EXHIBIT 4.4

                                                                [Execution Copy]






================================================================================







                       MORGAN STANLEY ABS CAPITAL I INC.,
                                  as Depositor,


                      DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                   as Trustee,


                                       and


                          WILSHIRE CREDIT CORPORATION,
                                   as Servicer


                               SERVICING AGREEMENT


                           Dated as of January 1, 2004


                MORGAN STANLEY ABS CAPITAL I INC. TRUST 2004-SD1


                       MORTGAGE PASS-THROUGH CERTIFICATES,
                                 SERIES 2004-SD1







================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                    ARTICLE I

                                   DEFINITIONS

   Section 1.01         Defined Terms..........................................1
   Section 1.02         Accounting............................................13

                                   ARTICLE II

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

   Section 2.01         Servicer to Act as Servicer...........................14
   Section 2.02         Collection of Mortgage Loan Payments..................15
   Section 2.03         Realization Upon Defaulted Mortgage Loans.............15
   Section 2.04         Collection Account....................................16
   Section 2.05         Permitted Withdrawals From the Collection Account.....18
   Section 2.06         Establishment of Escrow Accounts; Deposits in
                          Escrow Accounts.....................................19
   Section 2.07         Permitted Withdrawals From Escrow Account.............19
   Section 2.08         Payment of Taxes, Insurance and Other Charges;
                          Collections Thereunder..............................19
   Section 2.09         Transfer of Accounts..................................20
   Section 2.10         Maintenance of Hazard Insurance.......................20
   Section 2.11         Maintenance of Mortgage Impairment Insurance Policy...21
   Section 2.12         Fidelity Bond, Errors and Omissions Insurance.........21
   Section 2.13         Title, Management and Disposition of REO Property.....21
   Section 2.14         Due-on-Sale Clauses; Assumption and Substitution
                          Agreements..........................................23
   Section 2.15         Notification of Adjustments...........................23
   Section 2.16         Optional Purchases of Mortgage Loans by Servicer......24
   Section 2.17         Trustee to Cooperate; Release of Files................24
   Section 2.18         Servicing Compensation................................25
   Section 2.19         Annual Statement as to Compliance.....................25
   Section 2.20         Annual Independent Certified Public Accountants'
                          Reports.............................................26
   Section 2.21         Access to Certain Documentation and Information
                          Regarding the Mortgage Loans........................26
   Section 2.22         Substitution Adjustment Amounts.......................26
   Section 2.23         Obligations of the Servicer in Respect of
                          Compensating Interest...............................26
   Section 2.24         Obligations of the Servicer in Respect of Mortgage
                          Interest Rates and Monthly Payments.................26
   Section 2.25         Investment of Funds in the Collection Account.........27
   Section 2.26         Liability of Servicer; Indemnification................27
   Section 2.27         Reports of Foreclosure and Abandonment of
                          Mortgaged Properties................................28
   Section 2.28         Remittance Reports; Advances..........................28
   Section 2.29         Periodic Filings......................................29
   Section 2.30         Gramm-Leach-Bliley....................................29

                                   ARTICLE III

                                   [RESERVED]


                                   ARTICLE IV

                         THE SERVICER AND THE DEPOSITOR

   Section 4.01         Liability of the Servicer and the Depositor...........30
   Section 4.02         Merger or Consolidation of, or Assumption of the
                          Obligations of  the Servicer or the Depositor.......30
   Section 4.03         Limitation on Liability of the Servicer and Others....30

                                       i
<PAGE>

   Section 4.04         Servicer Not to Resign................................31
   Section 4.05         Delegation of Duties..................................31
   Section 4.06         Representations, Warranties and Covenants of
                          the Servicer........................................31

                                    ARTICLE V

                                     DEFAULT

   Section 5.01         Servicer Events of Termination........................33
   Section 5.02         Trustee to Act; Appointment of Successor..............34
   Section 5.03         Waiver of Defaults....................................35
   Section 5.04         Notification to Certificateholders....................35
   Section 5.05         Survivability of Servicer Liabilities.................35

                                   ARTICLE VI

                                   TERMINATION

   Section 6.01         Termination...........................................36

                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

   Section 7.01         Amendment.............................................36
   Section 7.02         Recordation of Agreement; Counterparts................37
   Section 7.03         Governing Law; Jurisdiction...........................37
   Section 7.04         Notices...............................................37
   Section 7.05         Severability of Provisions............................37
   Section 7.06         Article and Section References........................38
   Section 7.07         Notice to the Rating Agencies.........................38
   Section 7.08         Further Assurances....................................38
   Section 7.09         Benefits of Agreement.................................38
   Section 7.10         Acts of Certificateholders............................38


                                    EXHIBITS:

Exhibit A        Mortgage Loan Schedule
Exhibit B        Form of Request for Release
Exhibit C        Monthly Information Provided by Servicer
Exhibit D        Annual Certifications
Exhibit E        Data and Format to be Provided by the Servicer to the Depositor

                                       ii
<PAGE>

         This Servicing Agreement is dated as of January 1, 2004 (the
"Agreement"), among MORGAN STANLEY ABS CAPITAL I INC., a Delaware corporation,
as depositor (the "Depositor"), DEUTSCHE BANK NATIONAL TRUST COMPANY, a national
banking association, as trustee (the "Trustee"), and WILSHIRE CREDIT
CORPORATION, a Nevada corporation, as servicer (the "Servicer").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, the Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), which are to be issued pursuant to a pooling
agreement, dated as of January 1, 2004 (the "Pooling Agreement"), among the
Depositor, the Seller, the Trustee and the Custodian (each, as hereinafter
defined).

         WHEREAS, the Certificates will be backed by certain Mortgage Loans.

         WHEREAS, the Servicer, the Trustee and the Depositor have agreed that
the Servicer shall service certain of such Mortgage Loans on behalf of the
Depositor and the parties hereto desire to provide the mechanics of such
servicing by the Servicer.

         NOW, THEREFORE, in consideration of the mutual covenants made herein,
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01      Defined Terms.
                           -------------

         Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

         "1934 Act":  The Securities Exchange Act of 1934, as amended.

         "60+ Day Delinquent Loan": Without duplication, (i) each Mortgage Loan
with respect to which any portion of a Monthly Payment is, as of the last
calendar day of the prior Collection Period, two months or more past due (other
than a Re-Performing 60+ Day Delinquent Loan), (ii) each Mortgage Loan in
foreclosure (other than a Re-Performing 60+ Day Delinquent Loan), (iii) each
Mortgage Loan for which the Mortgagor has filed for bankruptcy after the Closing
Date (other than a Re-Performing 60+ Day Delinquent Loan) and (iv) all REO
Property.

         "Account":  Any of the Collection Account or the Distribution Account.

         "Actuarial Mortgage Loan": Any Mortgage Loan other than a Simple
Interest Mortgage Loan.

         "Adjustable-Rate Mortgage Loan": A Mortgage Loan which has a rate at
which interest accrues that adjusts based on an Index plus a related Gross
Margin, as set forth and subject to the limitations in the related Mortgage
Note.

         "Adjustment Date": With respect to each Adjustable-Rate Mortgage Loan,
each adjustment date, on which the Mortgage Interest 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.

         "Advance": As to any Actuarial Mortgage Loan, any advance made by the
Servicer in respect of any Distribution Date pursuant to Section 2.28.

<PAGE>

         "Affiliate": With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.

         "Agreement": This Servicing Agreement and all amendments and
supplements hereto.

         "Applicable Regulations": As to any Mortgage Loan, all federal, state
and local laws, statutes, rules and regulations applicable thereto, including
with respect to each FHA Loan, the FHA Regulations and the related FHA Insurance
Contract.

          "Balloon Mortgage Loan": A Mortgage Loan that provides for the payment
of the unamortized principal balance of such Mortgage Loan in a single payment
at the maturity of such Mortgage Loan that is substantially greater than the
preceding monthly payment.

          "Balloon Payment": A payment of the unamortized principal balance of a
Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is
substantially greater than the preceding Monthly Payment.

         "Bank of America": Bank of America, N.A., a national banking
association, or any successor servicer thereto, in its capacity as servicer
under the Bank of America Servicing Agreement.

         "Bank of America Servicing Agreement": The servicing agreement dated as
of January 1, 2004 by and among the Depositor, the Trustee and Bank of America,
as servicer.

         "Bankruptcy Code":  Title 11 of the United States Code, as amended.

         "Business Day": Any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of Delaware, the State of New York, the
State of Oregon or in the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law or executive order to be
closed.

         "Certificate":  As defined in the Recitals hereto.

         "Certificate Register": The register maintained pursuant to the Pooling
Agreement.

         "Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register, in accordance with the Pooling
Agreement.

         "Certification":  As defined in Section 2.29(b).

         "Class P Certificate":  As defined in the Pooling Agreement.

         "Class R Certificate":  As defined in the Pooling Agreement.

         "Class X Certificate":  As defined in the Pooling Agreement.

         "Closing Date": January 30, 2004.

         "Code": The Internal Revenue Code of 1986, as it may be amended from
time to time.

         "Collection Account": The account or accounts created and maintained by
the Servicer pursuant to Section 2.04, which shall be entitled "Collection
Account, Wilshire Credit Corporation, as Servicer for the Trust under the
Servicing Agreement dated as of January 1, 2004 between Morgan Stanley ABS
Capital I Inc., as Depositor, Deutsche Bank National Trust Company, as Trustee
and Wilshire Credit Corporation, as Servicer, in trust for registered Holders of
Morgan Stanley ABS Capital I Inc. Trust 2004-SD1, Mortgage Pass-Through
Certificates, Series 2004-SD1", and which must be an Eligible Account.

                                       2
<PAGE>

         "Collection Period": With respect to any Distribution Date or Servicer
Remittance Date, the calendar month preceding the month in which such
Distribution Date or Servicer Remittance Date occurs.

         "Combined Amortized Loan-to-Value Ratio": As of any date and Mortgage
Loan, the fraction, expressed as a percentage, the numerator of which is (i) the
Principal Balance of the Mortgage Loan, as of such date of determination, plus
(ii) the principal balance of any related senior mortgage loan at the time of
origination of such Mortgage Loan, and the denominator of which is the Value at
the time of origination of such Mortgage Loan, of the related Mortgaged
Property.

         "Compensating Interest":  As defined in Section 2.23 hereof.

         "Condemnation Proceeds": All awards or settlements in respect of a
taking of a Mortgaged Property by exercise of the power of eminent domain or
condemnation.

         "Conventional Mortgage Loan": Any Mortgage Loan that is not an FHA
Loan.

         "Corporate Trust Office": With respect to the Trustee, the corporate
trust office of the Trustee at which at any particular time its corporate trust
business in connection with this Agreement shall be administered, which office
at the date of the execution of this instrument is located at 1761 East St.
Andrew Place, Santa Ana, California, 92705, Attention: Trust Administration --
MS04S1 and for purposes of transfer, exchange and surrender, the office of the
Trustee's agent located at c/o DTC Transfer Agent Services, 55 Water Street,
Jeanette Park Entrance, New York, New York, 10041, or at such other address as
the Trustee may designate from time to time by notice to the Certificateholders,
the Depositor, the Custodian and the Servicer.

         "Cumulative Loss Percentage": With respect to any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from the Cut-off Date to the last day of the
preceding calendar month and the denominator of which is the Principal Balance
of the Mortgage Loans as of the Cut-off Date.

         "Custodian": Deutsche Bank National Trust Company, a national banking
association, or any successor in interest.

         "Cut-off Date":  January 1, 2004.

         "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.

         "Defective Mortgage Loan": A Mortgage Loan replaced or to be replaced
by one or more Eligible Substitute Mortgage Loans.

         "Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code.

         "Delinquent Loan": A Mortgage Loan for which the related Monthly
Payment due on any Due Date is not received by the close of business on the next
scheduled Due Date for such Mortgage Loan.

         "Depositor": Morgan Stanley ABS Capital I Inc., a Delaware corporation,
or any successor in interest.

         "Determination Date": With respect to any Distribution Date, the 10th
day of the calendar month in which such Distribution Date occurs or, if such
10th calendar day is not a Business Day, the Business Day immediately preceding
such 10th calendar day.

                                       3
<PAGE>

         "Distribution Account": The trust account or accounts by such name
created and maintained by the Trustee pursuant to the Pooling Agreement.

         "Distribution Date": The 25th day of any calendar month, or if such
25th calendar day is not a Business Day, the Business Day immediately following
such 25th calendar day, commencing in February 2004.

         "Due Date": With respect to each Mortgage Loan and any Distribution
Date, the day of the calendar month in which such Distribution Date occurs on
which the Monthly Payment for such Mortgage Loan was due, exclusive of any grace
period.

         "Eligible Account": Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
commercial paper, short-term debt obligations, demand deposits or other
short-term deposits of which are rated in one of the two highest rating
categories by each of the Rating Agencies at the time any amounts are held on
deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC (to the limits established by such corporation), the
uninsured deposits in which account are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to the Trustee and to each Rating
Agency, the Certificateholders will have a claim with respect to the funds in
such account or a perfected first priority security interest against such
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 with which such account is maintained, (iii) a trust
account or accounts maintained with the trust department of a federal or state
chartered depository institution, national banking association or trust company
acting in its fiduciary capacity or (iv) an account otherwise acceptable to each
Rating Agency. Eligible Accounts may bear interest.

         "Eligible Substitute Mortgage Loan": A mortgage loan substituted for a
Defective Mortgage Loan pursuant to the terms of this Agreement which must, on
the date of such substitution, (i) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of, and not more than 10% less
than, the outstanding principal balance of the Defective Mortgage Loan as of the
Due Date in the calendar month during which the substitution occurs, (ii) have a
Mortgage Interest Rate, with respect to a Fixed-Rate Mortgage Loan, not less
than the Mortgage Interest Rate of the Defective Mortgage Loan and not more than
1% in excess of the Mortgage Interest Rate of such Defective Mortgage Loan,
(iii) if an Adjustable-Rate Mortgage Loan, have a Maximum Loan Rate not less
than the Maximum Loan Rate for the Defective Mortgage Loan, (iv) if an
Adjustable-Rate Mortgage Loan, have a Minimum Loan Rate not less than the
Minimum Loan Rate of the Defective Mortgage Loan, (v) if an Adjustable-Rate
Mortgage Loan, have a Gross Margin equal to or greater than the Gross Margin of
the Defective Mortgage Loan, (vi) if an Adjustable-Rate Mortgage Loan, have a
next Adjustment Date not more than two months later than the next Adjustment
Date on the Defective Mortgage Loan, (vii) have a remaining term to maturity not
greater than (and not more than one year less than) that of the Defective
Mortgage Loan, (viii) be current as of the date of substitution, (ix) have a
Combined Amortized Loan-to-Value Ratio as of the date of substitution equal to
or lower than the Combined Amortized Loan-to-Value Ratio of the Defective
Mortgage Loan as of such date, but in no event greater than 125%, (x) have been
reunderwritten by the Seller in accordance with materially similar underwriting
criteria and guidelines as the Defective Mortgage Loan and (xi) conform to each
representation and warranty set forth in Section 2.04 of the Pooling Agreement
applicable to the Defective Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Defective Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Interest Rates described in clause
(ii) hereof shall be determined on the basis of weighted average Mortgage
Interest Rates, the terms described in clause (vii) hereof shall be determined
on the basis of weighted average remaining term to maturity, the Combined
Amortized Loan-to-Value Ratios described in clause (ix) hereof shall be
satisfied as to each such mortgage loan and, except to the extent otherwise
provided in this sentence, the representations and warranties described in
clause (xi) hereof must be satisfied as to each Eligible Substitute Mortgage
Loan or in the aggregate, as the case may be.

         "Escrow Account": The account or accounts created and maintained
pursuant to Section 2.06.

         "Escrow Payments": The amounts constituting ground rents, taxes,
assessments, water rates, mortgage insurance premiums, fire and hazard insurance
premiums and other payments required to be escrowed by the Mortgagor with the
mortgagee pursuant to any Mortgage Loan.

                                       4
<PAGE>

         "Estate in Real Property": A fee simple estate in a parcel of real
property.

         "Expense Fee Rate":  As defined  in the Pooling Agreement.

         "FDIC": Federal Deposit Insurance Corporation or any successor thereto.

         "FHA":  The Federal Housing Administration, an agency within HUD.

         "FHA Approved Mortgagee": Those institutions which are approved by FHA
to act as servicer and mortgagee of record pursuant to FHA Regulations.

         "FHA Insurance Contract" or "FHA Insurance": The contractual obligation
of FHA respecting the insurance of an FHA Loan pursuant to the National Housing
Act, as amended.

         "FHA Loan": A Mortgage Loan which is the subject of an FHA Insurance
Contract as evidenced by a Mortgage Insurance Certificate.

         "FHA Regulations": Regulations promulgated by HUD under the National
Housing Act, codified in 24 Code of Federal Regulations, and other HUD issuances
relating to FHA Loans, including the related handbooks, circulars, notices and
mortgagee letters.

