BEAR STEARNS ASSET BACKED SECURITIES, INC.,

                                   Depositor,

                            EMC MORTGAGE CORPORATION,

                           Seller and Master Servicer,

                                       and

                       LASALLE BANK NATIONAL ASSOCIATION,

                                     Trustee
                              ____________________

                         POOLING AND SERVICING AGREEMENT

                           Dated as of January 1, 2004
                    ________________________________________

               BEAR STEARNS ASSET BACKED SECURITIES TRUST 2004-HE1

                   ASSET-BACKED CERTIFICATES, SERIES 2004-HE1



<PAGE>



                                TABLE OF CONTENTS

                                                                            Page
                                                           ----


                                          ARTICLE I

                                         DEFINITIONS
Section 1.01    Defined Terms..................................................6
Section 1.02    Allocation of Certain Interest Shortfalls.....................50


                                         ARTICLE II

                                  CONVEYANCE OF TRUST FUND
                               REPRESENTATIONS AND WARRANTIES
Section 2.01    Conveyance of Trust Fund......................................52
Section 2.02    Acceptance of the Mortgage Loans..............................54
Section 2.03    Representations, Warranties and Covenants of the Master
                Servicer and the Seller.......................................56
Section 2.04    Representations and Warranties of the Depositor...............61
Section 2.05    Delivery of Opinion of Counsel in Connection with
                Substitutions and Repurchases.................................62
Section 2.06    Countersignature and Delivery of Certificates.................63


                                         ARTICLE III

                     ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 3.01    The Master Servicer to act as Master Servicer.................65
Section 3.02    Due-on-Sale Clauses; Assumption Agreements....................66
Section 3.03    Subservicers..................................................67
Section 3.04    Documents, Records and Funds in Possession of the Master
                Servicer To Be Held for Trustee...............................68
Section 3.05    Maintenance of Hazard Insurance...............................68
Section 3.06    Presentment of Claims and Collection of Proceeds..............69
Section 3.07    Maintenance of the Primary Mortgage Insurance Policies........69
Section 3.08    Fidelity Bond, Errors and Omissions Insurance.................70
Section 3.09    Realization Upon Defaulted Mortgage Loans; Determination
                of Excess Liquidation Proceeds and Realized Losses;
                Repurchases of Certain Mortgage Loans.........................70
Section 3.10    Servicing Compensation........................................73
Section 3.11    REO Property..................................................73
Section 3.12    Liquidation Reports...........................................74
Section 3.13    Annual Certificate as to Compliance...........................74
Section 3.14    Annual Independent Certified Public Accountants'
                Servicing Report..............................................74


                                        i

<PAGE>



Section 3.15    Books and Records.............................................75
Section 3.16    Reports Filed with Securities and Exchange Commission.........75
Section 3.17    UCC...........................................................77
Section 3.18    Optional Purchase of Certain Mortgage Loans...................77
Section 3.19    Obligations of the Master Servicer in Respect of Mortgage
                Rates and Scheduled Payments..................................77
Section 3.20    Reserve Fund..................................................78
Section 3.21    Advancing Facility............................................79


                                   ARTICLE IV

                                    ACCOUNTS
Section 4.01    Collection of Mortgage Loan Payments; Protected Account.......81
Section 4.02    Permitted Withdrawals From the Protected Account..............83
Section 4.03    Collection of Taxes; Assessments and Similar Items;
                Escrow Accounts...............................................85
Section 4.04    Distribution Account..........................................85
Section 4.05    Permitted Withdrawals and Transfers from the Distribution
                Account.......................................................86
Section 4.06    Class P Certificate Account...................................86


                                    ARTICLE V

                           DISTRIBUTIONS AND ADVANCES
Section 5.01    Advances......................................................87
Section 5.02    Compensating Interest Payments................................88
Section 5.03    REMIC Distributions...........................................88
Section 5.04    Distributions.................................................88
Section 5.04A   Allocation of Realized Losses.................................93
Section 5.05    Monthly Statements to Certificateholders......................95
Section 5.06    REMIC Designations and REMIC Distributions....................98
Section 5.07    Policy Matters...............................................100


                                   ARTICLE VI

                                THE CERTIFICATES
Section 6.01    The Certificates.............................................104
Section 6.02    Certificate Register; Registration of Transfer and Exchange
                of Certificates..............................................105
Section 6.03    Mutilated, Destroyed, Lost or Stolen Certificates............108
Section 6.04    Persons Deemed Owners........................................109
Section 6.05    Access to List of Certificateholders' Names and Addresses....109
Section 6.06    Book-Entry Certificates......................................109
Section 6.07    Notices to Depository........................................110
Section 6.08    Definitive Certificates......................................110


                                             ii

<PAGE>



Section 6.09    Maintenance of Office or Agency..............................111


                                         ARTICLE VII

                            THE DEPOSITOR AND THE MASTER SERVICER
Section 7.01    Liabilities of the Depositor and the Master Servicer.........112
Section 7.02    Merger or Consolidation of the Depositor or the Master
                Servicer.....................................................112
Section 7.03    Indemnification of the Trustee and the Master Servicer.......112
Section 7.04    Limitations on Liability of the Depositor, the Master
                Servicer and Others..........................................113
Section 7.05    Master Servicer Not to Resign................................114
Section 7.06    Successor Master Servicer....................................114
Section 7.07    Sale and Assignment of Master Servicing......................114


                                        ARTICLE VIII

                           DEFAULT; TERMINATION OF MASTER SERVICER
Section 8.01    Events of Default............................................117
Section 8.02    Trustee to Act; Appointment of Successor.....................119
Section 8.03    Notification to Certificateholders...........................120
Section 8.04    Waiver of Defaults...........................................121


                                         ARTICLE IX

                                   CONCERNING THE TRUSTEE
Section 9.01    Duties of Trustee............................................122
Section 9.02    Certain Matters Affecting the Trustee........................123
Section 9.03    Trustee Not Liable for Certificates or Mortgage Loans........125
Section 9.04    Trustee May Own Certificates.................................126
Section 9.05    Trustee's Fees and Expenses..................................126
Section 9.06    Eligibility Requirements for Trustee.........................126
Section 9.07    Insurance....................................................127
Section 9.08    Resignation and Removal of Trustee...........................127
Section 9.09    Successor Trustee............................................128
Section 9.10    Merger or Consolidation of Trustee...........................128
Section 9.11    Appointment of Co-Trustee or Separate Trustee................128
Section 9.12    Tax Matters..................................................130


                                          ARTICLE X

                                         TERMINATION
Section 10.01   Termination upon Liquidation or Repurchase of all
                Mortgage Loans...............................................133


                                             iii

<PAGE>



Section 10.02   Final Distribution on the Certificates.......................133
Section 10.03   Additional Termination Requirements..........................135


                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS
Section 11.01   Amendment....................................................136
Section 11.02   Recordation of Agreement; Counterparts.......................137
Section 11.03   Governing Law................................................137
Section 11.04   Intention of Parties.........................................138
Section 11.05   Notices......................................................138
Section 11.06   Severability of Provisions...................................139
Section 11.07   Assignment...................................................139
Section 11.08   Limitation on Rights of Certificateholders...................139
Section 11.09   Inspection and Audit Rights..................................140
Section 11.10   Certificates Nonassessable and Fully Paid....................140
Section 11.11   Certificate Insurer Rights...................................141



                                       iv

<PAGE>



EXHIBITS

Exhibit A-1     Form of Class A Certificates
Exhibit A-2     Form of Class M Certificates
Exhibit A-3     Form of Class CE Certificates
Exhibit A-4     Form of Class P Certificates
Exhibit A-5     Form of Class R Certificates
Exhibit B       Mortgage Loan Schedule
Exhibit C       [Reserved]
Exhibit D       Form of Transfer Affidavit
Exhibit E       Form of Transferor Certificate
Exhibit F       Form of Investment Letter (Non-Rule 144A)
Exhibit G       Form of Rule 144A Investment Letter
Exhibit H       Form of Request for Release
Exhibit I       DTC Letter of Representations
Exhibit J       Schedule of Mortgage Loans with Lost Notes
Exhibit K       Form of Custodial Agreement
Exhibit L       Form of Class III-A Policy
Exhibit M       Form of Back-Up Certification


                                        v

<PAGE>



                  POOLING AND SERVICING AGREEMENT, dated as of January 1, 2004,
among BEAR STEARNS ASSET BACKED SECURITIES, INC., a Delaware corporation, as
depositor (the "Depositor"), EMC MORTGAGE CORPORATION, a Delaware corporation,
as seller (in such capacity, the "Seller") and as master servicer (in such
capacity, the "Master Servicer") and LASALLE BANK NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity, but solely as
trustee (the "Trustee").

                              PRELIMINARY STATEMENT

                  The Depositor is the owner of the Trust Fund that is hereby
conveyed to the Trustee in return for the Certificates.


                                     REMIC I
                                     -------

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


                 Uncertificated
                     REMIC I         Initial Uncertificated     Latest Possible
Designation     Pass-Through Rate      Principal Balance       Maturity Date (1)
-----------     -----------------    ----------------------    -----------------
   AA              Variable(2)         $245,730,455.29         February 25, 2034
   I-A-1           Variable(2)         $    266,790.00         February 25, 2034
   I-A-2           Variable(2)         $    213,485.00         February 25, 2034
   II-A-1          Variable(2)         $    683,995.00         February 25, 2034
   II-A-2          Variable(2)         $     75,995.00         February 25, 2034
   III-A           Variable(2)         $    746,890.00         February 25, 2034
   M-1             Variable(2)         $    169,255.00         February 25, 2034
   M-2             Variable(2)         $    135,405.00         February 25, 2034
   M-3             Variable(2)         $     43,880.00         February 25, 2034
   M-4             Variable(2)         $     32,595.00         February 25, 2034
   M-5             Variable(2)         $     36,360.00         February 25, 2034
   M-6             Variable(2)         $     31,340.00         February 25, 2034
   ZZ              Variable(2)         $  2,578,917.25         February 25, 2034
   P                0.00%(2)           $        100.00         February 25, 2034
   1A              Variable(2)         $      2,515.03         February 25, 2034


                                      -1-


<PAGE>


   1B              Variable(2)         $     12,120.53         February 25, 2034
   2A              Variable(2)         $      3,979.79         February 25, 2034
   2B              Variable(2)         $     19,179.59         February 25, 2034
   3A              Variable(2)         $      3,911.15         February 25, 2034
   3B              Variable(2)         $     18,848.95         February 25, 2034
   XX              Variable(2)         $250,684,807.50         February 25, 2034
___________________________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for each REMIC I Regular Interest.
(2)  Calculated in accordance with the definition of "Uncertificated REMIC I
     Pass-Through Rate" herein.

                                    REMIC II
                                    --------

                  As provided herein, the Trustee will make an election to treat
the segregated pool of assets consisting of the REMIC I Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC II". The Class R-2 Certificates will represent the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions.

                  The following table irrevocably sets forth the Class
designation, Pass-Through Rate and Initial Certificate Principal Balance for
each Class of Certificates that represents one or more of the "regular
interests" in REMIC II created hereunder.


                                        Initial Certificate      Assumed Final
   Designation      Pass-Through Rate    Principal Balance      Maturity Date(1)
----------------    -----------------   -------------------    -----------------
      I-A-1            Variable(2)        $ 53,358,000.00      February 25, 2034
      I-A-2            Variable(2)        $ 42,697,000.00      February 25, 2034
     II-A-1            Variable(2)        $136,799,000.00      February 25, 2034
     II-A-2            Variable(2)        $ 15,199,000.00      February 25, 2034
      III-A            Variable(2)        $149,378,000.00      February 25, 2034
       M-1             Variable(2)        $ 33,851,000.00      February 25, 2034
       M-2             Variable(2)        $ 27,081,000.00      February 25, 2034
       M-3             Variable(2)        $  8,776,000.00      February 25, 2034
       M-4             Variable(2)        $  6,519,000.00      February 25, 2034
       M-5             Variable(2)        $  7,272,000.00      February 25, 2034
       M-6             Variable(2)        $  6,268,000.00      February 25, 2034
Class CE Interest      Variable(2)        $ 14,292,725.09      February 25, 2034
Class P Interest        0.00%(2)          $        100.00      February 25, 2034
___________________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date in the month following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for each REMIC II Regular Interest.
(2)  Calculated in accordance with the definition of "Pass-Through Rate" herein.


                                       -2-

<PAGE>



(3)  The Class CE Interest will accrue interest at its variable Pass-Through
     Rate on the Uncertificated Notional Amount of the Class CE Interest
     outstanding from time to time which shall equal the Uncertificated
     Principal Balance of the REMIC I Regular Interests (other than REMIC I
     Regular Interest P). The Class CE Interest will not accrue interest on its
     Certificate Principal Balance.
(4)  The Class P Interest is not entitled to distributions in respect of
     interest.

                                    REMIC III
                                    ---------

                  As provided herein, the Trustee shall make an election to
treat the segregated pool of assets consisting of the Class CE Interest as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III." The Class R-III Interest represents the sole class
of "residual interests" in REMIC III for purposes of the REMIC Provisions.

                  The following table sets forth (or describes) the Class
designation, Pass-Through Rate and Initial Certificate Principal Balance for the
indicated Class of Certificates that represents a "regular interest" in REMIC
III created hereunder:


                                           Initial Aggregate
                                              Certificate       Latest Possible
  Class Designation    Pass-Through Rate   Principal Balance    Maturity Date(1)
---------------------  -----------------   ------------------  -----------------
Class CE Certificates     Variable(2)       $ 14,292,725.09    February 25, 2034
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for the Class CE Certificates.
(2)  The Class CE Certificates will receive 100% of amounts received in respect
     of the Class CE Interest.

                                    REMIC IV
                                    --------

                  As provided herein, the Trustee shall make an election to
treat the segregated pool of assets consisting of the Class P Interest as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC IV." The Class R-IV Interest represents the sole class
of "residual interests" in REMIC IV for purposes of the REMIC Provisions.

                  The following table sets forth (or describes) the Class
designation, Pass-Through Rate and Initial Certificate Principal Balance for the
indicated Class of Certificates that represents a "regular interest" in REMIC IV
created hereunder:

                                           Initial Aggregate
                                              Certificate       Latest Possible
  Class Designation    Pass-Through Rate   Principal Balance    Maturity Date(1)
---------------------  -----------------   ------------------  -----------------
Class P Certificates         0.00%(2)            $100.00       February 25, 2034
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for the Class P Certificates.


                                       -3-

<PAGE>



(2)  The Class P Certificates will receive 100% of amounts received in respect
     of the Class P Interest.

                  The Trust Fund shall be named, and may be referred to as, the
"Bear Stearns Asset Backed Securities Trust 2004-HE1." The Certificates issued
hereunder may be referred to as "Asset- Backed Certificates, Series 2004-HE1"
(including for purposes of any endorsement or assignment of a Mortgage Note or
Mortgage).

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


                                       -4-

<PAGE>






                                       -5-

<PAGE>



                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01 DEFINED TERMS.

         In addition to those terms defined in Section 1.02, whenever used in
this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:

         ACCEPTED SERVICING PRACTICES: With respect to each Mortgage Loan, those
mortgage servicing practices (including collection procedures) that are in
accordance with all applicable statutes, regulations and prudent mortgage
banking practices for similar mortgage loans.

         ACCOUNT: The Distribution Account, the Reserve Account, the Class P
Certificate Account, the Class III-A Policy Payments Account and the Protected
Account.

         ACCRUAL PERIOD: With respect to the Certificates (other than the Class
CE, Class P and the Residual Certificates) and any Distribution Date, the period
from and including the immediately preceding Distribution Date (or with respect
to the first Accrual Period, the Closing Date) to and including the day prior to
such Distribution Date. With respect to the Class CE Certificates and any
Distribution Date, the calendar month immediately preceding such Distribution
Date. All calculations of interest on the Certificates (other than the Class CE,
Class P and the Residual Certificates) will be made on the basis of the actual
number of days elapsed in the related Accrual Period. All calculations of
interest on the Class CE Certificates will be made on the basis of a 360- day
year consisting of twelve 30-day months.

         ACCRUAL RATE: The rate set forth in the Insurance Agreement. The
Accrual Rate shall be computed on the basis of the actual number of days elapsed
over the actual number of days in the current calendar year. In no event shall
the Accrual Rate exceed the maximum rate permissible under law applicable to
this Agreement limiting interest rates.

         ADVANCE: An advance of delinquent payments of principal or interest in
respect of a Mortgage Loan required to be made by the Master Servicer as
provided in Section 5.01 hereof.

         AGREEMENT: This Pooling and Servicing Agreement and any and all
amendments or supplements hereto made in accordance with the terms herein.

         ADJUSTABLE RATE MORTGAGE LOAN: Each of the Mortgage Loans identified in
the Mortgage Loan Schedule as having a Mortgage Rate that is subject to
adjustment.

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



                                       -6-

<PAGE>



         AMOUNT HELD FOR FUTURE DISTRIBUTION: As to any Distribution Date, the
aggregate amount held in the Protected Account at the close of business on the
immediately preceding Determination Date on account of (i) all Scheduled
Payments or portions thereof received in respect of the Mortgage Loans due after
the related Due Period and (ii) Principal Prepayments, Liquidation Proceeds and
Insurance Proceeds received in respect of such Mortgage Loans after the last day
of the related Prepayment Period.

         APPLIED REALIZED LOSS AMOUNT: With respect to any Distribution Date and
a Class of Offered Certificates, the sum of the Realized Losses with respect to
the Mortgage Loans which have been applied in reduction of the Certificate
Principal Balance of that Class of Certificates pursuant to Section 5.04A of
this Agreement which have not previously been reimbursed.

         APPRAISED VALUE: With respect to any Mortgage Loan originated in
connection with a refinancing, the appraised value of the Mortgaged Property
based upon the appraisal made at the time of such refinancing or, with respect
to any other Mortgage Loan, the lesser of (x) the appraised value of the
Mortgaged Property based upon the appraisal made by a fee appraiser at the time
of the origination of the related Mortgage Loan, and (y) the sales price of the
Mortgaged Property at the time of such origination.

         AVOIDED PAYMENT: As defined in the Class III-A Policy.

         BASIS RISK SHORTFALL: With respect to any Distribution Date and any
Class of Offered Certificates, the excess, if any, of (a) the amount of Current
Interest that such Class would have been entitled to receive on such
Distribution Date had the Pass-Though Rate applicable to such Class been
calculated at a per annum rate equal to One-Month LIBOR plus the related
Certificate Margin, over (b) the amount of Current Interest that such Class
received on such Distribution Date at a per annum rate equal to the applicable
Net Rate Cap.

         BASIS RISK SHORTFALL CARRY FORWARD AMOUNT: With respect to any
Distribution Date and any Class of Offered Certificates, Basis Risk Shortfalls
for all previous Distribution Dates not previously paid, together with interest
thereon at a rate equal to the related Pass-Through Rate for such Distribution
Date.

         BANKRUPTCY CODE: Title 11 of the United States Code.

         BOOK-ENTRY CERTIFICATES: Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 6.06). As of the Closing
Date, each Class of Regular Certificates (other than the Class CE Certificates
and Class P Certificates) constitutes a Class of Book-Entry Certificates.

         BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a
day on which banking institutions in The City of New York, New York,
Minneapolis, Minnesota or the city in which the


                                       -7-

<PAGE>



Corporate Trust Office of the Trustee or the principal office of the Certificate
Insurer or the Master Servicer is located are authorized or obligated by law or
executive order to be closed.

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

         CERTIFICATE: Any one of the certificates of any Class executed and
authenticated by the Trustee in substantially the forms attached hereto as
Exhibits A-1 through A-5.

         CERTIFICATE INSURER: Ace Guaranty Corp., a Maryland domiciled insurance
company, or any successor thereto.

         CERTIFICATE INSURER CONTACT PERSON: The officer designated by the
Master Servicer to provide information to the Certificate Insurer pursuant to
Section 5.07(i).

         CERTIFICATE INSURER DEFAULT: As defined in Section 5.07(l).

         CERTIFICATE INSURER PREMIUM AMOUNT: With respect to the Class III-A
Policy and each Distribution Date, an amount equal to the product of the
Certificate Insurer Premium Rate and the Certificate Principal Balance of the
Class III-A Certificates immediately prior to such Distribution Date.

         CERTIFICATE INSURER PREMIUM RATE: A percentage equal to one twelfth
(1/12) of the "premium percentage" set forth in the Premium Letter.

         CERTIFICATE MARGIN: With respect to the Class I-A-1 Certificates and,
for purposes of the definition of "One-Month LIBOR Pass-Through Rate", REMIC I
Regular Interest I-A-1, 0.20%.

         With respect to the Class I-A-2 Certificates and, for purposes of the
definition of "One- Month LIBOR Pass-Through Rate", REMIC I Regular Interest
I-A-2, 0.65% in the case of each Distribution Date through and including the
first possible Optional Termination Date and 1.30% in the case of each
Distribution Date thereafter.

         With respect to the Class II-A-1 Certificates and, for purposes of the
definition of "One- Month LIBOR Pass-Through Rate", REMIC I Regular Interest
II-A-1, 0.32% in the case of each Distribution Date through and including the
first possible Optional Termination Date and 0.64% in the case of each
Distribution Date thereafter.

         With respect to the Class II-A-2 Certificates and, for purposes of the
definition of "One- Month LIBOR Pass-Through Rate", REMIC I Regular Interest
II-A-2, 0.45% in the case of each Distribution Date through and including the
first possible Optional Termination Date and 0.90% in the case of each
Distribution Date thereafter.

         With respect to the Class III-A Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest
III-A, 0.32% in the case of each Distribution


                                       -8-

<PAGE>



Date through and including the first possible Optional Termination Date and
0.64% in the case of each Distribution Date thereafter.

         With respect to the Class M-1 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-1,
0.65% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 0.975% in the case of each Distribution
Date thereafter.

         With respect to the Class M-2 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-2,
1.30% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 1.95% in the case of each Distribution
Date thereafter.

         With respect to the Class M-3 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-3,
1.50% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 2.25% in the case of each Distribution
Date thereafter.

         With respect to the Class M-4 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-4,
1.75% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 2.625% in the case of each Distribution
Date thereafter.

         With respect to the Class M-5 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-5,
2.00% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 3.00% in the case of each Distribution
Date thereafter.

         With respect to the Class M-6 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-6,
4.00% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 6.00% in the case of each Distribution
Date thereafter.

         CERTIFICATE NOTIONAL BALANCE: With respect to the Class CE Certificates
and any Distribution Date, the Uncertificated Principal Balance of the REMIC I
Regular Interests (other than REMIC I Regular Interest P) for such Distribution
Date.

         CERTIFICATE OWNER: With respect to a Book-Entry Certificate, the Person
that is the beneficial owner of such Book-Entry Certificate.

         CERTIFICATE PRINCIPAL BALANCE: As to any Certificate (other than any
Class CE Certificate or Class R Certificate) and as of any Distribution Date,
the Initial Certificate Principal Balance of such Certificate less the sum of
(i) all amounts distributed with respect to such Certificate in reduction of the
Certificate Principal Balance thereof on previous Distribution Dates pursuant to
Section 5.04, and (ii) any Applied Realized Loss Amounts allocated to such
Certificate on previous Distribution Dates. Exclusively for the purpose of
determining any subrogation rights of the Certificate Insurer


                                       -9-

<PAGE>



arising under Section 5.07 hereof, the Certificate Principal Balance of the
Class III-A Certificates shall not be reduced by the amount of any payments made
by the Certificate Insurer in respect of principal on such Certificates under
the Class III-A Policy, except to the extent such payment shall have been
reimbursed to the Certificate Insurer pursuant to the provisions of this
Agreement.

         CERTIFICATE REGISTER: The register maintained pursuant to Section 6.02
hereof.

         CERTIFICATEHOLDER OR HOLDER: The person in whose name a Certificate is
registered in the Certificate Register (initially, Cede & Co., as nominee for
the Depository, in the case of any Book- Entry Certificates) and, with respect
to the Class III-A Certificates, the Certificate Insurer to the extent of any
Reimbursement Amount.

         CLASS: All Certificates bearing the same Class designation as set forth
in Section 6.01 hereof.

         CLASS A CERTIFICATES: Collectively, the Class I-A-1, Class I-A-2, Class
II-A-1, Class II-A-2 and Class III-A Certificates.

         CLASS A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the Principal Distribution Amount for such
Distribution Date and (y) the excess, if any, of (i) the aggregate Certificate
Principal Balance of the Class A Certificates immediately prior to such
Distribution Date, over (ii) the lesser of (a) the product of (1) 58.50% and (2)
the aggregate Stated Principal Balance of the Mortgage Loans as of the last day
of the related Due Period, and (b) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period minus $2,507,454.

         CLASS I-A CERTIFICATE: Any of the Class I-A-1 Certificates or the Class
I-A-2 Certificates.

         CLASS I-A-1 CERTIFICATE: Any Certificate designated as a "Class I-A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class I-A-1 Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS I-A-2 CERTIFICATE: Any Certificate designated as a "Class I-A-2
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class I-A-2 Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS I-A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
with respect to the Class I-A Certificates and any Distribution Date, is the
product of the Class A Principal Distribution Amount and a fraction, the
numerator of which is the Principal Funds for Loan Group I for such Distribution
Date and the denominator of which is the Principal Funds for all Loan Groups for
such Distribution Date.

         CLASS II-A CERTIFICATE: Any of the Class II-A-1 Certificates or the
Class II-A-2 Certificates.



                                      -10-

<PAGE>



         CLASS II-A-1 CERTIFICATE: Any Certificate designated as a "Class II-A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class II-A-1 Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS II-A-2 CERTIFICATE: Any Certificate designated as a "Class II-A-2
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class II-A-2 Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS II-A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
with respect to the Class II-A Certificates and any Distribution Date, is the
product of the Class A Principal Distribution Amount and a fraction, the
numerator of which is the Principal Funds for Loan Group II for such
Distribution Date and the denominator of which is the Principal Funds for all
Loan Groups for such Distribution Date.

         CLASS III-A CERTIFICATE: Any Certificate designated as a "Class III-A
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class III-A Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS III-A POLICY: The irrevocable financial guaranty insurance
policy, No. D-2004-2, including any endorsements thereto, issued by the
Certificate Insurer with respect to the Class III-A Certificates, in the form
attached hereto as Exhibit L.

         CLASS III-A POLICY PAYMENTS ACCOUNT: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 5.07(c) in the name of
the Trustee for the benefit of the Class III- A Certificateholders and
designated "LaSalle Bank National Association, in trust for registered holders
of Bear Stearns Asset Backed Securities Trust 2004-HE1, Asset-Backed
Certificates, Series 2004-HE1, Class III-A." Funds in the Class III-A Policy
Payments Account shall be held in trust for the Class III-A Certificateholders
for the uses and purposes set forth in this Agreement.

         CLASS III-A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
with respect to the Class III-A Certificates and any Distribution Date, is the
product of the Class A Principal Distribution Amount and a fraction, the
numerator of which is the Principal Funds for Loan Group III for such
Distribution Date and the denominator of which is the Principal Funds for all
Loan Groups for such Distribution Date.

         CLASS CE CERTIFICATE: Any Certificate designated as a "Class CE
Certificate" on the face thereof, in the form of Exhibit A-3 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class CE Certificates herein and evidencing a Regular Interest in REMIC III.

         CLASS CE INTEREST: An uncertificated interest in the Trust Fund held by
the Trustee on behalf of the Holders of the Class CE Certificates, evidencing a
Regular Interest in REMIC II for purposes of the REMIC Provisions.


                                      -11-

<PAGE>



         CLASS CE DISTRIBUTION AMOUNT: With respect to any Distribution Date,
the sum of (i) the Current Interest for the Class CE Interest for such
Distribution Date and (ii) any Overcollateralization Release Amount for such
Distribution Date; provided, however that on any Distribution Date after the
Distribution Date on which the Certificate Principal Balance of the Offered
Certificates has been reduced to zero, the Class CE Distribution Amount shall
include the Overcollateralization Amount.

         CLASS M CERTIFICATE: Any one of the Class M-1 Certificates, the Class
M-2 Certificates, the Class M-3 Certificates, the Class M-4 Certificates, the
Class M-5 Certificates and the Class M-6 Certificates.

         CLASS M-1 CERTIFICATE: Any Certificate designated as a "Class M-1
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class M-1 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-1 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount and (y) the excess, if any, of (a) the sum of (1) the
aggregate Certificate Principal Balance of the Class A Certificates (after
taking into account the distribution of the Class A Principal Distribution
Amount on such Distribution Date and (2) the Certificate Principal Balance of
the Class M-1 Certificates immediately prior to such Distribution Date, over (b)
the lesser of (1) the product of (x) 72.00% and (y) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period minus $2,507,454.

         CLASS M-2 CERTIFICATE: Any Certificate designated as a "Class M-2
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class M-2 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-2 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount and the Class M-1 Principal Distribution Amount and (y) the
excess, if any, of (a) the sum of (1) the aggregate Certificate Principal
Balance of the Class A Certificates (after taking into account the distribution
of the Class A Principal Distribution Amount on such Distribution Date), (2) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (3) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date, over (b) the lesser of
(1) the product of (x) 82.80% and (y) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period, and (2) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $2,507,454.



                                      -12-

<PAGE>



         CLASS M-3 CERTIFICATE: Any Certificate designated as a "Class M-3
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class M-3 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-3 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount and the Class
M-2 Principal Distribution Amount and (y) the excess, if any, of (a) the sum of
(1) the aggregate Certificate Principal Balance of the Class A Certificates
(after taking into account the distribution of the Class A Principal
Distribution Amount on such Distribution Date), (2) the Certificate Principal
Balance of the Class M-1 Certificates (after taking into account the
distribution of the Class M-1 Principal Distribution Amount on such Distribution
Date), (3) the Certificate Principal Balance of the Class M-2 Certificates
(after taking into account the distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date) and (4) the Certificate Principal
Balance of the Class M-3 Certificates immediately prior to such Distribution
Date, over (b) the lesser of (1) the product of (x) 86.30% and (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period minus $2,507,454.

         CLASS M-4 CERTIFICATE: Any Certificate designated as a "Class M-4
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class M-4 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-4 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount and the Class M-3 Principal Distribution Amount
and (y) the excess, if any, of (a) the sum of (1) the aggregate Certificate
Principal Balance of the Class A Certificates (after taking into account the
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (2) the Certificate Principal Balance of the Class M-1 Certificates
(after taking into account the distribution of the Class M-1 Principal
Distribution Amount on such Distribution Date), (3) the Certificate Principal
Balance of the Class M-2 Certificates (after taking into account the
distribution of the Class M-2 Principal Distribution Amount on such Distribution
Date), (4) the Certificate Principal Balance of the Class M-3 Certificates
(after taking into account the distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date) and (5) the Certificate Principal
Balance of the Class M-4 Certificates immediately prior to such Distribution
Date, over (b) the lesser of (1) the product of (x) 88.90% and (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period minus $2,507,454.

         CLASS M-5 CERTIFICATE: Any Certificate designated as a "Class M-5
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of


                                      -13-

<PAGE>



distributions provided for the Class M-5 Certificates as set forth herein and
evidencing a Regular Interest in REMIC II.

         CLASS M-5 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount, the Class M-3 Principal Distribution Amount and
the Class M-4 Principal Distribution Amount and (y) the excess, if any, of (a)
the sum of (1) the aggregate Certificate Principal Balance of the Class A
Certificates (after taking into account the distribution of the Class A
Principal Distribution Amount on such Distribution Date), (2) the Certificate
Principal Balance of the Class M-1 Certificates (after taking into account the
distribution of the Class M-1 Principal Distribution Amount on such Distribution
Date), (3) the Certificate Principal Balance of the Class M-2 Certificates
(after taking into account the distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (4) the Certificate Principal
Balance of the Class M-3 Certificates (after taking into account the
distribution of the Class M-3 Principal Distribution Amount on such Distribution
Date), (5) the Certificate Principal Balance of the Class M-4 Certificates
(after taking into account the distribution of the Class M-4 Principal
Distribution Amount on such Distribution Date) and (6) the Certificate Principal
Balance of the Class M-5 Certificates immediately prior to such Distribution
Date, over (b) the lesser of (1) the product of (x) 91.80% and (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period minus $2,507,454.

         CLASS M-6 CERTIFICATE: Any Certificate designated as a "Class M-6
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class M-6 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-6 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount, the Class M-3 Principal Distribution Amount, the
Class M-4 Principal Distribution Amount and the Class M-5 Principal Distribution
Amount and (y) the excess, if any, of (a) the sum of (1) the aggregate
Certificate Principal Balance of the Class A Certificates (after taking into
account the distribution of the Class A Principal Distribution Amount on such
Distribution Date), (2) the Certificate Principal Balance of the Class M-1
Certificates (after taking into account the distribution of the Class M-1
Principal Distribution Amount on such Distribution Date), (3) the Certificate
Principal Balance of the Class M-2 Certificates (after taking into account the
distribution of the Class M-2 Principal Distribution Amount on such Distribution
Date), (4) the Certificate Principal Balance of the Class M-3 Certificates
(after taking into account the distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date), (5) the Certificate Principal
Balance of the Class M-4 Certificates (after taking into account the
distribution of the Class M-4 Principal Distribution Amount on such Distribution
Date), (6) the Certificate Principal Balance of the Class M-5 Certificates
(after taking into account the distribution of the Class M-5 Principal
Distribution Amount on such Distribution Date) and (7) the Certificate Principal
Balance of the Class M-6


                                      -14-

<PAGE>



Certificates immediately prior to such Distribution Date, over (b) the lesser of
(1) the product of (x) 94.30% and (y) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period, and (2) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $2,507,454.

         CLASS P CERTIFICATE: Any Certificate designated as a "Class P
Certificate" on the face thereof, in the form of Exhibit A-4 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class P Certificates as set forth herein and evidencing a Regular Interest
in REMIC IV.

         CLASS P INTEREST: An uncertificated interest in the Trust Fund held by
the Trustee on behalf of the Holders of the Class P Certificates, evidencing a
Regular Interest in REMIC II for purposes of the REMIC Provisions.

         CLASS P CERTIFICATE ACCOUNT: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.05 in the name of the Trustee
for the benefit of the Class P Certificateholders.

         CLASS R-I CERTIFICATE: Any Certificate designated a "Class R-I
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-5 hereto, evidencing the Residual Interest in REMIC I and representing the
right to the Percentage Interest of distributions provided for the Class R-I
Certificates as set forth herein.

         CLASS R-II CERTIFICATE: Any Certificate designated a "Class R-II
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-5 hereto, evidencing the Residual Interest in REMIC II and representing the
right to the Percentage Interest of distributions provided for the Class R-II
Certificates as set forth herein.

         CLASS RX CERTIFICATE: Any Certificate designated a "Class RX
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-5 hereto, evidencing the ownership of the Class R-III Interest and the Class
R-IV Interest and representing the right to the Percentage Interest of
distributions provided for the Class RX Certificates as set forth herein.

         CLASS R-III INTEREST: The uncertificated Residual Interest in REMIC
III.

         CLASS R-IV INTEREST: The uncertificated Residual Interest in REMIC IV.

         CLOSING DATE: January 30, 2004.

         CODE: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.

         COMPENSATING INTEREST: An amount, not to exceed the Servicing Fee, to
be deposited in the Protected Account by the Master Servicer to the payment of a
Prepayment Interest Shortfall on a Mortgage Loan subject to this Agreement.



                                      -15-

<PAGE>



         CORPORATE TRUST OFFICE: The designated office of the Trustee where at
any particular time its corporate trust business with respect to this Agreement
shall be administered, which office at the date of the execution of this
Agreement is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois,
Attention: Global Securitization Trust Services Group - Bear Stearns Asset
Backed Securities, Inc., Series 2004-HE1, or at such other address as the
Trustee may designate from time to time.

         CORRESPONDING CERTIFICATE: With respect to each Uncertificated REMIC I
Regular Interest, the Certificate with the corresponding designation.

         CURRENT INTEREST: As of any Distribution Date, with respect to
Certificates of each Class (other than the Class P Certificates and the Residual
Certificates), (i) the interest accrued on the Certificate Principal Balance or
Certificate Notional Balance or Uncertificated Notional Balance, as applicable,
during the related Accrual Period at the applicable Pass-Through Rate plus any
amount previously distributed with respect to interest for such Certificate that
has been recovered as a voidable preference by a trustee in bankruptcy minus
(ii) the sum of (a) any Prepayment Interest Shortfall for such Distribution
Date, to the extent not covered by Compensating Interest and (b) any Relief Act
Interest Shortfalls during the related Due Period, provided, however, that for
purposes of calculating Current Interest for any such Class, amounts specified
in clause (ii) hereof for any such Distribution Date shall be allocated first to
the Class CE Certificates and Residual Certificates in reduction of amounts
otherwise distributable to such Certificates on such Distribution Date and then
any excess shall be allocated to each Class of Offered Certificates pro rata
based on the respective amounts of interest accrued pursuant to clause (i)
hereof for each such Class on such Distribution Date.

         CURRENT SPECIFIED ENHANCEMENT PERCENTAGE: With respect to any
Distribution Date, the percentage obtained by dividing (x) the sum of (i) the
aggregate Certificate Principal Balance of the Class M Certificates and (ii) the
Overcollateralization Amount, in each case prior to the distribution of the
Principal Distribution Amount on such Distribution Date, by (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the end of the related Due
Period.

         CUSTODIAL AGREEMENT: An agreement dated as of January 1, 2004 among the
Depositor, the Seller, the Master Servicer, the Trustee and the Custodian in
substantially the form of Exhibit K hereto.

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

         CUT-OFF DATE: The close of business on January 1, 2004.

         CUT-OFF DATE PRINCIPAL BALANCE: As to any Mortgage Loan, the unpaid
principal balance thereof as of the close of business on the Cut-off Date after
application of all Principal Prepayments received prior to the Cut-off Date and
scheduled payments of principal due on or before the Cut-off Date, whether or
not received, but without giving effect to any installments of principal
received in respect of Due Dates after the Cut-off Date.



                                      -16-

<PAGE>



         DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction
by a court of competent jurisdiction in a proceeding under the Bankruptcy Code
in the Scheduled Payment for such Mortgage Loan that became final and
non-appealable, except such a reduction resulting from a Deficient Valuation or
any other reduction that results in a permanent forgiveness of principal.

         DEFICIENCY AMOUNT: As of any Distribution Date, the sum of (i) any
shortfall in the Interest Funds to pay the Current Interest due on the Class
III-A Certificates, except for any portion thereof payable under the Class III-A
Policy as an Avoided Payment and (ii) the amount of any Applied Realized Loss
Amount allocated to the Class III-A Certificates on such Distribution Date and
(iii) for the Last Scheduled Distribution Date, the Certificate Principal
Balance of the Class III-A Certificates to the extent unpaid on such
Distribution Date (after taking into account all distributions to be made on
such Distribution Date).

         DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation by
a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then outstanding indebtedness under such Mortgage Loan, or any
reduction in the amount of principal to be paid in connection with any Scheduled
Payment that results in a permanent forgiveness of principal, which valuation or
reduction results from an order of such court that is final and non-appealable
in a proceeding under the Bankruptcy Code.

         DEFINITIVE CERTIFICATES: As defined in Section 6.06.

         DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be replaced by a
Replacement Mortgage Loan.

         DELINQUENCY EVENT: A Delinquency Event shall have occurred and be
continuing if at any time, (x) the percent equivalent of a fraction, the
numerator of which is the aggregate Stated Principal Balance of the Mortgage
Loans that are 60 days or more Delinquent or are in bankruptcy or foreclosure or
are REO Properties, and the denominator of which is the aggregate Stated
Principal Balance of all of the Mortgage Loans as of the last day of the related
Due Period exceeds (y) 33% of the Current Specified Enhancement Percentage.

         DELINQUENT: A Mortgage Loan is "delinquent" if any payment due thereon
is not made pursuant to the terms of such Mortgage Loan by the close of business
on the day such payment is scheduled to be due. A Mortgage Loan is "30 days
delinquent" if such payment has not been received by the close of business on
the corresponding day of the month immediately succeeding the month in which
such payment was due, or, if there is no such corresponding day (e.g., as when a
30- day month follows a 31-day month in which a payment was due on the 31st day
of such month), then on the last day of such immediately succeeding month.
Similarly for "60 days delinquent," "90 days delinquent" and so on.

         DENOMINATION: With respect to each Certificate, the amount set forth on
the face thereof as the "Initial Principal Balance of this Certificate".

         DEPOSITOR: Bear Stearns Asset Backed Securities, Inc., a Delaware
corporation, or its successor in interest.


                                      -17-

<PAGE>



         DEPOSITORY: The initial Depository shall be The Depository Trust
Company ("DTC"), the nominee of which is Cede & Co., or any other organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended. The Depository shall initially be the
registered Holder of the Book-Entry Certificates. The Depository shall at all
times be a "clearing corporation" as defined in Section 8-102(a)(5) of the
Uniform Commercial Code of the State of New York.

         DEPOSITORY AGREEMENT: With respect to the Class of Book-Entry
Certificates, the agreement among the Depositor, the Trustee and the initial
Depository, dated as of the Closing Date, substantially in the form of Exhibit
I.

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

         DETERMINATION DATE: With respect to any Distribution Date, the 15th day
of the month of such Distribution Date or, if such 15th day is not a Business
Day, the immediately preceding Business Day.

         DISTRIBUTION ACCOUNT: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.04 in the name of the Trustee
for the benefit of the Certificateholders and the Certificate Insurer designated
"LaSalle Bank National Association, in trust for registered holders of Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series
2004-HE1". Funds in the Distribution Account shall be held in trust for the
Certificateholders and the Certificate Insurer for the uses and purposes set
forth in this Agreement.

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

         DISTRIBUTION DATE: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such 25th day is not a Business Day,
the next succeeding Business Day, commencing in February 2004.

         DUE DATE: As to any Mortgage Loan, the date in each month on which the
related Scheduled Payment is due, as set forth in the related Mortgage Note.

         DUE PERIOD: With respect to any Distribution Date, the period from the
second day of the calendar month preceding the calendar month in which such
Distribution Date occurs through close of business on the first day of the
calendar month in which such Distribution Date occurs.

         ELIGIBLE ACCOUNT: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company, the
long-term unsecured debt obligations and short-term unsecured debt obligations
of which (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the debt obligations of such
holding company, so long as Moody's is not a Rating Agency) are rated by each
Rating Agency in one of its two highest long-term and its highest short-term
rating categories, respectively, at the time any amounts are held on deposit
therein, or (ii) an account or accounts in a depository institution or trust


                                      -18-

<PAGE>



company in which such accounts are insured by the FDIC (to the limits
established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
the Trustee, the Certificate Insurer and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company having capital and surplus of
not less than $50,000,000, acting in its fiduciary capacity or (iv) any other
account acceptable to the Rating Agencies, as evidenced in writing. Eligible
Accounts may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.

         EMC: EMC Mortgage Corporation, a Delaware corporation, and its
successors and assigns.

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

         ERISA RESTRICTED CERTIFICATE: Each of the Class CE, Class P and the
Residual Certificates.

         EVENT OF DEFAULT: As defined in Section 8.01 hereof.

         EXCESS CASHFLOW: With respect to any Distribution Date, an amount, if
any, equal to the sum of (a) the Remaining Excess Spread for such Distribution
Date and (b) the Overcollateralization Release Amount for such Distribution
Date.

         EXCESS LIQUIDATION PROCEEDS: To the extent not required by law to be
paid to the related Mortgagor, the excess, if any, of any Liquidation Proceeds
with respect to a Mortgage Loan over the Stated Principal Balance of such
Mortgage Loan and accrued and unpaid interest at the related Mortgage Rate
through the last day of the month in which the Mortgage Loan has been
liquidated.

         EXCESS SPREAD: With respect to any Distribution Date, the excess, if
any, of (i) the Interest Funds for such Distribution Date over (ii) the sum of
the Certificate Insurer Premium Amount, Current Interest on the Offered
Certificates and Interest Carry Forward Amounts on the Class A Certificates
(other than Interest Carry Forward Amounts paid pursuant to Section
5.04(a)(5)(A)), in each case for such Distribution Date.

         EXEMPTION: Prohibited Transaction Exemption 90-30, as amended from time
to time.

         EXTRA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the lesser of (i) the excess, if any, of the Overcollateralization Target
Amount for such Distribution Date over the Overcollateralization Amount for such
Distribution Date (after giving effect to distributions of principal on the
Certificates other than any Extra Principal Distribution Amount) and (ii) the
Excess Spread for such Distribution Date.

         FANNIE MAE: Fannie Mae (formerly, Federal National Mortgage
Association), or any successor thereto.


                                      -19-

<PAGE>



         FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.

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

         FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989.

         FINAL RECOVERY DETERMINATION: With respect to any defaulted Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the Seller pursuant to or as contemplated by Section 2.03(c) or Section
10.01), a determination made by the Master Servicer pursuant that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Trustee shall
maintain records, based solely on information provided by the Master Servicer,
of each Final Recovery Determination made thereby.

         FISCAL AGENT: As defined in the Class III-A Policy.

         FREDDIE MAC: Federal Home Loan Mortgage Corporation, or any successor
thereto.

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

         GROUP I PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the product of the Principal Distribution Amount for such Distribution
Date and a fraction, the numerator of which is the Principal Funds for the Loan
Group I for such Distribution Date and the denominator of which is the Principal
Funds for all Loan Groups for such Distribution Date.

         GROUP II PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the product of the Principal Distribution Amount for such
Distribution Date and a fraction, the numerator of which is the Principal Funds
for the Loan Group II for such Distribution Date and the denominator of which is
the Principal Funds for all Loan Groups for such Distribution Date.

         GROUP III PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the product of the Principal Distribution Amount for such
Distribution Date and a fraction, the numerator of which is the Principal Funds
for the Loan Group III for such Distribution Date and the denominator of which
is the Principal Funds for all Loan Groups for such Distribution Date.

         INDEMNIFIED PERSONS: The Trustee, the Master Servicer, the Certificate
Insurer, the Trust Fund and their officers, directors, agents and employees and,
with respect to the Trustee, any separate co- trustee and its officers,
directors, agents and employees.

         INDEX: With respect to each Adjustable Rate Mortgage Loan and with
respect to each related Adjustment Date, the index as specified in the related
Mortgage Note.



                                      -20-

<PAGE>



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

         INITIAL CERTIFICATE PRINCIPAL BALANCE: With respect to any Certificate,
the Certificate Principal Balance of such Certificate or any predecessor
Certificate on the Closing Date.

         INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated
January 30, 2004, among the Certificate Insurer, the Seller, the Master
Servicer, the Depositor and the Trustee, as the same may be amended from time to
time in accordance with the terms thereof.

         INSURANCE POLICY: With respect to any Mortgage Loan included in the
Trust Fund, any insurance policy or LPMI Policy, including all riders and
endorsements thereto in effect with respect to such Mortgage Loan, including any
replacement policy or policies for any Insurance Policies.

         INSURANCE PROCEEDS: Proceeds paid in respect of the Mortgage Loans
pursuant to any Insurance Policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are payable to the mortgagee under
the Mortgage, the Master Servicer or the trustee under the deed of trust and are
not applied to the restoration of the related Mortgaged Property or released to
the Mortgagor in accordance with the procedures that the Master Servicer would
follow in servicing mortgage loans held for its own account, in each case other
than any amount included in such Insurance Proceeds in respect of Insured
Expenses.

         INSURED EXPENSES: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.

         INSURED PAYMENT: With respect to any Distribution Date, (i) any
Deficiency Amount and (ii) any Avoided Payment.

         INTEREST CARRY FORWARD AMOUNT: As of any Distribution Date and with
respect to each Class of Certificates (other than the Class CE, Class P and the
Residual Certificates), the sum of (i) the excess of (a) the Current Interest
for such Class with respect to such Distribution Date and any prior Distribution
Dates over (b) the amount actually distributed to such Class of Certificates
with respect to interest on such Distribution Dates and (ii) interest thereon
(to the extent permitted by applicable law) at the applicable Pass-Through Rate
for such Class for the related Accrual Period including the Accrual Period
relating to such Distribution Date.

         INTEREST DETERMINATION DATE: Shall mean the second LIBOR Business Day
preceding the commencement of each Accrual Period.

         INTEREST FUNDS: With respect to each Loan Group and any Distribution
Date (i) the sum, without duplication, of (a) all scheduled interest during the
related Due Period with respect to the related Mortgage Loans less the Servicing
Fee, the Trustee Fee and the LPMI Fee, if any, (b) all Advances relating to
interest with respect to the related Mortgage Loans made on or prior to the
related Distribution Account Deposit Date, (c) all Compensating Interest with
respect to the related Mortgage Loans and required to be remitted by the Master
Servicer pursuant to this Agreement with respect to such Distribution Date, (d)
Liquidation Proceeds with respect to the related Mortgage


                                      -21-

<PAGE>



Loans collected during the related Prepayment Period (to the extent such
Liquidation Proceeds relate to interest), and (e) all amounts relating to
interest with respect to each Mortgage Loan in such Loan Group repurchased by
the Seller pursuant to Sections 2.02 and 2.03 and by EMC pursuant to Section
3.18, in each case to the extent remitted by the Master Servicer to the
Distribution Account pursuant to this Agreement minus (ii) all amounts relating
to interest required to be reimbursed pursuant to Sections 4.02 and 4.05 or as
otherwise set forth in this Agreement.

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

         LAST SCHEDULED DISTRIBUTION DATE: February 25, 2034.

         LATEST POSSIBLE MATURITY DATE: The Distribution Date in the month
following the final scheduled maturity date of the Mortgage Loan in the Trust
Fund having the latest scheduled maturity date as of the Cut-off Date. For
purposes of the Treasury Regulations under Code section 860A through 860G, the
latest possible maturity date of each regular interest issued by REMIC I and
REMIC II shall be the Latest Possible Maturity Date.

         LIBOR BUSINESS DAY: Shall mean a day on which banks are open for
dealing in foreign currency and exchange in London and New York City.

         LIQUIDATED LOAN: With respect to any Distribution Date, a defaulted
Mortgage Loan that has been liquidated through deed-in-lieu of foreclosure,
foreclosure sale, trustee's sale or other realization as provided by applicable
law governing the real property subject to the related Mortgage and any security
agreements and as to which the Master Servicer has made a Final Recovery
Determination with respect thereto.

