BEAR STEARNS ASSET BACKED SECURITIES, INC.,

                                    Depositor

                            EMC MORTGAGE CORPORATION,

                           Seller and Master Servicer

                                       and

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,

                      Trustee and Securities Administrator

                    ----------------------------------------

                         POOLING AND SERVICING AGREEMENT

                           Dated as of August 1, 2001
                    ----------------------------------------

               BEAR STEARNS ASSET BACKED SECURITIES TRUST 2001-AC1

                   ASSET-BACKED CERTIFICATES, SERIES 2001-AC1



<PAGE>



<TABLE>
<CAPTION>
                                                   TABLE OF CONTENTS
                                                                                           Page
                                                                                           ----



                                    ARTICLE I

                                   DEFINITIONS
<S>                                                                                        <C>
        Section 1.01   DEFINED TERMS...........................................................-5-




                                   ARTICLE II

                            CONVEYANCE OF TRUST FUND
                         REPRESENTATIONS AND WARRANTIES
        Section 2.01   CONVEYANCE OF TRUST FUND...............................................-45-
        Section 2.02   ACCEPTANCE OF THE MORTGAGE LOANS.......................................-46-
        Section 2.03   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER SERVICER AND THE
                       SELLER.................................................................-48-
        Section 2.03(A)       ASSIGNMENT OF INTERESTS IN THE NATIONAL CITY SUBSERVICING AGREEMENT
                                                                                              -58-
        Section 2.04   REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR........................-58-
        Section 2.05   DELIVERY OF OPINION OF COUNSEL IN CONNECTION WITH SUBSTITUTIONS AND
                       REPURCHASES............................................................-59-
        Section 2.06   COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES..........................-60-
        Section 2.07   COVENANTS OF THE MASTER SERVICER.......................................-60-




                                   ARTICLE III

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
        Section 3.01   MASTER SERVICER........................................................-62-
        Section 3.02   REMIC-RELATED COVENANTS................................................-63-
        Section 3.03   SUBSERVICING; NATIONAL CITY SUBSERVICING AGREEMENT; MONITORING OF
                       SUBSERVICERS; ENFORCEMENT OF OBLIGATIONS...............................-63-
        Section 3.04   SUCCESSOR MASTER SERVICER AND SUBSERVICING AGREEMENTS..................-64-
        Section 3.05   RIGHTS OF THE DEPOSITOR AND THE TRUSTEE IN RESPECT OF THE MASTER SERVICER
                        ......................................................................-65-
        Section 3.06   DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.............................-65-
        Section 3.07   RELEASE OF MORTGAGE FILES..............................................-66-
        Section 3.08   DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF MASTER SERVICER TO BE HELD
                       FOR TRUSTEE............................................................-67-


                                        i

<PAGE>



        Section 3.09   MAINTENANCE OF HAZARD INSURANCE........................................-67-
        Section 3.10   PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.......................-68-
        Section 3.11   MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.................-68-
        Section 3.12   TRUSTEE TO RETAIN POSSESSION OF CERTAIN INSURANCE POLICIES AND DOCUMENTS
                        ......................................................................-69-
        Section 3.13   REALIZATION UPON DEFAULTED MORTGAGE LOANS; DETERMINATION OF EXCESS
                       LIQUIDATION PROCEEDS AND REALIZED LOSSES; REPURCHASES OF CERTAIN MORTGAGE
                       LOANS..................................................................-69-
        Section 3.14   SERVICING COMPENSATION.................................................-72-
        Section 3.15   REO PROPERTY...........................................................-72-
        Section 3.16   ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE..........................-72-
        Section 3.17   ANNUAL INDEPENDENT ACCOUNTANT'S SERVICING REPORT.......................-73-
        Section 3.18   REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION..................-73-
        Section 3.19   ACCESS TO CERTAIN DOCUMENTATION........................................-74-
        Section 3.20   OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS..........................-74-




                                   ARTICLE IV

                                    ACCOUNTS
        Section 4.01   COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT................-76-
        Section 4.02   PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.......................-78-
        Section 4.03   COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW ACCOUNTS
                        ......................................................................-79-
        Section 4.04   DISTRIBUTION ACCOUNT...................................................-80-
        Section 4.05   PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION ACCOUNT
                        ......................................................................-80-




                                    ARTICLE V

                           DISTRIBUTIONS AND ADVANCES
                             BY THE MASTER SERVICER
        Section 5.01   ADVANCES...............................................................-82-
        Section 5.02   COMPENSATING INTEREST PAYMENTS.........................................-82-
        Section 5.03   REMIC DISTRIBUTIONS....................................................-83-
        Section 5.04   DISTRIBUTIONS..........................................................-83-
        Section 5.04A  ALLOCATION OF REALIZED LOSSES..........................................-87-
        Section 5.05   MONTHLY STATEMENTS TO CERTIFICATEHOLDERS...............................-88-
        Section 5.06   REMIC DESIGNATIONS AND ALLOCATIONS.....................................-91-



                                       ii

<PAGE>



                                   ARTICLE VI

                                THE CERTIFICATES
        Section 6.01   THE CERTIFICATES.......................................................-96-
        Section 6.02   CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES
                        ......................................................................-97-
        Section 6.03   MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.....................-100-
        Section 6.04   PERSONS DEEMED OWNERS.................................................-101-
        Section 6.05   ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.............-101-
        Section 6.06   BOOK-ENTRY CERTIFICATES...............................................-101-
        Section 6.07   NOTICES TO DEPOSITORY.................................................-102-
        Section 6.08   DEFINITIVE CERTIFICATES...............................................-102-
        Section 6.09   MAINTENANCE OF OFFICE OR AGENCY.......................................-103-




                                   ARTICLE VII

                        THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER
        Section 7.01   RESPECTIVE LIABILITIES OF THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER
                        .....................................................................-104-
        Section 7.02   MERGER OR CONSOLIDATION OF THE DEPOSITOR, THE MASTER SERVICER OR THE SELLER
                                                                                             -104-
        Section 7.03   LIMITATION ON LIABILITY OF THE DEPOSITOR, THE SELLER, THE MASTER SERVICER AND
                       OTHERS................................................................-104-
        Section 7.04   LIMITATION ON RESIGNATION OF MASTER SERVICER..........................-105-
        Section 7.05   ERRORS AND OMISSIONS INSURANCE; FIDELITY BONDS........................-105-




                                  ARTICLE VIII

                     DEFAULT; TERMINATION OF MASTER SERVICER

        Section 8.01   EVENTS OF DEFAULT.....................................................-106-
        Section 8.02   TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR..............................-107-
        Section 8.03   NOTIFICATION TO CERTIFICATEHOLDERS....................................-109-
        Section 8.04   WAIVER OF DEFAULTS....................................................-109-






                                       iii

<PAGE>




                                   ARTICLE IX

                     CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR
        Section 9.01   DUTIES OF TRUSTEE AND SECURITIES ADMINISTRATOR........................-110-
        Section 9.02   CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR
                        .....................................................................-112-
        Section 9.03   TRUSTEE AND SECURITIES ADMINISTRATOR NOT LIABLE FOR CERTIFICATES OR MORTGAGE
                       LOANS.................................................................-113-
        Section 9.04   TRUSTEE AND SECURITIES ADMINISTRATOR MAY OWN CERTIFICATES.............-114-
        Section 9.05   TRUSTEE'S AND SECURITIES ADMINISTRATOR'S EXPENSES.....................-114-
        Section 9.06   ELIGIBILITY REQUIREMENTS FOR TRUSTEE AND SECURITIES ADMINISTRATOR.....-114-
        Section 9.07   INSURANCE.............................................................-115-
        Section 9.08   RESIGNATION AND REMOVAL OF TRUSTEE AND SECURITIES ADMINISTRATOR.......-115-
        Section 9.09   SUCCESSOR TRUSTEE OR SECURITIES ADMINISTRATOR.........................-116-
        Section 9.10   MERGER OR CONSOLIDATION OF TRUSTEE OR SECURITIES ADMINISTRATOR........-117-
        Section 9.11   APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.........................-117-
        Section 9.12   TAX MATTERS...........................................................-118-




                                    ARTICLE X

                                   TERMINATION
        Section 10.01  TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL MORTGAGE LOANS
                        .....................................................................-122-
        Section 10.02  FINAL DISTRIBUTION ON THE CERTIFICATES................................-122-
        Section 10.03  ADDITIONAL TERMINATION REQUIREMENTS...................................-124-




                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS
        Section 11.01  AMENDMENT.............................................................-125-
        Section 11.02  RECORDATION OF AGREEMENT; COUNTERPARTS................................-126-
        Section 11.03  GOVERNING LAW.........................................................-126-
        Section 11.04  INTENTION OF PARTIES..................................................-127-
        Section 11.05  NOTICES...............................................................-127-
        Section 11.06  SEVERABILITY OF PROVISIONS............................................-128-
        Section 11.07  ASSIGNMENT............................................................-128-
        Section 11.08  LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS............................-128-
        Section 11.09  INSPECTION AND AUDIT RIGHTS...........................................-129-
        Section 11.10  CERTIFICATES NONASSESSABLE AND FULLY PAID.............................-130-
</TABLE>


                                       iv

<PAGE>


EXHIBITS

Exhibit A-1    Form of Class [A-_] Certificates
Exhibit A-2    Form of Class [M-__][B][B-IO] Certificates
Exhibit A-3    Form of Class P Certificates
Exhibit A-4    Form of Class R Certificates
Exhibit B      Mortgage Loan Schedule
Exhibit C-1    Form of Initial Certification of Trustee
Exhibit C-2    Form of Interim Certification of Trustee
Exhibit C-3    Form of Final Certification of Trustee
Exhibit D      Form of Transfer Affidavit
Exhibit E      Form of Transferor Certificate
Exhibit F      Form of Investment Letter (Non-Rule 144A)
Exhibit G      Form of Rule 144A Investment Letter
Exhibit H      Form of Request for Release
Exhibit I      DTC Letter of Representations
Exhibit J      Schedule of Mortgage Loans with Lost Notes


                                       v

<PAGE>



               POOLING AND SERVICING AGREEMENT, dated as of August 1, 2001,
among BEAR STEARNS ASSET BACKED SECURITIES, INC., a Delaware corporation, as
depositor (the "Depositor"), EMC MORTGAGE CORPORATION, a Delaware corporation,
as seller (in such capacity, the "Seller") and as a master servicer (in such
capacity, the "Master Servicer"), WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as trustee (in such capacity, the
"Trustee" and as securities administrator (in such capacity, the "Securities
Administrator").

                              PRELIMINARY STATEMENT

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

                                     REMIC I

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


<TABLE>
<CAPTION>


                         Uncertificated REMIC I    Initial Uncertificated        Assumed Final
     Designation           Pass-Through Rate          Principal Balance        Maturity Date(1)
---------------------------------------------------------------------------------------------------
<S>     <C>                   <C>                 <C>                       <C>
        LT1A                  Variable(2)         $   217,861,578.03          September 25, 2031
        LT1B                  Variable(2)         $         1,254.06          September 25, 2031
        LT1C                  Variable(2)         $           924.57          September 25, 2031
        LT1D                  Variable(2)         $    24,200,000.00          September 25, 2031
        LT1P                  Variable(2)         $           100.00          September 25, 2031
</TABLE>
 -------------------
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date in the month of the maturity date for
     the Mortgage Loan with the latest maturity date has been designated as the
     "latest possible maturity date" for each REMIC I Regular Interest.
(2)  Calculated in accordance with the definition of "Uncertificated REMIC I
     Pass-Through Rate" herein.

                                    REMIC II
                                    --------

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


                                       -1-

<PAGE>



        The following table irrevocably sets forth the designation, the
Uncertificated REMIC II Pass- Through Rate, the initial Uncertificated Principal
Balance, and solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC
II Regular Interests. None of the REMIC II Regular Interests will be
certificated.



<TABLE>
<CAPTION>


                        Uncertificated REMIC II    Initial Uncertificated        Assumed Final
     Designation           Pass-Through Rate          Principal Balance        Maturity Date(1)
-----------------------------------------------------------------------------------------------------
<S>    <C>                   <C>                  <C>                         <C>
       LT2-1AA                Variable(2)         $     136,549,738.00       September 25, 2031
       LT2-AI1                Variable(2)         $         385,520.00       September 25, 2031
       LT2-AI2                Variable(2)         $         400,560.00       September 25, 2031
       LT2-AI3                Variable(2)         $         161,070.00       September 25, 2031
       LT2-AI4                Variable(2)         $         244,050.00       September 25, 2031
       LT2-AI5                Variable(2)         $         132,500.00       September 25, 2031
       LT2-1M1                Variable(2)         $          27,865.28       September 25, 2031
       LT2-1M2                Variable(2)         $          24,382.84       September 25, 2031
       LT2-1B                 Variable(2)         $          17,412.20       September 25, 2031
       LT2-1ZZ                Variable(2)         $       1,393,369.03       September 25, 2031
       LT2-2AA                Variable(2)         $     100,672,743.53       September 25, 2031
       LT2-AII                Variable(2)         $         975,910.00       September 25, 2031
       LT2-2M1                Variable(2)         $          20,544.72       September 25, 2031
       LT2-2M2                Variable(2)         $          17,977.16       September 25, 2031
       LT2-2B                 Variable(2)         $          12,837.80       September 25, 2031
       LT2-2ZZ                Variable(2)         $       1,027,276.10       September 25, 2031
       LT2A-IO                Variable(2)                       N/A(3)       September 25, 2031
        LT2P                  Variable(2)         $             100.00       September 25, 2031
</TABLE>
-------------------

(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date in the month following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for each REMIC II Regular Interest.
(2)  Calculated in accordance with the definition of "Uncertificated REMIC II
     Pass-Through Rate" herein.
(3)  REMIC II Regular Interest LT2A-IO will not have an Uncertificated Principal
     Balance, but will accrue interest on its Uncertificated Notional Amount
     outstanding from time to time which shall equal the Uncertificated
     Principal Balance of REMIC I Regular Interest LT1D.

                                   REMIC III

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



                                       -2-

<PAGE>



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



<TABLE>
<CAPTION>


                      Initial Certificate Principal                            Assumed Final
  Class Designation              Balance               Pass-Through Rate     Maturity Date(1)
--------------------  -----------------------------   ------------------   -------------------
<S>                    <C>                             <C>                 <C>
     Class I-A1                   $38,552,000              Class I-A1         September 25, 2031
                                                        Pass-Through Rate
     Class I-A2                   $40,056,000              Class I-A2         September 25, 2031
                                                        Pass-Through Rat
     Class I-A3                   $16,107,000              Class I-A3         September 25, 2031
                                                        Pass-Through Rate
     Class I-A4                   $24,405,000              Class I-A4         September 25, 2031
                                                        Pass-Through Rate
     Class I-A5                   $13,250,000              Class I-A5         September 25, 2031
                                                       Pass-Through Rate
     Class II-A                   $97,591,000              Class II-A         September 25, 2031
                                                       Pass-Through Rate
     Class A-IO                        N/A(3)              Class A-IO         September 25, 2031
                                                       Pass-Through Rate
      Class M-1                    $4,841,000              Class M-1          September 25, 2031
                                                       Pass-Through Rate
      Class M-2                    $4,236,000              Class M-2          September 25, 2031
                                                       Pass-Through Rate
       Class B                     $3,025,000               Class B           September 25, 2031
                                                       Pass-Through Rate
     Class B-IO                    $756.67(2)              Class B-10         September 25, 2031
                                                       Pass-Through Rate
       Class P                           $100                N/A(4)           September 25, 2031

</TABLE>

-------------------
(1)       Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
          regulations, the Distribution Date in the month following the maturity
          date for the Mortgage Loan with the latest maturity date has been
          designated as the "latest possible maturity date" for each Class of
          Certificates that represents one or more of the "regular interests" in
          REMIC III.
(2)       The Class B-IO Certificates will accrue interest at the Class B-IO
          Pass-Through Rate on the Certificate Notional Balance of the Class
          B-IO Certificates outstanding from time to time which shall equal the
          aggregate of the Uncertificated Principal Balances of the REMIC II
          Regular Interests. The Class B-IO Certificates will not accrue
          interest on their Certificate Principal Balance.
(3)       The Class A-IO Certificates do not have a Certificate Principal
          Balance and are not entitled to distributions of principal. The Class
          A-IO Certificates accrue interest on a Certificate Notional Balance
          calculated in accordance with the definition of "Certificate Notional
          Balance" herein.
(4)       The Class P Certificates do not accrue interest.

        The Trust Fund shall be named, and may be referred to as, the "Bear
Stearns Asset Backed Securities Trust 2001-AC1." The Certificates issued
hereunder may be referred to as "Asset-Backed


                                       -3-

<PAGE>



Certificates Series 2001-AC1" (including for purposes of any endorsement or
assignment of a Mortgage Note or Mortgage).

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


                                       -4-

<PAGE>



                                    ARTICLE I

                                   DEFINITIONS

        Section 1.01   DEFINED TERMS.

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

               ACCEPTED MASTER SERVICING PRACTICES: With respect to any Mortgage
Loan, as applicable, either (a) those customary mortgage servicing practices of
prudent mortgage servicing institutions that master service mortgage loans of
the same type and quality as such Mortgage Loan in the jurisdiction where the
related Mortgaged Property is located, to the extent applicable to the Trustee
(except in its capacity as successor to the Master Servicer), or (b) with
respect to the Master Servicer, as provided in this Agreement or, with respect
to any subservicer, as provided in the related Subservicing Agreement, but, in
each case, in no event below the standard set forth in clause (a).

               ACCOUNT: The Distribution Account and any Protected Account.

               ACCRUAL PERIOD: With respect to the Certificates (other than the
Class I-A1 Certificates and the Class P Certificates) and any Distribution Date,
the calendar month immediately preceding such Distribution Date. With respect to
the Class I-A1 Certificates and any Distribution Date, the period from and
including the immediately preceding Distribution Date (or, in the case of the
first Distribution Date, the Closing Date) to but excluding such Distribution
Date. All calculations of interest on the Certificates (other than the Class
I-A1 Certificates and the Class P Certificates) will be made on the basis of a
360-day year consisting of twelve 30-day months, and all calculations of
interest on the Class I-A1 Certificates will be made on the basis of the actual
number of days elapsed in the related Accrual Period and in a 360-day year.

               ADVANCE: An advance of delinquent payments of principal or
interest in respect of a Mortgage Loan required to be made by the Master
Servicer as provided in Section 5.01 or by any subservicer in accordance with
the related Subservicing Agreement.

               AGGREGATE GROUP NET RATE CAP: For any Distribution Date (i)
through the applicable Accrual Period for a Class relating to the Distribution
Date in February 2004, the excess of (a) the weighted average of the Net
Mortgage Rates of the Mortgage Loans in Loan Group I and Loan Group II as of the
last day of the related Due Period over (b) interest payable on the Class A-IO
Certificates with respect to each such Accrual Period expressed as a per annum
rate calculated on the basis of the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period and (ii) thereafter,
the lesser of the Group I Net Rate Cap and the Group II Net Rate Cap, in each
case for such Distribution Date. Such amount is the equivalent of the weighted
average of (x) the Uncertificated REMIC I Pass-Through Rate with respect to
REMIC I Regular Interest LT1A, REMIC I Regular Interest LT1B, REMIC I Regular
Interest LT1C and REMIC I Regular Interest LT1P for such Distribution Date and
(y) the excess, if any, of (i) the Uncertificated REMIC I Pass-Through Rate with
respect to REMIC I Regular Interest LT1D for such Distribution Date over (ii) in
the case of


                                       -5-

<PAGE>



the Distribution Dates beginning in September 2001 and ending in February 2004,
the applicable Class A-IO Pass-Through Rate, and (B) in the case of any
Distribution Date thereafter, 0.00% per annum, weighted, in the case of clause
(x), on the basis of the aggregate Uncertificated Principal Balance of REMIC I
Regular Interest LT1A, REMIC I Regular Interest LT1B, REMIC I Regular Interest
LT1C and REMIC I Regular Interest LT1P and in the case of clause (y), on the
basis of the Uncertificated Principal Balance of REMIC I Regular Interest LT1D,
respectively.

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

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

               APPLIED REALIZED LOSS AMOUNT: With respect to any Distribution
Date and a Class of Subordinated Certificates (other than the Class B-IO
Certificates and the Residual Certificates) the sum of the Realized Losses with
respect to the Mortgage Loans, which are to be applied in reduction of the
Certificate Principal Balance of that Class of Certificates pursuant to this
Agreement, which shall on any such Distribution Date equal with respect to the
Class B Certificates, Class M-2 Certificates and Class M-1 Certificates, in that
order, so long as their respective Certificate Principal Balances have not been
reduced to zero, the amount, if any, by which, (i) the aggregate Certificate
Principal Balance of all of the Certificates (after all distributions of
principal on such Distribution Date) exceeds (ii) the aggregate Stated Principal
Balance of all of the Mortgage Loans as of the last day of the related Due
Period.

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

               ASSUMPTION AGREEMENT: The Assignment, Assumption and Recognition
Agreement dated August 30, 2001, by and among the Seller, National City and the
Trust acknowledging the transfer of the National City Subservicing Agreement to
the Trust.

               BANKRUPTCY CODE: Title 11 of the United States Code.

               BOOK-ENTRY CERTIFICATES: Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository


                                       -6-

<PAGE>



and as described in Section 6.06). As of the Closing Date, each Class of Regular
Certificates (other than the Class P and the Class B-IO Certificates)
constitutes a Class of Book-Entry Certificates.

               BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in The City of New York, New York,
Minneapolis, Minnesota or the city in which the Corporate Trust Office of the
Trustee or the principal office of the Master Servicer is located are authorized
or obligated by law or executive order to be closed.

               CERTIFICATE: Any one of the certificates of any Class executed
and authenticated by the Trustee in substantially the forms attached hereto as
Exhibits A-1 through A-4.

               CERTIFICATE NOTIONAL BALANCE: As to any Class A-IO Certificate
and any Distribution Date, an amount equal to the Uncertificated Principal
Balance of REMIC I Regular Interest LT1D. With respect to the Class B-IO
Certificates, immediately prior to any Distribution Date, the aggregate of the
Uncertificated Principal Balances of the REMIC II Regular Interests.

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

               CERTIFICATE PRINCIPAL BALANCE: As to any Certificate (other than
any Class A-IO, Class B-IO or Class R Certificate) and as of any Distribution
Date, the Initial Certificate Principal Balance of such Certificate less the sum
of (i) all amounts distributed with respect to such Certificate in reduction of
the Certificate Principal Balance thereof on previous Distribution Dates
pursuant to Section 5.04, and (ii) in the case of any Subordinated Certificate,
any Applied Realized Loss Amounts allocated to such Certificate on previous
Distribution Dates. References herein to the Certificate Principal Balance of a
Class of Certificates or a Class A Group shall mean the Certificate Principal
Balances of all Certificates in such Class or all Certificates in such Class A
Group, as the case may be.

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

               CERTIFICATEHOLDER OR HOLDER: The person in whose name a
Certificate is registered in the Certificate Register (initially, Cede & Co., as
nominee for the Depository, in the case of any Book-Entry Certificates).

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

               CLASS A CERTIFICATES: The Senior Certificates.

               CLASS A GROUP: Either of the Class A-I Group or the Class A-II
Group.

               CLASS A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
an amount equal to the excess, if any, of (i) the aggregate Certificate
Principal Balance of the Class A Certificates immediately prior to such
Distribution Date over (ii) the excess of (a) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period over
(b) the product of


                                       -7-

<PAGE>



(1) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period and (2) the sum of (x) 10.00% and (y) the Current
Specified Overcollateralization Percentage for such Distribution Date.

               CLASS I-A1 CERTIFICATE: Any Certificate designated as a "Class
I-A1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class I-A1 Certificates as set forth herein and evidencing a Regular
Interest in REMIC III.

               CLASS I-A1 PASS-THROUGH RATE: For the first Distribution Date,
3.73% per annum and for any Distribution Date thereafter, the lesser of (i)
One-Month LIBOR for the related Accrual Period plus 0.15% per annum and (ii) the
Class 1-A1 Rate Cap for such Distribution Date.

               CLASS I-A1 RATE CAP: With respect to any Distribution Date for
the Class I-A1 Certificates the product of (i) a fraction, the numerator of
which is the actual number of days elapsed in the related Accrual Period and the
denominator of which is 360, (ii) 12 and (iii) for each Distribution Date (a) on
or prior to the Distribution Date in February 2004, the Aggregate Group Net Rate
Cap (calculated pursuant to clause (i) of the definition thereof) and (b)
thereafter, the Group I Net Rate Cap, in each case for such Distribution Date.

               CLASS I-A2 CERTIFICATE: Any Certificate designated as a "Class
I-A2 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class I-A2 Certificates as set forth herein and evidencing a Regular
Interest in REMIC III.

               CLASS I-A2 PASS-THROUGH RATE: On any Distribution Date, the
lesser of (i) 5.640% per annum and (ii) the Class I-A2 Rate Cap for such
Distribution Date.

               CLASS I-A2 RATE CAP: With respect to any Distribution Date for
the Class I-A2 Certificates (i) on or prior to the Distribution Date in February
2004, the Aggregate Group Net Rate Cap (calculated pursuant to clause (i) of the
definition thereof) and (ii) thereafter, the Group I Net Rate Cap, in each case
for such Distribution Date.

               CLASS I-A3 CERTIFICATE: Any Certificate designated as a "Class
I-A3 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class I-A3 Certificates as set forth herein and evidencing a Regular
Interest in REMIC III.

               CLASS I-A3 PASS-THROUGH RATE: On any Distribution Date, the
lesser of (i) 6.350% per annum and (ii) the Class I-A3 Rate Cap for such
Distribution Date.

               CLASS I-A3 RATE CAP: With respect to any Distribution Date for
the Class I-A3 Certificates (i) on or prior to the Distribution Date in February
2004, the Aggregate Group Net Rate Cap (calculated pursuant to clause (i) of the
definition thereof) and (b) thereafter, the Group I Net Rate Cap, in each case
for such Distribution Date.



                                       -8-

<PAGE>



               CLASS I-A4 CERTIFICATE: Any Certificate designated as a "Class
I-A4 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class I-A4 Certificates as set forth herein and evidencing a Regular
Interest in REMIC III.

               CLASS I-A4 PASS-THROUGH RATE: On any Distribution Date, the
lesser of (i) if such Distribution Date occurs on or prior to the Optional
Termination Date, 6.900% per annum, and thereafter, 7.400% per annum and (ii)
the Class I-A4 Rate Cap for such Distribution Date.

               CLASS I-A4 RATE CAP: With respect to any Distribution Date for
the Class I-A4 Certificates (i) on or prior to the Distribution Date in February
2004, the Aggregate Group Net Rate Cap (calculated pursuant to clause (i) of the
definition thereof) and (b) thereafter, the Group I Net Rate Cap, in each case
for such Distribution Date.

               CLASS I-A5 CERTIFICATE: Any Certificate designated as a "Class
I-A5 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class I-A5 Certificates as set forth herein and evidencing a Regular
Interest in REMIC III.

               CLASS I-A5 PASS-THROUGH RATE: On any Distribution Date, the
lesser of (i) if such Distribution Date occurs on or prior to the Optional
Termination Date, 7.430% per annum, and thereafter, 7.930% per annum and (ii)
the Class I-A5 Rate Cap for such Distribution Date.

               CLASS I-A5 RATE CAP: With respect to any Distribution Date for
the Class I-A5 Certificates (i) on or prior to the Distribution Date in February
2004, the Aggregate Group Net Rate Cap (calculated pursuant to clause (i) of the
definition thereof) and (b) thereafter, the Group I Net Rate Cap, in each case
for such Distribution Date.

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

               CLASS II-A PASS-THROUGH RATE: On any Distribution Date, the
lesser of (i) if such Distribution Date occurs on or prior to the Optional
Termination Date, 7.000% per annum, and thereafter 7.500% per annum and (ii) the
Class II-A Rate Cap for such Distribution Date.

               CLASS II-A RATE CAP: With respect to any Distribution Date for
the Class II-A Certificates (i) on or prior to the Distribution Date in February
2004, the Aggregate Group Net Rate Cap (calculated pursuant to clause (i) of the
definition thereof) and (ii) thereafter, the Group II Net Rate Cap, in each case
for such Distribution Date.

               CLASS A-I GROUP: The Class I-A1 Certificates, Class I-A2
Certificates, the Class I-A3 Certificates, Class I-A4 Certificates and Class
I-A5 Certificates.

               CLASS A-II GROUP: The Class II-A Certificates.

                                       -9-

<PAGE>



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

               CLASS A-IO PASS-THROUGH RATE: With respect to the Class A-IO
Certificates and (a) any of the first through the eighteenth Distribution Dates,
a per annum rate equal to the excess of (i) the Weighted Average Net Mortgage
Rate over (ii) the excess (but not less than zero) of (x) the Weighted Average
Net Mortgage Rate over (y) 8.00% per annum, (b) any of the eighteenth through
the twenty-fourth Distribution Dates, a per annum rate equal to the excess of
(i) the Weighted Average Net Mortgage Rate over (ii) the excess (but not less
than zero) of (x) the Weighted Average Net Mortgage Rate over (y) 7.25% per
annum, (c) any of the twenty-fourth through the thirtieth Distribution Dates, a
per annum rate equal to the excess of (i) the Weighted Average Net Mortgage Rate
over (ii) the excess (but not less than zero) of (x) the Weighted Average Net
Mortgage Rate over (y) 7.00% per annum, and (d) any Distribution Date after the
thirtieth Distribution Date, 0.00% per annum. The interest calculated in
preceding sentence shall be the equivalent of the interest on REMIC II Regular
Interest LT2A-IO.

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

               CLASS B PASS-THROUGH RATE: On any Distribution Date, the lesser
of (i) if such Distribution Date occurs on or prior to the Optional Termination
Date, 7.000% per annum, and thereafter, 7.500% per annum and (ii) the
Subordinated Certificates Rate Cap for such Distribution Date.

               CLASS B PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
an amount equal to the excess, if any, of (i) the Certificate Principal Balance
of the Class B Certificates immediately prior to such Distribution Date over
(ii) the excess of (a) the aggregate Stated Principal Balance of the Mortgage
Loans as of the last day of the related Due Period over (b) the sum of (1) the
Certificate Principal Balance of the Class A Certificates (after taking into
account the payment of the Class A Principal Distribution Amount on such
Distribution Date), (2) the Certificate Principal Balance of the Class M-1
Certificates (after taking into account the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date), (3) the Certificate Principal
Balance of the Class M-2 Certificates (after taking into account the payment of
the Class M-2 Principal Distribution Amount on such Distribution Date) and (4)
the product of (x) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period and (y) the Current Specified
Overcollateralization Percentage for such Distribution Date.

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



                                      -10-

<PAGE>



               CLASS B-IO PASS-THROUGH RATE: On any Distribution Date, a per
annum rate equal to the percentage equivalent of a fraction, the numerator of
which is (x) the sum of the amounts calculated pursuant to clauses (A) through
(P) below, and the denominator of which is (y) the aggregate of the
Uncertificated Principal Balances of the REMIC II Regular Interests. For
purposes of calculating the Pass-Through Rate for the Class B-IO Certificates,
the numerator is equal to the sum of the following components:

               (A) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-1AA minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-1AA;

               (B) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-AI1 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-AI1;

               (C) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-AI2 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-AI2;

               (D) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-AI3 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-AI3;

               (E) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-AI4 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-AI4;

               (F) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-AI5 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-AI5;

               (G) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-1M1 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-1M1;

               (H) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-1M2 minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-1M2;

               (I) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-1B minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-1B;

               (J) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-1ZZ minus the Group I Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-1ZZ;


                                      -11-

<PAGE>



               (K) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-2AA minus the Group II Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-2AA;

               (L) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-AII minus the Group II Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-AII;

               (M) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-2M1 minus the Group II Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-2M1;

               (N) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-2M2 minus the Group II Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-2M2;

               (O) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-2B minus the Group II Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-2B;

               (P) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LT2-2ZZ minus the Group II Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-2ZZ; and

               (P) 100% of the interest accrued on REMIC II Regular Interest
LT2P.

               The Class P Certificates will not accrue interest and therefore
will not have a Pass- Through Rate.

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

               CLASS M-1 PASS-THROUGH RATE: On any Distribution Date, the lesser
of (i) if such Distribution Date occurs on or prior to the Optional Termination
Date, 6.850% per annum, and thereafter, 7.350% per annum and (ii) the
Subordinated Certificates Rate Cap for such Distribution Date.

               CLASS M-1 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution
Date, an amount equal to the excess, if any, of (i) the Certificate Principal
Balance of the Class M-1 Certificates immediately prior to such Distribution
Date over (ii) the excess of (a) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period over (b) the sum of
(1) the Certificate Principal Balance of the Class A Certificates (after taking
into account the payment of the Class A Principal Distribution Amount on such
Distribution Date and (2) the product of (x) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due


                                      -12-

<PAGE>



Period and (y) the sum of (I) 6.00% and (II) the Current Specified
Overcollateralization Percentage for such Distribution Date.

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

               CLASS M-2 PASS-THROUGH RATE: On any Distribution Date, the lesser
of (i) if such Distribution Date occurs on or prior to the Optional Termination
Date, 7.000% per annum, and thereafter, 7.500% per annum and (ii) the
Subordinated Certificates Rate Cap for such Distribution Date.

               CLASS M-2 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution
Date, an amount equal to the excess, if any, of (i) the Certificate Principal
Balance of the Class M-2 Certificates immediately prior to such Distribution
Date over (ii) the excess of (a) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period over (b) the sum of
(1) the Certificate Principal Balance of the Class A Certificates (after taking
into account the payment of the Class A Principal Distribution Amount on such
Distribution Date), (2) the Certificate Principal Balance of the Class M-1
Certificates (after taking into account the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date) and (3) the product of (x) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period and (y) the sum of (I) 2.50% and (II) the Current
Specified Overcollateralization Percentage for such Distribution Date.

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

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

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

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

               CLOSING DATE: August 30, 2001.


                                      -13-

<PAGE>



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

               COMPENSATING INTEREST: An amount, not to exceed the Servicing
Fee, to be applied by the Master Servicer pursuant to Section 5.02 to the
payment of a Prepayment Interest Shortfall on a Mortgage Loan subject to this
Agreement (other than a National City Loan); provided that with respect to each
National City Loan, the Trustee shall be required to pay any Prepayment Interest
Shortfalls relating thereto out of amounts otherwise payable to it as its
compensation.

               CORPORATE TRUST OFFICE: The designated office of the Trustee
where at any particular time its corporate trust business with respect to this
Agreement shall be administered, which office at the date of the execution of
this Agreement is located, for Certificate transfer purposes, at Sixth and
Marquette, Minneapolis, Minnesota 55479, Attention: Bear Stearns Asset Backed
Securities, Inc., Series 2001-AC1 and for all other purposes at 11000 Broken
Land Parkway, Columbia, Maryland 21044-3562, Attention: Bear Stearns Asset
Backed Securities, Inc., Series 2001-AC1, or at such other address as the
Trustee may designate from time to time.

               CORRESPONDING CERTIFICATE: With respect to:

               (i)  REMIC II Regular Interest LT2-AI1, the Class I-A1
                    Certificates,

               (ii) REMIC II Regular Interest LT2-AI2, the Class I-A2
                    Certificates,

               (iii) REMIC II Regular Interest LT2-AI3, the Class I-A3
                    Certificates,

               (iv) REMIC II Regular Interest LT2-AI4, the Class I-A4
                    Certificates,

               (v)  REMIC II Regular Interest LT2-AI5, the Class I-A5
                    Certificates,

               (vi) REMIC II Regular Interest LT2-AII, the Class II-A
                    Certificates,

              (vii) REMIC II Regular Interest LT2-1M1 and REMIC II Regular
                    Interest LT2- 2M1, the Class M-1 Certificates,

             (viii) REMIC II Regular Interest LT2-1M2 and REMIC II Regular
                    Interest LT2- 2M2, the Class M-2 Certificates,

               (ix) REMIC II Regular Interest LT2-1B and REMIC II Regular
                    Interest LT2-2B, the Class B Certificates, and

               (x)  REMIC II Regular Interest LT2P, the Class P Certificates.

               CURRENT INTEREST: As of any Distribution Date, with respect to
Certificates of each Class other than the Class P Certificates and the Residual
Certificates, (i) the interest accrued on the Certificate Principal Balance or
Certificate Notional Balance, as applicable, during the related Accrual Period
at the applicable Pass-Through Rate plus any amount previously distributed with


                                      -14-

<PAGE>



respect to interest for such Certificate that has been recovered as a voidable
preference by a trustee in bankruptcy minus (ii) the sum of (a) any Prepayment
Interest Shortfall for such Distribution Date, to the extent not covered by
Compensating Interest and (b) any shortfalls resulting from application of the
Relief Act during the related Due Period, provided, however, that for purposes
of calculating Current Interest for any such Class, amounts specified in clause
(ii) hereof for any such Distribution Date shall be allocated first to the Class
B-IO Certificates and the Residual Certificates in reduction of amounts
otherwise distributable to such Certificates on such Distribution Date and then
any excess shall be allocated to each Class of Offered Certificates pro rata
based on the respective amounts of interest accrued pursuant to clause (i)
hereof for each such Class on such Distribution Date.

               CURRENT SPECIFIED OVERCOLLATERALIZATION PERCENTAGE: For any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Overcollateralization Target Amount, and the denominator of which
is the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period.

               CUT-OFF DATE: The close of business on August 1, 2001.

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

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

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

               DEFINITIVE CERTIFICATES: As defined in Section 6.06.

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

               DELINQUENCY EVENT: A Delinquency Event shall have occurred and be
continuing if at any time, (x) the percent equivalent of a fraction, the
numerator of which is the aggregate Stated Principal Balance of the Mortgage
Loans that are 60 days or more Delinquent or are in bankruptcy or foreclosure or
are REO Properties, and the denominator of which is the aggregate Stated
Principal


                                      -15-

<PAGE>



Balance of all of the Mortgage Loans as of the last day of the related Due
Period equals or exceeds (y) 50% of the Senior Enhancement Percentage.

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

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

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

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

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

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

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

               DISTRIBUTION ACCOUNT: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.03 in the name of the Trustee
for the benefit of the Certificateholders and designated "Wells Fargo Bank
Minnesota, National Association, in trust for registered holders of Bear Stearns
Asset Backed Securities, Inc., Asset-Backed Certificates, Series 2001- AC1".
Funds in the Distribution Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

               DISTRIBUTION ACCOUNT DEPOSIT DATE: As to any Distribution Date,
on or before 1:00 p.m. Eastern time on the Business Day immediately preceding
such Distribution Date.


                                      -16-

<PAGE>



               DISTRIBUTION DATE: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such 25th day is not a Business Day,
the next succeeding Business Day, commencing in September 2001.

