                    3.8(a)  From and after the occurrence of an Event of
          Default, whether or not such Event of Default shall have been cured or
          waived for other purposes, the Credit Agent may, and at the direction
          of the Majority Warehousing Lenders shall, require the Company to, and
          thereupon the Company shall, require that all payments in respect of
          Receivables (i) if made by check or other payment item, be made to a
          post office box under the exclusive control of the Credit Agent or its
          designees (the "Lock Box"), and (ii) if made by wire transfer or other
          method of inter-bank funds transfer, be made by transfer to a deposit
          account at a bank acceptable to the Credit Agent (the "Lock Box Bank")
          under the exclusive control of the 
<PAGE>
 
          Credit Agent (the "Lock Box Account"). The Company may not modify or
          revoke any such requirement or modify any agreement relating to the
          Lock Box or the Lock Box Account without the consent of the Credit
          Agent. The Credit Agent or its designee shall cause all checks or
          payment items received in the Lock Box to be deposited into the Lock
          Box Account.

                    3.8(b)  Following the occurrence and during the continuance
          of an Event of Default, the Credit Agent may hold all amounts on
          deposit in the Lock Box Account as Collateral for the Obligations,
          withdraw all amounts on deposit in the Lock Box Account and apply such
          amounts to the Obligations as provided in Section 8.3 below or, with
          the consent of the Majority Warehousing Lenders, deposit such amounts
          into the Operating Account.  Prior to the occurrence of an Event of
          Default, or after all Events of Default that have occurred have been
          cured or waived in accordance with this Agreement, the Credit Agent
          shall transfer all amounts deposited into the Lock Box Account into
          the Operating Account.

          3.9  Return of Collateral at Maturity.  If (a) the Commitments shall
               --------------------------------                               
     have expired or been terminated, (b) no Advances, interest or other
     Obligations shall be outstanding and unpaid, and (c) no Letters of Credit
     remain outstanding and no Letter of Credit Obligations remain unpaid, the
     Credit Agent shall release its security interest and the Collateral Agent
     shall deliver all Collateral in its possession to the Borrowers at the
     Borrowers' expense.  The receipt of the Borrowers for any Collateral
     released or delivered to the Borrowers pursuant to any provision of this
     Agreement shall be a complete and full acquittance for the Collateral so
     returned, and the Secured Parties shall thereafter be discharged from any
     liability or responsibility therefor.

4.   CONDITIONS PRECEDENT.

          4.1  Initial Advances.  The obligation of the Lenders to make the
               ----------------                                            
     initial Advance under this Agreement is subject to the satisfaction, in the
     sole discretion of the Credit Agent, on or before the date thereof, of the
     following conditions precedent:

                    4.1(a)  The Credit Agent shall have received the following,
          all of which must be satisfactory in form and content to the Credit
          Agent, in its sole discretion:
<PAGE>
 
                                    (1) This Agreement duly executed by all
               parties hereto.

                                    (2) The Notes duly executed by the
               Borrowers.

                                    (3) The Collateral Agency Agreement duly
               executed by all parties thereto.

                                    (4) The Borrowers' articles of incorporation
               as certified by the Secretary of State of the State of each
               Borrowers' incorporation, bylaws certified by the corporate
               secretary of each Borrower, or a Certificate of each of the
               Borrowers stating that there have been no change in either its
               articles of incorporation or bylaws since those delivered in
               connection with the Existing Credit Agreement, and certificates
               of good standing dated no less recently than thirty (30) days
               prior to the date of this Agreement for each Borrower.

                                    (5) A resolution of the board of directors
               of each of the Borrowers, certified as of the date of this
               Agreement by each of the Borrowers' corporate secretary,
               authorizing the execution, delivery and performance of this
               Agreement and the other Loan Documents, and all other instruments
               or documents to be delivered by the Borrowers pursuant to this
               Agreement.

                                    (6) A certificate of the Borrowers'
               corporate secretary as to the incumbency and authenticity of the
               signatures of the officers of the Borrowers executing this
               Agreement and the other Loan Documents and each Advance Request
               and all other instruments or documents to be delivered pursuant
               hereto (the Credit Agent being entitled to rely thereon until a
               new such certificate has been furnished to the Credit Agent).

                                    (7) A favorable written opinion of counsel
               to the Borrowers, dated as of the date of this Agreement and
               substantially in the form of Exhibit H attached hereto, addressed
                                            ---------                           
               to the Credit Agent and the Lenders.
<PAGE>
 
                                   (8)  With respect to each Special Fannie Mae
               Program Agreement described on Exhibit Q hereto, to the extent
                                              ---------  
               not previously delivered pursuant to the Existing Credit
               Agreement, (i) an executed copy of such Special Fannie Mae
               Program Agreement, (ii) executed copies of the promissory note(s)
               evidencing the Special Fannie Mae Loans made thereunder, (iii) an
               executed copy of the Fannie Mae Special Pool Purchase Contract
               relating thereto, and (iv) an executed original of a bailee
               agreement with respect to any of the promissory notes described
               in clause (ii) above that have been delivered to Fannie Mae, in
               form and substance satisfactory to the Credit Agent.

                                   (9)  Uniform Commercial Code, tax lien and
               judgment searches of the appropriate public records in the
               jurisdictions where each Borrower has an office, which search
               shall not have disclosed the existence of any prior Lien on the
               Collateral other than in favor of the Credit Agent or as
               permitted hereunder.

                                   (10) Executed financing statements or
               amendments to financing statements previously filed against the
               Borrowers, in recordable form covering the Collateral and ready
               for filing in all jurisdictions required by the Credit Agent.

                                   (11) Copies of the certificates, documents or
               other written instruments which evidence the Borrowers'
               eligibility described in Section 5.13 hereof, all in form and
               substance satisfactory to the Credit Agent.

                                   (12) Copies of the Borrowers' errors and
               omissions insurance policy or mortgage impairment insurance
               policy and blanket bond coverage policy, or certificates in lieu
               of policies, all in form and content satisfactory to the Credit
               Agent, showing compliance by the Borrowers as of the date of this
               Agreement with the related provisions of Section 6.8 hereof.

                                   (13) Evidence that all accounts necessary
               into which Advances will be funded have been established at the
               Funding Bank 
<PAGE>
 
               and receipt of a fully executed Funding Bank Agreement.

                         4.1(b)  All directors, officers and shareholders of the
          Borrowers, all Affiliates of the Borrowers or of any Subsidiary of the
          Borrowers, to whom or to any of whom the Borrowers shall be indebted
          as of the date of this Agreement, which indebtedness has a term of
          more than one (1) year or is in excess of Five Hundred Thousand
          Dollars ($500,000) shall have subordinated such indebtedness to the
          Obligations, by executing a Subordination of Debt Agreement, in the
          form of Exhibit F hereto; and the Credit Agent shall have received an
                  ---------                                                    
          executed copy of any such Subordination of Debt Agreement, certified
          by the corporate secretary of the Borrowers to be true and complete
          and in full force and effect as of the date of the Advance.

                         4.1(c)  After giving effect to the application of all
          Advances made on the Closing Date, all of the Borrowers' "Obligations"
          (as defined in the Existing Credit Agreement) shall have been repaid
          in full and the Credit Agent shall have received satisfactory evidence
          thereof.

          4.2  Each Advance.  The obligation of the Lenders to make the initial
               ------------                                                    
     and each subsequent Advance under this Agreement is subject to the
     satisfaction, in the sole discretion of the Credit Agent, as of the date of
     each such Advance, of the following additional conditions precedent:

                         4.2(a)  The Borrowers shall have delivered to the
          Credit Agent the original Advance Request, and the Borrowers shall
          have delivered to the Collateral Agent a copy of the Advance Request,
          and the Collateral Documents, called for under, and shall have
          satisfied the procedures set forth in, Section 2.3 hereof and the
          applicable Exhibits hereto described in that Section, according to the
          type of the requested Advance. All items delivered to the Credit Agent
          or the Collateral Agent, as the case may be, shall be satisfactory to
          the Credit Agent or the Collateral Agent, in form and content, and the
          Credit Agent or the Collateral Agent, as the case may be, may reject
          such of them as do not meet the requirements of this Agreement or of
          the related Purchase Commitment.

                         4.2(b)  The Collateral Agent shall have given
          telephonic notice to the Credit Agent of the 
<PAGE>
 
          Mortgage Loans against which Advances may be made, followed by a Loans
          Warehoused Report as provided for and defined in the Collateral Agency
          Agreement.

                         4.2(c)  The Credit Agent shall have received evidence
          satisfactory to it as to the making and/or continuation of any book
          entry or the due filing and recording in all appropriate offices of
          all financing statements and other instruments as may be necessary to
          perfect the security interest of the Credit Agent in the Collateral
          under the Uniform Commercial Code or other applicable law.

                         4.2(d)  The representations and warranties of the
          Borrowers contained in Article 5 hereof shall be accurate and complete
          in all material respects as if made on and as of the date of each
          Advance.

                         4.2(e)  The Borrowers shall have performed all
          agreements to be performed by them hereunder, and after giving effect
          to the requested Advance, there shall exist no Default or Event of
          Default hereunder.

                         4.2(f)  The Borrowers shall not have incurred any
          material liabilities, direct or contingent, other than in the ordinary
          course of its business, since the Statement Date.

                         4.2(g)  The Credit Agent shall have received from
          counsel for the Borrowers, if requested by the Credit Agent in its
          sole discretion, an updated opinion, in form and substance
          satisfactory to the Credit Agent, addressed to the Credit Agent and
          the Lenders and dated as of the date of such Advance, covering such of
          the matters as the Credit Agent may reasonably request.

     Delivery of an Advance Request by the Borrowers shall be deemed a
     representation by the Borrowers that all conditions set forth in this
     Section 4.2 shall have been satisfied as of the date of such Advance.

          4.3  New Subsidiary Borrowers.  WMF Group may, at any time, amend
               ------------------------                                    
     Exhibit P to add any direct or indirect Subsidiary of WMF Group as a
     ---------                                                           
     Borrower hereunder (provided, that the addition of such Subsidiary as a
     Borrower would not result in a breach of Section 8.1(n) hereof); provided,
     that the effectiveness of any such amendment to Exhibit P, and of 
                                                     ---------            
<PAGE>
 
     the addition of any such direct or indirect Subsidiary of WMF Group as a
     Borrower hereunder, shall be subject to the following conditions precedent:

                    4.3(a)    The Credit Agent shall have received the
          following, all of which must be in form and content satisfactory to
          the Credit Agent, in its sole discretion:

                              (1)  A Borrower Addition Agreement, duly executed
               by WMF Group (on behalf of the Borrowers) and the wholly-owned
               Subsidiary to be added as a Borrower hereunder (the "New
               Borrower").

                              (2)  Certified copies of the New Borrower's
               articles of incorporation and bylaws or other organizational
               documents, and certificates of good standing dated no less
               recently than thirty (30) days prior to the date of the Borrower
               Addition Agreement.

                              (3)  A copy of resolutions of the board of
               directors or other governing authority of the New Borrower,
               certified as of the date of the Borrower Addition Agreement by
               its corporate secretary (or the equivalent), authorizing the
               execution, delivery and performance of the Borrower Addition
               Agreement (and thereby the assumption of the Obligations under
               the Loan Documents) and all other instruments or documents to be
               delivered by the New Borrower pursuant to this Agreement and the
               Borrower Addition Agreement (including, without limitation, the
               Notes contemplated pursuant to Section 4.3(b)).

                              (4)  A certificate of the corporate secretary (or
               the equivalent) of the New Borrower, as to the incumbency and
               authenticity of the signatures of the officers of the New
               Borrower executing the Borrower Addition Agreement, and all other
               instruments or documents to be delivered by such New Borrower
               pursuant to the Borrower Addition Agreement and this Agreement
               (the Credit Agent being entitled to rely thereon until a new such
               certificate has been furnished to the Credit Agent).

                              (5)  A tax, lien and judgment search of the
               appropriate public records for the
<PAGE>
 
               New Borrower in the States where its chief executive office is
               located, including a search of Uniform Commercial Code financing
               statements, which search shall not have disclosed the existence
               of any prior Lien on the Collateral other than in favor of the
               Credit Agent, for the benefit of the Secured Parties, or as
               permitted hereunder.

                              (6)  Executed financing statements in recordable
               form naming the New Borrower as debtor, covering the Collateral
               and ready for filing in all jurisdictions required by the Credit
               Agent.

                              (7)  Copies of the certificates, documents or
               other written instruments which evidence the New Borrower's
               status as a mortgagee, seller, servicer or issuer with HUD,
               Ginnie Mae and the applicable Investors all in form and substance
               satisfactory to the Lender.

                              (8)  Copies of the New Borrower's errors and
               omissions insurance policy or mortgage impairment insurance
               policy and blanket bond coverage policy, or certificates in lieu
               of such policies or naming the new Borrower as an insured under
               the existing Borrowers' policies, all in form and content
               satisfactory to the Credit Agent, showing compliance by the New
               Borrower as of the date of the Borrower Addition Agreement with
               the related provisions of Section 6.8 hereof.

                              (9)  Funding Bank Agreements in the forms attached
               to this Agreement, executed by the New Borrower.

                    4.3(b)    The representations and warranties of the
          Borrowers contained in Article 5 hereof shall be accurate and complete
          in all material respects as if made on and as of the date of, and
          after giving effect to, the Borrower Addition Agreement.

                    4.3(c)    The Borrowers shall have performed all agreements
          to be performed by them hereunder, and after giving effect to the
          addition of the New Borrower hereunder, there shall exist no Default
          or Event of Default hereunder.
<PAGE>
 
                    4.3(d)  The Borrowers shall not have incurred any material
          liabilities, direct or contingent, other than in the ordinary course
          of their business, since the Statement Date.

                    4.3(e)  If requested by the Credit Agent, the Lenders
          shall have received from counsel for the Borrowers an updated opinion,
          in form and substance satisfactory to the Credit Agent, addressed to
          the Credit Agent and the Lenders and dated as of the date of the
          Borrower Addition Agreement, covering such of the matters set forth 
          on Exhibit H hereto as the Credit Agent may reasonably request.
             ---------

     Each of the Borrowers (including, without limitation, any Borrower that
     becomes a party hereto pursuant to a Borrower Addition Agreement) hereby
     authorizes WMF Group, on behalf of the Borrowers, to execute and deliver
     Borrower Addition Agreements on behalf of all of the Borrowers.

          4.4  New Fannie Mae Special Program Agreements.  Washington may, at
               -----------------------------------------                     
     any time with the prior written consent of the Credit Agent, amend Exhibit
                                                                        -------
     Q to add any Special Fannie Mae Program Agreement thereto; provided, that
     -                                                                        
     the effectiveness of any such amendment to Exhibit Q, and the obligation of
                                                ---------                       
     the Lenders to make Warehousing Advances against Special Fannie Mae Loans
     made thereunder, shall be subject to the following conditions precedent:

                    4.4(a)  The representations and warranties of the Borrowers
          contained in Article 5 hereof shall be accurate and complete in all
          material respects as if made on and as of the date of, and after
          giving effect to, the amendment to Exhibit Q hereto.
                                             ---------        

                    4.4(b)  The Borrowers shall have performed all agreements to
          be performed by them hereunder, and there shall exist no Default or
          Event of Default hereunder.

                    4.4(c)  The Borrowers shall not have incurred any material
          liabilities, direct or contingent, other than in the ordinary course
          of their business, since the Statement Date.

                    4.4(d)  If requested by any Lender holding a Warehousing
          Commitment, the Lenders shall have received from counsel for the
          Borrowers an updated opinion, in form and substance satisfactory to
          the Credit Agent, addressed to the Credit Agent and the 
<PAGE>
 
          Lenders and dated the date of the amendment to Exhibit Q hereto,
                                                         ---------
          covering such matters relating to the Special Fannie Mae Program
          Agreement and related documents as any Lender may reasonably request.

     The Credit Agent shall promptly notify the other Lenders holding
     Warehousing Commitments of any such amendment to Exhibit Q.
                                                      --------- 

5.   REPRESENTATIONS AND WARRANTIES.

          The Borrowers hereby represent and warrant to the Lenders, as of the
     date of this Agreement and as of the date of each Advance Request and the
     making of each Advance, that:

          5.1  Organization; Good Standing; Subsidiaries.  Each of the Borrowers
               -----------------------------------------                        
     and each Subsidiary of the Borrowers is a corporation duly organized,
     validly existing and in good standing under the laws of the jurisdiction of
     its incorporation, has the full legal power and authority to own its
     property and to carry on its business as currently conducted and is duly
     qualified as a foreign corporation to do business and is in good standing
     in each jurisdiction in which the transaction of its business makes such
     qualification necessary, except in jurisdictions, if any, where a failure
     to be in good standing has no material adverse effect on the business,
     operations, assets or financial condition of the Borrowers or any such
     Subsidiary.  For the purposes hereof, good standing shall include
     qualification for any and all licenses and payment of any and all taxes
     required in the jurisdiction of its incorporation and in each jurisdiction
     in which the Borrowers, transacts business.  The Borrowers have no
     Subsidiaries except as set forth on Exhibit G hereto.  Exhibit G sets forth
                                         ---------          ---------           
     with respect to each such Subsidiary, its name, address, place of
     incorporation, each state in which it is qualified as a foreign
     corporation, and the percentage ownership of its capital stock by the
     Borrowers.