         "Fidelity Bond": Shall have the meaning assigned thereto in Section
2.12.

         "Final Recovery Determination": With respect to any defaulted Mortgage
Loan or any REO Property, a determination made by the Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.

         "Fitch": Fitch, Inc. and its successors, and if such company shall for
any reason no longer perform the functions of a securities rating agency,
"Fitch" shall be deemed to refer to any other "nationally recognized statistical
rating organization" as set forth on the most current list of such organizations
released by the SEC.

         "Fixed-Rate Mortgage Loan": A Mortgage Loan which has a constant annual
rate at which interest accrues in accordance with the provisions of the related
Mortgage Note.

         "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 Interest Rate for such Mortgage
Loan.

         "HUD": The United States Department of Housing and Urban Development,
or any successor thereto and including the Federal Housing Commissioner and the
Secretary of Housing and Urban Development where appropriate under the FHA
Regulations.

         "Independent": When used with respect to any specified Person, any such
Person who (i) is in fact independent of the Depositor, the Servicer and their
respective Affiliates, (ii) does not have any direct financial interest in or
any material indirect financial interest in the Depositor, the Servicer or any
Affiliate thereof and (iii) is not connected with the Depositor, the Servicer or
any Affiliate thereof as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions; provided, however,
that a Person shall not fail to be Independent of the Depositor, the Servicer or
any Affiliate thereof merely because such Person is the beneficial owner of 1%
or less of any Class of securities issued by the Depositor, the Servicer or any
Affiliate thereof, as the case may be.

         "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.

                                       5
<PAGE>

          "Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy covering a Mortgage Loan, to the extent such proceeds are
not to be applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the procedures that the Servicer
would follow in servicing mortgage loans held for its own account, subject to
the terms and conditions of the related Mortgage Note and Mortgage.

         "Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any related
Collection Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent on a
contractual basis for such Collection Period and not previously recovered.

         "Liquidated Mortgage Loan": As to any Distribution Date, any Mortgage
Loan in respect of which the Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Prepayment
Period, that all Liquidation Proceeds and Insurance Proceeds which it expects to
recover with respect to the liquidation of the Mortgage Loan or disposition of
the related REO Property have been recovered.

         "Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03 of the Pooling Agreement. With
respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Fund by reason of its being sold or purchased
pursuant to Section 2.13 hereof or Section 2.03 of the Pooling Agreement.

         "Liquidation Proceeds": The amount (other than amounts received in
respect of the rental of any REO Property prior to REO Disposition) received by
the Servicer in connection with (i) the taking of all or a part of a Mortgaged
Property by exercise of the power of eminent domain or condemnation or (ii) the
liquidation of a defaulted Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise.

         "Liquidation Report": The report with respect to a Liquidated Mortgage
Loan as provided by the Servicer to the Trustee.

         "Majority Certificateholders": The Holders of Certificates evidencing
at least 51% of the Voting Rights.

         "Maximum Loan Rate": With respect to each Adjustable-Rate Mortgage
Loan, the percentage set forth in the related Mortgage Note as the maximum
Mortgage Interest Rate thereunder.

         "Minimum Loan Rate": With respect to each Adjustable-Rate Mortgage
Loan, the percentage set forth in the related Mortgage Note as the minimum
Mortgage Interest Rate thereunder.

         "Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest or principal collectible from the related Mortgagor
pursuant to the Relief Act; (b) without giving effect to any extension granted
or agreed to by the Servicer pursuant to Section 2.01; and (c) on the assumption
that all other amounts, if any, due under such Mortgage Loan are paid when due.

         "Moody's": Moody's Investors Service, Inc. and its successors, and if
such company shall for any reason no longer perform the functions of a
securities rating agency, "Moody's" shall be deemed to refer to any other
"nationally recognized statistical rating organization" as set forth on the most
current list of such organizations released by the SEC.

                                       6
<PAGE>

         "Mortgage": The mortgage, deed of trust or other instrument creating a
first or second lien on, or first or second priority security interest in, a
Mortgaged Property securing a Mortgage Note.

         "Mortgage File": The mortgage documents pertaining to a particular
Mortgage Loan and any additional documents required to be added to the Mortgage
File pursuant to the Pooling Agreement.

         "Mortgage Insurance Certificate": The certificate evidencing an FHA
Insurance Contract.

         "Mortgage Interest Rate": With respect to each 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 (i) in
the case of each Fixed-Rate Mortgage Loan shall remain constant at the rate set
forth in the Mortgage Loan Schedule as the Mortgage Interest Rate in effect
immediately following the Cut-off Date and (ii) in the case of each
Adjustable-Rate Mortgage Loan (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 Interest 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 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.

         "Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee pursuant to the Pooling Agreement as from time to time held as a part of
the Trust Fund, the Mortgage Loans so held being identified in the Mortgage Loan
Schedule.

         "Mortgage Loan Schedule": As of any date with respect to the Mortgage
Loans, the list of such Mortgage Loans included in the Trust Fund on such date,
separately identifying the Fixed-Rate Mortgage Loans and the Adjustable-Rate
Mortgage Loans, attached hereto as Exhibit A. The Mortgage Loan Schedule shall
set forth the following information with respect to each Mortgage Loan: (1) the
Mortgage Loan identifying number; (2) the city, state and zip code of the
Mortgaged Property; (3) the type of Residential Dwelling constituting the
Mortgaged Property or a designation that the Mortgaged Property is a
multi-family property; (4) the occupancy status of the Mortgaged Property at
origination; (5) the original months to maturity; (6) the date of origination;
(7) the first payment date; (8) the stated maturity date; (9) the stated
remaining months to maturity; (10) the original principal amount of the Mortgage
Loan; (11) the Principal Balance of each Mortgage Loan as of the Cut-off Date;
(12) the P&I Arrearage of the Mortgage Loan as of the Cut-off Date; (13) the
Mortgage Interest Rate of the Mortgage Loan as of the Cut-off Date; (14) the
current principal and interest payment of the Mortgage Loan as of the Cut-off
Date; (15) the contractual interest paid to date of the Mortgage Loan; (16) if
the Mortgage Loan is not owner-financed, the Combined Amortized Loan-to-Value
Ratio at origination; (17) a code indicating the loan performance status of the
Mortgage Loan as of the Cut-off Date; (18) a code indicating whether the
Mortgage Loan is a Simple Interest Mortgage Loan or an Actuarial Mortgage Loan;
(19) a code indicating whether the Mortgaged Property is in bankruptcy or in its
forbearance period as of the Cut-off Date; (20) a code indicating whether the
Mortgage Loan is conventional or insured by the FHA; (21) a code indicating the
Index that is associated with such Mortgage Loan; (22) the Gross Margin; (23)
the Periodic Rate Cap; (24) the Minimum Loan Rate; (25) the Maximum Loan Rate;
(26) a code indicating whether the Mortgage Loan has a prepayment penalty and
the type and the amount of the prepayment penalty; (27) the first Adjustment
Date immediately following the Cut-off Date; (28) the rate adjustment frequency;
(29) the payment adjustment frequency; (30) a code indicating whether the
Mortgage Loan is owner-financed; (31) a code indicating whether the Mortgage
Loan is subject to negative amortization; (32) a code indicating whether the
Mortgage Loan is a second lien; (33) a code indicating whether a Primary
Insurance Policy has been issued with respect to the Mortgage Loan and the name
of the insurer and the amount of such Primary Insurance Policy; and (34) the
Servicing Fee Rate.

         The Mortgage Loan Schedule shall set forth the following information,
as of the Cut-off Date, with respect to the Mortgage Loans in the aggregate, for
the Fixed-Rate Mortgage Loans and for the Adjustable-Rate Mortgage Loans: (1)
the number of Mortgage Loans; (2) the current Principal Balance of the Mortgage
Loans; (3) the weighted average Mortgage Interest Rate of the Mortgage Loans;
and (4) the weighted average maturity of the Mortgage Loans. The Mortgage Loan
Schedule shall be amended from time to time in accordance with the

                                       7
<PAGE>

provisions of this Agreement. With respect to any Eligible Substitute Mortgage
Loan, Cut-off Date shall refer to the related Cut-off Date for such Mortgage
Loan, determined in accordance with the definition of Cut-off Date herein.

         "Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

         "Mortgage Pool": The pool of Mortgage Loans, identified on Exhibit A
from time to time, and any REO Properties acquired in respect thereof.

         "Mortgaged Property": The underlying property securing a Mortgage Loan,
including any REO Property, consisting of an Estate in Real Property improved by
a Residential Dwelling or multi-family dwelling.

         "Mortgagor":  The obligor on a Mortgage Note.

         "Net Interest Margin Securities":  As defined in Section 2.16 hereof.

         "Net Liquidation Proceeds": With respect to any Liquidated Mortgage
Loan or any other disposition of related Mortgaged Property (including REO
Property) the related Liquidation Proceeds net of Advances, Servicing Advances,
Servicing Fees and any other accrued and unpaid servicing fees received and
retained in connection with the liquidation of such Mortgage Loan or Mortgaged
Property.

         "Net Mortgage Interest Rate": With respect to any Mortgage Loan, the
Mortgage Interest Rate borne by such Mortgage Loan minus (i) the Servicing Fee
Rate and (ii) the Expense Fee Rate.

         "Nonrecoverable Advance": Any Advance or Servicing Advance previously
made or proposed to be made in respect of a Mortgage Loan that, in the good
faith business judgment of the Servicer, will not or, in the case of a proposed
Advance or Servicing Advance, would not be ultimately recoverable from Late
Collections on such Mortgage Loan as provided herein.

         "Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer or the Depositor,
as applicable.

         "Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be a salaried counsel for the Depositor or the Servicer except that
any opinion of counsel relating to (a) the qualification of any REMIC as a REMIC
or (b) compliance with the REMIC Provisions must be an opinion of Independent
counsel.

         "P&I Arrearage": With respect to a Delinquent Mortgage Loan, the total
amount of scheduled monthly principal and interest payments due thereon on or
before the Cut-off Date that were not received prior to the Cut-off Date, but
excluding any Servicing Arrearage.

         "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 Interest Rate
for such Mortgage Loan may increase or decrease (without regard to the Maximum
Loan Rate or the Minimum Loan Rate) on such Adjustment Date from the Mortgage
Interest Rate in effect immediately prior to such Adjustment Date.

         "Permitted Investments": Any one or more of the following obligations
or securities acquired at a purchase price of not greater than par, regardless
of whether issued or managed by the Depositor, the Servicer, the Trustee or any
of their respective Affiliates or for which an Affiliate of the Trustee serves
as an advisor:

                  (i)      direct obligations of, or obligations fully
         guaranteed as to timely payment of principal and interest by, the
         United States or any agency or instrumentality thereof, provided such
         obligations are backed by the full faith and credit of the United
         States;

                                       8
<PAGE>

                  (ii)     demand and time deposits in, certificates of deposit
         of, bankers' acceptances issued by or federal funds sold by any
         depository institution or trust company (including the Trustee or their
         agents acting in their respective commercial capacities) incorporated
         under the laws of the United States of America or any state thereof and
         subject to supervision and examination by federal and/or state
         authorities, so long as, at the time of such investment or contractual
         commitment providing for such investment, such depository institution
         or trust company or its ultimate parent has a short-term uninsured debt
         rating in one of the two highest available rating categories of S&P and
         Moody's and the highest available rating category of Fitch and provided
         that each such investment has an original maturity of no more than 365
         days and (B) any other demand or time deposit or deposit which is fully
         insured by the FDIC;

                  (iii)    repurchase obligations with a term not to exceed 30
         days with respect to any security described in clause (i) above and
         entered into with a depository institution or trust company (acting as
         principal) rated A or higher by S&P and Fitch and rated A2 or higher by
         Moody's, provided, however, that collateral transferred pursuant to
         such repurchase obligation must be of the type described in clause (i)
         above and must (A) be valued daily at current market prices plus
         accrued interest or (B) pursuant to such valuation, be equal, at all
         times, to 105% of the cash transferred by the Trustee in exchange for
         such collateral and (C) be delivered to the Trustee or, if the Trustee
         is supplying the collateral, an agent for the Trustee, in such a manner
         as to accomplish perfection of a security interest in the collateral by
         possession of certificated securities;

                  (iv)     securities bearing interest or sold at a discount
         that are issued by any corporation incorporated under the laws of the
         United States of America or any State thereof and that are rated by
         each Rating Agency in its highest long-term unsecured rating categories
         at the time of such investment or contractual commitment providing for
         such investment;

                  (v)      commercial paper (including both non-interest-bearing
         discount obligations and interest-bearing obligations payable on demand
         or on a specified date not more than 30 days after the date of
         acquisition thereof) that is rated by each Rating Agency in its highest
         short-term unsecured debt rating available at the time of such
         investment;

                  (vi)     units of money market funds including funds managed
         or advised by the Trustee or affiliates thereof having the highest
         rating category by the applicable Rating Agency; and

                  (vii)    if previously confirmed in writing to the Trustee,
         any other demand, money market or time deposit, or any other
         obligation, security or investment, as may be acceptable to the Rating
         Agencies;

provided, that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.

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

         "Pool Balance": As of any date of determination, the aggregate
Principal Balance of the Mortgage Loans.

         "Pooling Agreement": The Pooling Agreement, dated as of January 1,
2004, among the Depositor, the Seller, the Trustee and the Custodian.

         "Prepayment Interest Shortfall": With respect to any Distribution Date,
for each Mortgage Loan that was during the related Prepayment Period the subject
of a Principal Prepayment in full that was applied by the Servicer to reduce the
outstanding principal balance of such loan on a date preceding the related Due
Date, an amount equal to interest at the applicable Mortgage Interest Rate (net
of the Servicing Fee Rate) on the amount of such Principal Prepayment for the
number of days commencing on the date on which the prepayment is applied and
ending on the last calendar day of the related Prepayment Period.

                                       9
<PAGE>

         "Prepayment Period": With respect to any Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs.

         "Primary Insurance Policy": Each policy of primary guaranty mortgage
insurance issued by a Qualified Insurer in effect with respect to any Mortgage
Loan, or any replacement policy therefor obtained by the Servicer pursuant to
Section 2.08.

         "Principal Balance": As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the related scheduled principal balance thereof as of
the Cut-off Date, minus all collections credited against the principal balance
of any such Mortgage Loan and the principal portion of Advances plus, Deferred
Interest, if any. For purposes of this definition, a Liquidated Mortgage Loan
shall be deemed to have a Principal Balance equal to the Principal Balance of
the related Mortgage Loan as of the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter. As to any REO Property and
any day, the Principal Balance of the related Mortgage Loan immediately prior to
such Mortgage Loan becoming REO Property minus any REO Principal Amortization
received with respect thereto on or prior to such day.

         "Principal Prepayment": Any payment of principal made by the Mortgagor
on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing the full amount
of scheduled interest due on any Due Date in any month or months subsequent to
the month of prepayment.

         "Purchase Price": With respect to any Mortgage Loan or REO Property to
be purchased by the Seller pursuant to or as contemplated in the Pooling
Agreement, an amount equal to the sum of (i) 100% of the Principal Balance
thereof as of the date of purchase, (ii) accrued interest on such Principal
Balance at the applicable Mortgage Interest Rate in effect from time to time
from the Due Date as to which interest was last covered by a payment by the
Mortgagor or an Advance by the Servicer, through the end of the calendar month
in which the purchase is to be effected, (iii) any unreimbursed Servicing
Advances and Advances and any unpaid Servicing Fees allocable to such Mortgage
Loan or REO Property, (iv) any amounts previously withdrawn from the Collection
Account in respect of such Mortgage Loan or REO Property pursuant to Section
2.13, (v) expenses reasonably incurred or to be incurred by the Servicer or
Trustee in respect of the breach or defect giving rise to the purchase
obligation and (vi) any costs and damages incurred by the Trust Fund in
connection with any violation of any predatory or abusive lending law with
respect thereto.

         "Qualified Insurer": Any mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of business
and each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states and to
write the insurance provided by the insurance policy issued by it, approved as a
FNMA- or FHLMC-approved mortgage insurer. Any replacement insurer with respect
to a Mortgage Loan must have at least as high a claims paying ability rating as
the insurer it replaces had on the Closing Date.

         "Rating Agency" or "Rating Agencies": Fitch, Moody's and S&P, or their
respective successors. If such agencies or their successors are no longer in
existence, "Rating Agencies" shall be such nationally recognized statistical
rating organizations as set forth on the most current list of such organizations
released by the SEC and designated by the Depositor, notice of which designation
shall be given to the Trustee and the Servicer.

         "Realized Loss": With respect to a Liquidated Mortgage Loan, the amount
by which the remaining unpaid principal balance of the Mortgage Loan exceeds the
amount of Net Liquidation Proceeds applied to the principal balance of the
related Mortgage Loan.

         "Related Documents": With respect to any Mortgage Loan, the related
Mortgage Notes, Mortgages and other related documents.

         "Relief Act": The Soldiers' and Sailors Civil Relief Act of 1940, as
amended, or any other similar state law(s).