         LIQUIDATION PROCEEDS: Amounts, other than Insurance Proceeds, received
in connection with the partial or complete liquidation of a Mortgage Loan,
whether through trustee's sale, foreclosure sale or otherwise, or in connection
with any condemnation or partial release of a Mortgaged Property and any other
proceeds received with respect to an REO Property, less the sum of related
unreimbursed Advances, Servicing Fees and Servicing Advances and all expenses of
liquidation, including property protection expenses and foreclosure and sale
costs, including court and reasonable attorneys fees.

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

         LOAN GROUP: Any of Loan Group I, Loan Group II or Loan Group III.

         LOAN GROUP I: The Mortgage Loans included as such on the Mortgage Loan
Schedule.

         LOAN GROUP II: The Mortgage Loans included as such on the Mortgage Loan
Schedule.

         LOAN GROUP III: The Mortgage Loans included as such on the Mortgage
Loan Schedule.


                                      -22-

<PAGE>



         LPMI FEE: The fee payable to the insurer for each Mortgage Loan subject
to an LPMI Policy as set forth in such LPMI Policy.

         LPMI POLICY: A policy of mortgage guaranty insurance issued by an
insurer meeting the requirements of Fannie Mae and Freddie Mac in which the
Master Servicer or the related subservicer of the related Mortgage Loan is
responsible for the payment of the LPMI Fee thereunder from collections on the
related Mortgage Loan.

         MARKER RATE: With respect to the Class CE Interest and any Distribution
Date, a per annum rate equal to two (2) times the weighted average of the
Uncertificated REMIC I Pass-Through Rate for each of REMIC I Regular Interest
I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular Interest II-A-1, REMIC I
Regular Interest II-A-2, REMIC I Regular Interest III-A, REMIC I Regular
Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC
I Regular Interest M-4, REMIC I Regular Interest M-5, REMIC I Regular Interest
M-6, and REMIC I Regular Interest ZZ, with the rate on each such REMIC I Regular
Interest (other than REMIC I Regular Interest ZZ) subject to a cap equal to the
lesser of (i) the related One-Month LIBOR Pass-Through Rate for the
Corresponding Certificate plus, in the case of REMIC I Regular Interest III-A,
the Certificate Insurer Premium Rate and (ii) the Net Rate Cap for the
Corresponding Certificate for the purpose of this calculation for such
Distribution Date and with the rate on REMIC I Regular Interest ZZ subject to a
cap of zero for the purpose of this calculation.

         MASTER SERVICER: EMC Mortgage Corporation, in its capacity as master
servicer, and its successors and assigns.

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

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

         MAXIMUM UNCERTIFICATED ACCRUED INTEREST DEFERRAL AMOUNT: With respect
to any Distribution Date, the excess of (i) accrued interest at the
Uncertificated REMIC I Pass-Through Rate applicable to REMIC I Regular Interest
ZZ for such Distribution Date on a balance equal to the Uncertificated


                                      -23-

<PAGE>



Principal Balance of REMIC I Regular Interest ZZ minus the REMIC I
Overcollateralized Amount, in each case for such Distribution Date, over (ii)
Uncertificated Accrued Interest on REMIC I Regular Interest I-A-1, REMIC I
Regular Interest I-A-2, REMIC I Regular Interest II-A-1, REMIC I Regular
Interest II-A-2, REMIC I Regular Interest III-A, REMIC I Regular Interest M-1,
REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular
Interest M-4, REMIC I Regular Interest M-5 and REMIC I Regular Interest M-6 for
such Distribution Date, with the rate on each such REMIC I Regular Interest
subject to a cap equal to the lesser of (i) the One-Month LIBOR Pass-Through
Rate for the Corresponding Certificate plus, in the case of REMIC I Regular
Interest III-A, the Certificate Insurer Premium Rate and (ii) the Net Rate Cap
for the Corresponding Certificate for the purpose of this calculation for such
Distribution Date.

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

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

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

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

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

         MONTHLY STATEMENT: The statement delivered to the Certificateholders
and the Certificate Insurer pursuant to Section 5.05.

         MOODY'S: Moody's Investors Service, Inc., and any successor thereto.

         MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien on or first priority ownership interest in an estate in fee simple in
real property securing a Mortgage Note.

         MORTGAGE FILE: The mortgage documents listed in Section 2.01 hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Custodian to be added to the Mortgage File pursuant to this Agreement and
the Custodial Agreement.

         MORTGAGE LOANS: Such of the Mortgage Loans transferred and assigned to
the Trustee pursuant to the provisions hereof, as from time to time are held as
a part of the Trust Fund (including any REO Property), the mortgage loans so
held being identified in the Mortgage Loan Schedule, notwithstanding foreclosure
or other acquisition of title of the related Mortgaged Property.

         MORTGAGE LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement
dated as of January 30, 2004, between the Seller, as seller and the Depositor,
as purchaser.


                                      -24-

<PAGE>



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

         MORTGAGE LOAN SCHEDULE: The list of Mortgage Loans (as from time to
time amended by the Seller or the Master Servicer to reflect the deletion of
Deleted Mortgage Loans and the addition of Replacement Mortgage Loans pursuant
to the provisions of this Agreement) transferred to the Trustee as part of the
Trust Fund and from time to time subject to this Agreement, the initial Mortgage
Loan Schedule being attached hereto as Exhibit B, setting forth the following
information with respect to each Mortgage Loan:

                  (i)    the loan number;

                  (ii)   the Mortgage Rate in effect as of the Cut-off Date;

                  (iii)  the Servicing Fee Rate;

                  (iv)   the Net Mortgage Rate in effect as of the Cut-off Date;

                  (v)    the maturity date;

                  (vi)   the original principal balance;

                  (vii)  the Cut-off Date Principal Balance;

                  (viii) the original term;

                  (ix)   the remaining term;

                  (x)    the property type;

                  (xi)   the MIN with respect to each MOM Loan;

                  (xii)  with respect to each Adjustable Rate Mortgage Loan, the
         Minimum Mortgage Rate;

                  (xiii) with respect to each Adjustable Rate Mortgage Loan, the
         Maximum Mortgage Rate;

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

                  (xv)   with respect to each Adjustable Rate Mortgage Loan, the
         next Adjustment Date; and

                  (xvi)  with respect to each Adjustable Rate Mortgage Loan, the
         Periodic Rate Cap.



                                      -25-

<PAGE>



Such schedule shall also set forth the aggregate Cut-off Date Principal Balance
for all of the Mortgage Loans.

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

         MORTGAGE RATE: With respect to each fixed rate Mortgage Loan, the rate
set forth in the related Mortgage Note. With respect to each Adjustable Rate
Mortgage Loan, the annual rate at which interest accrues on such Mortgage Loan
from time to time in accordance with the provisions of the related Mortgage
Note, which rate (A) as of any date of determination until the first Adjustment
Date following the Cut-off Date shall be the rate set forth in the Mortgage Loan
Schedule as the Mortgage Rate in effect immediately following the Cut-off Date
and (B) as of any date of determination thereafter shall be the rate as adjusted
on the most recent Adjustment Date, to equal the sum, rounded to the next
highest or nearest 0.125% (as provided in the Mortgage Note), of the Index,
determined as set forth in the related Mortgage Note, plus the related Gross
Margin subject to the limitations set forth in the related Mortgage Note. With
respect to each Mortgage Loan that becomes an REO Property, as of any date of
determination, the annual rate determined in accordance with the immediately
preceding sentence as of the date such Mortgage Loan became an REO Property.

         MORTGAGED PROPERTY: The underlying property securing a Mortgage Loan.

         MORTGAGOR: The obligors on a Mortgage Note.

         NET MORTGAGE RATE: As to each Mortgage Loan, and at any time, the per
annum rate equal to the Mortgage Rate less the sum of (i) the Servicing Fee
Rate, (ii) the Trustee Fee Rate and (iii) the rate at which the LPMI Fee is
calculated, if any.

         NET RATE CAP: With respect to the Class I-A-1 Certificates and Class
I-A-2 Certificates and any Distribution Date, a rate per annum equal to the
product of (x) the weighted average of the Net Mortgage Rates on the then
outstanding Mortgage Loans in Loan Group I, weighted based on their Stated
Principal Balances as of the first day of the calendar month preceding the month
in which the Distribution Date occurs and (y) a fraction, the numerator of which
is 30 and the denominator of which is the actual number of days elapsed in the
related Accrual Period. For federal income tax purposes, however, such rate
shall be the economic equivalent of the foregoing, expressed as the weighted
average of (adjusted for the actual number of days elapsed in the related
Accrual Period) the Uncertificated REMIC I Pass-Through Rate on REMIC I Regular
Interest 1B, weighted on the basis of the Uncertificated Principal Balance of
such REMIC I Regular Interest.

         With respect to the Class II-A-1 Certificates and Class II-A-2
Certificates and any Distribution Date, a rate per annum equal to the product of
(x) the weighted average of the Net Mortgage Rates on the then outstanding
Mortgage Loans in Loan Group II, weighted based on their Stated Principal
Balances as of the first day of the calendar month preceding the month in which
the Distribution Date occurs and (y) a fraction, the numerator of which is 30
and the denominator of which is the actual number of days elapsed in the related
Accrual Period. For federal income tax purposes, however, such rate shall be the
economic equivalent of the foregoing, expressed as the


                                      -26-

<PAGE>



weighted average of (adjusted for the actual number of days elapsed in the
related Accrual Period) the Uncertificated REMIC I Pass-Through Rate on REMIC I
Regular Interest 2B, weighted on the basis of the Uncertificated Principal
Balance of such REMIC I Regular Interest.

         With respect to the Class III-A Certificates and any Distribution Date,
a rate per annum equal to the product of (x) the weighted average of the Net
Mortgage Rates on the then outstanding Mortgage Loans in Loan Group III,
weighted based on their Stated Principal Balances as of the first day of the
calendar month preceding the month in which the Distribution Date occurs, minus
the Certificate Insurer Premium Rate and (y) a fraction, the numerator of which
is 30 and the denominator of which is the actual number of days elapsed in the
related Accrual Period. For federal income tax purposes, however, such rate
shall be the economic equivalent of the foregoing, expressed as the weighted
average of (adjusted for the actual number of days elapsed in the related
Accrual Period) the Uncertificated REMIC I Pass-Through Rate on REMIC I Regular
Interest 3B, weighted on the basis of the Uncertificated Principal Balance of
such REMIC I Regular Interest, minus the Certificate Insurer Premium Rate. For
purposes of the definitions of the Marker Rate and Maximum Uncertificated
Accrued Interest Deferral Amount, the foregoing definitions in this paragraph
shall not be reduced by the Certificate Insurer Premium Rate.

         With respect to the Class M Certificates and any Distribution Date, a
rate per annum equal to the product of (x) the weighted average of the Net
Mortgage Rates on the then outstanding Mortgage Loans in each Loan Group,
weighted in proportion to the results of subtracting from the aggregate Stated
Principal Balance of each such Loan Group as of the first day of the calendar
month preceding the month in which the Distribution Date, the Current Principal
Amount of the related Class or Classes of Senior Certificates and (y) a
fraction, the numerator of which is 30 and the denominator of which is the
actual number of days elapsed in the related Accrual Period. For federal income
tax purposes, however, such rate shall be the economic equivalent of the
foregoing, expressed as the weighted average of (adjusted for the actual number
of days elapsed in the related Accrual Period) the Uncertificated REMIC I
Pass-Through Rates on (a) REMIC I Regular Interest 1A, subject to a cap and a
floor equal to the weighted average of the Net Mortgage Rates of the Mortgage
Loans in Loan Group I, (b) REMIC I Regular Interest 1B, subject to a cap and a
floor equal to the weighted average of the Net Mortgage Rates of the Mortgage
Loans in Loan Group II, and (c) REMIC I Regular Interest 1C, subject to a cap
and a floor equal to the weighted average of the Net Mortgage Rates of the
Mortgage Loans in Loan Group III, weighted on the basis of the Uncertificated
Balance of each such REMIC I Regular Interest.

         NON-BOOK-ENTRY CERTIFICATE: Any Certificate other than a Book-Entry
Certificate.

         NONRECOVERABLE ADVANCE: Any portion of an Advance previously made or
proposed to be made by the Master Servicer pursuant to this Agreement, that, in
the good faith judgment of the Master Servicer, will not or, in the case of a
proposed advance, would not, be ultimately recoverable by it from the related
Mortgagor, related Liquidation Proceeds, Insurance Proceeds or otherwise.

         OFFERED CERTIFICATES: The Class I-A-1, Class I-A-2, Class II-A-1, Class
II-A-2, Class III-A, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and
Class M-6 Certificates.



                                      -27-

<PAGE>



         OFFICER'S CERTIFICATE: A certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Vice President (however
denominated), an Assistant Vice President, the Treasurer, the Secretary, or one
of the assistant treasurers or assistant secretaries of the Depositor or the
Master Servicer (or any other officer customarily performing functions similar
to those performed by any of the above designated officers and also to whom,
with respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with a particular subject) or (ii), if
provided for in this Agreement, signed by a Servicing Officer, as the case may
be, and delivered to the Depositor, the Seller, the Certificate Insurer and/or
the Trustee, as the case may be, as required by this Agreement.

         ONE-MONTH LIBOR: With respect to any Accrual Period, the rate
determined by the Trustee on the related Interest Determination Date on the
basis of the rate for U.S. dollar deposits for one month that appears on
Telerate Screen Page 3750 as of 11:00 a.m. (London time) on such Interest
Determination Date; provided that the parties hereto acknowledge that One-Month
LIBOR for the first Accrual Period shall equal 1.10% per annum. If such rate
does not appear on such page (or such other page as may replace that page on
that service, or if such service is no longer offered, such other service for
displaying One-Month LIBOR or comparable rates as may be reasonably selected by
the Trustee), One-Month LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Trustee and no
Reference Bank Rate is available, One- Month LIBOR will be One-Month LIBOR
applicable to the preceding Accrual Period. The establishment of One-Month LIBOR
on each Interest Determination Date by the Trustee and the Trustee's calculation
of the rate of interest applicable to the Offered Certificates for the related
Accrual Period shall, in the absence of manifest error, be final and binding.

         ONE-MONTH LIBOR PASS-THROUGH RATE: With respect to the Class I-A-1
Certificates and, for purposes of the definition of "Marker Rate" and "Maximum
Uncertificated Accrued Interest Deferral Amount", REMIC I Regular Interest
I-A-1, a per annum rate equal to One-Month LIBOR plus the related Certificate
Margin.

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

         With respect to the Class II-A-1 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest II-A-1, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

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

         With respect to the Class III-A Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest III-A, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.



                                      -28-

<PAGE>



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

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

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

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

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

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

         OPINION OF COUNSEL: A written opinion of counsel, who may be counsel
for the Seller, the Depositor or the Master Servicer, reasonably acceptable to
each addressee of such opinion; provided that with respect to Section 2.05,
7.05, 7.07 or 11.01, or the interpretation or application of the REMIC
Provisions, such counsel must (i) in fact be independent of the Seller,
Depositor and the Master Servicer, (ii) not have any direct financial interest
in the Seller, the Depositor or the Master Servicer or in any affiliate of
either, and (iii) not be connected with the Seller, the Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.

         OPTIONAL TERMINATION: The termination of the Trust Fund created
hereunder as a result of the purchase of all of the Mortgage Loans and any REO
Property pursuant to the last sentence of Section 10.01 hereof.

         OPTIONAL TERMINATION DATE: The Distribution Date on which the Stated
Principal Balance of all of the Mortgage Loans is equal to or less than 10% of
the Stated Principal Balance of all of the Mortgage Loans as of the Cut-off
Date.

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

         OTS: The Office of Thrift Supervision.


                                      -29-

<PAGE>



         OUTSTANDING: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:

         (a) Certificates theretofore canceled by the Trustee or delivered to
the Trustee for cancellation; and

         (b) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee pursuant to this
Agreement.

         OUTSTANDING MORTGAGE LOAN: As of any date of determination, a Mortgage
Loan with a Stated Principal Balance greater than zero that was not the subject
of a Principal Prepayment in full, and that did not become a Liquidated Loan,
prior to the end of the related Prepayment Period.

         OVERCOLLATERALIZATION AMOUNT: With respect to any Distribution Date,
the excess, if any, of the aggregate Stated Principal Balances of the Mortgage
Loans as of the last day of the related Due Period (including any reduction due
to Realized Losses) over the Certificate Principal Balances of the Certificates
on such Distribution Date (after taking into account the payment of principal
other than any Extra Principal Distribution Amount on such Certificates).

         OVERCOLLATERALIZATION RELEASE AMOUNT: With respect to any Distribution
Date, the lesser of (x) the Principal Remittance Amount for such Distribution
Date and (y) the excess, if any, of (i) the Overcollateralization Amount for
such Distribution Date (assuming that 100% of the Principal Remittance Amount is
applied as a principal payment on such Distribution Date) over (ii) the
Overcollateralization Target Amount for such Distribution Date.

         OVERCOLLATERALIZATION TARGET AMOUNT: With respect to any Distribution
Date, (a) prior to the Stepdown Date, 2.85% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date, (b) on or after the
Stepdown Date and if a Trigger Event is not in effect, the greater of (i) 5.70%
of the then current aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (ii) $2,507,454 or (c) on or after
the Stepdown Date and if a Trigger Event is in effect, the Overcollateralization
Target Amount for the immediately preceding Distribution Date.

         OWNERSHIP INTEREST: As to any Certificate, any ownership interest in
such Certificate including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.

         PASS-THROUGH RATE: With respect to the Offered Certificates and any
Distribution Date, a rate per annum equal to the lesser of (i) the related
One-Month LIBOR Pass-Through Rate for such Distribution Date and (ii) the
related Net Rate Cap for such Distribution Date.

         With respect to the Class CE Interest and any Distribution Date, a rate
per annum equal to the percentage equivalent of a fraction, the numerator of
which is the sum of the amounts calculated pursuant to clauses (a) through (k)
below, and the denominator of which is the aggregate Uncertificated Principal
Balances of REMIC I Regular Interest AA, REMIC I Regular Interest I-A-1, REMIC I
Regular Interest I-A-2, REMIC I Regular Interest II-A-1, REMIC I Regular
Interest II-A-2,


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<PAGE>



REMIC I Regular Interest III-A, REMIC I Regular Interest M-1, REMIC I Regular
Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC
I Regular Interest M-5, REMIC I Regular Interest M-6 and REMIC I Regular
Interest ZZ. For purposes of calculating the Pass-Through Rate for the Class CE
Interest, the numerator is equal to the sum of the following components:

         (a)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest AA minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest AA;

         (b)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest I-A-1 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest I-A-1;

         (c)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest I-A-2 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest I-A-2;

         (d)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest II-A-1 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest II-A-1;

         (e)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest II-A-2 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest II-A-2;

         (f)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest III-A minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest III-A;

         (g)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-1 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-1;

         (h)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-2 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-2;

         (i)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-3 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-3;

         (j)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-4 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-4;



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<PAGE>



         (k)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-5 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-5;

         (l)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-6 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-6; and

         (m)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest ZZ minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest ZZ.

         With respect to the Class CE Certificates, 100% of the amounts
distributable to the Class CE Interest.

         With respect to the Class P Certificates, 0.00% per annum.

         PERCENTAGE INTEREST: With respect to any Certificate of a specified
Class, the Percentage Interest set forth on the face thereof or the percentage
obtained by dividing the Denomination of such Certificate by the aggregate of
the Denominations of all Certificates of the such Class.

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

         PERMITTED INVESTMENTS: At any time, any one or more of the following
obligations and securities:

                  (i) obligations of the United States or any agency thereof,
         provided such obligations are backed by the full faith and credit of
         the United States;

                  (ii) general obligations of or obligations guaranteed by any
         state of the United States or the District of Columbia receiving the
         highest long-term debt rating of each Rating Agency, or such lower
         rating as will not result in the downgrading or withdrawal of the
         ratings then assigned to the Certificates by each Rating Agency
         (determined without regard to the Class III-A Policy), as evidenced in
         writing;

                  (iii) [Reserved];

                  (iv) commercial or finance company paper which is then
         receiving the highest commercial or finance company paper rating of
         each Rating Agency, or such lower rating as will not result in the
         downgrading or withdrawal of the ratings then assigned to the
         Certificates by each Rating Agency (determined without regard to the
         Class III-A Policy), as evidenced in writing;


                                      -32-

<PAGE>



                  (v) certificates of deposit, demand or time deposits, or
         bankers' acceptances issued by any depository institution or trust
         company incorporated under the laws of the United States or of any
         state thereof and subject to supervision and examination by federal
         and/or state banking authorities (including the Trustee in its
         commercial banking capacity), provided that the commercial paper and/or
         long term unsecured debt obligations of such depository institution or
         trust company are then rated one of the two highest long-term and the
         highest short-term ratings of each such Rating Agency for such
         securities, or such lower ratings as will not result in the downgrading
         or withdrawal of the rating then assigned to the Certificates by any
         Rating Agency (determined without regard to the Class III-A Policy), as
         evidenced in writing;

                  (vi) guaranteed reinvestment agreements issued by any bank,
         insurance company or other corporation containing, at the time of the
         issuance of such agreements, such terms and conditions as will not
         result in the downgrading or withdrawal of the rating then assigned to
         the Certificates by any such Rating Agency (determined without regard
         to the Class III-A Policy), as evidenced in writing;

                  (vii) repurchase obligations with respect to any security
         described in clauses (i) and (ii) above, in either case entered into
         with a depository institution or trust company (acting as principal)
         described in clause (v) above;

                  (viii) securities (other than stripped bonds, stripped coupons
         or instruments sold at a purchase price in excess of 115% of the face
         amount thereof) bearing interest or sold at a discount issued by any
         corporation incorporated under the laws of the United States or any
         state thereof which, at the time of such investment, have one of the
         two highest short term ratings of each Rating Agency (except if the
         Rating Agency is Moody's, such rating shall be the highest commercial
         paper rating of Moody's for any such securities), or such lower rating
         as will not result in the downgrading or withdrawal of the rating then
         assigned to the Certificates by any Rating Agency (determined without
         regard to the Class III-A Policy), as evidenced by a signed writing
         delivered by each Rating Agency;

                  (ix) interests in any money market fund (including any such
         fund managed or advised by the Trustee or any affiliate thereof) which
         at the date of acquisition of the interests in such fund and throughout
         the time such interests are held in such fund has the highest
         applicable short term rating by each Rating Agency or such lower rating
         as will not result in the downgrading or withdrawal of the ratings then
         assigned to the Certificates by each Rating Agency (determined without
         regard to the Class III-A Policy), as evidenced in writing;

                  (x) short term investment funds sponsored by any trust company
         or banking association incorporated under the laws of the United States
         or any state thereof (including any such fund managed or advised by the
         Trustee or the Master Servicer or any affiliate thereof) which on the
         date of acquisition has been rated by each Rating Agency in their
         respective highest applicable rating category or such lower rating as
         will not result in the downgrading or withdrawal of the ratings then
         assigned to the Certificates by each Rating Agency (determined without
         regard to the Class III-A Policy), as evidenced in writing; and



                                      -33-

<PAGE>



                  (xi) such other investments having a specified stated maturity
         and bearing interest or sold at a discount acceptable to each Rating
         Agency and as will not result in the downgrading or withdrawal of the
         rating then assigned to the Certificates by any Rating Agency
         (determined without regard to the Class III-A Policy), as evidenced by
         a signed writing delivered by each Rating Agency;

provided, that no such instrument shall be a Permitted Investment if such
instrument (i) evidences the right to receive interest only payments with
respect to the obligations underlying such instrument, (ii) is purchased at a
premium or (iii) is purchased at a deep discount; provided further that no such
instrument shall be a Permitted Investment (A) if such instrument evidences
principal and interest payments derived from obligations underlying such
instrument and the interest payments with respect to such instrument provide a
yield to maturity of greater than 120% of the yield to maturity at par of such
underlying obligations, or (B) if it may be redeemed at a price below the
purchase price (the foregoing clause (B) not to apply to investments in units of
money market funds pursuant to clause (vii) above); provided further that no
amount beneficially owned by any REMIC may be invested in investments (other
than money market funds) treated as equity interests for federal income tax
purposes, unless the Master Servicer shall receive an Opinion of Counsel, at the
expense of the Master Servicer, to the effect that such investment will not
adversely affect the status of any such REMIC as a REMIC under the Code or
result in imposition of a tax on any such REMIC. Permitted Investments that are
subject to prepayment or call may not be purchased at a price in excess of par.

         PERMITTED TRANSFEREE: Any person other than (i) the United States, any
State or political subdivision thereof, any possession of the United States or
any agency or instrumentality of any of the foregoing, (ii) a foreign
government, International Organization or any agency or instrumentality of
either of the foregoing, (iii) an organization (except certain farmers'
cooperatives described in section 521 of the Code) that is exempt from tax
imposed by Chapter 1 of the Code (including the tax imposed by section 511 of
the Code on unrelated business taxable income) on any excess inclusions (as
defined in section 860E(c)(1) of the Code) with respect to any Residual
Certificate, (iv) rural electric and telephone cooperatives described in section
1381(a)(2)(C) of the Code, (v) a Person that is not a citizen or resident of the
United States, a corporation, partnership (other than a partnership that has any
direct or indirect foreign partners) or other entity (treated as a corporation
or a partnership for federal income tax purposes), created or organized in or
under the laws of the United States, any state thereof or the District of
Columbia, an estate whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have authority to control all substantial decisions
of the trustor and (vi) any other Person so designated by the Trustee based upon
an Opinion of Counsel addressed to the Trustee (which shall not be an expense of
the Trustee) that states that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause REMIC I, REMIC II, REMIC III or
REMIC IV to fail to qualify as a REMIC at any time that any Certificates are
Outstanding. The terms "United States," "State" and "International Organization"
shall have the meanings set forth in section 7701 of the Code or successor
provisions. A corporation will not be treated as an instrumentality of the
United States or of any State or political subdivision thereof for


                                      -34-

<PAGE>



these purposes if all of its activities are subject to tax and, with the
exception of Freddie Mac, a majority of its board of directors is not selected
by such government unit.

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

         PREMIUM LETTER: The letter agreement dated January 30, 2004, among the
Seller, the Depositor, the Certificate Insurer and the Trustee.

         PREPAYMENT ASSUMPTION: The applicable rate of prepayment, as described
in the Prospectus Supplement relating to each Class of Offered Certificates.

         PREPAYMENT CHARGE: Any prepayment premium, penalty or charge payable by
a Mortgagor in connection with any Principal Prepayment on a Mortgage Loan
pursuant to the terms of the related Mortgage Note.

         PREPAYMENT INTEREST SHORTFALL: With respect to any Distribution Date,
for each Mortgage Loan that was the subject of a partial Principal Prepayment, a
Principal Prepayment in full, or that became a Liquidated Loan during the
related Prepayment Period, (other than a Principal Prepayment in full resulting
from the purchase of a Mortgage Loan pursuant to Section 2.02, 2.03, 3.18 or
10.01 hereof), the amount, if any, by which (i) one month's interest at the
applicable Net Mortgage Rate on the Stated Principal Balance of such Mortgage
Loan immediately prior to such prepayment (or liquidation) or in the case of a
partial Principal Prepayment on the amount of such prepayment (or liquidation
proceeds) exceeds (ii) the amount of interest paid or collected in connection
with such Principal Prepayment or such liquidation proceeds less the sum of (a)
the Trustee Fee, (b) the Servicing Fee and (c) the LPMI Fee, if any.

         PREPAYMENT PERIOD: As to any Distribution Date, the period commencing
on the 16th day of the month prior to the month in which the related
Distribution Date occurs and ending on the 15th day of the month in which such
Distribution Date occurs.

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

         PRINCIPAL DISTRIBUTION AMOUNT: With respect to each Distribution Date,
an amount equal to (x) the Principal Funds for such Distribution Date plus (y)
any Extra Principal Distribution Amount for such Distribution Date, less (z) any
Overcollateralization Release Amount.

         PRINCIPAL FUNDS: With respect to each Loan Group and any Distribution
Date, (i) the sum, without duplication, of (a) all scheduled principal collected
during the related Due Period, (b) all Advances relating to principal made on or
before the Distribution Account Deposit Date, (c) Principal Prepayments
exclusive of prepayment charges or penalties collected during the related


                                      -35-

<PAGE>



Prepayment Period, (d) the Stated Principal Balance of each Mortgage Loan in the
related Loan Group that was repurchased by the Seller pursuant to Sections 2.02
and 2.03 or by EMC pursuant to Section 3.18, (e) the aggregate of all
Substitution Adjustment Amounts for the related Determination Date in connection
with the substitution of Mortgage Loans pursuant to Section 2.03(c), (f) all
Liquidation Proceeds collected during the related Prepayment Period (to the
extent such Liquidation Proceeds relate to principal), in each case to the
extent remitted by the Master Servicer to the Distribution Account pursuant to
this Agreement and (g) amounts in respect of principal paid by EMC pursuant to
Section 10.01, minus (ii) all amounts required to be reimbursed pursuant to
Sections 4.02 and 4.05 or as otherwise set forth in this Agreement.

         PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of (or
proceeds with respect to) principal on a Mortgage Loan (including loans
purchased or repurchased under Sections 2.02, 2.03, 3.18 and 10.01 hereof) that
is received in advance of its scheduled Due Date and is not accompanied by an
amount as to interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment. Partial Principal
Prepayments shall be applied by the Master Servicer, as appropriate, in
accordance with the terms of the related Mortgage Note.

         PRINCIPAL REMITTANCE AMOUNT: With respect to each Distribution Date,
the sum of the amounts listed in clauses (a) through (f) of the definition of
Principal Funds.

         PRIVATE CERTIFICATE: Each of the Class P, Class CE and Residual
Certificates.

         PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated January 27, 2004
relating to the public offering of the Offered Certificates.

         PROTECTED ACCOUNT: Each account established and maintained by the
Master Servicer with respect to the Mortgage Loans and REO Property in
accordance with Section 4.01 hereof.

         PUD: A Planned Unit Development.

         PURCHASE PRICE: With respect to any Mortgage Loan (x) required to be
repurchased by the Seller pursuant to Section 2.02 or 2.03 hereof or (y) that
EMC has a right to purchase pursuant to Section 3.18 hereof, an amount equal to
the sum of (i) 100% of the outstanding principal balance of the Mortgage Loan as
of the date of such purchase plus (ii) accrued interest thereon at the
applicable Mortgage Rate through the first day of the month in which the
Purchase Price is to be distributed to Certificateholders, reduced by any
portion of the Servicing Fee, Servicing Advances and Advances payable to the
purchaser of the Mortgage Loan plus (iii) any costs and damages (if any)
incurred by the Trust in connection with any violation of such Mortgage Loan of
any predatory lending laws.

         RATING AGENCY: Each of Moody's and S&P. If any such organization or its
successor is no longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization, or other comparable Person,
designated by the Depositor, notice of which designation shall be given to the
Trustee. References herein to a given rating category of a Rating Agency shall
mean such rating category without giving effect to any modifiers.



                                      -36-

<PAGE>



         RATING EVENT: Any time any of the Class A Certificates is put on a
"watch list" by Moody's or S&P or downgraded below "Aaa" by Moody's or "AAA" by
S&P (and with respect to the Class III-A Certificates, without regard to the
Class III-A Policy).

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

         With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, minus (iv)
the aggregate of all unreimbursed Advances and Servicing Advances.

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

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

         RECORD DATE: With respect to any Distribution Date and the Offered
Certificates, so long as the Offered Certificates are Book-Entry Certificates,
the Business Day preceding such Distribution Date, and otherwise, the close of
business on the last Business Day of the month preceding the month in which such
Distribution Date occurs. With respect to the Class CE, Class P and Residual
Certificates and (a) the first Distribution Date, the Closing Date and (b) with
respect to any other


                                      -37-

<PAGE>



Distribution Date, the close of business on the last Business Day of the month
preceding the month in which such Distribution Date occurs.

         REFERENCE BANKS: Shall mean leading banks selected by the Trustee and
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market (i) with an established place of business in London, (ii) which have been
designated as such by the Trustee and (iii) which are not controlling,
controlled by, or under common control with, the Depositor, the Seller or the
Master Servicer.

         REFERENCE BANK RATE: With respect to any Accrual Period shall mean the
arithmetic mean, rounded upwards, if necessary, to the nearest whole multiple of
0.03125%, of the offered rates for United States dollar deposits for one month
that are quoted by the Reference Banks as of 11:00 a.m., New York City time, on
the related Interest Determination Date to prime banks in the London interbank
market for a period of one month in an amount approximately equal to the
aggregate Certificate Principal Balance of the Offered Certificates for such
Accrual Period, provided that at least two such Reference Banks provide such
rate. If fewer than two offered rates appear, the Reference Bank Rate will be
the arithmetic mean, rounded upwards, if necessary, to the nearest whole
multiple of 0.03125%, of the rates quoted by one or more major banks in New York
City, selected by the Trustee, as of 11:00 a.m., New York City time, on such
date for loans in United States dollars to leading European banks for a period
of one month in amounts approximately equal to the aggregate Certificate
Principal Balance of the Offered Certificates for such Accrual Period.

         REGULAR CERTIFICATE: Any Certificate other than a Residual Certificate.

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

         REIMBURSEMENT AMOUNT: Shall mean the sum of (a) the aggregate
unreimbursed amount of any payments made by the Certificate Insurer under the
Class III-A Policy, together with interest on such amount from the date of
payment by the Certificate Insurer until paid in full at a rate of interest
equal to the Accrual Rate and (b) any other amounts owed to the Certificate
Insurer under this Agreement or the Insurance Agreement.

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

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

         REMAINING EXCESS SPREAD: With respect to any Distribution Date, the
Excess Spread less (i) any Extra Principal Distribution Amount, in each case for
such Distribution Date and (ii) any unpaid Reimbursement Amounts related to
interest or principal draws not previously paid to the Certificate Insurer
pursuant to Sections 5.04(a)(1), (2) and (3).

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


                                      -38-

<PAGE>




         REMIC I: The segregated pool of assets described in Section 5.06(a).

         REMIC I INTEREST LOSS ALLOCATION AMOUNT: With respect to any
Distribution Date, an amount (subject to adjustment based on the actual number
of days elapsed in the respective Accrual Period) equal to (a) the product of
(i) 50% of the aggregate Stated Principal Balance of the Mortgage Loans and REO
Properties then outstanding and (ii) the Uncertificated REMIC I Pass-Through
Rate for REMIC I Regular Interest AA minus the Marker Rate, divided by (b) 12.

         REMIC I MARKER ALLOCATION PERCENTAGE: 50% of any amount payable or loss
attributable from the Mortgage Loans, which shall be allocated to REMIC I
Regular Interest AA, REMIC I Regular Interest I-A-1, REMIC I Regular Interest
I-A-2, REMIC I Regular Interest II-A-1, REMIC I Regular Interest II-A-2, REMIC I
Regular Interest III-A, REMIC I Regular Interest M-1, REMIC I Regular Interest
M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular
Interest M-5, REMIC I Regular Interest M-6 and REMIC I Regular Interest ZZ.

         REMIC I OVERCOLLATERALIZATION AMOUNT: With respect to any date of
determination, (i) 0.50% of the aggregate Uncertificated Principal Balances of
the REMIC I Regular Interests (other than REMIC I Regular Interest P) minus (ii)
the aggregate of the Uncertificated Principal Balances of REMIC I Regular
Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular Interest II-A-1,
REMIC I Regular Interest II-A-2, REMIC I Regular Interest III-A, REMIC I Regular
Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC
I Regular Interest M-4, REMIC I Regular Interest M-5 and REMIC I Regular
Interest M-6, in each case as of such date of determination.

         REMIC I PRINCIPAL LOSS ALLOCATION AMOUNT: With respect to any
Distribution Date, an amount equal to (a) the product of (i) 50% of the
aggregate Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
aggregate of the Uncertificated Principal Balances of REMIC I Regular Interest
I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular Interest II-A-1, REMIC I
Regular Interest II-A-2, REMIC I Regular Interest III-A, REMIC I Regular
Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC
I Regular Interest M-4, REMIC I Regular Interest M-5 and REMIC I Regular
Interest M-6, and the denominator of which is the aggregate of the
Uncertificated Principal Balances of REMIC I Regular Interest I-A-1, REMIC I
Regular Interest I-A-2, REMIC I Regular Interest II-A-1, REMIC I Regular
Interest II-A-2, REMIC I Regular Interest III-A, REMIC I Regular Interest M-1,
REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular
Interest M-4, REMIC I Regular Interest M-5, REMIC I Regular Interest M-6 and
REMIC I Regular Interest ZZ.

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


                                      -39-

<PAGE>



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

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

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

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

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

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

         REMIC I REGULAR INTEREST M-1: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest M-1 shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and



                                      -40-
<PAGE>



conditions hereof, in an aggregate amount equal to its initial Uncertificated
Principal Balance as set forth in the Preliminary Statement hereto.

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

         REMIC I REGULAR INTEREST M-3: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest M-3 shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC I REGULAR INTEREST M-4: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest M-4 shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC I REGULAR INTEREST M-5: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest M-5 shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC I REGULAR INTEREST M-6: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest M-6 shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

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



                                      -41-

<PAGE>



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

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

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

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

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

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

         REMIC I REGULAR INTEREST 3A: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest 3A shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and


                                      -42-

<PAGE>



conditions hereof, in an aggregate amount equal to its initial Uncertificated
Principal Balance as set forth in the Preliminary Statement hereto.

         REMIC I REGULAR INTEREST 3B: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest 3B shall accrue interest
at the related Uncertificated REMIC I Pass-Through Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC I SUB WAC ALLOCATION PERCENTAGE: 50% of any amount payable or
loss attributable from the Mortgage Loans, which shall be allocated to REMIC I
Regular Interest 1A, REMIC I Regular Interest 1B, REMIC I Regular Interest 2A,
REMIC I Regular Interest 2B, REMIC I Regular Interest 3A, REMIC I Regular
Interest 3B and REMIC I Regular Interest XX.

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

         REMIC I REQUIRED OVERCOLLATERALIZATION AMOUNT: 0.50% of the
Overcollateralization Target Amount.

         REMIC II: The segregated pool of assets described in Section 5.06(a).

         REMIC II CERTIFICATE: Any Regular Certificate (other than the Class CE
Certificate and Class P Certificate) or Class R-II Certificate.

         REMIC II CERTIFICATEHOLDER: The Holder of any REMIC II Certificate.

         REMIC II REGULAR INTEREST: Any Class A Certificate, Class M
Certificate, the Class CE Interest or Class P Interest.

         REMIC III: The segregated pool of assets consisting of the Class CE
Interest conveyed in trust to the Trustee, for the benefit of the Holders of the
Class CE Certificates and the Class RX Certificate (in respect of the Class
R-III Interest), with respect to which a separate REMIC election is to be made.

         REMIC III CERTIFICATE: Any Class CE Certificate or Class RX Certificate
(in respect of the Class R-III Interest).

         REMIC IV: The segregated pool of assets consisting of the Class P
Interest conveyed in trust to the Trustee, for the benefit of the Holders of the
Class P Certificates and the Class RX Certificate


                                      -43-

<PAGE>



(in respect of the Class R-IV Interest), with respect to which a separate REMIC
election is to be made.

         REMIC IV CERTIFICATE: Any Class P Certificate or Class RX Certificate
(in respect of the Class R-IV Interest).

         REMIC OPINION: Shall mean an Opinion of Counsel to the effect that the
proposed action will not have an adverse affect on any REMIC created hereunder.

         REMIC PROVISIONS: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at sections 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
proposed, temporary and final regulations and published rulings, notices and
announcements promulgated thereunder, as the foregoing may be in effect from
time to time as well as provisions of applicable state laws.

         REMITTANCE DATE: Shall mean the Business Day immediately preceding the
Distribution Account Deposit Date.

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

         REO PROPERTY: A Mortgaged Property acquired by the Master Servicer
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.

         REPLACEMENT MORTGAGE LOAN: A Mortgage Loan or Mortgage Loans in the
aggregate substituted by the Seller for a Deleted Mortgage Loan, which must, on
the date of such substitution, as confirmed in a Request for Release, (i) have a
Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
less than 90% of, the Stated Principal Balance of the Deleted Mortgage Loan;
(ii) have a fixed Mortgage Rate not less than or more than 1% per annum higher
than the Mortgage Rate of the Deleted Mortgage Loan; (iii) have the same or
higher credit quality characteristics than that of the Deleted Mortgage Loan;
(iv) have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage
Loan; (v) have a remaining term to maturity no greater than (and not more than
one year less than) that of the Deleted Mortgage Loan; (vi) not permit
conversion of the Mortgage Rate from a fixed rate to a variable rate; (vii) have
the same lien priority as the Deleted Mortgage Loan; (viii) constitute the same
occupancy type as the Deleted Mortgage Loan or be owner occupied; (ix) if the
Replacement Mortgage Loan is an Adjustable Rate Mortgage Loan, have a Maximum
Mortgage Rate not less than the Maximum Mortgage Rate on the Deleted Mortgage
Loan, (x) if the Replacement Mortgage Loan is an Adjustable Rate Mortgage Loan,
have a Minimum Mortgage Rate not less than the Minimum Mortgage Rate of the
Deleted Mortgage Loan, (xi) if the Replacement Mortgage Loan is an Adjustable
Rate Mortgage Loan, have a Gross Margin equal to or greater than the Gross
Margin of the Deleted Mortgage Loan, (xii) if the Replacement Mortgage Loan is
an Adjustable Rate Mortgage Loan, have a next Adjustment Date not more than two
months later than the next


                                      -44-

<PAGE>



Adjustment Date on the Deleted Mortgage Loan, (xiii) comply with each
representation and warranty set forth in Section 7 of the Mortgage Loan Purchase
Agreement and (xiv) the Custodian has delivered a Final Certification noting no
defects or exceptions.

         REPURCHASE PRICE: With respect to each Mortgage Loan, a price equal to
(i) the outstanding principal balance of such Mortgage Loan, plus (ii) interest
on such outstanding principal balance at the Mortgage Rate (net of the Servicing
Fee Rate) from the last date through which interest has been paid to the end of
the month of repurchase, less (iii) amounts advanced by the Master Servicer in
respect of such repurchased Mortgage Loan which are being held in the Protected
Account for remittance to the Trustee plus (iv) any costs or damages (if any)
incurred by the Trust in connection with any violation of such Mortgage Loan of
any predatory lending laws.

         REQUEST FOR RELEASE: The Request for Release to be submitted by the
Seller or the Master Servicer to the Custodian substantially in the form of
Exhibit H. Each Request for Release furnished to the Custodian by the Seller or
the Master Servicer shall be in duplicate and shall be executed by an officer of
such Person or a Servicing Officer (or, if furnished electronically to the
Custodian, shall be deemed to have been sent and executed by an officer of such
Person or a Servicing Officer) of the Master Servicer.

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

         RESERVE FUND: Shall mean the separate trust account created and
maintained by the Trustee pursuant to Section 3.20 hereof.

         RESIDUAL CERTIFICATES: The Class R-I, Class R-II and Class RX
Certificates each evidencing the sole class of "residual interests" (within the
meaning of Section 860G(a)(2) of the Code) in the related REMIC.

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

         RESPONSIBLE OFFICER: With respect to the Trustee, any Vice President,
any Assistant Vice President, the Secretary, any Assistant Secretary, or any
Trust Officer with specific responsibility for the transactions contemplated
hereby, any other officer customarily performing functions similar to those
performed by any of the above designated officers or other officers of the
Trustee specified by the Trustee, as to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.

         S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc,
and any successor thereto.

         SCHEDULED PAYMENT: The scheduled monthly payment on a Mortgage Loan due
on any Due Date allocable to principal and/or interest on such Mortgage Loan.

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


                                      -45-

<PAGE>



         SELLER: EMC Mortgage Corporation, a Delaware corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans to the
Depositor.

         SENIOR CERTIFICATES: The Class I-A-1, Class I-A-2, Class II-A-1, Class
II-A-2 and Class III-A Certificates.

         SERVICING ADVANCES: All customary, reasonable and necessary "out of
pocket" costs and expenses (including reasonable legal fees) incurred in the
performance by the Master Servicer of its servicing obligations hereunder,
including, but not limited to, the cost of (i) the preservation, restoration and
protection of a Mortgaged Property, (ii) any enforcement or judicial
proceedings, including foreclosures, and including any expenses incurred in
relation to any such proceedings that result from the Mortgage Loan being
registered in the MERS(R) System, (iii) the management and liquidation of any
REO Property (including, without limitation, realtor's commissions) and (iv)
compliance with any obligations under Section 3.07 hereof to cause insurance to
be maintained.

         SERVICING FEE: As to each Mortgage Loan and any Distribution Date, an
amount equal to 1/12th of the Servicing Fee Rate multiplied by the Stated
Principal Balance of such Mortgage Loan as of the last day of the related Due
Period or, in the event of any payment of interest that accompanies a Principal
Prepayment in full during the related Due Period made by the Mortgagor
immediately prior to such prepayment, interest at the Servicing Fee Rate on the
Stated Principal Balance of such Mortgage Loan for the period covered by such
payment of interest.

         SERVICING FEE RATE: 0.50% per annum.

         SERVICING MODIFICATION: With respect to any Mortgage Loan that is in
default or, in the reasonable judgment of the Master Servicer, as to which
default is reasonably foreseeable, any modification which is effected by the
Master Servicer in accordance with the terms of this Agreement which results in
any change in the outstanding Stated Principal Balance, any change in the
Mortgage Rate or any extension of the term of such Mortgage Loan.

         SERVICING OFFICER: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee and the Certificate Insurer by the Master Servicer on the Closing
Date pursuant to this Agreement, as such list may from time to time be amended.

         STARTUP DAY: The Startup Day for each REMIC formed hereunder shall be
the Closing Date.

         STATED PRINCIPAL BALANCE: With respect to any Mortgage Loan or related
REO Property and any Distribution Date, the Cut-off Date Principal Balance
thereof minus the sum of (i) the principal portion of the Scheduled Payments due
with respect to such Mortgage Loan during each Due Period ending prior to such
Distribution Date (and irrespective of any delinquency in their payment), (ii)
all Principal Prepayments with respect to such Mortgage Loan received prior to
or during the related Prepayment Period, and all Liquidation Proceeds to the
extent applied by the Master Servicer as recoveries of principal in accordance
with Section 3.09 with respect to such Mortgage Loan, that were received by the
Master Servicer as of the close of business on the last day of the Prepayment
Period related to such Distribution Date and (iii) any Realized Losses on such
Mortgage Loan


                                      -46-

<PAGE>



incurred during the related Prepayment Period. The Stated Principal Balance of a
Liquidated Loan equals zero.

         STEPDOWN DATE: The later to occur of (a) the Distribution Date in
February 2007 and (b) the first Distribution Date on which the aggregate
Certificate Principal Balance of the Class M Certificates and the
Overcollateralization Amount divided by the Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period is greater than or
equal to 41.50%.

         SUBORDINATED CERTIFICATES: The Class M Certificates, Class CE
Certificates and Residual Certificates.

         SUBSERVICING AGREEMENT: Any agreement entered into between the Master
Servicer and a subservicer with respect to the subservicing of any Mortgage Loan
hereunder by such subservicer.

         SUBSTITUTION ADJUSTMENT AMOUNT: The meaning ascribed to such term
pursuant to Section 2.03(c).

         SUCCESSOR MASTER SERVICER: The meaning ascribed to such term pursuant
to Section 8.01.

         TAX MATTERS PERSON: The person designated as "tax matters person" in
the manner provided under Treasury regulation ss. 1.860F-4(d) and temporary
Treasury regulation ss. 301.6231(a)(7)-1T. The holder of the greatest Percentage
Interest in a Class of Residual Certificates shall be the Tax Matters Person for
the related REMIC. The Trustee, or any successor thereto or assignee thereof
shall serve as tax administrator hereunder and as agent for the related Tax
Matters Person.

         TRANSACTION DOCUMENTS: This Agreement, the Mortgage Loan Purchase
Agreement, the Custodial Agreement, the Insurance Agreement, the Indemnification
Agreement (as defined in the Insurance Agreement), the Underwriting Agreement
and the Premium Letter.

         TRANSFER: Any direct or indirect transfer or sale of any Ownership
Interest in a Certificate.

         TRANSFER AFFIDAVIT: As defined in Section 6.02(c).

         TRIGGER EVENT: With respect to any Distribution Date after the Stepdown
Date, a Trigger Event exists if (i) a Delinquency Event shall have occurred and
be continuing or (ii) the aggregate amount of Realized Losses on the Mortgage
Loans as a percentage of the initial aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date exceeds the applicable percentages set
forth below with respect to such Distribution Date:

         Distribution Date                        Percentage
         -----------------                        ----------
         February 2007 to January 2008            3.75%
         February 2008 to January 2009            5.75%
         February 2009 to January 2010            7.00%
         February 2010 to January 2011            7.75%
         February 2011 and thereafter             8.25%



                                      -47-

<PAGE>



         TRUST FUND: The corpus of the trust created hereunder consisting of (i)
the Mortgage Loans and all interest accruing and principal due with respect
thereto after the Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof; (ii) the Distribution Account, the Class
III-A Policy Payments Account, the Class P Certificate Account, the Reserve Fund
and the Protected Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iii) property that secured a Mortgage
Loan and has been acquired by foreclosure, deed in lieu of foreclosure or
otherwise; (iv) the mortgagee's rights under the Insurance Policies with respect
to the Mortgage Loans; (v) for the benefit of the Class III-A Certificates only,
the Class III-A Policy; (vi) the rights under the Yield Maintenance Agreements;
(vii) the rights under the Mortgage Loan Purchase Agreement; and (viii) all
proceeds of the foregoing, including proceeds of conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.

         TRUSTEE: LaSalle Bank National Association, a national banking
association, not in its individual capacity, but solely in its capacity as
trustee for the benefit of the Certificateholders under this Agreement, and any
successor thereto, and any corporation or national banking association resulting
from or surviving any consolidation or merger to which it or its successors may
be a party and any successor trustee as may from time to time be serving as
successor trustee hereunder.

         TRUSTEE FEE: As to each Mortgage Loan and any Distribution Date, a fee
per annum equal to 0.0036% multiplied by the Stated Principal Balance of such
Mortgage Loan as of the last day of the related Due Period.