          5.2  Authorization and Enforceability.  The Borrowers have the power
               --------------------------------                               
     and authority to execute, deliver and perform this Agreement, the Notes and
     all other Loan Documents to which the Borrowers are a party and to make the
     borrowings hereunder.  The execution, delivery and performance by the
     Borrowers of this Agreement, the Notes and all other Loan Documents to
     which the Borrowers are a party and the making of the borrowings hereunder
     and thereunder, have been duly and validly authorized by all necessary
     corporate action on the part of the Borrowers (none of which actions has
     been 
<PAGE>
 
     modified or rescinded, and all of which actions are in full force and
     effect) and do not and will not conflict with or violate any provision of
     law, of any judgments binding upon the Borrowers, or of the articles of
     incorporation or by-laws of the Borrowers, conflict with or result in a
     breach of or constitute a default or require any consent under, or result
     in the creation of any Lien upon any property or assets of the Borrowers
     other than the Lien on the Collateral granted hereunder, or result in or
     require the acceleration of any indebtedness of the Borrowers pursuant to
     any agreement, instrument or indenture to which the Borrowers are a party
     or by which the Borrowers or their property may be bound or affected. This
     Agreement, the Notes, the Collateral Agency Agreement and all other Loan
     Documents contemplated hereby or thereby constitute legal, valid, and
     binding obligations of the Borrowers, enforceable in accordance with their
     respective terms, except as limited by bankruptcy, insolvency or other such
     laws affecting the enforcement of creditors' rights generally and general
     principles of equity.

          5.3  Approvals.  The execution and delivery of this Agreement, the
               ---------                                                    
     Notes and all other Loan Documents and the performance of the Borrowers'
     obligations hereunder and thereunder and validity and enforceability hereof
     and thereof do not require any license, consent, approval or other action
     of any state or federal agency or governmental or regulatory authority
     other than those which have been obtained and remain in full force and
     effect.

          5.4  Financial Condition.  The balance sheet of WMF Group and its
               -------------------                                         
     Subsidiaries, on a consolidated basis, as of the Statement Date, and the
     related statements of income and changes in stockholders' equity for the
     fiscal period ended on the Statement Date, heretofore furnished to each
     Lender, fairly present the financial condition of WMF Group and its
     Subsidiaries as of the Statement Date and the results of its operations for
     the fiscal period ended on the Statement Date.  The Borrowers had, on the
     Statement Date, no known material liabilities, direct or indirect, fixed or
     contingent, matured or unmatured, or liabilities for taxes, long-term
     leases or unusual forward or long-term commitments not disclosed by, or
     reserved against in, said balance sheet and related statements, and at the
     present time there are no material unrealized or anticipated losses from
     any loans, advances or other commitments of the Borrowers except as
     heretofore disclosed to the Lenders in writing.  Said financial statements
     were prepared in accordance with GAAP applied on a consistent basis
     throughout the periods involved.  Since the Statement Date, there has been
     no 
<PAGE>
 
     material adverse change in the business, operations, assets or financial
     condition of the Borrowers (and their Subsidiaries), nor are the Borrowers
     aware of any state of facts which (with or without notice or lapse of time
     or both) would or could result in any such material adverse change.

          5.5  Litigation.  Except as set forth on Exhibit T hereto, there are
               ----------                          ---------                  
     no actions, claims, suits or proceedings pending or, to the knowledge of
     the Borrowers, threatened or reasonably anticipated against or affecting
     the Borrowers or any Subsidiary of the Borrowers in any court or before any
     arbitrator or before any government commission, board, bureau or other
     administrative agency which, if adversely determined, may reasonably be
     expected to result in any material and adverse change in the business,
     operations, assets or financial condition of the Borrowers as a whole, or
     which would affect the validity or enforceability of this Agreement, the
     Notes or any other Loan Document.

          5.6  Compliance with Laws.  None of the Borrowers and none of their
               --------------------                                          
     Subsidiaries is in violation of any provision of any law, or of any
     judgment, award, rule, regulation, order, decree, writ or injunction of any
     court or public regulatory body or authority which might have a material
     adverse effect on the business, operations, assets or financial condition
     of the Borrowers and their Subsidiaries as a whole or which would affect
     the validity or enforceability of this Agreement, the Notes or any other
     Loan Document.

          5.7  Regulation U.  The Borrowers are not engaged principally, or as
               ------------                                                   
     one of their important activities, in the business of extending credit for
     the purpose of purchasing or carrying Margin Stock, and no part of the
     proceeds of any Advances made hereunder will be used to purchase or carry
     any Margin Stock or to extend credit to others for the purpose of
     purchasing or carrying any Margin Stock.

          5.8  Investment Company Act.  None of the Borrowers is an "investment
               ----------------------                                          
     company" or controlled by an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended.

          5.9  Payment of Taxes.  The Borrowers and each of their Subsidiaries
               ----------------                                               
     have filed or caused to be filed all federal, state and local income,
     excise, property and other tax returns with respect to the operations of
     the Borrowers and their Subsidiaries which are required to be filed, all
     such returns are true and correct, and the Borrowers and each of 
<PAGE>
 
     their Subsidiaries have paid or caused to be paid all taxes as shown on
     such returns or on any assessment, including, but not limited to, all FICA
     payments and withholding taxes, if appropriate, to the extent that such
     taxes have become due. The amounts reserved as a liability for income and
     other taxes payable in the financial statements described in Section 5.4
     hereof are sufficient pursuant to GAAP for payment of all unpaid federal,
     state and local income, excise, property and other taxes, whether or not
     disputed, of the Borrowers and their Subsidiaries accrued for or applicable
     to the period and on the dates of such financial statements and all years
     and periods prior thereto and for which either Borrower or any of their
     Subsidiaries may be liable in their own right or as transferee of the
     assets of, or as successor to, any other Person. No tax Liens have been
     filed and no material claims are being asserted with respect to any such
     taxes, fees or charges.

          5.10  Agreements.  None of the Borrowers and none of their
                ----------                                          
     Subsidiaries, except WMFCC, is a party to any agreement, instrument or
     indenture or subject to any restriction materially and adversely affecting
     its business, operations, assets or financial condition, except as
     disclosed in the financial statements described in Section 5.4 hereof.
     None of the Borrowers and none of their Subsidiaries, except WMFCC, is in
     default in the performance, observance or fulfillment of any of the
     obligations, covenants or conditions contained in any agreement,
     instrument, or indenture which default could have a material adverse effect
     on the business, operations, properties or financial condition of the
     Borrowers and their Subsidiaries as a whole.  No holder of any indebtedness
     of any of the Borrowers or any of their Subsidiaries has given notice of
     any asserted default thereunder, and no liquidation or dissolution of any
     of the Borrowers or of any of their Subsidiaries, and no receivership,
     insolvency, bankruptcy, reorganization or other similar proceedings
     relative to any of the Borrowers, any of their Subsidiaries or any of their
     properties, is pending or threatened.

          5.11  Title to Properties.  Each of the Borrowers and each Subsidiary
                -------------------                                            
     of the Borrowers has good, valid, insurable (in the case of real property)
     and marketable title to all of its properties and assets (whether real or
     personal, tangible or intangible) reflected on the financial statements
     described in Section 5.4 hereof, except for such properties and assets as
     have been disposed of since the date of such financial statements as no
     longer used or useful in the conduct of its business or as have been
     disposed of in the ordinary course of business, and all such 
<PAGE>
 
     properties and assets are free and clear of all Liens except as disclosed
     in such financial statements.

          5.12  ERISA.  All plans ("Plans") of a type described in Section 3(3)
                -----                                                          
     of ERISA in respect of which any of the Borrowers or any Subsidiary of the
     Borrowers is an "Employer," as defined in Section 3(5) of ERISA, are in
     substantial compliance with ERISA, and none of such Plans is insolvent or
     in reorganization, has an accumulated or waived funding deficiency within
     the meaning of Section 412 of the Internal Revenue Code, and none of the
     Borrowers and none of their Subsidiaries has incurred any material
     liability (including any material contingent liability) to or on account of
     any such Plan pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA;
     and no proceedings have been instituted to terminate any such Plan, and no
     condition exists which presents a material risk to any of the Borrowers or
     any of their Subsidiaries of incurring a liability to or on account of any
     such Plan pursuant to any of the foregoing Sections of ERISA.  No Plan or
     trust forming a part thereof has been terminated since September 1, 1974.

          5.13  Eligibility.  The Borrowers are approved and qualified and in
                -----------                                                  
     good standing as a lender or seller/servicer, as set forth in Exhibit R
                                                                   ---------
     attached hereto, and meet all requirements applicable to its status as
     such.

          5.14  Place of Business.  The chief executive office and principal
                -----------------                                           
     place of business of WMF Group and Washington is 1593 Spring Hill Road,
     Suite 400, Vienna, Virginia 22182.  The chief executive office and
     principal place of business of Huntoon is 379 Thornall Street, Edison, New
     Jersey  08837.  The chief executive office and principal place of business
     of Proctor is 3883 Telegraph Road, Suite 210, Bloomfield Hills, Michigan
     48302.  The principal place of business of Wilson is 19 Briar Hollow Lane,
     Suite 200, Houston, Texas 77027.  The principal place of business of
     Wilson-Arizona is 5080 N. 40th Street, Suite 105, Phoenix, Arizona 85018.
     The principal place of business of Carbon Mesa is 11755 Wilshire Boulevard,
     Suite 1900, Los Angeles, California 90025.

          5.15  Special Representations Concerning Warehousing Collateral.  The
                ---------------------------------------------------------      
     Borrowers hereby represent and warrant to the Lenders, as of the date of
     this Agreement and as of the date of each Advance Request and the making of
     each Advance, that:
<PAGE>
 
                    5.15(a)  The applicable Borrower is the legal and equitable
          owner and holder, free and clear of all Liens (other than Liens
          granted hereunder), of the Pledged Mortgages and the Pledged
          Securities.  All Pledged Mortgages, Pledged Securities and Purchase
          Commitments have been duly authorized and validly issued to the
          Borrowers, and all of the foregoing items of Collateral comply with
          all of the requirements of this Agreement, and have been and will
          continue to be validly pledged or assigned to the Credit Agent,
          subject to no other Liens.

                    5.15(b)  Each Borrower has, and will continue to have, the
          full right, power and authority to pledge the Collateral pledged and
          to be pledged by it hereunder.

                    5.15(c)  Any Mortgage Loan and any related document included
          in the Pledged Mortgages (1) has been duly executed and delivered by
          the parties thereto at a closing held not more than thirty (30) days
          prior to the date of the initial Warehousing Advance Request for such
          Mortgage Loan, except with respect to a Warehousing Advance Request
          for a Special Fannie Mae Advance or the Warehousing Advance Request
          made for Warehousing Advances to refinance Existing Agreement
          Warehousing Advances, (2) has been made in compliance with all
          applicable requirements of the Real Estate Settlement Procedures Act,
          Equal Credit Opportunity Act, the federal Truth-In-Lending Act and all
          other applicable laws and regulations, (3) is and will continue to be
          valid and enforceable in accordance with its terms, without defense or
          offset, except as such enforceability may be limited by bankruptcy,
          insolvency, reorganization, liquidation, receivership, moratorium or
          other laws affecting the enforcement of creditors' rights and by
          general principles of equity (regardless of whether such enforcement
          is considered in a proceeding at law or in equity), (4) has not been
          modified or amended except in writing, which writing is part of the
          Collateral Documents, nor any requirements thereof waived, (5) has
          been evaluated or appraised in accordance with Title XI of FIRREA and
          industry standards, and (6) complies and will continue to comply with
          the terms of this Agreement and the related Purchase Commitment.
          Except for FHA Construction Mortgage Loans and Special Fannie Mae
          Loans, each Mortgage Loan has been fully advanced in the face amount
          thereof.  Each First Mortgage is a first Lien on the premises
          described therein and each Second Mortgage 
<PAGE>
 
          is a second Lien on the premises described therein, and has or will
          have a title insurance policy, in American Land Title Association form
          or equivalent thereof, from a recognized title insurance company,
          insuring the priority of the Lien of the Mortgage and meeting the
          usual requirements of Investors purchasing such Mortgage Loans. Each
          premises securing a Pledged Mortgage is free and clear of all tax
          liens and assessments (except for Liens for taxes and assessments not
          yet delinquent or accruing interest or penalties).

                    5.15(d)  No default has occurred and is continuing for more
          than sixty (60) days under any Mortgage Loan included in the Pledged
          Mortgages without the Advance against such Pledged Mortgage having
          been repaid in accordance with Section 2.10(f)(7) hereof; provided,
          however, that, with respect to Pledged Mortgages which have already
          been pledged as Collateral hereunder, if any default has occurred, the
          Borrowers will promptly notify the Credit Agent.

                    5.15(e)  The Borrowers have complied and will continue to
          comply with all laws, rules and regulations in respect of the FHA
          insurance of each Mortgage Loan included in the Pledged Mortgages
          designated by the Borrowers as an FHA insured Mortgage Loan, and such
          insurance is and will continue  to be in full force and effect.

                    5.15(f)  Each premises securing a Pledged Mortgage is
          insured by an "all-risks" or "fire and extended perils" insurance
          policy issued by an insurer satisfactory to the Lender, and all such
          insurance policies (1) name and will continue to name the applicable
          Borrower and its successors and assigns as the insured under a
          standard mortgagee clause, (2) are and will continue to be in full
          force and effect, and (3) afford and will continue to afford insurance
          against fire and such other risks as are usually insured against in
          the broad form of extended coverage insurance from time to time
          available.

                    5.15(g)  Pledged Mortgages secured by premises located in a
          special flood hazard area designated as such by the Director of the
          Federal Emergency Management Agency are and shall continue to be
          covered by special flood insurance under the National Flood Insurance
          Program.  Pledged Mortgages that are Commercial Mortgage Loans have
          insurance covering earthquake risk from an insurer and on terms and
          conditions satisfying the requirements of Standard 
<PAGE>
 
          & Poor's Ratings Service for inclusion in a Commercial Mortgage-backed
          Security.

                    5.15(h)  Each FHA insured Mortgage Loan pledged hereunder
          meets all applicable governmental requirements for such insurance.
          Each Pledged Mortgage against which an Advance is made on the basis of
          a Purchase Commitment meets all requirements of such Purchase
          Commitment.  The Borrowers shall assure that Pledged Mortgages which
          are intended to be used in the formation of Mortgage-backed Securities
          or asset-backed securities shall comply or, prior to the formation of
          any such Mortgage-backed Security or asset-backed securities, shall
          comply with the requirements of the governmental instrumentality,
          department or agency issuing or guaranteeing such Mortgage-backed
          Security or at least one Investor that purchases similar Mortgage
          Loans for securitization and two Rating Agencies.

                    5.15(i)  For Pledged Mortgages which will be used to back
          Ginnie Mae Mortgage-backed Securities, the applicable Borrower has
          received from Ginnie Mae a Confirmation Notice or Confirmation Notices
          for Request Additional Commitment Authority and for Request Pool
          Numbers, and there remains available thereunder a commitment on the
          part of Ginnie Mae sufficient to permit the issuance of Ginnie Mae
          Mortgage-backed Securities in an amount at least equal to the amount
          of such Pledged Mortgages designated by the Borrowers as the Mortgage
          Loans to be used to back such Ginnie Mae Mortgage-backed Securities;
          each such Confirmation Notice is in full force and effect; each of
          such Pledged Mortgages has been assigned by the Borrowers to one of
          such Pool Numbers and a portion of the available Ginnie Mae Commitment
          has been allocated thereto by the Borrowers, in an amount at least
          equal to such Pledged Mortgages; and each such assignment and
          allocation has been reflected in the books and records of the
          Borrowers.

                    5.15(j)  At the time of any Advance to Washington against a
          Special Fannie Mae Loan, (i) the related Special Fannie Mae Program
          Agreement and the promissory note(s) evidencing such Special Fannie
          Mae Loan are in full force and effect and constitute the legal, valid
          and binding obligations of the parties thereto, enforceable against
          such parties in accordance with their terms, (ii) all of the Mortgages
          and pledges of Mortgage Notes securing such Special Fannie Mae Loans
  
<PAGE>
 
          under the related Special Fannie Mae Program Agreement are in full
          force and effect, constitute the legal, valid and binding obligations
          of the parties thereto, enforceable against such parties in accordance
          with their terms, and, in the case of Mortgages, constitute valid,
          perfected first priority Liens on the underlying property, subject
          only to Liens specified as exceptions in the original title insurance
          policy related thereto and Liens in favor of Washington in connection
          with the same Special Fannie Mae Program Agreement, and in the case of
          pledges of Mortgage Notes, constitute a valid, perfected first
          priority Lien on such Mortgage Notes, which is in turn secured by
          valid, perfected, first priority Liens on the underlying property,
          subject only to Liens specified in the original file policy related
          thereto; and (iii) such Special Fannie Mae Loan is or was made, and
          each of Washington and the borrower(s) and other obligor(s) is, in
          compliance with all terms of the related Special Fannie Mae Program
          Agreement and the FNMA Special Pool Purchase Contract related thereto.

          5.16  Servicing.  Attached hereto as Exhibit E is a true and complete
                ---------                      ---------                       
     list of the Borrowers' Servicing Portfolio.  All of the Borrowers'
     Servicing Contracts are in full force and effect and, except as otherwise
     indicated, are unencumbered by Liens.  No default or event which, with
     notice or lapse of time or both, would become a default, exists under any
     such Servicing Contract.

