<PAGE>   1
                                                                   EXHIBIT 10.81

                        BULK SERVICING PURCHASE AGREEMENT




                                 by and between


                     THE CITY NATIONAL BANK OF WEST VIRGINIA
                                   (Purchaser)


                                       and


                            MEGO MORTGAGE CORPORATION
                                    (Seller)













                            Dated as of June 26, 1998






<PAGE>   2



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               -----
<S>                                                                                                            <C>

ARTICLE I DEFINITIONS.............................................................................................1

         1.1. "Administrative Fee Mortgage".......................................................................1
         1.2. "Advances"..........................................................................................1
         1.3. "Agency"............................................................................................2
         1.4. "Ancillary Income"..................................................................................2
         1.5. "Business Day"......................................................................................2
         1.6. "Closing Date"......................................................................................2
         1.7. "Collateral"........................................................................................2
         1.8. "Current In Bankruptcy Mortgage"....................................................................2
         1.9. "Deposit"...........................................................................................2
         1.10. "FHA"..............................................................................................2
         1.11 "FNMA"..............................................................................................2
         1.12. "Final Mortgage Documentation".....................................................................2
         1.13. "HUD"..............................................................................................3
         1.14. "In Bankruptcy"....................................................................................3
         1.15. "In Foreclosure"...................................................................................3
         1.16. "In Litigation"....................................................................................3
         1.17. "Interim Period"...................................................................................3
         1.18. "Investor".........................................................................................3
         1.19. "Legal Title"......................................................................................3
         1.20 "Master Servicer"...................................................................................3
         1.21. "Mortgage".........................................................................................4
         1.22. "Mortgage File"....................................................................................4
         1.23. "Prior Servicer"...................................................................................4
         1.24. "Purchase Price"...................................................................................4
         1.25. "Purchaser"........................................................................................4
         1.26. "Related Accounts".................................................................................4
         1.27. "Sale Agreement"...................................................................................4
         1.28. "Seller"...........................................................................................4
         1.29. "Servicing"........................................................................................4
         1.30. "Servicing Agreement"..............................................................................5
         1.31. "Title I"..........................................................................................5
         1.32. "Transfer Date"....................................................................................5

ARTICLE II SALE AND TRANSFER OF SERVICING.........................................................................5


         2.1. Items to be Sold....................................................................................5
         2.2. Closing Date........................................................................................5
</TABLE>

                                       i
<PAGE>   3


<TABLE>
<S>      <C>                                                                                                     <C>
         2.3. Transfer Date.......................................................................................6
         2.4. Actions Required Prior to the Transfer Date.........................................................6
         2.5. Examination of Mortgage Documents...................................................................7
         2.6. Undertaking by Purchaser............................................................................7
         2.7. Preparation and Modification of Exhibits............................................................8

ARTICLE III CONSIDERATION.........................................................................................9

         3.1. Purchase Price......................................................................................9
         3.2. Payment............................................................................................10
         3.3. Advances...........................................................................................11
         3.4. Other Costs........................................................................................11

ARTICLE IV GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER......................................................11

         4.1. Due Incorporation and Good Standing................................................................12
         4.2. Authority and Capacity.............................................................................12
         4.3. Effective Agreement................................................................................12
         4.4. Statements Made; Notification of Breach............................................................12

ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AS TO
         SERVICING & MORTGAGES...................................................................................13

         5.1. Compliance with Law and Other Requirements.........................................................13
         5.2. Filing of Reports..................................................................................13
         5.3. Related Accounts...................................................................................14
         5.4. Escrow Analysis....................................................................................14
         5.5. Compliance with Insurance Contracts................................................................14
         5.6. Title Insurance....................................................................................14
         5.7. Errors and Omissions Insurance.....................................................................15
         5.8. Sole Servicer......................................................................................15
         5.9. Authorizations.....................................................................................15
         5.10. Capital...........................................................................................15
         5.11. Title to the Servicing Rights and Escrow Accounts.................................................15
         5.12. Mortgage Documents................................................................................16
         5.13. Validity of Mortgages.............................................................................16
         5.14. Physical Damage; Condemnation.....................................................................16
         5.15. No Uninsured Mortgages............................................................................16
         5.16. Application of Funds..............................................................................17
         5.17. Custodial Accounts................................................................................17
         5.18. Payoff Statements.................................................................................17
         5.19. Mortgage Files....................................................................................17
         5.20. Tax Identification Numbers........................................................................17
         5.21. Litigation........................................................................................18
         5.22. Mortgage Disbursement.............................................................................18
</TABLE>

                                       ii
<PAGE>   4

<TABLE>
<S>      <C>                                                                                                    <C>
         5.23. No Forgiven Payment...............................................................................18
         5.24. Unpaid Principal Balances.........................................................................18
         5.25. Payment of Taxes, Insurance Premiums, etc.........................................................18
         5.26. Effective Insurance...............................................................................19
         5.27. Flood Insurance; Certifications...................................................................19
         5.28. Other Insurance...................................................................................19
         5.29. Real Property Tax Identifications and Descriptions................................................19
         5.30. Compliance with Contractual Obligations...........................................................20
         5.31. No Accrued Liabilities............................................................................20
         5.32. Foreclosure.......................................................................................20
         5.33. Servicing Agreements..............................................................................20
         5.34. Investor and Master Servicer Approvals............................................................20
         5.35. Non-Recourse Loans................................................................................20
         5.36. Agency and Investor Requirements..................................................................21

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................................21

         6.1. Due Incorporation and Good Standing................................................................21
         6.2. Authority and Capacity.............................................................................21
         6.3. Effective Agreement................................................................................22
         6.4. Good Standing......................................................................................22

ARTICLE VII COVENANTS............................................................................................22

         7.1. Notice to Mortgagors...............................................................................22
         7.2. Notice to Taxing Authorities and Insurance Companies...............................................23
         7.3. Delivery of Servicing Records......................................................................23
         7.4. Delivery of Mortgage Documents.....................................................................23
         7.5. Escrow/Impound Balances; Unearned Fees.............................................................23
         7.6. Remittances and Investor Reports After Transfer Date...............................................23
         7.7. Mortgage Payments Received After Transfer Date.....................................................24
         7.8. Misapplied Payments................................................................................24
         7.9. Books and Records..................................................................................24
         7.10. Compliance with Regulations.......................................................................24
         7.11. Related Accounts..................................................................................25
         7.12. Servicing Transfer Guidelines.....................................................................25
         7.13. Documents After Transfer Date.....................................................................25
         7.14. FEMA Notices......................................................................................25
         7.15. Short-Year Escrow Statements......................................................................25
         7.16. Solicitation by Seller............................................................................25
         7.17 Solicitation by the Purchaser; Payoff Information..................................................26

ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER....................................................26

         8.1. Delivery of Servicing Data and Records.............................................................26
</TABLE>

                                      iii
<PAGE>   5

<TABLE>
<S>      <C>                                                                                                    <C>
         8.2. Correctness of Representations and Warranties......................................................27
         8.3. Compliance with Conditions.........................................................................27
         8.4. Preferred Stock Purchase Agreement.................................................................27
         8.5. Review of Mortgage Files...........................................................................27
         8.6. Servicing Agreements...............................................................................28
         8.7. Documentation of Transfer..........................................................................28

ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.........................................................28

         9.1. Correctness of Representations and Warranties......................................................28
         9.2. Compliance with Conditions.........................................................................28
         9.3. Documentation of Transfer..........................................................................28
         9.4. Preferred Stock Purchase Agreement.................................................................28
         9.5 Payment of Deposit by Purchaser.....................................................................29

ARTICLE X MISCELLANEOUS..........................................................................................29

         10.1. Costs and Expenses................................................................................29
         10.2. Indemnification by Seller.........................................................................29
         10.3. Indemnification by Purchaser......................................................................30
         10.4. Failure to Deliver Documents......................................................................31
         10.5. Repurchase of Servicing...........................................................................31
         10.6. Supplementary Information.........................................................................31
         10.7. Financial Statements..............................................................................32
         10.8. Confidentiality...................................................................................32
         10.9. Broker's Fees.....................................................................................32
         10.10. Survival of Representations and Warranties.......................................................32
         10.11. Form of Payment to be Made.......................................................................32
         10.12. Assignment.......................................................................................33
         10.13. Notices..........................................................................................33
         10.14. Waivers..........................................................................................33
         10.15. Entire Agreement; Amendment......................................................................34
         10.16. Binding Effect...................................................................................34
         10.17. Headings.........................................................................................34
         10.18. Applicable Laws..................................................................................34
         10.19. Incorporation of Exhibits........................................................................34
         10.20. Counterparts.....................................................................................34
         10.21. Further Assurances...............................................................................34
</TABLE>



         Exhibit A         The Mortgages
         Exhibit B         Servicing Agreements
         Exhibit C         Advances
         Exhibit D         Servicing Fee Rates
         Exhibit E         Administrative Fee Mortgages


                                       iv
<PAGE>   6

         Exhibit F         Recoveries from Casualty Insurance
         Exhibit G         Loans with Incorrect or Missing Tax Identification
         Exhibit H         Pending Litigation
         Exhibit I         Mortgages with Other Insurance
         Exhibit J         Investor Approvals
         Exhibit K         Schedule of Servicing Information
         Exhibit L         Required Loan Documentation




                                        v



<PAGE>   7



                        BULK SERVICING PURCHASE AGREEMENT

         This Bulk Servicing Purchase Agreement (the "Sale Agreement") is dated
as of the 26th day of June, 1998, by and between THE CITY NATIONAL BANK OF WEST
VIRGINIA, a national banking association (the "Purchaser") and MEGO MORTGAGE
CORPORATION, a Delaware corporation (the "Seller").


                              W I T N E S S E T H:


         WHEREAS, Seller owns the right to service certain one-to-four family
mortgage loans, including a limited number of unsecured loans, described in
Exhibit A attached hereto (collectively the "Mortgages" or each a "Mortgage")
having an aggregate outstanding principal balance as of the date hereof of
$535,803,578.07. Each owner of a Mortgage is referred to herein as an
"Investor";

         WHEREAS, the rights and responsibilities of Seller with respect to
servicing the Mortgages under the servicing agreements identified in Exhibit B
hereto, and the maintenance and servicing of the Related Accounts are sometimes
hereinafter referred to as the "Servicing";

         WHEREAS, Purchaser desires to purchase and Seller desires to sell all
right, title and interest in and to the Servicing in accordance with the terms
and conditions of this Sale Agreement; and

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


                                    ARTICLE I

                                   DEFINITIONS

         1.1.     "Administrative Fee Mortgage".

                  A Mortgage that is three (3) or more scheduled payments past
due, In Bankruptcy (and not a Current In Bankruptcy Mortgage), In Foreclosure or
In Litigation.

         1.2.     "Advances".

                  With respect to any Mortgage, the amounts advanced but not
recovered by Seller prior to the Transfer Date in connection with the
performance of servicing functions (including, without limitation, advances in
respect of principal, interest, taxes, insurance premiums, reasonable
expenditures related to foreclosure proceedings, bankruptcy proceedings and
other litigation, and expenses incurred in upkeep and making repairs to
Collateral).




