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                                                                   EXHIBIT 10.24

   Master Repurchase
   Agreement

   September 1996 Version

   Dated as of September 23, 1998

   Between:

       MERRILL LYNCH MORTGAGE CAPITAL INC.,

       MERRILL LYNCH CREDIT CORPORATION

   and

       LONG BEACH MORTGAGE COMPANY




1.  APPLICABILITY

    From time to time the parties hereto may enter into transactions in which
    one party ("Seller") agrees to transfer to the other ("Buyer") securities or
    other assets ("Securities") against the transfer of funds by Buyer, with a
    simultaneous agreement by Buyer to transfer to Seller such Securities at a
    date certain or on demand, against the transfer of funds by Seller. Each
    such transaction shall be referred to herein as a "Transaction" and, unless
    otherwise agreed in writing, shall be governed by this Agreement, including
    any supplemental terms or conditions contained in Annex I hereto and in any
    other annexes identified herein or therein as applicable hereunder.

2.  DEFINITIONS

(a) "Act of Insolvency", with respect to any party, (i) the commencement by such
    party as debtor of any case or proceeding under any bankruptcy, insolvency,
    reorganization, liquidation, moratorium, dissolution, delinquency or similar
    law, or such party seeking the appointment or election of a receiver,
    conservator, trustee, custodian or similar official for such party or any
    substantial part of its property, or the convening of any meeting of
    creditors for purposes of commencing any such case or proceeding or seeking
    such an appointment or election, (ii) the commencement of any such case or
    proceeding against such party, or another seeking such an appointment or
    election, or the filing against a party of an application for a protective
    decree under the provisions of the Securities Investor Protection Act of
    1970, which (A) is consented to or not timely contested by such party, (B)
    results in the entry of an order for relief, such an appointment or
    election, the issuance of 



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    such a protective decree or the entry of an order
    having a similar effect, or (C) is not dismissed within 15 days, (iii) the
    making by such party of a general assignment for the benefit of creditors,
    or (iv) the admission in writing by such party of such party's inability to
    pay such party's debts as they become due;

(b) "Additional Purchased Securities", Securities provided by Seller to Buyer
    pursuant to Paragraph 4 (a) hereof;

(c) "Buyer"s Margin Amount", with respect to any Transaction as of any date, the
    amount obtained by application of the Buyer's Margin Percentage to the
    Repurchase Price for such Transaction as of such date;

(d) "Buyer's Margin Percentage', with respect to any Transaction as of any date,
    a percentage (which may be equal to the Seller's Margin Percentage) agreed
    to by Buyer and Seller or, in the absence of any such agreement, the
    percentage obtained by dividing the Market Value of the Purchased Securities
    on the Purchase Date by the Purchase Price on the Purchase Date for such
    Transaction;

(e) "Confirmation", the meaning specified in Paragraph 3 (b) hereof,

(f) "Income", with respect to any Security at any time, any principal thereof
    and all interest, dividends or other distributions thereon;

(g) "Margin Deficit", the meaning specified in Paragraph 4 (a) hereof;

(h) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;

(i) "Margin Notice Deadline", the time agreed to by the parties in the relevant
    Confirmation, Annex I hereto or otherwise as the deadline for giving notice
    requiring same-day satisfaction of margin maintenance obligations as
    provided in Paragraph 4 hereof (or, in the absence of any such agreement,
    the deadline for such purposes established in accordance with market
    practice);

(j) "Market Value", with respect to any Securities as of any date, the price for
    such Securities on such date obtained from a generally recognized source
    agreed to by the parties or the most recent closing bid quotation from such
    a source, plus accrued Income to the extent not included therein (other than
    any Income credited or transferred to, or applied to the obligations of,
    Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to
    market practice for such Securities);

(k) "Price Differential", with respect to any Transaction as of any date, the
    aggregate amount obtained by daily application of the Pricing Rate for such
    Transaction to the Purchase Price for such Transaction on a 360 day per year
    basis for the actual number of days during the period commencing on (and
    including) the Purchase Date for such Transaction and ending on (but
    excluding) the date of determination 


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    (reduced by any amount of such Price Differential previously paid by Seller
    to Buyer with respect to such Transaction);

(l) "Pricing Rate", the per annum percentage rate for determination of the Price
    Differential;

(m) "Prime Rate", the prime rate of U.S. commercial banks as published in The
    Wall Street Journal (or, if more than one such rate is published, the
    average of such rates);

(n) "Purchase Date", the date on which Purchased Securities are to be
    transferred by Seller to Buyer;

(o) "Purchase Price", (i) on the Purchase Date, the price at which Purchased
    Securities are transferred by Seller to Buyer, and (ii) thereafter, except
    where Buyer and Seller agree otherwise, such price increased by the amount
    of any cash transferred by Buyer to Seller pursuant to Paragraph 4 (b)
    hereof and decreased by the amount of any cash transferred by Seller to
    Buyer pursuant to Paragraph 4 (a) hereof or applied to reduce Seller's
    obligations under clause (ii) of Paragraph 5 hereof;

(p) "Purchased Securities", the Securities transferred by Seller to Buyer in a
    Transaction hereunder, and any Securities substituted therefor in accordance
    with Paragraph 9 hereof. The term "Purchased Securities" with respect to any
    Transaction at any time also shall include Additional Purchased Securities
    delivered pursuant to Paragraph 4 (a) hereof and shall exclude Securities
    returned pursuant to Paragraph 4(b) hereof;

(q) "Repurchase Date", the date on which Seller is to repurchase the Purchased
    Securities from Buyer, including any date determined by application of the
    provisions of Paragraph 3 (c) or 11 hereof;

(r) "Repurchase Price", the price at which Purchased Securities are to be
    transferred from Buyer to Seller upon termination of a Transaction, which
    will be determined in each case (including Transactions terminable upon
    demand) as the sum of the Purchase Price and the Price Differential as of
    the date of such determination;

(s) "Seller's Margin Amount", with respect to any Transaction as of any date,
    the amount obtained by application of the Seller's Margin Percentage to the
    Repurchase Price for such Transaction as of such date;

(t) "Seller's Margin Percentage", with respect to any Transaction as of any
    date, a percentage (which may be equal to the Buyer's Margin Percentage)
    agreed to by Buyer and Seller or, in the absence of any such agreement, the
    percentage obtained by dividing the Market Value of the Purchased Securities
    on the Purchase Date by the Purchase Price on the Purchase Date for such
    Transaction.

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3.  INITIATION; CONFIRMATION; TERMINATION

(a) An agreement to enter into a Transaction may be made orally or in writing at
    the initiation of either Buyer or Seller. On the Purchase Date for the
    Transaction, the Purchased Securities shall be transferred to Buyer or its
    agent against the transfer of the Purchase Price to an account of Seller.

(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or
    both), as shall be agreed, shall promptly deliver to the other party a
    written confirmation of each Transaction (a "Confirmation"). The
    Confirmation shall describe the Purchased Securities (including CUSIP
    number, if any), identify Buyer and Seller and set forth (i) the Purchase
    Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
    Transaction is to be terminable on demand, (iv) the Pricing Rate or
    Repurchase Price applicable to the Transaction, and (v) any additional terms
    or conditions of the Transaction not inconsistent with this Agreement. The
    Confirmation, together with this Agreement, shall constitute conclusive
    evidence of the terms agreed between Buyer and Seller with respect to the
    Transaction to which the Confirmation relates, unless with respect to the
    Confirmation specific objection is made promptly after receipt thereof. In
    the event of any conflict between the terms of such Confirmation and this
    Agreement, this Agreement shall prevail.

(c) In the case of Transactions terminable upon demand, such demand shall be
    made by Buyer or Seller, no later than such time as is customary in
    accordance with market practice, by telephone or otherwise on or prior to
    the business day on which such termination will be effective. On the date
    specified in such demand, or on the date fixed for termination in the case
    of Transactions having a fixed term, termination of the Transaction will be
    effected by transfer to Seller or its agent of the Purchased Securities and
    any Income in respect thereof received by Buyer (and not previously credited
    or transferred to, or applied to the obligations of, Seller pursuant to
    Paragraph 5 hereof) against the transfer of the Repurchase Price to an
    account of Buyer.

4.  MARGIN MAINTENANCE

(a) If at any time the aggregate Market Value of all Purchased Securities
    subject to all Transactions in which a particular party hereto is acting as
    Buyer is less than the aggregate Buyer's Margin Amount for all such
    Transactions (a "Margin Deficit"), then Buyer may by notice to Seller
    require Seller in such Transactions, at Seller's option, to transfer to
    Buyer cash or additional Securities reasonably acceptable to Buyer
    ("Additional Purchased Securities"), so that the cash and aggregate Market
    Value of the Purchased Securities, including any such Additional Purchased
    Securities, will thereupon equal or exceed such aggregate Buyer's Margin
    Amount (decreased by the amount of any Margin Deficit as of such date
    arising from any Transactions in which such Buyer is acting as Seller).


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(b) If at any time the aggregate Market Value of all Purchased Securities
    subject to all Transactions in which a particular party hereto is acting as
    Seller exceeds the aggregate Seller's Margin Amount for all such
    Transactions at such time (a "Margin Excess"), then Seller may by notice to
    Buyer require Buyer in such Transactions, at Buyer's option, to transfer
    cash or Purchased Securities to Seller, so that the aggregate Market Value
    of the Purchased Securities, after deduction of any such cash or any
    Purchased Securities so transferred, will thereupon not exceed such
    aggregate Seller's Margin Amount (increased by the amount of any Margin
    Excess as of such date arising from any Transactions in which such Seller is
    acting as Buyer).

(c) If any notice is given by Buyer or Seller under subparagraph (a) or (b) of
    this Paragraph at or before the Margin Notice Deadline on any business day,
    the party receiving such notice shall transfer cash or Additional Purchased
    Securities as provided in such subparagraph no later than the close of
    business in the relevant market on such day. If any such notice is given
    after the Margin Notice Deadline, the party receiving such notice shall
    transfer such cash or Securities no later than the close of business in the
    relevant market on the next business day following such notice.

(d) Any cash transferred pursuant to this Paragraph shall be attributed to such
    Transactions as shall be agreed upon by Buyer and Seller.

(e) Seller and Buyer may agree, with respect to any or all Transactions
    hereunder, that the respective rights of Buyer or Seller (or both) under
    subparagraphs (a) and (b) of this Paragraph may be exercised only where a
    Margin Deficit or Margin Excess, as the case may be, exceeds a specified
    dollar amount or a specified percentage of the Repurchase Prices for such
    Transactions (which amount or percentage shall be agreed to by Buyer and
    Seller prior to entering into any such Transactions).

(f) Seller and Buyer may agree, with respect to any or all Transactions
    hereunder, that the respective rights of Buyer and Seller under
    subparagraphs (a) and (b) of this Paragraph to require the elimination of a
    Margin Deficit or a Margin Excess, as the case may be, may be exercised
    whenever such a Margin Deficit or Margin Excess exists with respect to any
    single Transaction hereunder (calculated without regard to any other
    Transaction outstanding under this Agreement).

5.  INCOME PAYMENTS

    Seller shall be entitled to receive an amount equal to all Income paid or
    distributed on or in respect of the Securities that is not otherwise
    received by Seller, to the full extent it would be so entitled if the
    Securities had not been sold to Buyer. Buyer shall, as the parties may agree
    with respect to any Transaction (or, in the absence of any such agreement,
    as Buyer shall reasonably determine in its discretion), on the date such
    Income is paid or distributed either (i) transfer to or credit to the
    account of Seller such Income with respect to any Purchased Securities
    subject to such Transaction or (ii) with 


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    respect to Income paid in cash, apply the Income payment or payments to
    reduce the amount, if any, to be transferred to Buyer by Seller upon
    termination of such Transaction. Buyer shall not be obligated to take any
    action pursuant to the preceding sentence (A) to the extent that such action
    would result in the creation of a Margin Deficit, unless prior thereto or
    simultaneously therewith Seller transfers to Buyer cash or Additional
    Purchased Securities sufficient to eliminate such Margin Deficit, or (B) if
    an Event of Default with respect to Seller has occurred and is then
    continuing at the time such Income is paid or distributed.

6.  SECURITY INTEREST

    Although the parties intend that all Transactions hereunder be sales and
    purchases and not loans, in the event any such Transactions are deemed to be
    loans, Seller shall be deemed to have pledged to Buyer as security for the
    performance by Seller of its obligations under each such Transaction, and
    shall be deemed to have granted to Buyer a security interest in, all of the
    Purchased Securities with respect to all Transactions hereunder and all
    Income thereon and other proceeds thereof.