          5.17  Special Representations Concerning Servicing Collateral.  The
                -------------------------------------------------------      
     Borrowers hereby represent and warrant to the Lenders, as of the Closing
     Date and as of the date of each Servicing Facility Advance Request or
     Warehousing Advance Request for a P&I Advance or a Liquidity Advance, and
     the making of each such Advance, that:

                5.17(a)  A Borrower is the legal and equitable owners and
          holders, free and clear of all Liens (other than Liens granted
          hereunder), of each Pledged Servicing Contract, and the Pledged
          Servicing Contracts have been and will continue to be validly pledged
          or assigned to the Credit Agent, subject to no other Liens.

                5.17(b)  The Borrower that owns each Pledged Servicing Contracts
          has, and will continue to have, the full right, power and authority to
          pledge such Pledged 
<PAGE>
 
          Servicing Contract, subject to the rights of Fannie Mae, Ginnie Mae or
          any applicable Investor.

                    5.17(c)  All of the servicing rights under the Servicing
          Contracts included in the calculation of Servicing Collateral Value
          constitute direct, primary servicing rights.

                    5.17(d)  Each Pledged Servicing Contract is in full force
          and effect, each Pledged Servicing Contract is legal, valid and
          enforceable in accordance with its terms and no default or event
          which, with notice or lapse of time or both, would become a default,
          exists under any Pledged Servicing Contract.

                    5.17(e)  Each right to the payment of money under the
          Pledged Servicing Contracts is genuine and enforceable in accordance
          with its terms against the parties obligated to pay the same
          ("Obligor"), except as limited by bankruptcy, insolvency, moratorium
          or other similar laws affecting the enforcement of creditors' rights
          generally and general principles of equity, which terms have not been
          modified or waived in any material respect or to any material extent.

                    5.17(f)  To the best of the Borrowers' knowledge, the amount
          represented by the Borrowers to the Credit Agent as owing by an
          Obligor under each Mortgage Loan being serviced under a Pledged
          Servicing Contract is the correct amount actually and unconditionally
          owing by such Obligor.

                    5.17(g)  To the best of the Borrowers' knowledge, no Obligor
          has any defense, set off, claim or counterclaim against the Borrowers
          or any Subsidiary of the Borrowers which can be asserted against the
          Credit Agent or the Lenders, whether in any proceeding to enforce the
          Credit Agent's security interest in the related Pledged Servicing
          Contracts or otherwise.

                    5.17(h)  The Borrowers have not sold, assigned or otherwise
          transferred any rights associated with the Mortgage Loans being
          serviced under any Pledged Servicing Contract, including, without
          limitation, any rights to place escrow deposits with respect thereto.

                    5.17(i)  Except for Acknowledgment Agreements, no consent of
          any Obligor or any other 
<PAGE>
 
          Person is required for the grant of a security interest in favor of
          the Credit Agent, for the benefit of the Secured Parties, in any of
          the Servicing Collateral including, without limitation, the Pledged
          Servicing Contracts, or any computer software being utilized by the
          Borrowers pursuant to license, lease or otherwise, other than consents
          which have been obtained, nor will any consent need to be obtained
          upon the occurrence of an Event of Default for the Credit Agent to
          exercise its rights with respect to any of the Servicing Collateral
          except as set forth in the Acknowledgment Agreements.

          5.18  No Adverse Selection.  The Borrowers have not selected the
                --------------------                                      
     Collateral in a manner so as to affect adversely the Lenders' interests.

          5.19  Year 2000 Compliance.  The Borrowers have conducted a
                --------------------                                 
     comprehensive review and assessment of the Borrowers' computer applications
     and made inquiry of the Borrowers' key suppliers, vendors, customers, and
     Investors with respect to the Year 2000 Problem and, based on that review
     and inquiry, the Borrowers do not believe the Year 2000 Problem will result
     in a material adverse change in the Borrowers' business condition
     (financial or otherwise), operations, properties or prospects, or ability
     to pay the Obligations.

6.   AFFIRMATIVE COVENANTS.

          The Borrowers hereby covenant and agree with the Lenders that, so long
as any of the Commitments are outstanding or there remain any Obligations to be
paid or performed under this Agreement or under any other Loan Document, the
Borrowers shall:

          6.1  Payment of Notes.  Punctually pay or cause to be paid all
               ----------------                                         
     Obligations payable hereunder and under the Notes in accordance with the
     terms hereof and thereof.

          6.2  Financial Statements and Other Reports.  Deliver to each Lender:
               --------------------------------------                          

                    6.2(a)  As soon as available and in any event within forty-
          five (45) days after the end of each month, statements of income and
          changes in stockholders' equity of WMF Group and its Subsidiaries on a
          consolidated basis for the immediately preceding month and for the
          period from the beginning of the fiscal year to the end of such month,
          and the related balance sheet as of the end of the immediately
<PAGE>
 
          preceding month, all in reasonable detail and certified as to the
          fairness of presentation by the chief financial officer of WMF Group,
          subject, however, to year-end audit adjustments.

                    6.2(b)  As soon as available and in any event within ninety
          (90) days after the close of each fiscal year of WMF Group, statements
          of income, changes in stockholders' equity and cash flow of WMF Group
          and its Subsidiaries on a consolidated basis for such year, and the
          related balance sheet as of the end of such year (setting forth in
          comparative form the corresponding figures for the preceding fiscal
          year), all in reasonable detail and accompanied by an opinion (which
          opinion shall not be qualified due to possible failure to take all
          appropriate steps to successfully address the Year 2000 Problem) in
          form and substance satisfactory to the Lenders and prepared by
          independent certified public accountants of recognized standing
          selected by WMF Group and reasonably satisfactory to the Lenders as to
          said financial statements and a certificate signed by the chief
          financial officer of WMF Group stating that said financial statements
          fairly present the financial condition and results of operations of
          WMF Group and its Subsidiaries as of the end of, and for, such fiscal
          year.

                    6.2(c)  Together with each delivery of financial statements
          required in Section 6.2(a) for the last month of any fiscal quarter,
          and each delivery of financial statements required in Section 6.2(b),
          an Officer's Certificate substantially in the form of Exhibit I-MF
                                                                ------------
          hereto:  (1) setting forth in reasonable detail all calculations
          necessary to show that the Borrowers are in compliance with the
          requirements of Sections 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13,
          7.14 and 7.16 hereof as of the end of such month or year (or, if the
          Borrowers are not in compliance, showing the extent of non-compliance
          and specifying the period of non-compliance and what actions the
          Borrowers have taken, are taking or propose to take with respect
          thereto); (2) certifying that the Borrowers were, as of the end of the
          period, in compliance and in good standing with applicable HUD, Ginnie
          Mae, or Investor net worth requirements; (3) certifying that the
          representation set forth in Section 5.19 hereof is true and correct as
          of the date of such certificate or, if such representation is not true
          and correct as of such date, specifying the nature of the problem and
          what action the Borrowers have taken, is taking or proposes 
<PAGE>
 
          to take with respect thereto; and (4) stating that the signers have
          reviewed the terms of this Agreement and have made, or caused to be
          made under their supervision, a review in reasonable detail of the
          transactions and conditions of the Borrowers and their Subsidiaries
          during the accounting period covered by such financial statements and
          that such review has not disclosed the existence during or at the end
          of such accounting period, and that the signers do not have knowledge
          of the existence as of the date of the Officer's Certificate, of any
          Default or Event of Default or if any Default or Event of Default
          existed or exists, specifying the nature and period of the existence
          thereof and what action the Borrowers have taken, are taking and
          propose to take with respect thereto.

                    6.2(d)  As soon as available and in any event within forty-
          five (45) days after the end of each month, a consolidated report (the
          "Servicing Portfolio Report") as of the end of the month detailing, as
          to all Mortgage Loans the servicing rights to which are owned by the
          Borrowers (specified by investor type, recourse and non-recourse)
          regardless of whether such Mortgage Loans are Pledged Mortgages and
          which report shall indicate Mortgage Loans which (A) are current and
          in good standing, (B) are more than 30, 60 or 90 days past due,
          respectively, (C) are the subject of pending bankruptcy or foreclosure
          proceedings, (D) are excluded in calculating the Adjusted Servicing
          Portfolio for any of the reasons listed in clauses (a) - (f) of the
          definition thereof, or (E) have been converted (through foreclosure or
          other proceedings in lieu thereof) by the Borrowers into real estate
          owned by the Borrowers.

                    6.2(e)  As soon as available and in any event within forty-
          five (45) days after the end of each fiscal quarter of the Borrowers,
          a consolidated report (the "Loan Production Report") as of the end of
          the fiscal quarter, presenting the total dollar volume and the number
          of Mortgage Loans originated or purchased during the fiscal year,
          specified by property type and loan type or Investor (e.g. FHA, Ginnie
          Mae, Fannie Mae, Freddie Mac, etc.)

                    6.2(f)  Reports in respect of the Pledged Mortgages, Pledged
          Securities and Pledged Servicing Contracts, in such detail and at such
          times as any Lender in its discretion may reasonably request at any
          time or from time to time.
<PAGE>
 
                    6.2(g)  As of the last day of June and December of each year
          (to be delivered with the financial statements required under Sections
          6.2(a) and (b), respectively, as of such dates), and at any time at
          the request of the Credit Agent, an Appraisal of the Pledged Servicing
          Contracts; if the Borrowers shall at any time fail to obtain an
          Appraisal required by this Section 6.2(g), the Credit Agent may obtain
          such Appraisal, and the Borrowers shall reimburse the Credit Agent for
          its costs and expenses incurred in connection therewith.

                    6.2(h)  As soon as available and in any event within forty-
          five (45) days after the end of each Calendar Quarter, a valuation of
          the Pledged Servicing Contracts prepared by the Borrowers using the
          methodology used in the most recent Appraisal thereof.

                    6.2(i)  Copies of all regular or periodic financial and
          other reports, if any, which the Borrowers shall file with the
          Securities and Exchange Commission or any governmental agency
          successor thereto and copies of any audits completed by HUD, Ginnie
          Mae, Fannie Mae or Freddie Mac. Copies of the Mortgage Bankers'
          Financial Reporting Forms (Freddie Mac Form 1055/Fannie Mae Form 1002)
          which the Borrowers shall have filed with Fannie Mae or Freddie Mac,
          in such detail and at such times as any Lender may reasonably request.

                    6.2(j)  From time to time, with reasonable promptness, such
          further information regarding the business, operations, properties or
          financial condition of the Borrowers as any Lender may reasonably
          request.

          6.3  Maintenance of Existence; Conduct of Business.  Preserve and
               ---------------------------------------------               
     maintain their corporate existence in good standing and all of its rights,
     privileges, licenses and franchises necessary or desirable in the normal
     conduct of their business, including, without limitation, their eligibility
     as lender, seller/servicer and issuer described under Section 5.13 hereof
     or in any Borrower Addition Agreement; conduct their businesses in an
     orderly and efficient manner; maintain a net worth of acceptable assets as
     required for maintaining each Borrower's eligibility as lender,
     seller/servicer and issuer described under Section 5.13 hereof or in any
     Borrower Addition Agreement; and make no change in the nature or character
     of their businesses or 
<PAGE>
 
     engage in any business in which they were not engaged on the date of this
     Agreement or, in the case of any New Borrower acquired by the Borrowers in
     a Servicing Acquisition, on the date the Borrowers' acquisition of such New
     Borrower was approved by the Lenders hereunder. Notwithstanding anything in
     this Agreement to the contrary, it shall not be deemed a change in the
     nature or character of their businesses for any of the Borrowers, directly
     or indirectly through any existing or prospective Subsidiary, to engage as
     a principal in (i) mortgage loan securitizations in the primary and
     secondary markets, (ii) mortgage asset management, and (iii) services with
     respect to mortgage banking generally, with respect to the financing,
     managing and sale of real property, and with respect to collateralized
     mortgage obligations.

          6.4  Compliance with Applicable Laws.  Comply with the requirements of
               -------------------------------                                  
     all applicable laws, rules, regulations and orders of any governmental
     authority, a breach of which could materially adversely affect their
     business, operations, assets, or financial condition, except where
     contested in good faith and by appropriate proceedings.

          6.5  Inspection of Properties and Books.  Permit authorized
               ----------------------------------                    
     representatives of the Credit Agent, the Collateral Agent, any Lender or
     any Participant to discuss the business, operations, assets and financial
     condition of the Borrowers and their Subsidiaries with their officers and
     employees and to examine their books of account and make copies or extracts
     thereof, all at such reasonable times as the Credit Agent, the Collateral
     Agent, any Lender or any Participant may request; provided, that prior to
     the occurrence of a Default or an Event of Default, the Borrowers shall
     have no obligation to permit any such visitation or examination on less
     than two (2) Business Days notice from the Credit Agent, the Collateral
     Agent, any Lender or any Participant.  The Borrowers will provide their
     accountants with a copy of this Agreement promptly after the execution
     hereof and will instruct its accountants to answer candidly any and all
     questions that the officers of the Credit Agent, the Collateral Agent, any
     Lender or any Participant or any authorized representative of the Credit
     Agent, the Collateral Agent, any Lender or any Participant may address to
     them in reference to the financial condition or affairs of the Borrowers
     and their Subsidiaries.  The Borrowers may have their representatives in
     attendance at any meetings between the officers or other representatives of
     the Credit Agent, the Collateral Agent, any Lender or any Participant and
     the Borrowers' accountants held in accordance with this authorization.
<PAGE>
 
          6.6  Notice.  Give  Notice to the Credit Agent, promptly after the
               ------                                                       
     Borrowers have actual or constructive notice thereof, of (a) any action,
     suit or proceeding instituted by or against any Borrower or any of their
     Subsidiaries in any federal or state court or before any commission or
     other regulatory body (federal, state or local, domestic or foreign) which
     action, suit or proceeding has at issue in excess of Five Hundred Thousand
     Dollars ($500,000), or any such proceedings threatened against any Borrower
     or any of their Subsidiaries in a writing containing the details thereof
     that the Borrowers reasonably determine is likely to be instituted unless
     settled, (b) the filing, recording or assessment of any federal, state or
     local tax Lien against any Borrower, any of their Subsidiaries or any of
     their assets, (c) the occurrence of any Event of Default hereunder or the
     occurrence of any Default and continuation thereof for five (5) days, (d)
     the suspension, revocation or termination of any Borrower's eligibility, in
     any respect, as approved lender, seller/servicer or issuer as described
     under Section 5.13 hereof or in any Borrower Addition Agreement, (e) the
     transfer, loss or termination (other than termination resulting from
     repayment of one or more Mortgage Loan in whole) of any Servicing Contract
     to which any Borrower or any of their Subsidiaries is a party, or which is
     held for the benefit of any Borrower or any of their Subsidiaries, and the
     reason for such transfer, loss or termination, if known to any Borrower, if
     the unpaid principal balance of the Mortgage Loans serviced pursuant to all
     such Servicing Contracts transferred, lost or terminated since the date of
     the most recent appraisal or valuation delivered pursuant to Section 6.2(g)
     or 6.2(h) hereof exceeds five percent (5%) of the Servicing Portfolio as of
     the date of such appraisal or valuation, and (f) any other action, event or
     condition of any nature which may lead to or result in a material adverse
     effect upon the business, operations, assets, or financial condition of the
     Borrowers and their Subsidiaries or which, with or without notice or lapse
     of time or both, would constitute a default under any other agreement,
     instrument or indenture to which any Borrower or any of their Subsidiaries
     is a party or to which any Borrower or any of their Subsidiaries, their
     properties, or assets may be subject.

          6.7  Payment of Debt, Taxes, etc.  Pay and perform all obligations and
               ---------------------------                                      
     indebtedness of any Borrower, and cause to be paid and performed all
     obligations and indebtedness of their Subsidiaries, except WMFCC, promptly
     and in accordance with the terms thereof and pay and discharge or cause to
     be
<PAGE>
 
     paid and discharged promptly all taxes, assessments and governmental
     charges or levies imposed upon any Borrower or any of their Subsidiaries,
     except WMFCC, or upon their respective income, receipts or properties
     before the same shall become past due, as well as all lawful claims for
     labor, materials and supplies or otherwise which, if unpaid, might become a
     Lien or charge upon such properties or any part thereof; provided, however,
     that any Borrower and any of their Subsidiaries shall not be required to
     pay taxes, assessments or governmental charges or levies or claims for
     labor, materials or supplies for which the Borrowers or their Subsidiaries
     shall have obtained an adequate bond or adequate insurance or which are
     being contested in good faith and by proper proceedings which are being
     reasonably and diligently pursued and for which proper reserves have been
     created.

          6.8   Insurance.  Maintain (a) errors and omissions insurance or
                ---------                                                 
     mortgage impairment insurance and blanket bond coverage, with such
     companies and in such amounts as satisfy prevailing requirements applicable
     to a lender, seller/servicer and issuer described under Section 5.13
     hereof, and (b) liability insurance and fire and other hazard insurance on
     its properties, with responsible insurance companies approved by the Credit
     Agent, in such amounts and against such risks as is customarily carried by
     similar businesses operating in the same vicinity; and within thirty (30)
     days after Notice from the Credit Agent, obtain such additional insurance
     as the Credit Agent shall reasonably require, all at the sole expense of
     the Borrowers.  Copies of such policies shall be furnished to the Credit
     Agent without charge upon request of the Credit Agent.