<PAGE>   8



         1.3.     "Agency".

                  FHA or HUD.

         1.4.     "Ancillary Income".

                  With respect to each Mortgage, late fees, assumption fees,
impound and escrow earnings, where permitted by law, and other fees and amounts
(other than monthly servicing fees expressed as a specified number of basis
points per annum) that the servicer is entitled to retain in accordance with the
related Servicing Agreement.

         1.5.     "Business Day".

                  Any day other than (a) a Saturday or Sunday, or (b) a day on
which banking institutions in the State of West Virginia or the State of Georgia
are authorized or obligated by law or by executive order to be closed.

         1.6.     "Closing Date".

                  Close of business on June 29, 1998.

         1.7.     "Collateral".

                  The property securing a Mortgage.

         1.8.     "Current In Bankruptcy Mortgage".

                  A Mortgage that (a) is In Bankruptcy as of the Closing Date
and (b) is current in accordance with the terms of the related Note on the
Closing Date and on the Transfer Date.

         1.9.     "Deposit".

                  The amount described in Section 3.2(a) hereof.

         1.10.    "FHA".

                  The Federal Housing Administration.

         1.11     "FNMA".

                  Fannie Mae.

         1.12.    "Final Mortgage Documentation".

                  All documents and information described in Sections 2.4, 7.1
through 7.4 and 8.1 hereof.



                                      -2-
<PAGE>   9



         1.13.    "HUD".

                  The United States Department of Housing and Urban Development.

         1.14.    "In Bankruptcy".

                  With respect to any Mortgage, a voluntary or involuntary
petition under Title 11 of the United States Code, or a proceeding under similar
laws for the relief of debtors, that has been filed by or against a mortgagor,
guarantor or other person or entity who presently holds title to the Collateral.
The status In Bankruptcy shall continue with respect to a Mortgage until the
Collateral is released from the jurisdiction of the bankruptcy or other court in
which the matter is pending, regardless of whether the proceeding has been
dismissed or otherwise concluded.

         1.15.    "In Foreclosure".

                  With respect to any Mortgage, action (including, without
limitation, referral to legal counsel for institution of an appropriate
proceeding) has been initiated, or should have been initiated pursuant to
applicable Master Servicer, Investor, Agency or insurer requirements or
guidelines or the applicable Servicing Agreement, to acquire title to the
Collateral in a foreclosure sale or pursuant to any comparable procedure
permitted under applicable law.

         1.16.    "In Litigation".

                  With respect to any Mortgage, a pending action before a court
or an administrative or regulatory agency or an arbitration or other dispute
resolution proceeding (not including an action, petition or proceeding that
would cause the Mortgage to be In Foreclosure or In Bankruptcy) that may
materially and adversely affect the Mortgage.

         1.17.    "Interim Period".

                  With respect to each Mortgage, the period of time beginning on
the Closing Date and ending on the Business Day immediately preceding the
Transfer Date.

         1.18.    "Investor".

                  As defined in the recitals hereof. With respect to any
Mortgage that is securitized, the "Investor" shall be deemed to be FNMA or the
related trustee or trustees or the related owner or owners, as applicable.

         1.19.    "Legal Title".

                  All indicia of legal ownership of the Servicing and any
Related Accounts and all other legal rights, obligations and duties with respect
to the Servicing and any Related Accounts.

         1.20     "Master Servicer".

                  As defined in the applicable Servicing Agreements.


                                      -3-
<PAGE>   10

         1.21.    "Mortgage".

                  As defined in the recitals hereof.

         1.22.    "Mortgage File".

                  With respect to any Mortgage, the individual loan file or
files and/or microfilm duplicate thereof or computer data file containing the
original or copy of the note and related mortgage or deed of trust, together
with all mortgage papers and documents, evidence of payment of taxes and
insurance premiums, tax receipts, if any, and insurance policies, insurance
premium receipts, if any, water stock certificates, ledger sheets, payment
records, insurance claim files and correspondence, collection files and
correspondence, historical computerized data files and other papers and records
reasonably required to document and service such Mortgage in accordance with
applicable Master Servicer, Investor or Agency guidelines. Such documents may be
provided on microfilm.

         1.23.    "Prior Servicer".

                  Each servicer who serviced any Mortgage prior to Seller.

         1.24.    "Purchase Price".

                  As defined in Section 3.1 hereof.

         1.25.    "Purchaser".

                  As defined in the first paragraph of this Sale Agreement.

         1.26.    "Related Accounts".

                  Any accounts maintained by Seller relating to the Servicing to
be transferred to Purchaser pursuant to the terms of this Sale Agreement
including (i) mortgage escrow/impound accounts, if any, and (ii) the account or
accounts containing amounts collected by Seller constituting the payment of
principal and interest with respect to the Mortgages.

         1.27.    "Sale Agreement".

                  As defined in the first paragraph of this agreement.

         1.28.    "Seller".

                  As defined in the first paragraph of this Sale Agreement.

         1.29.    "Servicing".

                  With respect to each Mortgage, all rights and duties of the
servicer, as set forth in the related Servicing Agreement, including but not
limited to, the rights to collect and receive all 



                                      -4-
<PAGE>   11
amounts payable with respect to the related Mortgage and to receive and retain
all servicing fees and Ancillary Income that may be retained in accordance with
the related Servicing Agreement.

         1.30.    "Servicing Agreement".

                  With respect to each Mortgage, any agreement setting forth the
terms and conditions for the servicing of such Mortgage on behalf of the related
Investor or Master Servicer, including but not limited to, an applicable pooling
and servicing agreement, servicing agreement or Investor seller/servicer guide,
as amended, pursuant to which Seller is currently servicing the Mortgages, and
any related purchase agreement or other agreement with the related Investor or
Master Servicer. If no such agreement sets forth the terms and conditions for
the servicing of a Mortgage, then with respect to that Mortgage, the term
"Servicing Agreement" shall be deemed to be prudent mortgage banking practices
for servicing mortgages of a similar size and type.

         1.31.    "Title I".

                  Title I of the National Housing Act of 1934, as amended, and
the related rules and regulations promulgated thereunder.

         1.32.    "Transfer Date".

                  The date set forth in Section 2.4.


                                   ARTICLE II

                         SALE AND TRANSFER OF SERVICING

         2.1.     Items to be Sold.

                  Subject to and upon the terms and conditions of this Sale
Agreement, Seller shall, as hereinafter provided, sell, transfer, assign and
deliver to Purchaser all right, title and interest in and to (a) the Servicing
of the Mortgages, (b) any Related Accounts and (c) Seller's rights to all
servicing compensation and Ancillary Income due the servicer of the Mortgages on
and after the Transfer Date. Except as otherwise noted herein, Seller shall
cease all servicing responsibilities related to the Mortgages, and the right of
Seller to any portion of the servicing fees and Ancillary Income collected with
respect to the Mortgages shall terminate, on the last Business Day preceding the
Transfer Date.

         2.2.     Closing Date.

         (a)      On the Closing Date, Purchaser shall pay the Deposit, as
                  defined in Section 3.2(a), to Seller. For the period between
                  the Closing Date and the Transfer Date (the
                  "Interim Period"), Seller shall continue to service the
                  Mortgages and shall retain the right to receive all servicing
                  fees and Ancillary Income related to Servicing of the
                  Mortgages.






                                      -5-
<PAGE>   12

         (b)      During the Interim Period, Seller shall pay, perform and
                  discharge all liabilities and obligations relating to
                  ownership of the Servicing and all the rights, obligations and
                  duties with respect to any Related Accounts until the transfer
                  of such items on the Transfer Date. During such period, Seller
                  agrees to service the Mortgages at all times in accordance
                  with (i) any applicable Master Servicer, Investor or Agency
                  requirements, (ii) all applicable statutes, federal and state
                  regulations and contractual provisions of applicable Servicing
                  Agreements and Mortgage insurers, and (iii) all prudent
                  mortgage banking practices. Unless otherwise mutually agreed
                  upon by Purchaser and Seller, Seller's right to service each
                  Mortgage and receive any servicing fees and Ancillary Income
                  shall terminate on the last Business Day preceding the
                  Transfer Date. Such servicing fees and Ancillary Income shall
                  be apportioned pro rata for partial months during the Interim
                  Period.

         2.3.     Transfer Date.

                  The Transfer Date shall be July 31, 1998. On the Transfer
Date, (i) Purchaser or its designee shall assume all servicing responsibilities
with respect to the Mortgages and any Related Accounts, (ii) Seller shall assign
to Purchaser, and Purchaser shall assume, the right to receive all servicing
fees and Ancillary Income with respect to the servicing of Mortgages and all
obligations under the Servicing Agreements, and (iii) Legal Title to the
Servicing (including mortgagee of record status, if applicable) and any Related
Accounts shall be transferred to Purchaser or its designee.

         2.4.     Actions Required Prior to the Transfer Date.

                  The following actions shall be taken with respect to the
Mortgages for which the Servicing is being sold to Purchaser. On or prior to the
Transfer Date (except that Seller shall have fifteen days after the Transfer
Date to prepare and send to the appropriate recorder's office for recording,
with a certified copy to Purchaser, assignments where required) Seller shall,
with respect to the Mortgages, at Seller's sole cost and expense:

         (a)      Assign to Purchaser, by appropriate endorsements and
                  individual assignments, all of Seller's right, title and
                  interest in and to the Servicing Agreements (except Seller's
                  right to any Excess Spread or Excess Yield, as those terms are
                  defined in the Servicing Agreements with First National Bank
                  of Boston, Greenwich Capital Markets, Inc. and Atlantic Bank),
                  notes and mortgages (or deeds of trust) related to the
                  Servicing to the extent required by any applicable Master
                  Servicer, Investor and Agency requirements and applicable
                  Servicing Agreements. Seller shall prepare and record the
                  assignments, if any, required to reflect changes in mortgagee
                  of record status (if necessary), including intervening
                  assignments if not previously prepared and recorded. Seller
                  shall also prepare assignments of Mortgages from Purchaser to
                  the appropriate Investors, if required by applicable Investor
                  requirements or Servicing Agreements, and provide such
                  assignments and copies of executed assignments required by the
                  first two sentences of this subparagraph, if any, (with a
                  certification that each assignment has been submitted

                                      -6-
<PAGE>   13

                  for recording) to Purchaser. Additionally, Seller shall
                  deliver such other appropriately executed and authenticated
                  instruments of sale, assignment, transfer and conveyance to
                  Purchaser, including limited powers of attorney, as Purchaser
                  or its counsel may reasonably request in order to accomplish
                  the transfer to Purchaser of all of Seller's rights related to
                  the Servicing (for example, Seller's rights with respect to
                  foreclosures, bankruptcies, payoffs and insurance/guarantee
                  claims, but excluding Title I insurance claims). Such
                  instruments provided by Seller shall be reasonably
                  satisfactory in form to Purchaser and its counsel. Seller and
                  Purchaser hereby acknowledge and agree that all such
                  assignments and endorsements are made solely for the
                  administrative convenience of Purchaser in its capacity as
                  servicer of the Mortgages.

