EXECUTION COPY








                        MASTER SPREAD ACCOUNT AGREEMENT,

                          dated as of January 20, 1998

                                      among

                     NATIONAL FINANCIAL AUTO FUNDING TRUST,

                        FINANCIAL SECURITY ASSURANCE INC.

                                       and

                         HARRIS TRUST AND SAVINGS BANK,

                       as Trustee and as Collateral Agent


12.TXT

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                                TABLE OF CONTENTS
                                                                            Page

                                    ARTICLE I
                                   DEFINITIONS

   Section 1.01.  Definitions................................................3
   Section 1.02.  Rules of Interpretation...................................17

                                   ARTICLE II
            REVERSIONARY HOLDERS; SERIES SUPPLEMENTS; THE COLLATERAL

   Section 2.01.  Reversionary Holders......................................18
   Section 2.02.  Series Supplements........................................19
   Section 2.03.  Creation and Grant of Security Interest by
                     the Transferor.........................................19
   Section 2.04.  Priority..................................................20
   Section 2.05.  Transferor Remains Liable.................................20
   Section 2.06.  Maintenance of Collateral.................................21
   Section 2.07.  Termination and Release of Rights.........................24
   Section 2.08.  Non-Recourse Obligations of Transferor and
                     the Reversionary Holders...............................25

                                   ARTICLE III
                                 SPREAD ACCOUNTS

   Section 3.01.  Establishment of Spread Accounts; Initial
                     Deposits into Spread Accounts..........................26
   Section 3.02.  Investments...............................................27
   Section 3.03.  Distributions; Priority of Payments.......................28
   Section 3.04.  General Provisions Regarding Spread Accounts..............31
   Section 3.05.  Reports by the Collateral Agent...........................32

                                   ARTICLE IV
                THE COLLATERAL AGENT AND SECURITIES INTERMEDIARY

   Section 4.01.  Appointment and Powers....................................32
   Section 4.02.  Performance of Duties.....................................33
   Section 4.03.  Limitation on Liability...................................33
   Section 4.04.  Reliance upon Documents...................................34
   Section 4.05.  Successor Collateral Agent................................34
   Section 4.06.  Indemnification...........................................37
   Section 4.07.  Compensation and Reimbursement............................37
   Section 4.08.  Representations and Warranties of the
                     Collateral Agent.......................................37
   Section 4.09.  Waiver of Setoffs.........................................38
   Section 4.10.  Control by the Controlling Party..........................38

                                    ARTICLE V
                           COVENANTS OF THE TRANSFEROR

   Section 5.01.  Preservation of Collateral................................39
   Section 5.02.  Opinions as to Collateral.................................39
   Section 5.03.  Notices...................................................40

                                       -i-

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   Section 5.04.  Waiver of Stay or Extension Laws; Marshalling
                     of Assets..............................................40
   Section 5.05.  Noninterference, etc......................................40
   Section 5.06.  Transferor Changes........................................41

                                   ARTICLE VI
                   CONTROLLING PARTY; INTERCREDITOR PROVISIONS

   Section 6.01.  Appointment of Controlling Party..........................41
   Section 6.02.  Controlling Party's Authority.............................42
   Section 6.03.  Rights of Secured Parties.................................43
   Section 6.04.  Degree of Care............................................43

                                   ARTICLE VII
                              REMEDIES UPON DEFAULT

   Section 7.01.  Remedies upon a Default...................................44
   Section 7.02.  Waiver of Default.........................................44
   Section 7.03.  Restoration of Rights and Remedies........................44
   Section 7.04.  No Remedy Exclusive.......................................44

                                  ARTICLE VIII
                                  MISCELLANEOUS

   Section 8.01.  Further Assurances........................................45
   Section 8.02.  Waiver....................................................45
   Section 8.03.  Amendments, Waivers.......................................45
   Section 8.04.  Severability..............................................46
   Section 8.05.  Nonpetition Covenant......................................46
   Section 8.06.  Notices...................................................47
   Section 8.07.  Term of this Agreement....................................49
   Section 8.08.  Assignments, Third-Party Rights; Reinsurance..............49
   Section 8.09.  Consent of Controlling Party..............................50
   Section 8.10.  Trial by Jury Waived......................................50
   Section 8.11.  Governing Law.............................................50
   Section 8.12.  Consents to Jurisdiction..................................50
   Section 8.13.  Limitation of Liability...................................51
   Section 8.14.  Determination of Adverse Effect...........................51
   Section 8.15.  Counterparts..............................................51
   Section 8.16.  Headings..................................................51


                                      -ii-

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                         MASTER SPREAD ACCOUNT AGREEMENT


     MASTER  SPREAD  ACCOUNT  AGREEMENT,  dated  as of  January  20,  1998  (the
"Agreement"),  by and among  NATIONAL  FINANCIAL  AUTO FUNDING TRUST, a Delaware
business trust (the "Transferor"), FINANCIAL SECURITY ASSURANCE INC., a New York
stock insurance  company  ("Financial  Security"),  and HARRIS TRUST AND SAVINGS
BANK, an Illinois banking  corporation,  in its capacities as Trustee under each
Securitization  Agreement  referred to below,  in such capacity as agent for the
Securityholders  and Financial  Security with respect to the related Series (the
"Trustee") and as Collateral Agent (as defined below).

                                    RECITALS

     1.  National  Auto  Finance  1998-1 Trust (the "Series  1998-1  Trust"),  a
Delaware  business  trust,  was formed pursuant to a Trust Agreement dated as of
December  15,  1997 (as such  agreement  may be amended,  amended and  restated,
supplemented  or otherwise  modified  from time to time in  accordance  with the
terms thereof, the "Series 1998-1 Trust Agreement"),  between the Transferor and
Wilmington Trust Company, a Delaware banking corporation,  as Owner Trustee (the
"Owner Trustee").

     2. Pursuant to a Sale and Servicing Agreement dated as of December 15, 1997
(as such  agreement  may be  amended,  amended  and  restated,  supplemented  or
otherwise  modified from time to time in accordance with the terms thereof,  the
"Series  1998-1 Sale and  Servicing  Agreement")  by and among the Series 1998-1
Trust,  the  Transferor,   National  Auto  Finance  Company,  Inc.,  a  Delaware
corporation  ("NAFI"),  in its capacity as Servicer (the  "Servicer") and Harris
Trust and Savings Bank, an Illinois  banking  corporation,  as Trust  Collateral
Agent  (the  "Trust   Collateral   Agent")  and  Backup  Servicer  (the  "Backup
Servicer"),  the  Transferor  will,  on the  Closing  Date and from time to time
thereafter,  sell all of its right, title and interest in and to the Receivables
and certain  other  property  of the Series  1998-1  Trust  Estate to the Series
1998-1 Trust,  and pursuant to the  Indenture  dated as of December 15, 1997 (as
such agreement may be amended,  amended and restated,  supplemented or otherwise
modified from time to time in  accordance  with the terms  thereof,  the "Series
1998-1  Indenture",  and together with the Series 1998-1 Trust Agreement and the
Series 1998-1 Sale and Servicing  Agreement,  the "Series 1998-1  Securitization
Agreements"), between the Series 1998-1 Trust and Harris Trust and Savings Bank,
as Indenture  Trustee and as Trust Collateral Agent, the Series 1998-1 Trust has
assigned the  Receivables  and certain other property of the Series 1998-1 Trust
Estate to the Trust  Collateral  Agent for the  benefit of the  Noteholders  and
Financial  Security.  Also pursuant to the Series 1998-1  Indenture,  the Series
1998-1  Trust  will  issue  $85,200,000  aggregate  principal  amount  of  5.88%
Automobile Receivables-Backed Notes (the "Series 1998" or "Series 1998-1").

                                       -1-

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     3. Financial Security has been asked to issue the Series 1998-1 Note Policy
to the Trust Collateral Agent to guarantee payment of the Scheduled Payments (as
defined in the Series 1998-1 Note Policy) on each  Distribution  Date in respect
of the Series 1998.

     4. In partial  consideration  of the  issuance  of the Series  1998-1  Note
Policy,  the Transferor  has agreed that  Financial  Security shall have certain
rights as Controlling Party, to the extent set forth herein.

     5. In order to secure  the  performance  of the  Secured  Obligations,  the
Transferor, in its capacity as the agent of the Reversionary Holders, has agreed
to pledge the  Collateral to the  Collateral  Agent for the benefit of Financial
Security and for the benefit of the  Trustees on behalf of the  Securityholders,
upon the terms and conditions set forth herein.

     6. It is  contemplated  that NAFI  and/or the  Transferor  and/or any other
Affiliate  of  NAFI  may  in the  future  enter  into  one  or  more  additional
Securitization  Agreements  pursuant to which the Transferor  and/or NAFI and/or
such other  Affiliate of NAFI will sell or pledge all or a portion of its right,
title and interest in and to pools of contracts and/or other financial assets or
property  to a Trust or  other  Person  and in  connection  therewith  Financial
Security in its  discretion  may in the future issue  additional  Policies  with
respect to certain  guaranteed  distributions or scheduled payments with respect
to the corresponding  additional Series. In connection with any such issuance of
additional  Policies,  it is  contemplated  that Financial  Security will obtain
certain  Controlling Party rights with respect to the related Series,  and that,
in connection  with each such additional  Series,  the parties hereto will enter
into a Series  Supplement  hereto  pursuant to which NAFI and/or the  Transferor
and/or  any  other  Affiliate  of NAFI  will  assign,  or cause to be  assigned,
additional Collateral pursuant to the terms hereof.


                                   AGREEMENTS

     In  consideration  of  the  premises,  and  for  other  good  and  valuable
consideration,  the  adequacy,  receipt  and  sufficiency  of which  are  hereby
acknowledged, the parties hereto agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

     Section 1.1.  Definitions.  Unless defined in this  Agreement,  capitalized
terms  used in this  Agreement  shall have the  meaning  given such terms in the
applicable Securitization Agreement or

                                       -2-

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Series Supplement,  as identifiable from the context in which such term is used.
The following terms shall have the following respective meanings:

     "Affiliate"  means,  as to any Person,  any other Person that,  directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person within the meaning of control under Section 15 of the Securities Act
of 1933, as amended.

     "Agreement" means this Master Spread Account Agreement,  as the same may be
amended,  amended and restated,  supplemented or otherwise modified from time to
time in accordance with the terms hereof.

     "Authorized  Officer"  with  respect  to  Series  1998-1,  has the  meaning
specified  in Section 1.01 of the Series  1998-1  Securitization  Agreement  for
"Responsible Officer".

     "Authorized  Officer" means,  (i) with respect to Financial  Security,  the
Chairman of the Board,  the  President,  the  Executive  Vice  President  or any
Managing  Director of Financial  Security,  (ii) with respect to the Trustees or
the Collateral  Agent,  any Vice President or Trust Officer  thereof,  and (iii)
with respect to the Transferor, any Co-Trustee thereof.

     "Backup Servicer" with respect to Series 1998-1,  has the meaning specified
in the Series 1998-1 Securitization Agreement for "Standby Servicer".

     "Collateral"  means the Series 1998-1  Collateral,  and with respect to any
other Series,  all collateral  delivered  hereunder with respect to each of such
Series, as specified in the related Series Supplement.

     "Collateral Agent" means, initially,  Harris Trust and Savings Bank, in its
capacity as  collateral  agent on behalf of the Secured  Parties,  including its
successors  in  interest,  until  a  successor  Person  shall  have  become  the
Collateral  Agent pursuant to Section 4.05 hereof,  and  thereafter  "Collateral
Agent" shall mean such successor Person.

     "Collateral  Agent Fee" means,  with respect to the Series 1998, the annual
fee payable to the  Collateral  Agent for  services  rendered as the  Collateral
Agent,  which  Collateral Agent Fee is included in the fees paid to Harris Trust
and  Savings  Bank  pursuant  to the  applicable  Series  1998-1  Securitization
Agreement.

     "Collection Account" means the Collection Account applicable to any Series,
as specified in the related Securitization Agreement.


                                       -3-

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     "Control" shall have the meaning specified in Section 8-106 of the UCC.

     "Controlling  Party"  means,  with  respect to a Series,  at any time,  the
Person designated as the Controlling Party at such time pursuant to Section 6.01
hereof.

     "Cumulative  Loss  Rate"  means,  as of any  Reporting  Date,  a  fraction,
expressed  as a  percentage,  the  numerator  of which is an amount equal to the
excess of (i) the sum of (a) the  aggregate  of the  Principal  Balances  of all
Receivables that have become Liquidated Receivables (each such Principal Balance
calculated  as of the last day of the Due Period  during  which such  Receivable
became a  Liquidated  Receivable),  (b)  accrued  and  unpaid  interest  on such
Principal  Balances  through  the last day of the Due Period  during  which such
Receivable  became a Liquidated  Receivable and (c) the amount of all Bankruptcy
Losses with respect to the Receivables  over (ii) the Net  Liquidation  Proceeds
received  by the Trust  with  respect  to all  Liquidated  Receivables,  and the
denominator  of which is an amount equal to the sum of the Series 1998-1 Initial
Balance and the aggregate  Principal Balances of Subsequent  Receivables sold to
the Trust  through  the last day of the  related  Due  Period  (which  Aggregate
Principal  balances shall be as of the respective dates on which such Subsequent
Receivables were sold to the Trust).

     "Deemed  Cured" means,  as of a Reporting  Date,  with respect to a Trigger
Event that has  occurred  with respect to a Series,  that no Trigger  Event with
respect to such Series shall have  occurred as of such  Reporting  Date or as of
any of the two consecutively preceding Reporting Dates.

     "Default"  means with respect to any Series,  at any time, (i) if Financial
Security  is then  the  Controlling  Party  with  respect  to such  Series,  any
Insurance  Agreement  Event of Default with respect to such Series,  and (ii) if
the  Trustee is then the  Controlling  Party with  respect to such  Series,  any
Servicer Termination Event with respect to such Series.

     "Deficiency Claim Date" means,  with respect to any Distribution  Date, the
fourth Business Day preceding such Distribution Date.