          6.9   Closing Instructions.  Indemnify and hold the Secured Parties
                --------------------                                         
     harmless from and against any loss, including reasonable attorneys' fees
     and costs, attributable to the failure of a title insurance company, agent
     or approved attorney to comply with the disbursement or instruction letter
     or letters of the Borrowers relating to any Mortgage Loan.  The Collateral
     Agent shall have the right to pre-approve the closing instructions of the
     Borrowers to the title insurance company, agent or attorney in any case
     where the Mortgage Loan to be created at settlement is intended to be
     pledged as Collateral pursuant hereto.

          6.10  Subordination of Certain Indebtedness.  Cause any indebtedness
                -------------------------------------                         
     of any Borrower incurred after the date of this Agreement to any
     shareholder, director or officer of any 
<PAGE>
 
     Borrower, or to any Affiliate of any Borrower or of any Subsidiary of any
     Borrower, which indebtedness has a term of more than one (1) year or is in
     excess of Five Hundred Thousand Dollars ($500,000), to be subordinated to
     all Obligations by the execution of a Subordination of Debt Agreement in
     the form of Exhibit F hereto and deliver to the Credit Agent an executed 
                 ---------           
     copy of said Agreement, certified by the corporate secretary of the
     applicable Borrower to be true and complete and in full force and effect.

          6.11  Other Loan Obligations.  Perform all material obligations under
                ----------------------                                         
     the terms of each loan agreement, note, mortgage, security agreement or
     debt instrument by which any Borrower is bound or to which any of their
     property is subject, and promptly notify the Credit Agent in writing of a
     declared default under or the termination, cancellation, reduction or
     nonrenewal of any of its other lines of credit or agreements with any other
     lender.  Exhibit J hereto is a true and complete list of all such lines of
              ---------                                                        
     credit or agreements as of the date hereof and the Borrowers hereby agree
     to give the Credit Agent at least thirty (30) days Notice before entering
     into any additional lines of credit or agreements.

          6.12  Use of Proceeds of Advances.  Use the proceeds of each Advance
                ---------------------------                                   
     solely for the purpose set forth in Section 2.1(b), Section 2.4(b) or
     Section 2.6 for Advances of that type.

          6.13  Special Affirmative Covenants Concerning Collateral.
                --------------------------------------------------- 

                    6.13(a)  Warrant and defend the right, title and interest of
          the Secured Parties in and to the Collateral against the claims and
          demands of all Persons whomsoever.

                    6.13(b)  Service or cause to be serviced all Mortgage Loans
          in accordance with the standard requirements of the issuers of
          Purchase Commitments covering the same, all applicable HUD, Fannie Mae
          and Freddie Mac requirements and, with respect to Mortgage Loans not
          intended for sale to Fannie Mae or Freddie Mac or to back a Ginnie Mae
          Mortgage-backed Security, the Rating Agencies, including without
          limitation taking all actions necessary to enforce the obligations of
          the obligors under such Mortgage Loans.  The Borrowers shall service
          or cause to be serviced all Mortgage Loans backing Pledged Securities
          in accordance with applicable 
<PAGE>
 
          governmental requirements and requirements of issuers of Purchase
          Commitments covering the same. The Borrowers shall hold all escrow
          funds collected in respect of Pledged Mortgages, Mortgage Loans
          backing Pledged Securities and Mortgage Loans serviced pursuant to
          Pledged Servicing Contracts in trust, without commingling the same
          with non-custodial funds, and apply the same for the purposes for
          which such funds were collected.

                    6.13(c)  Execute and deliver to the Credit Agent such
          Uniform Commercial Code financing statements with respect to the
          Collateral as the Credit Agent may request.  The Borrowers shall also
          execute and deliver to the Credit Agent and obtain the execution and
          delivery by Fannie Mae, Ginnie Mae and/or other Investors
          Acknowledgment Agreements in the forms from time to time promulgated
          by Fannie Mae, Ginnie Mae and/or other Investors, as applicable, and
          acceptable to the Credit Agent, with respect to the Pledged Servicing
          Contracts.  The Borrowers shall also execute and deliver to the Credit
          Agent such further instruments of sale, pledge or assignment or
          transfer, and such powers of attorney, as may be reasonably requested
          by the Credit Agent, and shall do and perform all matters and things
          necessary or desirable to be done or observed, for the purpose of
          effectively creating, maintaining and preserving the security and
          benefits intended to be afforded the Secured Parties under this
          Agreement and the other Loan Documents.  The Credit Agent shall have
          all the rights and remedies of a secured party under the Uniform
          Commercial Code of Minnesota or any other applicable law in addition
          to all rights provided for herein and in the other Loan Documents.

                    6.13(d)  Notify the Collateral Agent within two (2) Business
          Days of any default under, or of the termination of, any Purchase
          Commitment relating to any Pledged Mortgage, Eligible Mortgage Pool or
          Pledged Security.

                    6.13(e)  Promptly comply in all respects with the terms and
          conditions of all Purchase Commitments, and all extensions, renewals
          and modifications or substitutions thereof or thereto.  The Borrowers
          will cause to be delivered to the Investor the Pledged Mortgages and
          Pledged Securities to be sold under each Purchase Commitment not later
          than three (3) 
<PAGE>
 
          Business Days prior to the mandatory delivery date thereof.

                    6.13(f)  Maintain, at their principal office or in a
          regional office approved by the Credit Agent, or in the office of a
          computer service bureau engaged by the Borrowers and approved by the
          Credit Agent, and, upon request, shall make available to the
          Collateral Agent, the originals, or copies in any case where the
          originals have been delivered to the Collateral Agent or to an
          Investor, of its Mortgage Notes and Mortgages included in Pledged
          Mortgages, Mortgage-backed Securities delivered to the Collateral
          Agent as Pledged Securities, Purchase Commitments, and all related
          Mortgage Loan documents and instruments, and all files, surveys,
          certificates, correspondence, appraisals, computer programs, tapes,
          discs, cards, accounting records and other information and data
          relating to the Collateral.

                    6.13(g)  Promptly provide the Credit Agent with copies of
          any amendment, supplement, restatement or other modification of any
          Special Fannie Mae Program Agreement, the promissory note(s)
          evidencing the Special Fannie Mae Loans made thereunder, or the Fannie
          Mae Special Pool Purchase Contract related thereto.

          6.14  Repayment of Debt to PNC Bank, N.A. The Borrowers will, on or
                -----------------------------------                          
     before March 27, 1999, repay in full all of their outstanding Debt to PNC
     Bank, N.A., terminate all outstanding lending commitments from PNC Bank,
     N.A., and obtain the release of all Liens on their assets in favor of PNC
     Bank, N.A. (including, without limitation, the termination of any financing
     statements filed to perfect those Liens).

7.  NEGATIVE COVENANTS.

          The Borrowers hereby covenant and agree with the Lenders that, so long
as the commitments of the Lenders are outstanding or there remain any
Obligations to be paid or performed, the Borrowers shall not, either directly or
indirectly, without the prior written consent of all the Lenders:

          7.1  Contingent Liabilities.  Assume, guarantee, endorse, or otherwise
               ----------------------                                           
     become contingently liable for the obligation of any Person, except another
     Borrower, and except by endorsement of negotiable instruments for deposit
     or collection in the ordinary course of business, for liability for
     breaches of representations and warranties 
<PAGE>
 
     made by any Borrower in connection with the sale of Mortgage Loans in the
     ordinary course of business, provided such representations and warranties
     are typical of non-recourse sales of similar Mortgage Loans, for liability
     as a result of sales of Mortgage Loans to RFC pursuant to the Master
     Purchase Agreement (Bridge Mortgage Loans) dated as of September 22, 1997
     by and between Washington, Huntoon and Proctor, as sellers, and RFC, as
     purchaser, and for liability as a result of the sale of Fannie Mae DUS
     Mortgage Loans with recourse in the ordinary course of the Borrowers'
     businesses.

          7.2  Sale or Pledge of Servicing Contracts.  Sell, pledge or grant a
               -------------------------------------                          
     security interest in any existing or future Servicing Contracts of any
     Borrower or acquired in any Servicing Acquisition other than to the Credit
     Agent for the benefit of the Secured Parties, or omit to take any action
     required to keep all such Servicing Contracts in full force and effect;
     provided, however, that if no Default or Event of Default has occurred and
     is continuing, (a) servicing on individual Mortgage Loans may be sold
     concurrently with and incidental to the sale of such Mortgage Loans (with
     servicing released) in the ordinary course of the Borrowers' business, and
     (b) Servicing Contracts may be sold by the Borrowers or any Subsidiary of
     the Borrowers in the ordinary course of business as long as (i) after
     giving effect to any such sale, the requirements of Section 7.11 will be
     satisfied, and (ii) after giving effect to any prepayments of Servicing
     Facility Advances made with the proceeds of such sale, no further
     prepayments will be required pursuant to Section 2.10(l) hereof.

          7.3  Merger; Sale of Assets; Acquisitions.  Liquidate, dissolve,
               ------------------------------------                       
     consolidate or merge or sell any substantial part of its assets, or acquire
     any substantial part of the assets of another, other than acquisition of
     (a) Nonrecourse Servicing Contracts acquired in the ordinary course of the
     Borrowers' business, and (b) the stock or assets of a Person engaged
     principally in the mortgage banking business and acquired in a Servicing
     Acquisition.  For purposes of this Section 7.3, "mortgage banking business"
     shall mean business activities relating to (i) mortgage loan
     securitizations in the primary and secondary markets, (ii) mortgage asset
     management, and (iii) services with respect to the financing, managing and
     sale of real property, and with respect to collateralized mortgage
     obligations.

          7.4  Deferral of Subordinated Debt.  Except for the repayment of
               -----------------------------                              
     Subordinated Debt owed to COMIT in an amount not to exceed $4,000,000
     (principal, accrued interest and other amounts) on or before the date the
     Rights Offering 
<PAGE>
 
     closes, pay in advance of the stated maturity thereof any Subordinated Debt
     of the Borrowers or, if a Default or Event of Default hereunder shall have
     occurred, make any payment of any kind thereafter on such Subordinated
     Debt, until all Obligations have been paid and performed in full and any
     applicable preference period has expired.

          7.5   Loss of Eligibility.  Take any action that would cause any
                -------------------                                       
     Borrower to lose all or any part of its status as an eligible lender,
     seller/servicer and issuer as described under Section 5.13 hereof or in any
     Borrower Addition Agreement.

          7.6   Debt to Adjusted Tangible Net Worth Ratio.  Permit the ratio of
                -----------------------------------------                      
     Debt (excluding, for this purpose only, Debt arising under the Hedging
     Arrangements, to the extent of assets arising under the same Hedging
     Arrangements) to Adjusted Tangible Net Worth of WMF Group (and its
     Subsidiaries, on a consolidated basis) at any time to exceed 15 to 1.

          7.7   Non-Warehouse Debt to Adjusted Tangible Net Worth. Permit the
                -------------------------------------------------            
     ratio of Debt (excluding, for this purpose only, (a) Debt arising under
     Hedging Arrangements, to the extent of assets arising under the same
     Hedging Arrangements, (b) Warehousing Advances, and (c) other Debt secured
     by Multifamily Mortgage Loans, Commercial Mortgage Loans and/or Mortgage-
     backed Securities covered by Purchase Commitments issued by Investors, to
     the extent such Debt does not exceed the Committed Purchase Price of such
     Mortgage Loans) to Adjusted Tangible Net Worth of WMF Group (and its
     Subsidiaries, on a consolidated basis) at any time to exceed 1.25 to 1.

          7.8   Minimum Adjusted Tangible Net Worth.  Permit Adjusted Tangible
                -----------------------------------                           
     Net Worth of WMF Group (and its Subsidiaries, on a consolidated basis) at
     any time (a) from the Closing Date to and including June 30, 1999, to be
     less than Thirty-Five Million Dollars ($35,000,000); and (b) thereafter, to
     be less than Fifty Million Dollars ($50,000,000).

          7.9   Liquidity.  Permit the Liquid Assets of WMF Group (and its
                ---------                                                 
     Subsidiaries, on a consolidated basis) at any time to be less than the
     greater of (a) twenty-five percent (25%) of Tangible Net Worth or (b) Five
     Million Dollars ($5,000,000).

          7.10  Maximum Pass-Throughs.  Permit the ratio (expressed as a
                ---------------------                                   
     percentage) of (a) the aggregate cumulative 
<PAGE>
 
     outstanding amount of advances to or on behalf of defaulting mortgagors
     paid or required to have been paid by the Borrowers and their Subsidiaries
     on Mortgage Loans and Mortgage-backed Securities to (b) Tangible Net Worth
     of WMF Group (and its Subsidiaries, on a consolidated basis) at any time to
     exceed forty percent (40%).

          7.11  Minimum Nonrecourse Servicing Portfolio.  Permit the Nonrecourse
                ---------------------------------------                         
     Servicing Portfolio of the Borrowers to be less than Five Billion Dollars
     ($5,000,000,000).

          7.12  Debt Service Coverage Ratio.  Permit the Debt Service Coverage
                ---------------------------                                   
     Ratio, measured as of the last day of any fiscal quarter ending on or after
     September 30, 1999, to be less than 1.50 to 1.00.

          7.13  Minimum Income.  Permit the net income of WMF Group (and its
                --------------                                              
     Subsidiaries, on a consolidated basis, excluding, for measurement periods
     ending on or before March 31, 2000, WMFCC) for any period of four (4)
     consecutive fiscal quarters, to be less than One Dollar ($1).

          7.14  Debt Limitation.  Permit Debt (excluding, for this purpose only,
                ---------------                                                 
     (a) Debt arising under Hedging Arrangements, to the extent of assets under
     the same Hedging Arrangements, (b) Warehousing Advances, (c) other Debt
     secured by Multifamily Mortgage Loans, Commercial Mortgage Loans or
     Mortgage-backed Securities covered by Purchase Commitments issued by
     Investors, to the extent such Debt does not exceed the Committed Purchase
     Price of such Mortgage Loans, (d) Subordinated Debt, and (e) Debt of
     Subsidiaries of WMF Group that are not Borrowers, provided such Debt is not
     guaranteed by, secured by the assets of, or otherwise supported by, any
     Borrower) of WMF Group (and its Subsidiaries, on a consolidated basis) to
     exceed One Hundred Million Dollars ($100,000,000).

          7.15  Acquisition of Recourse Servicing Contracts.  Acquire or enter
                -------------------------------------------                   
     into, or permit any Subsidiary to acquire or enter into, Servicing
     Contracts under which any Borrower or Subsidiary is obligated to repurchase
     or indemnify the holder of the Mortgage Loans as a result of defaults on
     the Mortgage Loans at any time during the term of such Mortgage Loans
     (other than those Servicing Contracts that are customarily recognized in
     the trade as non-recourse but that may contain repurchase or
     indemnification obligations related to breaches of usual and customary
     representations and warranties made in connection with the non-recourse
     sale and servicing of the Mortgage Loans serviced thereunder).
<PAGE>
 
          7.16  Transactions with Affiliates.  Directly or indirectly (a) make
                ----------------------------                                  
     any loan, advance, extension of credit or capital contribution to any of
     its Affiliates, (b) transfer, sell, pledge, assign or otherwise dispose of
     any of its assets to or on behalf of such Affiliates, (c) merge or
     consolidate with or purchase or acquire assets from such Affiliates, or (d)
     pay management fees to or on behalf of such Affiliates; provided, that
     nothing in this Section 7.16 shall restrict transactions between the
     Borrowers.  Provided that no Default or Event of Default has occurred or is
     continuing at the time any transfer or investment is made, this Section
     7.16 does not prohibit investments by WMF Group in an aggregate amount not
     to exceed Ten Million Dollars ($10,000,000) in COMIT.

          7.17  Gestation Facilities.  Directly or indirectly sell or finance
                --------------------                                         
     Pledged Mortgages under any Gestation Agreements.

          7.18  Restricted Payments.  Make any Restricted Payment if, either
                -------------------                                         
     before or after giving effect thereto, a Default or Event of Default will
     have occurred and be continuing.

          7.19  Special Negative Covenants Concerning Collateral.
                ------------------------------------------------ 

                    7.19(a)  The Borrowers shall not amend or modify, or waive
          any of the terms and conditions of, or settle or compromise any claim
          in respect of, any Pledged Mortgages or Pledged Securities.

                    7.19(b)  The Borrowers shall not sell, assign, transfer or
          otherwise dispose of, or grant any option with respect to, or pledge
          or otherwise encumber (except pursuant to this Agreement or as
          permitted herein), any of the Collateral or any interest therein.

                    7.19(c)  The Borrowers shall not make any compromise,
          adjustment or settlement in respect of any of the Collateral or accept
          other than cash in payment or liquidation of the Collateral.

                    7.19(d)  At any time that a Special Fannie Mae Advance is
          outstanding against any Special Fannie Mae Loan, Washington shall not
          amend, supplement, restate or otherwise modify the related Special
          Fannie Mae Program Agreement, the promissory note(s) evidencing such
          Special Fannie Mae Loans or the Fannie Mae Special Pool Purchase
          Contract related thereto.