                                       10
<PAGE>

         "Relief Act Shortfall": With respect to any Distribution Date, for any
Mortgage Loan with respect to which there has been a reduction in the amount of
interest or principal collectible thereon for the most recently ended Collection
Period as a result of the application of the Relief Act, the amount by which (i)
interest or principal collectible on such Mortgage Loan during such Collection
Period is less than (ii) one month's interest on the Principal Balance of such
Mortgage Loan at the Mortgage Interest Rate or that month's principal payment
for such Mortgage Loan before giving effect to the application of the Relief
Act.

         "Remainder Amount":  As defined in Section 2.16 hereof.

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

         "REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and rulings promulgated thereunder, as the foregoing may be in
effect from time to time.

         "Remittance Report": A report prepared by the Servicer and delivered to
the Trustee pursuant to Section 2.28, containing the information attached hereto
as Exhibit C.

         "REO Disposition": The sale or other disposition of an REO Property on
behalf of the Trust Fund.

         "REO Principal Amortization": With respect to any REO Property, for any
calendar month, the aggregate of all amounts received in respect of such REO
Property during such calendar month, whether in the form of rental income, sale
proceeds (including, without limitation, that portion of any purchase price paid
in connection with a purchase of all of the Mortgage Loans and REO Properties
pursuant to Section 7.01 of the Pooling Agreement that is allocable to such REO
Property) or otherwise, net of any portion of such amounts (i) payable pursuant
to Section 2.13 in respect of the proper operation, management and maintenance
of such REO Property or (ii) payable or reimbursable to the Servicer pursuant to
Section 2.13 for unpaid Servicing Fees in respect of the related Mortgage Loan
and unreimbursed Servicing Advances and Advances in respect of such REO Property
or the related Mortgage Loan.

         "REO Property": A Mortgaged Property acquired by the Servicer on behalf
of the Trust Fund through foreclosure or deed-in-lieu of foreclosure, as
described in Section 2.13.

         "Re-Performing 60+ Day Delinquent Loan": Each Mortgage Loan with
respect to which, as of any date of determination, (x) any portion of a Monthly
Payment is, as of the last calendar day of the prior Collection Period, two
months or more past due and (y) with respect to which the Mortgagor has made
three aggregate Monthly Payments within the three calendar months preceding such
date of determination.

         "Re-Performance Test": The following criteria one of which must be met
for a Mortgage Loan to qualify as a Re-Performing Mortgage Loan: (1) the
Mortgagor has made at least three aggregate Monthly Payments in the three
calendar months preceding the Cut-off Date (regardless of either the timing of
receipt of such payments or the payment history of such loans prior to October
1, 2003), or (2) the Mortgagor has made at least four aggregate Monthly Payments
in the four calendar months preceding the Cut-off Date (regardless of either the
timing of receipt of such payments or the payment history of such loans prior to
September 1, 2003), or (3) the Mortgagor has made at least five aggregate
Monthly Payments in the five calendar months preceding the Cut-off Date
(regardless of either the timing of receipt of such payments or the payment
history of such loans prior to August 1, 2003).

         "Re-Performing Mortgage Loan": A Mortgage Loan which has defaulted in
the past and which is at least 90 days Delinquent with respect to certain
Monthly Payments but which satisfies one of the Re-Performance Test criteria.

         "Request for Release": A release signed by a Servicing Officer, in the
form of Exhibit B attached hereto.

         "Residential Dwelling": Any one of the following: (i) a one-family
dwelling, (ii) a two- to four-family dwelling, (iii) a one-family dwelling unit
in a Fannie Mae eligible condominium project, (iv) a one-family dwelling

                                       11
<PAGE>

in a planned unit development, which is not a co-operative, or (v) a mobile or
manufactured home (as defined in 42 United States Code, Section 5402(6)).

         "Responsible Officer": With respect to the Trustee, any vice president,
assistant vice president, associate or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers who at such time shall be officers 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 and who shall have direct
responsibility for the administration of this Agreement.

          "S&P": Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and its successors, and if such company shall for any reason no longer
perform the functions of a securities rating agency, "S&P" shall be deemed to
refer to any other "nationally recognized statistical rating organization" as
set forth on the most current list of such organizations released by the SEC.

         "SEC":  As defined in Section 2.29(a).

         "Seller": Morgan Stanley Mortgage Capital Inc., a Delaware corporation,
or any successor in interest.

         "Servicer": Wilshire Credit Corporation, a Nevada corporation, or any
successor servicer appointed as herein provided, in its capacity as Servicer
hereunder.

         "Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Servicer or which is 50% or more owned by the Servicer
and (ii) which is qualified to service residential mortgage loans.

         "Servicer Event of Termination": One or more of the events described in
Section 5.01.

         "Servicer Remittance Date": With respect to any Distribution Date,
three (3)Business Days prior to such Distribution Date.

         "Servicer Report Date": With respect to any Distribution Date, the 12th
day of the calendar month in which such Distribution Date occurs or, if such
12th calendar day is not a Business Day, the Business Day immediately preceding
such 12th calendar day.

         "Servicing Advances": All customary, reasonable and necessary "out of
pocket" costs and expenses incurred by the Servicer in the performance of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property and (iv) compliance with the
obligations under Sections 2.01, 2.03, 2.08 and 2.28. Servicing Advances also
include any reasonable "out-of-pocket" cost and expenses (including reasonable
legal fees) incurred by the Servicer in connection with executing and recording
instruments of satisfaction, deeds of reconveyance or Assignments of Mortgage to
the extent not recovered from the Mortgagor or otherwise payable under this
Agreement.

         "Servicing Arrearage": With respect to a Delinquent Mortgage Loan, any
unreimbursed Servicing Advances as of the Cut-off Date.

         "Servicing Fee": With respect to each Mortgage Loan (including each REO
Property) and for any calendar month, an amount equal to one month's interest at
the Servicing Fee Rate on the same principal amount on which interest on such
Mortgage Loan accrues for such calendar month.

         "Servicing Fee Rate": With respect to each Mortgage Loan, the rate set
forth on the Mortgage Loan Schedule with respect to such Mortgage Loan.

         "Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of Mortgage Loans, whose name
and specimen signature appear on a list of servicing officers furnished by the
Servicer to the Trustee and the Depositor on the Closing Date, as such list may
from time to time be amended.

                                       12
<PAGE>

         "Servicing Standard": Shall mean the standards set forth in Section
2.01.

         "Simple Interest Method": The method of allocating a payment to
principal and interest, pursuant to which the portion of such payment that is
allocated to interest is equal to the product of the fixed rate of interest
multiplied by the unpaid principal balance multiplied by the period of time
elapsed since the preceding payment of interest was made and divided by either
360 or 365, as specified in the related Mortgage Note, and the remainder of such
payment is allocated to principal.

         "Simple Interest Mortgage Loan": Any Mortgage Loan under which the
portion of a payment allocable to interest and the portion of such payment
allocable to principal is determined in accordance with the Simple Interest
Method.

         "Startup Day": With respect to each REMIC established pursuant to the
Pooling Agreement, the Closing Date.

         "Stayed Funds": Any payment required to be made under the terms of the
Certificates and this Agreement but which is not remitted by the Servicer
because the Servicer is the subject of a proceeding under the Bankruptcy Code
and the making of such remittance is prohibited by Section 362 of the Bankruptcy
Code.

         "Substitution Adjustment Amount":  As defined in Section 2.22 hereof.

         "Termination Notice":  As defined in Section 2.16 hereof.

         "Termination Price":  As defined in the Pooling Agreement.

         "Trust": Morgan Stanley ABS Capital I Inc. Trust 2004-SD1, the trust
created pursuant to the Pooling Agreement.

         "Trust Fund": The segregated pool of assets subject to the Pooling
Agreement, constituting the primary trust created pursuant to the Pooling
Agreement and to be administered pursuant to the Pooling Agreement.

         "Trustee": Deutsche Bank National Trust Company, a national banking
association, or any successor Trustee appointed pursuant to the Pooling
Agreement.

         "Value": With respect to any Mortgaged Property, the value thereof as
determined by an independent appraisal made at the time of the origination of
the related Mortgage Loan or the sale price, if the appraisal is not available;
except that, with respect to any Mortgage Loan that is a purchase money mortgage
loan, the lesser of (i) the value thereof as determined by an independent
appraisal made at the time of the origination of such Mortgage Loan, if any, and
(ii) the sales price of the related Mortgaged Property.

         "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate in accordance with the
Pooling Agreement.

         "Washington Mutual": Washington Mutual Bank, FA, a savings association
organized under the laws of the United States, or any successor servicer
thereto, in its capacity as servicer under the Washington Mutual Servicing
Agreement.

         "Washington Mutual Servicing Agreement": The servicing agreement dated
as of January 1, 2004 by and among the Depositor, the Trustee and Washington
Mutual Bank, FA, as servicer.

         Section 1.02      Accounting.
                           ----------

         Unless otherwise specified herein, for the purpose of any definition or
calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account such definition or calculation and any
related definitions or calculations shall be determined without duplication of
such functions.

                                       13
<PAGE>

                                   ARTICLE II

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

         Section 2.01      Servicer to Act as Servicer.
                           ---------------------------

         The Servicer, as independent contract servicer, shall service and
administer the Mortgage Loans in accordance with this Agreement and the normal
and usual standards of practice of prudent mortgage servicers, and shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which the Servicer
may deem necessary or desirable and consistent with the terms of this Agreement
including, in the case of FHA Loans, taking all actions that a mortgagee is
permitted or required to take by the FHA (the "Servicing Standards").

         Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the
Certificateholders; provided, however, that the Servicer shall not make future
advances and (unless the Mortgagor is in default with respect to the Mortgage
Loan or such default is, in the judgment of the Servicer, reasonably
foreseeable) the Servicer shall not permit any modification with respect to any
Mortgage Loan that would (i) change the Mortgage Interest Rate, defer or forgive
the payment thereof of any principal or interest payments, reduce the
outstanding principal amount (except for actual payments of principal) or extend
the final maturity date with respect to such Mortgage Loan, (ii) in the case of
FHA Loans, affect the FHA Insurance Contract with respect to such Mortgage Loan,
(iii) affect adversely the status of any REMIC as a REMIC or (iv) cause any
REMIC to be subject to a tax on "prohibited transactions" or "contributions"
pursuant to the REMIC Provisions. Notwithstanding the foregoing, the Servicer
shall not permit any modification with respect to any Mortgage Loan that would
both (x) effect an exchange or reissuance of such Mortgage Loan under Section
1.860G-2(b) of the Treasury Regulations and (y) cause any REMIC constituting
part of the Trust Fund to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or "contributions" after the
Startup Day under the REMIC Provisions. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
to execute and deliver on behalf of itself, and the Trustee, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Property. The Servicer shall make all required
Servicing Advances and shall service and administer the Mortgage Loans in
accordance with Applicable Regulations and the servicing standards set forth in
the Fannie Mae Guide, and shall provide to the Mortgagor any reports required to
be provided to them thereby. If reasonably required by the Servicer and
commercially reasonable in form and substance, the Trustee shall execute any
powers of attorney and other documents provided to it by the Servicer that are
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.

         In servicing and administering FHA Loans, the Servicer shall comply
strictly with the National Housing Act and the FHA Regulations and
administrative guidelines issued thereunder or pursuant thereto (insofar as the
same apply to any Mortgage Loan) and, to the extent permitted hereunder,
promptly discharge all of the obligations of the mortgagee thereunder and under
each Mortgage including the timely giving of notices, the essence hereof being
that the full benefits of each FHA Insurance Contract inure to the Trustee, on
behalf of the Certificateholders.

         In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures including collection procedures and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account giving due consideration to accepted mortgage
servicing practices of prudent lending institutions and the FHA Insurance
Contracts, where applicable, and the Certificateholders' reliance on the
Servicer.

         The Servicer shall give prompt notice to the Trustee of any action, of
which the Servicer has actual knowledge, to (i) assert a claim against the Trust
Fund or (ii) assert jurisdiction over the Trust Fund.

                                       14
<PAGE>

         Notwithstanding anything in this Agreement to the contrary, in the
event of a Principal Prepayment in full of a Mortgage Loan, the Servicer may not
waive any prepayment penalty or portion thereof required by the terms of the
related Mortgage Note unless (i) the Servicer determines that such waiver would
maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into
account the value of such prepayment penalty, or (ii) (A) the enforceability
thereof is limited (1) by bankruptcy, insolvency, moratorium, receivership, or
other similar law relating to creditors' rights generally or (2) due to
acceleration in connection with a foreclosure or other involuntary payment, or
(B) the enforceability is otherwise limited or prohibited by applicable law. If
the Servicer has waived or does not collect all or a portion of a prepayment
penalty relating to a Principal Prepayment in full due to any action or omission
of the Servicer, other than as provided above, the Servicer shall, within 90
days of the date on which the Principal Prepayment in full is remitted to the
Trustee deliver to the Trustee the amount of such prepayment penalty (or such
portion thereof as had been waived for deposit) into the Distribution Account
for distribution in accordance with the terms of the Pooling Agreement.

         Section 2.02      Collection of Mortgage Loan Payments.
                           ------------------------------------

         Continuously from the date hereof until the principal and interest on
all Mortgage Loans are paid in full, the Servicer will diligently collect all
payments due under each Mortgage Loan when the same shall become due and payable
and shall, to the extent such procedures shall be consistent with this Agreement
and the terms and provisions of any related Primary Insurance Policy and
Applicable Regulations, follow such collection procedures as it follows with
respect to mortgage loans comparable to the Mortgage Loans and held for its own
account. The Servicer shall apply all payments on a Mortgage Loan as follows:
first, to reimburse itself for any related unreimbursed Advances; second, to the
Monthly Payment due on the Mortgage Loan with respect to the current Due Date;
third, to unpaid Monthly Payments due on the Mortgage Loan as of any prior Due
Date since the Cut-off Date with respect to which the Servicer has not
previously made an Advance; fourth, as a recovery of any P&I Arrearages on such
Mortgage Loan; fifth, to reimburse itself for any related unreimbursed Servicing
Advances; sixth, as a recovery of any Servicing Arrearages on such Mortgage
Loan; seventh, to any ancillary servicing compensation (i.e. amounts that may be
retained by the Servicer pursuant to Section 2.18 hereof); and eighth, to any
partial prepayments on such Mortgage Loan; provided; that with respect to any
Liquidated Mortgage Loan, (i) the Servicer may apply Liquidation Proceeds
thereon to cover both unreimbursed Advances and unreimbursed Servicing Advances
on such Liquidated Mortgage Loan pursuant to priority first above and (ii)
following application of such Liquidation Proceeds to cover unreimbursed Advance
and Servicing Advances, all remaining Liquidation Proceeds shall be applied to
the outstanding Principal Balance of such Liquidated Mortgage Loan prior to
applying any remaining amounts pursuant to the payment application procedures
set forth pursuant to clauses fourth through seventh above. The Servicer will
take special care in ascertaining and estimating annual ground rents, taxes,
assessments, water rates, fire and hazard insurance premiums, mortgage insurance
premiums, and all other charges that, as provided in the Mortgage, will become
due and payable to that end that the installments payable by the Mortgagors will
be sufficient to pay such charges as and when they become due and payable.

         Section 2.03      Realization Upon Defaulted Mortgage Loans.
                           -----------------------------------------

         In the event that any payment due under any Conventional Mortgage Loan
is not paid when the same becomes due and payable, or in the event the Mortgagor
fails to perform any other covenant or obligation under the Mortgage Loan and
such failure continues beyond any applicable grace period, the Servicer shall
take such action as it shall deem to be in the best interest of the
Certificateholders. In the event that any payment due under any FHA Loan becomes
delinquent, the Servicer shall take all such actions as are in the best
interests of the Certificateholders and permitted under any applicable FHA loss
mitigation proceedings, including, but not limited to, requesting the FHA to
accept an assignment of such FHA Loan, and, upon the Servicer's determination
that foreclosure is in the best interest of the Certificateholders, commencing
foreclosure proceedings. With respect to any defaulted Mortgage Loan, the
Servicer shall have the right to review the status of the related forbearance
plan and, subject to the second paragraph of Section 2.01, may modify such
forbearance plan; including, extending the Mortgage Loan repayment date for a
period of one year or reducing the Mortgage Interest Rate up to 50 basis points.

         In connection with a foreclosure or other conversion, the Servicer
shall exercise such rights and powers vested in it hereunder and use the same
degree of care and skill in its exercise as prudent mortgage servicers would
exercise or use under the circumstances in the conduct of their own affairs and
consistent with Applicable

                                       15
<PAGE>

Regulations, including, without limitation, advancing funds for the payment of
taxes and insurance premiums with respect to first lien Mortgage Loans.