7.  PAYMENT AND TRANSFER

    Unless otherwise mutually agreed, all transfers of funds hereunder shall be
    in immediately available funds. All Securities transferred by one party
    hereto to the other party (i) shall be in suitable form for transfer or
    shall be accompanied by duly executed instruments of transfer or assignment
    in blank and such other documentation as the party receiving possession may
    reasonably request, (ii) shall be transferred on the book-entry system of a
    Federal Reserve Bank, or (iii) shall be transferred by any other method
    mutually acceptable to Seller and Buyer.

8.  SEGREGATION OF PURCHASED SECURITIES

    To the extent required by applicable law, all Purchased Securities in the
    possession of Seller shall be segregated from other securities in its
    possession and shall be identified as subject to this Agreement. Segregation
    may be accomplished by appropriate identification on the books and records
    of the holder, including a financial or securities intermediary or a
    clearing corporation. All of Seller's interest in the Purchased Securities
    shall pass to Buyer on the Purchase Date and, unless otherwise agreed by
    Buyer and Seller, nothing in this Agreement shall preclude Buyer from
    engaging in repurchase transactions with the Purchased Securities or
    otherwise selling, transferring, pledging or hypothecating the Purchased
    Securities, but no such transaction shall relieve Buyer of its obligations
    to transfer Purchased Securities to Seller pursuant to Paragraph 3, 4 or 11
    hereof, or of Buyer's obligation to credit or pay Income to, or apply Income
    to the obligations of, Seller pursuant to Paragraph 5 hereof.



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      REQUIRED DISCLOSURE FOR TRANSACTIONS IN WHICH THE SELLER

      RETAINS CUSTODY OF THE PURCHASED SECURITIES

      Seller is not permitted to substitute other securities for those subject
      to this Agreement and therefore must keep Buyer's securities segregated at
      all times, unless in this Agreement Buyer grants Seller the right to
      substitute other securities. If Buyer grants the right to substitute, this
      means that Buyer's securities will likely be commingled with Seller's own
      securities during the trading day. Buyer is advised that, during any
      trading day that Buyer's securities are commingled with Seller's
      securities, they [will] * [may] ** be subject to liens granted by Seller
      to [its clearing bank] * [third parties] ** and may be used by Seller for
      deliveries on other securities transactions. Whenever the securities are
      commingled, Seller's ability to resegregate substitute securities for
      Buyer will be subject to Seller's ability to satisfy [the clearing] *
      [any]** lien or to obtain substitute securities.

      *  Language to be used under 17 C.F.R. (beta)403.4 (e) if Seller is a 
         government securities broker or dealer other than a financial 
         institution.
      ** Language to be used under 17 C.F.R. (beta)403.5(d) if Seller is a 
         financial institution.
--------------------------------------------------------------------------------
1.      SUBSTITUTION

(a) Seller may, subject to agreement with and acceptance by Buyer, substitute
    other Securities for any Purchased Securities. Such substitution shall be
    made by transfer to Buyer of such other Securities and transfer to Seller of
    such Purchased Securities. After substitution, the substituted Securities
    shall be deemed to be Purchased Securities.

(b) In Transactions in which Seller retains custody of Purchased Securities, the
    parties expressly agree that Buyer shall be deemed, for purposes of
    subparagraph (a) of this Paragraph, to have agreed to and accepted in this
    Agreement substitution by Seller of other Securities for Purchased
    Securities; provided, however, that such other Securities shall have a
    Market Value at least equal to the Market Value of the Purchased Securities
    for which they are substituted.

2.  REPRESENTATIONS

    Each of Buyer and Seller represents and warrants to the other that (i) it is
    duly authorized to execute and deliver this Agreement, to enter into
    Transactions contemplated hereunder and to perform its obligations hereunder
    and has taken all necessary action to authorize such execution, delivery and
    performance, (ii) it will engage in such Transactions as principal (or, if
    agreed in writing, in the form of an annex hereto or otherwise, in advance
    of any Transaction by the other party hereto, as agent for a disclosed
    principal), (iii) the person signing this Agreement on its behalf is duly
    authorized to do so on its behalf (or on behalf of any such disclosed
    principal), (iv) it has obtained all authorizations of any governmental body
    required in connection with this Agreement and the Transactions hereunder
    and such authorizations are in full force and effect and (v) the execution,
    delivery and performance of this Agreement and the Transactions hereunder
    will not violate any law, ordinance, charter, by-law or rule applicable to
    it or any agreement by which it is bound or by which any of its assets are
    affected. On the Purchase Date for any Transaction Buyer and Seller shall
    each be deemed to repeat all the foregoing representations made by it.



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3.  EVENTS OF DEFAULT

    In the event that (i) Seller fails to transfer or Buyer fails to purchase
    Purchased Securities upon the applicable Purchase Date, (ii) Seller fails to
    repurchase or Buyer fails to transfer Purchased Securities upon the
    applicable Repurchase Date, (iii) Seller or Buyer fails to comply with
    Paragraph 4 hereof, (iv) Buyer fails, after one business day's notice, to
    comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect
    to Seller or Buyer, (vi) any representation made by Seller or Buyer shall
    have been incorrect or untrue in any material respect when made or repeated
    or deemed to have been made or repeated, or (vii) Seller or Buyer shall
    admit to the other its inability to, or its intention not to, perform any of
    its obligations hereunder (each an "Event of Default"):

    (a) The nondefaulting party may, at its option (which option shall be deemed
        to have been exercised immediately upon the occurrence of an Act of
        Insolvency), declare an Event of Default to have occurred hereunder and,
        upon the exercise or deemed exercise of such option, the Repurchase Date
        for each Transaction hereunder shall, if it has not already occurred, be
        deemed immediately to occur (except that, in the event that the Purchase
        Date for any Transaction has not yet occurred as of the date of such
        exercise or deemed exercise, such Transaction shall be deemed
        immediately canceled). The nondefaulting party shall (except upon the
        occurrence of an Act of Insolvency) give notice to the defaulting party
        of the exercise of such option as promptly as practicable.

    (b) In all Transactions in which the defaulting party is acting as Seller,
        if the nondefaulting party exercises or is deemed to have exercised the
        option referred to in subparagraph (a) of this Paragraph, (i) the
        defaulting party's obligations in such Transactions to repurchase all
        Purchased Securities, at the Repurchase Price therefor on the Repurchase
        Date determined in accordance with subparagraph (a) of this Paragraph,
        shall thereupon become immediately due and payable, (ii) all Income paid
        after such exercise or deemed exercise shall be retained by the
        nondefaulting party and applied to the aggregate unpaid Repurchase
        Prices and any other amounts owing by the defaulting party hereunder,
        and (iii) the defaulting party shall immediately deliver to the
        nondefaulting party any Purchased Securities subject to such
        Transactions then in the defaulting party's possession or control.

    (c) In all Transactions in which the defaulting party is acting as Buyer,
        upon tender by the nondefaulting party of payment of the aggregate
        Repurchase Prices for all such Transactions, all right, title and
        interest in and entitlement to all Purchased Securities subject to such
        Transactions shall be deemed transferred to the nondefaulting party, and
        the defaulting party shall deliver all such Purchased Securities to the
        nondefaulting party.



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    (d) If the nondefaulting party exercises or is deemed to have exercised the
        option referred to in subparagraph (a) of this Paragraph, the
        nondefaulting party, without prior notice to the defaulting party, may:

        (i) as to Transactions in which the defaulting party is acting as
            Seller, (A) immediately sell, in a recognized market (or otherwise
            in a commercially reasonable manner) at such price or prices as the
            nondefaulting party may reasonably deem satisfactory, any or all
            Purchased Securities subject to such Transactions and apply the
            proceeds thereof to the aggregate unpaid Repurchase Prices and any
            other amounts owing by the defaulting party hereunder or (B) in its
            sole discretion elect, in lieu of selling all or a portion of such
            Purchased Securities, to give the defaulting party credit for such
            Purchased Securities in an amount equal to the price therefor on
            such date, obtained from a generally recognized source or the most
            recent closing bid quotation from such a source, against the
            aggregate unpaid Repurchase Prices and any other amounts owing by
            the defaulting party hereunder; and

       (ii) as to Transactions in which the defaulting party is acting as
            Buyer, (A) immediately purchase, in a recognized market (or
            otherwise in a commercially reasonable manner) at such price or
            prices as the nondefaulting party may reasonably deem satisfactory,
            securities ("Replacement Securities") of the same class and amount
            as any Purchased Securities that are not delivered by the defaulting
            party to the nondefaulting party as required hereunder or (B) in its
            sole discretion elect, in lieu of purchasing Replacement Securities,
            to be deemed to have purchased Replacement Securities at the price
            therefor on such date, obtained from a generally recognized source
            or the most recent closing offer quotation from such a source.

        Unless otherwise provided in Annex I, the parties acknowledge and agree
        that (1) the Securities subject to any Transaction hereunder are
        instruments traded in a recognized market, (2) in the absence of a
        generally recognized source for prices or bid or offer quotations for
        any Security, the nondefaulting party may establish the source therefor
        in its sole discretion and (3) all prices, bids and offers shall be
        determined together with accrued Income (except to the extent contrary
        to market practice with respect to the relevant Securities).

    (e) As to Transactions in which the defaulting party is acting as Buyer, the
        defaulting party shall be liable to the nondefaulting party for any
        excess of the price paid (or deemed paid) by the nondefaulting party for
        Replacement Securities over the Repurchase Price for the Purchased
        Securities replaced thereby and for any amounts payable by the
        defaulting party under Paragraph 5 hereof or otherwise hereunder.

    (f) For purposes of this Paragraph 11, the Repurchase Price for each
        Transaction hereunder in respect of which the defaulting party is acting
        as Buyer shall not 


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        increase above the amount of such Repurchase Price
        for such Transaction determined as of the date of the exercise or deemed
        exercise by the nondefaulting party of the option referred to in
        subparagraph (a) of this Paragraph.

    (g) The defaulting party shall be liable to the nondefaulting party for (i)
        the amount of all reasonable legal or other expenses incurred by the
        nondefaulting party in connection with or as a result of an Event of
        Default, (ii) damages in an amount equal to the cost (including all
        fees, expenses and commissions) of entering into replacement
        transactions and entering into or terminating hedge transactions in
        connection with or as a result of an Event of Default, and (iii) any
        other loss, damage, cost or expense directly arising or resulting from
        the occurrence of an Event of Default in respect of a Transaction.

    (h) To the extent permitted by applicable law, the defaulting party shall be
        liable to the nondefaulting party for interest on any amounts owing by
        the defaulting party hereunder, from the date the defaulting party
        becomes liable for such amounts hereunder until such amounts are (i)
        paid in full by the defaulting party or (ii) satisfied in full by the
        exercise of the nondefaulting party's rights hereunder. Interest on any
        sum payable by the defaulting party to the nondefaulting party under
        this Paragraph 11 (h) shall be at a rate equal to the greater of the
        Pricing Rate for the relevant Transaction or the Prime Rate.

    (i) The nondefaulting party shall have, in addition to its rights hereunder,
        any rights otherwise available to it under any other agreement or
        applicable law.

4.  SINGLE AGREEMENT

    Buyer and Seller acknowledge that, and have entered hereinto and will enter
    into each Transaction hereunder in consideration of and in reliance upon the
    fact that, all Transactions hereunder constitute a single business and
    contractual relationship and have been made in consideration of each other.
    Accordingly, each of Buyer and Seller agrees (i) to perform all of its
    obligations in respect of each Transaction hereunder, and that a default in
    the performance of any such obligations shall constitute a default by it in
    respect of all Transactions hereunder, (ii) that each of them shall be
    entitled to set off claims and apply property held by them in respect of any
    Transaction against obligations owing to them in respect of any other
    Transactions hereunder and (iii) that payments, deliveries and other
    transfers made by either of them in respect of any Transaction shall be
    deemed to have been made in consideration of payments, deliveries and other
    transfers in respect of any other Transactions hereunder, and the
    obligations to make any such payments, deliveries and other transfers may be
    applied against each other and netted.

5.  NOTICES AND OTHER COMMUNICATIONS

    Any and all notices, statements, demands or other communications hereunder
    may be given by a party to the other by mail, facsimile, telegraph,
    messenger or otherwise to 


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    the address specified in Annex II hereto, or so sent to such party at any
    other place specified in a notice of change of address hereafter received by
    the other. All notices, demands and requests hereunder may be made orally,
    to be confirmed promptly in writing, or by other communication as specified
    in the preceding sentence.