         UNCERTIFICATED ACCRUED INTEREST: With respect to each REMIC I Regular
Interest on each Distribution Date, an amount equal to one month's interest at
the Uncertificated REMIC I Pass- Through Rate on the Uncertificated Principal
Balance of such REMIC I Regular Interest. In each case, Uncertificated Accrued
Interest will be reduced by any Prepayment Interest Shortfalls and Relief Act
Interest Shortfalls (allocated to such REMIC I Regular Interests as set forth in
Section 5.06).

         UNCERTIFICATED NOTIONAL BALANCE: With respect to the Class CE Interest
and any Distribution Date, the Uncertificated Principal Balance of the REMIC I
Regular Interests (other than REMIC I Regular Interest P) for such Distribution
Date.

UNCERTIFICATED PRINCIPAL BALANCE: The amount of the REMIC I Regular Interests
outstanding as of any date of determination. As of the Closing Date, the
Uncertificated Principal Balance of each REMIC I Regular Interest shall equal
the amount set forth in the Preliminary Statement hereto as its initial
uncertificated principal balance. On each Distribution Date, the Uncertificated
Principal Balance of the REMIC I Regular Interest shall be reduced by all
distributions of principal made on such REMIC I Regular Interest on such
Distribution Date pursuant to Section 5.06 and, if and to the extent necessary
and appropriate, shall be further reduced on such Distribution Date by Realized
Losses as provided in Section 5.04A and the Uncertificated Principal Balance of
REMIC I Regular Interest ZZ shall be increased by interest deferrals as provided
in Section 5.06(b)(1)(i). The Uncertificated Principal Balance of each REMIC I
Regular Interest shall never be less than zero. With respect to the Class CE
Interest as of any date of determination, an amount equal to the excess, if any,
of (A) the then aggregate Uncertificated Principal Balances of the REMIC I
Regular Interests


                                      -48-

<PAGE>



over (B) the then aggregate Certificate Principal Balances of the Class A
Certificates, the Class M Certificates and the Class P Interest then
outstanding.

         UNCERTIFICATED REMIC I PASS-THROUGH RATE: With respect to REMIC I
Regular Interest AA, REMIC I Regular Interest I-A-1, REMIC I Regular Interest
I-A-2, REMIC I Regular Interest II-A-1, REMIC I Regular Interest II-A-2, REMIC I
Regular Interest III-A, REMIC I Regular Interest M-1, REMIC I Regular Interest
M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular
Interest M-5, REMIC I Regular Interest M-6, REMIC I Regular Interest ZZ, REMIC I
Regular Interest 1A, REMIC I Regular Interest 2A, REMIC I Regular Interest 3A
and REMIC I Regular Interest XX, the weighted average of the Net Mortgage Rates
of the Mortgage Loans. With respect to REMIC I Regular Interest 1B, the weighted
average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I. With
respect to REMIC I Regular Interest 2B, the weighted average of the Net Mortgage
Rates of the Mortgage Loans in Loan Group II. With respect to REMIC I Regular
Interest 3B, the weighted average of the Net Mortgage Rates of the Mortgage
Loans in Loan Group III. With respect to REMIC I Regular Interest P, 0.00%.

         UNDERWRITING AGREEMENT: The Underwriting Agreement dated as of October
29, 2003 among the Depositor, Bear, Stearns & Co. Inc. ("Bear Stearns") and Banc
of America Securities LLC ("Banc of America"), together with the related Terms
Agreement, dated as of January 27, 2004 among the Depositor, Bear Stearns and
Banc of America.

         UNPAID REALIZED LOSS AMOUNT: With respect to any Class A Certificates
and as to any Distribution Date, is the excess of Applied Realized Loss Amounts
with respect to such Class over the sum of all distributions in reduction of the
Applied Realized Loss Amounts on all previous Distribution Dates. Any amounts
distributed to the Class A Certificates in respect of any Unpaid Realized Loss
Amount shall not be applied to reduce the Certificate Principal Balance of such
Class.

         VOTING RIGHTS: The portion of the voting rights of all the Certificates
that is allocated to any Certificate for purposes of the voting provisions
hereunder. Voting Rights shall be allocated (i) 94% to the Offered Certificates,
(ii) 3% to the Class CE Certificates until paid in full, and (iii) 1% to each
Class of Residual Certificates (other than the Class RX Certificates) and Class
P Certificates, with the allocation among the Certificates (other than the Class
CE, Class P and the Residual Certificates) to be in proportion to the
Certificate Principal Balance of each Class relative to the Certificate
Principal Balance of all other such Classes. Voting Rights will be allocated
among the Certificates of each such Class in accordance with their respective
Percentage Interests. With respect to Voting Rights, the Class III-A
Certificateholders are subject to Section 5.07(l) of this Agreement.

         YIELD MAINTENANCE AGREEMENTS: The two Yield Maintenance Agreements,
each dated January 30, 2004 between the Trust (on behalf of the Class II-A-1,
Class II-A-2 and Class M Certificateholders) and Bear Stearns Financial Products
Inc.



                                      -49-

<PAGE>



         Section 1.02 ALLOCATION OF CERTAIN INTEREST SHORTFALLS.

         For purposes of calculating the amount of Current Interest for the
Class A Certificates, the Class M Certificates and the Class CE Certificates for
any Distribution Date, the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Master Servicer
pursuant to Section 5.02) and any Relief Act Interest Shortfalls incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, to the Class CE Certificates based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the Certificate
Notional Amount thereof and, thereafter, among the Offered Certificates, in each
case on a PRO RATA basis based on, and to the extent of, one month's interest at
the then applicable respective Pass-Through Rate on the respective Certificate
Principal Balance of each such Certificate.

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

         (a) The REMIC I Marker Allocation Percentage of the aggregate amount of
any Prepayment Interest Shortfalls (to the extent not covered by payments by the
Master Servicer pursuant to Section 5.02) and the REMIC I Marker Allocation
Percentage of any Relief Act Interest Shortfalls incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated first, to
Uncertificated Accrued Interest payable to REMIC I Regular Interest AA and REMIC
I Regular Interest ZZ up to an aggregate amount equal to the REMIC I Interest
Loss Allocation Amount, 98.00% and 2.00%, respectively, and thereafter among
REMIC I Regular Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular
Interest II-A-1, REMIC I Regular Interest II-A-2, REMIC I Regular Interest
III-A, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I
Regular Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest
M-5, REMIC I Regular Interest M-6 and REMIC I Regular Interest ZZ PRO RATA based
on, and to the extent of, one month's interest at the then applicable respective
Uncertificated REMIC I Pass-Through Rate on the respective Uncertificated
Principal Balance of each such REMIC I Regular Interest;

         (b) The REMIC I Sub WAC Allocation Percentage of the aggregate amount
of any Prepayment Interest Shortfalls (to the extent not covered by payments by
the Master Servicer pursuant to Section 5.02) and the REMIC I Sub WAC Allocation
Percentage of any Relief Act Interest Shortfalls incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated to Uncertificated
Accrued Interest payable to REMIC I Regular Interest 1A, REMIC I Regular
Interest 1B, REMIC I Regular Interest 2A, REMIC I Regular Interest 2B, REMIC I
Regular Interest 3A, REMIC I Regular Interest 3B and REMIC I Regular Interest
XX, pro rata based on, and to the extent of, one month's interest at the then
applicable respective Uncertificated REMIC I Pass- Through Rate on the
respective Uncertificated Principal Balance of each such REMIC I Regular
Interest; and

         (c) The aggregate amount of any Prepayment Interest Shortfalls (to the
extent not covered by payments by the Master Servicer pursuant to Section 5.02)
and any Relief Act Interest Shortfalls allocated to the Class CE Certificates
shall be deemed allocated to the Class CE Interest.




                                      -50-

<PAGE>






                                      -51-

<PAGE>



                                   ARTICLE II

                            CONVEYANCE OF TRUST FUND
                         REPRESENTATIONS AND WARRANTIES

         Section 2.01 CONVEYANCE OF TRUST FUND.

         The Seller hereby sells, transfers, assigns, sets over and otherwise
conveys to the Depositor, without recourse, all the right, title and interest of
the Seller in and to the assets in the Trust Fund.

         The Seller has entered into this Agreement in consideration for the
purchase of the Mortgage Loans by the Depositor and has agreed to take the
actions specified herein.

         The Depositor, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee
for the use and benefit of the Certificateholders and the Certificate Insurer,
without recourse, all the right, title and interest of the Depositor in and to
the Trust Fund. In addition, on or prior to the Closing Date, the Depositor
shall cause the Certificate Insurer to deliver the Class III-A Policy to the
Trustee.

         In connection with such sale, the Depositor has delivered to, and
deposited with, the Trustee or the Custodian, as its agent, the following
documents or instruments with respect to each Mortgage Loan so assigned: (i) the
original Mortgage Note, including any riders thereto, endorsed without recourse
to the order of "LaSalle Bank National Association, as Trustee for
certificateholders of Bear Stearns Asset Backed Securities, Inc. Asset Backed
Certificates, Series 2004-HE1," and showing an unbroken chain of endorsements
from the original payee thereof to the Person endorsing it to the Trustee, (ii)
the original Mortgage and, if the related Mortgage Loan is a MOM Loan, noting
the presence of the MIN and language indicating that such Mortgage Loan is a MOM
Loan, which shall have been recorded (or if the original is not available, a
copy), with evidence of such recording indicated thereon (or if clause (x) in
the proviso below applies, shall be in recordable form), (iii) unless the
Mortgage Loan is a MOM Loan, the assignment (either an original or a copy, which
may be in the form of a blanket assignment if permitted in the jurisdiction in
which the Mortgaged Property is located) to the Trustee of the Mortgage with
respect to each Mortgage Loan in the name of "LaSalle Bank National Association,
as Trustee for certificateholders of Bear Stearns Asset Backed Securities, Inc.
Asset Backed Certificates, Series 2004-HE1," which shall have been recorded (or
if clause (x) in the proviso below applies, shall be in recordable form) (iv) an
original or a copy of all intervening assignments of the Mortgage, if any, with
evidence of recording thereon, (v) the original policy of title insurance or
mortgagee's certificate of title insurance or commitment or binder for title
insurance, if available, or a copy thereof, or, in the event that such original
title insurance policy is unavailable, a photocopy thereof, or in lieu thereof,
a current lien search on the related Mortgaged Property and (vi) originals or
copies of all available assumption, modification or substitution agreements, if
any; provided, however, that in lieu of the foregoing, the Seller may deliver
the following documents, under the circumstances set forth below: (x) if any
Mortgage, assignment thereof to the Trustee or intervening assignments thereof
have been delivered or are being delivered to recording offices for recording
and have not been returned in time to permit their delivery as specified above,
the Depositor may deliver a true copy thereof with a certification by the Seller
or the title company issuing the commitment for title insurance, on the face of
such copy,


                                      -52-

<PAGE>



substantially as follows: "Certified to be a true and correct copy of the
original, which has been transmitted for recording"; and (y) in lieu of the
Mortgage Notes relating to the Mortgage Loans identified in the list set forth
in Exhibit J, the Depositor may deliver a lost note affidavit and indemnity and
a copy of the original note, if available; and provided, further, however, that
in the case of Mortgage Loans which have been prepaid in full after the Cut-Off
Date and prior to the Closing Date, the Depositor, in lieu of delivering the
above documents, may deliver to the Trustee and its Custodian a certification of
a Servicing Officer to such effect and in such case shall deposit all amounts
paid in respect of such Mortgage Loans, in the Protected Account or in the
Distribution Account on the Closing Date. In the case of the documents referred
to in clause (x) above, the Depositor shall deliver such documents to the
Trustee or its Custodian promptly after they are received. The Seller shall
cause, at its expense, the Mortgage and intervening assignments, if any, and to
the extent required in accordance with the foregoing, the assignment of the
Mortgage to the Trustee to be submitted for recording promptly after the Closing
Date; provided that the Seller need not cause to be recorded (a) any assignment
in any jurisdiction under the laws of which, as evidenced by an Opinion of
Counsel addressed to the Trustee delivered by the Seller to the Trustee, the
Certificate Insurer and the Rating Agencies, the recordation of such assignment
is not necessary to protect the Trustee's interest in the related Mortgage Loan
or (b) if MERS is identified on the Mortgage or on a properly recorded
assignment of the Mortgage as the mortgagee of record solely as nominee for
Seller and its successors and assigns. In the event that the Seller, the
Depositor or the Master Servicer gives written notice to the Trustee that a
court has recharacterized the sale of the Mortgage Loans as a financing, the
Seller shall submit or cause to be submitted for recording as specified above
each such previously unrecorded assignment to be submitted for recording as
specified above at the expense of the Trust. In the event a Mortgage File is
released to the Master Servicer as a result of such Person having completed a
Request for Release, the Custodian shall, if not so completed, complete the
assignment of the related Mortgage in the manner specified in clause (iii)
above.

         In connection with the assignment of any Mortgage Loan registered on
the MERS(R) System, the Seller further agrees that it will cause, at the
Seller's own expense, within 30 days after the Closing Date, the MERS(R) System
to indicate that such Mortgage Loans have been assigned by the Seller to the
Depositor and by the Depositor to the Trustee in accordance with this Agreement
for the benefit of the Certificateholders and the Certificate Insurer by
including (or deleting, in the case of Mortgage Loans which are repurchased in
accordance with this Agreement) in such computer files (a) the code in the field
which identifies the specific Trustee and (b) the code in the field "Pool Field"
which identifies the series of the Certificates issued in connection with such
Mortgage Loans. The Seller further agrees that it will not, and will not permit
the Master Servicer to, and the Master Servicer agrees that it will not, alter
the codes referenced in this paragraph with respect to any Mortgage Loan during
the term of this Agreement unless and until such Mortgage Loan is repurchased in
accordance with the terms of this Agreement or the Mortgage Loan Purchase
Agreement.



                                      -53-

<PAGE>



         Section 2.02      ACCEPTANCE OF THE MORTGAGE LOANS.

         (a) Based on the Initial Certification received by it from the
Custodian, the Trustee acknowledges receipt of, subject to the further review
and exceptions reported by the Custodian pursuant to the procedures described
below, the documents (or certified copies thereof) delivered to the Trustee or
the Custodian on its behalf pursuant to Section 2.01 and declares that it holds
and will continue to hold directly or through a custodian those documents and
any amendments, replacements or supplements thereto and all other assets of the
Trust Fund delivered to it in trust for the use and benefit of all present and
future Holders of the Certificates and the Certificate Insurer. On the Closing
Date, the Trustee or the Custodian on its behalf will deliver an Initial
Certification in the form of Exhibit One to the Custodial Agreement confirming
whether or not it has received the Mortgage File for each Mortgage Loan, but
without review of such Mortgage File, except to the extent necessary to confirm
whether such Mortgage File contains the original Mortgage Note or a lost note
affidavit and indemnity in lieu thereof. No later than 90 days after the Closing
Date, the Trustee or the Custodian on its behalf shall, for the benefit of the
Certificateholders and the Certificate Insurer, review each Mortgage File
delivered to it and execute and deliver to the Seller, the Master Servicer and
the Certificate Insurer and, if reviewed by the Custodian, the Trustee, an
Interim Certification substantially in the form of Exhibit Two to the Custodial
Agreement. In conducting such review, the Trustee or the Custodian on its behalf
will ascertain whether all required documents have been executed and received
and whether those documents relate, determined on the basis of the Mortgagor
name, original principal balance and loan number, to the Mortgage Loans
identified in Exhibit B to this Agreement, as supplemented (provided, however,
that with respect to those documents described in subclauses (iv) and (vi) of
Section 2.01, such obligations shall extend only to documents actually delivered
pursuant to such subclauses). In performing any such review, the Trustee and the
Custodian may conclusively rely on the purported due execution and genuineness
of any such document and on the purported genuineness of any signature thereon.
If the Trustee or the Custodian on its behalf finds any document constituting
part of the Mortgage File not to have been executed or received, or to be
unrelated to the Mortgage Loans identified in Exhibit B or to appear to be
defective on its face, the Trustee or the Custodian on its behalf shall include
such information in the exception report attached to the Interim Certification.
The Seller shall correct or cure any such defect or, if prior to the end of the
second anniversary of the Closing Date, the Seller may substitute for the
related Mortgage Loan a Replacement Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03 or shall deliver to the Trustee and the Certificate Insurer an Opinion of
Counsel addressed to the Trustee to the effect that such defect does not
materially or adversely affect the interests of the Certificateholders in such
Mortgage Loan (such determination to be made without regard to the Class III-A
Policy) within 60 days from the date of notice from the Trustee of the defect
and if the Seller fails to correct or cure the defect or deliver such opinion
within such period, the Seller will, subject to Section 2.03, within 90 days
from the notification of the Trustee purchase such Mortgage Loan at the Purchase
Price; provided, however, that if such defect relates solely to the inability of
the Seller to deliver the Mortgage, assignment thereof to the Trustee, or
intervening assignments thereof with evidence of recording thereon because such
documents have been submitted for recording and have not been returned by the
applicable jurisdiction, the Seller shall not be required to purchase such
Mortgage Loan if the Seller delivers such documents promptly upon receipt, but
in no event later than 360 days after the Closing Date.



                                      -54-

<PAGE>



         (b) No later than 180 days after the Closing Date, the Trustee or the
Custodian on its behalf will review, for the benefit of the Certificateholders
and the Certificate Insurer, the Mortgage Files and will execute and deliver or
cause to be executed and delivered to the Seller, the Master Servicer and the
Certificate Insurer and, if reviewed by the Custodian, the Trustee, a Final
Certification substantially in the form of Exhibit Three to the Custodial
Agreement. In conducting such review, the Trustee or the Custodian on its behalf
will ascertain whether each document required to be recorded has been returned
from the recording office with evidence of recording thereon and the Trustee or
the Custodian on its behalf has received either an original or a copy thereof,
as required in Section 2.01 (provided, however, that with respect to those
documents described in subclauses (iv) and (vi) of Section 2.01, such
obligations shall extend only to documents actually delivered pursuant to such
subclauses). If the Trustee or the Custodian on its behalf finds any document
with respect to a Mortgage Loan has not been received, or to be unrelated,
determined on the basis of the Mortgagor name, original principal balance and
loan number, to the Mortgage Loans identified in Exhibit B or to appear
defective on its face, the Trustee or the Custodian on its behalf shall note
such defect in the exception report attached to the Final Certification and
shall promptly notify the Seller and the Certificate Insurer. The Seller shall
correct or cure any such defect or, if prior to the end of the second
anniversary of the Closing Date, the Seller may substitute for the related
Mortgage Loan a Replacement Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03 or shall deliver to the Trustee and the Certificate Insurer an Opinion of
Counsel addressed to the Trustee to the effect that such defect does not
materially or adversely affect the interests of Certificateholders in such
Mortgage Loan (such determination to be made without regard to the Class III-A
Policy) within 60 days from the date of notice from the Trustee of the defect
and if the Seller is unable within such period to correct or cure such defect,
or to substitute the related Mortgage Loan with a Replacement Mortgage Loan or
to deliver such opinion, the Seller shall, subject to Section 2.03, within 90
days from the notification of the Trustee, purchase such Mortgage Loan at the
Purchase Price; provided, however, that if such defect relates solely to the
inability of the Seller to deliver the Mortgage, assignment thereof to the
Trustee or intervening assignments thereof with evidence of recording thereon,
because such documents have not been returned by the applicable jurisdiction,
the Seller shall not be required to purchase such Mortgage Loan, if the Seller
delivers such documents promptly upon receipt, but in no event later than 360
days after the Closing Date. Notwithstanding anything to the contrary, the
Trustee shall have no responsibility with respect to the custody or review of
Mortgage Files held by the Custodian pursuant to the Custodial Agreement. The
Trustee shall have no liability for the failure of the Custodian to perform its
obligations under the Custodial Agreement.

         (c) In the event that a Mortgage Loan is purchased by the Seller in
accordance with subsections 2.02(a) or (b) above or Section 2.03, the Seller
shall remit the applicable Purchase Price to the Master Servicer for deposit in
the Protected Account and shall provide written notice to the Trustee and the
Certificate Insurer detailing the components of the Purchase Price, signed by a
Servicing Officer. Upon deposit of the Purchase Price in the Protected Account
and upon receipt of a Request for Release with respect to such Mortgage Loan,
the Trustee or the Custodian will release to the Seller the related Mortgage
File and the Trustee shall execute and deliver all instruments of transfer or
assignment, without recourse, representation or warranty furnished to it by the
Seller, as are necessary to vest in the Seller title to and rights under the
Mortgage Loan. Such purchase shall be deemed to have occurred on the date on
which the deposit into the Protected Account was made. The Trustee shall
promptly notify the Rating Agencies and the Certificate Insurer of such
repurchase.


                                      -55-

<PAGE>



The obligation of the Seller to cure, repurchase or substitute for any Mortgage
Loan as to which a defect in a constituent document exists shall be the sole
remedies respecting such defect available to the Certificateholders and the
Certificate Insurer or to the Trustee on their behalf.

         (d) The Seller shall deliver to the Trustee or the Custodian on its
behalf, and Trustee agrees to accept the Mortgage Note and other documents
constituting the Mortgage File with respect to any Replacement Mortgage Loan,
which the Trustee or the Custodian will review as provided in subsections
2.02(a) and 2.02(b), provided, that the Closing Date referred to therein shall
instead be the date of delivery of the Mortgage File with respect to each
Replacement Mortgage Loan.

         Section 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER AND THE SELLER.

         (a) The Master Servicer hereby represents and warrants to the
Depositor, the Trustee and the Certificate Insurer as follows, as of the Closing
Date:

                  (i) It is duly organized and is validly existing and in good
         standing under the laws of the State of Delaware and is duly authorized
         and qualified to transact any and all business contemplated by this
         Agreement to be conducted by it in any state in which a Mortgaged
         Property is located or is otherwise not required under applicable law
         to effect such qualification and, in any event, is in compliance with
         the doing business laws of any such state, to the extent necessary to
         ensure its ability to enforce each Mortgage Loan, to service the
         Mortgage Loans in accordance with the terms of this Agreement and to
         perform any of its other obligations under this Agreement and any other
         Transaction Documents to which it is a party in accordance with the
         terms hereof or thereof.

                  (ii) It has the full corporate power and authority to service
         each Mortgage Loan, and to execute, deliver and perform, and to enter
         into and consummate the transactions contemplated by this Agreement and
         any other Transaction Documents to which it is a party and has duly
         authorized by all necessary corporate action on its part the execution,
         delivery and performance of this Agreement and any other Transaction
         Documents to which it is a party; and this Agreement and any other
         Transaction Documents to which it is a party, assuming the due
         authorization, execution and delivery hereof by the other parties
         hereto or thereto, as applicable, constitutes its legal, valid and
         binding obligation, enforceable against it in accordance with its
         terms, except that (a) the enforceability hereof may be limited by
         bankruptcy, insolvency, moratorium, receivership and other similar laws
         relating to creditors' rights generally and (b) the remedy of specific
         performance and injunctive and other forms of equitable relief may be
         subject to equitable defenses and to the discretion of the court before
         which any proceeding therefor may be brought.

                  (iii) The execution and delivery of this Agreement and any
         other Transaction Documents to which it is a party by it, the servicing
         of the Mortgage Loans by it under this Agreement, the consummation of
         any other of the transactions contemplated by this Agreement and any
         other Transaction Documents to which it is a party , and the
         fulfillment of or compliance with the terms hereof and thereof are in
         its ordinary course of business and will not (A) result in a breach of
         any term or provision of its charter or by-laws or (B)


                                      -56-

<PAGE>



         conflict with, result in a breach, violation or acceleration of, or
         result in a default under, the terms of any other material agreement or
         instrument to which it is a party or by which it may be bound, or (C)
         constitute a violation of any statute, order or regulation applicable
         to it of any court, regulatory body, administrative agency or
         governmental body having jurisdiction over it; and it is not in breach
         or violation of any material indenture or other material agreement or
         instrument, or in violation of any statute, order or regulation of any
         court, regulatory body, administrative agency or governmental body
         having jurisdiction over it which breach or violation may materially
         impair its ability to perform or meet any of its obligations under this
         Agreement and any other Transaction Documents to which it is a party.

                  (iv) It is an approved servicer of conventional mortgage loans
         for Fannie Mae or Freddie Mac and is a mortgagee approved by the
         Secretary of Housing and Urban Development pursuant to sections 203 and
         211 of the National Housing Act.

                  (v) No litigation is pending or, to the best of its knowledge,
         threatened, against it that would materially and adversely affect the
         execution, delivery or enforceability of this Agreement and any other
         Transaction Documents to which it is a party or its ability to service
         the Mortgage Loans or to perform any of its other obligations under
         this Agreement and any other Transaction Documents to which it is a
         party in accordance with the terms hereof or thereof.

                  (vi) No consent, approval, authorization or order of any court
         or governmental agency or body is required for its execution, delivery
         and performance of, or compliance with, this Agreement and any other
         Transaction Documents to which it is a party or the consummation of the
         transactions contemplated hereby or thereby, or if any such consent,
         approval, authorization or order is required, it has obtained the same.

         (b) The Seller hereby represents and warrants to the Depositor, the
Trustee and the Certificate Insurer as follows, as of the Closing Date:

                  (i) The Seller is duly organized as a Delaware corporation and
         is validly existing and in good standing under the laws of the State of
         Delaware and is duly authorized and qualified to transact any and all
         business contemplated by this Agreement to be conducted by the Seller
         in any state in which a Mortgaged Property is located or is otherwise
         not required under applicable law to effect such qualification and, in
         any event, is in compliance with the doing business laws of any such
         state, to the extent necessary to ensure its ability to enforce each
         Mortgage Loan, to sell the Mortgage Loans in accordance with the terms
         of this Agreement and to perform any of its other obligations under
         this Agreement and any other Transaction Documents to which it is a
         party in accordance with the terms hereof or thereof.

                  (ii) The Seller has the full corporate power and authority to
         sell each Mortgage Loan, and to execute, deliver and perform, and to
         enter into and consummate the transactions contemplated by this
         Agreement and any other Transaction Documents to which it is a party
         and has duly authorized by all necessary corporate action on the part
         of the Seller the execution, delivery and performance of this Agreement
         and any other Transaction


                                      -57-

<PAGE>



         Documents to which it is a party; and this Agreement and any other
         Transaction Documents to which it is a party, assuming the due
         authorization, execution and delivery hereof by the other parties
         hereto or thereto, as applicable, constitutes a legal, valid and
         binding obligation of the Seller, enforceable against the Seller in
         accordance with its terms, except that (a) the enforceability hereof
         may be limited by bankruptcy, insolvency, moratorium, receivership and
         other similar laws relating to creditors' rights generally and (b) the
         remedy of specific performance and injunctive and other forms of
         equitable relief may be subject to equitable defenses and to the
         discretion of the court before which any proceeding therefor may be
         brought.

                  (iii) The execution and delivery of this Agreement and any
         other Transaction Documents to which it is a party by the Seller, the
         sale of the Mortgage Loans by the Seller under this Agreement, the
         consummation of any other of the transactions contemplated by this
         Agreement and any other Transaction Documents to which it is a party,
         and the fulfillment of or compliance with the terms hereof and thereof
         are in the ordinary course of business of the Seller and will not (A)
         result in a material breach of any term or provision of the charter or
         by-laws of the Seller or (B) conflict with, result in a breach,
         violation or acceleration of, or result in a default under, the terms
         of any other material agreement or instrument to which the Seller is a
         party or by which it may be bound, or (C) constitute a violation of any
         statute, order or regulation applicable to the Seller of any court,
         regulatory body, administrative agency or governmental body having
         jurisdiction over the Seller; and the Seller is not in breach or
         violation of any material indenture or other material agreement or
         instrument, or in violation of any statute, order or regulation of any
         court, regulatory body, administrative agency or governmental body
         having jurisdiction over it which breach or violation may materially
         impair the Seller's ability to perform or meet any of its obligations
         under this Agreement and any other Transaction Documents to which it is
         a party.

                  (iv) The Seller is an approved seller of conventional mortgage
         loans for Fannie Mae or Freddie Mac and is a mortgagee approved by the
         Secretary of Housing and Urban Development pursuant to sections 203 and
         211 of the National Housing Act.

                  (v) No litigation is pending or, to the best of the Seller's
         knowledge, threatened, against the Seller that would materially and
         adversely affect the execution, delivery or enforceability of this
         Agreement and any other Transaction Documents to which it is a party or
         the ability of the Seller to sell the Mortgage Loans or to perform any
         of its other obligations under this Agreement and any other Transaction
         Documents to which it is a party in accordance with the terms hereof or
         thereof.

                  (vi) No consent, approval, authorization or order of any court
         or governmental agency or body is required for the execution, delivery
         and performance by the Seller of, or compliance by the Seller with,
         this Agreement and any other Transaction Documents to which it is a
         party or the consummation of the transactions contemplated hereby or
         thereby, or if any such consent, approval, authorization or order is
         required, the Seller has obtained the same.



                                      -58-

<PAGE>



                  (vii) With respect to each Mortgage Loan as of the Closing
         Date (or such other date as may be specified in Section 7 of the
         Mortgage Loan Purchase Agreement), the Seller hereby remakes and
         restates each of the representations and warranties set forth in
         Section 7 of the Mortgage Loan Purchase Agreement to the Depositor, the
         Certificate Insurer and the Trustee to the same extent as if fully set
         forth herein.

         (c) Upon discovery by any of the parties hereto or the Certificate
Insurer of a breach of a representation or warranty set forth in the Mortgage
Loan Purchase Agreement with respect to the Mortgage Loans that materially and
adversely affects the interests of the Certificateholders or the Certificate
Insurer in any Mortgage Loan (such determination to be made without regard to
the Class III-A Policy), the party discovering such breach shall give prompt
written notice thereof to the other parties and the Certificate Insurer. Any
breach of a representation or warranty contained in clauses (hh) through (mm) of
Section 7 of the Mortgage Loan Purchase Agreement in respect of a Group II Loan,
shall be deemed to materially adversely affect the interests of the
Certificateholders and the Certificate Insurer. The Seller hereby covenants with
respect to the representations and warranties set forth in the Mortgage Loan
Purchase Agreement with respect to the Mortgage Loans, that within 90 days of
the discovery of a breach of any representation or warranty set forth therein
that materially and adversely affects the interests of the Certificateholders
(such determination to be made without regard to the Class III-A Policy) or the
Certificate Insurer in any Mortgage Loan, it shall cure such breach in all
material respects and, if such breach is not so cured, (i) if such 90-day period
expires prior to the second anniversary of the Closing Date, remove such
Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund and substitute in
its place a Replacement Mortgage Loan, in the manner and subject to the
conditions set forth in this Section; or (ii) repurchase the affected Mortgage
Loan or Mortgage Loans from the Trustee at the Purchase Price in the manner set
forth below; provided that any such substitution pursuant to (i) above or
repurchase pursuant to (ii) above shall not be effected prior to the delivery to
the Trustee and the Certificate Insurer of an Opinion of Counsel if required by
Section 2.05 hereof and any such substitution pursuant to (i) above shall not be
effected prior to the additional delivery to the Trustee of a Request for
Release. The Trustee shall give prompt written notice to the parties hereto and
the Certificate Insurer of the Seller's failure to cure such breach as set forth
in the preceding sentence. The Seller shall promptly reimburse the Master
Servicer and the Trustee for any expenses reasonably incurred by the Master
Servicer or the Trustee in respect of enforcing the remedies for such breach. To
enable the Master Servicer to amend the Mortgage Loan Schedule, the Seller
shall, unless it cures such breach in a timely fashion pursuant to this Section
2.03, promptly notify the Master Servicer whether it intends either to
repurchase, or to substitute for, the Mortgage Loan affected by such breach.
With respect to the representations and warranties with respect to the Mortgage
Loans that are made to the best of the Seller's knowledge, if it is discovered
by any of the Depositor, the Master Servicer, the Seller, the Trustee, the
Custodian or the Certificate Insurer that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Mortgage Loan, notwithstanding the Seller's lack of
knowledge with respect to the substance of such representation or warranty, the
Seller shall nevertheless be required to cure, substitute for or repurchase the
affected Mortgage Loan in accordance with the foregoing.

         With respect to any Replacement Mortgage Loan or Loans, the Seller
shall deliver to the Trustee or the Custodian on its behalf for the benefit of
the Certificateholders and the Certificate Insurer such documents and agreements
as are required by Section 2.01. No substitution will be


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<PAGE>



made in any calendar month after the Determination Date for such month.
Scheduled Payments due with respect to Replacement Mortgage Loans in the Due
Period related to the Distribution Date on which such proceeds are to be
distributed shall not be part of the Trust Fund and will be retained by the
Seller. For the month of substitution, distributions to Certificateholders will
include the Scheduled Payment due on any Deleted Mortgage Loan for the related
Due Period and thereafter the Seller shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loan. The Master Servicer shall
amend the Mortgage Loan Schedule for the benefit of the Certificateholders and
the Certificate Insurer to reflect the removal of such Deleted Mortgage Loan and
the substitution of the Replacement Mortgage Loan or Loans and the Master
Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee, the
Custodian and the Certificate Insurer. Upon such substitution, the Replacement
Mortgage Loan or Loans shall be subject to the terms of this Agreement in all
respects, and the Seller shall be deemed to have made with respect to such
Replacement Mortgage Loan or Loans, as of the date of substitution, the
representations and warranties set forth in Section 7 of the Mortgage Loan
Purchase Agreement with respect to such Mortgage Loan. Upon any such
substitution and the deposit into the Protected Account of the amount required
to be deposited therein in connection with such substitution as described in the
following paragraph and receipt by the Trustee of a Request for Release for such
Mortgage Loan, the Trustee or the Custodian shall release to the Seller the
Mortgage File relating to such Deleted Mortgage Loan and held for the benefit of
the Certificateholders and the Certificate Insurer and the Trustee shall execute
and deliver at the Seller's direction such instruments of transfer or assignment
as have been prepared by the Seller, in each case without recourse,
representation or warranty as shall be necessary to vest in the Seller, or its
respective designee, title to the Trustee's interest in any Deleted Mortgage
Loan substituted for pursuant to this Section 2.03.

         For any month in which the Seller substitutes one or more Replacement
Mortgage Loans for a Deleted Mortgage Loan, the Master Servicer will determine
the amount (if any) by which the aggregate principal balance of all the
Replacement Mortgage Loans as of the date of substitution is less than the
Stated Principal Balance (after application of the principal portion of the
Scheduled Payment due in the month of substitution) of such Deleted Mortgage
Loan. An amount equal to the aggregate of such deficiencies, described in the
preceding sentence for any Distribution Date (such amount, the "Substitution
Adjustment Amount") shall be deposited into the Protected Account, by the Seller
delivering such Replacement Mortgage Loan on the Determination Date for the
Distribution Date relating to the Prepayment Period during which the related
Mortgage Loan became required to be purchased or replaced hereunder.

         In the event that the Seller shall have repurchased a Mortgage Loan,
the Purchase Price therefor shall be deposited into the Protected Account, on
the Determination Date for the Distribution Date in the month following the
month during which the Seller became obligated to repurchase or replace such
Mortgage Loan and upon such deposit of the Purchase Price, the delivery of an
Opinion of Counsel if required by Section 2.05 and the receipt of a Request for
Release, the Trustee or the Custodian shall release the related Mortgage File
held for the benefit of the Certificateholders to the Seller, and the Trustee
shall execute and deliver at such Person's direction the related instruments of
transfer or assignment prepared by the Seller, in each case without recourse, as
shall be necessary to transfer title from the Trustee for the benefit of the
Certificateholders and transfer the Trustee's interest to the Seller to any
Mortgage Loan purchased pursuant to this Section 2.03. It is understood and
agreed that the obligation under this Agreement


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<PAGE>



of the Seller to cure, repurchase or replace any Mortgage Loan as to which a
breach has occurred and is continuing shall constitute the sole remedies against
the Seller respecting such breach available to the Certificateholders, the
Depositor or the Trustee.

         (d) The representations and warranties set forth in this Section 2.03
hereof shall survive delivery of the respective Mortgage Loans and Mortgage
Files to the Trustee or the Custodian for the benefit of the Certificateholders
and the Certificate Insurer.

         Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

         The Depositor hereby represents and warrants to the Master Servicer,
the Trustee and the Certificate Insurer as follows, as of the date hereof and as
of the Closing Date:

                  (i) The Depositor is duly organized and is validly existing as
         a corporation in good standing under the laws of the State of Delaware
         and has full power and authority (corporate and other) necessary to own
         or hold its properties and to conduct its business as now conducted by
         it and to enter into and perform its obligations under this Agreement
         and any other Transaction Document to which it is a party.

                  (ii) The Depositor has the full corporate power and authority
         to execute, deliver and perform, and to enter into and consummate the
         transactions contemplated by, this Agreement and any other Transaction
         Document to which it is a party and has duly authorized, by all
         necessary corporate action on its part, the execution, delivery and
         performance of this Agreement and any other Transaction Document to
         which it is a party; and this Agreement and any other Transaction
         Document to which it is a party, assuming the due authorization,
         execution and delivery hereof and thereof by the other parties hereto
         or thereto, constitutes a legal, valid and binding obligation of the
         Depositor, enforceable against the Depositor in accordance with its
         terms, subject, as to enforceability, to (i) bankruptcy, insolvency,
         reorganization, moratorium and other similar laws affecting creditors'
         rights generally and (ii) general principles of equity, regardless of
         whether enforcement is sought in a proceeding in equity or at law.

                  (iii) The execution and delivery of this Agreement and any
         other Transaction Document to which it is a party by the Depositor, the
         consummation of the transactions contemplated by this Agreement and any
         other Transaction Document to which it is a party, and the fulfillment
         of or compliance with the terms hereof and thereof are in the ordinary
         course of business of the Depositor and will not (A) result in a
         material breach of any term or provision of the charter or by-laws of
         the Depositor or (B) conflict with, result in a breach, violation or
         acceleration of, or result in a default under, the terms of any other
         material agreement or instrument to which the Depositor is a party or
         by which it may be bound or (C) constitute a violation of any statute,
         order or regulation applicable to the Depositor of any court,
         regulatory body, administrative agency or governmental body having
         jurisdiction over the Depositor; and the Depositor is not in breach or
         violation of any material indenture or other material agreement or
         instrument, or in violation of any statute, order or regulation of any
         court, regulatory body, administrative agency or governmental body
         having jurisdiction over it which breach or violation may materially
         impair the Depositor's ability to perform


                                      -61-

<PAGE>



         or meet any of its obligations under this Agreement and any other
         Transaction Document to which it is a party.

                  (iv) No litigation is pending, or, to the best of the
         Depositor's knowledge, threatened, against the Depositor that would
         materially and adversely affect the execution, delivery or
         enforceability of this Agreement and any other Transaction Document to
         which it is a party or the ability of the Depositor to perform its
         obligations under this Agreement and any other Transaction Document to
         which it is a party in accordance with the terms hereof or thereof.

                  (v) No consent, approval, authorization or order of any court
         or governmental agency or body is required for the execution, delivery
         and performance by the Depositor of, or compliance by the Depositor
         with, this Agreement and any other Transaction Document to which it is
         a party or the consummation of the transactions contemplated hereby or
         thereby, or if any such consent, approval, authorization or order is
         required, the Depositor has obtained the same.

         The Depositor hereby represents and warrants to the Trustee and the
Certificate Insurer as of the Closing Date, following the transfer of the
Mortgage Loans to it by the Seller, the Depositor had good title to the Mortgage
Loans and the related Mortgage Notes were subject to no offsets, claims,
defenses or counterclaims.

         It is understood and agreed that the representations and warranties set
forth in this Section 2.04 shall survive delivery of the Mortgage Files to the
Trustee or the Custodian for the benefit of the Certificateholders and the
Certificate Insurer. Upon discovery by the Depositor, the Trustee or the
Certificate Insurer of a breach of such representations and warranties, the
party discovering such breach shall give prompt written notice to the others, to
each Rating Agency and to the Certificate Insurer.

         Section 2.05 DELIVERY OF OPINION OF COUNSEL IN CONNECTION WITH
SUBSTITUTIONS AND REPURCHASES.

         (a) Notwithstanding any contrary provision of this Agreement, with
respect to any Mortgage Loan that is not in default or as to which default is
not imminent, no repurchase or substitution pursuant to Sections 2.02 or 2.03
shall be made unless the Seller delivers to the Trustee and the Certificate
Insurer an Opinion of Counsel, addressed to the Trustee and the Certificate
Insurer, to the effect that such repurchase or substitution would not (i) result
in the imposition of the tax on "prohibited transactions" of REMIC I, REMIC II,
REMIC III or REMIC IV or contributions after the Closing Date, as defined in
sections 860F(a)(2) and 860G(d) of the Code, respectively or (ii) cause either
REMIC I, REMIC II, REMIC III or REMIC IV to fail to qualify as a REMIC at any
time that any Certificates are outstanding. Any Mortgage Loan as to which
repurchase or substitution was delayed pursuant to this paragraph shall be
repurchased or the substitution therefor shall occur (subject to compliance with
Sections 2.02 or 2.03) upon the earlier of (a) the occurrence of a default or
imminent default with respect to such Mortgage Loan and (b) receipt by the
Trustee and the Certificate Insurer of an Opinion of Counsel addressed to the
Trustee to the effect that such


                                      -62-

<PAGE>



repurchase or substitution, as applicable, will not result in the events
described in clause (i) or clause (ii) of the preceding sentence.

         (b) Upon discovery by the Depositor, the Seller, the Certificate
Insurer or the Master Servicer that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of section 860G(a)(3) of the Code, the
party discovering such fact shall promptly (and in any event within 5 Business
Days of discovery) give written notice thereof to the other parties and the
Trustee. In connection therewith, the Trustee shall require the Seller, at the
Seller's option, to either (i) substitute, if the conditions in Section 2.03
with respect to substitutions are satisfied, a Replacement Mortgage Loan for the
affected Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90
days of such discovery in the same manner as it would a Mortgage Loan for a
breach of representation or warranty in accordance with Section 2.03. The
Trustee shall reconvey to the Seller the Mortgage Loan to be released pursuant
hereto (and the Custodian shall deliver the related Mortgage File) in the same
manner, and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty in accordance with
Section 2.03.

         Section 2.06 COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES.

         (a) The Trustee acknowledges the sale, transfer and assignment to it of
the Trust Fund and, concurrently with such transfer and assignment, has
executed, countersigned and delivered, to or upon the order of the Depositor,
the Certificates in authorized denominations evidencing the entire ownership of
the Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the
rights referred to above for the benefit of all present and future Holders of
the Certificates and the Certificate Insurer and to perform the duties set forth
in this Agreement in accordance with its terms.

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

         (c) The Seller, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Seller in and
to the Class CE Interest for the benefit of the holders of the REMIC III
Certificates. The Trustee acknowledges receipt of the Class CE Interest (which
are uncertificated) and declares that it holds and will hold the same in trust
for the exclusive use and benefit of the holders of the REMIC III Certificates.

         (d) The Seller, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Seller in and
to the Class P Interest for the benefit of the holders of the REMIC IV
Certificates. The Trustee acknowledges receipt of the Class P Interest (which
are uncertificated) and declares that it holds and will hold the same in trust
for the exclusive use and benefit of the holders of the REMIC IV Certificates.


                                      -63-

<PAGE>






                                      -64-

<PAGE>



                                   ARTICLE III

               ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

         Section 3.01 THE MASTER SERVICER TO ACT AS MASTER SERVICER.

         The Master Servicer shall service and administer the Mortgage Loans in
accordance with customary and usual standards of practice of prudent mortgage
loan servicers in the respective states in which the related Mortgaged
Properties are located. In connection with such servicing and administration,
the Master Servicer shall have full power and authority, acting alone and/or
through subservicers as provided in Section 3.03, to do or cause to be done any
and all things that it may deem necessary or desirable in connection with such
servicing and administration, including but not limited to, the power and
authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Certificateholders, the Trustee and the Certificate Insurer, customary
consents or waivers and other instruments and documents, (ii) to consent to
transfers of any related Mortgaged Property and assumptions of the Mortgage
Notes and related Mortgages (but only in the manner provided herein), (iii) to
collect any Insurance Proceeds and other Liquidation Proceeds, and (iv) subject
to Section 3.09, to effectuate foreclosure or other conversion of the ownership
of the Mortgaged Property securing any Mortgage Loan; provided that the Master
Servicer shall take no action that is inconsistent with or prejudices the
interests of the Trust Fund, the Certificate Insurer or the Certificateholders
in any Mortgage Loan or the rights and interests of the Depositor, the Trustee
or the Certificate Insurer under this Agreement and any other Transaction
Document to which it is a party.

         Without limiting the generality of the foregoing, the Master Servicer,
in its own name or in the name of the Trust, the Depositor or the Trustee, is
hereby authorized and empowered by the Trust, the Depositor and the Trustee,
when the Master Servicer believes it appropriate in its reasonable judgment, to
execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Certificateholders and the
Certificate Insurer. The Master Servicer shall prepare and deliver to the
Depositor and/or the Trustee such documents requiring execution and delivery by
any or all of them as are necessary or appropriate to enable the Master Servicer
to service and administer the Mortgage Loans. Upon receipt of such documents,
the Depositor and/or the Trustee shall execute such documents and deliver them
to the Master Servicer.

         In accordance with the standards of the first paragraph of this Section
3.01, the Master Servicer shall advance or cause to be advanced funds as
necessary for the purpose of effecting the payment of taxes and assessments on
the Mortgaged Properties, which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section 5.03,
and further as provided in Section 5.02. All costs incurred by the Master
Servicer, if any, in effecting the timely payments of taxes and assessments on
the Mortgaged Properties and related insurance premiums shall not, for the
purpose of calculating monthly distributions to the Certificateholders, be added
to the Stated Principal Balance under the related Mortgage Loans,
notwithstanding that the terms of such Mortgage Loans so permit.


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<PAGE>



         Section 3.02      DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.

         (a) Except as otherwise provided in this Section 3.02, when any
property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing, the Master Servicer is not required to exercise
such rights with respect to a Mortgage Loan if the Person to whom the related
Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the
terms and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Master Servicer is prohibited by law from
enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is otherwise
permitted hereunder, the Master Servicer is authorized, subject to Section
3.02(b), to take or enter into an assumption and modification agreement from or
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Mortgage Note and, unless
prohibited by applicable state law, the Mortgagor remains liable thereon,
provided that the Mortgage Loan shall continue to be covered (if so covered
before the Master Servicer enters such agreement) by the applicable Required
Insurance Policies. The Master Servicer, subject to Section 3.02(b), is also
authorized with the prior approval of the insurers under any Required Insurance
Policies to enter into a substitution of liability agreement with such Person,
pursuant to which the original Mortgagor is released from liability and such
Person is substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Master Servicer shall not be deemed to be in
default under this Section 3.02(a) by reason of any transfer or assumption that
the Master Servicer reasonably believes it is restricted by law from preventing.

         (b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.02(a), in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification agreement or supplement
to the Mortgage Note or Mortgage that requires the signature of the Trustee, or
if an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the related Mortgage Loan, the Master Servicer shall
prepare and deliver or cause to be prepared and delivered to the Trustee for
signature and shall direct, in writing, the Trustee to execute the assumption
agreement with the Person to whom the Mortgaged Property is to be conveyed and
such modification agreement or supplement to the Mortgage Note or Mortgage or
other instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
(including, but not limited to, the Mortgage Rate, the amount of the Scheduled
Payment and any other term affecting the amount or timing of payment on the
Mortgage Loan) may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Master Servicer in accordance with
its servicing standards as then in effect. The Master Servicer shall notify the
Trustee that any such substitution or assumption agreement has been completed by
forwarding to the Trustee the original of such substitution or assumption
agreement, which in the case of the


                                      -66-

<PAGE>



original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional
servicing compensation.

         Section 3.03      SUBSERVICERS.

         The Master Servicer shall perform all of its servicing responsibilities
hereunder or may cause a subservicer to perform any such servicing
responsibilities on its behalf, but the use by the Master Servicer of a
subservicer shall not release the Master Servicer from any of its obligations
hereunder and the Master Servicer shall remain responsible hereunder for all
acts and omissions of each subservicer as fully as if such acts and omissions
were those of the Master Servicer. The Master Servicer shall pay all fees of
each subservicer from its own funds, and a subservicer's fee shall not exceed
the Servicing Fee payable to the Master Servicer hereunder.

         At the cost and expense of the Master Servicer, without any right of
reimbursement from its Protected Account, the Master Servicer shall be entitled
to terminate the rights and responsibilities of a subservicer and arrange for
any servicing responsibilities to be performed by a successor subservicer;
provided, however, that nothing contained herein shall be deemed to prevent or
prohibit the Master Servicer, at the Master Servicer's option, from electing to
service the related Mortgage Loans itself. In the event that the Master
Servicer's responsibilities and duties under this Agreement are terminated
pursuant to Section 8.03, the Master Servicer shall at its own cost and expense
terminate the rights and responsibilities of each subservicer effective as of
the date of termination of the Master Servicer. The Master Servicer shall pay
all fees, expenses or penalties necessary in order to terminate the rights and
responsibilities of each subservicer from the Master Servicer's own funds
without reimbursement from the Trust Fund.

         Notwithstanding the foregoing, the Master Servicer shall not be
relieved of its obligations hereunder and shall be obligated to the same extent
and under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into an agreement with a subservicer for indemnification of the Master Servicer
by the subservicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.

         Any subservicing agreement and any other transactions or services
relating to the Mortgage Loans involving a subservicer shall be deemed to be
between such subservicer and the Master Servicer alone, and the Trustee shall
not have any obligations, duties or liabilities with respect to such subservicer
including any obligation, duty or liability of the Trustee to pay such
subservicer's fees and expenses. Each subservicing agreement shall provide that
such agreement may be assumed or terminated without cause or penalty by the
Trustee or other Successor Master Servicer in the event the Master Servicer is
terminated in accordance with this Agreement. For purposes of remittances to the
Trustee pursuant to this Agreement, the Master Servicer shall be deemed to have
received a payment on a Mortgage Loan when a subservicer has received such
payment.



                                      -67-

<PAGE>



         Section 3.04 DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF THE MASTER
SERVICER TO BE HELD FOR TRUSTEE.

         Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee or the Custodian on behalf of the Trustee
as required by this Agreement all documents and instruments in respect of a
Mortgage Loan coming into the possession of the Master Servicer from time to
time and shall account fully to the Trustee for any funds received by the Master
Servicer or that otherwise are collected by the Master Servicer as Liquidation
Proceeds or Insurance Proceeds in respect of any such Mortgage Loan. All
Mortgage Files and funds collected or held by, or under the control of, the
Master Servicer in respect of any Mortgage Loans, whether from the collection of
principal and interest payments or from Liquidation Proceeds, including but not
limited to, any funds on deposit in the Protected Account, shall be held by the
Master Servicer for and on behalf of the Trustee and shall be and remain the
sole and exclusive property of the Trustee, subject to the applicable provisions
of this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Protected Account or in any Escrow Account, or any funds that otherwise are or
may become due or payable to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, to any claim, lien, security
interest, judgment, levy, writ of attachment or other encumbrance, or assert by
legal action or otherwise any claim or right of set off against any Mortgage
File or any funds collected on, or in connection with, a Mortgage Loan, except,
however, that the Master Servicer shall be entitled to set off against and
deduct from any such funds any amounts that are properly due and payable to the
Master Servicer under this Agreement.

         Section 3.05 MAINTENANCE OF HAZARD INSURANCE.

         The Master Servicer shall cause to be maintained, for each Mortgage
Loan, hazard insurance on buildings upon, or comprising part of, the Mortgaged
Property against loss by fire, hazards of extended coverage and such other
hazards as are customary in the area where the related Mortgaged Property is
located with an insurer which is licensed to do business in the state where the
related Mortgaged Property is located. Each such policy of standard hazard
insurance shall contain, or have an accompanying endorsement that contains, a
standard mortgagee clause. The Master Servicer shall also cause flood insurance
to be maintained on property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, to the extent described below. Pursuant to
Section 4.01, any amounts collected by the Master Servicer under any such
policies (other than the amounts to be applied to the restoration or repair of
the related Mortgaged Property or property thus acquired or amounts released to
the Mortgagor in accordance with the Master Servicer's normal servicing
procedures) shall be deposited in the Protected Account. Any cost incurred by
the Master Servicer in maintaining any such insurance shall not, for the purpose
of calculating monthly distributions to the Certificateholders or remittances to
the Trustee for their benefit, be added to the principal balance of the Mortgage
Loan, notwithstanding that the terms of the Mortgage Loan so permit. Such costs
shall be recoverable by the Master Servicer out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section
4.02. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired
in respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time of
origination of the Mortgage Loan in a federally


                                      -68-

<PAGE>



designated special flood hazard area and such area is participating in the
national flood insurance program, the Master Servicer shall cause flood
insurance to be maintained with respect to such Mortgage Loan. Such flood
insurance shall be in an amount equal to the least of (i) the Stated Principal
Balance of the related Mortgage Loan, (ii) minimum amount required to compensate
for damage or loss on a replacement cost basis or (iii) the maximum amount of
such insurance available for the related Mortgaged Property under the Flood
Disaster Protection Act of 1973, as amended.

         In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section 3.05, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Master Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged Property a
policy complying with the first sentence of this Section 3.05, and there shall
have been a loss that would have been covered by such policy, deposit in the
Protected Account the amount not otherwise payable under the blanket policy
because of such deductible clause. Such deposit shall be from the Master
Servicer's own funds without reimbursement therefor. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to present, on behalf of itself, the Depositor and the Trustee
for the benefit of the Certificateholders and the Certificate Insurer, claims
under any such blanket policy.

         Section 3.06 PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.

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

         Section 3.07 MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.

         (a) The Master Servicer shall not take any action that would result in
noncoverage under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of the Master Servicer would have been covered
thereunder. The Master Servicer shall use its best efforts to keep in force and
effect (to the extent that the Mortgage Loan requires the Mortgagor to maintain
such insurance), Primary Mortgage Insurance applicable to each Mortgage Loan.
The Master Servicer shall not cancel or refuse to renew any such Primary
Mortgage Insurance Policy that is in effect at the date of the initial issuance
of the Mortgage Note and is required to be kept in force hereunder.

         (b) The Master Servicer agrees to present on behalf of the Trustee, the
Certificateholders and the Certificate Insurer, claims to the insurer under any
Primary Mortgage Insurance Policies and, in this regard, to take such reasonable
action as shall be necessary to permit recovery under any


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Primary Mortgage Insurance Policies respecting defaulted Mortgage Loans.
Pursuant to Section 4.01, any amounts collected by the Master Servicer under any
Primary Mortgage Insurance Policies shall be deposited in the Protected Account,
subject to withdrawal pursuant to Section 4.02 hereof.

         Section 3.08 FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE.

         The Master Servicer shall maintain, at its own expense, a blanket
fidelity bond and an errors and omissions insurance policy, with broad coverage
with responsible companies on all officers, employees or other persons acting in
any capacity with regard to the Mortgage Loans and who handle funds, money,
documents and papers relating to the Mortgage Loans. The fidelity bond and
errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Master Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons. Such fidelity bond shall also protect and insure
the Master Servicer against losses in connection with the failure to maintain
any insurance policies required pursuant to this Agreement and the release or
satisfaction of a Mortgage Loan which is not in accordance with Accepted
Servicing Practices. No provision of this Section 3.08 requiring the fidelity
bond and errors and omissions insurance shall diminish or relieve the Master
Servicer from its duties and obligations as set forth in this Agreement. The
minimum coverage under any such bond and insurance policy shall be at least
equal to the corresponding amounts required by Accepted Servicing Practices. The
Master Servicer shall deliver to the Trustee a certificate from the surety and
the insurer as to the existence of the fidelity bond and errors and omissions
insurance policy and shall obtain a statement from the surety and the insurer
that such fidelity bond or insurance policy shall in no event be terminated or
materially modified without thirty days prior written notice to the Trustee. The
Master Servicer shall notify the Trustee within five business days of receipt of
notice that such fidelity bond or insurance policy will be, or has been,
materially modified or terminated. The Trustee for the benefit of the
Certificateholders and the Certificate Insurer must be named as loss payees on
the fidelity bond and as additional insured on the errors and omissions policy.

         Section 3.09 REALIZATION UPON DEFAULTED MORTGAGE LOANS; DETERMINATION
OF EXCESS LIQUIDATION PROCEEDS AND REALIZED LOSSES; REPURCHASES OF CERTAIN
MORTGAGE LOANS.

         (a) The Master Servicer shall use reasonable efforts to foreclose upon
or otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
the requirements of the insurer under any Required Insurance Policy; provided
that the Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Insurance Proceeds, Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Protected Account pursuant to
Section 4.02). If the Master Servicer reasonably believes that Liquidation
Proceeds with respect to any such Mortgage Loan would not be increased as a
result of such foreclosure or other action, such


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Mortgage Loan will be charged-off and will become a Liquidated Loan. The Master
Servicer will give notice of any such charge-off to the Trustee and the
Certificate Insurer. The Master Servicer shall be responsible for all other
costs and expenses incurred by it in any such proceedings; provided that such
costs and expenses shall be Servicing Advances and that it shall be entitled to
reimbursement thereof from the proceeds of liquidation of the related Mortgaged
Property, as contemplated in Section 4.02. If the Master Servicer has knowledge
that a Mortgaged Property that the Master Servicer is contemplating acquiring in
foreclosure or by deed- in-lieu of foreclosure is located within a one-mile
radius of any site with environmental or hazardous waste risks known to the
Master Servicer, the Master Servicer will, prior to acquiring the Mortgaged
Property, consider such risks and only take action in accordance with its
established environmental review procedures.

         With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee for the benefit of the Certificateholders
and the Certificate Insurer (or the Trustee's nominee on behalf of the
Certificateholders and the Certificate Insurer). The Trustee's name shall be
placed on the title to such REO Property solely as the Trustee hereunder and not
in its individual capacity. The Master Servicer shall ensure that the title to
such REO Property references this Agreement and the Trustee's capacity
hereunder. Pursuant to its efforts to sell such REO Property, the Master
Servicer shall either itself or through an agent selected by the Master Servicer
protect and conserve such REO Property in the same manner and to such extent as
is customary in the locality where such REO Property is located and may,
incident to its conservation and protection of the interests of the
Certificateholders and the Certificate Insurer, rent the same, or any part
thereof, as the Master Servicer deems to be in the best interest of the Master
Servicer and the Certificateholders and the Certificate Insurer for the period
prior to the sale of such REO Property. The Master Servicer shall prepare for
and deliver to the Trustee a statement with respect to each REO Property that
has been rented showing the aggregate rental income received and all expenses
incurred in connection with the management and maintenance of such REO Property
at such times as is necessary to enable the Trustee to comply with the reporting
requirements of the REMIC Provisions. The net monthly rental income, if any,
from such REO Property shall be deposited in the Protected Account no later than
the close of business on each Determination Date. The Master Servicer shall
perform the tax reporting and withholding related to foreclosures, abandonments
and cancellation of indebtedness income as specified by Sections 1445, 6050J and
6050P of the Code by preparing and filing such tax and information returns, as
may be required.

         In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to three years after its acquisition by the Trust Fund or, at the expense
of the Trust Fund, request more than 60 days prior to the day on which such
three-year period would otherwise expire, an extension of the three-year grace
period unless the Trustee and the Certificate Insurer shall have been supplied
with an Opinion of Counsel addressed to the Trustee and the Certificate Insurer
(such opinion not to be an expense of the Trustee or the Certificate Insurer) to
the effect that the holding by the Trust Fund of such Mortgaged Property
subsequent to such three-year period will not result in the imposition of taxes
on "prohibited transactions" of REMIC I, REMIC II, REMIC III or REMIC IV as
defined in section 860F of the Code or cause either REMIC I, REMIC II, REMIC III
or REMIC IV to fail to qualify as a REMIC at any time that any Certificates are
outstanding, in which case the Trust Fund may continue to hold such Mortgaged
Property (subject to any conditions contained in such Opinion of Counsel).
Notwithstanding any


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<PAGE>



other provision of this Agreement, no Mortgaged Property acquired by the Trust
Fund shall be rented (or allowed to continue to be rented) or otherwise used for
the production of income by or on behalf of the Trust Fund in such a manner or
pursuant to any terms that would (i) cause such Mortgaged Property to fail to
qualify as "foreclosure property" within the meaning of section 860G(a)(8) of
the Code or (ii) subject either REMIC I, REMIC II, REMIC III or REMIC IV to the
imposition of any federal, state or local income taxes on the income earned from
such Mortgaged Property under section 860G(c) of the Code or otherwise, unless
the Master Servicer has agreed to indemnify and hold harmless the Trust Fund
with respect to the imposition of any such taxes.

         The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any Mortgaged
Properties acquired through foreclosure or other judicial proceeding, net of
reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Servicing Fees, Advances, Servicing Advances and any management fee
paid or to be paid with respect to the management of such Mortgaged Property,
shall be applied to the payment of principal of, and interest on, the related
defaulted Mortgage Loans (with interest accruing as though such Mortgage Loans
were still current) and all such income shall be deemed, for all purposes in the
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Protected Account. To the extent
the income received during a Prepayment Period is in excess of the amount
attributable to amortizing principal and accrued interest at the related
Mortgage Rate on the related Mortgage Loan, such excess shall be considered to
be a partial Principal Prepayment for all purposes hereof.

         The Liquidation Proceeds from any liquidation of a Mortgage Loan, net
of any payment to the Master Servicer as provided above, shall be deposited in
the Protected Account on the next succeeding Determination Date following
receipt thereof for distribution on the related Distribution Date, except that
any Excess Liquidation Proceeds shall be retained by the Master Servicer as
additional servicing compensation.

         The proceeds of any Liquidated Loan, as well as any recovery resulting
from a partial collection of Liquidation Proceeds or any income from an REO
Property, will be applied in the following order of priority: first, to
reimburse the Master Servicer for any related unreimbursed Servicing Advances
and Servicing Fees, pursuant to Section 4.02 or this Section 3.09; second, to
reimburse the Master Servicer for any unreimbursed Advances, pursuant to Section
4.02 or this Section 3.09; third, to accrued and unpaid interest (to the extent
no Advance has been made for such amount) on the Mortgage Loan or related REO
Property, at the Net Mortgage Rate to the first day of the month in which such
amounts are required to be distributed; and fourth, as a recovery of principal
of the Mortgage Loan.

         (b) On each Determination Date, the Master Servicer shall determine the
respective aggregate amounts of Excess Liquidation Proceeds and Realized Losses,
if any, for the related Prepayment Period.



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<PAGE>



         (c) The Master Servicer has no intent to foreclose on any Mortgage Loan
based on the delinquency characteristics as of the Closing Date; provided, that
the foregoing does not prevent the Master Servicer from initiating foreclosure
proceedings on any date hereafter if the facts and circumstances of such
Mortgage Loans including delinquency characteristics in the Master Servicer's
discretion so warrant such action.

         Section 3.10 SERVICING COMPENSATION.

         As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Protected Account out of each payment
of interest on a Mortgage Loan included in the Trust Fund an amount equal to the
Servicing Fee.

         Additional servicing compensation in the form of any Excess Liquidation
Proceeds, assumption fees, late payment charges, all income and gain net of any
losses realized from Permitted Investments with respect to funds in or credited
to the Protected Account shall be retained by the Master Servicer to the extent
not required to be deposited in the Protected Account pursuant to Section 4.02.
The Master Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including payment of any
premiums for hazard insurance, as required by Section 3.05 and maintenance of
the other forms of insurance coverage required by Section 3.07) and shall not be
entitled to reimbursement therefor except as specifically provided in Section
4.02.

         Section 3.11 REO PROPERTY.

         (a) In the event the Trust Fund acquires ownership of any REO Property
in respect of any related Mortgage Loan, the deed or certificate of sale shall
be issued to the Trustee, or to its nominee, on behalf of the related
Certificateholders and the Certificate Insurer. The Master Servicer shall sell
any REO Property as expeditiously as possible and in accordance with the
provisions of this Agreement. Pursuant to its efforts to sell such REO Property,
the Master Servicer shall protect and conserve such REO Property in the manner
and to the extent required herein, in accordance with the REMIC Provisions.

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

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



                                      -73-

<PAGE>



         Section 3.12 LIQUIDATION REPORTS.

         Upon the foreclosure of any Mortgaged Property or the acquisition
thereof by the Trust Fund pursuant to a deed-in-lieu of foreclosure, the Master
Servicer shall submit a liquidation report to the Trustee and Certificate
Insurer containing such information as shall be mutually acceptable to the
Master Servicer and the Trustee with respect to such Mortgaged Property.

         Section 3.13 ANNUAL CERTIFICATE AS TO COMPLIANCE.

         (a) The Master Servicer will deliver to the Trustee, the Rating
Agencies and the Certificate Insurer not later than March 1, 2005 and not later
than March 1 of each year thereafter, a certificate of a Servicing Officer
stating, as to each signatory thereof, that (i) a review of the activities of
the Master Servicer during the preceding calendar year or portion thereof and of
its performance under this Agreement has been made under such officer's
supervision, and (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all of its obligations under this
Agreement in all material respects throughout such year or portion thereof, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof except for such defaults as such officer in its good faith judgment
believe to be immaterial.

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

         Section 3.14 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' SERVICING
REPORT.

         Not later than March 1, 2005 and not later than March 1 of each year
thereafter, the Master Servicer at its expense shall cause a firm of independent
public accountants which is a member of the American Institute of Certified
Public Accountants to furnish a statement to the Trustee, the Rating Agencies
and the Certificate Insurer to the effect that, with respect to the preceding
calendar year, such firm has examined certain documents and records relating to
the Master Servicer's servicing of mortgage loans of the same type as the
Mortgage Loans pursuant to servicing agreements substantially similar to this
Agreement, which agreements may include this Agreement, and that, on the basis
of such an examination, conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers, such firm is of the opinion
that the Master Servicer's servicing has been conducted in compliance with the
agreements examined pursuant to this Section 3.14, except for (i) such
exceptions as such firm shall believe to be immaterial,(ii) such other
exceptions as shall be set forth in such statement and (iii) such exceptions
that the Uniform Single Attestation Program for Mortgage Bankers requires it to
report. Copies of such statements shall be provided to any Certificateholder
upon request by the Master Servicer or by the Trustee at the Master Servicer's
expense if the Master Servicer failed to provide such copies (unless (i) the
Master Servicer shall have failed to provide the Trustee with such statement or
(ii) the Trustee shall be unaware of the Master Servicer's failure to provide
such statement).



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         Section 3.15 BOOKS AND RECORDS.

         The Master Servicer shall be responsible for maintaining, and shall
maintain, a complete set of books and records for the Mortgage Loans which shall
be appropriately identified in the Master Servicer's computer system to clearly
reflect the ownership of the Mortgage Loans by the Trust. In particular, the
Master Servicer shall maintain in its possession, available for inspection by
the Trustee and the Certificate Insurer and shall deliver to the Trustee and the
Certificate Insurer upon demand, evidence of compliance with all federal, state
and local laws, rules and regulations. To the extent that original documents are
not required for purposes of realization of Liquidation Proceeds or Insurance
Proceeds, documents maintained by the Master Servicer may be in the form of
microfilm or microfiche or such other reliable means of recreating original
documents, including, but not limited to, optical imagery techniques so long as
the Master Servicer complies with the requirements of Accepted Servicing
Practices.

         The Master Servicer shall maintain with respect to each Mortgage Loan
and shall make available for inspection by the Trustee and the Certificate
Insurer the related servicing file during the time such Mortgage Loan is subject
to this Agreement and thereafter in accordance with applicable law.

         Section 3.16 REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION.

         (a) The Depositor shall prepare or cause to be prepared the initial
current report on Form 8-K. Within 15 days after each Distribution Date, the
Trustee shall, in accordance with industry standards, file with the Commission
via the Electronic Data Gathering and Retrieval System ("EDGAR"), a Form 8-K
with a copy of the monthly statement to be furnished by the Trustee to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30 in each year commencing in 2005, the Trustee shall, in accordance
with industry standards, file a Form 15 Suspension Notice with respect to the
Trust Fund, if applicable. Prior to (i) March 15, 2005 and (ii) unless and until
a Form 15 Suspension Notice shall have been filed, prior to March 15 of each
year thereafter, the Master Servicer shall provide the Trustee with a Master
Servicer Certification, together with a copy of the annual independent
accountant's servicing report and annual statement of compliance to be delivered
by the Master Servicer pursuant to Sections 3.13 and 3.14. Prior to (i) March
31, 2005 and (ii) unless and until a Form 15 Suspension Notice shall have been
filed, March 31 of each year thereafter, the Trustee shall, subject to
subsection (d) below, file a Form 10-K, in substance conforming to industry
standards, with respect to the Trust Fund. Such Form 10-K shall include the
Master Servicer Certification and other documentation provided by the Master
Servicer pursuant to the second preceding sentence and the Form 10-K
certification signed by the Depositor. The Depositor hereby grants to the
Trustee a limited power of attorney to execute and file each such document on
behalf of the Depositor. Such power of attorney shall continue until either the
earlier of (i) receipt by the Trustee from the Depositor of written termination
of such power of attorney and (ii) the termination of the Trust Fund. The
Depositor agrees to promptly furnish to the Trustee, from time to time upon
request, such further information, reports and financial statements within its
control related to this Agreement, the Mortgage Loans as the Trustee reasonably
deems appropriate to prepare and file all necessary reports with the Commission.
The Trustee shall have no responsibility to file any items other than those
specified in this Section 3.16; provided, however, the Trustee will cooperate
with the Depositor in connection with any additional filings with respect


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<PAGE>



to the Trust Fund as the Depositor deems necessary under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Copies of all reports filed by the
Trustee under the Exchange Act shall be sent to: the Depositor c/o Bear, Stearns
& Co. Inc., Attn: Managing Director-Analysis and Control, One Metrotech Center
North, Brooklyn, New York 11202-3859. Fees and expenses incurred by the Trustee
in connection with this Section 3.16 shall not be reimbursable from the Trust
Fund.

         (b) In connection with the filing of any 10-K hereunder, the Trustee
shall sign a certification (in the form attached hereto as Exhibit M) for the
Depositor regarding certain aspects of the Form 10-K certification signed by the
Depositor, provided, however, that the Trustee shall not be required to
undertake an analysis of any accountant's report attached as an exhibit to the
Form 10-K.

         (c) (i) The Trustee shall indemnify and hold harmless the Depositor and
its officers, directors and affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments and other costs and expenses arising out of or based upon a
breach of the Trustee's obligations under this Section 3.16 or the Trustee's
negligence, bad faith or willful misconduct in connection therewith.

                  (ii) The Depositor shall indemnify and hold harmless the
         Trustee and its officers, directors and affiliates from and against any
         losses, damages, penalties, fines, forfeitures, reasonable and
         necessary legal fees and related costs, judgments and other costs and
         expenses arising out of or based upon a breach of the obligations of
         the Depositor under this Section 3.16 or the Depositor's negligence,
         bad faith or willful misconduct in connection therewith.

                  (iii) The Master Servicer shall indemnify and hold harmless
         the Trustee and the Depositor and their respective officers, directors
         and affiliates from and against any losses, damages, penalties, fines,
         forfeitures, reasonable and necessary legal fees and related costs,
         judgments and other costs and expenses arising out of or based upon a
         breach of the obligations of the Master Servicer under this Section
         3.16 or the Master Servicer's negligence, bad faith or willful
         misconduct in connection therewith.

                  (iv) If the indemnification provided for herein is unavailable
         or insufficient to hold harmless the Depositor or the Trustee, as
         applicable, then the defaulting party, in connection with a breach of
         its respective obligations under this Section 3.16 or its respective
         negligence, bad faith or willful misconduct in connection therewith,
         agrees that it shall contribute to the amount paid or payable by the
         other parties as a result of the losses, claims, damages or liabilities
         of the other party in such proportion as is appropriate to reflect the
         relative fault and the relative benefit of the Depositor on the one
         hand and the Trustee on the other.

         (d) Nothing shall be construed from the foregoing subsections (a), (b)
and (c) to require the Trustee or any officer, director or Affiliate thereof to
sign any Form 10-K or any certification contained therein. Furthermore, the
inability of the Trustee to file a Form 10-K as a result of the lack of required
information as set forth in Section 3.16(a) or required signatures on such Form
10-K or


                                      -76-

<PAGE>



any certification contained therein shall not be regarded as a breach by the
Trustee of any obligation under this Agreement.

         (e) Notwithstanding the provisions of Section 11.01, this Section 3.16
may be amended without the consent of the Certificateholders or the Certificate
Insurer.

         Section 3.17 UCC. The Trustee agrees to file continuation statements
for any Uniform Commercial Code financing statements which the Seller has
informed the Trustee were filed on the Closing Date in connection with the
Trust. The Seller shall file any financing statements or amendments thereto
required by any change in the Uniform Commercial Code.

         Section 3.18 OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS.

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

         In addition, EMC shall, at its option, purchase any Mortgage Loan from
the Trust if the first Due Date for such Mortgage Loan is subsequent to the
Cut-off Date and the initial Scheduled Payment is not made within thirty (30)
days of such Due Date. Such purchase shall be made at a price equal to the
Repurchase Price.

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

         Section 3.19 OBLIGATIONS OF THE MASTER SERVICER IN RESPECT OF MORTGAGE
RATES AND SCHEDULED PAYMENTS.

         In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Mortgage Rates, Scheduled Payments or Stated Principal Balances that were made
by the Master Servicer in a manner not consistent with the terms


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<PAGE>



of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trustee
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the
Trustee, the Depositor and any successor Master Servicer in respect of any such
liability. Such indemnities shall survive the termination or discharge of this
Agreement. Notwithstanding the foregoing, this Section 3.19 shall not limit the
ability of the Master Servicer to seek recovery of any such amounts from the
related Mortgagor under the terms of the related Mortgage Note and Mortgage, to
the extent permitted by applicable law.

         Section 3.20 RESERVE FUND.

         (a) On or before the Closing Date, the Trustee shall establish a
Reserve Fund on behalf of the Holders of the Certificates. The Reserve Fund must
be an Eligible Account. The Reserve Fund shall be entitled "Reserve Fund,
LaSalle Bank National Association as Trustee for the benefit of holders of Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series 2004-
HE1". The Trustee shall demand payment of all money payable by Bear Stearns
Financial Products Inc. (the "Counterparty") under the Yield Maintenance
Agreements. The Trustee shall deposit in the Reserve Fund all payments received
from the Counterparty pursuant to the Yield Maintenance Agreements. On each
Distribution Date the Trustee shall remit amounts received from the Counterparty
to the Holders of the Class II-A Certificates, Class M Certificates and Class CE
Certificates in the manner provided in clause (b) below. of Section 5.04(a)
hereof. In addition, on each Distribution Date as to which there is a Basis Risk
Shortfall Carry Forward Amount payable to any Class of Certificates, the Trustee
shall deposit the amounts distributable pursuant to clauses (C) and (E) of
Section 5.04(a)(5) into the Reserve Fund and the Trustee has been directed by
the Class CE Certificateholder to distribute such amounts to the Holders of the
Offered Certificates in the amounts and priorities set forth in clauses (C) and
(E) of Section 5.04(a)(5). Any payments to the Holders of Offered Certificates
pursuant to the preceding sentence in respect of Basis Risk Shortfall Carry
Forward Amount shall not be payments with respect to a "regular interest" in a
REMIC within the meaning of Code Section 860(G)(a)(1).

         (b) Amounts received from the Counterparty under the Yield Maintenance
Agreement shall be distributed in the following manner and order of priority:

                  (i) FIRST, (A) from amounts received under the Yield
                  Maintenance Agreement related to the Class II-A Certificates,
                  to the Class II-A Certificates, pro rata based on the amount
                  of Basis Risk Shortfall Carryforward Amount for such Classes
                  of Certificates, and (B) from amounts received under the Yield
                  Maintenance Agreement related to the Class M Certificates,
                  sequentially to the Class M-1, Class M-2, Class M-3, Class
                  M-4, Class M-5 and Class M-6 Certificates, in that order, the
                  sum of (i) any Basis Risk Shortfall for such Distribution Date
                  and (ii) any Basis Risk Shortfall Carryforward Amount for such
                  Distribution Date;

                  (ii) SECOND, from any remaining amounts received under the
                  non-related Yield Maintenance Agreement, to the Class II-A
                  Certificates and Class M Certificates, among such Classes of
                  Certificates in the manner and order of priority set forth in
                  clause (i), the sum of (i) any Basis Risk Shortfall for such
                  Distribution Date and (ii)


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<PAGE>



                  any Basis Risk Shortfall Carryforward Amount for such
                  Distribution Date to the extent not covered in clause (i)
                  above; and

                  (iii) THIRD, any remaining amounts received under the Yield
                  Maintenance Agreements, to the Class CE Certificates.

         (c) The Reserve Fund is an "outside reserve fund" within the meaning of
Treasury Regulation ss.1.860G-2(h) and shall be an asset of the Trust Fund but
not an asset of any REMIC. The Trustee on behalf of the Trust shall be the
nominal owner of the Reserve Fund. The Class CE Certificateholder shall be the
beneficial owner of the Reserve Fund, subject to the power of the Trustee to
transfer amounts under Section 5.04. Amounts in the Reserve Fund shall, at the
direction of the Class CE Certificateholder, be invested in Permitted
Investments that mature no later than the Business Day prior to the next
succeeding Distribution Date. All net income and gain from such investments
shall be distributed to the Class CE Certificateholder, not as a distribution in
respect of any interest in any REMIC, on such Distribution Date. All amounts
earned on amounts on deposit in the Reserve Fund shall be taxable to the Class
CE Certificateholder. Any losses on such investments shall be deposited in the
Reserve Fund by the Class CE Certificateholder out of its own funds immediately
as realized.

         (d) For federal tax return and information reporting, the right of the
holders of the Offered Certificates to receive payments from the Reserve Fund in
respect of any Basis Risk Shortfall Carry Forward Amount shall be assigned a
value of zero.

         Section 3.21      ADVANCING FACILITY.

         (a) The Master Servicer and/or the Trustee on behalf of the Trust Fund,
in either case, with the consent of the Master Servicer in the case of the
Trustee and, in each case, with the consent of the Certificate Insurer (which
consent shall not be unreasonably withheld) and notice to the Rating Agencies,
is hereby authorized to enter into a facility (the "Advancing Facility") with
any Person which provides that such Person (an "Advancing Person") may fund
Advances and/or Servicing Advances to the Trust Fund under this Agreement,
although no such facility shall reduce or otherwise affect the Master Servicer's
obligation to fund such Advances and/or Servicing Advances. If the Master
Servicer enters into such an Advancing Facility pursuant to this Section 3.21,
upon reasonable request of the Advancing Person, the Trustee shall execute a
letter of acknowledgment, confirming its receipt of notice of the existence of
such Advancing Facility. To the extent that an Advancing Person funds any
Advance or any Servicing Advance and provides the Trustee with notice
acknowledged by the Servicer that such Advancing Person is entitled to
reimbursement, such Advancing Person shall be entitled to receive reimbursement
pursuant to this Agreement for such amount to the extent provided in Section
3.21(b). Such notice from the Advancing Person must specify the amount of the
reimbursement, the Section of this Agreement that permits the applicable Advance
or Servicing Advance to be reimbursed and the section(s) of the Advancing
Facility that entitle the Advancing Person to request reimbursement from the
Trustee, rather than the Master Servicer, and include the Master Servicer's
acknowledgment thereto or proof of an Event of Default under the Advancing
Facility. The Trustee shall have no duty or liability with respect to any
calculation of any reimbursement to be paid to an Advancing Person and shall be
entitled to rely without independent investigation on the Advancing Person's
notice provided pursuant to this


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<PAGE>



Section 3.21. An Advancing Person whose obligations hereunder are limited to the
funding of Advances and/or Servicing Advances shall not be required to meet the
qualifications of a Master Servicer or a subservicer pursuant to Section 8.02
hereof and will not be deemed to be a subservicer under this Agreement.

         (b) If an Advancing Facility is entered into, then the Master Servicer
shall not be permitted to reimburse itself therefor under Section 4.02(a)(ii),
Section 4.02(a)(iii) and Section 4.02(a)(v) prior to the remittance to the Trust
Fund, but instead the Master Servicer shall include such amounts in the
applicable remittance to the Trustee made pursuant to Section 4.02. The Trustee
is hereby authorized to pay to the Advancing Person, reimbursements for Advances
and Servicing Advances from the Distribution Account to the same extent the
Master Servicer would have been permitted to reimburse itself for such Advances
and/or Servicing Advances in accordance with Section 4.02(a)(ii), Section
4.02(a)(iii) or Section 4.02(a)(v), as the case may be, had the Master Servicer
itself funded such Advance or Servicing Advance. The Trustee is hereby
authorized to pay directly to the Advancing Person such portion of the Servicing
Fee as the parties to any advancing facility agree.

         (c) All Advances and Servicing Advances made pursuant to the terms of
this Agreement shall be deemed made and shall be reimbursed on a "first in-first
out" (FIFO) basis.

         (d) Any amendment to this Section 3.21 or to any other provision of
this Agreement that may be necessary or appropriate to effect the terms of an
Advancing Facility as described generally in this Section 3.21, including
amendments to add provisions relating to a successor master servicer, may be
entered into by the Trustee and the Master Servicer without the consent of any
Certificateholder but with the consent of the Certificate Insurer,
notwithstanding anything to the contrary in this Agreement.




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<PAGE>



                                   ARTICLE IV

                                    ACCOUNTS

         Section 4.01 COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT.

         (a) The Master Servicer shall make reasonable efforts in accordance
with customary and usual standards of practice of prudent mortgage lenders in
the respective states in which the Mortgaged Properties are located to collect
all payments called for under the terms and provisions of the Mortgage Loans to
the extent such procedures shall be consistent with this Agreement and the terms
and provisions of any related Required Insurance Policy. Consistent with the
foregoing, the Master Servicer may in its discretion (i) waive any late payment
charge and (ii) extend the due dates for payments due on a Mortgage Note for a
period not greater than 125 days. In the event of any such arrangement, the
Master Servicer shall make Advances on the related Mortgage Loan during the
scheduled period in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangements, and shall be
entitled to reimbursement therefor in accordance with Section 5.01. The Master
Servicer shall not be required to institute or join in litigation with respect
to collection of any payment (whether under a Mortgage, Mortgage Note or
otherwise or against any public or governmental authority with respect to a
taking or condemnation) if it reasonably believes that enforcing the provision
of the Mortgage or other instrument pursuant to which such payment is required
is prohibited by applicable law. In addition, if (x) a Mortgage Loan is in
default or default is imminent and (y) the Master Servicer delivers to the
Trustee and the Certificate Insurer a certification addressed to the Trustee and
the Certificate Insurer, based on the advice of counsel or certified public
accountants, in either case, that have a national reputation with respect to
taxation of REMICs, that a modification of such Mortgage Loan will not result in
the imposition of taxes on or disqualify either REMIC I, REMIC II, REMIC III or
REMIC IV, the Master Servicer may, (A) amend the related Mortgage Note to reduce
the Mortgage Rate applicable thereto, provided that such reduced Mortgage Rate
shall in no event be lower than 5.00% with respect to any Mortgage Loan and (B)
amend any Mortgage Note to extend to the maturity thereof.

         The Master Servicer shall not waive (or permit a sub-servicer to waive)
any Prepayment Charge unless: (i) the enforceability thereof shall have been
limited by bankruptcy, insolvency, moratorium, receivership and other similar
laws relating to creditors' rights generally, (ii) the enforcement thereof is
illegal, or any local, state or federal agency has threatened legal action if
the prepayment penalty is enforced, (iii) the collectability thereof shall have
been limited due to acceleration in connection with a foreclosure or other
involuntary payment or (iv) such waiver is standard and customary in servicing
similar Mortgage Loans and relates to a default or a reasonably foreseeable
default and would, in the reasonable judgment of the Master Servicer, maximize
recovery of total proceeds taking into account the value of such Prepayment
Charge and the related Mortgage Loan. In no event will the Master Servicer waive
a Prepayment Charge in connection with a refinancing of a Mortgage Loan that is
not related to a default or a reasonably foreseeable default. If a Prepayment
Charge is waived, but does not meet the standards described above, then the
Master Servicer is required to pay the amount of such waived Prepayment Charge,
for the benefit of the Class P Certificates, by remitting such amount to the
Trustee by the Distribution Account Deposit Date.



                                      -81-

<PAGE>



         (b) The Master Servicer shall establish and maintain a Protected
Account (which shall at all times be an Eligible Account) with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of the Certificateholders and the Certificate Insurer and designated "EMC
Mortgage Corporation, as Master Servicer, for the benefit of LaSalle Bank
National Association, in trust for registered holders of Bear Stearns Asset
Backed Securities, Inc., Asset-Backed Certificates Series 2004-HE1". The Master
Servicer shall deposit or cause to be deposited into the Protected Account on a
daily basis within one Business Day of receipt, except as otherwise specifically
provided herein, the following payments and collections remitted by subservicers
or received by it in respect of the Mortgage Loans subsequent to the Cut-off
Date (other than in respect of principal and interest due on the Mortgage Loans
on or before the Cut-off Date) and the following amounts required to be
deposited hereunder:

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

                  (ii) all payments on account of interest on the Mortgage Loans
         net of the Servicing Fee permitted under Section 3.10 and LPMI Fees, if
         any;

                  (iii) all Liquidation Proceeds and Insurance Proceeds, other
         than proceeds to be applied to the restoration or repair of the
         Mortgaged Property or released to the Mortgagor in accordance with the
         Master Servicer's normal servicing procedures;

                  (iv) any amount required to be deposited by the Master
         Servicer pursuant to Section 4.01(c) in connection with any losses on
         Permitted Investments;

                  (v) any amounts required to be deposited by the Master
         Servicer pursuant to Section 3.05;

                  (vi) any Prepayment Charges collected on the Mortgage Loans;
         and

                  (vii) any other amounts required to be deposited hereunder.

         The foregoing requirements for remittance by the Master Servicer into
the Protected Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of late
payment charges or assumption fees, if collected, need not be remitted by the
Master Servicer. In the event that the Master Servicer shall remit any amount
not required to be remitted and not otherwise subject to withdrawal pursuant to
Section 4.02, it may at any time withdraw or direct the institution maintaining
the Protected Account, to withdraw such amount from the Protected Account, any
provision herein to the contrary notwithstanding. Such withdrawal or direction
may be accomplished by delivering written notice thereof to the institution
maintaining the Protected Account, that describes the amounts deposited in error
in the Protected Account. The Master Servicer shall maintain adequate records
with respect to all withdrawals made pursuant to this Section. All funds
deposited in the Protected Account shall be held in trust for the
Certificateholders and the Certificate Insurer until withdrawn in accordance
with Section 4.02.



                                      -82-

<PAGE>



         (c) The institution that maintains the Protected Account shall invest
the funds in the Protected Account, in the manner directed by the Master
Servicer, in Permitted Investments which shall mature not later than the
Remittance Date and shall not be sold or disposed of prior to its maturity. All
such Permitted Investments shall be made in the name of the Trustee, for the
benefit of the Certificateholders and the Certificate Insurer. All income and
gain net of any losses realized from any such investment shall be for the
benefit of the Master Servicer as servicing compensation and shall be remitted
to it monthly as provided herein. The amount of any losses incurred in the
Protected Account in respect of any such investments shall be deposited by the
Master Servicer into the Protected Account, out of the Master Servicer's own
funds.

         (d) The Master Servicer shall give at least 30 days advance notice to
the Trustee, the Seller, each Rating Agency, the Certificate Insurer and the
Depositor of any proposed change of location of the Protected Account prior to
any change thereof.

         Section 4.02 PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.

         (a) The Master Servicer may from time to time make withdrawals from the
Protected Account for the following purposes:

                  (i) to pay itself (to the extent not previously paid to or
         withheld by the Master Servicer), as servicing compensation in
         accordance with Section 3.10, that portion of any payment of interest
         that equals the Servicing Fee for the period with respect to which such
         interest payment was made, and, as additional servicing compensation,
         those other amounts set forth in Section 3.10;

                  (ii) to reimburse the Master Servicer for Advances made by it
         with respect to the Mortgage Loans, provided, however, that the Master
         Servicer's right of reimbursement pursuant to this subclause (ii) shall
         be limited to amounts received on particular Mortgage Loan(s)
         (including, for this purpose, Liquidation Proceeds and Insurance
         Proceeds) that represent late recoveries of payments of principal
         and/or interest on such particular Mortgage Loan(s) in respect of which
         any such Advance was made;

                  (iii) to reimburse the Master Servicer for any previously made
         portion of a Servicing Advance or an Advance made by the Master
         Servicer that, in the good faith judgment of the Master Servicer, will
         not be ultimately recoverable by it from the related Mortgagor, any
         related Liquidation Proceeds, Insurance Proceeds or otherwise (a
         "Nonrecoverable Advance"), to the extent not reimbursed pursuant to
         clause (ii) or clause (v);

                  (iv) to reimburse the Master Servicer from Insurance Proceeds
         for Insured Expenses covered by the related Insurance Policy;

                  (v) to pay the Master Servicer any unpaid Servicing Fees and
         to reimburse it for any unreimbursed Servicing Advances, provided,
         however, that the Master Servicer's right to reimbursement for
         Servicing Advances pursuant to this subclause (v) with respect to any
         Mortgage Loan shall be limited to amounts received on particular
         Mortgage Loan(s)


                                      -83-

<PAGE>



         (including, for this purpose, Liquidation Proceeds, Insurance Proceeds
         and purchase and repurchase proceeds) that represent late recoveries of
         the payments for which such Servicing Advances were made;

                  (vi) to pay to the Seller, the Depositor or itself, as
         applicable, with respect to each Mortgage Loan or property acquired in
         respect thereof that has been purchased pursuant to Section 2.02, 2.03
         or 3.18 of this Agreement, all amounts received thereon and not taken
         into account in determining the related Stated Principal Balance of
         such repurchased Mortgage Loan;

                  (vii) to pay any expenses recoverable by the Master Servicer
         pursuant to Section 7.04 of this Agreement;

                  (viii) to withdraw pursuant to Section 4.01 any amount
         deposited in the Protected Account and not required to be deposited
         therein; and

                  (ix) to clear and terminate the Protected Account upon
         termination of this Agreement pursuant to Section 10.01 hereof.

         In addition, no later than 1:00 p.m. Eastern time on the Distribution
Account Deposit Date, the Master Servicer shall withdraw from the Protected
Account and remit to the Trustee the amount of Interest Funds for each Loan
Group (without taking into account any reduction in the amount of Interest Funds
attributable to the application of clause (c) of the definition thereof
contained in Article I of this Agreement) and Principal Funds for each Loan
Group collected, to the extent on deposit, and the Trustee shall deposit such
amount in the Distribution Account. In addition, on or before the Distribution
Account Deposit Date, the Master Servicer shall remit to the Trustee for deposit
in the Distribution Account any Advances or any payments of Compensating
Interest required to be made by the Master Servicer with respect to the Mortgage
Loans. Furthermore, on each Distribution Account Deposit Date, the Master
Servicer shall remit to the Trustee all Prepayment Charges collected by the
Master Servicer with respect to the Mortgage Loans during the related Prepayment
Period.

         The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Protected Account pursuant to subclauses (i), (ii), (iv),
(v), (vi) and (vii) above. Prior to making any withdrawal from the Protected
Account pursuant to subclause (iii), the Master Servicer shall deliver to the
Trustee an Officer's Certificate of a Servicing Officer indicating the amount of
any previous Advance or Servicing Advance determined by the Master Servicer to
be a Nonrecoverable Advance and identifying the related Mortgage Loan(s), and
their respective portions of such Nonrecoverable Advance.



                                      -84-

<PAGE>



         Section 4.03 COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW
ACCOUNTS.

         With respect to each Mortgage Loan, to the extent required by the
related Mortgage Note, the Master Servicer shall establish and maintain one or
more accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Master Servicer) for the
payment of taxes, assessments, hazard insurance premiums or comparable items for
the account of the Mortgagors. Nothing herein shall require the Master Servicer
to compel a Mortgagor to establish an Escrow Account in violation of applicable
law.

         Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Master Servicer out of related collections for any payments made with
respect to each Mortgage Loan pursuant to Section 3.01 (with respect to taxes
and assessments and insurance premiums) and Section 3.05 (with respect to hazard
insurance), to refund to any Mortgagors for any Mortgage Loans any sums as may
be determined to be overages, to pay interest, if required by law or the terms
of the related Mortgage or Mortgage Note, to such Mortgagors on balances in the
Escrow Account or to clear and terminate the Escrow Account at the termination
of this Agreement in accordance with Section 10.01 thereof. The Escrow Account
shall not be a part of the Trust Fund.

         Section 4.04 DISTRIBUTION ACCOUNT.

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

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

         (c) The Distribution Account shall constitute an Eligible Account of
the Trust Fund segregated on the books of the Trustee and held by the Trustee
and the Distribution Account and the funds deposited therein shall not be
subject to, and shall be protected from, all claims, liens, and encumbrances of
any creditors or depositors of the Trustee (whether made directly, or indirectly
through a liquidator or receiver of the Trustee). The amount at any time
credited to the Distribution Account may be invested in the name of the Trustee,
in such Permitted Investments, or deposited in demand deposits with such
depository institutions, as determined by the Trustee. All Permitted Investments
shall mature or be subject to redemption or withdrawal on or before, and shall
be held until, the next succeeding Distribution Date if the obligor for such
Permitted Investment is the Trustee or, if such obligor is any other Person, the
Business Day preceding such Distribution Date. All investment earnings on
amounts on deposit in the Distribution Account or benefit from funds uninvested
therein from time to time shall be for the account of the Trustee. The Trustee
shall be permitted to withdraw or receive distribution of any and all investment
earnings from the Distribution Account on each Distribution Date. If there is
any loss on a Permitted Investment or demand deposit, the Trustee shall deposit
the amount of the loss in the Distribution Account not later than the applicable
Distribution Date on which the moneys so invested are required to be distributed


                                      -85-

<PAGE>



to the Certificateholders. With respect to the Distribution Account and the
funds deposited therein, the Trustee shall take such action as may be necessary
to ensure that the Certificateholders and the Certificate Insurer shall be
entitled to the priorities afforded to such a trust account (in addition to a
claim against the estate of the Trustee) as provided by 12 U.S.C. ss. 92a(e),
and applicable regulations pursuant thereto, if applicable, or any applicable
comparable state statute applicable to state chartered banking corporations.

         Section 4.05 PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION
ACCOUNT.

         (a) The Trustee will make or cause to be made such withdrawals or
transfers from the Distribution Account for the following purposes:

                  (i) to pay to itself the Trustee Fee;

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

                  (iii) to pay investment income to the Trustee;

                  (iv) to remove amounts deposited in error; and

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

         (b) On each Distribution Date, the Trustee shall distribute Interest
Funds and Principal Funds in the Distribution Account for each Loan Group to the
holders of the Certificates and the Certificate Insurer in accordance with
Section 5.04.

         Section 4.06  CLASS P CERTIFICATE ACCOUNT.

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

         (b) On the Closing Date, the Depositor will deposit, or cause to be
deposited in the Class P Certificate Account, an amount equal to $100. All
amounts deposited to the Class P Certificate Account shall be held by the
Trustee in the name of the Trustee in trust for the benefit of the Class P
Certificateholders in accordance with the terms and provisions of this
Agreement. The amount on deposit in the Class P Certificate Account shall be
held uninvested.




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<PAGE>



                                    ARTICLE V

                           DISTRIBUTIONS AND ADVANCES

         Section 5.01  ADVANCES.

         The Master Servicer shall, or shall cause the related subservicer
pursuant to the Subservicing Agreement to, make an Advance and deposit such
Advance in the Protected Account. Each such Advance shall be remitted to the
Distribution Account no later than 1:00 p.m. Eastern time on the Distribution
Account Deposit Date in immediately available funds. The Master Servicer shall
be obligated to make any such Advance only to the extent that such advance would
not be a Nonrecoverable Advance. If the Master Servicer shall have determined
that it has made a Nonrecoverable Advance or that a proposed Advance or a lesser
portion of such Advance would constitute a Nonrecoverable Advance, the Master
Servicer shall deliver (i) to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer funds constituting the remaining
portion of such Advance, if applicable, and (ii) to the Depositor, each Rating
Agency, the Certificate Insurer and the Trustee an Officer's Certificate setting
forth the basis for such determination. Subject to the Master Servicer's
recoverability determination, in the event that a subservicer fails to make a
required Advance, the Master Servicer shall be required to remit the amount of
such Advance to the Distribution Account.

         In lieu of making all or a portion of such Advance from its own funds,
the Master Servicer may (i) cause to be made an appropriate entry in its records
relating to the Protected Account that any Amount Held for Future Distributions
has been used by the Master Servicer in discharge of its obligation to make any
such Advance and (ii) transfer such funds from the Protected Account to the
Distribution Account. Any funds so applied and transferred shall be replaced by
the Master Servicer by deposit in the Distribution Account, no later than the
close of business on the Business Day immediately preceding the Distribution
Date on which such funds are required to be distributed pursuant to this
Agreement.

         The Master Servicer shall be entitled to be reimbursed from the
Protected Account for all Advances of its own funds made pursuant to this
Section as provided in Section 4.02. The obligation to make Advances with
respect to any Mortgage Loan shall continue until such Mortgage Loan is paid in
full or the related Mortgaged Property or related REO Property has been
liquidated or until the purchase or repurchase thereof (or substitution
therefor) from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section 5.01.

         Subject to and in accordance with the provisions of Article VIII
hereof, in the event the Master Servicer fails to make such Advance, then the
Trustee, as Successor Master Servicer, shall be obligated to make such Advance,
subject to the provisions of this Section 5.01.



                                      -87-

<PAGE>



         Section 5.02 COMPENSATING INTEREST PAYMENTS.

         In the event that there is a Prepayment Interest Shortfall arising from
a voluntary Principal Prepayment in part or in full by the Mortgagor with
respect to any Mortgage Loan, the Master Servicer shall, to the extent of the
Servicing Fee for such Distribution Date, deposit into the Distribution Account,
as a reduction of the Servicing Fee for such Distribution Date, no later than
the close of business on the Business Day immediately preceding such
Distribution Date, an amount equal to the Prepayment Interest Shortfall; and in
case of such deposit, the Master Servicer shall not be entitled to any recovery
or reimbursement from the Depositor, the Trustee, the Seller, the Trust Fund or
the Certificateholders.

         Section 5.03 REMIC DISTRIBUTIONS.

         On each Distribution Date the Trustee shall be deemed to have allocated
distributions to the REMIC I Regular Interests in accordance with Section 5.06
hereof.

         Section 5.04 DISTRIBUTIONS.

         (a) On each Distribution Date, an amount equal to the Interest Funds
and Principal Funds for each Loan Group for such Distribution Date shall be
withdrawn by the Trustee from the Distribution Account and distributed in the
following order of priority:

         (1) Interest Funds shall be distributed in the following manner and
order of priority:

                  (A) From Interest Funds in respect of:

                  (i) Loan Group I, to the Class I-A-1 Certificates and Class
                  I-A-2 Certificates, the Current Interest and any Interest
                  Carry Forward Amount for each such Class, on a pro rata basis
                  based on the entitlement of each such Class;

                  (ii) Loan Group II, to the Class II-A-1 Certificates and Class
                  II-A-2 Certificates, the Current Interest and any Interest
                  Carry Forward Amount for each such Class, on a pro rata basis
                  based on the entitlement of each such Class; and

                  (iii) Loan Group III, first, to the Certificate Insurer, the
                  Certificate Insurer Premium Amount, second, to the Class III-A
                  Certificates, the Current Interest and any Interest Carry
                  Forward Amount for such Class, and third, to the Certificate
                  Insurer, with respect to any Reimbursement Amount in
                  connection with any draws relating to interest on the Class
                  III-A Policy;

                  (B) From remaining Interest Funds in respect of the
         non-related Loan Groups, to the Class I-A, Class II-A and Class III-A
         Certificates, the remaining Interest Carry Forward Amount, if any, for
         such Classes, pro rata based on the entitlement of each such Class;
         provided, however, any such remaining Interest Funds that would
         otherwise be distributed to the Class III-A Certificates to pay the
         remaining Interest Carry Forward Amount for any Distribution Date will
         be used to pay the Certificate Insurer the Reimbursement Amount


                                      -88-

<PAGE>



         related to interest draws on the Class III-A Policy, if any, prior to
         paying such Interest Carry Forward Amount to the Class III-A
         Certificates; and

                  (C) From remaining Interest Funds in respect of all Loan
         Groups, sequentially, to the Class M-1, Class M-2, Class M-3, Class
         M-4, Class M-5 and Class M-6 Certificates, in that order, the Current
         Interest for each such Class.