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

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

               ELIGIBLE ACCOUNT: Any of (i) an account or accounts maintained
with a federal or state chartered depository institution or trust company, the
long-term unsecured debt obligations and short-term unsecured debt obligations
of which (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the debt obligations of such
holding company, so long as Moody's is not a Rating Agency) are rated by each
Rating Agency in one of its two highest long-term and its highest short-term
rating categories respectively, at the time any amounts are held on deposit
therein, or (ii) an account or accounts in a depository institution or trust
company in which such accounts are insured by the FDIC (to the limits
established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
the Trustee and to each Rating Agency, the Certificateholders have a claim with
respect to the funds in such account or a perfected first priority security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution or trust company in which
such account is maintained, or (iii) a trust account or accounts maintained with
the corporate trust department of a federal or state chartered depository
institution or trust company having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity or (iv) any other account
acceptable to the Rating Agencies. Eligible Accounts may bear interest, and may
include, if otherwise qualified under this definition, accounts maintained with
the Trustee.

               EMC: EMC Mortgage Corporation, a Delaware corporation.

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

               ERISA RESTRICTED CERTIFICATE: Each of the Class B-IO
Certificates, Class P Certificates and Residual Certificates.

               EVENT OF DEFAULT: As defined in Section 8.01 hereof.

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

               EXCESS LIQUIDATION PROCEEDS: To the extent not required by law to
be paid to the related Mortgagor, the excess, if any, of any Liquidation
Proceeds with respect to a Mortgage Loan over the Stated Principal Balance of
such Mortgage Loan and accrued and unpaid interest at the


                                      -17-

<PAGE>



related Mortgage Rate through the last day of the month in which the Mortgage
Loan has been liquidated. Excess Overcollateralization Amount: With respect to
any Distribution Date, the lesser of (i) Principal Funds and (ii) the excess, if
any, of the Overcollateralization Amount over the Overcollateralization Target
Amount, in each case for such Distribution Date.

               EXCESS SPREAD: With respect to any Distribution Date, the excess,
if any, of (i) the Interest Funds for such Distribution Date over (ii) the sum
of Current Interest on the Offered Certificates and Interest Carry Forward
Amounts on the Class A Certificates, in each case for such Distribution Date.

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

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

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

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

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

               GROUP I MARKER RATE: With respect to the Class B-IO Certificates
and any Distribution Date, a per annum rate equal to two (2) times the weighted
average of the Uncertificated REMIC II Pass-Through Rates for REMIC II Regular
Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular Interest
LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular Interest LT2-AI5,
REMIC II Regular Interest LT2-1MI, REMIC II Regular Interest LT2-1M2, REMIC II
Regular Interest LT2-1B and REMIC II Regular Interest LT2-1ZZ, with the rate on
REMIC II Regular Interest LT2-AI1 subject to a cap equal to the lesser of (x)
LIBOR plus 0.15% per annum and (y) the Class I-A1 Rate Cap for the purpose of
this calculation; with the rate on REMIC II Regular Interest LT2-AI2 subject to
a cap equal to the lesser of (x) 5.640% per annum and (y) the Class I-A2 Rate
Cap for the purpose of this calculation; with the rate on REMIC II Regular
Interest LT2-AI3 subject to a cap equal to the lesser of (x) 6.350% per annum
and (y) the Class I-A3 Rate Cap for the purpose of this calculation; with the
rate on REMIC II Regular Interest LT2-AI4 subject to a cap equal to the lesser
of (x) 6.900% per annum and (y) the Class I-A4 Rate Cap for the purpose of this
calculation; with the rate on REMIC II Regular Interest LT2-AI5 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 7.430% per annum and (y) the Class
I-A5 Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.930% per annum and (y) the Class I-A5 Rate
Cap for the purpose of this calculation; with the rate on REMIC II Regular
Interest LT2-1M1 subject to a cap equal to (A) in the case of any Distribution
Date up to and including the Optional Termination Date, the lesser of (x) 6.850%
per annum and (y) the Subordinated Certificates Rate Cap and (B) in the case of
any Distribution Date after the Optional


                                      -18-

<PAGE>



Termination Date, the lesser of (x) 7.350% per annum and (y) the Subordinated
Certificates Rate Cap for the purpose of this calculation; with the rate on
REMIC II Regular Interest LT2-1M2 subject to a cap equal to (A) in the case of
any Distribution Date up to and including the Optional Termination Date, the
lesser of (x) 7.000% per annum and (y) the Subordinated Certificates Rate Cap
and (B) in the case of any Distribution Date after the Optional Termination
Date, the lesser of (x) 7.500% per annum and (y) the Subordinated Certificates
Rate Cap for the purpose of this calculation; with the rate on REMIC II Regular
Interest LT2-1B subject to a cap equal to (A) in the case of any Distribution
Date up to and including the Optional Termination Date, the lesser of (x) 7.000%
per annum and (y) the Subordinated Certificates Rate Cap and (B) in the case of
any Distribution Date after the Optional Termination Date, the lesser of (x)
7.500% per annum and (y) the Subordinated Certificates Rate Cap for the purpose
of this calculation; and with the rate on REMIC II Regular Interest LT2-1ZZ
subject to a cap of zero for the purpose of this calculation; provided, however,
that for this purpose, calculations of the Uncertificated REMIC II Pass-Through
Rate and the related caps with respect to REMIC II Regular Interest LT2-AI1
shall be multiplied by a fraction, the numerator of which is the actual number
of days in the Accrual Period and the denominator of which is 30.

               GROUP I NET RATE CAP: For any Distribution Date, the weighted
average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I as of
the last day of the related Due Period.

               GROUP II MARKER RATE: With respect to the Class B-IO Certificates
and any Distribution Date, a per annum rate equal to two (2) times the weighted
average of the Uncertificated REMIC II Pass-Through Rates for REMIC II Regular
Interest LT2-AII, REMIC II Regular Interest LT2-2MI, REMIC II Regular Interest
LT2-2M2, REMIC II Regular Interest LT2-2B and REMIC II Regular Interest LT2-2ZZ;
with the rate on REMIC II Regular Interest LT2-AII subject to a cap equal to (A)
in the case of any Distribution Date up to and including the Optional
Termination Date, the lesser of (x) 7.000% per annum and (y) the Class II-A Rate
Cap and (B) in the case of any Distribution Date after the Optional Termination
Date, the lesser of (x) 7.500% per annum and (y) the Class II-A Rate Cap for the
purpose of this calculation; with the rate on REMIC II Regular Interest LT2-2MI
subject to a cap equal to (A) in the case of any Distribution Date up to and
including the Optional Termination Date, the lesser of (x) 6.850% per annum and
(y) the Subordinated Certificates Rate Cap and (B) in the case of any
Distribution Date after the Optional Termination Date, the lesser of (x) 7.350%
per annum and (y) the Subordinated Certificates Rate Cap for the purpose of this
calculation; with the rate on REMIC II Regular Interest LT2-2M2 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 7.000% per annum and (y) the
Subordinated Certificates Rate Cap and (B) in the case of any Distribution Date
after the Optional Termination Date, the lesser of (x) 7.500% per annum and (y)
the Subordinated Certificates Rate Cap for the purpose of this calculation; with
the rate on REMIC II Regular Interest LT2-2B subject to a cap equal to (A) in
the case of any Distribution Date up to and including the Optional Termination
Date, the lesser of (x) 7.000% per annum and (y) the Subordinated Certificates
Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.500% per annum and (y) the Subordinated
Certificates Rate Cap for the purpose of this calculation; and with the rate on
REMIC II Regular Interest LT2-2ZZ subject to a cap of zero for the purpose of
this calculation.



                                      -19-

<PAGE>



               GROUP II NET RATE CAP: For any Distribution Date, the weighted
average of the Net Mortgage Rates of the Mortgage Loans in Loan Group II as of
the last day of the related Due Period.

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

               INITIAL OVERCOLLATERALIZATION AMOUNT: $756.67.

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

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

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

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

               INTEREST DETERMINATION DATE: With respect to the Class I-A1
Certificates and for the first Accrual Period, August 28, 2001. With respect to
the Class I-A1 Certificates and any Accrual Period thereafter, the second LIBOR
Business Day preceding the commencement of such Accrual Period.

               INTEREST FUNDS: For any Distribution Date with respect to each
Loan Group, (i) the sum, without duplication, of (a) all scheduled interest
during the related Due Period with respect to the related Mortgage Loans less
the Servicing Fee, (b) all Advances relating to interest with respect to the
related Mortgage Loans made on or prior to the related Distribution Account
Deposit Date, (c) all Compensating Interest with respect to the related Mortgage
Loans and required to be remitted by the Master Servicer or the Trustee pursuant
to this Agreement with respect to such Distribution Date, (d) Liquidation
Proceeds with respect to the related Mortgage Loans collected during the related
Prepayment Period (to the extent such Liquidation Proceeds relate to interest),
(e) all amounts relating to interest with respect to each Mortgage Loan
repurchased by the Seller pursuant to Sections 2.02, 2.03 and 3.20 and (f) all
amounts in respect of interest paid by the Master Servicer


                                      -20-

<PAGE>



pursuant to Section 10.01, in each case to the extent remitted by the Master
Servicer, any subservicer or the Trustee, as applicable, to the Distribution
Account pursuant to this Agreement or any Subservicing Agreement minus (ii) all
amounts relating to interest required to be reimbursed pursuant to Section 4.02
and minus (iii) all amounts relating to interest required to be reimbursed
pursuant to Sections 4.04 and 4.05.

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

               LIBOR BUSINESS DAY: Any day on which banks in the London, England
and New York City, U.S.A. are open and conducting transactions in foreign
currency and exchange.

               LIQUIDATED LOAN: With respect to any Distribution Date, a
defaulted Mortgage Loan that has been liquidated through deed-in-lieu of
foreclosure, foreclosure sale, trustee's sale or other realization as provided
by applicable law governing the real property subject to the related Mortgage
and any security agreements and as to which the Master Servicer has certified
(in accordance with Section 3.07) in the related Prepayment Period that it has
received all amounts it expects to receive in connection with such liquidation.

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

               LOAN GROUP: Either Loan Group I or Loan Group II.

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

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

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

               LOCKOUT PERCENTAGE: With respect to the Class I-A5 Certificates
and any Distribution Date prior to the Distribution Date in September 2004, 0%.
For any Distribution Date thereafter, the percentage determined as follows:



                                      -21-

<PAGE>



               o    for each Distribution Date from the Distribution Date in
                    September 2004 through the Distribution Date in August 2006,
                    45%,

               o    for each Distribution Date from the Distribution Date in
                    September 2006 through the Distribution Date in August 2007,
                    80%,

               o    for each Distribution Date from the Distribution Date in
                    September 2007 through the Distribution Date in August 2008,
                    100%, and

               o    for each Distribution Date thereafter, 300%.

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

               MASTER SERVICER PREPAYMENT CHARGE PAYMENT AMOUNT: The amounts
payable by the Master Servicer in respect of any waived Prepayment Charges
pursuant to Section 2.03.

               MAXIMUM UNCERTIFICATED ACCRUED INTEREST DEFERRAL AMOUNT: With
respect to any Distribution Date, the excess of (a) the sum of (I) accrued
interest at the Uncertificated REMIC II Pass-Through Rate applicable to REMIC II
Regular Interest LT2-1ZZ for such Distribution Date on a balance equal to the
excess of (i) the Uncertificated Principal Balance of REMIC II Regular Interest
LT2-1ZZ and (ii) the REMIC II Group 1 Overcollateralized Amount for such
Distribution Date and (II) accrued interest at the Uncertificated REMIC II
Pass-Through Rate applicable to REMIC II Regular Interest LT2-2ZZ for such
Distribution Date on a balance equal to the excess of (i) the Uncertificated
Principal Balance of REMIC II Regular Interest LT2-2ZZ and (ii) the REMIC II
Group 2 Overcollateralized Amount for such Distribution Date, over (b)
Uncertificated Accrued Interest on REMIC II Regular Interest LT2-AI1, with the
rate on REMIC II Regular Interest LT2-AI1 subject to a cap equal to the lesser
of (x) LIBOR plus 0.15% per annum and (y) the Class I-A1 Rate Cap;
Uncertificated Accrued Interest on REMIC II Regular Interest LT2-AI2, with the
rate on REMIC II Regular Interest LT2-AI2 subject to a cap equal to the lesser
of (x) 5.640% per annum and (y) the Class I-A2 Rate Cap; Uncertificated Accrued
Interest on REMIC II Regular Interest LT2-AI3, with the rate on REMIC II Regular
Interest LT2-AI3 subject to a cap equal to the lesser of (x) 6.350% per annum
and (y) the Class I-A3 Rate Cap; Uncertificated Accrued Interest on REMIC II
Regular Interest LT2-AI4, with the rate on REMIC II Regular Interest LT2-AI4
subject to a cap equal to the lesser of (x) 6.900% per annum and (y) the Class
I-A4 Rate Cap; Uncertificated Accrued Interest on REMIC II Regular Interest
LT2-AI5, with the rate on REMIC II Regular Interest LT2-AI5 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 7.430% per annum and (y) the Class
I-A5 Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.930% per annum and (y) the Class I-A5 Rate
Cap; Uncertificated Accrued Interest on REMIC II Regular Interest LT2-1M1 with
the rate on REMIC II Regular Interest LT2-1M1 subject to a cap equal to (A) in
the case of any Distribution Date up to and including the Optional Termination
Date, the lesser of (x) 6.850% per annum and (y) the Subordinated Certificates
Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.350% per annum and (y) the Subordinated
Certificates Rate Cap for the purpose of this calculation, Uncertificated
Accrued Interest on REMIC II Regular Interest LT2- 1M2, with the rate on REMIC
II Regular Interest LT2-
                                      -22-
<PAGE>

1M2 subject to a cap equal to (A) in the case of any Distribution Date up to and
including the Optional Termination Date, the lesser of (x) 7.000% per annum and
(y) the Subordinated Certificates Rate Cap and (B) in the case of any
Distribution Date after the Optional Termination Date, the lesser of (x) 7.500%
per annum and (y) the Subordinated Certificates Rate Cap for the purpose of this
calculation, Uncertificated Accrued Interest on REMIC II Regular Interest
LT2-1B, with the rate on REMIC II Regular Interest LT2-1B subject to a cap equal
to (A) in the case of any Distribution Date up to and including the Optional
Termination Date, the lesser of (x) 7.000% per annum and (y) the Subordinated
Certificates Rate Cap and (B) in the case of any Distribution Date after the
Optional Termination Date, the lesser of (x) 7.500% per annum and (y) the
Subordinated Certificates Rate Cap for the purpose of this calculation;
Uncertificated Accrued Interest on REMIC II Regular Interest LT2-AII, with the
rate on REMIC II Regular Interest LT2-AII subject to a cap equal to (A) in the
case of any Distribution Date up to and including the Optional Termination Date,
the lesser of (x)7.000% per annum and (y) the Class II-A Rate Cap and (B) in the
case of any Distribution Date after the Optional Termination Date, the lesser of
(x) 7.500% per annum and (y) the Class II-A Rate Cap for the purpose of this
calculation, Uncertificated Accrued Interest on REMIC II Regular Interest
LT2-2M1, with the rate on REMIC II Regular Interest LT2-2M1 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 6.850% per annum and (y) the
Subordinated Certificates Rate Cap and (B) in the case of any Distribution Date
after the Optional Termination Date, the lesser of (x) 7.350% per annum and (y)
the Subordinated Certificates Rate Cap for the purpose of this calculation,
Uncertificated Accrued Interest on REMIC II Regular Interest LT2-2M2, with the
rate on REMIC II Regular Interest LT2-

2M2 subject to a cap equal to (A) in the case of any Distribution Date up to and
including the Optional Termination Date, the lesser of (x) 7.000% per annum and
(y) the Subordinated Certificates Rate Cap and (B) in the case of any
Distribution Date after the Optional Termination Date, the lesser of (x) 7.500%
per annum and (y) the Subordinated Certificates Rate Cap for the purpose of this
calculation, and Uncertificated Accrued Interest on REMIC II Regular Interest
LT2-2B, with the rate on REMIC II Regular Interest LT2-2B subject to a cap equal
to (A) in the case of any Distribution Date up to and including the Optional
Termination Date, the lesser of (x) 7.000% per annum and (y) the Subordinated
Certificates Rate Cap and (B) in the case of any Distribution Date after the
Optional Termination Date, the lesser of (x) 7.500% per annum and (y) the
Subordinated Certificates Rate Cap for the purpose of this calculation.

               MLP&IS AGREEMENTS: Shall mean each of (i) the three Mortgage Loan
Purchase and Interim Servicing Agreements, dated as of May 1, 2001; June 1,
2001; and July 1, 2001, each between First National Bank of Nevada, as seller
and the Seller, as purchaser, (ii) the Mortgage Loan Purchase and Interim
Servicing Agreement, dated as of June 1, 2001 between First Guaranty Mortgage
Corporation, as seller and the Seller, as purchaser and (iii) the Mortgage Loan
Purchase and Interim Servicing Agreement, dated as of June 28, 2001, between
Greenpoint Mortgage Funding, Inc., as seller and the Seller, as purchaser.

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

               MOODY'S: Moody's Investors Service, Inc.



                                      -23-

<PAGE>



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

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

               MORTGAGE LOANS: Such of the Mortgage Loans transferred and
assigned to the Trustee pursuant to the provisions hereof, as from time to time
are held as a part of the Trust Fund (including any REO Property), the mortgage
loans so held being identified in the Mortgage Loan Schedule, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property. Any
mortgage loan that was intended by the parties hereto to be transferred to the
Trust Fund as indicated by such Mortgage Loan Schedule which is in fact not so
transferred for any reason including, without limitation, a breach of the
representation contained in Section 2.03(b)(v) hereof, shall continue to be a
Mortgage Loan hereunder until the Purchase Price with respect thereto has been
paid to the Trust Fund.

               MORTGAGE LOAN PURCHASE AGREEMENT: Shall mean the Mortgage Loan
Purchase Agreement dated as of August 30, 2001, between the Seller, as seller
and the Depositor, as purchaser. Mortgage Loan Purchase Price: The price,
calculated as set forth in Section 10.01, to be paid in connection with the
repurchase of the Mortgage Loans pursuant to Section 10.01.

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

               (i)     the loan number;

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

               (iii)   the Servicing Fee Rate;

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

               (v)     the maturity date;

               (vi)    the original principal balance;

               (vii)   the Cut-off Date Principal Balance;

               (viii)  the original term;

               (ix)    the remaining term;


                                      -24-

<PAGE>



               (x)     the property type;

               (xi)    the type and term of the related Prepayment Charge, if
                       any; and

               (xii)   the Loan Group.

Such schedule shall also set forth the aggregate Cut-off Date Principal Balance
for all of the Mortgage Loans and such aggregate amount for all Mortgage Loans
for each Loan Group.

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

               MORTGAGE RATE: The annual rate of interest borne by a Mortgage
Note.

               MORTGAGED PROPERTY: The underlying property securing a Mortgage
Loan.

               MORTGAGOR: The obligors on a Mortgage Note.

               NATIONAL CITY: National City Mortgage Co., and any successor
thereto.

               NATIONAL CITY LOANS: Those Mortgage Loans subject to this
Agreement which were purchased by the Seller from National City pursuant to the
National City Subservicing Agreement and assigned by the Seller to the Trust
pursuant to the Assumption Agreement.

               NATIONAL CITY SUBSERVICING AGREEMENT: The Mortgage Loan Purchase
and Servicing Agreement, dated as of August 1, 2001, by and between National
City and the Seller.

               NET MORTGAGE RATE: As to each Mortgage Loan, and at any time, the
per annum rate equal to the Mortgage Rate less the Servicing Fee Rate.

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

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

               OFFERED CERTIFICATES: The Class I-A1 Certificates, Class I-A2
Certificates, Class I-A3 Certificates, Class I-A4 Certificates, Class I-A5
Certificates, Class II-A Certificates, Class A-IO Certificates, Class M-1
Certificates, Class M-2 Certificates, Class B Certificates.

               OFFICER'S CERTIFICATE: A certificate (i) signed by the Chairman
of the Board, the Vice Chairman of the Board, the President, a Vice President
(however denominated), an Assistant Vice President, the Treasurer, the
Secretary, or one of the assistant treasurers or assistant secretaries of the
Depositor or the Master Servicer (or any other officer customarily performing
functions similar to those performed by any of the above designated officers and
also to whom, with respect to a


                                      -25-

<PAGE>



particular matter, such matter is referred because of such officer's knowledge
of and familiarity with a particular subject) or (ii), if provided for in this
Agreement, signed by a Servicing Officer, as the case may be, and delivered to
the Depositor, the Seller, the Securities Administrator and/or the Trustee, as
the case may be, as required by this Agreement.

               ONE-MONTH LIBOR: With respect to any Accrual Period, the rate
determined by the Trustee on the related Interest Determination Date on the
basis of the rate for U.S. dollar deposits for one month that appears on
Telerate Screen Page 3750 as of 11:00 a.m. (London time) on such Interest
Determination Date; provided that the parties hereto acknowledge that One-Month
LIBOR for the first Accrual Period shall equal 4.09% per annum. If such rate
does not appear on such page (or such other page as may replace that page on
that service, or if such service is no longer offered, such other service for
displaying One-Month LIBOR or comparable rates as may be reasonably selected by
the Securities Administrator), One-Month LIBOR for the applicable Accrual Period
will be the Reference Bank Rate. If no such quotations can be obtained by the
Securities Administrator and no Reference Bank Rate is available, One-Month
LIBOR will be One-Month LIBOR applicable to the preceding Accrual Period.

               OPINION OF COUNSEL: A written opinion of counsel, who may be
counsel for the Depositor or the Master Servicer, reasonably acceptable to each
addressee of such opinion; provided that with respect to Section 7.04 or 11.01,
or the interpretation or application of the REMIC Provisions, such counsel must
(i) in fact be independent of the Depositor and the Master Servicer, (ii) not
have any direct financial interest in the Depositor or the Master Servicer or in
any affiliate of either, and (iii) not be connected with the Depositor or the
Master Servicer as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.

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

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

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

               ORIGINATOR: Any of First National Bank of Nevada, First Guaranty
Mortgage Corporation, Greenpoint Mortgage Funding and National City.

               OTS: The Office of Thrift Supervision.

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



                                      -26-

<PAGE>



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

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

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

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

               OVERCOLLATERALIZATION TARGET AMOUNT:  $605,159.64.

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

               PASS-THROUGH RATE: With respect to each Class of Certificates
other than the Residual Certificates, the applicable Pass-Through Rate for each
such Class as set forth in the Preliminary Statement.

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

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

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

               (ii) general obligations of or obligations guaranteed by any
        state of the United States or the District of Columbia receiving the
        highest long-term debt rating of each Rating Agency, or such lower
        rating as will not result in the downgrading or withdrawal of the
        ratings then assigned to the Certificates by each Rating Agency;

               (iii)   [Reserved];

               (iv) commercial or finance company paper which is then receiving
        the highest commercial or finance company paper rating of each Rating
        Agency, or such lower rating as


                                      -27-

<PAGE>



        will not result in the downgrading or withdrawal of the ratings then
        assigned to the Certificates by each Rating Agency;

               (v) certificates of deposit, demand or time deposits, or bankers'
        acceptances issued by any depository institution or trust company
        incorporated under the laws of the United States or of any state thereof
        and subject to supervision and examination by federal and/or state
        banking authorities (including the Trustee in its commercial banking
        capacity), provided that the commercial paper and/or long term unsecured
        debt obligations of such depository institution or trust company (or in
        the case of the principal depository institution in a holding company
        system, the commercial paper or long-term unsecured debt obligations of
        such holding company, but only if Moody's is not a Rating Agency) are
        then rated one of the two highest long-term and the highest short-term
        ratings of each such Rating Agency for such securities, or such lower
        ratings as will not result in the downgrading or withdrawal of the
        rating then assigned to the Certificates by any Rating Agency;

               (vi) demand or time deposits or certificates of deposit issued by
        any bank or trust company or savings institution to the extent that such
        deposits are fully insured by the FDIC; (vii) guaranteed reinvestment
        agreements issued by any bank, insurance company or other corporation
        containing, at the time of the issuance of such agreements, such terms
        and conditions as will not result in the downgrading or withdrawal of
        the rating then assigned to the Certificates by any such Rating Agency;

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

               (ix) securities (other than stripped bonds, stripped coupons or
        instruments sold at a purchase price in excess of 115% of the face
        amount thereof) bearing interest or sold at a discount issued by any
        corporation incorporated under the laws of the United States or any
        state thereof which, at the time of such investment, have one of the two
        highest long term ratings of each Rating Agency (except if the Rating
        Agency is Moody's, such rating shall be the highest commercial paper
        rating of Moody's for any such securities), or such lower rating as will
        not result in the downgrading or withdrawal of the rating then assigned
        to the Certificates by any Rating Agency, as evidenced by a signed
        writing delivered by each Rating Agency;

               (x) interests in any money market fund (including any such fund
        managed or advised by the Trustee or any affiliate thereof) which at the
        date of acquisition of the interests in such fund and throughout the
        time such interests are held in such fund has the highest applicable
        long term rating by each Rating Agency or such lower rating as will not
        result in the downgrading or withdrawal of the ratings then assigned to
        the Certificates by each Rating Agency;

               (xi) short term investment funds sponsored by any trust company
        or national banking association incorporated under the laws of the
        United States or any state thereof (including any such fund managed or
        advised by the Trustee or any affiliate thereof) which


                                      -28-

<PAGE>



        on the date of acquisition has been rated by each Rating Agency in their
        respective highest applicable rating category or such lower rating as
        will not result in the downgrading or withdrawal of the ratings then
        assigned to the Certificates by each Rating Agency; and

               (xii) such other investments having a specified stated maturity
        and bearing interest or sold at a discount acceptable to each Rating
        Agency as will not result in the downgrading or withdrawal of the rating
        then assigned to the Certificates by any Rating Agency, as evidenced by
        a signed writing delivered by each Rating Agency;

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

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


                                      -29-

<PAGE>



in section 7701 of the Code or successor provisions. A corporation will not be
treated as an instrumentality of the United States or of any State or political
subdivision thereof for these purposes if all of its activities are subject to
tax and, with the exception of the Federal Home Loan Mortgage Corporation, a
majority of its board of directors is not selected by such government unit.

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

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

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

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

               PREPAYMENT PERIOD: As to any Distribution Date, the calendar
month immediately preceding the month in which such Distribution Date occurs.

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

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

               PRINCIPAL FUNDS: With respect to any Distribution Date, (i) the
sum, without duplication, of (a) all scheduled principal collected during the
related Due Period, (b) all Advances relating to principal made on or before the
Distribution Account Deposit Date, (c) Principal Prepayments exclusive of
prepayment charges or penalties collected during the related Prepayment Period,
(iii) the Stated Principal Balance of each Mortgage Loan that was repurchased by
the Seller pursuant to Sections 2.02, 2.03 or 3.20, (d) the aggregate of all
Substitution Adjustment Amounts


                                      -30-

<PAGE>



for the related Determination Date in connection with the substitution of
Mortgage Loans pursuant to Section 2.03(c), (e) amounts in respect of principal
paid by the Master Servicer pursuant to Section 10.01 and (f) all Liquidation
Proceeds collected during the related Prepayment Period (to the extent such
Liquidation Proceeds relate to principal), in each case to the extent remitted
by the Master Servicer or any subservicer to the Distribution Account pursuant
to this Agreement or any applicable Subservicing Agreement minus (ii) all
amounts required to be reimbursed pursuant to Section 4.05.

               PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of
(or proceeds with respect to) principal on a Mortgage Loan (including loans
purchased or repurchased under Sections 2.02, 2.03, 3.20 and 10.01 hereof) that
is received in advance of its scheduled Due Date and is not accompanied by an
amount as to interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment. Partial Principal
Prepayments shall be applied by the Master Servicer or the applicable
subservicer, as appropriate, in accordance with the terms of the related
Mortgage Note.

               PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated August 27,
2001 relating to the public offering of the Offered Certificates.

               PROTECTED ACCOUNT: An account established and maintained by the
Master Servicer with respect to receipts on the Mortgage Loans and REO Property
in accordance with Section 4.01 hereof or by a subservicer in accordance with
the applicable Subservicing Agreement.

               PUD: A Planned Unit Development.

               PURCHASE PRICE: With respect to any Mortgage Loan (x) required to
be repurchased by the Seller pursuant to Section 2.02 or 2.03 hereof or (y) that
the Seller has a right to purchase pursuant to Section 3.20 hereof, an amount
equal to the sum of (i) 100% of the outstanding principal balance of the
Mortgage Loan as of the date of such purchase plus (ii) accrued interest thereon
at the applicable Mortgage Rate through the first day of the month in which the
Purchase Price is to be distributed to Certificateholders, reduced by any
portion of the Servicing Fee, Servicing Advances and Advances payable to the
purchaser of the Mortgage Loan.

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

               REALIZED LOSS: With respect to each Liquidated Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of such Liquidated Loan as of the date of such liquidation, minus (ii)
the Liquidation Proceeds, if any, received in connection with such liquidation
during the month in which such liquidation occurs, to the extent applied as
recoveries of principal of the Liquidated Loan. With respect to each Mortgage
Loan that has become the subject of a Deficient Valuation, (i) if the value of
the related Mortgaged Property was reduced below the principal balance


                                      -31-

<PAGE>



of the related Mortgage Note, the amount by which the value of the Mortgaged
Property was reduced below the principal balance of the related Mortgage Note,
and (ii) if the principal amount due under the related Mortgage Note has been
reduced, the difference between the principal balance of the Mortgage Loan
outstanding immediately prior to such Deficient Valuation and the principal
balance of the Mortgage Loan as reduced by the Deficient Valuation plus any
reduction in the interest component of the Scheduled Payments. With respect to
each Mortgage Loan that has become the subject of a Debt Service Reduction and
any Distribution Date, the amount, if any, by which the related Scheduled
Payment was reduced. With respect to each Mortgage Loan that has become the
subject of a Servicing Modification, a loss resulting from such Servicing
Modification.

               RECORD DATE: With respect to the Certificates (other than the
Class I-A1 Certificates) and (a) the first Distribution Date, the Closing Date
and (b) with respect to any other Distribution Date, the close of business on
the last Business Day of the month preceding the month in which such
Distribution Date occurs. With respect to any Distribution Date and the Class
I-A1 Certificates, so long as the Class I-A1 Certificates are Book-Entry
Certificates, the Business Day preceding such Distribution Date, and otherwise,
the close of business on the last Business Day of the month preceding the month
in which such Distribution Date occurs.

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

               REFERENCE BANKS: Barclays Bank PLC, Citibank, N.A. and Deutsche
Bank AG, provided that if any of the foregoing banks are not suitable to serve
as a Reference Bank, then any leading banks selected by the Securities
Administrator which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, England, (ii) not controlling, under the control of or under common
control with the Depositor, the Seller, Master Servicer or any affiliate thereof
and (iii) which have been designated as such by the Trustee.

               REGULAR CERTIFICATE: Any Certificate other than a Residual
Certificate.

               RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.

               REMAINING EXCESS SPREAD: With respect to any Distribution Date,
the Excess Spread less any Extra Principal Distribution Amount, in each case for
such Distribution Date.


                                      -32-

<PAGE>



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

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

               REMIC I CERTIFICATES: The REMIC I Regular Interests and the Class
R-I Certificate.

               REMIC I REGULAR INTEREST LT1A: One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT1A shall
accrue interest at the related Uncertificated REMIC I Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               REMIC I REGULAR INTEREST LT1B: One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT1B shall
accrue interest at the related Uncertificated REMIC I Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               REMIC I REGULAR INTEREST LT1C: One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT1C shall
accrue interest at the related Uncertificated REMIC I Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               REMIC I REGULAR INTEREST LT1D: One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT1D shall
accrue interest at the related Uncertificated REMIC I Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               REMIC I REGULAR INTEREST LT1P: One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT1P shall
accrue interest at the related Uncertificated REMIC I Pass- Through Rate in
effect from time to time, and shall be entitled to any Prepayment Charges
relating to the Mortgage Loans collected by the Master Servicer and to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC I REGULAR INTERESTS: REMIC I Regular Interest LT1A, REMIC I
Regular Interest LT1B, REMIC I Regular Interest LT1C, REMIC I Regular Interest
LT1D and REMIC I Regular Interest LT1P.


                                      -33-

<PAGE>



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

               REMIC II CERTIFICATES: The REMIC II Regular Interests and the
Class R-II Certificate.

               REMIC II GROUP 1 INTEREST LOSS ALLOCATION AMOUNT: With respect to
any Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans in Loan Group I and related REO
Properties then outstanding and (ii) the Uncertificated REMIC II Pass-Through
Rate for REMIC II Regular Interest LT2-1AA minus the Group I Marker Rate,
divided by (b) 12.

               REMIC II GROUP 2 INTEREST LOSS ALLOCATION AMOUNT: With respect to
any Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans in Loan Group II and related REO
Properties then outstanding and (ii) the Uncertificated REMIC II Pass-Through
Rate for REMIC II Regular Interest LT2-2AA minus the Group II Marker Rate,
divided by (b) 12.

               REMIC II GROUP 1 OVERCOLLATERALIZED AMOUNT: With respect to any
date of determination, (i) 1% of the aggregate Uncertificated Principal Balances
of REMIC II Regular Interest LT2-1AA, REMIC II Regular Interest LT2-AI1, REMIC
II Regular Interest LT2-AI2, REMIC II Regular Interest LT2-AI3, REMIC II Regular
Interest LT2-AI4, REMIC II Regular Interest LT2-1M1, REMIC II Regular Interest
LT2-1M2, REMIC II Regular Interest LT2-1B and REMIC II Regular Interest LT2-1ZZ,
minus (ii) the aggregate of the Uncertificated Principal Balances of REMIC II
Regular Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular
Interest LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular Interest
LT2- 1M1, REMIC II Regular Interest LT2-1M2 and REMIC II Regular Interest
LT2-1B, in each case as of such date of determination.

               REMIC II GROUP 2 OVERCOLLATERALIZED AMOUNT: With respect to any
date of determination, (i) 1% of the aggregate Uncertificated Principal Balances
of REMIC II Regular Interest LT2-2AA, REMIC II Regular Interest LT2-AII, REMIC
II Regular Interest LT2-2M1, REMIC II Regular Interest LT2-2M2, REMIC II Regular
Interest LT2-2B and REMIC II Regular Interest LT2-2ZZ, minus (ii) the aggregate
of the Uncertificated Principal Balances of REMIC II Regular Interest LT2-AII,
REMIC II Regular Interest LT2-2M1, REMIC II Regular Interest LT2- 2M2 and REMIC
II Regular Interest LT2-2B, in each case as of such date of determination.

               REMIC II GROUP 1 PRINCIPAL LOSS ALLOCATION AMOUNT: With respect
to any Distribution Date and the Mortgage Loans in Loan Group I, an amount equal
to (a) the product of (i) the aggregate Stated Principal Balance of the Mortgage
Loans in Loan Group and related REO Properties then outstanding and (ii) 1 minus
a fraction, the numerator of which is two times the aggregate of the
Uncertificated Principal Balances of REMIC II Regular Interest LT2-AI1, REMIC II
Regular Interest LT2-AI2, REMIC II Regular Interest LT2-AI3, REMIC II Regular
Interest LT2- AI4, REMIC II Regular Interest LT2-1M1, REMIC II Regular Interest
LT2-1M2 and REMIC II Regular Interest LT2-1B, and the denominator of which is
the aggregate of the Uncertificated Principal Balances of REMIC II Regular
Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular Interest
LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular


                                      -34-

<PAGE>



Interest LT2-1M1, REMIC II Regular Interest LT2-1M2, REMIC II Regular Interest
LT2-1B and REMIC II Regular Interest LT2-1ZZ.

               REMIC II GROUP 2 PRINCIPAL LOSS ALLOCATION AMOUNT: With respect
to any Distribution Date and the Mortgage Loans in Loan Group II, an amount
equal to (a) the product of (i) the aggregate Stated Principal Balance of the
Mortgage Loans in Loan Group II and related REO Properties then outstanding and
(ii) 1 minus a fraction, the numerator of which is two times the aggregate of
the Uncertificated Principal Balances of REMIC II Regular Interest LT2-AII,
REMIC II Regular Interest LT2-2M1, REMIC II Regular Interest LT2-2M2 and REMIC
II Regular Interest LT2-2B, and the denominator of which is the aggregate of the
Uncertificated Principal Balances of REMIC II Regular Interest LT2-AII, REMIC II
Regular Interest LT2-2M1, REMIC II Regular Interest LT2-2M2 and REMIC II Regular
Interest LT2-2B.

               REMIC II OVERCOLLATERALIZATION TARGET AMOUNT: 1% of the
Overcollateralization Target Amount.

               REMIC II REGULAR INTEREST LT2A-IO: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2A-IO shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate on its Uncertificated Notional Amount outstanding from time to
time.

               REMIC II REGULAR INTEREST LT2-1AA: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-1AA shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-AI1: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-AI1 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-AI2: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-AI2 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-AI3: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-AI3 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal,


                                      -35-

<PAGE>



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

               REMIC II REGULAR INTEREST LT2-AI4: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-AI4 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-AI5: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-AI5 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-1M1: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-1M1 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-1M2: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-1M2 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-1B: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest LT2-1B
shall accrue interest at the related Uncertificated REMIC II Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-1ZZ: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-1ZZ shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.



                                      -36-

<PAGE>



               REMIC II REGULAR INTEREST LT2-2AA: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-2AA shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-AII: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-AII shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-2M1: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-2M1 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-2M2: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-2M2 shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-2B: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest LT2-2B
shall accrue interest at the related Uncertificated REMIC II Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2P: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest LT2P
shall accrue interest at the related Uncertificated REMIC II Pass- Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

               REMIC II REGULAR INTEREST LT2-2ZZ: One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. REMIC II Regular Interest
LT2-2ZZ shall accrue interest at the related Uncertificated REMIC II
Pass-Through Rate in effect from time to time, and shall be entitled to
distributions of principal,


                                      -37-

<PAGE>



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

               REMIC II REGULAR INTERESTS: REMIC II Regular Interest LT2-1AA,
REMIC II Regular Interest LT2A-IO, REMIC II Regular Interest LT2-AI1, REMIC II
Regular Interest LT2-AI2, REMIC II Regular Interest LT2-AI3, REMIC II Regular
Interest LT2-AI4, REMIC II Regular Interest LT2-AI5, REMIC II Regular Interest
LT2-1M1, REMIC II Regular Interest LT2-1M2, REMIC II Regular Interest LT2-1B,
REMIC II Regular Interest LT2-1ZZ, REMIC II Regular Interest LT2-2AA, REMIC II
Regular Interest LT2-AII, REMIC II Regular Interest LT2-2M1, REMIC II Regular
Interest LT2-2M2, REMIC II Regular Interest LT2-2B, REMIC II Regular Interest
LT2P and REMIC II Regular Interest LT2-2ZZ.

               REMIC III: The segregated pool of assets described in the
Preliminary Statement.

               REMIC III CERTIFICATES: The REMIC III Regular Interests and the
Class R-III Certificate.

               REMIC III REGULAR INTERESTS: As defined in the Preliminary
Statement.

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

               REMIC REGULAR INTEREST: A REMIC I Regular Interest or REMIC II
Regular Interest. Remittance Report: As defined in Section 5.04(d).