6.  ENTIRE AGREEMENT; SEVERABILITY

    This Agreement shall supersede any existing agreements between the parties
    containing general terms and conditions for repurchase transactions. Each
    provision and agreement herein shall be treated as separate and independent
    from any other provision or agreement herein and shall be enforceable
    notwithstanding the unenforceability of any such other provision or
    agreement.

7.  NON-ASSIGNABILITY; TERMINATION

    (a) The rights and obligations of the parties under this Agreement and under
        any Transaction shall not be assigned by either party without the prior
        written consent of the other party, and any such assignment without the
        prior written consent of the other party shall be null and void. Subject
        to the foregoing, this Agreement and any Transactions shall be binding
        upon and shall inure to the benefit of the parties and their respective
        successors and assigns. This Agreement may be terminated by either party
        upon giving written notice to the other, except that this Agreement
        shall, notwithstanding such notice, remain applicable to any
        Transactions then outstanding.

    (b) Subparagraph (a) of this Paragraph 15 shall not preclude a party from
        assigning, charging or otherwise dealing with all or any part of its
        interest in any sum payable to it under Paragraph 11 hereof.

8.  GOVERNING LAW

    This Agreement shall be governed by the laws of the State of New York
    without giving effect to the conflict of law principles thereof.

9.  NO WAIVERS, ETC.

    No express or implied waiver of any Event of Default by either party shall
    constitute a waiver of any other Event of Default and no exercise of any
    remedy hereunder by any party shall constitute a waiver of its right to
    exercise any other remedy hereunder. No modification or waiver of any
    provision of this Agreement and no consent by any party to a departure
    herefrom shall be effective unless and until such shall be in writing and
    duly executed by both of the parties hereto. Without limitation on any of
    the foregoing, the failure to give a notice pursuant to Paragraph 4(a) or
    4(b) hereof will not constitute a waiver of any right to do so at a later
    date.

10. USE OF EMPLOYEE PLAN ASSETS



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    (a) If assets of an employee benefit plan subject to any provision of the
        Employee Retirement Income Security Act of 1974 ("ERISA") are intended
        to be used by either party hereto (the "Plan Party") in a Transaction,
        the Plan Party shall so notify the other party prior to the Transaction.
        The Plan Party shall represent in writing to the other party that the
        Transaction does not constitute a prohibited transaction under ERISA or
        is otherwise exempt therefrom, and the other party may proceed in
        reliance thereon but shall not be required so to proceed.

    (b) Subject to the last sentence of subparagraph (a) of this Paragraph, any
        such Transaction shall proceed only if Seller furnishes or has furnished
        to Buyer its most recent available audited statement of its financial
        condition and its most recent subsequent unaudited statement of its
        financial condition.

    (c) By entering into a Transaction pursuant to this Paragraph, Seller shall
        be deemed (i) to represent to Buyer that since the date of Seller's
        latest such financial statements, there has been no material adverse
        change in Seller's financial condition which Seller has not disclosed to
        Buyer, and (ii) to agree to provide Buyer with future audited and
        unaudited statements of its financial condition as they are issued, so
        long as it is a Seller in any outstanding Transaction involving a Plan
        Party.

11. INTENT

    (a) The parties recognize that each Transaction is a "repurchase agreement"
        as that term is defined in Section 101 of Title 11 of the United States
        Code, as amended (except insofar as the type of Securities subject to
        such Transaction or the term of such Transaction would render such
        definition inapplicable), and a "securities contract" as that term is
        defined in Section 741 of Title 11 of the United States Code, as amended
        (except insofar as the type of assets subject to such Transaction would
        render such definition inapplicable).

    (b) It is understood that either party's right to liquidate Securities
        delivered to it in connection with Transactions hereunder or to exercise
        any other remedies pursuant to Paragraph 11 hereof is a contractual
        right to liquidate such Transaction as described in Sections 555 and 559
        of Title 11 of the United States Code, as amended.

    (c) The parties agree and acknowledge that if a party hereto is an "insured
        depository institution," as such term is defined in the Federal Deposit
        Insurance Act, as amended ("FDIA"), then each Transaction hereunder is a
        "qualified financial contract," as that term is defined in FDIA and any
        rules, orders or policy statements thereunder (except insofar as the
        type of assets subject to such Transaction would render such definition
        inapplicable).

    (d) It is understood that this Agreement constitutes a "netting contract" as
        defined in and subject to Title IV of the Federal Deposit Insurance
        Corporation Improvement Act of 1991 ("FDICIA") and each payment
        entitlement and payment obligation 


                                       12


<PAGE>   13

        under any Transaction hereunder shall constitute a "covered contractual
        payment entitlement" or "covered contractual payment obligation",
        respectively, as defined in and subject to FDICIA (except insofar as one
        or both of the parties is not a "financial institution" as that term is
        defined In FDICIA).

12. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

    The parties acknowledge that they have been advised that:

    (a) in the case of Transactions in which one of the parties is a broker or
        dealer registered with the Securities and Exchange Commission ("SEC")
        under Section 15 of the Securities Exchange Act of 1934 ("1934 Act"),
        the Securities Investor Protection Corporation has taken the position
        that the provisions of the Securities Investor Protection Act of 1970
        ("SIPA") do not protect the other party with respect to any Transaction
        hereunder;

    (b) in the case of Transactions in which one of the parties is a government
        securities broker or a government securities dealer registered with the
        SEC under Section 15C of the 1934 Act, SIPA will not provide protection
        to the other party with respect to any Transaction hereunder; and

    (c) in the case of Transactions in which one of the parties is a financial
        institution, funds held by the financial institution pursuant to a
        Transaction hereunder are not a deposit and therefore are not insured by
        the Federal Deposit Insurance Corporation or the National Credit Union
        Share Insurance Fund, as applicable.

Merrill Lynch Mortgage Capital Inc.           Long Beach Mortgage Company

By:                                           By:
       ------------------------------                --------------------------
Title:                                        Title:
       ------------------------------                --------------------------
Date:                                         Date:
       ------------------------------                --------------------------


Merrill Lynch Credit Corporation

By:
       ------------------------------ 
Title:
       ------------------------------ 
Date:
       ------------------------------ 


  
                                       13


<PAGE>   14

                                                                 EXECUTION COPY



                                     ANNEX I
                                   (continued)

                      SUPPLEMENTAL TERMS AND CONDITIONS TO
                          MASTER REPURCHASE AGREEMENT,
                      DATED AS OF SEPTEMBER 23, 1998, AMONG
                      MERRILL LYNCH MORTGAGE CAPITAL INC.,
                        MERRILL LYNCH CREDIT CORPORATION
                         AND LONG BEACH MORTGAGE COMPANY

1.      APPLICABILITY. These Supplemental Terms and Conditions (the
        "Supplemental Terms") to the Master Repurchase Agreement (the "Master
        Repurchase Agreement", and collectively with these Supplemental Terms,
        the "Agreement") modify the terms and conditions under which the parties
        hereto, from time to time, enter into Transactions. To the extent that
        these Supplemental Terms conflict with the terms of the Master
        Repurchase Agreement, these Supplemental Terms shall control.

2.      ADDITIONAL DEFINITIONS. Capitalized terms used herein and not otherwise
        defined shall have the meanings set forth in the Master Repurchase
        Agreement. Capitalized terms used in the Master Repurchase Agreement
        whose definitions are modified in these Supplemental Terms shall, for
        all purposes of the Agreement, be deemed to have such modified
        definitions.

               (a)    "A Quality Mortgage Loans" shall refer to Mortgage Loans
                      originated in the manner described for such category in
                      the Seller's Underwriting Guidelines.

               (b)    "A- Quality Mortgage Loans" shall refer to Mortgage Loans
                      originated in the manner described for such category in
                      the Seller's Underwriting Guidelines.

               (c)    "Affiliate" means with respect to any Person, any
                      director, officer, employee or partner of such Person, and
                      any other Person, directly or indirectly controlling,
                      controlled by or under common control with such Person,
                      and any Affiliate of any of the foregoing. The term
                      "control" means the possession, directly or indirectly, of
                      the power to direct or cause the direction of the
                      management policies of the Person, whether through the
                      ownership of securities, by contract or otherwise.

<PAGE>   15

               (d)    "B Quality Mortgage Loans" shall refer to Mortgage Loans
                      originated in the manner described for such category in
                      the Seller's Underwriting Guidelines.

               (e)    "B- Quality Mortgage Loans" shall refer to Mortgage Loans
                      originated in the manner described for such category in
                      the Seller's Underwriting Guidelines.

               (f)    "Book Net Worth" shall refer to the equity of Seller
                      determined in accordance with GAAP less the sum of (i)
                      intercompany receivables (ii) loans to officers or
                      employees of Seller in excess of $1,000,000 in aggregate
                      and (iii) intangible items.

               (g)    "Business Day" shall mean any day excluding Saturday,
                      Sunday and any day on which banks located in the States of
                      New York, California or Texas are authorized or permitted
                      to close for business. All references to "business day" in
                      the Master Repurchase Agreement shall be deemed to be
                      references to Business Day.

               (h)    "Buyer" shall mean MLCC, in the case of Eligible Assets
                      secured by second liens, and MLMCI in all other cases.

               (i)    "Buyer's Margin Amount" shall have the meaning set forth
                      in the Master Repurchase Agreement except that the
                      percentage referred to therein for each Transaction shall
                      be specified in the related Confirmation/Funding Request.

               (j)    "C Quality Mortgage Loans" shall refer to Mortgage Loans
                      originated in the manner described for such category in
                      the Seller's Underwriting Guidelines.

               (k)    "Closing Agent" shall refer to each title company, closing
                      attorney or other agent that disburses funds on behalf of
                      Seller in connection with the origination of a Wet
                      Mortgage Loan included on the List of Closing Agents
                      attached hereto as Exhibit B; provided that such list may
                      be amended upon notice to Buyer and provided further than
                      any additional Closing Agent shall receive the prior
                      approval of Buyer.

               (l)    "CLTV" shall mean, with respect to each Mortgage Loan that
                      is not a first lien residential mortgage loan, the
                      combined loan-to-value ratio calculated as a fraction,
                      expressed as a percentage, the numerator of which is the
                      original principal balance of the related Mortgage Loan
                      (together with the related senior lien mortgage loans) and
                      the denominator of which is the lesser of the sales price
                      or the appraised value of the related mortgaged property.

                                       2



<PAGE>   16

               (m)    "Confirmation/Funding Request" shall have the meaning of
                      "Confirmation" as set forth in the Master Repurchase
                      Agreement but shall be substantially in the form attached
                      hereto as Exhibit A.

               (n)    "Covenant Compliance Certificate" shall refer to a
                      certificate of Seller to the effect that the Seller is in
                      compliance, as of the date of such certificate, with the
                      covenants set forth Section 9(c)(v), 9(c)(vi) and
                      9(c)(vii) of this Agreement.

               (o)    "Custodian" shall refer to Chase Bank of Texas, National
                      Association, or any permitted successor thereto pursuant
                      to the Custody Agreement, as the same shall be amended
                      from time to time.

               (p)    "Custody Agreement" shall refer to a custody agreement
                      pursuant to which the Custodian acts as bailee for Buyer.

               (q)    "D Quality Mortgage Loans" shall refer to Mortgage Loans
                      originated in the manner described for such category in
                      the Seller's Underwriting Guidelines.

               (r)    "Disbursement Instructions" shall refer to the written
                      disbursement instructions sent by Seller to a Closing
                      Agent in connection with the origination of a Wet Mortgage
                      Loan.

               (s)    "Dry Mortgage Loans" shall refer to Mortgage Loans other
                      than Wet Mortgage Loans.

               (t)    "Eligible Assets" shall refer to duly recorded first or
                      second lien Mortgage Loans originated by Seller or
                      acquired by Seller in the ordinary course of business.

               (u)    "GAAP" shall mean generally accepted accounting principles
                      consistently applied.

               (v)    "Market Value" shall, in addition to the definition set
                      forth in the Master Repurchase Agreement, provide that (i)
                      buyer shall determine the Market Value for the Purchased
                      Securities in the good faith exercise of its reasonable
                      business judgment from time to time and at such time as it
                      may elect in its sole discretion and (ii) that Buyer shall
                      assign a Market Value of zero with respect to (A) any
                      Mortgage Loan that has been delinquent for more than the
                      Permitted Delinquency Period, (B) any Mortgage Loan with
                      respect to which there is a breach of a representation,
                      warranty or covenant made by Seller in this Agreement or
                      the Custody Agreement that materially adversely affects
                      Buyer's interest in such Mortgage Loan and which breach
                      has not been cured prior to the date on which Market Value
                      is being determined, (C) any Mortgage Loan that 



                                       3
<PAGE>   17

                      Buyer determines in its sole discretion has not been
                      originated in accordance with applicable laws and (D) any
                      Wet Mortgage Loan that is subject to the Agreement or the
                      Custody Agreement for more than five (5) Business Days in
                      aggregate without having become a Dry Mortgage Loan.