         Any Excess Spread to the extent necessary to meet a level of
overcollateralization equal to the Overcollateralization Target Amount will be
the Extra Principal Distribution Amount and will be included as part of the
Principal Distribution Amount; provided, however, any such Excess Spread that
would otherwise be distributed to the Class III-A Certificates to pay the Extra
Principal Distribution Amount for any Distribution Date will be used to pay the
Certificate Insurer the Reimbursement Amount related to interest or principal
draws on the Class III-A Policy, if any, prior to paying such Extra Principal
Distribution Amount to the Class III-A Certificates. Any Remaining Excess Spread
together with any Overcollateralization Release Amount will be applied as Excess
Cashflow and distributed pursuant to clauses (5)(A) through (G) below.

         On any Distribution Date, any Relief Act Interest Shortfalls and any
Prepayment Interest Shortfalls to the extent not covered by Compensating
Interest will be allocated as set forth in the definition of "Current Interest"
herein.

         (2) Principal Funds, including any Extra Principal Distribution Amount,
shall be distributed in the following manner and order of priority:

                  (A) For each Distribution Date (i) prior to the Stepdown Date
         or (ii) on which a Trigger Event is in effect:

                  (i)  To the Class A Certificates, the Principal Distribution
                  Amount for such Distribution Date to be distributed as
                  follows:

                           (1) from the Group I Principal Distribution Amount
                           for such Distribution Date, sequentially, to the
                           Class I-A-1 Certificates and Class I-A-2
                           Certificates, in that order, in each case until the
                           Certificate Principal Balance thereof is reduced to
                           zero;

                           (2) from the Group II Principal Distribution Amount
                           for such Distribution Date, to the Class II-A-1
                           Certificates and Class II-A-2 Certificates, pro rata,
                           based on the Certificate Principal Balance of each
                           such Class, until the Certificate Principal Balances
                           thereof are reduced to zero; and

                           (3) from the Group III Principal Distribution Amount
                           for such Distribution Date, to the Class III-A
                           Certificates, until the Certificate Principal Balance
                           thereof is reduced to zero;



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<PAGE>



                  (ii) To the Class M-1 Certificates, from any remaining
                  Principal Funds in respect of all Loan Groups for such
                  Distribution Date, the remaining Principal Distribution
                  Amount, until the Certificate Principal Balance thereof is
                  reduced to zero;

                  (iii) To the Class M-2 Certificates, from any remaining
                  Principal Funds in respect of all Loan Groups for such
                  Distribution Date, the remaining Principal Distribution
                  Amount, until the Certificate Principal Balance thereof is
                  reduced to zero;

                  (iv) To the Class M-3 Certificates, from any remaining
                  Principal Funds in respect of all Loan Groups for such
                  Distribution Date, the remaining Principal Distribution
                  Amount, until the Certificate Principal Balance thereof is
                  reduced to zero;

                  (v) To the Class M-4 Certificates, from any remaining
                  Principal Funds in respect of all Loan Groups for such
                  Distribution Date, the remaining Principal Distribution
                  Amount, until the Certificate Principal Balance thereof is
                  reduced to zero;

                  (vi) To the Class M-5 Certificates, from any remaining
                  Principal Funds in respect of all Loan Groups for such
                  Distribution Date, the remaining Principal Distribution
                  Amount, until the Certificate Principal Balance thereof is
                  reduced to zero; and

                  (vii) To the Class M-6 Certificates, from any remaining
                  Principal Funds in respect of all Loan Groups for such
                  Distribution Date, the remaining Principal Distribution
                  Amount, until the Certificate Principal Balance thereof is
                  reduced to zero.

                  (B) For each Distribution Date on or after the Stepdown Date,
         so long as a Trigger Event is not in effect:

                  (i) To the Class A Certificates, the Principal Distribution
                  Amount for such Distribution Date to be distributed as
                  follows:

                           (1) from the Group I Principal Distribution Amount
                           for such Distribution Date, sequentially, to the
                           Class I-A-1 Certificates and Class I-A-2
                           Certificates, in that order, the Class I-A Principal
                           Distribution Amount for such Distribution Date, in
                           each case until the Certificate Principal Balance
                           thereof is reduced to zero;

                           (2) from the Group II Principal Distribution Amount
                           for such Distribution Date, to the Class II-A-1
                           Certificates and Class II-A-2 Certificates, pro rata,
                           based on the Certificate Principal Balance of each
                           such Class, the Class II-A Principal Distribution
                           Amount for such Distribution Date, until the
                           Certificate Principal Balances thereof is reduced to
                           zero; and

                           (3) from the Group III Principal Distribution Amount
                           for such Distribution Date, to the Class III-A
                           Certificates, the Class III-A Principal Distribution
                           Amount for such Distribution Date, until the
                           Certificate Principal Balance thereof is reduced to
                           zero;


                                      -90-

<PAGE>




                  (ii) To the Class M-1 Certificates, from any remaining
                  Principal Distribution Amount in respect of all Loan Groups,
                  the Class M-1 Principal Distribution Amount, until the
                  Certificate Principal Balance thereof is reduced to zero;

                  (iii) To the Class M-2 Certificates, from any remaining
                  Principal Distribution Amount in respect of all Loan Groups,
                  the Class M-2 Principal Distribution Amount, until the
                  Certificate Principal Balance thereof is reduced to zero;

                  (iv) To the Class M-3 Certificates, from any remaining
                  Principal Distribution Amount in respect of all Loan Groups,
                  the Class M-3 Principal Distribution Amount, until the
                  Certificate Principal Balance thereof is reduced to zero;

                  (v) To the Class M-4 Certificates, from any remaining
                  Principal Distribution Amount in respect of all Loan Groups,
                  the Class M-4 Principal Distribution Amount, until the
                  Certificate Principal Balance thereof is reduced to zero;

                  (vi) To the Class M-5 Certificates, from any remaining
                  Principal Distribution Amount in respect of all Loan Groups,
                  the Class M-5 Principal Distribution Amount, until the
                  Certificate Principal Balance thereof is reduced to zero; and

                  (vii) To the Class M-6 Certificates, from any remaining
                  Principal Distribution Amount in respect of all Loan Groups,
                  the Class M-6 Principal Distribution Amount, until the
                  Certificate Principal Balance thereof is reduced to zero.

         (3) Notwithstanding the provisions of clauses (2)(A) and (B) above, if
on any Distribution Date the Class A Certificates related to a Loan Group are no
longer outstanding, the pro rata portion of the Principal Distribution Amount or
the applicable Class A Principal Distribution Amount, as applicable, otherwise
allocable to such Class A Certificates will be allocated among the remaining
group or groups of Class A Certificates pro rata and among the Classes of each
such group in the same manner and order of priority described above; provided,
however, any such amount allocable to the Class III-A Certificates will be used
first to pay the Certificate Insurer any Reimbursement Amounts related to
principal draws on the Class III-A Policy, if any; and

         (4) Notwithstanding the provisions of clauses (2)(A) and (B) above, if
on any Distribution Date the pro rata portion of the applicable Class A
Principal Distribution Amount allocated to a Class of Class A Certificates is
insufficient to pay to such Class A Certificates the principal to which they are
entitled under clause (2)(B)(i), any Excess Cashflow will be allocated in an
amount equal to the lesser of the deficiency and the aggregate amount of such
Excess Cashflow, and if the pro rata portion of the applicable Class A Principal
Distribution Amount is insufficient for all Classes of Class A Certificates,
then pro rata based upon the respective amounts of such deficiencies.

         (5) Any Excess Cashflow shall be distributed in the following manner
and order of priority:



                                      -91-

<PAGE>



                  (A) from any remaining Excess Cashflow, to the Class A
         Certificates, (a) first, any remaining Interest Carry Forward Amount
         for such Classes, pro rata, in accordance with the Interest Carry
         Forward Amount due with respect to each such Class, to the extent not
         fully paid pursuant to clauses (1) (A) and (B) above; provided,
         however, that any Excess Cashflow allocable to the Class III-A
         Certificates under this clause will be used to pay any unpaid
         Reimbursement Amounts relating to interest draws owed to the
         Certificate Insurer prior to paying any such Interest Carry Forward
         Amount to the Class III-A Certificates and (b) second, any Unpaid
         Realized Loss Amount for such Classes for such Distribution Date, pro
         rata, in accordance with the Applied Realized Loss Amount allocated to
         each such Class;

                  (B) from any remaining Excess Cashflow, sequentially, to the
         Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6
         Certificates, in that order, an amount equal to the Interest Carry
         Forward Amount for each such Class for such Distribution Date;

                  (C) from any remaining Excess Cashflow otherwise distributable
         to the Class CE Certificates, to the Reserve Fund to pay to the Class
         I-A, Class II-A and Class III-A Certificates, any Basis Risk Shortfall
         Carry Forward Amount for each such Class for such Distribution Date, on
         a pro rata basis, based on the amount of the Basis Risk Shortfall Carry
         Forward Amount for each such Class, and in the case of the Class II-A
         Certificates, to the extent not covered by the Yield Maintenance
         Agreements;

                  (D) from any such remaining Excess Cashflow, to pay the
         Certificate Insurer any Reimbursement Amount to the extent not paid
         above;

                  (E) from any remaining Excess Cashflow otherwise distributable
         to the Class CE Certificates, to the Reserve Fund to pay to the Class
         M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6
         Certificates, sequentially in that order, any Basis Risk Shortfall
         Carry Forward Amount for each such Class for such Distribution Date, if
         any, in each case to the extent not covered by the Yield Maintenance
         Agreements;

                  (F) from any remaining Excess Cashflow, to the Class CE
         Certificates, an amount equal to the Class CE Distribution Amount
         reduced by amounts distributed in clauses (C) and (E) above; and

                  (G) any remaining amounts to each of the Class R-I, Class R-II
         and Class RX Certificates, based on the related REMIC in which such
         amounts remain.

         On each Distribution Date, all amounts in respect of Prepayment Charges
shall be distributed to the Holders of the Class P Certificates, provided that
such distributions shall not be in reduction of the principal balance thereof.
On the Distribution Date immediately following the expiration of the latest
Prepayment Charge term as identified on the Mortgage Loan Schedule, any amount
on deposit in the Class P Certificate Account will be distributed to the Holders
of the Class P Certificates in reduction of the Certificate Principal Balance
thereof.

         In addition, notwithstanding the foregoing, on any Distribution Date
after the Distribution Date on which the Certificate Principal Balance of a
Class of Offered Certificates has been reduced


                                      -92-

<PAGE>



to zero, that Class of Offered Certificates will be retired and will no longer
be entitled to distributions, including distributions in respect of Prepayment
Interest Shortfalls or Basis Risk Shortfalls.

         (b) Subject to Section 10.02 hereof respecting the final distribution,
on each Distribution Date the Trustee shall make distributions to each
Certificateholder of record on the preceding Record Date either by wire transfer
in immediately available funds to the account of such holder at a bank or other
entity having appropriate facilities therefor, if such Holder has so notified
the Trustee at least 5 Business Days prior to the related Record Date, or, if
not, by check mailed by first class mail to such Certificateholder at the
address of such holder appearing in the Certificate Register. Notwithstanding
the foregoing, but subject to Section 10.02 hereof respecting the final
distribution, distributions with respect to Certificates registered in the name
of a Depository shall be made to such Depository in immediately available funds.

         (c) On or before 5:00 p.m. Eastern time on the fifth Business Day
immediately preceding each Distribution Date, the Master Servicer shall deliver
a report to the Trustee in electronic form (or by such other means as the Master
Servicer and the Trustee may agree from time to time) containing such data and
information, as agreed to by the Master Servicer and the Trustee such as to
permit the Trustee to prepare the Monthly Statement to Certificateholders and to
make the required distributions for the related Distribution Date.

         Section 5.04A  ALLOCATION OF REALIZED LOSSES.

         (a) All Realized Losses on the Mortgage Loans allocated to any REMIC I
Regular Interest pursuant to Section 5.04A(b) on the Mortgage Loans shall be
allocated by the Trustee on each Distribution Date as follows: first, to Excess
Spread; second, to the Class CE Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; third, to the Class M-6 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero;
fourth, to the Class M-5 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; fifth, to the Class M-4 Certificates, until
the Certificate Principal Balance thereof has been reduced to zero; sixth, to
the Class M-3 Certificates, until the Certificate Principal Balance thereof has
been reduced to zero; seventh, to the Class M-2 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero; eighth, to the
Class M-1 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; and ninth, to the Class A Certificates, on a pro rata basis,
until the Certificate Principal Balance of each such Class has been reduced to
zero. All Realized Losses to be allocated to the Certificate Principal Balances
of all Classes on any Distribution Date shall be so allocated after the actual
distributions to be made on such date as provided above. All references above to
the Certificate Principal Balance of any Class of Certificates shall be to the
Certificate Principal Balance of such Class immediately prior to the relevant
Distribution Date, before reduction thereof by any Realized Losses, in each case
to be allocated to such Class of Certificates, on such Distribution Date.

         (b) Any allocation of Realized Losses to a Class of Offered
Certificates on any Distribution Date shall be made by reducing the Certificate
Principal Balance thereof by the amount so allocated; any allocation of Realized
Losses to a Class CE Certificates shall be made by reducing the amount otherwise
payable in respect thereof pursuant to clause SEVENTH Section 5.04(a). No


                                      -93-

<PAGE>



allocations of any Realized Losses shall be made to the Certificate Principal
Balance of the Class P Certificates.

         As used herein, an allocation of a Realized Loss on a "pro rata basis"
among two or more specified Classes of Certificates means an allocation on a pro
rata basis, among the various Classes so specified, to each such Class of
Certificates on the basis of their then outstanding Certificate Principal
Balances prior to giving effect to distributions to be made on such Distribution
Date. All Realized Losses and all other losses allocated to a Class of
Certificates hereunder will be allocated among the Certificates of such Class in
proportion to the Percentage Interests evidenced thereby.

         (c) (i) The REMIC I Marker Percentage of all Realized Losses on the
Mortgage Loans (without duplication of losses allocated pursuant to Section
1.02) shall be allocated by the Trustee on each Distribution Date to the
following REMIC I Regular Interests in the specified percentages, as follows:
first, to Uncertificated Accrued Interest payable to the REMIC I Regular
Interest AA and REMIC I Regular Interest ZZ up to an aggregate amount equal to
the REMIC I Interest Loss Allocation Amount, 98.00% and 2.00%, respectively;
second, to the Uncertificated Principal Balances of the REMIC I Regular Interest
AA and REMIC I Regular Interest ZZ up to an aggregate amount equal to the REMIC
I Principal Loss Allocation Amount, 98.00% and 2.00%, respectively; third, to
the Uncertificated Principal Balances of REMIC I Regular Interest AA, REMIC I
Regular Interest M-6 and REMIC I Regular Interest ZZ, 98.00%, 1.00% and 1.00%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest M-6 has been reduced to zero; fourth, to the Uncertificated Principal
Balances of REMIC I Regular Interest AA, REMIC I Regular Interest M-5 and REMIC
I Regular Interest ZZ, 98.00%, 1.00% and 1.00%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest M-5 has been
reduced to zero; fifth, to the Uncertificated Principal Balances of REMIC I
Regular Interest AA, REMIC I Regular Interest M-4 and REMIC I Regular Interest
ZZ, 98.00%, 1.00% and 1.00%, respectively, until the Uncertificated Principal
Balance of REMIC I Regular Interest M-4 has been reduced to zero; sixth to the
Uncertificated Principal Balances of REMIC I Regular Interest AA, REMIC I
Regular Interest M-3 and REMIC I Regular Interest ZZ, 98.00%, 1.00%, and 1.00%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest M-3 has been reduced to zero; seventh to the Uncertificated Principal
Balances of REMIC I Regular Interest AA, REMIC I Regular Interest M-2 and REMIC
I Regular Interest ZZ, 98.00%, 1.00% and 1.00%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest M-2 has been
reduced to zero; eighth to the Uncertificated Principal Balances of REMIC I
Regular Interest AA, REMIC I Regular Interest M-1 and REMIC I Regular Interest
ZZ, 98.00%, 1.00% and 1.00%, respectively, until the Uncertificated Principal
Balance of REMIC I Regular Interest M-1 has been reduced to zero; ninth with
respect to any Realized Losses on the Mortgage Loans, to the Uncertificated
Principal Balance of REMIC I Regular Interest AA, 98.00%, to the Uncertificated
Principal Balances of REMIC I Regular Interests I-A-1, I-A-2, II-A-1, II-A-2 and
III-A, 1.00% pro rata, and to the Uncertificated Principal Balance of REMIC I
Regular Interest ZZ, 1.00%, until the Uncertificated Principal Balances of REMIC
I Regular Interests I-A-1, I-A-2, II-A-1, II-A-2 and III-A have been reduced to
zero.

                  (ii) The REMIC I Sub WAC Allocation Percentage of all Realized
         Losses shall be applied after all distributions have been made on each
         Distribution Date first, so as to keep the Uncertificated Principal
         Balance of each REMIC I Regular Interest ending with the


                                      -94-

<PAGE>



         designation "B" equal to 0.01% of the aggregate Stated Principal
         Balance of the Mortgage Loans in the related Loan Group; second, to
         each REMIC I Regular Interest ending with the designation "A," so that
         the Uncertificated Principal Balance of each such REMIC I Regular
         Interest is equal to 0.01% of the excess of (x) the aggregate Stated
         Principal Balance of the Mortgage Loans in the related Loan Group over
         (y) the current Certificate Principal Balance of the Class A
         Certificates related to such Loan Group (except that if any such excess
         is a larger number than in the preceding distribution period, the least
         amount of Realized Losses shall be applied to such REMIC I Regular
         Interests such that the REMIC I Subordinated Balance Ratio is
         maintained); and third, any remaining Realized Losses shall be
         allocated to REMIC I Regular Interest XX.

         Section 5.05 MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

         (a) Not later than each Distribution Date, the Trustee shall prepare
and make available to each Holder of Certificates, the Certificate Insurer, the
Trustee, the Master Servicer and the Depositor a statement setting forth for the
Certificates:

                  (i) the amount of the related distribution to Holders of each
         Class allocable to principal, separately identifying (A) the aggregate
         amount of any Principal Prepayments included therein, (B) the aggregate
         of all scheduled payments of principal included therein and (C) the
         Extra Principal Distribution Amount (if any);

                  (ii) the amount of such distribution to Holders of each Class
         allocable to interest and the portion thereof, if any, provided by the
         Yield Maintenance Agreements;

                  (iii) the Interest Carry Forward Amount and any Basis Risk
         Shortfall Carry Forward Amount for each Class of Certificates;

                  (iv) the Certificate Principal Balance or Certificate Notional
         Balance of each Class after giving effect (i) to all distributions
         allocable to principal on such Distribution Date and (ii) the
         allocation of any Applied Realized Loss Amounts for such Distribution
         Date;

                  (v) the aggregate of the Stated Principal Balances of all of
         the Mortgage Loans for the following Distribution Date;

                  (vi) the related amount of the Servicing Fees paid to or
         retained by the Master Servicer for the related Due Period;

                  (vii) the Pass-Through Rate for each Class of Offered
         Certificates with respect to the current Accrual Period, and, if
         applicable, whether such Pass-Through Rate was limited by the
         applicable Net Rate Cap;

                  (viii) the amount of Advances included in the distribution on
         such Distribution Date;

                  (ix) the cumulative amount of Applied Realized Loss Amounts to
         date;


                                      -95-

<PAGE>




                  (x) the number and aggregate principal amounts of Mortgage
         Loans (A) Delinquent (exclusive of Mortgage Loans in foreclosure and
         bankruptcy) (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 or more
         days, (B) in foreclosure and delinquent (1) 31 to 60 days, (2) 61 to 90
         days and (3) 91 or more days and (C) in bankruptcy and delinquent (1)
         31 to 60 days, (2) 61 to 90 days and (3) 91 or more days, in each case
         as of the close of business on the last day of the calendar month
         preceding such Distribution Date;

                  (xi) with respect to any Mortgage Loan that was liquidated
         during the preceding calendar month, the loan number and Stated
         Principal Balance of, and Realized Loss on, such Mortgage Loan as of
         the close of business on the Determination Date preceding such
         Distribution Date;

                  (xii) the total number and principal balance of any real
         estate owned or REO Properties as of the close of business on the
         Determination Date preceding such Distribution Date;

                  (xiii) the three month rolling average of the percent
         equivalent of a fraction, the numerator of which is the aggregate
         stated Principal Balance of the Mortgage Loans that are 60 days or more
         delinquent or are in bankruptcy or foreclosure or are REO Properties,
         and the denominator of which is the aggregate Stated Principal Balance
         of all of the Mortgage Loans as of the last day of such Distribution
         Date;

                  (xiv) the Realized Losses during the related Prepayment Period
         and the cumulative Realized Losses through the end of the preceding
         month;

                  (xv) whether a Trigger Event exists;

                  (xvi) the amount of the distribution made on such Distribution
         Date to the Holders of the Class P Certificates allocable to Prepayment
         Charges;

                  (xvii) the Certificate Insurer Premium Amount; and

                  (xviii) the Reimbursement Amount, separately indicating the
         amount related to (a) interest draws on the Class III-A Policy, (b)
         principal draws on the Class III-A Policy and (c) all other amounts
         representing such Reimbursement Amount.

         The Trustee may make the foregoing Monthly Statement (and, at its
option, any additional files containing the same information in an alternative
format) available each month to Certificateholders and the Certificate Insurer
via the Trustee's internet website. The Trustee's internet website shall
initially be located at "www.etrustee.net". Assistance in using the website can
be obtained by calling the Trustee's customer service desk at (312) 904-7053.
Parties that are unable to use the above distribution options are entitled to
have a paper copy mailed to them via first class mail by calling the customer
service desk and indicating such. The Trustee may change the way Monthly
Statements are distributed in order to make such distributions more convenient
or more accessible to the above parties.


                                      -96-

<PAGE>



         (b) The Trustee's responsibility for making the above information
available to the Certificateholders is limited to the availability, timeliness
and accuracy of the information derived from the Master Servicer. The Trustee
will make available a copy of each statement provided pursuant to this Section
5.05 to each Rating Agency.

         (c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished upon request to each Person who at
any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i) and (a)(ii) of this
Section 5.05 aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.

         (d) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Residual Certificates the applicable Form 1066 and
each applicable Form 1066Q and shall respond promptly to written requests made
not more frequently than quarterly by any Holder of a Residual Certificate with
respect to the following matters:

                  (i) The original projected principal and interest cash flows
         on the Closing Date on each Class of regular and residual interests
         created hereunder and on the Mortgage Loans, based on the Prepayment
         Assumption;

                  (ii) The projected remaining principal and interest cash flows
         as of the end of any calendar quarter with respect to each Class of
         regular and residual interests created hereunder and the Mortgage
         Loans, based on the Prepayment Assumption;

                  (iii) The applicable Prepayment Assumption and any interest
         rate assumptions used in determining the projected principal and
         interest cash flows described above;

                  (iv) The original issue discount (or, in the case of the
         Mortgage Loans, market discount) or premium accrued or amortized
         through the end of such calendar quarter with respect to each Class of
         regular or residual interests created hereunder and to the Mortgage
         Loans, together with each constant yield to maturity used in computing
         the same;

                  (v) The treatment of losses realized with respect to the
         Mortgage Loans or the regular interests created hereunder, including
         the timing and amount of any cancellation of indebtedness income of a
         REMIC with respect to such regular interests or bad debt deductions
         claimed with respect to the Mortgage Loans;

                  (vi) The amount and timing of any non-interest expenses of a
         REMIC; and

                  (vii) Any taxes (including penalties and interest) imposed on
         the REMIC, including, without limitation, taxes on "prohibited
         transactions," "contributions" or "net income from foreclosure
         property" or state or local income or franchise taxes.



                                      -97-

<PAGE>



         The information pursuant to clauses (i), (ii), (iii) and (iv) above
shall be provided by the Depositor pursuant to Section 9.12.

         Section 5.06 REMIC DESIGNATIONS AND REMIC DISTRIBUTIONS.

         (a) The Trustee shall elect that each of REMIC I, REMIC II, REMIC III
and REMIC IV shall be treated as a REMIC under Section 860D of the Code. Any
inconsistencies or ambiguities in this Agreement or in the administration of
this Agreement shall be resolved in a manner that preserves the validity of such
REMIC elections. The assets of REMIC I shall include the Mortgage Loans and all
interest owing in respect of and principal due thereon, the Distribution
Account, the Protected Account, any REO Property, any proceeds of the foregoing
and any other assets subject to this Agreement (other than the Reserve Fund).
The REMIC I Regular Interests shall constitute the assets of REMIC II. The Class
CE Interest shall constitute the assets of REMIC III and the Class P Interest
shall constitute the assets of REMIC IV.

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

                  (i) to Holders of REMIC I Regular Interest AA, REMIC Regular
         Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular
         Interest II-A-1, REMIC I Regular Interest II-A-2, REMIC I Regular
         Interest III-A, REMIC I Regular Interest M-1, REMIC I Regular Interest
         M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC
         I Regular Interest M-5, REMIC I Regular Interest M-6 and REMIC I
         Regular Interest ZZ, PRO RATA, in an amount equal to (A) the
         Uncertificated Accrued Interest for such Distribution Date, plus (B)
         any amounts in respect thereof remaining unpaid from previous
         Distribution Dates. Amounts payable as Uncertificated Accrued Interest
         in respect of REMIC I Regular Interest ZZ shall be reduced when the
         REMIC I Overcollateralization Amount is less than the REMIC I Required
         Overcollateralization Amount, by the lesser of (x) the amount of such
         difference and (y) the Maximum Uncertificated Accrued Interest Deferral
         Amount and such amount will be payable to the Holders of REMIC I
         Regular Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular
         Interest II-A-1, REMIC I Regular Interest II-A-2, REMIC I Regular
         Interest III-A, REMIC I Regular Interest M-1, REMIC I Regular Interest
         M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC
         I Regular Interest M-5 and REMIC I Regular Interest M-6, in the same
         proportion as the Overcollateralization Increase Amount is allocated to
         the Corresponding Certificates and the Uncertificated Principal Balance
         of REMIC I Regular Interest ZZ shall be increased by such amount;

                  (ii) to Holders of REMIC I Regular Interest 1A, REMIC I
         Regular Interest 1B, REMIC I Regular Interest 2A, REMIC I Regular
         Interest 2B, REMIC I Regular Interest 3A, REMIC I Regular Interest 3B
         and REMIC I Regular Interest XX, pro rata, an amount equal to (A) the
         Uncertificated Accrued Interest for such Distribution Date, plus (B)
         any amounts in respect thereof remaining unpaid from previous
         Distribution Dates;



                                      -98-

<PAGE>



                  (iii) to the Holders of REMIC I Regular Interests, in an
         amount equal to the remainder of the REMIC I Marker Allocation
         Percentage of the Interest Funds and Principal Funds for all Loan
         Groups for such Distribution Date after the distributions made pursuant
         to clause (i) above, allocated as follows:

                  (A) to the Holders of REMIC I Regular Interest AA, 98.00% of
         such remainder, until the Uncertificated Principal Balance of such
         REMIC I Regular Interest is reduced to zero;

                  (B) to the Holders of REMIC I Regular Interest I-A-1, REMIC I
         Regular Interest I-A-2, REMIC I Regular Interest II-A-1, REMIC I
         Regular Interest II-A-2, REMIC I Regular Interest III-A, REMIC I
         Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular
         Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest
         M-5 and REMIC I Regular Interest M-6, 1.00% of such remainder, in the
         same proportion as principal payments are allocated to the
         Corresponding Certificates, until the Uncertificated Principal Balances
         of such REMIC I Regular Interests are reduced to zero;

                  (C) to the Holders of REMIC I Regular Interest ZZ, 1.00% of
         such remainder, until the Uncertificated Principal Balance of such
         REMIC I Regular Interest is reduced to zero; then

                  (D) any remaining amount to the Holders of the Class R-I
         Certificates;

provided, however, that 98.00% and 2.00% of any principal payments that are
attributable to an Overcollateralization Release Amount shall be allocated to
Holders of REMIC I Regular Interest AA and REMIC I Regular Interest ZZ,
respectively.

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

         (c) On each Distribution Date, all amounts representing Prepayment
Charges deemed distributed in respect of the Class P Interest shall be deemed
distributed in respect of REMIC I Regular Interest P, provided that such amounts
shall not reduce the Uncertificated Principal Balance of REMIC I Regular
Interest P. On the Distribution Date immediately following the expiration of


                                      -99-

<PAGE>



the latest Prepayment Charge term as identified on the Mortgage Loan Schedule,
$100 shall be deemed distributed in respect of REMIC I Regular Interest P in
reduction of the Uncertificated Principal Balance thereof.

         (d) On each Distribution Date, an amount equal to the amounts
distributed pursuant to Sections 5.04(a)(5)(C), (E) and (F) on such date shall
be deemed distributed from REMIC II to REMIC III in respect of the Class CE
Distribution Amount distributable to the Class CE Interest.

         (e) On each Distribution Date, 100% of the amounts deemed distributed
on REMIC I Regular Interest P shall be deemed distributed by REMIC II to REMIC
IV in respect of the Class P Interest.

         Section 5.07 POLICY MATTERS.

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

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

         (c) At the time of the execution hereof, and for the purposes hereof,
the Trustee shall establish a separate special purpose trust account in the name
of the Trustee for the benefit of Holders of the Class III-A Certificates (the
"Class III-A Policy Payments Account") over which the Trustee shall have
exclusive control and sole right of withdrawal. The Class III-A Policy Payments
Account shall be an Eligible Account. The Trustee shall deposit any amount paid
under the Class III-A Policy into the Class III-A Policy Payments Account and
distribute such amount only for the purposes of making the payments to Holders
of the Class III-A Certificates in respect of the Insured Payment for which the
related claim was made under the Class III-A Policy. Such amounts shall be
allocated by the Trustee to Holders of Class III-A Certificates affected by such
shortfalls in the same manner as interest and principal payments are to be
allocated with respect to such Certificates pursuant to Section 5.04. It shall
not be necessary for such payments to be made by checks or wire


                                      -100-

<PAGE>



transfers separate from the checks or wire transfers used to make regular
payments hereunder with funds withdrawn from the Distribution Account. However,
any payments made on the Class III-A Certificates from funds in the Class III-A
Policy Payments Account shall be noted as provided in subsection (e) below.
Funds held in the Class III-A Policy Payments Account shall not be invested by
the Trustee.

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

         (e) The Trustee shall keep complete and accurate records in respect of
(i) all funds remitted to it by the Certificate Insurer and deposited into the
Class III-A Policy Payments Account and (ii) the allocation of such funds to (A)
payments of interest on and principal in respect of any Class III-A Certificates
and (B) the amount of funds available to make distributions on the Class III- A
Certificates pursuant to Section 5.04. The Certificate Insurer shall have the
right to inspect such records at reasonable times during normal business hours
upon three Business Days' prior notice to the Trustee.

         (f) The Trustee acknowledges, and each Holder of a Class III-A
Certificate by its acceptance of the Class III-A Certificate agrees, that,
without the need for any further action on the part of the Certificate Insurer
or the Trustee to the extent the Certificate Insurer makes payments, directly or
indirectly, on account of principal of or interest on any Class III-A
Certificates, the Certificate Insurer will be fully subrogated to the rights of
the Holders of such Class III-A Certificates to receive such principal and
interest from the Trust Fund. The Holders of the Class III-A Certificates, by
acceptance of the Class III-A Certificates, assign their rights as Holders of
the Class III-A Certificates to the extent of the Certificate Insurer's interest
with respect to amounts paid under the Class III-A Policy. Anything herein to
the contrary notwithstanding, solely for purposes of determining the Certificate
Insurer's rights, as applicable, as subrogee for payments distributable pursuant
to Section 5.04, any payment with respect to distributions to the Class III-A
Certificates which is made with funds received pursuant to the terms of the
Class III-A Policy, shall not be considered payment of the Class III-A
Certificates from the Trust Fund and shall not result in the distribution or the
provision for the distribution in reduction of the Certificate Principal Balance
of the Class III-A Certificates as described in this Article V.

         The Trustee and the Master Servicer shall cooperate in all respects
with any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement or
the Insurance Agreement without limiting the rights or affecting the interests
of the Holders as otherwise set forth herein.


                                      -101-

<PAGE>



         (g) Upon its becoming aware of the occurrence of an Event of Default,
the Trustee shall promptly notify the Certificate Insurer of such Event of
Default.

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

         (i) The Master Servicer shall designate a Certificate Insurer Contact
Person who shall be available to the Certificate Insurer to provide reasonable
access to information regarding the Mortgage Loans. The initial Certificate
Insurer Contact Person is to the attention of EMC Mortgage Corporation, 909
Hidden Ridge Drive, Irving, Texas 75038, Attention: Christa Fellers, telephone:
972-444-3329.

         (j) The Trustee shall promptly surrender the Class III-A Policy to the
Certificate Insurer for cancellation upon the reduction of the Certificate
Principal Balance of the Class III-A Certificates to zero.

         (k) The Trustee shall send to the Certificate Insurer the statements
prepared pursuant to Section 5.05, as well as any other statements or
communications sent to Holders of the Class III-A Certificates, in each case at
the same time such reports, statements and communications are otherwise sent.

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

         With respect to this Section 5.07, (i) the terms "Receipt" and
"Received" shall mean actual delivery to the Certificate Insurer and Certificate
Insurer's Fiscal Agent, if any, received prior to


                                      -102-

<PAGE>



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

         (m) Unless otherwise designated in writing by the President or a
Managing Director of the Certificate Insurer to the Trustee, the Certificate
Insurer Premium Amount to be paid pursuant to Section 5.04(a)(1) shall be paid
by the Trustee to the Certificate Insurer in accordance with the terms of the
Premium Letter.




                                      -103-

<PAGE>



                                   ARTICLE VI

                                THE CERTIFICATES

         Section 6.01 THE CERTIFICATES.

         The Certificates shall be substantially in the forms attached hereto as
Exhibits A-1 through A-5. The Certificates shall be issuable in registered form,
in the minimum dollar denominations, integral dollar multiples in excess thereof
(except that one Certificate of each Class may be issued in a different amount
which must be in excess of the applicable minimum dollar denomination) and
aggregate dollar denominations as set forth in the following table:


                 Minimum        Integral Multiple in      Original Certificate
  Class        Denomination       Excess of Minimum        Principal Balance
---------    ---------------   ----------------------    -----------------------
  I-A-1          $25,000                $1.00              $ 53,358,000.00
  I-A-2          $25,000                $1.00              $ 42,697,000.00
 II-A-1          $25,000                $1.00              $136,799,000.00
 II-A-2          $25,000                $1.00              $ 15,199,000.00
  III-A          $25,000                $1.00              $149,378,000.00
   M-1           $25,000                $1.00              $ 33,851,000.00
   M-2           $25,000                $1.00              $ 27,081,000.00
   M-3           $25,000                $1.00              $  8,776,000.00
   M-4           $25,000                $1.00              $  6,519,000.00
   M-5           $25,000                $1.00              $  7,272,000.00
   M-6           $25,000                $1.00              $  6,268,000.00
   CE               10%                  1%                $ 14,292,725.09
    P              $100                  N/A               $        100.00
   R-I             100%                  N/A                      N/A
  R-II             100%                  N/A                      N/A

         The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such authentication and delivery. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate the countersignature
of the Trustee by manual signature, and such countersignature upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly countersigned and delivered hereunder. All
Certificates shall be dated the date of their countersignature. On the Closing
Date, the Trustee shall authenticate the Certificates to be issued at the
written direction of the Depositor, or any affiliate thereof.

         The Depositor shall provide, or cause to be provided, to the Trustee on
a continuous basis, an adequate inventory of Certificates to facilitate
transfers.



                                      -104-

<PAGE>



         Section 6.02 CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND
EXCHANGE OF CERTIFICATES.

         (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 6.09 hereof, a Certificate Register for the Trust
Fund in which, subject to the provisions of subsections (b) and (c) below and to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of Transfers and exchanges of Certificates
as herein provided. Upon surrender for registration of Transfer of any
Certificate, the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and of like aggregate Percentage Interest.

         At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, authenticate, and
deliver the Certificates that the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of Transfer or exchange shall be accompanied by a written instrument of Transfer
in form satisfactory to the Trustee duly executed by the holder thereof or his
attorney duly authorized in writing.

         No service charge to the Certificateholders shall be made for any
registration of Transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any Transfer or exchange of Certificates may be required.

         All Certificates surrendered for registration of Transfer or exchange
shall be canceled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.

         (b) No Transfer of a Private Certificate shall be made unless such
Transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under the Securities Act and such state securities
laws. In the event that a Transfer is to be made in reliance upon an exemption
from the Securities Act and such laws, in order to assure compliance with the
Securities Act and such laws, the Certificateholder desiring to effect such
Transfer and such Certificateholder's prospective transferee shall each certify
to the Trustee in writing the facts surrounding the Transfer in substantially
the forms set forth in Exhibit E (the "Transferor Certificate") and (x) deliver
a letter in substantially the form of either Exhibit F (the "Investment Letter")
or Exhibit G (the "Rule 144A Letter") or (y) there shall be delivered to the
Trustee an Opinion of Counsel addressed to the Trustee that such Transfer may be
made pursuant to an exemption from the Securities Act, which Opinion of Counsel
shall not be an expense of the Depositor, the Seller, the Master Servicer or the
Trustee. The Depositor shall provide to any Holder of a Private Certificate and
any prospective transferee designated by any such Holder, information regarding
the related Certificates and the Mortgage Loans and such other information as
shall be necessary to satisfy the condition to eligibility set forth in Rule
144A(d)(4) for Transfer of any such Certificate without registration thereof
under the Securities Act pursuant to the registration exemption provided by Rule
144A. The Trustee and the Master Servicer shall cooperate with the Depositor in
providing the Rule 144A information referenced in the preceding sentence,
including providing to the Depositor such information regarding the
Certificates, the Mortgage Loans and other matters regarding the Trust Fund as
the


                                      -105-

<PAGE>



Depositor shall reasonably request to meet its obligation under the preceding
sentence. Each Holder of a Private Certificate desiring to effect such Transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Seller and the Master Servicer against any liability that may result if the
Transfer is not so exempt or is not made in accordance with such federal and
state laws.

         No Transfer of an ERISA Restricted Certificate shall be made unless
either (i) the Trustee and the Master Servicer shall have received a
representation from the transferee of such Certificate acceptable to and in form
and substance satisfactory to the Trustee and the Master Servicer, to the effect
that such transferee is not an employee benefit plan subject to Section 406 of
ERISA and/or a plan subject to Section 4975 of the Code, or a Person acting on
behalf of any such plan or using the assets of any such plan, or (ii) in the
case of any such ERISA Restricted Certificate presented for registration in the
name of an employee benefit plan subject to ERISA, or a plan subject to Section
4975 of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan or any other person acting on behalf of any such plan,
the Trustee shall have received an Opinion of Counsel for the benefit of the
Trustee and the Master Servicer and on which they may relay, satisfactory to the
Trustee, to the effect that the purchase and holding of such ERISA Restricted
Certificate will not constitute or result in the assets of the Trust being
deemed to be "plan assets" under ERISA or the Code, will not result in any
prohibited transactions under ERISA or Section 4975 of the Code and will not
subject the Trustee, the Master Servicer or the Depositor to any obligation in
addition to those expressly undertaken in this Agreement, which Opinion of
Counsel shall not be an expense of the Trustee, the Master Servicer or the
Depositor. Notwithstanding anything else to the contrary herein, any purported
transfer of an ERISA Restricted Certificate to or on behalf of an employee
benefit plan subject to Section 406 of ERISA and/or a plan subject to Section
4975 of the Code without the delivery of the Opinion of Counsel as described
above shall be void and of no effect; provided that the restriction set forth in
this sentence shall not be applicable if there has been delivered to the Trustee
an Opinion of Counsel meeting the requirements of clause (ii) of the first
sentence of this paragraph. Neither the Trustee nor the Master Servicer shall be
required to monitor, determine or inquire as to compliance with the transfer
restrictions with respect to any ERISA Restricted Certificate that is a
Book-Entry Certificate, and neither the Trustee nor the Master Servicer shall
have any liability for transfers of any such Book- Entry Certificates made
through the book-entry facilities of any Depository or between or among
participants of the Depository or Certificate Owners made in violation of the
transfer restrictions set forth herein. Neither the Trustee nor the Master
Servicer shall be under any liability to any Person for any registration of
transfer of any ERISA Restricted Certificate that is in fact not permitted by
this Section 6.02(b) or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder under the
provisions of this Agreement. The Trustee shall be entitled, but not obligated,
to recover from any Holder of any ERISA Restricted Certificate that was in fact
an employee benefit plan subject to Section 406 of ERISA or a plan subject to
Section 4975 of the Code or a Person acting on behalf of any such plan at the
time it became a Holder or, at such subsequent time as it became such a plan or
Person acting on behalf of such a plan, all payments made on such ERISA
Restricted Certificate at and after either such time. Any such payments so
recovered by the Trustee shall be paid and delivered by the Trustee to the last
preceding Holder of such Certificate that is not such a plan or Person acting on
behalf of a plan.

         Each beneficial owner of a Class M Certificate or any interest therein
shall be deemed to have represented, by virtue of its acquisition or holding of
that certificate or interest therein, that either


                                      -106-

<PAGE>



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

         (c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

                  (i) Each Person holding or acquiring any Ownership Interest in
         a Residual Certificate shall be a Permitted Transferee and shall
         promptly notify the Trustee of any change or impending change in its
         status as a Permitted Transferee.

                  (ii) No Ownership Interest in a Residual Certificate may be
         registered on the Closing Date or thereafter transferred, and the
         Trustee shall not register the Transfer of any Residual Certificate
         unless, in addition to the certificates required to be delivered to the
         Trustee under subparagraph (b) above, the Trustee shall have been
         furnished with an affidavit (a "Transfer Affidavit") of the initial
         owner or the proposed transferee in the form attached hereto as Exhibit
         D.

                  (iii) Each Person holding or acquiring any Ownership Interest
         in a Residual Certificate shall agree (A) to obtain a Transfer
         Affidavit from any other Person to whom such Person attempts to
         Transfer its Ownership Interest in a Residual Certificate, (B) to
         obtain a Transfer Affidavit from any Person for whom such Person is
         acting as nominee, trustee or agent in connection with any Transfer of
         a Residual Certificate and (C) not to Transfer its Ownership Interest
         in a Residual Certificate or to cause the Transfer of an Ownership
         Interest in a Residual Certificate to any other Person if it has actual
         knowledge that such Person is not a Permitted Transferee.

                  (iv) Any attempted or purported Transfer of any Ownership
         Interest in a Residual Certificate in violation of the provisions of
         this Section 6.02(c) shall be absolutely null and void and shall vest
         no rights in the purported Transferee. If any purported transferee
         shall become a Holder of a Residual Certificate in violation of the
         provisions of this Section 6.02(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Residual
         Certificate. The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Residual Certificate that is in fact
         not permitted by Section 6.02(b) and this Section 6.02(c) or for making
         any payments due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the provisions of
         this Agreement so long as the Transfer was registered after receipt of
         the related Transfer Affidavit. The Trustee shall be entitled but not
         obligated to recover from any Holder of a Residual Certificate that was
         in fact not a


                                      -107-

<PAGE>



         Permitted Transferee at the time it became a Holder or, at such
         subsequent time as it became other than a Permitted Transferee, all
         payments made on such Residual Certificate at and after either such
         time. Any such payments so recovered by the Trustee shall be paid and
         delivered by the Trustee to the last preceding Permitted Transferee of
         such Certificate.

                  (v) The Master Servicer shall make available within 60 days of
         written request from the Trustee, all information necessary to compute
         any tax imposed under Section 860E(e) of the Code as a result of a
         Transfer of an Ownership Interest in a Residual Certificate to any
         Holder who is not a Permitted Transferee.

         The restrictions on Transfers of a Residual Certificate set forth in
this Section 6.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee and the Certificate Insurer of an
Opinion of Counsel addressed to the Trustee and the Certificate Insurer, which
Opinion of Counsel shall not be an expense of the Trustee, the Seller, the
Certificate Insurer or the Master Servicer to the effect that the elimination of
such restrictions will not cause REMIC I, REMIC II, REMIC III or REMIC IV, as
applicable, to fail to qualify as a REMIC at any time that the Certificates are
outstanding or result in the imposition of any tax on the Trust Fund, a
Certificateholder or another Person. Each Person holding or acquiring any
ownership Interest in a Residual Certificate hereby consents to any amendment of
this Agreement that, based on an Opinion of Counsel addressed to the Trustee and
the Certificate Insurer and furnished to the Trustee and the Certificate
Insurer, is reasonably necessary (a) to ensure that the record ownership of, or
any beneficial interest in, a Residual Certificate is not transferred, directly
or indirectly, to a Person that is not a Permitted Transferee and (b) to provide
for a means to compel the Transfer of a Residual Certificate that is held by a
Person that is not a Permitted Transferee to a Holder that is a Permitted
Transferee.

         (d) The preparation and delivery of all certificates and opinions
referred to above in this Section 6.02 shall not be an expense of the Trust
Fund, the Trustee, the Depositor, the Seller or the Master Servicer.

         Section 6.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

         If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and of the ownership thereof and (b) there is delivered to
the Trustee (and with respect to any Class III-A Certificates, to the
Certificate Insurer) such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Trustee that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 6.03, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 6.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.


                                      -108-

<PAGE>



All Certificates surrendered to the Trustee under the terms of this Section 6.03
shall be canceled and destroyed by the Trustee in accordance with its standard
procedures without liability on its part.

         Section 6.04 PERSONS DEEMED OWNERS.

         The Trustee, the Certificate Insurer and any agent of the Trustee or
the Certificate Insurer may treat the person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions as provided in this Agreement and for all other purposes
whatsoever, and neither the Trustee, the Certificate Insurer nor any agent of
the Trustee or the Certificate Insurer shall be affected by any notice to the
contrary.

         Section 6.05 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication that such Certificateholders propose to transmit or if the
Depositor, the Certificate Insurer or the Master Servicer shall request such
information in writing from the Trustee, then the Trustee shall, within ten
Business Days after the receipt of such request, provide the Depositor, the
Certificate Insurer, the Master Servicer or such Certificateholders at such
recipients' expense the most recent list of the Certificateholders of the Trust
Fund held by the Trustee, if any. The Depositor and every Certificateholder, by
receiving and holding a Certificate, agree that the Trustee shall not be held
accountable by reason of the disclosure of any such information as to the list
of the Certificateholders hereunder, regardless of the source from which such
information was derived.

         Section 6.06 BOOK-ENTRY CERTIFICATES.

         The Regular Certificates, upon original issuance, shall be issued in
the form of one or more typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the Depository by or on behalf of the
Depositor. Such Certificates shall initially be registered on the Certificate
Register in the name of the Depository or its nominee, and no Certificate Owner
of such Certificates will receive a definitive certificate representing such
Certificate Owner's interest in such Certificates, except as provided in Section
6.08. Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to the Certificate Owners of such Certificates
pursuant to Section 6.08:

         (a) the provisions of this Section shall be in full force and effect;

         (b) the Depositor and the Trustee may deal with the Depository and the
Depository Participants for all purposes (including the making of distributions)
as the authorized representative of the respective Certificate Owners of such
Certificates;

         (c) registration of the Book-Entry Certificates may not be transferred
by the Trustee except to another Depository;



                                      -109-

<PAGE>



         (d) the rights of the respective Certificate Owners of such
Certificates shall be exercised only through the Depository and the Depository
Participants and shall be limited to those established by law and agreements
between the Owners of such Certificates and the Depository and/or the Depository
Participants. Pursuant to the Depository Agreement, unless and until Definitive
Certificates are issued pursuant to Section 6.08, the Depository will make
book-entry transfers among the Depository Participants and receive and transmit
distributions of principal and interest on the related Certificates to such
Depository Participants;

         (e) the Depository may collect its usual and customary fees, charges
and expenses from its Depository Participants;

         (f) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants; and

         (g) to the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control.

         For purposes of any provision of this Agreement requiring or permitting
actions with the consent of, or at the direction of, Certificateholders
evidencing a specified percentage of the aggregate unpaid principal amount of
any Class of Certificates, such direction or consent may be given by Certificate
Owners (acting through the Depository and the Depository Participants) owning
Book-Entry Certificates evidencing the requisite percentage of principal amount
of such Class of Certificates.

         Section 6.07 NOTICES TO DEPOSITORY.

         Whenever any notice or other communication is required to be given to
Certificateholders of a Class with respect to which Book-Entry Certificates have
been issued, unless and until Definitive Certificates shall have been issued to
the related Certificate Owners, the Trustee shall give all such notices and
communications to the Depository.

         Section 6.08 DEFINITIVE CERTIFICATES.

         If, after Book-Entry Certificates have been issued with respect to any
Certificates, (a) the Depositor or the Depository advises the Trustee that the
Depository is no longer willing or able to discharge properly its
responsibilities under the Depository Agreement with respect to such
Certificates and the Depositor is unable to locate a qualified successor or (b)
the Depositor, at its sole option, advises the Trustee that it elects to
terminate the book-entry system with respect to such Certificates through the
Depository, then the Trustee shall notify all Certificate Owners of such
Certificates, through the Depository, of the occurrence of any such event and of
the availability of Definitive Certificates to applicable Certificate Owners
requesting the same. The Depositor shall provide the Trustee with an adequate
inventory of certificates to facilitate the issuance and transfer of Definitive
Certificates. Upon surrender to the Trustee of any such Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall countersign and deliver such Definitive
Certificates. Neither the Depositor nor the Trustee shall be


                                      -110-

<PAGE>



liable for any delay in delivery of such instructions and each may conclusively
rely on, and shall be protected in relying on, such instructions.