         Notwithstanding the foregoing provisions of this Section 2.03, with
respect to any Mortgage Loan as to which the Servicer has received actual notice
of, or has actual knowledge of, the presence of any toxic or hazardous substance
on the related Mortgaged Property, the Servicer shall not either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property if, as a result of any such action, the
Trust Fund would be considered to hold title to, to be a mortgagee-in-possession
of, or to be an owner or operator of such Mortgaged Property within the meaning
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a prudent
report prepared by a Person who regularly conducts environmental audits using
customary industry standards, that:

                  A.       such Mortgaged Property is in compliance with
         applicable environmental laws or, if not, that it would be in the best
         economic interest of the Certificateholders to take such actions as are
         necessary to bring the Mortgaged Property into compliance therewith;
         and

                  B.       there are no circumstances present at such Mortgaged
         Property relating to the use, management or disposal of any hazardous
         substances, hazardous materials, hazardous wastes, or petroleum-based
         materials for which investigation, testing, monitoring, containment,
         clean-up or remediation could be required under any federal, state or
         local law or regulation, or that if any such materials are present for
         which such action could be required, that it would be in the best
         economic interest of the Certificateholders to take such actions with
         respect to the affected Mortgaged Property.

         The cost of the environmental audit report contemplated by this Section
2.03 shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section 2.05(ii).

         If the Servicer determines, as described above, that it is in the best
economic interest of the Certificateholders to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Certificateholders. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Servicer, subject
to the Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 2.05(ii).

         Notwithstanding anything to the contrary set forth herein, the Servicer
will not institute foreclosure proceedings (i.e. putting a stop code on the
Mortgage Loan in the Servicer's system) with respect to any Mortgage Loan based
solely on such Mortgage Loan's status as a Delinquent Loan as of the Cut-off
Date.

         Section 2.04      Collection Account.
                           ------------------

         (a)      The Servicer shall segregate and hold all funds collected and
received pursuant to each Mortgage Loan separate and apart from any of its own
funds and general assets and shall establish and maintain one or more Collection
Accounts. Each Collection Account shall be an Eligible Account.

         The Servicer shall deposit in the Collection Account on a daily basis
within two Business Days of receipt, and retain therein, the following payments
and collections received or made by it after the Cut-off Date with respect to
the Mortgage Loans:

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

                                       16
<PAGE>

                  (ii)     all payments on account of interest on the Mortgage
         Loans adjusted to the Mortgage Interest Rate less the Servicing Fee
         Rate;

                  (iii)    all Liquidation Proceeds;

                  (iv)     all Insurance Proceeds including amounts required to
         be deposited pursuant to Section 2.10, other than proceeds to be held
         in the Escrow Account and applied to the restoration or repair of the
         Mortgaged Property or released to the Mortgagor in accordance with the
         Servicer's normal servicing procedures, the loan documents or
         applicable law;

                  (v)      all Condemnation Proceeds affecting any Mortgaged
         Property which are not released to the Mortgagor in accordance with the
         Servicer's normal servicing procedures, the loan documents or
         applicable law; and

                  (vi)     any amounts required to be deposited by the Servicer
         in connection with any REO Property pursuant to Section 2.13.

         Any interest paid on funds deposited in the Collection Account, subject
to Section 2.25, shall accrue to the benefit of the Servicer and the Servicer
shall be entitled to retain and withdraw such interest from the Collection
Account pursuant to Section 2.05(v). The foregoing requirements for deposit from
the Collection 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, prepayment charges that are not prepayment penalties, and
assumption fees need not be deposited by the Servicer in the Collection Account.

         (b)      On behalf of the Trust Fund, the Servicer shall, subject to
withdrawals pursuant to Section 2.05, deliver to the Trustee in immediately
available funds for deposit in the Distribution Account by 1:00 p.m. New York
time on the Servicer Remittance Date, all amounts then on deposit in the
Collection Account from whatever source with respect to amounts due during the
related Collection Period. In the event the Servicer does not remit such amounts
to the Trustee on the Servicer Remittance Date, the Servicer shall pay to the
Trustee interest at the "prime rate" (as published in the "Money Rates" section
of the Wall Street Journal) on the amount of such remittance from and including
the Servicer Remittance Date to but excluding the day such remittance is made.

         (c)      Funds in the Collection Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 2.25. The
Servicer shall give notice to the Trustee of the location of the Collection
Account maintained by it when established and prior to any change thereof. The
Trustee shall give notice to the Servicer and the Depositor of the location of
the Distribution Account when established and prior to any change thereof.

         (d)      In the event the Servicer shall deliver to the Trustee for
deposit in the Distribution Account any amount not required to be deposited
therein, it may at any time request that the Trustee withdraw such amount from
such Account and remit to the Servicer any such amount, any provision herein to
the contrary notwithstanding. In addition, the Servicer shall deliver to the
Trustee from time to time for deposit, and the Trustee shall so deposit, in the
Distribution Account:

                  (i)      any Advances, as required pursuant to Section 2.28;

                  (ii)     any Stayed Funds, as soon as permitted by the federal
         bankruptcy court having jurisdiction in such matters;

                  (iii)    any prepayment penalties or amounts in connection
         with the waiver of such prepayment penalties, in each case required to
         be deposited pursuant to Section 2.01;

                  (iv)     any amounts required to be deposited in the
         Distribution Account pursuant to Sections 2.04, 2.15, 2.16, 2.23 or
         2.28; and

                                       17
<PAGE>

                  (v)      any amounts required to be deposited by the Servicer
         pursuant to Section 2.11 in connection with the deductible clause in
         any blanket hazard insurance policy, such deposit being made from the
         Servicer's own funds, without reimbursement therefor.

         (e)      Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source,
the Trustee shall notify the Servicer of such receipt and deposit such funds in
the Distribution Account, subject to withdrawal thereof as permitted hereunder.

         Section 2.05      Permitted Withdrawals From the Collection Account.
                           -------------------------------------------------

         The Servicer may, from time to time, withdraw from the Collection
Account for the following purposes:

                  (i)      to remit to the Trustee for deposit in the
         Distribution Account the amounts required to be so remitted pursuant to
         Section 2.04(b) or permitted to be so remitted pursuant to the first
         sentence of Section 2.04(d);

                  (ii)     to reimburse itself for Advances and Servicing
         Advances; the Servicer's right to reimburse itself pursuant to this
         subclause (ii) being limited to amounts received on the related
         Mortgage Loan which represent Late Collections, Condemnation Proceeds,
         Insurance Proceeds or Liquidation Proceeds;

                  (iii)    to reimburse itself for (A) unreimbursed Servicing
         Advances and for unreimbursed Advances to the extent that such amounts
         are deemed to be Nonrecoverable Advances, and (B) any unpaid Servicing
         Fees to the extent not recoverable from Liquidation Proceeds, Insurance
         Proceeds or other amounts received with respect to the related Mortgage
         Loan under Section 2.05(ii);

                  (iv)     to reimburse itself for any amounts paid pursuant to
         Section 2.03 (and not otherwise previously reimbursed);

                  (v)      to pay to itself as servicing compensation (in
         addition to the Servicing Fee) any interest earned on funds in the
         Collection Account (all such interest to be withdrawn monthly not later
         than each Servicer Remittance Date);

                  (vi)     to pay or reimburse itself for any amounts payable or
         paid pursuant to Section 4.03 (and not otherwise previously
         reimbursed);

                  (vii)    to pay, or to reimburse the Servicer for advances in
         respect of, expenses incurred in connection with any Mortgage Loan
         pursuant to Section 2.13;

                  (viii)   to withdraw amounts deposited in the Collection
         Account in error; and

                  (ix)     to clear and terminate the Collection Account upon
         the termination of this Agreement.

         The foregoing requirements for withdrawal from the Collection Account
shall be exclusive. In the event the Servicer shall deposit in the Collection
Account any amount not required to be deposited therein, it may at any time
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding.

         Upon request, the Servicer shall provide the Depositor and/or the
Trustee with copies of reasonably acceptable invoices or other documentation
relating to Advances and/or Servicing Advances that have been reimbursed from
the Collection Account.

                                       18
<PAGE>

         Section 2.06      Establishment of Escrow Accounts; Deposits in Escrow
Accounts.                  ----------------------------------------------------
--------

         The Servicer shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan which constitute Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts. A copy of such letter agreement shall be
furnished to the Trustee upon request. Each Escrow Account shall be an Eligible
Account.

         The Servicer shall deposit in the Escrow Account or Accounts on a daily
basis within two Business Days of receipt, and retain therein, (i) all Escrow
Payments collected on account of the Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of this
Agreement, and (ii) all Insurance Proceeds which are to be applied to the
restoration or repair of any Mortgaged Property. The Servicer shall make
withdrawals therefrom only to effect such payments as are required under this
Agreement, and for such other purposes as shall be set forth in, or in
accordance with, Section 2.07. The Servicer shall be entitled to retain any
interest paid on funds deposited in the Escrow Account by the depository
institution other than interest on escrowed funds required by law to be paid to
the Mortgagor and, to the extent required by the related Mortgage Loan or
Applicable Regulations, the Servicer shall pay interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account is non-interest bearing or
that interest paid thereon is insufficient for such purposes.

         Section 2.07      Permitted Withdrawals From Escrow Account.
                           -----------------------------------------

         Withdrawals from the Escrow Account may be made by the Servicer (i) to
effect timely payments of ground rents, taxes, assessments, water rates, sewer
rents, fire, flood and hazard insurance premiums, Primary Insurance Policy
premiums, if applicable, and comparable items, (ii) to reimburse the Servicer
for any Servicing Advance made by the Servicer with respect to a related
Mortgage Loan but only from amounts received on the related Mortgage Loan which
represent late payments or Late Collections of Escrow Payments thereunder, (iii)
to refund to the Mortgagor any funds as may be determined to be overages, (iv)
for transfer to the Collection Account in accordance with the terms of this
Agreement, (v) for application to restoration or repair of the Mortgaged
Property, (vi) to pay to the Servicer, or to the Mortgagor to the extent
required by the related Mortgage Loan or Applicable Regulations, any interest
paid on the funds deposited in the Escrow Account, (vii) to clear and terminate
the Escrow Account on the termination of this Agreement, (viii) to transfer to
the Collection Account any Insurance Proceeds or (ix) in the case of FHA Loans,
for transfer to the Collection Account, fire and hazard insurance proceeds and
Escrow Payments with respect to any Mortgage Loan where the FHA has directed
application of such funds as a credit against the proceeds of the FHA Insurance
Contract. As part of its servicing duties, the Servicer shall pay to the
Mortgagor interest on funds in the Escrow Account, to the extent required by the
related Mortgage Loan or Applicable Regulations, and to the extent that interest
earned on funds in the Escrow Account is insufficient, shall pay such interest
from its own funds, without any reimbursement therefor.

         In the event the Servicer shall deposit in the Escrow Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Escrow Account, any provision herein to the contrary
notwithstanding.

         Section 2.08      Payment of Taxes, Insurance and Other Charges;
Collections Thereunder.    ----------------------------------------------
----------------------

         With respect to each first lien Mortgage Loan, the Servicer shall
maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of Primary Insurance Policy premiums and
fire, flood and hazard insurance coverage and shall obtain, from time to time,
all bills for the payment of such charges (including renewal premiums) and shall
effect payment thereof prior to the applicable penalty or termination date and
at a time appropriate for securing maximum discounts allowable, employing for
such purpose deposits of the Mortgagor in the Escrow Account which shall have
been estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage or Applicable Regulations.
To the extent that the Mortgage does not provide for Escrow Payments, the
Servicer shall determine that any such payments are made by the Mortgagor at the
time they first become due. The Servicer assumes full responsibility for the
timely payment of all such bills and shall effect timely payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make Servicing Advances from
its own funds to effect such payments.

                                       19
<PAGE>

         The Servicer, on behalf of the Trustee, as mortgagee, will maintain in
full force and effect (to the extent a Mortgage Loan has a Primary Insurance
Policy) a Primary Insurance Policy issued by a Qualified Insurer with respect to
each Mortgage Loan for which a Primary Insurance Policy is in effect on the
Closing Date. Such coverage will be maintained until the Combined Amortized
Loan-to-Value Ratio of the related Mortgage Loan is reduced to 80% or less. The
Servicer will not cancel or refuse to renew any Primary Insurance Policy in
effect on the Closing Date that is required to be kept in force under this
Agreement unless a replacement Primary Insurance Policy for such cancelled or
non-renewed policy is obtained from and maintained with a Qualified Insurer. The
Servicer shall not take any action which would result in non-coverage under any
applicable Primary Insurance Policy of any loss which, but for the actions of
the Servicer, would have been covered thereunder. In connection with any
assumption or substitution agreement entered into or to be entered into pursuant
to Section 2.14, the Servicer shall promptly notify the insurer under the
related Primary Insurance Policy, if any, of such assumption or substitution of
liability in accordance with the terms of such policy and shall take all actions
which may be required by such insurer as a condition to the continuation of
coverage under the Primary Insurance Policy. If such Primary Insurance Policy is
terminated as a result of such assumption or substitution of liability, the
Servicer shall use reasonable efforts to obtain a replacement Primary Insurance
Policy as provided above.

         In connection with its activities as servicer, the Servicer agrees to
prepare and present, on behalf of itself and the Trustee, claims to the insurer
under any Primary Insurance Policy in a timely fashion in accordance with the
terms of such policies and, in this regard, to take such action as shall be
necessary to permit recovery under any Primary Insurance Policy respecting a
defaulted Mortgage Loan. Pursuant to Section 2.04, any amounts collected by the
Servicer under any Primary Insurance Policy shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 2.05.

         Section 2.09      Transfer of Accounts.
                           --------------------

         The Servicer may transfer the Collection Account or the Escrow Account
to a different depository institution from time to time. Upon such transfer, the
Servicer shall deliver to the Trustee and the Depositor a certification or
letter agreement, as the case may be, as required pursuant to Sections 2.04 and
2.06.

         Section 2.10      Maintenance of Hazard Insurance.
                           -------------------------------

         The Servicer shall cause to be maintained for each first lien Mortgage
Loan fire and hazard insurance with extended coverage as is customary in the
area where the Mortgaged Property is located in an amount which is at least
equal to the lesser of (i) the amount necessary to fully compensate for any
damage or loss to the improvements which are a part of such property on a
replacement cost basis (less reasonable deductibles), (ii) the Principal Balance
of the Mortgage Loan, in each case in an amount not less than such amount as is
necessary to prevent the Mortgagor and/or the Mortgagee from becoming a
co-insurer or (iii) the amount required under applicable HUD/FHA regulations. If
the Mortgaged Property is in an area identified in the Federal Register by the
Flood Emergency Management Agency as having special flood hazards and flood
insurance has been made available, the Servicer will cause to be maintained a
flood insurance policy meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable insurance carrier,
in an amount representing coverage not less than the least of (i) the Principal
Balance of the Mortgage Loan, (ii) the maximum insurable value of the
improvements securing such Mortgage Loan or (iii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973, as
amended. The Servicer shall also maintain on the REO Property for the benefit of
the Certificateholders (in each case, with reasonable deductibles), (x) fire and
hazard insurance with extended coverage in an amount which is at least equal to
the replacement cost of the improvements which are a part of such property, (y)
public liability insurance and, (z) to the extent required and available under
the Flood Disaster Protection Act of 1973, as amended, flood insurance in an
amount as provided above. Any amounts collected by the Servicer under any such
policies other than amounts to be deposited in the Escrow Account and applied to
the restoration or repair of the Mortgaged Property or REO Property, or released
to the Mortgagor in accordance with the Servicer's normal servicing procedures,
shall be deposited in the Collection Account, subject to withdrawal pursuant to
Section 2.05. It is understood and agreed that no earthquake or other additional
insurance is required to be maintained by the Servicer or the Mortgagor or
maintained on property acquired in respect of the Mortgage Loan, other than
pursuant to such Applicable Regulations as shall at any time be in force and as
shall require such additional insurance. All such policies shall be endorsed
with standard mortgagee clauses with loss payable to the Servicer and shall
provide for at least thirty days prior written notice of any cancellation,
reduction in the amount of

                                       20
<PAGE>

or material change in coverage to the Servicer. The Servicer shall not interfere
with the Mortgagor's freedom of choice in selecting either his insurance carrier
or agent, provided, however, that the Servicer shall not accept any such
insurance policies from insurance companies unless such companies are Qualified
Insurers.

         Section 2.11      Maintenance of Mortgage Impairment Insurance Policy.
                           ---------------------------------------------------

         In the event that the Servicer shall obtain and maintain a blanket
policy issued by a Qualified Insurer insuring against hazard losses on all of
the Mortgage Loans, then, to the extent such policy provides coverage in an
amount equal to the amount required pursuant to Section 2.10 and otherwise
complies with all other requirements of Section 2.10, it shall conclusively be
deemed to have satisfied its obligations as set forth in Section 2.10, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property or REO Property a policy complying with
Section 2.10, and there shall have been a loss which would have been covered by
such policy, deliver to the Trustee for deposit in the Distribution Account the
amount not otherwise payable under the blanket policy because of such deductible
clause, which amount shall not be reimbursable to the Servicer from the Trust
Fund. In connection with its activities as servicer of the Mortgage Loans, the
Servicer agrees to prepare and present, on behalf of the Trustee, claims under
any such blanket policy in a timely fashion in accordance with the terms of such
policy. Upon request of the Trustee, the Servicer shall cause to be delivered to
the Trustee a certified true copy of such policy and a statement from the
insurer thereunder that such policy shall in no event be terminated or
materially modified without thirty days prior written notice to the Trustee.