               (w)    "MLCC" shall refer to Merrill Lynch Credit Corporation.

               (x)    "MLMCI" shall refer to Merrill Lynch Mortgage Capital Inc.

               (y)    "Mortgage" shall mean a duly recorded first or second
                      mortgage or first or second deed of trust on improved
                      residential real property.

               (z)    "Mortgage Loan Schedule" shall have the meaning set forth
                      in Section 3(a) herein.

               (aa)   "Mortgage Loans" shall mean those first or second lien
                      residential mortgage loans that Seller has sold to Buyer
                      hereunder and shall include A Quality Mortgage Loans, A-
                      Quality Mortgage Loans, B Quality Mortgage Loans, B-
                      Quality Mortgage Loans, C Quality Mortgage Loans and
                      D Quality Mortgage Loans.

               (bb)   "Mortgage Loan Income" shall mean income payable with
                      respect to a Mortgage Loan including all amounts payable
                      on account of such Mortgage Loan whether principal,
                      interest, partial prepayments, prepayments in full,
                      penalties, advance payments or expenses and whether
                      payable by or from the Mortgagor or the servicer for such
                      Mortgage Loan.

               (cc)   "Permitted Delinquency Period" shall mean thirty (30) days
                      in the case of all Mortgage Loans; provided, however, that
                      Buyer may, in its sole discretion, extend the Permitted
                      Deliquency Period on a loan-by-loan basis to forty-five
                      (45) days with such reduction in Market Value as Buyer, in
                      its sole discretion, may deem appropriate.

               (dd)   "Person" means a corporation, association, partnership,
                      organization, business, trust, individual, a government or
                      political subdivision thereof, any governmental agency or
                      any other entity.

               (ee)   "Purchase Date" shall in addition to the meaning set forth
                      in the Master Repurchase Agreement, refer only to that
                      portion of any Purchase Date commencing at the time the
                      Purchase Price is paid and the Purchased Securities are
                      transferred, which payment and transfer shall be deemed to
                      be simultaneous.



                                       4


<PAGE>   18

               (ff)   "Required Loan Documents" shall refer to the documents
                      required to be held by the Custodian as bailee under the
                      Custody Agreement.

               (gg)   "Securities" shall, in addition to the definition set
                      forth in the Master Repurchase Agreement, refer to
                      Mortgage Loans; provided, however, that such Mortgage
                      Loans shall not be deemed to be securities for the
                      purposes of any securities or blue sky laws.

               (hh)   "Seller" shall refer to Long Beach Mortgage Company, a
                      Delaware corporation.

               (ii)   "Seller's Margin Amount" shall have the meaning set forth
                      in the Master Repurchase Agreement except that the
                      percentage referred to therein for each Transaction shall
                      be specified in the related Confirmation/Funding Request.

               (jj)   "Seller's Underwriting Guidelines" shall refer to the
                      underwriting guidelines for various categories of Mortgage
                      Loans in the form most recently approved by Buyer in
                      writing.

               (kk)   "Servicer" shall refer to Ameriquest Mortgage Company or
                      Long Beach Mortgage Company.

               (ll)   "Servicing Agreement" shall, refer to the Master
                      Sub-servicing Agreement dated as of April 28, 1997 between
                      Seller and Ameriquest Mortgage Company, attached hereto as
                      Exhibit C.

               (mm)   "Third Person" shall refer to any Person to whom Buyer
                      transfers any portion of its interest in the Eligible
                      Assets.

               (nn)   "Transaction" shall, in addition to the definition set
                      forth in the Master Repurchase Agreement, refer to
                      substitutions pursuant to Paragraph 9 of the Master
                      Repurchase Agreement.

               (oo)   "Trust Receipt" shall refer to the Trust Receipt
                      substantially in the form attached as an exhibit to the
                      Custody Agreement.

               (pp)   "Wet Mortgage Loan" shall refer to a Mortgage Loan for
                      which the Custodian has not issued a Trust Receipt to
                      Buyer at the time the related Purchase Price is paid.

1.       INITIATION, CONFIRMATION.

        (a)    Not less than two (2) Business Days prior to each proposed
               Purchase Date, Seller shall forward to Buyer a detailed listing
               of the Securities proposed to be 

                                       5




<PAGE>   19

               the subject of a Transaction (a "Mortgage Loan Schedule"), which
               Mortgage Loan Schedule shall indicate the category of Mortgage
               Loan, whether such Mortgage Loan is a Wet Mortgage Loan or a Dry
               Mortgage Loan and such other information as Buyer may require.

        (b)    Seller shall deliver, pursuant to the terms of the Custody
               Agreement, such documents relating to each Mortgage Loan on the
               Mortgage Loan Schedule.

        (c)    Each Confirmation shall be binding upon Seller and Buyer unless
               written notice of objection is given by the objecting party to
               the other party within one (1) business day after the objecting
               party's receipt of such Confirmation.

        (d)    Buyer may, but shall not be required to, deliver Confirmations
               confirming periodic adjustments in the Pricing Rate for a
               particular Transaction.

        (e)    Notwithstanding Paragraph 3(b) of the Master Repurchase
               Agreement, in the event of any conflict between the terms of a
               Confirmation and this Agreement, such Confirmation shall prevail.

        (f)    Seller shall, simultaneously with the funding of each
               Transaction, deliver to Buyer through the Custodian a fully
               executed Trust Receipt.

1.       MARGIN.

        (a)    Paragraph 4(a) of the Master Repurchase Agreement is hereby
               modified to provide that if the notice to be given by Buyer to
               Seller under such paragraph is given at or prior to 12:00 p.m.
               New York City time on a Business Day, Seller shall transfer the
               cash or Additional Purchased Securities to Buyer (in the manner
               contemplated by the Agreement and the Custody Agreement) prior to
               the close of business in New York City on the date of such
               notice, and if such notice is given after 12:00 p.m. New York
               City time, Seller shall transfer the cash or Additional Purchased
               Securities (in the manner as aforesaid) prior to the close of
               business in New York City on the Business Day following the date
               of such notice.

        (b)    Paragraph 4(a) of the Master Repurchase Agreement is hereby
               further amended to provide that Seller shall transfer the cash or
               Mortgage Loans to Buyer (in the manner contemplated by the
               Agreement and the Custody Agreement) in accordance with Section
               24 of these Supplemental Terms.

        (c)    The Master Repurchase Agreement is hereby amended by adding the
               following sentence at the end of Paragraph 4(a):

               In case of a Margin Deficit with respect to Mortgage Loans,
               Seller shall transfer cash or Mortgage Loans to satisfy its
               obligations hereunder; provided, however, Seller may transfer
               Mortgage Loans only to the extent that they have been 


                                       6

<PAGE>   20

               reviewed by the Custodian pursuant to the Custody Agreement and
               the Custodian has furnished its Trust Receipt with respect
               thereto.

1.      INCOME PAYMENTS. All payments and distributions, whether in cash or in
        kind, made on or with respect to the Mortgage Loans shall, unless
        otherwise mutually agreed by Buyer and Seller, be paid, delivered or
        transferred in the case of Mortgage Loans, so long as an Event of
        Default on the part of Seller shall not have occurred and be continuing,
        directly to the Servicer from the related mortgagor.

2.       MODIFICATIONS TO THE MASTER REPURCHASE AGREEMENT.

        (a)    The Master Repurchase Agreement is hereby amended by adding the
               following after the last sentence of Paragraph 5:

                      If an Event of Default shall have occurred and be
               continuing, Seller shall collect, or cause to be collected, all
               Mortgage Loan Income on behalf of Buyer and, upon request of
               Buyer, shall forward such payments to Buyer immediately upon
               receipt.

        (b)    The Master Repurchase Agreement is hereby amended by adding the
               following after the last sentence of Paragraph 7:

                      Buyer shall disburse funds to an account specified in
               writing by Seller. In the case of Mortgage Loans, transfer of
               such Mortgage Loans to Buyer shall occur as of the date on which
               Buyer receives (i) the Trust Receipt of the Custodian and (ii) a
               list identifying the Servicer with respect to each such Mortgage
               Loan, if not otherwise set forth in the Trust Receipt.

                      In the case of Mortgage Loans transferred by Buyer to a
               Third Person, Buyer shall send a notice to the Custodian and
               transfer of such Mortgage Loans to any Third Person shall occur
               when such Third Person receives the acknowledgment of the
               Custodian identifying such Mortgage Loans. Any Mortgage Loans
               repurchased by Seller pursuant to Paragraph 3(c) or 11(c) of the
               Master Repurchase Agreement shall be transferred to Seller or its
               agent upon the receipt by the Custodian from Buyer of a notice of
               transfer which confirms the release of Buyer's interest in any
               such Mortgage Loans.

        (c)    The Master Repurchase Agreement is amended by adding the
               following at the end of the last sentence of Paragraph 8:

                      In the case of Mortgage Loans, Buyer hereby grants to
               Seller the right to perform in Buyer's stead under any
               repurchase, reverse repurchase or similar transaction in which
               Buyer has sold, loaned or otherwise transferred the Mortgage
               Loans in the event that Buyer has defaulted on its obligation to
               repurchase or accept redelivery of such Mortgage Loans in
               conformity with the terms of any 


                                       7




<PAGE>   21

               such transaction and so long as an Event of Default under the
               Agreement on the part of Seller shall not have occurred and be
               continuing.

        (d)    Paragraph 9 of the Master Repurchase Agreement is hereby amended
               by adding the following at the end of subparagraph (b):

               (c)    In the case of any Transaction for which the Repurchase
                      Date is other than the Business Day immediately following
                      the Purchase Date and with respect to which Seller does
                      not have any existing right to substitute substantially
                      the same Securities for the Purchased Securities, Seller
                      shall have the right, subject to the proviso to this
                      sentence, upon notice to Buyer, which notice shall be
                      given at or prior to 12:00 p.m. (New York City time) on
                      such Business Day, to substitute substantially the same
                      Securities for any Purchased Securities; provided,
                      however, that Buyer may elect, by the close of business on
                      the Business Day notice is received, or by the close of
                      the next Business Day if notice is given after 12:00 p.m.
                      (New York City time) on such day, not to accept such
                      substitution. In the event such substitution is accepted
                      by Buyer, such substitution shall be made by Seller's
                      transfer to Buyer of such other Securities and Buyer's
                      transfer to Seller of such Purchased Securities, and after
                      such substitution, the substituted Securities shall be
                      deemed to be Purchased Securities. In the event Buyer
                      elects not to accept such substitution, Buyer shall offer
                      Seller the right to terminate the Transaction.

               (d)    In the event Seller exercises its right to substitute or
                      terminate under sub-paragraph (c), Seller shall be
                      obligated to pay to Buyer, by the close of the Business
                      Day of such substitution or termination, as the case may
                      be, an amount equal to (A) Buyer's actual cost (including
                      all fees, expenses and commissions) of (i) entering into
                      replacement transactions; (ii) entering into or
                      terminating hedge transactions; and/or (iii) terminating
                      transactions or substituting securities in like
                      transactions with third parties in connection with or as a
                      result of such substitution or termination , and (B) to
                      the extent Buyer determines not to enter into replacement
                      transactions, the loss incurred by Buyer directly arising
                      or resulting from such substitution or termination. The
                      foregoing amounts shall be solely determined and
                      calculated by Buyer in good faith.

        (e)    The Master Repurchase Agreement is hereby further amended by
               adding the following new subsections (i) and (j) to Paragraph 11:

               (i)    Any sales of Purchased Securities, pursuant to Paragraph
                      11(d)(i) of the Agreement, which are Mortgage Loans may be
                      effected in public or private sales as Buyer may
                      reasonably deem appropriate and at such price or prices as
                      Buyer may reasonably deem satisfactory. In the event Buyer
                      elects in lieu of so selling such Purchased Securities to
                      give Seller credit 


                                       8



<PAGE>   22

                      for such Purchased Securities, such credit shall be in an
                      amount equal to the Market Value thereof as of the date of
                      such acceleration.