     "Delivery" means with respect to the Collateral:

                                       -4-

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     (1)  the  perfection  and  priority  of a  security  interest  in  which is
          governed  by the law of a  jurisdiction  which  has  adopted  the 1978
          Revision to Article 8 of the UCC:

          (a) with respect to bankers' acceptances, commercial paper, negotiable
     certificates of deposit and other obligations that constitute "instruments"
     within  the  meaning  of  Section   9-105(l)(i)  of  the  UCC  (other  than
     certificated securities) and are susceptible of physical delivery, transfer
     thereof to the  Collateral  Agent by physical  delivery  to the  Collateral
     Agent,  indorsed to, or registered in the name of, the Collateral  Agent or
     its  nominee  or  indorsed  in blank  and such  additional  or  alternative
     procedures  as may  hereafter  become  appropriate  to effect the  complete
     transfer of ownership of any such  Collateral to the Collateral  Agent free
     and clear of any adverse claims,  consistent with changes in applicable law
     or regulations or the interpretation thereof;

          (b) with respect to a  "certificated  security" (as defined in Section
     8-102(1)(a) of the UCC), transfer thereof:

               (i) by  physical  delivery of such  certificated  security to the
          Collateral  Agent,  provided that if the  certificated  security is in
          registered  form,  it shall be indorsed to, or  registered in the name
          of, the Collateral Agent or indorsed in blank;

               (ii) by  physical  delivery  of such  certificated  security to a
          "financial  intermediary"  (as defined in Section 8-313(4) of the UCC)
          of the Collateral Agent specially indorsed to or issued in the name of
          the Collateral Agent;

               (iii) by the sending by a financial intermediary, not a "clearing
          corporation"  (as  defined  in  Section  8-102(3)  of the  UCC),  of a
          confirmation  of  the  purchase  and  the  making  by  such  financial
          intermediary  of  entries  on its books  and  records  identifying  as
          belonging  to the  Collateral  Agent  of (A) a  specific  certificated
          security in the financial intermediary's possession, (B) a quantity of
          securities  that  constitute  or  are  part  of  a  fungible  bulk  of
          certificated securities in the financial intermediary's possession, or
          (C) a quantity of securities that constitute or are part of a fungible
          bulk of securities shown on the account of the financial  intermediary
          on the books of another financial intermediary; or

               (iv) by the  making  by a  clearing  corporation  of  appropriate
          entries on its books reducing the

                                       -5-

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          appropriate  securities  account of the  transferor and increasing the
          appropriate  securities  account of the  Collateral  Agent or a Person
          designated by the Collateral Agent by the amount of such  certificated
          security,  provided  that in each case:  (A) the clearing  corporation
          identifies  such  certificated  security  for the sole  and  exclusive
          account  of the  Collateral  Agent  or the  Person  designated  by the
          Collateral Agent, (B) such  certificated  security shall be subject to
          the clearing  corporation's  exclusive control,  (C) such certificated
          security is in bearer form or indorsed in blank or  registered  in the
          name of the clearing  corporation  or  custodian  bank or a nominee or
          either of them,  (D) custody of such  certificated  security  shall be
          maintained  by such  clearing  corporation  or a "custodian  bank" (as
          defined  in  Section  8-102(4)  of the UCC) or the  nominee  of either
          subject  to the  control  of the  clearing  corporation  and (E)  such
          certificated  security  is  shown  on the  account  of the  transferor
          thereof on the books of the clearing  corporation  prior to the making
          of such entries; and such additional or alternative  procedures as may
          hereafter  become  appropriate  to effect  the  complete  transfer  of
          ownership  of any such  Collateral  to the  Collateral  Agent free and
          clear of any adverse claims, consistent with changes in applicable law
          or regulations or the interpretation thereof;

          (c) with  respect to any  security  issued by the U.S.  Treasury,  the
     Federal Home Loan Mortgage  Corporation or by the Federal National Mortgage
     Association that is a book-entry  security held through the Federal Reserve
     System   pursuant  to  Federal  book  entry   regulations,   the  following
     procedures,  all in accordance with applicable  law,  including  applicable
     Federal   regulations  and  Articles  8  and  9  of  the  UCC:   book-entry
     registration  of  such  property  to  an  appropriate   book-entry  account
     maintained with a Federal Reserve Bank by a financial intermediary which is
     also a "depositary" pursuant to applicable Federal regulations and issuance
     by such  financial  intermediary  of a  deposit  advice  or  other  written
     confirmation of such book-entry registration to the Collateral Agent of the
     purchase by the financial intermediary on behalf of the Collateral Agent of
     such book-entry security; the identification by the Federal Reserve Bank of
     such  book-entry   certificates  on  its  records  being  credited  to  the
     securities  intermediary's  Participant's securities account; the making by
     such financial intermediary of entries in its books and records identifying
     such  book-entry  security held through the Federal Reserve System pursuant
     to Federal book-entry  regulations as belonging to the Collateral Agent and
     indicating that such financial intermediary holds such

                                       -6-

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     book-entry  security  solely an agent for the  Collateral  Agent;  and such
     additional or alternative procedures as may hereafter become appropriate to
     effect  complete  transfer  of  ownership  of any  such  Collateral  to the
     Collateral  Agent free of any adverse  claims,  consistent  with changes in
     applicable law or regulations or the interpretation thereof;

          (d) with respect to any item of Collateral that is an  "uncertificated
     security"  (as defined in Section  8-102(1)(b)  of the UCC) and that is not
     governed by clause (c) above, transfer thereof:

               (i) by  registration  of the transfer  thereof to the  Collateral
          Agent, on the books and records of the issuer thereof;

               (ii) by the sending of a confirmation by a financial intermediary
          of the  purchase,  and the making by such  financial  intermediary  of
          entries  on its books and  records  identifying  as  belonging  to the
          Collateral  Agent (A) a quantity of securities which constitute or are
          part of a fungible bulk of uncertificated securities registered in the
          name of the  financial  intermediary  or (B) a quantity of  securities
          which constitute or are part of a fungible bulk of securities shown on
          the  account  of the  financial  intermediary  on the books of another
          financial intermediary; or

               (iii) by the  making by a  clearing  corporation  of  appropriate
          entries  on  its  books  reducing  the  appropriate   account  of  the
          transferor and  increasing  the account of the  Collateral  Agent or a
          person  designated  by the  Collateral  Agent  by the  amount  of such
          uncertificated security,  provided that in each case: (A) the clearing
          corporation  identifies such uncertificated  security for the sole and
          exclusive use of the Collateral Agent or the Person  designated by the
          Collateral  Agent, (B) such  uncertificated  security is registered in
          the name of the clearing  corporation or a custodian bank or a nominee
          of  either,  and (C)  such  uncertificated  security  is  shown on the
          account of the  transferor  on the books of the  clearing  corporation
          prior to the making of such entries; and

          (e) in each case of delivery contemplated herein, the Collateral Agent
     shall make appropriate notations on its records, and shall cause same to be
     made of the records of

                                       -7-

<PAGE>



     its nominees, indicating that such securities are held in trust pursuant to
     and as provided in this Agreement.

     (2) the perfection and priority of a security interest in which is governed
by the law of a jurisdiction which has adopted the 1994 Revision to Article 8 of
the UCC:

          (a) with respect to bankers' acceptances, commercial paper, negotiable
     certificates of deposit and other obligations that constitute "instruments"
     within  the  meaning  of  Section   9-105(1)(i)  of  the  UCC  (other  than
     certificated securities) and are susceptible of physical delivery, transfer
     thereof to the  Collateral  Agent by physical  delivery  to the  Collateral
     Agent,  indorsed to, or registered in the name of, the Collateral  Agent or
     its  nominee  or  indorsed  in blank  and such  additional  or  alternative
     procedures  as may  hereafter  become  appropriate  to effect the  complete
     transfer of ownership of any such  Collateral to the Collateral  Agent free
     and clear of any adverse claims,  consistent with changes in applicable law
     or regulations or the interpretation thereof;

          (b) with respect to a  "certificated  security" (as defined in Section
     8-102(a)(4) of the UCC), transfer thereof:

               (i) by  physical  delivery of such  certificated  security to the
          Collateral  Agent,  provided that if the  certificated  security is in
          registered  form,  it shall be indorsed to, or  registered in the name
          of, the Collateral Agent or indorsed in blank;

               (ii) by  physical  delivery  of  such  certificated  security  in
          registered form to the Securities Intermediary acting on behalf of the
          Collateral  Agent if the  certificated  security  has  been  specially
          endorsed to the Collateral Agent by an effective endorsement.

          (c) with  respect to any  security  issued by the U.S.  Treasury,  the
     Federal Home Loan Mortgage  Corporation or by the Federal National Mortgage
     Association that is a book-entry  security held through the Federal Reserve
     System   pursuant  to  Federal  book  entry   regulations,   the  following
     procedures,  all in accordance with applicable  law,  including  applicable
     federal   regulations  and  Articles  8  and  9  of  the  UCC:   book-entry
     registration  of  such  property  to  an  appropriate   book-entry  account
     maintained with a

                                       -8-

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     Federal  Reserve  Bank  by  a  securities  intermediary  which  is  also  a
     "depositary"  pursuant to applicable  federal  regulations  and issuance by
     such  securities   intermediary  of  a  deposit  advice  or  other  written
     confirmation of such book-entry registration to the Collateral Agent of the
     purchase by the securities  intermediary on behalf of the Collateral  Agent
     of such book-entry security; the identification by the Federal Reserve Bank
     of such  book-entry  certificates  on its  records  being  credited  to the
     securities  intermediary's  Participant's securities account; the making by
     such   securities   intermediary  of  entries  in  its  books  and  records
     identifying  such  book-entry  security  held  through the Federal  Reserve
     System  pursuant to Federal  book-entry  regulations  as  belonging  to the
     Collateral  Agent and indicating  that such securities  intermediary  holds
     such book-entry security solely as agent for the Collateral Agent; and such
     additional or alternative procedures as may hereafter become appropriate to
     effect  complete  transfer  of  ownership  of any  such  Collateral  to the
     Collateral  Agent free of any adverse  claims,  consistent  with changes in
     applicable law or regulations or the interpretation thereof;

          (d) with respect to any item of Collateral that is an  "uncertificated
     security" (as defined in Section  8-102(a)(18)  of the UCC) and that is not
     governed by clause (c) above, transfer thereof:

               (i) (A) by registration to the Collateral Agent as the registered
          owner thereof, on the books and records of the issuer thereof.

                    (B) by another Person (not a securities intermediary) either
               becomes the registered  owner of the  uncertificated  security on
               behalf of the Collateral  Agent,  or having become the registered
               owner acknowledges that it holds for the Collateral Agent.

               (ii) the issuer  thereof  has  agreed  that it will  comply  with
          instructions  originated  by  the  Collateral  Agent  without  further
          consent of the registered owner thereof.

          (e) in each case of delivery contemplated herein, the Collateral Agent
     shall make appropriate notations on its records, and shall cause same to be
     made of the records of its nominees, indicating that securities are held in
     trust pursuant to and as provided in this Agreement.


                                       -9-

<PAGE>



          (f) with  respect to a "security  entitlement"  (as defined in Section
     8-102(a)(17) of the UCC)

               (i)  if  a  securities   intermediary   (as  defined  in  Section
          8-102(a)(14)of  the UCC)(A)  indicates by book entry that a "financial
          asset"  (as  defined  in  Section  8-102(a)(9)  of the  UCC)  has been
          credited to the Collateral Agent's "securities account" (as defined in
          Section  8-501(a) of the UCC),  (B) receives a financial  asset (as so
          defined) from the Collateral  Agent or acquires a financial  asset for
          the Collateral Agent, and in either case, accepts it for credit to the
          Collateral  Agent's  securities  account (as so defined),  (C) becomes
          obligated  under other law,  regulation  or rule to credit a financial
          asset to the Collateral Agent's securities  account, or (D) has agreed
          that it will comply with  "entitlement  orders" (as defined in Section
          8-102(a)(8)  of the UCC)  originated by the  Collateral  Agent without
          further consent by the "entitlement  holder" (as defined in Section 8-
          102(a)(7)  of the UCC),  of a  confirmation  of the  purchase  and the
          making by such  securities  intermediary  of  entries on its books and
          records  identifying  as  belonging to the  Collateral  Agent of (I) a
          specific  certificated  security  in  the  securities   intermediary's
          possession,  (II) a quantity of securities that constitute or are part
          of a  fungible  bulk  of  certificated  securities  in the  securities
          intermediary's  possession,  or (III) a quantity  of  securities  that
          constitute or are part of a fungible  bulk of securities  shown on the
          account  of the  securities  intermediary  on  the  books  of  another
          securities intermediary.

     "Eligible  Deposit Account" with respect to Series 1998-1,  has the meaning
specified in Section 1.01 of the Series  1998-1  Securitization  Agreement for "
Eligible Account".

     "Eligible"  with  respect to Series  1998-1,  has the meaning  specified in
Section  1.01 of the  Series  1998-1  Securitization  Agreement  for  "Permitted
Investment".

     "Entitlement   Holder"   shall  have  the  meaning   specified  in  Section
8-102(a)(7)  of the UCC.  "Final  Termination  Date"  means,  with  respect to a
Series,  the date that is the  later of (i) the  Insurer  Termination  Date with
respect to such Series and (ii) the  Trustee  Termination  Date with  respect to
such Series.

     "Financial Asset" shall have the meaning  specified in Section  8-102(a)(9)
of the UCC.

                                      -10-

<PAGE>




     "Financial  Security Default" means, with respect to any Series, any one of
the following events shall have occurred and be continuing:

          (a) Financial  Security  shall have failed to make a payment  required
     under the related Policy;

          (b)  Financial  Security  shall have (i) filed a petition or commenced
     any case or proceeding  under any provision or chapter of the United States
     Bankruptcy  Code or any other  similar  Federal  or state law  relating  to
     insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
     made a general assignment for the benefit of its creditors, or (iii) had an
     order for relief entered against it under the United States Bankruptcy Code
     or  any  other  similar  Federal  or  state  law  relating  to  insolvency,
     bankruptcy,  rehabilitation,  liquidation or reorganization  which is final
     and nonappealable; or

          (c) a court of  competent  jurisdiction,  the New York  Department  of
     Insurance  or other  competent  regulatory  authority  shall have entered a
     final  and  nonappealable  order,  judgment  or  decree  (i)  appointing  a
     custodian,  trustee, agent or receiver for Financial Security or for all or
     any  material  portion of its  property or (ii)  authorizing  the taking of
     possession by a custodian, trustee, agent or receiver of Financial Security
     (or the taking of possession of all or any material portion of the property
     of Financial Security).

     "Guaranteed  Distributions" shall have the meaning set forth in the related
Policy.

     "Harris  Trust and Savings  Bank" means Harris Trust and Savings  Bank,  an
Illinois banking corporation.

     "Initial Spread Account Deposit" means, with respect to the Series 1998, an
amount equal to $3,745,054.95.

     "Insurance  Agreement" means, with respect to any Series, the Insurance and
Indemnity  Agreement among Financial  Security and/or NAFI and/or the Transferor
and such other  parties as may be named  therein,  pursuant  to which  Financial
Security  issued  a  Policy  to  the  Trustee,  as  the  same  may  be  amended,
supplemented  or otherwise  modified  from time to time in  accordance  with the
terms thereof.

     "Insurer Secured  Obligations" means, with respect to a Series, all amounts
and  obligations  which  may at any time be owed to or on  behalf  of  Financial
Security (or any agents,  accountants or attorneys for Financial Security) under
the Insurance Agreement related to such Series or under any Transaction

                                      -11-

<PAGE>



Document in respect of such Series,  regardless of whether such amounts are owed
now  or in  the  future,  whether  liquidated  or  unliquidated,  contingent  or
noncontingent.

     "Insurer  Termination  Date" means,  with  respect to any Series,  the date
which is the latest of (i) the date of the expiration of all Policies  issued in
respect of such Series,  (ii) the date on which  Financial  Security  shall have
received payment and performance in full of all Insurer Secured Obligations with
respect to such Series and (iii) the latest  date any payment  referred to above
could be avoided as a preference or otherwise under the United States Bankruptcy
Code  or any  other  similar  Federal  or  state  law  relating  to  insolvency,
bankruptcy,  rehabilitation,  liquidation or reorganization,  as specified in an
Opinion of Counsel delivered to the Collateral Agent and the Trustee.

     "Lien" means any  security  interest,  lien,  charge,  pledge,  preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of the law.

     "Monthly Period" means,  with respect to a Reporting Date or a Distribution
Date, the calendar month immediately preceding the month in which such Reporting
Date or  Distribution  Date occurs (such calendar month being referred to as the
"related"  Monthly Period with respect to such  Reporting  Date or  Distribution
Date).

     "NAFI" means National Auto Finance Company, Inc., a Delaware corporation.

     "Non-Controlling  Party"  means with  respect to a Series at any time,  the
Secured Party that is not the Controlling Party at such time.

     "Opinion of Counsel" means a written opinion of counsel  acceptable,  as to
form, substance and issuing counsel, to the Controlling Party.

     "Policy"  means the Series  1998-1  Note  Policy and any  insurance  policy
subsequently issued by Financial Security with respect to a Series.