         Section 2.12      Fidelity Bond, Errors and Omissions Insurance.
                           ---------------------------------------------

         The Servicer shall maintain, at its own expense, a blanket fidelity
bond (the "Fidelity Bond") and an errors and omissions insurance policy, with
broad coverage with financially responsible companies on all officers, employees
or other persons acting in any capacity with regard to the Mortgage Loans to
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 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 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 without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 2.12 requiring the
Fidelity Bond and errors and omissions insurance shall diminish or relieve the
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 Fannie Mae in the Fannie Mae MBS
Selling and Servicing Guide or by Freddie Mac in the Freddie Mac Servicer's
Guide. Upon request of the Trustee, the Servicer shall cause to be delivered to
the requesting party a certified true copy of the Fidelity Bond and errors and
omissions insurance policy and a statement from the surety and the insurer that
such Fidelity Bond and errors and omissions insurance policy shall in no event
be terminated or materially modified without thirty days' prior written notice
to the Trustee.

         Section 2.13      Title, Management and Disposition of REO Property.
                           -------------------------------------------------

         (a)      In the event that title to a Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken (pursuant to a limited power of attorney to be provided by the
Trustee to the Servicer) in the name of the Trustee, on behalf of the
Certificateholders, or in the event the Trustee is not authorized or permitted
to hold title to real property in the state where the REO Property is located,
or would be adversely affected under the "doing business" or tax laws of such
state by so holding title, the deed or certificate of sale shall be taken in the
name of such Person or Persons as shall be consistent with an Opinion of Counsel
obtained by the Servicer from an attorney duly licensed to practice law in the
state where the REO Property is located. Any Person or Persons holding such
title other than the Trustee shall acknowledge in writing that such title is
being held as nominee for the benefit of the Trustee.

         (b)      In the event that the Trust Fund acquires any REO Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer shall dispose of such REO Property before the end of
the third calendar year beginning after the year of its acquisition by the Trust
Fund for purposes of

                                       21
<PAGE>

Section 860G(a)(8) of the Code or, at the expense of the Trust Fund, request
from the Internal Revenue Service, more than 60 days before the day on which the
above-mentioned grace period would otherwise expire, an extension of the
above-mentioned grace period, unless the Servicer obtains an Opinion of Counsel,
addressed to the Servicer and the Trustee, to the effect that the holding by the
Trust Fund of such REO Property subsequent to such period will not: (i) result
in the imposition of any tax on "prohibited transactions" as defined in Section
860F of the Code; or (ii) cause any REMIC constituting any part of the Trust
Fund 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 REO Property
(subject to any conditions contained in such Opinion of Counsel). The Servicer
shall be entitled to be reimbursed from the Collection Account for any costs
incurred in obtaining such Opinion of Counsel, as provided in Section 2.05.

         Subject to compliance with applicable laws and regulations as shall at
any time be in force, and notwithstanding any other provisions of this
Agreement, no REO Property acquired by the Trust Fund shall be rented (or
allowed to continue to be rented) or otherwise used by or on behalf of the Trust
Fund in such a manner or pursuant to any terms that would: (i) cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code; or (ii) subject any REMIC constituting part of
the Trust Fund to the imposition of any federal income taxes on the income
earned from such REO Property, including any taxes imposed by reason of Sections
860F or 860G(c) of the Code, unless the Servicer has agreed to indemnify and
hold harmless the Trust Fund with respect to the imposition of any such taxes.

         The Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders and the Trust Fund solely for the purpose of
its prompt disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the related REMIC of
any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which
is subject to taxation under the REMIC Provisions. The Servicer shall cause each
REO Property to be inspected promptly upon the acquisition of title thereto and
shall cause each REO Property to be inspected at least annually thereafter. The
Servicer shall make or cause to be made a written report of each such
inspection. Such reports shall be retained in the Mortgage Servicing File and
copies thereof shall be forwarded by the Servicer to the Trustee upon request.
The Servicer shall attempt to sell the same (and may temporarily rent the same)
on such terms and conditions as the Servicer deems to be in the best interest of
the Certificateholders and the Trust Fund.

         With respect to each REO Property, the Servicer shall account
separately for each REO Property with respect to all funds collected and
received in connection with the operation of such REO Property.

         The Servicer shall deposit or cause to be deposited, on a daily basis,
within two Business Days of receipt, in the Collection Account, all revenues
received with respect to each REO Property and shall withdraw therefrom funds
necessary for the proper operation, management and maintenance of the related
REO Property, including the cost of maintaining any hazard insurance pursuant to
Section 2.10 hereof and the fees of any managing agent acting on behalf of the
Servicer.

         The Servicer shall furnish to the Depositor, on each Servicer
Remittance Date, an operating statement for each REO Property covering the
operation of each REO Property for the previous month. Such operating statement
shall be accompanied by such other information as the Depositor shall reasonably
request.

         The Servicer shall use its best efforts to dispose of the REO Property
as promptly as is practically consistent with protecting the Certificateholders'
interests.

         Each REO Disposition shall be carried out by the Servicer at such price
and upon such terms and conditions as the Servicer deems to be in the best
interest of the Certificateholders. If as of the date title to any REO Property
was acquired by the Servicer there were outstanding unreimbursed Servicing
Advances with respect to the REO Property, the Servicer, upon an REO Disposition
of such REO Property, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances from proceeds received in connection with such
REO Disposition. The proceeds from the REO Disposition, net of any payment to
the Servicer as provided above, shall be deposited in the Collection Account for
distribution on the succeeding Servicer Remittance Date.

                                       22
<PAGE>

         Any REO Disposition shall be for cash only (unless changes in the REMIC
Provisions made subsequent to the Startup Day allow a sale for other
consideration and an Opinion of Counsel is obtained by the Servicer to the
effect that such sale shall not cause any REMIC constituting part of the Trust
Fund to fail to qualify as a REMIC).

         Section 2.14      Due-on-Sale Clauses; Assumption and Substitution
Agreements.                ------------------------------------------------
----------

         When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. An Opinion of Counsel at
the expense of the Servicer (which expense shall constitute a Servicing Advance)
delivered to the Trustee and the Depositor to the foregoing effect shall
conclusively establish the reasonableness of such belief. In such event, the
Servicer shall make reasonable efforts to enter into an assumption and
modification agreement 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 law or the Mortgage, the
Mortgagor remains liable thereon. If the foregoing is not permitted under
applicable law, the Servicer is authorized 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 Note. The Mortgage Loan, as assumed, shall conform in
all respects to the requirements, representations and warranties of this
Agreement. The Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed, and shall forward to the Custodian a
copy of such assumption or substitution agreement (indicating the Mortgage File
to which it relates) which copy shall be added by the Custodian to the related
Mortgage File (pending receipt from the Servicer of the original recorded
assumption or substitution agreement) and which 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. The Servicer shall be
responsible for recording any such assumption or substitution agreements and
sending the original recorded copy to the Custodian for inclusion in the related
Mortgage File, as set forth in the preceding sentence. In connection with any
such assumption or substitution agreement, the Monthly Payment on the related
Mortgage Loan shall not be changed but shall remain as in effect immediately
prior to the assumption or substitution, the stated maturity or outstanding
principal amount of such Mortgage Loan shall not be changed nor shall any
required monthly payments of principal or interest be deferred or forgiven. Any
fee collected by the Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Servicer as additional servicing compensation.

         Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.

         Section 2.15      Notification of Adjustments.
                           ---------------------------

         On each Adjustment Date, the Servicer shall make Mortgage Interest Rate
adjustments for each Adjustable-Rate Mortgage Rate Loan in compliance with the
requirements of the related Mortgage and Mortgage Note and Applicable
Regulations. The Servicer shall execute and deliver the notices required by each
Mortgage and Mortgage Note and Applicable Regulations regarding Mortgage
Interest Rate adjustments. The Servicer also shall provide timely notification
to the Trustee of all applicable data and information regarding such Mortgage
Interest Rate adjustments and the Servicer's methods of implementing such
Mortgage Interest Rate adjustments. Upon the discovery by the Servicer that the
Servicer has failed to adjust or has incorrectly adjusted a Mortgage Interest
Rate or a Monthly Payment pursuant to the terms of the related Mortgage Note and
Mortgage, the Servicer shall deliver to the Trustee for deposit in the
Distribution Account from its own funds the amount of any interest loss caused
thereby without reimbursement therefor; provided, however, the Servicer shall be
held harmless with respect to any Mortgage Interest Rate adjustments made by any
servicer prior to the Servicer.

                                       23
<PAGE>

         Section 2.16      Optional Purchases of Mortgage Loans by Servicer.
                           ------------------------------------------------

The Servicer, together with Washington Mutual, as servicer under the Washington
Mutual Servicing Agreement and Bank of America, as servicer under the Bank of
America Servicing Agreement, may, if each of the Servicer, Washington Mutual and
Bank of America agree to do so in a written notice provided to the Trustee at
least five Business Days prior to the related Distribution Date (the
"Termination Notice"), terminate the Trust Fund and retire the Offered
Certificates on the next succeeding Distribution Date as of which the aggregate
current Pool Balance is less than 10% of the aggregate Pool Balance of the
Mortgage Loans as of the Cut-off Date by purchasing all of the outstanding
Mortgage Loans in the Trust Fund at a price equal to the Termination Price and
by reimbursing all Servicers for outstanding Advances and Servicing Arrearages;
provided, however, that if the Washington Mutual may exercise its option under
this Section 2.16 only if the Termination Price is equal to or less than the
aggregate fair market value of all of the assets in the Trust Fund (as
determined by Washington Mutual as of the close of business on the third
Business Day preceding the date on which the Certificates are to be retired
pursuant to this Section 2.16). The Termination Price and reimbursement amounts
shall be allocated among and paid by the Servicer, Washington Mutual or Bank of
America and the purchased Mortgage Loans shall be distributed among the
Servicer, Washington Mutual and Bank of America in the manner set forth in the
Termination Notice. If the Servicer, Washington Mutual and Bank of America elect
not to purchase all of the outstanding Mortgage Loans in the Trust Fund on the
Optional Termination Date, then the non-electing party's option to purchase such
Mortgage Loans may be exercised by the Servicer, Washington Mutual and/or Bank
of America, as the case may be, as agreed to by such electing parties, provided
that all and not part of the Mortgage Loans are purchased at the Termination
Price. If the option is not exercised on such Distribution Date then on the next
succeeding Distribution Date, and on each Distribution Date thereafter until
such time, if any, as the Mortgage Loans are repurchased, any of the Servicer,
Washington Mutual and/or Bank of America (or any combination thereof) may, at
their option, purchase all of the outstanding Mortgage Loans in the Trust Fund,
in the manner described above, for the Termination Price as of such Distribution
Date and reimbursement to all Servicers for outstanding Advances and Servicing
Arrearages. Notwithstanding the foregoing, if S&P has rated a class of debt
securities ("Net Interest Margin Securities") that are backed by the Class X
Certificates and Class P Certificates and that are outstanding on any date on
which the Servicer, Washington Mutual and/or Bank of America, as applicable,
intend to exercise their option to purchase the Mortgage Loans, the Servicer,
Washington Mutual and/or Bank of America, as applicable, will be permitted to
exercise such option only if one of the following conditions is met: (i) after
distribution of the Termination Price to the Certificateholders (other than the
Holders of the Class X Certificates, Class P Certificates and Class R
Certificates) to redeem the related Certificates, the remainder of the
Termination Price (the "Remainder Amount") is distributed to the Holders of the
Class X Certificates and Class P Certificates and is sufficient to pay the
outstanding principal amount of and accrued and unpaid interest on the Net
Interest Margin Securities; or (ii) (A) at the same time that the Servicer,
Washington Mutual and/or Bank of America, as applicable, remit the Termination
Price to the Trustee, they also remit to the Trustee an additional amount which,
in combination with the Remainder Amount, is sufficient to pay the outstanding
principal amount of and accrued and unpaid interest on the Net Interest Margin
Securities, and (B) the Trustee remits the Remainder Amount to the Holders of
the Class X Certificates and Class P Certificates and remits that additional
amount directly to the indenture trustee (plus any outstanding expenses due and
owing to the indenture trustee) under the indenture creating the Net Interest
Margin Securities.

         Section 2.17      Trustee to Cooperate; Release of Files.
                           --------------------------------------

         (a)      Upon the payment in full of any Mortgage Loan (including any
liquidation of such Mortgage Loan through foreclosure or otherwise, or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes), the Servicer shall deliver to the
Trustee and the Custodian one executed copy of a completed "Request for Release"
in the form of Exhibit B. Upon receipt of such Request for Release of Documents,
the Trustee shall instruct (which instruction may be a standing instruction) the
Custodian, in accordance with the Pooling Agreement, to release the related
Mortgage File, in trust to (i) the Servicer, or (ii) such other party identified
in the related Request for Release. Upon any such payment in full, or the
receipt of such notification that such funds have been placed in escrow, the
Servicer shall direct the Trustee in writing to execute an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the
Mortgaged Property relating to such Mortgage, which instrument of satisfaction
or assignment, as the case may be,

                                       24
<PAGE>

shall be delivered to the Person or Persons entitled thereto against receipt
therefor of payment in full, it being understood and agreed that no expense
incurred in connection with such instrument of satisfaction or assignment, as
the case may be, shall be chargeable to the Collection Account. In lieu of
executing any such satisfaction or assignment, as the case may be, the Servicer
may prepare and submit to the Trustee a satisfaction (or assignment without
recourse, if requested by the Person or Persons entitled thereto) in form for
execution by the Trustee with all requisite information completed by the
Servicer; in such event, the Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related Mortgage File, as aforesaid.

         (b)      From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any insurance policy relating
to a Mortgage Loan, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related Mortgage File is released to an escrow
agent or an employee, agent or attorney of the Trustee), upon written request of
the Servicer and delivery to the Trustee and the Custodian of one executed copy
of a "Request for Release" in the form of Exhibit B signed by a Servicing
Officer, instruct (which instruction may be a standing instruction) the
Custodian to release the related Mortgage File to the Servicer in accordance
with the Pooling Agreement and shall execute such documents as shall be
necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the
Servicer. Such receipt shall obligate the Servicer to return the Mortgage File
to the Custodian when the need therefor by the Servicer no longer exists, as
determined by the Servicer, unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a Request for Release evidencing such liquidation,
the receipt shall be released by the Custodian to the Servicer. The Custodian
shall send such Mortgage File to the Servicer by overnight mail at the request
of the Servicer.

         (c)      Subject to Section 2.01, the Servicer shall have the right to
accept applications of Mortgagors for consent to (i) partial releases of
Mortgages, (ii) alterations, (iii) removal, demolition or division of properties
subject to Mortgages and (iv) second mortgage subordination agreements. No
application for approval shall be considered by the Servicer unless: (w) it has
received an Opinion of Counsel, addressed to the Trustee (which opinion shall
not be an expense of the Trustee or the Trust Fund) that such sale, disposition,
substitution, acquisition or contribution will not affect adversely the status
of any REMIC constituting part of the Trust Fund as a REMIC or cause any REMIC
constituting part of the Trust Fund to be subject to a tax on "prohibited
transactions" or "contributions" pursuant to the REMIC Provisions; (x) the
provisions of the related Note and Mortgage have been complied with; (y) the
Combined Amortized Loan-to-Value Ratio and debt-to-income ratio after any
release does not exceed the maximum Combined Amortized Loan-to-Value Ratio and
debt-to-income ratio established in accordance with the underwriting standards
of the Mortgage Loans; and (z) the lien priority of the related Mortgage is not
affected. Upon receipt by the Trustee of a Servicing Officer's certificate
setting forth the action proposed to be taken in respect of a particular
Mortgage Loan and certifying that the criteria set forth in the immediately
preceding sentence have been satisfied, the Trustee shall execute and deliver to
the Servicer the partial release so requested by the Servicer. A proposed form
of partial release shall accompany any Servicing Officer's certificate delivered
by the Servicer pursuant to this paragraph.

         Section 2.18      Servicing Compensation.
                           ----------------------

         As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the Servicing Fee with respect to each Mortgage
Loan (including REO Properties). The Servicer shall be entitled to retain
additional servicing compensation in the form of release fees, bad check
charges, assumption fees, modification or extension fees, late payment charges,
or any other service-related fees, Insurance Proceeds and Liquidation Proceeds
not required to be deposited in the Collection Account and similar items, to the
extent collected from Mortgagors.