               (j)    Any purchases of Replacement Securities, pursuant to
                      Paragraph 11(d)(ii) of the Agreement, which are Mortgage
                      Loans shall be of the same or similar type, maturity and
                      amount as the Purchased Securities that are not delivered
                      by Buyer and may be effected in purchases in a
                      commercially reasonable manner at such price or prices as
                      Seller may reasonably deem appropriate. In the event
                      Seller elects in lieu of so purchasing such Replacement
                      Securities to be deemed to have purchased Replacement
                      Securities in a commercially reasonable manner as provided
                      in Paragraph 11(d)(ii), such Replacement Securities shall
                      be deemed to have been purchased at the Market Value
                      thereof.

1.   DISBURSEMENT OF FUNDS. Seller may request that the parties enter into a
     transaction hereunder by making a written request for the purchase and sale
     of Eligible Assets, either by mail or facsimile transmission, to Buyer.
     Buyer shall pay the Purchase Price within one (1) Business Day of receipt
     of such notice, so long as the terms and conditions of the Agreement and
     the Custody Agreement are fully satisfied and no Event of Default hereunder
     shall have occurred and be continuing. The amount of any such Purchase
     Price of Eligible Assets shall be in a minimum amount of $100,000 and
     integral multiples of $100,000 in excess thereof unless otherwise agreed by
     Buyer in its sole discretion.

2.   SECURITY INTEREST; ASSIGNMENTS.

        (a)    In the event, for any reason, any Transaction is construed by any
               court as a secured loan rather than a purchase and sale, the
               parties intend that Buyer shall have a perfected first priority
               security interest in all of the Purchased Securities.

        (b)    Seller shall pay all reasonable fees and expenses associated with
               perfecting such security interest including, without limitation,
               the cost of filing financing statements under the Uniform
               Commercial Code, to the extent required by Buyer or its counsel,
               and any reasonable fees charged by the Custodian.

1.   REPRESENTATIONS, WARRANTIES AND COVENANTS.

        (a)    Each party represents and warrants, and shall on and as of the
               Purchase Date of any Transaction be deemed to represent and
               warrant, as follows:

               (i)    The execution, delivery and performance of the Agreement
                      and the performance of each Transaction do not and will
                      not result in or require the creation of any lien,
                      security interest or other charge or encumbrance (other
                      than pursuant hereto) upon or with respect to any of its
                      properties; and


                                       9



<PAGE>   23

               (ii)   The Agreement is, and each Transaction when entered into
                      under the Agreement will be, a legal, valid and binding
                      obligation of such party enforceable against it in
                      accordance with the terms of the Agreement, subject to
                      applicable bankruptcy, insolvency, and similar laws
                      affecting creditors' rights generally and subject, as to
                      enforceability, to general principles of equity
                      (regardless of whether enforcement is sought in a
                      proceeding in equity or at law).

        (a)    Seller represents and warrants as of the date of the Agreement
               and as of the Purchase Date of each Transaction, as follows:

               (i)    All information provided by Seller to Buyer or the
                      Custodian concerning the Mortgage Loans is true and
                      correct in all material respects;

               (ii)   the servicing agreement attached hereto as Exhibit C is a
                      true, accurate and complete copy of the servicing
                      agreement which agreement is in full force and effect as
                      of the date of this Agreement and which has not been
                      waived, amended or modified in any respect, other than as
                      disclosed to Buyer, nor have any notices of termination
                      been given thereunder.

               (iii)  No Mortgage Loan shall have any scheduled payments of
                      Mortgage Loan Income in default or delinquent by more than
                      the Permitted Delinquency Period;

               (iv)   Seller shall cause each Mortgage Loan to be serviced in
                      accordance with standards maintained by the servicers of
                      mortgage loans that are generally accepted in the mortgage
                      servicing industry as reasonable and prudent;

               (v)    Seller, immediately prior to the purchase by Buyer under
                      the Agreement, is the legal and beneficial owner of the
                      Mortgage Loans free and clear of any lien, security
                      interest, option or encumbrance;

               (vi)   Buyer has a perfected first-priority security interest in
                      each Mortgage Loan subject to no prior lien, charge,
                      encumbrance or rights of others, and no further action,
                      other than the possession by the Custodian of certain
                      documents relating thereto pursuant to the Custody
                      Agreement, including any filing or recordation of any
                      document, is required in order to establish and perfect
                      the liens on and security interest in the Mortgage Loans
                      in favor of Buyer against any third party in any
                      jurisdiction;

               (vii)  No Mortgage Loan was subject to any lien or encumbrance at
                      the time of the purchase thereof by Buyer under the
                      Agreement;



                                       10

<PAGE>   24

               (viii) Notwithstanding any other provision of the Agreement, no
                      Eligible Asset subject to any Transaction hereunder shall
                      have been subject to the Agreement or to the Custody
                      Agreement for more than (1) one hundred and fifty (150)
                      days in aggregate in the case of Dry Mortgage Loans that
                      are the subject of a Takeout Commitment, (2) ninety (90)
                      days in the case of all other Dry Mortgage Loans and (3)
                      five (5) Business Days in the case of Wet Mortgage Loans
                      that have not become Dry Mortgage Loans;

               (ix)   The aggregate outstanding Repurchase Price for Mortgage
                      Loans subject to the Agreement at any time does not exceed
                      (1) the lesser of $10,000,000 and 10% of the aggregate
                      outstanding Repurchase Price for all Mortgage Loans in the
                      case of Mortgage Loans with respect to which the Custodian
                      has not received all Required Loan Documents or for which
                      the Custodian has advised Buyer of an irregularity with
                      respect to any Required Loan Documents; provided that Wet
                      Mortgage Loans shall not be considered in the calculations
                      of this clause (1) until such time as Seller is required
                      to deliver Required Loan Documents to the Custodian, (2)
                      the lesser of $10,000,000 and 10% of the aggregate
                      outstanding Repurchase Price of all Mortgage Loans in the
                      case of Mortgage Loans having a CLTV in excess of 90% and
                      (3) the lesser of $15,000,000 and 15% of the aggregate
                      facility amount for all Wet Mortgage Loans;

               (x)    The aggregate outstanding Repurchase Price for Mortgage
                      Loans that are not first lien residential mortgage loans
                      does not exceed an amount equal to 20% of the aggregate
                      outstanding Repurchase Price for all Mortgage Loans
                      subject to the Agreement;

               (xi)   The CLTV for each Mortgage Loan that is not a first lien
                      residential mortgage loan is not in excess of 90%;

               (xii)  Each Eligible Asset has been originated in compliance with
                      the Seller's Underwriting Guidelines and all applicable
                      laws;

               (xiii) Each Wet Mortgage Loan has been funded by a Closing Agent;

               (xiv)  Each Wet Mortgage Loan is a first lien residential
                      mortgage loan;

               (xv)   No Eligible Asset has a CLTV in excess of 125%;

               (xvi)  Each Mortgage Loan conforms to the representations and
                      warranties set forth in Exhibit E hereto.

        (a)     Seller covenants with Buyer as follows:


                                       11




<PAGE>   25

               (i)    Seller shall be at the time it delivers any Mortgage Loans
                      to the Custodian or Buyer for any Transaction, and shall
                      continue to be, through the Purchase Date relating to each
                      such Transaction, the legal and beneficial owner of such
                      Mortgage Loans free and clear of any lien, security
                      interest, option or encumbrance except for the security
                      interest created by the Agreement;

               (ii)   All data and other information relating to the Mortgage
                      Loans provided at any time by or on behalf of Seller to
                      the Custodian, whether in writing, by electronic
                      transmission or on computer tape or diskette or otherwise,
                      will be true and correct as reported by Servicer;

               (iii)  On an ongoing basis, at Seller's expense without request
                      of Buyer, Seller shall provide Buyer with:

                      (1)    Seller's year-end balance sheet and income
                             statement and cash flow statement audited by a firm
                             of independent accountants acceptable to Buyer in
                             its sole discretion, within ninety (90) days after
                             the end of Seller's fiscal year;

                      (2)    Seller's quarterly balance sheet and income
                             statement and cash flow statement within forty-five
                             (45) days after the end of the first three fiscal
                             quarters in each of Seller's fiscal years; and

                      (3)    Seller's monthly balance sheet and income statement
                             within thirty (30) days after the end of the first
                             two months in each of Seller's fiscal quarters;

               (i)    Seller shall promptly notify Buyer of (i) the acceleration
                      of any debt obligation or the termination of any credit
                      facility of Seller where such debt obligation or credit
                      facility is for an amount equal to or greater than
                      $1,000,000; (ii) the amount and maturity of any such debt
                      assumed after the date hereof; (iii) any adverse
                      developments with respect to pending or future litigation
                      involving Seller which, if adversely determined against
                      Seller either would result in a judgment equal to or
                      greater than $5,000,000 or would materially and adversely
                      affect the Purchased Securities; and (iv) any other
                      developments which might materially and adversely affect
                      the financial condition of Seller;

               (ii)   Seller shall experience losses or changes in its financial
                      condition (exclusive of amounts withdrawn for payment of
                      taxes due and payable by the shareholders of Seller) such
                      that at the end of each of two consecutive calendar
                      quarters its Book Net Worth is less than or equal to 80%
                      of its Book Net Worth at the commencement of each such
                      calendar quarter, respectively;



                                       12


<PAGE>   26

               (iii)  Seller's Book Net Worth shall not be less than $35,000,000
                      at any time from and including the date of the Agreement;

               (iv)   The ratio of Seller's outstanding indebtedness to all
                      lenders (including, without limitation, all indebtedness
                      incurred under any loan agreement, warehouse finance
                      agreement and repurchase agreement but excluding any
                      indebtedness to Buyer or any of its Affiliates) to its
                      Book Net Worth shall not at any time be more than 10 to 1;

               (v)    Seller shall promptly notify Buyer if Seller's
                      Underwriting Guidelines are amended or supplemented in any
                      way;

               (vi)   Seller shall deliver or cause to be delivered to the
                      Custodian the Required Loan Documents relating to each Wet
                      Mortgage Loan within five (5) Business Days of the payment
                      of the Purchase Price therefor;

               (vii)  There shall exist, with respect to each Wet Mortgage Loan,
                      a policy of title insurance (or title commitment or title
                      binder to issue same) effective as of the date of
                      origination of such Wet Mortgage Loan, the original of
                      which policy of title insurance (or title commitment or
                      title binder to issue same) shall be delivered to the
                      Custodian in accordance with the terms of the Agreement
                      and the Custody Agreement;

               (viii) Seller shall provide Buyer with a monthly Covenant
                      Compliance Certificate within thirty (30) days of the end
                      of each calendar month;

               (ix)   Seller shall provide Buyer, promptly upon Buyer's request,
                      with copies of any Disbursement Instructions requested by
                      Buyer; and

               (x)    Seller shall distribute to the related Closing Agent any
                      funds provided to it in connection with the origination of
                      a Wet Mortgage Loan within one (1) Business Day of its
                      receipt of such funds.

1.  EVENTS OF DEFAULT.

     (a)    The term "Event of Default" shall, in addition to the definition set
            forth in the Master Repurchase Agreement, include the following
            events:

               (i)    Any governmental or self-regulatory authority shall take
                      possession of Seller, or any Affiliate thereof, or all or
                      substantially all its property or appoint any such
                      trustee, receiver, conservator or other official, or such
                      party shall take any action to authorize any of the
                      actions set forth in this clause (i);


                                       13
<PAGE>   27


               (ii)   Buyer or Seller shall have reasonably determined that the
                      other party is or will be unable to meet its commitments
                      under this Agreement, shall have notified such other party
                      of such determination and such other party shall not have
                      responded with appropriate information to the contrary to
                      the satisfaction of the notifying party within one (1)
                      Business Day;

               (iii)  In the judgment of Buyer a material adverse change shall
                      have occurred in the business, operations, properties,
                      prospects or financial condition of Seller;

               (iv)   The Agreement shall for any reason cease to create a
                      valid, perfected, first priority security interest in any
                      of the Purchased Securities;

               (v)    Seller shall be in default with respect to any normal and
                      customary covenants under any material contract or
                      agreement to which it is a party, such material contract
                      or agreement relating to obligations equal to or greater
                      than $500,000, or where any obligations subject to such
                      acceleration at any time equal or exceed $500,000 which
                      default permits acceleration of the obligations of Seller
                      under such contract or agreement by any other party
                      thereto;

               (vi)   Seller shall merge or consolidate into any entity unless
                      the surviving or resulting entity shall be acceptable to
                      Buyer, in its sole discretion, and such entity expressly
                      assumes by written agreement, executed and delivered to
                      Buyer in form and substance satisfactory to Buyer, the
                      performance of all Seller's duties and obligations
                      hereunder and under the Custody Agreement;

               (vii)  Buyer shall request assurances as to the financial
                      well-being of Seller and such assurances shall not have
                      been provided in writing within forty-eight (48) hours of
                      receipt of such request; provided, that such request shall
                      be in writing, and if transmitted by facsimile such
                      request shall be deemed to be received when transmitted so
                      long as the transmitting machine has provided an
                      electronic confirmation of such transmission.