     "Requisite Amount" means, with respect to Series 1998-1,as of any Reporting
Date after giving effect to any distributions of principal on the Series 1998 to
be made on the  related  Distribution  Date,  the  greater  of (a) the lesser of
(i)(A) if such Reporting Date occurs before the January 1999 Distribution  Date,
5.0% of an amount equal to the sum of the Series 1998-1 Initial  Balance and the
aggregate Principal Balance of Subsequent  Receivables sold to the Trust through
such  Reporting  Date  (such  Principal  Balance  calculated  as of the  related
Subsequent Cutoff

                                      -12-

<PAGE>



Dates), or (B) if such Reporting Date occurs after the January 1999 Distribution
Date and (1) the Cumulative Loss Rate as of the January 1999  Distribution  Date
is less than  4.0%,  2.5% of an  amount  equal to the sum of the  Series  1998-1
Initial Balance and the aggregate  Principal  Balance of Subsequent  Receivables
sold to the Trust through such Reporting Date (such Principal Balance calculated
as of the related Subsequent Cutoff Dates) or (2) the Cumulative Loss Rate as of
the January 1999  Distribution Date is equal to or greater than 4.0%, 5.0% of an
amount equal to the sum of the Series 1998-1  Initial  Balance and the aggregate
Principal  Balance of  Subsequent  Receivables  sold to the Trust  through  such
Reporting Date (such Principal Balance  calculated as of the related  Subsequent
Cutoff Dates),  and (ii) the greater of (A) the outstanding  principal amount of
the  Series  1998  as  of  such  Reporting  Date  after  giving  effect  to  any
distributions of principal to be made thereon on the related  Distribution  Date
and (B)  $100,000,  and (b)(i) if a Trigger Event shall have occurred as of such
Reporting  Date (and until such Trigger  Event is Deemed Cured) and no Insurance
Agreement  Event of Default shall have occurred as of such Reporting  Date, 9.0%
of the Series 1998-1 Balance as of such Reporting  Date, or (ii) if an Insurance
Agreement  Event of Default  shall have occurred as of such  Reporting  Date, an
unlimited amount. Notwithstanding the foregoing, if the Reporting Date for which
the Requisite Amount is being determined occurs after March 31, 1998 and NAFI or
the Transferor has failed to perform or observe either of its covenant set forth
in Section 2.05(o)(i) or (ii) of the Series 1998-1 Insurance  Agreement (without
giving effect to any grace period  provided for in the Series  1998-1  Insurance
Agreement)  and for so long as such  failure of  performance  or  observance  of
either of its  covenants  is  continuing,  the  "Requisite  Amount"  shall be an
unlimited amount.

     "Reversionary Holders" has the meaning specified in Section 2.01 hereof.

     "Scheduled  Payments"  shall  have the  meaning  set  forth in the  related
Policy.

     "Secured  Obligations"  means,  with  respect to each  Series  the  Insurer
Secured  Obligations  with  respect  to  such  Series  and the  Trustee  Secured
Obligations with respect to such Series.

     "Secured Parties" means Financial Security and the Trustee.

     "Securities" means the "notes",  "certificates" or other obligations issued
or arising under a Securitization Agreement.

     "Securities   Intermediary"   means  the   Person   acting  as   securities
intermediary  within the meaning of Section 8- 102(a)(14)  under this  Agreement
(which initially is Harris Trust and Savings Bank).

                                      -13-

<PAGE>





     "Securitization  Agreement"  means,  with respect to the Series  1998,  the
Series  1998-1  Securitization  Agreements  and, for each other  Series  created
pursuant to a Securitization  Agreement,  the "Trust  Agreement",  the "Sale and
Servicing  Agreement",  the "Indenture",  the "Pooling and Servicing Agreement",
"Sale  and  Servicing  Agreement",   "Indenture",   "Purchase  and  Contribution
Agreement" or any other financing document related to such Series.

     "Securityholders"  means the holders of the  Securities of a Series as more
particularly  described  in the  Securitization  Agreement  with respect to such
Series.

     "Security  Interests"  means,  with respect to the Series 1998-1 Notes, the
security interests and Liens in the Series 1998-1 Collateral granted pursuant to
Section  2.03  hereof,  and,  with  respect to any other  Series,  the  security
interests and Liens in the related  Collateral  granted  pursuant to the related
Series Supplement.

     "Series 1998-1  Balance" means with respect to any Reporting  Date, the sum
of the Pool  Balance as of the last day of the related Due Period and the amount
on deposit in the Pre-Funding Account, if any, on such date.

     "Series 1998-1  Collateral"  has the meaning  specified in Section  2.03(a)
hereof.

     "Series 1998-1 Indenture" has the meaning provided in the second recital to
this Agreement.

     "Series 1998-1 Initial Balance" means $75,504,414.69.

     "Series 1998-1 Insurance  Agreement" means the Insurance  Agreement related
to the Series 1998.

     "Series  1998-1  Insurer  Secured  Obligations"  means the Insurer  Secured
Obligations with respect to the Series 1998.

     "Series  1998-1 Note  Policy"  means the Policy  issued with respect to the
Series 1998.

     "Series  1998" has the  meaning  set forth in the  second  recital  to this
Agreement.

     "Series 1998-1  Reversionary  Holders" has the meaning specified in Section
2.01 hereof.

     "Series 1998-1 Secured  Obligations" means the Secured  Obligations related
to the Series 1998.


                                      -14-

<PAGE>



     "Series 1998-1 Securitization  Agreements" has the meaning set forth in the
second recital to this Agreement.

     "Series 1998-1 Spread Account" has the meaning specified in Section 3.01(a)
hereof.

     "Series 1998-1 Trust" has the meaning provided in the first recital to this
Agreement.

     "Series  1998-1  Trust  Agreement"  has the  meaning  provided in the first
recital to this Agreement.

     "Series  1998-1  Trust  Estate"  means the Trust Estate with respect to the
Series 1998, as described in the Series 1998-1 Sale and Servicing  Agreement and
the Series 1998-1 Indenture.

     "Series of Securities" or "Series" means the Series 1998 or, as the context
may require,  any other series of  Securities  issued or arising as described in
Section 2.02 hereof, or collectively, all such series.

     "Series  Supplement"  means a  supplement  hereto  executed  by the parties
hereto in accordance with Section 2.02 hereof.

     "Servicer  Termination Side Letter" shall have the meaning set forth in the
Insurance Agreement.

     "Spread Account" has the meaning specified in Section 3.01(a) hereof.

     "Spread Account Eligible  Investments"  means Eligible  Investments held by
the  Collateral  Agent  in a  Spread  Account  and with  respect  to  which  the
Collateral Agent has taken Delivery.

     "Spread  Account  Shortfall"  means,  with  respect  to any  Series and any
Reporting  Date with  respect to which (x) a Trigger  Event has occurred and has
not been  Deemed  Cured or (y) an  Insurance  Agreement  Event  of  Default  has
occurred,  the  excess,  if  any,  of  the  amount  determined  pursuant  to the
applicable  definition of Requisite  Amount with respect to such  Reporting Date
over the amount on deposit in the related  Spread  Account as of such  Reporting
Date after  making any  withdrawals  therefrom  required  by  priorities  FIRST,
SECOND, and THIRD of Section 3.03(b) hereof.

     "Transaction  Documents" means,  with respect to a Series,  this Agreement,
each of the applicable Securitization  Agreements, the Servicer Termination Side
Letter, the Insurance  Agreement,  the Indemnification  Agreement,  the Purchase
Agreement,  the Inducement Letter, the Premium Letter, the Assignment Agreement,
if any, the Custodian Agreement,  the Lockbox Agreement,  any Conveyance related
to such Series, any Subsequent Transfer

                                      -15-

<PAGE>



Agreement  related to such Series and any other  financing  document  related to
such Series.

     "Trigger  Event"  means,  with  respect  to Series  1998-1,  that as of any
Reporting  Date with  respect  to Series  1998-1  that any one of the  following
events shall have  occurred and shall not have been Deemed  Cured:  (a)(i) as of
such  Reporting  Date before the January  1999  Distribution  Date,  the Average
Delinquency  Rate is equal to or greater than 8.75% or (ii) as of such Reporting
Date after the January 1999  Distribution  Date, (x) if the Cumulative Loss Rate
as of the January 1999  Distribution  Date is equal to or greater than 4.0%, the
Average  Delinquency  Rate is  equal  to or  greater  than  8.75%  or (y) if the
Cumulative Loss Rate as of the January 1999 Distribution Date is less than 4.0%,
the Average  Delinquency  Rate is equal to or greater  than 8.35%;  or (b) as of
such Reporting Date (i) occurring before the January 1999 Distribution Date, the
Average  Default Rate is equal to or greater than 18.50%,  (ii) occurring  after
the January 1999 Distribution Date but before the January 2000 Distribution Date
and (x) if the Cumulative Loss Rate as of the January 1999  Distribution Date is
equal to or greater than 4.0%,  the Average  Default Rate is equal to or greater
than  18.50%  or  (y)  if the  Cumulative  Loss  Rate  as of  the  January  1999
Distribution  Date is less than 4.0%,  the Average  Default  Rate is equal to or
greater  than  18.10%  and  (iii)  occurring  subsequent  to  the  January  2000
Distribution  Date and (x) if the  Cumulative  Loss Rate as of the January  1999
Distribution  Date is equal to or greater than 4.0%, the Average Default Rate is
equal to or greater  than  14.50% or (y) if the  Cumulative  Loss Rate as of the
January 1999  Distribution  Date is less than 4.0%, the Average  Default Rate is
equal to or greater than 14.10%;  or (c) as of such Reporting Date (i) occurring
before the January 1999 Distribution Date, the Average Net Loss Rate is equal to
or greater than 9.20%,  (ii) occurring after the January 1999  Distribution Date
but before the January 2000  Distribution  Date and (x) if the  Cumulative  Loss
Rate as of the January 1999  Distribution Date is equal to or greater than 4.0%,
the  Average  Net  Loss  Rate is equal to or  greater  than  9.20% or (y) if the
Cumulative Loss Rate as of the January 1999 Distribution Date is less than 4.0%,
the Average Net Loss Rate is equal to or greater than 8.30% and (iii)  occurring
subsequent to the January 2000  Distribution Date and (x) if the Cumulative Loss
Rate as of the January 1999  Distribution Date is equal to or greater than 4.0%,
the  Average  Net  Loss  Rate is equal to or  greater  than  7.20% or (y) if the
Cumulative Loss Rate as of the January 1999 Distribution Date is less than 4.0%,
the Average Net Loss Rate is equal to or greater than 6.30%.

     "Trust" means a trust formed pursuant to a Securitization Agreement.

     "Trust  Estate" with  respect to any Series means the property  assigned to
the Trustee or other Person or held in the estate of

                                      -16-

<PAGE>



the Trust, in each case pursuant to the related Securitization Agreement.

     "Trustee" means with respect to any Series, the Trustee or Trust Collateral
Agent, as applicable, named in the related Securitization Agreement.

     "Trustee Secured  Obligations" means, with respect to a Series, all amounts
and  obligations  which NAFI, the Transferor or the Trust may at any time owe to
or on behalf of the  Trustee for the  benefit of the  Securityholders  under the
Securitization Agreement with respect to such Series.

     "Trustee  Termination  Date" means,  with  respect to any Series,  the date
which is the latest of (i) the date on which the Trustee shall have received, as
Trustee  for  the  holders  of  the  Securities  of  such  Series,  payment  and
performance  in  full  of all  Trustee  Secured  Obligations  arising  out of or
relating to such  Series,  (ii) the date on which all payments in respect of the
Securities  of such Series shall have been made and the related Trust shall have
been terminated  pursuant to the terms of the related  Securitization  Agreement
and (iii) the latest  date any  payment  referred to above could be avoided as a
preference  or otherwise  under the United States  Bankruptcy  Code or any other
similar Federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or  reorganization,  as specified in an Opinion of Counsel delivered
to the Collateral Agent, Financial Security and the Trustee.

     "Uniform  Commercial  Code" or "UCC" means the Uniform  Commercial  Code in
effect in the  relevant  jurisdiction,  as the same may be amended  from time to
time.

     "Unreimbursed Amounts" has the meaning specified in Section 3.03(b) hereof.

     Section  1.2.  Rules of  Interpretation.  The terms  "hereof,"  "herein" or
"hereunder," unless otherwise modified by more specific  reference,  shall refer
to this Agreement in its entirety.  Unless otherwise  indicated in context,  the
terms "Article,"  "Section,"  "Appendix," "Exhibit" or "Annex" shall refer to an
Article or Section of, or  Appendix,  Exhibit or Annex to, this  Agreement.  The
definition  of a term shall  include the  singular,  the plural,  the past,  the
present,  the  future,  the active and the  passive  forms of such term.  A term
defined herein and used herein preceded by a Series designation, shall mean such
term as it relates to the Series designated.



                                      -17-

<PAGE>



                                   ARTICLE II

            REVERSIONARY HOLDERS; SERIES SUPPLEMENTS; THE COLLATERAL

     Section  2.1.   Reversionary   Holders.   It  is   anticipated   that  each
Securitization  Agreement will require that certain  amounts be deposited into a
Spread  Account.  With  respect to any  Series,  the Person or Persons  who will
ultimately  be entitled to receive  distributions  of amounts  released from the
related  Spread  Account are the  "Reversionary  Holders"  with  respect to such
Spread  Account  and  Series and may be  classified  into  different  classes of
Reversionary  Holders  pursuant to the applicable  Securitization  Agreement and
Section 3.03 hereof.  With respect to Series 1998-1,  the  Reversionary  Holders
(the "Series  1998-1  Reversionary  Holders")  shall be the holders of the Trust
Certificates.

     It is intended by the parties hereto that the Collateral  shall  constitute
property held in trust by the  Collateral  Agent,  to provide for the payment of
the  Secured  Obligations,  and that such  Collateral  and any  property  rights
appurtenant  thereto  shall vest in the related  Reversionary  Holders only when
such  Collateral is released to such  Reversionary  Holders in  accordance  with
Section 3.03(b) hereof.

     Notwithstanding  the  foregoing,  each  Reversionary  Holder  may treat the
deposit of the related Collateral into the related Spread Account as the receipt
by such  Reversionary  Holder of such  Collateral  for Federal and state  income
taxes, as may be required by law.

     Each  Securitization  Agreement in which the  Transferor  is not itself the
sole Reversionary Holder shall provide that the Transferor shall be deemed to be
the agent of the related  Reversionary Holders for the purpose of perfecting the
Collateral   Agent's  Security   Interest  in  the  related   Collateral.   Each
Securitization  Agreement  shall  additionally  provide  that  the  Reversionary
Holders agree to execute and deliver such instruments of conveyance, assignment,
grant, confirmation, etc., as well as any financing statements, in each case, as
the Controlling  Party shall consider  reasonably  necessary in order to perfect
the Collateral Agent's Security Interest in the related Collateral.

     Section  2.2.  Series  Supplements.  The  parties  hereto  agree  that  the
Transferor  will have the option to enter into a Series  Supplement  hereto with
respect to each Series, the Secured  Obligations with respect to which are to be
secured by Collateral  held pursuant to the  provisions of this  Agreement.  The
parties will enter into a Series  Supplement  only if the  following  conditions
shall have been satisfied:


                                      -18-

<PAGE>



               (i) The Transferor shall have sold or pledged all or a portion of
          its right,  title and interest in and to a pool of receivables  and/or
          other financial assets or property to a Trust or other Person pursuant
          to a Securitization Agreement;

               (ii) Financial  Security shall have issued a Policy in respect of
          the Guaranteed  Distributions or Scheduled  Payments,  as the case may
          be,  with  respect to the Series  issued or arising  pursuant  to such
          Securitization Agreement; and

               (iii)  Pursuant  to the  related  Series  Supplement  the related
          Collateral  specified  herein shall be  administered by the Collateral
          Agent substantially on the terms set forth in Section 2.03 hereof.