         Section 2.19      Annual Statement as to Compliance.
                           ---------------------------------

         The Servicer, at its own expense, will deliver to the Trustee and the
Depositor, not later than March 15th of each year, commencing in 2005, a
Servicing Officer's certificate stating, as to each signer thereof, that (i) a
review of the activities of the Servicer during the preceding fiscal year (or
such shorter period in the case of the first such report) and of performance
under this Agreement has been made under such officers' supervision, and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement for such year, or, if there
has been a default in the fulfillment of all such obligations, specifying each
such default known to such officers and the nature and status thereof including
the steps being taken by the Servicer to remedy such default.

                                       25
<PAGE>

         Section 2.20      Annual Independent Certified Public Accountants'
Reports.                   ------------------------------------------------
-------

         Not later than March 15th of each year, commencing in 2005, the
Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Trustee and the
Depositor a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in either the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America or the Audit Program for Mortgages serviced by Freddie
Mac, with respect to the servicing of residential mortgage loans during the most
recently completed fiscal year and (ii) on the basis of an examination conducted
by such firm in accordance with standards established by the American Institute
of Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Trustee, the Depositor and each Rating
Agency. Copies of such statement shall be provided by the Trustee to any
Certificateholder upon request at the Servicer's expense, provided that such
statement is delivered by the Servicer to the Trustee.

         Section 2.21       Access to Certain Documentation and Information
                            -----------------------------------------------
Regarding the Mortgage Loans.
----------------------------

         The Servicer shall provide to the Trustee, Certificateholders that are
federally insured savings and loan associations, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of each of the
foregoing (which, in the case of supervisory agents and examiners, may be
required by applicable state and federal regulations) access to the
documentation regarding the Mortgage Loans, such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Servicer designated by it.

         Section 2.22      Substitution Adjustment Amounts.
                           -------------------------------

         For any month in which the Seller substitutes one or more Eligible
Substitute Mortgage Loans for one or more Defective Mortgage Loans in accordance
with the provisions of the Pooling Agreement, the Servicer will determine the
amount (the "Substitution Adjustment Amount"), if any, by which the aggregate
Purchase Price of all such Defective Mortgage Loans exceeds the aggregate, as to
each such Eligible Substitute Mortgage Loan, of the principal balance thereof as
of the date of substitution, together with one month's interest on such
principal balance at the applicable Net Mortgage Interest Rate. In accordance
with the Pooling Agreement, on the date of such substitution, the Seller will
deliver or cause to be delivered to the Servicer for deposit in the Collection
Account an amount equal to the Substitution Adjustment Amount, if any.

         Section 2.23      Obligations of the Servicer in Respect of
Compensating Interest.     -----------------------------------------
---------------------

         Not later than 1:00 p.m. New York time on each Servicer Remittance
Date, the Servicer shall deliver to the Trustee for deposit in the Distribution
Account an amount ("Compensating Interest") equal to the lesser of (A) the
aggregate of the Prepayment Interest Shortfalls on the Actuarial Mortgage Loans
for the related Distribution Date resulting from Principal Prepayments on the
Actuarial Mortgage Loans during the related Prepayment Period and (B) its
aggregate Servicing Fee received in the related Collection Period. The Servicer
shall apply Compensating Interest to offset any Prepayment Interest Shortfalls
on the Actuarial Mortgage Loans. The Servicer shall not have the right to
reimbursement for any amounts remitted to the Trustee in respect of Compensating
Interest. The Servicer shall not be obligated to pay Compensating Interest with
respect to Prepayment Interest Shortfalls on Simple Interest Mortgage Loans or
Relief Act Shortfalls.

         Section 2.24      Obligations of the Servicer in Respect of Mortgage
                           --------------------------------------------------
Interest Rates and Monthly 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 Interest Rates, Monthly Payments or Principal Balances that were made
by the Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the 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

                                       26
<PAGE>

Trust Fund, the Trustee, the Depositor and any successor servicer in respect of
any such liability. Such indemnities shall survive the termination or discharge
of this Agreement.

         Section 2.25      Investment of Funds in the Collection Account.
                           ---------------------------------------------

         (a)      The Servicer may direct any depository institution maintaining
the Collection Account or Accounts (for purposes of this Section 2.25, each an
"Investment Account"), to invest the funds in such Investment Account in one or
more Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Trustee is the
obligor thereon, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Trustee is the obligor thereon. All such Permitted Investments shall be held to
maturity, unless payable on demand. Any investment of funds in the Distribution
Account shall be made in the name of the Trustee or the Servicer, as applicable
(in its capacity as such) or in the name of a nominee of the Trustee. The
Trustee shall be entitled to sole possession over each such investment and the
income thereon, and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Trustee or its agent, together
with any document of transfer necessary to transfer title to such investment to
the Trustee or its nominee.

         (b)      All income and gain realized from the investment of funds in
the Collection Account shall be for the benefit of the Servicer. The Servicer
shall deposit in the Collection Account the amount of any loss incurred in
respect of any such Permitted Investment made with funds in such account
immediately upon realization of such loss.

         (c)      Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, upon the request of the Holders of
Certificates representing more than 50% of the Voting Rights allocated to any
Class of Certificates, shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings.

         The Trustee shall not in any way be held liable by reason of any
insufficiency in any Account held by the Trustee resulting from any investment
loss on any Permitted Investment included therein (except to the extent that the
Trustee is the obligor and has defaulted thereon).

         Section 2.26      Liability of Servicer; Indemnification.
                           --------------------------------------

         (a)      Subject to clause (b) below and Section 4.03, the Servicer
indemnifies and holds the Trustee, the Depositor and each Certificateholder
harmless against any and all claims, losses, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trustee, the Depositor and any Certificateholder may
sustain in any way related to the failure of the Servicer to perform its duties
and service the Mortgage Loans in compliance with the Servicing Standards, the
terms of this Agreement and the terms of the Mortgage Notes. The Servicer shall
immediately notify the Trustee, the Depositor and each Certificateholder if a
claim is made that may result in such claims, losses, penalties, fines,
forfeitures, legal fees or related costs, judgments, or any other costs, fees
and expenses, and the Servicer shall assume (with the consent of the Depositor)
the defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Trustee, the
Depositor and/or Certificateholder in respect of such claim. The provisions of
this Section 2.26 shall survive the termination of this Agreement and the
payment of the outstanding Certificates. The indemnification obligations under
this Section 2.26(a) shall not be assumed by the Trustee in its role as
successor Servicer.

         (b)      None of the Depositor, the Servicer, or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken,
or for refraining from the taking of any action, in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor or the Servicer or any such Person against any
breach of warranties or representations made herein, or against any specific
liability imposed on the Servicer for a breach of the Servicing Standard, or
against any liability which would otherwise be imposed by reason of its

                                       27
<PAGE>

respective willful misfeasance, bad faith, fraud or negligence in the
performance of its duties or by reasons of negligent disregard of its respective
obligations or duties hereunder.

         The Depositor, the Servicer and any director, officer, employee or
agent of the Depositor or the Servicer may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any
appropriate Person with respect to any matters arising hereunder. The Depositor,
the Servicer and any director, officer, employee or agent of the Depositor or
the Servicer shall be indemnified and held harmless by the Trust Fund against
any loss, liability or expense incurred in connection with any legal action
relating to this Agreement or the Certificates, other than any loss, liability
or expense incurred in connection with any legal action incurred by reason of
its respective misfeasance, bad faith, fraud or negligence, a breach of a
representation or warranty hereunder or (in the case of the Servicer) a breach
of the Servicing Standard in the performance of its respective duties or by
reason of negligent disregard of its respective obligations or duties hereunder.
Neither the Depositor nor the Servicer shall be under any obligation to appear
in, prosecute or defend any legal action unless such action is related to its
respective duties under this Agreement and in its opinion does not expose it to
any expense or liability; provided, however, that the Depositor or the Servicer
may in its discretion undertake any action related to its obligations hereunder
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.

         Section 2.27      Reports of Foreclosure and Abandonment of Mortgaged
Properties.                ---------------------------------------------------
----------

         On or before the last day of January of each year beginning in 2005,
the Servicer shall file the reports of foreclosure and abandonment of any
Mortgaged Property required by Section 6050J of the Code with the Internal
Revenue Service. The reports from the Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by such Section 6050J.

         Section 2.28      Remittance Reports; Advances.
                           ----------------------------

         (a)      On the Servicer Report Date, the Servicer shall deliver to the
Trustee in electronic form (or by such other means as the Servicer and the
Trustee may agree from time to time) a Remittance Report with respect to the
related Distribution Date and any other information that the Trustee reasonably
requests and which is reasonably available to the Servicer. The Trustee shall
not be responsible to recompute, recalculate or verify any information provided
to it by the Servicer.

         (b)      The Servicer shall use reasonable efforts to provide to the
Depositor the following notices and reports in a timely manner and using the
same methodology and calculations used in its Remittance Report. The Servicer
shall send all such notices and reports to the Depositor in electronic format
unless otherwise specified herein or agreed to in writing by the Depositor.

                  (i)      All Mortgage Loans - Within ten (10) Business Days
         after each month-end, commencing with the month ending January 31,
         2004, the Servicer shall provide the Depositor a report of each
         Mortgage Loan, indicating the information contained in Exhibit E to
         this Agreement for the Due Date relating to such month to the extent
         such information is reasonably available to the Servicer.

                  (ii)     Liquidated Mortgage Loans - Within ten (10) Business
         Days after each month-end, commencing with the month ending January 31,
         2004, the Servicer shall provide the Depositor and the Trustee with
         copies of realized loss certificates or any such itemization regarding
         Liquidated Mortgage Loans.

                  (iii)    Primary Mortgage Insurance Claims - Where applicable,
         the Servicer shall provide the Depositor with reports on all primary
         mortgage insurance claims filed, as well as the actual amount paid on
         each claim in respect of a Mortgage Loan. The Servicer shall provide
         the Depositor with copies of primary mortgage insurance claims upon the
         Depositor's request.

                  (iv)     Hazard and Flood Insurance Claims - Where applicable,
         the Servicer shall provide the Depositor with reports on all hazard and
         flood insurance claims filed by the Servicer, as well as the actual

                                       28
<PAGE>

         amount paid on each claim in respect of a Mortgage Loan. The Servicer
         shall provide the Depositor with copies of hazard and flood insurance
         claims filed by the Servicer upon the Depositor's request.

         (c)      The amount of Advances to be made by the Servicer for any
Distribution Date shall equal, subject to Section 2.28(d), the aggregate amount
of Monthly Payments (net of the related Servicing Fee), due during the related
Collection Period in respect of the Actuarial Mortgage Loans, which Monthly
Payments were delinquent on a contractual basis as of the close of business on
the related Determination Date. For purposes of the preceding sentence, the
Monthly Payment on each Balloon Mortgage Loan with a delinquent Balloon Payment
is equal to the assumed monthly payment that would have been due on the related
Due Date based on the original principal amortization schedule for such Balloon
Mortgage Loan. The Servicer shall not be obligated to make any Advance with
respect to Simple Interest Mortgage Loans or REO Properties.

         On or before 1:00 p.m. New York time on the Servicer Remittance Date,
the Servicer shall remit in immediately available funds to the Trustee for
deposit in the Distribution Account an amount equal to the aggregate amount of
Advances, if any, to be made in respect of the Mortgage Loans for the related
Distribution Date either (i) from its own funds or (ii) from the Collection
Account, to the extent of funds held therein for future distribution (in which
case it will cause to be made an appropriate entry in the records of the
Collection Account that amounts held for future distribution have been, as
permitted by this Section 2.28, used by the Servicer in discharge of any such
Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the
total amount of Advances to be made by the Servicer with respect to the Mortgage
Loans. Any amounts held for future distribution and so used shall be
appropriately reflected in the Servicer's records and replaced by the Servicer
by deposit in the Collection Account on or before any future Servicer Remittance
Date. The Trustee will provide notice to the Servicer electronically or by
telecopy by the close of business on any Servicer Remittance Date in the event
that the amount remitted by the Servicer to the Trustee on such date is less
than the amount required to be remitted by the Servicer for the related
Distribution Date, as set forth in the related Remittance Report.

         (d)      The obligation of the Servicer to make such Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
(e) below, and, with respect to any Mortgage Loan, shall continue until the
earlier of such time as the Trust acquires title to the related Mortgaged
Property or such Mortgage Loan is paid in full by the Mortgagor or disposed of
by the Trust, or until the recovery of all Liquidation Proceeds thereon.

         (e)      Notwithstanding anything herein to the contrary, no Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if such
Advance would, if made, constitute a Nonrecoverable Advance. The determination
by the Servicer that it has made a Nonrecoverable Advance or that any proposed
Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced
by an Officers' Certificate of the Servicer delivered to the Depositor and the
Trustee.

         Section 2.29      Periodic Filings.
                           ----------------

         (a)      The Servicer shall reasonably cooperate with the Trustee and
the Depositor in connection with the Trust's satisfying the reporting
requirements under the 1934 Act. Upon the request of the Trustee or the
Depositor, the Servicer shall cooperate with the Trustee in the preparation of
any such report and shall provide to the Trustee in a timely manner all such
information or documentation as the Trustee may reasonably request in connection
with the performance of its duties and obligations under this Section.

         (b)      A Servicing Officer of the Servicer who is responsible for the
servicing and administration of the Mortgage Loans shall sign a certification in
the form attached hereto as Exhibit D for the benefit of the Depositor, the
Trustee and their respective officers, directors and Affiliates in respect of
items 4 and 5 of the Certification. Each such certification shall be delivered
to the Depositor and the Trustee (as applicable), no later than March 15th of
each year (or if such day is not a Business Day, the immediately preceding
Business Day) and the Depositor shall deliver the Certification to be filed to
the Trustee no later than March 20th of each year, beginning in 2005, (or if
such day is not a Business Day, the immediately preceding Business Day). In the
event that prior to the filing date of the Form 10-K in March of each year, the
Trustee or the Servicer has actual knowledge of information material to the
Certification, that party shall promptly notify the Depositor and each of the
other parties signing the certifications. In addition, the Servicer shall
indemnify and hold harmless the Depositor, the Trustee and their respective
officers, directors and Affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary

                                       29
<PAGE>

legal fees and related costs, judgments and other costs and expenses arising out
of or based upon any breach of the Servicer's obligations under this Section
2.29(c) or the Servicer's negligence, bad faith or willful misconduct in
connection therewith. If the indemnification provided for herein is unavailable
or insufficient to hold harmless the indemnified party then the Servicer agrees
in connection with a breach of the Servicer's obligations under this Section
2.29(c) or the Servicer's negligence, bad faith or willful misconduct in
connection therewith that it shall contribute to the amount paid or payable by
the Depositor and the Trustee as a result of the losses, claims, damages or
liabilities of the Depositor and the Trustee in such proportion as is
appropriate to reflect the relative fault of the Depositor and the Trustee on
the one hand and the Servicer on the other.

         Section 2.30      Gramm-Leach-Bliley.
                           ------------------

         The Servicer shall comply with Title V of the Gramm-Leach-Bliley Act of
1999 and all applicable regulations promulgated thereunder, relating to the
Mortgage Loans and the related borrowers and shall provide all required notices
thereunder. The Servicer hereby represents and warrants that it has procedures
and systems in place in order to comply with Title V of the Gramm-Leach-Bliley
Act of 1999 and all applicable regulations promulgated thereunder.


                                   ARTICLE III

                                   [RESERVED]


                                   ARTICLE IV

                         THE SERVICER AND THE DEPOSITOR

         Section 4.01      Liability of the Servicer and the Depositor.
                           -------------------------------------------

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

         Section 4.02      Merger or Consolidation of, or Assumption of the
                           ------------------------------------------------
Obligations of the Servicer or the Depositor.
--------------------------------------------

         Any entity into which the Servicer or the Depositor may be merged or
consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Servicer or the Depositor shall be a party, or any
corporation succeeding to the business of the Servicer or the Depositor, shall
be the successor of the Servicer or the Depositor, as the case may be,
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; provided, however, that the successor Servicer shall satisfy
all the requirements of Section 5.02 with respect to the qualifications of a
successor Servicer, except that the net worth of any successor of the Servicer
need only be greater than $20,000,000.

         Section 4.03      Limitation on Liability of the Servicer and Others.
                           --------------------------------------------------

         Neither the Servicer nor any of the directors or officers or employees
or agents of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of duties of the Servicer or by reason of its reckless disregard
of its obligations and duties of the Servicer hereunder; provided, further, that
this provision shall not be construed to entitle the Servicer to indemnity in
the event that amounts advanced by the Servicer to retire any senior lien exceed
Liquidation Proceeds (in excess of related liquidation expenses) realized with
respect to the related Mortgage Loan. The Servicer and any director or officer
or employee or agent of the 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. The Servicer and any director or officer or

                                       30
<PAGE>

employee or agent of the Servicer shall be indemnified by the Trust and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense incurred by reason of its willful misfeasance, bad
faith or negligence in the performance of duties hereunder or by reason of its
reckless disregard of obligations and duties hereunder. The Servicer may
undertake any such action which it may deem necessary or desirable in respect of
this Agreement, and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, the reasonable
legal expenses and costs of such action and any liability resulting therefrom
shall be expenses, costs and liabilities of the Trust and the Servicer shall be
entitled to pay such expenses from the proceeds of the Trust or to be reimbursed
therefor pursuant to Section 2.05 upon presentation to the Trustee of
documentation of such expenses, costs and liabilities. The Servicer's right to
indemnity or reimbursement pursuant to this Section shall survive any
resignation or termination of the Servicer pursuant to Section 4.04 or 5.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination). This paragraph shall apply to the Servicer solely
in its capacity as Servicer hereunder and in no other capacities.