               (viii) A final non-appealable judgment by any competent court in
                      the United States of America for the payment of money in
                      an amount of at least $500,000 is rendered against the
                      defaulting party, and the same remains undischarged or
                      unpaid for a period of thirty (30) days during which
                      execution of such judgment is not effectively stayed;
                      provided, that such amount shall first be reduced by the
                      expected proceeds of any applicable insurance policy;
                      provided, further, that Seller shall have provided Buyer
                      with written evidence that the Seller is entitled to such


                                       14


<PAGE>   28

                      proceeds under a current insurance policy, that a claim
                      has been filed under the policy, the related insurance
                      carrier has approved or is reviewing the related claim and
                      that the claim has not been rejected.

               (ix)   Any representation or warranty made by Seller in the
                      Agreement or the Custody Agreement shall have been
                      incorrect or untrue when made or repeated or when deemed
                      to have been made or repeated and such breach is
                      continuing; provided, however, that with respect to any
                      representation or warranty made by Seller with respect to
                      a Mortgage Loan, such circumstance shall not constitute an
                      Event of Default if after determining the aggregate Market
                      Value of all Mortgage Loans subject to Transactions
                      without consideration of the Mortgage Loan with respect to
                      which such circumstances have occurred, no other Event of
                      Default shall have occurred and be continuing;

               (x)    Seller shall breach any covenant in the Agreement and such
                      breach is continuing; provided, that with respect to the
                      covenants set forth in Sections 9(c)(iii) and (xii),
                      Seller shall have five (5) days in which to cure such
                      breach;

               (xi)   A firm of independent accountants shall have failed to
                      issue an opinion or shall have issued an opinion qualified
                      adversely in any material respect in connection with the
                      most recent audited financial statements of Seller;

               (xii)  Seller or any of Seller's Affiliates shall be in default
                      with respect to any contract or agreement with Buyer or
                      any of Buyer's Affiliates.

        (a)    In addition to the other remedies available to Buyer or Seller
               upon the occurrence and during the continuance of an Event of
               Default by a defaulting party, Buyer shall have the following
               additional remedies upon the occurrence and during the
               continuance of an Event of Default by Seller:

               (i)    All rights of Seller to receive payments on the Mortgage
                      Loans which it would otherwise be authorized to receive
                      pursuant to Paragraph 5 of the Master Repurchase Agreement
                      as modified by Section 4 of these Supplemental Terms shall
                      cease, and all rights to such payments shall thereupon
                      become vested in Buyer, which shall thereupon have the
                      sole right to receive such payments and apply them to the
                      amounts owed by Seller pursuant to the Agreement.

               (ii)   All payments that are received by Seller contrary to the
                      provisions of the preceding clause (i) shall be received
                      in trust for the benefit of Buyer, shall be segregated
                      from other funds of Seller and shall be promptly paid to
                      Buyer.


                                       15


<PAGE>   29

               (iii)  Any funds paid by Buyer to Seller in respect of Wet
                      Mortgage Loans that have not been distributed to a Closing
                      Agent shall be promptly repaid to Buyer.

               (iv)   Buyer may unilaterally instruct the Servicer to direct all
                      payments of Mortgage Loan Income directly to Buyer.

               (v)    Buyer shall be entitled to the right of set off with
                      respect to any amounts owed by Buyer or any Affiliate of
                      Buyer to Seller or any Affiliate of Seller under any
                      contract, margin account or other arrangement.

        (a)    Any sale of Purchased Securities under Paragraph 11 of the Master
               Repurchase Agreement as modified by these Supplemental Terms
               shall be conducted in a commercially reasonable manner.

        (b)    Expenses incurred in connection with an Event of Default shall
               include without limitation those reasonable costs and expenses
               incurred by the nondefaulting party as a result of the early
               termination of any repurchase agreement or reverse repurchase
               agreement entered into by the nondefaulting party in connection
               with the Transaction then in default.

        (c)    Any provision of the Agreement to the contrary notwithstanding,
               no breach of a representation, warranty or covenant with respect
               to any Mortgage Loan shall be an Event of Default if, after
               determining the Market Value of the Mortgage Loans without taking
               into account the Mortgage Loan with respect to which such breach
               has occurred, no other Event of Default shall have occurred and
               be continuing.

1.      UNILATERAL TERMINATION BY BUYER.

        (a)    At the option of Buyer, exercised by written notice to Seller,
               the Repurchase Date for some or all of the Transactions under the
               Agreement shall be deemed to immediately occur in the event that
               the senior debt obligations or short-term debt obligations of
               Merrill Lynch & Co., Inc. shall be rated below the four highest
               generic grades (without regard to any pluses or minuses
               reflecting gradations within such generic grades) by any
               nationally-recognized statistical rating organization.

        (b)    The event specified in subparagraph (a) above which may, at the
               option of Buyer, cause an acceleration of the Repurchase Date for
               a Transaction shall be in addition to any other rights of Buyer
               to cause such an acceleration under the Agreement.


                                       16

<PAGE>   30

1.      FINANCIAL STATEMENTS.

        (a)    As of the date hereof, Seller shall provide Buyer with its
               audited year-end financial statements and its most recent
               available interim financial statement. Seller shall provide Buyer
               with Seller's year-end balance sheet, income statement, and cash
               flow statement, audited by a firm of independent accountants
               acceptable to Buyer in its sole discretion, within ninety (90)
               days after the end of Seller's fiscal year, Seller's quarterly
               balance sheet, income statement and cash flow statement within
               forty-five (45) days after the end of the first three fiscal
               Quarters in each of Seller's fiscal years and Seller's monthly
               balance sheet, income statement within thirty (30) days after the
               end of the first two months in each of Seller's fiscal quarters.

        (b)    Seller shall provide Buyer, at the expense of Seller when
               requested by Buyer, with all periodic unaudited balance sheets
               and income statements from time to time as soon after the
               preparation thereof as practicable.

        (c)    Each delivery of Purchased Securities by Seller to Buyer
               hereunder will constitute a representation by Seller that there
               has been no material adverse change in Seller's financial
               condition not disclosed to Buyer since the date of Seller's most
               recent unaudited balance sheet or income statement delivered to
               Buyer. Seller shall provide Buyer, from time to time at Seller's
               expense, with such information concerning Seller of a financial
               or operational nature as Buyer may reasonably request promptly
               upon receipt of such request.

1.      PRICE DIFFERENTIAL; REPURCHASE PRICE.

        (a)    The Price Differential shall be payable in arrears with respect
               to each Transaction, together with the Purchase Price therefor,
               on the termination date for the related Transaction or as may be
               otherwise mutually agreed upon by the parties and as specified in
               the related Confirmation.

        (b)    All calculations of Price Differential shall be made on the basis
               of a 360-day year and the actual number of days elapsed.

        (c)    Payment of the Repurchase Price (including the Price
               Differential) shall be made by wire transfer in immediately
               available funds or in such other manner as may be mutually agreed
               upon by Buyer and Seller in writing. Amounts received by Buyer
               after 3:00 p.m., New York City time, on any Business Day shall be
               deemed to have been paid by Seller and received by Buyer on the
               next succeeding Business Day.

1.      MAXIMUM TRANSACTION AMOUNT.

        (a)    The aggregate outstanding Repurchase Price for the Purchased
               Securities that are Mortgage Loans shall not at any time exceed
               $100,000,000.

                                       17

<PAGE>   31

        (b)    The aggregate outstanding Repurchase Price for Purchased
               Securities that are C Quality Mortgage Loans or D Quality
               Mortgage Loans shall not at any time exceed 20% of the aggregate
               outstanding Repurchase Price for all Purchased Securities under
               the Agreement.

1.      TERMINATION. Notwithstanding any provisions of Paragraph 15 of the
        Master Repurchase Agreement to the contrary, the Agreement and all
        Transactions outstanding hereunder shall terminate automatically without
        any requirement for notice on the date occurring on the earlier of (i)
        eleven months and twenty-nine days after the date of the Agreement and
        (ii) the written agreement of Seller and Buyer; provided, however, that
        notwithstanding the foregoing, the Agreement shall continue in full
        force and effect until any outstanding Repurchase Price has been paid in
        full. Upon termination of the Agreement and the payment of the
        Repurchase Price with respect to all Transactions, Buyer shall release
        its lien and security interest under the Agreement and assign, transfer
        and deliver, against receipt, any remaining Purchased Securities and
        money received in respect thereof to or on the order of Seller. Upon the
        request of Seller, Buyer will then execute termination statements and
        such other documents as Seller may reasonably request as are necessary
        to make clear upon the public record the termination of the lien and
        security interests created by the Agreement with respect to the
        Purchased Securities.

2.      ADDITIONAL INFORMATION; CONFIDENTIALITY.

        (a)    At any reasonable time, Seller shall permit Buyer, its agents or
               attorneys, to inspect and copy any and all documents and data in
               their possession pertaining to each Mortgage Loan that is the
               subject of such Transaction. Such inspection shall occur upon the
               request of Buyer at a mutually agreeable location during regular
               business hours and on a date not more than two (2) Business Days
               after the date of such request.

        (b)    Seller agrees to provide Buyer from time to time with such
               information concerning Seller of a financial or operational
               nature as Buyer may reasonably request.

        (c)    Each of the parties acknowledges that the Agreement and the
               Custody Agreement are confidential in nature and each such party
               agrees that, unless otherwise directed by a court or regulatory
               entity of competent jurisdiction or as may be required by federal
               or state law (which determination as to federal or state law
               shall be based upon written advice of counsel), it shall limit
               the distribution of such documents to its officers, employees,
               attorneys, accountants and agents as required in order to conduct
               its business with the other parties hereto. This subparagraph (c)
               shall not apply to information which has entered the public
               domain through means other than a breach of the foregoing
               covenant by the party seeking to distribute such documents or
               which the other party has given written permission to disclose.


                                       18


<PAGE>   32

1.      OPINIONS OF COUNSEL. Seller shall, within thirty (30) days of the date
        of this Agreement and, upon the request of Buyer, on the date of any
        subsequent Transaction, cause to be delivered to Buyer, with reliance
        thereon permitted as to any person or entity that purchases the Eligible
        Assets from Buyer in a repurchase transaction, a favorable opinion of
        Seller's counsel with respect to the matters set forth in Exhibit D
        hereto, in form and substance reasonably acceptable to Buyer.

2.      FURTHER ASSURANCES. Seller shall promptly provide such further
        assurances or agreements as Buyer may request in order to effect the
        purposes of the Agreement.

3.      BUYER AS ATTORNEY-IN-FACT. Upon the occurrence and during the
        continuation of an Event of Default, Buyer is hereby appointed the
        attorney-in-fact of Seller for the purpose of carrying out the
        provisions of the Agreement and taking any action and executing any
        instruments that Buyer 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, after an Event of Default has occurred and is continuing,
        Buyer shall have the right and power to (i) take any action Buyer deems
        prudent to direct the receipt of payments on any Mortgage Loan from the
        Servicer thereof to Buyer or its designee, including, without
        limitation, the sending of any letter which irrevocably instructs such
        Servicer to make all payments directly to Buyer or its designee, and
        (ii) receive, endorse and collect all checks made payable to the order
        of Seller representing any payment on account of the principal of or
        interest on any of the Purchased Securities and to give full discharge
        for the same.

4.      APPOINTMENT OF AGENT. MLCC hereby appoints MLMCI as its agent for
        purposes of reviewing and executing Confirmation/Funding Requests,
        determining Market Value, exercising any termination option provided for
        in Paragraph 15 of these Supplemental Terms, exercising MLCC's rights
        under any margin maintenance provision of the Agreement, exercising
        MLCC's rights under the default provisions of the Agreement and such
        other purposes as MLCC may direct. The appointment of such agent shall
        not relieve MLCC of its obligations as Buyer hereunder.

5.      SERVICING ARRANGEMENTS.

        (a)    The parties hereto agree and acknowledge that, notwithstanding
               the purchase and sale of the Purchased Securities contemplated
               hereby, Seller shall cause the Purchased Securities to continue
               to be serviced for the benefit of Buyer and, if Buyer shall
               exercise its rights to sell the Purchased Securities pursuant to
               this Agreement prior to the related Repurchase Date, Buyer's
               assigns; provided, however, that, the obligation of Seller to
               service or cause to be serviced the Purchased Securities for the
               benefit of Buyer as aforesaid shall cease upon the payment to
               Buyer of the Repurchase Price therefor.