     Section 2.3. Creation and Grant of Security Interest by the Transferor.

     (a) To secure the performance of the Series 1998-1 Secured  Obligations and
the Secured Obligations with respect to each other Series to the extent provided
herein,  the  Transferor,  including  in its  capacity as agent on behalf of the
Reversionary Holders, hereby pledges,  assigns, grants, transfers and conveys to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties, a
lien on and security  interest in (which lien and security  interest is intended
to be prior to all other Liens),  all of its right, title and interest in and to
the following (all being  collectively  referred to herein as the "Series 1998-1
Collateral" and constituting Collateral hereunder):

          (i) the  amounts  distributed  to the  Series  1998-1  Spread  Account
     pursuant  to Section  5.7(b)(v)  of the Series  1998-1  Sale and  Servicing
     Agreement and Section 5.6(a) of the Series 1998-1  Indenture and all rights
     and  remedies  that the  Series  1998-1  Reversionary  Holders  may have to
     enforce such distributions,  whether under the Series 1998-1 Securitization
     Agreements or otherwise;

          (ii) the Series 1998-1 Spread Account established  pursuant to Section
     3.01 hereof,  and each other  account  established  by the  Transferor  and
     maintained by the Collateral  Agent  (including,  without  limitation,  the
     Initial Spread Account Deposit  related thereto and all additional  monies,
     checks, securities,  investments and other documents from time to time held
     in or evidencing any such accounts);

          (iii)  all  of the  Transferor's  right,  title  and  interest  in its
     capacity as agent for the Series  1998-1  Reversionary  Holders,  in and to
     investments made with

                                      -19-

<PAGE>



     proceeds of the property  described in clauses (i) and (ii) above,  or made
     with amounts on deposit in the Series 1998-1 Spread Account; and

          (iv) all distributions,  revenues, products, substitutions,  benefits,
     profits and proceeds, in whatever form, of any of the foregoing.

     (b) To effectuate the provisions and purposes of this Agreement,  including
for the purpose of perfecting  the security  interests  granted  hereunder,  the
Transferor represents and warrants that it has executed and filed on or prior to
the Closing Date an appropriate  Uniform Commercial Code financing  statement in
the State of Illinois  sufficient to assure that the Collateral  Agent, as agent
for the Secured Parties, has a first priority perfected security interest in all
Series  1998-1  Collateral  which can be  perfected by the filing of a financing
statement.

     Section 2.4.  Priority.  The Transferor  intends the security  interests in
favor of the Collateral  Agent,  for the benefit of the Secured  Parties,  to be
prior to all other Liens in respect of the Collateral,  and the Transferor shall
take all actions  necessary to obtain and maintain,  in favor of the  Collateral
Agent,  for the  benefit  of the  Secured  Parties,  a first lien on and a first
priority  perfected  security  interest  in  the  Collateral.   Subject  to  the
provisions hereof specifying the rights and powers of the Controlling Party from
time to time to control certain  specified  matters  relating to the Collateral,
each Secured  Party shall have all of the rights,  remedies  and  recourse  with
respect to the Collateral  afforded a secured party under the Uniform Commercial
Code, and all other applicable law in addition to, and not in limitation of, the
other  rights,  remedies  and recourse  granted to such Secured  Parties by this
Agreement or any other law relating to the creation and  perfection of liens on,
and security interests in, the Collateral.

     Section 2.5.  Transferor Remains Liable. The Security Interests are granted
as security  only and shall not (i) transfer or in any way affect or modify,  or
relieve the Transferor  from,  any  obligation to perform or satisfy,  any term,
covenant,  condition or agreement to be performed or satisfied by the Transferor
under or in connection with this Agreement, the Insurance Agreement or any other
Transaction Document to which it is a party or (ii) impose any obligation on any
of the Secured  Parties or the  Collateral  Agent to perform or observe any such
term,  covenant,  condition or  agreement or impose any  liability on any of the
Secured  Parties or the  Collateral  Agent for any act or  omission  on its part
relative thereto or for any breach of any representation or warranty on its part
contained therein or made

                                      -20-

<PAGE>



in connection therewith, except, in each case, to the extent provided herein and
in the other Transaction Documents.

     Section 2.6. Maintenance of Collateral.

     (a) Safekeeping. The Collateral Agent agrees to (i) maintain the Collateral
(other than Spread Account Eligible  Investments) received by it and all records
and documents  relating  thereto at the office of the Collateral Agent specified
in Section  8.06  hereof or such  other  address  within  the State of  Illinois
(unless all filings  have been made to continue the  perfection  of the security
interest in the Collateral to the extent such security interest can be perfected
by filing a financing statement, as evidenced by an Opinion of Counsel delivered
by the  Transferor  to  the  Controlling  Party),  as  may  be  approved  by the
Controlling  Party and (ii) take  Delivery of and  maintain  the Spread  Account
Eligible  Investments  and all records  and  documents  relating  thereto at its
offices  within  the State of New York.  The  Collateral  Agent  shall  keep all
Collateral and related  documentation in its possession  separate and apart from
all other property that it is holding in its possession and from its own general
assets and shall  maintain  accurate  records  pertaining to the Spread  Account
Eligible  Investments and Spread  Accounts  included in the Collateral in such a
manner as shall enable the  Collateral  Agent and the Secured  Parties to verify
the accuracy of such  record-keeping.  The Collateral  Agent's books and records
shall at all times show that the Collateral is held by the  Collateral  Agent as
agent of the Secured  Parties and is not the property of the  Collateral  Agent.
The  Collateral  Agent  will  promptly  report  to each  Secured  Party  and the
Transferor  any failure on its part to hold the  Collateral  as provided in this
Section  2.06(a) and will  promptly take  appropriate  action to remedy any such
failure.

     (b) Access.  The Collateral Agent shall permit each of the Secured Parties,
the Reversionary  Holders or their  respective duly authorized  representatives,
attorneys, auditors or designees, to inspect the Collateral in the possession of
or otherwise  under the control of the Collateral  Agent pursuant hereto at such
reasonable  times during  normal  business  hours as any such  Secured  Party or
Reversionary  Holders may  reasonably  request  upon not less than two  Business
Days' prior  written  notice.  The costs and expenses  associated  with any such
inspection will be paid by the party making such inspection.

     (c) With  respect to the  Collateral  credited to the Spread  Account,  the
Collateral Agent, in its capacity as the Securities Intermediary agrees that:

          (i) any  Collateral  that is held in  deposit  accounts  shall be held
     solely in a bank that is an Eligible  Bank;  and each such deposit  account
     shall be subject to the exclusive

                                      -21-

<PAGE>



     custody  and control of the  Securities  Intermediary,  and the  Securities
     Intermediary shall have sole signature authority with respect thereto;

          (ii) except for any deposit accounts specified in clause (c)(i) above,
     the Spread  Account  shall be invested  only in cash,  securities  or other
     assets which the Securities Intermediary or other Eligible Bank maintaining
     the Spread Account pursuant to Section 3.01(a) agrees to treat as Financial
     Assets; and

          (iii) any such Collateral that is, or is treated as, a Financial Asset
     shall be physically  delivered  (accompanied by any required  endorsements)
     to, or credited to an account in the name of, the  Securities  Intermediary
     or other Eligible Bank  maintaining the Spread Account  pursuant to Section
     3.01(a) in  accordance  with the  Securities  Intermediary's  or such other
     institution's customary procedures such that the Securities Intermediary or
     such other institution  establishes a Security  Entitlement in favor of the
     Collateral   Agent  with  respect   thereto   over  which  the   Securities
     Intermediary or such other institution has Control.

     (d) The Securities Intermediary hereby confirms that (A) the Spread Account
is an  account  to  which  Financial  Assets  are or may be  credited,  and  the
Securities Intermediary shall, subject to the terms of this Agreement, treat the
Collateral  Agent as entitled to exercise the rights that comprise any Financial
Asset  credited  to the Spread  Account,  (B) all  Collateral  in respect of the
Spread Account will be promptly  credited by the Securities  Intermediary to the
Spread  Account,  and  (C) all  securities  or  other  property  underlying  any
Financial  Assets credited to the Spread Account shall be registered in the name
of the Securities  Intermediary,  endorsed to the Securities  Intermediary or in
blank or credited to another  securities  account  maintained in the name of the
Securities  Intermediary and in no case will any Financial Asset credited to the
Spread Account be registered in the name of the Transferor, payable to the order
of the  Transferor or specially  endorsed to the  Transferor in each case to the
extent the foregoing have been specially endorsed to the Securities Intermediary
or in blank.

     (e) The  Securities  Intermediary  hereby agrees that each item of property
(whether investment  property,  financial asset,  security,  instrument or cash)
credited to the Spread Account shall be treated as a Financial Asset.

     (f) If at any time the Securities Intermediary shall receive any order from
the Collateral  Agent  directing  transfer or redemption of any financial  asset
relating to the Spread Account,  the Securities  Intermediary  shall comply with
such entitlement

                                      -22-

<PAGE>



order without further consent by the Transferor or any other Person. If at any
time the Collateral  Agent notifies the Securities  Intermediary in writing that
the Final  Termination Date of the last Series has occurred,  then thereafter if
the  Securities  Intermediary  shall  receive  any  order  from  the  Transferor
directing  transfer or redemption of any financial  asset relating to the Spread
Account,  the Securities  Intermediary  shall comply with such entitlement order
without further consent by the Collateral Agent or any other Person.

     (g) In the  event  that the  Securities  Intermediary  has or  subsequently
obtains by agreement,  operation of law or otherwise a security  interest in the
Spread  Account  or  any  Financial  Asset  credited  thereto,   the  Securities
Intermediary  hereby agrees that such security  interest shall be subordinate to
the security  interest of the Collateral Agent. The Financial Assets credited to
the Spread Account will not be subject to deduction,  set-off, banker's lien, or
any other right in favor of any person other than the Collateral Agent.

     (h) There are no other  agreements  entered  into  between  the  Securities
Intermediary  in such  capacity  and the  Transferor  with respect to the Spread
Account.  In the event of any conflict  between this Agreement (or any provision
of this  Agreement)  and any other  agreement now existing or hereafter  entered
into, the terms of this Agreement shall prevail.

     (i) The rights and powers granted herein to the Collateral  Agent have been
granted in order to perfect its security  interest in the Spread Account and the
Security  Entitlements to the Financial  Assets credited  thereto and are powers
coupled  with an  interest  and will  neither  be  affected  by the  bankruptcy,
receivership  or  conservatorship,  as applicable,  of the Transferor nor by the
lapse of time. The  obligations of the Securities  Intermediary  hereunder shall
continue in effect until the security  interest of the  Collateral  Agent in the
Spread Account and such Security  Entitlements  has been terminated  pursuant to
the terms of this Agreement and the Collateral Agent has notified the Securities
Intermediary of such termination in writing.

     (j)  Notwithstanding  anything else contained herein, the Transferor agrees
that  the  Spread  Account  will  be   established   only  with  the  Securities
Intermediary  which  agrees  substantially  as follows:  (i) it will comply with
Entitlement  Orders  related  to such  account  issued by the  Collateral  Agent
without  further  consent  by the  Transferor;  (ii)  until  termination  of the
Agreement,  it will not enter into any other  agreement  related to such account
pursuant  to which it agrees to comply  with  Entitlement  Orders of any  Person
other than the Collateral  Agent;  and (iii) all assets delivered or credited to
it in connection with such account and all investments  thereof will be promptly
credited to such account.

                                      -23-

<PAGE>





     Section 2.7. Termination and Release of Rights.

     (a) On the  Insurer  Termination  Date  relating  to a Series,  the rights,
remedies,  powers,  duties,  authority and obligations  conferred upon Financial
Security pursuant to this Agreement in respect of the Collateral related to such
Series (and, to the extent provided herein, in respect of Collateral  related to
other  Series)  shall  terminate  and be of no further  force and effect and all
rights,  remedies,  powers,  duties,  authority  and  obligations  of  Financial
Security  with  respect  to such  Collateral  shall be  automatically  released;
provided that any indemnity  provided to or by Financial  Security  herein shall
survive  such  Insurer  Termination  Date.  If  Financial  Security is acting as
Controlling  Party with respect to a Series on the related  Insurer  Termination
Date,  Financial  Security agrees, at the expense of the Transferor,  to execute
and deliver such instruments as the successor  Controlling  Party may reasonably
request  to effect  such  release,  and any such  instruments  so  executed  and
delivered  shall be fully binding on Financial  Security and any Person claiming
by, through or under Financial Security.

     (b) On the  Trustee  Termination  Date  related  to a Series,  the  rights,
remedies, powers, duties, authority and obligations,  if any, conferred upon the
Trustee,  as  Collateral  Agent,  pursuant to this  Agreement  in respect of the
Collateral  related to such  Series  (and,  to the extent  provided  herein,  in
respect of the Collateral  related to other Series) shall terminate and be of no
further  force  and  effect  and all  such  rights,  remedies,  powers,  duties,
authority and obligations of the Trustee,  as Collateral  Agent, with respect to
such Collateral  shall be  automatically  released;  provided that any indemnity
provided to or by the Trustee  herein shall  survive  such  Trustee  Termination
Date. If the Trustee is acting as Controlling  Party with respect to a Series on
the related Trustee  Termination Date, the Trustee agrees, at the expense of the
Transferor,  to execute and  deliver  such  instruments  as the  Transferor  may
reasonably  request to effectuate  such  release,  and any such  instruments  so
executed and delivered shall be fully binding on the Trustee.

     (c) On the Final  Termination  Date with  respect to a Series,  the rights,
remedies,   powers,  duties,   authority  and  obligations  conferred  upon  the
Collateral  Agent  and each  Secured  Party  pursuant  to this  Agreement  shall
terminate  and be of no  further  force and  effect  and all  rights,  remedies,
powers,  duties,  authority and  obligations  of the  Collateral  Agent and each
Secured Party with respect to the Collateral related to such Series (and, to the
extent provided herein, in respect of Collateral  related to other Series) shall
be  automatically  released,  subject to the  application  of such  amounts  for
indemnity payments and all other amounts due and payable hereunder. On the Final
Termination Date with respect to a

                                      -24-

<PAGE>



Series,  the  Collateral  Agent agrees,  and each Secured  Party agrees,  at the
expense of the Transferor, to execute such instruments of release, in recordable
form if necessary,  in favor of the  Transferor as the Transferor may reasonably
request,  to deliver any Collateral  related to such Series in its possession to
the Transferor or as otherwise provided in the related Securitization Agreement,
and to otherwise  release the lien of this  Agreement and release and deliver to
the Transferor or as otherwise provided in the related Securitization  Agreement
the Collateral related to such Series.

     Section 2.8.  Non-Recourse  Obligations of Transferor and the  Reversionary
Holders.  Notwithstanding  anything herein or in the other Transaction Documents
to the contrary, the parties hereto agree that the obligations of the Transferor
and the Reversionary  Holders  hereunder shall be recourse only to the extent of
amounts  deposited in the Spread Accounts.  The Transferor  agrees that it shall
not declare or make payment of (i) any dividend or other  distribution  on or in
respect of any  beneficial  interests in the  Transferor  or (ii) any payment on
account  of the  purchase,  redemption,  retirement  or  acquisition  of (x) any
beneficial interest in the Transferor or (y) any option,  warrant or other right
to acquire any  beneficial  interest in the Transferor or (z) any payment of any
loan made by NAFI or any  Affiliate of NAFI to the  Transferor,  unless (in each
case) at the time of such  declaration  or  payment  (and  after  giving  effect
thereto) no amount payable by the Transferor or any  Reversionary  Holders under
any Transaction Document is then due and owing but unpaid.