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

               REPLACEMENT MORTGAGE LOAN: A Mortgage Loan or Mortgage Loans in
the aggregate substituted by the Seller for a Deleted Mortgage Loan, which must,
on the date of such substitution, as confirmed in a Request for Release, (i)
have a Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
less than 90% of, the Stated Principal Balance of the Deleted Mortgage Loan;
(ii) have a fixed Mortgage Rate not less than or more than 1% per annum higher
than the Mortgage Rate of the Deleted Mortgage Loan; (iii) have the same or
higher credit quality characteristics than that of the Deleted Mortgage Loan;
(iv) have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage
Loan; (v) have a remaining term to maturity no greater than (and not more than
one year less than) that of the Deleted Mortgage Loan; (vi) not permit
conversion of the Mortgage Rate from a fixed rate to a variable rate; (vii)
provide for a prepayment charge on terms substantially similar to those of the
prepayment charge, if any, of the Deleted Mortgage Loan; (viii) have the same
lien priority as the Deleted Mortgage Loan; (ix) constitute the same occupancy
type as the Deleted Mortgage Loan or be owner occupied; and (x) comply with each
representation and warranty set forth in Section 2.03 hereof.


                                      -38-

<PAGE>



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

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

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

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

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

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

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

               SECURITIES ADMINISTRATOR: Wells Fargo Bank Minnesota, National
Association, in its capacity as securities administrator hereunder, and its
successors and assigns.

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

               SENIOR CERTIFICATES: The Class I-A1 Certificates, Class I-A2
Certificates, Class I-A3 Certificates, Class I-A4 Certificates, Class I-A5
Certificates, Class II-A Certificates and Class A-IO Certificates.

               SENIOR ENHANCEMENT PERCENTAGE: As to each Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the sum of (i)
the aggregate of the Certificate Principal Balances of the Class M-1, Class M-2
and Class B Certificates and (ii) the Overcollateralization Amount, in each case
after taking into account the distribution of the related Principal Distribution
Amounts on such Distribution Date, and the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period.


                                      -39-

<PAGE>



               SERVICING ADVANCES: All customary, reasonable and necessary "out
of pocket" costs and expenses (including reasonable legal fees) incurred in the
performance by the Master Servicer of its servicing obligations hereunder,
including, but not limited to, the cost of (i) the preservation, restoration and
protection of a Mortgaged Property, (ii) any enforcement or judicial
proceedings, including foreclosures, (iii) the management and liquidation of any
REO Property (including, without limitation, realtor's commissions) and (iv)
compliance with any obligations under Section 3.09 hereof to cause insurance to
be maintained.

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

               SERVICING FEE RATE:  0.25% per annum.

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

               SERVICING OFFICER: Any officer of the Master Servicer or any
subservicer involved in, or responsible for, the administration and servicing of
the Mortgage Loans (i) in the case of the Master Servicer, whose name and
facsimile signature appear on a list of servicing officers furnished to the
Trustee by the Master Servicer on the Closing Date pursuant to this Agreement,
as such list may from time to time be amended and (ii) in the case of any
subservicer, as to which evidence reasonably acceptable to the Trustee, as
applicable, of due authorization, by such party has been furnished from time to
time to the Trustee.

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

               STATED PRINCIPAL BALANCE: With respect to any Mortgage Loan or
related REO Property and any Distribution Date, the Cut-off Date Principal
Balance thereof minus the sum of (i) the principal portion of the Scheduled
Payments due with respect to such Mortgage Loan during each Due Period ending
prior to such Distribution Date (and irrespective of any delinquency in their
payment), (ii) all Principal Prepayments with respect to such Mortgage Loan
received prior to or during the related Prepayment Period, and all Liquidation
Proceeds to the extent applied by the Master Servicer or any subservicer as
recoveries of principal in accordance with Section 3.13 or the applicable
Subservicing Agreement with respect to such Mortgage Loan, that were received by
the Master Servicer or the related subservicer as of the close of business on
the last day of the Prepayment Period related to such Distribution Date and
(iii) any Realized Losses on such Mortgage Loan incurred during the related
Prepayment Period. The Stated Principal Balance of a Liquidated


                                      -40-

<PAGE>



Loan equals zero. References herein to the Stated Principal Balance of a Loan
Group at any time shall mean the aggregate Stated Principal Balance of all
Mortgage Loans in such Loan Group.

               STEPDOWN DATE: The earlier to occur of (i) the Distribution Date
on which the aggregate Certificate Principal Balance of the Class A Certificates
has been reduced to zero and (ii) the later to occur of (a) the Distribution
Date in September 2004 and (b) the first Distribution Date on which the
aggregate Certificate Principal Balance of the Class M-1 Certificates, Class M-2
Certificates and the Class B Certificates divided by the Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period is
greater than or equal to 10.00%.

               SUBORDINATED CERTIFICATES: The Class M-1 Certificates, Class M-2
Certificates, Class B Certificates, Class B-IO Certificates and Residual
Certificates.

               SUBORDINATED CERTIFICATES RATE CAP: For each Distribution Date
with respect to the Class M-1 Certificates, Class M-2 Certificates and Class B
Certificates (i) through the related Accrual Period for such Class relating to a
Distribution Date on or prior to February 2004, the Aggregate Group Net Rate Cap
(calculated pursuant to clause (i) of the definition thereof) for such
Distribution Date and (b) thereafter, the lesser of (1) the Group I Net Rate Cap
and (2) the Group II Net Rate Cap, in each case for such Distribution Date.

               SUBSERVICING AGREEMENT: Any agreement (including, without
limitation, the National City Subservicing Agreement) entered into between the
Master Servicer and a subservicer with respect to the subservicing of any
Mortgage Loan hereunder by such subservicer.

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

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

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

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

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

               TRIGGER EVENT: With respect to any Distribution Date after the
Stepdown Date, a Trigger Event exists if a Delinquency Event shall have occurred
and be continuing.



                                      -41-

<PAGE>



               TRUST FUND: The corpus of the trust created hereunder consisting
of (i) the Mortgage Loans and all interest accruing and principal due with
respect thereto after the Cut-off Date to the extent not applied in computing
the Cut-off Date Principal Balance thereof; (ii) the Distribution Account and
the Protected Account maintained by the Master Servicer and all amounts
deposited therein pursuant to the applicable provisions of this Agreement; (iii)
property that secured a Mortgage Loan and has been acquired by foreclosure, deed
in lieu of foreclosure or otherwise; (iv) the mortgagee's rights under the
Insurance Policies with respect to the Mortgage Loans; (v) the National City
Subservicing Agreement and the Assumption Agreement; and (vi) all proceeds of
the foregoing, including proceeds of conversion, voluntary or involuntary, of
any of the foregoing into cash or other liquid property.

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

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

               UNCERTIFICATED NOTIONAL AMOUNT: With respect to each of REMIC II
Regular Interest LT2A-IO and any Distribution Date, the Uncertificated Principal
Balance of REMIC I Regular Interest LT1D for such Distribution Date.

               UNCERTIFICATED PASS-THROUGH RATE: The Uncertificated REMIC I
Pass-Through Rate or the Uncertificated REMIC II Pass-Through Rate.

               UNCERTIFICATED PRINCIPAL BALANCE: With respect to each REMIC
Regular Interest (other than REMIC II Regular Interest LT2A-IO), the principal
amount of such REMIC Regular Interest outstanding as of any date of
determination. As of the Closing Date, the Uncertificated Principal Balance of
each REMIC Regular Interest (other than REMIC II Regular Interest LT2A-IO) shall
equal the amount set forth in the Preliminary Statement hereto as its initial
Uncertificated Principal Balance. On each Distribution Date, the Uncertificated
Principal Balance of each REMIC Regular Interest shall be reduced by all
distributions of principal made on such REMIC Regular Interest on such
Distribution Date pursuant to Section 5.06 and, if and to the extent necessary
and appropriate, shall be further reduced on such Distribution Date by Realized
Losses as provided in Section 5.06. The Uncertificated Principal Balance of each
of REMIC II Regular Interest LT2-1ZZ and REMIC II Regular Interest LT2-2ZZ shall
each be increased by interest deferrals as provided in Section 5.06. The
Uncertificated Principal Balance of each REMIC Regular Interest shall never be
less than zero. REMIC II Regular Interest LT2A-IO will not have an
Uncertificated Principal Balance.



                                      -42-

<PAGE>



               UNCERTIFICATED REMIC I PASS-THROUGH RATE: With respect to any
Distribution Date and REMIC I Regular Interest LT1A, REMIC I Regular Interest
LT1D and REMIC I Regular Interest LT1P, a per annum rate equal to the average of
the Net Mortgage Rates of the Mortgage Loans, weighted on the basis of the
Stated Principal Balances thereof as of the close of business on the last day of
the calendar month preceding the month in which such Distribution Date occurs.
With respect to any Distribution Date and REMIC I Regular Interest LT1B, a per
annum rate equal to the average of the Net Mortgage Rates of the Mortgage Loans
in Loan Group I, weighted on the basis of the Stated Principal Balances thereof
as of the close of business on the last day of the calendar month preceding the
month in which such Distribution Date occurs. With respect to any Distribution
Date and REMIC I Regular Interest LT1C, a per annum rate equal to the average of
the Net Mortgage Rates of the Mortgage Loans in Loan Group II, weighted on the
basis of the Stated Principal Balances thereof as of the close of business on
the last day of the calendar month preceding the month in which such
Distribution Date occurs.

               UNCERTIFICATED REMIC II PASS-THROUGH RATE:

               (a) With respect to REMIC II Regular Interest LT2-1AA, REMIC II
Regular Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular
Interest LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular Interest
LT2-1M1, REMIC II Regular Interest LT2- 1M2, REMIC II Regular Interest LT2-1B,
REMIC II Regular Interest LT2-1ZZ, REMIC II Regular Interest LT2-2AA, REMIC II
Regular Interest LT2-AII, REMIC II Regular Interest LT2-2M1, REMIC II Regular
Interest LT2-2M2, REMIC II Regular Interest LT2-2B, REMIC II Regular Interest
LT2P and REMIC II Regular Interest LT2-2ZZ and any Distribution Date prior to
and including the Distribution Date in February 2004, a per annum rate equal to
the Aggregate Group Net Rate Cap.

               (b) With respect to REMIC II Regular Interest LT2-1AA, REMIC II
Regular Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular
Interest LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular Interest
LT2-1M1, REMIC II Regular Interest LT2- 1M2, REMIC II Regular Interest LT2-1B
and REMIC II Regular Interest LT2-1ZZ and any Distribution Date after the
Distribution Date in February 2004, a per annum rate equal to the Uncertificated
REMIC I Pass-Through Rate of the Uncertificated REMIC I Regular Interest LT1B.

               (c) With respect to REMIC II Regular Interest LT2-2AA, REMIC II
Regular Interest LT2-AII, REMIC II Regular Interest LT2-M1, REMIC II Regular
Interest LT2-2M2, REMIC II Regular Interest LT2-2B and REMIC II Regular Interest
LT2-2ZZ and any Distribution Date after the Distribution Date in February 2004,
a per annum rate equal to the Uncertificated REMIC I Pass- Through Rate of the
Uncertificated REMIC I Regular Interest LT1C.

               (d) With respect to REMIC II Regular Interest LT2A-IO and the
first 30 Distribution Dates, the Class A-IO Rate, and 0.00% per annum
thereafter.

               UNPAID REALIZED LOSS AMOUNT: As of any Distribution Date, and
each Class of Subordinated Certificates (other than the Class B-IO Certificates
and Residual Certificates) the excess of (i) the Applied Realized Loss Amount
for such Class over (ii) the sum of all distributions


                                      -43-

<PAGE>



on such Class in reduction of the Applied Realized Loss Amount for such Class on
all previous Distribution Dates.

               VOTING RIGHTS: The portion of the voting rights of all the
Certificates that is allocated to any Certificate for purposes of the voting
provisions hereunder. Voting Rights shall be allocated (i) 93% to the Offered
Certificates (other than the Class A-IO Certificates and the Residual
Certificates), (ii) 1% to the Class A-IO Certificates until paid in full, (iii)
prior to payment in full of the Class A-IO Certificates, 2% and thereafter 3%,
to the Class B-IO Certificates, (iv) 1% to the Class P Certificates and (v) 1%
to each Class of Residual Certificates, with the allocation among the
Certificates (other than the Class A-IO Certificates, the Class B-IO
Certificates and the Residual Certificates) to be in proportion to the
Certificate Principal Balance of each Class relative to the Certificate
Principal Balance of all other such Classes. Voting Rights will be allocated
among the Certificates of each such Class in accordance with their respective
Percentage Interests.

               WEIGHTED AVERAGE NET MORTGAGE RATE: The weighted average of the
Net Mortgage Rates of the Mortgage Loans, weighted on the basis of the Stated
Principal Balances thereof as of the close of business on the first day of the
calendar month preceding the month in which such Distribution Date occurs.




                                      -44-

<PAGE>



                                   ARTICLE II

                            CONVEYANCE OF TRUST FUND
                         REPRESENTATIONS AND WARRANTIES

        Section 2.01   CONVEYANCE OF TRUST FUND.

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

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

               The Depositor, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the
Trustee for the use and benefit of the Certificateholders, without recourse, all
the right, title and interest of the Depositor in and to the Trust Fund.

               In connection with any such transfer and assignment, the
Depositor has delivered to, and deposited with, the Trustee the following
documents or instruments with respect to each Mortgage Loan so assigned: (i) the
original Mortgage Note, including any riders thereto, endorsed without recourse
to the order of "Wells Fargo Bank Minnesota, National Association, as Trustee
for certificateholders of Bear Stearns Asset Backed Securities, Inc. Asset
Backed Certificates, Series 2001- AC1," and showing to the extent available to
the Seller an unbroken chain of endorsements from the original payee thereof to
the Person endorsing it to the Trustee, (ii) the original Mortgage, which shall
have been recorded (or if the original is not available, a copy), with evidence
of such recording indicated thereon (or if clause (x) in the proviso below
applies, shall be in recordable form), (iii) the assignment (either an original
or a copy, which may be in the form of a blanket assignment if permitted in the
jurisdiction in which the Mortgaged Property is located) to the Trustee of the
Mortgage with respect to each Mortgage Loan in the name of "Wells Fargo Bank
Minnesota, National Association, as Trustee for certificateholders of Bear
Stearns Asset Backed Securities, Inc. Asset Backed Certificates, Series
2001-AC1," which shall have been recorded (or if clause (x) in the proviso below
applies or for Mortgage Loans with respect to which the related Mortgaged
Property is located in a state other than Maryland, Florida, Mississippi, South
Carolina or Tennessee, shall be in recordable form) (iv) an original or a copy
of all intervening assignments of the Mortgage, if any, to the extent available
to the Seller, with evidence of recording thereon, (v) the original policy of
title insurance or mortgagee's certificate of title insurance or commitment or
binder for title insurance, if available, or a copy thereof, or, in the event
that such original title insurance policy is unavailable, a photocopy thereof,
or in lieu thereof, a current lien search on the related Mortgaged Property and
(vi) originals or copies of all available assumption, modification or
substitution agreements, if any; provided, however, that in lieu of the
foregoing, the Seller may deliver the following documents, under the
circumstances set forth below: (x) if any Mortgage, assignment thereof to the
Trustee or intervening assignments thereof have been delivered or are being
delivered to recording offices for recording and have not been returned in time
to permit their delivery as specified above, the Depositor may deliver a true
copy thereof with a certification by the Master


                                      -45-

<PAGE>



Servicer or the title company issuing the commitment for title insurance, on the
face of such copy, substantially as follows: "Certified to be a true and correct
copy of the original, which has been transmitted for recording"; and (y) in lieu
of the Mortgage Notes relating to the Mortgage Loans identified in the list set
forth in Exhibit J, the Depositor may deliver a lost note affidavit and
indemnity and a copy of the original note, if available; and provided, further,
however, that in the case of Mortgage Loans which have been prepaid in full
after the Cut-Off Date and prior to the Closing Date, the Depositor, in lieu of
delivering the above documents, may deliver to the Trustee a certification of a
Servicing Officer to such effect and in such case shall deposit all amounts paid
in respect of such Mortgage Loans, in the Master Servicer's Protected Account or
in the Distribution Account on the Closing Date. In the case of the documents
referred to in clause (x) above, the Depositor shall deliver such documents to
the Trustee promptly after they are received. The Seller shall cause, at its
expense, the Mortgage and intervening assignments, if any, and to the extent
required in accordance with the foregoing, the assignment of the Mortgage to the
Trustee to be submitted for recording promptly after the Closing Date; provided
that the Seller need not cause to be recorded any assignment in any jurisdiction
under any state other than Maryland, Florida, Mississippi, South Carolina and
Tennessee or of which, as evidenced by an Opinion of Counsel delivered by the
Seller to the Trustee and the Rating Agencies, the recordation of such
assignment is not necessary to protect the Trustee's interest in the related
Mortgage Loan. In the event that the Seller, the Depositor or the Master
Servicer gives written notice to the Trustee that a court has recharacterized
the sale of the Mortgage Loans as a financing, the Seller shall submit or cause
to be submitted for recording as specified above or, should the Seller fail to
perform such obligations, the Trustee shall cause each such previously
unrecorded assignment to be submitted for recording as specified above at the
expense of the Trust pursuant to Section 9.05. In the event a Mortgage File is
released to the Master Servicer as a result of the Master Servicer's having
completed a Request for Release, the Trustee shall, if not so completed,
complete the assignment of the related Mortgage in the manner specified in
clause (iii) above.

        Section 2.02   ACCEPTANCE OF THE MORTGAGE LOANS.

               (a) The Trustee acknowledges receipt of, subject to the further
review and exceptions reported by the Trustee pursuant to the procedures
described below, the documents (or certified copies thereof) delivered to the
Trustee pursuant to Section 2.01 and declares that it holds and will continue to
hold directly or through a custodian those documents and any amendments,
replacements or supplements thereto and all other assets of the Trust Fund
delivered to it in trust for the use and benefit of all present and future
Holders of the Certificates. On the Closing Date, the Trustee will deliver an
Initial Certification in the form annexed hereto as Exhibit C-1 confirming
whether or not it has received the Mortgage File for each Mortgage Loan, but
without review of such Mortgage File, except to the extent necessary to confirm
whether such Mortgage File contains the original Mortgage Note or a lost note
affidavit and indemnity in lieu thereof. No later than 90 days after the Closing
Date, the Trustee shall, for the benefit of the Certificateholders, review each
Mortgage File delivered to it and execute and deliver to the Seller and the
Master Servicer an Interim Certification substantially in the form annexed
hereto as Exhibit C-2. In conducting such review, the Trustee will ascertain
whether all required documents have been executed and received and whether those
documents relate, determined on the basis of the Mortgagor name, original
principal balance and loan number, to the Mortgage Loans identified in Exhibit B
to this Agreement, as supplemented (provided, however, that with respect to
those documents described in subclauses (iv) and (vi) of


                                      -46-

<PAGE>



Section 2.01, such obligations shall extend only to documents actually delivered
pursuant to such subclauses). In performing any such review, the Trustee may
conclusively rely on the purported due execution and genuineness of any such
document and on the purported genuineness of any signature thereon. If the
Trustee finds any document constituting part of the Mortgage File not to have
been executed or received, or to be unrelated to the Mortgage Loans identified
in Exhibit B or to appear to be defective on its face, the Trustee shall include
such information in the exception report attached to Exhibit C-2. The Seller
shall correct or cure any such defect or, if prior to the end of the second
anniversary of the Closing Date, the Seller may substitute for the related
Mortgage Loan a Replacement Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03 or shall deliver to the Trustee an Opinion of Counsel to the effect that
such defect does not materially or adversely affect the interests of
Certificateholders in such Mortgage Loan within 60 days from the date of notice
from the Trustee of the defect and if the Seller fails to correct or cure the
defect or deliver such opinion within such period, the Seller will, subject to
Section 2.03, within 90 days from the notification of the Trustee purchase such
Mortgage Loan at the Purchase Price; provided, however, that if such defect
relates solely to the inability of the Seller to deliver the Mortgage,
assignment thereof to the Trustee, or intervening assignments thereof with
evidence of recording thereon because such documents have been submitted for
recording and have not been returned by the applicable jurisdiction, the Seller
shall not be required to purchase such Mortgage Loan if the Seller delivers such
documents promptly upon receipt, but in no event later than 360 days after the
Closing Date.

               (b) No later than 180 days after the Closing Date, the Trustee
will review, for the benefit of the Certificateholders, the Mortgage Files and
will execute and deliver or cause to be executed and delivered to the Seller and
the Master Servicer, a Final Certification substantially in the form annexed
hereto as Exhibit C-3. In conducting such review, the Trustee will ascertain
whether each document required to be recorded has been returned from the
recording office with evidence of recording thereon and the Trustee has received
either an original or a copy thereof, as required in Section 2.01 (provided,
however, that with respect to those documents described in subclauses (iv) and
(vi) of Section 2.01, such obligations shall extend only to documents actually
delivered pursuant to such subclauses). If the Trustee finds any document with
respect to a Mortgage Loan has not been received, or to be unrelated, determined
on the basis of the Mortgagor name, original principal balance and loan number,
to the Mortgage Loans identified in Exhibit B or to appear defective on its
face, the Trustee shall note such defect in the exception report attached to the
Final Certification and shall promptly notify the Seller. The Seller shall
correct or cure any such defect or, if prior to the end of the second
anniversary of the Closing Date, the Seller may substitute for the related
Mortgage Loan a Replacement Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03 or shall deliver to the Trustee an Opinion of Counsel to the effect that
such defect does not materially or adversely affect the interests of
Certificateholders in such Mortgage Loan within 60 days from the date of notice
from the Trustee of the defect and if the Seller is unable within such period to
correct or cure such defect, or to substitute the related Mortgage Loan with a
Replacement Mortgage Loan or to deliver such opinion, the Seller shall, subject
to Section 2.03, within 90 days from the notification of the Trustee, purchase
such Mortgage Loan at the Purchase Price; provided, however, that if such defect
relates solely to the inability of the Seller to deliver the Mortgage,
assignment thereof to the Trustee or intervening assignments thereof with
evidence of recording thereon, because such documents have not been returned by
the applicable jurisdiction, the Seller shall not be required to


                                      -47-

<PAGE>



purchase such Mortgage Loan, if the Seller delivers such documents promptly upon
receipt, but in no event later than 360 days after the Closing Date.

               (c) In the event that a Mortgage Loan is purchased by the Seller
in accordance with subsections 2.02(a) or (b) above or Section 2.03, the Seller
shall remit the applicable Purchase Price to the Trustee for deposit in the
Distribution Account and shall provide written notice to the Trustee detailing
the components of the Purchase Price, signed by a Servicing Officer. Upon
deposit of the Purchase Price in the Distribution Account and upon receipt of a
Request for Release with respect to such Mortgage Loan, the Trustee will release
to the Seller the related Mortgage File and the Trustee shall execute and
deliver all instruments of transfer or assignment, without recourse, furnished
to it by the Seller, as are necessary to vest in the Seller title to and rights
under the Mortgage Loan. Such purchase shall be deemed to have occurred on the
date on which the deposit into the Distribution Account was made. The Trustee
shall promptly notify the Rating Agencies of such repurchase. The obligation of
the Seller to cure, repurchase or substitute for any Mortgage Loan as to which a
defect in a constituent document exists shall be the sole remedy respecting such
defect available to the Certificateholders or to the Trustee on their behalf.

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

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

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

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

               (ii) It has the full corporate power and authority to service
        each Mortgage Loan, and to execute, deliver and perform, and to enter
        into and consummate the transactions contemplated by this Agreement and
        has duly authorized by all necessary corporate action on its part the
        execution, delivery and performance of this Agreement; and this
        Agreement, assuming the due authorization, execution and delivery hereof
        by the other parties hereto, constitutes its legal, valid and binding
        obligation, enforceable against it in accordance with its terms, except
        that (a) the enforceability hereof may be limited by bankruptcy,
        insolvency, moratorium, receivership and other similar laws relating to
        creditors' rights generally and (b)


                                      -48-

<PAGE>



        the remedy of specific performance and injunctive and other forms of
        equitable relief may be subject to equitable defenses and to the
        discretion of the court before which any proceeding therefor may be
        brought.

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

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

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

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

               (vii) The Master Servicer will not waive any Prepayment Charge
        unless it is waived in accordance with the standard set forth in Section
        3.01.

               (b) The Seller hereby represents and warrants to the Depositor,
the Securities Administrator, the Master Servicer and the Trustee as follows, as
of the Closing Date:

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


                                      -49-

<PAGE>



        this Agreement and to perform any of its other obligations under this
        Agreement in accordance with the terms hereof.

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

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

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

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

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


                                      -50-

<PAGE>



               (vii) With respect to each Mortgage Loan as of the Cut-off Date
        (unless otherwise expressly provided):

               (A) The information set forth in the Mortgage Loan Schedule on
the Closing Date is complete, true and correct.

               (B) All payments required to be made prior to the Cut-off Date
with respect to each Mortgage Loan have been made and no Mortgage Loan is
delinquent sixty or more days; and the Seller has not advanced funds, or
induced, solicited or knowingly received any advance of funds from a party other
than the owner of the Mortgaged Property subject to the Mortgage, directly or
indirectly, for the payment of any amount required under any Mortgage Loan.

               (C) Except with respect to taxes, insurance and other amounts
previously advanced by a prior servicer with respect to any Mortgage Loan, to
the best of Seller's knowledge, there are no delinquent taxes, water charges,
sewer rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments, or other outstanding charges
affecting the related Mortgaged Property.

               (D) The terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments which in the case of the Mortgage Loans are in the Mortgage File and
have been or will be recorded, if necessary to protect the interests of the
Trustee, and which have been or will be delivered to the Trustee, all in
accordance with this Agreement. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by
the related policy. No Mortgagor has been released, in whole or in part, except
in connection with an assumption agreement approved by the title insurer, to the
extent required by the policy, and which assumption agreement in the case of the
Mortgage Loans is part of the Mortgage File.

               (E) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto.

               (F) All buildings upon, or comprising part of, the Mortgaged
Property are insured by an insurer acceptable to Fannie Mae and Freddie Mac
against loss by fire, hazards of extended coverage and such other hazards as are
customary in the area where the Mortgaged Property is located, and such insurer
is licensed to do business in the state where the Mortgaged Property is located.
All such insurance policies contain a standard mortgagee clause naming the
originator, its successors and assigns as mortgagee and Seller has received no
notice that all premiums thereon have not been paid. If upon origination of the
Mortgage Loan, the Mortgaged Property was, or was subsequently deemed to be, in
an area identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards (and such flood insurance has been made
available), which require under applicable law that a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration (or any successor thereto) be


                                      -51-

<PAGE>



obtained, such flood insurance policy is in effect which policy is with a
generally acceptable carrier in an amount representing coverage not less than
the least of (A) the Stated Principal Balance of the related Mortgage Loan, (B)
the minimum amount required to compensate for damage or loss on a replacement
cost basis, or (C) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at Mortgagor's cost and expense and,
on the Mortgagor's failure to do so, authorizes the holder of the Mortgage to
maintain such insurance at Mortgagor's cost and expense and to obtain
reimbursement therefor from the Mortgagor.

               (G) Any and all requirements of any federal, state or local law
including, usury, truth in lending, real estate settlement procedures including,
the Real Estate Settlement Procedures Act of 1974, as amended, consumer credit
protection, equal credit opportunity or disclosure laws applicable to the
Mortgage Loan have been complied with in all material respects.

               (H) The Mortgage has not been satisfied, canceled, subordinated,
or rescinded, in whole or in part, and the Mortgaged Property has not been
released from the lien of the Mortgage, in whole or in part, nor has any
instrument been executed that would effect any such release, cancellation,
subordination or rescission.

               (I) The Mortgage is a valid, existing and enforceable first on
the Mortgaged Property, including all improvements on the Mortgaged Property, if
any, subject only to (1) the lien of current real property taxes and assessments
not yet due and payable, (2) covenants, conditions and restrictions, rights of
way, easements and other matters of the public record as of the date of
recording being acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and which do not adversely affect the Appraised
Value of the Mortgaged Property and (3) other matters to which like properties
are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage. The Seller has full right to
sell and assign the Mortgage to the Depositor.

               (J) The Mortgage Note and the related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or reorganization or general principles
of equity.

               (K) All parties to the Mortgage Note and the Mortgage had the
legal capacity to enter into the Mortgage Loan transaction and to execute and
deliver the Mortgage Note and the Mortgage, and the Mortgage Note and the
Mortgage have been duly and properly executed by such parties.

               (L) The proceeds of the Mortgage Loan have been fully disbursed
and there is no requirement for future advances thereunder and any and all
requirements as to completion of any on- site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not entitled to any
refund of any amounts paid or due under the Mortgage Note or Mortgage.


                                      -52-

<PAGE>



               (M) Immediately prior to the conveyance of the Mortgage Loans by
the Seller to the Depositor hereunder, the Seller was the sole owner and holder
of the Mortgage Loan; the related Originator or the Seller or the applicable
Servicer was the custodian of the related escrow account, if applicable; the
Mortgage Loan had neither been assigned nor pledged, and the Seller had good and
marketable title thereto, and had full right to transfer and sell the Mortgage
Loan and the related servicing rights to the Depositor free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest subject to
the National City Subservicing Agreement, if applicable, and had full right and
authority subject to no interest or participation of, or agreement with, any
other party, to sell and assign the Mortgage Loan and the related servicing
rights to the Depositor pursuant to the terms of this Agreement.

               (N) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located, and (2) organized under the laws of such
state, qualified to do business in such state, a federal savings and loan
association or national bank having principal offices in such state or not
deemed to be doing business in such state under applicable law.

               (O) The Mortgage Loan is covered by an ALTA lender's title
insurance policy or equivalent form acceptable to the Department of Housing and
Urban Development, or any successor thereto, and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring (subject to the
exceptions contained in clause (I) above) the Seller (as assignee), its
successors and assigns as to the first priority lien of the Mortgage in the
original principal amount of the Mortgage Loan and against any loss by reason of
the invalidity or unenforceability of the lien resulting from the provisions of
the Mortgage Note and/or Mortgage providing for adjustment in the Mortgage Rate
and monthly payment. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress, and against encroachments by or upon
the Mortgaged Property or any interest therein. With respect to each Mortgage
Loan, the Seller (as assignee) is the sole insured of such lender's title
insurance policy, and such lender's title insurance policy is in full force and
effect. No claims have been made under such lender's title insurance policy, and
no prior holder of the related Mortgage, including the Seller in the case of a
Mortgage Loan, has done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy.

               (P) Except as provided in clause (B), immediately prior to the
Cut-off Date, there was no default, breach, violation or event of acceleration
existing under the Mortgage or the Mortgage Note and there was no event which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of acceleration,
and the Seller has not waived any default, breach, violation or event of
acceleration.

               (Q) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to such lien) affecting the related Mortgaged Property which
are or may be liens prior to or equal with, the lien of the related Mortgage.



                                      -53-

<PAGE>



               (R) All improvements which were considered in any appraisal which
was used in determining the Appraised Value of the related Mortgaged Property
lay wholly within the boundaries and building restriction lines of the Mortgaged
Property, and no improvements on adjoining properties encroach upon the
Mortgaged Property.

               (S)     [Reserved]

               (T) The origination, servicing and collection practices with
respect to each Mortgage Note and Mortgage including, the establishment,
maintenance and servicing of the escrow accounts and escrow payments, if any,
since origination, have been conducted in all respects in accordance with the
terms of Mortgage Note and in compliance with all applicable laws and
regulations and, unless otherwise required by law or Fannie Mae/Freddie Mac
standard, in accordance with the proper, prudent and customary practices in the
mortgage origination and servicing business. With respect to the escrow accounts
and escrow payments, if any, and a Mortgage Loan (other than the National City
Loans) all such payments are in the possession or under the control of the
Seller (including pursuant to a Servicing Agreement) and there exists no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. Any interest required to be paid pursuant
to state and local law has been properly paid and credited.

               (U) The Mortgaged Property is free of material damage and waste
and there is no proceeding pending for the total or partial condemnation
thereof.

               (V) The Mortgage contains customary and enforceable provisions to
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
intended to be provided thereby, including, (1) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (2) otherwise by judicial
foreclosure. There is no other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage. The Mortgagor has not notified the Seller
and the Seller has no knowledge of any relief requested or allowed to the
Mortgagor under the Soldiers and Sailors Civil Relief Act of 1940.

               (W) The Mortgage Note is not and has not been secured by any
collateral except the lien of the applicable Mortgage.

               (X)     [Reserved]

               (Y) In the event the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Certificateholders to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor.

               (Z) No Mortgage Loan contains a permanent or temporary "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan.



                                      -54-

<PAGE>


               (AA) The Mortgagor has received all disclosure materials required
by applicable law with respect to the making of the Mortgage Loan.

               (BB) No Mortgage Loan was made in connection with the
construction or rehabilitation of a Mortgaged Property.

               (CC) To the best of Seller's knowledge, the Mortgaged Property is
lawfully occupied under applicable law and all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy, have been made or
obtained from the appropriate authorities.

               (DD) The assignment of Mortgage with respect to a Mortgage Loan
is in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.

               (EE)    [Reserved].

               (FF)    [Reserved].

               (GG) The Mortgaged Property consists of a single parcel of real
property with or without a detached single family residence erected thereon, or
an individual condominium unit, or a 2-4 family dwelling, or an individual unit
in a planned unit development as defined by Fannie Mae or a manufactured
dwelling which conforms with Fannie Mae and Freddie Mac requirements regarding
such dwellings, or a townhouse, each structure of which is permanently affixed
to the Mortgaged Property, and is legally classified as real estate.

               (HH)    [Reserved]

               (II)    [Reserved].

               (JJ) Each Mortgage Loan at the time of origination was
underwritten in general in accordance with guidelines not inconsistent with the
guidelines set forth in the Prospectus Supplement and generally accepted prime
credit underwriting guidelines.

               (KK) No error, omission, misrepresentation, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of the
Seller or the related Originator.

               (LL) As of the Cut-off Date, none of the Mortgage Loans were
subject to the Home Ownership and Equity Protection Act of 1994 ("HOEPA").

               (MM) No Mortgage Loan imposes a Prepayment Charge for a term in
excess of five years.

               (c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty set forth in Section 2.03(b)(vii) that materially and
adversely affects the interests of the


                                      -55-

<PAGE>



Certificateholders in any Mortgage Loan, the party discovering such breach shall
give prompt written notice thereof to the other parties. Any breach of a
representation or warranty contained in clauses (LL) and/or (MM) above, shall be
automatically deemed to affect materially and adversely the interests of the
Certificateholders. The Seller hereby covenants with respect to the
representations and warranties set forth in Section 2.03(b)(vii), that within 90
days of the discovery of a breach of any representation or warranty set forth
therein that materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, it shall cure such breach in all
material respects and, if such breach is not so cured, (i) if such 90-day period
expires prior to the second anniversary of the Closing Date, remove such
Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund and substitute in
its place a Replacement Mortgage Loan, in the manner and subject to the
conditions set forth in this Section; or (ii) repurchase the affected Mortgage
Loan or Mortgage Loans from the Trustee at the Purchase Price in the manner set
forth below; provided that any such substitution pursuant to (i) above or
repurchase pursuant to (ii) above shall not be effected prior to the delivery to
the Trustee of an Opinion of Counsel if required by Section 2.05 hereof and any
such substitution pursuant to (i) above shall not be effected prior to the
additional delivery to the Trustee of a Request for Release. The Seller shall
promptly reimburse the Master Servicer and the Trustee for any expenses
reasonably incurred by the Master Servicer or the Trustee in respect of
enforcing the remedies for such breach. To enable the Securities Administrator
to amend the Mortgage Loan Schedule, the Seller shall, unless it cures such
breach in a timely fashion pursuant to this Section 2.03, promptly notify the
Securities Administrator whether it intends either to repurchase, or to
substitute for, the Mortgage Loan affected by such breach. With respect to the
representations and warranties in Section 2.03(b)(vii) that are made to the best
of the Seller's knowledge, if it is discovered by any of the Depositor, the
Master Servicer, the Seller, the Securities Administrator or the Trustee that
the substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation or warranty, the Seller shall nevertheless be
required to cure, substitute for or repurchase the affected Mortgage Loan in
accordance with the foregoing.

               Notwithstanding the foregoing, within 90 days of the earlier of
discovery by the Master Servicer or receipt of notice by the Master Servicer of
the breach of the covenant of the Master Servicer set forth in Section
2.03(a)(vii) above which materially and adversely affects the interests of the
Holders of the Class P Certificates in any Prepayment Charge, the Master
Servicer shall remedy such breach as follows: the Master Servicer shall pay the
amount of such waived Prepayment Charge, for the benefit of the holders of the
Class P Certificates, by depositing such amount into the Distribution Account
(net of any amount actually collected by the Master Servicer in respect of such
Prepayment Charge and remitted by the Master Servicer, for the benefit of the
holders of the Class P Certificates, in respect of such Prepayment Charge, into
the Distribution Account).

               With respect to any Replacement Mortgage Loan or Loans, the
Seller shall deliver to the Trustee for the benefit of the Certificateholders
such documents and agreements as are required by Section 2.01. No substitution
will be made in any calendar month after the Determination Date for such month.
Scheduled Payments due with respect to Replacement Mortgage Loans in the Due
Period related to the Distribution Date on which such proceeds are to be
distributed shall not be part of the Trust Fund and will be retained by the
Seller. For the month of substitution,


                                      -56-

<PAGE>



distributions to Certificateholders will include the Scheduled Payment due on
any Deleted Mortgage Loan for the related Due Period and thereafter the Seller
shall be entitled to retain all amounts received in respect of such Deleted
Mortgage Loan. The Securities Administrator shall amend the Mortgage Loan
Schedule for the benefit of the Certificateholders to reflect the removal of
such Deleted Mortgage Loan and the substitution of the Replacement Mortgage Loan
or Loans and the Securities Administrator shall deliver the amended Mortgage
Loan Schedule to the Trustee. Upon such substitution, the Replacement Mortgage
Loan or Loans shall be subject to the terms of this Agreement in all respects,
and the Seller shall be deemed to have made with respect to such Replacement
Mortgage Loan or Loans, as of the date of substitution, the representations and
warranties set forth in Section 2.03(b)(vii) with respect to such Mortgage Loan.
Upon any such substitution and the deposit into the Protected Account maintained
by the Master Servicer of the amount required to be deposited therein in
connection with such substitution as described in the following paragraph and
receipt by the Trustee of a Request for Release for such Mortgage Loan, the
Trustee shall release to the Seller the Mortgage File relating to such Deleted
Mortgage Loan and held for the benefit of the Certificateholders and shall
execute and deliver at the Seller's direction such instruments of transfer or
assignment as have been prepared by the Seller, in each case without recourse,
as shall be necessary to vest in the Seller, or its respective designee, title
to the Trustee's interest in any Deleted Mortgage Loan substituted for pursuant
to this Section 2.03.

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

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




                                      -57-

<PAGE>


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

        Section 2.03(A)       ASSIGNMENT OF INTERESTS IN THE NATIONAL CITY
                              SUBSERVICING AGREEMENT.

               To the extent not provided for in the Assumption Agreement, the
Seller hereby assigns to the Depositor who concurrently with the execution and
delivery of this Agreement assigns to the Trustee, on behalf of the
Certificateholders, all of its right, title and interest in the National City
Subservicing Agreement and, if applicable, the Assumption Agreement, including
but not limited to the Seller's rights and obligations pursuant to the National
City Subservicing Agreement (noting that the Seller has retained the right in
the event of breach of the representations, warranties and covenants, if any,
with respect to the related Mortgage Loans of National City under the National
City Subservicing Agreement to enforce the provisions thereof and to seek all or
any available remedies).