         (b)      Deliver to Purchaser or Purchaser's document custodian all
                  Mortgage documents in the possession of Seller for each
                  Mortgage for which documents are required by the related
                  Servicing Agreement or Master Servicer or Investor
                  requirements to be held by a custodian or the servicer of the
                  related Investor's loan. Such documents and any other
                  documents relating to each Mortgage in the possession of any
                  document custodian pursuant to the related Servicing Agreement
                  shall include all documents required by applicable regulations
                  and contractual provisions and shall contain true and correct
                  copies of such documents as Purchaser may require to transfer
                  title of the Collateral in the event of foreclosure.

         2.5.     Examination of Mortgage Documents.

                  Purchaser shall during the period prior to the Transfer Date
have reasonable access during business hours to Seller's books, records and
accounts with respect to the Mortgages and any Related Accounts to be
transferred on the Transfer Date. Purchaser shall use its reasonable best
efforts not to disrupt Seller's normal business in exercising the foregoing
right.

         2.6.     Undertaking by Purchaser.

         (a)      Purchaser covenants and agrees, upon acceptance of the
                  assignment of the Servicing and any Related Accounts with
                  respect to the Mortgages, to cause the same to be serviced in
                  accordance with the terms and conditions of the applicable
                  Servicing Agreements or Master Servicer, Investor or Agency
                  requirements and all Federal, state or local laws, regulations
                  or rules, and to the extent not in conflict with the
                  foregoing, consistent with the procedures and standards by
                  which Purchaser services loans held for Purchasers' own
                  account and the accounts of its affiliates and consistent with
                  mortgage loan servicing standards exercised by prudent
                  mortgage lending institutions that service mortgage loans of
                  the same amount and type as the Mortgages.

         (b)      Prior to the Closing Date, Purchaser shall provide to Seller a
                  copy of Purchaser's servicing guidelines setting forth the
                  procedures and standards by which Purchaser services mortgages
                  held for Purchaser's own account. Purchaser acknowledges that
                  Seller has entered into this Sale Agreement in reliance upon
                  the Purchaser's 


                                      -7-
<PAGE>   14

                  independent status, the adequacy of its servicing facilities,
                  plan, personnel, records and procedures, its integrity,
                  reputation and financial standing.

         (c)      On and after the Transfer Date, Purchaser shall provide to
                  Seller copies of all monthly reports required to be filed
                  under any Servicing Agreement or otherwise, including, but not
                  limited to, reports to any Master Servicer, Investor, Agency,
                  insurer or governmental agencies having jurisdiction over the
                  Servicing. Purchaser shall provide such copies to Seller at
                  the time such reports are filed.

         (d)      Purchaser shall not be responsible for the servicing acts and
                  omissions of Seller or any Prior Servicer that occur, or for
                  any servicing obligations or liabilities of Seller or any
                  Prior Servicer that arise, prior to the Transfer Date. Seller
                  shall not be responsible for the servicing acts and omissions
                  of Purchaser or any future servicer that occur, or for any
                  servicing obligations or liabilities of Purchaser or future
                  servicers that arise, on or after the Transfer Date.

         2.7.     Preparation and Modification of Exhibits.

                  Exhibits to this Sale Agreement shall be prepared and modified
                  as follows:

         (a)      Exhibit A, in the form attached hereto on the Closing Date,
                  has been prepared by Seller and is intended to include
                  information as it is known at the end of business on June 24,
                  1998. Seller shall prepare and deliver to Purchaser not later
                  than August 4, 1998, (i) revisions of Exhibit A that includes
                  information as it exists at the end of July 1998 and (ii)
                  Exhibits B through L.

         (b)      It is understood and agreed by the parties that the Exhibits
                  provided by Seller pursuant to Section 2.7(a) hereof may not
                  accurately reflect in every respect the information attributed
                  to such Exhibits in this Sale Agreement. The parties agree
                  that each such Exhibit will be reviewed in light of the
                  requirements hereof and, if necessary, revised from time to
                  time following the Closing Date so that on the Transfer Date
                  each such Exhibit will accurately reflect the information
                  attributed to it herein. Each reference herein to such an
                  Exhibit will be deemed to be a reference to that Exhibit as it
                  may have been revised through the Transfer Date. (For example,
                  the purpose of Exhibit A, as qualified by Exhibit B, shall
                  always be to list the mortgages for which Servicing is
                  transferred hereunder on the Closing Date, but the version of
                  Exhibit A that will be ultimately controlling for purposes of
                  the transactions contemplated by this Sale Agreement shall be
                  the version in effect on the Transfer Date.) If the
                  information reflected in a modification of an Exhibit requires
                  an adjustment of the Purchase Price or aggregate
                  Administrative Fee, the adjustment shall be made as provided
                  in Section 3.1.



                                      -8-
<PAGE>   15
                                  ARTICLE III

                                  CONSIDERATION

         3.1.     Purchase Price.

                  In full consideration for the sale of the Servicing as
specified in Article II hereof, and upon the terms and conditions of this Sale
Agreement, Purchaser shall pay to Seller the purchase price (the "Purchase
Price") as follows:

         (a)      Ninety percent (90%) of the book value of the Servicing and
                  other rights purchased hereunder as set forth on the books of
                  the Seller on the Transfer Date, determined in accordance with
                  GAAP and consistent with the valuation methodology used to
                  calculate such book value in the Company's financial
                  statements included in the Offering Memorandum, as defined in
                  the Preferred Stock Purchase Agreement dated June 9, 1998 (the
                  "Offering Memorandum"), by and between Seller and Purchaser,
                  less the amount of any Advances and any Title I insurance
                  premiums not collected from the borrower under any Mortgage.

         (b)      It is understood and agreed that if, within 120 days of the
                  Transfer Date, the principal balance of any Mortgage used in
                  computing the Purchase Price shall be found to be incorrectly
                  computed, the book value of the Servicing and other rights
                  purchased hereunder shall be promptly and appropriately
                  adjusted and the Purchase Price recalculated on the basis of
                  such adjusted book value.

         (c)      It is understood and agreed that if, within 120 days of the
                  Transfer Date, the servicing fee rate specified in Exhibit D
                  hereto shall be found to be incorrectly stated as to any
                  Mortgage, or if any other error in the computation of the
                  Purchase Price is discovered, the Purchase Price shall be
                  promptly and appropriately adjusted.

         (d)      The amount of any adjustment to the Purchase Price shall be
                  remitted to the party in whose favor the adjustment is to be
                  made by the other party within ten (10) calendar days after
                  the remitting party determines or is given notice of the
                  determination that there was an error in the Purchase Price.
                  The parties shall cooperate following the Transfer Date in
                  making such determinations with respect to the Mortgages.

         (e)      At Seller's option, Purchaser shall accept transfer of
                  servicing for Mortgages designated by Seller that were, as of
                  the Closing Date, or became during the Interim Period,
                  Administrative Fee Mortgages. Seller shall exercise this
                  option, if at all, by giving Purchaser at least thirty (30)
                  days' notice before the Transfer Date and identifying the
                  Administrative Fee Mortgages that it will transfer to
                  Purchaser on the Transfer Date. Seller will pay Purchaser an
                  administrative fee (the "Administrative Fee") for each
                  Administrative Fee Mortgage, if any, that Seller transfers to
                  Purchaser. The Administrative Fee shall be $750 for each


                                      -9-
<PAGE>   16

                  Administrative Fee Mortgage. Upon payment of the
                  Administrative Fee, and notwithstanding any representation or
                  warranty set forth herein, Seller shall have no further
                  liability with respect to any Administrative Fee Mortgage for
                  any servicing expense incurred by Purchaser on or after the
                  Transfer Date that is attributable to acts or omissions of the
                  related borrower. Mortgages determined to be Administrative
                  Fee Mortgages are listed on Exhibit E hereto.

         3.2.     Payment.

                  The Purchase Price shall be paid as follows:

         (a)      On the Closing Date, Purchaser will pay to the Seller a
                  Deposit equal to twenty-five percent (25%) of the Purchase
                  Price, as estimated as of the Closing Date.

         (b)      Purchaser shall pay to Seller, on the later of (i) the fifth
                  Business Day following the Transfer Date or (ii) the date when
                  substantially all Mortgage Files and custodial files have been
                  received by Purchaser, an amount equal to the difference
                  between (A) seventy-five percent (75%) of the Purchase Price,
                  calculated as of the Transfer Date and (B) the amount paid by
                  the Purchaser to the Seller pursuant to paragraph (a) of this
                  Section 3.2.

         (c)      Purchaser will pay Seller the balance of the Purchase Price
                  (the "Balance"), adjusted in accordance with Section 3.1
                  hereof, as follows:

                           (i)  On the last Business Day of each calendar month
                  following the Transfer Date, Purchaser will pay to Seller an
                  amount determined by multiplying the Balance by a fraction the
                  numerator of which is the aggregate unpaid principal balance
                  at the Transfer Date of the Mortgages transferred to the
                  Purchaser for which Final Mortgage Documentation has been
                  received and the denominator of which is the aggregate unpaid
                  principal balance at the Transfer Date of the Mortgages
                  transferred to the Purchaser.

                           (ii) Notwithstanding clause (i), Purchaser shall pay
                  Seller the final ten percent (10%) of the Purchase Price only
                  after Purchaser has received Final Mortgage Documentation for
                  all the Mortgages.

         (d)      Seller will pay Purchaser on the Transfer Date the aggregate
                  Administrative Fee determined as described in Section 3.1(e)
                  hereof.

         (e)      If Purchaser defaults on the payment of the Purchase Price
                  (and the conditions precedent in Article VIII have been
                  performed in full), (i) Seller shall refund to Purchaser an
                  amount equal to (A) that portion of the Purchase Price
                  previously received by Seller, less (B) ten percent (10%) of
                  the Purchase Price, and (ii) Purchaser, at its expense, shall
                  promptly return to Seller all Mortgage documentation and other
                  documentation that it has received from Seller in connection
                  with the transactions contemplated by this Sale Agreement.


                                      -10-
<PAGE>   17

         (f)      If Seller defaults on its obligations hereunder (or the
                  conditions precedent in Article VIII hereof have not been
                  performed in full), (i) Seller shall, within five (5) Business
                  Days after receipt of Purchaser's demand, pay to Purchaser (A)
                  the portion of the Purchase Price previously received by
                  Seller, plus (B) an additional amount equal to ten percent
                  (10%) of the Purchase Price, and (ii) Purchaser, at Seller's
                  expense, shall promptly return to Seller all Mortgage
                  documentation and other documentation that it has received
                  from Seller in connection with the transactions contemplated
                  by this Sale Agreement. The provisions of this Section 3.2(f)
                  shall be in addition to and not in limitation of the rights
                  and remedies available to the parties at law or equity or
                  otherwise provided to them herein upon a breach of this Sale
                  Agreement.