                                   ARTICLE III

                                 SPREAD ACCOUNTS

     Section 3.1. Establishment of Spread Accounts; Initial Deposits into Spread
Accounts.

     (a) On or  prior  to the  Closing  Date  relating  to  Series  1998-1,  the
Collateral  Agent shall establish with respect to such Series,  at its office or
at another depository  institution or trust company an Eligible Deposit Account,
designated, "Spread Account - National Auto Finance Series 1998-1 Trust - Harris
Trust and Savings  Bank, as Collateral  Agent for Financial  Security  Assurance
Inc. and another Secured Party" (the "Spread Account",  and, with respect to the
Series  1998,  the  "Series  1998-  1  Spread  Account").  All  Spread  Accounts
established  under this  Agreement  from time to time shall be maintained at the
same depository  institution  (which depository  institution may be changed from
time  to  time  in  accordance  with  this  Agreement).  If any  Spread  Account
maintained  or  established  with  respect to a Series  ceases to be an Eligible
Deposit Account, the Collateral

                                      -25-

<PAGE>



Agent shall, within five Business Days, establish a new Eligible Deposit Account
for such Series.

     (b) No  withdrawals  may be made of funds in any Spread  Account  except as
provided in Section 3.03 of this Agreement.  Except as specifically  provided in
this Agreement,  funds in a Spread Account  established with respect to a Series
shall not be commingled with funds in a Spread Account  established with respect
to another  Series or with any other moneys.  All moneys  deposited from time to
time in such Spread Account and all  investments  made with such moneys shall be
held by the  Collateral  Agent as part of the  Collateral  with  respect to such
Series.

     (c) On the Closing  Date with  respect to a Series,  the  Collateral  Agent
shall deposit the Initial Spread Account Deposit with respect to such Series, if
any, received from the Transferor into the related Spread Account.

     (d) Each Spread  Account shall be separate from each Trust,  and amounts on
deposit  therein  will not  constitute  a part of the Trust Estate of any Trust.
Each Spread  Account shall be maintained  by the  Collateral  Agent at all times
separate and apart from any other account of the Transferor, the Servicer or the
Trust. All income or loss on investments of funds in any Spread Account shall be
reported by the  applicable  Reversionary  Holders as taxable  income or loss of
such Reversionary Holders.

     Section 3.2. Investments.

     (a) Funds which may at any time be held in the Spread  Account  established
with  respect to a Series  shall be invested and  reinvested  by the  Collateral
Agent, at the written direction  (including,  subject to the provisions  hereof,
general  standing  instructions)  of the Transferor  (unless a Default  actually
known to an Authorized  Officer of the Collateral  Agent shall have occurred and
be continuing,  in which case at the written direction of the Controlling Party)
or its designee received by the Collateral Agent by 1:00 P.M. New York City time
on the Business Day prior to the date on which such investment shall be made, in
one or more Spread  Account  Eligible  Investments  in the manner  specified  in
Section 3.02(c) hereof.  If no written  direction with respect to any portion of
such Spread Account is received by the Collateral  Agent,  the Collateral  Agent
shall invest such funds overnight in such Eligible Investments as the Collateral
Agent may select, provided that the Collateral Agent shall not be liable for any
loss or absence of income  resulting from such  investments  or for  investments
made pursuant to written  instructions  received in accordance with this Section
3.02(a).

     (b) Each  investment  made  pursuant to this Section 3.02 on any date shall
mature not later than the Business Day  immediately  preceding the  Distribution
Date next succeeding the day such

                                      -26-

<PAGE>



investment  is made,  except  that any  investment  made on the day  preceding a
Distribution  Date shall mature on such  Distribution  Date;  provided  that any
investment of funds in any Spread Account  maintained with the Collateral  Agent
(which  shall be  qualified  as a Spread  Account  Eligible  Investment)  in any
investment  as to which  the  Collateral  Agent  is the  obligor,  if  otherwise
qualified as an Eligible Investment (including any repurchase agreement on which
the  Collateral  Agent in its  commercial  capacity is liable as principal)  may
mature on the Distribution Date next succeeding the date of such investment.

     (c) Subject to the other provisions hereof, the Collateral Agent shall have
sole  control  over  each  such  investment  and  the  income  thereon,  and any
certificate or other instrument evidencing any such investment, if any, shall be
delivered  directly to the  Collateral  Agent or its agent,  together  with each
document of transfer,  if any, necessary to transfer title to such investment to
the  Collateral  Agent in a manner  complying  with  Section 2.06 hereof and the
requirements of the definition of "Spread Account Eligible Investments."

     (d) If amounts on deposit in any Spread Account are at any time invested in
a Spread Account  Eligible  Investment  payable on demand,  the Collateral Agent
shall (i) consistent  with any notice  required to be given  thereunder,  demand
that  payment  thereon  be made on the  last day such  Spread  Account  Eligible
Investment  is permitted to mature under the  provisions  hereof and (ii) demand
payment of all amounts due  thereunder  promptly upon receipt of written  notice
from  the  Controlling  Party  to the  effect  that  such  investment  does  not
constitute a Spread Account Eligible Investment.

     (e) All moneys on deposit in a Spread Account together with any deposits or
securities  in which such moneys may be invested  or  reinvested,  and any gains
from such investments, shall constitute Collateral hereunder with respect to the
related Series subject to the Security Interests of the Secured Parties.

     (f)  Subject to Section  4.03  hereof,  the  Collateral  Agent shall not be
liable by reason of any  insufficiency in any Spread Account  resulting from any
loss on any Eligible  Investment included therein except for losses attributable
to the Collateral Agent's failure to make payments on Eligible Investments as to
which the Collateral Agent, in its commercial capacity, is obligated to make.

     Section 3.3. Distributions; Priority of Payments.

     (a) On or before each Deficiency Claim Date with respect to any Series, the
Collateral  Agent  will  make  the  following   calculations  on  the  basis  of
information (including,  without limitation,  the amount of any Deficiency Claim
Amount with

                                      -27-

<PAGE>



respect to any  Series)  received  pursuant  to Section  4.11 of the  applicable
Securitization  Agreement  (or other section  referenced  in the related  Series
Supplement),  with  respect to each such  Series from the  Servicer  thereunder;
provided,  however,  that if the Collateral Agent receives notice from Financial
Security of the  occurrence  of an  Insurance  Agreement  Event of Default  with
respect to any Series,  such notice shall be  determinative  for the purposes of
determining the Requisite Amount for such Series:

          FIRST, determine the amounts to be on deposit in the respective Spread
     Accounts  (taking  into account  amounts to be  deposited  into the related
     Spread  Accounts) on the next  succeeding  Distribution  Date which will be
     available to satisfy any Deficiency Claim Amount.

          SECOND, determine (i) the amounts, if any, to be distributed from each
     Spread Account  related to each Series with respect to which there exists a
     Deficiency Claim Amount, and (ii) whether,  following distribution from the
     related  Spread  Accounts to the  respective  Trustees for deposit into the
     respective  Collection  Account  with  respect  to  which  there  exists  a
     Deficiency  Claim Amount,  a Deficiency Claim Amount will continue to exist
     with respect to one or more Series.

          THIRD,  if a  Deficiency  Claim  Amount  will  continue  to exist with
     respect to one or more  Series  other than the Series  1998  following  the
     distributions  from the related Spread  Accounts  contemplated by paragraph
     SECOND  above,  determine  the  amount,  if any, to be  distributed  to the
     Trustee with respect to each Series from  unrelated  Spread  Accounts other
     than the Series 1998-1 Spread Account in respect of such  Deficiency  Claim
     Amount(s).  This  determination  shall  be  made  in  accordance  with  the
     distribution priority scheme set forth in Section 3.03(b) below.

     On such  Deficiency  Claim Date related to a Series,  the Collateral  Agent
shall deliver a certificate  to each Trustee in respect of which the  Collateral
Agent has  received a  Deficiency  Notice  stating  the  amount,  if any,  to be
distributed  to such  Trustee on the next  Distribution  Date in respect of such
Deficiency Claim Amount.

     (b) On each  Distribution  Date,  following the deposit into the respective
Spread Accounts of the amounts required to be deposited  therein pursuant to the
respective   Securitization  Agreements  and  if  the  Trustee  has  received  a
Deficiency  Notice with respect to one or more such  Series,  or with respect to
priority  SIXTH  below to the extent the amount  referred  to therein is due and
owing,  the  Collateral  Agent  shall make the  following  distributions  in the
following order of priority:

                                      -28-

<PAGE>




          FIRST,  if with respect to any Series there exists a Deficiency  Claim
     Amount,  from the Spread Account related to such Series, to the Trustee for
     deposit in the related  Collection  Account  the amount of such  Deficiency
     Claim Amount.

          SECOND, if with respect to any Series other than the Series 1998 there
     continues  to  exist a  Deficiency  Claim  Amount  after  deposit  into the
     Collection  Account of amounts  distributed  pursuant to priority  FIRST of
     this Section  3.03(b),  from amounts,  if any, on deposit in each unrelated
     Spread  Account other than the Series 1998-1 Spread  Account,  pro rata, in
     excess of the related  Requisite  Amount,  an amount in the aggregate up to
     the aggregate of the Deficiency Claim Amounts for all Series other than the
     Series 1998-1, for deposit in the respective  Collection  Accounts pro rata
     in accordance with the respective Deficiency Claim Amounts.

          THIRD,  if with respect to any Series other than the Series 1998 there
     continues  to  exist a  Deficiency  Claim  Amount  after  deposit  into the
     Collection  Account of amounts  distributed  pursuant to priority FIRST and
     SECOND of this Section  3.03(b),  from each unrelated  Spread Account other
     than the Series 1998-1 Spread  Account pro rata in accordance  with amounts
     on  deposit  therein,  an  amount  up to the  aggregate  of  the  remaining
     Deficiency  Claim Amounts for all Series other than the Series 1998, to the
     respective  Trustees for deposit in the respective  Collection Accounts pro
     rata in accordance with the respective Deficiency Claim Amounts.

          FOURTH,  if with  respect to one or more Series  other than the Series
     1998 there exists a Spread Account Shortfall,  from amounts, if any, (1) on
     deposit in each Spread  Account other than the Series 1998-1 Spread Account
     in excess of the related  Requisite  Amount or (2) on deposit in any Spread
     Account other than the Series  1998-1 Spread  Account with respect to which
     the Final Termination Date shall have occurred on such Distribution Date or
     a prior  Distribution  Date, an amount in the aggregate up to the aggregate
     of the Spread Account  Shortfalls for all Series other than the Series 1998
     for deposit into each Spread  Account  other than the Series  1998-1 Spread
     Account  pro  rata  in  accordance  with  the  respective   Spread  Account
     Shortfalls.

          FIFTH,  if with  respect  to one or more  Series,  amounts  have  been
     withdrawn  from the related  Spread  Account  pursuant to priority THIRD of
     this Section 3.03(b) on such  Distribution  Date and/or prior  Distribution
     Dates and such amounts have not been  redeposited  in full into such Spread
     Account pursuant to this priority FIFTH (such amounts in the

                                      -29-

<PAGE>



     aggregate for a Series "Unreimbursed  Amounts"),  from amounts, if any, (1)
     on deposit in each  Spread  Account  other  than the Series  1998-1  Spread
     Account in excess of the related Requisite Amount; or (2) on deposit in any
     Spread  Account other than the Series 1998-1 Spread Account with respect to
     which the Final  Termination Date shall have occurred on such  Distribution
     Date or a prior  Distribution  Date,  an amount up to the  aggregate of the
     Unreimbursed  Amounts  for all such  Series for  deposit  into each  Spread
     Account other than the Series  1998-1 Spread  Account with respect to which
     there exist Unreimbursed Amounts pro rata in accordance with the respective
     Unreimbursed Amounts.

          SIXTH, if any amounts are owed to the Trustee, the Collateral Agent or
     Backup  Servicer for reasonable  out-of-pocket  expenses in connection with
     the  administration  of the Trust,  including the expenses  incurred in the
     transition  to a successor  Servicer  and such  amounts have not been paid,
     then from  amounts (if any) on deposit in the related  Spread  Account,  an
     amount up to the amount so owed, to be paid to the Trustee,  the Collateral
     Agent and the Backup Servicer.

          SEVENTH,  any funds in a Spread  Account  in excess of the  applicable
     Requisite Amount and any funds in a Spread Account with respect to a Series
     for which the Final Termination Date shall have occurred after distribution
     pursuant to priorities  FIRST through SIXTH will be released to the related
     Reversionary  Holders as provided in the related  Securitization  Agreement
     (or, if the related  Securitization  Agreement does not so provide,  to the
     Transferor),  in  each  case,  free  and  clear  of  the  Lien  established
     hereunder.

     Section 3.4. General Provisions Regarding Spread Accounts.

     (a) Promptly upon the establishment (initially or upon any relocation) of a
Spread Account  hereunder,  the Collateral Agent shall advise the Transferor and
each  Secured  Party  in  writing  of the  name and  address  of the  depository
institution or trust company where such Spread Account has been  established (if
not Harris  Trust and  Savings  Bank or any  successor  Collateral  Agent in its
commercial  banking  capacity),  the  name  of the  officer  of  the  depository
institution  responsible for overseeing such Spread Account,  the account number
and the  individuals  whose names appear on the signature  cards for such Spread
Account.  The Transferor  shall cause each such depository  institution or trust
company to execute a written  agreement,  in form and substance  satisfactory to
the Controlling  Party,  waiving,  and the Collateral  Agent by its execution of
this Agreement hereby waives (except to the extent expressly  provided  herein),
in each case to the extent  permitted under  applicable law, (i) any banker's or
other statutory or similar Lien, and (ii) any right of set-off or

                                      -30-

<PAGE>



other similar right under  applicable  law with respect to such Spread  Account,
and any other Spread  Account,  and agreeing,  and the  Collateral  Agent by its
execution  of this  Agreement  hereby  agrees,  to notify  the  Transferor,  the
Collateral  Agent, and each Secured Party of any charge or claim against or with
respect to such Spread Account.  The Collateral  Agent shall give the Transferor
and each Secured Party at least ten (10) Business  Days' prior written notice of
any change in the  location  of such Spread  Account or in any  related  account
information. If the Collateral Agent changes the location of any Spread Account,
it shall change the location of the other  Spread  Accounts,  so that all Spread
Accounts  shall at all  times be  located  at the same  depository  institution.
Anything herein to the contrary  notwithstanding,  unless otherwise consented to
by the Controlling Party in writing, the Collateral Agent shall have no right to
change the location of any Spread Account.

     (b) Upon the written request of the Controlling  Party, the Transferor,  or
any Reversionary Holder, the Collateral Agent shall cause, at the expense of the
Transferor, the depository institution at which any Spread Account is located to
forward to the  requesting  party copies of all monthly  account  statements for
such Spread Account.

     (c) If at any time any  Spread  Account  ceases to be an  Eligible  Deposit
Account,  the Collateral  Agent shall notify the Controlling  Party of such fact
and shall  establish  within five (5)  Business  Days of such  determination  in
accordance  with  paragraph  (a) of this  Section,  a successor  Spread  Account
thereto,  which  shall be an Eligible  Deposit  Account,  at another  depository
institution  or trust  company  acceptable  to the  Controlling  Party and shall
establish  successor  Spread Accounts with respect to all other Spread Accounts,
each of which  shall be an  Eligible  Deposit  Account,  at the same  depository
institution. The Transferor shall cause such depository institution to execute a
written agreement under terms provided for in paragraph (a) of this Section.

     (d) No  passbook,  certificate  of  deposit  or  other  similar  instrument
evidencing a Spread  Account shall be issued,  and all  contracts,  receipts and
other papers, if any,  governing or evidencing a Spread Account shall be held by
the Collateral Agent.