               To the extent not provided for in the Mortgage Loan Purchase
Agreement, the Seller hereby assigns to the Depositor who concurrently with the
execution and delivery of this Agreement assigns to the Trustee, on behalf of
the Certificateholders, all of its right, title and interest in the MLP&IS
Agreements, including but not limited to the Seller's rights and obligations
pursuant to the MLP&IS Agreements (noting that the Seller has retained the right
in the event of breach of the representations, warranties and covenants, if any,
of the Originators with respect to the related Mortgage Loans under such MLP&IS
Agreements to enforce the provisions thereof and to seek all or any available
remedies).

        Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

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

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

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



                                      -58-

<PAGE>


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

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

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

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

               It is understood and agreed that the representations and
warranties set forth in the immediately preceding paragraph shall survive
delivery of the Mortgage Files to the Trustee. Upon discovery by the Depositor
or the Trustee of a breach of such representations and warranties, the party
discovering such breach shall give prompt written notice to the others and to
each Rating Agency.

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

               (a) Notwithstanding any contrary provision of this Agreement,
with respect to any Mortgage Loan that is not in default or as to which default
is not imminent, no repurchase or substitution pursuant to Sections 2.02 or 2.03
shall be made unless the Seller delivers to the Trustee an Opinion of Counsel,
addressed to the Trustee, to the effect that such repurchase or substitution
would not (i) result in the imposition of the tax on "prohibited transactions"
of REMIC I, REMIC II or REMIC III or contributions after the Closing Date, as
defined in sections 860F(a)(2) and





                                      -59-

<PAGE>



860G(d) of the Code, respectively or (ii) cause any of REMIC I, REMIC II or
REMIC III to fail to qualify as a REMIC at any time that any Certificates are
outstanding. Any Mortgage Loan as to which repurchase or substitution was
delayed pursuant to this paragraph shall be repurchased or the substitution
therefor shall occur (subject to compliance with Sections 2.02 or 2.03) upon the
earlier of (a) the occurrence of a default or imminent default with respect to
such Mortgage Loan and (b) receipt by the Trustee of an Opinion of Counsel to
the effect that such repurchase or substitution, as applicable, will not result
in the events described in clause (i) or clause (ii) of the preceding sentence.

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

        Section 2.06   COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES.

               The Trustee acknowledges the transfer and assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed,
countersigned and delivered, to or upon the order of the Depositor, the
Certificates in authorized denominations evidencing the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the holders of the Certificates
may be adequately and effectively protected.

        Section 2.07   COVENANTS OF THE MASTER SERVICER.

               The Master Servicer hereby covenants to the Depositor, the
Securities Administrator and the Trustee as follows:

               (a) it shall comply in the performance of its obligations under
this Agreement with all reasonable rules and requirements of the insurer under
each Required Insurance Policy;

               (b) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Securities
Administrator, the Depositor, any affiliate of the Depositor or the Trustee and
prepared by such Master Servicer pursuant to this Agreement will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the information, certificate, statement or report not misleading; and

               (c) it shall accurately and fully provide information regarding
payment performance of the Mortgagors to the nationally recognized credit
repositories, to the extent such


                                      -60-

<PAGE>



reporting remains customary and prudent in the servicing of mortgage loans
similar to the Mortgage Loans. Nothing in this Section shall derogate from the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the Master
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.




                                      -61-

<PAGE>



                                   ARTICLE III

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

        Section 3.01   MASTER SERVICER.

               For and on behalf of the Certificateholders, the Master Servicer
shall service and administer the Mortgage Loans in accordance with customary and
usual standards of practice of prudent mortgage loan servicers in the respective
states in which the Mortgaged Properties are located. In connection with such
servicing and administration, the Master Servicer shall have full power and
authority, acting alone and/or through subservicers as provided in Section 3.03,
to do or cause to be done any and all things that it may deem necessary or
desirable in connection with such servicing and administration, including but
not limited to, the power and authority, subject to the terms hereof (i) to
execute and deliver, on behalf of the Certificateholders and the Trustee,
customary consents or waivers and other instruments and documents, (ii) to
consent to transfers of any Mortgaged Property and assumptions of the Mortgage
Notes and related Mortgages (but only in the manner provided herein), (iii) to
collect any Insurance Proceeds and other Liquidation Proceeds, and (iv) subject
to Section 3.13, to effectuate foreclosure or other conversion of the ownership
of the Mortgaged Property securing any Mortgage Loan; provided that the Master
Servicer shall take no action that is inconsistent with or prejudices the
interests of the Trust Fund or the Certificateholders in any Mortgage Loan or
the rights and interests of the Depositor and the Trustee under this Agreement.
To the extent consistent with the foregoing, the Master Servicer shall be
permitted to waive a Prepayment Charge only under the following circumstances:
(i) such waiver is standard and customary in servicing similar mortgage loans
and (ii) such waiver would, in the reasonable judgment of the Master Servicer,
maximize recovery of total proceeds taking into account the value of such
Prepayment Charge and the related Mortgage Loan.

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

               In accordance with the standards of the first paragraph of this
Section 3.01, the Master Servicer shall advance or cause to be advanced funds as
necessary for the purpose of effecting the payment of taxes and assessments on
the Mortgaged Properties, which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section 4.03,
and further as provided in Section 4.02. All costs incurred by the Master
Servicer, if any, in effecting the timely payments of taxes and assessments on
the Mortgaged Properties and related insurance premiums shall not, for the
purpose of calculating monthly distributions to the


                                      -62-

<PAGE>



Certificateholders, be added to the Stated Principal Balance under the related
Mortgage Loans, notwithstanding that the terms of such Mortgage Loans so permit.

               Section 3.02 REMIC-RELATED COVENANTS.

               For as long as each REMIC shall exist, the Trustee shall act in
accordance herewith to assure continuing treatment of such REMIC as a REMIC, and
the Trustee shall comply with any directions of the Seller, the Depositor, any
Servicer or the Master Servicer to assure such continuing treatment. In
particular, the Trustee shall not (a) sell or permit the sale of all or any
portion of the Mortgage Loans or of any investment of deposits in an Account
unless such sale is as a result of a repurchase of the Mortgage Loans pursuant
to this Agreement or the Trustee has received a REMIC Opinion prepared at the
expense of the Trust Fund; and (b) other than with respect to a substitution
pursuant to Section 2.04 of this Agreement, as applicable, accept any
contribution to any REMIC after the Startup Day without receipt of a REMIC
Opinion.

               For as long as each REMIC shall exist, the Master Servicer shall
act in accordance herewith to assure continuing treatment of such REMIC as a
REMIC. Notwithstanding anything in this Agreement to the contrary, the Master
Servicer shall not (unless the Mortgagor is in default with respect to the
Mortgage Loan or such default is, in the judgment of the Master Servicer,
reasonably foreseeable) make or permit any modification, waiver or amendment of
any term of any Mortgage Loan that would both (i) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or Treasury
regulations promulgated thereunder) and (ii) cause any of REMIC I, REMIC II or
REMIC III to fail to qualify as a REMIC under the Code or the imposition of any
tax on "prohibited transactions" or "contributions" after the startup date under
the REMIC Provisions.

        Section 3.03   SUBSERVICING; NATIONAL CITY SUBSERVICING AGREEMENT;
                       MONITORING OF SUBSERVICERS; ENFORCEMENT OF OBLIGATIONS.

               (a) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a subservicer pursuant to a Subservicing Agreement; provided
that such subservicing arrangement and the terms of the related Subservicing
Agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder.
Notwithstanding the provisions of any Subservicing Agreement, any of the
provisions herein relating to agreements or arrangements between the Master
Servicer or a subservicer or reference to actions taken through the Master
Servicer or otherwise, the Master Servicer shall remain obligated and liable to
the Depositor, the Trust, the Trustee and the Certificateholders for the
servicing and administration of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of any such Subservicing Agreements or arrangements or by virtue of
indemnification from the subservicer and to the same extent and under the same
terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. Every Subservicing Agreement entered into by
the Master Servicer shall contain a provision giving the successor Master
Servicer the option to terminate such agreement in the event a successor Master
Servicer is appointed. All actions of each subservicer performed pursuant to the
related Subservicing Agreement shall be performed as an agent of the Master
Servicer with the same force and effect as if performed directly by the Master
Servicer.



                                      -63-

<PAGE>



               (b) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect to
the Mortgage Loans (other than the National City Loans) that are received by a
subservicer regardless of whether such payments are remitted by the subservicer
to the Master Servicer.

               (c) The parties hereto acknowledge that the National City Loans
are currently being subserviced by National City in accordance with the terms
and provisions of the National City Subservicing Agreement. The National City
Subservicing Agreement has been assigned to the Trust pursuant to the Assumption
Agreement. Pursuant to the National City Subservicing Agreement, National City
will make all remittances required thereunder directly to the Trustee for
deposit in the Distribution Account.

               (d) The Master Servicer, on behalf of the Trustee and the
Certificateholders, shall enforce the obligations of each Subservicer (including
National City) under the related Subservicing Agreement, and shall, in the event
that any such Subservicer (including National City) fails to perform its
obligations in accordance with the related Subservicing Agreement, subject to
the preceding paragraph, terminate the rights and obligations of such
Subservicer (including National City) thereunder and thereafter perform the
primary servicing obligations with respect to such Mortgage Loans; provided,
however, it is understood and acknowledged by the parties hereto that there will
be a period of transition (not to exceed 90 days) before the actual servicing
functions can be fully transferred to the Master Servicer. Such enforcement,
including, without limitation, the legal prosecution of claims, termination of
Subservicing Agreements and the pursuit of other appropriate remedies, shall be
in such form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Master Servicer shall pay the costs of such
enforcement at its own expense, provided that the Master Servicer shall not be
required to prosecute or defend any legal action except to the extent that the
Master Servicer shall have received reasonable indemnity for its costs and
expenses in pursuing such action.

        Section 3.04   SUCCESSOR MASTER SERVICER AND SUBSERVICING AGREEMENTS.

               In the event that, pursuant to Section 8.01 hereof, the Trustee
or any other Person shall become Successor Master Servicer, such Successor
Master Servicer may, at its option, succeed to any rights and obligations of the
predecessor Master Servicer under any Subservicing Agreement in accordance with
the terms thereof; provided that such Successor Master Servicer shall not incur
any liability or have any obligations in its capacity as servicer under a
Subservicing Agreement arising prior to the date of such succession unless it
expressly elects to succeed to the rights and obligations of the predecessor
Master Servicer thereunder; and the predecessor Master Servicer shall not
thereby be relieved of any liability or obligations under the Subservicing
Agreement arising prior to the date of such succession.

               Such predecessor Master Servicer shall, upon request of the
Trustee, but at the expense of such predecessor Master Servicer, deliver to the
assuming party all documents and records relating to each Subservicing Agreement
and the Mortgage Loans then being serviced thereunder and an accounting of
amounts collected held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreement to the assuming
party.


                                      -64-

<PAGE>



        Section 3.05 RIGHTS OF THE DEPOSITOR AND THE TRUSTEE IN RESPECT OF THE
MASTER SERVICER.

               Neither the Trustee nor the Depositor shall have any
responsibility or liability for any action or failure to act by the Master
Servicer and none of them is obligated to supervise the performance of the
Master Servicer.

        Section 3.06   DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.

               (a) Except as otherwise provided in this Section 3.06, when any
property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing, the Master Servicer is not required to exercise
such rights with respect to a Mortgage Loan if the Person to whom the related
Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the
terms and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Master Servicer is prohibited by law from
enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is otherwise
permitted hereunder, the Master Servicer is authorized, subject to Section
3.06(b), to take or enter into an assumption and modification agreement from or
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Mortgage Note and, unless
prohibited by applicable state law, the Mortgagor remains liable thereon,
provided that the Mortgage Loan shall continue to be covered (if so covered
before the Master Servicer enters such agreement) by the applicable Required
Insurance Policies. The Master Servicer, subject to Section 3.06(b), is also
authorized with the prior approval of the insurers under any Required Insurance
Policies to enter into a substitution of liability agreement with such Person,
pursuant to which the original Mortgagor is released from liability and such
Person is substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Master Servicer shall not be deemed to be in
default under this Section 3.06(a) by reason of any transfer or assumption that
the Master Servicer reasonably believes it is restricted by law from preventing.

               (b) Subject to the Master Servicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3.06(a), in any case in
which a Mortgaged Property has been conveyed to a Person by a Mortgagor, and
such Person is to enter into an assumption agreement or modification agreement
or supplement to the Mortgage Note or Mortgage that requires the signature of
the Trustee, or if an instrument of release signed by the Trustee is required
releasing the Mortgagor from liability on the Mortgage Loan, the Master Servicer
shall prepare and deliver or cause to be prepared and delivered to the Trustee
for signature and shall direct, in writing, the Trustee to execute the
assumption agreement with the Person to whom the Mortgaged Property is to be
conveyed and such modification agreement or supplement to the Mortgage Note or
Mortgage or other instruments as are reasonable or necessary to carry out the
terms of the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the Mortgaged Property
to such Person. In connection with any such assumption, no material term of the
Mortgage Note


                                      -65-

<PAGE>



(including, but not limited to, the Mortgage Rate, the amount of the Scheduled
Payment and any other term affecting the amount or timing of payment on the
Mortgage Loan) may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Master Servicer in accordance with
its servicing standards as then in effect. The Master Servicer shall notify the
Trustee that any such substitution or assumption agreement has been completed by
forwarding to the Trustee the original of such substitution or assumption
agreement, which in the case of the original shall be added to the related
Mortgage File and shall, for all purposes, be considered a part of such Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. Any fee collected by the Master Servicer for entering into an
assumption or substitution of liability agreement will be retained by the Master
Servicer as additional servicing compensation.

        Section 3.07   RELEASE OF MORTGAGE FILES.

               (a) Upon the payment in full of any Mortgage Loan or the escrow
of such amount in a manner customary for such purposes for payment to
Certificateholders on the next Distribution Date, the Master Servicer will
promptly furnish to the Trustee a copy of a certification substantially in the
form of Exhibit H hereto signed by a Servicing Officer or in a mutually
agreeable electronic format which will, in lieu of a signature on its face,
originate from a Servicing Officer (which certification shall include a
statement to the effect that all amounts received in connection with such
payment that are required to be deposited in the Protected Account maintained by
the Master Servicer have been or will be so deposited or escrowed) and shall
request that the Trustee deliver to the Master Servicer the related Mortgage
File. Upon receipt of such certification and request, the Trustee shall promptly
release the related Mortgage File to the Master Servicer and the Trustee shall
have any further responsibility with regard to such Mortgage File. Upon any such
payment in full, the Master Servicer is authorized to give, as agent for the
Trustee, as the mortgagee under the Mortgage that secured the Mortgage Loan, an
instrument of satisfaction (or assignment of mortgage without recourse)
regarding the Mortgaged Property subject to the Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of such payment, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Protected Account.

               (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Trustee shall execute such documents as
shall be prepared and furnished to the Trustee by the Master Servicer (in form
reasonably acceptable to the Trustee) and as are necessary to the prosecution of
any such proceedings. The Trustee shall, upon the request of the Master
Servicer, and delivery to the Trustee, of two copies of a request for release
signed by a Servicing Officer substantially in the form of Exhibit H (or in a
mutually agreeable electronic format which will, in lieu of a signature on its
face, originate from a Servicing Officer), release the related Mortgage File
held in its possession or control to the Master Servicer. Such trust receipt
shall obligate the Master Servicer to return the Mortgage File to the Trustee,
when the need therefor by the Master Servicer no longer exists unless the
Mortgage Loan shall be liquidated, in which case, upon receipt of a certificate
of a Servicing Officer similar to that hereinabove specified, the Mortgage File
shall be released by the Trustee, to the Master Servicer.



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<PAGE>



        Section 3.08   DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF MASTER
                       SERVICER TO BE HELD FOR TRUSTEE.

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

        Section 3.09   MAINTENANCE OF HAZARD INSURANCE.

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


                                      -67-

<PAGE>



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

               In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section 3.09, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Master Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged Property a
policy complying with the first sentence of this Section 3.09, and there shall
have been a loss that would have been covered by such policy, deposit in the
Protected Account maintained by the Master Servicer the amount not otherwise
payable under the blanket policy because of such deductible clause. Such deposit
shall constitute a Servicing Advance. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
present, on behalf of itself, the Depositor and the Trustee for the benefit of
the Certificateholders, claims under any such blanket policy.

        Section 3.10   PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.

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

        Section 3.11   MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.

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



                                      -68-

<PAGE>



               (b) The Master Servicer agrees to present on behalf of the
Trustee and the Certificateholders, claims to the insurer under any Primary
Mortgage Insurance Policies and, in this regard, to take such reasonable action
as shall be necessary to permit recovery under any Primary Mortgage Insurance
Policies respecting defaulted Mortgage Loans. Pursuant to Section 4.01, any
amounts collected by the Master Servicer under any Primary Mortgage Insurance
Policies shall be deposited in the Protected Account maintained by the Master
Servicer, subject to withdrawal pursuant to Section 4.02 hereof.

        Section 3.12   TRUSTEE TO RETAIN POSSESSION OF CERTAIN INSURANCE
                       POLICIES AND DOCUMENTS.

               The Trustee shall retain possession and custody of the originals
(to the extent available) of any Primary Mortgage Insurance Policies, or
certificate of insurance if applicable, and any certificates of renewal as to
the foregoing as may be issued from time to time. Until all amounts
distributable in respect of the Certificates have been distributed in full and
the Master Servicer otherwise has fulfilled its obligations under this
Agreement, the Trustee shall also retain possession and custody of each Mortgage
File in accordance with and subject to the terms and conditions of this
Agreement. The Master Servicer shall promptly deliver or cause to be delivered
to the Trustee, upon the execution or receipt thereof the originals of any
Primary Mortgage Insurance Policies, any certificates of renewal, and such other
documents or instruments that constitute portions of the Mortgage File that come
into the possession of the Master Servicer from time to time.

        Section 3.13   REALIZATION UPON DEFAULTED MORTGAGE LOANS;
                       DETERMINATION OF EXCESS LIQUIDATION PROCEEDS AND REALIZED
                       LOSSES; REPURCHASES OF CERTAIN MORTGAGE LOANS.

               (a) The Master Servicer shall use reasonable efforts to foreclose
upon or otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
the requirements of the insurer under any Required Insurance Policy; provided
that the Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Protected Account maintained by the Master
Servicer pursuant to Section 4.02). If the Master Servicer reasonably believes
that Liquidation Proceeds with respect to any such Mortgage Loan would not be
increased as a result of such foreclosure or other action, such Mortgage Loan
will be charged-off and will become a Liquidated Loan. The Master Servicer will
give notice of any such charge-off to the Trustee and the Securities
Administrator. The Master Servicer shall be responsible for all other costs and
expenses incurred by it in any such proceedings; provided that such costs and
expenses shall be Servicing Advances and that it shall be entitled to
reimbursement thereof from the proceeds of liquidation of the related Mortgaged
Property, as contemplated in Section 4.02. If the Master Servicer has knowledge
that a Mortgaged Property that the Master Servicer is contemplating acquiring in
foreclosure or by deed-


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<PAGE>



in-lieu of foreclosure is located within a one-mile radius of any site with
environmental or hazardous waste risks known to the Master Servicer, the Master
Servicer will, prior to acquiring the Mortgaged Property, consider such risks
and only take action in accordance with its established environmental review
procedures.

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

               In the event that the Trust Fund acquires any Mortgaged Property
as aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to three years after its acquisition by the Trust Fund or, at the expense
of the Trust Fund, request more than 60 days prior to the day on which such
three- year period would otherwise expire, an extension of the three-year grace
period unless the Trustee shall have been supplied with an Opinion of Counsel
(such opinion not to be an expense of the Trustee) to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to such
three-year period will not result in the imposition of taxes on "prohibited
transactions" of REMIC I, REMIC II or REMIC III as defined in section 860F of
the Code or cause any of REMIC I, REMIC II or REMIC III to fail to qualify as a
REMIC at any time that any Certificates are outstanding, in which case the Trust
Fund may continue to hold such Mortgaged Property (subject to any conditions
contained in such Opinion of Counsel). Notwithstanding any other provision of
this Agreement, no Mortgaged Property acquired by the Trust Fund shall be rented
(or allowed to continue to be rented) or otherwise used for the production of
income by or on behalf of the Trust Fund in such a manner or pursuant to any
terms that would (i) cause such Mortgaged Property to fail to qualify as
"foreclosure property" within the meaning of section 860G(a)(8) of the Code or
(ii) subject any of REMIC I, REMIC II or REMIC III to the imposition of any
federal, state or local income taxes on the income earned from such Mortgaged
Property under section 860G(c) of the Code or otherwise, unless the Master
Servicer has agreed to indemnify and hold harmless the Trust Fund with respect
to the imposition of any such taxes.


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<PAGE>



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

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

               The proceeds of any Liquidated Loan, as well as any recovery
resulting from a partial collection of Liquidation Proceeds or any income from
an REO Property, will be applied in the following order of priority: first, to
reimburse the Master Servicer for any related unreimbursed Servicing Advances
and Servicing Fees, pursuant to Section 4.02 or this Section 3.13; second, to
reimburse the Master Servicer for any unreimbursed Advances, pursuant to Section
4.02 or this Section 3.13; third, to accrued and unpaid interest (to the extent
no Advance has been made for such amount) on the Mortgage Loan or related REO
Property, at the Net Mortgage Rate to the first day of the month in which such
amounts are required to be distributed; and fourth, as a recovery of principal
of the Mortgage Loan.

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

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




                                      -71-

<PAGE>

        Section 3.14   SERVICING COMPENSATION.

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

               Additional servicing compensation in the form of any Excess
Liquidation Proceeds, assumption fees, late payment charges, all income and gain
net of any losses realized from Permitted Investments with respect to funds in
or credited to the Protected Account shall be retained by the Master Servicer to
the extent not required to be deposited in the Protected Account pursuant to
Section 4.02. The Master Servicer shall be required to pay all expenses incurred
by it in connection with its servicing activities hereunder (including payment
of any premiums for hazard insurance, as required by Section 3.09 and
maintenance of the other forms of insurance coverage required by Section 3.11)
and shall not be entitled to reimbursement therefor except as specifically
provided in Section 4.02.

        Section 3.15 REO PROPERTY.

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

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

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

        Section 3.16   ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.

               (a) The Master Servicer shall deliver to the Depositor, the
Trustee and the Rating Agencies within 120 days after the end of its fiscal
year, commencing with its fiscal year end in 2001, an Officer's Certificate,
certifying that with respect to the period ending on its fiscal year end: (i)
such Servicing Officer has reviewed the activities of the Master Servicer during
the preceding fiscal year or portion thereof and its performance under this
Agreement and (ii) to the best of such Servicing Officer's knowledge, based on
such review, the Master Servicer has performed and fulfilled its duties,
responsibilities and obligations under this Agreement in all material respects
throughout such year, or, if there has been a default in the fulfillment of any
such duties,


                                      -72-

<PAGE>


responsibilities or obligations, specifying each such default known to such
Servicing Officer and the nature and status thereof, (iii) nothing has come to
the attention of such Servicing Officer to lead such Servicing Officer to
believe that any Subservicer has failed to perform any of its duties,
responsibilities and obligations under its Subservicing Agreement in all
material respects throughout such year, or, if there has been a material default
in the performance or fulfillment of any such duties, responsibilities or
obligations, specifying each such default known to such Servicing Officer and
the nature and status thereof.

               (b) Copies of such statements shall be provided by the Trustee to
any Certificateholder upon request at the Master Servicer's expense, provided
that such statement shall have been delivered to the Trustee.

        Section 3.17   ANNUAL INDEPENDENT ACCOUNTANT'S SERVICING REPORT.

               The Master Servicer, at its expense, shall cause a nationally
recognized firm of independent certified public accountants to furnish a
statement to the Trustee, the Rating Agencies and the Seller within 120 days
after the end of each fiscal year, commencing with the fiscal year ending in
2001 to the effect that, with respect to the most recently ended fiscal year,
such firm has examined certain records and documents relating to the Master
Servicer's performance of its servicing obligations under this Agreement and
pooling and servicing and trust agreements in material respects similar to this
Agreement and to each other and that, on the basis of such examination conducted
substantially in compliance with the audit program for mortgages serviced for
Freddie Mac or the Uniform Single Attestation Program for Mortgage Bankers, such
firm is of the opinion that the Master Servicer's activities have been conducted
in compliance with this Agreement, or that such examination has disclosed no
material items of noncompliance except for (i) such exceptions as such firm
believes to be immaterial, (ii) such other exceptions as are set forth in such
statement and (iii) such exceptions that the Uniform Single Attestation Program
for Mortgage Bankers or the Audit Program for Mortgages Serviced by Freddie Mac
requires it to report. Copies of such statements shall be provided to any
Certificateholder, upon request, by the Master Servicer, or by the Trustee at
the expense of the Master Servicer if the Master Servicer shall fail to provide
such copies. If any such report discloses exceptions that are material, the
Master Servicer shall advise the Trustee whether such exceptions have been or
are susceptible of cure, and will take prompt action to do so.

        Section 3.18   REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION.

               Within 15 days after each Distribution Date, the Securities
Administrator shall, in accordance with industry standards, file with the
Commission via the Electronic Data Gathering and Retrieval System ("EDGAR"), a
Form 8-K with a copy of the statement to the Trustee who shall furnish a copy of
the monthly statement to the Certificateholders for such Distribution Date as an
exhibit thereto. Prior to January 30, 2002, the Securities Administrator shall,
in accordance with industry standards and only if instructed by the Depositor,
file a Form 15 Suspension Notice with respect to the Trust Fund, if applicable.
Prior to March 30, 2002, the Securities Administrator shall file a Form 10-K, in
substance conforming to industry standards, with respect to the Trust Fund. The
Depositor hereby grants to the Securities Administrator a limited power of
attorney to execute and file each such document on behalf of the Depositor. Such
power of attorney shall continue until


                                      -73-

<PAGE>



either the earlier of (i) receipt by the Securities Administrator from the
Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. The Depositor agrees to promptly furnish to the
Securities Administrator, from time to time upon request, such further
information, reports and financial statements within its control related to this
Agreement and the Mortgage Loans as the Securities Administrator reasonably
deems appropriate to prepare and file all necessary reports with the Commission.
The Securities Administrator shall have no responsibility to file any items
other than those specified in this Section 3.18; provided, however, the
Securities Administrator will cooperate with the Depositor in connection with
any additional filings with respect to the Trust Fund as the Depositor deems
necessary under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Copies of all reports filed by the Securities Administrator under the
Exchange Act shall be sent to: the Depositor c/o Bear, Stearns & Co. Inc., Attn:
Managing Director-Analysis and Control, One Metrotech Center North, Brooklyn,
New York 11202-3859. Fees and expenses incurred by the Securities Administrator
in connection with this Section 3.18 shall not be reimbursable from the Trust
Fund.

        Section 3.19   ACCESS TO CERTAIN DOCUMENTATION.

               The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising holders of the Certificates and
the examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to any documentation as may be held by the Master Servicer
regarding the Mortgage Loans required by applicable regulations of the OTS and
the FDIC. Such access shall be afforded without charge, but only upon reasonable
and prior written request and during normal business hours at the offices of the
Master Servicer designated by it. Nothing in this Section shall limit the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the Master
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.

        Section 3.20   OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS.

               Beginning on the first Business Day of the fiscal quarter
immediately following the date on which a Mortgage Loan has become at least 91
days delinquent, the Seller may, at its option, purchase such Mortgage Loan from
the Trustee at the Purchase Price therefor. If at any time the Seller makes a
payment to the Protected Account maintained by the Master Servicer, covering the
amount of the Purchase Price for such Mortgage Loan, and the Seller provides to
the Trustee a certification signed by a Servicing Officer stating that the
amount of such payment has been deposited in such Protected Account then the
Trustee shall execute the assignment of such Mortgage Loan at the request of the
Seller without recourse to the Seller which shall succeed to all the Trustee's
right, title and interest in and to such Mortgage Loan, and all security and
documents relative thereto. Such assignment shall be an assignment outright and
not for security. The Seller will thereupon own such Mortgage Loan, and all such
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto. Notwithstanding the foregoing, any such
optional right of repurchase by the Seller hereunder with respect to a
delinquent Mortgage Loan shall, if unexercised, terminate on the earlier of (i)
the date on which such delinquency has been cured or (ii) the last Business Day
of such fiscal quarter immediately following the date on which such Mortgage
Loan became 91 days delinquent, provided however, that such


                                      -74-

<PAGE>



optional right of repurchase shall be reinstated if (a) in the case of clause
(i), the related Mortgage Loan shall thereafter again have become 91 or more
days delinquent and (b) in the case of clause (ii), such delinquency shall have
been subsequently cured and the related Mortgage Loan shall thereafter again
become 91 or more days delinquent in any subsequent fiscal quarter.




                                      -75-

<PAGE>



                                   ARTICLE IV

                                    ACCOUNTS

        Section 4.01   COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT.

               (a) The Master Servicer shall make reasonable efforts in
accordance with customary and usual standards of practice of prudent mortgage
lenders in the respective states in which the Mortgaged Properties are located
to collect all payments called for under the terms and provisions of the
Mortgage Loans to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any related Required Insurance Policy.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any late payment charge and (ii) extend the due dates for payments due on
a Mortgage Note for a period not greater than 125 days. In the event of any such
arrangement, the Master Servicer shall make Advances on the related Mortgage
Loan during the scheduled period in accordance with the amortization schedule of
such Mortgage Loan without modification thereof by reason of such arrangements,
and shall be entitled to reimbursement therefor in accordance with Section 5.01.
The Master Servicer shall not be required to institute or join in litigation
with respect to collection of any payment (whether under a Mortgage, Mortgage
Note or otherwise or against any public or governmental authority with respect
to a taking or condemnation) if it reasonably believes that enforcing the
provision of the Mortgage or other instrument pursuant to which such payment is
required is prohibited by applicable law. In addition, if (x) a Mortgage Loan is
in default or default is imminent or (y) the Master Servicer delivers to the
Trustee a certification, based on the advice of counsel or certified public
accountants, in either case, that have a national reputation with respect to
taxation of REMICs, that a modification of such Mortgage Loan will not result in
the imposition of taxes on or disqualify any of REMIC I, REMIC II or REMIC III,
the Master Servicer may, (A) amend the related Mortgage Note to reduce the
Mortgage Rate applicable thereto, provided that such reduced Mortgage Rate shall
in no event be lower than 8.25% and (B) amend any Mortgage Note to extend to the
maturity thereof.

               (b) The Master Servicer shall establish and maintain a Protected
Account (which shall at all times be an Eligible Account) with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of the Certificateholders and designated "Wells Fargo Bank Minnesota,
National Association, in trust for registered holders of Bear Stearns Asset
Backed Securities, Inc., Asset-Backed Certificates Series 2001-AC1". The Master
Servicer shall deposit or cause to be deposited into the Protected Account on a
daily basis within one Business Day of receipt, except as otherwise specifically
provided herein, the following payments and collections remitted by subservicers
(other than National City) or received by it in respect of Mortgage Loans
subsequent to the Cut-off Date (other than in respect of principal and interest
due on the Mortgage Loans on or before the Cut-off Date) and the following
amounts required to be deposited hereunder:

               (i) all payments on account of principal, including Principal
        Prepayments, on the Mortgage Loans and all Prepayment Charges collected
        by the Master Servicer with respect to the Mortgage Loans;

               (ii)    all payments on account of interest on the Mortgage Loans
        net of the related Servicing Fee permitted under Section 3.14;


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<PAGE>




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

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

               (vi) any amounts required to be deposited by the Master Servicer
        pursuant to Section 3.09;

               (vii) the Purchase Price for any Mortgage Loan repurchased by the
        Seller pursuant to Sections 2.02, 2.03 or 3.20 of this Agreement and any
        Substitution Adjustment Amount relating to a Mortgage Loan; and

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

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

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

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


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<PAGE>




        Section 4.02   PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.

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

               (i) to pay itself (to the extent not previously paid to or
        withheld by the Master Servicer), as servicing compensation in
        accordance with Section 3.14, that portion of any payment of interest
        that equals the Servicing Fee for the period with respect to which such
        interest payment was made, and, as additional servicing compensation,
        those other amounts set forth in Section 3.14;

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

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

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

               (v) to pay the Master Servicer any unpaid Servicing Fees and to
        reimburse it for any unreimbursed Servicing Advances, provided, however,
        that the Master Servicer's right to reimbursement for Servicing Advances
        pursuant to this subclause (v) with respect to any Mortgage Loan shall
        be limited to amounts received on particular Mortgage Loan(s)
        (including, for this purpose, Liquidation Proceeds and purchase and
        repurchase proceeds) that represent late recoveries of the payments for
        which such Servicing Advances were made;

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

               (vii) to pay any expenses recoverable by the Master Servicer
        pursuant to Sections 3.03, 7.01, 7.03, 7.04 and 9.05 of this Agreement;

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


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<PAGE>




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

               In addition, no later than 1:00 p.m. Eastern time on the
Distribution Account Deposit Date, the Master Servicer shall withdraw from the
Protected Account and remit to the Trustee the amount of Interest Funds (without
taking into account any reduction in the amount of Interest Funds attributable
to the application of clause (iii) of the definition thereof contained in
Article I of this Agreement) and Principal Funds collected, to the extent on
deposit, and the Trustee shall deposit such amount in the Distribution Account.
In addition, on or before the Distribution Account Deposit Date, the Master
Servicer shall remit to the Trustee for deposit in the Distribution Account any
Advances or any payments of Compensating Interest required to be made by the
Master Servicer with respect to the Mortgage Loans; provided that the Master
Servicer will not be required to make any payments in respect of Compensating
Interest on the National City Loans. Furthermore, on each Distribution Account
Deposit Date, the Master Servicer shall remit to the Trustee all Prepayment
Charges collected by the Master Servicer with respect to the Mortgage Loans
during the related Prepayment Period and any Master Servicer Prepayment Charge
Payment Amounts required to be made by the Master Servicer in connection with
any Prepayment Charges waived by the Master Servicer during the related
Prepayment Period.

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

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

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

               Withdrawals of amounts so collected from the Escrow Accounts may
be made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Master Servicer out of related collections for any payments made pursuant to
Section 3.01 (with respect to taxes and assessments and insurance premiums) and
Section 3.09 (with respect to hazard insurance), to refund to any Mortgagors any
sums as may be determined to be overages, to pay interest, if required by law or
the terms of the related Mortgage or Mortgage Note, to Mortgagors on balances in
the Escrow Account


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<PAGE>



or to clear and terminate the Escrow Account at the termination of this
Agreement in accordance with Section 10.01 thereof. The Escrow Account shall not
be a part of the Trust Fund.

        Section 4.04   DISTRIBUTION ACCOUNT.

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

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

               (c) The Distribution Account shall constitute an Eligible Account
of the Trust Fund segregated on the books of the Trustee and held by the Trustee
and the Distribution Account and the funds deposited therein shall not be
subject to, and shall be protected from, all claims, liens, and encumbrances of
any creditors or depositors of the Trustee (whether made directly, or indirectly
through a liquidator or receiver of the Trustee). The amount at any time
credited to the Distribution Account may be invested in the name of the Trustee,
in such Permitted Investments, or deposited in demand deposits with such
depository institutions, as determined by the Trustee. All Permitted Investments
shall mature or be subject to redemption or withdrawal on or before, and shall
be held until, the next succeeding Distribution Date if the obligor for such
Permitted Investment is the Trustee or, if such obligor is any other Person, the
Business Day preceding such Distribution Date. All investment earnings on
amounts on deposit in the Distribution Account or benefit from funds uninvested
therein from time to time shall be for the account of the Trustee. The Trustee
shall be permitted to withdraw or receive distribution of any and all investment
earnings from the Distribution Account on each Distribution Date. If there is
any loss on a Permitted Investment or demand deposit, the Trustee shall deposit
the amount of the loss in the Distribution Account. With respect to the
Distribution Account and the funds deposited therein, the Trustee shall take
such action as may be necessary to ensure that the Certificateholders shall be
entitled to the priorities afforded to such a trust account (in addition to a
claim against the estate of the Trustee) as provided by 12 U.S.C. ss. 92a(e),
and applicable regulations pursuant thereto, if applicable, or any applicable
comparable state statute applicable to state chartered banking corporations.

               (d) The Trustee shall deposit in the Distribution Account for
inclusion in the Interest Funds and Principal Funds to be distributed to the
Certificateholders in the related Distribution Date, all payments, collections
and other recoveries received by it from National City with respect to the
National City Loans during the related Due Period or Prepayment Period, as
applicable, (which shall include all Principal Prepayments and Insurance
Proceeds received after the related Prepayment Period by the Master Servicer or
the Trustee, as applicable, which the Master Servicer deems to have been
received during the related Prepayment Period).

        Section 4.05   PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION
                       ACCOUNT.

               (a) The Trustee will, from time to time on demand of the Master
Servicer or the Securities Administrator, make or cause to be made such
withdrawals or transfers from the


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<PAGE>



Distribution Account as the Master Servicer has designated for such transfer or
withdrawal or as the Securities Administrator has instructed hereunder for the
following purposes:

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

               (ii) to pay investment income to the Trustee;

               (iii) to remove amounts deposited in error; and

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

               (b) On each Distribution Date, the Trustee shall distribute
Interest Funds and Principal Funds in the Distribution Account for each Loan
Group to the holders of the Certificates in accordance with Section 5.04. In
addition, on each Distribution Date, the Trustee shall make any payments of
Compensating Interest required to be made with respect to the National City
Loans out of funds otherwise payable to it as Trustee hereunder. The Trustee
will not be entitled to any recovery or reimbursement in respect of any such
payments.




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<PAGE>



                                    ARTICLE V

                           DISTRIBUTIONS AND ADVANCES
                             BY THE MASTER SERVICER

        Section 5.01   ADVANCES.

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

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

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

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

        Section 5.02   COMPENSATING INTEREST PAYMENTS.

               In the event that there is a Prepayment Interest Shortfall
arising from a voluntary Principal Prepayment in part or in full by the
Mortgagor with respect to any Mortgage Loan (other than a National City Loan),
the Master Servicer shall, to the extent of the Servicing Fee for such


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<PAGE>



Distribution Date, deposit into the Distribution Account, as a reduction of the
Servicing Fee for such Distribution Date, no later than the close of business on
the Business Day immediately preceding such Distribution Date, an amount equal
to the Prepayment Interest Shortfall; and in case of such deposit, the Master
Servicer shall not be entitled to any recovery or reimbursement from the
Depositor, the Trustee, the Seller, the Securities Administrator, the Trust Fund
or the Certificateholders.

               In the event that there is a Prepayment Interest Shortfall
arising from a voluntary Principal Prepayment in full by the Mortgagor with
respect to any National City Loan, the Trustee deposit into the Distribution
Account on such Distribution Date, an amount equal to the Prepayment Interest
Shortfall from funds otherwise payable to it as Trustee hereunder; and in case
of such deposit, the Trustee shall not be entitled to any recovery or
reimbursement from the Depositor, the Master Servicer, the Seller, the
Securities Administrator, the Trust Fund or the Certificateholders.