         In addition, if an Event of Default has occurred and is continuing,
each Certificate Owner materially adversely affected thereby may at its option
request a Definitive Certificate evidencing such Certificate Owner's Voting
Rights in the related Class of Certificates. In order to make such request, such
Certificate Owner shall, subject to the rules and procedures of the Depository,
provide the Depository or the related Depository Participant with directions for
the Trustee to exchange or cause the exchange of the Certificate Owner's
interest in such Class of Certificates for an equivalent Voting Right in fully
registered definitive form. Upon receipt by the Trustee of instructions from the
Depository directing the Trustee to effect such exchange (such instructions to
contain information regarding the Class of Certificates and the Current
Principal Amount being exchanged, the Depository Participant account to be
debited with the decrease, the registered holder of and delivery instructions
for the definitive Certificate, and any other information reasonably required by
the Trustee), (i) the Trustee shall instruct the Depository to reduce the
related Depository Participant's account by the aggregate Current Principal
Amount of the definitive Certificate, (ii) the Trustee shall execute,
authenticate and deliver, in accordance with the registration and delivery
instructions provided by the Depository, a definitive Certificate evidencing
such Certificate Owner's Voting Rights in such Class of Certificates and (iii)
the Trustee shall execute and authenticate a new Book-Entry Certificate
reflecting the reduction in the Current Principal Amount of such Class of
Certificates by the amount of the definitive Certificates.

         Section 6.09 MAINTENANCE OF OFFICE OR AGENCY.

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies at the Corporate Trust Office where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office, as the office for such
purposes. The Trustee will give prompt written notice to the Certificateholders
and the Certificate Insurer of any change in such location of any such office or
agency.




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<PAGE>



                                   ARTICLE VII

                      THE DEPOSITOR AND THE MASTER SERVICER

         Section 7.01 LIABILITIES OF THE DEPOSITOR AND THE MASTER SERVICER. Each
of the Depositor, and the Master Servicer shall be liable in accordance herewith
only to the extent of the obligations specifically imposed upon and undertaken
by it herein.

         Section 7.02 MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE MASTER
SERVICER.

         (a) Each of the Depositor and the Master Servicer will keep in full
force and effect its existence, rights and franchises as a corporation under the
laws of the state of its incorporation, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the other Transaction Documents to which it
is a party, the Certificates or any of the Mortgage Loans and to perform its
duties under this Agreement and the other Transaction Documents to which it is a
party.

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

         Section 7.03 INDEMNIFICATION OF THE TRUSTEE AND THE MASTER SERVICER.

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

         (b) The Seller will indemnify any Indemnified Person for any loss,
liability or expense of any Indemnified Person not otherwise paid or covered
pursuant to Subsection (a) above.


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<PAGE>




         Section 7.04 LIMITATIONS ON LIABILITY OF THE DEPOSITOR, THE MASTER
SERVICER AND OTHERS. Subject to the obligation of the Master Servicer to
indemnify the Indemnified Persons pursuant to Section 7.03:

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

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

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

         (d) Neither the Depositor nor the Master Servicer shall be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties under this Agreement and that in its opinion may
involve it in any expense or liability; provided, however, the Master Servicer
may in its discretion, with the consent of the Trustee (which consent shall not
be unreasonably withheld), undertake any such action which it may deem necessary
or desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust Fund, and the
Master Servicer shall be entitled to be reimbursed therefor out of the Protected
Account as provided by Section 4.02. Nothing in this Subsection 7.04(d) shall
affect the Master Servicer's obligation to service and administer the Mortgage
Loans pursuant to Article III.



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<PAGE>



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

         Section 7.05 MASTER SERVICER NOT TO RESIGN. Except as provided in
Section 7.07, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) with the prior consent of the Trustee and
the Certificate Insurer (which consents shall not be unreasonably withheld) or
(ii) upon a determination that any such duties hereunder are no longer
permissible under applicable law and such impermissibility cannot be cured. Any
such determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel, addressed to and delivered to, the Trustee
and the Certificate Insurer. No such resignation by the Master Servicer shall
become effective until the Trustee or a successor to the Master Servicer
reasonably satisfactory to the Trustee and the Certificate Insurer shall have
assumed the responsibilities and obligations of the Master Servicer in
accordance with Section 8.02 hereof. The Trustee shall notify the Rating
Agencies and the Certificate Insurer of the resignation of the Master Servicer.

         Section 7.06 SUCCESSOR MASTER SERVICER. In connection with the
appointment of any successor Master Servicer or the assumption of the duties of
the Master Servicer, the Trustee may make such arrangements for the compensation
of such successor master servicer out of payments on the Mortgage Loans as the
Trustee and such successor master servicer shall agree. If the successor master
servicer does not agree that such market value is a fair price, such successor
master servicer shall obtain two quotations of market value from third parties
actively engaged in the servicing of single-family mortgage loans. In no event
shall the compensation of any successor master servicer exceed that permitted
the Master Servicer hereunder without the consent of the Certificate Insurer and
all of the Certificateholders.

         Section 7.07 SALE AND ASSIGNMENT OF MASTER SERVICING. The Master
Servicer may sell and assign its rights and delegate its duties and obligations
in its entirety as Master Servicer under this Agreement; provided, however,
that: (i) the purchaser or transferee accepting such assignment and delegation
(a) shall be a Person which shall be qualified to service mortgage loans for
Fannie Mae or Freddie Mac; (b) shall have a net worth of not less than
$10,000,000 (unless otherwise approved by each Rating Agency pursuant to clause
(ii) below); (c) shall be reasonably satisfactory to the Trustee and the
Certificate Insurer (as evidenced in a writing signed by the Trustee and the
Certificate Insurer); and (d) shall execute and deliver to the Trustee and the
Certificate Insurer an agreement, in form and substance reasonably satisfactory
to the Trustee and the Certificate Insurer, which contains an assumption by such
Person of the due and punctual performance and observance of each covenant and
condition to be performed or observed by it as master servicer under this
Agreement, any custodial agreement from and after the effective date of such
agreement; (ii) each Rating Agency and the Certificate Insurer shall be given
prior written notice of the identity of the proposed successor to the Master
Servicer and each Rating Agency's rating of the Certificates in effect
immediately prior to such assignment, sale and delegation (determined without
regard to the Class III-A Policy) will not be downgraded, qualified or withdrawn
as a result of such assignment, sale and delegation, as evidenced by a letter to
such effect delivered to the Master Servicer, the Trustee and the Certificate
Insurer; and (iii) the Master Servicer assigning and selling the master


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<PAGE>



servicing shall deliver to the Trustee and the Certificate Insurer an Officer's
Certificate and an Opinion of Counsel addressed to the Trustee and the
Certificate Insurer, each stating that all conditions precedent to such action
under this Agreement have been completed and such action is permitted by and
complies with the terms of this Agreement. No such assignment or delegation
shall affect any liability of the Master Servicer arising prior to the effective
date thereof.


                                      -115-

<PAGE>







                                      -116-

<PAGE>



                                  ARTICLE VIII

                     DEFAULT; TERMINATION OF MASTER SERVICER

         Section 8.01 EVENTS OF DEFAULT.

         "Event of Default," wherever used herein, means any one of the
following events:

                  (i) any failure by the Master Servicer to remit to the Trustee
         any amounts received or collected by the Master Servicer in respect of
         the Mortgage Loans and required to be remitted by it hereunder (other
         than any Advance), which failure shall continue unremedied for one
         Business Day after the date on which written notice of such failure
         shall have been given to the Master Servicer by the Trustee or the
         Depositor, or to the Trustee and the Master Servicer by the Holders of
         Certificates evidencing not less than 25% of the Voting Rights
         evidenced by the Certificates;

                  (ii) any failure by the Master Servicer to observe or perform
         in any material respect any other of the covenants or agreements on the
         part of the Master Servicer contained in this Agreement or any breach
         of a representation or warranty by the Master Servicer, which failure
         or breach shall continue unremedied for a period of 60 days after the
         date on which written notice of such failure shall have been given to
         Master Servicer by the Trustee or the Depositor, or to the Trustee and
         the Master Servicer by the Holders of Certificates evidencing not less
         than 25% of the Voting Rights evidenced by the Certificates;

                  (iii) a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings, or for
         the winding-up or liquidation of its affairs, shall have been entered
         against the Master Servicer and such decree or order shall have
         remained in force undischarged or unstayed for a period of 60
         consecutive days;

                  (iv) the Master Servicer shall consent to the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings of or
         relating to the Master Servicer or all or substantially all of the
         property of the Master Servicer;

                  (v) the Master Servicer shall admit in writing its inability
         to pay its debts generally as they become due, file a petition to take
         advantage of, or commence a voluntary case under, any applicable
         insolvency or reorganization statute, make an assignment for the
         benefit of its creditors, or voluntarily suspend payment of its
         obligations;

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



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<PAGE>



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

                  (viii) any draw on the Class III-A Policy, if Certificate
         Insurer Default has occurred and is not continuing; provided that if
         the Master Servicer is EMC Mortgage Corporation, the Master Servicer
         shall not be in default pursuant to this clause if the parent of EMC
         Mortgage Corporation is rated at least "BBB" by Standard & Poor's or
         "Baa2" by Moody's.

         If an Event of Default shall occur, then, and in each and every such
case, so long as such Event of Default shall not have been remedied, the Trustee
may, and at the direction of the Holders of Certificates evidencing not less
than 25% of the Voting Rights evidenced by the Certificates, the Trustee shall
in the case of any Event of Default described in clauses (i) through (vii) above
or upon receipt of written instructions from the Certificate Insurer in the case
of an Event of Default described in clause (viii) above, by notice in writing to
the Master Servicer (with a copy to each Rating Agency and the Certificate
Insurer), terminate all of the rights and obligations of the Master Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
other than its rights as a Certificateholder hereunder. On or after the receipt
by the Master Servicer of such written notice, all authority and power of the
Master Servicer hereunder, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee, or any successor
appointed pursuant to Section 8.02 (a "Successor Master Servicer"); provided, to
the extent the Certificate Insurer directs the Trustee to terminate the Master
Servicer due to an Event of Default described in clause (viii) above, the
Certificate Insurer will be required to appoint a Successor Master Servicer
which is reasonably acceptable to the Trustee. Such Successor Master Servicer
shall thereupon if such Successor Master Servicer is a successor to the Master
Servicer, make any Advance required by Article V, subject, in the case of the
Trustee, to Section 8.02. The Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the terminated Master Servicer, as attorney-
in- fact or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of any Mortgage Loans and related documents, or
otherwise. Unless expressly provided in such written notice, no such termination
shall affect any obligation of the Master Servicer to pay amounts owed pursuant
to Article VII or Article IX. The Master Servicer agrees to cooperate with the
Trustee in effecting the termination of the Master Servicer's responsibilities
and rights hereunder, including, without limitation, the transfer to the
applicable Successor Master Servicer of all cash amounts which shall at the time
be credited to the Protected Account maintained pursuant to Section 4.02, or
thereafter be received with respect to the applicable Mortgage Loans. The
Trustee shall promptly notify the Rating Agencies and the Certificate Insurer of
the occurrence of an Event of Default known to the Trustee.

         Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Mortgage Loan that was due prior to
the notice terminating the Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
the Master Servicer would have been entitled pursuant to Sections 4.02 and to
receive any other amounts payable to the Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder.


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<PAGE>



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

         Section 8.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

         Except with respect to an Event of Default described in Section
8.01(viii) above for which the Certificate Insurer is required to appoint a
Successor Master Servicer, on and after the time the Master Servicer receives a
notice of termination pursuant to Section 8.01 hereof the Trustee shall
automatically become the successor to the Master Servicer with respect to the
transactions set forth or provided for herein and after a transition period (not
to exceed 90 days), shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof; provided, however that, pursuant to Article V hereof, the
Trustee in its capacity as successor Master Servicer shall be responsible for
making any Advances required to be made by the Master Servicer immediately upon
the termination of the Master Servicer and any such Advance shall be made on the
Distribution Date on which such Advance was required to be made by the
predecessor Master Servicer. Effective on the date of such notice of
termination, as compensation therefor, the Trustee shall be entitled to all
compensation, reimbursement of expenses and indemnification that the Master
Servicer would have been entitled to if it had continued to act hereunder,
provided, however, that the Trustee shall not be (i) liable for any acts or
omissions of the Master Servicer, (ii) obligated to make Advances if it is
prohibited from doing so under applicable law, (iii) responsible for expenses of
the Master Servicer pursuant to Section 2.03 or (iv) obligated to deposit losses
on any Permitted Investment directed by the Master Servicer. Notwithstanding the
foregoing, the Trustee may, if it shall be unwilling to so act, or shall, if it
is prohibited by applicable law from making Advances pursuant to Article V or if
it is otherwise unable to so act, appoint, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution the
appointment of which does not adversely affect the then current rating of the
Certificates by each Rating Agency (determined without regard to the Class III-A
Policy) as the successor to the Master Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder. Any Successor Master Servicer shall (i) be an institution
that is a Fannie Mae and Freddie Mac approved seller/servicer in good standing,
that has a net worth of at least $15,000,000, (ii) be acceptable to the Trustee
and the Certificate Insurer (which consent shall not be unreasonably withheld)
and (iii) be willing to act as successor servicer of any Mortgage Loans under
this Agreement, and shall have executed and delivered to the Depositor, the
Trustee and the Certificate Insurer an agreement accepting such delegation and
assignment, that contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Master Servicer
(other than any liabilities of the Master Servicer hereof incurred prior to
termination of the Master Servicer under Section 8.01 or as otherwise set forth
herein), with like effect as if originally named as a party to this Agreement,
provided that each Rating Agency shall have acknowledged in writing that its
rating of the Certificates in effect


                                      -119-

<PAGE>



immediately prior to such assignment and delegation (determined without regard
to the Class III-A Policy) will not be qualified or reduced as a result of such
assignment and delegation. If the Trustee assumes the duties and
responsibilities of the Master Servicer in accordance with this Section 8.02,
the Trustee shall not resign as Master Servicer until a Successor Master
Servicer has been appointed and has accepted such appointment. Pending
appointment of a successor to the Master Servicer hereunder, the Trustee, unless
the Trustee is prohibited by law from so acting, shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans or otherwise as it and such successor shall agree;
provided that no such compensation unless agreed to by the Certificateholders
shall be in excess of that permitted the Master Servicer hereunder. The Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. Neither the Trustee nor
any other Successor Master Servicer shall be deemed to be in default hereunder
by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof or any failure to perform, or any delay in
performing, any duties or responsibilities hereunder, in either case caused by
the failure of the Master Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.

         The costs and expenses of the Trustee in connection with the
termination of the Master Servicer, appointment of a Successor Master Servicer
and, if applicable, any transfer of servicing, including, without limitation,
all costs and expenses associated with the complete transfer of all servicing
data and the completion, correction or manipulation of such servicing data as
may be required by the Trustee to correct any errors or insufficiencies in the
servicing data or otherwise to enable the Trustee or the Successor Master
Servicer to service the related Mortgage Loans properly and effectively, to the
extent not paid by the terminated Master Servicer, shall be payable to the
Trustee pursuant to Section 9.05. Any successor to the Master Servicer as
successor servicer under any Subservicing Agreement shall give notice to the
applicable Mortgagors of such change of servicer and shall, during the term of
its service as successor servicer maintain in force the policy or policies that
the Master Servicer is required to maintain pursuant to Section 3.08.

         Section 8.03 NOTIFICATION TO CERTIFICATEHOLDERS.

         (a) Upon any termination of or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders, the Certificate Insurer and to each Rating Agency.

         (b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders and the Certificate
Insurer notice of each such Event of Default hereunder actually known to a
Responsible Officer of the Trustee, unless such Event of Default shall have been
cured or waived.



                                      -120-

<PAGE>



         Section 8.04 WAIVER OF DEFAULTS.

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




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                                   ARTICLE IX

                             CONCERNING THE TRUSTEE

         Section 9.01 DUTIES OF TRUSTEE.

         (a) The Trustee, prior to the occurrence of an Event of Default and
after the curing or waiver of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement as duties of the Trustee. If an Event of Default has
occurred and has not been cured or waived, the Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and the same degree of
care and skill in their exercise, as a prudent person would exercise under the
circumstances in the conduct of such Person's own affairs.

         (b) Upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments which are specifically
required to be furnished to the Trustee pursuant to any provision of this
Agreement, the Trustee shall examine them to determine whether they are in the
form required by this Agreement; provided, however, that the Trustee shall not
be responsible for the accuracy or content of any resolution, certificate,
statement, opinion, report, document, order or other instrument furnished by the
Master Servicer; provided, further, that the Trustee shall not be responsible
for the accuracy or verification of any calculation provided to it pursuant to
this Agreement.

         (c) On each Distribution Date, the Trustee shall make monthly
distributions and the final distribution to the Certificateholders from funds in
the Distribution Account as provided in Sections 5.04 and 10.01 herein.

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

                  (i) Prior to the occurrence of an Event of Default, and after
         the curing or waiver of all such Events of Default which may have
         occurred, the duties and obligations of the Trustee shall be determined
         solely by the express provisions of this Agreement, the Trustee shall
         not be liable except for the performance of their respective duties and
         obligations as are specifically set forth in this Agreement, no implied
         covenants or obligations shall be read into this Agreement against the
         Trustee and, in the absence of bad faith on the part of the Trustee,
         the Trustee may conclusively rely, as to the truth of the statements
         and the correctness of the opinions expressed therein, upon any
         certificates or opinions furnished to the Trustee and conforming to the
         requirements of this Agreement;

                  (ii) The Trustee shall not be liable in its individual
         capacity for an error of judgment made in good faith by a Responsible
         Officer or Responsible Officers of the Trustee unless it shall be
         proved that the Trustee was negligent in ascertaining the pertinent
         facts;



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                  (iii) The Trustee shall not be liable with respect to any
         action taken, suffered or omitted to be taken by it in good faith in
         accordance with the directions of the Holders of Certificates
         evidencing not less than 25% of the aggregate Voting Rights of the
         Certificates (or such other percentage as specifically set forth
         herein), if such action or non-action relates to the time, method and
         place of conducting any proceeding for any remedy available to the
         Trustee or exercising any trust or other power conferred upon the
         Trustee under this Agreement;

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

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

                  (vi) Anything in this Agreement to the contrary
         notwithstanding, in no event shall the Trustee be liable for special,
         indirect or consequential loss or damage of any kind whatsoever
         (including but not limited to lost profits), even if the Trustee has
         been advised of the likelihood of such loss or damage and regardless of
         the form of action; and

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

The Trustee shall not be required to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any of the
obligations of the Master Servicer.

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

         Section 9.02      CERTAIN MATTERS AFFECTING THE TRUSTEE.

         (a)      Except as otherwise provided in Section 10.01:

                  (i) The Trustee may rely and shall be protected in acting or
         refraining from acting in reliance on any resolution or certificate of
         the Seller or the Master Servicer, any certificates of auditors or any
         other certificate, statement, instrument, opinion, report, notice,


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<PAGE>



         request, consent, order, appraisal, bond or other paper or document
         believed by it to be genuine and to have been signed or presented by
         the proper party or parties;

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

                  (iii) The Trustee shall not be under any obligation to
         exercise any of the trusts or powers vested in it by this Agreement,
         other than its obligation to give notices pursuant to this Agreement,
         or to institute, conduct or defend any litigation hereunder or in
         relation hereto at the request, order or direction of any of the
         Certificateholders pursuant to the provisions of this Agreement, unless
         such Certificateholders shall have offered to the Trustee reasonable
         security or indemnity against the costs, expenses and liabilities which
         may be incurred therein or thereby. Nothing contained herein shall,
         however, relieve the Trustee of the obligation, upon the occurrence of
         an Event of Default of which a Responsible Officer of the Trustee has
         actual knowledge (which has not been cured or waived), to exercise such
         of the rights and powers vested in it by this Agreement, and to use the
         same degree of care and skill in their exercise, as a prudent person
         would exercise under the circumstances in the conduct of his own
         affairs;

                  (iv) The Trustee shall not be liable in its individual
         capacity for any action taken, suffered or omitted by it in good faith
         and believed by it to be authorized or within the discretion or rights
         or powers conferred upon it by this Agreement;

                  (v) The Trustee shall not be bound to make any investigation
         into the facts or matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice, request, consent,
         order, approval, bond or other paper or document, unless requested in
         writing to do so by Holders of Certificates evidencing not less than
         25% of the aggregate Voting Rights of the Certificates and provided
         that the payment within a reasonable time to the Trustee of the costs,
         expenses or liabilities likely to be incurred by it in the making of
         such investigation is, in the opinion of the Trustee reasonably assured
         to the Trustee by the security afforded to it by the terms of this
         Agreement. The Trustee may require reasonable indemnity against such
         expense or liability as a condition to taking any such action. The
         reasonable expense of every such examination shall be paid by the
         Certificateholders requesting the investigation;

                  (vi) The Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or through
         Affiliates, agents or attorneys; provided, however, that the Trustee
         may not appoint any paying agent to perform any paying agent functions
         under this Agreement without the express written consent of the Master
         Servicer and the Certificate Insurer, which consents will not be
         unreasonably withheld. The Trustee shall not be liable or responsible
         for the misconduct or negligence of any of the Trustee's agents or
         attorneys or paying agent appointed hereunder by the Trustee with due
         care and, when required, with the consent of the Master Servicer;



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                  (vii) Should the Trustee deem the nature of any action
         required on its part to be unclear, the Trustee may require prior to
         such action that it be provided by the Depositor with reasonable
         further instructions; the right of the Trustee to perform any
         discretionary act enumerated in this Agreement shall not be construed
         as a duty, and the Trustee shall not be accountable for other than its
         negligence or willful misconduct in the performance of any such act;

                  (viii) The Trustee shall not be required to give any bond or
         surety with respect to the execution of the trust created hereby or the
         powers granted hereunder, except as provided in Subsection 9.07; and

                  (ix) The Trustee shall not have any duty to conduct any
         affirmative investigation as to the occurrence of any condition
         requiring the repurchase of any Mortgage Loan by any Person pursuant to
         this Agreement, or the eligibility of any Mortgage Loan for purposes of
         this Agreement.

         (b) The Trustee is hereby directed by the Depositor to execute and
deliver the Insurance Agreement and the Yield Maintenance Agreements.

         Section 9.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.

         The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Trustee on the Certificates) shall be
taken as the statements of the Depositor, and the Trustee shall not have any
responsibility for their correctness. The Trustee makes no representation as to
the validity or sufficiency of the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) or of any Mortgage Loan
except as expressly provided in Sections 2.02 and 2.06 hereof; provided,
however, that the foregoing shall not relieve the Trustee, or the Custodian on
its behalf, of the obligation to review the Mortgage Files pursuant to Section
2.02 of this Agreement. The Trustee's signature and countersignature (or
countersignature of its agent) on the Certificates shall be solely in its
capacity as Trustee and shall not constitute the Certificates an obligation of
the Trustee in any other capacity. The Trustee shall not be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor with respect to the Mortgage Loans. Subject to Section 2.06,
the Trustee shall not be responsible for the legality or validity of this
Agreement or any document or instrument relating to this Agreement, the validity
of the execution of this Agreement or of any supplement hereto or instrument of
further assurance, or the validity, priority, perfection or sufficiency of the
security for the Certificates issued hereunder or intended to be issued
hereunder. The Trustee shall not at any time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage or any Mortgage Loan, or the perfection and priority of any
Mortgage or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust Fund or its ability to generate the
payments to be distributed to Certificateholders, under this Agreement. The
Trustee shall not be responsible for filing any financing or continuation
statement in any public office at any time or to otherwise perfect or maintain
the perfection of any security interest or lien granted to it hereunder or to
record this Agreement.



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<PAGE>



         Section 9.04 TRUSTEE MAY OWN CERTIFICATES.

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

         Section 9.05 TRUSTEE'S FEES AND EXPENSES.

         The Trustee will be entitled to recover from the Distribution Account
pursuant to Section 4.05, the Trustee Fee, all reasonable out-of-pocket
expenses, disbursements and advances and the expenses of the Trustee in
connection with any Event of Default (or anything related thereto, including any
determination that an Event of Default does or does not exist), any breach of
this Agreement or any claim or legal action (including any pending or threatened
claim or legal action) incurred or made by the Trustee in the administration of
the trusts hereunder (including the reasonable compensation, expenses and
disbursements of its counsel) except any such expense, disbursement or advance
as may arise from its negligence or intentional misconduct or which is the
responsibility of the Certificateholders hereunder. If funds in the Distribution
Account are insufficient therefor, the Trustee shall recover such expenses,
disbursements or advances from the Depositor and the Depositor hereby agrees to
pay such expenses, disbursements or advances. Such compensation and
reimbursement obligation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust.

         Section 9.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.

         The Trustee and any successor Trustee shall during the entire duration
of this Agreement be a state bank or trust company or a national banking
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus and undivided profits of at least
$50,000,000, subject to supervision or examination by federal or state authority
and rated "BBB" or higher by Fitch with respect to their long-term rating and
rated "BBB" or higher by Standard & Poor's and "Baa2" or higher by Moody's with
respect to any outstanding long-term unsecured unsubordinated debt, and, in the
case of a successor Trustee other than pursuant to Section 9.10, rated in one of
the two highest long-term debt categories of, or otherwise acceptable to, each
of the Rating Agencies and the Certificate Insurer (which consent shall not be
unreasonably withheld). The Trustee shall not be an Affiliate of the Master
Servicer. If the Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 9.06 the combined capital and
surplus of such corporation shall be deemed to be its total equity capital
(combined capital and surplus) as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.08.



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<PAGE>



         Section 9.07 INSURANCE.

         The Trustee, at its own expense, shall at all times maintain and keep
in full force and effect: (i) fidelity insurance, (ii) theft of documents
insurance and (iii) forgery insurance (which may be collectively satisfied by a
"Financial Institution Bond" and/or a "Bankers' Blanket Bond"); provided, that
such insurance may be provided through self-insurance so long as the Trustee is
rated "A" or better by S&P and "A1" or better by Moody's. All such insurance
shall be in amounts, with standard coverage and subject to deductibles, as are
customary for insurance typically maintained by banks or their affiliates which
act as custodians for investor-owned mortgage pools. A certificate of an officer
of the Trustee as to the Trustee's compliance with this Section 9.07 shall be
furnished to any Certificateholder and the Certificate Insurer upon reasonable
written request.

         Section 9.08 RESIGNATION AND REMOVAL OF TRUSTEE.

         The Trustee may at any time resign and be discharged from the Trust
hereby created by giving written notice thereof to the Depositor, the Seller and
the Master Servicer, with a copy to the Rating Agencies and the Certificate
Insurer. Upon receiving such notice of resignation, the Depositor shall promptly
appoint a successor trustee by written instrument, in triplicate, one copy of
which instrument shall be delivered to each of the resigning Trustee and the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

         If at any time (i) the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 hereof and shall fail to resign after
written request thereto by the Depositor, (ii) the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
(iii)(A) a tax is imposed with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee and (C) the Trustee fails
to indemnify the Trust Fund against such tax, then the Depositor or the Master
Servicer may remove the Trustee and appoint a successor trustee by written
instrument, in multiple copies, a copy of which instrument shall be delivered to
the Trustee, the Master Servicer and the successor trustee.

         The Holders evidencing at least 51% of the Voting Rights of each Class
of Certificates (with the prior written consent of the Certificate Insurer,
which consent shall not be unreasonably withheld) may at any time remove the
Trustee and appoint a successor trustee by written instrument or instruments, in
multiple copies, signed by such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered by the
successor trustee to the Master Servicer, the Trustee so removed and the
successor trustee so appointed. Notice of any removal of the Trustee shall be
given to each Rating Agency and the Certificate Insurer by the Trustee or
successor trustee.



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<PAGE>



         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 9.08 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 9.09 hereof.

         Section 9.09 SUCCESSOR TRUSTEE.

         Any successor trustee appointed as provided in Section 9.08 hereof
shall execute, acknowledge and deliver to the Depositor, to its predecessor
trustee, the Master Servicer and the Certificate Insurer an instrument accepting
such appointment hereunder and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as trustee herein.

         No successor trustee shall accept appointment as provided in this
Section 9.09 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 9.07 hereof and its appointment
shall not adversely affect the then current rating of the Certificates
(determined without regard to the Class III-A Policy).

         Upon acceptance of appointment by a successor trustee as provided in
this Section 9.09, the successor trustee shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates and the Certificate
Insurer. If the successor trustee fails to mail such notice within ten days
after acceptance of appointment, the Depositor shall cause such notice to be
mailed at the expense of the Trust Fund.

         Section 9.10 MERGER OR CONSOLIDATION OF TRUSTEE.

         Any corporation, state bank or national banking association into which
the Trustee may be merged or converted or with which it may be consolidated or
any corporation, state bank or national banking association resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation, state bank or national banking association succeeding to
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided that such corporation shall be
eligible under the provisions of Section 9.06 hereof without the execution or
filing of any paper or further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.

         Section 9.11 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders and the Certificate Insurer, such title to the
Trust Fund or any part thereof, whichever is applicable, and, subject to the
other


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<PAGE>



provisions of this Section 9.11, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request to do so, or in the case an
Event of Default shall have occurred and be continuing, the Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.09.

         Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

                  (i) All rights, powers, duties and obligations conferred or
         imposed upon the Trustee, except for the obligation of the Trustee
         under this Agreement to advance funds on behalf of the Master Servicer,
         shall be conferred or imposed upon and exercised or performed by the
         Trustee and such separate trustee or co-trustee jointly (it being
         understood that such separate trustee or co-trustee is not authorized
         to act separately without the Trustee joining in such act), except to
         the extent that under any law of any jurisdiction in which any
         particular act or acts are to be performed (whether a Trustee hereunder
         or as a Successor Master Servicer hereunder), the Trustee shall be
         incompetent or unqualified to perform such act or acts, in which event
         such rights, powers, duties and obligations (including the holding of
         title to the Trust Fund or any portion thereof in any such
         jurisdiction) shall be exercised and performed singly by such separate
         trustee or co-trustee, but solely at the direction of the Trustee;

                  (ii) No trustee hereunder shall be held personally liable by
         reason of any act or omission of any other trustee hereunder; and

                  (iii) The Trustee may at any time accept the resignation of or
         remove any separate trustee or co-trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

         Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co- trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.


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<PAGE>



         Section 9.12  TAX MATTERS.

         It is intended that the Trust Fund shall constitute, and that the
affairs of the Trust Fund shall be conducted so that each REMIC formed hereunder
qualifies as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of the Trust Fund. The Trustee, as
agent on behalf of the Trust Fund, shall do or refrain from doing, as
applicable, the following: (a) the Trustee shall prepare and file, or cause to
be prepared and filed, in a timely manner, U.S. Real Estate Mortgage Investment
Conduit Income Tax Returns (Form 1066 or any successor form adopted by the
Internal Revenue Service) and prepare and file or cause to be prepared and filed
with the Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect to each
such REMIC containing such information and at the times and in the manner as may
be required by the Code or state or local tax laws, regulations, or rules, and
furnish or cause to be furnished to Certificateholders the schedules, statements
or information at such times and in such manner as may be required thereby; (b)
the Trustee shall apply for an employer identification number with the Internal
Revenue Service via a Form SS-4 or other comparable method for each REMIC that
is or becomes a taxable entity, and within thirty days of the Closing Date,
furnish or cause to be furnished to the Internal Revenue Service, on Forms 8811
or as otherwise may be required by the Code, the name, title, address, and
telephone number of the person that the holders of the Certificates may contact
for tax information relating thereto, together with such additional information
as may be required by such Form, and update such information at the time or
times in the manner required by the Code for the Trust Fund; (c) the Trustee
shall make or cause to be made elections, on behalf of each REMIC formed
hereunder to be treated as a REMIC on the federal tax return of such REMIC for
its first taxable year (and, if necessary, under applicable state law); (d) the
Trustee shall prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders and to the Internal Revenue Service and, if necessary, state
tax authorities, all information returns and reports as and when required to be
provided to them in accordance with the REMIC Provisions, including without
limitation, the calculation of any original issue discount using the Prepayment
Assumption; (e) the Trustee shall provide information necessary for the
computation of tax imposed on the transfer of a Residual Certificate to a Person
that is not a Permitted Transferee, or an agent (including a broker, nominee or
other middleman) of a Person that is not a Permitted Transferee, or a
pass-through entity in which a Person that is not a Permitted Transferee is the
record holder of an interest (the reasonable cost of computing and furnishing
such information may be charged to the Person liable for such tax); (f) the
Trustee shall, to the extent under its control, conduct the affairs of the Trust
Fund at all times that any Certificates are outstanding so as to maintain the
status of each REMIC formed hereunder as a REMIC under the REMIC Provisions; (g)
the Trustee shall not knowingly or intentionally take any action or omit to take
any action that would cause the termination of the REMIC status of any REMIC
formed hereunder; (h) the Trustee shall pay, from the sources specified in the
penultimate paragraph of this Section 9.12, the amount of any federal, state and
local taxes, including prohibited transaction taxes as described below, imposed
on any REMIC formed hereunder prior to the termination of the Trust Fund when
and as the same shall be due and payable (but such obligation shall not prevent
the Trustee or any other appropriate Person from contesting any such tax in
appropriate proceedings and shall not prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings); (i) the Trustee shall maintain records relating to each REMIC
formed hereunder including but not limited to the income, expenses, assets


                                      -130-

<PAGE>



and liabilities of each such REMIC and adjusted basis of the Trust Fund property
determined at such intervals as may be required by the Code, as may be necessary
to prepare the foregoing returns, schedules, statements or information; (j) the
Trustee shall, for federal income tax purposes, maintain books and records with
respect to the REMICs on a calendar year and on an accrual basis; (k) the
Trustee shall not enter into any arrangement not otherwise provided for in this
Agreement by which the REMICs will receive a fee or other compensation for
services nor permit the REMICs to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code; and (l) as and when
necessary and appropriate, the Trustee, at the expense of the Trust Fund, shall
represent the Trust Fund in any administrative or judicial proceedings relating
to an examination or audit by any governmental taxing authority, request an
administrative adjustment as to any taxable year of any REMIC formed hereunder,
enter into settlement agreements with any governmental taxing agency, extend any
statute of limitations relating to any tax item of the Trust Fund, and otherwise
act on behalf of each REMIC formed hereunder in relation to any tax matter
involving any such REMIC.

         In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within 10 days after the Closing Date all information or data that the Trustee
requests in writing and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, request in order to
enable the Trustee to perform its duties as set forth herein. The Depositor
hereby indemnifies the Trustee for any losses, liabilities, damages, claims or
expenses of the Trustee arising from any errors or miscalculations of the
Trustee that result from any failure of the Depositor to provide, or to cause to
be provided, accurate information or data to the Trustee on a timely basis.

         In the event that any tax is imposed on "prohibited transactions" of
any of REMIC I, REMIC II, REMIC III or REMIC IV as defined in Section 860F(a)(2)
of the Code, on the "net income from foreclosure property" of the Trust Fund as
defined in Section 860G(c) of the Code, on any contribution to any of REMIC I,
REMIC II, REMIC III or REMIC IV after the startup day pursuant to Section
860G(d) of the Code, or any other tax is imposed, including, without limitation,
any federal, state or local tax or minimum tax imposed upon any of REMIC I,
REMIC II, REMIC III or REMIC IV, and is not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement, (ii) any party hereto (other than the Trustee) to the extent any
such other tax arises out of or results from a breach by such other party of any
of its obligations under this Agreement or (iii) in all other cases, or in the
event that any liable party hereto fails to honor its obligations under the
preceding clauses (i) or (ii), any such tax will be paid first with amounts
otherwise to be distributed to the Class R Certificateholders, and second with
amounts otherwise to be distributed to all other Certificateholders in the
following order of priority: first, to the Class M-6 Certificates, second, to
the Class M-5 Certificates, third, to the Class M-4 Certificates, fourth, to the
Class M-3 Certificates, fifth, to the Class M-2 Certificates, sixth, to the
Class M-1 Certificates, and seventh to the Class A Certificates (pro rata based
on the amounts to be distributed). Notwithstanding anything to the contrary
contained herein, to the extent that such tax is payable by the Holder of any
Certificates, the Trustee is hereby authorized to retain on any Distribution
Date,


                                      -131-

<PAGE>



from the Holders of the Class R Certificates (and, if necessary, second, from
the Holders of the other Certificates in the priority specified in the preceding
sentence), funds otherwise distributable to such Holders in an amount sufficient
to pay such tax. The Trustee shall promptly notify in writing the party liable
for any such tax of the amount thereof and the due date for the payment thereof.

         The Trustee agrees that, in the event it should obtain any information
necessary for the other party to perform its obligations pursuant to this
Section 9.12, it will promptly notify and provide such information to such other
party.




                                      -132-

<PAGE>



                                    ARTICLE X

                                   TERMINATION

         Section 10.01 TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL
MORTGAGE LOANS.

         Subject to Section 10.03, the obligations and responsibilities of the
Depositor, the Master Servicer, the Seller and the Trustee created hereby with
respect to the Trust Fund shall terminate upon the earlier of (a) the purchase
by the Master Servicer of all of the Mortgage Loans (and REO Properties)
remaining in the Trust Fund at a price (the "Mortgage Loan Purchase Price")
equal to the sum of (i) 100% of the Stated Principal Balance of each Mortgage
Loan (other than in respect of REO Property), (ii) accrued interest thereon at
the applicable Mortgage Rate to, but not including, the first day of the month
of such purchase, (iii) the appraised value of any REO Property in the Trust
Fund (up to the Stated Principal Balance of the related Mortgage Loan), such
appraisal to be conducted by an appraiser mutually agreed upon by the Master
Servicer and the Trustee, (iv) unreimbursed out-of pocket costs of the Master
Servicer, including unreimbursed servicing advances and the principal portion of
any unreimbursed Advances, made on the Mortgage Loans prior to the exercise of
such repurchase right, (v) any unreimbursed costs and expenses of the Trustee
payable pursuant to Section 9.05 and (vi) the amount of any Reimbursement Amount
due to the Certificate Insurer and (b) the later of (i) the maturity or other
liquidation (or any Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all REO Property and (ii) the
distribution to Certificateholders and to the Certificate Insurer of all amounts
required to be distributed to them pursuant to this Agreement, as applicable. In
no event shall the trusts created hereby continue beyond the earlier of (i) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late Ambassador of the United States to the Court of St.
James, living on the date hereof and (ii) the Latest Possible Maturity Date.

         The right to repurchase all Mortgage Loans and REO Properties pursuant
to clause in the preceding paragraph shall be conditioned upon the Stated
Principal Balance of all of the Mortgage Loans in the Trust Fund, at the time of
any such repurchase, aggregating 10% or less of the aggregate Cut- off Date
Principal Balance of all of the Mortgage Loans.

         Section 10.02     FINAL DISTRIBUTION ON THE CERTIFICATES.

         If on any Determination Date, (i) the Master Servicer determines that
there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Protected Account, the Master Servicer
shall direct the Trustee to send a final distribution notice promptly to the
Certificate Insurer and each Certificateholder or (ii) the Trustee determines
that a Class of Certificates shall be retired after a final distribution on such
Class, the Trustee shall notify the Certificateholders (and the Certificate
Insurer with respect to the Class III-A Certificates) within five (5) Business
Days after such Determination Date that the final distribution in retirement of
such Class of Certificates is scheduled to be made on the immediately following
Distribution Date. Any final distribution made pursuant to the immediately
preceding sentence will be made only upon presentation and surrender of the
related Certificates at the Corporate Trust Office of the Trustee. If the Master
Servicer elects to terminate the Trust Fund pursuant to Section 10.01, at least
20 days prior to the date notice is to be mailed to the Certificateholders, the
Master Servicer shall notify the


                                      -133-

<PAGE>



Depositor, the Certificate Insurer and the Trustee of the date the Master
Servicer intends to terminate the Trust Fund. The Master Servicer shall remit
the Mortgage Loan Purchase Price to the Trustee on the Business Day prior to the
Distribution Date for such Optional Termination by the Master Servicer.

         Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders and the Certificate Insurer
mailed not later than two Business Days after the Determination Date in the
month of such final distribution. Any such notice shall specify (a) the
Distribution Date upon which final distribution on the Certificates will be made
upon presentation and surrender of Certificates at the office therein
designated, (b) the amount of such final distribution, (c) the location of the
office or agency at which such presentation and surrender must be made and (d)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified. The Trustee will give such notice
to each Rating Agency at the time such notice is given to Certificateholders.

         In the event such notice is given, the Master Servicer shall cause all
funds in the Protected Account to be remitted to the Trustee for deposit in the
Distribution Account on the Business Day prior to the applicable Distribution
Date in an amount equal to the final distribution in respect of the Certificates
and any Reimbursement Amounts due to the Certificate Insurer. Upon such final
deposit with respect to the Trust Fund and the receipt by the Trustee of a
Request for Release therefor, the Trustee or the Custodian shall promptly
release to EMC as applicable the Mortgage Files for the Mortgage Loans and the
Trustee shall execute and deliver any documents prepared and delivered to it
which are necessary to transfer any REO Property.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders of each Class and to the
Certificate Insurer the amounts allocable to such Certificates and to the
Certificate Insurer held in the Distribution Account in the order and priority
set forth in Section 5.04 hereof on the final Distribution Date and in
proportion to their respective Percentage Interests.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Class R Certificateholders
shall be entitled to all unclaimed funds and other assets of the Trust Fund that
remain subject hereto.



                                      -134-

<PAGE>



         Section 10.03 ADDITIONAL TERMINATION REQUIREMENTS.

         (a) Upon exercise by the Master Servicer of its purchase option as
provided in Section 10.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee and the Certificate
Insurer have been supplied with an Opinion of Counsel addressed to the Trustee
and the Certificate Insurer, at the expense of the Master Servicer, to the
effect that the failure of the Trust Fund to comply with the requirements of
this Section 10.03 will not (i) result in the imposition of taxes on "prohibited
transactions" of a REMIC, or (ii) cause a REMIC to fail to qualify as a REMIC at
any time that any Certificates are outstanding:

         (1) The Master Servicer shall establish a 90-day liquidation period and
notify the Trustee thereof, and the Trustee shall in turn specify the first day
of such period in a statement attached to the tax return for each of REMIC I,
REMIC II, REMIC III and REMIC IV pursuant to Treasury Regulation Section
1.860F-1. The Master Servicer shall satisfy all the requirements of a qualified
liquidation under Section 860F of the Code and any regulations thereunder, as
evidenced by an Opinion of Counsel obtained at the expense of the Master
Servicer;

         (2) During such 90-day liquidation period, and at or prior to the time
of making the final payment on the Certificates, the Trustee shall sell all of
the assets of REMIC I, REMIC II, REMIC III and REMIC IV for cash; and

         (3) At the time of the making of the final payment on the Certificates,
the Trustee shall distribute or credit, or cause to be distributed or credited,
to the Holders of the Residual Certificates all cash on hand (other than cash
retained to meet claims), and REMIC I shall terminate at that time.

         (b) By their acceptance of the Certificates, the Holders thereof hereby
authorize the adoption of a 90-day liquidation period for REMIC I, REMIC II,
REMIC III and REMIC IV, which authorization shall be binding upon all successor
Certificateholders.

         (c) The Trustee as agent for each REMIC hereby agrees to adopt and sign
such a plan of complete liquidation upon the written request of the Master
Servicer, and the receipt of the Opinion of Counsel referred to in Section
10.03(a)(1) and to take such other action in connection therewith as may be
reasonably requested by the Master Servicer.




                                      -135-

<PAGE>



                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

         Section 11.01 AMENDMENT.

         This Agreement may be amended from time to time by parties hereto, with
the consent of the Certificate Insurer but without the consent of any of the
Certificateholders to cure any ambiguity, to correct or supplement any
provisions herein (including to give effect to the expectations of investors),
to change the manner in which the Protected Account is maintained or to make
such other provisions with respect to matters or questions arising under this
Agreement as shall not be inconsistent with any other provisions herein if such
action shall not, as evidenced by an Opinion of Counsel addressed to the
Trustee, adversely affect in any material respect the interests of any
Certificateholder; provided that any such amendment shall be deemed not to
adversely affect in any material respect the interests of the Certificateholders
and no such Opinion of Counsel shall be required if the Person requesting such
amendment obtains a letter from each Rating Agency stating that such amendment
would not result in the downgrading or withdrawal of the respective ratings then
assigned to the Certificates (determined without regard to the Class III-A
Policy).

         Notwithstanding the foregoing, without the consent of the
Certificateholders, the parties hereto may at any time and from time to time
amend this Agreement to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or appropriate to maintain the qualification
of each of REMIC I, REMIC II, REMIC III and REMIC IV as a REMIC under the Code
or to avoid or minimize the risk of the imposition of any tax on any of REMIC I,
REMIC II, REMIC III or REMIC IV pursuant to the Code that would be a claim
against either REMIC I, REMIC II, REMIC III or REMIC IV at any time prior to the
final redemption of the Certificates, provided that the Trustee and the
Certificate Insurer has been provided an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, which opinion shall be an expense of the
party requesting such opinion but in any case shall not be an expense of the
Trustee or the Trust Fund, to the effect that such action is necessary or
appropriate to maintain such qualification or to avoid or minimize the risk of
the imposition of such a tax.

         This Agreement may also be amended from time to time by the parties
hereto with the consent of the Certificate Insurer and the Holders of each Class
of Certificates affected thereby evidencing over 50% of the Voting Rights of
such Class or Classes for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Holders of Certificates; provided that
no such amendment shall (i) reduce in any manner the amount of, or delay the
timing of, payments required to be distributed on any Certificate without the
consent of the Holder of such Certificate, (ii) cause either REMIC I, REMIC II,
REMIC III or REMIC IV to cease to qualify as a REMIC or (iii) reduce the
aforesaid percentages of Certificates of each Class the Holders of which are
required to consent to any such amendment without the consent of the Holders of
all Certificates of such Class then outstanding.

         Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it and the
Certificate Insurer shall have first received an


                                      -136-

<PAGE>



Opinion of Counsel addressed to the Trustee and the Certificate Insurer, which
opinion shall be an expense of the party requesting such amendment but in any
case shall not be an expense of the Trustee, to the effect that such amendment
will not (other than an amendment pursuant to clause (ii) of, and in accordance
with, the preceding paragraph) cause the imposition of any tax on REMIC I, REMIC
II, REMIC III or REMIC IV or the Certificateholders or cause REMIC I, REMIC II,
REMIC III or REMIC IV to cease to qualify as a REMIC at any time that any
Certificates are outstanding. Further, nothing in this Agreement shall require
the Trustee to enter into an amendment without receiving an Opinion of Counsel
(a copy of which shall be addressed to and delivered to the Certificate
Insurer), satisfactory to the Trustee that (i) such amendment is permitted and
is not prohibited by this Agreement and that all requirements for amending this
Agreement (including any consent of the applicable Certificateholders) have been
complied with.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder, the
Certificate Insurer and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

         Section 11.02 RECORDATION OF AGREEMENT; COUNTERPARTS.

         To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
of the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere. The Master Servicer shall effect such recordation at the
Trust's expense upon the request in writing of a Certificateholder, but only if
such direction is accompanied by an Opinion of Counsel (provided at the expense
of the Certificateholder requesting recordation) to the effect that such
recordation would materially and beneficially affect the interests of the
Certificateholders or is required by law.

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

         Section 11.03 GOVERNING LAW.

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO THE CONFLICTS OF


                                      -137-

<PAGE>



LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAWS).

         Section 11.04 INTENTION OF PARTIES.

         It is the express intent of the parties hereto that the conveyance of
the Mortgage Notes, Mortgages, assignments of Mortgages, title insurance
policies and any modifications, extensions and/or assumption agreements and
private mortgage insurance policies relating to the Mortgage Loans by the Seller
to the Depositor, and by the Depositor to the Trustee be, and be construed as,
an absolute sale thereof to the Depositor or the Trustee, as applicable. It is,
further, not the intention of the parties that such conveyance be deemed a
pledge thereof by the Seller to the Depositor, or by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Seller or the Depositor, as
applicable, or if for any other reason this Agreement is held or deemed to
create a security interest in such assets, then (i) this Agreement shall be
deemed to be a security agreement within the meaning of the Uniform Commercial
Code of the State of New York and (ii) each conveyance provided for in this
Agreement shall be deemed to be an assignment and a grant by the Seller or the
Depositor, as applicable , for the benefit of the Certificateholders and the
Certificate Insurer, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

         The Depositor for the benefit of the Certificateholders and the
Certificate Insurer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were deemed
to create a security interest in the assets of the Trust Fund, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such throughout the term of the
Agreement.

         Section 11.05 NOTICES.

         (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency and the Certificate Insurer with respect to each of the
following of which a Responsible Officer of the Trustee has actual knowledge:

                  (i) Any material change or amendment to this Agreement;

                  (ii) The occurrence of any Event of Default that has not been
         cured;

                  (iii) The resignation or termination of the Master Servicer or
         the Trustee and the appointment of any successor;

                  (iv) The repurchase or substitution of Mortgage Loans pursuant
         to Sections 2.02, 2.03, 3.18 and 10.01; and

                  (v) The final payment to Certificateholders.

         (b) All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered at or mailed by
registered mail, return receipt requested,


                                      -138-

<PAGE>



postage prepaid, or by recognized overnight courier, or by facsimile
transmission to a number provided by the appropriate party if receipt of such
transmission is confirmed to (i) in the case of the Depositor, Bear Stearns
Asset Backed Securities, Inc., 383 Madison Avenue, New York, New York 10179,
Attention: Chief Counsel; (ii) in the case of the Seller or the Master Servicer,
EMC Mortgage Corporation, 909 Hidden Ridge Drive, Irving, Texas 75038,
Attention: Ralene Ruyle or such other address as may be hereafter furnished to
the other parties hereto by the Master Servicer in writing; (iv) in the case of
the Trustee, at each Corporate Trust Office or such other address as the Trustee
may hereafter furnish to the other parties hereto; (v) in the case of the
Certificate Insurer, Ace Guaranty Corp., 1325 Avenue of the Americas, New York,
New York 10019, Attention: General Counsel, with a copy to Risk Management at
the same address, or such other address as may be hereafter furnished to the
Trustee by the Certificate Insurer in writing; and (vi) in the case of the
Rating Agencies, (x) Moody's Investors Service, Inc., 99 Church Street, New
York, New York 10007, Attention: Home Equity Monitoring and (y) Standard &
Poor's, 55 Water Street, 41st Floor, New York, New York 10041, Attention:
Mortgage Surveillance Group. Any notice delivered to the Seller, the Master
Servicer, the Trustee or the Certificate Insurer under this Agreement shall be
effective only upon receipt. Any notice required or permitted to be mailed to a
Certificateholder, unless otherwise provided herein, shall be given by
first-class mail, postage prepaid, at the address of such Certificateholder as
shown in the Certificate Register; any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice.

         Section 11.06 SEVERABILITY OF PROVISIONS.