         3.3.     Advances.

                  With respect to each Mortgage, Purchaser shall reimburse
Seller for the Advances set forth on Exhibit C to the extent that the Purchaser
recovers such reimbursement from amounts received with respect to such Mortgage.
Purchaser shall transfer any such reimbursement to Seller within five (5)
Business Days of Purchaser's receipt of the reimbursement.

         3.4.     Other Costs.

         (a)      Seller shall be responsible, at its sole cost and expense, to
                  take such actions as are necessary to obtain any and all
                  approvals or consents required to be delivered by Seller to
                  the Purchaser pursuant to this Agreement.

         (b)      Seller shall comply, at its sole cost and expense, with
                  Purchaser's reasonable requirements pertaining to the
                  processing and shipping of loan files, insurance files, tax
                  records, collection records, and any other documents that are
                  reasonably necessary to service the Mortgages.

         (c)      Seller shall be responsible, at its sole cost and expense, to
                  take such actions as are necessary to deliver all Mortgage
                  documents to Purchaser or Purchaser's designated document
                  custodian as required by Section 2.4(b).

         (d)      Seller shall bear the risk of loss of or to the Mortgage
                  documents until the Mortgage documents are unloaded and
                  accepted by Purchaser or Purchaser's designated custodian at
                  Purchaser's receiving facility or at the receiving facility of
                  Purchaser's designated custodian.


                                   ARTICLE IV

                GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER

         As an inducement to Purchaser to enter into this Sale Agreement, Seller
represents and warrants as follows (it being acknowledged that each such
representation and warranty relates to



                                      -11-
<PAGE>   18

material matters upon which Purchaser relied, and it being understood that each
such representation and warranty is made to the Purchaser as of the Closing Date
and Transfer Date except as otherwise specifically stated):

         4.1.     Due Incorporation and Good Standing.

                  Seller is a corporation duly organized and validly existing
under the laws of the State of Delaware. Seller and each Prior Servicer or
sub-servicer were qualified or licensed to transact business in each
jurisdiction in which its activities with respect to the Mortgages or the
Servicing require it to be qualified or licensed.

         4.2.     Authority and Capacity.

                  Seller has all requisite power, authority and capacity to
enter into this Sale Agreement and to perform the obligations required of it
hereunder. The execution and delivery of this Sale Agreement and the
consummation of the transactions contemplated hereby have each been duly and
validly authorized by all necessary corporate action. This Sale Agreement
constitutes the valid and legally binding agreement of Seller enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, or other laws
relating to or affecting the enforcement of creditors' rights or the collection
of debtors' obligations in general or by general equitable principles. No
offset, counterclaim or defense exists to Seller's full performance of this Sale
Agreement, except as may result from the Mortgages In Litigation, as set forth
on Exhibit H.

         4.3.     Effective Agreement.

                  The execution, delivery and performance of this Sale Agreement
by Seller, its compliance with the terms hereof and the consummation of the
transactions contemplated hereby (assuming the receipt of various consents
required pursuant to this Agreement) will not violate, conflict with, result in
a breach of, constitute a default under, be prohibited by or require any
additional approval under the articles of incorporation, bylaws, or any
instrument or agreement to which Seller is a party or by which it is bound or
which affects the Servicing, or any state or federal law, rule or regulation or
any judicial or administrative decree, order, ruling or regulation applicable to
it or to the Servicing.

         4.4.     Statements Made; Notification of Breach.

                  No representation, warranty or statement made by Seller in
this Sale Agreement or in any Exhibit hereto, written statement or certificate
furnished by Seller to Purchaser in connection with the transactions
contemplated hereby, including specifically the servicing fee rate applicable to
the Mortgages and the method of calculating such rate as set forth in Exhibit D
hereto and the Mortgage balances as set forth in Exhibit A hereto, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact materially necessary to make the statements contained
herein or therein not misleading. Seller shall promptly notify Purchaser in
writing upon its discovery or receipt of notice (which may come 



                                      -12-
<PAGE>   19

from Purchaser or any other person or entity) that Seller has breached any of
its covenants, representations or warranties made herein.


                                    ARTICLE V

           REPRESENTATIONS AND WARRANTIES OF SELLER AS TO SERVICING &
                                    MORTGAGES

         As further inducement to Purchaser to enter into this Sale Agreement,
Seller represents and warrants to Purchaser, with respect to the Servicing, each
Mortgage and each Related Account, as set forth in Sections 5.1 through 5.38
hereof.

         5.1.     Compliance with Law and Other Requirements.

                  Prior to the Transfer Date, neither Seller nor any Prior
Servicer or originator has violated in any material respect any applicable law,
regulation, ordinance, order, injunction or decree, or any other requirement of
any governmental body, court, Master Servicer, Investor, Agency or insurer or
any provision of any Servicing Agreement in connection with the origination or
servicing of the Mortgages, the violation of which would have a material adverse
effect on the Servicing or any of the Mortgages. Without limitation of the
foregoing, Seller, any prior Servicer or originator and any other party
originally named as payee under the promissory notes with respect to the
Mortgages have complied in all material respects, and Seller will continue to so
comply through the Transfer Date, with every applicable federal, state or local
law, statute and ordinance, and any rule, regulation or order issued thereunder,
pertaining to the subject matter of this Sale Agreement. Each party originally
named as payee under a promissory note and as mortgagee under the mortgage (or
deed of trust) with respect to a Mortgage was lender-approved by the related
Investor at all relevant times and was qualified to do business in the state in
which the applicable property is located as well as the states in which such
note or mortgage was executed if qualification was required of such party under
the law of the applicable state.

         5.2.     Filing of Reports.

                  Up to and including the Transfer Date, Seller, all Prior
Servicers and/or subservicers and any originator of any Mortgage, have filed or
will file all reports required under any Servicing Agreement, Master Servicer,
Investor or Agency requirements or otherwise, including, but not limited to,
reports to any Master Servicer, Investor, Agency, insurer and governmental
agencies having jurisdiction over the Servicing. Seller warrants that all
reports required to be made by the Internal Revenue Code of 1986, as amended,
have been filed. Seller shall provide to the mortgagors a year-end statement and
IRS Forms 1098, 1099 and 1041, as applicable, for the period ended on the last
Business Day preceding the Transfer Date. Seller shall provide to Purchaser
electronic or hard copies of any such year-end statements that have been
produced on any loan within seven (7) business days of Purchaser's request for
such statement.



                                      -13-
<PAGE>   20

         5.3.     Related Accounts.

                  The Related Accounts are being maintained in accordance with
applicable law, the terms of the Servicing Agreements related to the Servicing
and the Mortgage documents and, where applicable, in accordance with the
requirements of any applicable Master Servicer, Investor, Agency,
insurers and other governmental agencies having jurisdiction. The Related
Accounts have been maintained using the Aggregate Accounting Methodology. Except
for payments that are past due under the terms of the Mortgage documents, all
escrow balances, if any, required by the Mortgage documents and paid to Seller
for the account of the mortgagors are on deposit in the appropriate escrow
accounts. The Seller warrants that it is not currently and has not been required
to pay any interest on any escrow/impound account.

         5.4.     Escrow Analysis.

                  The escrow portions of the Related Accounts, if any, have been
analyzed in accordance with RESPA guidelines. Seller has (i) analyzed the
payments for escrow deposits required to be deposited into the Related Accounts,
and (ii) with respect to any deficiency discovered at the time of such analysis
in the amount of the payments required to be made in respect thereof, adjusted
the amount of such payments so that, assuming all required payments are timely
made, such deficiency will be eliminated. Seller has refunded all overages in
accordance with HUD Regulation 4330.1. A hard copy of the latest annual escrow
analysis will be in each individual mortgage loan file prior to transfer.

         5.5.     Compliance with Insurance Contracts.

                  Seller, all Prior Servicers and any originator of any Mortgage
have complied with all obligations under all applicable insurance contracts,
including the private mortgage insurance contracts, which might adversely affect
any of the Servicing. Seller, all Prior Servicers and any originator of any
Mortgage have not taken any action or failed to take any action which might
cause the cancellation of or otherwise affect any of the private mortgage
insurance contracts relating to the Mortgages.

         5.6.     Title Insurance.

                  If required by any appropriate Master Servicer, Agency,
Investor or Servicing Agreement, an acceptable title policy, title report or
abstract of title has been issued for each Mortgage, insuring (in the case of
any title insurance policies) that the Mortgage, security deed or deed of trust
relating thereto is a valid lien on the property therein described, which has
not been modified except as permitted by such Agency, Investor, Master Servicer
or Servicing Agreement. Each such title policy or abstract of title extends
coverage to successors and assigns as additional named insureds of said policy
running to the benefit of the Seller, its successors or assigns. Each such title
report may be relied upon and enforced by the Seller, its successors or assigns.



                                      -14-
<PAGE>   21

         5.7.     Errors and Omissions Insurance.

                  Seller has in full force and effect an errors and omissions
policy with respect to its servicing operations and a Financial Institutions
Fidelity Blanket Bond in an amount sufficient to comply with applicable Agency
guidelines.

         5.8.     Sole Servicer.

                  Seller is the sole servicer of each of the Mortgages, except
for (i) those Mortgages for which Preferred Equities Corporation performs
certain servicing activities as a delegated agent of Seller and (ii) those
Mortgages serviced by Norwest as Master Servicer. Seller has used and shall
continue to use its best efforts to have Preferred Equities Corporation
cooperate in the performance of Seller's obligations under this Sale Agreement.
Seller represents and warrants that on and after the Transfer Date, neither
Seller nor Purchaser has any obligation to continue to engage Preferred Equities
Corporation to perform any servicing activities with respect to the Mortgages.

         5.9.     Authorizations.

                  No authorizations, approval or consent of or declaration of
filing including, but not limited to, any filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended, with any
Federal State or local governmental authority or regulatory body, is necessary
or required of the Seller in connection with the execution and delivery of this
Agreement or the performance by the Seller, except approvals required by an
appropriate Master Servicer, Investor or Agency, if any, for the transfer of the
Servicing.

         5.10.    Capital.

                  As of the Transfer Date, the Seller's capital level is in full
compliance with applicable provisions of the Servicing Agreements and any
applicable Master Servicer, Agency or Investor requirements.

         5.11.    Title to the Servicing Rights and Escrow Accounts.

                  Seller is the lawful owner of the Servicing, is custodian of
any Related Accounts and has the sole right and authority to transfer the
Servicing as contemplated hereby, subject to any required Master Servicer,
Investor or Agency approvals, and is aware of no adverse claims to or
encumbrances on the Servicing or Related Accounts. The transfer, assignment and
delivery of the Servicing and of the Related Accounts in accordance with the
terms and conditions of this Agreement shall vest in Purchaser all rights as
servicer free and clear of any and all claims, charges, defenses, offsets, and
encumbrances of any kind or nature whatsoever, including, but not limited to,
those of Seller or Prior Servicers. The Servicing is not hypothecated, assigned
or pledged as collateral for any obligations of Seller.