        Section 5.03 REMIC DISTRIBUTIONS.

               On each Distribution Date the Securities Administrator, as agent
for the Trustee, shall allocate distributions to the REMIC I Regular Interests,
the REMIC II Regular Interests, and the REMIC III Regular Interests, in
accordance with Section 5.06 hereof.

        Section 5.04   DISTRIBUTIONS.

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

        FIRST, to pay accrued and unpaid interest on the Offered Certificates,
in the following order of priority:

        1.     From Interest Funds in respect of Loan Group I and Loan Group II,
               in proportion to the amounts of Interest Funds relating to each
               such Loan Group, to the Class A-IO Certificates, the Current
               Interest and any Interest Carry Forward Amount for such Class;

        2.     From remaining Interest Funds in respect of (a) Loan Group I, to
               each Class in the Class A-I Group, the Current Interest and any
               Interest Carry Forward Amount for such Class, pro rata in
               accordance with the amount of accrued interest due thereon and
               (b) Loan Group II, to the Class II-A Certificates, the Current
               Interest and any Interest Carry Forward Amount for such Class;

        3.     From remaining Interest Funds in respect of:

               (a)     Loan Group I, to the Class II-A Certificates, any
                       remaining Interest Carry Forward Amount for such Class
                       for such Distribution Date, in accordance with any such
                       remaining Interest Carry Forward Amount for such Class,
                       and


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<PAGE>



               (b)     Loan Group II, to each of the Class I-A1 Certificates,
                       Class I-A2 Certificates, Class I-A3 Certificates, Class
                       I-A4 Certificates and Class I- A5 Certificates, any
                       remaining Interest Carry Forward Amount for such Class
                       for such Distribution Date, pro rata in accordance with
                       any remaining Interest Carry Forward Amount for each such
                       Class.

        4.     From remaining Interest Funds in respect of Loan Group I and Loan
               Group II, to the Class M-1 Certificates, the Class M-2
               Certificates and the Class B Certificates, sequentially, in that
               order, the Current Interest for each such Class;

        5.     Any Excess Spread to the extent necessary to meet a level of
               overcollateralization equal to the Overcollateralization Target
               Amount will be the Extra Principal Distribution Amount and will
               be included as part of the Principal Distribution Amount; and

        6.     Any Remaining Excess Spread will be added to any Excess
               Overcollateralization Amount and will be applied as Excess
               Cashflow pursuant to clauses SECOND (D) through SEVENTH, below.

        Notwithstanding the provisions of clauses first 4 and 5, above, on the
first Distribution Date, all Excess Spread will be paid to the holders of the
Class B-IO Certificates.

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

        SECOND, to pay as principal on the Offered Certificates entitled to
payments of principal, in the following order of priority:

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

        1.     To the Senior Certificates entitled to payments of principal, the
               Principal Distribution Amount, pro rata, based on the Principal
               Funds for such Distribution Date from each of Loan Group I and
               Loan Group II, respectively, in each case until the Certificate
               Principal Balance of the respective Class is reduced to zero to
               be distributed as follows:

               (a)     with respect to the Class I-A Group

                       (i)    to the Class I-A5 Certificates, an amount equal to
                              the Lockout Percentage of the Class I-A5
                              Certificate's pro rata share of the Principal
                              Distribution Amount with respect to Loan Group I,



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<PAGE>



                       (ii)   to the Class I-A1 Certificates, Class I-A2
                              Certificates, Class I-A3 Certificates and Class
                              I-A4, sequentially, in that order, any remaining
                              Principal Distribution Amount with respect to Loan
                              Group I, and

                       (iii)  to the Class I-A5 Certificates, any remaining
                              Principal Distribution Amount with respect to Loan
                              Group I; and

               (b)     the Class II-A Certificates, the Principal Distribution
                       Amount with respect to Loan Group II;

        2.     To the Class M-1 Certificates, any remaining Principal
               Distribution Amount until the Certificate Principal Balance
               thereof is reduced to zero;

        3.     To the Class M-2 Certificates, any remaining Principal
               Distribution Amount until the Certificate Principal Balance
               thereof is reduced to zero;

        4.     To the Class B Certificates, any remaining Principal Distribution
               Amount until the Certificate Principal Balance thereof is reduced
               to zero;

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

        1.     To the Senior Certificates entitled to payments of principal,
               from the Principal Distribution Amount, the Class A Principal
               Distribution Amount, pro rata, based on the Principal Funds for
               such Distribution Date from each of Loan Group I and Loan Group
               II, respectively, in each case until the Certificate Principal
               Balance of the respective Class is reduced to zero to be
               distributed as follows:

               (a)     with respect to the Class I-A Group

                       (i)    to the Class I-A5 Certificates, an amount equal to
                              the Lockout Percentage of the Class I-A5
                              Certificate's pro rata share of the Class A
                              Principal Distribution Amount with respect to Loan
                              Group I,

                       (ii)   to the Class I-A1 Certificates, Class I-A2
                              Certificates, Class I-A3 Certificates and Class
                              I-A4 Certificates, sequentially, in that order,
                              any remaining Class A Principal Distribution
                              Amount with respect to Loan Group I, and

                       (iii)  to the Class I-A5 Certificates, any remaining
                              Class A Principal Distribution Amount with respect
                              to Loan Group I; and

               (b)     the Class II-A Certificates, the Class A Principal
                       Distribution Amount with respect to Loan Group II,



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<PAGE>



        provided, however that, if the Class A Principal Distribution Amount
        with respect to Loan Group I is more than the balance of the available
        funds remaining after distributions pursuant to clauses FIRST 1 through
        5 above, the amount paid to the Class I-A5 Certificates pursuant to
        clause SECOND (B)(1)(a)(i) above shall be reduced by an amount equal to
        the Class I-A5 Certificates' pro rata share (based on the Certificate
        Principal Balance thereof relative to the aggregate Certificate
        Principal Balance of the other Certificates in the Class A-I Group) of
        such difference.

        2.     To the Class M-1 Certificates, from any remaining Principal
               Distribution Amount, the Class M-1 Principal Distribution Amount,
               until the Certificate Principal Balance thereof is reduced to
               zero;

        3.     To the Class M-2 Certificates, from any remaining Principal
               Distribution Amount, the Class M-2 Principal Distribution Amount,
               until the Certificate Principal Balance thereof is reduced to
               zero;

        4.     To the Class B Certificates, from any remaining Principal
               Distribution Amount, the Class B Principal Distribution Amount,
               until the Certificate Principal Balance thereof is reduced to
               zero;

(C)     Notwithstanding the provisions of clauses second (A) and (B), if on any
        Distribution Date all of the Senior Certificates of a Class A Group are
        no longer outstanding, the pro rata portion of the Class A Principal
        Distribution Amount otherwise allocable to such Class A Group will be
        allocated to the other Class A Group, pro rata in accordance with the
        aggregate Certificate Principal Balances of the outstanding Senior
        Certificates of the Class A Group to which such funds are allocated; and

(D)     Notwithstanding the provisions of clauses second (A) and (B), if on any
        Distribution Date the pro rata portion of the Class A Principal
        Distribution Amount allocated to a Class A Group is insufficient to pay
        to the related Senior Certificates the principal to which they are
        entitled under clause second (B)(1), any Excess Cashflow will be
        allocated in an amount equal to the lesser of the deficiency and the
        aggregate amount of such Excess Cashflow, and if the pro rata portion of
        the Class A Principal Distribution Amount is insufficient in both Class
        A Groups, then pro rata based upon the respective amounts of such
        deficiencies.

        THIRD, from any remaining Excess Cashflow, to the Class M-1 Certificates
an amount equal to (i) any Interest Carry Forward Amount and then (ii) any
Unpaid Realized Losses for such Class for such Distribution Date;

        FOURTH, from any remaining Excess Cashflow, to the Class M-2
Certificates an amount equal to (i) any Interest Carry Forward Amount and then
(ii) any Unpaid Realized Losses for such Class for such Distribution Date;

        FIFTH, from any remaining Excess Cashflow, to the Class B Certificates
an amount equal to (i) any Interest Carry Forward Amount and then (ii) any
Unpaid Realized Losses for such Class and such Distribution Date;


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<PAGE>



        SIXTH, from any remaining Excess Cashflow, to the Class B-IO
Certificates, the Class B-IO Distribution Amount;

        SEVENTH, if such Distribution Date follows a Prepayment Period during
which occurs the latest date on which a Prepayment Charge may be required to be
paid in respect of any of the Mortgage Loans, to the Class P Certificates, in
reduction of the Certificate Principal Balance thereof, until the Certificate
Principal Balance thereof is reduced to zero; and

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

               (b) On each Distribution Date, all amounts representing
Prepayment Charges in respect of the Mortgage Loans received during the related
Prepayment Period and any Master Servicer Prepayment Charge Amounts paid by the
Master Servicer during the related Prepayment Period will be withdrawn from the
Distribution Account and distributed by the Trustee to the Holders of the Class
P Certificates and shall not be available for distribution to the Holders of any
other Class of Certificates. The payment of the foregoing amounts to the Holders
of the Class P Certificates shall not reduce the Certificate Principal Balances
thereof.

               (c) Subject to Section 10.02 hereof respecting the final
distribution, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either by wire
transfer in immediately available funds to the account of such holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least 5 Business Days prior to the related Record
Date and (ii) such Holder shall hold Regular Certificates with aggregate
principal denominations of not less than $1,000,000 or evidencing a Percentage
Interest aggregating 10% or more with respect to such Class or, if not, by check
mailed by first class mail to such Certificateholder at the address of such
holder appearing in the Certificate Register. Notwithstanding the foregoing, but
subject to Section 10.02 hereof respecting the final distribution, distributions
with respect to Certificates registered in the name of a Depository shall be
made to such Depository in immediately available funds.

               (d) On or before 5:00 p.m. Eastern time on the fifth Business Day
immediately preceding each Distribution Date, the Master Servicer shall deliver
a report to the Securities Administrator in the form of a computer readable
magnetic tape (or by such other means as the Master Servicer and the Securities
Administrator may agree from time to time) containing such data and information,
as agreed to by the Master Servicer and the Securities Administrator such as to
permit the Securities Administrator to prepare the Monthly Statement to
Certificateholders and to direct the Trustee in writing to make the required
distributions for the related Distribution Date (the "Remittance Report"). The
Securities Administrator shall deliver a Remittance Report to the Trustee on or
before 5:00 p.m. Eastern time on the Business Day immediately preceding each
Distribution Date.

        Section 5.04A  ALLOCATION OF REALIZED LOSSES.

               Any Realized Losses with respect to the Mortgage Loans in the
aggregate or the Mortgage Loans in a particular Loan Group, as applicable, shall
be applied on each Distribution Date


                                      -87-

<PAGE>



after the distributions provided for in Section 5.04 in reduction of the
Certificate Principal Balance of the Class or Classes of Certificates as
provided in the definition of Applied Realized Loss Amount.

        Section 5.05   MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

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

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

               (ii)    the amount of such distribution to Holders of each Class
        (other than Class P) allocable to interest;

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

               (iv) the aggregate of the Stated Principal Balances of all of the
        Mortgage Loans and of the Mortgage Loans in each Loan Group for the
        following Distribution Date;

               (v)     the related amount of the Servicing Fees paid to or
         retained by the Master Servicer and the Servicing Fees paid to or
         retained by any subservicer for the related Due Period;

               (vi) the Pass-Through Rate for each Class of Offered Certificates
        with respect to the current Accrual Period, and, if applicable, whether
        such Pass-Through Rate was limited by any interest rate cap;

               (vii) any Interest Carry Forward Amount for each Class of Offered
        Certificates;

               (viii) the amount of the distribution made on such Distribution
        Date to the Holders of the Class P Certificates allocable to Prepayment
        Charges and Master Servicer Prepayment Charge Payment Amounts;

               (ix) the amount of Advances for each Loan Group included in  the
        distribution on such Distribution Date;

               (x) the cumulative amount of Applied Realized Loss Amounts to
        date and, in addition, if the Certificate Principal Balances of the
        Class M-1 Certificates, Class M-2 Certificates and Class B Certificates
        have all been reduced to zero, the cumulative amount of any Realized
        Losses that have not been allocated to any Certificates;



                                      -88-

<PAGE>



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

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

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

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

               (xv) the Realized Losses for each Loan Group during the related
        Prepayment Period and the cumulative Realized Losses for each Loan Group
        and the mortgage pool through the end of the preceding month; and

               (xvi)   whether a Trigger Event exists.

               The Securities Administrator may make the foregoing monthly
statement (and, at its option, any additional files containing the same
information in an alternative format) available each month to Certificateholders
via the Securities Administrator's internet website. The Security
Administrator's internet website shall initially be located at
"www.ctslink.com". Assistance in using the website can be obtained by calling
the Securities Administrator's customer service desk at (301) 815-6600. Parties
that are unable to use the above distribution options are entitled to have a
paper copy mailed to them via first class mail by calling the customer service
desk and indicating such. The Securities Administrator may change the way
monthly statements are distributed in order to make such distributions more
convenient or more accessible to the above parties.

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



                                      -89-

<PAGE>



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

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

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

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

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

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

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

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

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

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




                                      -90-

<PAGE>

        Section 5.06 REMIC DESIGNATIONS AND ALLOCATIONS.

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

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

               (1) first, from Interest Funds, to REMIC I Regular Interest LT1D,
        in an amount equal to (A) the Uncertificated Accrued Interest for such
        Distribution Date, plus (B) any amounts in respect thereof remaining
        unpaid from previous Distribution Dates and second, to Holders of REMIC
        I Regular Interest LT1A, REMIC I Regular Interest LT1B and REMIC I
        Regular Interest LT1C in an amount equal to (A) the Uncertificated
        Accrued Interest for such Distribution Date, plus (B) any amounts in
        respect thereof remaining unpaid from previous Distribution Dates; and

               (2) second, from Principal Funds, to the Holders of REMIC I
        Regular Interests, allocated in the following order of priority:

                       (A) to the Holders of REMIC I Regular Interest LT1P, on
               the Distribution Date immediately following the expiration of the
               latest Prepayment Charge as identified on the Prepayment Charge
               Schedule or any Distribution Date thereafter until $100 has been
               distributed pursuant to this clause (A);

                       (B) with respect to the Mortgage Loans in Loan Group I,
               to the Holders of REMIC I Regular Interest LT1B, its respective
               proportion (based on its Uncertificated Principal Balance in
               relation to such Loan Group) of such amount and to the Holders of
               REMIC I Regular Interest LT1A, the remainder, until the
               Uncertificated Principal Balance of those REMIC I Regular
               Interests are reduced to zero;

                       (C) with respect to the Mortgage Loans in Loan Group II,
               to the Holders of REMIC I Regular Interest LT1C, its respective
               proportion (based on its Uncertificated Principal Balance in
               relation to such Loan Group) of such amount and to the Holders of
               REMIC I Regular Interest LT1A, the remainder, until the
               Uncertificated Principal Balance of those REMIC I Regular
               Interests are reduced to zero;



                                      -91-

<PAGE>



                       (D) to the Holders of REMIC I Regular Interest LT1D,
               until the Uncertificated Principal Balance of REMIC I Regular
               Interest LT1D is reduced to zero; and

                       (E) any remaining amount to the Holders of the Class R-I
               Certificates.

               On each Distribution Date, all amounts representing Prepayment
Charges in respect of the Mortgage Loans received during the related Prepayment
Period and any Master Servicer Prepayment Charge Payment Amounts paid by the
Master Servicer during the related Prepayment Period will be distributed by
REMIC I to the Holders of REMIC I Regular Interest LT1P. The payment of the
foregoing amounts to the Holders of REMIC I Regular Interest LT1P shall not
reduce the Uncertificated Principal Balance thereof.

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

               (i) first, from Interest Funds, to the Holders of REMIC II
        Regular Interest A- IO, in an amount equal to (A) the Uncertificated
        Accrued Interest for such Distribution Date, plus (B) any amounts in
        respect thereof remaining unpaid from previous Distribution Dates and
        then to Holders of REMIC II Regular Interest LT2-1AA, REMIC II Regular
        Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular
        Interest LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular
        Interest LT2-AI5, REMIC II Regular Interest LT2-1M1, REMIC II Regular
        Interest LT2-1M2, REMIC II Regular Interest LT2-1B, REMIC II Regular
        Interest LT2-1ZZ, REMIC II Regular Interest LT2-2AA, REMIC II Regular
        Interest LT2-AII, REMIC II Regular Interest LT2-2M1, REMIC II Regular
        Interest LT2-2M2, REMIC II Regular Interest LT2-2B, REMIC II Regular
        Interest LT2-2ZZ and REMIC II Regular Interest LT2P, PRO RATA, in an
        amount equal to (A) the Uncertificated Accrued Interest for such
        Distribution Date, plus (B) any amounts in respect thereof remaining
        unpaid from previous Distribution Dates. Amounts payable as
        Uncertificated Accrued Interest in respect of REMIC II Regular Interest
        LT2-1ZZ and REMIC II Regular Interest LT2-2ZZ shall be reduced when the
        sum of the REMIC II Group 1 Overcollateralized Amount and REMIC II Group
        2 Overcollateralized Amount is less than the REMIC II
        Overcollateralization Target Amount, by the lesser of (x) the amount of
        such difference and (y) the Maximum Uncertificated Accrued Interest
        Deferral Amount, and such amount will be payable to the Holders of REMIC
        II Regular Interest LT2-AI1, REMIC II Regular Interest LT2- AI2, REMIC
        II Regular Interest LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II
        Regular Interest LT2-AI5, REMIC II Regular Interest LT2-1M1, REMIC II
        Regular Interest LT2-1M2, REMIC II Regular Interest LT2- 1B, REMIC II
        Regular Interest LT2-AII, REMIC II Regular Interest LT2-2M1, REMIC II
        Regular Interest LT2-2M2 and REMIC II Regular Interest LT2-2B in the
        same proportion as the Extra Principal Distribution Amount is allocated
        to the Corresponding Certificates;

               (ii) second, from Principal Funds to the Holders of REMIC II
        Regular Interests, allocated as follows:


                                      -92-

<PAGE>



                       (a) with respect to the Mortgage Loans in Loan Group I,
               to the Holders of REMIC II Regular Interest LT2-1AA, 98.00% of
               such remainder, until the Uncertificated Principal Balance of
               such Uncertificated REMIC II Regular Interest is reduced to zero,
               and with respect to the Mortgage Loans in Loan Group II, to the
               Holders of REMIC II Regular Interest LT2-2AA, 98.00% of such
               remainder, until the Uncertificated Principal Balance of such
               Uncertificated REMIC II Regular Interest is reduced to zero;

                       (b) with respect to the Mortgage Loans in Loan Group I,
               to the Holders of REMIC II Regular Interest LT2-AI1, REMIC II
               Regular Interest LT2-AI2, REMIC II Regular Interest LT2-AI3,
               REMIC II Regular Interest LT2-AI4, REMIC II Regular Interest
               LT2-AI5, REMIC II Regular Interest LT2-1M1, REMIC II Regular
               Interest LT2-1M2 and REMIC II Regular Interest LT2-1B, 1.00% of
               such remainder, in the same proportion as principal payments are
               allocated to the Corresponding Certificates, until the
               Uncertificated Principal Balances of such REMIC II Regular
               Interests are reduced to zero; and with respect to the Mortgage
               Loans in Loan Group II, to the Holders of REMIC II Regular
               Interest LT2-AII, REMIC II Regular Interest LT2-2M1, REMIC II
               Regular Interest LT2-2M2 and REMIC II Regular Interest LT2-2B,
               1.00% of such remainder, in the same proportion as principal
               payments are allocated to the Corresponding Certificates, until
               the Uncertificated Principal Balances of such REMIC II Regular
               Interests are reduced to zero;

                       (c) with respect to the Mortgage Loans in Loan Group I,
               to the Holders of REMIC II Regular Interest LT2-1ZZ, 1.00% of
               such remainder, until the Uncertificated Principal Balance of
               such REMIC II Regular Interest is reduced to zero, and with
               respect to the Mortgage Loans in Loan Group II, to the Holders of
               REMIC II Regular Interest LT2-2ZZ, 1.00% of such remainder, until
               the Uncertificated Principal Balance of such REMIC II Regular
               Interest is reduced to zero; and

                       (d) to the Holders of REMIC II Regular Interest LT2P, on
               the Distribution Date immediately following the expiration of the
               latest Prepayment Charge as identified on the Prepayment Charge
               Schedule or any Distribution Date thereafter until $100 has been
               distributed pursuant to this clause; then

                       (e) any remaining amount to the Holders of the Class R-II
               Certificates; and

               (iii) third, to REMIC II Regular Interest LT2P, 100% of the
        amount paid in respect of Prepayment Charges and Master Servicer
        Prepayment Charge Payment Amounts on REMIC I Regular Interest LT1P.

               (c) For purposes of calculating the amount of Uncertificated
Accrued Interest for the Uncertificated REMIC I Regular Interests for any
Distribution Date, the aggregate amount of any Prepayment Interest Shortfalls
and shortfalls resulting from application of the Relief Act incurred in respect
of the Mortgage Loans for any Distribution Date shall be allocated first: with
respect to


                                      -93-

<PAGE>



any Mortgage Loans in Loan Group I, to REMIC I Regular Interest LT1B, its
respective proportion (based on its Uncertificated Principal Balance in relation
to such Loan Group) of such shortfall and to REMIC I Regular Interest LT1A, the
remainder, and with respect to any Group II Loan, to REMIC I Regular Interest
LT1C, its respective proportion (based on its Uncertificated Principal Balance
in relation to such Loan Group) of such shortfall and to REMIC I Regular
Interest LT1A, the remainder and second to REMIC I REMIC I Regular Interest
LT1D, in each case to the extent of one month's interest at the then applicable
respective Uncertificated REMIC I Pass- Through Rate on the respective
Uncertificated Principal Balance of each such Uncertificated REMIC I Regular
Interest.

        For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertificated REMIC II Regular Interests for any Distribution
Date, the aggregate amount of any Prepayment Interest Shortfalls and shortfalls
resulting from application of the Relief Act incurred in respect of the Mortgage
Loans for any Distribution Date shall be allocated (i) with respect to the
Mortgage Loans in Loan Group I, first, to Uncertificated Accrued Interest
payable to REMIC II Regular Interest LT2-1AA and REMIC II Regular Interest
LT2-1ZZ up to an aggregate amount equal to the REMIC II Group 1 Interest Loss
Allocation Amount, 98% and 2%, respectively, and thereafter among REMIC II
Regular Interest LT2A-IO, REMIC II Regular Interest LT2-1AA, REMIC II Regular
Interest LT2-AI1, REMIC II Regular Interest LT2-AI2, REMIC II Regular Interest
LT2-AI3, REMIC II Regular Interest LT2-AI4, REMIC II Regular Interest LT2-AI5,
REMIC II Regular Interest LT2-1M1, REMIC II Regular Interest LT2-1M2, REMIC II
Regular Interest LT2-1B and REMIC II Regular Interest LT2-1ZZ, PRO RATA based
on, and to the extent of, one month's interest at the then applicable respective
Uncertificated REMIC II Pass-Through Rate on the respective Uncertificated
Principal Balance of each such Uncertificated REMIC II Regular Interest, and
(ii) with respect to the Mortgage Loans in Loan Group II, first, to
Uncertificated Accrued Interest payable to REMIC II Regular Interest LT2-2AA and
REMIC II Regular Interest LT2-2ZZ up to an aggregate amount equal to the REMIC
II Group 2 Interest Loss Allocation Amount, 98% and 2%, respectively, and
thereafter among REMIC II Regular Interest LT2A-IO, REMIC II Regular Interest
LT2-2AA, REMIC II Regular Interest LT2-AII, REMIC II Regular Interest LT2-2M1,
REMIC II Regular Interest LT2-2M2, REMIC II Regular Interest LT2-2B and REMIC II
Regular Interest LT2-2ZZ, PRO RATA based on, and to the extent of, one month's
interest at the then applicable respective Uncertificated REMIC II Pass-Through
Rate on the respective Uncertificated Principal Balance of each such
Uncertificated REMIC II Regular Interest.

               (d) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date as follows: with respect to Realized
Losses on the Mortgage Loans in Loan Group I, first to REMIC I Regular Interest
LT1B, its respective proportion (based on its Uncertificated Principal Balance
in relation to such Loan Group) of such Realized Loss and to REMIC I Regular
Interest LT1A, the remainder, and with respect to Realized Losses on the
Mortgage Loans in Loan Group II, to REMIC I Regular Interest LT1C, its
respective proportion (based on its Uncertificated Principal Balance in relation
to such Loan Group) of such Realized Loss and to REMIC I Regular Interest LT1A,
the remainder, until the Uncertificated Principal Balance has been reduced to
zero and second to REMIC I Regular Interest LT1D until the Uncertificated
Principal Balance has been reduced to zero.

               (e) All Realized Losses on the REMIC I Regular Interest LT1A,
REMIC I Regular Interest LT1B, REMIC I Regular Interest LT1C and REMIC I Regular
Interest LT1D shall


                                      -94-

<PAGE>



be deemed to have been allocated in the specified percentages, as follows: with
respect to Realized Losses on the Mortgage Loans in Loan Group I, first, to
Uncertificated Accrued Interest payable to the REMIC II Regular Interest LT2-1AA
and REMIC II Regular Interest LT2-1ZZ up to an aggregate amount equal to the
REMIC II Group 1 Interest Loss Allocation Amount, 98% and 2%, respectively;
second, to the Uncertificated Principal Balances of REMIC II Regular Interest
LT2- 1AA and REMIC II Regular Interest LT2-1ZZ up to an aggregate amount equal
to the REMIC II Group 1 Principal Loss Allocation Amount, 98% and 2%,
respectively; third, to the Uncertificated Principal Balances of REMIC II
Regular Interest LT2-1AA, REMIC II Regular Interest LT2-1B and REMIC II Regular
Interest LT2-1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated
Principal Balance of REMIC II Regular Interest LT2-1B has been reduced to zero;
fourth, to the Uncertificated Principal Balances of REMIC II Regular Interest
LT2-1AA, REMIC II Regular Interest LT2-1M2 and REMIC II Regular Interest
LT2-1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal
Balance of REMIC II Regular Interest LT2-1M2 has been reduced to zero; and
fifth, to the Uncertificated Principal Balances of REMIC II Regular Interest
LT2-1AA, REMIC II Regular Interest LT2-1M1 and REMIC II Regular Interest
LT2-1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal
Balance of REMIC II Regular Interest LT2-1M1 has been reduced to zero, and with
respect to Realized Losses on the Mortgage Loans in Loan Group II, first, to
Uncertificated Accrued Interest payable to the REMIC II Regular Interest LT2-2AA
and REMIC II Regular Interest LT2-2ZZ up to an aggregate amount equal to the
REMIC II Group 2 Interest Loss Allocation Amount, 98% and 2%, respectively;
second, to the Uncertificated Principal Balances of REMIC II Regular Interest
LT2-2AA and REMIC II Regular Interest LT2-2ZZ up to an aggregate amount equal to
the REMIC II Group 2 Principal Loss Allocation Amount, 98% and 2%, respectively;
third, to the Uncertificated Principal Balances of REMIC II Regular Interest
LT2-2AA, REMIC II Regular Interest LT2-2B and REMIC II Regular Interest LT2-2ZZ,
98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of
REMIC II Regular Interest LT2-2B has been reduced to zero; fourth, to the
Uncertificated Principal Balances of REMIC II Regular Interest LT2-2AA, REMIC II
Regular Interest LT2-2M2 and REMIC II Regular Interest LT2-2ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC II Regular
Interest LT2- 2M2 has been reduced to zero; and fifth, to the Uncertificated
Principal Balances of REMIC II Regular Interest LT2-2AA, REMIC II Regular
Interest LT2-2M1 and REMIC II Regular Interest LT2-2ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC II Regular
Interest LT2-2M1 has been reduced to zero.



                                      -95-

<PAGE>




                                   ARTICLE VI

                                THE CERTIFICATES

        Section 6.01   THE CERTIFICATES.

               The Certificates shall be substantially in the forms attached
hereto as Exhibits A-1 through A-4. The Certificates shall be issuable in
registered form, in the minimum dollar denominations, integral dollar multiples
in excess thereof (except that one Certificate of each Class may be issued in a
different amount which must be in excess of the applicable minimum dollar
denomination) and aggregate dollar denominations as set forth in the following
table:


<TABLE>
<CAPTION>


                                                       Original Certificate
                                                       Principal Balance/or
                     Minimum    Integral Multiple in    Notional Principal
        Class     Denomination  Excess of Minimum         Balance             Pass-Through Rate
----------------  ------------  --------------------   -------------------    -----------------
<S>      <C>      <C>           <C>                    <C>                    <C>
                                                                                  Class I-A1
         I-A1       $25,000         $1,000             $38,552,000            Pass-Through Rate
                                                                                  Class I-A2
         I-A2       $25,000         $1,000             $40,056,000            Pass-Through Rate
                                                                                  Class I-A3
         I-A3       $25,000         $1,000             $16,107,000            Pass-Through Rate
                                                                                  Class I-A4
         I-A4       $25,000         $1,000             $24,405,000            Pass-Through Rate
                                                                                  Class I-A5
         I-A5       $25,000         $1,000             $13,250,000            Pass-Through Rate
                                                                                  Class II-A
         II-A       $25,000         $1,000             $97,591,000            Pass-Through Rate
                                                                                  Class A-IO
         A-IO       $25,000         $1,000              N/A(4)                Pass-Through Rate
                                                                                  Class M-1
         M-1        $25,000         $1,000              $4,841,000            Pass-Through Rate
                                                                                  Class M-2
         M-2        $25,000         $1,000              $4,236,000            Pass-Through Rate
                                                                                   Class B
          B         $25,000         $1,000              $3,025,000            Pass-Through Rate
                                                                                  Class B-IO
        B-IO             10%           1%                        0            Pass-Through Rate
         R-I            100%          N/A                     N/A                      N/A
        R-II            100%          N/A                     N/A                      N/A
       R-III            100%          N/A                     N/A                      N/A

</TABLE>

               The Certificates shall be executed by manual or facsimile
signature on behalf of the Trustee by an authorized officer. Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Trustee
shall bind the Trustee, notwithstanding that such individuals or any of them
have ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold


                                      -96-

<PAGE>



such offices at the date of such authentication and delivery. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless there appears on such Certificate the countersignature of the
Trustee by manual signature, and such countersignature upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate has
been duly countersigned and delivered hereunder. All Certificates shall be dated
the date of their countersignature. On the Closing Date, the Trustee shall
authenticate the Certificates to be issued at the written direction of the
Depositor, or any affiliate thereof.

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

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

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

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

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

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

               (b) No Transfer of a Class P, Class B-IO or Class R Certificate
shall be made unless such Transfer is made pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws or
is exempt from the registration requirements under the Securities Act and such
state securities laws. In the event that a Transfer is to be made in reliance
upon an exemption from the Securities Act and such laws, in order to assure
compliance with the Securities Act and such laws, the Certificateholder desiring
to effect such Transfer and such Certificateholder's prospective transferee
shall each certify to the Trustee and the Securities Administrator in writing
the facts surrounding the Transfer in substantially the forms set forth in


                                      -97-

<PAGE>



Exhibit E (the "Transferor Certificate") and (x) deliver a letter in
substantially the form of either Exhibit F (the "Investment Letter") or Exhibit
G (the "Rule 144A Letter") or (y) there shall be delivered to the Trustee and
the Securities Administrator an Opinion of Counsel that such Transfer may be
made pursuant to an exemption from the Securities Act, which Opinion of Counsel
shall not be an expense of the Depositor, the Seller, the Master Servicer, the
Securities Administrator or the Trustee. The Depositor shall provide to any
Holder of a Class P, Class B-IO or Class R Certificate and any prospective
transferee designated by any such Holder, information regarding the related
Certificates and the Mortgage Loans and such other information as shall be
necessary to satisfy the condition to eligibility set forth in Rule 144A(d)(4)
for Transfer of any such Certificate without registration thereof under the
Securities Act pursuant to the registration exemption provided by Rule 144A. The
Trustee, the Securities Administrator and the Master Servicer shall cooperate
with the Depositor in providing the Rule 144A information referenced in the
preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Class P, Class B-IO or Class R
Certificate desiring to effect such Transfer shall, and does hereby agree to,
indemnify the Trustee, the Depositor, the Seller, the Securities Administrator
and the Master Servicer against any liability that may result if the Transfer is
not so exempt or is not made in accordance with such federal and state laws.

               No Transfer of an ERISA Restricted Certificate shall be made
unless the Trustee, the Master Servicer and the Securities Administrator shall
have received either (i) a representation from the transferee of such
Certificate acceptable to and in form and substance satisfactory to the Trustee,
the Master Servicer and the Securities Administrator, to the effect that such
transferee is not an employee benefit plan subject to Section 406 of ERISA
and/or a plan subject to Section 4975 of the Code, or a Person acting on behalf
of any such plan or using the assets of any such plan, or (ii) in the case of
any such ERISA Restricted Certificate presented for registration in the name of
an employee benefit plan subject to ERISA, or a plan subject to Section 4975 of
the Code (or comparable provisions of any subsequent enactments), or a trustee
of any such plan or any other person acting on behalf of any such plan, an
Opinion of Counsel satisfactory to the Trustee, the Master Servicer and the
Securities Administrator to the effect that the purchase or holding of such
ERISA Restricted Certificate will not result in any prohibited transactions
under ERISA or Section 4975 of the Code and will not subject the Trustee, the
Master Servicer or the Securities Administrator to any obligation in addition to
those expressly undertaken in this Agreement, which Opinion of Counsel shall not
be an expense of the Trustee, the Master Servicer or the Securities
Administrator. For purposes of clause (i) of the preceding sentence, such
representation shall be deemed to have been made to the Trustee, the Master
Servicer and the Securities Administrator by the transferee's acceptance of an
ERISA Restricted Certificate (or the acceptance by a Certificate Owner of the
beneficial interest in any such Class of ERISA Restricted Certificates) unless
the Trustee, the Master Servicer and the Securities Administrator shall have
received from the transferee an alternative representation acceptable in form
and substance to the Trustee, the Master Servicer, the Depositor and the
Securities Administrator. Notwithstanding anything else to the contrary herein,
any purported transfer of an ERISA Restricted Certificate to or on behalf of an
employee benefit plan subject to Section 406 of ERISA and/or a plan subject to
Section 4975 of the Code without the delivery to the Trustee, the Master
Servicer and the Securities Administrator of an Opinion of Counsel satisfactory
to the Trustee, the Master Servicer and the Securities Administrator as
described above shall be void and of no effect; provided that the restriction
set forth in this sentence shall not be applicable if there


                                      -98-

<PAGE>



has been delivered to the Trustee, the Master Servicer and the Securities
Administrator an Opinion of Counsel meeting the requirements of clause (ii) of
the first sentence of this paragraph. None of the Trustee, the Securities
Administrator or the Master Servicer shall be required to monitor, determine or
inquire as to compliance with the transfer restrictions with respect to any
ERISA Restricted Certificate that is a Book-Entry Certificate, and none of the
Trustee, the Securities Administrator or the Master Servicer shall have any
liability for transfers of any such Book-Entry Certificates made through the
book-entry facilities of any Depository or between or among participants of the
Depository or Certificate Owners made in violation of the transfer restrictions
set forth herein. None of the Trustee, the Securities Administrator or the
Master Servicer shall be under any liability to any Person for any registration
of transfer of any ERISA Restricted Certificate that is in fact not permitted by
this Section 6.02(b) or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder under the
provisions of this Agreement. The Trustee and the Securities Administrator shall
each be entitled, but not obligated, to recover from any Holder of any ERISA
Restricted Certificate that was in fact an employee benefit plan subject to
Section 406 of ERISA or a plan subject to Section 4975 of the Code or a Person
acting on behalf of any such plan at the time it became a Holder or, at such
subsequent time as it became such a plan or Person acting on behalf of such a
plan, all payments made on such ERISA Restricted Certificate at and after either
such time. Any such payments so recovered by the Trustee or the Securities
Administrator shall be paid and delivered by the Trustee or the Securities
Administrator to the last preceding Holder of such Certificate that is not such
a plan or Person acting on behalf of a plan.

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

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

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

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


                                      -99-

<PAGE>



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

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

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

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

        Section 6.03   MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

               If (a) any mutilated Certificate is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and of the ownership thereof and (b) there is delivered
to each Master Servicer, the Securities Administrator and the


                                      -100-

<PAGE>



Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 6.03, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 6.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time. All Certificates
surrendered to the Trustee under the terms of this Section 6.03 shall be
canceled and destroyed by the Trustee in accordance with its standard procedures
without liability on its part.

        Section 6.04   PERSONS DEEMED OWNERS.

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

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

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

        Section 6.06 BOOK-ENTRY CERTIFICATES.

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



                                      -101-

<PAGE>



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

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

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

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

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

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

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

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

        Section 6.07   NOTICES TO DEPOSITORY.

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

        Section 6.08   DEFINITIVE CERTIFICATES.

               If, after Book-Entry Certificates have been issued with respect
to any Certificates, (a) the Depositor or the Depository advises the Trustee
that the Depository is no longer willing or able to discharge properly its
responsibilities under the Depository Agreement with respect to such
Certificates and the Trustee or the Depositor is unable to locate a qualified
successor, (b) the


                                      -102-

<PAGE>



Depositor, at its sole option, advises the Trustee that it elects to terminate
the book-entry system with respect to such Certificates through the Depository
or (c) after the occurrence and continuation of an Event of Default, Certificate
Owners of such Book-Entry Certificates having not less than 51% of the Voting
Rights evidenced by any Class of Book-Entry Certificates advise the Trustee and
the Depository in writing through the Depository Participants that the
continuation of a book-entry system with respect to Certificates of such Class
through the Depository (or its successor) is no longer in the best interests of
the Certificate Owners of such Class, then the Trustee shall notify all
Certificate Owners of such Certificates, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to applicable Certificate Owners requesting the same. The Depositor shall
provide the Trustee with an adequate inventory of certificates to facilitate the
issuance and transfer of Definitive Certificates. Upon surrender to the Trustee
of any such Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall countersign
and deliver such Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and each may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of such Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of such Definitive Certificates as Certificateholders hereunder.

        Section 6.09   MAINTENANCE OF OFFICE OR AGENCY.

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




                                      -103-

<PAGE>



                                   ARTICLE VII

                        THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER

        Section 7.01   RESPECTIVE LIABILITIES OF THE DEPOSITOR, THE MASTER
                       SERVICER AND THE SELLER.

               The Depositor, the Master Servicer and the Seller shall each be
liable in accordance herewith only to the extent of the obligations specifically
and respectively imposed upon and undertaken by them herein.

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

               The Depositor, the Master Servicer and the Seller will each keep
in full effect its existence, rights and franchises as a corporation under the
laws of the United States or under the laws of one of the States thereof and
will each obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, or any
of the Mortgage Loans and to perform its respective duties under this Agreement.

               Any Person into which the Depositor, the Master Servicer or the
Seller may be merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor, the Master Servicer or the Seller shall be
a party, or any person succeeding to the business of the Depositor, the Master
Servicer or the Seller, shall be the successor of the Depositor, the Master
Servicer or the Seller, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided that the successor or
surviving Person to the Master Servicer shall be qualified to sell mortgage
loans to, and to service mortgage loans on behalf of, Fannie Mae or Freddie Mac.