     Section 3.5.  Reports by the Collateral  Agent.  The Collateral Agent shall
report to the Transferor,  Financial Security, the Trustee and the Servicer on a
monthly basis no later than each Distribution Date with respect to the amount on
deposit in each Spread  Account and the  identity  of the  investments  included
therein as of the last day of the  related  Monthly  Period,  and shall  provide
accountings of deposits into and withdrawals  from the Spread  Accounts,  and of
the investments

                                      -31-

<PAGE>



made  therein,  upon the request of the  Transferor,  Financial  Security or the
Servicer.


                                   ARTICLE IV

                THE COLLATERAL AGENT AND SECURITIES INTERMEDIARY

     Section 4.1.  Appointment  and Powers.  Subject to the terms and conditions
hereof,  each of the Secured  Parties hereby  appoints  Harris Trust and Savings
Bank as the  Collateral  Agent with respect to the Series 1998-1  Collateral and
the related Collateral subsequently specified in a Series Supplement, and Harris
Trust and Savings  Bank hereby  accepts  such  appointment  and agrees to act as
Collateral  Agent  with  respect  to the  Series  1998-1  Collateral,  and  upon
execution of any Series Supplement,  shall be deemed to accept such appointment,
and agree to act as Collateral  Agent with respect to such  Collateral,  in each
case,  for the Secured  Parties,  to maintain  custody  and  possession  of such
Collateral  (except as otherwise  provided  hereunder)  and to perform the other
duties  of the  Collateral  Agent  in  accordance  with the  provisions  of this
Agreement.   Subject  to  the  terms  and  conditions  hereof,  the  Transferor,
individually and in its capacity as agent on behalf of the Reversionary Holders,
each of the Secured Parties and the Collateral Agent hereby appoint Harris Trust
and Savings Bank as Securities  Intermediary with respect to the Spread Account,
and Harris Trust and Savings Bank hereby accepts such  appointment as Securities
Intermediary  and  agrees to act on behalf  of,  and at the  direction  of,  the
Collateral Agent with respect thereto.  Each Secured Party hereby authorizes the
Collateral Agent to take such action on its behalf, and to exercise such rights,
remedies,  powers and privileges hereunder,  as the Controlling Party may direct
and as are  specifically  authorized to be exercised by the Collateral  Agent by
the terms  hereof,  together  with such actions,  rights,  remedies,  powers and
privileges as are reasonably  incidental thereto. The Collateral Agent shall act
upon and in compliance with the written  instructions  of the Controlling  Party
delivered  pursuant to this Agreement promptly following receipt of such written
instructions;  provided,  however,  that the  Collateral  Agent shall not act in
accordance  with  any  instructions  (i)  which  are not  authorized  by,  or in
violation of the provisions of, this  Agreement,  (ii) which are in violation of
any applicable  law, rule or regulation or (iii) for which the Collateral  Agent
has not received reasonable indemnity. Receipt of such instructions shall not be
a condition  to the  exercise  by the  Collateral  Agent of its  express  duties
hereunder,  except where this Agreement  provides that the  Collateral  Agent is
permitted to act only following and in accordance with such instructions.


                                      -32-

<PAGE>



     Section 4.2.  Performance  of Duties.  The  Collateral  Agent shall have no
duties or  responsibilities  except those  expressly set forth in this Agreement
and the other Transaction  Documents to which the Collateral Agent is a party as
Collateral Agent or as directed by the Controlling Party in accordance with this
Agreement.  The Collateral Agent shall not be required to take any discretionary
actions hereunder except at the written  direction and with the  indemnification
of the Controlling Party.

     Section 4.3. Limitation on Liability.  Neither the Collateral Agent nor any
of its directors, officers or employees, shall be liable for any action taken or
omitted to be taken by it or them hereunder,  or in connection herewith,  except
that the Collateral Agent shall be liable for its gross negligence, bad faith or
willful  misconduct;  nor  shall the  Collateral  Agent be  responsible  for the
validity,  effectiveness,  value,  sufficiency  or  enforceability  against  the
Transferor of this  Agreement or any of the  Collateral  (or any part  thereof).
Notwithstanding  any term or provision of this Agreement,  the Collateral  Agent
shall incur no liability to the Transferor or the Secured Parties for any action
taken or omitted by the  Collateral  Agent in  connection  with the  Collateral,
except for the  negligence,  bad faith or willful  misconduct on the part of the
Collateral Agent, and, further,  shall incur no liability to the Secured Parties
except for  negligence,  bad faith or willful  misconduct  in  carrying  out its
duties to the Secured  Parties.  Subject to Section 4.04 hereof,  the Collateral
Agent  shall be  protected  and shall  incur no  liability  to any such party in
relying upon the accuracy,  acting in reliance  upon the contents,  and assuming
the genuineness of any notice,  demand,  certificate,  signature,  instrument or
other document  reasonably believed by the Collateral Agent to be genuine and to
have been  duly  executed  by the  appropriate  signatory,  and  (absent  actual
knowledge to the  contrary) the  Collateral  Agent shall not be required to make
any independent  investigation with respect thereto.  The Collateral Agent shall
at all times be free independently to establish to its reasonable  satisfaction,
but shall have no duty to independently verify, the existence or nonexistence of
facts that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Transaction  Documents.  The Collateral  Agent may
consult with counsel, and shall not be liable for any action taken or omitted to
be taken by it hereunder in good faith and in accordance with the written advice
of such  counsel.  The  Collateral  Agent shall not be under any  obligation  to
exercise any of the remedial  rights or powers vested in it by this Agreement or
to follow any direction from the Controlling Party unless it shall have received
reasonable  security or indemnity  satisfactory to the Collateral  Agent against
the  costs,  expenses  and  liabilities  which  might be  incurred  by it in the
exercise thereof.


                                      -33-

<PAGE>



     Section 4.4.  Reliance upon  Documents.  In the absence of negligence,  bad
faith or willful  misconduct on its part, the Collateral Agent shall be entitled
to conclusively rely on any communication,  instrument,  paper or other document
reasonably  believed  by it to be genuine and correct and to have been signed or
sent by the proper  Person or Persons and shall have no liability in acting,  or
omitting to act,  where such  action or omission to act is in reliance  upon any
statement or opinion contained in any such document or instrument.

     Section 4.5. Successor Collateral Agent.

     (a) Merger.  Any Person into which the Collateral Agent may be converted or
merged,  or with  which  it may be  consolidated,  or to  which  it may  sell or
transfer its trust business and assets as a whole or  substantially  as a whole,
or any Person resulting from any such conversion, merger, consolidation, sale or
transfer  to  which  the  Collateral  Agent is a party,  shall  (provided  it is
otherwise  qualified to serve as the Collateral Agent hereunder) be and become a
successor  Collateral Agent hereunder and be vested with all of the title to and
interest  in  the  Collateral  and  all  of  the  trusts,  powers,  discretions,
immunities,  privileges  and other  matters as was its  predecessor  without the
execution or filing of any  instrument or any further act, deed or conveyance on
the  part  of  any  of the  parties  hereto,  anything  herein  to the  contrary
notwithstanding, except to the extent, if any, that any such action is necessary
to perfect,  or continue the perfection of, the security interest of the Secured
Parties in the Collateral.

     (b) Resignation.  The Collateral  Agent and any successor  Collateral Agent
may  resign  only (i) upon a  determination  that by reason of a change in legal
requirements,  the performance of its duties under this Agreement would cause it
to be in violation of such legal  requirements in a manner which would result in
a material  adverse effect on the Collateral  Agent,  and the Controlling  Party
does not elect to waive the  Collateral  Agent's  obligation  to  perform  those
duties which render it legally  unable to act or elect to delegate  those duties
to another  Person,  or (ii) with the prior written  consent of the  Controlling
Party.  The  Collateral  Agent shall give not less than 60 days'  prior  written
notice of any such permitted  resignation by registered or certified mail to the
other Secured Party and the Transferor;  provided,  that such resignation  shall
take effect only upon the date which is the latest of (i) the effective  date of
the appointment of a successor Collateral Agent and the acceptance in writing by
such successor  Collateral  Agent of such  appointment  and of its obligation to
perform its duties  hereunder in accordance  with the  provisions  hereof,  (ii)
delivery of the Collateral to such  successor to be held in accordance  with the
procedures  specified in Article II hereof, and (iii) receipt by the Controlling
Party of an Opinion of Counsel to the effect

                                      -34-

<PAGE>



described in Section 5.02 hereof. Notwithstanding the preceding sentence, if, by
the  contemplated  date  of  resignation  specified  in the  written  notice  of
resignation  delivered as described  above,  no  successor  Collateral  Agent or
temporary  successor  Collateral  Agent has been appointed  Collateral  Agent or
becomes the Collateral  Agent  pursuant to subsection (d) hereof,  the resigning
Collateral Agent may petition a court of competent jurisdiction in New York, New
York for the appointment of a successor.

     (c) Removal.  The Collateral Agent may be removed by the Controlling  Party
at any time, with or without cause,  by an instrument or concurrent  instruments
in writing  delivered to the Collateral  Agent,  the other Secured Party and the
Transferor.  A  temporary  successor  may be  removed  at any  time  to  allow a
successor Collateral Agent to be appointed pursuant to subsection (d) below. Any
removal pursuant to the provisions of this subsection (c) shall take effect only
upon the date which is the latest of (i) the effective  date of the  appointment
of a successor  Collateral Agent and the acceptance in writing by such successor
Collateral Agent of such appointment and of its obligation to perform its duties
hereunder  in  accordance  with the  provisions  hereof,  (ii)  delivery  of the
Collateral  to such  successor  to be held in  accordance  with  the  procedures
specified in Article II hereof and (iii) receipt by the Controlling  Party of an
Opinion of Counsel to the effect described in Section 5.02 hereof.

     (d)  Acceptance by  Successor.  The  Controlling  Party shall have the sole
right to appoint each successor  Collateral Agent.  Every temporary or permanent
successor  Collateral Agent appointed  hereunder shall execute,  acknowledge and
deliver to its  predecessor  and to each  Secured  Party and the  Transferor  an
instrument  in writing  accepting  such  appointment  hereunder and the relevant
predecessor  shall  execute,  acknowledge  and deliver such other  documents and
instruments  as will  effectuate the delivery of all Collateral to the successor
Collateral  Agent to be held in  accordance  with the  procedures  specified  in
Article II hereof,  whereupon such  successor,  without any further act, deed or
conveyance, shall become fully vested with all the estates, properties,  rights,
powers,  duties and  obligations of its  predecessor.  Such  predecessor  shall,
nevertheless,  on the written request of either Secured Party or the Transferor,
execute  and  deliver  an  instrument  transferring  to such  successor  all the
estates,  properties,  rights and powers of such predecessor  hereunder.  In the
event that any  instrument in writing from the  Transferor or a Secured Party is
reasonably required by a successor  Collateral Agent to more fully and certainly
vest in such  successor  the estates,  properties,  rights,  powers,  duties and
obligations  vested or intended to be vested hereunder in the Collateral  Agent,
any and all such written  instruments  shall, at the request of the temporary or
permanent

                                      -35-

<PAGE>



successor Collateral Agent, be forthwith executed, acknowledged and delivered by
the  Transferor.  The  designation  of any  successor  Collateral  Agent and the
instrument  or  instruments  removing  any  Collateral  Agent and  appointing  a
successor  hereunder,  together with all other instruments  provided for herein,
shall be  maintained  with the records  relating to the  Collateral  and, to the
extent required by applicable law, filed or recorded by the successor Collateral
Agent in each place where such filing or  recording  is  necessary to effect the
transfer of the  Collateral to the successor  Collateral  Agent or to protect or
continue the perfection of the security interests granted hereunder.

     (e) Any  resignation or removal of a Collateral  Agent and appointment of a
successor  Collateral Agent shall be effected with respect to this Agreement and
all Series Supplements simultaneously, so that at no time is there more than one
Collateral Agent acting hereunder and under all Series Supplements.

     Section 4.6. Indemnification. The Transferor shall indemnify the Collateral
Agent,  its  directors,  officers,  employees  and  agents  for,  and  hold  the
Collateral  Agent,  its  directors,  officers,  employees  and  agents  harmless
against,  any loss,  liability or expense  (including  the costs and expenses of
defending  against any claim of liability)  arising out of or in connection with
the Collateral  Agent's acting as Collateral Agent hereunder,  except such loss,
liability or expense as shall result from the  negligence,  bad faith or willful
misconduct of the Collateral Agent or its officers or agents.  The obligation of
the  Transferor  under  this  Section  shall  survive  the  termination  of this
Agreement and the resignation or removal of the Collateral Agent. The Collateral
Agent covenants and agrees that the obligations of the Transferor  hereunder and
under  Section  4.07 hereof  shall be limited to the extent  provided in Section
2.08 hereof,  and further covenants not to take any action to enforce its rights
to indemnification hereunder with respect to the Transferor and to payment under
Section 4.07 hereof  except in  accordance  with the  provisions of Section 8.05
hereof,  or  otherwise to assert any Lien or take any other action in respect of
the  Collateral  or the Trust  Estate of a Series  until  the  applicable  Final
Termination Date.

     Section 4.7. Compensation and Reimbursement.  The Transferor agrees for the
benefit of the Secured Parties and as part of the Secured Obligations (a) to pay
to the Collateral Agent, on each Distribution Date, the Collateral Agent Fee for
all services rendered by it hereunder (which  compensation  shall not be limited
by any provision of law in regard to the compensation of a collateral  trustee);
and (b) to reimburse the  Collateral  Agent upon its request for all  reasonable
expenses, disbursements and advances incurred or made by the Collateral

                                      -36-

<PAGE>



Agent in  accordance  with any  provision  of, or  carrying  out its  duties and
obligations  under,  this Agreement  (including the reasonable  compensation and
fees and the expenses and disbursements of its agents, any independent certified
public accountants and independent counsel), except any expense, disbursement or
advances as may be attributable to negligence,  bad faith or willful  misconduct
on the part of the Collateral Agent.

     Section 4.8.  Representations  and Warranties of the Collateral  Agent. The
Collateral  Agent  represents and warrants to the Transferor and to each Secured
Party as follows:

          (a) Due  Organization.  The  Collateral  Agent is an Illinois  banking
     corporation,  duly organized,  validly  existing and in good standing under
     the laws of the State of  Illinois,  and is duly  authorized  and  licensed
     under applicable law to conduct its business as presently conducted.

          (b) Corporate  Power.  The Collateral  Agent has all requisite  right,
     power and  authority to execute and deliver this  Agreement  and to perform
     all of its duties as Collateral Agent hereunder.

          (c) Due  Authorization.  The execution and delivery by the  Collateral
     Agent of this Agreement and the other Transaction  Documents to which it is
     a  party,  and  the  performance  by the  Collateral  Agent  of its  duties
     hereunder  and  thereunder,  have been  duly  authorized  by all  necessary
     corporate  proceedings and no further  approvals or filings,  including any
     governmental  approvals,  are required for the valid execution and delivery
     by the Collateral  Agent,  or the  performance by the Collateral  Agent, of
     this Agreement and such other Transaction Documents.

          (d)  Valid  and  Binding  Agreement.  The  Collateral  Agent  has duly
     executed and delivered this Agreement and each other  Transaction  Document
     to which it is a party,  and each of this  Agreement  and each  such  other
     Transaction Document constitutes the legal, valid and binding obligation of
     the  Collateral  Agent,   enforceable   against  the  Collateral  Agent  in
     accordance with its terms, except as (i) such enforceability may be limited
     by bankruptcy,  insolvency,  reorganization and similar laws relating to or
     affecting the  enforcement of the rights of creditors of federally  insured
     depository  institutions,  rights  generally and (ii) the  availability  of
     equitable  remedies  may be  limited  by  equitable  principles  of general
     applicability.