                                      -15-
<PAGE>   22

         5.12.    Mortgage Documents.

                  The Mortgage documents are genuine, legally valid, binding 
and enforceable obligations of the mortgagor and have been duly executed by a
mortgagor of legal capacity, and all insertions in any Mortgage document were
correct when made. The Mortgage documents upon origination were in compliance
with applicable law, any applicable provisions of the Servicing Agreements, and
any Master Servicer, Investor, Agency and insurer requirements and are complete
in all material respects with regard to origination and servicing activity.
Seller has no knowledge of any mortgagor defense to payment with respect to any
Mortgage, other than the Mortgages In Litigation set forth on Exhibit H.

         5.13.    Validity of Mortgages.

                  To the best of Seller's knowledge, no facts exist which would
impair the validity of the Mortgages, any other loan document or the Collateral.
Except as permitted by the Servicing Agreements and any applicable Master
Servicer, Investor or Agency requirements, the terms of each Mortgage have not
been modified, no party thereto has been released in whole or in part, and no
part of the mortgaged property has been released. The full original principal
amount of the Mortgage has been advanced to the mortgagor or paid to third
parties on its behalf in accordance with the Servicing Agreements and any
applicable Master Servicer, Agency or Investor guidelines, regulations and
requirements.

         5.14.    Physical Damage; Condemnation.

                  To the best of Seller's knowledge, there exists no (i)
physical damage to the Collateral securing the Mortgages from fire, flood,
windstorm, earthquake, tornado, hurricane, mudslide or any other similar
casualty, or (ii) notice of condemnation with respect to a mortgaged property,
which physical damage or condemnation would cause any Mortgage to become
delinquent or adversely affect the value or marketability of any Mortgage,
Servicing or the Collateral securing such Mortgage. If timely repair is
presently being undertaken with casualty insurance proceeds or an insurance
claim is being processed with the insurance company, no breach of this warranty
shall occur as long as there will be no diminution in the value of the
Collateral from the value it had prior to the casualty loss.

         5.15.    No Uninsured Mortgages.

                  To the best of Seller's knowledge, there are no uninsured
casualty losses or casualty losses where coinsurance has been or Seller has
reason to believe will be, claimed by the insurance company, or where the loss,
exclusive of contents, is greater than the net recovery from the hazard
insurance as identified under Exhibit F. No casualty insurance proceeds have
been used to reduce Mortgage Loan balances or for any other purposes except to
make repairs to the mortgage premises or as otherwise allowed by applicable
Servicing Agreements and any applicable Master Servicer, Investor or Agency
requirements, regulations and guidelines. Except as otherwise noted in the
related Mortgage File, all damages with respect to which casualty insurance
proceeds have been received by or through Seller have been properly repaired or
are in the process of such repair with such proceeds in accordance with
applicable Servicing 



                                      -16-
<PAGE>   23

Agreements and any applicable Master Servicer, Agency or Investor requirements,
regulations and guidelines.

         5.16.    Application of Funds.

                  Seller represents and warrants that it has not advanced or
otherwise recorded a payment not actually received with respect to any Mortgage.
Except as noted in the related Mortgage File, all monies received with respect
to each Mortgage have been properly accounted for
and applied in accordance with the related Mortgage documents, including all
remittances required to have been made to Investors. Seller shall be responsible
for resolving any disputes regarding the application of funds prior to the
Transfer Date, including, but not limited to, such a dispute between Seller and
The First National Bank of Boston.

         5.17.    Custodial Accounts.

                  Custodial accounts have been established and continuously
maintained in accordance with each Servicing Agreement, any applicable Agency
requirements, and other applicable laws and regulations, and all payments which
have been received in connection with each Mortgage have been duly and regularly
deposited to the custodial accounts, and all disbursements therefrom have been
made in accordance with said agreements, requirements, laws, and regulations.

         5.18.    Payoff Statements.

                  All payoff and assumption statements with respect to each
Mortgage provided by Seller, its agent, or any Prior Servicers to mortgagors or
their agents were complete and accurate.

         5.19.    Mortgage Files.

                  The Mortgage Files for each Mortgage will contain, upon
transfer of the Servicing to Purchaser, all items required by applicable
Servicing Agreements and any applicable Master Servicer, Investor or Agency
requirements, or such items shall be supplied by Seller in accord with
applicable Servicing Agreements and any Master Servicer, Investor or Agency
requirements. Except as reflected in the related Mortgage File, no waiver,
alteration or modification in any respect has been made by Seller of the terms
and provisions of any Mortgage note or other document relating to the Mortgage,
nor have such terms and provisions been subordinated, modified or released in
whole or in part by Seller, except as plainly shown on the face of such
documents and which change is acceptable to the related Investor.

         5.20.    Tax Identification Numbers.

                  The Seller hereby agrees to provide the certification of an
authorized officer certifying that the Seller has complied with all Internal
Revenue Service and U.S. Treasury Department requirements for due diligence in
obtaining and maintaining tax identification numbers for each Mortgage. In
addition to the foregoing, the Seller agrees to reimburse the Purchaser for any
and all penalties incurred because of Internal Revenue Service or Treasury
Department requirements for any missing tax identification numbers and forms
which are 



                                      -17-
<PAGE>   24

incurred as a result of infractions which occurred prior to the
Transfer Date. Seller shall provide to Purchaser, as Exhibit G to this
Agreement, a list of each loan being transferred which has an incorrect or
missing tax identification number.

         5.21.    Litigation.

                  There is no litigation or governmental investigation pending
(other than the Mortgages In Litigation described in Exhibit H hereto and such
servicer termination events as Seller has disclosed in the Offering Memorandum)
or, to the knowledge of Seller, threatened, nor is there any order, injunction
or decree outstanding against or relating to Seller, which could have a material
adverse effect upon the Servicing or Mortgages, nor does Seller know of any
material basis for any such litigation.

         5.22.    Mortgage Disbursement.

                  Each Mortgage was fully disbursed and made or consummated in
accordance with applicable law and regulations, a violation of which would have
a material adverse effect on the Servicing.

         5.23.    No Forgiven Payment.

                  No payment of principal or interest on any Mortgage has been
forgiven, suspended or rescheduled except as disclosed, and no waiver,
alteration or modification has been made to the terms or provisions of any
Mortgage except as allowed by applicable Servicing Agreements and any applicable
Master Servicer, Investor or Agency guidelines, regulations or requirements.

         5.24.    Unpaid Principal Balances.

                  The amount of the unpaid principal balance for each Mortgage
is correct as set forth on Exhibit A as of the date Exhibit A was prepared, and
there are no defenses, setoffs or counterclaims against such Mortgages, except
the Mortgages In Litigation set forth on Exhibit H. All payments received by
Seller with respect to any Mortgage have been remitted and properly accounted
for in accordance with the terms of applicable Servicing Agreements and any
applicable Master Servicer, Investor or Agency requirements.

         5.25.    Payment of Taxes, Insurance Premiums, etc.

                  If required by the related Servicing Agreement or Master
Servicer, Agency or Investor requirements, Seller shall pay or cause to be paid,
prior to the Transfer Date, all real estate, special assessments, water, sewer
or like tax bills issued by the jurisdiction (including all interest, late
payments and penalties in connection therewith) and relating to the property
securing the Mortgage, where such a tax bill has been received that is due and
owing without penalty to such taxing authority prior to or on the Transfer Date,
and those due thirty (30) days after the Transfer Date provided a tax bill has
been received prior to the Transfer Date. Seller shall provide to Purchaser a
list of those loans on which tax bills are due but despite Seller's best
efforts, it has been unable to obtain a bill to pay. Seller and any Prior
Servicers have paid when



                                      -18-
<PAGE>   25

due all flood insurance premiums, hazard insurance premiums, ground rents and
mortgage insurance premiums. In the event Purchaser incurs any delinquent
interest, late penalties and/or payments as a result of either incorrect parcel
identification numbers or property addresses, Seller hereby indemnifies
Purchaser for such penalties and shall reimburse Purchaser in full for such
expenses up to and including the next billing period for each taxing entity.

         5.26.    Effective Insurance.

                  All required insurance policies have been issued by insurance
companies rated, at the time the related Mortgage was closed, B+ or higher as
determined by the then-current edition of Best's Key Rating Guide and remain in
full force and effect. Seller has complied with all insurance contract
obligations which, if not complied with, might have a material adverse effect on
the Servicing. To the best of Seller's knowledge each building or other
improvement located on the premises covered by each Mortgage is insured in the
manner required under applicable mortgagee clauses against (i) loss or damage by
fire and from such other insurable risks and against hazards as are set forth in
the standard extended coverage form of endorsement, and (ii) such other hazards
required by applicable Servicing Agreements, the related Master Servicer,
Investor or Agency, if any. To the best of Seller's knowledge, all premiums for
such insurance have been paid to date. Seller has no knowledge and has not
received notice that any of the said buildings or other improvements have been
affected in any substantial manner or suffered any material loss as a result of
any fire, explosion, accident, strike, riot, war, Act of God or act of a public
enemy.

         5.27.    Flood Insurance; Certifications.

                  To the best of Seller's knowledge, adequate flood hazard
insurance is in full force and effect as required under applicable Servicing
Agreements, laws, regulations or Master Servicer, Investor or Agency guidelines
in an amount representing coverage not less than the least of (i) the
outstanding principal balance, or (ii) the maximum amount of insurance which is
available under the Act. Seller agrees to effect a blanket assignment of the
"life-of-loan" flood monitoring contracts for all Mortgages, which flood
certifications currently are or will be in all of Mortgage Files.

         5.28.    Other Insurance.

                  All Mortgages, if any, for which mortgage/credit life
insurance, accidental death, disability, unemployment insurance, or any similar
insurance is paid as part of the mortgagor's monthly payment shall be identified
in Exhibit I.

         5.29.    Real Property Tax Identifications and Descriptions.

                  To the best of Seller's knowledge, all real property tax
identifications and property descriptions contained in any Mortgage document are
complete and legally sufficient.



                                      -19-
<PAGE>   26

         5.30.    Compliance with Contractual Obligations.

                  Seller and all Prior Servicers and originators have complied
with all of their contractual obligations, including all Servicing Agreements
and applicable Master Servicer, Investor and Agency requirements, that relate to
the origination, underwriting or servicing of each Mortgage, the breach of which
might materially adversely affect the Servicing, except that Seller has
disclosed certain servicer termination events in the Offering Memorandum.

         5.31.    No Accrued Liabilities.

                  Except for such transfer and termination fees as may be
imposed in connection with the sale contemplated hereby and which are to be paid
by Seller, there are no accrued liabilities of Seller with respect to the
Mortgages or the Servicing, and Seller does not know of any events that could
result in any such accrued liabilities arising against Purchaser as successor to
the Servicing. All distributions due any Investor from Seller have been made,
and except for the dispute between Seller and The First National Bank of Boston
(which Seller is entirely responsible for resolving), there are no claims by any
Investor that Seller has defaulted in its obligations to any Investor regarding
such payments.

         5.32.    Foreclosure.

                  The foreclosure proceedings initiated with respect to each
Mortgage that is In Foreclosure at the Closing Date will have been properly
conducted in accordance with all applicable law, Servicing Agreements and any
related Master Servicer, Investor or Agency requirements, and to the best of
Seller's knowledge, no extraordinary costs or expenses will be required to
complete such foreclosure proceedings.