8.   DEFAULTS; REMEDIES.
<PAGE>
 
          8.1  Events of Default.  The occurrence of any of the following
               -----------------                                         
     conditions or events shall be an event of default ("Event of Default"):

                    8.1(a)  Failure to pay the principal of any Advance when
          due, whether at stated maturity, by acceleration, or otherwise; or
          failure to pay any installment of interest on any Advance or any other
          amount due under this Agreement within ten (10) days after the due
          date; or failure to pay, within any applicable grace period, the
          principal or interest on any other indebtedness of the Borrowers due
          the Lenders; or

                    8.1(b)  Failure of any Borrower or any of their
          Subsidiaries, except WMFCC, to pay, or any default in the payment of
          any principal or interest on, any other indebtedness or contingent
          obligations in an aggregate amount of One Million Dollars ($1,000,000)
          or more within any period of grace provided; breach or default with
          respect to any other material term of any other indebtedness or of any
          loan agreement, mortgage, indenture or other agreement relating
          thereto, if the effect of such breach or default is to cause, or to
          permit the holder or holders thereof (or a trustee on behalf of such
          holder or holders) to cause, indebtedness of any Borrower or any of
          their Subsidiaries, except WMFCC, in the aggregate amount of One
          Million Dollars ($1,000,000) or more to become or be declared due
          prior to its stated maturity (upon the giving or receiving of notice,
          lapse of time, both, or otherwise); or

                    8.1(c)  Failure of the Borrowers to perform or comply with
          any term or condition applicable to them contained in Sections 6.3,
          6.12, 6.13 and 6.14, or in any Section of Article 7 of this Agreement;
          provided, however, that no Event of Default shall be deemed to occur
          as a result of a breach of Section 6.13 or Section 7.19 hereof
          relating to particular Pledged Mortgages if the Borrowers deliver to
          the Lender the Release Amount for each Pledged Mortgage affected by
          such breach within one (1) Business Day after the earliest of (i)
          receipt by the Borrowers of Notice from the Lender of such breach,
          (ii) receipt by the Lender of Notice from the Borrowers of such
          breach, or (iii) the date the Borrowers should have notified the
          Lender of such breach pursuant to Section 6.6(c) hereof; or
<PAGE>
 
                    8.1(d)  (1) Any of the Borrowers' representations or
          warranties made or deemed made herein or in any other Loan Document
          shall be inaccurate or incomplete in any material respect on the date
          as of which made or deemed made, or (2) any of the Borrowers'
          representations or warranties made or deemed made in any statement or
          certificate at any time given by any Borrower in writing pursuant
          hereto or thereto shall be inaccurate or incomplete in any material
          respect on the date as of which made or deemed made and, if such
          inaccuracy or incompleteness was unintentional, the same has not been
          cured within ten (10) days after (i) receipt by the Borrowers of
          Notice thereof from the Credit Agent, (ii) receipt by the Credit Agent
          of Notice thereof from the Borrowers, or (iii) the date the Borrowers
          should have notified the Credit Agent thereof pursuant to Section
          6.6(c); or

                    8.1(e)  The Borrowers shall default in the performance of or
          compliance with any term contained in this Agreement or any other Loan
          Document other than those referred to above in Subsections 8.1(a),
          8.1(c) or 8.1(d) and such default shall not have been remedied or
          waived within thirty (30) days after the earliest of (i) receipt by
          the Borrowers of Notice from the Credit Agent of such default, (ii)
          receipt by the Credit Agent of Notice from the Borrowers of such
          default, or (iii) the date the Borrowers should have notified the
          Credit Agent of such default pursuant to Section 6.6(c); or

                    8.1(f) (1) A court having jurisdiction shall enter a decree
          or order for relief in respect of any Borrower or any of their
          Subsidiaries in an involuntary case under any applicable bankruptcy,
          insolvency or other similar law in respect of any Borrower or any of
          their Subsidiaries now or hereafter in effect, which decree or order
          is not stayed; any Borrower or any of their Subsidiaries shall consent
          to the entry of any such decree or order; or a filing of a voluntary
          case under any applicable bankruptcy, insolvency or other similar law
          in respect of any Borrower or any of their Subsidiaries has occurred;
          or any other similar relief shall be granted under any applicable
          federal or state law; or (2) the filing of an involuntary case in
          respect of any Borrower or any of their Subsidiaries under any
          applicable bankruptcy, insolvency or other similar law; or a decree or
          order of a court having jurisdiction for the appointment of a
          receiver, liquidator, sequestrator, trustee, custodian 
<PAGE>
 
          or other officer having similar powers over any Borrower or any of
          their Subsidiaries, or over all or a substantial part of their
          respective property, shall have been entered; or the involuntary
          appointment of an interim or permanent receiver, trustee or other
          custodian of any Borrower or any of their Subsidiaries for all or a
          substantial part of their respective property; or the issuance of a
          warrant of attachment, execution or similar process against any
          substantial part of the property of any Borrower or any of their
          Subsidiaries, and the continuance of any such events in Subsection (2)
          above for sixty (60) days unless dismissed, bonded off or discharged;
          or

                    8.1(g)  Any Borrower or any of their Subsidiaries shall
          consent to the appointment of or taking possession by a receiver,
          trustee or other custodian for all or a substantial part of its
          property; the making by any Borrower or any of their Subsidiaries of
          any assignment for the benefit of creditors; or the inability or
          failure of any Borrower or any of their Subsidiaries other than WMFCC,
          or the admission by any Borrower or any of their Subsidiaries other
          than WMFCC in writing of its inability, to pay its debts as such debts
          become due; or

                    8.1(h)  Failure of any Borrower or any of their Subsidiaries
          to perform any contractual obligations which it may have to repurchase
          Mortgage Loans if such obligations in the aggregate exceed One Million
          Dollars ($1,000,000); or

                    8.1(i)  Any money judgment, writ or warrant of attachment,
          or similar process involving in any case an amount in excess of Five
          Hundred Thousand Dollars ($500,000) shall be entered or filed against
          any Borrower, any of their Subsidiaries or any of their respective
          assets and shall remain undischarged, unvacated, unbonded or unstayed
          for a period of thirty (30) days or in any event later than five (5)
          days prior to the date of any proposed sale thereunder; or

                    8.1(j)  Any order, judgment or decree shall be entered
          against any Borrower decreeing the dissolution or split up of any
          Borrower and such order shall remain undischarged or unstayed for a
          period in excess of twenty (20) days; or

                    8.1(k)  Any Plan maintained by any Borrower or any of their
          Subsidiaries shall be 
<PAGE>
 
          terminated within the meaning of Title IV of ERISA or a trustee shall
          be appointed by an appropriate United States district court to
          administer any Plan, or the Pension Benefit Guaranty Corporation (or
          any successor thereto) shall institute proceedings to terminate any
          Plan or to appoint a trustee to administer any Plan if as of the date
          thereof such Borrower's or Subsidiary's liability (after giving effect
          to the tax consequences thereof) to the Pension Benefit Guaranty
          Corporation (or any successor thereto) for unfunded guaranteed vested
          benefits under the Plan exceeds the then current value of assets
          accumulated in such Plan by more than Twenty-Five Thousand Dollars
          ($25,000) (or in the case of a termination involving any Borrower or
          any of their Subsidiaries as a "substantial employer" (as defined in
          Section 4001(a)(2) of ERISA) the withdrawing employer's proportionate
          share of such excess shall exceed such amount); or

                    8.1(l)  Any Borrower or any of their Subsidiaries as
          employer under a Multiemployer Plan shall have made a complete or
          partial withdrawal from such Multiemployer Plan and the plan sponsor
          of such Multiemployer Plan shall have notified such withdrawing
          employer that such employer has incurred a withdrawal liability in an
          annual amount exceeding Twenty-Five Thousand Dollars ($25,000); or

                    8.1(m)  Any Borrower or any of their Subsidiaries shall
          purport to disavow its obligations hereunder or under any other Loan
          Document, or shall contest the validity or enforceability hereof or
          thereof; or the Credit Agent's security interest on  any portion of
          the Collateral shall become unenforceable or otherwise impaired;
          provided that, subject to the Majority Lenders' approval, no Event of
          Default shall occur as a result of such impairment if all Advances
          made against any such  Collateral shall be paid in full within ten
          (10) days of the date of such impairment; or

                    8.1(n)  WMF Group shall cease to own, directly or
          indirectly, at least 51% of each class of the capital stock of any
          other Borrower or any Subsidiary that has granted a Lien to secure the
          Obligations; or

                    8.1(o)  The Rights Offering shall not have closed, or WMF
          Group shall not have received at 
<PAGE>
 
          least $20,000,000 in Net Proceeds therefrom, on or before May 31,
          1999; or

                         8.1(p)  A material adverse change occurs, or is
          reasonably likely to occur, in the business condition (financial or
          otherwise), operations, properties or prospects of the Borrowers, or
          in the ability of the Borrowers to repay their Obligations; or

                         8.1(q)  Any Lien for any taxes, assessments or other
          governmental charges (i) is filed against the Borrowers or any of
          their properties, or is otherwise enforced against the Borrowers or
          any portion of their Collateral, or (ii) obtains priority that is
          equal or greater than the priority of the Lender's security interest
          in any of the Collateral; or

                         8.1(r)  The Warehousing Maturity Date shall occur.

          8.2  Remedies.
               -------- 

                         8.2(a)  If a Lender shall have knowledge of a Default
          or an Event of Default, it shall forthwith give Notice thereof to the
          Credit Agent. If the Credit Agent shall have knowledge of a Default or
          an Event of Default, it shall forthwith give Notice thereof to each
          Lender and to the Borrowers. The Credit Agent shall not be deemed to
          have knowledge or Notice of the occurrence of a Default or an Event of
          Default unless the Credit Agent has received Notice thereof from a
          Lender or the Borrowers .

                         8.2(b)  Upon the occurrence of any Event of Default
          described in Sections 8.1(f) or 8.1(g) with respect to any Borrower,
          the Commitment shall automatically be terminated and all unpaid
          principal amounts of and accrued interest on the Notes and all other
          Obligations shall automatically become due and payable, without
          presentment, demand or other requirements of any kind, all of which
          are hereby expressly waived by the Borrowers.

                         8.2(c)  Upon the occurrence of any Event of Default,
          other than those described in Sections 8.1(f) and 8.1(g) with respect
          to any Borrower, the Majority Lenders may, by Notice to the Borrowers,
          terminate the Commitments and/or declare all Obligations to be
          immediately due and payable,
<PAGE>
 
          whereupon the same shall forthwith become due and payable, together
          with all accrued interest thereon, and the obligation of the Lenders
          to make any Advances shall thereupon terminate.

                         8.2(d)    Upon the occurrence of any Event of Default,
          the Credit Agent, on behalf of the Secured Parties, may also do any of
          the following:

                                   (1)  Foreclose upon or otherwise enforce its
               security interest in and Lien on the Collateral to secure all
               payments and performance of the Obligations in any manner
               permitted by law or provided for hereunder.

                                   (2)  Notify all obligors in respect of
               Collateral that the Collateral has been assigned to the Credit
               Agent, for the benefit of the Secured Parties, and that all
               payments thereon are to be made directly to the Credit Agent or
               such other party as may be designated by the Credit Agent;
               settle, compromise, or release, in whole or in part, any amounts
               owing on the Collateral, any such obligor or any Investor or any
               portion of the Collateral, on terms acceptable to the Credit
               Agent; enforce payment and prosecute any action or proceeding
               with respect to any and all Collateral; and where any such
               Collateral is in default, foreclose on and enforce security
               interests in such Collateral by any available judicial procedure
               or without judicial process and sell property acquired as a
               result of any such foreclosure.

                                   (3)  Act, or contract with a third party to
               act, as servicer or subservicer of each item of Collateral
               requiring servicing and perform all obligations required in
               connection with the Pledged Mortgages, the Pledged Securities,
               the Pledged Servicing Contracts and related Purchase Commitments,
               such third party's fees to be paid by the Borrowers.

                                   (4)  Require the Borrowers to assemble the
               Collateral and/or books and records relating thereto and make
               such available to the Credit Agent at a place to be designated by
               the Credit Agent.

                                   (5)  Enter onto property where any Collateral
               or books and records relating
<PAGE>
 
               thereto are located and take possession thereof with or without
               judicial process; and obtain access to the Borrowers' data
               processing equipment, computer hardware and software relating to
               the Collateral and to use all of the foregoing and the
               information contained therein in any manner the Credit Agent
               deems necessary for the purpose of effectuating its rights under
               this Agreement and any other Loan Document.

                                   (6)  Prior to the disposition of the
               Collateral, prepare it for disposition in any manner and to the
               extent the Credit Agent deems appropriate.

                                   (7)  Exercise all rights and remedies of a
               secured creditor under the Uniform Commercial Code of Minnesota
               or other applicable law, including, but not limited to, selling
               or otherwise disposing of the Collateral, or any part thereof, at
               one or more public or private sales, whether or not such
               Collateral is present at the place of sale, for cash or credit or
               future delivery, on such terms and in such manner as the Credit
               Agent may determine, including, without limitation, sale pursuant
               to any applicable Purchase Commitment. If notice is required
               under such applicable law, the Credit Agent will give the
               Borrowers not less than ten (10) days' notice of any such public
               sale or of the date after which any private sale may be held. The
               Borrowers agree that ten (10) days' notice shall be reasonable
               notice. The Credit Agent may, without notice or publication,
               adjourn any public or private sale or cause the same to be
               adjourned from time to time by announcement at the time and place
               fixed for the sale, and such sale may be made at any time or
               place to which the same may be so adjourned. In case of any sale
               of all or any part of the Collateral on credit or for future
               delivery, the Collateral so sold may be retained by the Credit
               Agent until the selling price is paid by the purchaser thereof,
               but the Credit Agent shall not incur any liability in case of the
               failure of such purchaser to take up and pay for the Collateral
               so sold and, in case of any such failure, such Collateral may
               again be sold upon like notice. The Credit Agent may, however,
               instead of exercising the power of sale herein conferred upon it,
               proceed by a suit or suits at law or in equity
<PAGE>
 
               to collect all amounts due upon the Collateral or to foreclose
               the pledge and sell the Collateral or any portion thereof under a
               judgment or decree of a court or courts of competent
               jurisdiction, or both.

                                 (8)  Proceed against the Borrowers on the
               Notes.

                    The Credit Agent shall follow the instructions of the
          Majority Lenders in exercising or not exercising its rights under this
          Section 8.2(d), but (i) the Credit Agent shall have no obligation to
          take or not to take any action which it believes may expose it to any
          liability, and (ii) the Credit Agent may, but shall be under no
          obligation to, await instructions from the Majority Lenders before
          exercising or not exercising its rights under this Section 8.2(d).

                         8.2(e)  Neither the Credit Agent nor any other Secured
          Party shall incur any liability as a result of the sale or other
          disposition of the Collateral, or any part thereof, at any public or
          private sale or disposition. The Borrowers hereby waive (to the extent
          permitted by law) any claims it may have against the Credit Agent and
          the other Secured Parties arising by reason of the fact that the price
          at which the Collateral may have been sold at such private sale was
          less than the price which might have been obtained at a public sale or
          was less than the aggregate amount of the outstanding Advances and the
          unpaid interest accrued thereon, even if the Credit Agent accepts the
          first offer received and does not offer the Collateral to more than
          one offeree, provided such sale was commercially reasonable in all
          other respects. Any sale of Collateral pursuant to the terms of a
          Purchase Commitment, or any other disposition of Collateral arranged
          by any Borrower, whether before or after the occurrence of an Event of
          Default, shall be deemed to have been made in a commercially
          reasonable manner.

                         8.2(f)  The Borrowers acknowledge that Mortgage Loans
          and Mortgage-backed Securities are collateral of a type which is
          customarily sold on a recognized market. The Borrowers waive any right
          they may have to prior notice of the sale of any Pledged Mortgage or
          Pledged Security, and agrees that any
<PAGE>
 
          Lender may purchase any Pledged Mortgages or Pledged Securities at a
          private sale of such Collateral.

                         8.2(g)  The Borrowers specifically waive and release
          (to the extent permitted by law) any equity or right of redemption,
          all rights of redemption, stay or appraisal which the Borrowers have
          or may have under any rule of law or statute now existing or hereafter
          adopted, and any right to require the Credit Agent or any of the
          Secured Parties to (1) proceed against any Person, (2) proceed against
          or exhaust any of the Collateral or pursue their rights and remedies
          as against the Collateral in any particular order, or (3) pursue any
          other remedy in their power. The Credit Agent shall not be required to
          take any steps necessary to preserve any rights of the Borrowers
          against holders of mortgages prior to the Lien of any Mortgage
          included in the Collateral or to preserve rights against prior
          parties.

                         8.2(h)  The Credit Agent and/or the Lenders may, but
          shall not be obligated to, advance any sums or do any act or thing
          necessary to uphold and enforce the Lien and priority of, or the
          security intended to be afforded by, any Mortgage included in the
          Collateral, including, without limitation, payment of delinquent taxes
          or assessments and insurance premiums. All advances, charges, costs
          and expenses, including reasonable attorneys' fees and disbursements,
          incurred or paid by the Credit Agent or any Lender in exercising any
          right, power or remedy conferred by this Agreement, or in the
          enforcement hereof, together with interest thereon at the Default Rate
          from the time of payment until repaid, shall become a part of the
          principal balance outstanding hereunder and under the Notes.