     Section 4.9.  Waiver of Setoffs.  The  Collateral  Agent  hereby  expressly
waives any and all rights of setoff that the

                                      -37-

<PAGE>



Collateral  Agent may  otherwise  at any time  have  under  applicable  law with
respect to any Spread  Account  and agrees that  amounts in the Spread  Accounts
shall at all times be held and applied solely in accordance  with the provisions
hereof.

     Section 4.10.  Control by the Controlling Party. The Collateral Agent shall
comply with notices and instructions given by the Transferor only if accompanied
by the  written  consent of the  Controlling  Party,  except that if any Default
shall have occurred and be continuing,  the Collateral  Agent shall act upon and
comply with notices and instructions given by the Controlling Party alone in the
place and stead of the Transferor.


                                    ARTICLE V

                           COVENANTS OF THE TRANSFEROR

     Section 5.1. Preservation of Collateral.  Subject to the rights, powers and
authorities  granted to the Collateral  Agent and the Controlling  Party in this
Agreement,  the  Transferor,  on  behalf  of  itself  and  as the  agent  of the
Reversionary  Holders,  shall take such action as is  necessary  and proper with
respect to the Collateral in order to preserve and maintain such Collateral. The
Transferor will do, execute, acknowledge and deliver, or cause to be done by the
Reversionary  Holders,  or others,  executed,  acknowledged and delivered,  such
instruments of transfer or take such other steps or actions as may be necessary,
or required by the Controlling  Party, to perfect the Security Interests granted
hereunder in the Collateral,  to ensure that such Security  Interests rank prior
to all other Liens and to preserve the priority of such  Security  Interests and
the validity and  enforceability  thereof.  Upon any delivery or substitution of
Collateral,  the  Transferor,  on  behalf  of  itself  and as the  agent  of the
Reversionary  Holders,  shall be obligated to execute such documents and perform
such  actions (or cause the  Reversionary  Holders to so execute and perform) as
are necessary to create in the  Collateral  Agent for the benefit of the Secured
Parties a valid first priority Lien on, and valid and perfected,  first priority
security interest in, the Collateral so delivered and to deliver such Collateral
to the  Collateral  Agent,  free and  clear of any  other  Lien,  together  with
satisfactory assurances thereof, and to pay any reasonable costs incurred by any
of the  Secured  Parties  or the  Collateral  Agent  (including  its  agents) or
otherwise in connection with such delivery.

     Section 5.2. Opinions as to Collateral. Not more than 90 days nor less than
30 days prior to (i) each anniversary of the date hereof during the term of this
Agreement and (ii) each date on which the Transferor proposes to take any action
contemplated by Section 5.06 hereof,  the Transferor  shall, at its own cost and
expense, furnish to each Secured Party and the Collateral Agent

                                      -38-

<PAGE>



an Opinion of Counsel with respect to each Series  either (a) stating  that,  in
the  opinion of such  counsel,  such  action has been taken with  respect to the
execution and filing of any financing statements and continuation statements and
other  actions as are  necessary  to perfect,  maintain and protect the lien and
security interest of the Collateral Agent (and the priority thereof),  on behalf
of the Secured  Parties,  with respect to such Collateral  against all creditors
of, and  purchasers  from,  the  Transferor  and the  Reversionary  Holders  and
reciting the details of such action, or (b) stating that, in the opinion of such
counsel,  no such  action is  necessary  to  maintain  such  perfected  lien and
security interest. Such Opinion of Counsel shall further describe each execution
and filing of any financing  statements  and  continuation  statements  and such
other actions as will,  in the opinion of such counsel,  be required to perfect,
maintain and protect the lien and security  interest of the Collateral Agent, on
behalf of the  Secured  Parties,  with  respect to such  Collateral  against all
creditors of, and purchasers from, the Transferor and the  Reversionary  Holders
for a period,  specified in such  Opinion,  continuing  until a date not earlier
than eighteen months from the date of such Opinion.

     Section 5.3. Notices.  In the event that the Transferor  acquires knowledge
of the occurrence and continuance of any Insurance Agreement Event of Default or
Servicer  Termination Event or of any event of default or like event,  howsoever
described or called,  under any of the  Transaction  Documents,  the  Transferor
shall  immediately  give notice thereof to the Collateral Agent and each Secured
Party.

     Section 5.4. Waiver of Stay or Extension Laws;  Marshalling of Assets.  The
Transferor,  on  behalf of itself  and as agent  for the  Reversionary  Holders,
covenants,  to the fullest extent  permitted by applicable  law, that neither it
nor any  Reversionary  Holder will at any time  insist  upon,  plead,  or in any
manner  whatsoever claim or take the benefit or advantage of, any  appraisement,
valuation,  stay,  extension or redemption law wherever  enacted,  now or at any
time hereafter in force,  in order to prevent or hinder the  enforcement of this
Agreement or any absolute sale of the  Collateral  or any part  thereof,  or the
possession  thereof  by any  purchaser  at any sale  under  Article  VII of this
Agreement;  and the  Transferor,  on  behalf  of  itself  and as  agent  for the
Reversionary  Holders,  to the fullest extent  permitted by applicable  law, for
itself, each Reversionary Holder, and all who may claim under it or them, hereby
waives the  benefit  of all such laws,  and  covenants  that  neither it nor any
Reversionary  Holder will  hinder,  delay or impede the  execution  of any power
herein granted to the Collateral Agent, but will suffer and permit the execution
of every such power as though no such law had been enacted. The Transferor,  for
itself,  each  Reversionary  Holders,  and all who may  claim  under it or them,
waives, to the fullest extent permitted by applicable law, all

                                      -39-

<PAGE>



right  to  have  the  Collateral   marshalled  upon  any  foreclosure  or  other
disposition thereof.

     Section 5.5. Noninterference,  etc. The Transferor, on behalf of itself and
as agent for the  Reversionary  Holders,  agrees that neither the Transferor nor
any  Reversionary  Holder  shall (i) waive or alter any of its rights  under the
Collateral (or any agreement or instrument  relating  thereto) without the prior
written  consent  of the  Controlling  Party;  or  (ii)  fail  to pay  any  tax,
assessment,  charge or fee levied or  assessed  against  the  Collateral,  or to
defend any action,  if such  failure to pay or defend may  adversely  affect the
priority or  enforceability  of the  Transferor's or any  Reversionary  Holder's
right, title or interest in and to the Collateral or the Collateral Agent's lien
on, and  security  interest  in, the  Collateral  for the benefit of the Secured
Parties; or (iii) take any action, or fail to take any action, if such action or
failure to take action would  interfere with the enforcement of any rights under
the Transaction Documents.

     Section 5.6. Transferor Changes.

     (a) Change in Name,  Structure,  etc. The  Transferor  shall not change its
name,  identity or corporate  structure  unless it shall have given each Secured
Party and the Collateral  Agent at least 60 days' prior written notice  thereof,
shall have  effected any  necessary or  appropriate  assignments  or  amendments
thereto and filings of financing  statements  or amendments  thereto,  and shall
have  delivered to the  Collateral  Agent and each  Secured  Party an Opinion of
Counsel of the type described in Section 5.02 hereof.

     (b) Relocation of the  Transferor.  Neither NAFI nor the  Transferor  shall
change its principal executive office unless it gives each Secured Party and the
Collateral Agent at least 90 days' prior written notice of any relocation of its
principal executive office. If the Transferor  relocates its principal executive
office or principal  place of business from Florida,  the Transferor  shall give
prior notice thereof to the Controlling Party and the Collateral Agent and shall
effect such  appropriate  recordations  and filings as are  necessary  and shall
provide an Opinion of Counsel to the Controlling Party and the Collateral Agent,
to the  effect  that,  upon  the  recording  of  any  necessary  assignments  or
amendments  to  previously-recorded  assignments  and  filing  of any  necessary
amendments to the previously filed financing or continuation  statements or upon
the filing of one or more specified new financing statements,  and the taking of
such other actions as may be specified in such opinion,  the security  interests
in the Collateral shall remain,  after such relocation,  valid and perfected and
first in priority.



                                      -40-

<PAGE>



                                   ARTICLE VI

                   CONTROLLING PARTY; INTERCREDITOR PROVISIONS

     Section 6.1.  Appointment of Controlling  Party. From and after the Closing
Date of a Series  until the Insurer  Termination  Date  related to such  Series,
Financial  Security shall be the  Controlling  Party with respect to such Series
and shall be entitled to exercise  all the rights  given the  Controlling  Party
hereunder  with respect to such Series.  From and after the Insurer  Termination
Date related to such Series until the Trustee  Termination  Date related to such
Series,  the Trustee shall be the Controlling Party with respect to such Series.
Notwithstanding  the foregoing,  in the event that a Financial  Security Default
shall have  occurred and be  continuing,  the Trustee  shall be the  Controlling
Party with respect to such Series until the applicable Trustee Termination Date.
If prior to an Insurer  Termination  Date,  the  Trustee  shall have  become the
Controlling  Party with respect to a Series as a result of the  occurrence  of a
Financial  Security Default and either such Financial  Security Default is cured
or for any other  reason  ceases to exist or the Trustee  Termination  Date with
respect to a Series  occurs,  then upon such cure or other  cessation or on such
Trustee  Termination  Date, as the case may be, Financial  Security shall,  upon
notice  thereof  being  duly  given  to  the  Collateral  Agent,  again  be  the
Controlling Party with respect to such Series.

     Section 6.2. Controlling Party's Authority.

     (a) The Transferor hereby  irrevocably  appoints the Controlling Party, and
any  successor  to the  Controlling  Party  appointed  pursuant to Section  6.01
hereof,  its true and lawful attorney,  with full power of substitution,  in the
name of the Transferor,  the Secured Parties or otherwise, at the expense of the
Transferor,  to the extent  permitted by law to  exercise,  at any time and from
time to time while any Insurance  Agreement Event of Default has occurred and is
continuing, any or all of the following powers with respect to all or any of the
Collateral  related to the relevant  Series:  (i) to demand,  sue for,  collect,
receive and give acquittance for any and all monies due or to become due upon or
by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,  (iii) to direct the Collateral Agent
to sell,  transfer,  assign  or  otherwise  deal  with the same or the  proceeds
thereof as fully and  effectively as if the  Collateral  Agent were the absolute
owner thereof,  and (iv) to extend the time of payment of any or all thereof and
to make any allowance or other adjustments with respect thereto.

     (b) With  respect to each Series and the related  Collateral,  each Secured
Party  hereby  irrevocably  and  unconditionally  constitutes  and  appoints the
Controlling Party with respect to

                                      -41-

<PAGE>



such Series,  and any successor to such Controlling Party appointed  pursuant to
Section 6.01 hereof from time to time,  as the true and lawful  attorney-in-fact
of such Secured Party for so long as such Secured  Party is the  Non-Controlling
Party, with full power of substitution,  to execute, acknowledge and deliver any
notice,  document,  certificate,  paper, pleading or instrument and to do in the
name of the  Controlling  Party as well as in the name,  place and stead of such
Secured  Party such acts,  things and deeds for and on behalf of and in the name
of such  Secured  Party under this  Agreement  with respect to such Series which
such  Secured  Party could or might do or which may be  necessary,  desirable or
convenient in such  Controlling  Party's sole  discretion to effect the purposes
contemplated  hereunder and, without limitation,  exercise full right, power and
authority to take,  or defer from  taking,  any and all acts with respect to the
administration of the Collateral  related to such Series, and the enforcement of
the rights of the Secured  Parties  hereunder  with respect to such  Series,  on
behalf of and for the benefit of such Controlling Party and such Non-Controlling
Party, as their interests may appear.

     Section 6.3. Rights of Secured Parties. With respect to each Series and the
related Collateral,  the Non-Controlling Party at any time expressly agrees that
it shall not assert any rights that it may  otherwise  have,  as a Secured Party
with  respect  to the  Collateral,  to  direct  the  maintenance,  sale or other
disposition  of the  Collateral  or any  portion  thereof,  notwithstanding  the
occurrence  and  continuance  of any  Insurance  Agreement  Event of  Default or
Servicer Termination Event with respect to such Series or any non-performance by
the  Transferor  or any  Reversionary  Holders  of any  obligation  owed to such
Secured Party hereunder or under any other Transaction Document,  and each party
hereto agrees that the  Controlling  Party shall be the only Person  entitled to
assert and exercise such rights.

     Section 6.4. Degree of Care.

     (a)  Controlling  Party.  Notwithstanding  any  term or  provision  of this
Agreement,  the Controlling  Party shall incur no liability to the Transferor or
any Reversionary Holder for any action taken or omitted by the Controlling Party
in connection with the Collateral, except for any gross negligence, bad faith or
willful  misconduct on the part of the  Controlling  Party and,  further,  shall
incur no liability to the Non-Controlling Party except for a breach of the terms
of this Agreement or for gross  negligence,  bad faith or willful  misconduct in
carrying out its duties, if any, to the  Non-Controlling  Party. The Controlling
Party  shall be  protected  and shall  incur no  liability  to any such party in
relying upon the accuracy, acting in reliance upon the contents and assuming the
genuineness of any notice, demand, certificate,  signature,  instrument or other
document believed by the Controlling Party to be genuine and to have been duly

                                      -42-

<PAGE>



executed by the  appropriate  signatory,  and (absent  manifest  error or actual
knowledge to the contrary) the  Controlling  Party shall not be required to make
any independent investigation with respect thereto. The Controlling Party shall,
at all times, be free independently to establish to its reasonable  satisfaction
the existence or nonexistence,  as the case may be, of any fact the existence or
nonexistence of which shall be a condition to the exercise or enforcement of any
right or remedy under this Agreement or any of the Transaction Documents.

     (b) The  Non-Controlling  Party.  The  Non-Controlling  Party  shall not be
liable to the Transferor or any Reversionary Holder for any action or failure to
act by the Controlling  Party or the Collateral Agent in exercising,  or failing
to exercise, any rights or remedies hereunder.


                                   ARTICLE VII

                              REMEDIES UPON DEFAULT

     Section 7.1. Remedies upon a Default. If a Default with respect to a Series
has occurred  and is  continuing,  the  Collateral  Agent shall,  at the written
direction of the Controlling  Party, take whatever action at law or in equity as
may appear  necessary or desirable in the judgment of the  Controlling  Party to
collect  and satisfy all  Secured  Obligations,  including,  but not limited to,
foreclosure  upon the  Collateral  and all other  rights  available  to  secured
parties under  applicable  law or to enforce  performance  and observance of any
obligation, agreement or covenant under any of the Transaction Documents related
to such Series.

     Section 7.2. Waiver of Default.  The Controlling  Party shall have the sole
right,  to be exercised in its  complete  discretion,  to waive any Default by a
writing setting forth the terms,  conditions and extent of such waiver signed by
the Controlling  Party and delivered to the Collateral  Agent, the other Secured
Party  and  the   Transferor.   Any  such  waiver  shall  be  binding  upon  the
Non-Controlling  Party and the Collateral  Agent.  Unless such writing expressly
provides  to the  contrary,  any  waiver so  granted  shall  extend  only to the
specific event or occurrence which gave rise to the Default so waived and not to
any other similar event or occurrence  occurring  subsequent to the date of such
waiver.

     Section 7.3.  Restoration of Rights and Remedies.  If the Collateral  Agent
has  instituted  any  proceeding  to  enforce  any  right or remedy  under  this
Agreement,  and such  proceeding  has been  discontinued  or  abandoned  for any
reason,  or has been determined  adversely to such Collateral Agent, then and in
every such case the Transferor, the Collateral Agent and each of the

                                      -43-

<PAGE>



Secured Parties and each Reversionary Holder shall, subject to any determination
in such  proceeding,  be restored  severally  and  respectively  to their former
positions  hereunder,  and  thereafter  all rights and  remedies  of the Secured
Parties shall continue as though no such proceeding had been instituted.