         5.33.    Servicing Agreements.

                  Each Servicing Agreement related to any Mortgage is in full
force and effect. Purchaser acknowledges that Seller has disclosed certain
servicer termination events in the Offering Memorandum. Seller has not received
notice from any Master Servicer that the Servicing with respect to any Mortgage
has been terminated or is proposed to be transferred to another servicer.

         5.34.    Investor and Master Servicer Approvals.

                  Seller has prepared all forms, documents and other information
requested by each Investor and Master Servicer and has obtained each Investor
and/or Master Servicer approval required by any applicable Servicing Agreements
or Master Servicer, Investor or Agency requirements, for the transfer of the
Servicing from Seller to Purchaser pursuant hereto. Such consents and approvals
are attached hereto as Exhibit J.

         5.35.    Non-Recourse Loans.

                  If a Mortgage has been sold to an Agency or Investor, such
Mortgage has been sold to the Agency or Investor with the notes endorsed on a
"non-recourse" basis, other than for a 



                                      -20-
<PAGE>   27

breach of representations or warranties, i.e., such Agency or Investor may not
demand repurchase because of mortgagor default and such Agency or Investor bears
the economic risk of a Mortgage default, unless the default results from a
breach of representations and warranties.

         5.36.    Agency and Investor Requirements.

                  Seller, all Prior Servicers or sub-servicers and any
originator of any Mortgage have performed all obligations to be performed under
applicable Agency and Investor requirements, if any, and no event has occurred
and is continuing which, but for the passage of time or the giving of notice or
both, would constitute an event of default thereunder. Seller and all Prior
Servicers have serviced the Mortgages and have kept and maintained complete and
accurate books and records in connection therewith, all in accordance with
applicable Agency and Investor requirements, if any. Seller further specifically
warrants that, as of both the Closing Date and the Transfer Date, no such Agency
or Investor has required that Seller indemnify such Agency or Investor in whole
or in part for any mortgage loans, except for breaches of representations and
warranties, and further that there are no outstanding purchase or
indemnification requests by such Agency or Investor, as of both the Closing Date
and the Transfer Date.


                                   ARTICLE VI

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

         As an inducement to Seller to enter into this Sale Agreement, Purchaser
represents and warrants as follows (it being acknowledged that each such
representation and warranty relates to material matters upon which Seller
relied, and it being understood that each such representation and warranty is
made to the Seller as of the Closing Date and the Transfer Date):

         6.1.     Due Incorporation and Good Standing.

                  Purchaser is a national banking association duly organized and
validly existing under the laws of the United States of America. Purchaser is
qualified or licensed to transact business in each jurisdiction in which its
activities with respect to the Mortgages or the Servicing require it to be
qualified or licensed.

         6.2.     Authority and Capacity.

                  Purchaser has all requisite power, authority and capacity to
enter into this Sale Agreement and to perform the obligations required of it
hereunder. The execution and delivery of this Sale Agreement and the
consummation of the transactions contemplated hereby have each been duly and
validly authorized by all necessary corporate action. This Sale Agreement
constitutes the valid and legally binding agreement of Purchaser enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, or other laws
relating to or affecting the enforcement of creditors' rights or the collection
of debtors' obligations in general or by general equitable



                                      -21-
<PAGE>   28

principles. No offset, counterclaim or defense exists to Purchaser's full
performance of this Sale Agreement.

         6.3.     Effective Agreement.

                  The execution, delivery and performance of this Sale Agreement
by Purchaser, its compliance with the terms hereof and the consummation of the
transactions contemplated hereby will not violate, conflict with, result in a
breach of, constitute a default under, be prohibited by or require any
additional approval under the certificate of incorporation, bylaws, or any
instrument or agreement to which Purchaser is a party or by which it is bound or
which affects the Servicing, or any state or federal law, rule or regulation or
any judicial or administrative decree, order, ruling or regulation applicable to
it or to the Servicing.

         6.4.     Good Standing.

                  Purchaser is, and shall be at all times this Sale Agreement is
in effect, in good standing with all appropriate regulatory authorities and
agencies to the extent that such good standing is necessary to ensure that
consummation of the transactions contemplated by this Sale Agreement is not
materially and adversely affected.


                                   ARTICLE VII

                                    COVENANTS

         7.1.     Notice to Mortgagors.

         (a)      Seller shall, in a manner that complies with all applicable
                  laws, prepare and mail to the mortgagor of each Mortgage no
                  later than fifteen (15) days prior to the Transfer Date a
                  letter advising the mortgagor of the transfer of Servicing to
                  Purchaser; provided, however, the content and format of the
                  letter shall have the prior written approval of Purchaser,
                  which shall not be unreasonably withheld. A copy of said
                  notice shall be placed in each Mortgage File prior to the
                  Transfer Date or Purchaser will accept by electronic means a
                  facsimile of each letter. If such a copy or facsimile is not
                  available, Seller can provide Purchaser with a certification
                  stating that all the letters were mailed in a timely manner
                  using all RESPA guidelines. Attached to the certification will
                  be a list of all mortgagors who received the letter.

         (b)      Purchaser shall mail to the mortgagor of each Mortgage a
                  letter meeting applicable legal requirements advising the
                  Mortgagor of the Transfer of Servicing to the Purchaser no
                  later than fifteen (15) days after the Transfer Date;
                  provided, however, the content and format of the letter shall
                  have prior approval of Seller, which shall not be unreasonably
                  withheld.


                                      -22-
<PAGE>   29

         (c)      Purchaser and Seller will consult to coordinate the mailing of
                  each letter in a timely manner. Seller and Purchaser shall
                  divide the costs associated with preparing and mailing the
                  notices required pursuant to this Section 7.2.

                  7.2.     Notice to Taxing Authorities and Insurance Companies.

                  If required by the terms of a Mortgage, no later than fifteen
(15) days prior to the Transfer Date, Seller shall, at Seller's expense,
transmit to the applicable taxing authorities or tax service company and
insurance companies and/or agents, notification of the assignment of the
Servicing for such Mortgage and instructions to deliver all notices, tax bills
and insurance statements, as the case may be, to Purchaser from and after the
Transfer Date. Seller will provide Purchaser with copies of those notifications
either by electronic means, on microfiche or hard copy, unless otherwise agreed
to by the parties.

         7.3.     Delivery of Servicing Records.

                  Seller shall forward to Purchaser no later than five (5)
Business Days following the Transfer Date all servicing records in the
possession of Seller relating to each Mortgage, including the information
enumerated in Exhibit K.

         7.4.     Delivery of Mortgage Documents.

                  Seller shall provide Purchaser no later than five (5) Business
Days following the Transfer Date the loan documentation described in Exhibit L
for the Mortgages.

         7.5.     Escrow/Impound Balances; Unearned Fees.

                  Seller shall provide Purchaser within five (5) Business Days
after the Transfer Date with immediately available funds in the amount of:

         (a)      Any escrow, suspense balances and other servicing account
                  balances associated with the Mortgages net of the collectible
                  receivables. Seller shall provide Purchaser with an accounting
                  statement of any such escrow and suspense balances and loss
                  draft balances sufficient to enable Purchaser to reconcile the
                  amount of such payment with the accounts of the Mortgages; and

         (b)      All collected but unearned assumption or service fees as of
                  the Transfer Date.

         7.6.     Remittances and Investor Reports After Transfer Date.

                  As applicable, Seller shall be responsible for making
appropriate remittances and filing reports, as required by each Servicing
Agreement and any applicable Master Servicer, Investor or Agency requirements,
covering servicing activity through July 31, 1998.



                                      -23-





<PAGE>   30

         7.7.     Mortgage Payments Received After Transfer Date.

                  The amount of any Mortgage payments received by Seller on or
after the Transfer Date shall be forwarded to Purchaser in the form received
with any necessary endorsements by overnight mail within one (1) Business Day of
the date of receipt, for a period of sixty (60) days after the Transfer Date,
and thereafter by first class mail within one (1) Business Day of the date of
receipt. Seller will forward with such payments sufficient information to permit
processing of the payment by Purchaser.

         7.8.     Misapplied Payments.

                  Misapplied payments shall be processed as follows:

         (a)      Both parties shall cooperate in correcting misapplication
                  errors.

         (b)      The party receiving notice of a misapplied payment occurring
                  prior to the Transfer Date and discovered on or after the
                  Transfer Date shall immediately notify the other party.

         (c)      If a misapplied payment that occurred prior to the Transfer
                  Date cannot be identified by either party and the misapplied
                  payment has resulted in a shortage in a Mortgage account,
                  Seller shall be liable for the amount of such shortage. Seller
                  shall reimburse Purchaser for the amount of such shortage
                  within thirty (30) days after receipt of written demand
                  therefor from Purchaser.

         (d)      If a misapplied payment has created an improper Purchase Price
                  as the result of an inaccurate outstanding principal balance,
                  a check shall be issued to the party shorted by the improper
                  payment application within ten (10) Business Days after notice
                  thereof by the other party.

         (e)      Any check issued under the provisions of this Section 7.8
                  shall be accompanied by a statement indicating the purpose of
                  the check, the mortgagor and property address involved, and
                  the corresponding Seller and/or Purchaser account number.

         7.9.     Books and Records.

                  On the Transfer Date, the books, records and accounts of
Seller with respect to the Mortgages shall be in accordance with all applicable
Master Servicer, Investor and Agency requirements.

         7.10.    Compliance with Regulations.

                  On and after the Transfer Date, Purchaser shall comply with
all applicable laws and regulations with respect to, and which might affect, any
of the Mortgages or the Servicing.



                                      -24-
<PAGE>   31

         7.11.    Related Accounts.

                  On and after the Transfer Date, the Related Accounts shall be
maintained in accordance with applicable law and the terms of the Mortgages and,
where applicable, in accordance with the regulations of the governmental
agencies having jurisdiction with respect thereto.

         7.12.    Servicing Transfer Guidelines.

                  Seller and Purchaser each agrees to use its reasonable best
efforts to implement the Servicing transfer contemplated herein in accordance
with this Sale Agreement, any applicable Servicing Agreement, applicable Master
Servicer, Investor or Agency requirements and all applicable federal and state
legislative or regulatory requirements.

         7.13.    Documents After Transfer Date.

                  Seller agrees to forward to Purchaser, on and after the
Transfer Date, any notice, tax bill, cancellation notice or other documentation
(identified with Purchaser loan number) involving any Mortgage by personal or
second day delivery for the first sixty (60) days following the Transfer Date
and thereafter, mailed by regular mail.

         7.14.    FEMA Notices.

                  If required by the related Servicing Agreement, Master
Servicer, Agency or Investor requirements, or any other rule, regulation or
statute, Seller agrees to provide to the Federal Emergency Management Agency and
HUD at Seller's expense any required notice of the transfer of Servicing
hereunder.

         7.15.    Short-Year Escrow Statements.

                  As applicable, and at Seller's expense, Seller shall be
obligated to provide to the mortgagor or mortgagors an escrow statement for each
Mortgage covering the portion of the calendar year through the last Business Day
preceding the Transfer Date.