                         8.2(i)  No failure on the part of the Credit Agent or
          any other Secured Party to exercise, and no delay in exercising, any
          right, power or remedy provided hereunder, at law or in equity shall
          operate as a waiver thereof; nor shall any single or partial exercise
          by the Credit Agent or any other Secured Party of any right, power or
          remedy provided hereunder, at law or in equity preclude any other or
          further exercise thereof or the exercise of any other right, power or
          remedy. Without intending to limit the foregoing, all defenses based
          on the statute of limitations are hereby waived by the Borrowers to
          the extent permitted by law.
<PAGE>
 
          The remedies herein provided are cumulative and are not exclusive of
          any remedies provided at law or in equity.

                         8.2(j)  The Borrowers acknowledge that the Borrowers
          and the Credit Agent may from time to time hereafter enter into,
          agreements ("Acknowledgment Agreements") with Fannie Mae, Ginnie Mae
          or any other Investor in order to obtain the consent of Fannie Mae,
          Ginnie Mae or such other Investor to the assignment of and security
          interest granted in the Pledged Servicing Contracts. The Borrowers
          further acknowledge that the Acknowledgment Agreements may contain
          certain provisions concerning the enforcement by the Credit Agent of
          its security interest, for the benefit of the Secured Parties, in the
          Servicing Contracts subject thereto. The Borrowers agree that the
          disposition of their rights in any Pledged Servicing Contract pursuant
          to the terms of the applicable Acknowledgment Agreement shall be
          deemed commercially reasonable within the meaning of Section 9-504(3)
          of the Uniform Commercial Code of Minnesota. The Borrowers hereby
          waive any claims they might otherwise have against the Credit Agent or
          the other Secured Parties as a result of the Credit Agent's compliance
          with the terms of any Acknowledgment Agreement.

                         8.2(k)  The Credit Agent is hereby granted a license or
          other right to use, without charge, the Borrowers' computer programs,
          other programs, labels, patents, copyrights, rights of use of any
          name, trade secrets, trade names, trademarks, service marks and
          advertising matter, or any property of a similar nature, as it
          pertains to the Collateral, in advertising for sale and selling any
          Collateral, and the Borrowers' rights under all licenses and all other
          agreements related to the foregoing shall insure to the Credit Agent's
          benefit until the Obligations and the Letter of Credit Obligations are
          paid in full and no Letters of Credit are outstanding.

          8.3  Application of Proceeds.  The proceeds of any sale, disposition
               -----------------------                                        
     or other enforcement of the Credit Agent's security interest in all or any
     part of the Collateral shall be applied by the Credit Agent as follows:

                         8.3(a)  In the case of the proceeds of the Warehousing
          Collateral and Receivables:
<PAGE>
 
                          First,   to the payment of the costs and expenses of
                          -----                                             
          such sale or enforcement, including reasonable compensation to the
          Credit Agent's and Collateral Agent's agents and counsel, and all
          expenses, liabilities and advances made or incurred by or on behalf of
          the Credit Agent and Collateral Agent in connection therewith;

                          Second,  to the payment of the costs and expenses of
                          ------                                             
          such sale or enforcement, including reasonable compensation to the
          Lenders' agents and counsel, and all expenses, liabilities and
          advances made or incurred by or on behalf of any Lender in connection
          therewith;

                          Third,   to the Swingline Lender, in an amount equal 
                          -----                                                
          to the amount of accrued interest, or accrued fees charged in lieu of
          interest pursuant to a Balance Funded Agreement, owed to the Swingline
          Lender in respect of Swingline Advances, until paid in full;

                          Fourth,  to the Swingline Lenders until the principal
                          ------                                              
          amount of all Swingline Advances outstanding are paid in full;

                          Fifth,   to the Lenders holding Warehousing Advances,
                          -----                                              
          pro rata in accordance with the amount of accrued interest, or accrued
          fees charged in lieu of interest pursuant to a Balance Funded
          Agreement, owed to each of them in respect to Warehousing Advances,
          until such interest and fees are paid in full;

                          Sixth,   to the Lenders holding Warehousing Advances,
                          -----                                              
          pro rata in accordance with their respective Warehousing Percentage
          Shares, until the principal amounts of all Warehousing Advances
          outstanding are paid in full;

                          Seventh, to the Lenders holding Warehousing Advances,
                          -------                                              
          pro rata in accordance with their respective Warehousing Percentage
          Shares, until all fees and other Obligations accrued by or due each
          Lender, the Credit Agent and the Collateral Agent are paid in full;

                          Eighth,  to the Lenders, for application to the
                          ------                                        
          Obligations owed to each of them in respect of the Servicing Facility
          Advances and the Term Loan 
<PAGE>
 
          Advances, as set forth in clauses Third and Fourth of Section 8.2(b)
                                            -----     ------
          hereof;

                          Ninth,   to LaSalle, for application to the Letter of
                          -----                                              
          Credit Obligations and to hold as separate collateral for any future
          Letter of Credit Obligations, in the amount notified by LaSalle to the
          Credit Agent;

                          Tenth,   to the remaining Obligations; and
                          -----                                   

                          Finally, to the payment to the Borrowers, or to their
                          -------                                              
          successors or assigns, or as a court of competent jurisdiction may
          direct, of any surplus then remaining from such proceeds.

                          8.3(b)  In the case of the proceeds of the Servicing
          Collateral:

                          First,   to the payment of the costs and expenses of
                          -----                                             
          such sale or enforcement, including reasonable compensation to the
          Credit Agent's and Collateral Agent's agents and counsel, and all
          expenses, liabilities and advances made or incurred by or on behalf of
          the Credit Agent and Collateral Agent in connection therewith;

                          Second,  to the payment of the costs and expenses of
                          ------                                             
          such sale or enforcement, including reasonable compensation to the
          Lenders' agents and counsel, and all expenses, liabilities and
          advances made or incurred by or on behalf of any Lender in connection
          therewith;

                          Third,   to the Lenders holding Servicing Facility
                          -----                                           
          Advances and/or Term Loan Advances, pro rata in accordance with the
          amount of accrued interest, or accrued fees charged in lieu of
          interest pursuant to a Balance Funded Agreement, owed to each of them
          in respect of Term Loan Advances and Servicing Facility Advances,
          until such interest and fees are paid in full;

                          Fourth,  to the Lenders holding Servicing Facility
                          ------                                           
          Advances and/or Term Loan Advances, pro rata in accordance with their
          respective Servicing Facility Percentage Shares and Term Loan
          Servicing Facility Percentage Shares and Term Loan Percentage Shares,
          until the principal amount of all Term Loan Advances 
<PAGE>
 
          and Servicing Facility Advances outstanding are paid in full;

                          Fifth,   to the Lenders holding Servicing Facility
                          -----                                           
          Advances and/or Term Loan Advances, pro rata in accordance with their
          respective Percentage Shares, until all fees and other Obligations
          accrued by or due each Lender, the Credit Agent and the Collateral
          Agent are paid in full;

                          Sixth,   to LaSalle, for application to the Letter of
                          -----                                              
          Credit Obligations and to hold as separate collateral for any future
          Letter of Credit Obligations, in the amount notified by LaSalle to the
          Credit Agent;

                          Seventh, to the Lenders, for application to the
                          -------                                        
          Obligations owed to each of them in respect of Warehousing Advances,
          as set forth in clauses Third, Fourth, Fifth and Sixth of Section
                                  -----  ------  -----     -----           
          8.3(a) hereof;

                          Eighth,  to the remaining Obligations; and
                          ------                                   

                          Finally, to the payment to the Borrowers, or to their
                          -------                                              
          successors or assigns, or as a court of competent jurisdiction may
          direct, of any surplus then remaining from such proceeds.

                          8.3(c)  If the proceeds of any such sale, disposition 
          or other enforcement are insufficient to cover the costs and expenses
          of such sale, as aforesaid, and the payment in full of all
          Obligations, the Borrowers shall remain liable for any deficiency.

          8.4  Credit Agent Appointed Attorney-in-Fact.  The Credit Agent is
               ---------------------------------------                      
     hereby appointed the attorney-in-fact of the Borrowers, with full power of
     substitution, for the purpose of carrying out the provisions hereof and
     taking any action and executing any instruments which the Credit Agent may
     deem necessary or advisable to accomplish the purposes hereof, which
     appointment as attorney-in-fact is irrevocable and coupled with an
     interest.  Without limiting the generality of the foregoing, the Credit
     Agent shall have the right and power to give notices of its security
     interest in the Collateral to any Person, either in the name of the
     Borrowers or in its own name, to endorse all Pledged Mortgages or Pledged
     Securities payable to the order of the Borrowers, to change or cause to be
     changed the book-entry registration or name of subscriber or Investor on
     any 
<PAGE>
 
     Pledged Security, or to receive, endorse and collect all checks made
     payable to the order of either Borrower representing any payment on account
     of the principal of or interest on, or the proceeds of sale of, any of the
     Pledged Mortgages or Pledged Securities and to give full discharge for the
     same. Except to the extent the Credit Agent is granted the power to take
     any action covered by the foregoing power of attorney prior to the
     occurrence of an Event of Default under the Loan Documents, the Lenders
     agree that the Credit Agent shall not exercise the foregoing power of
     attorney prior to the occurrence of an Event of Default.

          8.5  Right of Setoff.  The Borrowers hereby grant to the Credit Agent,
               ---------------                                                  
     to each Lender and to any assignee or Participant of any Lender a right of
     setoff, to secure the repayment of the Obligations and (in the case of
     LaSalle) the Letter of Credit Obligations, upon any and all monies,
     securities, or other property of the Borrowers, and the proceeds thereof,
     now or hereafter held or received by or in transit to such Person, from or
     for the account of the Borrowers, whether for safekeeping, custody, pledge,
     transmission, collection or otherwise, and all deposits (general or
     special, time or demand, provisional or final) and credits of the Borrowers
     and any and all claims of the Borrowers against such Person at any time
     existing.  Upon the occurrence and during the continuance of any Event of
     Default, the Credit Agent, each Lender and any assignee or Participant of
     any Lender is hereby authorized, at any time and from time to time, without
     notice, to setoff and to appropriate or apply any and all items hereinabove
     described against and on account of the Obligations and (in the case of
     LaSalle) the Letter of Credit Obligations, irrespective of whether or not
     the Lenders shall have made any demand hereunder and whether or not said
     Obligations or Letter of Credit Obligations shall have matured.

          8.6  Sharing of Payments.  If upon the occurrence of an Event of
               -------------------                                        
     Default and acceleration of the Obligations any Lender shall hold or
     receive and retain any payment, whether by setoff, application of deposit
     balance or security, or otherwise, in respect of the Obligations, then such
     Lender shall purchase from the other Lenders for cash and at face value and
     without recourse, such participation in the Obligations held by them as
     shall be necessary to cause such payment to be shared with each of them as
     provided in Section 8.3 hereof; provided, that if such payment or part
     thereof is thereafter recovered from such purchasing Lender, the related
     purchases from the other Lenders shall be rescinded ratably and the
     purchase price restored as to the portion of such excess payment so
     recovered, but without 
<PAGE>
 
     interest thereon unless the purchasing Lender is required to pay interest
     on such amounts to the Person recovering such payment, in which case with
     interest thereon, computed at the same rate, and on the same basis, as the
     interest that the purchasing Lender is required to pay. If any Lender
     receives a payment from the Borrowers not in respect of the Obligations,
     but relating to another relationship of such Lender and the Borrowers, such
     Lender may apply the payment first to the indebtedness arising out of the
     other relationship and then against the Obligations as provided for above.

9.   THE CREDIT AGENT.

          9.1  Appointment.  Each Lender hereby irrevocably designates and
               -----------                                                
     appoints the Credit Agent as the agent of such Lender under the Loan
     Documents and each such Lender hereby irrevocably authorizes the Credit
     Agent to take such action on its behalf under the provisions of the Loan
     Documents and to exercise such powers and perform such duties as are
     expressly delegated to the Credit Agent by the terms of the Loan Documents,
     together with such other powers as are reasonably incidental thereto.  The
     Credit Agent hereby accepts such appointment and agrees to act in
     accordance with this Agreement.

          9.2  Duties of Credit Agent.  The provisions of the Loan Documents set
               ----------------------                                           
     forth the exclusive duties of the Credit Agent and no implied duties or
     obligations shall be read into the Loan Documents against the Credit Agent.
     The Credit Agent shall not be bound in any way by any agreement or contract
     other than the Loan Documents and any other agreement to which it is a
     party.

          9.3  Standard of Care.  The Credit Agent shall act in accordance with
               ----------------                                                
     customary standards for those engaged as agents of commercial loan
     transactions in similar capacities.  Without limiting the generality of the
     foregoing:

               9.3(a)   The Credit Agent shall not be required to ascertain or
          inquire as to the performance or observance of any of the conditions
          or agreements to be performed or observed by any other party, except
          as specifically provided in the Loan Documents.  The Credit Agent
          disclaims any responsibility for the validity or accuracy of the
          recitals to this Agreement and any representations and warranties
          contained herein, unless specifically identified as recitals,
          representations or warranties of the Credit Agent.
<PAGE>
 
               9.3(b)  The Credit Agent shall have no responsibility for
          ascertaining the value, collectibility, insurability, enforceability,
          effectiveness or suitability of any Collateral, the title of any party
          therein, the validity or adequacy of the security afforded thereby, or
          the validity of this Agreement (except as to Credit Agent's authority
          to enter into this Agreement and to perform its obligations
          hereunder).

               9.3(c)  No provision of this Agreement shall require the Credit
          Agent to expend or risk its own funds or otherwise incur any financial
          liability in the performance of any of its duties hereunder or in the
          exercise of any of its rights or powers, if, in its sole judgment, it
          shall believe that repayment of such funds or adequate indemnity
          against such risk or liability is not assured to it.

               9.3(d)  The Credit Agent is not responsible for preparing or
          filing any reports or returns relating to federal, state or local
          income taxes with respect to this Agreement, other than for the Credit
          Agent's compensation or for reimbursement of expenses.

          9.4  Delegation of Duties.  The Credit Agent may execute any of its
               --------------------                                          
     duties under the Loan Documents by or through agents or attorneys-in-fact
     and shall be entitled to advice of counsel concerning all matters
     pertaining to such duties.  The Credit Agent shall not be responsible for
     the negligence or misconduct of any agents or attorneys-in-fact selected by
     it with reasonable care.

          9.5  Exculpatory Provisions.  Neither the Credit Agent nor any of its
               ----------------------                                          
     respective officers, directors, employees, agents, attorneys-in-fact or
     Affiliates shall be (a) liable for any action taken or omitted to be taken
     by it or such Person under or in connection with the Loan Documents (except
     for its or such Person's own gross negligence or willful misconduct), or
     (b) responsible in any manner to any of the Lenders for any recitals,
     statements, representations or warranties made by the Borrowers or any
     officer thereof contained in the Loan Documents or in any certificate,
     report, statement or other document referred to or provided for in, or
     received by the Credit Agent under or in connection with, the Loan
     Documents or for the value, validity, effectiveness, genuineness,
     enforceability or sufficiency of the Loan Documents or for any failure of
     the Borrowers to perform their obligations under any Loan Document.  The
     Credit Agent shall not be under any 
<PAGE>
 
     obligation to any Lender to ascertain or to inquire as to the observance or
     performance of any of the agreements contained in, or conditions of, the
     Loan Documents or to inspect the properties, books or records of the
     Borrowers or any of their Subsidiaries.

          9.6  Reliance by Credit Agent.  The Credit Agent shall be entitled to
               ------------------------                                        
     rely, and shall be fully protected in relying, upon any note, writing,
     resolution, notice, consent, certification, affidavit, letter, cablegram,
     telegram, telecopy, telex or teletype message, statement, order or other
     document or conversation reasonably believed by it to be correct and to
     have been signed, sent or made by the proper Person or Persons and upon
     advice and statements of legal counsel (including, without limitation,
     counsel to the Borrowers), independent accountants and other experts
     selected by the Credit Agent.  The Credit Agent may deem and treat the
     payee of any Note as the owner thereof for all purposes.  As to the
     Lenders:  (a) the Credit Agent shall be fully justified in failing or
     refusing to take any action under the Loan Documents unless it shall first
     receive such advice or concurrence of the Majority Lenders or all of the
     Lenders, as appropriate, and/or it shall first be indemnified to its
     satisfaction by the Lenders ratably in accordance with their respective
     Percentage Shares against any and all liability and expense which may be
     incurred by it by reason of taking or continuing to take any action (except
     for liabilities and expenses resulting from the Credit Agent's gross
     negligence or willful misconduct), and (b) the Credit Agent shall in all
     cases be fully protected in acting, or in refraining from acting, under the
     Loan Documents in accordance with a request of the Majority Lenders or all
     of the Lenders, as appropriate, and such request and any action taken or
     failure to act pursuant thereto shall be binding upon all the Lenders.