        (b)    Seller shall service or caused to be serviced the Purchased
               Securities to be serviced in accordance with the servicing
               standards for similar assets generally


                                       19



<PAGE>   33

               employed by prudent servicers in the mortgage loan industry.

        (c)    Buyer may, in its sole discretion if an Event of Default shall
               have occurred and be continuing, without payment of any
               termination fee or any other amount to Seller, (i) sell its right
               to the Purchased Securities on a servicing released basis or (ii)
               terminate the Servicer with or without cause.

1.      CROSS-COLLATERALIZATION; RIGHT OF SET-OFF. Buyer may, in its sole
        discretion upon the occurrence and during the continuation of an Event
        of Default hereunder, proceed against any assets of Seller held by Buyer
        or any Affiliate under any agreement and shall have a right of set-off
        against any amounts owed by Buyer or any Affiliate to Seller under any
        agreement. In addition, the parties agree that Buyer may, in its sole
        discretion upon the occurrence and during the continuation of an event
        of default under any other agreement to which Seller and Buyer or any of
        its Affiliates are parties, proceed against any assets held by Buyer
        hereunder and shall have a right of set-off against any amounts owed by
        Buyer to Seller hereunder.

2.      EXPENSES. Seller shall pay its own expenses and all reasonable
        out-of-pocket costs and expenses: (1) of Buyer incident to the
        preparation and negotiation of the Agreement, the Custodial Agreement,
        any documents relating thereto, any amendments or waivers thereto, and
        the protection of the rights of Buyer thereunder, (including fees and
        disbursements of counsel up to a maximum amount of $25,000), (2) of
        Buyer incident to Buyer's due diligence review of the Mortgage Loans and
        the books and records of Seller relating thereto, up to a maximum amount
        of $75,000, and (3) of Buyer incident to the enforcement of payment of
        amounts due under the Agreement or the Custodial Agreement, whether by
        judicial proceedings or otherwise, including, without limitation, in
        connection with bankruptcy, insolvency, liquidation, reorganization,
        moratorium or other similar proceedings involving Seller.
        Notwithstanding any provision hereof to the contrary, the obligations of
        Seller under this Paragraph 23 shall be effective and enforceable
        whether or not any Transaction remains outstanding and shall survive
        payment of all other obligations owed by Seller to Buyer.

3.      COUNTERPARTS. The Agreement may be executed in any number of
        counterparts, each of which counterparts shall be deemed to be an
        original, and such counterparts shall constitute but one and the same
        instrument.

4.      BINDING TERMS. All of the covenants, stipulations, promises and
        agreements in the Agreement shall bind the successors and assigns of the
        parties hereto, whether expressed or not.

5.      NOTICES AND OTHER COMMUNICATIONS. Any provision of Paragraph 13 of the
        Master Repurchase Agreement to the contrary notwithstanding, any notice
        required or permitted by the Agreement shall be in writing (including
        telegraphic, facsimile or telex communication) and shall be effective
        and deemed delivered only when received by the party to which it is
        sent; provided, however, that a facsimile transmission
        shall be deemed 

                                       20




<PAGE>   34

        to be received when transmitted so long as the transmitting machine has
        provided an electronic confirmation of such transmission. Any such
        notice shall be sent to a party at the address or facsimile transmission
        number set forth in Annex II attached hereto.

6.      INCORPORATION OF TERMS. The Master Repurchase Agreement as supplemented
        hereby shall be read, taken and construed as one and the same
        instrument.




                                       21


<PAGE>   35

                                                                      EXHIBIT A

                                            CONFIRMATION/FUNDING REQUEST
<TABLE>
<CAPTION>
<S>                                          <C>
TO:  Long Beach Mortgage Company             FROM: Merrill Lynch Mortgage Capital Inc.
     1100 Town and Country Road, Ste 1600          101 Hudson Street, 12th Floor
     Orange, California 92868                      Jersey City, NJ  07302
     Attention: Terrin Enssle                      Attention:  Michael Fiorino
</TABLE>

Merrill Lynch Mortgage Capital Inc. ("Buyer") is pleased to confirm your sale
and our purchase of the Mortgage Loans listed on Attachment I hereto pursuant to
the Master Repurchase Agreement (including the supplemental terms set forth in
Annex I thereto), dated as of September 23, 1998 (the "Master Repurchase
Agreement") among Buyer and Long Beach Financial Corporation under the following
terms and conditions:

ORIG PRIN AMT OF MTG LOANS:
                                   -----     -----     -----     -----
REM PRIN AMT OF MTG LOANS:
                                   -----     -----     -----     -----
PURCHASE DATE:
                                   -----     -----     -----     -----
REPURCHASE DATE:
                                   -----     -----     -----     -----
PURCHASE PRICE:
                                   -----     -----     -----     -----
PRICING RATE:
                                   -----     -----     -----     -----
PRICE DIFFERENTIAL DUE:
                                   -----     -----     -----     -----
BUYER'S MARGIN AMOUNT:
                                   -----     -----     -----     -----
SELLER'S MARGIN AMOUNT:
                                   -----     -----     -----     -----

The Master Repurchase Agreement is incorporated by reference into this
Confirmation/Funding Request and made a part hereof as if it were fully set
forth herein. All capitalized terms used herein but not otherwise defined shall
have the meanings specified in the Master Repurchase Agreement.



 LONG BEACH MORTGAGE COMPANY                    MERRILL LYNCH MORTGAGE
                                                CAPITAL INC.

 BY:                                            BY:
         ---------------------------                   -------------------------
 NAME:                                          NAME
         ---------------------------                   -------------------------
 TITLE:                                         TITLE:
         ---------------------------                   -------------------------




                                      A-1


<PAGE>   36

                                                                    ATTACHMENT 1
                                                                    TO EXHIBIT A


                 CONFIRMATION/FUNDING REQUEST FOR MORTGAGE LOANS


                                 Request No. ___


                                 Date: _________


<TABLE>
<CAPTION>
<S>         <C>          <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>           <C>      <C>
 Investor     Product     Wire      Loan     Borrower     Loan    Purchase    Market     Note     No. Days   Maturity  Wet/
               Type       Date     Number    Last        Amount      Price    Value      Rate     Delinquent   Date    Dry
             --------     ----     ------    ---         ------    -------    ------     ----     ---------- -------   ---
</TABLE>

TOTALS:


















Long Beach Financial Corporation

By:    ______________________________

Title: ______________________________

Date:  ______________________________                         Amount to be
                                                              funded by Buyer:
                                                              $________________

-------------------------------------------------------------------------------
 **     Long Beach Mortgage Company hereby represents that as of the related
        Purchase Date no warehouse lien or other lien or encumbrance exists with
        respect to the above-referenced Mortgage Loans.


                                     A-1-1

<PAGE>   37

                                                                       EXHIBIT B


                             LIST OF CLOSING AGENTS






                                       B-1

<PAGE>   38

                                                                       EXHIBIT C




                               SERVICING AGREEMENT




                                      C-1

<PAGE>   39

                                                                       EXHIBIT D


                          OPINION OF COUNSEL TO SELLER

1.      Seller is a duly organized and validly existing corporation in good
        standing under the laws of the State of Delaware and has all power and
        authority (corporate and other) to enter into and perform its
        obligations under the Agreement. Seller is duly qualified to do business
        and is in good standing in each jurisdiction in which the character of
        the business transacted by it requires such qualification and in which
        the failure so to qualify would have a material adverse effect on the
        business, properties, prospects, assets or condition (financial or
        other) of Seller and its subsidiaries, considered as a whole.

2.      The Agreement has been duly authorized, executed and delivered by 
        Seller.

3.      The consummation of any of the transactions contemplated by the
        Agreement will not conflict with, result in a breach of, or constitute a
        default under the charter or bylaws of Seller or the terms of any
        indenture or other agreement or instrument known to us to which Seller
        is party or bound, or any order known to such counsel to be applicable
        to Seller or any regulations applicable to Seller, of any state or
        federal court, regulatory body, administrative agency, governmental body
        or arbitrator having jurisdiction over Seller.

4.      There is no pending or threatened action, suit or proceeding before any
        court or governmental agency, authority or body or any arbitrator
        involving Seller or relating to the transaction contemplated by the
        Agreement which, if adversely determined, would have a material adverse
        effect on Buyer.

5.      Each note relating to a Mortgage Loan will have been endorsed in a
        manner which satisfies any requirement of endorsement in order to
        transfer all right, title and interest in and to that Mortgage Loan from
        Seller to Buyer. Each assignment of Mortgage related to each Mortgage
        Loan is in recordable form and is sufficient under applicable law to
        validly and effectively transfer all right, title and interest of Seller
        to Buyer. The Agreement together with (a) the delivery of such related
        notes to the Custodian; (b) the endorsement of such Notes in blank; and
        (c) the delivery of the assignments of Mortgages related to the Mortgage
        Loans to the Custodian in recordable form assigning such Mortgages in
        blank, creates a valid, perfected security interest in such Mortgage
        Loans in favor of Custodian for the benefit of Buyer; such security
        interest will have the same priority and will be subject to the same
        security interests and liens as apply to such Mortgage Loans in the
        hands of Seller.

6.      The Agreement constitutes a valid and legally binding obligation of
        Seller enforceable against Seller in accordance with its terms, subject,
        as to enforcement, to bankruptcy, insolvency, reorganization and other
        laws of general applicability relating to or affecting creditors' rights
        generally and to general equity principles.


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<PAGE>   40

7.      No consent, approval, authorization or order of any state or federal
        court or government agency or body is required to be obtained by Seller
        for the consummation of the transactions contemplated by the Agreement.

8.      The consummation of any of the transactions contemplated by the
        Agreement will not conflict with, result in a breach of, or constitute a
        default under any regulations applicable to Seller, of any state or
        federal court, regulatory body, administrative agency, governmental body
        or arbitrator having jurisdiction over Seller.






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<PAGE>   41

                                                                       EXHIBIT E

                         REPRESENTATIONS AND WARRANTIES

                             Part I. Eligible Asset

        As to each Eligible Asset on a Purchase Date (and the related Mortgage,
mortgage Note, assignment of Mortgage and mortgaged property), Seller shall be
deemed to make the following representations and warranties to Buyer as of such
date and as of each date Market Value is determined. With respect to any
representations and warranties made to the best of Seller's knowledge, in the
event that it is discovered that the circumstances with respect to the related
Mortgage Loan are not accurately reflected in such representation and warranty
notwithstanding the knowledge or lack of knowledge of Seller, then,
notwithstanding that such representation and warranty is made to the best of
Seller's knowledge, such Mortgage Loan shall be assigned a Collateral Value of
zero.

        1. Seller has good title to and is the sole owner and holder of the
Mortgage Loan.

        2. Immediately prior to the pledge and grant of security interest to
Buyer, the Note and the Mortgage Loan were not subject to an assignment or
pledge, and Seller has full right and authority to pledge and assign the
Mortgage Loan to Buyer.

        3. Seller is transferring such Mortgage Loan to Buyer free and clear of
any and all liens, pledges, charges or security interests of any nature
encumbering the Mortgage Loan.

        4. The information set forth on the List of Eligible Assets is true and
correct in all material respects as of the date of the origination of the
Mortgage Loan.

        5. Each Mortgage Loan has been originated and serviced in compliance
with all applicable federal, state and local laws and regulations and the terms
of the related Note and Mortgage.

        6. The related Note and Mortgage are genuine and each is the legal,
valid and binding obligation of the maker thereof, enforceable in accordance
with its terms except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law).

        7. The related Mortgage is a valid and enforceable first lien or second
lien on the related mortgaged property, which mortgaged property, to the best of
Seller's knowledge, is free and clear of all encumbrances and liens (including
mechanics liens) having priority over the first lien of the Mortgage except for:
(i) liens for real estate taxes and assessments not yet due and payable; (ii)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected or considered in the lender's title
insurance policy delivered to the originator of the Mortgage Loan and




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<PAGE>   42

referred to in the appraisal made in connection with the origination of the
related Mortgage Loan and (iii) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage.

        8. Any security agreement, chattel mortgage or equivalent document
related to such Mortgage Loan establishes and creates a valid and enforceable
lien on the property described herein.

        9. Seller has not advanced funds, or induced, solicited or knowingly
received any advance of funds by a party other than the Borrower, directly or
indirectly, for the payment of any amount required under the Mortgage Loan under
the Mortgage Loan.

        10. Except as otherwise disclosed by written instruments included in the
related documents required to be held by the Custodian pursuant to the Custodial
Agreement with respect to such Mortgage Loan (the "Mortgage File"), Seller has
not impaired, waived, altered or modified the related Mortgage or Note in any
material respect, or satisfied, canceled, rescinded or subordinated such
Mortgage or Note in whole or in part or released all or any material portion of
the mortgaged property from the lien of the Mortgage, or executed any instrument
of release, cancellation, rescission or satisfaction of the Note or Mortgage.

        11. The Mortgage has not been satisfied, canceled or subordinated, in
whole, or rescinded, and the mortgaged property has not been released from the
lien of the Mortgage, in whole or in part (except for a release that does not
materially impair the security of the Mortgage Loan or a release the effect of
which is reflected in the loan-to-value ratio for the Mortgage Loan as set forth
in the List of Eligible Assets, nor to the best of Seller's knowledge has any
instrument been executed that would effect any such release, cancellation,
subordination or rescission;

        12. No condition exists which could give rise to any right of
rescission, set off, counterclaim, or defense including, without limitation, the
defense of usury, and no such right has been asserted.

        13. To the best of Seller's knowledge, there is no proceeding pending
for the total or partial condemnation and no eminent domain proceedings pending
affecting any mortgaged property.

        14. Each Mortgage Loan is covered by either (i) a mortgage title
insurance policy or other generally acceptable form of insurance policy
customary in the jurisdiction where the mortgaged property is located or (ii) if
generally acceptable in the jurisdiction where the mortgaged property is
located, an attorney's opinion of title given by an attorney licensed to
practice law in the jurisdiction where the mortgaged property is located. All of
Seller's rights under such policies, opinions or other instruments shall be
deemed to be transferred and assigned to Buyer upon transfer and pledge of the
Mortgage Loans hereunder. The title insurance policy has been issued by a title
insurer licensed to do business in the jurisdiction where the mortgaged property
is located, insuring the original lender, its successor and assigns, as to the
first or second priority lien, as applicable, of the Mortgage in the original
principal amount of the Mortgage 



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<PAGE>   43

Loan, subject to the exceptions contained in such policy. Seller is the sole
insured of such mortgagee title insurance policy, and such mortgagee title
insurance policy is in full force and effect and will be in force and effect
upon the consummation of the transactions contemplated by this Agreement. Seller
has not made and has no knowledge of any claims made as of the Purchase Date
under such mortgagee title insurance policy. Seller has no knowledge as to
whether or not any such claims may be made at any time in the future relating to
actions which predate the Purchase Date; and Seller shall notify Buyer if it
becomes aware of any such claim. Seller is not aware of any action by a prior
holder and Seller has not done, by act or omission, anything which could impair
the coverage or enforceability of such mortgagee title insurance policy or the
accuracy of such attorney's opinion of title.

        15. Except for delinquent monthly payments, there exists no material
default, breach, violation or event of acceleration existing under the related
Mortgage or the related Note and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration. Seller has not
waived any such default, breach, violation or event of acceleration.

        16. With respect to any Mortgage Loan which provides for an adjustable
interest rate, all rate adjustments made by Seller have been performed in
accordance with the terms of the related Note or subsequent modifications, if
any.

        17. With respect to any Mortgage Loan for which Seller is holding escrow
funds, and to the best of Seller's knowledge with respect to all other Mortgage
Loans, as of the time of origination, there are no delinquent taxes, ground
rents, water charges, sewer rents, assessments, insurance premiums, leasehold
payments, including assessments payable in future installments or other
outstanding charges, affecting the related mortgaged property.

        18. No foreclosure proceedings are pending against the related mortgaged
property, and to Seller's best knowledge, no material litigation or lawsuit
relating to the Mortgage Loan is pending and the Mortgage Loan is not subject to
any pending bankruptcy or insolvency proceeding.

        19. The Mortgage Loan obligates the Borrower thereunder to maintain a
hazard insurance policy ("Hazard Insurance") in an amount at least equal to the
lesser of (i) the amount necessary to fully compensate for any damage or loss to
the improvements which are part of such mortgaged property on a replacement cost
basis and (ii) the outstanding principal balance of the Mortgage Loan, in either
case in an amount sufficient to avoid the application of any "co-insurance
provisions". If the mortgaged property is in an area identified in the Federal
Register by the Federal Emergency Management Agency ("FEMA") as having special
flood hazards, a flood insurance policy is in effect which met the requirements
of FEMA at the time such policy was issued. The Mortgage obligates the Borrower
to maintain the Hazard Insurance and, if applicable, flood insurance policy at
the Borrower's cost and expense, and on the Borrower's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Borrower's cost and expense, and to seek reimbursement therefor from the
Borrower. The mortgaged property is covered by Hazard Insurance.



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<PAGE>   44

        20. The Note is not and has not been secured by any collateral except
the lien on the corresponding Mortgage and the security interest of any
applicable security agreement or chattel mortgage.

        21. Subject to any applicable laws, the Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event that the mortgaged property is sold or
transferred without the prior written consent of the Mortgagee thereunder. The
Mortgage contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for the realization against
the mortgaged property of the benefits of the security provided thereby,
including (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale or judicial foreclosure and (ii) otherwise by judicial
foreclosure. To the best of Seller's knowledge, since the date of origination of
the Mortgage Loan, the mortgaged property has not been subject to any bankruptcy
proceeding or foreclosure proceeding and the Borrower has not filed for
protection under applicable bankruptcy laws. There is no homestead or other
exemption available to the Borrower that would interfere with the right to sell
the mortgaged property at a trustee's sale or the right to foreclose the
Mortgage. In the event the Mortgage constitutes a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has been properly designated
and currently so serves and is named in the Mortgage, and no fees or expenses
are or will become payable by Buyer to the trustee under the deed of trust,
except in connection with a trustee's sale after default by the related
Borrower. The Borrower has not notified Seller and Seller has no knowledge of
any relief requested or allowed to the Borrower under the Soldiers and Sailors
Civil Relief Act of 1940.

        22. Except as set forth in the appraisal which forms part of the related
Mortgage File, the mortgaged property, normal wear and tear excepted, is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect materially and adversely the value of
the mortgaged property as security for the Mortgage Loan or the use for which
the premises were intended and Seller has no knowledge of any proceeding pending
for the total or partial condemnation of such Mortgage Property.

        23. There was no fraud involved in the origination of the Mortgage Loan
by the mortgagee or, to Seller's knowledge, by the Borrower, any appraiser or
any other party involved in the origination of the Mortgage Loan.

        24. Each Mortgage File contains an appraisal of the mortgaged property
indicating an appraised value equal to the appraised value identified for such
mortgaged property on the List of Eligible Assets, unless indicated in Seller's
Underwriting Guidelines. Each appraisal has been performed in accordance with
the provisions of the Financial Institutions Reform, Recovery and Enforcement
Act of 1989.

        25. All parties which have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) in compliance with any
and all applicable "doing business" and licensing requirements of the laws of
the state wherein the mortgaged property is located.



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<PAGE>   45

        26. No improvements on the related mortgaged property encroach on
adjoining properties (and in the case of a condominium unit, such improvements
are within the project with respect to that unit), and no improvements on
adjoining properties encroach upon the mortgaged property unless there exists in
the Mortgage File a title policy with endorsements which insure against losses
sustained by the insured as a result of such encroachments.

        27. Principal payments on the Mortgage Loan commenced no more than sixty
days after the proceeds of the Mortgage Loan were disbursed and the Note is
payable on the first day of each month.

        28. The Mortgage Loan bears interest at the mortgage interest rate as
disclosed in the electronic tape relating to the Mortgage Loans forwarded by
Seller to Buyer and the Note does not permit negative amortization.

        29. With respect to escrow deposits, if any, all such payments are in
the possession of, or under the control of, Seller and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or escrow advances or
other charges or payments due Seller have been capitalized under any Mortgage or
the related Note.

        30. No Mortgage Loan contains provisions pursuant to which monthly
payments are: (i) paid or partially paid with funds deposited in any separate
account established by Seller, the Borrower, or anyone on behalf of the
Borrower; (ii) paid by any source other than the Borrower or (iii) contains any
other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature.

        31. To Seller's best knowledge, the mortgaged property is lawfully
occupied under applicable law.

        32. Each Mortgage Loan has been underwritten in accordance with Seller's
Underwriting Guidelines and Policies (on the basis of its classification of an A
Quality Non-Conforming Mortgage Loan, A- Quality Non-Conforming Mortgage Loan, B
Quality Non-Conforming Mortgage Loan, B- Quality Non-Conforming Mortgage Loan, C
Quality Non-Conforming Mortgage Loan or D Quality Non-Conforming Mortgage Loan,
as applicable) in effect at the time the Mortgage Loan was originated or
purchased by Seller.

        33. No law relating to servicing, collection or notification practices
and no law relating to origination practices, has been violated in connection
with any Mortgage Loan transferred to Buyer pursuant to this Agreement,
including, without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws. The Mortgage Loan has been serviced by Seller and any predecessor servicer
in accordance with the terms of the Note.


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<PAGE>   46

        34. No Mortgage Loan was made in connection with (a) the construction or
rehabilitation of a mortgaged property or (b) facilitating the trade-in or
exchange of a mortgaged property.

               (A) Except for Mortgage Loans for which a portion of the proceeds
        of the loan, such amount not exceeding $10,000, are held by the Seller
        to cover the cost of repairs to the related Mortgaged Property, such
        Mortgage Loans not to exceed 10% of all Mortgage Loans subject to
        Transactions, by principal balance, the proceeds of the Mortgage Loan
        have been fully disbursed to or for the account of the Borrower and
        there is no obligation for the Mortgagee to advance additional funds
        thereunder, and any and all requirements as to completion of any on-site
        or off-site improvement and as to disbursements of any escrow funds
        therefor have been complied with. All costs, fees and expenses incurred
        in making or closing the Mortgage Loan and the recording of the Mortgage
        have been paid, and the Borrower is not entitled to any refund of any
        amounts paid or due to the Mortgagee pursuant to the Note or Mortgage.

        1. To the best of Seller's knowledge, there are no mechanics' or similar
liens or claims that have been filed for work, labor or material (and no rights
are outstanding that under law could give rise to such lien) affecting the
related mortgaged property that are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage.

        2. As to each fixed rate Mortgage Loan, interest is calculated on the
Note on the basis of twelve 30 day months and a 360 day year, and, as to each
adjustable rate Mortgage Loan, interest is calculated on the Note on the basis
of the number of days in the related interest accrual period.

        3. The mortgaged property consists of either (i) a single parcel of real
property or (ii) more than one parcel of real property (as determined for tax
purposes only) which parcels are contiguous and are subject to a single deed or
title, in each case with a detached single family residence erected thereon, or
a two- to four-family dwelling, or an individual condominium unit in a low-rise
or high-rise condominium project, or a manufactured dwelling attached to a
permanent foundation, or an individual unit in a planned unit development or a
townhouse. No residence or dwelling is a mobile home. No Mortgage Loan is
secured by a leasehold estate.





                                      E-6



<PAGE>   47


                                    ANNEX II



             Names and Addresses for Communications Between Parties



                       MERRILL LYNCH MORTGAGE CAPITAL INC.
                            Timothy M. Loughlin, Jr.
                                 Vice President
                        Merrill Lynch World Headquarters
                             World Financial Center
                             North Tower - 8th Floor
                            New York, New York 10281
                            Telephone: (212) 449-5939
                            Telecopy: (212) 449-6673

                        MERRILL LYNCH CREDIT CORPORATION
                     c/o Merrill Lynch Mortgage Capital Inc.
                            Timothy M. Loughlin, Jr.
                                 Vice President
                        Merrill Lynch World Headquarters
                             World Financial Center
                             North Tower - 8th Floor
                            New York, New York 10281
                            Telephone: (212) 449-5939
                            Telecopy: (212) 449-6673

                           in each case with a copy to

                                 Michael A. Blum
                                    Director
                        Merrill Lynch World Headquarters
                             World Financial Center
                             North Tower - 8th Floor
                            New York, New York 10281
                            Telephone: (212) 449-8486
                            Telecopy: (212) 449-6673

                                       and

                              Michael P. Peck, Esq.
                                Brown & Wood LLP
                             One World Trade Center
                            New York, New York 10048
                            Telephone: (212) 839-5576
                            Telecopy: (212) 839-5599


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<PAGE>   48

                                       and

                           LONG BEACH MORTGAGE COMPANY
                                  Terrin Enssle
                           1100 Town and Country Road
                                   Suite 1600
                            Orange, California 92868
                            Telephone: (714) 541-5378
                            Telecopy: (714) 560-0508








                                      II-1