         7.16.    Solicitation by Seller.

         (a)      On or after the Closing Date, Seller will not intentionally or
                  directly solicit, and Seller shall exercise reasonable efforts
                  to prevent any of its affiliates or related parties from
                  intentionally or directly soliciting by means of direct mail,
                  by telephone or a personal solicitation, a refinance of any
                  Mortgage or solicitation of related mortgage products, nor
                  will it directly or indirectly assist or be employed by or
                  participate with any other party in soliciting a refinance of
                  a Mortgage or otherwise solicit a mortgagor for optional
                  insurance or related mortgage products for the life of such
                  Mortgage. Seller will not be liable under this provision
                  should the mortgagor, correspondent or Prior Servicer solicit
                  the refinance, provided that the correspondent or Prior
                  Servicer is not a subsidiary, affiliate or related party of
                  Purchaser.



                                      -25-
<PAGE>   32

         (b)      On or after the Closing Date, Seller shall not directly
                  solicit in connection with any Mortgage for the sale of any
                  financial product, including but not limited to
                  mortgage-related optional insurance, hazard insurance, flood
                  insurance and deposit accounts of all types.

         (c)      This Section 7.16 shall not be interpreted to prohibit
                  advertising of any sort intended for the general public, or
                  any response thereto.

         (d)      If permissible, Purchaser shall promptly notify Seller of any
                  requests for payoff information Purchaser receives pertaining
                  to the Mortgage Loans and provide such information as is
                  necessary from Seller to solicit for the sale of any financial
                  product offered by Seller.

         7.17     Solicitation by the Purchaser; Payoff Information.

         (a)      On or after the Closing Date, Purchaser will not intentionally
                  or directly solicit, and Purchaser shall exercise reasonable
                  efforts to prevent any of its affiliates or related parties
                  from intentionally or directly soliciting by means of direct
                  mail, by telephone or a personal solicitation, a refinance of
                  any Mortgage, nor will it directly or indirectly assist or be
                  employed by or participate with any other party in soliciting
                  a refinance of a Mortgage. Purchaser will not be liable under
                  this provision should the mortgagor, correspondent or Prior
                  Servicer solicit the refinance, provided that the
                  correspondent or Prior Servicer is not a subsidiary or
                  affiliate of Purchaser.

         (b)      This Section 7.17 shall not be interpreted to prohibit
                  advertising of any sort intended for the general public, or to
                  any response thereto.

         (c)      As permitted by any applicable Servicing Agreement, Master
                  Servicer, Investor or Agency requirements, or Federal, state
                  or local statutes and regulations, Purchaser shall promptly
                  notify Seller if Purchaser receives any requests for payoff
                  information pertaining to the Mortgages, and Purchaser shall
                  supply to Seller such information as is necessary for Seller
                  to solicit for the sale of any financial product offered by
                  Seller.


                                  ARTICLE VIII

                CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER

         The obligations of Purchaser under this Sale Agreement are subject, at
Purchaser's option, to the satisfaction at or prior to the Transfer Date of each
of the following conditions:

         8.1.     Delivery of Servicing Data and Records.

                  Seller shall provide Purchaser with servicing information
consisting of a master loan tape, a history tape and a payee tape covering the
Mortgages. An initial set of these tapes 


                                      -26-
<PAGE>   33

shall be received by Purchaser no later than June 30, 1998. A final set of tapes
shall be sent to the following address:

                  City Mortgage Services
                  c/o City National Bank of West Virginia
                  25 Gatewater Road
                  Cross Lanes, West Virginia 25313
                  Attn:  A. Lawrence Crimmins, Jr.

by August 2, 1998. If receipt by Purchaser of a final set of these tapes is
delayed beyond such specified dates, Seller will pay Purchaser $100 for each
calendar day of such delay. The tapes shall be accompanied with a hard copy
trial balance and related reports and shall include (i) the information set
forth in Exhibit K and (ii) evidence that Internal Revenue Service Forms 1098
and 1099 have been prepared and transmitted annually to all appropriate parties
during the period that Seller has owned the Servicing. Within five (5) days
after the Transfer Date Seller shall deliver to Purchaser the related servicing
files containing the documentation set forth in Exhibit L, provided that where
the original documents are held by a trustee or a custodian, the servicing file
shall include copies. Purchaser acknowledges that the delivery of Servicing data
on Exhibits K and L are made to the best of Seller's actual possession of items
listed on Exhibits K and L; Seller acknowledges that failure to provide the
information or documents on Exhibits K and L may give rise to a claim under
Section 10.2 to the extent such failure results in a loss, cost or other damage
to Purchaser. Purchaser shall have approved and accepted all documentation that
may be reasonably required to effectuate the transfer of the Servicing.

         8.2.     Correctness of Representations and Warranties.

                  The representations and warranties made by Seller in this Sale
Agreement are true and correct in all material respects and shall continue to be
true and correct in all material respects on the Closing Date and the Transfer
Date.

         8.3.     Compliance with Conditions.

                  All of the terms, covenants and conditions of this Sale
Agreement required to be complied with and performed by Seller at or prior to
the Transfer Date shall have been duly complied with and performed in all
material respects.

         8.4.     Preferred Stock Purchase Agreement.

                  The transactions contemplated by the Preferred Stock Purchase
Agreement, dated June 9, 1998, between Seller and Purchaser shall have been
consummated before the Closing Date.

         8.5.     Review of Mortgage Files.

                  During the Interim Period, Purchaser shall be provided between
the Closing Date and the Transfer Date during regular business hours reasonable
access to the books, records and accounts of Seller with respect to the
Mortgages, related Servicing Agreements, and any Related



                                      -27-
<PAGE>   34

Accounts and shall have determined that the books, records, and accounts of
Seller with respect to the Servicing are acceptable and the information provided
to Purchaser is complete and correct in all material respects. Purchaser shall
use its reasonable best efforts not to disturb the conduct of Seller's business.

         8.6.     Servicing Agreements.

                  The related Servicing Agreements shall be in full force and
effect. Purchaser acknowledges that Seller has disclosed certain servicer
termination events as Seller has disclosed in the Offering Memorandum.

         8.7.     Documentation of Transfer.

                  Purchaser shall have approved and accepted all documentation
used to effectuate the transfer of Servicing contemplated by this Sale
Agreement, which approval and acceptance shall not be unreasonably withheld.


                                   ARTICLE IX

                  CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

         The obligations of Seller under this Sale Agreement are subject, at the
option of Seller, to the satisfaction at or prior to the Transfer Date of each
of the following conditions:

         9.1.     Correctness of Representations and Warranties.

                  The representations and warranties made by Purchaser in this
Sale Agreement are true and correct and shall continue to be true and correct on
the Transfer Date.

         9.2.     Compliance with Conditions.

                  All of the terms, conditions and covenants of this Sale
Agreement required to be complied with and performed by Purchaser at or prior to
the Transfer Date shall have been duly complied with and performed.

         9.3.     Documentation of Transfer.

                  Purchaser shall have approved and accepted all documentation
used to effectuate the transfer of Servicing contemplated by this Sale
Agreement, which approval and acceptance shall not be unreasonably withheld.

         9.4.     Preferred Stock Purchase Agreement.

                  The transactions contemplated by the Preferred Stock Purchase
Agreement, dated June 9, 1998, between Seller and Purchaser shall have been
consummated before the Closing Date.



                                      -28-
<PAGE>   35

         9.5      Payment of Deposit by Purchaser.

                  Purchaser shall have paid to Seller the Deposit as set forth
in Section 3.2(a).


                                    ARTICLE X

                                  MISCELLANEOUS

         10.1.    Costs and Expenses.

                  Certain costs and expenses incurred in connection with the
transactions contemplated hereby shall be paid as follows:

         (a)      Seller shall pay all reasonable costs associated with the
                  transfer of the Servicing to Purchaser, including the costs of
                  shipping files to Purchaser and to Purchaser's custodian, any
                  recording or filing fees, Investor transfer fees, Seller
                  custodian charges, and all other costs associated with the
                  preparation, filing and due recording of Mortgage assignments
                  including intervening assignments, and any other expenses
                  incurred by Seller or its affiliates.

         (b)      Except as provided in (a) above, Purchaser shall pay the
                  expenses incurred by it or its affiliates in connection with
                  the transactions contemplated hereby, whether or not the
                  transactions hereby contemplated shall be consummated,
                  including but not limited to expenses incurred in conducting
                  its due diligence and the fees and expenses of its
                  professional advisors.

         (c)      Before, on and after the Transfer Date, Seller shall pay all
                  custodial fees relating to the Mortgage documents (except for
                  special expenses associated with Purchaser's servicing
                  activities and fees charged for the retrieval of documents for
                  Purchaser's use, if any).

         10.2.    Indemnification by Seller.

                  Seller shall indemnify and hold Purchaser harmless from and
shall reimburse Purchaser for any losses, damages, deficiencies, claims, causes
of action or expenses of any nature (including reasonable attorneys' fees)
incurred by Purchaser before or after the Closing Date that:

         (a)      Result from any material misrepresentation made by Seller in
                  this Sale Agreement or in any schedule, written statement or
                  certificate furnished to Purchaser by Seller pursuant to this
                  Sale Agreement, or any material breach or violation of any
                  representation or warranty made by Seller in this Sale
                  Agreement; as to any representation or warranty qualified to
                  Seller's knowledge, Seller shall be obligated to indemnify
                  Purchaser as to any such matter regardless of whether Seller
                  did or did not have knowledge of such matter;



                                      -29-
<PAGE>   36

         (b)      Result from the material breach of any covenant or promise of
                  Seller contained in this Sale Agreement or in any schedule,
                  written statement or certificate furnished by Seller pursuant
                  to this Sale Agreement;

         (c)      Result from errors of improper servicing by Seller in
                  servicing any of the Mortgages prior to the Transfer Date
                  (including, without limiting this clause (c), any failure by
                  Seller to determine and apply correctly an adjustable interest
                  rate on any Mortgage) or litigation existing or pending on the
                  Closing Date involving the Servicing of any of the Mortgages
                  or litigation involving the servicing of any Mortgage arising
                  out of matters occurring prior to the Transfer Date;

         (d)      Arise out of the litigation currently pending against Seller
                  as described on Exhibit H hereto or out of such servicer
                  termination events as Seller has disclosed in the Offering
                  Memorandum; or

         (e)      Result from Seller's failure to comply with any Servicing
                  Agreement or applicable rules, regulations or guidelines of a
                  Master Servicer, Investor or Agency with respect to the
                  Servicing, including the dispute between Seller and The First
                  National Bank of Boston.