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

         Section 11.07 ASSIGNMENT.

         Notwithstanding anything to the contrary contained herein, except as
provided pursuant to Section 7.02, this Agreement may not be assigned by the
Master Servicer, the Seller or the Depositor.

         Section 11.08 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's
legal representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed


                                      -139-

<PAGE>



so as to constitute the Certificateholders from time to time as partners or
members of an association; nor shall any Certificateholder be under any
liability to any third party by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as hereinbefore provided,
the Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 11.08, each and every Certificateholder or the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

         Section 11.09 INSPECTION AND AUDIT RIGHTS. The Master Servicer agrees
that, on reasonable prior notice, it will permit any representative of the
Depositor, the Trustee or the Certificate Insurer during the Master Servicer's
normal business hours, to examine all the books of account, records, reports and
other papers of the Master Servicer relating to the Mortgage Loans, to make
copies and extracts therefrom, to cause such books to be audited by independent
certified public accountants selected by the Depositor, the Trustee or the
Certificate Insurer and to discuss its affairs, finances and accounts relating
to such Mortgage Loans with its officers, employees and independent public
accountants (and by this provision the Master Servicer hereby authorizes such
accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the Depositor,
the Trustee or the Certificate Insurer of any right under this Section 11.09
shall be borne by the party requesting such inspection, subject to such party's
right to reimbursement hereunder (in the case of the Trustee, pursuant to
Section 9.05 hereof or in the case of the Certificate Insurer, solely if a
Rating Event exists or at any time the Certificate Insurer has not be fully
reimbursed for amounts paid pursuant to the Class III-A Policy, as provided in
the Insurance Agreement).

         Section 11.10 CERTIFICATES NONASSESSABLE AND FULLY PAID.

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.



                                      -140-

<PAGE>



         Section 11.11 CERTIFICATE INSURER RIGHTS.

         (a) All notices, statements, reports, certificates, lists or opinions
required by this Agreement to be sent to the parties hereto, the Rating Agencies
or the Class III-A Certificateholders shall also be sent at such time to the
Certificate Insurer at the notice address set forth in Section 11.05.

         (b) The Certificate Insurer shall be an express third party beneficiary
of this Agreement for the purpose of enforcing the provisions hereof to the
extent of the Certificate Insurer's or any Class III-A Certificateholder's
rights explicitly specified herein as if a party hereto.

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

         (d) The Trustee, the Depositor and the Master Servicer shall cooperate
in all respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
hereunder without limiting the rights or affecting the interests of the
Certificateholders as otherwise set forth herein.

         (e) The Certificate Insurer will have the right to exercise all rights,
including voting rights, which the Holders of the Class III-A Certificates are
entitled to exercise under this Agreement, under the Mortgage Loan Purchase
Agreement or any other instrument, document or agreement relating to the
foregoing. In addition, the Certificate Insurer shall have the right to
participate in, to direct the enforcement or defense of, and, at the Certificate
Insurer's sole option, to institute or assume the defense of, any action,
proceeding or investigation for any remedy available to the Trustee with respect
to any matter that could adversely affect the Trust, the Trust Fund or the
rights or obligations of the Certificate Insurer hereunder, under the Mortgage
Loan Purchase Agreement, under the Insurance Agreement or under the Class III-A
Policy or any other instrument, document or agreement relating to the foregoing
or under the other Transaction Documents, including (without limitation) any
insolvency or bankruptcy proceeding in respect of the Seller, the Master
Servicer, the Depositor or any Affiliate thereof provided, that such
participation or direction shall not be in conflict with any rule of law or with
the terms of this Agreement. Following written notice to the Trustee, the
Certificate Insurer shall have the exclusive right to determine, in its sole
discretion, the actions necessary to preserve and protect the Trust and the
Trust Fund.

         (f) The Trustee hereby agrees to provide to the Certificate Insurer
prompt written notice of any action, proceeding or investigation of which it has
actual knowledge that names the Trust or the Trustee as a party or that could
adversely affect the Trust or the Trust Fund.

         (g) Notwithstanding anything contained herein or in any of the other
Transaction Documents to the contrary, the Trustee shall not, without the
Certificate Insurer's prior written consent or unless directed in writing by the
Certificate Insurer, undertake or join any litigation or agree to any settlement
of any action, proceeding or investigation affecting the Trust or the Trust Fund
to the extent any such settlement, action, proceeding or investigation could
reasonably be expected to have a material adverse affect on the rights or
obligations of the Certificate Insurer hereunder or under the Class III-A Policy
or the Transaction Documents.


                                      -141-

<PAGE>




         (h) Each Holder of a Certificate, by acceptance of its Certificate, and
the Trustee agree that Certificate Insurer shall have such rights as set forth
in this Section, which are in addition to any rights of the Certificate Insurer
pursuant to the other provisions of the Transaction Documents, that the rights
set forth in this Section may be exercised by the Certificate Insurer, in its
sole discretion, without the need for the consent or approval of any
Certificateholder or the Trustee, notwithstanding any other provision contained
herein or in any of the other Transaction Documents, and that nothing contained
in this Section shall be deemed to be an obligation of the Certificate Insurer
to exercise any of the rights provided for herein.

                                      * * *








                                      -142-

<PAGE>



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

                                          BEAR STEARNS ASSET BACKED SECURITIES,
                                          INC.,
                                                   as Depositor


                                          By: /s/ Joseph T. Jurkowski
                                             -----------------------------------
                                          Name:   Joseph T. Jurkowski
                                          Title:  Vice President

                                          EMC MORTGAGE CORPORATION,
                                                   as Seller and Master Servicer


                                          By: /s/ Sue Stepanek
                                             -----------------------------------
                                          Name:   Sue Stepanek
                                          Title:  Executive Vice President

                                          LASALLE BANK NATIONAL ASSOCIATION
                                                   as Trustee


                                          By: /s/ Christopher Lewis
                                             -----------------------------------
                                          Name:   Christopher Lewis
                                          Title:  Assistant Vice President



                                      -143-

<PAGE>



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

         On this 30th day of January, 2004, before me, a notary public in and
for said State, appeared _______________, personally known to me on the basis of
satisfactory evidence to be an authorized representative of Bear Stearns Asset
Backed Securities, Inc., one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
such corporation and acknowledged to me that such corporation executed the
within instrument.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.


                                              __________________________________
                                              Notary Public

[Notarial Seal]



                                      -144-

<PAGE>



STATE OF               )
                       ) ss.:
COUNTY OF              )

         On this 30th day of January, 2004, before me, a notary public in and
for said State, appeared ______________, personally known to me on the basis of
satisfactory evidence to be an authorized representative of EMC Mortgage
Corporation, one of the corporations that executed the within instrument, and
also known to me to be the person who executed it on behalf of such corporation
and acknowledged to me that such corporation executed the within instrument.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.


                                              __________________________________
                                              Notary Public


[Notarial Seal]


                                      -145-

<PAGE>


STATE OF               )
                       ) ss.:
COUNTY OF              )

         On this 30th day of January, 2004, before me, a notary public in and
for said State, appeared _____________, personally known to me on the basis of
satisfactory evidence to be an authorized representative of LaSalle Bank
National Association that executed the within instrument, and also known to me
to be the person who executed it on behalf of such corporation, and acknowledged
to me that such corporation executed the within instrument.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.


                                              __________________________________
                                              Notary Public



[Notarial Seal]



                                      -146-



<PAGE>

                                                                     EXHIBIT A-1

                          Form of Class A Certificates


                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES ALLOCABLE HERETO.
ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE
PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION
SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE
PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.


                                      A-1-1

<PAGE>




<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Variable Pass-Through Rate

Class [I-A-1][I-A-2][II-A-1][II-A-2][III-A]
Senior

Date of Pooling and Servicing Agreement                   Aggregate Initial Certificate Principal Balance
and Cut-off Date:                                         of this Certificate as of the Cut-off Date:
January 1, 2004                                           $___________________

First Distribution Date:                                  Initial Certificate Principal Balance of this
February 25, 2004                                         Certificate as of the Cut-off Date:
                                                          $___________________

Master Servicer:
EMC Mortgage Corporation                                  CUSIP: ____________

Assumed Final Distribution Date:
____________, _____
</TABLE>


                            ASSET-BACKED CERTIFICATE
                                 SERIES 2004-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class Class [I-A-1][I-A-2][II-A-1][II-A-2][III-A]
         Certificates with respect to a Trust Fund consisting primarily of a
         pool of conventional, closed-end one- to four-family first and second
         lien, fixed and adjustable interest rate mortgage loans sold by BEAR
         STEARNS ASSET BACKED SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or the Trustee or any of
their affiliates or any other person. Neither this Certificate nor the
underlying Mortgage Loans are guaranteed or insured by any governmental entity
or by Bear Stearns Asset Backed Securities, Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or any of their affiliates
will have any obligation with respect to any certificate or other obligation
secured by or payable from payments on the Certificates.

                  This certifies that Cede & Co. is the registered owner of the
Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional, closed-end first and second lien, fixed
and adjustable rate mortgage loans secured by one- to four- family residences
(collectively, the "Mortgage Loans") sold by Bear Stearns Asset Backed
Securities, Inc. ("BSABS"). The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to BSABS. EMC will act


                                      A-1-2

<PAGE>



as master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and Master Servicer and
LaSalle Bank National Association, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein shall have the meaning
ascribed to them in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of its acceptance hereof
assents and by which such Holder is bound.

                  Interest on this Certificate will accrue during the month
prior to the month in which a Distribution Date (as hereinafter defined) occurs,
commencing on the Distribution Date of the prior month, on the Certificate
Principal Balance hereof at a per annum rate equal to the Pass-Through Rate set
forth above. The Trustee will distribute on the 25th day of each month, or, if
such 25th day is not a Business Day, the immediately following Business Day
(each, a "Distribution Date"), commencing on the First Distribution Date
specified above, to the Person in whose name this Certificate is registered at
the close of business on the Business Day immediately preceding such
Distribution Date so long as such Certificate remains in book-entry form (and
otherwise, the close of business on the last Business Day of the month
immediately preceding the month of such Distribution Date), an amount equal to
the product of the Percentage Interest evidenced by this Certificate and the
amount (of interest and principal, if any) required to be distributed to the
Holders of Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date in the month following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the date on
which the Certificate Principal Balance of this Class of Certificates will be
reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice. The
initial Certificate Principal Balance of this Certificate is set forth above.
The Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any realized losses applicable
hereto.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  [This Certificate is entitled to the benefits of an
irrevocable and unconditional financial guaranty insurance policy issued by ACE
Guaranty Corp. (the "Policy").]

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund [and the Policy] for payment
hereunder and that the Trustee is not liable to


                                      A-1-3

<PAGE>



the Certificateholders for any amount payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.

                  This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of each Class of Certificates affected thereby evidencing over 50% of
the Voting Rights of such Class or Classes. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of Depositor, the Master Servicer, the
Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after


                                      A-1-4

<PAGE>



the first Distribution Date on which the aggregate Stated Principal Balance of
the Mortgage Loans is less than 10% of the aggregate Stated Principal Balance of
the Mortgage Loans at the Cut-off Date. The exercise of such right will effect
the early retirement of the Certificates. In no event, however, will the Trust
Fund created by the Agreement continue beyond the expiration of 21 years after
the death of certain persons identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.



                                      A-1-5

<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: January 30, 2004                     LASALLE BANK NATIONAL ASSOCIATION
                                            not in its individual capacity but
                                            solely as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class [I-A-1][I-A-2][II-A-1][II-A-2][III-A]
Certificates referred to in the within-mentioned Agreement.

                                            LASALLE BANK NATIONAL ASSOCIATION
                                            Authorized signatory of LaSalle Bank
                                            National Association, not in its
                                            individual capacity but solely as
                                            Trustee

                                            By:
                                               ---------------------------------
                                                     Authorized Signatory




<PAGE>



                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                          _____________________________________________
                                    Signature by or on behalf of assignor


                                                ________________________________
                                                       Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.


<PAGE>

                                                                     EXHIBIT A-2

                          Form of Class M Certificates


                  THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
SENIOR CERTIFICATES [,] [AND] [CLASS M-1 CERTIFICATES] [,] [AND] [CLASS M-2
CERTIFICATES] [,] [AND] [CLASS M-3 CERTIFICATES] [,] [AND] [CLASS M-4
CERTIFICATES] [AND] [CLASS M-5 CERTIFICATES] AS DESCRIBED IN THE AGREEMENT (AS
DEFINED BELOW).

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES APPLICABLE
THERETO. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE
CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE
DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS
CERTIFICATE PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

         EACH BENEFICIAL OWNER OF A CERTIFICATE OR ANY INTEREST THEREIN SHALL BE
DEEMED TO HAVE REPRESENTED, BY VIRTUE OF ITS ACQUISITION OR HOLDING OF THAT
CERTIFICATE OR INTEREST THEREIN, THAT EITHER (I) IT IS NOT A PLAN OR INVESTING
WITH "PLAN ASSETS", (II) IT HAS ACQUIRED AND IS HOLDING SUCH CERTIFICATE IN
RELIANCE ON PROHIBITED TRANSACTION EXEMPTION 2002-41 AS AMENDED ("EXEMPTION"),
AND THAT IT UNDERSTANDS THAT THERE ARE CERTAIN CONDITIONS TO THE AVAILABILITY OF
THE EXEMPTION, INCLUDING THAT THE CERTIFICATE MUST BE RATED, AT THE TIME OF
PURCHASE, NOT LOWER THAN "BBB-" (OR ITS EQUIVALENT) BY S&P, FITCH RATINGS OR
MOODY'S, AND THE CERTIFICATE IS SO RATED OR (III) (1) IT IS AN INSURANCE
COMPANY, (2) THE SOURCE OF FUNDS USED TO ACQUIRE OR HOLD THE CERTIFICATE OR
INTEREST THEREIN IS AN "INSURANCE COMPANY GENERAL ACCOUNT," AS SUCH TERM IS
DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 95-60, AND (3) THE
CONDITIONS IN SECTIONS I AND III OF PTCE 95-60 HAVE BEEN SATISFIED.

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR


                                      A-2-1

<PAGE>



SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.


                                      A-2-2

<PAGE>




<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Variable Pass-Through Rate

Class M-[1][2][3][4][5][6] Subordinate

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Principal Balance
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
January 1, 2004                                           $_________________

First Distribution Date:                                  Initial Certificate Principal Balance of this
February 25, 2004                                         Certificate as of the Cut-off Date:
                                                          $_________________

Master Servicer:
EMC Mortgage Corporation                                  CUSIP: ______________

Assumed Final Distribution Date:
February 25, 2034
</TABLE>


                            ASSET-BACKED CERTIFICATE
                                 SERIES 2004-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class M-[1][2][3][4][5][6] Certificates with respect
         to a Trust Fund consisting primarily of a pool of conventional,
         closed-end one- to four-family first and second lien, fixed and
         adjustable interest rate mortgage loans sold by BEAR STEARNS ASSET
         BACKED SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or the Trustee or any of
their affiliates or any other person. Neither this Certificate nor the
underlying Mortgage Loans are guaranteed or insured by any governmental entity
or by Bear Stearns Asset Backed Securities, Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or any of their affiliates
will have any obligation with respect to any certificate or other obligation
secured by or payable from payments on the Certificates.

                  This certifies that Cede & Co. is the registered owner of the
Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional, closed-end first and second lien, fixed
and adjustable rate mortgage loans secured by one- to four- family residences
(collectively, the "Mortgage Loans") sold by Bear Stearns Asset Backed
Securities, Inc. ("BSABS"). The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to BSABS. EMC will act as master servicer of the Mortgage
Loans (in that capacity, the "Master Servicer," which term


                                      A-2-3

<PAGE>



includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and Master Servicer, and
LaSalle Bank National Association as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein shall have the meaning
ascribed to them in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of its acceptance hereof
assents and by which such Holder is bound.

                  Interest on this Certificate will accrue during the month
prior to the month in which a Distribution Date (as hereinafter defined) occurs,
commencing on the Distribution Date of the prior month, on the Certificate
Principal Balance hereof at a per annum rate equal to the Pass-Through Rate set
forth above. The Trustee will distribute on the 25th day of each month, or, if
such 25th day is not a Business Day, the immediately following Business Day
(each, a "Distribution Date"), commencing on the First Distribution Date
specified above, to the Person in whose name this Certificate is registered at
the close of business on the Business Day immediately preceding such
Distribution Date so long as such Certificate remains in book-entry form (and
otherwise, the close of business on the last Business Day of the month
immediately preceding the month of such Distribution Date), an amount equal to
the product of the Percentage Interest evidenced by this Certificate and the
amount (of interest and principal, if any) required to be distributed to the
Holders of Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date in the month following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the date on
which the Certificate Principal Balance of this Class of Certificates will be
reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice. The
initial Certificate Principal Balance of this Certificate is set forth above.
The Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any Realized Losses allocable
hereto and any realized losses applicable hereto.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund for payment hereunder and that
the Trustee is not liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.



                                      A-2-4

<PAGE>



                  This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

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

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.



                                      A-2-5

<PAGE>



                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than 10% of the
aggregate Stated Principal Balance of the Mortgage Loans at the Cut-off Date.
The exercise of such right will effect the early retirement of the Certificates.
In no event, however, will the Trust Fund created by the Agreement continue
beyond the expiration of 21 years after the death of certain persons identified
in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.



                                      A-2-6

<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: January 30, 2004                     LASALLE BANK NATIONAL ASSOCIATION
                                            not in its individual capacity but
                                            solely as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class M-[1][2][3][4][5][6] Certificates referred to
in the within-mentioned Agreement.

                                            LASALLE BANK NATIONAL ASSOCIATION
                                            Authorized signatory of LaSalle Bank
                                            National Association, not in its
                                            individual capacity but solely as
                                            Trustee

                                            By:
                                               ---------------------------------
                                                     Authorized Signatory




<PAGE>



                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                          _____________________________________________
                                    Signature by or on behalf of assignor


                                                ________________________________
                                                       Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.



<PAGE>



                                                                     EXHIBIT A-3


                          Form of Class CE Certificates

                  THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
SENIOR CERTIFICATES AND THE CLASS M CERTIFICATES AS DESCRIBED IN THE AGREEMENT
(AS DEFINED BELOW).

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES ALLOCABLE HERETO.
ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE
PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION
SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE
PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

                  THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES
THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH
ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY
THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
(B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE
THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE


                                      A-3-1

<PAGE>



SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION.

                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 6.02
OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE THAT THE
PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL
NOT SUBJECT THE TRUSTEE, MASTER SERVICER OR THE DEPOSITOR TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.




                                      A-3-2

<PAGE>





<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Percentage Interest: 100%

Class CE                                                  Variable Pass-Through Rate

Date of Pooling and Servicing Agreement and               Initial Certificate Notional Balance of this
Cut-off Date:                                             Certificate as of the Cut-off Date:
January 1, 2004                                           $______________

First Distribution Date:                                  Aggregate Certificate Notional Balance of this
February 25, 2004                                         Certificate as of the Cut-off Date:
                                                          $______________

Master Servicer:
EMC Mortgage Corporation                                  CUSIP:______________

Assumed Final Distribution Date:
February 25, 2034
</TABLE>


                            ASSET-BACKED CERTIFICATE
                                 SERIES 2004-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class CE Certificates with respect to a Trust Fund
         consisting primarily of a pool of conventional, closed-end one- to
         four-family first and second lien, fixed and adjustable interest rate
         mortgage loans sold by BEAR STEARNS ASSET BACKED SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or the Trustee or any of
their affiliates or any other person. Neither this Certificate nor the
underlying Mortgage Loans are guaranteed or insured by any governmental entity
or by Bear Stearns Asset Backed Securities, Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or any of their affiliates
will have any obligation with respect to any certificate or other obligation
secured by or payable from payments on the Certificates.

                  This certifies that Bear, Stearns Securities Corp. is the
registered owner of the Percentage Interest evidenced hereby in the beneficial
ownership interest of Certificates of the same Class as this Certificate in a
trust (the "Trust Fund") generally consisting of conventional, closed-end first
and second lien, fixed and adjustable rate mortgage loans secured by one- to
four- family residences (collectively, the "Mortgage Loans") sold by Bear
Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were sold by
EMC Mortgage Corporation ("EMC") to BSABS.


                                      A-3-3

<PAGE>



EMC will act as master servicer of the Mortgage Loans (in that capacity, the
"Master Servicer," which term includes any successors thereto under the
Agreement referred to below). The Trust Fund was created pursuant to the Pooling
and Servicing Agreement dated as of the Cut-off Date specified above (the
"Agreement"), among BSABS, as depositor (the "Depositor"), EMC Mortgage
Corporation as seller and Master Servicer and LaSalle Bank National Association,
as trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of its acceptance hereof assents and by which such Holder is bound.

                  The Trustee will distribute on the 25th day of each month, or,
if such 25th day is not a Business Day, the immediately following Business Day
(each, a "Distribution Date"), commencing on the First Distribution Date
specified above, to the Person in whose name this Certificate is registered at
the close of business on the last day (or if such last day is not a Business
Day, the Business Day immediately preceding such last day) of the calendar month
immediately preceding the month in which the Distribution Date occurs, an amount
equal to the product of the Percentage Interest evidenced by this Certificate
and the amounts required to be distributed to the Holders of Certificates of the
same Class as this Certificate. The Assumed Final Distribution Date is the
Distribution Date in the month following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit E and either
Exhibit F or G, as applicable, and (ii) in all other cases, an Opinion of
Counsel satisfactory to it that such transfer may be made without such
registration or qualification (which Opinion of Counsel shall not be an expense
of the Trust Fund or of the Depositor, the Trustee or the Master Servicer in
their respective capacities as such), together with copies of the written
certification(s) of the Holder of the Certificate desiring to effect the
transfer and/or such Holder's prospective transferee upon which such Opinion of
Counsel is based. Neither the Depositor nor the Trustee is obligated to register
or qualify the Class of Certificates specified on the face hereof under the 1933


                                      A-3-4

<PAGE>



Act or any other securities law or to take any action not otherwise required
under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Depositor, the
Seller and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

                  No transfer of this Class CE Certificate will be made unless
the transferee provides either a certification pursuant to section 6.02 of the
Agreement or an Opinion of Counsel satisfactory to the Trustee that the purchase
of this Certificate will not constitute or result in a non-exempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code and will not
subject the Trustee, the Master Servicer or the Depositor to any obligation or
liability in addition to those undertaken in the agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund for payment hereunder and that
the Trustee is not liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.

                  This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject


                                      A-3-5

<PAGE>



to certain limitations therein set forth, this Certificate is exchangeable for
one or more new Certificates evidencing the same Class and in the same aggregate
Percentage Interest, as requested by the Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than or equal
to 10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.



                                      A-3-6

<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: January 30, 2004                     LASALLE BANK NATIONAL ASSOCIATION
                                            not in its individual capacity but
                                            solely as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.

                                            LASALLE BANK NATIONAL ASSOCIATION
                                            Authorized signatory of LaSalle Bank
                                            National Association, not in its
                                            individual capacity but solely as
                                            Trustee

                                            By:
                                               ---------------------------------
                                                     Authorized Signatory




<PAGE>



                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                          _____________________________________________
                                    Signature by or on behalf of assignor


                                                ________________________________
                                                       Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.



<PAGE>



                                                                     EXHIBIT A-4


                           Form of Class P Certificate

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE INITIAL
ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE PRINCIPAL BALANCE BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.

                  THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES
THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH
ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY
THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
(B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE
THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION.




                                      A-4-1

<PAGE>



                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 6.02
OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE THAT THE
PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL
NOT SUBJECT THE TRUSTEE, MASTER SERVICER OR THE DEPOSITOR TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.


                                      A-4-2

<PAGE>





<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Percentage Interest: 100%

Class P

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Principal Balance
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
January 1, 2004                                           $100.00

First Distribution Date:                                  Initial Certificate Principal Balance of this
February 25, 2004                                         Certificate as of the Cut-off Date:
                                                          $100.00

Master Servicer:
EMC Mortgage Corporation                                  CUSIP: _________________

Assumed Final Distribution Date:
February 25, 2034
</TABLE>


                            ASSET-BACKED CERTIFICATE
                                 SERIES 2004-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class P Certificates with respect to a Trust Fund
         consisting primarily of a pool of conventional, closed-end one- to
         four-family first and second lien, fixed and adjustable interest rate
         mortgage loans sold by BEAR STEARNS ASSET BACKED SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or the Trustee or any of
their affiliates or any other person. Neither this Certificate nor the
underlying Mortgage Loans are guaranteed or insured by any governmental entity
or by Bear Stearns Asset Backed Securities, Inc., the Master Servicer, the
Trustee or any of their affiliates or any other person. None of Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or any of their affiliates
will have any obligation with respect to any certificate or other obligation
secured by or payable from payments on the Certificates.

                  This certifies that Bear, Stearns Securities Corp. is the
registered owner of the Percentage Interest evidenced hereby in the beneficial
ownership interest of Certificates of the same Class as this Certificate in a
trust (the "Trust Fund") generally consisting of conventional, closed-end first
and second lien, fixed and adjustable rate mortgage loans secured by one- to
four- family residences (collectively, the "Mortgage Loans") sold by Bear
Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were sold by
EMC Mortgage Corporation ("EMC") to BSABS.


                                      A-4-3

<PAGE>



EMC will act as master servicer of the Mortgage Loans (in that capacity, the
"Master Servicer," which term includes any successors thereto under the
Agreement referred to below). The Trust Fund was created pursuant to the Pooling
and Servicing Agreement dated as of the Cut-off Date specified above (the
"Agreement"), among BSABS, as depositor (the "Depositor"), EMC Mortgage
Corporation as seller and Master Servicer and LaSalle Bank National Association,
as trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of its acceptance hereof assents and by which such Holder is bound.

                  Each Holder of this Certificate will be deemed to have agreed
to be bound by the restrictions set forth in the Agreement to the effect that
(i) each person holding or acquiring any Ownership Interest in this Certificate
must be a United States Person and a Permitted Transferee, (ii) the transfer of
any Ownership Interest in this Certificate will be conditioned upon the delivery
to the Trustee of, among other things, an affidavit to the effect that it is a
United States Person and Permitted Transferee, (iii) any attempted or purported
transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the
purported transferee, and (iv) if any person other than a United States Person
and a Permitted Transferee acquires any Ownership Interest in this Certificate
in violation of such restrictions, then the Depositor will have the right, in
its sole discretion and without notice to the Holder of this Certificate, to
sell this Certificate to a purchaser selected by the Depositor, which purchaser
may be the Depositor, or any affiliate of the Depositor, on such terms and
conditions as the Depositor may choose.

                  The Trustee will distribute on the 25th day of each month, or,
if such 25th day is not a Business Day, the immediately following Business Day
(each, a "Distribution Date"), commencing on the First Distribution Date
specified above, to the Person in whose name this Certificate is registered at
the close of business on the last day (or if such last day is not a Business
Day, the Business Day immediately preceding such last day) of the calendar month
immediately preceding the month in which the Distribution Date occurs, an amount
equal to the product of the Percentage Interest evidenced by this Certificate
and the amounts required to be distributed to the Holders of Certificates of the
same Class as this Certificate. The Assumed Final Distribution Date is the
Distribution Date in the month following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice.



                                      A-4-4

<PAGE>



                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit E and either
Exhibit F or G, as applicable, and (ii) in all other cases, an Opinion of
Counsel satisfactory to it that such transfer may be made without such
registration or qualification (which Opinion of Counsel shall not be an expense
of the Trust Fund or of the Depositor, the Trustee or the Master Servicer in
their respective capacities as such), together with copies of the written
certification(s) of the Holder of the Certificate desiring to effect the
transfer and/or such Holder's prospective transferee upon which such Opinion of
Counsel is based. Neither the Depositor nor the Trustee is obligated to register
or qualify the Class of Certificates specified on the face hereof under the 1933
Act or any other securities law or to take any action not otherwise required
under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Depositor, the
Seller and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

                  No transfer of this Class P Certificate will be made unless
the transferee provides either a certification pursuant to section 6.02 of the
Agreement or an Opinion of Counsel satisfactory to the Trustee that the purchase
of this Certificate will not constitute or result in a non-exempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code and will not
subject the Trustee, the Master Servicer or the Depositor to any obligation or
liability in addition to those undertaken in the agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund for payment hereunder and that
the Trustee is not liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.

                  This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. Any such consent by the
Holder of this Certificate shall be


                                      A-4-5

<PAGE>



conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than or equal
to 10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.


                                      A-4-6

<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: January 30, 2004                     LASALLE BANK NATIONAL ASSOCIATION
                                            not in its individual capacity but
                                            solely as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class P Certificates referred to in the
within-mentioned Agreement.

                                            LASALLE BANK NATIONAL ASSOCIATION
                                            Authorized signatory of LaSalle Bank
                                            National Association, not in its
                                            individual capacity but solely as
                                            Trustee

                                            By:
                                               ---------------------------------
                                                     Authorized Signatory




<PAGE>



                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                          _____________________________________________
                                    Signature by or on behalf of assignor


                                                ________________________________
                                                       Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.



<PAGE>



                                                                     EXHIBIT A-5


                          Form of Class R Certificates

                  THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A
NON-UNITED STATES PERSON OR A DISQUALIFIED ORGANIZATION (AS DEFINED BELOW).

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 6.02
OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE THAT THE
PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL
NOT SUBJECT THE TRUSTEE, MASTER SERVICER OR THE DEPOSITOR TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.

                  ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE
MASTER SERVICER AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE UNITED
STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED
STATES, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN
INSTRUMENTALITY WHICH IS A CORPORATION IF ALL OF ITS ACTIVITIES ARE SUBJECT TO
TAX AND EXCEPT FOR FREDDIE MAC, A MAJORITY OF ITS BOARD OF DIRECTORS IS NOT
SELECTED BY SUCH GOVERNMENTAL UNIT), (B) A FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF EITHER OF THE FOREGOING, (C)
ANY ORGANIZATION (OTHER THAN CERTAIN FARMERS' COOPERATIVES DESCRIBED IN SECTION
521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE
CODE (INCLUDING THE TAX IMPOSED BY SECTION 511 OF THE CODE ON UNRELATED BUSINESS
TAXABLE INCOME), (D) RURAL ELECTRIC AND TELEPHONE COOPERATIVES DESCRIBED IN
SECTION 1381(A)(2)(C) OF THE CODE, (E) AN ELECTING LARGE PARTNERSHIP UNDER
SECTION 775(A) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES
(A), (B), (C), (D) OR (E) BEING HEREIN REFERRED TO AS A


                                      A-5-1

<PAGE>



"DISQUALIFIED ORGANIZATION"), OR (F) AN AGENT OF A DISQUALIFIED ORGANIZATION,
(2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX
AND (3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS
CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR
EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH.



                                                       A-5-2

<PAGE>




<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1

Class R[-I][-II][RX]                                      Percentage Interest: 100%

Date of Pooling and Servicing Agreement and
Cut-off Date:
January 1, 2004

First Distribution Date:
February 25, 2004

Master Servicer:
EMC Mortgage Corporation                                  CUSIP: _________________

Assumed Final Distribution Date:
February 25, 2034
</TABLE>


                            ASSET-BACKED CERTIFICATE
                                 SERIES 2004-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class R[-I][-II][RX] Certificates with respect to a
         Trust Fund consisting primarily of a pool of conventional, closed-end
         one- to four-family first and second lien, fixed and adjustable
         interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or the Trustee or any of
their affiliates or any other person. Neither this Certificate nor the
underlying Mortgage Loans are guaranteed or insured by any governmental entity
or by Bear Stearns Asset Backed Securities, Inc., the Master Servicer, the
Trustee or any of their affiliates or any other person. None of Bear Stearns
Asset Backed Securities, Inc., the Master Servicer or any of their affiliates
will have any obligation with respect to any certificate or other obligation
secured by or payable from payments on the Certificates.

                  This certifies that Bear, Stearns Securities Corp. is the
registered owner of the Percentage Interest evidenced hereby in the beneficial
ownership interest of Certificates of the same Class as this Certificate in a
trust (the "Trust Fund") generally consisting of conventional, closed-end first
and second lien, fixed and adjustable rate mortgage loans secured by one- to
four- family residences (collectively, the "Mortgage Loans") sold by Bear
Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were sold by
EMC Mortgage Corporation ("EMC") to BSABS. EMC will act as master servicer of
the Mortgage Loans (in that capacity, the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust Fund


                                      A-5-3

<PAGE>



was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), among BSABS, as depositor (the
"Depositor"), EMC Mortgage Corporation as seller and Master Servicer and LaSalle
Bank National Association as trustee (the "Trustee"), a summary of certain of
the pertinent provisions of which is set forth hereafter. To the extent not
defined herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the Holder
of this Certificate by virtue of its acceptance hereof assents and by which such
Holder is bound.

         Each Holder of this Certificate will be deemed to have agreed to be
bound by the restrictions set forth in the Agreement to the effect that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
United States Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the delivery to
the Trustee of, among other things, an affidavit to the effect that it is a
United States Person and Permitted Transferee, (iii) any attempted or purported
transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the
purported transferee, and (iv) if any person other than a United States Person
and a Permitted Transferee acquires any Ownership Interest in this Certificate
in violation of such restrictions, then the Depositor will have the right, in
its sole discretion and without notice to the Holder of this Certificate, to
sell this Certificate to a purchaser selected by the Depositor, which purchaser
may be the Depositor, or any affiliate of the Depositor, on such terms and
conditions as the Depositor may choose.

                  The Trustee will distribute on the 25th day of each month, or,
if such 25th day is not a Business Day, the immediately following Business Day
(each, a "Distribution Date"), commencing on the First Distribution Date
specified above, to the Person in whose name this Certificate is registered at
the close of business on the last day (or if such last day is not a Business
Day, the Business Day immediately preceding such last day) of the calendar month
immediately preceding the month in which the Distribution Date occurs, an amount
equal to the product of the Percentage Interest evidenced by this Certificate
and the amounts required to be distributed to the Holders of Certificates of the
same Class as this Certificate. The Assumed Final Distribution Date is the
Distribution Date in the month following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice.


                  No transfer of this Class R Certificate will be made unless
the transferee provides either a certification pursuant to section 6.02 of the
Agreement or an Opinion of Counsel satisfactory


                                      A-5-4

<PAGE>



to the Trustee that the purchase of this Certificate will not constitute or
result in a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code and will not subject the Trustee, the Master Servicer
or the Depositor to any obligation or liability in addition to those undertaken
in the agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund for payment hereunder and that
the Trustee is not liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.

                  This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Depositor, the Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is


                                      A-5-5

<PAGE>



registered as the owner hereof for all purposes, and none of Depositor, the
Master Servicer, the Trustee or any such agent shall be affected by notice to
the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than or equal
to 10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.



                                      A-5-6

<PAGE>



         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: January 30, 2004                     LASALLE BANK NATIONAL ASSOCIATION
                                            not in its individual capacity but
                                            solely as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class R[-I][-II][RX] Certificates referred to in the
within-mentioned Agreement.

                                            LASALLE BANK NATIONAL ASSOCIATION
                                            Authorized signatory of LaSalle Bank
                                            National Association, not in its
                                            individual capacity but solely as
                                            Trustee

                                            By:
                                               ---------------------------------
                                                     Authorized Signatory




<PAGE>



                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                          _____________________________________________
                                    Signature by or on behalf of assignor


                                                ________________________________
                                                       Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.



<PAGE>



                                                                       EXHIBIT B



                             MORTGAGE LOAN SCHEDULE
                             ----------------------

                  The Preliminary and Final Mortgage Loan Schedules shall set
forth the following information with respect to each Mortgage Loan:

                  (a) the loan number;

                  (b) [Reserved];

                  (c) the city, state and zip code of the Mortgaged Property;

                  (d) the property type;

                  (e) the Mortgage Rate;

                  (f) the Servicing Fee Rate;

                  (g) the Mortgage Net Rate;

                  (h) the original term;

                  (i) the maturity date;

                  (j) the stated remaining term to maturity;

                  (k) the original principal balance;

                  (1) the first payment date;

                  (m) the principal and interest payment in effect as of the
                      Cut-off Date;

                  (n) the unpaid principal balance as of the Cut-off Date;

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

                  (p) paid-through date;

                  (q) the insurer of any Primary Mortgage Insurance Policy;

                  (r) reserved;

                  (s) the Gross Margin, if applicable;


                                       B-1

<PAGE>



                  (t) the Maximum Lifetime Mortgage Rate, if applicable;

                  (u) the Minimum Lifetime Mortgage Rate, if applicable;

                  (v) the Periodic Rate Cap, if applicable; and

                  (w) the number of days delinquent, if any.




                                       B-2

<PAGE>



                                    EXHIBIT C

                                   [RESERVED]





                                      C-1-1

<PAGE>



                                    EXHIBIT D

                           FORM OF TRANSFER AFFIDAVIT

                                        Affidavit pursuant to Section 860E(e)(4)
                                        of the Internal Revenue Code of 1986, as
                                        amended, and for other purposes

STATE OF                   )
                           )ss:
COUNTY OF                  )

         [NAME OF OFFICER], being first duly sworn, deposes and says:

         1. That he/she is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of _____] [the United States], on behalf of which
he makes this affidavit.

         2. That (i) the Investor is not a "disqualified organization" as
defined in Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), and will not be a disqualified organization as of [Closing Date]
[date of purchase]; (ii) it is not acquiring the Bear Stearns Backed Securities,
Inc. Asset-Backed Certificates, Series 2004-HE1, Class R-__ Certificates (the
"Residual Certificates") for the account of a disqualified organization; (iii)
it consents to any amendment of the Pooling and Servicing Agreement that shall
be deemed necessary by Bear Stearns Asset Backed Securities, Inc. (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Residual
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer such Residual Certificates unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.

         3. That the Investor is one of the following: (i) a citizen or resident
of the United States, (ii) a corporation or partnership (including an entity
treated as a corporation or partnership for federal income tax purposes) created
or organized in, or under the laws of, the United States or any state thereof or
the District of Columbia (except, in the case of a partnership, to the extent
provided in regulations), provided that no partnership or other entity treated
as a partnership for United States federal income tax purposes shall be treated
as a United States Person unless all persons that own an interest in such
partnership either directly or through any entity that is not a corporation for
United States federal income tax purposes are United States Persons, (iii) an
estate whose income is subject to United States federal income tax regardless of
its source, or (iv) a trust other than a "foreign trust," as defined in Section
7701 (a)(31) of the Code.

         4. That the Investor's taxpayer identification number is
______________________.

         5. That no purpose of the acquisition of the Residual Certificates is
to avoid or impede the assessment or collection of tax.


                                       D-1

<PAGE>




         6. That the Investor understands that, as the holder of the Residual
Certificates, the Investor may incur tax liabilities in excess of any cash flows
generated by such Residual Certificates.

         7. That the Investor intends to pay taxes associated with holding the
Residual Certificates as they become due.

         IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] this ____ day of _________, 20__.


                                       [NAME OF INVESTOR]


                                       By:______________________________________
                                          [Name of Officer]
                                          [Title of Officer]
                                          [Address of Investor for receipt of
                                          distributions]

                                          Address of Investor for receipt of tax
                                          information:



                                       D-2

<PAGE>



         Personally appeared before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer] of the Investor, and acknowledged to me that he/she
executed the same as his/her free act and deed and the free act and deed of the
Investor.

         Subscribed and sworn before me this ___ day of _________, 20___.

NOTARY PUBLIC

COUNTY OF

STATE OF


My commission expires the ___ day of ___________________, 20___.




                                       D-3

<PAGE>



                                    EXHIBIT E

                         FORM OF TRANSFEROR CERTIFICATE


                              ______________,200___


Bear Stearns Asset Backed Securities, Inc.
383 Madison Avenue
New York, New York 10179

LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60603

Attention: Bear Stearns Asset Backed Securities Trust 2004-HE1

                  Re:      Bear Stearns Asset Backed Securities, Inc.
                           Asset-Backed Certificates, Series 2004-HE1, Class__
                           ---------------------------------------------------

Ladies and Gentlemen:

         In connection with the sale by ___________ (the "Seller") to ________
(the "Purchaser") of $_________ Initial Certificate Principal Balance of
Asset-Backed Certificates, Series 2004-HE1, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of January 1, 2004 among Bear Stearns Asset
Backed Securities, Inc., as depositor (the "Depositor"), EMC Mortgage
Corporation, as seller and master servicer, and LaSalle Bank National
Association, as trustee (the "Trustee"). The Seller hereby certifies, represents
and warrants to, a covenants with, the Depositor and the Trustee that:

         Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act in any
manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and Servicing Agreement.



                                       E-1

<PAGE>




                                          Very truly yours,



                                          ______________________________
                                          (Seller)

                                          By:___________________________

                                          Name:_________________________

                                          Title:________________________



                                       E-2

<PAGE>



                                    EXHIBIT F

             FORM OF INVESTOR REPRESENTATION LETTER (NON-RULE 144A)

                                ___________,200__


Bear Stearns Asset Backed Securities, Inc.
383 Madison Avenue
New York, New York 10179

LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60603


Attention:        Bear Stearns Asset Backed Securities Trust 2004-HE1

                  Re:      Bear Stearns Asset Backed Securities, Inc.
                           Asset-Backed Certificates, Series 2004-HE1, Class__
                           ---------------------------------------------------

Ladies and Gentlemen:

         ______________ (the "Purchaser") intends to purchase from
______________ (the "Seller") $_________ Initial Certificate Principal Balance
of Asset-Backed Certificates, Series 2004-HE1, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of January 1, 2004 among Bear Stearns Asset
Backed Securities, Inc., as depositor (the "Depositor"), EMC Mortgage
Corporation, as seller and master servicer, and LaSalle Bank National
Association, as trustee (the "Trustee"). All terms used herein and not otherwise
defined shall have the meanings set forth in the Pooling and Servicing
Agreement. The Purchaser hereby certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:

                           1. The Purchaser understands that (a) the
                  Certificates have not been and will not be registered or
                  qualified under the Securities Act of 1933, as amended (the
                  "Act") or any state securities law, (b) the Depositor is not
                  required to so register or qualify the Certificates, (c) the
                  Certificates may be resold only if registered and qualified
                  pursuant to the provisions of the Act or any state securities
                  law, or if an exemption from such registration and
                  qualification is available, (d) the Pooling and Servicing
                  Agreement contains restrictions regarding the transfer of the
                  Certificates and (e) the Certificates will bear a legend to
                  the foregoing effect.

                           2. The Purchaser is acquiring the Certificates for
                  its own account for investment only and not with a view to or
                  for sale in connection with any distribution thereof in any
                  manner that would violate the Act or any applicable state
                  securities laws.


                                       F-1

<PAGE>



                           3. The Purchaser is (a) a substantial, sophisticated
                  institutional investor having such knowledge and experience in
                  financial and business matters, and, in particular, in such
                  matters related to securities similar to the Certificates,
                  such that it is capable of evaluating the merits and risks of
                  investment in the Certificates, (b) able to bear the economic
                  risks of such an investment and (c) an "accredited investor"
                  within the meaning of Rule 501 (a) promulgated pursuant to the
                  Act.

                           4. The Purchaser has been furnished with, and has had
                  an opportunity to review (a) [a copy of the Private Placement
                  Memorandum, dated ______, 2004, relating to the Certificates
                  (b)] a copy of the Pooling and Servicing Agreement and [(b)]
                  [(c)] such other information concerning the Certificates, the
                  Mortgage Loans and the Depositor as has been requested by the
                  Purchaser from the Depositor or the Seller and is relevant to
                  the Purchaser's decision to purchase the Certificates. The
                  Purchaser has had any questions arising from such review
                  answered by the Depositor or the Seller to the satisfaction of
                  the Purchaser. [If the Purchaser did not purchase the
                  Certificates from the Seller in connection with the initial
                  distribution of the Certificates and was provided with a copy
                  of the Private Placement Memorandum (the "Memorandum")
                  relating to the original sale (the "Original Sale") of the
                  Certificates by the Depositor, the Purchaser acknowledges that
                  such Memorandum was provided to it by the Seller, that the
                  Memorandum was prepared by the Depositor solely for use in
                  connection with the Original Sale and the Depositor did not
                  participate in or facilitate in any way the purchase of the
                  Certificates by the Purchaser from the Seller, and the
                  Purchaser agrees that it will look solely to the Seller and
                  not to the Depositor with respect to any damage, liability,
                  claim or expense arising out of, resulting from or in
                  connection with (a) error or omission, or alleged error or
                  omission, contained in the Memorandum, or (b) any information,
                  development or event arising after the date of the
                  Memorandum.]

                           5. The Purchaser has not and will not nor has it
                  authorized or will it authorize any person to (a) offer,
                  pledge, sell, dispose of or otherwise transfer any
                  Certificate, any interest in any Certificate or any other
                  similar security to any person in any manner, (b) solicit any
                  offer to buy or to accept a pledge, disposition of other
                  transfer of any Certificate, any interest in any Certificate
                  or any other similar security from any person in any manner,
                  (c) otherwise approach or negotiate with respect to any
                  Certificate, any interest in any Certificate or any other
                  similar security with any person in any manner, (d) make any
                  general solicitation by means of general advertising or in any
                  other manner or (e) take any other action, that (as to any of
                  (a) through (e) above) would constitute a distribution of any
                  Certificate under the Act, that would render the disposition
                  of any Certificate a violation of Section 5 of the Act or any
                  state securities law, or that would require registration or
                  qualification pursuant thereto. The Purchaser will not sell or
                  otherwise transfer any of the Certificates, except in
                  compliance with the provisions of the Pooling and Servicing
                  Agreement.



                                       F-2

<PAGE>




                                          Very truly yours,



                                          ______________________________
                                          (Purchaser)

                                          By:___________________________

                                          Name:_________________________

                                          Title:________________________








                                       F-3

<PAGE>



                                    EXHIBIT G

                       FORM OF RULE 144A INVESTMENT LETTER

                                                                          [Date]
[SELLER]

Bear Stearns Asset Backed Securities, Inc.
383 Madison Avenue
New York, New York 10179

LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60603

         Re:      Bear Stearns Asset Backed Securities Trust 2004-HE1,
                  Asset-Backed Certificates, Series 2004-HE1 (the
                  "Certificates"), including the Class __Certificates (the
                  "Privately Offered Certificates")
                  --------------------------------------------------------

Dear Ladies and Gentlemen:

         In connection with our purchase of Privately Offered Certificates, we
confirm that:

                  (i)      we understand that the Privately Offered Certificates
                           are not being registered under the Securities Act of
                           1933, as amended (the "Act") or any applicable state
                           securities or "Blue Sky" laws, and are being sold to
                           us in a transaction that is exempt from the
                           registration requirements of such laws;

                  (ii)     any information we desired concerning the
                           Certificates, including the Privately Offered
                           Certificates, the trust in which the Certificates
                           represent the entire beneficial ownership interest
                           (the "Trust") or any other matter we deemed relevant
                           to our decision to purchase Privately Offered
                           Certificates has been made available to us;

                  (iii)    we are able to bear the economic risk of investment
                           in Privately Offered Certificates; we are an
                           institutional "accredited investor" as defined in
                           Section 501(a) of Regulation D promulgated under the
                           Act and a sophisticated institutional investor;

                  (iv)     we are acquiring Privately Offered Certificates for
                           our own account, not as nominee for any other person,
                           and not with a present view to any distribution or
                           other disposition of the Privately Offered
                           Certificates;

                  (v)      we agree the Privately Offered Certificates must be
                           held indefinitely by us (and may not be sold,
                           pledged, hypothecated or in any way disposed of)
                           unless subsequently registered under the Act and any
                           applicable state securities or "Blue Sky" laws or an
                           exemption from the registration


                                       G-1

<PAGE>



                           requirements of the Act and any applicable state
                           securities or "Blue Sky" laws is available;

                  (vi)     we agree that in the event that at some future time
                           we wish to dispose of or exchange any of the
                           Privately Offered Certificates (such disposition or
                           exchange not being currently foreseen or
                           contemplated), we will not transfer or exchange any
                           of the Privately Offered Certificates unless:

                                    (A) (1) the sale is to an Eligible Purchaser
                           (as defined below), (2) if required by the Pooling
                           and Servicing Agreement (as defined below) a letter
                           to substantially the same effect as either this
                           letter or, if the Eligible Purchaser is a Qualified
                           Institutional Buyer as defined under Rule 144A of the
                           Act, the Rule 144A and Related Matters Certificate in
                           the form attached to the Pooling and Servicing
                           Agreement (as defined below) (or such other
                           documentation as may be acceptable to the Trustee) is
                           executed promptly by the purchaser and delivered to
                           the addressees hereof and (3) all offers or
                           solicitations in connection with the sale, whether
                           directly or through any agent acting on our behalf,
                           are limited only to Eligible Purchasers and are not
                           made by means of any form of general solicitation or
                           general advertising whatsoever; and

                                    (B) if the Privately Offered Certificate is
                           not registered under the Act (as to which we
                           acknowledge you have no obligation), the Privately
                           Offered Certificate is sold in a transaction that
                           does not require registration under the Act and any
                           applicable state securities or "blue sky" laws and,
                           if LaSalle Bank National Association (the "Trustee")
                           so requests, a satisfactory Opinion of Counsel is
                           furnished to such effect, which Opinion of Counsel
                           shall be an expense of the transferor or the
                           transferee;

                  (vii)    we agree to be bound by all of the terms (including
                           those relating to restrictions on transfer) of the
                           Pooling and Servicing, pursuant to which the Trust
                           was formed; we have reviewed carefully and understand
                           the terms of the Pooling and Servicing Agreement;

                  (viii)   we either: (i) are not acquiring the Privately
                           Offered Certificate directly or indirectly by, or on
                           behalf of, an employee benefit plan or other
                           retirement arrangement which is subject to Title I of
                           the Employee Retirement Income Security Act of 1974,
                           as amended, and/or section 4975 of the Internal
                           Revenue Code of 1986, as amended, or (ii) are
                           providing the Opinion of Counsel required by the
                           Agreement.

                  (ix)     We understand that each of the Class ___ Certificates
                           bears, and will continue to bear, a legend to
                           substantiate the following effect: "THIS CERTIFICATE
                           HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
                           SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
                           ACT"), OR UNDER ANY STATE SECURITIES LAWS.