     Section 7.4. No Remedy Exclusive.  No right or remedy herein conferred upon
or reserved to the  Collateral  Agent,  the  Controlling  Party or either of the
Secured  Parties is intended to be exclusive  of any other right or remedy,  and
every right or remedy shall,  to the extent  permitted by law, be cumulative and
in addition to every other right and remedy given  hereunder or now or hereafter
existing at law, in equity or otherwise (but, in each case,  shall be subject to
the provisions of this  Agreement  limiting such  remedies),  and each and every
right, power and remedy whether  specifically herein given or otherwise existing
may be  exercised  from  time to time and as often  and in such  order as may be
deemed expedient by the Controlling  Party, and the exercise of or the beginning
of the  exercise of any right or power or remedy  shall not be construed to be a
waiver of the right to exercise at the same time or thereafter  any other right,
power or remedy.


                                  ARTICLE VIII

                                  MISCELLANEOUS

     Section 8.1. Further  Assurances.  Each party hereto shall take such action
and  deliver  such  instruments  to any other party  hereto,  in addition to the
actions and instruments  specifically  provided for herein, as may be reasonably
requested or required to effectuate  the purpose or provisions of this Agreement
or to confirm or perfect any transaction described or contemplated herein.

     Section  8.2.  Waiver.  Any  waiver by any party of any  provision  of this
Agreement or any right,  remedy or option hereunder shall only prevent and estop
such party from thereafter enforcing such provision,  right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific  purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances,  or in a course of dealing,
upon the strict  performance of any of the terms or provisions of this Agreement
by any party  hereto or the  partial  exercise  of any  right,  remedy or option
hereunder shall not be construed as a waiver or  relinquishment of any such term
or provision, but the same shall continue in full force and effect.

     Section 8.3.  Amendments,  Waivers. No amendment,  modification,  waiver or
supplement to this Agreement or any

                                      -44-

<PAGE>



provision  of this  Agreement  shall in any event be  effective  unless the same
shall have been made or  consented  to in writing by each of the parties  hereto
and each Rating Agency shall have  confirmed in writing that such amendment will
not  cause a  reduction  or  withdrawal  of a rating  on any  Series;  provided,
however,  that, for so long as Financial Security shall be the Controlling Party
with  respect to a Series,  amendments,  modifications,  waivers or  supplements
hereto relating to such Series,  the related Collateral or Spread Account or any
requirement hereunder to deposit or retain any amounts in such Spread Account or
to  distribute  any amounts  therein as provided in Section 3.03 hereof shall be
effective  if made  or  consented  to in  writing  by  Financial  Security,  the
Transferor and the Collateral  Agent (the consent of which shall not be withheld
or delayed  with respect to any  amendment  that does not  adversely  affect the
Collateral  Agent)  but shall in no  circumstances  require  the  consent of the
Trustee or the Securityholders related to such Series or any other Series or any
Reversionary Holder.

     Section  8.4.  Severability.  In the  event  that  any  provision  of  this
Agreement or the application  thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable  statute,  regulation or rule of law, then
such provision  shall be deemed  inoperative to the extent that it is invalid or
unenforceable,  and the remainder of this Agreement,  and the application of any
such  invalid  or  unenforceable  provision  to the  parties,  jurisdictions  or
circumstances   other  than  to  whom  or  to  which  it  is  held   invalid  or
unenforceable,  shall not be  affected  thereby  nor shall the same  affect  the
validity or enforceability of any other provision of this Agreement. The parties
hereto  further  agree that the holding by any court of  competent  jurisdiction
that any remedy pursued by the Collateral  Agent, or any of the Secured Parties,
hereunder  is  unavailable  or  unenforceable  shall  not  affect in any way the
ability  of the  Collateral  Agent or any of the  Secured  Parties to pursue any
other remedy  available to it or them  (subject,  however,  to the provisions of
this Agreement limiting such remedies).

     Section 8.5. Nonpetition Covenant. Notwithstanding any prior termination of
this  Agreement,  each of the parties  hereto agrees that it shall not, prior to
one year and one day after the Final Scheduled Distribution Date with respect to
each Series, acquiesce,  petition or otherwise invoke or cause the Transferor or
the Trust to invoke the process of the United  States of  America,  any State or
other  political   subdivision  thereof  or  any  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to  government  for the purpose of commencing or sustaining a case by or against
the Transferor or the Trust under a Federal or state  bankruptcy,  insolvency or
similar law or appointing a receiver, liquidator,

                                      -45-

<PAGE>



assignee,  trustee,  custodian,  sequestrator  or other similar  official of the
Transferor  or the Trust or all or any part of their  respective  properties  or
assets  or  ordering  the  winding  up or  liquidation  of  the  affairs  of the
Transferor  or the Trust.  The parties  agree that damages will be an inadequate
remedy for breach of this  covenant and that this  covenant may be  specifically
enforced.

     Section 8.6.  Notices.  All notices,  demands,  certificates,  requests and
communications  hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt,  or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally  delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible  telecopier  transmission  with a confirmation of receipt,  in all cases
addressed to the recipient as follows:

      (i)         If to the Transferor:

                  National Financial Auto Funding Trust
                  c/o Chase Manhattan Bank Delaware
                  1201 Market Street
                  Wilmington, Delaware  19801
                  Attention:  Corporate Trust Administration

                  Telecopier No.:  (302) 984-4903
                  Confirmation No.:  (302) 428-3375

                  with a copy to:

                  Chase Manhattan Bank Delaware
                  c/o The Chase Manhattan Bank, N.A.
                  4 Chase Metrotech Center
                  Brooklyn, New York  11242
                  Attention:  Corporate Trust Administration

                  Telecopier No.:  (718) 242-3529
                  Confirmation No.:  (718) 242-7283

                                      -46-

<PAGE>





      (ii)        If to Financial Security:

                  Financial Security Assurance Inc.
                  350 Park Avenue
                  New York, New York 10022
                  Attention:  Surveillance Department
                  Re:  National Auto Finance 1998-1 Trust
                       5.88% Asset Backed  Notes  (and/or such other Series with
                        respect to which such notice pertains)

                  Telecopier No.: (212) 339-3518
                                   (212) 339-3529
                  Confirmation:  (212) 826-0100 (in each case in which notice or
                  other  communication to Financial Security refers to a Default
                  or a claim on the  Policy or in which  failure  on the part of
                  Financial  Security to respond  shall be deemed to  constitute
                  consent or  acceptance,  then with a copy to the  attention of
                  the Senior Vice President Surveillance)

      (iii)       If to the Trustee:

                  Harris Trust and Savings Bank
                  311 West Monroe Street
                  Chicago, Illinois  60606

                  Attention:  Indenture Trust Division

                  Telecopier No.:    (312) 461-3525
                  Confirmation No.:  (312) 461-4662


      (iv)        If to the Collateral Agent:

                  Harris Trust and Savings Bank
                  311 West Monroe Street
                  Chicago, Illinois  60606

                  Attention:  Indenture Trust Division

                  Telecopier No.:    (312) 461-3525
                  Confirmation No.:  (312) 461-4662



                                      -47-

<PAGE>



      (v)         If to Moody's:

                  Moody's Investors Service, Inc.
                  99 Church Street
                  New York, New York 10007

                  Telecopier No.:  (212) 553-0344


      (vi)        If to Standard & Poor's:

                  Standard & Poor's Ratings Group
                  26 Broadway
                  New York, New York 10004

                  Telecopier No.:  (212) 208-1582

A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication)  Financial Security,  the Transferor,  the Trustee and the
Collateral Agent. Each party hereto may, by notice given in accordance  herewith
to each of the other parties hereto,  designate any further or different address
to which subsequent notices shall be sent.

     Section 8.7. Term of this  Agreement.  This Agreement  shall take effect on
the  Closing  Date of Series 1998 and shall  continue  in effect  until the last
Final  Termination  Date to occur  with  respect to each  Series.  On such Final
Termination Date, this Agreement shall terminate, all obligations of the parties
hereunder shall cease and terminate and the  Collateral,  if any, held hereunder
and not to be used or applied in discharge of any  obligations of the Transferor
or NAFI in respect of the Secured Obligations or otherwise under this Agreement,
shall be released to and in favor of the related Reversionary Holder or Holders,
or, if not otherwise identified, to the Transferor, provided that the provisions
of Sections  4.06,  4.07 and 8.05 hereof shall survive any  termination  of this
Agreement and the release of any Collateral upon such termination.

     Section 8.8. Assignments, Third-Party Rights; Reinsurance.

     (a) This Agreement  shall be a continuing  obligation of the parties hereto
and shall (i) be binding upon the parties and their  respective  successors  and
assigns,  and (ii) inure to the benefit of and be  enforceable  by each  Secured
Party and the Collateral Agent, and by their respective successors,  transferees
and assigns. The Transferor shall not assign this Agreement,  or delegate any of
its duties  hereunder,  without  the prior  written  consent of the  Controlling
Party.

     (b) Financial  Security  shall have the right (unless a Financial  Security
Default shall have occurred and be continuing)

                                      -48-

<PAGE>



to give  participations  in its rights  under this  Agreement  and to enter into
contracts of reinsurance  with respect to any Policy issued in connection with a
Series and each such  participant or reinsurer  shall be entitled to the benefit
of any  representation,  warranty,  covenant and obligation of each party (other
than  Financial  Security)  hereunder as if such  participant or reinsurer was a
party hereto and,  subject only to such agreement  regarding such reinsurance or
participation,  shall have the right to  enforce  the  obligations  of each such
other party directly hereunder;  provided,  however, that no such reinsurance or
participation  agreement or arrangement shall relieve Financial  Security of its
obligations hereunder, under the Transaction Documents to which it is a party or
under any such Policy,  or shall  change the status of  Financial  Security as a
"Controlling  Party".  In addition,  nothing  contained  herein  shall  restrict
Financial  Security  from  assigning  to any Person  pursuant  to any  liquidity
facility  or  credit  facility  any  rights of  Financial  Security  under  this
Agreement  or with respect to any real or personal  property or other  interests
pledged to Financial  Security,  or in which  Financial  Security has a security
interest, in connection with the transactions  contemplated hereby. The terms of
any such assignment or participation shall contain an express  acknowledgment by
such Person of the condition of this Section and the  limitations  of the rights
of Financial Security hereunder.

     Section  8.9.  Consent  of  Controlling   Party.  In  the  event  that  the
Controlling  Party's  consent is  required  under the terms  hereof or under the
terms of any Transaction  Document,  it is understood and agreed that, except as
otherwise  provided  expressly  herein,  the  determination  whether to grant or
withhold such consent shall be made solely by the Controlling  Party in its sole
discretion.

     Section 8.10. Trial by Jury Waived.  Each of the parties hereto waives,  to
the fullest extent permitted by law, any right it may have to a trial by jury in
respect of any  litigation  arising  directly or indirectly  out of, under or in
connection with this Agreement, any of the other Transaction Documents or any of
the  transactions  contemplated  hereunder  or  thereunder.  Each of the parties
hereto (a)  certifies  that no  representative,  agent or  attorney of any other
party has represented,  expressly or otherwise, that such other party would not,
in the  event of  litigation,  seek to  enforce  the  foregoing  waiver  and (b)
acknowledges that it has been induced to enter into this Agreement and the other
Transaction  Documents  to which it is a party,  by  among  other  things,  this
waiver.

     Section  8.11.  Governing  Law.  This  Agreement  shall be  governed by and
construed,  and the  obligations,  rights and remedies of the parties  hereunder
shall be determined, in accordance with the laws of the State of New York.

                                      -49-

<PAGE>




     Section  8.12.  Consents  to  Jurisdiction.  Each  of  the  parties  hereto
irrevocably  submits to the jurisdiction of the United States District Court for
the Southern District of New York, any court in the state of New York located in
the city and county of New York,  and any appellate  court from any thereof,  in
any  action,  suit  or  proceeding  brought  against  it  and  related  to or in
connection  with  this  Agreement,   the  other  Transaction  Documents  or  the
transactions   contemplated  hereunder  or  thereunder  or  for  recognition  or
enforcement  of any  judgment  and each of the parties  hereto  irrevocably  and
unconditionally  agrees that all claims in respect of any such suit or action or
proceeding  may be heard or  determined  in such New York State court or, to the
extent  permitted  by law, in such  federal  court.  Each of the parties  hereto
agrees that a final  judgment in any such action,  suit or  proceeding  shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. To the extent  permitted by applicable law,
each of the parties hereby waives and agrees not to assert by way of motion,  as
a defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally  subject to the  jurisdiction  of such courts,  that the suit,
action or proceeding is brought in an inconvenient  forum, that the venue of the
suit,  action or  proceeding  is improper or that this  Agreement  or any of the
other  Transaction  Documents or the subject matter hereof or thereof may not be
litigated in or by such courts. The Transferor hereby  irrevocably  appoints and
designates  Harris  Trust and Savings  Bank as its true and lawful  attorney and
duly authorized agent for acceptance of service of legal process. The Transferor
agrees that service of such process upon such Person shall  constitute  personal
service  of such  process  upon it.  Subject  to Section  8.05  hereof,  nothing
contained in this Agreement shall limit or affect the rights of any party hereto
to  serve  process  in any  other  manner  permitted  by law or to  start  legal
proceedings  relating to any of the  Transaction  Documents  against NAFI or the
Transferor or their respective property in the courts of any jurisdiction.

     Section  8.13.  Limitation  of Liability.  It is expressly  understood  and
agreed by the parties hereto that (a) Harris Trust and Savings Bank is executing
this  Agreement not in its  individual  capacity but solely in its capacities as
Collateral  Agent and  trustee  of the  Trusts  pursuant  to the  Securitization
Agreements and (b) in no case whatsoever  shall Harris Trust and Savings Bank be
personally or  corporately  liable on, or for any loss in respect of, any of the
statements, representations, warranties, covenants, agreements or obligations of
the Trusts hereunder,  all such liability, if any, being expressly waived by the
parties hereto.

     Section 8.14.  Determination  of Adverse Effect.  Any  determination  of an
adverse effect on the interest of the Secured

                                      -50-

<PAGE>



Parties  or the  Securityholders  shall  be made  without  consideration  of the
availability of funds under the Policies.

     Section 8.15.  Counterparts.  This Agreement may be executed in two or more
counterparts  by  the  parties  hereto,  and  each  such  counterpart  shall  be
considered an original and all such  counterparts  shall  constitute one and the
same instrument.

     Section 8.16.  Headings.  The headings of sections and  paragraphs  and the
Table of Contents contained in this Agreement are provided for convenience only.
They form no part of this  Agreement  and shall not affect its  construction  or
interpretation.



                     [Remainder of Page Intentionally Blank]

                                    -51-

<PAGE>


     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date set forth on the first page hereof.


                                   NATIONAL FINANCIAL AUTO FUNDING TRUST


                                   By
                                      Name:
                                      Title:                     of
                                      Chase Manhattan Bank Delaware,
                                      not in its individual capacity,
                                      but solely in its capacity as
                                      trustee for National Financial
                                      Auto Funding Trust


                                   FINANCIAL SECURITY ASSURANCE INC.


                                   By
                                      Name:
                                      Title:


                                   HARRIS TRUST AND SAVINGS BANK,
                                      as Trustee


                                   By
                                      Name:
                                      Title:


                                   HARRIS TRUST AND SAVINGS BANK,
                                      as Collateral Agent


                                   By
                                      Name:
                                      Title:

<PAGE>