         Section 4.04      Servicer Not to Resign.
                           ----------------------

         Subject to the provisions of Section 5.01 and Section 4.02, the
Servicer shall not resign from the obligations and duties hereby imposed on it
except (i) upon determination that the performance of its obligations or duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it
or its subsidiaries or Affiliates, the other activities of the Servicer so
causing such a conflict being of a type and nature carried on by the Servicer or
its subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Servicer has proposed a
successor servicer to the Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Trustee and the Depositor; and (b) each
Rating Agency shall have delivered a letter to the Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Certificates; provided, however,
that no such resignation by the Servicer shall become effective until such
successor servicer or, in the case of (i) above, the Trustee shall have assumed
the Servicer's responsibilities and obligations hereunder or the Trustee shall
have designated a successor servicer in accordance with Section 5.02. Any such
resignation shall not relieve the Servicer of responsibility for any of the
obligations specified in Sections 5.01 and 5.02 as obligations that survive the
resignation or termination of the Servicer. Any such determination permitting
the resignation of the Servicer pursuant to clause (i) above shall be evidenced
by an Opinion of Counsel to such effect delivered to the Trustee. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Trustee.

         Section 4.05      Delegation of Duties.
                           --------------------

         In the ordinary course of business, the Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those set forth in Section 2.01. Such delegation shall not relieve
the Servicer of its liabilities and responsibilities with respect to such duties
and shall not constitute a resignation within the meaning of Section 4.04. The
Servicer shall provide the Trustee and the Rating Agencies with 60 days prior
written notice prior to the delegation of any of its duties to any Person other
than any of the Servicer's Affiliates or their respective successors and
assigns.

         Section 4.06      Representations, Warranties and Covenants of the
Servicer.                  ------------------------------------------------
--------

         The Servicer hereby represents, warrants and covenants to the Trustee,
for the benefit of each of the Certificateholders, and to the Depositor that as
of the Closing Date or as of such date specifically provided herein:

                  (i)      The Servicer is duly organized, validly existing, and
         in good standing under the laws of the jurisdiction of its formation
         and has all licenses necessary to carry on its business as now being
         conducted, except for such licenses, certificates and permits the
         absence of which, individually or in the aggregate, would not have a
         material adverse effect on the ability of the Servicer to conduct its
         business as it is presently conducted, and is licensed, qualified and
         in good standing in the states where the Mortgaged Property is located
         if the laws of such state require licensing or qualification in order
         to conduct business of

                                       31
<PAGE>

         the type conducted by the Servicer or to ensure the enforceability or
         validity of each Mortgage Loan; the Servicer has the power and
         authority to execute and deliver this Agreement and to perform in
         accordance herewith; the execution, delivery and performance of this
         Agreement (including all instruments of transfer to be delivered
         pursuant to this Agreement) by the Servicer and the consummation of the
         transactions contemplated hereby have been duly and validly authorized;

                  (ii)     The consummation of the transactions contemplated by
         this Agreement are in the ordinary course of business of the Servicer
         and will not result in the breach of any term or provision of the
         certificate of formation or the partnership agreement of the Servicer
         or result in the breach of any term or provision of, or conflict with
         or constitute a default under or result in the acceleration of any
         obligation under, any agreement, indenture or loan or credit agreement
         or other instrument to which the Servicer or its property is subject,
         or result in the violation of any law, rule, regulation, order,
         judgment or decree to which the Servicer or its property is subject;

                  (iii)    The Servicer is an approved seller/servicer of
         conventional mortgage loans for Fannie Mae, and is an FHA Approved
         Mortgagee in good standing to service mortgages and has not been
         suspended as a mortgagee or servicer by the FHA and has the facilities,
         procedures and experienced personnel necessary for the sound servicing
         of mortgage loans of the same type as the Mortgage Loans. The Servicer
         is, and shall remain for as long as it is servicing the Mortgage Loans
         hereunder, in good standing as an FHA Approved Mortgagee and to service
         mortgage loans for HUD, Fannie Mae or Freddie Mac, and no event has
         occurred, including but not limited to a change in insurance coverage,
         which would make the Servicer unable to comply with HUD, Fannie Mae,
         Freddie Mac or FHA eligibility requirements or which would require
         notification to any of HUD, Fannie Mae, Freddie Mac or FHA;

                  (iv)     This Agreement, and all documents and instruments
         contemplated hereby which are executed and delivered by the Servicer,
         constitute and will constitute valid, legal and binding obligations of
         the Servicer, enforceable in accordance with their respective terms,
         except as the enforcement thereof may be limited by applicable
         bankruptcy laws and general principles of equity;

                  (v)      The Servicer does not believe, nor does it have any
         reason or cause to believe, that it cannot perform each and every
         covenant contained in this Agreement;

                  (vi)     Except as previously disclosed to the Depositor,
         there is no action, suit, proceeding or investigation pending or, to
         its knowledge, threatened against the Servicer that, either
         individually or in the aggregate, may result in any material adverse
         change in the business, operations, financial condition, properties or
         assets of the Servicer, or in any material impairment of the right or
         ability of the Servicer to carry on its business substantially as now
         conducted, or in any material liability on the part of the Servicer, or
         that would draw into question the validity or enforceability of this
         Agreement or of any action taken or to be taken in connection with the
         obligations of the Servicer contemplated herein, or that would be
         likely to impair materially the ability of the Servicer to perform
         under the terms of this Agreement;

                  (vii)    No consent, approval or order of any court or
         governmental agency or body is required for the execution, delivery and
         performance by the Servicer of or compliance by the Servicer with this
         Agreement or the consummation of the transactions contemplated by this
         Agreement, except for such consents, approvals, authorizations and
         orders, if any, that have been obtained; and

                  (viii)   Neither this Agreement nor any information,
         certificate of an officer, statement furnished in writing or report
         delivered to the Trustee by the Servicer in connection with the
         transactions contemplated hereby contains or will contain any untrue
         statement of a material fact or omits or will omit to state a material
         fact necessary in order to make the statements contained therein, in
         light of the circumstances under which they were made, not misleading.

         It is understood and agreed that the representations, warranties and
covenants set forth in this Section 4.06 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Trustee, the
Depositor and the Certificateholders. Upon discovery by any of the Depositor,
the Trustee or the Servicer of a breach of any of the foregoing representations,
warranties and covenants which materially and adversely affects the value of any

                                       32
<PAGE>

Mortgage Loan or the interests therein of the Certificateholders, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to each of the other parties
hereto.


                                    ARTICLE V

                                   TERMINATION

         Section 5.01      Servicer Events of Termination.
                           ------------------------------

         (a)      If any one of the following events ("Servicer Events of
Termination") shall occur and be continuing:

                  (i)      (A) The failure by the Servicer to make any Advance;
         or (B) any other failure by the Servicer to deposit in the Collection
         Account or Distribution Account any deposit required to be made under
         the terms of this Agreement which continues unremedied for a period of
         one Business Day after the date upon which written notice of such
         failure shall have been given to the Servicer by the Trustee or by any
         Holder of a Certificate evidencing at least 25% of the Voting Rights;
         or

                  (ii)     The failure by the Servicer to make any required
         Servicing Advance which failure continues unremedied for a period of 30
         days, or the failure by the Servicer duly to observe or perform, in any
         material respect, any other covenants, obligations or agreements of the
         Servicer as set forth in this Agreement, which failure continues
         unremedied for a period of 30 days, after the date (A) on which written
         notice of such failure, requiring the same to be remedied, shall have
         been given to the Servicer by the Trustee or by any Holder of a
         Certificate evidencing at least 25% of the Voting Rights or (B) actual
         knowledge of such failure by a Servicing Officer of the Servicer; or

                  (iii)    The entry against the Servicer of a decree or order
         by a court or agency or supervisory authority having jurisdiction in
         the premises for the appointment of a trustee, conservator, receiver or
         liquidator in any insolvency, conservatorship, receivership,
         readjustment of debt, marshalling of assets and liabilities or similar
         proceedings, or for the winding up or liquidation of its affairs, and
         the continuance of any such decree or order unstayed and in effect for
         a period of 60 days; or

                  (iv)     The Servicer shall voluntarily go into liquidation,
         consent to the appointment of a conservator or receiver or liquidator
         or similar person in any insolvency, readjustment of debt, marshalling
         of assets and liabilities or similar proceedings of or relating to the
         Servicer or of or relating to all or substantially all of its property;
         or a decree or order of a court or agency or supervisory authority
         having jurisdiction in the premises for the appointment of a
         conservator, receiver, liquidator or similar person 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 Servicer and such decree or order shall
         have remained in force undischarged, unbonded or unstayed for a period
         of 60 days; or the Servicer shall admit in writing its inability to pay
         its debts generally as they become due, file a petition to take
         advantage of any applicable insolvency or reorganization statute, make
         an assignment for the benefit of its creditors or voluntarily suspend
         payment of its obligations; or

                  (v)      The Cumulative Loss Percentage exceeds 5%; or

                  (vi)     The quotient (expressed as a percentage) of (x) the
         Principal Balance of 60+ Day Delinquent Loans as of the end of the
         related Collection Period (including Mortgage Loans in bankruptcy,
         foreclosure or represented by an REO Property) over (y) the aggregate
         Principal Balance of the Mortgage Loans as of the end of the related
         Collection Period exceeds 45%; or

                                       33
<PAGE>

                  (vii)    Any reduction, withdrawal or qualification of the
         Servicer's rating by S&P, Moody's or Fitch which results in the
         inability of the Servicer, or the unacceptability by any such rating
         agency to allow the Servicer, in either case, to act as a primary
         servicer for this transaction or a primary servicer or special servicer
         for any other mortgage-backed or asset-backed transaction rated or to
         be rated by any such rating agency.

         (b)      Then, and in each and every such case, so long as a Servicer
Event of Termination shall not have been remedied within the applicable grace
period, if any, (x) with respect solely to clause (i)(A) above, if such Advance
is not made by 2:00 P.M., New York time, on the Business Day immediately
following the Servicer Remittance Date, the Trustee may terminate all of the
rights and obligations of the Servicer under this Agreement and the Trustee, or
a successor servicer appointed in accordance with Section 5.02, shall
immediately make such Advance and assume, pursuant to Section 5.02, the duties
of a successor Servicer and (y) in the case of (i)(B), (ii), (iii), (iv), (v),
(vi) and (vii) above, the Trustee may and, at the direction of the Holders of
each Class of Certificates evidencing Percentage Interests aggregating not less
than 51%, shall by notice then given in writing in accordance with Section 7.04
hereof to the Servicer, terminate all of the rights and obligations of the
Servicer as servicer under this Agreement. Any such notice to the Servicer shall
also be given to each Rating Agency and the Depositor. On or after the receipt
by the Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Certificates or the Mortgage
Loans or otherwise, shall pass to and be vested in the Trustee pursuant to and
under this Section, provided that the succession of the Trustee to all of the
responsibilities, duties and liabilities of the terminated Servicer may not be
complete for up to 90 days after the delivery of such written notice, as set
forth in Section 5.02(a) hereof; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the 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 of each Mortgage Loan and Related Documents or otherwise. The
Servicer agrees to cooperate with the Trustee (or the applicable successor
Servicer) in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the delivery to the Trustee
of all documents and records requested by it to enable it to assume the
Servicer's functions under this Agreement within ten Business Days subsequent to
such notice, the transfer within one Business Day subsequent to such notice to
the Trustee (or the applicable successor Servicer) for the administration by it
of all cash amounts that shall at the time be held by the Servicer and to be
deposited by it in the Collection Account, the Distribution Account, any REO
Account or any Escrow Account or that have been deposited by the Servicer in
such accounts or thereafter received by the Servicer with respect to the
Mortgage Loans or any REO Property received by the Servicer. All reasonable
costs and expenses (including reasonable attorneys' fees) incurred in connection
with transferring the servicing to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer (or if the predecessor Servicer is the
Trustee, the initial Servicer) upon presentation of reasonable documentation of
such costs and expenses. The Servicer shall continue to be entitled to the
benefits of Section 4.03, notwithstanding any termination hereunder, with
respect to events occurring prior to such termination. If such predecessor
Servicer does not pay such costs and expenses within a reasonable period of
time, the successor Servicer shall be entitled to be reimbursed from the Trust
Fund for such costs and expenses for which the Trust Fund will retain a right of
recovery against the predecessor or initial Servicer, as applicable. Any
Advances made by the predecessor Servicer will be reimbursed by the successor
Servicer (other than Nonrecoverable Advances which shall be reimbursed from the
amounts on deposit in the Collection Account).

         Section 5.02      Trustee to Act; Appointment of Successor.
                           ----------------------------------------

         (a)      Within 90 days of the time the Servicer receives a notice of
termination pursuant to Section 5.01, the Trustee (or such other successor
Servicer as is approved in accordance with this Agreement) shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof arising on and after
its succession. As compensation therefor, the Trustee (or such other successor
Servicer) shall be entitled to such compensation as the Servicer would have been
entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Servicer or (ii) if the Trustee is legally unable so to act, the Trustee shall
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank or other mortgage loan or
home equity loan servicer having a net worth of not less than $50,000,000 as the
successor to

                                       34
<PAGE>

the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided,
that the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the
Certificates or the ratings that are in effect by the Rating Agencies as
evidenced by a letter to such effect from the Rating Agencies. Pending
appointment of a successor to the Servicer hereunder, unless the Trustee is
prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Mortgage
Loans in an amount equal to the compensation which the Servicer would otherwise
have received pursuant to Section 2.18 (or such other compensation as the
Trustee and such successor shall agree, not to exceed the Servicing Fee). The
successor servicer shall be entitled to withdraw from the Collection Account all
costs and expenses associated with the transfer of the servicing to the
successor servicer. The appointment of a successor servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer to pay any deductible under an insurance
policy pursuant to Section 2.12 or to indemnify the parties indicated in Section
2.26 pursuant to the terms thereof, nor shall any successor Servicer be liable
for any acts or omissions of the predecessor Servicer or for any breach by such
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.

         (b)      Any successor, including the Trustee, to the Servicer as
servicer shall during the term of its service as servicer continue to service
and administer the Mortgage Loans for the benefit of Certificateholders, and
maintain in force a policy or policies of insurance covering errors and
omissions in the performance of its obligations as Servicer hereunder and a
Fidelity Bond in respect of its officers, employees and agents to the same
extent as the Servicer is so required pursuant to Section 2.12.

         Section 5.03      Waiver of Defaults.
                           ------------------

         The Majority Certificateholders may, on behalf of all
Certificateholders, waive any events permitting removal of the Servicer as
servicer pursuant to this Article V, provided, however, that the Majority
Certificateholders may not waive a default in making a required distribution on
a Certificate without the consent of the Holder of such Certificate. Upon any
waiver of a past default, such default shall cease to exist and any Servicer
Event of Termination arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the Trustee to
the Rating Agencies.

         Section 5.04      Notification to Certificateholders.
                           ----------------------------------

         (a)      On any termination or appointment of a successor the Servicer
pursuant to this Article V or Section 4.04, the Trustee shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register and each Rating Agency.

         (b)      No later than 60 days after the occurrence of any event which
constitutes or which, with notice or a lapse of time or both, would constitute a
Servicer Event of Termination for five Business Days after a Responsible Officer
of the Trustee obtains actual knowledge of the occurrence of such an event, the
Trustee shall transmit by mail to all Certificateholders notice of such
occurrence unless such default or Servicer Event of Termination shall have been
waived or cured. Such notice shall be given to the Rating Agencies promptly
after any such occurrence.

         Section 5.05      Survivability of Servicer Liabilities.
                           -------------------------------------

         Notwithstanding anything herein to the contrary, upon termination of
the Servicer hereunder, any liabilities of the Servicer which accrued prior to
such termination shall survive such termination.

                                       35
<PAGE>

                                   ARTICLE VI

                                   TERMINATION

         Section 6.01      Termination.
                           -----------

         The respective obligations and responsibilities of the Servicer, the
Depositor and the Trustee hereunder shall terminate upon termination of the
Trust in accordance with Section 7.01 of the Pooling Agreement.


                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

         Section 7.01      Amendment.
                           ---------

         This Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee without the consent of the Certificateholders, (i) to
cure any ambiguity, (ii) to correct or supplement any provisions herein which
may be defective or inconsistent with any other provisions herein or (iii) to
make any other provisions with respect to matters or questions arising under
this Agreement, which shall not be inconsistent with the provisions of this
Agreement; provided, however, that any such action listed in clause (i) through
(iii) above shall not adversely affect in any respect the interests of any
Certificateholder, as evidenced by (i) notice in writing to the Depositor, the
Servicer and the Trustee from the Rating Agencies that such action will not
result in the reduction or withdrawal of the rating of any outstanding Class of
Certificates with respect to which it is a Rating Agency, or (ii) an Opinion of
Counsel delivered to the Depositor, the Servicer and the Trustee to such effect.

         In addition, this Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Majority
Certificateholders 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,
however, that no such amendment or waiver shall (x) reduce in any manner the
amount of, or delay the timing of, payments on the Certificates which are
required to be made on any Certificate without the consent of the Holder of such
Certificate, (y) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in
clause (x) above, without the consent of the Holders of Certificates of such
Class evidencing at least a 66% of the Voting Rights of such Class, or (z)
reduce the percentage of Voting Rights required by clause (y) above without the
consent of the Holders of all Certificates of such Class then outstanding. Upon
approval of an amendment, a copy of such amendment shall be sent to the Rating
Agencies. Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel (at the expense
of the Person seeking such amendment) stating that the execution of such
amendment is authorized or permitted by this Agreement. The Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Trustee's own rights, duties or immunities under this Agreement.

         Notwithstanding any provision of this Agreement to the contrary, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, delivered by (and at the expense of)
the Person seeking such Amendment, to the effect that such amendment will not
result in the imposition of a tax on any REMIC constituting part of the Trust
Fund pursuant to the REMIC Provisions or cause any REMIC constituting part of
the Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding and that the amendment is being made in accordance with the terms
hereof.

         Promptly after the execution of any such amendment the Trustee shall
furnish, at the expense of the Person that requested the amendment if such
Person is the Servicer (but in no event at the expense of the Trustee),
otherwise at the expense of the Trust, a copy of such amendment and the Opinion
of Counsel referred to in the immediately preceding paragraph to the Servicer
and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section 7.01 to approve the particular form of any proposed amendment;
instead it shall be sufficient if such consent shall approve the substance

                                       36
<PAGE>

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 7.02      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
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
Servicer at the expense of the Trust, but only upon direction of
Certificateholders, accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects 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 together constitute but
one and the same instrument.

         Section 7.03      Governing Law; Jurisdiction.
                           ---------------------------

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. WITH RESPECT TO ANY
CLAIM ARISING OUT OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK, AND EACH PARTY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY
TIME TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING HERETO BROUGHT IN ANY SUCH COURTS, IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN ANY INCONVENIENT FORUM AND FURTHER IRREVOCABLY WAIVES THE RIGHT TO OBJECT,
WITH RESPECT TO SUCH CLAIM, SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY, PROVIDED THAT
SERVICE OF PROCESS HAS BEEN MADE BY ANY LAWFUL MEANS.

         Section 7.04      Notices.
                           -------

         All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at, faxed or
mailed by first class mail, postage prepaid, or by express delivery service, to
(a) in the case of the Depositor, Morgan Stanley ABS Capital I Inc., 1585
Broadway, New York, New York 10036, Attention: Michelle Wilke, Esq., (telecopy
number 212-761-0260) (b) in the case of the Servicer, Wilshire Credit
Corporation, 14523 S.W. Millikan Way, Beaverton, Oregon 97005, Attention: Jay
Memmott, or such other address as may be furnished to the Depositor in writing
by the Servicer, and (c) in the case of the Trustee, Deutsche Bank National
Trust Company, 1761 East St. Andrew Place, Santa Ana, California 92705
Attention: Trust Administration -- MS04S1. Any notice required or permitted to
be mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register.
Notice of any Servicer Event of Termination shall be given by telecopy and by
certified mail. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have duly been given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder shall also be mailed to the appropriate
party in the manner set forth above.

         Section 7.05      Severability of Provisions.
                           --------------------------

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall for any reason whatsoever be 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.

                                       37
<PAGE>

         Section 7.06      Article and Section References.
                           ------------------------------

         All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.

         Section 7.07      Notice to the Rating Agencies.
                           -----------------------------

         (a)      Each of the Trustee and the Servicer shall be obligated to use
its best reasonable efforts promptly to provide notice to the Rating Agencies
with respect to each of the following of which a Responsible Officer of the
Trustee or the Servicer, as the case may be, has actual knowledge:

                  (i)      any material change or amendment to this Agreement;
                  (ii)     the occurrence of any Servicer Event of Termination
         that has not been cured or waived;
                  (iii)    the resignation or termination of the Servicer;
                  (iv)     any change in the location of any Account;
                  (v)      and if the Trustee is acting as successor Servicer
         pursuant to Section 5.02 hereof, any event that would result in the
         inability of the Trustee to make Advances.

         In addition, the Servicer shall promptly furnish to each Rating Agency
copies of the following:

                           (A)      each annual statement as to compliance
                  described in Section 2.19 hereof;

                           (B)      each annual independent public accountants'
                  servicing report described in Section 2.20 hereof;

                           (C)      and each notice delivered pursuant to
                  Section 5.01(a) hereof which relates to the fact that the
                  Servicer has not made an Advance.

         Any such notice pursuant to this Section 7.07 shall be in writing and
shall be deemed to have been duly given if personally delivered, faxed or mailed
by first class mail, postage prepaid, or by express delivery service to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention:
Managing Director, Residential Mortgage-Backed Securities; Fitch Ratings, One
State Street Plaza, New York, New York 10004, Attention: Managing Director,
Residential Mortgage-Backed Securities; and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041,
Attention: Mortgage Surveillance Group.

         Section 7.08      Further Assurances.
                           ------------------

         Notwithstanding any other provision of this Agreement, neither the
Certificateholders nor the Trustee shall have any obligation to consent to any
amendment or modification of this Agreement unless they have been provided
reasonable security or indemnity against their out-of-pocket expenses (including
reasonable attorneys' fees) to be incurred in connection therewith.

         Section 7.09      Benefits of Agreement.
                           ---------------------

         Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Certificateholders and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.

         Section 7.10      Acts of Certificateholders.
                           --------------------------

         (a)      Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by the Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by agent duly appointed in writing; and such action shall become
effective when such instrument or instruments are delivered to the Servicer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes

                                       38
<PAGE>

referred to as the "act" of the Certificateholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee and the Trust, if made in the manner
provided in this Section 7.10.

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

                                       39
<PAGE>

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



                                 MORGAN STANLEY ABS CAPITAL I INC., as Depositor


                                 By:
                                     -------------------------------------------
                                     Name:
                                     Title:


                                 WILSHIRE CREDIT CORPORATION, as Servicer


                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:




                                 DEUTSCHE BANK NATIONAL TRUST COMPANY, not in
                                   its individual capacity but solely as Trustee


                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:

<PAGE>

                                    EXHIBIT A

                             MORTGAGE LOAN SCHEDULE

                  [Refer to Exhibit D of the Pooling Agreement]


                                     EX A-1
<PAGE>

                                    EXHIBIT B

                    FORM OF REQUEST FOR RELEASE OF DOCUMENTS



To:      Deutsche Bank National Trust Company
         1761 East St. Andrew Place
         Santa Ana, California  92705
         Attention:  Trust Administration -- MS04S1

         Re:      Servicing Agreement, dated as of June 1, 2004, among Morgan
                  Stanley ABS Capital I Inc., as depositor (the "Depositor"),
                  Wilshire Credit Corporation, as servicer (the "Servicer") and
                  Deutsche Bank National Trust Company, as trustee (the
                  "Trustee").

         All capitalized terms used herein shall have the means ascribed to them
in the Servicing Agreement (the "Agreement") referenced above.

         In connection with the administration of the Mortgage Loans held by
Deutsche Bank National Trust Company as Custodian pursuant to the Pooling
Agreement, we request the release, and hereby acknowledge receipt, of the
Trustee's 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
____________2.    Foreclosure
____________3.    Substitution
____________4.    Other Liquidation (Repurchases, etc.)
____________5.    Nonliquidation              Reason:

                                              By:
                                                 -------------------------------
                                              (authorized signer)

                                              Issuer:

                                              Address:



                                              Date:

         Please acknowledge the execution of the above request by your signature
and date below, if requested:


Signature

Date

                                     EX B-1
<PAGE>

                                    EXHIBIT C

                    MONTHLY INFORMATION DELIVERED BY SERVICER

1.       With respect to the Mortgage Pool, the number and Principal Balances of
         all Mortgage Loans which were the subject of Principal Prepayments
         during the related Collection Period.

2.       With respect to the Mortgage Pool, the amount of all curtailments which
         were received during the related Collection Period.

3.       With respect to the Mortgage Pool, the aggregate amount of principal
         portion of all Monthly Payments received during the related Collection
         Period.

4.       With respect to the Mortgage Pool, the amount of interest received on
         the Mortgage Loans during the related Collection Period.

5.       With respect to the Mortgage Pool, the aggregate amount of the Advances
         made and recovered with respect to such Distribution Date.

6.       With respect to the Mortgage Pool, the delinquency, bankruptcy and
         foreclosure information and the amount of Mortgage Loan Losses as of
         the close of business on the last day of the calendar month preceding
         the related Distribution Date (including the Principal Balance of all
         30-59 Day Delinquent Loans, 60-89 Day Delinquent Loans, 90-119 Day
         Delinquent Loans, 120-149 Day Delinquent Loans, 150 to 179 Day
         Delinquent Loans and 180+ Day Delinquent Loans and the book value of
         any REO Property) and whether such Mortgage Loan is a Re-Performing 60+
         Day Delinquent Loan.

7.       With respect to the Mortgage Pool, the weighted average maturity, the
         weighted average Mortgage Interest Rate and the weighted average Net
         Mortgage Interest Rate as of the last day of the Collection Period
         preceding of the related Accrual Period.

8.       The Servicing Fees paid and Servicing Fees accrued during the related
         Collection Period.

9.       The amount of all payments or reimbursements to the Servicer paid or to
         be paid since the prior Distribution Date (or in the case of the first
         Distribution Date, since the Closing Date).

10.      The Pool Balance.

11.      With respect to the Mortgage Pool, the number of Mortgage Loans
         outstanding at the beginning and at the end of the related Collection
         Period.

12.      The aggregate interest accrued on the Mortgage Loans at their
         respective Mortgage Interest Rates for the related Collection Period.

13.      The amount deposited in the Collection Account which may not be
         withdrawn therefrom pursuant to an Order of a United States Bankruptcy
         Court of competent jurisdiction imposing a stay pursuant to Section 362
         of U.S. Bankruptcy Code.

14.      The aggregate Realized Losses since the Cut-off Date as of the end of
         the related Collection Period.

15.      P&I Arrearages.

16.      Default Interest.

17.      Any other information requested by the Trustee to enable it to
         calculate distributions on the Certificates and prepare the reports
         required by the Pooling Agreement.

                                     EX C-1
<PAGE>

                                    EXHIBIT D

                              ANNUAL CERTIFICATIONS

Re:      Morgan Stanley ABS Capital I Inc. Trust 2004-SD1, Mortgage Pass-Through
Certificates, Series 2004-SD1, issued pursuant to the Pooling Agreement, dated
as of January 1, 2004, among Morgan Stanley ABS Capital I Inc., as depositor
(the "Depositor"), Morgan Stanley Mortgage Capital Inc., as seller (the
"Seller"), Deutsche Bank National Trust Company, as custodian and as trustee (in
such capacity, the "Trustee").

I, [identify the certifying individual], certify to the Depositor and the
Trustee and its officers, directors and affiliates, and with the knowledge and
intent that they will rely upon this certification, that:

         1.       [To be certified by the Trustee] I have reviewed the annual
                  report on Form 10-K for the fiscal year [___], and all reports
                  on Form 8-K containing distribution reports in respect of
                  periods included in the year covered by that annual report, of
                  the Depositor relating to the above-referenced trust;

         2.       [To be certified by the Trustee] Based on my knowledge, the
                  information in these distribution reports prepared by the
                  Trustee, 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 such statements were made, not
                  misleading as of the last day of the period covered by that
                  annual report;

         3.       [To be certified by the Trustee] Based on my knowledge, the
                  distribution information required to be provided by the
                  Trustee under the Pooling Agreement is included in these
                  reports;

         4.       [To be certified by the Servicer] I am responsible for
                  reviewing the activities performed by the Servicer under the
                  Servicing Agreement during the calendar year immediately
                  preceding the date of this certificate (the "Relevant Year").
                  Based upon the review required by the Servicing Agreement and
                  except as disclosed in the annual compliance statement or the
                  accountant's statement provided pursuant to section 2.19 of
                  the Servicing Agreement, to the best of my knowledge, the
                  Servicer has fulfilled its obligations under the Servicing
                  Agreement throughout the Relevant Year; and

         5.       [To be certified by the Servicer] All significant deficiencies
                  relating to the Servicer's compliance with the minimum
                  servicing standards for purposes of the report provided by an
                  independent public accountant, after conducting a review
                  conducted in compliance with the Uniform Single Attestation
                  Program for Mortgage Bankers or similar procedure, as set
                  forth in the Servicing Agreement, have been disclosed to such
                  accountant and are included in such reports.


Date:

[Name of Institution]


By:
    --------------------------

[Name]

[Title]

                                     EX D-1
<PAGE>

                                    EXHIBIT E

         DATA AND FORMAT TO BE PROVIDED BY THE SERVICER TO THE DEPOSITOR

FIELD                                                          FORMAT
-----                                                          ------
Name*                                                          Text
Lien Position*                                                 Text/Number
FICO Score*                                                    Number
Original Occupancy*                                            Text
Documentation*                                                 Text
Purpose*                                                       Text
Original Loan Amount*                                          Number
Original Appraisal Value*                                      Number
Original LTV*                                                  Number
Original P&I*                                                  Number
Original Interest Rate*                                        Number
First Payment Date*                                            MM/DD/YY
Origination Date*                                              MM/DD/YY
Originator*                                                    Text
Loan Term*                                                     Number
Product Type (adjustable rate or fixed rate)*                  Text
Property Type*                                                 Text
Street Address*                                                Text
City*                                                          Text
Zip Code*                                                      Text
State*                                                         Text
MI Certificate Number*                                         Number
Prepayment Flag                                                Text
Prepayment Expiration Date                                     MM/DD/YY
Loan Number                                                    Text
Deal Identifier by Loan                                        Text
Current Loan Amount                                            Number
Current LTV                                                    Number
Current Interest Rate                                          Number
Last Interest Payment Date                                     MM/DD/YY
Actual payment received (a dollar amount indicating
   what amount of funds the servicer received from the
   borrower during the month)                                  Number
Current P&I Payment Amount                                     Number
Paid Off Code                                                  Text
Scheduled Balance                                              Number
Calculation of Retained Yield by Loan Number (if
   applicable to the transaction)                              Number
Reporting of Delinquency Status on Defaulted
   Mortgage Loans                                              Text
Current Market Value                                           Number
Date of Market Value                                           MM/DD/YY
As-is Value                                                    Number
Repaired Value                                                 Number
Type of Valuation                                              Text
Foreclosure Flag                                               Text
Bankruptcy Flag                                                Text
Date NOD sent to MI company                                    MM/DD/YY
Foreclosure Start Date (Referral Date)                         MM/DD/YY
Scheduled Foreclosure Sale Date                                MM/DD/YY
Foreclosure Actual Sale Date                                   MM/DD/YY
Actual Notice of Intent Date                                   MM/DD/YY
Actual First Legal Date                                        MM/DD/YY
Bankruptcy Chapter                                             Number

                                     EX E-1

<PAGE>

Actual Bankruptcy Start Date                                   MM/DD/YY
Bankruptcy plan payment due date (either next
   due or last paid date)                                      MM/DD/YY
Required payment amount under bankruptcy plan                  Number
Bankruptcy discharge date                                      MM/DD/YY
Loan on Formal Payment Plan Flag                               Text
Loan on Informal Payment Plan Flag                             Text
Actual Payment Plan Start and End Dates                        MM/DD/YY
Payment/forbearance plan payment due date (either
   next due or last paid date)                                 MM/DD/YY
Required payment amount under payment/forbearance plan         Number
List Date                                                      MM/DD/YY
List Price                                                     Number
Vacancy/Occupancy Status                                       Text
Actual Eviction Start Date                                     MM/DD/YY
Actual Eviction Completion Date                                MM/DD/YY
Actual REO Start Date                                          MM/DD/YY
Sales Price                                                    Number
Actual Closing Date                                            MM/DD/YY
Net Sales Proceeds                                             Number
Mortgage Insurance Claim Filing Date                           MM/DD/YY
Mortgage Insurance Proceeds Received                           Number
Date Mortgage Insurance Proceeds Received                      MM/DD/YY
Hazard Insurance Claim Flag (a data field indicating
   that a hazard insurance issue has become known)             Text

*This information needs to be provided only on the first delivery of data.
--------------------------------------------------------------------------

                                     EX E-2