        Section 7.03   LIMITATION ON LIABILITY OF THE DEPOSITOR, THE SELLER, THE
                       MASTER SERVICER AND OTHERS.

               None of the Depositor, the Seller, the Master Servicer or any of
the directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the Trust Fund or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided that this provision shall not protect the Depositor, the Seller, the
Master Servicer or any such Person against any breach of representations or
warranties made by it herein or protect the Depositor, the Seller, the Master
Servicer or any such Person from any liability that would otherwise be imposed
by reasons of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller or the Master
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Depositor, the Seller, the Master Servicer and any director, officer,
employee or agent of the Depositor, the Seller or the Master Servicer shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense incurred in


                                      -104-

<PAGE>



connection with any audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the Certificates, other than any loss, liability or expense related to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. None of the Depositor,
the Seller or the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
duties hereunder and that in its opinion may involve it in any expense or
liability; provided that any of the Depositor, the Seller or the Master Servicer
may, in its discretion undertake any such action that it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
hereto and interests of the Trustee and the Certificateholders hereunder. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom shall be, expenses, costs and liabilities of the Trust Fund,
and the Depositor, the Seller and the Master Servicer shall be entitled to be
reimbursed therefor out of the Protected Account as provided by Section 4.02 and
out of the Distribution Account as provided in Section 4.05 hereof.

        Section 7.04   LIMITATION ON RESIGNATION OF MASTER SERVICER.

               The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except upon (x) determination that its duties
hereunder are no longer permissible under applicable law or (y) compliance with
the following requirements: (i) the Master Servicer has proposed a successor to
the Trustee and the Trustee has consented thereto (such consent not to be
withheld unreasonably; (ii) the successor is qualified to sell mortgage loans
to, and to service mortgage loans on behalf of, Fannie Mae or Freddie Mac; and
(iii) each Rating Agency shall have delivered to the Trustee written
confirmation that the appointment of such successor will not result in the
qualification, reduction or withdrawal of the then-current ratings assigned by
such Rating Agency to any of the Certificates. Any such determination permitting
the resignation of the Master Servicer shall be evidenced by an Opinion of
Counsel (which opinion shall not be an expense of the Trustee) to such effect
delivered to the Trustee. No such resignation shall become effective until the
Trustee or a successor servicer to such appointment shall have assumed the
Master Servicer's responsibilities, duties, liabilities and obligations
hereunder.

        Section 7.05   ERRORS AND OMISSIONS INSURANCE; FIDELITY BONDS.

               The Master Servicer shall, for so long as it acts as a successor
servicer under a Servicing Agreement, obtain and maintain in force (a) a policy
or policies of insurance covering errors and omissions in the performance of its
obligations as successor servicer thereunder, and (b) a fidelity bond in respect
of its officers, employees and agents. Each such policy or policies and bond
shall, together, comply with the requirements from time to time of Fannie Mae or
Freddie Mac for persons performing servicing for mortgage loans purchased by
Fannie Mae or Freddie Mac. In the event that any such policy or bond ceases to
be in effect, the Master Servicer shall use its reasonable best efforts to
obtain a comparable replacement policy or bond from an insurer or issuer,
meeting the requirements set forth above as of the date of such replacement.




                                      -105-

<PAGE>



                                  ARTICLE VIII

                     DEFAULT; TERMINATION OF MASTER SERVICER

        Section 8.01   EVENTS OF DEFAULT.

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

               (i) any failure by the Master Servicer to remit to the Trustee
        any payment, including any Advance, required to be made pursuant to this
        Agreement, which failure shall continue unremedied for five Business
        Days after the date on which written notice of such failure shall have
        been given to the Master Servicer by the Trustee or the Depositor, or to
        the Trustee and the Master Servicer by the Holders of Certificates
        evidencing not less than 25% of the Voting Rights evidenced by the
        Certificates; or

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

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

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

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

               If an Event of Default shall occur, then, and in each and every
such case, so long as such Event of Default shall not have been remedied, the
Trustee may, and at the direction of the Holders of Certificates evidencing not
less than 25% of the Voting Rights evidenced by the Certificates, the Trustee
shall, by notice in writing to the Master Servicer (with a copy to each Rating
Agency), terminate all of the rights and obligations of the Master Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
other than its rights as a Certificateholder


                                      -106-

<PAGE>



hereunder. On or after the receipt by the Master Servicer of such written
notice, all authority and power of the Master Servicer hereunder, whether with
respect to the Mortgage Loans or otherwise, shall pass to and be vested in the
Trustee, or any successor appointed pursuant to Section 8.02 (a "Successor
Master Servicer"). Such Successor Master Servicer shall thereupon if such
Successor Master Servicer is a successor to the Master Servicer, make any
Advance required by Section 5.01, subject, in the case of the Trustee, to
Section 8.02. The Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the terminated Master Servicer, as attorney- in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of any Mortgage Loans and related documents, or otherwise. Unless
expressly provided in such written notice, no such termination shall affect any
obligation of the Master Servicer to pay amounts owed pursuant to Article IX.
The Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the Master Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the applicable Successor Master
Servicer of all cash amounts which shall at the time be credited to the
Protected Account maintained pursuant to Section 4.01, or thereafter be received
with respect to the applicable Mortgage Loans. The Trustee shall promptly notify
the Rating Agencies of the occurrence of an Event of Default known to the
Trustee.

               Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Mortgage Loan that was due prior to
the notice terminating the Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
the Master Servicer would have been entitled pursuant to Sections 4.03 and 4.05
and to receive any other amounts payable to the Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder.

        Section 8.02   TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

               On and after the time the Master Servicer receives a notice of
termination pursuant to Section 8.01 hereof the Trustee shall automatically
become the successor to the Master Servicer with respect to the transactions set
forth or provided for herein and after a transition period (not to exceed 90
days), shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Master Servicer by the terms and provisions
hereof and applicable law including, if applicable, the obligation to make
Advances pursuant to Section 5.01 except as otherwise provided herein. Effective
on the date of such notice of termination, as compensation therefor, the Trustee
shall be entitled to all fees, costs and expenses relating to the Mortgage Loans
that the Master Servicer would have been entitled to if it had continued to act
hereunder, provided, however, that the Trustee shall not be (i) liable for any
acts or omissions of the Master Servicer, (ii) obligated to make Advances if it
is prohibited from doing so under applicable law, (iii) obligated to effectuate
any repurchases or substitutions of Mortgage Loans hereunder, including pursuant
to Section 2.02 or 2.03 hereof, (iv) responsible for expenses of the Master
Servicer pursuant to Section 2.03 or (v) deemed to have made any representations
and warranties hereunder, including pursuant to Section 2.03. Notwithstanding
the foregoing, the Trustee may, if it shall be unwilling to so act, or shall, if
it is prohibited by applicable law from making Advances pursuant to Section 5.01
or if it is otherwise unable to so act, appoint, or petition a court of
competent jurisdiction to appoint, any established


                                      -107-

<PAGE>



mortgage loan servicing institution the appointment of which does not adversely
affect the then current rating of the Certificates by each Rating Agency as the
successor to the Master Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Master Servicer hereunder.
Any Successor Master Servicer shall (i) be an institution that is a Fannie Mae
and Freddie Mac approved seller/servicer in good standing, that has a net worth
of at least $15,000,000 and (ii) be willing to act as successor servicer of any
Mortgage Loans under any Servicing Agreement with respect to which the original
Servicer has been terminated as servicer, and shall have executed and delivered
to the Depositor and the Trustee an agreement accepting such delegation and
assignment, that contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Master Servicer
(other than any liabilities of the Master Servicer hereof incurred prior to
termination of the Master Servicer under Section 8.01 or as otherwise set forth
herein), with like effect as if originally named as a party to this Agreement,
provided that each Rating Agency shall have acknowledged in writing that its
rating of the Certificates in effect immediately prior to such assignment and
delegation will not be qualified or reduced as a result of such assignment and
delegation. If the Trustee assumes the duties and responsibilities of the Master
Servicer in accordance with this Section 8.02, the Trustee shall not resign as
Master Servicer until a Successor Master Servicer has been appointed and has
accepted such appointment. Pending appointment of a successor to the Master
Servicer hereunder, the Trustee, unless the Trustee is prohibited by law from so
acting, shall, subject to Section 3.04 hereof, act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans or otherwise as it and such successor shall agree;
provided that no such compensation shall be in excess of that permitted the
Master Servicer hereunder. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. Neither the Trustee nor any other Successor Master Servicer
shall be deemed to be in default hereunder by reason of any failure to make, or
any delay in making, any distribution hereunder or any portion thereof or any
failure to perform, or any delay in performing, any duties or responsibilities
hereunder, in either case caused by the failure of the Master Servicer to
deliver or provide, or any delay in delivering or providing, any cash,
information, documents or records to it.

               The costs and expenses of the Trustee in connection with the
termination of the Master Servicer, appointment of a Successor Master Servicer
and, if applicable, any transfer of servicing, including, without limitation,
all costs and expenses associated with the complete transfer of all servicing
data and the completion, correction or manipulation of such servicing data as
may be required by the Trustee to correct any errors or insufficiencies in the
servicing data or otherwise to enable the Trustee or the Successor Master
Servicer to service the related Mortgage Loans properly and effectively, to the
extent not paid by the terminated Master Servicer, shall be payable to the
Trustee pursuant to Section 9.05. Any successor to the Master Servicer as
successor servicer under any Subservicing Agreement shall give notice to the
applicable Mortgagors of such change of servicer and shall, during the term of
its service as successor servicer maintain in force the policy or policies that
the Master Servicer is required to maintain pursuant to Section 7.05.






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<PAGE>



        Section 8.03   NOTIFICATION TO CERTIFICATEHOLDERS.

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

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

        Section 8.04   WAIVER OF DEFAULTS.

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




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<PAGE>



                                   ARTICLE IX

                     CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR

        Section 9.01   DUTIES OF TRUSTEE AND SECURITIES ADMINISTRATOR.

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

               (b) Upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments which are specifically
required to be furnished to the Trustee or the Securities Administrator pursuant
to any provision of this Agreement, the Trustee or the Securities Administrator,
respectively, shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that neither the Trustee nor the
Securities Administrator shall be responsible for the accuracy or content of any
resolution, certificate, statement, opinion, report, document, order or other
instrument furnished by the Master Servicer; provided, further, that neither the
Trustee nor the Securities Administrator shall be responsible for the accuracy
or verification of any calculation provided to it pursuant to this Agreement.

               (c) On each Distribution Date, the Trustee shall make monthly
distributions and the final distribution to the Certificateholders from funds in
the Distribution Account as provided in Sections 5.04 and 10.01 herein based the
applicable Remittance Report. In addition, the Trustee shall promptly notify the
Master Servicer if, on any Distribution Account Deposit Date, any fails to remit
to the Trustee the funds required to be remitted by such subservicer under its
Subservicing Agreement.

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

               (i) Prior to the occurrence of an Event of Default, and after the
        curing or waiver of all such Events of Default which may have occurred
        with respect to the Trustee and at all times with respect to the
        Securities Administrator, the duties and obligations of the Trustee and
        the Securities Administrator shall be determined solely by the express
        provisions of this Agreement, neither the Trustee nor the Securities
        Administrator shall be liable except for the performance of their
        respective duties and obligations as are specifically set forth in this
        Agreement, no implied covenants or obligations shall be read into this
        Agreement against the Trustee or the Securities Administrator and, in
        the absence of bad faith on the part of the Trustee or the Securities
        Administrator, respectively, the Trustee or the Securities
        Administrator, respectively, may conclusively rely, as to the truth of
        the statements and the


                                      -110-

<PAGE>



        correctness of the opinions expressed therein, upon any certificates or
        opinions furnished to the Trustee or the Securities Administrator,
        respectively, and conforming to the requirements of this Agreement;

               (ii) Neither the Trustee nor the Securities Administrator shall
        be liable in its individual capacity for an error of judgment made in
        good faith by a Responsible Officer or Responsible Officers of the
        Trustee or an officer or officers of the Securities Administrator,
        respectively, unless it shall be proved that the Trustee or the
        Securities Administrator, respectively, was negligent in ascertaining
        the pertinent facts;

               (iii) Neither the Trustee nor the Securities Administrator shall
        be liable with respect to any action taken, suffered or omitted to be
        taken by it in good faith in accordance with the directions of the
        Holders of Certificates evidencing not less than 25% of the aggregate
        Voting Rights of the Certificates, if such action or non-action relates
        to the time, method and place of conducting any proceeding for any
        remedy available to the Trustee or the Securities Administrator,
        respectively, or exercising any trust or other power conferred upon the
        Trustee or the Securities Administrator, respectively, under this
        Agreement;

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

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

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

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

Neither the Trustee nor the Securities Administrator shall be required to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Trustee or the Securities Administrator to perform, or be
responsible for the manner of performance of, any of the


                                      -111-

<PAGE>



obligations of the Master Servicer hereunder or any subservicer under the
applicable Subservicing Agreements.

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

        Section 9.02   CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE SECURITIES
                       ADMINISTRATOR.

               (a) Except as otherwise provided in Section 9.01:

               (i) The Trustee and the Securities Administrator may rely and
        shall be protected in acting or refraining from acting in reliance on
        any resolution or certificate of the Seller or the Master Servicer or
        any Subservicer, any certificates of auditors or any other certificate,
        statement, instrument, opinion, report, notice, request, consent, order,
        appraisal, bond or other paper or document believed by it to be genuine
        and to have been signed or presented by the proper party or parties;

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

               (iii) Neither the Trustee nor the Securities Administrator shall
be under any obligation to exercise any of the trusts or powers vested in it by
this Agreement, other than its obligation to give notices pursuant to this
Agreement, or to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee or the Securities
Administrator, as applicable, reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby.
Nothing contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of an Event of Default of which a Responsible Officer of the
Trustee has actual knowledge (which has not been cured or waived), to exercise
such of the rights and powers vested in it by this Agreement, and to use the
same degree of care and skill in their exercise, as a prudent person would
exercise under the circumstances in the conduct of his own affairs;

               (iv) Prior to the occurrence of an Event of Default hereunder and
after the curing or waiver of all Events of Default which may have occurred with
respect to the Trustee and at all times with respect to the Securities
Administrator, neither the Trustee nor the Securities Administrator shall be
liable in its individual capacity for any action taken, suffered or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement;

               (v) Neither the Trustee nor the Securities Administrator shall be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by Holders of Certificates evidencing not less
than 25% of the


                                      -112-

<PAGE>



aggregate Voting Rights of the Certificates and provided that the payment within
a reasonable time to the Trustee or the Securities Administrator, as applicable,
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee or the Securities
Administrator, as applicable, reasonably assured to the Trustee or the
Securities Administrator, as applicable, by the security afforded to it by the
terms of this Agreement. The Trustee or the Securities Administrator may require
reasonable indemnity against such expense or liability as a condition to taking
any such action. The reasonable expense of every such examination shall be paid
by the Certificateholders requesting the investigation;

               (vi) The Trustee and the Securities Administrator may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or through Affiliates, agents or attorneys; provided, however, that the
Trustee may not appoint any paying agent other than the Securities Administrator
to perform any paying agent functions under this Agreement without the express
written consent of the Master Servicer, which consent will not be unreasonably
withheld. Neither the Trustee nor the Securities Administrator shall be liable
or responsible for the misconduct or negligence of any of the Trustee's or the
Securities Administrator's agents or attorneys or paying agent appointed
hereunder by the Trustee or the Securities Administrator with due care and, when
required, with the consent of the Master Servicer;

               (vii) Should the Trustee or the Securities Administrator deem the
nature of any action required on its part to be unclear, the Trustee or the
Securities Administrator, respectively, may require prior to such action that it
be provided by the Depositor with reasonable further instructions; the right of
the Trustee or the Securities Administrator to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and neither the
Trustee nor the Securities Administrator shall be accountable for other than its
negligence or willful misconduct in the performance of any such act;

               (viii) Neither the Trustee nor the Securities Administrator shall
be required to give any bond or surety with respect to the execution of the
trust created hereby or the powers granted hereunder, except as provided in
Subsection 9.07; and

               (ix) Neither the Trustee nor the Securities Administrator shall
have any duty to conduct any affirmative investigation as to the occurrence of
any condition requiring the repurchase of any Mortgage Loan by any Person
pursuant to this Agreement, or the eligibility of any Mortgage Loan for purposes
of this Agreement.

        Section 9.03   TRUSTEE AND SECURITIES ADMINISTRATOR NOT LIABLE FOR
                       CERTIFICATES OR MORTGAGE LOANS.

               The recitals contained herein and in the Certificates (other than
the signature and countersignature of the Trustee on the Certificates) shall be
taken as the statements of the Depositor, and neither the Trustee nor the
Securities Administrator shall have any responsibility for their correctness.
Neither the Trustee nor the Securities Administrator makes any representation as
to the validity or sufficiency of the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) or of any Mortgage Loan
except as expressly provided in Sections 2.02 and 2.06 hereof; provided,
however, that the foregoing shall not relieve the Trustee of the obligation to
review


                                      -113-

<PAGE>



the Mortgage Files pursuant to Sections 2.02 and 2.05 of this Agreement. The
Trustee's signature and countersignature (or countersignature of its agent) on
the Certificates shall be solely in its capacity as Trustee and shall not
constitute the Certificates an obligation of the Trustee in any other capacity.
Neither the Trustee or the Securities Administrator shall be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor with respect to the Mortgage Loans. Subject to the provisions
of Section 2.06, neither the Trustee nor the Securities Administrator shall be
responsible for the legality or validity of this Agreement or any document or
instrument relating to this Agreement, the validity of the execution of this
Agreement or of any supplement hereto or instrument of further assurance, or the
validity, priority, perfection or sufficiency of the security for the
Certificates issued hereunder or intended to be issued hereunder. Neither the
Trustee nor the Securities Administrator shall at any time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage or any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust Fund or its ability to
generate the payments to be distributed to Certificateholders, under this
Agreement. Neither the Trustee nor the Securities Administrator shall have any
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to record this Agreement.

        Section 9.04 TRUSTEE AND SECURITIES ADMINISTRATOR MAY OWN CERTIFICATES.

               Each of the Trustee and the Securities Administrator in its
individual capacity or in any capacity other than as Trustee or Securities
Administrator hereunder may become the owner or pledgee of any Certificates with
the same rights it would have if it were not the Trustee or the Securities
Administrator, as applicable, and may otherwise deal with the parties hereto.

        Section 9.05   TRUSTEE'S AND SECURITIES ADMINISTRATOR'S EXPENSES.

               The Trustee and the Securities Administrator will be entitled to
recover from the Distribution Account all reasonable out-of-pocket expenses,
disbursements and advances and the expenses of the Trustee and the Securities
Administrator, respectively, in connection with any Event of Default, any breach
of this Agreement or any claim or legal action (including any pending or
threatened claim or legal action) incurred or made by the Trustee in the
administration of the trusts hereunder or the Securities Administrator,
respectively, (including the reasonable compensation, expenses and disbursements
of its counsel) except any such expense, disbursement or advance as may arise
from its negligence, bad faith or intentional misconduct. If such funds are
insufficient therefor, any such insufficiency shall be recoverable from the
Depositor. Such reimbursement obligation shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust.

        Section 9.06   ELIGIBILITY REQUIREMENTS FOR TRUSTEE AND SECURITIES
                       ADMINISTRATOR.

               The Trustee and any successor Trustee and the Securities
Administrator and any successor Securities Administrator shall during the entire
duration of this Agreement be a state bank or trust company or a national
banking association organized and doing business under the laws of


                                      -114-

<PAGE>



a state or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus and undivided
profits of at least $40,000,000 or, in the case of a successor Trustee,
$50,000,000, subject to supervision or examination by federal or state authority
and, in the case of the Trustee, rated "BBB" or higher by Fitch with respect to
their long-term rating and rated "BBB" or higher by Standard & Poor's and "Baa2"
or higher by Moody's with respect to any outstanding long-term unsecured
unsubordinated debt, and, in the case of a successor Trustee or successor
Securities Administrator other than pursuant to Section 9.10, rated in one of
the two highest long-term debt categories of, or otherwise acceptable to, each
of the Rating Agencies. The Trustee shall not be an Affiliate of the Master
Servicer. If the Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 9.06 the combined capital and
surplus of such corporation shall be deemed to be its total equity capital
(combined capital and surplus) as set forth in its most recent report of
condition so published. In case at any time the Trustee or the Securities
Administrator, as applicable, shall cease to be eligible in accordance with the
provisions of this Section 9.06, the Trustee or the Securities Administrator
shall resign immediately in the manner and with the effect specified in Section
9.08.

        Section 9.07   INSURANCE.

               The Trustee and the Securities Administrator, at their own
expense, shall at all times maintain and keep in full force and effect: (i)
fidelity insurance, (ii) theft of documents insurance and (iii) forgery
insurance (which may be collectively satisfied by a "Financial Institution Bond"
and/or a "Bankers' Blanket Bond"). All such insurance shall be in amounts, with
standard coverage and subject to deductibles, as are customary for insurance
typically maintained by banks or their affiliates which act as custodians for
investor-owned mortgage pools. A certificate of an officer of the Trustee or the
Securities Administrator as to the Trustee's or the Securities Administrator's,
respectively, compliance with this Section 9.07 shall be furnished to any
Certificateholder upon reasonable written request.

        Section 9.08   RESIGNATION AND REMOVAL OF TRUSTEE AND SECURITIES
                       ADMINISTRATOR.

               The Trustee and the Securities Administrator may at any time
resign and be discharged from the Trust hereby created by giving written notice
thereof to the Depositor, the Seller, the Securities Administrator (or the
Trustee, if the Securities Administrator resigns) and the Master Servicer, with
a copy to the Rating Agencies. Upon receiving such notice of resignation, the
Depositor shall promptly appoint a successor trustee or successor securities
administrator, as applicable, by written instrument, in triplicate, one copy of
which instrument shall be delivered to each of the resigning trustee or
securities administrator, as applicable, and the successor trustee or securities
administrator, as applicable. If no successor trustee or successor securities
administrator shall have been so appointed and have accepted appointment within
30 days after the giving of such notice of resignation, the resigning Trustee or
Securities Administrator may petition any court of competent jurisdiction for
the appointment of a successor trustee or securities administrator.

               If at any time (i) the Trustee or the Securities Administrator
shall cease to be eligible in accordance with the provisions of Section 9.06
hereof and shall fail to resign after written request thereto by the Depositor,
(ii) the Trustee or the Securities Administrator shall become incapable of


                                      -115-

<PAGE>



acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the
Trustee or the Securities Administrator or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or the
Securities Administrator or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or (iii)(A) a tax is imposed with
respect to the Trust Fund by any state in which the Trustee or the Securities
Administrator or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee or securities administrator
and (C) the Trustee or the Securities Administrator, as applicable fails to
indemnify the Trust Fund against such tax, then the Depositor or the Master
Servicer may remove the Trustee or the Securities Administrator, as applicable,
and appoint a successor trustee or successor securities administrator, as
applicable, by written instrument, in multiple copies, a copy of which
instrument shall be delivered to the Trustee, the Securities Administrator, each
Master Servicer and the successor trustee or successor securities administrator,
as applicable.

               The Holders evidencing at least 51% of the Voting Rights of each
Class of Certificates may at any time remove the Trustee or Securities
Administrator and appoint a successor trustee or securities administrator by
written instrument or instruments, in multiple copies, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered by the successor trustee or successor securities
administrator to each of the Master Servicer, the Trustee or Securities
Administrator so removed and the successor trustee or securities administrator
so appointed. Notice of any removal of the Trustee or Securities Administrator
shall be given to each Rating Agency by the Trustee or successor trustee.

               Any resignation or removal of the Trustee or Securities
Administrator and appointment of a successor trustee or securities administrator
pursuant to any of the provisions of this Section 9.08 shall become effective
upon acceptance of appointment by the successor trustee or securities
administrator as provided in Section 9.09 hereof.

        Section 9.09   SUCCESSOR TRUSTEE OR SECURITIES ADMINISTRATOR.

               Any successor trustee or securities administrator appointed as
provided in Section 9.08 hereof shall execute, acknowledge and deliver to the
Depositor and to its predecessor trustee or predecessor securities
administrator, as applicable, and the Master Servicer an instrument accepting
such appointment hereunder and thereupon the resignation or removal of the
predecessor trustee or securities administrator shall become effective and such
successor trustee or securities administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee or securities administrator herein.

               No successor trustee or securities administrator shall accept
appointment as provided in this Section 9.09 unless at the time of such
acceptance such successor trustee or securities administrator shall be eligible
under the provisions of Section 9.07 hereof and its appointment shall not
adversely affect the then current rating of the Certificates.

               Upon acceptance of appointment by a successor trustee or
securities administrator as provided in this Section 9.09, the successor trustee
or securities administrator shall mail notice of the succession of such trustee
or securities administrator hereunder to all Holders of Certificates. If


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<PAGE>



the successor trustee or securities administrator fails to mail such notice
within ten days after acceptance of appointment, the Depositor shall cause such
notice to be mailed at the expense of the Trust Fund.

        Section 9.10   MERGER OR CONSOLIDATION OF TRUSTEE OR SECURITIES
                       ADMINISTRATOR.

               Any corporation, state bank or national banking association into
which the Trustee or the Securities Administrator may be merged or converted or
with which it may be consolidated or any corporation, state bank or national
banking association resulting from any merger, conversion or consolidation to
which the Trustee or the Securities Administrator shall be a party, or any
corporation, state bank or national banking association succeeding to
substantially all of the corporate trust business of the Trustee or of the
business of the Securities Administrator, shall be the successor of the Trustee
or the Securities Administrator hereunder, provided that such corporation shall
be eligible under the provisions of Section 9.06 hereof without the execution or
filing of any paper or further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.

        Section 9.11 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

               Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust Fund or property securing any Mortgage Note may at
the time be located, the Master Servicers and the Trustee acting jointly shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee or co-trustees jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Fund, and to vest in such Person or Persons, in such capacity and
for the benefit of the Certificateholders, such title to the Trust Fund or any
part thereof, whichever is applicable, and, subject to the other provisions of
this Section 9.11, such powers, duties, obligations, rights and trusts as the
Master Servicer and the Trustee may consider necessary or desirable. If the
Master Servicer shall not have joined in such appointment within 15 days after
the receipt by it of a request to do so, or in the case an Event of Default
shall have occurred and be continuing, the Trustee alone shall have the power to
make such appointment. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
9.06 and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 9.09.

               Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

               (i) All rights, powers, duties and obligations conferred or
        imposed upon the Trustee, except for the obligation of the Trustee under
        this Agreement to advance funds on behalf of the Master Servicer, shall
        be conferred or imposed upon and exercised or performed by the Trustee
        and such separate trustee or co-trustee jointly (it being understood
        that such separate trustee or co-trustee is not authorized to act
        separately without the Trustee joining in such act), except to the
        extent that under any law of any jurisdiction in which any particular
        act or acts are to be performed (whether a Trustee hereunder or as a
        Successor Master Servicer hereunder), the Trustee shall be incompetent
        or unqualified to perform such


                                      -117-

<PAGE>



        act or acts, in which event such rights, powers, duties and obligations
        (including the holding of title to the Trust Fund or any portion thereof
        in any such jurisdiction) shall be exercised and performed singly by
        such separate trustee or co-trustee, but solely at the direction of the
        Trustee;

               (ii) No trustee hereunder shall be held personally liable by
        reason of any act or omission of any other trustee hereunder; and

               (iii) The Trustee may at any time accept the resignation of or
        remove any separate trustee or co-trustee.

               Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Master Servicer and the Depositor.

               Any separate trustee or co-trustee may, at any time, constitute
the Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co- trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

        Section 9.12   TAX MATTERS.

               It is intended that the Trust Fund shall constitute, and that the
affairs of the Trust Fund shall be conducted so that each REMIC formed hereunder
qualifies as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Securities Administrator covenants and agrees that it shall act as agent (and
the Securities Administrator is hereby appointed to act as agent) on behalf of
the Trust Fund. The Trustee and/or the Securities Administrator, as agent on
behalf of the Trust Fund, shall do or refrain from doing, as applicable, the
following: (a) the Securities Administrator shall prepare and file, or cause to
be prepared and filed, in a timely manner, U.S. Real Estate Mortgage Investment
Conduit Income Tax Returns (Form 1066 or any successor form adopted by the
Internal Revenue Service) and prepare and file or cause to be prepared and filed
with the Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect to each
such REMIC containing such information and at the times and in the manner as may
be required by the Code or state or local tax laws, regulations, or rules, and
furnish or cause to be furnished to Certificateholders the schedules, statements
or information at such times and in such manner as may be required thereby; (b)
the Securities Administrator shall apply for an employer identification number
with the Internal Revenue Service via a Form SS-4 or other comparable


                                      -118-

<PAGE>



method for each REMIC that is or becomes a taxable entity, and within thirty
days of the Closing Date, furnish or cause to be furnished to the Internal
Revenue Service, on Forms 8811 or as otherwise may be required by the Code, the
name, title, address, and telephone number of the person that the holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code for the
Trust Fund; (c) the Trustee shall make or cause to be made elections, on behalf
of each REMIC formed hereunder to be treated as a REMIC on the federal tax
return of such REMIC for its first taxable year (and, if necessary, under
applicable state law); (d) the Securities Administrator shall prepare and
forward, or cause to be prepared and forwarded, to the Certificateholders and to
the Internal Revenue Service and, if necessary, state tax authorities, all
information returns and reports as and when required to be provided to them in
accordance with the REMIC Provisions, including without limitation, the
calculation of any original issue discount using the Prepayment Assumption; (e)
the Securities Administrator shall provide information necessary for the
computation of tax imposed on the transfer of a Residual Certificate to a Person
that is not a Permitted Transferee, or an agent (including a broker, nominee or
other middleman) of a Person that is not a Permitted Transferee, or a
pass-through entity in which a Person that is not a Permitted Transferee is the
record holder of an interest (the reasonable cost of computing and furnishing
such information may be charged to the Person liable for such tax); (f) each of
the Securities Administrator and the Trustee shall, to the extent under its
control, conduct the affairs of the Trust Fund at all times that any
Certificates are outstanding so as to maintain the status of each REMIC formed
hereunder as a REMIC under the REMIC Provisions; (g) neither the Trustee nor the
Securities Administrator shall knowingly or intentionally take any action or
omit to take any action that would cause the termination of the REMIC status of
any REMIC formed hereunder; (h) the Trustee shall pay, from the sources
specified in the last paragraph of this Section 9.11, as directed by the
Securities Administrator in its Remittance Report, the amount of any federal,
state and local taxes, including prohibited transaction taxes as described
below, imposed on any REMIC formed hereunder prior to the termination of the
Trust Fund when and as the same shall be due and payable (but such obligation
shall not prevent the Trustee, the Securities Administrator at the written
request of the Trustee, or any other appropriate Person from contesting any such
tax in appropriate proceedings and shall not prevent the Securities
Administrator from withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings); (i) the Trustee shall sign or cause to be
signed federal, state or local income tax or information returns or any other
document prepared by the Securities Administrator pursuant to this Section 9.12
requiring a signature thereon by the Trustee; (j) the Securities Administrator
shall maintain records relating to each REMIC formed hereunder including but not
limited to the income, expenses, assets and liabilities of each such REMIC and
adjusted basis of the Trust Fund property determined at such intervals as may be
required by the Code, as may be necessary to prepare the foregoing returns,
schedules, statements or information; (k) the Securities Administrator shall,
for federal income tax purposes, maintain books and records with respect to the
REMICs on a calendar year and on an accrual basis; (l) neither the Trustee nor
the Master Servicer shall enter into any arrangement not otherwise provided for
in this Agreement by which the REMICs will receive a fee or other compensation
for services nor permit the REMICs to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code; and (m) as and when
necessary and appropriate, the Trustee, or at the written request of the
Trustee, the Securities Administrator, shall represent the Trust Fund in any
administrative or judicial proceedings relating to an examination or audit by
any governmental taxing authority,


                                      -119-

<PAGE>



request an administrative adjustment as to any taxable year of any REMIC formed
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of the Trust Fund,
and otherwise act on behalf of each REMIC formed hereunder in relation to any
tax matter involving any such REMIC.

               In order to enable each of the Trustee and the Securities
Administrator to perform its duties as set forth herein, the Depositor shall
provide, or cause to be provided, to the Trustee or the Securities Administrator
within 10 days after the Closing Date all information or data that the Trustee
or the Securities Administrator requests in writing and determines to be
relevant for tax purposes to the valuations and offering prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flows of the Certificates and the Mortgage Loans.
Thereafter, the Depositor shall provide to the Trustee or the Securities
Administrator promptly upon written request therefor, any such additional
information or data that the Trustee or the Securities Administrator may, from
time to time, request in order to enable the Trustee or the Securities
Administrator to perform its duties as set forth herein. The Depositor hereby
indemnifies each of Trustee and the Securities Administrator for any losses,
liabilities, damages, claims or expenses of the Trustee or the Securities
Administrator arising from any errors or miscalculations of the Trustee or the
Securities Administrator, as applicable, that result from any failure of the
Depositor to provide, or to cause to be provided, accurate information or data
to the Trustee or the Securities Administrator, as applicable, on a timely
basis.

               In the event that any tax is imposed on "prohibited transactions"
of any of REMIC I, REMIC II or REMIC III as defined in Section 860F(a)(2) of the
Code, on the "net income from foreclosure property" of the Trust Fund as defined
in Section 860G(c) of the Code, on any contribution to any of REMIC I, REMIC II
or REMIC III after the startup day pursuant to Section 860G(d) of the Code, or
any other tax is imposed, including, without limitation, any federal, state or
local tax or minimum tax imposed upon any of REMIC I, REMIC II or REMIC III, and
is not paid as otherwise provided for herein, such tax shall be paid by (i) the
Trustee or the Securities Administrator, if any such other tax arises out of or
results from a breach by the Trustee or the Securities Administrator,
respectively, of any of its obligations under this Agreement, (ii) any party
hereto (other than the Trustee or the Securities Administrator) to the extent
any such other tax arises out of or results from a breach by such other party of
any of its obligations under this Agreement or (iii) in all other cases, or in
the event that any liable party hereto fails to honor its obligations under the
preceding clauses (i) or (ii), any such tax will be paid first with amounts
otherwise to be distributed to the Class R Certificateholders and the Class B-IO
Certificateholders (pro rata based on the amounts to be distributed), and second
with amounts otherwise to be distributed to all other Certificateholders in the
following order of priority: first, to the Class B Certificates, second, to the
Class M-2 Certificates, third, to the Class M-1 Certificates, and fourth, to the
Senior Certificates (pro rata based on the amounts to be distributed).
Notwithstanding anything to the contrary contained herein, to the extent that
such tax is payable by the Holder of any Certificates, the Trustee is hereby
authorized to retain on any Distribution Date, from the Holders of the Class R
Certificates (and, if necessary, second, from the Holders of the other
Certificates in the priority specified in the preceding sentence), funds
otherwise distributable to such Holders in an amount sufficient to pay such tax.
Following written notification to the Securities Administrator by the Trustee of
any amount payable out of distributions to the Certificateholders pursuant to
the preceding two sentences, the Securities Administrator shall include in its
Remittance Report instructions as to distributions to such parties


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<PAGE>



taking into account the priorities described in the second preceding sentence.
The Securities Administrator, on written request by the Trustee, agrees to
promptly notify in writing the party liable for any such tax of the amount
thereof and the due date for the payment thereof.

               The Trustee and the Securities Administrator each agree that, in
the event it should obtain any information necessary for the other party to
perform its obligations pursuant to this Section 9.12, it will promptly notify
and provide such information to such other party. Notwithstanding anything in
this Agreement to the contrary, the Trustee agrees that, in the event that the
Trustee obtains actual knowledge that the Securities Administrator has breached
any of its obligations pursuant to this Section 9.12, the Trustee shall perform
such obligations on its behalf to the extent that the Trustee possesses all
documents necessary to so perform and receives reasonable compensation therefor,
provided, however, that the Trustee shall not be liable for any losses resulting
from any such breach.




                                      -121-

<PAGE>



                                    ARTICLE X

                                   TERMINATION

        Section 10.01  TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL
                       MORTGAGE LOANS.

               Subject to Section 10.03, the obligations and responsibilities of
the Depositor, the Master Servicer, the Securities Administrator, the Seller and
the Trustee created hereby with respect to the Trust Fund shall terminate upon
the earlier of (a) the purchase by the Master Servicer of all of the Mortgage
Loans (and REO Properties) remaining in the Trust Fund at a price equal to the
sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan (other
than in respect of REO Property), (ii) accrued interest thereon at the
applicable Mortgage Rate to, but not including, the first day of the month of
purchase, (iii) the appraised value of any REO Property in the Trust Fund (up to
the Stated Principal Balance of the related Mortgage Loan), such appraisal to be
conducted by an appraiser mutually agreed upon by the Master Servicer and the
Securities Administrator and (iv) unreimbursed out-of pocket costs of the
related Servicer or the Master Servicer, including unreimbursed servicing
advances and the principal portion of any unreimbursed Advances, made on the
Mortgage Loans prior to the exercise of such repurchase right and (v) any
unreimbursed costs and expenses of the Trustee and the Securities Administrator
payable pursuant to Section 9.05 and (b) the later of (i) the maturity or other
liquidation (or any Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all REO Property and (ii) the
distribution to Certificateholders of all amounts required to be distributed to
them pursuant to this Agreement, as applicable. In no event shall the trusts
created hereby continue beyond the earlier of (i) the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late Ambassador of the United States to the Court of St. James, living on the
date hereof and (ii) the Latest Possible Maturity Date.

               The right to repurchase all Mortgage Loans and REO Properties
pursuant to clause (a) above shall be conditioned upon the Stated Principal
Balance of all of the Mortgage Loans in the Trust Fund, at the time of any such
repurchase, aggregating ten percent or less of the aggregate Cut- off Date
Principal Balance of all of the Mortgage Loans.

        Section 10.02  FINAL DISTRIBUTION ON THE CERTIFICATES.

               If on any Determination Date, (i) the Master Servicer determines
that there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Protected Account of the Master Servicer,
the Master Servicer shall direct the Securities Administrator to send a final
distribution notice promptly to each Certificateholder or (ii) the Securities
Administrator determines that a Class of Certificates shall be retired after a
final distribution on such Class, the Securities Administrator shall notify the
Certificateholders within five (5) Business Days after such Determination Date
that the final distribution in retirement of such Class of Certificates is
scheduled to be made on the immediately following Distribution Date. Any final
distribution made pursuant to the immediately preceding sentence will be made
only upon presentation and surrender of the related Certificates at the
Corporate Trust Office of the Trustee. If the Master Servicer elects to
terminate the Trust Fund pursuant to Section 10.01, at least 20 days prior to
the date notice is to be mailed to the Certificateholders, the Master Servicer
shall notify the


                                      -122-

<PAGE>



Depositor, the Securities Administrator, the Trustee and the Securities
Administrator of the date the Master Servicer intends to terminate the Trust
Fund. The Master Servicer shall remit the Mortgage Loan Repurchase Price to the
Trustee on the Business Day prior to the Distribution Date for such Optional
Termination by the Master Servicer.

               Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Securities Administrator by letter to Certificateholders mailed not
earlier than the 10th day and no later than the 15th day of the month
immediately preceding the month of such final distribution. Any such notice
shall specify (a) the Distribution Date upon which final distribution on the
Certificates will be made upon presentation and surrender of Certificates at the
office therein designated, (b) the amount of such final distribution, (c) the
location of the office or agency at which such presentation and surrender must
be made and (d) that the Record Date otherwise applicable to such Distribution
Date is not applicable, distributions being made only upon presentation and
surrender of the Certificates at the office therein specified. The Securities
Administrator will give such notice to each Rating Agency at the time such
notice is given to Certificateholders.

               In the event such notice is given, the Master Servicer shall
cause all funds in the applicable Protected Account to be remitted to the
Trustee for deposit in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the Trust
Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Master Servicer or its designee the
Mortgage Files for the Mortgage Loans and any documents necessary to transfer
any REO Property.

               Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders of each Class the amounts
allocable to such Certificates held in the Distribution Account in the order and
priority set forth in Section 5.04 hereof on the final Distribution Date and in
proportion to their respective Percentage Interests.

               In the event that any affected Certificateholders shall not
surrender Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Securities Administrator
shall give a second written notice to the remaining Certificateholders to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. If within six months after the second notice all the
applicable Certificates shall not have been surrendered for cancellation, the
Securities Administrator may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets that remain a part of the Trust Fund. If within one year
after the second notice all Certificates shall not have been surrendered for
cancellation, the Class R Certificateholders shall be entitled to all unclaimed
funds and other assets of the Trust Fund that remain subject hereto.




                                      -123-

<PAGE>

        Section 10.03  ADDITIONAL TERMINATION REQUIREMENTS.

               (a) Upon exercise by the Master Servicer of its purchase option
as provided in Section 10.01, the Trust Fund shall be terminated in accordance
with the following additional requirements, unless each of the Trustee and the
Securities Administrator have been supplied with an Opinion of Counsel, at the
expense of the Master Servicer, to the effect that the failure of the Trust Fund
to comply with the requirements of this Section 10.03 will not (i) result in the
imposition of taxes on "prohibited transactions" of a REMIC, or (ii) cause a
REMIC to fail to qualify as a REMIC at any time that any Certificates are
outstanding:

               (1) The Master Servicer shall establish a 90-day liquidation
period and notify the Trustee and Securities Administrator thereof, and the
Securities Administrator shall in turn specify the first day of such period in a
statement attached to each of REMIC I, REMIC II and REMIC III's Tax Return
pursuant to Treasury Regulation Section 1.860F-1. The Master Servicer shall
satisfy all the requirements of a qualified liquidation under Section 860F of
the Code and any regulations thereunder, as evidenced by an Opinion of Counsel
obtained at the expense of the Master Servicer;

               (2) During such 90-day liquidation period, and at or prior to the
time of making the final payment on the Certificates, the Master Servicer as
agent of the Trustee shall sell all of the assets of REMIC I, REMIC II and REMIC
III for cash; and

               (3) At the time of the making of the final payment on the
Certificates, the Securities Administrator as agent for the Trustee shall
distribute or credit, or cause to be distributed or credited, to the Holders of
the Residual Certificates all cash on hand (other than cash retained to meet
claims), and REMIC I, REMIC II and REMIC III shall terminate at that time.

               (b) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Master Servicer to specify the 90-day liquidation period
for REMIC I, REMIC II and REMIC III, which authorization shall be binding upon
all successor Certificateholders.

               (c) The Securities Administrator as agent for each REMIC hereby
agrees to adopt and sign such a plan of complete liquidation upon the written
request of the Master Servicer, and the receipt of the Opinion of Counsel
referred to in Section 10.03(a)(1) and to take such other action in connection
therewith as may be reasonably requested by the Master Servicer.




                                      -124-

<PAGE>



                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

        Section 11.01  AMENDMENT.

               This Agreement may be amended from time to time by parties
hereto, without the consent of any of the Certificateholders to cure any
ambiguity, to correct or supplement any provisions herein (including to give
effect to the expectations of investors), to change the manner in which the
Protected Account maintained by the Master Servicer is maintained or to make
such other provisions with respect to matters or questions arising under this
Agreement as shall not be inconsistent with any other provisions herein if such
action shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder; provided that any such
amendment shall be deemed not to adversely affect in any material respect the
interests of the Certificateholders and no such Opinion of Counsel shall be
required if the Person requesting such amendment obtains a letter from each
Rating Agency stating that such amendment would not result in the downgrading or
withdrawal of the respective ratings then assigned to the Certificates.

               Notwithstanding the foregoing, without the consent of the
Certificateholders, the parties hereto may at any time and from time to time
amend this Agreement to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or appropriate to maintain the qualification
of each of REMIC I, REMIC II and REMIC III as a REMIC under the Code or to avoid
or minimize the risk of the imposition of any tax on any of REMIC I, REMIC II or
REMIC III pursuant to the Code that would be a claim against any of REMIC I,
REMIC II or REMIC III at any time prior to the final redemption of the
Certificates, provided that the Trustee has been provided an Opinion of Counsel,
which opinion shall be an expense of the party requesting such opinion but in
any case shall not be an expense of the Trustee or the Securities Administrator,
to the effect that such action is necessary or appropriate to maintain such
qualification or to avoid or minimize the risk of the imposition of such a tax.

               This Agreement may also be amended from time to time by the
parties hereto and the Holders of each Class of Certificates affected thereby
evidencing over 50% of the Voting Rights of such Class or Classes for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of Certificates; provided that no such amendment shall (i) reduce in
any manner the amount of, or delay the timing of, payments required to be
distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) cause any of REMIC I, REMIC II or REMIC III's REMIC elections
to fail to qualify or (iii) reduce the aforesaid percentages of Certificates of
each Class the Holders of which are required to consent to any such amendment
without the consent of the Holders of all Certificates of such Class then
outstanding.

               Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, which opinion shall be an expense of
the party requesting such amendment but in any case shall not be an expense of
the Trustee or the Securities Administrator, to the effect that such amendment
will not (other than an amendment pursuant to clause (ii) of, and in accordance
with, the


                                      -125-

<PAGE>



preceding paragraph) cause the imposition of any tax on REMIC I, REMIC II or
REMIC III or the Certificateholders or cause REMIC I, REMIC II or REMIC III's
REMIC elections to fail to qualify at any time that any Certificates are
outstanding. Further, nothing in this Agreement shall require the Trustee to
enter into an amendment without receiving an Opinion of Counsel, satisfactory to
the Trustee that (i) such amendment is permitted and is not prohibited by this
Agreement and that all requirements for amending this Agreement (including any
consent of the applicable Certificateholders) have been complied with.

               Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder and
each Rating Agency.

               It shall not be necessary for the consent of Certificateholders
under this Section to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

        Section 11.02  RECORDATION OF AGREEMENT; COUNTERPARTS.

               To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the Mortgaged Properties are situated, and in any other appropriate
public recording office or elsewhere. The Master Servicer shall effect such
recordation at the Trust's expense upon the request in writing of a
Certificateholder, but only if such direction is accompanied by an Opinion of
Counsel (provided at the expense of the Certificateholder requesting
recordation) to the effect that such recordation would materially and
beneficially affect the interests of the Certificateholders or is required by
law.

               For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

        Section 11.03  GOVERNING LAW.

               THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.




                                      -126-

<PAGE>

        Section 11.04  INTENTION OF PARTIES.

               It is the express intent of the parties hereto that the
conveyance of the Mortgage Notes, Mortgages, assignments of Mortgages, title
insurance policies and any modifications, extensions and/or assumption
agreements and private mortgage insurance policies relating to the Mortgage
Loans by the Seller to the Depositor, and by the Depositor to the Trustee be,
and be construed as, an absolute sale thereof to the Depositor or the Trustee,
as applicable. It is, further, not the intention of the parties that such
conveyance be deemed a pledge thereof by the Seller to the Depositor, or by the
Depositor to the Trustee. However, in the event that, notwithstanding the intent
of the parties, such assets are held to be the property of the Seller or the
Depositor, as applicable, or if for any other reason this Agreement is held or
deemed to create a security interest in such assets, then (i) this Agreement
shall be deemed to be a security agreement within the meaning of the Uniform
Commercial Code of the State of New York and (ii) each conveyance provided for
in this Agreement shall be deemed to be an assignment and a grant by the Seller
or the Depositor, as applicable, for the benefit of the Certificateholders, of a
security interest in all of the assets that constitute the Trust Fund, whether
now owned or hereafter acquired.

               The Depositor for the benefit of the Certificateholders shall, to
the extent consistent with this Agreement, take such actions as may be necessary
to ensure that, if this Agreement were deemed to create a security interest in
the assets of the Trust Fund, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of the Agreement.

        Section 11.05  NOTICES.

               (a) The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which it
has actual knowledge:

               (i) Any material change or amendment to this Agreement;

               (ii) The occurrence of any Event of Default that has not been
          cured;

               (iii) The resignation or termination of the Master Servicer, the
          Securities Administrator or the Trustee and the appointment of any
          successor;

               (iv) The repurchase or substitution of Mortgage Loans pursuant to
          Sections 2.02, 2.03, 3.12 and 10.01; and

               (v) The final payment to Certificateholders.

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

               (i) Each report to Certificateholders described in Section 5.05;

               (ii) Each annual statement as to compliance described in Section
          3.16; and



                                      -127-

<PAGE>



               (iii) Each annual independent public accountants' servicing
          report described in Section 3.17.

               (b) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered at or mailed
by registered mail, return receipt requested, postage prepaid, or by recognized
overnight courier, or by facsimile transmission to a number provided by the
appropriate party if receipt of such transmission is confirmed to (i) in the
case of the Depositor, Bear Stearns Asset Backed Securities, Inc., 245 Park
Avenue, New York, New York 10167, Attention: Chief Counsel; (ii) in the case of
the Seller or the Master Servicer, EMC Mortgage Corporation, 909 Hidden Ridge
Drive, Irving, Texas 75038, Attention: Ralene Ruyle or such other address as may
be hereafter furnished to the other parties hereto by the Master Servicer in
writing; (iv) in the case of the Trustee, at each Corporate Trust Office or such
other address as the Trustee may hereafter furnish to the other parties hereto;
(v) in the case of the Securities Administrator, 11000 Broken Land Parkway,
Columbia, Maryland 21044, Attention: BSABS 2001- AC1 or such other address as
may be hereafter furnished to the other parties hereto by the Securities
Administrator in writing and (vi) in the case of the Rating Agencies, (x)
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: Home Equity Monitoring and (y) Standard & Poor's, 55 Water Street,
41st Floor, New York, New York 10041, Attention: Mortgage Surveillance Group.
Any notice delivered to the Seller, the Master Servicer, the Securities
Administrator or the Trustee under this Agreement shall be effective only upon
receipt. Any notice required or permitted to be mailed to a Certificateholder,
unless otherwise provided herein, shall be given by first-class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register; any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.

        Section 11.06  SEVERABILITY OF PROVISIONS.

               If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

        Section 11.07  ASSIGNMENT.


               Notwithstanding anything to the contrary contained herein, except
as provided pursuant to Section 7.02, this Agreement may not be assigned by the
Master Servicer, the Seller or the Depositor.

        Section 11.08  LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

               The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition


                                      -128-

<PAGE>



or winding up of the Trust Fund, or otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.

               No Certificateholder shall have any right to vote (except as
provided herein) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto, nor shall anything
herein set forth or contained in the terms of the Certificates be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third party by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.

               No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee or the
Securities Administrator, as appropriate, a written notice of an Event of
Default and of the continuance thereof, as hereinbefore provided, the Holders of
Certificates evidencing not less than 25% of the Voting Rights evidenced by the
Certificates shall also have made written request to the Trustee or the
Securities Administrator, as appropriate to institute such action, suit or
proceeding in its own name as Trustee or the Securities Administrator, as
appropriate, hereunder and shall have offered to the Trustee or the Securities
Administrator, as appropriate, such reasonable indemnity as it may require
against the costs, expenses, and liabilities to be incurred therein or thereby,
and the Trustee or the Securities Administrator, as appropriate, for 60 days
after its receipt of such notice, request and offer of indemnity shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder or to enforce any right under this Agreement, except in
the manner herein provided and for the common benefit of all Certificateholders.
For the protection and enforcement of the provisions of this Section 11.08, each
and every Certificateholder, the Trustee or the Securities Administrator shall
be entitled to such relief as can be given either at law or in equity.

        Section 11.09  INSPECTION AND AUDIT RIGHTS.

               (a) The Master Servicer agrees that, on reasonable prior notice,
it will permit any representative of the Depositor or the Trustee during the
Master Servicer's normal business hours, to examine all the books of account,
records, reports and other papers of the Master Servicer relating to the
Mortgage Loans, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants selected by the Depositor or
the Trustee and to discuss its affairs, finances and accounts relating to such
Mortgage Loans with its officers, employees and independent public accountants
(and by this provision the Master Servicer hereby authorizes such accountants to
discuss with such representative such affairs, finances and accounts), all at
such reasonable times and as often as may be reasonably requested. Any
out-of-pocket expense incident to the exercise by the Depositor or the Trustee
of any right under this Section 11.09 shall be borne by the party requesting
such inspection; all other such expenses shall be borne by the Master Servicer.


                                      -129-

<PAGE>



               (b) The Trustee and the Securities Administrator shall each
provide access to the records and documentation in its possession regarding the
related Mortgage Loans and REO Property and the servicing thereof to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC, such access being afforded only upon reasonable prior written request and
during normal business hours at its respective office; provided, however, that,
unless otherwise required by law, neither the Trustee nor the Securities
Administrator shall be required to provide access to such records and
documentation if the provision thereof would violate the legal right to privacy
of any Mortgagor. The Trustee and the Securities Administrator shall each allow
representatives of the above entities to photocopy any of the records and
documentation and shall provide equipment for that purpose at a charge that
covers its actual costs.

        Section 11.10  CERTIFICATES NONASSESSABLE AND FULLY PAID.

               It is the intention of the Depositor that Certificateholders
shall not be personally liable for obligations of the Trust Fund, that the
interests in the Trust Fund represented by the Certificates shall be
nonassessable for any reason whatsoever, and that the Certificates, upon due
authentication thereof by the Trustee pursuant to this Agreement, are and shall
be deemed fully paid.

                                      * * *


                                      -130-

<PAGE>



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

&&&
                               BEAR STEARNS ASSET BACKED SECURITIES,
                               INC.,
                                       as Depositor

                               By: /s/ Joseph Jurkowski
                                   ---------------------------------
                               Name:   Joseph Jurkowski
                               Title:  Vice President/Secretary

                               EMC MORTGAGE CORPORATION,
                                       as Seller and Master Servicer

                               By: /s/ Jonathan Babkow
                                   ---------------------------------
                               Name:   Jonathan Babkow
                               Title:  Attorney-in-Fact

                               WELLS FARGO BANK MINNESOTA, NATIONAL
                               ASSOCIATION
                                       as Securities Administrator and Trustee

                               By:  /s/ Peter Masterman
                                   ---------------------------------
                               Name:    Peter Masterman
                               Title:   Vice President



                                      -131-

<PAGE>



STATE OF NEW YORK             )
                              ) ss.:
COUNTY OF NEW YORK            )

               On this ___ day of August, 2001, before me, a notary public in
and for said State, appeared ______________, personally known to me on the basis
of satisfactory evidence to be an authorized representative of Bear Stearns
Asset Backed Securities, Inc., one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
such corporation and acknowledged to me that such corporation executed the
within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                          ----------------------------
                                                  Notary Public

[Notarial Seal]



                                      -132-

<PAGE>



STATE OF       )
               ) ss.:
COUNTY OF      )

               On this ____ day of August, 2001, before me, a notary public in
and for said State, appeared _______________, personally known to me on the
basis of satisfactory evidence to be an authorized representative of Wells Fargo
Bank Minnesota, National Association that executed the within instrument, and
also known to me to be the person who executed it on behalf of such corporation,
and acknowledged to me that such corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                                 ----------------------------
                                                       Notary Public

[Notarial Seal]



                                      -133-

<PAGE>


STATE OF NEW YORK             )
                              ) ss.:
COUNTY OF NEW YORK            )

               On this ____ day of August, 2001, before me, a notary public in
and for said State, appeared _________________, personally known to me on the
basis of satisfactory evidence to be an authorized representative of EMC
Mortgage Corporation, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
such corporation and acknowledged to me that such corporation executed the
within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.


                                               ----------------------------
                                                     Notary Public


[Notarial Seal]


                                      -134-

<PAGE>


                                   EXHIBIT A-1

                         FORM OF CLASS [A--]CERTIFICATE

          SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

          THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES ALLOCABLE HERETO.
ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE
PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION
SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE
PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.


                                      A-1-1

<PAGE>

Certificate No.___                    [_____%] [Adjustable] Pass-Through Rate

Class [A-__] Senior

                                      Aggregate Initial [Certificate Principal
Date of Pooling and Servicing         Balance][Notional Amount] of this
Agreement and Cut-off Date:           Certificate as of the Cut-off Date:
August 1, 2001                        $___________

                                      Initial [Certificate Principal Balance]
                                      [Notional Amount] of this Certificate as
First Distribution Date:              of the Cut-off Date:
September 25, 2001                    $___________

Master Servicer:
EMC Mortgage Corporation

Assumed Final Distribution Date:
September 25, 2031
[February 25, 2004]                   CUSIP ___________



                            ASSET-BACKED CERTIFICATE
                                 SERIES 2001-AC1

     evidencing  a  fractional  undivided  interest in the  distributions
     allocable to the Class [A-___]  Certificates with respect to a Trust
     Fund  consisting  primarily  of  a  pool  of  conventional  one-  to
     four-family   fixed  rate  mortgage   loans  sold  by  BEAR  STEARNS
     ASSET-BACKED SECURITIES, INC.

          This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in Bear Stearns Asset-Backed
Securities, Inc., the Master Servicer, the Trustee, or the Securities
Administrator referred to below or any of their affiliates or any other person.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental entity or by Bear Stearns Asset-Backed Securities,
Inc., the Master Servicer, the Trustee, or the Securities Administrator or any
of their affiliates or any other person. None of Bear Stearns Asset-Backed
Securities, Inc., the Master Servicer or any of their affiliates will have any
obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.

          This certifies that Cede & Co. is the registered owner of the
Fractional Undivided Interest evidenced hereby in the beneficial ownership
interest of Certificates of the same Class as this Certificate in a trust (the
"Trust Fund") generally consisting of conventional first lien, fixed rate
mortgages loans secured by one- to four- family residences, units in planned
unit developments and individual condominium and cooperative units
(collectively, the "Mortgage Loans") sold by Bear


                                      A-1-2

<PAGE>



Stearns Asset-Backed Securities, Inc. ("BSABSI"). The Mortgage Loans were sold
by EMC Mortgage Corporation ("EMC") to BSABSI. EMC will act as master servicer
of the Mortgage Loans (the "Master Servicer," which term includes any successors
thereto under the Agreement referred to below). The Trust Fund was created
pursuant to the Pooling and Servicing Agreement dated as of the Cut-off Date
specified above (the "Agreement"), between BSABSI, as seller and master servicer
(the "Seller") and Wells Fargo Bank Minnesota, National Association, as trustee
(the "Trustee") and securities administrator (the "Securities Administrator"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, capitalized terms used herein shall have the
meaning ascribed to them in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of its acceptance hereof
assents and by which such Holder is bound.

          Interest on this Certificate will accrue during the month prior to the
month in which a Distribution Date (as hereinafter defined) occurs on the
Certificate Principal Balance hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last Business Day (or if such last
day is not a Business Day, the Business Day immediately preceding such last day)
of the calendar month preceding the month of such Distribution Date, an amount
equal to the product of the Fractional Undivided Interest evidenced by this
Certificate and the amount (of interest and principal, if any) required to be
distributed to the Holders of Certificates of the same Class as this
Certificate. The Assumed Final Distribution Date is the first anniversary of the
Distribution Date immediately following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

          Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Person entitled thereto as such name and address
shall appear on the Certificate Register or, if such Person so requests by
notifying the Trustee in writing as specified in the Agreement. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose and designated in such notice. The initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any Realized Losses allocable
hereto.

          This Certificate is one of a duly authorized issue of Certificates
designated as set forth on the face hereof (the "Certificates"), issued in
fifteen Classes. The Certificates, in the aggregate, evidence the entire
beneficial ownership interest in the Trust Fund formed pursuant to the
Agreement.

          The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the Trust Fund for payment hereunder and that the
Trustee is not liable to the


                                      A-1-3

<PAGE>



Certificateholders for any amount payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.

          This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement from time to
time by the Seller and the Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
66-2/3% (or in certain cases, Holders of Certificates of affected Classes
evidencing such percentage of the Fractional Undivided Interests thereof). Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable with the
Trustee upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee for such purposes, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates in authorized
denominations representing a like aggregate Fractional Undivided Interest will
be issued to the designated transferee.

          The Certificates are issuable only as registered Certificates without
coupons in the Classes and denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth, this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional Undivided Interest, as requested by
the Holder surrendering the same.

          No service charge will be made to the Certificateholders for any such
registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Seller, the Master Servicer, the Trustee and any agent of any of
them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of Seller, the Master Servicer, the
Trustee or any such agent shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby (other than the obligations to make payments to Certificateholders with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final payment or other liquidation (or Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and (B)
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and the remittance of all funds due under the
Agreement, or (ii) the optional


                                      A-1-4

<PAGE>



repurchase by the party named in the Agreement of all the Mortgage Loans and
other assets of the Trust Fund in accordance with the terms of the Agreement.
Such optional repurchase may be made only on or after the Distribution Date on
which the aggregate Stated Principal Balance of the Mortgage Loans is less than
the percentage of the aggregate Stated Principal Balance specified in the
Agreement of the Mortgage Loans at the Cut-off Date. The exercise of such right
will effect the early retirement of the Certificates. In no event, however, will
the Trust Fund created by the Agreement continue beyond the expiration of 21
years after the death of certain persons identified in the Agreement.

          Unless this Certificate has been countersigned by an authorized
signatory of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.



                                      A-1-5

<PAGE>



          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: August 30, 2001            WELLS FARGO BANK MINNESOTA,
                                       NATIONAL ASSOCIATION
                                  Not in its individual capacity but solely as
                                  Trustee


                                  By:_________________________________________
                                         Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class [A-___] Certificates referred to in the
within-mentioned Agreement.

                                  WELLS FARGO BANK MINNESOTA,
                                       NATIONAL ASSOCIATION

                                  Authorized signatory of Wells Fargo Bank
                                  Minnesota, National Association, not in its
                                  individual capacity but solely as Trustee

                                  By:_________________________________________
                                          Authorized Signatory



                                      A-1-6

<PAGE>



                                   ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto __________________________________ (Please print or typewrite
name and address including postal zip code of assignee) a Fractional Undivided
Interest evidenced by the within Asset- Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

          I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Dated:
                                   _________________________________________
                                     Signature by or on behalf of assignor


                                        ________________________________________
                                                 Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

          This information is provided by __________________, the assignee named
above, or ________________________, as its agent.




<PAGE>



                                                                     EXHIBIT A-2

                    FORM OF CLASS [M-_][B][B-IO] CERTIFICATE

          SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

          THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND ANY REALIZED LOSSES ALLOCABLE
HERETO. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE
CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE
DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS
CERTIFICATE PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

          [THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT
THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT
THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH
ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS


                                     A-2-1

<PAGE>



PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO
(A) THE RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN
THE AGREEMENT AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE
ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY
OTHER APPLICABLE JURISDICTION.]

          [THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH IS
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE AND THE SERVICING,
MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN
ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS
PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED TO, PROHIBITED
TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE 96-23
AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL FIDUCIARY OBLIGATIONS ON THE PART
OF THE SELLER, THE MASTER SERVICER OR THE TRUSTEE, WHICH WILL BE DEEMED
REPRESENTED BY AN OWNER OF A BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE AND
WILL BE EVIDENCED BY A REPRESENTATION OR AN OPINION OF COUNSEL TO SUCH EFFECT BY
OR ON BEHALF OF AN INSTITUTIONAL ACCREDITED INVESTOR.]




                                      A-2-2

<PAGE>


Certificate No.1                       ______% Pass-Through Rate

Class [M-__][B][B-IO]

                                       Aggregate Initial [Certificate Principal
Date of Pooling and Servicing          Balance][Notional Amount] of this
Agreement and Cut-off Date:            Certificate as of the Cut-off Date:
August 1, 2001                         $______________

                                       Initial [Certificate Principal Balance]
First Distribution Date:               [Notional Amount] of this Certificate as
September 25, 2001                     of the Cut-off Date: $____________

Master Servicer:
EMC Mortgage Corporation

Assumed Final Distribution Date:
September 25, 2031                     CUSIP ___________________



                            ASSET-BACKED CERTIFICATE
                                 SERIES 2001-AC1

     evidencing  a  fractional  undivided  interest in the  distributions
     allocable to the Class [M-__][B][B-IO]  Certificates with respect to
     a Trust Fund consisting  primarily of a pool of conventional one- to
     four-family   fixed  rate  mortgage   loans  sold  by  BEAR  STEARNS
     ASSET-BACKED SECURITIES, INC.

          This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in Bear Stearns Asset-Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator referred to below or any of their affiliates or any other person.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental entity or by Bear Stearns Asset-Backed Securities,
Inc., the Master Servicer, the Trustee or the Securities Administrator or any of
their affiliates or any other person. None of Bear Stearns Asset-Backed
Securities, Inc., the Master Servicer or any of their affiliates will have any
obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.

          This certifies that [Cede & Co.][________] is the registered owner of
the Fractional Undivided Interest evidenced hereby in the beneficial ownership
interest of Certificates of the same Class as this Certificate in a trust (the
"Trust Fund") generally consisting of conventional first lien, fixed rate
mortgages loans secured by one- to four- family residences, units in planned
unit developments and individual condominium and cooperative units
(collectively, the "Mortgage


                                      A-2-3

<PAGE>



Loans") sold by Bear Stearns Asset-Backed Securities, Inc. ("BSABSI"). The
Mortgage Loans were sold by EMC Mortgage Corporation ("EMC") to BSABSI. EMC will
act as master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), between BSABSI, as seller
(the "Seller") and Wells Fargo Bank Minnesota, National Association, as trustee
(the "Trustee") and securities administrator (the "Securities Administrator"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, capitalized terms used herein shall have the
meaning ascribed to them in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of its acceptance hereof
assents and by which such Holder is bound.

          Interest on this Certificate will accrue during the month prior to the
month in which a Distribution Date (as hereinafter defined) occurs on the
Certificate Principal Balance hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last Business Day (or if such last
day is not a Business Day, the Business Day immediately preceding such last day)
of the calendar month preceding the month of such Distribution Date, an amount
equal to the product of the Fractional Undivided Interest evidenced by this
Certificate and the amount (of interest and principal, if any) required to be
distributed to the Holders of Certificates of the same Class as this
Certificate. The Assumed Final Distribution Date is the first anniversary of the
Distribution Date immediately following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

          Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Person entitled thereto as such name and address
shall appear on the Certificate Register or, if such Person so requests by
notifying the Trustee in writing as specified in the Agreement. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose and designated in such notice. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any Realized Losses allocable
hereto.

          [This Certificate may not be acquired directly or indirectly by, or on
behalf of, an employee benefit plan or other retirement arrangement which is
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended, and/or Section 4975 of the Internal Revenue Code of 1986, as amended,
unless the proposed transfer and/or holding of a Certificate and the servicing,
management and/or operation of the trust and its assets: (i) will not result in
any prohibited transaction which is not covered under an individual or class
prohibited transaction exemption, including, but not limited to, Prohibited
Transaction Exemption ("PTE") 84-14, PTE 91-38, PTE 90- 1, PTE 95-60 or PTE
96-23 and (ii) will not give rise to any additional fiduciary obligations on the


                                      A-2-4

<PAGE>



part of the Seller, the Master Servicer or the Trustee, which will be deemed
represented by an owner of a Book-Entry Certificate or a Global Certificate and
will be evidenced by a representation or an Opinion of Counsel to such effect by
or on behalf of an Institutional Accredited Investor.]

          This Certificate is one of a duly authorized issue of Certificates
designated as set forth on the face hereof (the "Certificates"), issued in
fifteen Classes. The Certificates, in the aggregate, evidence the entire
beneficial ownership interest in the Trust Fund formed pursuant to the
Agreement.

          The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the Trust Fund for payment hereunder and that the
Trustee is not liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.

          This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement from time to
time by the Seller and the Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
66-2/3% (or in certain cases, Holders of Certificates of affected Classes
evidencing such percentage of the Fractional Undivided Interests thereof). Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable with the
Trustee upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee for such purposes, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates in authorized
denominations representing a like aggregate Fractional Undivided Interest will
be issued to the designated transferee.

          The Certificates are issuable only as registered Certificates without
coupons in the Classes and denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth, this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional Undivided Interest, as requested by
the Holder surrendering the same.

          No service charge will be made to the Certificateholders for any such
registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other


                                      A-2-5

<PAGE>



governmental charge payable in connection therewith. The Seller, the Master
Servicer, the Trustee and any agent of any of them may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Seller, the Master Servicer, the Trustee or any such agent shall be
affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby (other than the obligations to make payments to Certificateholders with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final payment or other liquidation (or Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and (B)
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and the remittance of all funds due under the
Agreement, or (ii) the optional repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance with
the terms of the Agreement. Such optional repurchase may be made only on or
after the Distribution Date on which the aggregate Stated Principal Balance of
the Mortgage Loans is less than the percentage of the aggregate Stated Principal
Balance specified in the Agreement of the Mortgage Loans at the Cut-off Date.
The exercise of such right will effect the early retirement of the Certificates.
In no event, however, will the Trust Fund created by the Agreement continue
beyond the expiration of 21 years after the death of certain persons identified
in the Agreement.

          Unless this Certificate has been countersigned by an authorized
signatory of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.




                                      A-2-6

<PAGE>



          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: August 30, 2001            WELLS FARGO BANK MINNESOTA,
                                     NATIONAL ASSOCIATION
                                  Not in its individual capacity but solely as
                                  Trustee


                                  By: _________________________________________
                                              Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class [M-__][B][B-IO] Certificates referred to in
the within- mentioned Agreement.

                                  WELLS FARGO BANK MINNESOTA,
                                       NATIONAL ASSOCIATION
                                  Authorized signatory of Wells Fargo Bank
                                  Minnesota, National Association, not in its
                                  individual capacity but solely as Trustee

                                  By: _________________________________________
                                                     Authorized Signatory



                                      A-2-7

<PAGE>



                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto __________________________________ (Please print or typewrite
name and address including postal zip code of assignee) a Fractional Undivided
Interest evidenced by the within Asset- Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

          I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                            ______________________________________________
                                   Signature by or on behalf of assignor


                                       _________________________________________
                                              Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to ______________________________________________.

          This information is provided by __________________, the assignee named
above, or ________________________, as its agent.




                                      A-2-8

<PAGE>



                                                                     EXHIBIT A-3

                           FORM OF CLASS P CERTIFICATE


          SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

          THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

          NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT (EACH A "PLAN") SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), SHALL BE MADE EXCEPT IN COMPLIANCE
WITH THE PROCEDURES DESCRIBED HEREIN.





                                      A-3-1

<PAGE>



Certificate No. 1

Class P                                 Aggregate Initial Certificate Principal
                                        Balance of the Class P Certificates:
                                        $100.00

Date of Pooling and Servicing           Initial Certificate Principal Balance
Agreement and Cut-off Date:             of this Certificate ("Denomination"):
August 1, 2001                          $100.00

First Distribution Date:                Percentage Interest of this Certificate:
September 25, 2001                      100.00%

Master Servicer:                        CUSIP:
EMC Mortgage Corporation

Assumed Final Distribution Date:
September 25, 2031



                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2001-7
                                     Class P

     evidencing a percentage interest in any distributions  allocable. to
     the Class P Certificates  with respect to the Trust Fund  consisting
     primarily  of a pool of one- to  four-family  fixed-rate  first lien
     mortgage  loans  formed  and  sold  by  BEAR  STEARNS   ASSET-BACKED
     SECURITIES, INC.

          This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator referred to below or any of their affiliates. Neither this
Certificate nor the underlying Mortgage Loans are guaranteed or insured by any
governmental agency or instrumentality or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates. None of the Company, the Master
Servicer or any of their affiliates will have any obligation with respect to any
certificate or other obligation secured by or payable from payments on the
Certificates.

          This certifies that ____________ is the registered owner of the
Percentage Interest evidenced by this Class P Certificate (obtained by dividing
the Denomination of this Class P Certificate by the Original Class Certificate
Principal Balance) in certain distributions with respect to a Trust Fund
consisting primarily of a pool of one- to four-family fixed-rate first lien
mortgage loans (the "Mortgage Loans"), formed and sold by Bear Stearns Asset
Backed Securities, Inc. (hereinafter called the "Depositor," which term includes
any successor entity under the Agreement referred to below). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as specified above
(the "Agreement") among the Depositor, the Master Servicer and Wells Fargo Bank
Minnesota, National Association, as trustee (the "Trustee") and securities
administrator (the


                                      A-3-2

<PAGE>



"Securities Administrator"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement; to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing as
described in the Agreement, to the Person in whose name this Certificate is
registered at the close of business on the last Business Day of the month
immediately preceding the month of such Distribution Date (the "Record Date"),
from the Available Distribution Amount in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount (of Prepayment
Charges and principal, if any) required to be distributed to Holders of Class P
Certificates on such Distribution Date.

          Distributions on this Certificate will be made either by the Trustee
or by a Paying Agent appointed by the Trustee either in immediately available
funds (by wire transfer or otherwise) for the account of the Person entitled
thereto if such Person shall have so notified the Trustee or such Paying Agent
at least 5 Business Days prior to the related Record Date, or by check mailed to
the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register.

          Notwithstanding the above, the final distribution on this Certificate
will be made after due notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of the
distributions allocable to principal allocable hereto.

          This Certificate is one of a duly authorized issue of Certificates
issued in several Classes designated as Asset-Backed Certificates of the Series
specified hereon (herein collectively called the "Certificates").

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. In the event Master Servicer
funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Master Servicer, to the extent provided in the Agreement,
from related recoveries on such Mortgage Loan or from other cash that would have
been distributable to Certificateholders.

          As provided in the Agreement, withdrawals from the Custodial Account
and/or the Certificate Account created for the benefit of Certificateholders may
be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including without limitation
reimbursement to the Trustee, the Depositor and the Master Servicer of advances
made, or certain expenses incurred, by either of them.


                                      A-3-3

<PAGE>



          No transfer of a Certificate of this Class shall be made unless such
transfer is made pursuant to an effective registration statement under the Act
and any applicable state securities laws or is exempt from the registration
requirements under said Act and such laws. In the event that a transfer is to be
made in reliance upon an exemption from the Act and such laws, in order to
assure compliance with the Act and such laws, the Certificateholder desiring to
effect such transfer and such Certificateholder's prospective transferee shall
each certify to the Trustee and the Depositor in writing the facts surrounding
the transfer. In the event that such a transfer is not to be made pursuant to
Rule 144A of the Act, there shall be delivered to the Trustee and the Depositor
of an Opinion of Counsel that such transfer may be made pursuant to an exemption
from the Act, which Opinion of Counsel shall not be obtained at the expense of
the Trustee, the Master Servicer or the Depositor; or there shall be delivered
to the Trustee and the Depositor a transferor certificate by the transferor and
an investment letter shall be executed by the transferee. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee and the Depositor against any liability that may result if the transfer
is not so exempt or is not made in accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any person using Plan Assets to acquire this Certificate shall be
made except in accordance with Section 5.02(d) of the Agreement.

          The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certifrcateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of
each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of
any of the Certificates and, in certain additional circumstances, without the
consent of the Holders of certain Classes of Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee, duly endorsed by,
or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest will be issued to
the designated transferee or transferees.

          The Certificates are issuable only as registered Certificates without
coupons in Classes and in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as requested by the
Holder surrendering the same.


                                      A-3-4

<PAGE>



          No service charge will be made for any such registration of transfer
or exchange, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

          The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.

          This Certificate shall be governed by and construed in accordance with
the laws of the State of New York.

          The obligations created by the Agreement in respect of the
Certificates and the Trust Fund created thereby shall terminate upon the payment
to Certificateholders of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the purchase by the Holder of at least 50.01% Percentage Interest in the
Class C Certificates (the "Majority Class C Certificateholder") from the Trust
Fund of all remaining Mortgage Loans and each REO Property in respect thereof
remaining in the Trust Fund, thereby effecting early retirement of the
Certificates and (ii) the final payment or other liquidation (or any Advance
with respect thereto) of the last Mortgage Loan remaining in the Trust Fund (or
the disposition of all REO Property in respects hereof). The Agreement permits,
but does not require, the Majority Class C Certificateholder to purchase at a
price determined as provided in the Agreement all remaining Mortgage Loans an
all REO Property; provided, that any such option may only be exercised if the
aggregate Stated Principal Balance of the Mortgage Loans as of the Distribution
Date upon which the proceeds of any such purchase are distributed is less than
ten percent of the aggregate Stated Principal Balance of the Mortgage Loans at
the Cut-off Date.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.




                                      A-3-5

<PAGE>



          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.


Dated:    October __, 2001        WELLS FARGO BANK MINNESOTA
                                  NATIONAL ASSOCIATION,
                                  Not in its individual capacity but solely as
                                  Trustee

                                  By:_________________________________________
                                  Authorized Signatory



                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class P Certificates referred to in the
within-mentioned Agreement.


                                  WELLS FARGO BANK MINNESOTA
                                  NATIONAL ASSOCIATION,
                                  Not in its individual capacity but solely as
                                  Trustee

                                  By:_________________________________________
                                  Authorized Signatory






                                      A-3-6

<PAGE>



                                   ASSIGNMENT


          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
             (Please print or typewrite name and address including
                          postal zip code of assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust.

          I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address: ______________________________________________________
________________________________________________________________________________

Dated:________________


                                           _____________________________________
                                           Signature by or on behalf of assignor





<PAGE>



                            DISTRIBUTION INSTRUCTIONS


          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
for the account of ____________________________________________________________,
account number __________________, or, if mailed by check, to __________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
______________________________________________________________________________.

          This information is provided by _____________________________________,
the assignee named above, or _________________________________________, as its
agent.






                                      A-3-8

<PAGE>



                                                                     EXHIBIT A-4

                         FORM OF CLASS R-[_] CERTIFICATE

          THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED
STATES PERSON, A PUBLICLY TRADED PARTNERSHIP OR A DISQUALIFIED ORGANIZATION (AS
DEFINED BELOW).

          SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

          THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH IS
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE AND THE SERVICING,
MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN
ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS
PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED TO, PROHIBITED
TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE 96-23
AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL FIDUCIARY OBLIGATIONS ON THE PART
OF THE SELLER, THE MASTER SERVICER OR THE TRUSTEE, WHICH WILL BE DEEMED
REPRESENTED BY AN OWNER OF A BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE AND
WILL BE EVIDENCED BY A REPRESENTATION OR AN OPINION OF COUNSEL TO SUCH EFFECT BY
OR ON BEHALF OF AN INSTITUTIONAL ACCREDITED INVESTOR

          ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE MASTER
SERVICER AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE UNITED STATES,
ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN SECTION
521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE
CODE, (C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE, (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREIN
REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (D) AN AGENT OF A DISQUALIFIED
ORGANIZATION, (2) NO PURPOSE OF SUCH


                                      A-4-1

<PAGE>



TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX AND (3) SUCH
TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL
CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS
CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR
EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH.




                                      A-4-2

<PAGE>


Certificate No.1                 Variable Pass-Through Rate

Class R-[_] Senior

Date of Pooling and Servicing    Aggregate Initial Certificate Principal Balance
Agreement and Cut-off Date:      of this Certificate as of the Cut-off Date:
August 1, 2001                   $100.00

First Distribution Date:         Initial Certificate Principal Balance of this
September 25, 2001               Certificate as of the Cut-off Date: $100.00

Master Servicer:
EMC Mortgage Corporation

Assumed Final Distribution
Date: September 25, 2031         CUSIP ____________________


                            ASSET-BACKED CERTIFICATE
                                 SERIES 2001-AC1

     evidencing  a  fractional  undivided  interest in the  distributions
     allocable  to the Class R-[_]  Certificates  with respect to a Trust
     Fund  consisting  primarily  of  a  pool  of  conventional  one-  to
     four-family   fixed  rate  mortgage   loans  sold  by  BEAR  STEARNS
     ASSET-BACKED SECURITIES, INC.

          This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in Bear Stearns Asset-Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator referred to below or any of their affiliates or any other person.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental entity or by Bear Stearns Asset-Backed Securities,
Inc., the Master Servicer, the Trustee or the Securities Administrator or any of
their affiliates or any other person. None of Bear Stearns Asset-Backed
Securities, Inc., the Master Servicer or any of their affiliates will have any
obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.

          This certifies that Bear, Steams Securities Corp. is the registered
owner of the Fractional Undivided Interest evidenced hereby in the beneficial
ownership interest of Certificates of the same Class as this Certificate in a
trust (the "Trust Fund") generally consisting of conventional first lien, fixed
rate mortgages loans secured by one- to four- family residences, units in
planned unit developments and individual condominium and cooperative units
(collectively, the "Mortgage Loans") sold by Bear Stearns Asset-Backed
Securities, Inc. ("BSABSI"). The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to BSABSI. EMC will act as master servicer of the


                                      A-4-3

<PAGE>



Mortgage Loans (the "Master Servicer," which term includes any successors
thereto under the Agreement referred to below). The Trust Fund was created
pursuant to the Pooling and Servicing Agreement dated as of the Cut-off Date
specified above (the "Agreement'), between BSABSI, as seller (the "Seller") and
Wells Fargo Bank Minnesota, National Association, as trustee (the "Trustee") and
securities administrator (the "Securities Administrator"), a summary of certain
of the pertinent provisions of which is set forth hereafter. To the extent not
defined herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the Holder
of this Certificate by virtue of its acceptance hereof assents and by which such
Holder is bound.

          Interest on this Certificate will accrue during the month prior to the
month in which a Distribution Date (as hereinafter defined) occurs on the
Certificate Principal Balance hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last Business Day (or if such last
day is not a Business Day, the Business Day immediately preceding such last day)
of the calendar month preceding the month of such Distribution Date, an amount
equal to the product of the Fractional Undivided Interest evidenced by this
Certificate and the amount (of interest and principal, if any) required to be
distributed to the Holders of Certificates of the same Class as this
Certificate. The Assumed Final Distribution Date is the first anniversary of the
Distribution Date immediately following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

          Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Person entitled thereto as such name and address
shall appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice. The Initial Certificate Principal Balance
of this Certificate is set forth above. The Certificate Principal Balance hereof
will be reduced to the extent of distributions allocable to principal hereon and
any Realized Losses allocable hereto.

          Each Holder of this Certificate will be deemed to have agreed to be
bound by the restrictions set forth in the Agreement to the effect that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
United States Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the delivery to
the Trustee of, among other things, an affidavit to the effect that it is a
United States Person and Permitted Transferee, (iii) any attempted or purported
transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the
purported transferee, and (iv) if any person other than a United States Person
and a Permitted Transferee acquires any Ownership Interest in this Certificate
in violation of such restrictions, then the Seller will have the right, in its
sole discretion and without notice to the Holder of this


                                      A-4-4

<PAGE>



Certificate, to sell this Certificate to a purchaser selected by the Depositor,
which purchaser may be the Seller, or any affiliate of the Seller, on such terms
and conditions as the Seller may choose.

          This Certificate may not be acquired directly or indirectly by, or on
behalf of, an employee benefit plan or other retirement arrangement which is
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended, and/or Section 4975 of the Internal Revenue Code of 1986, as amended,
unless the proposed transfer and/or holding of a Certificate and the servicing,
management and/or operation of the trust and its assets: (i) will not result in
any prohibited transaction which is not covered under an individual or class
prohibited transaction exemption, including, but not limited to, Prohibited
Transaction Exemption ("PTE") 84-14, PTE 91-38, PTE 90- 1, PTE 95-60 or PTE
96-23 and (ii) will not give rise to any additional fiduciary obligations on the
part of the Seller, the Master Servicer or the Trustee, which will be deemed
represented by an owner of a Book-Entry Certificate or a Global Certificate and
will be evidenced by a representation or an Opinion of Counsel to such effect by
or on behalf of an Institutional Accredited Investor.

          This Certificate is one of a duly authorized issue of Certificates
designated as set forth on the face hereof (the "Certificates"), issued in
fifteen Classes. The Certificates, in the aggregate, evidence the entire
beneficial ownership interest in the Trust Fund formed pursuant to the
Agreement.

          The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the Trust Fund for payment hereunder and that the
Trustee is not liable to the Certificateholders for any amount payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.

          This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement from time to
time by the Seller and the Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
66-2/3% (or in certain cases, Holders of Certificates of affected Classes
evidencing such percentage of the Fractional Undivided Interests thereof). Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable with the
Trustee upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee for such purposes, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and


                                      A-4-5

<PAGE>



thereupon one or more new Certificates in authorized denominations representing
a like aggregate Fractional Undivided Interest will be issued to the designated
transferee.

          The Certificates are issuable only as registered Certificates without
coupons in the Classes and denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth, this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional Undivided Interest, as requested by
the Holder surrendering the same.

          No service charge will be made to the Certificateholders for any such
registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Seller, the Master Servicer, the Trustee and any agent of any of
them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Seller, the Master Servicer, the
Trustee or any such agent shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby (other than the obligations to make payments to Certificateholders with
respect to the termination of the Agreement) shall terminate upon the earlier of
(i) the later of the (A) final payment or other liquidation (or Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and (B)
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and the remittance of all funds due under the
Agreement, or (ii) the optional repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance with
the terms of the Agreement. Such optional repurchase may be made only on or
after the Distribution Date on which the aggregate Stated principal balance of
the Mortgage Loans is less than the percentage of the aggregate Stated Principal
Balance specified in the Agreement of the Mortgage Loans at the Cut-off Date.
The exercise of such right will effect the early retirement of the Certificates.
In no event, however, will the Trust Fund created by the Agreement continue
beyond the expiration of 21 years after the death of certain persons identified
in the Agreement.

          Unless this Certificate has been countersigned by an authorized
signatory of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.



                                      A-4-6

<PAGE>



          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: August 30, 2001            WELLS FARGO BANK MINNESOTA,
                                     NATIONAL ASSOCIATION
                                  Not in its individual capacity but solely as
                                  Trustee


                                  By: ________________________________________
                                                Authorized Signatory


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class R-[_] Certificates referred to in the
within-mentioned Agreement.

                                  WELLS FARGO BANK MINNESOTA,
                                       NATIONAL ASSOCIATION

                                  Authorized signatory of Wells Fargo Bank
                                  Minnesota, National Association, not in its
                                  individual capacity but solely as Trustee

                                  By:  ________________________________________
                                               Authorized Signatory



                                      A-4-7

<PAGE>



                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto __________________________________ (Please print or typewrite
name and address including postal zip code of assignee) a Fractional Undivided
Interest evidenced by the within Asset- Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

          I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:



Dated:
                                  _____________________________________________
                                     Signature by or on behalf of assignor


                                         _______________________________________
                                                  Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

          This information is provided by __________________, the assignee named
above, or ________________________, as its agent.



                                      A-4-8

<PAGE>



                                                                       EXHIBIT B

                             MORTGAGE LOAN SCHEDULE
                             ----------------------

          The Preliminary and Final Mortgage Loan Schedules shall set forth the
following information with respect to each Mortgage Loan:

(a)  the loan number;

(b)  the Mortgagor's name;

(c)  the street address (including city, state and zip code) of the Mortgaged
     Property;

(d)  the property type;

(e)  the Mortgage Rate;

(f)  the Master Servicing Rate;

(g)  the Net Rate;

(h)  the original term;

(i)  the maturity date;

(j)  the stated remaining term to maturity;

(k)  the original principal balance;

(1)  the first payment date;

(m)  the principal and interest payment in effect as of the Cut-off Date;

(n)  the unpaid principal balance as of the Cut-off Date;

(o)  the Loan-to-Value Ratio at origination;

(p)  paid-through date;

(q)  the insurer of any Primary Mortgage Insurance Policy;

(r)  the Mortgage Loan Group;

(s)  the Gross Margin, if applicable;

(t)  the Maximum Lifetime Mortgage Rate, if applicable;


                                      B-1

<PAGE>



(u)  the Minimum Lifetime Mortgage Rate, if applicable;

(v)  the Periodic Rate Cap, if applicable; and

(w)  the number of days delinquent, if any.

Such schedule also shall set forth for all of the Mortgage Loans, the total
number of Mortgage Loans, the total of each of the amounts described under (xi)
and (xiv) above, the weighted average by principal balance as of the Cut-off
Date of each of the rates described under (v), (vi) and (vii) above, and the
weighted average remaining term to maturity by unpaid principal balance as of
the Cut-off Date.



                                       B-2

<PAGE>



                                                                     EXHIBIT C-1

                          FORM OF INITIAL CERTIFICATION

Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

                   Re:   Pooling and Servicing Agreement dated as of August
                         1, 2001, between Bear Stearns Asset-Backed
                         Securities, Inc., as seller and Wells Fargo Bank
                         Minnesota, National Association, as trustee, issuing
                         Asset-Backed Certificates, Series 2001-AC1
                         ----------------------------------------------------

Ladies and Gentlemen:

     In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, hereby certifies that, except as otherwise
noted on the attached exception report, that as to each Mortgage Loan listed on
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attachment hereto) it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: (i) all documents required to be included
in the Mortgage File pursuant to the Pooling and Servicing Agreement are in its
possession; (ii) such documents have been reviewed by it and appear regular on
their face, have, where applicable, been executed and relate to such Mortgage
Loan; and (iii) based on examination by it, and only as to such documents, the
information set forth in the Mortgage Loan Schedule as to Mortgagor Name,
original principal balance and loan number respecting such Mortgage Loan is
correct and accurately reflects the information in the Mortgage Loan File.

     The undersigned has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The undersigned makes no
representation that any documents specified in subclauses (iv), (v) and (vii) of
Section 2.01(b) should be included in any Mortgage File. The undersigned makes
no representations as to: (i) the validity, legality, enforceability or
genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                       [                      ]

                                       By:_____________________________________
                                          Name:
                                          Title:


                                      C-1-1

<PAGE>



                                                                     EXHIBIT C-2

                          FORM OF INTERIM CERTIFICATION

Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

         Re:   Pooling and Servicing Agreement dated as of
               August 1, 2001, between Bear Stearns Asset-
               Backed Securities, Inc., as depositor, EMC
               Mortgage Corporation, as master servicer and seller,
               and Wells Fargo Bank Minnesota, National
               Association, as trustee and securities administrator,
               Issuing Asset-Backed Certificates, Series 2001-AC1
               ---------------------------------------------------


Ladies and Gentlemen:

     In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, hereby certifies that, except as otherwise
noted on the attached exception report, that as to each Mortgage Loan listed on
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attachment hereto) it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: (i) all documents required to be included
in the Mortgage File pursuant to the Pooling and Servicing Agreement are in its
possession; (ii) such documents have been reviewed by it and appear regular on
their face, have, where applicable, been executed and relate to such Mortgage
Loan; and (iii) based on examination by it, and only as to such documents, the
information set forth in the Mortgage Loan Schedule as to Mortgagor Name,
original principal balance and loan number respecting such Mortgage Loan is
correct and accurately reflects the information in the Mortgage Loan File.

     The undersigned has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The undersigned makes no
representation that any documents specified in subclauses (iv), (v) and (vii) of
Section 2.01(b) should be included in any Mortgage File. The undersigned makes
no representations as to: (i) the validity, legality, enforceability or
genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.






                                      C-2-1

<PAGE>



                                               [                      ]

                                               By:______________________________
                                                      Name:
                                                      Title:


                                      C-2-2

<PAGE>



                                   EXHIBIT C-3

                           FORM OF FINAL CERTIFICATION

Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

[Service]
          Re:  Pooling and Servicing Agreement dated as of August 1, 2001,
               among Bear Stearns Asset-Backed Securities, Inc., as seller and
               Wells Fargo Bank Minnesota, National Association, as trustee
               issuing Mortgage Pass-through Certificates. Series 2001-AC1
               ----------------------------------------------------------------

Ladies and Gentlemen:

     In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, hereby certifies that, except as otherwise
noted on the attached exception report, that as to each Mortgage Loan listed on
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attachment hereto) it has received the documents set forth in Section
2.01 and has determined that (i) all documents required to be included in the
Mortgage File pursuant to the Pooling and Servicing Agreement are in its
possession; (ii) such documents have been reviewed by it and appear regular on
their face, have, where applicable, been executed and relate to such Mortgage
Loan; and (iii) based on examination by it, and only as to such documents, the
information set forth in the Mortgage Loan Schedule as to Mortgagor name,
original principal balance and loan number respecting such Mortgage Loan is
correct and accurately reflects the information in the Mortgage Loan File.

     The undersigned has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The undersigned makes no
representation that any documents specified in subclauses (iv), (v) and (vii) of
Section 2.01(b) should be included in any Mortgage File. The undersigned makes
no representations as to: (i) the validity, legality, enforceability or
genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                           [                      ]

                                           By:_________________________________
                                           Name:
                                           Title:


                                      C-3-1

<PAGE>



                                                                       EXHIBIT D

                                             Affidavit pursuant to Section
                                             860E(e)(4) of the Internal Revenue
                                             Code of 1986, as amended, and for
                                             other purposes

STATE OF                    )
                            )ss:
COUNTY OF                   )

          [NAME OF OFFICER], being first duly sworn, deposes and says:

     1. That he is [Title of Officer] of [Name of Investor] (the "Investor"), a
[savings institution] [corporation] duly organized and existing under the laws
of [the State of ] [the United States], on behalf of which he makes this
affidavit.

     2. That (i) the Investor is not a "disqualified organization" as defined in
Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended (the
"Code"), and will not be a disqualified organization as of [Closing Date] [date
of purchase]; (ii) it is not acquiring the Bear Stearns Asset-Backed Securities,
Inc. Asset-Backed Certificates, Series 2001-AC1, Class R Certificates (the
"Residual Certificates") for the account of a disqualified organization; (iii)
it consents to any amendment of the Pooling and Servicing Agreement that shall
be deemed necessary by Bear Stearns Asset-Backed Securities, Inc. (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Residual
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer such Residual Certificates unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.

     3. That the Investor is one of the following: (i) a citizen or resident of
the United States, (ii) a corporation or partnership (including an entity
treated as a corporation or partnership for federal income tax purposes) created
or organized in, or under the laws of, the United States or any state thereof or
the District of Columbia (except, in the case of a partnership, to the extent
provided in regulations), provided that no partnership or other entity treated
as a partnership for United States federal income tax purposes shall be treated
as a United States Person unless all persons that own an interest in such
partnership either directly or through any entity that is not a corporation for
United States federal income tax purposes are United States Persons, (iii) an
estate whose income is subject to United States federal income tax regardless of
its source, or (iv) a trust other than a "foreign trust," as defined in Section
7701 (a)(31) of the Code.

     4. That the Investor's taxpayer identification number is _________________.

     5. That no purpose of the acquisition of the Residual Certificates is to
avoid or impede the assessment or collection of tax.



                                       D-1

<PAGE>



     6. That the Investor understands that, as the holder of the Residual
Certificates, the Investor may incur tax liabilities in excess of any cash flows
generated by such Residual Certificates.

     7. That the Investor intends to pay taxes associated with holding the
Residual Certificates as they become due.

     IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to authority of its Board of Directors, by its [Title of
Officer] this ____ day of _________, 20__.


                                        [NAME OF INVESTOR]


                                        By:_____________________________________
                                          [Name of Officer]
                                          [Title of Officer]
                                          [Address of Investor for receipt of
                                          distributions]

                                              Address of Investor for receipt of
                                              tax information:



                                       D-2

<PAGE>



     Personally appeared before me the above-named [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [Title of Officer] of the Investor, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Investor.

     Subscribed and sworn before me this ___ day of _________, 20___.

NOTARY PUBLIC

COUNTY OF

STATE OF


My commission expires the ___ day of ___________________, 20___.




                                       D-3

<PAGE>



                                                                       EXHIBIT E

                    FORM OF TRANSFEROR REPRESENTATION LETTER



                                                 ______________,200___



Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

Wells Fargo Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044


Attention: Bear Stearns Asset-Backed Securities, Inc., Series 2001-AC1

           Re:  Bear Stearns Asset-Backed Securities, Inc.
                Asset-Backed Certificates, Series 2001-AC1, Class__
                -------------------------------------------------

Ladies and Gentlemen:

     In connection with the sale by ___________ (the "Seller") to ________ (the
"Purchaser") of $_________ Initial Certificate Principal Balance of Asset-Backed
Certificates, Series 2001-AC1, Class _____ (the "Certificates"), issued pursuant
to the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of August 1, 2001 among Bear Stearns Asset-Backed Securities, Inc., as
depositor (the "Depositor"), EMC Mortgage Corporation, as seller and master
servicer, and Wells Fargo Bank Minnesota, National Association, as trustee and
securities administrator (the "Trustee"). The Seller hereby certifies,
represents and warrants to, a covenants with, the Depositor and the Trustee
that:

     Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act in any
manner set forth in the


                                       E-1

<PAGE>



foregoing sentence with respect to any Certificate. The Seller has not and will
not sell or otherwise transfer any of the Certificates, except in compliance
with the provisions of the Pooling and Servicing Agreement.


                                         Very truly yours,


                                         _____________________________________
                                         (Seller)

                                         By:___________________________________

                                         Name:_________________________________

                                         Title:________________________________




                                       E-2

<PAGE>



                                                                     EXHIBIT F-1

                     FORM OF INVESTOR REPRESENTATION LETTER

                                                   ___________,200__


Wells Fargo Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044

Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

Attention:   Bear Stearns Asset-Backed Securities, Inc., Series 2001-AC1

             Re:   Bear Stearns Asset-Backed Securities, Inc.
                   Asset-Backed Certificates, Series 2001-AC1, Class__
                   -------------------------------------------------

Ladies and Gentlemen:

     ______________ (the "Purchaser") intends to purchase from ______________
(the "Seller") $_________ Initial Certificate Principal Balance of Asset-Backed
Certificates, Series 2001-AC1, Class _____ (the "Certificates"), issued pursuant
to the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of August 1, 2001 among Bear Stearns Asset-Backed Securities, Inc., as
depositor (the "Depositor"), EMC Mortgage Corporation, as seller and master
servicer, and Wells Fargo Bank Minnesota, National Association, as trustee and
securities administrator (the "Trustee"). All terms used herein and not
otherwise defined shall have the meanings set forth in the Pooling and Servicing
Agreement. The Purchaser hereby certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:

               1. The Purchaser understands that (a) the Certificates have not
          been and will not be registered or qualified under the Securities Act
          of 1933, as amended (the "Act") or any state securities law, (b) the
          Depositor is not required to so register or qualify the Certificates,
          (c) the Certificates may be resold only if registered and qualified
          pursuant to the provisions of the Act or any state securities law, or
          if an exemption from such registration and qualification is available,
          (d) the Pooling and Servicing Agreement contains restrictions
          regarding the transfer of the Certificates and (e) the Certificates
          will bear a legend to the foregoing effect.


               2. The Purchaser is acquiring the Certificates for its own
          account for investment only and not with a view to or for sale in
          connection with any distribution thereof in any manner that would
          violate the Act or any applicable state securities laws.


                                       E-3

<PAGE>



               3. The Purchaser is (a) a substantial, sophisticated
          institutional investor having such knowledge and experience in
          financial and business matters, and, in particular, in such matters
          related to securities similar to the Certificates, such that it is
          capable of evaluating the merits and risks of investment in the
          Certificates, (b) able to bear the economic risks of such an
          investment and (c) an "accredited investor" within the meaning of Rule
          501 (a) promulgated pursuant to the Act.

               4. The Purchaser has been furnished with, and has had an
          opportunity to review (a) [a copy of the Private Placement Memorandum,
          dated October 30, 2001, relating to the Certificates (b)] a copy of
          the Pooling and Servicing Agreement and [(b)] [(c)] such other
          information concerning the Certificates, the Mortgage Loans and the
          Depositor as has been requested by the Purchaser from the Depositor or
          the Seller and is relevant to the Purchaser's decision to purchase the
          Certificates. The Purchaser has had any questions arising from such
          review answered by the Depositor or the Seller to the satisfaction of
          the Purchaser. [If the Purchaser did not purchase the Certificates
          from the Seller in connection with the initial distribution of the
          Certificates and was provided with a copy of the Private Placement
          Memorandum (the "Memorandum") relating to the original sale (the
          "Original Sale") of the Certificates by the Depositor, the Purchaser
          acknowledges that such Memorandum was provided to it by the Seller,
          that the Memorandum was prepared by the Depositor solely for use in
          connection with the Original Sale and the Depositor did not
          participate in or facilitate in any way the purchase of the
          Certificates by the Purchaser from the Seller, and the Purchaser
          agrees that it will look solely to the Seller and not to the Depositor
          with respect to any damage, liability, claim or expense arising out
          of, resulting from or in connection with (a) error or omission, or
          alleged error or omission, contained in the Memorandum, or (b) any
          information, development or event arising after the date of the
          Memorandum.]

               5. The Purchaser has not and will not nor has it authorized or
          will it authorize any person to (a) offer, pledge, sell, dispose of or
          otherwise transfer any Certificate, any interest in any Certificate or
          any other similar security to any person in any manner, (b) solicit
          any offer to buy or to accept a pledge, disposition of other transfer
          of any Certificate, any interest in any Certificate or any other
          similar security from any person in any manner, (c) otherwise approach
          or negotiate with respect to any Certificate, any interest in any
          Certificate or any other similar security with any person in any
          manner, (d) make any general solicitation by means of general
          advertising or in any other manner or (e) take any other action, that
          (as to any of (a) through (e) above) would constitute a distribution
          of any Certificate under the Act, that would render the disposition of
          any Certificate a violation of Section 5 of the Act or any state
          securities law, or that would require registration or qualification
          pursuant thereto. The Purchaser will not sell or otherwise transfer
          any of the Certificates, except in compliance with the provisions of
          the Pooling and Servicing Agreement.



                                       E-4

<PAGE>




                                             Very truly yours,


                                             __________________________________
                                             (Purchaser)

                                             By:_______________________________

                                             Name:_____________________________

                                             Title:____________________________





                                       E-5

<PAGE>



                                                                     EXHIBIT G-1

                            FORM OF INVESTMENT LETTER

                                                   [Date]

[SELLER]

Wells Fargo Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044

Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

     Re:  BSABSI Series 2001-AC1 Asset-Backed Certificates (the
          "Certificates"), including the [Class XP, Class B-4,
          Class B-5, Class B-6] Certificates (The "Privately
          Offered Certificates")
          -----------------------------------------------------

Dear Ladies and Gentlemen:

     In connection with our purchase of Privately Offered Certificates, we
confirm that:

          (i)  we understand that the Privately Offered Certificates are not
               being registered under the Securities Act of 1933, as amended
               (the "Act") or any applicable state securities or "Blue Sky"
               laws, and are being sold to us in a transaction that is exempt
               from the registration requirements of such laws;

          (ii) any information we desired concerning the Certificates, including
               the Privately Offered Certificates, the trust in which the
               Certificates represent the entire beneficial ownership interest
               (the "Trust") or any other matter we deemed relevant to our
               decision to purchase Privately Offered Certificates has been made
               available to us;

          (iii) we are able to bear the economic risk of investment in Privately
               Offered Certificates; we are an institutional "accredited
               investor" as defined in Section 501(a) of Regulation D
               promulgated under the Act and a sophisticated institutional
               investor;

          (iv) we are acquiring Privately Offered Certificates for our own
               account, not as nominee for any other person, and not with a
               present view to any distribution or other disposition of the
               Privately Offered Certificates;

          (v)  we agree the Privately Offered Certificates must be held
               indefinitely by us (and may not be sold, pledged, hypothecated or
               in any way disposed of) unless subsequently registered under the
               Act and any applicable state


                                 G-1-6

<PAGE>



               securities or "Blue Sky" laws or an exemption from the
               registration requirements of the Act and any applicable state
               securities or "Blue Sky" laws is available;

          (vi) we agree that in the event that at some future time we wish to
               dispose of or exchange any of the Privately Offered Certificates
               (such disposition or exchange not being currently foreseen or
               contemplated), we will not transfer or exchange any of the
               Privately Offered Certificates unless:

                    (A) (1) the sale is to an Eligible Purchaser (as defined
               below), (2) if required by the Pooling and Servicing Agreement
               (as defined below) a letter to substantially the same effect as
               either this letter or, if the Eligible Purchaser is a Qualified
               Institutional Buyer as defined under Rule 144A of the Act, the
               Rule 144A and Related Matters Certificate in the form attached to
               the Pooling and Servicing Agreement (as defined below) (or such
               other documentation as may be acceptable to the Trustee) is
               executed promptly by the purchaser and delivered to the
               addressees hereof and (3) all offers or solicitations in
               connection with the sale, whether directly or through any agent
               acting on our behalf, are limited only to Eligible Purchasers and
               are not made by means of any form of general solicitation or
               general advertising whatsoever; and

                    (B) if the Privately Offered Certificate is not registered
               under the Act (as to which we acknowledge you have no
               obligation), the Privately Offered Certificate is sold in a
               transaction that does not require registration under the Act and
               any applicable state securities or "blue sky" laws and, if Wells
               Fargo Bank Minnesota, National Association (the "Trustee") so
               requests, a satisfactory Opinion of Counsel is furnished to such
               effect, which Opinion of Counsel shall be an expense of the
               transferor or the transferee;

          (vii) we agree to be bound by all of the terms (including those
               relating to restrictions on transfer) of the Pooling and
               Servicing, pursuant to which the Trust was formed; we have
               reviewed carefully and understand the terms of the Pooling and
               Servicing Agreement;

          (viii) we either: (i) are not acquiring the Privately Offered
               Certificate directly or indirectly by, or on behalf of, an
               employee benefit plan or other retirement arrangement which is
               subject to Title I of the Employee Retirement Income Security Act
               of 1974, as amended, and/or section 4975 of the Internal Revenue
               Code of 1986, as amended, or (ii) are providing a representation
               or an opinion of counsel to the effect that the proposed transfer
               and/or holding of a Privately Offered Certificate and the
               servicing, management and/or operation of the Trust and its
               assets: (I) will not result in any prohibited transaction which
               is not covered under an individual or class prohibited
               transaction exemption, including, but not limited to, Prohibited
               Transaction Exemption ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE
               95-60, PTE 96-23 or


                                 G-1-7

<PAGE>



               Section 401(c) of ERISA and the regulations promulgated
               thereunder and (II) will not give rise to any additional
               fiduciary duties on the part of the Seller, the Master Servicer
               or the Trustee.

          (ix) We understand that each of the Class B-IO, Class P, R-I, Class
               R-II and Class R-III Certificates bears, and will continue to
               bear, a legend to substantiate the following effect: "THIS
               CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
               SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
               UNDER ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING
               THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,
               RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH
               THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1)
               PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
               PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
               INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"),
               PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE
               ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
               THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE
               IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
               REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
               AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN "INSTITUTIONAL
               ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
               501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE ACT OR ANY
               ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH
               PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF THE
               SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
               LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
               (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE
               TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS
               IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
               OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS
               OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION. THIS
               CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
               BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
               ARRANGEMENT WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE
               RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, AND/OR
               SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
               UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE AND
               THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS
               ASSETS: (1) WILL NOT RESULT IN ANY


                                 G-1-8

<PAGE>



               PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL
               OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT
               LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE
               91-38, PTE 90-1, PTE 95-60, PTE 96-23 OR SECTION 401(C) OF ERISA
               AND THE REGULATIONS TO BE PROMULGATED THEREUNDER AND (II) WILL
               NOT GIVE RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE PART OF
               THE SELLER, THE MASTER SERVICER OR THE TRUSTEE, WHICH WILL BE
               DEEMED REPRESENTED BY AN OWNER OF A BOOK-ENTRY CERTIFICATE OR A
               GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A REPRESENTATION OR
               AN OPINION OF COUNSEL TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER
               OF A PRIVATE CERTIFICATE."

     "ELIGIBLE PURCHASER" means a corporation, partnership or other entity which
we have reasonable grounds to believe and do believe (i) can make
representations with respect to itself to substantially the same effect as the
representations set forth herein, and (ii) is either a Qualified Institutional
Buyer as defined under Rule 144A of the Act or an institutional "Accredited
Investor" as defined under Rule 501 of the Act.

     Terms not otherwise defined herein shall have the meanings assigned to them
in the Pooling and Servicing Agreement, dated as of August 1, 2001, between Bear
Stearns Asset-Backed Securities, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee (the "Pooling and Servicing Agreement').

     If the Purchaser proposes that its Certificates be registered in the name
of a nominee on its behalf, the Purchaser has identified such nominee below, and
has caused such nominee to complete the Nominee Acknowledgment at the end of
this letter.


Name of Nominee (if any): _____________________



                                      G-1-9

<PAGE>



          IN WITNESS WHEREOF, this document has been executed by the undersigned
who is duly authorized to do so on behalf of the undersigned Eligible Purchaser
on the ___ day of ________, 20___.

                                        Very truly yours,

                                        [PURCHASER]

                                        By:_____________________________________
                                                 (Authorized Officer)

                                        [By:____________________________________
                                                 Attorney-in-fact]



                                     G-1-10

<PAGE>



                             Nominee Acknowledgment

          The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner thereof is
and shall be the Purchaser identified above, for whom the undersigned is acting
as nominee.

                                        [NAME OF NOMINEE]

                                        By:_____________________________________
                                                 (Authorized Officer)


                                        [By:____________________________________
                                                 Attorney-in-fact]



                                     G-1-11

<PAGE>



                                                                     EXHIBIT G-2
           FORM OF RULE 144A AND RELATED MATTERS CERTIFICATE

[SELLER]                                                                  [Date]

Wells Fargo Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044

Bear Stearns Asset-Backed Securities, Inc.
245 Park Avenue
New York, New York 10167

          Re:      BSABSI Series 2001-AC1 Asset-Backed Certificates,
                   Class B-IO, Class P and Class R Certificates
                   (The "Privately Offered Certificates")
                   --------------------------------------------------

Dear Ladies and Gentlemen:

     In connection with our purchase of Privately Offered Certificates, the
undersigned certifies to each of the parties to whom this letter is addressed
that it is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act of 1933, as amended (the "Act")) as follows:

1.   It owned and/or invested on a discretionary basis eligible securities
     (excluding affiliate's securities, bank deposit notes and CD's, loan
     participations, repurchase agreements, securities owned but subject to a
     repurchase agreement and swaps), as described below:

     Date: ______________, 20__ (must be on or after the close of its most
     recent fiscal year)

     Amount: $ _____________________; and

2.   The dollar amount set forth above is:

     a.   greater than $100 million and the undersigned is one of the following
          entities:

          (x)  an insurance company as defined in Section 2(13) of the Act1; or

          (y)  an investment company registered under the Investment Company Act
               or any business development company as defined in Section
               2(a)(48) of the Investment Company Act of 1940; or

___________________

     1    A purchase by an insurance company for one or more of its separate
          accounts, as defined by Section 2(a)(37) of the Investment Company Act
          of 1940, which are neither registered nor required to be registered
          thereunder, shall be deemed to be a purchase for the account of such
          insurance company.



                                 G-2-1

<PAGE>



          (z)  a Small Business Investment Company licensed by the U.S. Small
               Business Administration under Section 301(c) or (d) of the Small
               Business Investment Act of 1958; or

          (aa) a plan (i) established and maintained by a state, its political
               subdivisions, or any agency or instrumentality of a state or its
               political subdivisions, the laws of which permit the purchase of
               securities of this type, for the benefit of its employees and
               (ii) the governing investment guidelines of which permit the
               purchase of securities of this type; or

          (bb) a business development company as defined in Section 202(a)(22)
               of the Investment Advisers Act of 1940; or

          (cc) a corporation (other than a U.S. bank, savings and loan
               association or equivalent foreign institution), partnership,
               Massachusetts or similar business trust, or an organization
               described in Section 501(c)(3) of the Internal Revenue Code; or

          (dd) a U.S. bank, savings and loan association or equivalent foreign
               institution, which has an audited net worth of at least $25
               million as demonstrated in its latest annual financial
               statements; or

          (ee) an investment adviser registered under the Investment Advisers
               Act; or

     b.   greater than $10 million, and the undersigned is a broker-dealer
          registered with the SEC; or

     c.   less than $ 10 million, and the undersigned is a broker-dealer
          registered with the SEC and will only purchase Rule 144A securities in
          transactions in which it acts as a riskless principal (as defined in
          Rule 144A); or

     d.   less than $100 million, and the undersigned is an investment company
          registered under the Investment Company Act of 1940, which, together
          with one or more registered investment companies having the same or an
          affiliated investment adviser, owns at least $100 million of eligible
          securities; or

     e.   less than $100 million, and the undersigned is an entity, all the
          equity owners of which are qualified institutional buyers.

     The undersigned further certifies that it is purchasing a Privately Offered
Certificate for its own account or for the account of others that independently
qualify as "Qualified Institutional Buyers" as defined in Rule 144A. It is aware
that the sale of the Privately Offered Certificates is being made in reliance on
its continued compliance with Rule 144A. It is aware that the transferor may
rely on the exemption from the provisions of Section 5 of the Act provided by
Rule 144A. The


                                 G-2-2

<PAGE>



undersigned understands that the Privately Offered Certificates may be resold,
pledged or transferred only to (i) a person reasonably believed to be a
Qualified Institutional Buyer that purchases for its own account or for the
account of a Qualified Institutional Buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance in Rule 144A, or (ii) an
institutional "accredited investor," as such term is defined under Rule 501 of
the Act in a transaction that otherwise does not constitute a public offering.

     The undersigned agrees that if at some future time it wishes to dispose of
or exchange any of the Privately Offered Certificates, it will not transfer or
exchange any of the Privately Offered Certificates to a Qualified Institutional
Buyer without first obtaining a Rule 144A and Related Matters Certificate in the
form hereof from the transferee and delivering such certificate to the
addressees hereof. Prior to making any transfer of Privately Offered
Certificates, if the proposed Transferee is an institutional "accredited
investor," the transferor shall obtain from the transferee and deliver to the
addressees hereof an Investment Letter in the form attached to the Pooling and
Servicing Agreement, dated as of August 1, 2001, between Bear Stearns
Asset-Backed Securities, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee, pursuant to Certificates were issued.

     The undersigned certifies that it either: (i) is not acquiring the
Privately Offered Certificate directly or indirectly by, or on behalf of, an
employee benefit plan or other retirement arrangement which is subject to Title
I of the Employee Retirement Income Security Act of 1974, as amended, and/or
section 4975 of the Internal Revenue Code of 1986, as amended, or (ii) is
providing a representation or an opinion of counsel to the effect that the
proposed transfer and/or holding of a Privately Offered Certificate and the
servicing, management and/or operation of the Trust and its assets: (I) will not
result in any prohibited transaction which is not covered under a prohibited
transaction exemption, including, but not limited to, Prohibited Transaction
Exemption ("PTE") 84- 14, PTE 91-38, PTE 90-1, PTE 95-60, PTE 96-23 or Section
401(c) of ERISA and the regulations to be promulgated thereunder and (II) will
not give rise to any additional fiduciary duties on the part of the Seller, the
Master Servicer or the Trustee.

     If the Purchaser proposes that its Certificates be registered in the name
of a nominee on its behalf, the Purchaser has identified such nominee below, and
has caused such nominee to complete the Nominee Acknowledgment at the end of
this letter.




                                 G-2-3

<PAGE>



Name of Nominee (if any):

IN WITNESS WHEREOF, this document has been executed by the undersigned who is
duly authorized to do so on behalf of the undersigned Eligible Purchaser on the
____ day of ___________, 20___.

                                        Very truly yours,

                                        [PURCHASER]


                                        By:_____________________________________
                                                 (Authorized Officer)

                                        [By:____________________________________
                                                 Attorney-in-fact]




                                      G-2-4

<PAGE>



                             Nominee Acknowledgment

     The undersigned hereby acknowledges and agrees that as to the Certificates
being registered in its name, the sole beneficial owner thereof is and shall be
the Purchaser identified above, for whom the undersigned is acting as nominee.

                                         [NAME OF NOMINEE]

                                         By:____________________________________
                                                  (Authorized Officer)

                                         [By:___________________________________
                                                  Attorney-in-fact]



                                      G-2-5

<PAGE>


                                                                       EXHIBIT H

                        REQUEST FOR RELEASE OF DOCUMENTS

To:  Wells Fargo Bank Minnesota, National Association
     1015 10th Avenue S.E.
     Minneapolis, MN 55414

RE:  Pooling and Servicing Agreement dated as of
     August 1, 2001, between BSABSI
     and Wells Fargo Bank Minnesota,
     National Association as Trustee

     In connection with the administration of the Mortgage Loans held by you
pursuant to the above-captioned Pooling and Servicing Agreement, we request the
release, and hereby acknowledge receipt, of the Mortgage File for the Mortgage
Loan described below, for the reason indicated.

MORTGAGE LOAN NUMBER:

MORTGAGOR NAME, ADDRESS & ZIP CODE:

REASON FOR REQUESTING DOCUMENTS (CHECK ONE):

_____     1.       Mortgage Paid in Full and proceeds have been deposited into
                   the Custodial Account

_____     2.       Foreclosure

_____     3.       Substitution

_____     4.       Other Liquidation

_____     5.       Nonliquidation                Reason:_______________________

_____     6.       California Mortgage Loan paid in full


                                                 By:____________________________
                                                          (authorized signer)

                                                 Issuer:________________________
                                                 Address:_______________________

                                                 Date:__________________________



                                       H-1

<PAGE>



                                                                       EXHIBIT I

                          DTC Letter of Representations
                             [provided upon Request]





                                       I-1

<PAGE>


                                                                       EXHIBIT J

                   Schedule of Mortgage Loans with Lost Notes
                             [provided upon Request]





                                       J-1