          9.7  Non-Reliance on Credit Agent or Other Lenders.  Each Lender
               ---------------------------------------------              
     expressly acknowledges that neither the Credit Agent nor any of its
     respective officers, directors, employees, agents, attorneys-in-fact or
     Affiliates has made any representations or warranties to such Lender and
     that no act by the Credit Agent hereafter taken, including any review of
     the affairs of the Borrowers, shall be deemed to constitute any
     representation or warranty by the Credit Agent to any Lender.  Each Lender
     represents to the Credit Agent that it has, independently and without
     reliance upon the Credit Agent or any other Lender, and based on such
     documents and information as it has deemed appropriate, made its own
     appraisal of and investigation into the business, operations, property,
     financial and other condition and 
<PAGE>
 
     creditworthiness of the Borrowers and made its own decision to enter into
     and make Advances under the Credit Agreement. Each Lender also represents
     that it will, independently and without reliance upon the Credit Agent or
     any other Lender, and based on such documents and information as it shall
     deem appropriate at the time, continue to make its own credit analysis,
     appraisals and decisions in taking or not taking action under the Credit
     Agreement, and to make such investigation as it deems necessary to inform
     itself as to the business, operations, property, financial and other
     condition and creditworthiness of the Borrowers. Except for notices,
     reports and other documents expressly required to be furnished to the
     Lenders by the Credit Agent hereunder, the Credit Agent shall have no duty
     or responsibility to provide any Lender with any credit or other
     information concerning the business, operations, property, financial or
     other condition or creditworthiness of the Borrowers or any Subsidiary
     which may come into the possession of the Credit Agent or any of its
     respective officers, directors, employees, agents, attorneys-in-fact or
     Affiliates.

          9.8  Credit Agent in Individual Capacity.  The Credit Agent may make
               -----------------------------------                            
     loans to, accept deposits from and generally engage in any kind of business
     with the Borrowers as though the Credit Agent was not the Credit Agent
     hereunder.  With respect to the Advances made or renewed by it and any Note
     issued to it, the Credit Agent shall have the same rights and powers under
     the Loan Documents as any Lender and may exercise the same as though it
     were not the Credit Agent, and the terms "Lender" and "Lenders" shall
     include the Credit Agent in its  individual capacity.

          9.9  Successor Credit Agent.  The Credit Agent may resign as such at
               ----------------------                                         
     any time upon giving thirty (30) days Notice to the Borrowers and the
     Lenders.  The Credit Agent may be removed immediately with cause or at any
     time upon thirty (30) days Notice from the Majority Lenders to the Credit
     Agent and the Borrowers.  Upon Notice of such resignation or removal, the
     Majority Lenders may appoint a successor Credit Agent (which successor
     Credit Agent, assuming that no Default or Event of Default exists, shall be
     reasonably acceptable to the Borrowers).  The date on which the Borrowers,
     the Collateral Agent and Lenders have received Notice from such successor
     of its acceptance of appointment as the Credit Agent shall constitute the
     effective date of resignation or removal of the resigning or removed the
     Credit Agent.  If no successor Credit Agent shall have been so appointed by
     the Majority Lenders, and shall have accepted such appointment within the
     allotted time period, then, upon five (5) days' Notice to the 
<PAGE>
 
     Borrowers, the resigned or removed Credit Agent may, on behalf of the
     Lenders, appoint a successor. Upon the effective date of resignation or
     removal of the resigning or removed Credit Agent, such successor will
     thereupon succeed to and become vested with all the rights, powers,
     privileges, and duties of the resigning or removed Credit Agent, but the
     resigning or removed Credit Agent shall not be discharged from any
     liability as a result of its or its directors', officers', agents', or
     employees' gross negligence or willful misconduct in the performance of its
     duties and obligations under this Agreement prior to the effective date of
     its resignation or removal. Upon the effective date of its resignation or
     removal, the Credit Agent shall assign all of its right, title and security
     interest in and to all Collateral to its successor, without recourse,
     warranty or representation, express or implied.

          9.10  Agreements Regarding Servicing Collateral and Acknowledgment
                ------------------------------------------------------------
     Agreements.  Each Lender (including each Lender becoming a party hereto as
     ----------                                                                
     an Additional Lender pursuant to Section 13.4) hereby agrees (a) to benefit
     under this Agreement with respect to the Servicing Collateral and under
     each Acknowledgment Agreement exclusively by and through the Credit Agent,
     (b) to authorize the Credit Agent or its agent to act exclusively for such
     Lender with respect to the Acknowledgment Agreements and persons (other
     than the Borrowers) party thereto, and (c) that all terms of the
     Acknowledgment Agreements shall be binding on such Lender as if it had
     executed the same.  The provisions of clause (c) of the preceding sentence
     shall not be effective with respect to any Acknowledgment Agreement, other
     than Acknowledgment Agreements in the forms promulgated by Fannie Mae and
     Freddie Mac as of the date of this Agreement, unless the Credit Agent's
     execution and delivery of such Acknowledgment Agreement is consented to by
     all of the Lenders.

10.  NOTICES.

          All notices, demands, consents, requests and other communications
     required or permitted to be given or made hereunder (collectively,
     "Notices") shall, except as otherwise expressly provided hereunder, be in
     writing and shall be delivered in person or telecopied, or mailed, first
     class or delivered by overnight courier, return receipt requested, postage
     prepaid, addressed to the respective party hereto at its address set forth
     opposite the name of such party on the signature pages of this Agreement
     or, as to any such party, at such other address as may be designated by it
     in a Notice to the other.  All Notices 
<PAGE>
 
     shall be conclusively deemed to have been properly given or made when duly
     delivered, in person, by telecopy or by overnight courier, or if mailed, on
     the date of receipt as noted on the return receipt.

11.  REIMBURSEMENT OF EXPENSES; INDEMNITY.

          11.1  Reimbursement of Expenses and Indemnification by the Borrowers.
                --------------------------------------------------------------  
     The Borrowers shall:   (a) pay a documentation production fee of Five
     Thousand Dollars ($5,000) to the Credit Agent in connection with the
     preparation and negotiation of this Agreement; (b) pay all reasonable out-
     of-pocket costs and expenses of the Credit Agent and the Collateral Agent,
     including, without limitation, reasonable fees and disbursements of counsel
     (including the fees and service charges of Dorsey & Whitney LLP, special
     counsel to the Credit Agent, and allocated costs of internal counsel), in
     connection with the preparation, negotiation, amendment, enforcement and
     administration of this Agreement, the Notes, and other Loan Documents and
     the making and repayment of the Advances and the payment of interest
     thereon; (c) indemnify, pay, and hold harmless the Lenders and any holder
     of the Notes from and against, any and all present and future stamp,
     documentary and other similar taxes with respect to the foregoing matters
     and save the Lenders and the holder or holders of the Notes harmless from
     and against any and all liabilities with respect to or resulting from any
     delay or omission to pay such taxes; (d) indemnify, pay and hold harmless
     the Credit Agent, the Collateral Agent and each Lender and any of their
     respective officers, directors, employees or agents and any subsequent
     holder of the Notes (collectively called the "Indemnitees") from and
     against any and all liabilities, obligations, losses, damages, penalties,
     judgments, suits, and reasonable costs, expenses and disbursements of any
     kind or nature whatsoever (including without limitation, the reasonable
     fees and disbursements of counsel of the Indemnitees (including allocated
     costs of internal counsel) in connection with any investigative,
     administrative or judicial proceeding, whether or not such Indemnitees
     shall be designated a party thereto) which may be imposed upon, incurred by
     or asserted against such Indemnitees in any manner relating to or arising
     out of this Agreement, the Notes, or any other Loan Document or any of the
     transactions contemplated hereby or thereby (the "Indemnified
     Liabilities"); provided, however, that the Borrowers shall have no
     obligation hereunder to any Indemnitee with respect to Indemnified
     Liabilities arising from any action or inaction by the Borrowers explicitly
     directed by the Credit Agent or by any Lender in writing, or 
<PAGE>
 
     the gross negligence or willful misconduct of such Indemnitee. To the
     extent that the undertaking to indemnify, pay and hold harmless as set
     forth in the preceding sentence may be unenforceable because it is
     violative of any law or public policy, the Borrowers shall contribute the
     maximum portion which it is permitted to pay and satisfy under applicable
     law, to the payment and satisfaction of all Indemnified Liabilities
     incurred by the Indemnitees or any of them. The agreement of the Borrowers
     contained in this Subsection (d) shall survive the expiration or
     termination of this Agreement and the payment in full of the Notes.
     Reasonable attorneys' fees and disbursements incurred in enforcing, or on
     appeal from, a judgment pursuant hereto shall be recoverable separately
     from and in addition to any other amount included in such judgment, and
     this clause is intended to be severable from the other provisions of this
     Agreement and to survive and not be merged into such judgment. As to
     Subsection (d), each Indemnitee shall use its best efforts to give
     Borrowers' notice of any such investigative, administrative or judicial
     proceeding, and the Borrowers shall have the right to consult in the
     defense of or the negotiation relating to any such matter at Borrowers'
     expense.

          11.2  Indemnification by the Lenders.  The Lenders agree to indemnify
                ------------------------------                                 
     each of the Credit Agent and the Collateral Agent in its respective
     capacity as such (to the extent not reimbursed by the Borrowers, and
     without limiting the obligation of the Borrowers to do so), ratably
     according to the respective amounts of their Percentage Shares, from and
     against any and all liabilities, obligations, losses, damages, penalties,
     actions, judgments, suits, costs, expenses or disbursements of any kind
     whatsoever which may at any time (including without limitation at any time
     following the payment of the Obligations) be imposed on, incurred by or
     asserted against the Credit Agent or the Collateral Agent in any way
     relating to or arising out of the Loan Documents or any documents
     contemplated by or referred to herein or therein or the transactions
     contemplated hereby or thereby or any action taken or omitted by the Credit
     Agent or the Collateral Agent under or in connection with any of the
     foregoing; provided that no Lender shall be liable for the payment of any
     portion of such liabilities, obligations, losses, damages, penalties,
     actions, judgments, suits, costs, expenses or disbursements resulting from
     the Credit Agent's or the Collateral Agent's gross negligence or willful
     misconduct.  The agreements in this Section shall survive the payment of
     the Obligations and the termination of this Agreement.  Attorneys' fees and
     disbursements incurred in enforcing, or on appeal from, a 
<PAGE>
 
     judgment pursuant hereto shall be recoverable separately from and in
     addition to any other amount included in such judgment, and this clause is
     intended to be severable from the other provisions of this Agreement and to
     survive and not be merged into such judgment.

12.  FINANCIAL INFORMATION.

          All financial statements and reports furnished to the Credit Agent or
     the Lenders hereunder shall be prepared in accordance with GAAP, applied on
     a basis consistent with that applied in preparing the financial statements
     as at the end of and for the last fiscal year ended (except to the extent
     otherwise required to conform to good accounting practice).

13.  MISCELLANEOUS.

          13.1  Terms Binding Upon Successors; Survival of Representations.  The
                ----------------------------------------------------------      
     terms and provisions of this Agreement shall be binding upon and inure to
     the benefit of the parties hereto and their respective successors and
     assigns.  All representations, warranties, covenants and agreements herein
     contained on the part of the Borrowers shall survive the making of any
     Advance and the execution of the Notes, and shall be effective so long as
     any Lender's commitment is outstanding hereunder or there remain any
     Obligations to be paid or performed.

          13.2  Lenders in Individual Capacity.  The Lenders and their
                ------------------------------                        
     Affiliates may make loans to, accept deposits from and generally engage in
     any kind of business with the Borrowers or any Subsidiary of the Borrowers
     regardless of the capacity of the Lenders hereunder.  The Lenders may
     disclose to the other Lenders information regarding other relationships
     which they may have with the Borrowers and the Borrowers hereby consent to
     these disclosures.

          13.3  Participation and Assignments.  This Agreement and the
                -----------------------------                         
     Obligations of the Borrowers may not be assigned by the Borrowers.  Any
     Lender may, subject to the limitations set forth below, assign or transfer,
     in whole or in part, this Agreement and the other Loan Documents and
     further may sell participations in all or any part of its Advances or
     Maximum Commitment or any other interest in the Obligations or any of its
     obligations hereunder to another Person, in which event:  (a) in the case
     of an assignment, upon consent of the Credit Agent and, with respect to any
     assignment made except after the occurrence and during the continuance of
     an Event of Default, the Borrowers (which consent of the 
<PAGE>
 
     Borrowers shall not be unreasonably withheld), the assignee shall have, to
     the extent of such assignment (unless otherwise provided thereby), the same
     rights and benefits as it would have if it were a "Lender" hereunder, and,
     if the assignee has expressly assumed, for the benefit of the Borrowers,
     such Lender's obligations hereunder, such Lender shall be relieved of its
     obligations hereunder to the extent of such assignment and assumption,
     provided that the Credit Agent shall have no obligation to consent to there
     being more than a total of ten (10) Lenders (a Participant is not a
     Lender); and (b) in the case of a participation, the participating Person's
     (a "Participant") rights against the Lender from whom it has purchased such
     participation in respect of such participation are those set forth in the
     agreement executed by such Lender in favor of the Participant relating
     thereto. In the case of any sale of a participation by any Lender, such
     Lender shall remain solely responsible to the other parties hereto for the
     performance of such Lender's obligations under the Loan Documents, whether
     or not such Lender shall remain the holder of any Note, such Lender shall
     retain all voting rights with respect to such Note, the Advances hereunder
     and the Lender's Maximum Commitment, and the Borrowers, the Credit Agent
     and the other Lenders shall continue to deal solely and directly with such
     Lender in connection with such Lender's rights and obligations under the
     Loan Documents. Each such Participant shall enter into an agreement with
     the Participating Lender under which such Participant agrees (a) to the
     benefit under this Agreement with respect to the Servicing Collateral and
     under the Acknowledgment Agreements exclusively by and through the Credit
     Agent, (b) to authorize the Credit Agent or its agent to act exclusively
     for such Participant with respect to the Acknowledgment Agreements and the
     parties thereto (other than the Borrowers), and (c) that all terms of the
     Acknowledgment Agreements shall be binding upon such Participant as if it
     had executed the same. Nothing contained herein shall in any manner or to
     any extent affect the right of any Lender to assign its Note and its right
     to receive and retain payments on its Note provided such Lender remains
     primarily and directly liable pursuant to the terms and conditions of this
     Agreement to keep, observe and perform all of its obligations under this
     Agreement, and all such assignments shall be treated, considered and
     administered as a sale of a participation and not as an assignment and
     shall be subject to and governed by the provisions of this Section.
     Notwithstanding the other provisions of this Section 13.3, (a) no Lender
     shall assign or transfer its Warehousing Advances or Maximum Warehousing
     Commitment if the portion of such Lender's Maximum Warehousing Commitment
     held by it
<PAGE>
 
     (after giving effect to all such assignments) would be less than Fifteen
     Million Dollars ($15,000,000), or if the Maximum Warehousing Commitment or,
     if the Warehousing Commitments have expired or been terminated, Warehousing
     Advances of the assignee Lender would be less than Fifteen Million Dollars
     ($15,000,000), and (b) no Lender may assign or transfer its Servicing
     Facility Advances, Maximum Servicing Facility Commitment, Term Loan
     Advances or Maximum Term Loan Commitment if the portion of the sum of such
     Lender's Maximum Servicing Facility Commitment or, if the Servicing
     Facility Commitments have expired or been terminated, Servicing Facility
     Advances, and Maximum Term Loan Commitment, or, after the Term Loan
     Advances have been made, Term Loan Advances held by it (after giving effect
     to all such assignments) would be less than Ten Million Dollars
     ($10,000,000) or if the sum of such amounts of the assignee Lender would be
     less than Ten Million Dollars ($10,000,000). On the closing date of any
     assignment by any Lender of any portion of its Commitments or Advances,
     such Lender shall pay to the Credit Agent an assignment fee in the amount
     of Two Thousand Five Hundred Dollars ($2,500). Any Lender may furnish any
     information concerning the Borrowers in the possession of such Lender from
     time to time to Affiliates of such Lender and to assignees and Participants
     (including prospective assignees and Participants) and the Borrowers hereby
     consent to the provision of such information.

          13.4  Commitment Increases.
                -------------------- 

                    13.4(a)  At any time and from time to time after the Closing
          Date, the Warehousing Credit Limit may be increased, either
          temporarily or permanently, by either an Additional Lender
          establishing a Maximum Commitment or by one or more then existing
          Lender ("Increase Lender") increasing its Maximum Warehousing
          Commitment (each such increase by either means, a "Commitment
          Increase"); provided that no Commitment Increase shall become
          effective unless and until (i) the Borrowers, the Credit Agent and the
          Additional Lender or the Increase Lender shall have executed and
          delivered an amendment with respect to such Commitment Increase, and
          (ii) if, after giving effect thereto, the Warehousing Credit Limit
          would exceed Three Hundred Thousand Dollars ($300,000,000), such
          Commitment Increase shall have been consented to by each of the other
          Lenders holding Warehousing Commitments. Prior to the effective date
          ("Effective Date") of any Commitment Increase, the Borrowers shall
          issue a promissory note to the Additional Lender, or against surrender
          of its existing Note to an Increase
<PAGE>
 
          Lender, in the amount of such Lender's Maximum Warehousing Commitment
          after giving effect to such Commitment Increase. Such new promissory
          note or notes shall constitute a "Warehousing Note" or "Warehousing
          Notes" for the purposes of the Loan Documents.