         10.3.    Indemnification by Purchaser.

                  Purchaser shall indemnify and hold Seller harmless from and
shall reimburse Seller for any losses, damages, deficiencies, claims, causes of
action or expenses of any nature (including reasonable attorneys' fees) incurred
by Seller and arising on or after the Transfer Date that:

         (a)      Result from any material misrepresentation made by Purchaser
                  in this Sale Agreement or in any schedule, written statement
                  or certificate furnished by Purchaser pursuant to this Sale
                  Agreement;

         (b)      Result from any material breach or violation of any
                  representation or warranty made by Purchaser in this Sale
                  Agreement, or the material breach of any covenant of Purchaser
                  contained in this Sale Agreement or in any schedule, written
                  statement or certificate furnished by Purchaser pursuant to
                  this Sale Agreement;

         (c)      Result from the Servicing of any Mortgage on or after the
                  Transfer Date, provided, however, that Purchaser shall not be
                  liable to Seller for any deficiencies in the performance of
                  any pool of Mortgages unless such deficiency is caused
                  primarily by Purchaser's (i) gross negligence, (ii) willful
                  misconduct or (iii) breach of the applicable Servicing
                  Agreement, Master Servicer, Investor or Agency requirements,
                  or Federal, state or local statute or regulation; provided,
                  however, that Purchaser shall have no indemnification
                  obligation to Seller in connection with any servicer
                  termination event that exists on or before the Transfer Date
                  pursuant to any such requirement or regulation; or



                                      -30-
<PAGE>   37

         (d)      Result from litigation arising out of matters occurring on or
                  after the Transfer Date and involving the Servicing of any
                  Mortgage.

         10.4.    Failure to Deliver Documents.

                  The Seller acknowledges the necessity that Purchaser have by
the times specified herein possession of the records, documents and other
information that Seller is required hereunder to deliver to Purchaser.
Accordingly, without limiting any other remedy of Purchaser set out in this Sale
Agreement, Seller and Purchaser agree that, subject to Seller's right to notice
and opportunity to cure, if Purchaser incurs expense because of the failure of
Seller to deliver by the times specified herein the records, documents and other
information that Seller is required to deliver to Purchaser hereunder, Seller
will reimburse Purchaser for such expense to the extent that it is reasonably
incurred. Purchaser, after advising Seller in writing of such expenses and
describing how the amount was determined, may offset such expenses against the
Balance that it holds pursuant to Section 3.2(c) hereof.

         10.5.    Repurchase of Servicing.

                  If, at any time during the life of a Mortgage, Purchaser
discovers that any of the representations and warranties contained in Articles
IV and V hereof were not accurate in all material respects at the time they were
made by Seller and such inaccuracy results from Seller's failure to follow
applicable Servicing Agreements or any applicable Master Servicer, Investor or
Agency rules, regulations and guidelines, giving rise to a right of
indemnification under Section 10.2 hereunder, Purchaser shall give prompt
written notice of such fact to Seller, and, subject to Seller's having an
opportunity to cure any such defect or violation as is reasonable under the
circumstances then existing and is permitted by the applicable Servicing
Agreement, Master Servicer, Investor or Agency, Purchaser may elect to have
Seller, in lieu of indemnifying Purchaser, repurchase from Purchaser the right
to service those Mortgages that are affected by the inaccurate representation
and warranty. If, at any time during the life of a Mortgage, Purchaser is
required to repurchase (or is permitted to repurchase and elects to have Seller
repurchase) such Mortgage from an Investor, subject to Seller's right to notice
and opportunity to cure, Seller shall repurchase the Mortgage from Purchaser at
the Investor repurchase price (as determined under any applicable Investor
guidelines). When Seller is required to repurchase or reclaim Servicing of a
Mortgage from Purchaser, such repurchase shall be accomplished within the time
period permitted or required by the applicable Investor, and such repurchase
shall be accomplished within fifteen (15) Business Days following Seller's
receipt from Purchaser of written demand and support documentation from
Purchaser pursuant hereto. Upon completion of such purchase or repurchase or
reclaiming by Seller, Purchaser shall promptly forward to Seller all servicing
records and all documents relating to such repurchased Servicing.

         10.6.    Supplementary Information.

                  From time to time on, before or after the Transfer Date,
Seller shall furnish Purchaser such incidental information, which is reasonably
available to Seller, supplementary to the information contained in the documents
and schedules delivered pursuant hereto and shall


                                      -31-
<PAGE>   38

file such reports as Purchaser may reasonably request to service in accordance
with any applicable Servicing Agreement or Master Servicer, Investor or Agency
requirements.

         10.7.    Financial Statements.

                  Purchaser will provide to Seller, as soon as available, and in
any event within 90 days after the end of each fiscal year of City Holding
Company, certified financial statements of City Holding Company, prepared by
independent certified accountants in accordance with generally accepted
accounting principles. Purchaser will provide to Seller, upon Seller's request,
City Holding Company's unaudited quarterly financial statements.

         10.8.    Confidentiality.

                  Each party and its respective affiliates shall hold, and shall
cause their respective directors, officers, employees and authorized
representatives to hold, in strict confidence and not use or disclose to any
other person without the prior written consent of the other party all
information concerning customers or proprietary business procedures, servicing
fees or prices, policies or plans of the other party or any of its affiliates
received by them from the other party in connection with the transactions
contemplated hereby. Neither party shall take any action that would permit the
use of such information by a third party. Nothwithstanding this Section 10.8,
Purchaser shall be permitted to use or disclose such information as may be
necessary for Purchaser or its affiliates to solicit in connection with any
Mortgage for the sale of mortgage-related products not involving the extension
of credit secured by real estate.

         10.9.    Broker's Fees.

                  Seller shall be responsible for the fees, if any, of Friedman,
Billings, Ramsey & Co., Inc., its advisor, in connection with the transactions
contemplated by this Sale Agreement. Each party hereto represents and warrants
to the other that it has made no other agreement to pay any agent, finder,
broker or other representative any fee or commission in the nature of a finder's
or originator's fee arising out of or in connection with the subject matter of
this Sale Agreement. The parties hereto covenant with each other and agree to
indemnify and hold each other harmless from and against any such other
obligation or liability and any expense (including reasonable attorneys' fees)
incurred in investigation or defending any claim based upon the other party's
actions in connection with such other obligation or liability.

         10.10.   Survival of Representations and Warranties.

                  Each party hereto covenants and agrees that the
representations and warranties in this Sale Agreement, and in any document
delivered or to be delivered pursuant hereto, shall survive the Closing Date and
the Transfer Date.

         10.11.   Form of Payment to be Made.

                  Except as to payments that are rightfully deducted from funds
due to Purchaser pursuant to the terms of this Sale Agreement, Purchaser shall
pay to Seller the amounts required by Article III by wire of immediately
available Fed funds in accordance with Seller's instructions.



                                      -32-
<PAGE>   39

         10.12.   Assignment.

                  Prior to the Transfer Date, Purchaser may assign its rights
under this Sale Agreement only upon (a) receipt of approval by Seller, which
Seller will not unreasonably withhold, and (b) reimbursement of Seller for all
costs reasonably incurred by Seller as a result of Purchaser's assignment.

         10.13.   Notices.

                  All notices, requests, demands and other communications that
are required or permitted to be given under this Sale Agreement shall be in
writing and shall be deemed to have been duly given upon the delivery, express
mail delivery or mailing thereof by registered or certified mail, return receipt
requested, postage prepaid:

         (a)      If to Seller, to:

                  Mego Mortgage Corporation
                  1000 Parkwood Circle, Suite 500
                  Atlanta, Georgia 30339
                  Attn: Jeffery S. Moore
                  with a copy to:  Robert H. Chastain, Esquire

         (b)      If to Purchaser, to:

                  City Mortgage Services
                  c/o City National Bank of West Virginia
                  25 Gatewater Road
                  Cross Lanes, West Virginia 25313
                  Attn:  A. Lawrence Crimmins, Jr.

                  with a copy to:

                  Hunton & Williams
                  951 E. Byrd Street
                  Richmond, Virginia 23219
                  Attn:  Randall S. Parks

or to such other address as Purchaser or Seller shall have specified in writing
to the others in the manner specified above.

         10.14.   Waivers.

                  Either Purchaser or Seller may, by written notice to the
other:

         (a)      Extend the time for the performance of any of the obligations
                  or other transactions of the other; and



                                      -33-
<PAGE>   40

         (b)      Waive compliance with any of the terms, conditions or
                  covenants required to be complied with by the other hereunder.

         The waiver by any party hereto of a breach of any provision of this
Sale Agreement shall not operate or be construed as a waiver of any other
subsequent breach or provision.

         10.15.   Entire Agreement; Amendment.

                  This Sale Agreement constitutes the entire agreement between
the parties with respect to the sale and purchase of the Servicing and
supersedes all prior agreements with respect thereto. This Sale Agreement may be
amended and any provision hereof waived, but only in writing signed by the party
against whom such amendment or waiver is sought to be enforced.

         10.16.   Binding Effect.

                  This Sale Agreement shall inure to the benefit of and be
binding upon the parties hereto and their successors and assigns. The parties
agree that, except as otherwise set forth herein, each may assign this Sale
Agreement to a third party so long as (i) such assignment cannot reasonably be
deemed to have an adverse effect on the other party, and (ii) written consent is
obtained from the other party prior to the assignment of the Sale Agreement.
Nothing in this Sale Agreement, express or implied, is intended to confer on any
person other than the parties hereto and their successors and assigns, any
rights, obligations, remedies or liabilities.

         10.17.   Headings.

                  Headings on the Articles and Sections in this Sale Agreement
are for reference purposes only and shall not be deemed to have any substantive
effect.

         10.18.   Applicable Laws.

                  This Sale Agreement shall be construed in accordance with the
laws of the State of West Virginia without reference to its principles of
conflict of laws.

         10.19.   Incorporation of Exhibits.

                  Exhibits A through L attached hereto shall be incorporated
herein and shall be understood to be a part hereof as though included in the
body of this Sale Agreement.

         10.20.   Counterparts.

                  This Sale Agreement may be executed in counterparts, each of
which, when so executed and delivered, shall be deemed to be an original and all
of which, taken together, shall constitute one and the same agreement.

         10.21.   Further Assurances.

                  Purchaser and Seller agree that each will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such 



                                      -34-
<PAGE>   41

supplements hereto and such further instruments or documents as may reasonably
be required or appropriate to further express the intention, or to facilitate
the performance, of this Sale Agreement and consummation of the transactions
contemplated hereby.



                                      -35-
<PAGE>   42
         IN WITNESS WHEREOF, each of the undersigned parties to this Sale
Agreement has caused this Sale Agreement to be duly executed in its corporate
name by one of its duly authorized officers, all as of the date first above
written.



SELLER:                                 MEGO MORTGAGE CORPORATION


ATTEST:                                 By:/s/ Jeff S. Moore
                                           ------------------------------------

                                        Name:  Jeff S. Moore
                                             ----------------------------------
/s/Robert H. Chastain
----------------------------------      Title: President
                                              ---------------------------------



PURCHASER:                              THE CITY NATIONAL BANK OF
                                        WEST VIRGINIA


ATTEST:                                 By:/s/ Robert A. Henson
                                           ------------------------------------

                                        Name:  Robert A. Henson
                                             ----------------------------------
/s/M.B. Carr
----------------------------------      Title: CFO
                                              ---------------------------------






                                      -36-