                                       G-2

<PAGE>



                           THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
                           AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,
                           RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
                           COMPLIANCE WITH THE SECURITIES ACT AND OTHER
                           APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A
                           UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
                           THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
                           INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
                           (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
                           PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
                           HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
                           PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
                           RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
                           REGISTRATION PROVIDED BY RULE 144 UNDER THE
                           SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED
                           FORM TO AN "INSTITUTIONAL ACCREDITED INVESTOR" WITHIN
                           THE MEANING THEREOF IN RULE 501(a)(1), (2), (3) or
                           (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN
                           WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH
                           PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN
                           VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE
                           RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN
                           THE FORM PROVIDED IN THE AGREEMENT AND (B) THE
                           RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE
                           ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE,
                           PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
                           SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH
                           CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
                           LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
                           JURISDICTION. THIS CERTIFICATE HAS NOT BEEN AND WILL
                           NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933,
                           AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
                           SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING
                           THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
                           REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
                           ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
                           APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A
                           UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
                           THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
                           INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
                           (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
                           PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
                           HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
                           PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
                           RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
                           REGISTRATION PROVIDED BY RULE 144 UNDER THE
                           SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED
                           FORM TO AN "INSTITUTIONAL ACCREDITED INVESTOR" WITHIN
                           THE


                                       G-3

<PAGE>



                           MEANING THEREOF IN RULE 501(a)(1), (2), (3) or (7) OF
                           REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL
                           OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS
                           PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF THE
                           SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE
                           TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM
                           PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT BY THE
                           TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE
                           TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER
                           IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
                           APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH
                           ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES
                           AND ANY OTHER APPLICABLE JURISDICTION."

         "Eligible Purchaser" means a corporation, partnership or other entity
which we have reasonable grounds to believe and do believe (i) can make
representations with respect to itself to substantially the same effect as the
representations set forth herein, and (ii) is either a Qualified Institutional
Buyer as defined under Rule 144A of the Act or an institutional "Accredited
Investor" as defined under Rule 501 of the Act.

         Terms not otherwise defined herein shall have the meanings assigned to
them in the Pooling and Servicing Agreement, dated as of January 1, 2004,
between Bear Stearns Asset Backed Securities, Inc., as depositor, EMC Mortgage
Corporation, as seller and master, and LaSalle Bank National Association, as
Trustee (the "Pooling and Servicing Agreement').

         If the Purchaser proposes that its Certificates be registered in the
name of a nominee on its behalf, the Purchaser has identified such nominee
below, and has caused such nominee to complete the Nominee Acknowledgment at the
end of this letter.


Name of Nominee (if any): _____________________



                                       G-4

<PAGE>



         IN WITNESS WHEREOF, this document has been executed by the undersigned
who is duly authorized to do so on behalf of the undersigned Eligible Purchaser
on the ___ day of ________, 20___.

                                             Very truly yours,

                                             [PURCHASER]

                                             By:________________________________
                                                      (Authorized Officer)

                                             [By:_______________________________
                                                      Attorney-in-fact]



                                       G-5

<PAGE>



                             Nominee Acknowledgment

         The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner thereof is
and shall be the Purchaser identified above, for whom the undersigned is acting
as nominee.

                                              [NAME OF NOMINEE]

                                              By:_______________________________
                                                       (Authorized Officer)


                                              [By:______________________________
                                                       Attorney-in-fact]



                                       G-6

<PAGE>



                                                                       EXHIBIT H

                           FORM OF REQUEST FOR RELEASE

To:      LaSalle Bank National Association
         135 South LaSalle Street, Suite 1625
         Chicago, Illinois 60603

RE:      Pooling and Servicing Agreement dated as of January 1, 2004, between
         Bear Stearns Asset Backed Securities Inc., as Depositor, EMC Mortgage
         Corporation, as seller and master servicer, and LaSalle Bank National
         Association, as Trustee
         ---------------------------------------------------------------------

         In connection with the administration of the Mortgage Loans held by you
pursuant to the above-captioned Pooling and Servicing Agreement, we request the
release, and hereby acknowledge receipt, of the Mortgage File for the Mortgage
Loan described below, for the reason indicated.

Mortgage Loan Number:
--------------------

Mortgagor Name, Address & Zip Code:
----------------------------------

Reason for Requesting Documents (check one):
-------------------------------------------

_____             1.       Mortgage Paid in Full and proceeds have been
                           deposited into the Custodial Account

_____             2.       Foreclosure

_____             3.       Substitution

_____             4.       Other Liquidation

_____             5.       Nonliquidation          Reason:______________________

_____             6.       California Mortgage Loan paid in full


                                             By:______________________________
                                                      (authorized signer)

                                             Issuer:__________________________
                                             Address:_________________________

                                             Date:____________________________


                                       H-1

<PAGE>



                                    EXHIBIT I

                          DTC Letter of Representations
                             [provided upon request]


                                       I-1

<PAGE>



                                    EXHIBIT J

                   Schedule of Mortgage Loans with Lost Notes
                             [provided upon request]



                                       J-1

<PAGE>



                                    EXHIBIT K


                           FORM OF CUSTODIAL AGREEMENT
                           ---------------------------

                  THIS CUSTODIAL AGREEMENT (as amended and supplemented from
time to time, the "Agreement'), dated as of January 30, 2004, by and among
LASALLE BANK NATIONAL ASSOCIATION, not individually but solely as trustee under
the Pooling and Servicing Agreement defined below (including its successors
under the Pooling and Servicing Agreement defined below, the "Trustee"), BEAR
STEARNS ASSET BACKED SECURITIES, INC., as depositor (together with any successor
in interest, the "Depositor"), EMC MORTGAGE CORPORATION, as seller (in that
capacity, the "Seller") and master servicer (together with any successor in
interest or successor under the Pooling and Servicing Agreement referred to
below, the "Master Servicer") and WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, as custodian (together with any successor in interest or any
successor appointed hereunder, the "Custodian").


                                WITNESSETH THAT:
                                ----------------

                  WHEREAS, the Depositor, the Seller, the Master Servicer and
the Trustee have entered into a Pooling and Servicing Agreement, dated as of
January 1, 2004, relating to the issuance of Bear Stearns Asset Backed
Securities Trust 2004-HE1, Asset-Backed Certificates, Series 2004-HE1 (as in
effect on the date of this Agreement, the "Original Pooling and Servicing
Agreement," and as amended and supplemented from time to time, the "Pooling and
Servicing Agreement'); and

                  WHEREAS, the Custodian has agreed to act as agent for the
Trustee on behalf of the Certificateholders and the Certificate Insurer for the
purposes of receiving and holding certain documents and other instruments
delivered by the Depositor, the Seller or the Master Servicer under the Pooling
and Servicing Agreement and the Servicers under their respective Servicing
Agreements, all upon the terms and conditions and subject to the limitations
hereinafter set forth;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the Trustee, the
Depositor, the Seller, the Master Servicer and the Custodian hereby agree as
follows:

                                   ARTICLE I.
                                   DEFINITIONS

                  Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned in the Original Pooling and Servicing
Agreement, unless otherwise required by the context herein.

                                   ARTICLE II.
                          CUSTODY OF MORTGAGE DOCUMENTS




                                       K-1

<PAGE>



                  Section 2.1. Custodian to Act as Agent: Acceptance of Mortgage
Files. The custodian, as the duly appointed custodial agent of the Trustee for
these purposes, acknowledges (subject to any exceptions noted in the Initial
Certification referred to in Section 2.3(a)) receipt of the Mortgage Files
relating to the Mortgage Loans identified on the schedule attached hereto (the
"Mortgage Files") and declares that it holds and will hold such Mortgage Files
as agent for the Trustee, in trust, for the use and benefit of all present and
future Certificateholders and the Certificate Insurer.

                  Section 2.2. Recordation of Assignments. If any Mortgage File
includes one or more assignments of Mortgage that have not been recorded
pursuant to the provisions of Section 2.01 of the Pooling and Servicing
Agreement and the related Mortgage Loan is not a MOM Loan or the related
Mortgaged Properties are located in jurisdictions specifically excluded by the
Opinion of Counsel delivered to the Trustee pursuant to Section 2.01 of the
Pooling and Servicing Agreement, each such assignment shall be delivered by the
Custodian to the Seller for the purpose of recording it in the appropriate
public office for real property records, and the Seller, at no expense to the
Custodian, shall promptly cause to be recorded in the appropriate public office
for real property records each such assignment of Mortgage and, upon receipt
thereof from such public office, shall return each such assignment of Mortgage
to the Custodian.

                  Section 2.3. Review of Mortgage Files.

                  (a) On or prior to the Closing Date, in accordance with
Section 2.02 of the Pooling and Servicing Agreement, the Custodian shall deliver
to the Seller, the Trustee and the Certificate Insurer an Initial Certification
in the form annexed hereto as Exhibit One evidencing receipt (subject to any
exceptions noted therein) of a Mortgage File for each of the Mortgage Loans
listed on the Schedule attached hereto (the "Mortgage Loan Schedule").

                  (b) Within 90 days of the Closing Date, the Custodian agrees,
for the benefit of Certificateholders and the Certificate Insurer, to review, in
accordance with the provisions of Section 2.02 of the Pooling and Servicing
Agreement, each such document, and shall deliver to the Seller, the Master
Servicer, the Certificate Insurer and the Trustee an Interim Certification in
the form annexed hereto as Exhibit Two to the effect that all such documents
have been executed and received and that such documents relate to the Mortgage
Loans identified on the Mortgage Loan Schedule, except for any exceptions listed
on Schedule A attached to such Interim Certification. The Custodian shall be
under no duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same are
genuine, enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face.

                  (c) Not later than 180 days after the Closing Date, the
Custodian shall review, for the benefit of Certificateholders and the
Certificate Insurer, the Mortgage Files as provided in Section 2.02 of the
Pooling and Servicing Agreement and deliver to the Seller, the Master Servicer,
the Certificate Insurer and the Trustee a Final Certification in the form
annexed hereto as Exhibit Three evidencing the completeness of the Mortgage
Files.



                                       K-2

<PAGE>



                  (d) In reviewing the Mortgage Files as provided herein and in
the Pooling and Servicing Agreement, the Custodian shall make no representation
as to and shall not be responsible to verify (i) the validity, legality,
enforceability, due authorization, recordability, sufficiency or genuineness of
any of the documents included in any Mortgage File or (ii) the collectibility,
insurability, effectiveness or suitability of any of the documents in any
Mortgage File.

         Upon receipt of written request from the Trustee, the Custodian shall
as soon as practicable supply the Trustee with a list of all of the documents
relating to the Mortgage Loans missing from the Mortgage Files.

                  Section 2.4. Notification of Breaches of Representations and
Warranties. Upon discovery by the Custodian of a breach of any representation or
warranty made by the Depositor as set forth in the Pooling and Servicing
Agreement with respect to a Mortgage Loan relating to a Mortgage File, the
Custodian shall give prompt written notice to the Depositor, the Master
Servicer, the Certificate Insurer and the Trustee.

                  Section 2.5. Custodian to Cooperate: Release of Mortgage
Files. Upon receipt of written notice from the Trustee that the Seller has
repurchased a Mortgage Loan pursuant to Article II of the Pooling and Servicing
Agreement, and a request for release (a "Request for Release") confirming that
the purchase price therefore has been deposited in the Protected Account or the
Distribution Account, then the Custodian agrees to promptly release to the
Seller the related Mortgage File.

                  Upon the Custodian's receipt of a Request for Release
substantially in the form of Exhibit H to the Pooling and Servicing Agreement
signed by a Servicing Officer of the Master Servicer, stating that it has
received payment in full of a Mortgage Loan or that payment in full will be
escrowed in a manner customary for such purposes, the Custodian agrees promptly
to release to the Master Servicer, the related Mortgage File. The Depositor
shall deliver to the Custodian and the Custodian agrees to review in accordance
with the provisions of the Custodial Agreement the Mortgage Note and other
documents constituting the Mortgage File with respect to any Replacement
Mortgage Loan.

                  From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any Primary Mortgage Insurance Policy or LPMI Policy, the Master Servicer shall
deliver to the Custodian a Request for Release signed by a Servicing Officer
requesting that possession of all of the Mortgage File be released to the Master
Servicer and certifying as to the reason for such release and that such release
will not invalidate any insurance coverage provided in respect of the Mortgage
Loan under any of the Insurance Policies. Upon receipt of the foregoing, the
Custodian shall deliver the Mortgage File to the Master Servicer. The Master
Servicer shall cause each Mortgage File or any document therein so released to
be returned to the Custodian when the need therefore by the Master Servicer no
longer exists, unless (i) the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Protected Account or the Distribution Account or (ii) the Mortgage File or such
document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has


                                       K-3

<PAGE>



delivered to the Custodian a certificate of a Servicing Officer certifying as to
the name and address of the Person to which such Mortgage File or such document
was delivered and the purpose or purposes of such delivery.

                  At any time that the Master Servicer is required to deliver to
the Custodian a Request for Release, the Master Servicer shall deliver two
copies of the Request for Release if delivered in hard copy or the Master
Servicer may furnish such Request for Release electronically to the Custodian,
in which event the Servicing Officer transmitting the same shall be deemed to
have signed the Request for Release. In connection with any Request for Release
of a Mortgage File because of a repurchase of a Mortgage Loan, such Request for
Release shall be accompanied by an assignment of mortgage, without recourse,
representation or warranty from the Trustee to the Seller (unless such Mortgage
Loan is a MOM Loan) and the related Mortgage Note shall be endorsed without
recourse, representation or warranty by the Trustee and be returned to the
Seller. In connection with any Request for Release of a Mortgage File because of
the payment in full of a Mortgage Loan, such Request for Release shall be
accompanied by a certificate of satisfaction or other similar instrument to be
executed by or on behalf of the Trustee and returned to the Master Servicer.

                  Section 2.6. Assumption Agreements. In the event that any
assumption agreement, substitution of liability agreement or sale of servicing
agreement is entered into with respect to any Mortgage Loan subject to this
Agreement in accordance with the terms and provisions of the Pooling and
Servicing Agreement, the Master Servicer, to the extent provided in the Pooling
and Servicing Agreement, shall notify the Custodian that such assumption or
substitution agreement has been completed by forwarding to the Custodian the
original of such assumption or substitution agreement, which shall be added to
the related Mortgage File and, for all purposes, shall be considered a part of
such Mortgage File to the same extent as all other documents and instruments
constituting parts thereof.

                                  ARTICLE III.
                            CONCERNING THE CUSTODIAN

                  Section 3.1. Custodian a Bailee and Agent of the Trustee. With
respect to each Mortgage Note, Mortgage and other documents constituting each
Mortgage File which are delivered to the Custodian, the Custodian is exclusively
the bailee and custodial agent of the Trustee and has no instructions to hold
any Mortgage Note or Mortgage for the benefit of any person other than the
Trustee, the Certificateholders and the Certificate Insurer and undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement and in the Pooling and Servicing Agreement. Except upon compliance
with the provisions of Section 2.5 of this Agreement, no Mortgage Note, Mortgage
or Mortgage File shall be delivered by the Custodian to the Seller, the
Depositor or the Master Servicer or otherwise released from the possession of
the Custodian.

                  Section 3.2. Reserved.

                  Section 3.3. Custodian May Own Certificates. The Custodian in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Custodian.


                                       K-4

<PAGE>




                  Section 3.4. Master Servicer to Pay Custodian's Fees and
Expenses. The Master Servicer covenants and agrees to pay to the Custodian from
time to time, and the Custodian shall be entitled to, reasonable compensation
for all services rendered by it in the exercise and performance of any of the
powers and duties hereunder of the Custodian, and the Master Servicer will pay
or reimburse the Custodian upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Custodian in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its negligence or bad faith or to the extent that such cost or
expense is indemnified by the Depositor pursuant to the Pooling and Servicing
Agreement.

                  Section 3.5. Custodian May Resign; Trustee May Remove
Custodian. The Custodian may resign from the obligations and duties hereby
imposed upon it as such obligations and duties relate to its acting as Custodian
of the Mortgage Loans. Upon receiving such written notice of resignation, the
Trustee shall either take custody of the Mortgage Files itself and give prompt
written notice thereof to the Depositor, the Master Servicer, the Certificate
Insurer and the Custodian, or promptly appoint a successor Custodian by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Custodian and one copy to the successor Custodian. If the Trustee
shall not have taken custody of the Mortgage Files and no successor Custodian
shall have been so appointed and have accepted appointment within 30 days after
the giving of such written notice of resignation, the resigning Custodian may
petition any court of competent jurisdiction for the appointment of a successor
Custodian.

                  The Trustee, at the direction of 25% of the
Certificateholders, shall remove the Custodian at any time upon 60 days prior
written notice to Custodian. In such event, the Trustee shall appoint, or
petition a court of competent jurisdiction to appoint, a successor Custodian
hereunder. Any successor Custodian shall be a depository institution subject to
supervision or examination by federal or state authority shall be able to
satisfy the other requirements contained in Section 3.7 and shall be
unaffiliated with the Master Servicer and the Depositor.

                  Any resignation or removal of the Custodian and appointment of
a successor Custodian pursuant to any of the provisions of this Section 3.5
shall become effective upon acceptance of appointment by the successor
Custodian. The Trustee shall give prompt notice to the Depositor, the
Certificate Insurer and the Master Servicer of the appointment of any successor
Custodian. Notwithstanding anything to the contrary set forth herein, no
successor Custodian shall be appointed by the Trustee without the prior approval
of the Depositor and the Master Servicer and with the prior written consent of
the Certificate Insurer (which consent shall not be unreasonably withheld).

                  Section 3.6. Merger or Consolidation of Custodian. Any Person
into which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.


                                       K-5

<PAGE>




                  Section 3.7. Representations of the Custodian. The Custodian
hereby represents that it is a depository institution subject to supervision or
examination by a federal or state authority, has a combined capital and surplus
of at least $15,000,000 and is qualified to do business in the jurisdictions in
which it will hold any Mortgage File.

                  Section 3.8. Limitation on Liability. Neither the Custodian
nor any of its directors, officers, agents or employees, shall be liable for any
action taken or omitted to be taken by it or them hereunder or in connection
herewith in good faith and believed (which belief may be based upon the opinion
or advice of counsel selected by it in the exercise of reasonable care) by it or
them to be within the purview of this Agreement, except for its or their own
negligence, lack of good faith or willful misconduct. The Custodian and any
director, officer, employee or agent of the Custodian may rely in good faith on
any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. In no event shall the Custodian
or its directors, officers, agents and employees be held liable for any special,
indirect or consequential damages resulting from any action taken or omitted to
be taken by it or them hereunder or in connection herewith even if advised of
the possibility of such damages.

                  Notwithstanding anything herein to the contrary, the Custodian
agrees to indemnify the Trust Fund, the Trustee and each of their respective
officers, directors and agents for any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever that may be imposed
on, incurred by or asserted against the Trustee or Trust Fund, due to any act or
omission by the Custodian with respect to the Mortgage Files; provided, however,
that the Custodian shall not be liable to any of the foregoing Persons for any
amount and any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of such Person. The provisions of this
Section 3.8 shall survive the termination of this Custodial Agreement.

                  The Custodian and its directors, officers, employees and
agents shall be entitled to indemnification and defense from the Trust Fund for
any loss, liability or expense incurred without negligence, willful misconduct,
bad faith on their part, arising out of, or in connection with, the acceptance
or administration of the custodial arrangement created hereunder, including the
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or duties
hereunder.

                                   ARTICLE IV.
                            MISCELLANEOUS PROVISIONS

                  Section 4.1. Notices. All notices, requests, consents and
demands and other communications required under this Agreement or pursuant to
any other instrument or document delivered hereunder shall be in writing and,
unless otherwise specifically provided, may be delivered personally, by telegram
or telex, or by registered or certified mail, postage prepaid, return receipt
requested, at the addresses specified on the signature page hereof (unless
changed by the particular party whose address is stated herein by similar notice
in writing), in which case the notice will be deemed delivered when received.



                                       K-6

<PAGE>



                  Section 4.2. Certificate Insurer Rights. The Certificate
Insurer shall be an express third party beneficiary of this Custodial Agreement
for the purpose of enforcing the provisions hereof to the extent of the
Certificate Insurer's or any Class III-A Certificateholder's rights explicitly
specified herein as if a party hereto.

                  Section 4.3. Amendments. No modification or amendment of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by all parties hereto, with the prior written consent of the
Certificate Insurer (which consent shall not be unreasonably withheld). The
Trustee shall give prompt notice to the Custodian of any amendment or supplement
to the Pooling and Servicing Agreement and furnish the Custodian with written
copies thereof.

                  Section 4.4. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

                  Section 4.5. Recordation of Agreement. To the extent permitted
by applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Depositor and at the Trust's expense, but
only upon direction accompanied by an Opinion of Counsel reasonably satisfactory
to the Depositor to the effect that the failure to effect such recordation is
likely to materially and adversely affect the interests of the
Certificateholders.

                  For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.

                  Section 4.6. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the holders thereof.


                                       K-7

<PAGE>




                  IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.



Address:                                     LASALLE BANK NATIONAL
                                             ASSOCIATION, not individually but
135 South LaSalle Street                     solely as Trustee
Chicago, IL 60603

Attention:                                   By:________________________________
                  BSABS 2004-HE1             Name:
Telecopy:                                    Title:
Confirmation:
Address:                                     BEAR STEARNS ASSET BACKED
                                             SECURITIES, INC.
383 Madison Avenue
New York, New York 10179
                                             By:________________________________
                                             Name:
                                             Title:

Address:                                     EMC MORTGAGE CORPORATION

909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038                          By:________________________________
                                             Name:
                                             Title:

Address:                                     WELLS FARGO BANK MINNESOTA,
                                             NATIONAL ASSOCIATION, as Custodian
1015 Tenth Avenue Southeast
Minneapolis, Minnesota 55414                 By:________________________________
                                             Name:    Leigh Taylor
                                             Title:   Assistant Vice President




<PAGE>



STATE OF                )
                        ) ss:
COUNTY OF               )

                  On the 30th day of January 2004 before me, a notary public in
and for said State, personally appeared _______________, known to me to be a(n)
___________________ of LaSalle Bank National Association, one of the parties
that executed the within agreement, and also known to me to be the person who
executed the within agreement on behalf of said party and acknowledged to me
that such party executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                ____________________________
                                                        Notary Public


[SEAL]





<PAGE>



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

                  On the 30th day of January 2004 before me, a notary public in
and for said State, personally appeared_____________________, known to me to be
a(n)________________of Bear Stearns Asset Backed Securities, Inc., and also
known to me to be the person who executed the within instrument on behalf of
said party, and acknowledged to me that such party executed the within
instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                ____________________________
                                                        Notary Public
[SEAL]




<PAGE>



STATE OF TEXAS                 )
                               ) ss:
COUNTY OF DALLAS               )

                  On the 30th day of January 2004 before me, a notary public in
and for said State, personally appeared _____________________, known to me to be
a(n) __________________of EMC Mortgage Corporation, one of the parties that
executed the within instrument, and also known to me to be the person who
executed the within instrument on behalf of said party, and acknowledged to me
that such party executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                ____________________________
                                                        Notary Public
[Notarial Seal]





                                      K-11

<PAGE>



STATE OF MINNESOTA     )
                       ) ss:
COUNTY OF HENNEPIN     )


                  On the 30th day of January 2004 before me, a notary public in
and for said State, personally appeared Leigh Taylor, known to me to be a
Assistant Vice President of Wells Fargo Bank Minnesota, National Association,
one of the national parties that executed the within instrument, and also known
to me to be the person who executed it on behalf of said party, and acknowledged
to me that such party executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                ____________________________
                                                        Notary Public
[Notarial Seal]






<PAGE>



                                   EXHIBIT ONE

                     FORM OF CUSTODIAN INITIAL CERTIFICATION


                                               January 30, 2004


LaSalle Bank National Association       ACE Guaranty Corp.
135 South LaSalle Street                1325 Avenue of the Americas, 18th Floor
Chicago, IL 60603                       New York, NY 10019

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2004-HE1

                  Re:      Custodial Agreement, dated as of January 30, 2004, by
                           and among LaSalle Bank National Association, Wells
                           Fargo Bank Minnesota, National Association, Bear
                           Stearns Asset Backed Securities, Inc. and EMC
                           Mortgage Corporation relating to Bear Stearns Asset
                           Backed Securities Trust 2004-HE1, Asset-Backed
                           Certificates, Series 2004-HE1
                           -----------------------------------------------------


Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, and subject to Section 2.02 of the Pooling and Servicing
Agreement, the undersigned, as Custodian, hereby certifies that it has received
a Mortgage File (which contains an original Mortgage Note or lost note
affidavit) to the extent required in Section 2.01 of the Pooling and Servicing
Agreement with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule, with any exceptions listed on Schedule A attached hereto.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                     WELLS FARGO BANK MINNESOTA,
                                                     NATIONAL ASSOCIATION


                                                     By:________________________
                                                     Name:______________________
                                                     Title:_____________________



                                      K-13

<PAGE>



                                   EXHIBIT TWO

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                            [DATE]

LaSalle Bank National Association        ACE Guaranty Corp.
135 South LaSalle Street                 1325 Avenue of the Americas, 18th Floor
Chicago, IL 60603                        New York, NY 10019

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2004-HE1

                  Re:      Custodial Agreement, dated as of January 30, 2004, by
                           and among LaSalle Bank National Association, Wells
                           Fargo Bank Minnesota, National Association, Bear
                           Stearns Asset Backed Securities, Inc. and EMC
                           Mortgage Corporation relating to Bear Stearns Asset
                           Backed Securities Trust 2004-HE1, Asset-Backed
                           Certificates, Series 2004-HE1
                           -----------------------------------------------------


Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File to the extent required pursuant to Section 2.01 of the
Pooling and Servicing Agreement with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule, and it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: all required documents have been executed
and received and that such documents related to the Mortgage Loans identified on
the Mortgage Loan Schedule, with any exceptions listed on Schedule A attached
hereto.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                WELLS FARGO BANK MINNESOTA,
                                                NATIONAL ASSOCIATION


                                                By:________________________
                                                Name:______________________
                                                Title:_____________________




                                      K-14

<PAGE>



                                  EXHIBIT THREE

                      FORM OF CUSTODIAN FINAL CERTIFICATION



                                                      [DATE]


LaSalle Bank National Association        ACE Guaranty Corp.
135 South LaSalle Street                 1325 Avenue of the Americas, 18th Floor
Chicago, IL 60603                        New York, NY 10019


EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2004-HE1

                  Re:      Custodial Agreement, dated as of January 30, 2004, by
                           and among LaSalle Bank National Association, Wells
                           Fargo Bank Minnesota, National Association, Bear
                           Stearns Asset Backed Securities, Inc. and EMC
                           Mortgage Corporation relating to Bear Stearns Asset
                           Backed Securities Trust 2004-HE1 Asset-Backed
                           Certificates, Series 2004-HE1
                           -----------------------------------------------------


Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule containing with respect to each such Mortgage Loan:

                  (i) the original Mortgage Note, including any riders thereto,
                  endorsed without recourse to the order of "LaSalle Bank
                  National Association, as Trustee for certificateholders of
                  Bear Stearns Asset Backed Securities, Inc. Asset Backed
                  Certificates, Series 2004- HE1," and showing to the extent
                  available to the Seller an unbroken chain of endorsements from
                  the original payee thereof to the Person endorsing it to the
                  Trustee,

                  (ii) the original Mortgage and, if the related Mortgage Loan
                  is a MOM Loan, noting the presence of the MIN and language
                  indicating that such Mortgage Loan is a MOM Loan, which shall
                  have been recorded (or if the original is not available, a
                  copy), with


                                      K-15

<PAGE>



                  evidence of such recording indicated thereon (or if permitted
                  by Section 2.2 of the Custodial Agreement, shall be in
                  recordable form),

         (iii) unless the Mortgage Loan is a MOM Loan, the assignment (either an
original or a copy, which may be in the form of a blanket assignment if
permitted in the jurisdiction in which the Mortgaged Property is located) to the
Trustee of the Mortgage with respect to each Mortgage Loan in the name of
"LaSalle Bank National Association , as Trustee for certificateholders of Bear
Stearns Asset Backed Securities, Inc. Asset Backed Certificates, Series
2004-HE1", which shall have been recorded (or if permitted by Section 2.2 of the
Custodial Agreement, shall be in recordable form);

                  (iv) an original or a copy of all intervening assignments of
                  the Mortgage, if any, with evidence of recording thereon,

                  (v) the original policy of title insurance or mortgagee's
                  certificate of title insurance or commitment or binder for
                  title insurance, if available, or a copy thereof, or, in the
                  event that such original title insurance policy is
                  unavailable, a photocopy thereof, or in lieu thereof, a
                  current lien search on the related Mortgaged Property and

                  (vi) originals or copies of all available assumption,
                  modification or substitution agreements, if any.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                WELLS FARGO BANK MINNESOTA,
                                                NATIONAL ASSOCIATION



                                                By:________________________
                                                Name:______________________
                                                Title:_____________________
















                                      K-16

<PAGE>




                                    EXHIBIT L

                           FORM OF CLASS III-A POLICY





                                               January __, 2004



ACE GUARANTY CORP.
1325 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

FINANCIAL GUARANTY INSURANCE POLICY
-----------------------------------


OBLIGATIONS INSURED:                                FINANCIAL GUARANTY INSURANCE
                                                    POLICY NUMBER:  D-2004-2
All Insured Payments now owing or which
may in the future be owing by the Trust and         EFFECTIVE DATE:
to be paid by the Trust to the Beneficiary          January 30, 2004
under the Obligations, as further described
and defined below.

         For value received and subject to the terms and conditions of this
financial guaranty insurance policy number D-2004-2 (the "Policy"), ACE Guaranty
Corp., a Maryland corporation, as Insurer with respect to the Obligations (the
"Insurer") for the trust created pursuant to the Pooling Agreement, as defined
below (the "Trust"), is held and firmly bound unto the Beneficiary identified
below for, and unconditionally and irrevocably agrees to pay, each and every
Insured Payment which shall become Due for Payment, but shall be unpaid by
reason of Nonpayment by the Trust (as such terms are defined below). This Policy
is non-cancelable for any reason, including, without limitation, the non-payment
of premium.

TERMS AND CONDITIONS
--------------------

SECTION 1.  Definitions

         Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Pooling Agreement as of the date of execution of
this Policy, without giving effect to any subsequent amendment to or
modification of the Pooling Agreement unless such amendment or modification has
been approved in writing by the Insurer pursuant to the amendment provisions of
the Pooling Agreement. In addition to the terms defined elsewhere herein, the
following terms shall have the respective meanings set forth below.



<PAGE>



         (a) "Avoided Payment" shall mean any amount previously distributed by
or on behalf of the Trust in respect of an Obligation that is recoverable and
sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to Insolvency Proceeding in accordance with a final nonappealable order
of a court having competent jurisdiction.

         (b) "Beneficiary" means the Trustee, on behalf of, and for the benefit
of the holders of the Obligations.

         (c) "Business Day" means any day other than (i) a Saturday or Sunday or
(ii) any other day on which banking institutions are authorized or required by
law, executive order or governmental decree to be closed in New York City,
Minnesota, Maryland or Illinois.

         (d) "Defaulted Amount" means the portion of an Insured Payment that is
Due for Payment and unpaid by reason of Nonpayment by the Trust.

         (e) "Due for Payment," means with respect to an Insured Payment and any
Distribution Date: (i) any shortfall in amounts available in the Distribution
Account in respect of the Interest Distribution Amount payable on each
Obligation on such Distribution Date; (ii) any Insured Certificate Loss Amount
with respect to each Obligation on such Distribution Date; and (iii) on the
Final Scheduled Distribution Date (or, with the consent of the Insurer, upon the
earlier termination of the Trust pursuant to the terms of the Pooling Agreement)
the Certificate Principal Balance of each Obligation after giving effect to any
distributions on such Distribution Date (other than distributions of Insured
Payments).

         (f) "Final Scheduled Distribution Date" means the Distribution Date
occurring in February 2034.

         (g) "Fiscal Agent" has the meaning assigned thereto in Section 4.

         (h) "Insolvency Proceeding" means the commencement after the date
hereof of any bankruptcy, insolvency, readjustment of debt, reorganization,
marshalling of assets and liabilities or similar proceedings by or against any
Person, or the commencement after the date hereof of any proceedings by or
against any Person for the winding up or the liquidation of its affairs, or the
consent after the date hereof to the appointment of a trustee, conservator,
administrator, receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, reorganization, marshalling of assets and liabilities or
similar proceedings relating to any Person.

         (i) "Insured Certificate Loss Amount" means, with respect to any
Distribution Date and the Obligation, the Applied Realized Loss Amount with
respect to the Obligation allocated on such Distribution Date.

         (j) "Insured Payment" means the following amounts now owing or which
may in the future be owing by the Trust to the Holders of any Obligation: (i)
the Current Interest payable on each Obligation on such Distribution Date; (ii)
any Insured Certificate Loss Amount with respect to each Obligation on each
Distribution Date; and (iii) the Certificate Principal Balance of each
Obligation on the Final Scheduled Distribution Date, or, with the consent of the
Insurer, upon the


                                       L-2

<PAGE>



earlier termination of the Trust pursuant to the terms of the Pooling Agreement,
in each case after giving effect to any distributions on such Distribution Date
(other than distributions of Insured Payments); provided, however, that so long
as the Insurer has not failed to pay when due and payable an amount previously
referred to in this definition, "Insured Payment" shall not include any
additional amounts owing by the Trust solely as a result of the failure by the
Trustee to pay such amount when due and payable, including, without limitation,
any such additional amounts as may be attributable to penalties or default
interest rates, amounts in respect of indemnification, or any other additional
amounts payable by the Trustee by reason of such a default. Notwithstanding the
foregoing, "Insured Payment" does not include any Basis Risk Shortfall, any
Prepayment Interest Shortfall, any Relief Act Interest Shortfall or any
shortfall attributable to the liability of the Trust for taxes or withholding
taxes including interest and penalties in respect of such liability.

         (k) "Nonpayment by the Trust" with respect to an Insured Payment at a
time when such Insured Payment is Due for Payment, means that the funds, if any,
remitted to the Beneficiary pursuant to the Pooling Agreement are insufficient
for payment in full of such Insured Payment. In addition to and without limiting
the foregoing, "Nonpayment by the Trust" includes any portion of any Insured
Payment which has become an Avoided Payment.

         (l) "Notice of Claim" means a notice of claim in the form of Exhibit A
hereto.

         (m) "Obligation" means the Asset-Backed Certificates, Series 2004-HE1,
Class III-A Certificates issued under the Pooling Agreement.

         (n) "Order" means a final, nonappealable order of a court or other body
exercising jurisdiction in an Insolvency Proceeding by or against the Trust, to
the effect that the Beneficiary is required to return or repay all or any
portion of an Avoided Payment.

         (o) "Person" means any legal person, including any individual,
corporation, partnership, joint venture, association, joint stock company,
limited liability company, trust or unincorporated organization or similar
entity.

         (p) "Policy" means this Financial Guaranty Insurance Policy No.
D-2004-2.

         (q) "Pooling Agreement" means the Pooling and Servicing Agreement,
dated as of January 1, 2004, among Bear Stearns Asset Backed Securities, Inc.,
as Depositor, EMC Mortgage Corporation, as Seller and Master Servicer and the
Trustee, without regard to any amendment or supplement thereto unless such
amendment or supplement has been approved in writing by the Insurer pursuant to
the amendment provisions of the Pooling Agreement.

         (r) "Receipt" and "Received" shall mean actual delivery to the Insurer
prior to 2:00 p.m., New York City time, on a Business Day; provided, however,
that delivery either on a day that is not a Business Day, or after 2:00 p.m.,
New York City time, on a Business Day, shall be deemed to be "Received" on the
next succeeding Business Day. For purposes of this definition, "actual delivery"
to the Insurer shall mean (i) the delivery of the original Notice of Claim,
notice or other applicable documentation to the Insurer at its address set forth
in Section 6, or (ii) facsimile transmission of the original Notice of Claim,
notice or other applicable documentation to the Insurer at its facsimile


                                       L-3

<PAGE>



number set forth in Section 6. If presentation is made by facsimile
transmission, the Beneficiary (i) promptly shall confirm transmission by
telephone to the Insurer at its telephone number set forth in Section 6, and
(ii) as soon as is reasonably practicable, shall deliver the original Notice of
Claim, notice or other applicable documentation to the Insurer at its address
set forth in Section 6. If any Notice of Claim, notice or other documentation
actually delivered (or attempted to be delivered) under the Policy by the
Beneficiary is not in proper form or is not properly completed, executed or
delivered, or otherwise is insufficient for the purpose of making a claim
hereunder, "Receipt" by the Insurer shall be deemed not to have occurred, and
the Insurer promptly shall so advise the Beneficiary. In such case, the
Beneficiary may submit an amended Notice of Claim, notice or other
documentation, as the case may be, to the Insurer.

         (s) "Term of the Policy" means the period from and including the
Effective Date to and including the date on which all Insured Payments have been
paid; provided, however, that in the event that any amount with respect to any
Insured Payment paid to the Beneficiary pursuant to the Pooling Agreement during
the Term of the Policy becomes an Avoided Payment, the Insurer's obligations
with respect thereto shall remain in effect or shall be reinstated, as
applicable, until payment in full by the Insurer pursuant to the terms hereof.

         (t) "Trustee" means LaSalle Bank National Association, or any successor
thereto under the Pooling Agreement.

SECTION 2.  Claims

         The Beneficiary may make a claim under this Policy for the amount of
any Defaulted Amount by executing and delivering, or causing to be executed and
delivered, to the Insurer a Notice of Claim, with appropriate insertions. Such
Notice of Claim, when so completed and delivered, shall constitute proof of a
claim hereunder when Received by the Insurer.

         In the event that any amount shall be received by the Beneficiary in
respect of a Defaulted Amount forming the basis of a claim specified in a Notice
of Claim submitted hereunder, which amount had not been received when the Notice
of Claim was prepared but which is received by the Beneficiary prior to the
receipt of payment from the Insurer as contemplated by this Policy (any such
amount, a "Recovery"), the Beneficiary immediately shall so notify the Insurer
(which notice shall include the amount of any such Recovery). The fact that a
Recovery has been received by the Beneficiary shall be deemed to be incorporated
in the applicable Notice of Claim as of the date such Notice of Claim originally
was prepared, without necessity of any action on the part of any Person, and the
Insurer shall pay the amount of the claim specified in the Notice of Claim as
herein provided, net of the Recovery.

         The Insurer will pay each Defaulted Amount (other than a Defaulted
Amount which consists of an Avoided Payment) to the Beneficiary on the later of
(i) noon, New York City time, on the date such Defaulted Amount becomes Due for
Payment or (ii) noon, New York City time, on the second Business Day following
the day on which the Insurer Receives a Notice of Claim as specified in the
preceding paragraph. The Insurer will pay each Defaulted Amount which consists
of an Avoided Payment as provided in Section 3.



                                       L-4

<PAGE>



         No claim may be made hereunder except by the Beneficiary.

SECTION 3.  Payments

         Payments due hereunder in respect of Insured Payments shall be
disbursed to the Beneficiary by wire transfer of immediately available funds to
an account of the Beneficiary specified in the applicable Notice of Claim.

         The Insurer's obligations hereunder in respect of Insured Payments
shall be discharged to the extent that funds are transferred to the Beneficiary
as provided in the Notice of Claim, whether or not such funds are properly
applied by the Beneficiary.

         If any amount or property paid, credited, transferred or delivered to
the Beneficiary by the Trust becomes an Avoided Payment, the Insurer will pay
the amount of such Avoided Payment when due to be paid pursuant to an applicable
Order, but in any event no earlier than the fourth Business Day following
Receipt by the Insurer from the Beneficiary of (i) a certified copy of such
Order, (ii) a certificate by or on behalf of the Beneficiary that such Order has
been entered and is not subject to any stay, (iii) an assignment, in form and
substance satisfactory to the Insurer, duly executed and delivered by the
Beneficiary, irrevocably assigning to the Insurer all rights and claims of the
Beneficiary against the estate of the Trust or otherwise, which rights and
claims relate to or arise under or with respect to the subject Avoided Payment,
and (iv) a Notice of Claim appropriately completed and executed by the
Beneficiary. Such payment shall be disbursed to the receiver, conservator,
administrator, debtor-in-possession or trustee in bankruptcy named in the Order,
and not to the Beneficiary directly, unless the Beneficiary has previously paid
the Avoided Payment over to such court or receiver, conservator, administrator,
debtor-in-possession, or trustee in bankruptcy, in which case the Insurer will
pay the Beneficiary subject to the delivery of (a) the items referred to in
clauses (i), (ii), (iii) and (iv) above to the Insurer, and (b) evidence
satisfactory to the Insurer that payment has been made to such court or
receiver, conservator, administrator, debtor-in-possession or trustee in
bankruptcy named in the Order.

         Notwithstanding the foregoing paragraph, in no event shall the Insurer
be obligated to make any payment in respect of an Avoided Payment prior to the
date such Avoided Payment is Due for Payment. In the event that the payment of
any amount in respect of any Insured Payment is accelerated or must otherwise be
paid by the Trust in advance of the scheduled payment date therefore, nothing in
this Policy shall be deemed to require the Insurer to make any payment hereunder
in respect of any such Insured Payment prior to the date such Insured Payment
otherwise would have been Due for Payment without giving effect to such
acceleration, unless the Insurer in its sole discretion elects to make any prior
payment, in whole or in part, with respect to any such Insured Payment.

SECTION 4.  Fiscal Agent

         At any time during the Term of the Policy, the Insurer may appoint a
fiscal agent (the "Fiscal Agent") for purposes of this Policy by written notice
to the Beneficiary, specifying the name and notice address of such Fiscal Agent.
From and after the date of receipt of such notice by the Beneficiary, copies of
all notices and documents required to be delivered to the Insurer pursuant to


                                       L-5

<PAGE>



this Policy shall be simultaneously delivered to the Fiscal Agent and to the
Insurer. All payments required to be made by the Insurer under this Policy may
be made directly by the Insurer or by the Fiscal Agent on behalf of the Insurer.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent shall in
no event be liable to the Beneficiary for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.

SECTION 5.  Assignment

         This Policy may not be assigned by the Beneficiary without the prior
written consent of the Insurer.

SECTION 6.  Notices

         All notices, presentations, transmissions, deliveries and
communications made by the Beneficiary to the Insurer with respect to this
Policy shall specifically refer to the number of this Policy, shall be in
writing (except as otherwise specifically provided herein) and shall be mailed
by registered mail or personally delivered or telecopied to the recipient as
follows:

         if to the Insurer:

                  ACE Guaranty Corp.
                  1325 Avenue of the Americas
                  New York, New York   10019
                  Attention:  Risk Management
                  Telephone: (212) 974-0100
                  Telecopier: (212) 581-3268,

                  With a copy to the General Counsel at the above address and
telecopier number.

         if to the Beneficiary:

                  LaSalle Bank National Association, as Trustee
                  135 South LaSalle Street
                  Suite 1625
                  Chicago, Illinois
                  Attention:  Global Securitization Trust Services Group -
                              Bear Stearns Asset Backed Securities, Inc.,
                              Series 2004-HE1

         The Insurer or the Beneficiary may designate an additional or different
address, or telephone or telecopier number, by prior written notice. Each
notice, presentation, delivery and communication to the Insurer shall be
effective only upon Receipt by the Insurer.






                                       L-6

<PAGE>



SECTION 7.  Subrogation

         The Insurer shall be subrogated to the rights of the Beneficiary to
receive payments in respect of the Insured Payments to the extent of any payment
by the Insurer hereunder. Any payment made by or on behalf of the Trust to, and
any amounts received under the Pooling Agreement for the benefit of, the
Beneficiary in respect of any Insured Payment forming the basis of a claim
hereunder (which claim shall have been paid by the Insurer) shall be received
and held in trust for the benefit of the Insurer and shall be paid over to the
Insurer in accordance with the Pooling Agreement. The Beneficiary shall
cooperate in all reasonable respects, and at the expense of the Insurer, with
any request by the Insurer for action to preserve or enforce the Insurer's
rights and remedies in respect of the Trust under the Obligation, any related
security arrangements or otherwise, including without limitation any request to
(i) institute or participate in any suit, action or other proceeding, (ii)
enforce any judgment obtained and collect from the Trust or the Beneficiary any
amounts adjudged due or (iii) transfer to the Insurer, via absolute legal
assignment, the Beneficiary's rights in respect of any Insured Payment which may
form the basis of a claim hereunder.

SECTION 8.  Premiums

         The Beneficiary shall pay or cause to be paid to the Insurer in
accordance with the Pooling Agreement the premium payable to the Insurer in
respect of this Policy as set forth in the premium letter, dated January 30,
2004 relating to this Policy.

SECTION 9.  Termination

         This Policy and the obligations of the Insurer hereunder shall
terminate upon the expiration of the Term of the Policy.

SECTION 10.  Miscellaneous

         (a) No waiver of any rights or powers of the Insurer or the
Beneficiary, or any consent by either of them, shall be valid unless in writing
and signed by an authorized officer or agent of the Insurer or Beneficiary, as
applicable. The waiver of any right by the Insurer or the Beneficiary, or the
failure promptly to exercise any such right, shall not be construed as a waiver
of any other right to exercise the same at any time thereafter.

         (b) This Policy will be governed by, and shall be construed in
accordance with, the laws of the State of New York (other than with respect to
its conflicts of laws principles).

         (c) The Insurer hereby irrevocably submits to the jurisdiction of the
United States District Court for the Southern District of New York and any court
in the State of New York located in the City and County of New York, and any
Appellate Court which hears appeals from any such court, in any action, suit or
proceeding brought against it in connection with its obligations under this
Policy, or for recognition or enforcement of any judgment with respect thereto,
and the Insurer hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard or determined in such New
York State court or, to the extent permitted by law, in such United States
federal court. The Insurer agrees that a final judgment in any such action,


                                       L-7

<PAGE>



suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, or in any other manner provided by
applicable law. To the extent permitted by applicable law, the Insurer hereby
waives and agrees not to assert by way of motion, as a defense or otherwise in
any such suit, action or proceeding, any claim (i) that it is not personally
subject to the jurisdiction of such courts, (ii) that the suit, action or
proceeding is brought in an inconvenient forum, (iii) that the venue of the
suit, action or proceeding is improper or (iv) that the subject matter thereof
may not be litigated in or by such courts.

         (d) The Insurer hereby waives and agrees not to assert, in each case
for the benefit of the Beneficiary only, any and all rights and defenses of any
kind which the Insurer might have with respect to the Obligation to pay the
amounts due hereunder in full.

         (e) This policy is not subject to coverage under the New York
Property/Casualty Insurance Security Fund.




                                       L-8

<PAGE>



         IN WITNESS WHEREOF, ACE GUARANTY CORP. has caused this Policy to be
affixed with its corporate seal and to be signed by its authorized officer, to
become effective and binding upon ACE GUARANTY CORP. by virtue of such
signature.




                                                     ACE GUARANTY CORP.



                                                     By: _______________________
                                                         Name:
                                                         Title:


[SEAL]











                                       L-9

<PAGE>



                                                                       EXHIBIT A
                                                                       ---------



                                 NOTICE OF CLAIM
                                 ---------------


ACE Guaranty Corp.
1325 Avenue of the Americas
New York, New York   10019

Attention: General Counsel


         The undersigned, a duly authorized officer of [Name of Beneficiary]
(the "Beneficiary"), hereby certifies to ACE Guaranty Corp. (the "Insurer") with
reference to Financial Guaranty Insurance Policy No. D-2004-2 (the "Policy"),
that:

         (i) The deficiency with respect to the Insured Payment Due for Payment
and unpaid by reason of Nonpayment by the Trust for [insert applicable payment
date] is $[insert applicable amount] (the "Defaulted Amount").

         (ii) The Beneficiary is making a claim under the Policy for the
Defaulted Amount to be applied to the payment of the above-described Insured
Payment.

         (iii) The Beneficiary agrees that, following payment by the Insurer
made with respect to the Defaulted Amount which is the subject of this Notice of
Claim, it (a) will cause such amounts to be applied directly to the payment of
the applicable Insured Payment; (b) will insure that such funds are not applied
for any other purpose; and (c) will cause an accurate record of such payment to
be maintained with respect to the appropriate Insured Payment(s), the
corresponding claim on the Policy, and the proceeds of such claim.

         (iv) Payment should be made by wire transfer to the following account :

                  LaSalle Bank National Association
                  ABA No.:          [________]
                  Account No:       [________]
                  Reference:        Trust Administration - [_______]

         Upon payment of the applicable Defaulted Amount(s), the Insurer shall
be subrogated to the rights of the Beneficiary with respect to such payment, to
the extent set forth in Section 7 of the Policy.

         Capitalized terms used in this Notice of Claim and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Policy.



                                      L-10

<PAGE>



         This Notice of Claim may be revoked at any time by written notice of
such revocation by the Beneficiary to the Insurer, if and only to the extent
that moneys are actually received prior to any such revocation from a source
other than the Insurer with respect to the Defaulted Amount set forth herein.

         IN WITNESS WHEREOF, the undersigned has executed and delivered this
Notice of Claim as of the __ day of _________ of 20__.


                                             LASALLE BANK NATIONAL ASSOCIATION,
                                                as Trustee


                                             By: ______________________________
                                                 Name:
                                                 Title:





                                      L-11

<PAGE>


                                    EXHIBIT M

             FORM OF BACK-UP CERTIFICATION TO FORM 10-K CERTIFICATE

         I, [identify the certifying individual], on behalf of LaSalle Bank
National Association, as trustee (the "Trustee") certify that:

         1. I have reviewed the annual report on Form 10-K for the fiscal year
[___], and all reports on Form 8-K containing distribution or servicing reports
filed in respect of periods included in the year covered by that annual report,
of the trust (the "Trust") created pursuant to the Pooling and Servicing
Agreement dated January 1, 2004 (the "P&S Agreement") among Bear Stearns Asset
Backed Securities, Inc., as depositor (the "Depositor"), EMC Mortgage
Corporation as seller (in that capacity, the "Seller") and master servicer (in
that capacity, the "Master Servicer") and LaSalle Bank National Association as
trustee (the "Trustee"); and

         2. Based on my knowledge, the distribution information in these reports
and any other information provided by the Trustee for inclusion in these
reports, taken as a whole, does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which the statements were made, not misleading
as of the last day of the period covered by that annual report.

Date:____________

_________________________________
[Signature]
Name:
Title:





                                       M-1