                         13.4(b)   On the Effective Date of any such Commitment
          Increase, if such Commitment Increase is permanent, the Credit Agent
          shall recompute the Warehousing Percentage Share for each Lender based
          on the new Warehousing Credit Limit which results from the Commitment
          Increase, and within two (2) Business Days, the Credit Agent shall
          request Warehousing Advances from or shall direct prepayments to each
          Lender so that the total amount of all then outstanding Warehousing
          Advances are shared pro rata with each Lender.  In the case of a
          temporary Commitment Increase, notwithstanding anything to the
          contrary set forth in this Agreement:


                                   (1)  Warehousing Advances during the period
               of such temporary Commitment Increase (the "Temporary Increase
               Period") shall be made by the Lenders holding Warehousing
               Commitments (i) ratably, based on (A) their respective Maximum
               Warehousing Commitments, without giving effect to such temporary
               Commitment Increase, until such amounts are fully advanced, and
               (ii) thereafter, by the Additional Lender(s) or Increase
               Lender(s) only, up to the amount of its or their Maximum
               Warehousing Commitment(s); and

                                   (2)  As long as the maturity of the
               Warehousing Commitments has not been accelerated pursuant to
               Section 8.2 of the Agreement, payments received by the Credit
               Agent in respect of the principal amount of Warehousing Advances
               outstanding shall be applied first, to Warehousing Advances made
               by the Additional Lender(s) or the Increase Lender(s) to the
               extent the outstanding principal balance thereof exceeds the
               permanent Maximum Warehousing Commitment of such Lender(s), and
               thereafter, to the remaining Warehousing Advances outstanding,
               ratably among the Lenders holding Warehousing Commitments.

     On the date any temporary Commitment Increase expires, the amount by which
     the outstanding principal balance of 
<PAGE>
 
     Warehousing Advances exceeds the Warehousing Credit Limit (as reduced by
     the expiration of the temporary increase) shall be due and payable to the
     Additional Lender(s) or Increase Lender(s).

          13.5  Amendments.
                ---------- 

                         13.5(a)   This Agreement may not be amended or terms or
          provisions hereof waived unless such amendment or waiver is in writing
          and signed by the Majority Lenders, the Credit Agent and the
          Borrowers; provided, however, that (i) without the prior written
          consent of one hundred percent (100%) of the Lenders, no amendment or
          waiver shall:  (1) reduce the principal of, or rate of interest or
          fees on, the Advances or any Lender's Maximum Servicing Facility
          Commitment or Maximum Warehousing Commitment, (2) except as provided
          in Section 13.4 hereof, modify the Warehousing Credit Limit, the
          Servicing Facility Credit Limit or the Term Loan Credit Limit, (3)
          except as expressly contemplated by Sections 13.3 and 13.4 hereof,
          modify any Lender's Percentage Share of the Warehousing Credit Limit,
          Term Loan Credit Limit or Servicing Facility Credit Limit, (4) modify
          the definition of "Majority Lenders," "Majority Warehousing Lenders,"
          "Majority Servicing Facility Lenders" or "Majority Term Loan Lenders,"
          (5) modify any of the provisions of this Agreement relating to the
          sharing of payments or proceeds of Collateral among the Lenders, (6)
          modify Section 11.1(c) or Section 11.1(d) hereof, (7) amend any of the
          definitions related to the foregoing provisions, or (8) release any of
          the Servicing Collateral except in connection with a sale of Servicing
          Contracts permitted pursuant to Section 7.2 of the Agreement, or (9)
          amend this Section; (ii) without the prior written consent of the
          Lenders holding one hundred percent (100%) of Servicing Facility
          Commitments or, if the Servicing Facility Commitments have expired or
          been terminated, the Servicing Facility Advances, (1) change the
          amount or time for payment of any Servicing Facility Advance or amount
          payable in respect thereof or any Servicing Facility Commitment or (2)
          amend any of the definitions relating to the foregoing provisions;
          (iii) without the prior written consent of the Lenders holding one
          hundred percent (100%) of the Term Loan Commitments or, after the Term
          Loans have been made, the Term Loan Advances, (1) change the amount of
          time for payment of any Term Loan Advances or installment thereof, or
          (2) amend any of the definitions relating to the foregoing 
<PAGE>
 
          provisions; or (iv) without the prior written consent of the Lenders
          holding one hundred percent (100%) of the Warehousing Commitments or,
          if the Warehousing Commitments have expired or been terminated, the
          Warehousing Advances, (1) change the amount or time for payment of any
          Warehousing Advance or amount payable in respect thereof or any
          Warehousing Commitment, (2) release any of the Warehousing Collateral
          except in connection with the sale of Pledged Mortgages or Pledged
          Securities in the ordinary course of business or (3) amend any of the
          definitions related to the foregoing. It is expressly agreed and
          understood that the failure by the Majority Lenders to elect to
          accelerate amounts outstanding hereunder or to terminate the
          obligation of the Lenders to make Advances hereunder shall not
          constitute an amendment or waiver of any term or provision of this
          Agreement.

                         13.5(b)   The Borrowers hereby agree that they shall,
          upon requesting any amendment of this Agreement or any other Loan
          Document or any waiver of any material term or provision of this
          Agreement or any other Loan Document (except an extension of the
          Maturity Date), pay at the time of such request a modification fee (1)
          to the Credit Agent in a minimum amount of One Thousand Dollars
          ($1,000) or such greater amount as may be specified in the Amendment
          or waiver, and (2) to each Lender (except any Lender which becomes
          party to the Agreement by virtue of such amendment) in a minimum
          amount of Five Hundred Dollars ($500) or such greater amount as may be
          specified in the Amendment or waiver. The payment of such modification
          fees shall be in addition to and shall not limit the Borrowers'
          reimbursement obligations pursuant to Article 11 hereof, and any other
          fee or charge imposed by the Credit Agent or the Lenders as a
          condition to any amendment.

          13.6  Operational Reviews.  From time to time upon request, the
                -------------------                                      
     Borrowers shall permit the Credit Agent, any Lender or their representative
     access to its premises and records for the purpose of conducting a review
     of the Borrowers' general mortgage business methods, policies, and
     procedures, auditing loan files and reviewing financial and operational
     aspects of the Borrowers' business.

          13.7  Governing Law.  This Agreement and the other Loan Documents
                -------------                                              
     shall be governed by the laws of the State of Minnesota, without reference
     to its principles of conflicts of laws.
<PAGE>
 
          13.8   Relationship of the Parties.  This Agreement provides for the
                 ---------------------------                                  
     making of Advances by the Lenders, in their capacities as lenders, to the
     Borrowers, in their capacity as borrowers, and for the payment of interest
     and repayment of principal by the Borrowers to the Lenders, and for the
     payment of certain fees by the Borrowers to the Lenders, the Credit Agent
     and the Collateral Agent.  The relationship between the Secured Parties and
     the Borrowers is limited to that of creditor/secured party, on the one
     hand, and debtor, on the other hand.  The provisions herein for compliance
     with financial covenants and delivery of financial statements are intended
     solely for the benefit of the Secured Parties to protect their interests in
     assuring payments of interest and repayment of principal and payment of
     certain fees, and nothing contained in this Agreement shall be construed as
     permitting or obligating any Secured Party to act as a financial or
     business advisor or consultant to the Borrowers, as permitting or
     obligating any Secured Party to control the Borrowers or to conduct the
     Borrowers' operations, as creating any fiduciary obligation on the part of
     the Lenders to the Borrowers, or as creating any joint venture, agency, or
     other relationship between or among any parties hereto other than as
     explicitly and specifically stated in this Agreement.  The Borrowers
     acknowledge that they have had the opportunity to obtain the advice of
     experienced counsel of its own choosing in connection with the negotiation
     and execution of this Agreement and to obtain the advice of such counsel
     with respect to all matters contained herein.  The Borrowers further
     acknowledge that they are experienced with respect to financial and credit
     matters and has made their own independent decisions to apply to the
     Lenders for credit and to execute and deliver this Agreement.

          13.9   Severability.  If any provision of this Agreement shall be
                 ------------                                              
     declared to be illegal or unenforceable in any respect, such illegal or
     unenforceable provision shall be and become absolutely null and void and of
     no force and effect as though such provision were not in fact set forth
     herein, but all other covenants, terms, conditions and provisions hereof
     shall nevertheless continue to be valid and enforceable.

          13.10  Counterparts.  This Agreement may be executed in any number of
                 ------------                                                  
     counterparts, each of which shall be deemed an original, but all such
     counterparts shall together constitute but one and the same instrument.
<PAGE>
 
          13.11  Consent to Credit References.  The Borrowers hereby consent to
                 ----------------------------                                  
     the disclosure of information regarding the Borrowers and their
     relationships with the Lenders to Persons making credit inquiries to the
     Lenders.  This consent is revocable by the Borrowers at any time upon
     Notice to the Lenders as provided in Section 10 hereof.

          13.12  Consent to Jurisdiction.  The Borrowers, the Credit Agent and
                 -----------------------                                      
     each of the Lenders hereby agree that any action or proceeding under the
     Loan Documents, the Notes or any document delivered pursuant hereto may be
     commenced against it in any court of competent jurisdiction within the
     State of Minnesota, by service of process by first class registered or
     certified mail, return receipt requested, addressed to such Person at its
     address last designated under the Notices provisions herein.  The
     Borrowers, the Credit Agent and each of the Lenders agree that any such
     suit, action or proceeding arising out of or relating to this Agreement or
     any other such document may be instituted in the Hennepin County, State
     District Court or in the United States District Court for the District of
     Minnesota at the option of the Credit Agent; and the Borrowers, the Credit
     Agent and each of the Lenders hereby waive any objection to the
     jurisdiction or venue of any such court with respect to, or the convenience
     of any court as a forum for, any such suit, action or proceeding.  Nothing
     herein shall affect the right of the Credit Agent or any Lender to
     accomplish service of process in any other manner permitted by law or to
     commence legal proceedings or otherwise proceed against the Borrowers in
     any other jurisdiction or court.

          13.13  Counterparts.  This Agreement may be executed in any number of
                 ------------                                                  
     counterparts, each of which shall be deemed an original, but all such
     counterparts shall together constitute but one and the same instrument.

          13.14  Confidentiality of Information.  The Lenders shall use their
                 ------------------------------                              
     usual and customary efforts (as applied to public companies) to assure that
     information about the Borrowers and their operations, affairs and financial
     condition not generally disclosed to the public or to trade and other
     creditors that is furnished to the Lenders pursuant to the provisions
     hereof is used only for the purposes of this Agreement and any other
     relationship between the Lenders and the Borrowers, and shall not be
     divulged to any Person other than the Lenders, their Affiliates and their
     respective officers, directors, employees and agents, except:  (a) to their
     attorneys and accountants, (b) in connection with the enforcement of the
     rights of the Credit Agent, the Collateral Agent and the Lenders hereunder
     and under the other Loan Documents or 
<PAGE>
 
     otherwise in connection with litigation involving the Borrowers, (c) in
     connection with assignments and participations and the solicitation of
     prospective assignees and participants referred to in Section 13.3 hereof,
     provided that the assignee, participant or prospective assignee or
     participant agrees to be bound by the terms of this Section 13.14 and (d)
     as may otherwise be required or requested by any applicable law, rule,
     regulation or judicial process, the opinion of the applicable Lender's
     counsel concerning the making of such disclosure to be binding on the
     parties hereto. The Lenders shall not incur any liability to the Borrowers
     by reason of any disclosure permitted by this Section 13.14.

          13.15  WAIVER OF JURY TRIAL.  THE BORROWERS, THE CREDIT AGENT AND EACH
                 --------------------                                           
     OF THE LENDERS HEREBY (a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
     OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES ANY RIGHT TO TRIAL
     BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
     EXIST.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN,
     KNOWINGLY AND VOLUNTARILY, BY THE BORROWERS, THE CREDIT AGENT AND EACH OF
     THE LENDERS, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
     INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT OF A JURY TRIAL WOULD
     OTHERWISE ACCRUE.  THE CREDIT AGENT, THE LENDERS AND THE BORROWERS ARE
     HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT
     HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
     TO SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO
     JURY TRIAL.  FURTHER, THE CREDIT AGENT, THE BORROWERS AND EACH OF THE
     LENDERS HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF ANY OF THEM,
     RESPECTIVELY, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF THE
     UNDERSIGNED THAT THE CREDIT AGENT, THE BORROWERS OR ANY OF THE LENDERS WILL
     NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

          13.16  Entire Agreement.  This Agreement, the Notes and the other Loan
                 ----------------                                               
     Documents represent the final agreement among the parties hereto and
     thereto with respect to the subject matter hereof and thereof, and may not
     be contradicted by evidence of prior or contemporaneous oral agreements
     among such parties.  There are no oral agreements among the parties with
     respect to the subject matter hereof and thereof.

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

                                  BORROWERS:
<PAGE>
 
                              THE WMF GROUP, LTD.,
                              a Delaware corporation


                              By:____________________

                              Its:___________________

                              WMF WASHINGTON MORTGAGE CORP.,
                              a Delaware corporation


                              By:____________________

                              Its:___________________

                              WMF/HUNTOON, PAIGE ASSOCIATES
                              LIMITED, a Delaware corporation


                              By:____________________

                              Its:___________________

                              WMF PROCTOR, LTD., a Michigan


                              By:____________________

                              Its:___________________

                              THE ROBERT C. WILSON COMPANY,
                              a Texas corporation
 

                              By:____________________

                              Its:___________________

                              THE ROBERT C. WILSON COMPANY-ARIZONA,
                              an Arizona corporation
 
 
                              By:____________________

                              Its:___________________

                              WMF CARBON MESA ADVISORS, INC.
                              a Delaware corporation
 
<PAGE>
 
                              By:____________________

                              Its:___________________

                              Notice Address:
                              The WMF Group, Ltd.
                              1593 Spring Hill Road, Suite 400
                              Vienna, VA  22182
                              Attention: Michael D. Ketcham, CFO
                              Telecopier No.: (703) 610-1459

STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
________________________________, the of THE WMF GROUP, LTD., a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:


STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
__________________________________________________, the of WMF WASHINGTON
MORTGAGE CORP., a Delaware corporation, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

     WITNESS my hand and official seal.
<PAGE>
 
______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:


STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
_____________________________________________________, the of WMF/HUNTOON, PAIGE
ASSOCIATES LIMITED, a Delaware corporation, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

     WITNESS my hand and official seal.


______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:


STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
_______________________________________________, the of WMF PROCTOR, LTD., a
Michigan corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.


______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:


STATE OF _______________ )
                         )ss                         
 
<PAGE>
 
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
____________________________________________________, the of THE ROBERT C.
WILSON COMPANY, a Texas corporation, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

     WITNESS my hand and official seal.

______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:


STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
_______________________________________________, the of THE ROBERT C. WILSON
COMPANY-ARIZONA, an Arizona corporation, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

     WITNESS my hand and official seal.

______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:

STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, 1999, before me, a Notary Public, personally appeared
_________________________________________________, the of WMF CARBON MESA
ADVISORS, INC., a Delaware corporation, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by 
<PAGE>
 
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

     WITNESS my hand and official seal.

______________________________
                              Notary Public
 (SEAL)                       My Commission Expire:


                              CREDIT AGENT:
                              RESIDENTIAL FUNDING CORPORATION,
                              a Delaware corporation


                              By:______________

                              Its: Director

                              Notice Address:
                              4800 Montgomery Lane
                              Suite 300
                              Bethesda, Maryland  20814
                              Attention: Lisa Carlson, Managing
                              Telecopier No.: (301) 215-7212

                              LENDERS:
Maximum Warehousing           RESIDENTIAL FUNDING CORPORATION,
 Commitment: $115,500,000     a Delaware corporation


                              By:______________

Maximum Servicing Facility    Its: Director
 Commitment: $  7,500,000
                              Notice Address:
Maximum Term Loan             4800 Montgomery Lane
 Commitment: $  7,500,000     Suite 300
                              Bethesda, Maryland 20814
                              Attention: Lisa Carlson, Managing
                              Telecopier No.: (301) 215-7212

STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, _____ before me, a Notary Public, personally appeared
_____________________________________________, the Director of RESIDENTIAL
FUNDING CORPORATION, a Delaware corporation, personally known to me (or proved
to me on the basis of 
<PAGE>
 
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.


______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:
<PAGE>
 
Maximum Warehousing           BANK UNITED
 Commitment: $34,500,000      a federal savings bank


                              By:_________________

Maximum Servicing Facility    Its:________________
 Commitment: $ 5,000,000
                              Notice Address:
                              8000 Towers Crescent Dr., Suite 1350
Maximum Term Loan             Vienna, VA  22182
 Commitment: $ 5,000,000      Attention: Sonya S. Faivre
                                         Regional Director
                              Telecopier No.: (703) 760-7846


STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, _____ before me, a Notary Public, personally appeared
________________________________________________, the of BANK UNITED, a federal
savings bank, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.


______________________________
                              Notary Public
 (SEAL)                       My Commission Expires:
<PAGE>
 
Maximum Warehousing           LASALLE NATIONAL BANK
 Commitment: $0               a federal savings bank


                              By:_______________

Maximum Servicing Facility    Its:______________
 Commitment: $12,500,000
                              Notice Address:
                              135 S. LaSalle, Suite 362
Maximum Term Loan             Chicago, IL 60603
 Commitment: $12,500,000      Attention: Lisa Mun
                              Telecopier No.: (312) 904-2903


STATE OF _______________ )
                         ) ss
COUNTY OF ______________ )

     On _________________, _____ before me, a Notary Public, personally appeared
____________________________________________, the of LASALLE NATIONAL BANK, a
federal savings bank, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.


______________________________
                              Notary Public
 (SEAL)                       My Commission Expires: