UNITED STATES
                             SECURITIES AND EXCHANGE COMMISSION
                                   WASHINGTON, D.C. 20549



                                          FORM 10-K


  (Mark one)

  /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 2006

      OR



  / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934


       Commission file number:  333-125422-52

       Structured Asset Mortgage Investments II Trust 2006-AR2
       (exact name of issuing entity as specified in its charter)

       Bear Stearns Asset Backed Securities I LLC.
       (exact name of the depositor as specified in its charter)

       EMC Mortgage Corporation
       (exact name of the sponsor as specified in its charter)


  New York                                          54-2195535
  (State or other jurisdiction of                   54-2195536
  incorporation or organization)                    54-2195553
                                                    (I.R.S. Employer
                                                    Identification No.)


   c/o Wells Fargo Bank, N.A.
   9062 Old Annapolis Road
   Columbia, MD                                21045
  (Address of principal executive offices)    (Zip Code)


  Registrant's telephone number, including area code: (410) 884-2000


  Securities registered pursuant to Section 12(b) of the Act:

        NONE.


  Securities registered pursuant to Section 12(g) of the Act:

        NONE.


  Indicate by check mark if the registrant is a well-known seasoned issuer,
  as defined in Rule 405 of the Securities Act.

        Yes  ___     No  X


  Indicate by check mark if the registrant is not required to file reports
  pursuant to Section 13 or Section 15(d) of the Act.

        Yes  ___     No  X


  Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period
  that the registrant was required to file such reports), and (2) has been
  subject to such filing requirements for the past 90 days.

        Yes  X       No  ___


  Indicate by check mark if disclosure of delinquent filers pursuant to
  Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained
  herein, and will not be contained, to the best of registrant's knowledge,
  in definitive proxy or information statements incorporated by reference
  in Part III of this Form 10-K or any amendment to this Form 10-K.

        Not applicable.


  Indicate by check mark whether the registrant is a large accelerated filer,
  an accelerated filer, or a non-accelerated filer. See definition of
  "accelerated filer and large accelerated filer" in Rule 12b-2 of the
  Exchange Act. (Check one):


  Large accelerated filer ___  Accelerated filer ___  Non-accelerated filer X


  Indicate by check mark whether the registrant is a shell company (as
  defined in Rule 12b-2 of the Act).

        Yes  ___     No  X


  State the aggregate market value of the voting and non-voting common
  equity held by non-affiliates computed by reference to the price at which
  the common equity was last sold, or the average bid and asked price of
  such common equity, as of the last business day of the registrant's most
  recently completed second fiscal quarter.

        Not applicable.


     Documents Incorporated by Reference

  List hereunder the following documents if incorporated by reference and
  the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
  document is incorporated: (1)Any annual report to security holders; (2)
  Any proxy or information statement; and (3)Any prospectus filed pursuant
  to Rule 424(b) or (c) under the Securities Act of 1933. The listed
  documents should be clearly described for identification purposes (e.g.,
  annual report to security holders for fiscal year ended December 24, 1980).

        Not applicable.


                                   PART I
  Item 1.  Business.

            Omitted.


  Item 1A.  Risk Factors.

            Omitted.


  Item 1B.  Unresolved Staff Comments.

            None.


  Item 2.  Properties.

            Omitted.


  Item 3.  Legal Proceedings.

            Omitted.


  Item 4.  Submission of Matters to a Vote of Security Holders.

            Omitted.


                                PART II

  Item 5. Market for Registrants Common Equity, Related Stockholder
          Matters and Issuer Purchases of Equity Securities.

            Omitted.


  Item 6.  Selected Financial Data.

            Omitted.


  Item 7.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations.

            Omitted.


  Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

            Omitted.


  Item 8.  Financial Statements and Supplementary Data.

            Omitted.


  Item 9.  Changes in and Disagreements With Accountants on Accounting and
           Financial Disclosure.

            Omitted.


  Item 9A. Controls and Procedures.

            Omitted.


  Item 9A(T). Controls and Procedures.

            Omitted.


  Item 9B. Other Information.

            None.


                                PART III

  Item 10. Directors, Executive Officers and Corporate Governance.

            Omitted.


  Item 11. Executive Compensation.

            Omitted.

  Item 12. Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters.

            Omitted.


  Item 13. Certain Relationships and Related Transactions, and Director
           Independence.

            Omitted.


  Item 14. Principal Accounting Fees and Services.

            Omitted.



                ADDITIONAL DISCLOSURE ITEMS FOR REGULATION AB

  Item 1112(b) of Regulation AB, Significant Obligor Financial Information.

            No single obligor represents more than 10% of the pool assets held
            by this transaction.


  Item 1114(b)(2) and 1115(b) of Regulation AB, Significant Enhancement
             Provider Financial Information.



            None.



  Item 1117 of Regulation AB, Legal Proceedings.

            The registrant knows of no material pending legal proceedings
            involving the Trust and all parties related to such Trust, other
            than routine litigation incidental to the duties of those respective
            parties.



  Item 1119 of Regulation AB, Affiliations and Certain Relationships and
             Related Transactions.


            On February 9, 2007, Bear Stearns Residential Mortgage Corporation,
            a wholly owned subsidiary of The Bear Stearns Companies Inc. and an
            affiliate of the Registrant, acquired certain assets used in the
            subprime wholesale mortgage banking division of Performance Credit
            Corporation (formerly known as Encore Credit Corp.) ("PCC"), a
            California corporation that, until February 9, 2007, originated and
            purchased one-to four-family residential mortgage loans offered to
            borrowers with a particular emphasis on "nonconforming" borrowers
            who generally do not satisfy the credit, collateral, documentation
            or other standards required by conventional mortgage lenders and
            loan buyers.


  Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria.


            The servicing criteria have been completed within the manner stated
            in the governing documents and are attached hereto under Item 15.

            The 1122 statements for Wells Fargo Bank, National Association
            (Corporate Trust Services) has disclosed material noncompliance with
            criterion 1122(d)(3)(i), as applicable to the Company during the
            twelve months ended December 31, 2006.  Certain monthly investor or
            remittance reports included errors in the calculation and/or the
            reporting of delinquencies for the pool assets.


            Although each servicing criterion required by Item 1122(d) of
            Regulation AB is addressed in one or more of the Assessments of
            Compliance with Servicing Criteria and related Attestation Reports
            included with this report, the Servicers', Countrywide Home Loans
            Servicing Inc, and Wells Fargo Bank NA (as Master Servicer),
            Assessments of Compliance and related Attestation Reports did not
            address each of the servicing criteria that the Servicers were
            required to address under the terms of the related Servicing
            Agreements. The Servicers have not identified such failure to
            provide an Assessment and Attestation for these items as a material
            failure to fulfill its obligations under the related servicing
            agreements in the Servicer's Compliance Statements provided under
            Item 1123 of Regulation AB, because the Servicers assert that those
            items are not applicable to the Servicers.



  Item 1123 of Regulation AB, Servicer Compliance Statement.


            The servicer compliance Statements have been completed within the
            manner stated in the governing documents and are attached hereto
            under Item 15.




                                PART IV


  Item 15. Exhibits, Financial Statement Schedules.

   (a) Exhibits

 (4.1) Pooling and Servicing Agreement, dated as of February 1, 2006, among Bear
       Stearns Asset Backed Securities I LLC, as depositor, Wells Fargo Bank
       National Association, as master servicer and as securities administrator,
       EMC Mortgage Corporation and JPMorgan Chase Bank, N.A., as trustee (As
       previously filed on Form 8-K filed on March 17, 2006 and is hereby
       incorporated by reference into this report on Form 10-K)



 (4.2) Amended and Restated Pooling and Servicing Agreement, dated as of
       December 5, 2006, among Bear Stearns Asset Backed Securities I LLC, as
       depositor, Wells Fargo Bank, National Association, as master servicer and
       as securities administrator, EMC Mortgage Corporation, as sponsor, and
       The Bank of New York, as successor to JP Morgan Chase Bank, N.A., as
       trustee (As previously filed on Form 8-K filed on January 4, 2007 and is
       hereby incorporated by reference into this report on Form 10-K)

(10.1) Seller's Warranties and Servicing Agreement, dated as of September 1,
       2002 among EMC Mortgage Corporation, as purchaser and Countrywide Home
       Loans, Inc., as company, as amended.


  (31) Rule 13a-14(d)/15d-14(d) Certifications.

  (33) Reports on assessment of compliance with servicing criteria for
       asset-backed securities.



      <TABLE>

      
         <c>
      a) Countrywide Home Loans Servicing LP, as Servicer <F1>
      b) Wells Fargo Bank, N.A., as Master Servicer <F1>
      c) Wells Fargo Bank, N.A., as Securities Administrator <F1>
      d) Wells Fargo Bank, N.A., as Custodian <F1>

      </TABLE>

     (34) Attestation reports on assessment of compliance with servicing
          criteria for asset-backed securities.

      <TABLE>

      
        <c>
      a) Countrywide Home Loans Servicing LP, as Servicer <F1>
      b) Wells Fargo Bank, N.A., as Master Servicer <F1>
      c) Wells Fargo Bank, N.A., as Securities Administrator <F1>
      d) Wells Fargo Bank, N.A., as Custodian <F1>

      </TABLE>

     (35) Servicer compliance statement.

      <TABLE>

      
         <c>
      a) Countrywide Home Loans Servicing LP, as Servicer <F1>
      b) Wells Fargo Bank, N.A., as Master Servicer <F1>
      c) Wells Fargo Bank, N.A., as Securities Administrator <F1>
      d) Wells Fargo Bank, N.A., as Custodian <F2>

      </TABLE>

   (b) Not applicable.

   (c) Omitted.


  <F1> Filed herewith.

  <F2> The Servicing Participant of the deal is not required under Regulation AB
       to provide such documentation.

                                SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities
  Exchange Act of 1934, the registrant has duly caused this report to be
  signed on its behalf by the undersigned, thereunto duly authorized.



    Structured Asset Mortgage Investments II Trust 2006-AR2
    (Issuing Entity)

    Wells Fargo Bank, N.A.
    (Master Servicer)

    /s/ Dawn Hammond
    Dawn Hammond, Vice President

    Date: March 30, 2007


  Exhibit Index

  Exhibit No.

    (31) Rule 13a-14(d)/15d-14(d) Certifications.

    (33) Reports on assessment of compliance with servicing criteria for
         asset-backed securities.



      <TABLE>

      
         <c>
      a) Countrywide Home Loans Servicing LP, as Servicer
      b) Wells Fargo Bank, N.A., as Master Servicer
      c) Wells Fargo Bank, N.A., as Securities Administrator
      d) Wells Fargo Bank, N.A., as Custodian

      </TABLE>

     (34) Attestation reports on assessment of compliance with servicing
          criteria for asset-backed securities.

      <TABLE>

      
        <c>
      a) Countrywide Home Loans Servicing LP, as Servicer
      b) Wells Fargo Bank, N.A., as Master Servicer
      c) Wells Fargo Bank, N.A., as Securities Administrator
      d) Wells Fargo Bank, N.A., as Custodian

      </TABLE>

     (35) Servicer compliance statement.

      <TABLE>

      
         <c>
      a) Countrywide Home Loans Servicing LP, as Servicer
      b) Wells Fargo Bank, N.A., as Master Servicer
      c) Wells Fargo Bank, N.A., as Securities Administrator

      </TABLE>

  EX-31 Rule 13a-14(d)/15d-14(d) Certifications

  I, Dawn Hammond, certify that:

  1. I have reviewed this report on Form 10-K and all reports on Form 10-D
     required to be filed in respect of the period covered by this report
     on Form 10-K of Structured Asset Mortgage Investments II Trust
     2006-AR2 (the "Exchange Act periodic reports");

  2. Based on my knowledge, the Exchange Act periodic reports, taken as a
     whole, do not contain any untrue statement of a material fact or omit
     to state a material fact necessary to make the statements made, in
     light of the circumstances under which such statements were made, not
     misleading with respect to the period covered by this report;

  3. Based on my knowledge, all of the distribution, servicing and other
     information required to be provided under Form 10-D for the period
     covered by this report is included in the Exchange Act periodic
     reports;

  4. I am responsible for reviewing the activities performed by the
     servicers and based on my knowledge and the compliance reviews
     conducted in preparing the servicer compliance statements required in
     this report under Item 1123 of Regulation AB, and except as disclosed
     in the Exchange Act periodic reports, the servicers have fulfilled
     their obligations under the servicing agreements; and

  5. All of the reports on assessment of compliance with servicing
     criteria for asset-backed securities and their related attestation
     reports on assessment of compliance with servicing criteria for
     asset-backed securities required to be included in this report in
     accordance with Item 1122 of Regulation AB and Exchange Act Rules
     13a-18 and 15d-18 have been included as an exhibit to this report,
     except as otherwise disclosed in this report. Any material instances
     of noncompliance described in such reports have been disclosed in
     this report on Form 10-K.

     In giving the certifications above, I have reasonably relied on
     information provided to me by the following unaffiliated parties:
     Countrywide Home Loans Servicing LP as Servicer.

     Dated: March 30, 2007

     /s/ Dawn Hammond
     Signature

     Vice President
     Title


EX-33 (a)
(logo) Countrywide
HOME LOANS

2900 MADERA ROAD
SIMI VALLEY, CALIFORNIA 93065-6298
(805) 955-1000


ASSESSMENT OF COMPLIANCE WITH APPLICABLE SERVICING CRITERIA


Countrywide Financial Corporation and certain of its subsidiaries, including its
direct and indirect wholly-owned subsidiaries, Countrywide Home Loans, Inc.
(CHL), Countrywide Tax Services Corporation, Newport Management Corporation, and
Countrywide Home Loans Servicing, L.P., a wholly-owned subsidiary of CHL
(collectively the "Company") provides this platform-level assessment, for which
Countrywide Financial Corporation and such subsidiaries participated in
servicing functions, as such term is described under Title 17, Section 229.1122
of the Code of Federal Regulations ("Item 1122 of Regulation AB"), of compliance
in respect of the following Applicable Servicing Criteria specified in Item
1122(d) of Regulation AB promulgated by the Securities and Exchange Commission
in regard to the following servicing platform for the following period:

Platform: publicly-issued (i.e., registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended) residential
mortgage-backed securities (securities collateralized by residential mortgage
loans, including prime, alternative loan products, sub-prime, HELOC and dosed
seconds) issued on or after January 1, 2006 for which the Company provides cash
collection and administration, investor remittances and reporting (except for
those activities relating to trustee and paying agent services), and pool asset
administration (except for those activities relating to custodial operations of
pool assets and related documents), collectively "Servicing Functions" and for
which the related issuer has a fiscal year end of December 31, 2006. The
platform excludes any transactions issued by any government sponsored enterprise
for which the Company provides Servicing Functions.

Period: as of and for the year ended December 31, 2006.

Applicable Servicing Criteria: all servicing criteria set forth in Item 1122(d),
to the extent required in the related agreements, except for the following
paragraphs: 1122(d)(1)(iii), 1122(d)(3)(i)(B), only as it relates to information
other than that contained in the monthly remittance report delivered by the
servicer to the master servicer, trustee, and/or bond administrator,
1122(d)(3)(i)(D), only as it relates to the agreeing with investors' records as
to the total unpaid principal balance and number of pool assets serviced by the
servicer, 1122(d)(3)(ii), only as it relates to amounts other than amounts
remitted by the servicer to the master servicer, trustee, and/or bond
administrator, 1122(d)(3)(iii), 1122(d)(3)(iv), 1122(d)(4)(i) and
1122(d)(4)(ii), only as 1122(d)(4)(i) and 1122(d)(4)(ii) relate to the custodial
operations of the pool assets and related documents (collateral file) by the
document custodian responsible for such functions for the related transaction,
and 1122(d)(4)(xv), only as it relates to Item 1115 of Regulation AB (derivative
transactions).


(page)


With respect to the Platform and the Period, the Company provides the following
assessment of compliance in respect of the Applicable Servicing Criteria:

1. The Company is responsible for assessing its compliance with the Applicable
Servicing Criteria.

2. The Company has assessed compliance with the Applicable Servicing Criteria.

3. Other than as identified on Schedule A hereto, as of and for the Period, the
Company was in material compliance with the Applicable Servicing Criteria.

KPMG LLP, an independent registered public accounting firm, has issued an
attestation report with respect to the Company's foregoing assessment of
compliance.


(page)


COUNTRYWIDE FINANCIAL CORPORATION

By: /s/ Steve Bailey
Steve Bailey

Its: Senior Managing Director and Chief Executive Officer,
Loan Administration


Dated: February 28, 2007

By:/s/ Kevin Meyers
Kevin Meyers

Its: Managing Director and Chief Financial Officer,
Countrywide Home Loans, Inc. Loan Administration


Dated: February 28, 2007


(page)


Schedule A


Material Instances of Noncompliance

No material instances of noncompliance: the Company has complied, in all
material respects, with the applicable servicing criteria as of and for the year
ended December 31, 2006.





EX-33 (b)
(logo) WELLS FARGO

Corporate Trust Services
9062 Old Annapolis Road
Columbia, MD 21045-1951
410 884-2000
410 715-2380 Fax

Wells Fargo Bank, N.A.

ASSESSMENT OF COMPLIANCE WITH APPLICABLE SERVICING CRITERIA

Corporate Trust Services division of Wells Fargo Bank, National Association (the
"Company") provides this assessment of compliance with the following applicable
servicing criteria set forth in Item 1122(d) of Regulation AB promulgated by
the Securities and Exchange Commission. Management has determined that the
servicing criteria are applicable in regards to the servicing platform for the
period as follows:

Platform: Publicly-issued (i.e., transaction-level reporting initially required
under the Securities Exchange Act of 1934, as amended) residential
mortgage-backed securities, commercial mortgage-backed securities and other
asset-backed securities, for which the Company provides master servicing,
trustee, securities administration or paying agent services, excluding
transactions issued by any agency or instrumentality of the U.S. government or
any government sponsored entity (the "Platform").

Applicable Servicing Criteria: All servicing criteria set forth in Item 1122(d),
to the extent required in the related transaction agreements or required by the
Item 1122(d) servicing criteria in regards to the activities performed by the
Company, except for the following criteria: 1122(d)(1)(iii), 1122(d)(4)(ii),
1122(d)(4)(iv), 1122(d)(4)(v), 1122(d)(4)(viii), 1122(d)(4)(ix), 1122(d)(4)(x),
1122(d)(4)(xi), 1122(d)(4)(xii) and 1122(d)(4)(xiii), which management has
determined are not applicable to the activities the Company performs with
respect to the Platform (the "Applicable Servicing Criteria").

Period: Twelve months ended December 31, 2006 (the "Period").

Third parties classified as vendors: With respect to servicing criteria
1122(d)(4)(i), the Company has engaged various vendors to handle certain Uniform
Commercial Code filing functions required by the servicing criteria ("vendors").
The Company has determined that none of the vendors is a "servicer" as defined
in Item 1101(j) of Regulation AB, and the Company elects to take responsibility
for assessing compliance with the portion of the servicing criteria applicable
to each vendor as permitted by Interpretation 17.06 of the SEC Division of
Corporation Finance Manual of Publicly Available Telephone Interpretations
("Interpretation 17.06"). The Company has policies and procedures in place to
provide reasonable assurance that each vendor's activities comply in all
material respects with the servicing criteria applicable to each vendor. The
Company is solely responsible for determining that it meets the SEC requirements
to apply Interpretation 17.06 for the vendors and related criteria.

With respect to the Platform and the Period, the Company provides the following
assessment of compliance with respect to the Applicable Servicing Criteria:

1. The Company is responsible for assessing its compliance with the Applicable
Servicing Criteria.

2. The Company has assessed compliance with the Applicable Servicing Criteria,
including servicing criteria for which compliance is determined based on
Interpretation 17.06 as described above, as of and for the Period. In performing
this assessment, management used the criteria set forth by the Securities and
Exchange Commission in paragraph (d) of Item 1122 of Regulation AB.

3. Other than as identified on Schedule A hereto, as of and for the Period, the
Company was in material compliance with the Applicable Servicing Criteria. Any
material instances of noncompliance by a vendor of which the Company is aware
and any material deficiency in the Company's policies and procedures to monitor
vendors' compliance that the Company has identified is specified on Schedule A
hereto.

KPMG LLP, a registered public accounting firm, has issued an attestation
report with respect to the Company's foregoing assessment of compliance as of
and for the Period.

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:/s/ Brian Bartlett
Brian Bartlett

Its:   Executive Vice President

Dated: March 1, 2007


(page)


(logo) WELLS FARGO

Corporate Trust Services
9062 Old Annapolis Road
Columbia, MD 21045-1951
410 884-2000
410 715-2380 Fax

Wells Fargo Bank, N.A.

Schedule A

Material Instances of Noncompliance by the Company

1122(d)(3)(i)- Delinquency Reporting - During the reporting period, certain
monthly investor or remittance reports included errors in the calculation and/or
the reporting of delinquencies for the pool assets, which errors may or may not
have been material. All such errors were the result of data processing errors
and/or the mistaken interpretation of data provided by other parties
participating in the servicing function. All necessary adjustments to data
processing systems and/or interpretive clarifications have been made to correct
those errors and to remedy related procedures.

Material instances of Noncompliance by any Vendor

NONE

Material Deficiencies In Company's Policies and Procedures to Monitor Vendors'
Compliance

NONE





EX-33 (c)
(logo) WELLS FARGO

Corporate Trust Services
9062 Old Annapolis Road
Columbia, MD 21045-1951
410 884-2000
410 715-2380 Fax

Wells Fargo Bank, N.A.

ASSESSMENT OF COMPLIANCE WITH APPLICABLE SERVICING CRITERIA

Corporate Trust Services division of Wells Fargo Bank, National Association (the
"Company") provides this assessment of compliance with the following applicable
servicing criteria set forth in Item 1122(d) of Regulation AB promulgated by
the Securities and Exchange Commission. Management has determined that the
servicing criteria are applicable in regards to the servicing platform for the
period as follows:

Platform: Publicly-issued (i.e., transaction-level reporting initially required
under the Securities Exchange Act of 1934, as amended) residential
mortgage-backed securities, commercial mortgage-backed securities and other
asset-backed securities, for which the Company provides master servicing,
trustee, securities administration or paying agent services, excluding
transactions issued by any agency or instrumentality of the U.S. government or
any government sponsored entity (the "Platform").

Applicable Servicing Criteria: All servicing criteria set forth in Item 1122(d),
to the extent required in the related transaction agreements or required by the
Item 1122(d) servicing criteria in regards to the activities performed by the
Company, except for the following criteria: 1122(d)(1)(iii), 1122(d)(4)(ii),
1122(d)(4)(iv), 1122(d)(4)(v), 1122(d)(4)(viii), 1122(d)(4)(ix), 1122(d)(4)(x),
1122(d)(4)(xi), 1122(d)(4)(xii) and 1122(d)(4)(xiii), which management has
determined are not applicable to the activities the Company performs with
respect to the Platform (the "Applicable Servicing Criteria").

Period: Twelve months ended December 31, 2006 (the "Period").

Third parties classified as vendors: With respect to servicing criteria
1122(d)(4)(i), the Company has engaged various vendors to handle certain Uniform
Commercial Code filing functions required by the servicing criteria ("vendors").
The Company has determined that none of the vendors is a "servicer" as defined
in Item 1101(j) of Regulation AB, and the Company elects to take responsibility
for assessing compliance with the portion of the servicing criteria applicable
to each vendor as permitted by Interpretation 17.06 of the SEC Division of
Corporation Finance Manual of Publicly Available Telephone Interpretations
("Interpretation 17.06"). The Company has policies and procedures in place to
provide reasonable assurance that each vendor's activities comply in all
material respects with the servicing criteria applicable to each vendor. The
Company is solely responsible for determining that it meets the SEC requirements
to apply Interpretation 17.06 for the vendors and related criteria.

With respect to the Platform and the Period, the Company provides the following
assessment of compliance with respect to the Applicable Servicing Criteria:

1. The Company is responsible for assessing its compliance with the Applicable
Servicing Criteria.

2. The Company has assessed compliance with the Applicable Servicing Criteria,
including servicing criteria for which compliance is determined based on
Interpretation 17.06 as described above, as of and for the Period. In performing
this assessment, management used the criteria set forth by the Securities and
Exchange Commission in paragraph (d) of Item 1122 of Regulation AB.

3. Other than as identified on Schedule A hereto, as of and for the Period, the
Company was in material compliance with the Applicable Servicing Criteria. Any
material instances of noncompliance by a vendor of which the Company is aware
and any material deficiency in the Company's policies and procedures to monitor
vendors' compliance that the Company has identified is specified on Schedule A
hereto.

KPMG LLP, a registered public accounting firm, has issued an attestation
report with respect to the Company's foregoing assessment of compliance as of
and for the Period.

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:/s/ Brian Bartlett
Brian Bartlett

Its:   Executive Vice President

Dated: March 1, 2007


(page)


(logo) WELLS FARGO

Corporate Trust Services
9062 Old Annapolis Road
Columbia, MD 21045-1951
410 884-2000
410 715-2380 Fax

Wells Fargo Bank, N.A.

Schedule A

Material Instances of Noncompliance by the Company

1122(d)(3)(i)- Delinquency Reporting - During the reporting period, certain
monthly investor or remittance reports included errors in the calculation and/or
the reporting of delinquencies for the pool assets, which errors may or may not
have been material. All such errors were the result of data processing errors
and/or the mistaken interpretation of data provided by other parties
participating in the servicing function. All necessary adjustments to data
processing systems and/or interpretive clarifications have been made to correct
those errors and to remedy related procedures.

Material instances of Noncompliance by any Vendor

NONE

Material Deficiencies In Company's Policies and Procedures to Monitor Vendors'
Compliance

NONE





EX-33 (d)
(logo) WELLS FARGO

Wells Fargo Bank, N.A.
Document Custody
1015 10th Avenue SE
Minneapolis, MN 55414


Appendix I


ASSESSMENT OF COMPLIANCE WITH APPLICABLE SERVICING CRITERIA

Corporate Trust Services division of Wells Fargo Bank, National Association
(the "Company") is responsible for assessing compliance with the servicing
criteria set forth in Item 1122(d) of Regulation AB promulgated by the
Securities and Exchange Commission. The Company has determined that the
servicing criteria are applicable in regard to the servicing platform for the
period as follows:

Platform: Publicly-issued (i.e., transaction-level reporting required under
the Securities Exchange Act of 1934, as amended) residential mortgage-backed
securities and commercial mortgage-backed securities issued on or after January
1, 2006, for which the Company provides document custody services, excluding any
publicly issued transactions issued by any government sponsored entity (the
"Platform").

Applicable Servicing Criteria: The servicing criteria set forth in Item
1122(d)(4)(i) and 1122(d)(4)(ii), in regard to the activities performed by the
Company with respect to the Platform (the "Applicable Servicing Criteria"). The
Company has determined that all other servicing criteria set forth in Item
1122(d) are not applicable to the Platform.

Period: Twelve months ended December 31, 2006 (the "Period").

With respect to the Platform, the Company provides the following
assessment of compliance with respect to the Applicable Servicing Criteria:

1. The Company is responsible for assessing the Company's compliance with
the Applicable Servicing Criteria as of and for the Period.

2. The Company has assessed compliance with the Applicable Servicing
Criteria. In performing this assessment, the Company used the criteria set forth
by the Securities and Exchange Commission in paragraph (d) of Item 1122 of
Regulation AB.

3. Based on such assessment, as of and for the Period, the Company has
complied, in all material respects with the Applicable Servicing Criteria.

KPMG LLP, a registered public accounting firm, has issued an attestation
report with respect to the Company's assessment of compliance as of and for the
Period.


WELLS FARGO BANK, NATIONAL ASSOCIATION

By: /s/ Shari L. Gillund
Shari L. Gillund

Its: Senior Vice President

Dated: March 1, 2007





EX-34 (a)
(logo) KPMG

KPMG LLP
Suite 2000
355 South Grand Avenue
Los Angeles, CA 90071-1568




Report of Independent Registered Public Accounting Firm


The Board of Directors
Countrywide Financial Corporation:

We have examined management's assessment, included in the accompanying
Assessment of Compliance with Applicable Servicing Criteria, that Countrywide
Financial Corporation and certain of its subsidiaries, including its direct and
indirect wholly owned subsidiaries, Countrywide Home Loans (CHL), Countrywide
Tax Services Corporation, Newport Management Corporation, and Countrywide Home
Loans Servicing L.P., a wholly owned subsidiary of CHL (collectively the
Company) complied with the servicing criteria set forth in Item 1122(d) of the
Securities and Exchange Commission's Regulation AB for publicly issued
residential mortgage-backed securities (securities collateralized by residential
mortgage loans, including prime, alternative loan products, subprime, HELOC, and
closed seconds) issued on or after January 1, 2006, for which the Company
provides cash collection and administration, investor remittances, and reporting
(except for those activities relating to trustee and paying agent services), and
pool asset administration (except for those activities relating to custodial
operations of pool assets and related documents), collectively "Servicing
Functions", excluding any transactions issued by any government sponsored
enterprise for which the Company provides Servicing Functions (the Platform),
except for servicing criteria 1122(d)(1)(iii), 1122(d)(3)(i)(B), only as it
relates to information other than that contained in the monthly remittance
report delivered by the servicer to the master servicer, trustee, and/or bond
administrator, and 1122(d)(3)(i)(D), only as it relates to the agreeing with
investors' records as to the total unpaid principal balance and number of pool
assets serviced by the servicer, 1122(d)(3)(ii), only as it relates to amounts
other than amounts remitted by the servicer to the master services, trustee,
and/or bond administrator, 1122(d)(3)(iii), 1122(d)(3)(iv), 1122(d)(4)(i), and
1122(d)(4)(ii), only as 1122(d)(4)(i) and 1122(d)(4)(ii) relate to the custodial
operations of the pool assets and related documents (collateral file) by the
document custodian responsible for such functions for the related transaction
and 1122(d)(4)(xv), only as it relates to Item 1115 of Regulation AB (derivative
transactions), as of and for the year ended December 31, 2006. Management is
responsible for the Company's compliance with those servicing criteria. Our
responsibility is to express an opinion on management's assessment about the
Company's compliance based on our examination.

Our examination was conducted in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and, accordingly, included
examining, on a test basis, evidence about the Company's compliance with the
servicing criteria specified above and performing such other procedures as we
considered necessary in the circumstances. Our examination included testing of
less than all of the individual asset-backed transactions and securities that
comprise the Platform, testing of less than all of the servicing activities
related to the Platform, and determining whether the Company processed those
selected transactions and performed those selected activities in compliance with
the servicing criteria. Furthermore,


(page)


our procedures were limited to the selected transactions and servicing
activities performed by the Company during the period covered by this report.
Our procedures were not designed to determine whether errors may have occurred
either prior to or subsequent to our tests that may have affected the balances
or amounts calculated or reported by the Company during the period covered by
this report for the selected transactions or any other transactions. We believe
that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on the Company's compliance
with the servicing criteria.

In our opinion, management's assessment that the Company complied with the
aforementioned servicing criteria as of and for the year ended December 31, 2006
is fairly stated in all material respects.

/s/ KPMG LLP

Los Angeles, California
February 28, 2007


2


KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.





EX-34 (b)
(logo) KPMG

KPMG LLP
303 East Wacker Drive
Chicago, IL 60801-5212

Report of Independent Registered Public Accounting Firm

The Board of Directors
The Corporate Trust Services division of Wells Fargo Bank, National Association:

We have examined the compliance of the Corporate Trust Services division of
Wells Fargo Bank, National Association (the Company) with the servicing criteria
set forth in Item 1122(d) of the Securities and Exchange Commission's Regulation
AB for publicly-issued (i.e., transaction-level reporting initially required
under the Securities Exchange Act of 1934, as amended) residential
mortgage-backed securities, commercial mortgage-backed securities and other
asset-backed securities, for which the Company provides master servicing,
trustee, securities administration or paying agent services, excluding
transactions issued by any agency or instrumentality of the U.S. government or
any government sponsored entity (the Platform), except for servicing criteria
1122(d)(1)(iii), 1122(d)(4)(ii), 1122(d)(4)(iv), 1122(d)(4)(v),
1122(d)(4)(viii), 1122(d)(4)(ix), 1122(d)(4)(x), 1122(d)(4)(xi),
1122(d)(4)(xii) and 1122(d)(4)(xiii), which the Company has determined are not
applicable to the activities it performs with respect to the Platform, as of and
for the twelve months ended December 31, 2006. Management is responsible for the
Company's compliance with those servicing criteria. Our responsibility is to
express an opinion on management's assertion about the Company's compliance
based on our examination.

Our examination was conducted in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and, accordingly, included
examining, on a test basis, evidence about the Company's compliance with the
servicing criteria specified above and performing such other procedures as we
considered necessary in the circumstances. Our examination included testing of
less than all of the individual asset-backed transactions and securities that
comprise the Platform, testing of less than all of the servicing activities
related to the Platform, and determining whether the Company processed those
selected transactions and performed those selected activities in compliance with
the servicing criteria. Furthermore, our procedures were limited to the selected
transactions and servicing activities performed by the Company during the period
covered by this report. Our procedures were not designed to determine whether
errors may have occurred either prior to or subsequent to our tests that may
have affected the balances or amounts calculated or reported by the Company
during the period covered by this report for the selected transactions or any
other transactions. We believe that our examination provides a reasonable basis
for our opinion. Our examination does not provide a legal determination on the
Company's compliance with the servicing criteria.

As described in the accompanying management's Assessment of Compliance With
Applicable Servicing Criteria, for servicing criteria 1122(d)(4)(i), the Company
has engaged various vendors to perform the activities required by these
servicing criteria. The Company has determined that these vendors are not
considered a "servicer" as defined in Item 1101(j) of Regulation AB, and the
Company has elected to take responsibility for assessing compliance with the
servicing criteria applicable to each vendor as permitted by Interpretation
17.06 of the SEC Division of Corporation Finance Manual of Publicly Available
Telephone Interpretations ("Interpretation 17.06"). As permitted by
Interpretation 17.06, the Company has asserted that it has policies and

KPMG LLP, a U.S. limited liability partnership, in the U.S. member firm
of KPMG International, a Swiss cooperative.

(page)

(logo) KPMG

procedures in place designed to provide assurance that the vendors' activities
comply in all material respects with the servicing criteria applicable to each
vendor. The Company is solely responsible for determining that it meets the SEC
requirements to apply Interpretation 17.06 for the vendors and related criteria
as described in its assertion, and we performed no procedures with respect to
the Company's eligibility to apply Interpretation 17.06.

Our examination disclosed material noncompliance with criterion 1122(d)(3)(i),
as applicable to the Company during the twelve months ended December 31, 2006.
Certain monthly investor or remittance reports included errors in the
calculation and/or the reporting of delinquencies for the pool assets.

In our opinion, except for the material non-compliance described above, the
Company complied, in all material respects, with the aforementioned servicing
criteria, including servicing criteria for which compliance is determined based
on Interpretation 17.06 as discussed above, as of and for the twelve months
ended December 31, 2006.

/s/ KPMG LLP

Chicago, IL 60601
March 1, 2007





EX-34 (c)
(logo) KPMG

KPMG LLP
303 East Wacker Drive
Chicago, IL 60801-5212

Report of Independent Registered Public Accounting Firm

The Board of Directors
The Corporate Trust Services division of Wells Fargo Bank, National Association:

We have examined the compliance of the Corporate Trust Services division of
Wells Fargo Bank, National Association (the Company) with the servicing criteria
set forth in Item 1122(d) of the Securities and Exchange Commission's Regulation
AB for publicly-issued (i.e., transaction-level reporting initially required
under the Securities Exchange Act of 1934, as amended) residential
mortgage-backed securities, commercial mortgage-backed securities and other
asset-backed securities, for which the Company provides master servicing,
trustee, securities administration or paying agent services, excluding
transactions issued by any agency or instrumentality of the U.S. government or
any government sponsored entity (the Platform), except for servicing criteria
1122(d)(1)(iii), 1122(d)(4)(ii), 1122(d)(4)(iv), 1122(d)(4)(v),
1122(d)(4)(viii), 1122(d)(4)(ix), 1122(d)(4)(x), 1122(d)(4)(xi),
1122(d)(4)(xii) and 1122(d)(4)(xiii), which the Company has determined are not
applicable to the activities it performs with respect to the Platform, as of and
for the twelve months ended December 31, 2006. Management is responsible for the
Company's compliance with those servicing criteria. Our responsibility is to
express an opinion on management's assertion about the Company's compliance
based on our examination.

Our examination was conducted in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and, accordingly, included
examining, on a test basis, evidence about the Company's compliance with the
servicing criteria specified above and performing such other procedures as we
considered necessary in the circumstances. Our examination included testing of
less than all of the individual asset-backed transactions and securities that
comprise the Platform, testing of less than all of the servicing activities
related to the Platform, and determining whether the Company processed those
selected transactions and performed those selected activities in compliance with
the servicing criteria. Furthermore, our procedures were limited to the selected
transactions and servicing activities performed by the Company during the period
covered by this report. Our procedures were not designed to determine whether
errors may have occurred either prior to or subsequent to our tests that may
have affected the balances or amounts calculated or reported by the Company
during the period covered by this report for the selected transactions or any
other transactions. We believe that our examination provides a reasonable basis
for our opinion. Our examination does not provide a legal determination on the
Company's compliance with the servicing criteria.

As described in the accompanying management's Assessment of Compliance With
Applicable Servicing Criteria, for servicing criteria 1122(d)(4)(i), the Company
has engaged various vendors to perform the activities required by these
servicing criteria. The Company has determined that these vendors are not
considered a "servicer" as defined in Item 1101(j) of Regulation AB, and the
Company has elected to take responsibility for assessing compliance with the
servicing criteria applicable to each vendor as permitted by Interpretation
17.06 of the SEC Division of Corporation Finance Manual of Publicly Available
Telephone Interpretations ("Interpretation 17.06"). As permitted by
Interpretation 17.06, the Company has asserted that it has policies and

KPMG LLP, a U.S. limited liability partnership, in the U.S. member firm
of KPMG International, a Swiss cooperative.

(page)

(logo) KPMG

procedures in place designed to provide assurance that the vendors' activities
comply in all material respects with the servicing criteria applicable to each
vendor. The Company is solely responsible for determining that it meets the SEC
requirements to apply Interpretation 17.06 for the vendors and related criteria
as described in its assertion, and we performed no procedures with respect to
the Company's eligibility to apply Interpretation 17.06.

Our examination disclosed material noncompliance with criterion 1122(d)(3)(i),
as applicable to the Company during the twelve months ended December 31, 2006.
Certain monthly investor or remittance reports included errors in the
calculation and/or the reporting of delinquencies for the pool assets.

In our opinion, except for the material non-compliance described above, the
Company complied, in all material respects, with the aforementioned servicing
criteria, including servicing criteria for which compliance is determined based
on Interpretation 17.06 as discussed above, as of and for the twelve months
ended December 31, 2006.

/s/ KPMG LLP

Chicago, IL 60601
March 1, 2007





EX-34 (d)
(logo) KPMG

KPMG LLP
303 East Wacker Drive
Chicago, IL 60601-5212

Report of Independent Registered Public Accounting Firm

The Board of Directors
The Corporate Trust Services division of Wells Fargo Bank National Association:

We have examined management's assertion, included in the accompanying Appendix
I, that the Document Custody section of the Corporate Trust Services division of
Wells Fargo Bank National Association complied with the servicing criteria set
forth in Item 1122(d) of the Securities and Exchange Commission's Regulation AB
for publicly-issued (i.e., transaction-level reporting required under the
Securities Exchange Act of 1934, as amended) residential mortgage-backed
securities and commercial mortgage-backed securities issued on or after January
1, 2006 for which the Company provides document custody services, excluding any
publicly issued transactions issued by any government sponsored entity (the
Platform) as of and for the twelve months ended December 31, 2006. Management
has determined that servicing criteria 1122(d)(4)(i) and 1122(d)(4)(ii) are
applicable to the activities it performs with respect to the Platform, and that
all other servicing criteria set forth in Item 1122(d) are not applicable to the
document custody services provided by the Company with respect to the Platform.
Management is responsible for the Company's compliance with those servicing
criteria. Our responsibility is to express an opinion on management's assertion
about the Company's compliance based on our examination.

Our examination was conducted in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and, accordingly, included
examining, on a test basis, evidence about the Company's compliance with the
servicing criteria specified above and performing such other procedures as we
considered necessary in the circumstances. Our examination included testing of
less than all of the individual asset-backed transactions and securities that
comprise the Platform, testing of less than all of the servicing activities
related to the Platform, and determining whether the Company processed those
selected transactions and performed those selected activities in compliance with
the servicing criteria. Furthermore, our procedures were limited to the selected
transactions and servicing activities performed by the Company during the period
covered by this report. Our procedures were not designed to determine whether
errors may have occurred either prior to or subsequent to our tests that may
have affected the balances or amounts calculated or reported by the Company
during the period covered by this report for the selected transactions or any
other transactions. We believe that our examination provides a reasonable basis
for our opinion. Our examination does not provide a legal determination on the
Company's compliance with the servicing criteria.

In our opinion, management's assertion that the Company complied with the
aforementioned servicing criteria as of and for the period ended December 31,
2006 is fairly stated, in all material respects.

/s/ KPMG LLP

Chicago, Illinois
March 1, 2007

KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG
International, a Swiss cooperative.





EX-35 (a)
(logo) Countrywide
HOME LOANS

400 Countrywide Way
Simi Valley, California 93065-6298

February 28, 2007




WELLS FARGO
9062 OLD ANNAPOLIS RD
COLUMBIA, MD 21045
Laneise Foxworth


OFFICER'S CERTIFICATE


I, Joseph Candelario, hereby certify that I am an officer of Countrywide LP,
Inc., general partner of Countrywide Home Loans Servicing LP (the "Servicer"). I
further certify, with respect to the applicable servicing agreement relating to
the securitization transaction(s) set forth on Exhibit A attached hereto (the
"Servicing Agreement") that:

(a)  A review of the activities of the Servicer during the preceding calendar
year and of the performance of the Servicer under the Servicing Agreement has
been made under my supervision; and

(b)  To the best of my knowledge, based on such review, the Servicer has
fulfilled all of its obligations under the Servicing Agreement in all material
respects throughout such year.

/s/ Joseph Candelario
Joseph Candelario
First Vice President
Compliance Officer
Loan Administration

February 28, 2007

See Deal Name listing on following page.


(page)


Exhibit A

ACE 2006-CW1
ACE 2006-FM2
ACE 2006-NC2
ACE 2006-NC3
BAFC 2006-2
BAFC 2006-A
BAFC 2006-D
BAFC 2006-H
BCAP 2006AA1
BCAP 2006-AA2
BSALTA 2006-1
BSALTA 2006-2
BSALTA 2006-3
BSALTA 2006-4
BSALTA 2006-5
BSALTA 2006-6
BSALTA 2006-7
BSALTA 2006-8
BSARM 2006-2
BSARM 2006-4
CSAB 2006-2
CSAB 2006-3
CSAB 2006-4
CSFB ARMT 2006-1
CSFB ARMT 2006-2
CSFB ARMT 2006-3
CSMC 2006-1
CSMC 2006-2
CSMC 2006-3
CSMC 2006-4
CSMC 2006-5
CSMC 2006-7
CSMC 2006-8
CSMC 2006-9
DBALT 2006-AB3 (SUB)
DBALT 2006-AB4 (SUB)
DBALT 2006-AF1
DBALT 2006-AR1
DBALT 2006-AR2
DBALT 2006-AR3
DBALT 2006-AR4
DBALT 2006-AR5 (SUB)
DBALT 2006-AR6 (SUB)
DBALT 2006-OA1 (SUB)
GSAA 2006-10 (SUB)
GSAA 2006-11
GSAA 2006-14
GSAA 2006-16
GSAA 2006-17


(page)


Exhibit A (con't.)
GSAA 2006-19
GSAA 2006-20
GSAA 2006-4
GSAA 2006-4 (SUB)
GSAA 2006-7 SUB
GSAA 2006-8
GSAA 2006-8 (SUB)
GSR 2006-1F (SUB)
GSR 2006-1F (SUB)
GSR 2006-2F (SUB)
GSR 2006-2F (SUB)
GSR 2006-3F (SUB)
GSR 2006-3F (SUB)
GSR 2006-5F (SUB)
GSR 2006-5F (SUB)
GSR 2006-6F
GSR 2006-7F
GSR 2006-8F
GSR 2006-9F
GSR 2006-10F
GSR 2006-AR1
GSR 2006-AR2
GSR 2006-OA1
HARBORVIEW 2006-2
HARBORVIEW 2006-6
HARBORVIEW 2006-11
HARBORVIEW 2006-12
SASCO 2006-BC2
SASCO 2006-BC3
SASCO 2006-BC4
SASCO 2006-BC5
THORNBURG 2006-1
THORNBURG 2006-2
THORNBURG 2006-4
THORNBURG 2006-5
DBALT 2006-AR6
DBALT 2006-OA1
GSR 2006-1F
GSR 2006-5F
JPMMT 2006-A7
JPMMT 2006-S2
JPMMT 2006-S3
JPMMT 2006-54
LMT 2006-9
LUMINENT 2006-2
LUMINENT 2006-5
LUMINENT 2006-5
LUMINENT 2006-6
MARM 2006-2
MARM 2006-OA2
MLMI 2006-A1


(page)


Exhibit A (con't.)
MLMI 2006-A2
MLMI 2006-A3
MLMI 2006-A4
MSAC 2006-HE8
MSIX 2006-1
MSM 2006-1AR
SAIL 2006-3
SAMI II 2006-AR1
SAMI II 2006-AR2
SAMI II 2006-AR3
SAMI II 2006-AR4
SAMI II 2006-AR6
SAMI II 2006-AR7
SAMI II 2006-AR8
SARM 2006-2
SARM 2006-3
SARM 2006-4
SARM 2006-5
SARM 2006-7
SARM 2006-8
SARM 2006-9
THORNBURG 2006-3
ZUNI 2006-OA1
GSR 2006-3F
GSR 2006-2F
PRIME 2006-CL1
SARM 2006-1
THORNBURG 2006-6
JPALT 2006-A1
JPALT 2006-A2
JPALT 2006-A3
JPALT 2006-A4
JPALT 2006-A6
JPALT 2006-A7
JPALT 2006-S1
JPALT 2006-S3
JPALT 2006-S4
JPMAC 2006-CW2
JPMMT 2006-A1
JPMMT 2006-A2
JPMMT 2006-A3
JPMMT 2006-A4
JPMMT 2006-A6
HASCO 2006-HE1
SEQUOIA 2006-1
SEQUOIA 2006-1
SQALT 2006-1





EX-35 (b)
(logo) WELLS FARGO

Corporate Trust Services
MAC N2702-011
9062 Old Annapolis Road
Columbia, MD 21045
410 884-2000
410 715-2380 Fax

Wells Fargo Bank, N.A.

March 12, 2007

Bear Stearns Asset Backed Securities I LLC
245 Park Avenue
4th Floor
New York, NY 10167

RE: Annual Statement As To Compliance for Structured Asset Mortgage Investments
II Trust 2006-AR2

Per Section 3.16 of the Pooling and Servicing Agreement, dated as of 2/1/2006,
the undersigned Officer of Wells Fargo Bank, N.A., (Master Servicer), hereby
certifies the following for the 2006 calendar year or portion thereof:

(i)  a review of the activities of the Master Servicer during the preceding
     calendar year and of its performance under this Agreement has been made
     under such officer's supervision and

(ii) to the best of such officer's knowledge, based on such review, the Master
     Servicer has fulfilled all of its obligations under this Agreement in all
     material respects throughout such year, or, if there has been a failure to
     fulfill any such obligation in any material respect, specifying each such
     failure known to such officer and the nature and status of cure provisions
     thereof.




Certified By:
/s/ Kristen Ann Cronin
Kristen Ann Cronin, Vice President

Certified By:
/s/ Gordon Johnson
Gordon Johnson, Assistant Secretary





EX-35 (c)
(logo) WELLS FARGO

Corporate Trust Services
MAC N2702-011
9062 Old Annapolis Road
Columbia, MD 21045
410 884-2000
410 715-2380 Fax

Wells Fargo Bank, N.A.

March 24, 2007

Bear Stearns Asset Backed Securities I LLC
245 Park Avenue
4th Floor
New York, NY 10167

RE: Annual Statement As To Compliance for Structured Asset Mortgage
Investments II Trust 2006-AR2

Per Section 3.16 of the Pooling and Servicing Agreement, dated as of 2/1/2006,
the undersigned Officer of Wells Fargo Bank, N.A., (Securities Administrator),
hereby certifies the following for the 2006 calendar year or portion thereof:

(i) a review of the activities of the Master Servicer during the preceding
calendar year and of its performance under this Agreement has been made under
such officer's supervision and

(ii) to the best of such officer's knowledge, based on such review, the Master
Servicer has fulfilled all of its obligations under this Agreement in all
material respects throughout such year, or, if there has been a failure to
fulfill any such obligation in any material respect, specifying each such
failure known to such officer and the nature and status of cure provisions
thereof.


Certified By:
/s/ Scott Strack
Scott Strack, Vice President


Certified By:
/s/ Gordon Johnson
Gordon Johnson, Assistant Secretary


Ex. 99


                               AMENDMENT REG AB
         TO THE MASTER MORTGAGE LOAN PURCHASEAND SERVICING AGREEMENT

            This  is  Amendment  Reg AB  ("Amendment  Reg  AB"),  dated  as of
January 1, 2006, by and between EMC Mortgage  Corporation  (the  "Purchaser"),
and  Countrywide  Home Loans,  Inc. (the  "Company") to that certain  Seller's
Warranties  and  Servicing  Agreement]  dated as of  September  1, 2002 by and
between the Company and the Purchaser (as amended,  modified or  supplemented,
the "Existing Agreement").

W I T N E S S E T H

            WHEREAS,  the Company and the  Purchaser  have agreed,  subject to
the terms and conditions of this Amendment Reg AB that the Existing  Agreement
be amended to  reflect  agreed  upon  revisions  to the terms of the  Existing
Agreement.

            Accordingly,  the  Company  and the  Purchaser  hereby  agree,  in
consideration of the mutual premises and mutual  obligations set forth herein,
that the Existing Agreement is hereby amended as follows:

1.    Capitalized  terms used herein but not otherwise  defined shall have the
meanings  set forth in the  Existing  Agreement.  The  Existing  Agreement  is
hereby   amended  by  adding  the  following   definitions   in  their  proper
alphabetical order:

      Commission:  The United States Securities and Exchange Commission.

      Company Information:  As defined in Section 2(g)(i)(A)(1).

      Depositor:  The  depositor,  as such term is defined in  Regulation  AB,
with respect to any Securitization Transaction.

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

      Master Servicer:  With respect to any  Securitization  Transaction,  the
"master servicer," if any, identified in the related transaction documents.

      Qualified  Correspondent:  Any Person from which the  Company  purchased
Mortgage  Loans,  provided that the following  conditions are  satisfied:  (i)
such  Mortgage  Loans were  either (x)  originated  pursuant  to an  agreement
between the Company and such Person that  contemplated  that such Person would
underwrite  mortgage  loans  from time to time,  for sale to the  Company,  in
accordance   with   underwriting   guidelines   designated   by  the   Company
("Designated  Guidelines") or guidelines that do not vary materially from such
Designated  Guidelines or (y) individually  re-underwritten  by the Company to
the  Designated  Guidelines at the time such  Mortgage  Loans were acquired by
the Company;  (ii) either (x) the Designated Guidelines were, at the time such
Mortgage  Loans  were  originated,  used  by the  Company  in  origination  of
mortgage  loans of the same type as the Mortgage  Loans for the  Company's own
account  or (y) the  Designated  Guidelines  were,  at the time such  Mortgage
Loans were  underwritten,  designated by the Company on a consistent basis for
use by lenders in  originating  mortgage loans to be purchased by the Company;
and (iii) the Company employed,  at the time such Mortgage Loans were acquired
by the Company,  pre-purchase or post-purchase  quality  assurance  procedures
(which may involve,  among other things,  review of a sample of mortgage loans
purchased  during a  particular  time period or through  particular  channels)
designed to ensure that either Persons from which it purchased  mortgage loans
properly  applied the underwriting  criteria  designated by the Company or the
Mortgage  Loans  purchased  by  the  Company  substantially  comply  with  the
Designated Guidelines.
<PAGE>

      Reconstitution:  Any Securitization Transaction or Whole Loan Transfer.

      Reconstitution  Agreement:  An agreement or  agreements  entered into by
the Company and the Purchaser  and/or certain third parties in connection with
a  Reconstitution  with respect to any or all of the Mortgage  Loans  serviced
under the Agreement.

      Regulation AB: Subpart  229.1100 - Asset Backed  Securities  (Regulation
AB), 17 C.F.R.  ss.ss.229.1100-229.1123,  as such may be amended  from time to
time,  and  subject  to such  clarification  and  interpretation  as have been
provided by the Commission in the adopting release  (Asset-Backed  Securities,
Securities Act Release No. 33-8518,  70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005))
or by the staff of the Commission,  or as may be provided by the Commission or
its staff from time to time.

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

      Securitization  Transaction:  Any  transaction  subject to Regulation AB
involving  either (1) a sale or other  transfer of some or all of the Mortgage
Loans  directly  or  indirectly  to an issuing  entity in  connection  with an
issuance of publicly offered, rated or unrated  mortgage-backed  securities or
(2) an  issuance  of  publicly  offered,  rated  or  unrated  securities,  the
payments  on  which  are  determined  primarily  by  reference  to one or more
portfolios of residential  mortgage loans consisting,  in whole or in part, of
some or all of the Mortgage Loans.

      Servicer:  As defined in Section 2(c)(iii).

      Servicing Criteria:  The "servicing  criteria" set forth in Item 1122(d)
of Regulation AB, as such may be amended from time to time.

      Static Pool  Information:  Static pool  information as described in Item
1105 of Regulation AB.

      Subcontractor:  Any vendor,  subcontractor  or other  Person that is not
responsible for the overall  servicing (as "servicing" is commonly  understood
by participants in the  mortgage-backed  securities  market) of Mortgage Loans
but  performs one or more  discrete  functions  identified  in Item 1122(d) of
Regulation AB with respect to Mortgage  Loans under the direction or authority
of the Company or a Subservicer.


                                      2
<PAGE>

      Subservicer:  Any Person that services  Mortgage  Loans on behalf of the
Company or any Subservicer  and is responsible  for the  performance  (whether
directly or through  Subservicers or Subcontractors) of a substantial  portion
of the material  servicing  functions  required to be performed by the Company
under this  Agreement or any  Reconstitution  Agreement that are identified in
Item 1122(d) of Regulation AB; provided,  however, that the term "Subservicer"
shall not include any master  servicer other than the Company,  or any special
servicer  engaged at the request of a  Depositor,  Purchaser  or investor in a
Securitization  Transaction,  nor any "back-up servicer" or trustee performing
servicing  functions on behalf of a Securitization  Transaction engaged at the
request  of  a  Depositor,   Purchaser,   or  investor  in  a   Securitization
Transaction.

      Third-Party   Originator:   Each   Person,   other   than  a   Qualified
Correspondent, that originated Mortgage Loans acquired by the Company.

      Whole  Loan  Transfer:  Any  sale  or  transfer  of  some  or all of the
Mortgage Loans, other than a Securitization Transaction.

2.    The  Purchaser  and the Company  agree that the  Existing  Agreement  is
hereby amended by adding the following provisions:

      (a)   Intent of the Parties; Reasonableness.

      The Purchaser and the Company  acknowledge and agree that the purpose of
Article 2 of this  Agreement is to facilitate  compliance by the Purchaser and
any  Depositor  with the  provisions  of  Regulation  AB and related rules and
regulations of the  Commission.  Neither the Purchaser nor any Depositor shall
exercise its right to request  delivery of  information  or other  performance
under these  provisions  other than in good faith,  or for purposes other than
compliance  with the  Securities  Act,  the  Exchange  Act and the  rules  and
regulations  of  the  Commission   thereunder.   Although   Regulation  AB  is
applicable by its terms only to offerings of asset-backed  securities that are
registered under the Securities Act, the parties  acknowledges  that investors
in  privately  offered  securities  may  require  that  the  Purchaser  or any
Depositor  provide  comparable  disclosure  in  unregistered  offerings.   The
parties  agree  over time to  negotiate  in good  faith  with  respect  to the
provision  of  comparable   disclosure  in  private  offerings.   The  Company
acknowledges  that  interpretations  of the  requirements of Regulation AB may
change  over  time,  whether  due to  interpretive  guidance  provided  by the
Commission  or its staff.  The Company  agrees to negotiate in good faith with
the  Purchaser or any  Depositor  with regard to any  reasonable  requests for
delivery  of  information  under  these  provisions  on the basis of  evolving
interpretations  of  Regulation  AB.  In  connection  with any  Securitization
Transaction,  the Company shall  cooperate fully with the Purchaser to deliver
to the  Purchaser  (including  any of its  assignees  or  designees)  and  any
Depositor, any and all statements,  reports,  certifications,  records and any
other  information  necessary  to permit the  Purchaser  or such  Depositor to
comply with the  provisions of Regulation AB,  together with such  disclosures
relating to the  Company,  and any parties or items  identified  in writing by
the Purchaser,  including, any Subservicer, any Third-Party Originator and the
Mortgage  Loans,  or the servicing of the Mortgage Loans necessary in order to
effect  such  compliance,   in  the  Purchaser's  or  Depositor's   reasonable
determination.


                                      3
<PAGE>

      The  Purchaser  agrees  that it will  cooperate  with  the  Company  and
provide   sufficient  and  timely  notice  of  any  information   requirements
pertaining  to a  Securitization  Transaction.  The  Purchaser  will  make all
reasonable  efforts to limit  requests for  information,  reports or any other
materials  to  items  the  Purchaser   reasonably  believes  is  required  for
compliance with Regulation AB, and shall not request  information which is not
required for such compliance.

      (b)   Additional Representations and Warranties of the Company.

            (i)   The Company  shall be deemed to represent  to the  Purchaser
      and to any  Depositor,  as of the  date on  which  information  is first
      provided to the  Purchaser  or any  Depositor  under  Section 2(c) that,
      except as disclosed in writing to the Purchaser or such Depositor  prior
      to such date:  (i) the Company is not aware and has not received  notice
      that any default,  early  amortization or other  performance  triggering
      event  has  occurred  as to any other  securitization  due to any act or
      failure to act of the Company;  (ii) the Company has not been terminated
      as servicer in a residential  mortgage loan  securitization,  either due
      to a servicing  default or to  application  of a  servicing  performance
      test or trigger;  (iii) no material  noncompliance  with the  applicable
      servicing criteria with respect to other  securitizations of residential
      mortgage  loans  involving the Company as servicer has been disclosed or
      reported  by the  Company;  (iv) no  material  changes to the  Company's
      policies or procedures  with respect to the  servicing  function it will
      perform  under  this  Agreement  and any  Reconstitution  Agreement  for
      mortgage  loans of a type  similar to the Mortgage  Loans have  occurred
      during  the  three-year   period   immediately   preceding  the  related
      Securitization  Transaction;  (v) there are no aspects of the  Company's
      financial  condition  that could have a material  adverse  effect on the
      performance  by the  Company  of its  servicing  obligations  under this
      Agreement or any  Reconstitution  Agreement;  (vi) there are no material
      legal or governmental  proceedings pending (or known to be contemplated)
      against the Company, any Subservicer or any Third-Party Originator;  and
      (vii) there are no affiliations,  relationships or transactions relating
      to the Company,  any  Subservicer  or any  Third-Party  Originator  with
      respect  to  any  Securitization   Transaction  and  any  party  thereto
      identified by the related  Depositor of a type described in Item 1119 of
      Regulation AB.

            (ii)  If so  requested by the  Purchaser  or any  Depositor on any
      date  following the date on which  information  is first provided to the
      Purchaser  or any  Depositor  under  Section  2(c),  the Company  shall,
      within five Business  Days  following  such request,  confirm in writing
      the  accuracy  of  the  representations  and  warranties  set  forth  in
      paragraph  (i) of  this  Section  or,  if any  such  representation  and
      warranty  is not  accurate  as of the  date  of  such  request,  provide
      reasonably  adequate  disclosure of the pertinent facts, in writing,  to
      the requesting party.

      (c)   Information to Be Provided by the Company.

      In connection with any Securitization  Transaction the Company shall (1)
within  five  Business  Days  following   request  by  the  Purchaser  or  any
Depositor,  provide to the Purchaser and such  Depositor  (or, as  applicable,
cause  each  Third-Party  Originator  and each  Subservicer  to  provide),  in
writing   reasonably   required  for  compliance   with   Regulation  AB,  the
information and materials  specified in paragraphs  (i), (ii),  (iii) and (vi)
of this Section 2(c), and (2) as promptly as practicable  following  notice to
or discovery by the Company,  provide to the  Purchaser  and any Depositor (as
required by  Regulation  AB) the  information  specified in paragraph  (iv) of
this Section.


                                      4
<PAGE>

            (i)   If so  requested  by the  Purchaser  or any  Depositor,  the
      Company shall  provide such  information  regarding (x) the Company,  as
      originator of the Mortgage  Loans  (including as an acquirer of Mortgage
      Loans  from  a  Qualified  Correspondent,  if  applicable),  or  (y)  as
      applicable,  each Third-Party  Originator,  and (z) as applicable,  each
      Subservicer,  as is requested for the purpose of  compliance  with Items
      1103(a)(1),  1105 (subject to paragraph (b) below),  1110, 1117 and 1119
      of Regulation AB.  Such information shall include, at a minimum:

                  (A)   the originator's form of organization;

                  (B)   to  the  extent   material,   a  description   of  the
            originator's  origination  program and how long the originator has
            been engaged in  originating  residential  mortgage  loans,  which
            description   shall  include  a  discussion  of  the  originator's
            experience in originating  mortgage loans of a similar type as the
            Mortgage  Loans; if material,  information  regarding the size and
            composition  of  the  originator's   origination  portfolio;   and
            information   that  may  be   material   to  an  analysis  of  the
            performance  of the Mortgage  Loans,  including  the  originators'
            credit-granting  or  underwriting  criteria for mortgage  loans of
            similar  type(s) as the Mortgage Loans and such other  information
            as the Purchaser or any Depositor may  reasonably  request for the
            purpose of compliance with Item 1110(b)(2) of Regulation AB;

                  (C)   a  brief   description   of  any  material   legal  or
            governmental  proceedings  pending (or known to be contemplated by
            a governmental  authority)  against the Company,  each Third-Party
            Originator, if applicable, and each Subservicer; and

                  (D)   a  description  of  any  affiliation  or  relationship
            between the Company, each Third-Party  Originator,  if applicable,
            each   Subservicer   and  any  of  the  following   parties  to  a
            Securitization  Transaction, as such parties are identified to the
            Company by the  Purchaser  or any  Depositor  in writing or in the
            related  Reconstitution  Agreement  within five  Business  Days in
            advance of such Securitization Transaction:

                        (1)   the sponsor;
                        (2)   the depositor;
                        (3)   the issuing entity;
                        (4)   any servicer;
                        (5)   any trustee;
                        (6)   any originator;
                        (7)   any significant obligor;
                        (8)   any enhancement or support provider; and


                                      5
<PAGE>

                        (9)   any other material transaction party.

            (ii)  If so  requested  by the  Purchaser  or any  Depositor,  and
      required by  Regulation  AB or as otherwise  agreed upon by the Company,
      the Purchaser  and/or the  Depositor,  the Company shall provide (or, as
      applicable,  cause each  Third-Party  Originator to provide) Static Pool
      Information  with  respect to the  mortgage  loans (of a similar type as
      the  Mortgage  Loans,  as  reasonably  identified  by the  Purchaser  as
      provided  below)  originated  by (a) the  Company,  if the Company is an
      originator  of  Mortgage  Loans  (including  as an  acquirer of Mortgage
      Loans from a  Qualified  Correspondent,  if  applicable),  and/or (b) as
      applicable,  each Third-Party  Originator.  Such Static Pool Information
      shall be prepared by the Company  (or, if  applicable,  the  Third-Party
      Originator) on the basis of its  reasonable,  good faith  interpretation
      of the  requirements  of Item  1105(a)(1)-(3)  of Regulation  AB. To the
      extent  that  there  is   reasonably   available   to  the  Company  (or
      Third-Party  Originator,  as applicable)  Static Pool  Information  with
      respect  to more than one  mortgage  loan  type,  the  Purchaser  or any
      Depositor  shall be  entitled  to  specify  whether  some or all of such
      information  shall be provided  pursuant to this paragraph.  The content
      of such Static Pool Information may be in the form customarily  provided
      by the  Company,  and need not be  customized  for the  Purchaser or any
      Depositor.  Such Static Pool  Information  for each vintage  origination
      year or prior  securitized  pool, as  applicable,  shall be presented in
      increments  no less  frequently  than  quarterly  over  the  life of the
      mortgage  loans  included  in the  vintage  origination  year  or  prior
      securitized  pool.  The most recent  periodic  increment must be as of a
      date no  later  than 135 days  prior  to the date of the  prospectus  or
      other  offering  document in which the Static Pool  Information is to be
      included or  incorporated  by  reference.  The Static  Pool  Information
      shall be provided  in an  electronic  format  that  provides a permanent
      record of the information  provided,  such as a portable document format
      (pdf) file, or other such electronic format.

            Promptly  following  notice or discovery  of a material  error (as
      determined in Company's  sole  discretion),  in Static Pool  Information
      provided pursuant to the immediately  preceding paragraph  (including an
      omission  to  include  therein  information   required  to  be  provided
      pursuant to such paragraph),  the Company shall provide corrected Static
      Pool  Information to the Purchaser or any Depositor,  as applicable,  in
      the  same  format  in  which  Static  Pool  Information  was  previously
      provided to such party by the Company.

            If so requested by the  Purchaser  or any  Depositor,  the Company
      shall provide (or, as applicable,  cause each Third-Party  Originator to
      provide),  at the expense of the requesting  party (to the extent of any
      additional  incremental  expense  associated  with delivery  pursuant to
      this  Agreement),  agreed-upon  procedures  letters of certified  public
      accountants  pertaining  to Static  Pool  Information  relating to prior
      securitized  pools for  securitizations  closed on or after  January  1,
      2006 or, in the case of Static  Pool  Information  with  respect  to the
      Company's or, if applicable,  Third-Party  Originator's  originations or
      purchases,  to  calendar  months  commencing  January  1,  2006,  as the
      Purchaser or such Depositor shall  reasonably  request.  Such statements
      and  letters  shall  be  addressed  to and be for  the  benefit  of such
      parties as the Purchaser or such Depositor shall designate,  which shall
      be limited to any Sponsor,  any  Depositor,  any broker dealer acting as
      underwriter,  placement  agent or initial  purchaser  with  respect to a
      Securitization  Transaction  or any other party that is  reasonably  and
      customarily  entitled  to  receive  such  statements  and  letters  in a
      Securitization  Transaction.  Any such  statement or letter may take the
      form of a  standard,  generally  applicable  document  accompanied  by a
      reliance  letter  authorizing  reliance by the addressees  designated by
      the Purchaser or such Depositor.


                                      6
<PAGE>

            (iii) If reasonably  requested by the Purchaser or any  Depositor,
      the Company shall  provide such  information  regarding the Company,  as
      servicer  of the  Mortgage  Loans,  and  each  Subservicer  (each of the
      Company  and  each  Subservicer,  for  purposes  of  this  paragraph,  a
      "Servicer"),  as is  reasonably  requested for the purpose of compliance
      with Item 1108 of Regulation AB. Such  information  shall include,  at a
      minimum:

                  (A)   the Servicer's form of organization;

                  (B)   a  description  of how  long  the  Servicer  has  been
            servicing  residential mortgage loans; a general discussion of the
            Servicer's  experience in servicing  assets of any type as well as
            a more detailed  discussion of the  Servicer's  experience in, and
            procedures for, the servicing  function it will perform under this
            Agreement   and   any   Reconstitution   Agreements;   information
            regarding  the size,  composition  and  growth  of the  Servicer's
            portfolio of  residential  mortgage loans of a type similar to the
            Mortgage Loans and  information on factors related to the Servicer
            that  may be  material,  in the  reasonable  determination  of the
            Purchaser or any  Depositor,  to any analysis of the  servicing of
            the  Mortgage  Loans or the related  asset-backed  securities,  as
            applicable, including, without limitation:

                        (1)   whether  any prior  securitizations  of mortgage
                  loans of a type similar to the Mortgage Loans  involving the
                  Servicer   have    defaulted   or   experienced   an   early
                  amortization or other  performance  triggering event because
                  of  servicing  during  the  three-year  period   immediately
                  preceding the related Securitization Transaction;
                        (2)   the extent of outsourcing the Servicer utilizes;
                        (3)   whether  there has been  previous  disclosure of
                  material   noncompliance   with  the  applicable   servicing
                  criteria   with   respect   to  other   securitizations   of
                  residential  mortgage  loans  involving  the  Servicer  as a
                  servicer during the three-year period immediately  preceding
                  the related Securitization Transaction;
                        (4)   whether  the  Servicer  has been  terminated  as
                  servicer  in a  residential  mortgage  loan  securitization,
                  either due to a  servicing  default or to  application  of a
                  servicing performance test or trigger; and
                        (5)   such other  information  as the Purchaser or any
                  Depositor  may   reasonably   request  for  the  purpose  of
                  compliance with Item 1108(b)(2) of Regulation AB;

                  (C)   a  description  of any  material  changes  during  the
            three-year    period    immediately    preceding    the    related
            Securitization   Transaction   to  the   Servicer's   policies  or
            procedures with respect to the servicing  function it will perform
            under  this  Agreement  and  any  Reconstitution   Agreements  for
            mortgage loans of a type similar to the Mortgage Loans;


                                      7
<PAGE>

                  (D)   information   regarding   the   Servicer's   financial
            condition,  to the extent  that  there is a material  risk that an
            adverse  financial  event or  circumstance  involving the Servicer
            could have a material  adverse  effect on the  performance  by the
            Company of its servicing  obligations  under this Agreement or any
            Reconstitution Agreement;

                  (E)   information  regarding  advances  made by the Servicer
            on  the  Mortgage  Loans  and  the  Servicer's  overall  servicing
            portfolio of residential  mortgage loans for the three-year period
            immediately  preceding  the  related  Securitization  Transaction,
            which may be limited to a statement  by an  authorized  officer of
            the  Servicer  to the  effect  that  the  Servicer  has  made  all
            advances  required  to  be  made  on  residential  mortgage  loans
            serviced by it during such  period,  or, if such  statement  would
            not be accurate,  information regarding the percentage and type of
            advances  not made as  required,  and the reasons for such failure
            to advance;

                  (F)   a  description   of  the   Servicer's   processes  and
            procedures  designed  to address  any  special  or unique  factors
            involved  in  servicing  loans of a similar  type as the  Mortgage
            Loans;

                  (G)   a  description   of  the   Servicer's   processes  for
            handling delinquencies,  losses, bankruptcies and recoveries, such
            as through liquidation of mortgaged properties,  sale of defaulted
            mortgage loans or workouts; and

                  (H)   information   as  to  how  the  Servicer   defines  or
            determines delinquencies and charge-offs,  including the effect of
            any  grace  period,  re-aging,  restructuring,   partial  payments
            considered  current or other practices with respect to delinquency
            and loss experience.

            (iv)  For the  purpose  of  satisfying  its  reporting  obligation
      under  the  Exchange  Act with  respect  to any  class  of  asset-backed
      securities,  the Company shall (or shall cause each  Subservicer and, if
      applicable,  any  Third-Party  Originator  to) (a) provide notice within
      two (2)  Business  Days to the  Purchaser,  any Master  Servicer and any
      Depositor  in  writing  of (1)  any  merger,  consolidation  or  sale of
      substantially all of the assets of the Company,  (2) the Company's entry
      into an  agreement  with a  Subservicer  to  perform  or  assist  in the
      performance of any of the Company's  obligations  under the Agreement or
      any  Reconstitution  Agreement  that  qualifies  as  an  "entry  into  a
      material definitive  agreement" under Item 1.01 of the form 8-K, and (b)
      provide  prompt  notice to the  Purchaser,  the Master  Servicer and the
      Depositor of (1) any Event of Default  under the terms of the  Agreement
      or any  Reconstitution  Agreement  to  the  extent  not  known  by  such
      Purchaser,   Master   Servicer  or  Depositor,   and  (2)  any  material
      litigation  or  governmental  proceedings  involving  the  Company,  any
      Subservicer or any Third Party Originator.


                                      8
<PAGE>

            (v)   To the  extent  the  Purchaser  or any  Depositor  does  not
      itself have an  affiliation  or  relationship  required to be  disclosed
      under Item 1119 of  Regulation  AB that  develops  following the closing
      date of a Securitization  Transaction,  the Company shall provide to the
      Purchaser  and any Depositor a description  of any such  affiliation  or
      relationship  involving the Company,  any Subservicer or any Third-Party
      Originator  no  later  than 15  calendar  days  prior  to the  date  the
      Depositor is required to file its Form 10-K disclosing such  affiliation
      or  relationship.  For purposes of the foregoing,  the Company (1) shall
      be  entitled   to  assume   that  the  parties  to  the   Securitization
      Transaction  with whom  affiliations  or relations must be disclosed are
      the same as on the closing date if it provides a written  request (which
      may be by e-mail) to the Depositor or Master  Servicer,  as  applicable,
      requesting  such  confirmation  and either obtains such  confirmation or
      receives no response  within three (3) Business  Days,  (2) shall not be
      obligated  to  disclose  any  affiliations  or  relationships  that  may
      develop after the closing date for the  Securitization  Transaction with
      any parties  not  identified  to the  Company  pursuant to clause (D) of
      paragraph  (i) of this Section  2(c),  and (3) shall be entitled to rely
      upon any written  identification  of parties  provided by the Depositor,
      the Purchaser or any master servicer.

            (v)   As a  condition  to the  succession  to the  Company  or any
      Subservicer  as  servicer or  subservicer  under this  Agreement  or any
      applicable  Reconstitution  Agreement  related thereto by any Person (i)
      into  which  the   Company  or  such   Subservicer   may  be  merged  or
      consolidated,  or (ii)  which may be  appointed  as a  successor  to the
      Company or any Subservicer,  the Company shall provide to the Purchaser,
      any Master Servicer, and any Depositor,  at least 15 calendar days prior
      to the effective  date of such  succession or  appointment,  (x) written
      notice  to the  Purchaser  and  any  Depositor  of  such  succession  or
      appointment and (y) in writing, all information  reasonably requested by
      the  Purchaser or any  Depositor  in order to comply with its  reporting
      obligation  under  Item  6.02 of Form 8-K with  respect  to any class of
      asset-backed securities.

            (vi)  Not  later  than ten  days  prior  to the  deadline  for the
      filing  of any  distribution  report  on  Form  10-D in  respect  of any
      Securitization  Transaction  that  includes  any of the  Mortgage  Loans
      serviced by the Company,  the Company  shall,  to the extent the Company
      has knowledge,  provide to the party  responsible for filing such report
      (including,   if  applicable,   the  Master   Servicer)  notice  of  the
      occurrence  of any of the following  events along with all  information,
      data,  and materials  related  thereto as may be required to be included
      in the related  distribution  report on Form 10-D (as  specified  in the
      provisions of Regulation AB referenced below):

                  (a)   any material  modifications,  extensions or waivers of
            Mortgage  Loan  terms,  fees,  penalties  or  payments  during the
            distribution  period or that  have  cumulatively  become  material
            over time (Item 1121(a)(11) of Regulation AB);

                  (b)   material breaches of Mortgage Loan  representations or
            warranties or transaction  covenants under the Existing Agreement,
            as amended herein (Item 1121(a)(12) of Regulation AB): and


                                      9
<PAGE>

                  (c)   information  regarding any Mortgage Loan changes (such
            as,  additions,  substitutions  or  repurchases)  and any material
            changes  in  origination,  underwriting,  or  other  criteria  for
            acquisition  or  selection  of pool assets  (Item  1121(a)(14)  of
            Regulation AB).

            (vii) In  addition  to  such   information  as  the  Company,   as
      servicer,  is obligated to provide  pursuant to other provisions of this
      Agreement,  if reasonably  requested by the Purchaser or any  Depositor,
      the Company  shall  provide such  information  which is available to the
      Company,  regarding the servicing of the Mortgage Loans as is reasonably
      required  to  facilitate   preparation   of   distribution   reports  in
      accordance with Item 1121 of Regulation AB.

      (d)   Servicer Compliance Statement.

      On or before March 5 of each  calendar  year,  commencing  in 2007,  the
Company  shall  deliver to the  Purchaser  and any  Depositor a  statement  of
compliance  addressed to the  Purchaser  and such  Depositor  and signed by an
authorized  officer of the  Company,  to the  effect  that (i) a review of the
Company's servicing activities during the immediately  preceding calendar year
(or applicable  portion  thereof) and of its  performance  under the servicing
provisions  of this  Agreement  and any  applicable  Reconstitution  Agreement
during such period has been made under such  officer's  supervision,  and (ii)
to the best of such  officers'  knowledge,  based on such review,  the Company
has fulfilled all of its servicing  obligations  under this  Agreement and any
applicable  Reconstitution  Agreement in all material respects throughout such
calendar year (or applicable  portion thereof) or, if there has been a failure
to  fulfill  any  such  obligation  in  any  material  respect,   specifically
identifying  each such  failure  known to such  officer and the nature and the
status thereof.

      (e)   Report on Assessment of Compliance and Attestation.

            (i)   On or before March 5 of each  calendar  year,  commencing in
      2007, the Company shall:

                  (A)   deliver to the  Purchaser  and any  Depositor a report
            regarding  the  Company's   assessment  of  compliance   with  the
            Servicing  Criteria  during  the  immediately  preceding  calendar
            year,  as required  under Rules  13a-18 and 15d-18 of the Exchange
            Act  and  Item  1122  of  Regulation  AB.  Such  report  shall  be
            addressed to the  Purchaser  and such  Depositor  and signed by an
            authorized  officer of the Company,  and shall address each of the
            applicable   Servicing   Criteria  specified  on  a  certification
            substantially in the form of Exhibit A hereto (wherein  "investor"
            shall  mean  the  Master  Servicer)  delivered  to  the  Purchaser
            concurrently with the execution of this Agreement;

                  (B)   deliver to the  Purchaser  and any  Depositor a report
            of a  registered  public  accounting  firm that  attests  to,  and
            reports on, the  assessment of compliance  made by the Company and
            delivered  pursuant to the preceding  paragraph.  Such attestation
            shall be in  accordance  with  Rules  1-02(a)(3)  and  2-02(g)  of
            Regulation S-X under the Securities Act and the Exchange Act;


                                      10
<PAGE>

                  (C)   if required by Regulation  AB, cause each  Subservicer
            and each  Subcontractor  determined  by the  Company  pursuant  to
            Section 2(f)(ii) to be "participating  in the servicing  function"
            within  the  meaning  of  Item  1122 of  Regulation  AB  (each,  a
            "Participating  Entity"),  to  deliver  to the  Purchaser  and any
            Depositor   an   assessment   of   compliance   and   accountants'
            attestation  as and when  provided  in  paragraphs  (A) and (B) of
            this Section 2(e)(i); and

                  (D)   deliver or, if required by  Regulation  AB, cause each
            Subservicer  and  Subcontractor  described  in Section  2(e)(i)(C)
            above to deliver to the  Purchaser,  Depositor or any other Person
            that  will  be  responsible  for  signing  the   certification  (a
            "Sarbanes   Certification")   required  by  Rules   13a-14(d)  and
            15d-14(d)  under the Exchange Act  (pursuant to Section 302 of the
            Sarbanes-Oxley  Act of 2002) on behalf of an  asset-backed  issuer
            with  respect to a  Securitization  Transaction  a  certification,
            signed by the  appropriate  officer  of the  Company,  in the form
            attached  hereto as Exhibit B;  provided  that such  certification
            delivered  by the  Company  may not be filed as an exhibit  to, or
            included in, any filing with the Commission.

      The Company  acknowledges  that the party  identified  in clause  (i)(D)
above may rely on the  certification  provided by the Company pursuant to such
clause  in  signing  a  Sarbanes   Certification  and  filing  such  with  the
Commission.  Neither the Purchaser nor any Depositor  will request  deliver of
a certification under clause (D) above unless the Purchaser,  Depositor or any
other Person is required  under the  Exchange Act to file an annual  report on
Form  10-K with  respect  to an  issuing  entity  whose  asset  pool  includes
Mortgage Loans.

            (ii)  Each  assessment  of  compliance  provided by a  Subservicer
      pursuant to Section  2(e)(i)(A)  shall  address  each of the  applicable
      Servicing  Criteria  specified on a certification  substantially  in the
      form of Exhibit A hereto  delivered to the Purchaser  concurrently  with
      the  execution  of this  Agreement  or,  in the  case  of a  Subservicer
      subsequently  appointed  as  such,  on or  prior  to the  date  of  such
      appointment.  An assessment of  compliance  provided by a  Participating
      Entity  pursuant to Section  2(e)(i)(C) need not address any elements of
      the  Servicing  Criteria  other  than  those  specified  by the  Company
      pursuant to Section 2(f).

            (iii) If reasonably  requested by the Purchaser or any  Depositor,
      the Company shall provide to the Purchaser,  any Master  Servicer or any
      Depositor,  evidence  of the  authorization  of the person  signing  any
      certification  or  statement  pursuant  to Section  2(d) or 2(e) of this
      Agreement.

      (f)   Use of Subservicers and Subcontractors.

      The Company  shall not hire or  otherwise  utilize  the  services of any
Subservicer  to fulfill  any of the  obligations  of the  Company as  servicer
under  this  Agreement  or any  related  Reconstitution  Agreement  unless the
Company  complies  with the  provisions  of paragraph  (i) of this  Subsection
(f).  The Company  shall not hire or  otherwise  utilize  the  services of any
Subcontractor,  and shall not  permit  any  Subservicer  to hire or  otherwise
utilize the services of any  Subcontractor,  to fulfill any of the obligations
of the Company as servicer under this Agreement or any related  Reconstitution
Agreement  unless the Company  complies with the  provisions of paragraph (ii)
of this Subsection (f).


                                      11
<PAGE>

            (i)   It  shall  not be  necessary  for the  Company  to seek  the
      consent of the  Purchaser  or any  Depositor to the  utilization  of any
      Subservicer.  If required by Regulation  AB, the Company shall cause any
      Subservicer  used by the Company (or by any Subservicer) for the benefit
      of the  Purchaser  and any  Depositor to comply with the  provisions  of
      this Section and with Sections 2(b), 2(c)(iii),  2(c)(v), 2(d), and 2(e)
      of  this  Agreement  , and to  provide  the  information  required  with
      respect to such  Subservicer  under Section  2(c)(iv) of this Agreement.
      The Company shall be  responsible  for obtaining  from each  Subservicer
      and   delivering  to  the  Purchaser  and  any  Depositor  any  servicer
      compliance  statement required to be delivered by such Subservicer under
      Section 2(d), any assessment of compliance and  attestation  required to
      be  delivered   by  such   Subservicer   under   Section  2(e)  and  any
      certification  required  to be  delivered  to the  Person  that  will be
      responsible  for signing the Sarbanes  Certification  under Section 2(e)
      as and when required to be delivered.

            (ii)  It  shall  not be  necessary  for the  Company  to seek  the
      consent of the  Purchaser  or any  Depositor to the  utilization  of any
      Subcontractor.   If  required  by  Regulation   AB,  the  Company  shall
      promptly  upon request  provide to the  Purchaser  and any Depositor (or
      any  designee  of  the   Depositor,   such  as  a  master   servicer  or
      administrator)  a written  description  of the role and function of each
      Subcontractor  utilized  by the Company or any  Subservicer,  specifying
      (A) the identity of each such Subcontractor,  (B) which (if any) of such
      Subcontractors  are  Participating  Entities,  and (C) which elements of
      the Servicing  Criteria will be addressed in  assessments  of compliance
      provided by each Participating  Entity identified pursuant to clause (B)
      of this paragraph.

      The  Company  shall  cause  any such  Participating  Entity  used by the
Company  (or by any  Subservicer)  for the  benefit of the  Purchaser  and any
Depositor to comply with the  provisions  of Section  2(e) of this  Agreement.
The Company shall be responsible for obtaining from each Participating  Entity
and   delivering  to  the  Purchaser  and  any  Depositor  any  assessment  of
compliance and attestation  and  certificate  required to be delivered by such
Participating  Entity under Section 2(e), in each case as and when required to
be delivered.

      (g)   Indemnification; Remedies.

            (i)   The Company  shall  indemnify  the Purchaser and each of the
      following parties  participating in a Securitization  Transaction:  each
      sponsor and issuing  entity;  each Person  responsible for the execution
      or filing of any report  required to be filed with the  Commission  with
      respect  to  such  Securitization  Transaction,  or for  execution  of a
      certification  pursuant to Rule  13a-14(d) or Rule  15d-14(d)  under the
      Exchange  Act with  respect  to such  Securitization  Transaction;  each
      Person who controls  any of such parties  (within the meaning of Section
      15 of the  Securities  Act and Section 20 of the Exchange  Act); and the
      respective present and former directors,  officers and employees of each
      of the  foregoing  and of the  Depositor,  and  shall  hold each of them
      harmless  from  and  against  any  losses,  damages,  penalties,  fines,
      forfeitures,  legal fees and expenses and related costs, judgments,  and
      any other costs,  fees and expenses that any of them may sustain arising
      out of or based upon:


                                      12
<PAGE>

                  (A)(1)      any  untrue   statement   of  a  material   fact
            contained or alleged to be  contained in any written  information,
            written  report,  certification  or other material  provided under
            this Amendment Reg AB by or on behalf of the Company,  or provided
            under this  Amendment  Reg AB by or on behalf of any  Subservicer,
            Participating  Entity or, if  applicable,  Third-Party  Originator
            (collectively,  the "Company Information"), or (2) the omission or
            alleged  omission to state in the Company  Information  a material
            fact  required  to  be  stated  in  the  Company   Information  or
            necessary in order to make the  statements  therein,  in the light
            of the  circumstances  under which they were made, not misleading;
            provided,  by way  of  clarification,  that  clause  (2)  of  this
            paragraph  shall be  construed  solely by reference to the Company
            Information  and  not to any  other  information  communicated  in
            connection  with a sale or purchase of securities,  without regard
            to whether  the  Company  Information  or any  portion  thereof is
            presented together with or separately from such other information;

                  (B)   any  failure  by the  Company,  any  Subservicer,  any
            Participating Entity or any Third-Party  Originator to deliver any
            information,  report, certification,  accountants' letter or other
            material  when  and as  required  under  this  Amendment  Reg  AB,
            including  any  failure by the  Company to  identify  pursuant  to
            Section 2(f)(ii) any Participating Entity; or

                  (C)   any  breach  by the  Company  of a  representation  or
            warranty  set forth in Section  2(b)(i) or in a writing  furnished
            pursuant  to Section  2(b)(ii)  and made as of a date prior to the
            closing  date of the related  Securitization  Transaction,  to the
            extent that such breach is not cured by such closing  date, or any
            breach  by  the  Company  of a  representation  or  warranty  in a
            writing furnished  pursuant to Section 2(b)(ii) to the extent made
            as of a date subsequent to such closing date.

      In the case of any failure of performance  described in clause (i)(B) of
this  Section,  the  Company  shall  promptly  reimburse  the  Purchaser,  any
Depositor,  as applicable,  and each Person  responsible  for the execution or
filing of any report  required to be filed with the Commission with respect to
such Securitization  Transaction, or for execution of a certification pursuant
to Rule  13a-14(d)  or Rule  15d-14(d)  under the Exchange Act with respect to
such  Securitization  Transaction,  for all costs reasonably  incurred by each
such  party  in  order  to  obtain  the  information,  report,  certification,
accountants'  letter  or other  material  not  delivered  as  required  by the
Company,  any  Subservicer,   any  Participating  Entity  or  any  Third-Party
Originator.


                                      13
<PAGE>

            (ii)  (A)   Any  failure  by the  Company,  any  Subservicer,  any
      Participating  Entity  or any  Third-Party  Originator  to  deliver  any
      information,   report,  certification,   accountants'  letter  or  other
      material  when  and as  required  under  this  Amendment  Reg AB , which
      continues  unremedied  for three  Business  Days  after  receipt  by the
      Company and the applicable  Subservicer,  Subcontractor,  or Third-Party
      Originator  of written  notice of such  failure  from the  Purchaser  or
      Depositor  shall,  except as provided  in clause (B) of this  paragraph,
      constitute  an Event of Default with  respect to the Company  under this
      Agreement  and  any  applicable   Reconstitution  Agreement,  and  shall
      entitle  the  Purchaser  or  Depositor,  as  applicable,   in  its  sole
      discretion  to terminate  the rights and  obligations  of the Company as
      servicer  under  this  Agreement  and/or any  applicable  Reconstitution
      Agreement related thereto without payment  (notwithstanding  anything in
      this  Agreement  or  any  applicable  Reconstitution  Agreement  related
      thereto to the contrary) of any  compensation to the Company (and if the
      Company  is  servicing  any of the  Mortgage  Loans in a  Securitization
      Transaction,  appoint a successor servicer reasonably  acceptable to any
      Master Servicer for such Securitization Transaction);  provided, however
      it is understood  that the Company  shall retain any rights  pursuant to
      which it may be  entitled  to  receive  reimbursement  for  unreimbursed
      Monthly  Advances and Servicing  Advances made by the Company under this
      Agreement    and/or    any    applicable    Reconstitution    Agreement.
      Notwithstanding  anything  to the  contrary  set  forth  herein,  to the
      extent  that any  provision  of this  Agreement  and/or  any  applicable
      Reconstitution  Agreement expressly provides for the survival of certain
      rights or obligations  following termination of the Company as servicer,
      such provision shall be given effect.

                  (B)   Any failure by the  Company,  any  Subservicer  or any
            Participating   Entity  to  deliver   any   information,   report,
            certification or accountants'  letter required under Regulation AB
            when and as required  under  Section 2(d) or 2(e),  including  any
            failure by the Company to identify a Participating  Entity,  which
            continues  unremedied  for ten  calendar  days  after  the date on
            which such  information,  report,  certification  or  accountants'
            letter was required to be delivered  shall  constitute an Event of
            Default with respect to the Company  under this  Agreement and any
            applicable   Reconstitution   Agreement,  and  shall  entitle  the
            Purchaser or Depositor,  as applicable,  in its sole discretion to
            terminate  the rights and  obligations  of the Company as servicer
            under  this  Agreement   and/or  any   applicable   Reconstitution
            Agreement  without  payment  (notwithstanding   anything  in  this
            Agreement  to the  contrary) of any  compensation  to the Company;
            provided,  however it is understood  that the Company shall retain
            any  rights  pursuant  to  which  it may be  entitled  to  receive
            reimbursement  for  unreimbursed  Monthly  Advances and  Servicing
            Advances  made by the  Company  under  this  Agreement  and/or any
            applicable Reconstitution  Agreement.  Notwithstanding anything to
            the contrary set forth  herein,  to the extent that any  provision
            of this Agreement and/or any applicable  Reconstitution  Agreement
            expressly   provides  for  the  survival  of  certain   rights  or
            obligations  following  termination  of the  Company as  servicer,
            such provision shall be given effect.


                                      14
<PAGE>

                  (C)   The Company  shall  promptly  reimburse  the Purchaser
            (or any  affected  designee  of the  Purchaser,  such as a  master
            servicer) and any  Depositor,  as  applicable,  for all reasonable
            expenses  incurred by the  Purchaser  (or such  designee)  or such
            Depositor  as  such  are   incurred,   in   connection   with  the
            termination  of the  Company  as  servicer  and  the  transfer  of
            servicing  of the  Mortgage  Loans to a  successor  servicer.  The
            provisions of this paragraph  shall not limit whatever  rights the
            Company,  the  Purchaser  or any  Depositor  may have under  other
            provisions of this Agreement and/or any applicable  Reconstitution
            Agreement or  otherwise,  whether in equity or at law,  such as an
            action for damages, specific performance or injunctive relief.

            (iii) The  Purchaser  agrees to  indemnify  and hold  harmless the
      Company, any Subservicer,  any Participating Entity, and, if applicable,
      any  Third-Party  Originator,  each  Person  who  controls  any of  such
      parties  (within  the  meaning of Section 15 of the  Securities  Act and
      Section 20 of the Exchange Act),  and the respective  present and former
      directors,  officers  and  employees of each of the  foregoing  from and
      against any losses, damages, penalties,  fines, forfeitures,  legal fees
      and expenses and related  costs,  judgments,  and any other costs,  fees
      and expenses  that any of them may sustain  arising out of or based upon
      any untrue  statement or alleged  untrue  statement of any material fact
      contained  in  any  filing  with  the  Commission   with  respect  to  a
      Securitization  Transaction or the omission or alleged omission to state
      in any filing  with the  Commission  with  respect  to a  Securitization
      Transaction  a material  fact  required to be stated or  necessary to be
      stated  in order to make the  statements  therein,  in the  light of the
      circumstances  under which they were made, not misleading,  in each case
      to the  extent,  but only to the  extent,  that such  untrue  statement,
      alleged untrue statement,  omission,  or alleged omission relates to any
      filing with the Commission with respect to a Securitization  Transaction
      other than the Company Information.

            (iv)  If the  indemnification  provided for herein is  unavailable
      or  insufficient  to hold  harmless  the  indemnified  party,  then  the
      indemnifying  party agrees that it shall  contribute  to the amount paid
      or payable by such indemnified party as a result of any claims,  losses,
      damages  or  liabilities  uncured  by  such  indemnified  party  in such
      proportion  as is  appropriate  to reflect  the  relative  fault of such
      indemnified  party  on the one hand  and the  indemnifying  party on the
      other.

            (v)   This  indemnification  shall survive the termination of this
      Amendment Reg AB or the  termination  of any party to this Amendment Reg
      AB.

3.    Notwithstanding  any  other  provision  of this  Amendment  Reg AB,  the
Company  shall seek the consent of the Purchaser  for the  utilization  of all
Subservicers and  Participating  Entities,  when required by and in accordance
with the terms of the Existing Agreement.

4.    The  Existing  Agreement  is  hereby  amended  by  adding  the  Exhibits
attached  hereto as Exhibit A and Exhibit B to the end thereto.  References in
this  Amendment  Reg  AB to  "this  Agreement"  or  words  of  similar  import
(including  indirect  references  to the  Agreement)  shall  be  deemed  to be
references  to the  Existing  Agreement as amended by this  Amendment  Reg AB.
Except as  expressly  amended  and  modified  by this  Amendment  Reg AB,  the
Agreement shall continue to be, and shall remain,  in full force and effect in
accordance with its terms.  In the event of a conflict  between this Amendment
Reg AB and any other document or agreement,  including without  limitation the
Existing Agreement, this Amendment Reg AB shall control.


                                      15
<PAGE>

5.    All notification pursuant to Section 2(c)(iv) should be sent to:

            EMC Mortgage Corporation
            2780 Lake Vista Drive
            Lewisville, TX  75067-3884
            Attention:  Conduit Seller Approval Dept.
            Facsimile:  (214) 626-3751
            Email:  sellerapproval@bear.com

            With a copy to:

            Bear, Stearns & Co. Inc.
            383 Madison Avenue, 3rd Floor
            New, York, NY  10179
            Attention:  Global Credit Administration
            Facsimile:  (212) 272-6564

            All notification pursuant to Section 2(c)(iv)(4) should be sent to:

            EMC Mortgage Corporation
            Two Mac Arthur Ridge
            909 Hidden Ridge Drive, Suite 200
            Irving, TX  75038
            Attention:  Associate General Counsel for Loan Administration
            Facsimile:  (972) 831-2555

            With copies to:

            Bear, Stearns & Co. Inc.
            383 Madison Avenue, 3rd Floor
            New, York, NY  10179
            Attention:  Global Credit Administration
            Facsimile:  (212) 272-6564

            EMC Mortgage Corporation
            2780 Lake Vista Drive
            Lewisville, TX  75067-3884
            Attention:  Conduit Seller Approval Dept.
            Facsimile:  (214) 626-3751
            Email:  sellerapproval@bear.com

      All  notifications  to any Master  Servicer,  to the extent such "Master
Servicer" is Wells Fargo, should be sent to:


                                      16
<PAGE>

            UPS/FedEx Delivery:

            9062 Old Annapolis Road
            Columbia, MD  21045
            Attention: Corporate Trust Group, [Insert Deal Name]

            USPS Delivery:

            P.O. Box 98
            Columbia, MD  21046
            Attention: Corporate Trust Group, [Insert Deal Name]

6.    This  Amendment  Reg AB shall be governed by and construed in accordance
with the laws of the State of New York  without  reference  to its conflict of
laws  provisions  (other than Section 5-1401 of the General  Obligation  Law),
and the  obligations,  rights and remedies of the parties  hereunder  shall be
determined accordance with such laws.

7.    This  Amendment Reg AB may be executed in one or more  counterparts  and
by different parties hereto on separate  counterparts,  each of which, when so
executed,  shall constitute one and the same agreement.  This Amendment Reg AB
will become  effective as of the date first  mentioned  above.  This Amendment
Reg AB  shall  bind and  inure to the  benefit  of and be  enforceable  by the
Company and the Purchaser and the respective  permitted successors and assigns
of the Company and the successors and assigns of the Purchaser.

                           [Signature Page Follows]


                                      17
<PAGE>

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

                                    EMC MORTGAGE CORPORATION

                                    Purchaser

                                    By:_________________________________
                                    Name:_______________________________
                                    Title:______________________________

                                    COUNTRYWIDE HOME LOANS, INC.

                                    Company

                                    By:_________________________________
                                    Name:_______________________________
                                    Title:______________________________


                                            Signature page to Amendment Reg AB
<PAGE>

                                  EXHIBIT A

        SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE

      The  assessment of compliance to be delivered by [the Company]  [Name of
Subservicer] shall address,  at a minimum,  the applicable criteria identified
below as "Applicable Servicing Criteria":

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                           Applicable Servicing
                                   Servicing Criteria                                            Criteria
-----------------------------------------------------------------------------------------------------------------
     Reference                                     Criteria
-----------------------------------------------------------------------------------------------------------------
                                       General Servicing Considerations
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>                                                                             <C>
1122(d)(1)(i)        Policies and procedures  are  instituted to monitor any  performance            X
                     or other  triggers  and  events of default  in  accordance  with the
                     transaction agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(1)(ii)       If  any  material  servicing  activities  are  outsourced  to  third            X
                     parties,  policies  and  procedures  are  instituted  to monitor the
                     third  party's   performance  and  compliance  with  such  servicing
                     activities.
-----------------------------------------------------------------------------------------------------------------
1122(d)(1)(iii)      Any  requirements  in  the  transaction  agreements  to  maintain  a
                     back-up servicer for the mortgage loans are maintained.
-----------------------------------------------------------------------------------------------------------------
1122(d)(1)(iv)       A fidelity bond and errors and omissions  policy is in effect on the            X
                     party   participating  in  the  servicing  function  throughout  the
                     reporting  period  in  the  amount  of  coverage   required  by  and
                     otherwise  in   accordance   with  the  terms  of  the   transaction
                     agreements.
-----------------------------------------------------------------------------------------------------------------
                                      Cash Collection and Administration
-----------------------------------------------------------------------------------------------------------------
1122(d)(2)(i)        Payments  on  mortgage  loans  are  deposited  into the  appropriate            X
                     custodial  bank accounts and related bank clearing  accounts no more
                     than two business days  following  receipt,  or such other number of
                     days specified in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(2)(ii)       Disbursements  made via wire  transfer on behalf of an obligor or to            X
                     an investor are made only by authorized personnel.
-----------------------------------------------------------------------------------------------------------------
1122(d)(2)(iii)      Advances of funds or guarantees  regarding  collections,  cash flows            X
                     or  distributions,  and any  interest or other fees charged for such
                     advances,  are made,  reviewed  and  approved  as  specified  in the
                     transaction agreements.
-----------------------------------------------------------------------------------------------------------------
                     The  related  accounts  for the  transaction,  such as cash  reserve
                     accounts    or    accounts     established     as    a    form    of
                     overcollateralization,   are  separately   maintained   (e.g.,  with            X
                     respect  to  commingling  of cash) as set  forth in the  transaction
1122(d)(2)(iv)       agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(2)(v)        Each  custodial   account  is  maintained  at  a  federally  insured            X
                     depository  institution as set forth in the transaction  agreements.
                     For  purposes  of  this  criterion,  "federally  insured  depository
                     institution" with respect to a foreign  financial  institution means
                     a foreign financial  institution that meets the requirements of Rule
                     13k-1(b)(1) of the Securities Exchange Act.
-----------------------------------------------------------------------------------------------------------------
1122(d)(2)(vi)       Unissued  checks  are  safeguarded  so  as to  prevent  unauthorized            X
                     access.
-----------------------------------------------------------------------------------------------------------------
</TABLE>


                                      A-1
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                           Applicable Servicing
                                   Servicing Criteria                                            Criteria
-----------------------------------------------------------------------------------------------------------------
     Reference                                     Criteria
-----------------------------------------------------------------------------------------------------------------
                                       General Servicing Considerations
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>                                                                             <C>
1122(d)(2)(vii)      Reconciliations   are   prepared   on  a   monthly   basis  for  all            X
                     asset-backed  securities related bank accounts,  including custodial
                     accounts and related bank clearing accounts.  These  reconciliations
                     are (A)  mathematically  accurate;  (B) prepared  within 30 calendar
                     days after the bank  statement  cutoff date, or such other number of
                     days  specified  in the  transaction  agreements;  (C)  reviewed and
                     approved  by  someone   other  than  the  person  who  prepared  the
                     reconciliation;  and (D) contain explanations for reconciling items.
                     These  reconciling  items are  resolved  within 90 calendar  days of
                     their  original  identification,   or  such  other  number  of  days
                     specified in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
                                      Investor Remittances and Reporting
-----------------------------------------------------------------------------------------------------------------
1122(d)(3)(i)        Reports  to  investors,   including  those  to  be  filed  with  the            X
                     Commission,  are  maintained  in  accordance  with  the  transaction
                     agreements and  applicable  Commission  requirements.  Specifically,
                     such  reports (A) are prepared in  accordance  with  timeframes  and
                     other  terms set forth in the  transaction  agreements;  (B) provide
                     information  calculated  in accordance  with the terms  specified in
                     the  transaction  agreements;  (C) are filed with the  Commission as
                     required  by  its  rules  and   regulations;   and  (D)  agree  with
                     investors'  or  the  trustee's   records  as  to  the  total  unpaid
                     principal  balance  and number of  mortgage  loans  serviced  by the
                     Servicer.
-----------------------------------------------------------------------------------------------------------------
1122(d)(3)(ii)       Amounts due to investors  are  allocated  and remitted in accordance            X
                     with timeframes,  distribution priority and other terms set forth in
                     the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
                     Disbursements  made to an investor  are posted  within two  business
                     days to the  Servicer's  investor  records,  or such other number of            X
1122(d)(3)(iii)      days specified in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
                     Amounts  remitted to investors  per the investor  reports agree with
                     cancelled  checks,  or other  form of  payment,  or  custodial  bank            X
1122(d)(3)(iv)       statements.
-----------------------------------------------------------------------------------------------------------------
                                          Pool Asset Administration
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(i)        Collateral  or security on mortgage  loans is maintained as required            X
                     by the transaction agreements or related mortgage loan documents.
-----------------------------------------------------------------------------------------------------------------
                     Mortgage loan and related  documents are  safeguarded as required by            X
1122(d)(4)(ii)       the transaction agreements
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(iii)      Any  additions,  removals  or  substitutions  to the asset  pool are            X
                     made,  reviewed and approved in  accordance  with any  conditions or
                     requirements in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(iv)       Payments  on  mortgage  loans,   including  any  payoffs,   made  in            X
                     accordance  with the related  mortgage loan  documents are posted to
                     the Servicer's  obligor records maintained no more than two business
                     days after  receipt,  or such other number of days  specified in the
                     transaction  agreements,  and  allocated to  principal,  interest or
                     other items (e.g.,  escrow) in accordance with the related  mortgage
                     loan documents.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(v)        The Servicer's  records  regarding the mortgage loans agree with the            X
                     Servicer's  records with respect to an  obligor's  unpaid  principal
                     balance.
-----------------------------------------------------------------------------------------------------------------
</TABLE>


                                      A-2
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                           Applicable Servicing
                                   Servicing Criteria                                            Criteria
-----------------------------------------------------------------------------------------------------------------
     Reference                                     Criteria
-----------------------------------------------------------------------------------------------------------------
                                       General Servicing Considerations
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>                                                                             <C>
1122(d)(4)(vi)       Changes  with  respect  to  the  terms  or  status  of an  obligor's            X
                     mortgage  loans (e.g.,  loan  modifications  or re-agings) are made,
                     reviewed and approved by  authorized  personnel in  accordance  with
                     the transaction agreements and related pool asset documents.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(vii)      Loss  mitigation  or  recovery  actions  (e.g.,  forbearance  plans,            X
                     modifications  and deeds in lieu of  foreclosure,  foreclosures  and
                     repossessions,   as  applicable)   are   initiated,   conducted  and
                     concluded in accordance  with the  timeframes or other  requirements
                     established by the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(viii)     Records  documenting  collection  efforts are maintained  during the            X
                     period  a  mortgage  loan  is  delinquent  in  accordance  with  the
                     transaction  agreements.  Such records are  maintained on at least a
                     monthly  basis,  or such other period  specified in the  transaction
                     agreements,  and  describe  the entity's  activities  in  monitoring
                     delinquent  mortgage  loans  including,  for  example,  phone calls,
                     letters and payment  rescheduling  plans in cases where  delinquency
                     is deemed temporary (e.g., illness or unemployment).
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(ix)       Adjustments  to interest rates or rates of return for mortgage loans            X
                     with variable rates are computed based on the related  mortgage loan
                     documents.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(x)        Regarding  any funds  held in trust for an  obligor  (such as escrow            X
                     accounts):  (A) such  funds are  analyzed,  in  accordance  with the
                     obligor's  mortgage loan documents,  on at least an annual basis, or
                     such other  period  specified  in the  transaction  agreements;  (B)
                     interest  on such  funds  is  paid,  or  credited,  to  obligors  in
                     accordance with  applicable  mortgage loan documents and state laws;
                     and (C) such funds are  returned to the  obligor  within 30 calendar
                     days of full repayment of the related  mortgage loans, or such other
                     number of days specified in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(xi)       Payments  made on behalf  of an  obligor  (such as tax or  insurance            X
                     payments)  are made on or before the related  penalty or  expiration
                     dates,  as  indicated on the  appropriate  bills or notices for such
                     payments,  provided  that  such  support  has been  received  by the
                     servicer at least 30  calendar  days prior to these  dates,  or such
                     other number of days specified in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
1122(d)(4)(xii)      Any late  payment  penalties  in  connection  with any payment to be            X
                     made on behalf of an obligor are paid from the servicer's  funds and
                     not charged to the  obligor,  unless the late payment was due to the
                     obligor's error or omission.
-----------------------------------------------------------------------------------------------------------------
                     Disbursements  made on behalf of an obligor  are  posted  within two
                     business days to the obligor's  records  maintained by the servicer,
                     or  such  other  number  of  days   specified  in  the   transaction            X
1122(d)(4)(xiii)     agreements.
-----------------------------------------------------------------------------------------------------------------
</TABLE>


                                      A-3
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>                                                                             <C>
                     Delinquencies,    charge-offs   and   uncollectible   accounts   are
                     recognized   and  recorded  in  accordance   with  the   transaction
1122(d)(4)(xiv)      agreements.                                                                     X
-----------------------------------------------------------------------------------------------------------------
                     Any  external  enhancement  or  other  support,  identified  in Item
                     1114(a)(1)  through (3) or Item 1115 of Regulation AB, is maintained
1122(d)(4)(xv)       as set forth in the transaction agreements.
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                    [NAME OF COMPANY] [NAME OF SUBSERVICER]

                                    Date:__________________________________

                                    By:____________________________________
                                    Name:__________________________________
                                    Title:_________________________________


                                     A-4
<PAGE>

                                  EXHIBIT B

                         FORM OF ANNUAL CERTIFICATION

      Re: The [        ] agreement dated as of [    ], 200[ ] (the "Agreement"),
          among [IDENTIFY PARTIES]

      I,  ________________________________,   the  _______________________  of
Countrywide Home Loans,  Inc.,  certify to [the  Purchaser],  [the Depositor],
[Master Servicer],  [Securities Administrator] or [Trustee], and its officers,
with the  knowledge  and intent  that they will rely upon this  certification,
that:

            (1)   I have  reviewed  the servicer  compliance  statement of the
      Company  provided in  accordance  with Item 1123 of  Regulation  AB (the
      "Compliance  Statement"),  the  report on  assessment  of the  Company's
      compliance  with the  servicing  criteria  set forth in Item  1122(d) of
      Regulation AB (the  "Servicing  Criteria"),  provided in accordance with
      Rules  13a-18 and  15d-18  under  Securities  Exchange  Act of 1934,  as
      amended  (the  "Exchange  Act")  and  Item  1122 of  Regulation  AB (the
      "Servicing   Assessment"),   the  registered  public  accounting  firm's
      attestation  report  provided in accordance with Rules 13a-18 and 15d-18
      under  the  Exchange  Act and  Section  1122(b)  of  Regulation  AB (the
      "Attestation   Report"),   and   all   servicing   reports,    officer's
      certificates  and other  information  relating to the  servicing  of the
      Mortgage  Loans by the Company  during 200[ ] that were delivered by the
      Company to the [Depositor] [Master Servicer] [Securities  Administrator]
      or  [Trustee]  pursuant to the  Agreement  (collectively,  the  "Company
      Servicing Information");

            (2)   Based on my knowledge,  the Company  Servicing  Information,
      taken as a whole,  does not contain any untrue  statement  of a material
      fact or omit to state a material fact  necessary to make the  statements
      made,  in the light of the  circumstances  under  which such  statements
      were made, not misleading  with respect to the period of time covered by
      the Company Servicing Information;

            (3)   Based  on  my  knowledge,   all  of  the  Company  Servicing
      Information  required to be provided by the Company  under the Agreement
      has been  provided  to the  [Depositor]  [Master  Servicer]  [Securities
      Administrator] or [Trustee];

            (4)   I am responsible  for reviewing the activities  performed by
      the Company as servicer under the  Agreement,  and based on my knowledge
      and  the  compliance   review  conducted  in  preparing  the  Compliance
      Statement  and except as  disclosed  in the  Compliance  Statement,  the
      Servicing   Assessment  or  the  Attestation  Report,  the  Company  has
      fulfilled its obligations under the Agreement; and

                          [Intentionally Left Blank]


                                     B-1
<PAGE>

            (5)   The  Compliance  Statement  required to be  delivered by the
      Company  pursuant to this  Agreement,  and the Servicing  Assessment and
      Attestation  Report  required  to be provided by the Company and by each
      Subservicer and  Participating  Entity  pursuant to the Agreement,  have
      been  provided  to  the  [Depositor]  [Master  Servicer].  Any  material
      instances  of   noncompliance   described  in  such  reports  have  been
      disclosed to the [Depositor]  [Master  Servicer].  Any material instance
      of noncompliance  with the Servicing Criteria has been disclosed in such
      reports.

                                    Date:__________________________________

                                    By:____________________________________
                                    Name:__________________________________
                                    Title:_________________________________


                                     B-2





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

                            EMC Mortgage Corporation,

                                                        Purchaser

                                       and

                          Countrywide Home Loans, Inc.,

                                                        Company

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

                   SELLER'S WARRANTIES AND SERVICING AGREEMENT

                          Dated as of September 1, 2002

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

                   Residential Adjustable Rate Mortgage Loans

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

<PAGE>

                                TABLE OF CONTENTS

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

                                   DEFINITIONS

                                   ARTICLE II

           CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
                    BOOKS AND RECORDS; DELIVERY OF DOCUMENTS

Section 2.01   Conveyance of Mortgage Loans; Possession of Mortgage Files;
                 Maintenance of Servicing Files ......................................     13
Section 2.02   Books and Records; Transfers of Mortgage Loans ........................     14
Section 2.03   Delivery of Documents .................................................     15

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES;
                               REMEDIES AND BREACH

Section 3.01   Company Representations and Warranties ................................     16
Section 3.02   Representations and Warranties Regarding Individual Mortgage Loans ....     18
Section 3.03   Remedies for Breach of Representations and Warranties .................     28
Section 3.04   Indemnification .......................................................     29
Section 3.05   Repurchase Upon Conversion ............................................     30
Section 3.06   Restrictions and Requirements Applicable in the Event
                 that a Mortgage Loan is Acquired by a REMIC .........................     30
Section 3.07   Review of Mortgage Loans ..............................................     31

                                   ARTICLE IV

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

Section 4.01   Company to Act as Servicer ............................................     32
Section 4.02   Liquidation of Mortgage Loans .........................................     34
Section 4.03   Collection of Mortgage Loan Payments ..................................     35
Section 4.04   Establishment of and Deposits to Custodial Account ....................     35
Section 4.05   Permitted Withdrawals From Custodial Account ..........................     37
Section 4.06   Establishment of and Deposits to Escrow Account .......................     38
Section 4.07   Permitted Withdrawals From Escrow Account .............................     38
Section 4.08   Payment of Taxes, Insurance and Other Charges .........................     39
Section 4.09   Protection of Accounts ................................................     39
</TABLE>


                                     - i -
<PAGE>

<TABLE>
<S>                                                                                        <C>
Section 4.10   Maintenance of Hazard Insurance .......................................     40
Section 4.11   Maintenance of Mortgage Impairment Insurance ..........................     42
Section 4.12   Maintenance of Fidelity Bond and Errors and Omissions Insurance .......     42
Section 4.13   Inspections ...........................................................     42
Section 4.14   Restoration of Mortgaged Property .....................................     43
Section 4.15   Maintenance of PMI and LPMI Policy; Claims ............................     43
Section 4.16   Title, Management and Disposition of REO Property .....................     45
Section 4.17   Real Estate Owned Reports .............................................     46
Section 4.18   Liquidation Reports ...................................................     46
Section 4.19   Reports of Foreclosures and Abandonments of Mortgaged Property ........     46
Section 4.20   Notification of Adjustments ...........................................     46

                                    ARTICLE V

                              PAYMENTS TO PURCHASER

Section 5.01   Remittances ...........................................................     47
Section 5.02   Statements to Purchaser ...............................................     47
Section 5.03   Monthly Advances by Company ...........................................     48

                                   ARTICLE VI

                          GENERAL SERVICING PROCEDURES

Section 6.01   Transfers of Mortgaged Property .......................................     48
Section 6.02   Satisfaction of Mortgages and Release of Mortgage Files ...............     49
Section 6.03   Servicing Compensation ................................................     50
Section 6.04   Annual Statement as to Compliance .....................................     50
Section 6.05   Annual Independent Public Accountants' Servicing Report ...............     51
Section 6.06   Right to Examine Company Records ......................................     51

                                   ARTICLE VII

                     AGENCY TRANSFER; PASS-THROUGH TRANSFER

Section 7.01   Removal of Mortgage Loans from Inclusion Under this Agreement
                 Upon an Agency Transfer, or a Pass-Through Transfer on One or
                 More Reconstitution Dates ...........................................     51
Section 7.02   Purchaser's Repurchase and Indemnification Obligations ................     52

                                  ARTICLE VIII

                              COMPANY TO COOPERATE

Section 8.01   Provision of Information ..............................................     53
Section 8.02   Financial Statements; Servicing Facility ..............................     53
</TABLE>


                                     - ii -
<PAGE>

<TABLE>
<S>                                                                                        <C>
                                   ARTICLE IX

                                   THE COMPANY

Section 9.01   Indemnification; Third Party Claims ...................................     54
Section 9.02   Merger or Consolidation of the Company ................................     54
Section 9.03   Limitation on Liability of Company and Others .........................     55
Section 9.04   Limitation on Resignation and Assignment by Company ...................     55

                                    ARTICLE X

                                     DEFAULT

Section 10.01  Events of Default .....................................................     56
Section 10.02  Waiver of Defaults ....................................................     57

                                   ARTICLE XI

                                   TERMINATION

Section 11.01  Termination ...........................................................     57
Section 11.02  Termination Without Cause .............................................     58

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

Section 12.01  Successor to Company ..................................................     58
Section 12.02  Amendment .............................................................     59
Section 12.03  Governing Law .........................................................     59
Section 12.04  Duration of Agreement .................................................     59
Section 12.05  Notices ...............................................................     59
Section 12.06  Severability of Provisions ............................................     60
Section 12.07  Relationship of Parties ...............................................     60
Section 12.08  Execution; Successors and Assigns .....................................     60
Section 12.09  Recordation of Assignments of Mortgage ................................     60
Section 12.10  Assignment by Purchaser ...............................................     61
Section 12.11  No Personal Solicitation ..............................................     61
</TABLE>


                                     - iii -
<PAGE>

                                    EXHIBITS

EXHIBIT A        MORTGAGE LOAN SCHEDULE
EXHIBIT B        CONTENTS OF EACH MORTGAGE FILE
EXHIBIT C        MORTGAGE LOAN DOCUMENTS
EXHIBIT D-1      FORM OF CUSTODIAL ACCOUNT
                 CERTIFICATION
EXHIBIT D-2      FORM OF CUSTODIAL ACCOUNT
                 LETTER AGREEMENT
EXHIBIT E-1      FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT E-2      FORM OF ESCROW ACCOUNT
                 LETTER AGREEMENT
EXHIBIT F        FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT G        FORM OF ASSIGNMENT AND ASSUMPTION
EXHIBIT H        UNDERWRITING GUIDELINES


                                     - iv -
<PAGE>

            This  is  a  Seller's   Warranties  and  Servicing  Agreement  for
residential  adjustable rate first lien mortgage loans, dated and effective as
of September 1, 2002,  and is executed  between EMC Mortgage  Corporation,  as
purchaser (the  "Purchaser"),  and Countrywide Home Loans, Inc., as seller and
servicer (the "Company").

                              W I T N E S S E T H:

            WHEREAS,  from time to time the  Purchaser  has agreed to purchase
from the  Company  and from time to time the Company has agreed to sell to the
Purchaser  certain Mortgage Loans (excluding the right to service the Mortgage
Loans which the Company expressly retains);

            WHEREAS, each of the Mortgage Loans is secured by a mortgage, deed
of trust or other security  instrument  creating a first lien on a residential
dwelling  located in the  jurisdiction  indicated on the related Mortgage Loan
Schedule, which is annexed hereto as Exhibit A;

      WHEREAS,  the Company has agreed to service,  from time to time, certain
of the Mortgage Loans  acquired by the Purchaser in accordance  with the terms
and provisions of this Agreement; and

      WHEREAS,  the  Purchaser and the Company wish to prescribe the manner of
purchase of the Mortgage  Loans and the  management,  servicing and control of
the Mortgage Loans which from time to time are subject to this Agreement.

            NOW,   THEREFORE,   in  consideration  of  the  mutual  agreements
hereinafter  set forth,  and for other good and  valuable  consideration,  the
receipt and adequacy of which is hereby  acknowledged,  the  Purchaser and the
Company agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

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

            Accepted Servicing  Practices:  With respect to any Mortgage Loan,
those mortgage  servicing  practices of prudent mortgage lending  institutions
which  service  mortgage  loans of the same type as such  Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located.

            Agency Transfer:  The sale or transfer by Purchaser of some or all
of the Mortgage Loans to Fannie Mae under its Cash Purchase Program or its MBS
Swap Program  (Special  Servicing  Option) or to Freddie Mac under its Freddie
Mac Cash  Program or Gold PC  Program,  retaining  the  Company  as  "servicer
thereunder".

<PAGE>

            Agreement:  This Seller's  Warranties and Servicing  Agreement and
all amendments hereof and supplements hereto.

            ALTA:  The  American  Land  Title  Association  or  any  successor
thereto.

            Appraised  Value:  The  value set  forth in an  appraisal  made in
connection with the  origination of the related  Mortgage Loan as the value of
the Mortgaged Property.

            Approved Flood Certification  Provider: Any provider acceptable to
Fannie Mae and Freddie Mac.

            Assignment  and  Conveyance:  An Assignment  and Conveyance in the
form of Exhibit 6 to the Mortgage Loan Purchase Agreement dated as of the date
hereof, by and between the Seller and the Purchaser.

            Assignment of Mortgage:  An assignment of the Mortgage,  notice of
transfer or equivalent  instrument in recordable  form,  sufficient  under the
laws of the jurisdiction  wherein the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Purchaser.

            BIF: The Bank Insurance Fund, or any successor thereto.

            Business Day: Any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking and savings and loan  institutions  in the State of New
York or California are authorized or obligated by law or executive order to be
closed.

            Closing Date:  The date set forth on the related  Confirmation  on
which the Purchaser from time to time shall purchase and the Company from time
to time shall sell,  the Mortgage  Loans listed on the related  Mortgage  Loan
Schedule.

            Code: The Internal Revenue Code of 1986, as it may be amended from
time to time or any successor statute thereto,  and applicable U.S. Department
of the Treasury regulations issued pursuant thereto.

            Company:  Countrywide  Home  Loans,  Inc.,  or  its  successor  in
interest or assigns,  or any  successor  to the Company  under this  Agreement
appointed as herein provided.

            Condemnation  Proceeds:  All awards or settlements in respect of a
Mortgaged  Property,  whether  permanent or temporary,  partial or entire,  by
exercise  of the power of eminent  domain or  condemnation,  to the extent not
required to be released to a  Mortgagor  in  accordance  with the terms of the
related Mortgage Loan Documents.

            Confirmation:  The trade  confirmation  letter between the parties
hereto which relates to the Mortgage Loans on the related Closing Date.

            Convertible  Mortgage Loan: Any individual Mortgage Loan purchased
pursuant to this Agreement which contains a provision whereby the Mortgagor is
permitted to convert the Mortgage  Loan to a fixed-rate  mortgage  loan at any
time  between  the  first   anniversary  and  the  fifth  anniversary  of  the
origination of the mortgage loan.


                                     - 2 -
<PAGE>

            Custodial  Account:  The separate  account or accounts created and
maintained pursuant to Section 4.04.

            Custodial Agreement: That certain Custodial Agreement, dated as of
November  23,1999 by and between the Purchaser and Wells Fargo Bank Minnesota,
N.A.

            Custodian:  The Custodian  under the Custodial  Agreement,  or its
successor in interest or assigns or any successor to the  Custodian  under the
Custodial Agreement as provided therein.

            Cut-off Date: The date set forth on the related Confirmation.

            Deleted Mortgage Loan: A Mortgage Loan which is repurchased by the
Company in  accordance  with the terms of this  Agreement and which is, in the
case of a  substitution  pursuant to Section 3.03,  replaced or to be replaced
with a Qualified Substitute Mortgage Loan.

            Determination  Date:  The 15th  day (or if such  15th day is not a
Business  Day, the Business Day  immediately  preceding  such 15th day) of the
month of the related Remittance Date.

            Disqualified  Organization:  An  organization  defined  as such in
Section 860E(e) of the Code.

            Due Date: The day of the month on which the Monthly Payment is due
on a  Mortgage  Loan,  exclusive  of any days of grace.  With  respect  to the
Mortgage Loans for which payment from the Mortgagor is due on a day other than
the first day of the  month,  such  Mortgage  Loans  will be treated as if the
Monthly Payment is due on the first day of the month of such Due Date.

            Due  Period:  With  respect  to each  Remittance  Date,  the prior
calendar month.

            Eligible  Investments:  Any  one or more  of the  obligations  and
securities  listed below which investment  provides for a date of maturity not
later than the Determination Date in each month:

            (i) direct  obligations of, and obligations  fully  guaranteed by,
      the United States of America,  or any agency or  instrumentality  of the
      United States of America the obligations of which are backed by the full
      faith and credit of the United States of America; and

            (ii) federal funds,  demand and time deposits in,  certificates of
      deposits  of,  or  bankers'   acceptances   issued  by,  any  depository
      institution or trust company incorporated or organized under the laws of
      the  United  States of  America  or any state  thereof  and  subject  to
      supervision and examination by federal and/or state banking authorities,
      so long as at the  time of such  investment  or  contractual  commitment
      providing for such investment the commercial  paper or other  short-term
      debt obligations of such depository institution or trust company (or, in
      the  case of a  depository  institution  or trust  company  which is the
      principal subsidiary of a holding company, the commercial paper or other
      short-term debt  obligations of such holding company) are rated "P-1" by
      Moody's  Investors  Service,  Inc. and the long-term debt obligations of
      such holding company) are rated "P-1" by Moody's Investors Service, Inc.
      and the long-term  debt  obligations of such  depository  institution or
      trust  company  (or, in the case of a  depository  institution  or trust
      company which is the  principal  subsidiary  of a holding  company,  the
      long-term debt  obligations of such holding  company) are rated at least
      "Aa" by Moody's Investors Service, Inc.;


                                     - 3 -
<PAGE>

            (iii)  investments and securities  otherwise  acceptable to Fannie
      Mae and Freddie Mac.

provided,  however, that no such instrument shall be an Eligible Investment if
such instrument evidences either (i) a right to receive only interest payments
with  respect to the  obligations  underlying  such  instrument,  or (ii) both
principal  and interest  payments  derived from  obligations  underlying  such
instrument  and the  principal  and  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.

            Errors and  Omissions  Insurance  Policy:  An errors and omissions
insurance policy to be maintained by the Company pursuant to Section 4.12.

            Escrow  Account:  The  separate  account or  accounts  created and
maintained pursuant to Section 4.06.

            Escrow  Payments:  With respect to any Mortgage  Loan, the amounts
constituting  ground  rents,  taxes,  assessments,  water rates,  sewer rents,
municipal  charges,  mortgage  insurance  premiums,  fire and hazard insurance
premiums,  condominium charges, and any other payments required to be escrowed
by the  Mortgagor  with the  mortgagee  pursuant to the  Mortgage or any other
related document.

            Event  of  Default:  Any one of the  conditions  or  circumstances
enumerated in Section 10.01.

            Fannie Mae:  The Federal  National  Mortgage  Association,  or any
successor thereto.

            Fannie Mae Guides:  The Fannie Mae  Sellers'  Guide and the Fannie
Mae Servicers' Guide and all amendments or additions thereto.

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

            Fidelity  Bond: A fidelity  bond to be  maintained  by the Company
pursuant to Section 4.12.

            First  Remittance  Date:  As stated in the related  Mortgage  Loan
Purchase Agreement.


                                     - 4 -
<PAGE>

            5/1 ARM Mortgage  Loan:  Any  individual  Mortgage Loan  purchased
pursuant to this  Agreement  which  contains a provision  whereby the interest
rate on such  Mortgage  Loan is fixed for the first five (5) years of the term
of the related  Mortgage Loan and which  thereafter is converted to a Treasury
Rate Mortgage Loan or a LIBOR  Mortgage Loan except that the Periodic Rate Cap
does not apply to the initial  Interest Rate  Adjustment  Date for the related
Mortgage Loan.

            Freddie Mac: The Federal Home Loan  Mortgage  Corporation,  or any
successor thereto.

            GEMICO:  General Electric  Mortgage  Insurance  Corporation or any
successor thereto.

            Gross  Margin:  With  respect  to each  Mortgage  Loan,  the fixed
percentage  amount set forth on the related  Mortgage  Note,  which  amount is
added to the Index in accordance  with the terms of the related  Mortgage Note
to determine on each Interest Rate Adjustment Date, the Mortgage Interest Rate
for such Mortgage Loan.

            Index: With respect to any individual Treasury Rate Mortgage Loan,
and with respect to any  individual  10/1 ARM Mortgage  Loan, 5/1 ARM Mortgage
Loan or 3/1 ARM  Mortgage  Loan  commencing  from and after the 120th  Monthly
Payment,  sixtieth  Monthly  Payment,  or  the  thirty-sixth  Monthly  Payment
thereof,  respectively,  Index shall mean a rate per annum equal to the weekly
average yield on U.S. Treasury  securities  adjusted to a constant maturity of
one year as published by the Federal Reserve Board in statistical  release No.
H 15  (519) or any  similar  publication  as  available  45 days  prior to the
Interest Rate Adjustment  Date. With respect to any individual  LIBOR Mortgage
Loan,  Index  shall mean a rate per annum  equal to the  average of  interbank
offered rates for twelve month U.S. dollar denominated  deposits in the London
market as determined as set forth in the related  Mortgage Note.  With respect
to any individual CD Mortgage Loan, Index shall mean a rate per annum equal to
the weekly  average yield on  certificates  of deposit  adjusted to a constant
maturity  of  six  months  as  published  by  the  Federal  Reserve  Board  in
statistical release No. H 15 (519) or similar publication as available 45 days
prior to the Interest Rate Adjustment Date.

            Initial  Rate Cap:  With  respect  to each  Mortgage  Loan and the
initial Interest Rate Adjustment Date therefor,  a number of percentage points
per annum that is set forth in the related  Mortgage  Loan Schedule and in the
related  Mortgage  Note,  which is the  maximum  amount by which the  Mortgage
Interest  Rate for  such  Mortgage  Loan may  increase  or  decrease  from the
Mortgage  Interest  Rate in effect  immediately  prior to such  Interest  Rate
Adjustment Date.

            Insurance  Proceeds:  With respect to each Mortgage Loan, proceeds
of insurance  policies  insuring the  Mortgage  Loan or the related  Mortgaged
Property.

            Interest Rate Adjustment  Date: The date on which an adjustment to
the Mortgage Interest Rate on a Mortgage Note becomes effective.

            LIBOR  Mortgage  Loan:  Any  individual  Mortgage  Loan  purchased
pursuant to this  Agreement  which  contains a provision  whereby the interest
rate on such Mortgage Loan is adjusted  annually based upon the rate per annum
equal to the average of interbank  offered rates for twelve month U.S.  dollar
denominated  deposits  in the London  market as  published  in The Wall Street
Journal.


                                     - 5 -
<PAGE>

            Lifetime Mortgage Interest Rate Cap: With respect to each Mortgage
Loan, the absolute  maximum  Mortgage  Interest Rate payable,  above which the
Mortgage  Interest Rate cannot be adjusted.  The Mortgage Interest Rate during
the term of a Mortgage Loan shall not at any time exceed the Mortgage Interest
Rate at the time of origination of such Mortgage Loan by more than 5% per

            Liquidation  Proceeds:   Cash  received  in  connection  with  the
liquidation  of a  defaulted  Mortgage  Loan,  whether  through  the  sale  or
assignment  of  such  Mortgage  Loan,  trustee's  sale,  foreclosure  sale  or
otherwise,  or the sale of the related  Mortgaged  Property  if the  Mortgaged
Property is acquired in satisfaction of the Mortgage Loan.

            Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the
ratio of the Stated  Principal  Balance of the Mortgage Loan as of the related
Cut-off Date (unless  otherwise  indicated) to the lesser of (a) the Appraised
Value  of the  Mortgaged  Property  and (b) if the  Mortgage  Loan was made to
finance the acquisition of the related Mortgaged Property,  the purchase price
of the Mortgaged Property, expressed as a percentage.

            LPMI Loan: A Mortgage Loan with a LPMI Policy.

            LPMI  Policy:  A policy of  primary  mortgage  guaranty  insurance
issued by another  Qualified  Insurer pursuant to which the related premium is
to be paid by the  Servicer  of the  related  Mortgage  Loan from  payments of
interest  made by the  Mortgagor  in an amount as is set forth in the  related
Confirmation and related Mortgage Loan Schedule.

            LPMI Fee:  With  respect  to each LPMI  Loan,  the  portion of the
Mortgage  Interest  Rate as set forth on the related  Mortgage  Loan  Schedule
(which shall be payable solely from the interest portion of Monthly  Payments,
Insurance Proceeds,  Condemnation  Proceeds or Liquidation  Proceeds),  which,
during such period  prior to the  required  cancellation  of the LPMI  Policy,
shall be used to pay the premium due on the related LPMI Policy.

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

            MERS Mortgage Loan: Any Mortgage Loan  registered with MERS on the
MERS System.

            MERS  System:  The  system of  recording  transfers  of  mortgages
electronically maintained by MERS.

            MIN:  The  Mortgage  Identification  Number for any MERS  Mortgage
Loan.

            Monthly  Advance:  The portion of Monthly Payment  delinquent with
respect to each  Mortgage  Loan at the close of business on the  Determination
Date  required to be advanced by the Company  pursuant to Section  5.03 on the
Business Day immediately preceding the Remittance Date of the related month.


                                     - 6 -
<PAGE>

            Monthly  Payment:  The scheduled  monthly payment of principal and
interest on a Mortgage Loan.

            Mortgage: The mortgage, deed of trust or other instrument securing
a Mortgage Note, which creates a first lien on an unsubordinated estate in fee
simple in real property securing the Mortgage Note.

            Mortgage File: The items pertaining to a particular  Mortgage Loan
referred to in Exhibit B annexed hereto, and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

            Mortgage  Impairment  Insurance  Policy: A mortgage  impairment or
blanket hazard insurance policy as described in Section 4.11.

            Mortgage  Interest Rate: The annual rate at which Interest accrues
on any  Mortgage  Loan as adjusted  from time to time in  accordance  with the
provisions of the related  Mortgage  Note and in  compliance  with the related
Initial Rate Cap,  Lifetime  Mortgage Interest Rate Cap and Periodic Rate Cap,
if any, of the related Mortgage Note.

            Mortgage  Loan:  An  individual  Convertible  or  Non-Convertible,
Treasury Rate,  LIBOR,  5/1 ARM, or 3/1 ARM Mortgage Loan which is the subject
of this  Agreement,  each  Mortgage Loan  originally  sold and subject to this
Agreement being identified on the Mortgage Loan Schedule,  which Mortgage Loan
includes without limitation the Mortgage File, the Monthly Payments, Principal
Prepayments,  Liquidation Proceeds, condemnation proceeds, Insurance Proceeds,
REO  disposition  proceeds,  and all  other  rights,  benefits,  proceeds  and
obligations arising from or in connection with such Mortgage Loan.

            Mortgage Loan Documents: The documents listed in Exhibit B hereto.

            Mortgage  Loan  Package:  A pool  of  Mortgage  Loans  sold to the
Purchaser by the Company on a Closing Date.

            Mortgage Loan Remittance Rate: With respect to each Mortgage Loan,
the annual rate of interest remitted to the Purchaser, which shall be equal to
the  Mortgage  Interest  Rate minus (i) the  Servicing  Fee Rate and (ii) with
respect to LPMI Loans, the LPMI Fee.

            Mortgage  Loan  Schedule:  With  respect  to  each  Mortgage  Loan
Package, a schedule of Mortgage Loans annexed hereto as Annex A, such schedule
setting forth the following  information  with respect to each Mortgage  Loan:
(1) the Company's Mortgage Loan identifying  number; (2) the Mortgagor's name;
(3) the street address of the Mortgaged Property including the city, state and
zip  code;  (4)  a  code   indicating   whether  the  Mortgaged   Property  is
owner-occupied  a second home, or an investment  property;  (5) the number and
type  of  residential  units  constituting  the  Mortgaged  Property;  (6) the
original months to maturity;  (7) the Loan-to-Value Ratio at origination;  (8)
the Mortgage  Interest Rate as of the Cut-off Date;  (9) the date on which the
initial Monthly Payment was due on the Mortgage Loan; (10) the stated maturity
date;  (11) the amount of the Monthly Payment as of the Cut-off Date; (12) the
last payment date on which a payment was actually  applied to the  outstanding
principal  balance;  (13) the original  principal amount of the Mortgage Loan;
(14) the principal balance of the Mortgage Loan as of the close of business on
the Cut-off  Date,  after  deduction of payments of principal due on or before
the Cut-off Date whether or not collected;  (15) a code indicating the purpose
of the  loan  (i.e.,  purchase,  rate  and  term  refinance,  equity  take-out
refinance);  (16)  a code  indicating  the  documentation  style  (i.e.  full,
alternative  or reduced);  (17) the Interest Rate  Adjustment  Date;  (18) the
Gross Margin; (19) the lifetime maximum Mortgage Interest Rate under the terms
of the Mortgage Note; (20) the date the Mortgage Loan was originated; (21) the
Periodic  Rate Cap;  (22) a code  indicating  the  company  providing  private
mortgage   insurance;   (23)  a  code  indicating  if  the  Mortgage  Loan  is
convertible;  (24) the Servicing Fee Rate; (25) the LPMI Fee, if any; and (26)
the Initial Rate Cap. With respect to the Mortgage Loans in the aggregate, the
Mortgage Loan Schedule  shall set forth the following  information,  as of the
Cut-off  Date:  (1) the number of Mortgage  Loans;  (2) the current  aggregate
outstanding  principal balance of the Mortgage Loans; (3) the weighted average
Mortgage  Interest Rate of the Mortgage  Loans;  and (4) the weighted  average
maturity of the  Mortgage  Loans.  The Mortgage  Loan  Schedule may consist of
multiple reports that collectively set forth all of the required information.


                                     - 7 -
<PAGE>

            Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.

            Mortgaged  Property:  The real property securing  repayment of the
debt evidenced by a Mortgage Note.

            Mortgagor: The obligor on a Mortgage Note.

            Non-Convertible   Mortgage  Loan:  Any  individual  Mortgage  Loan
purchased  pursuant  to this  Agreement  which  does not  contain a  provision
whereby the Mortgagor  may convert the Mortgage Loan to a fixed-rate  mortgage
loan.

            Officer's Certificate: A certificate signed by the Chairman of the
Board or the Vice Chairman of the Board or the  President or a Vice  President
or an assistant Vice President and by the Treasurer or the Secretary or one of
the  Assistant  Treasurers  or  Assistant  Secretaries  of  the  Company,  and
delivered to the Purchaser as required by this Agreement.

            Opinion of Counsel:  A written  opinion of counsel,  who may be an
employee of the Company, reasonably acceptable to the Purchaser, provided that
any Opinion of Counsel relating to compliance with the REMIC Provisions,  must
be an opinion of counsel who (i) is in fact independent of the Company and any
master servicer of the Mortgage Loans,  (ii) does not have any material direct
or indirect  financial  interest in the Company or any master  servicer of the
Mortgage  Loans or in an affiliate of either and (iii) is not  connected  with
the  Company or any  master  servicer  of the  Mortgage  Loans as an  officer,
employee, director or person performing similar functions.

            Pass-Through  Transfer: The sale or transfer of some or all of the
Mortgage  Loans to a trust to be  formed as part of a  publicly-issued  and/or
privately  placed,  rated  or  unrated,   mortgage  pass-through  transaction,
retaining  the  Company  as  "servicer"  (with or  without a master  servicer)
thereunder.


                                     - 8 -
<PAGE>

            Periodic  Rate  Cap:  With  respect  to each  Mortgage  Loan,  the
provision of each Mortgage Note which provides for an absolute  maximum amount
by which the  Mortgage  Interest  Rate  therein may increase or decrease on an
Interest Rate Adjustment  Date above the Mortgage  Interest Rate previously in
effect,  equal  to the  rate  set  forth on the  Mortgage  Loan  Schedule  per
adjustment.

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

            PMI: PMI Mortgage Insurance Co., or any successor thereto.

            PMI Policy: A policy of primary mortgage guaranty insurance issued
by a Qualified Insurer,  as required by this Agreement with respect to certain
Mortgage Loans.

            Pool Insurer: Any of GEMICO, PMI or UGI.

            Prepayment Interest Shortfall Amount: With respect to any Mortgage
Loan that was subject to a Principal  Prepayment in full or in part during any
Due Period, which Principal Prepayment was applied to such Mortgage Loan prior
to such  Mortgage  Loan's Due Date in such Due Period,  the amount of interest
(net the related  Servicing Fee) that would have accrued on the amount of such
Principal Prepayment during the period commencing on the date as of which such
Principal  Prepayment  was applied to such Mortgage Loan and ending on the day
immediately preceding such Due Date, inclusive.

            Prime Rate:  The prime rate announced to be in effect from time to
time,  as published as the average  rate in the "Money  Rates"  section of The
Wall Street Journal.

            Principal  Prepayment:  Any payment or other recovery of principal
on a Mortgage  Loan which is  received in advance of its  scheduled  Due Date,
including  any  prepayment  penalty  or  premium  thereon  and  which  is  not
accompanied by an amount of interest  representing  scheduled  interest due on
any  date  or  dates  in any  month  or  months  subsequent  to the  month  of
prepayment.

            Principal  Prepayment  Period:  The month  preceding  the month in
which the related Remittance Date occurs.

            Purchaser:  EMC Mortgage  Corporation or its successor in interest
or any successor to the Purchaser under this Agreement as herein provided.

            Qualified  Depository:  A  depository  the  accounts  of which are
insured by the FDIC  through  the BIF or the SAIF or the debt  obligations  of
which are rated AA (or the equivalent  rating  category) or better by national
recognized statistical rating organization.


                                     - 9 -
<PAGE>

            Qualified  Insurer:  A mortgage  guaranty  insurance  company duly
authorized and licensed where  required by law to transact  mortgage  guaranty
insurance business and approved as an insurer by Fannie Mae or Freddie Mac.

            Qualified Substitute Mortgage Loan: A mortgage loan eligible to be
substituted by the Company for a Deleted Mortgage Loan which must, on the date
of  such  substitution,  (i)  have an  outstanding  principal  balance,  after
deduction of all scheduled  payments due in the month of  substitution  (or in
the case of a  substitution  of more  than  one  mortgage  loan for a  Deleted
Mortgage Loan, an aggregate  principal  balance),  not in excess of the Stated
Principal  Balance of the Deleted  Mortgage  Loan;  (ii) have a Mortgage  Loan
Remittance  Rate not less than and not more than 2% greater  than the Mortgage
Loan Remittance Rate of the Deleted Mortgage Loan; (iii) have a remaining term
to maturity  not greater than and not more than one year less than that of the
Deleted  Mortgage  Loan;  (iv) have a Gross  Margin  not less than that of the
Deleted  Mortgage Loan; (v) comply with each  representation  and warranty set
forth in Sections 3.01 and 3.02;  (v) use the same Index for  determining  the
Mortgage  Interest  Rate as the  Deleted  Mortgage  Loan;  (vi)  have the same
provision  with respect to  convertibility  as the Deleted  Mortgage Loan; and
(viii) be a REMIC Eligible Mortgage Loan.

            Rating Agency: Any of Fitch, Moody's or Standard & Poor's or their
respective successors designed by the Purchaser.

            Reconstitution  Agreements:  The agreement or  agreements  entered
into by the Purchaser, the Company, Fannie Mae or Freddie Mac or certain third
parties  on  the  Reconstitution  Date(s)  with  respect  to any or all of the
Mortgage Loans serviced hereunder,  in connection with a Pass-Through Transfer
or an Agency Transfer as set forth in Section 7.01, including, but not limited
to, (i) a Fannie Mae Mortgage Selling and Servicing Contract,  a Pool Purchase
Contract,  and any and  all  servicing  agreements  and  tri-party  agreements
reasonably required by Fannie Mae with respect to a Fannie Mae Transfer,  (ii)
a Purchase  Contract and all purchase  documents  associated  therewith as set
forth  in the  Freddie  Mac  Sellers'  &  Servicers'  Guide,  and  any and all
servicing agreements and tri-party  agreements  reasonably required by Freddie
Mac with respect to a Freddie Mac Transfer,  and (iii) a Pooling and Servicing
Agreement  and/or  a  subservicing/master   servicing  agreement  and  related
custodial/trust agreement and related documents with respect to a Pass-Through
Transfer.  Such  agreement  or  agreements  shall  prescribe  the  rights  and
obligations  of the Company in servicing the related  Mortgage Loans and shall
provide for servicing  compensation  to the Company  (calculated on a weighted
average  basis for all the  related  Mortgage  Loans as of the  Reconstitution
Date), net of any guarantee fees due Fannie Mae or Freddie Mac, if applicable,
at least equal to the Servicing  Fee due the Company in  accordance  with this
Agreement  or the  servicing  fee  required  pursuant  to  the  Reconstitution
Agreement. The form of relevant Reconstitution Agreement to be entered into by
the Purchaser  and/or master  servicer or trustee and the Company with respect
to  Pass-Through  Transfers  shall  be  reasonably  satisfactory  in form  and
substance to the  Purchaser and the Company,  shall not material  increase the
Company's  obligations  or diminish the  Company's  rights  hereunder  and the
representations  and warranties  and servicing  provisions  contained  therein
shall be  substantially  similar to those contained in this Agreement,  unless
otherwise mutually agreed by the parties.


                                     - 10 -
<PAGE>

            Reconstitution  Date: The date or dates on which any or all of the
Mortgage  Loans  serviced  under this  Agreement  shall be  removed  from this
Agreement and  reconstituted  as part of an Agency  Transfer or a Pass-Through
Transfer  pursuant to Section 7.01 hereof. On such date or dates, the Mortgage
Loans  transferred  shall  cease  to be  covered  by  this  Agreement  and the
Company's  servicing  responsibilities  shall cease under this  Agreement with
respect to the related transferred Mortgage Loans.

            Record Date: The close of business of the last Business Day of the
month preceding the month of the related Remittance Date.

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

            REMIC Documents:  The document or documents creating and governing
the administration of a REMIC.

            REMIC  Eligible  Mortgage  Loan:  A Mortgage  Loan held by a REMIC
which satisfies and/or complies with all applicable REMIC Provisions.

            REMIC  Provisions:  Provisions  of  the  federal  income  tax  law
relating to a REMIC, which appear at Section 860A through 86OG of Subchapter M
of Chapter 1, Subtitle A of the Code, and related provisions, and regulations,
rulings or pronouncements  promulgated thereunder,  as the foregoing may be in
effect from time to time.

            Remittance  Date:  The  18th  day  (or if such  18th  day is not a
Business  Day, the first  Business Day  immediately  following)  of any month,
beginning with the First Remittance Date.

            REO  Disposition:  The  final  sale  by the  Company  of  any  REO
Property.

            REO Disposition Proceeds:  All amounts received with respect to an
REO Disposition pursuant to Section 4.16.

            REO  Property:  A  Mortgaged  Property  acquired by the Company on
behalf  of  the  Purchasers  through   foreclosure  or  by  deed  in  lieu  of
foreclosure, as described in Section 4.16.

            Repurchase Price: With respect to any Mortgage Loan, a price equal
to (i) the Stated Principal Balance of the Mortgage Loan plus (ii) interest on
such Stated  Principal  Balance at the Mortgage Loan  Remittance Rate from the
date on which interest has last been paid and  distributed to the Purchaser to
the date of repurchase,  less amounts  received or advanced in respect of such
repurchased  Mortgage Loan which are being held in the  Custodial  Account for
distribution in the month of repurchase.

            SAIF:  The Savings  Association  Insurance  Fund, or any successor
thereto.

            Securities  Act of 1933 or the 1933  Act:  The  Securities  Act of
1933, as amended.


                                     - 11 -
<PAGE>

            Servicing Advances:  All customary,  reasonable and necessary "out
of  pocket"  costs  and  expenses  other  than  Monthly  Advances   (including
reasonable  attorneys' fees and disbursements)  incurred in the performance by
the Company of its servicing obligations,  including,  but not limited to, the
cost of (a) the  preservation,  restoration  and  protection  of the Mortgaged
Property,  (b) any  enforcement  or judicial  proceedings,  including  without
limitation,  foreclosures,  (c)  the  management  and  liquidation  of any REO
Property and (d) compliance with the obligations under Section 4.08.

            Servicing  Fee: With respect to each Mortgage  Loan, the amount of
the annual fee the  Purchaser  shall pay to the Company,  which  shall,  for a
period of one full month,  be equal to  one-twelfth  of the product of (a) the
Servicing Fee Rate and (b) the outstanding  principal balance of such Mortgage
Loan.  Such fee shall be payable  monthly,  computed  on the basis of the same
principal amount and period respecting which any related interest payment on a
Mortgage  Loan  is  computed.  The  obligation  of the  Purchaser  to pay  the
Servicing Fee is limited to, and the Servicing Fee is payable solely from, the
interest  portion   (including   recoveries  with  respect  to  interest  from
Liquidation Proceeds, to the extent permitted by Section 4.05) of such Monthly
Payment collected by the Company, or as otherwise provided under Section 4.05.

            Servicing  Fee Rate:  0.25% per annum  with  respect to the period
prior to the initial  Interest  Adjustment  Date and, for the 5/1 7/1 and 10/1
ARM Loans 0.375% thereafter.

            Servicing  File:  With  respect to each  Mortgage  Loan,  the file
retained  by the Company  consisting  of  originals  of all  documents  in the
Mortgage  File  which are not  delivered  to the  Custodian  and copies of the
Mortgage  Loan  Documents  listed  in  Exhibit  B the  originals  of which are
delivered to the Custodian pursuant to Section 2.01.

            Servicing  Officer:  Any  officer of the  Company  involved  in or
responsible for, the  administration and servicing of the Mortgage Loans whose
name appears on a list of servicing  officers  furnished by the Company to the
Purchaser upon request, as such list may from time to time be amended.

            7/1 ARM Mortgage  Loan:  Any  individual  Mortgage Loan  purchased
pursuant to this  Agreement  which  contains a provision  whereby the interest
rate on such  Mortgage Loan is fixed for the first seven (7) years of the term
of the related  Mortgage Loan and which  thereafter is converted to a Treasury
Rate Mortgage Loan or a LIBOR  Mortgage Loan except that the Periodic Rate Cap
does not apply to the initial  Interest Rate  Adjustment  Date for the related
Mortgage Loan.

            Stated  Principal  Balance:  As to  each  Mortgage  Loan,  (i) the
principal  balance of the  Mortgage  Loan at the  related  Cut-off  Date after
giving effect to payments of principal due on or before such date,  whether or
not received,  minus (ii) all amounts previously  distributed to the Purchaser
with respect to the related Mortgage Loan representing  payments or recoveries
of principal or advances in lieu thereof.

            Subservicer:  Any Subservicer  which is subservicing  the Mortgage
Loans pursuant to a Subservicing  Agreement.  Any  subservicer  shall meet the
qualifications set forth in Section 4.01.


                                     - 12 -
<PAGE>

            Subservicing  Agreement:  An  agreement  between the Company and a
Subservicer for the servicing of the Mortgage Loans.

            10/1 ARM Mortgage  Loan:  Any  individual  Mortgage Loan purchased
pursuant to this  Agreement  which  contains a provision  whereby the interest
rate on such  Mortgage  Loan is fixed for the first ten (10) years of the term
of the related  Mortgage Loan and which  thereafter is converted to a Treasury
Rate Mortgage Loan or a LIBOR  Mortgage Loan except that the Periodic Rate Cap
does not apply to the initial  Interest Rate  Adjustment  Date for the related
Mortgage Loan.

            3/1 ARM Mortgage  Loan:  Any  individual  Mortgage Loan  purchased
pursuant to this  Agreement  which  contains a provision  whereby the interest
rate on such  Mortgage Loan is fixed for the first three (3) years of the term
of the related  Mortgage Loan and which  thereafter is converted to a Treasury
Rate Mortgage Loan or a LIBOR Mortgage Loan.

            Treasury  Rate  Mortgage  Loan:   Any  individual   Mortgage  Loan
purchased  pursuant to this Agreement  which contains a provision  whereby the
interest rate on such Mortgage Loan is adjusted  based upon the weekly average
yield on U.S. Treasury securities.

            Underwriting  Guidelines:   The  underwriting  guidelines  of  the
Company with respect to mortgage loans similar to the Mortgage Loans, attached
hereto as Exhibit H.

            UGI:  United  Guaranty   Residential   Insurance  Company  or  any
successor thereto.

                                   ARTICLE II

           CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
                    BOOKS AND RECORDS; DELIVERY OF DOCUMENTS

                  Section 2.01  Conveyance of Mortgage Loans; Possession of
                                Mortgage Files; Maintenance of Servicing Files.

            The Company,  on each Closing  Date,  does hereby sell,  transfer,
assign, set over and convey to the Purchaser, without recourse, but subject to
the terms of this Agreement,  all the right, title and interest of the Company
in and to the Mortgage Loans in the related  Mortgage Loan Package,  excluding
the right to service the Mortgage Loans which the Company  expressly  retains.
Pursuant  to Section  2.03,  the  Company  has  delivered  the  Mortgage  Loan
Documents  for  each  Mortgage  Loan  in  the  Mortgage  Loan  Package  to the
Custodian.

            The contents of each  Mortgage File not delivered to the Custodian
are and shall be held in trust by the Company for the benefit of the Purchaser
as the owner thereof.  The Company shall maintain a Servicing File  consisting
of a copy of the  contents  of each  Mortgage  File and the  originals  of the
documents in each Mortgage File not delivered to the Custodian. The possession
of each  Servicing File by the Company is at the will of the Purchaser for the
sole purpose of servicing the related  Mortgage  Loan,  and such retention and
possession by the Company is in a custodial  capacity  only.  Upon the sale of
the Mortgage Loans the ownership of each Mortgage  Note, the related  Mortgage
and the related Mortgage File and Servicing File shall vest immediately in the
Purchaser,  and the ownership of all records and documents with respect to the
related  Mortgage  Loan  prepared by or which come into the  possession of the
Company  shall vest  immediately  in the  Purchaser  and shall be retained and
maintained by the Company,  in trust, at the will of the Purchaser and only in
such custodial  capacity.  Each  Servicing  File shall be segregated  from the
other books and records of the  Company and shall be marked  appropriately  to
reflect  clearly the sale of the related  Mortgage Loan to the Purchaser.  The
Company shall  release its custody of the contents of any Servicing  File only
in  accordance  with  written  instructions  from the  Purchaser,  unless such
release is required as incidental  to the Company's  servicing of the Mortgage
Loans or is in  connection  with a repurchase of any Mortgage Loan pursuant to
Section 3.03, 3.05, 3.07, or 6.02.


                                     - 13 -
<PAGE>

            Section 2.02 Books and Records; Transfers of Mortgage Loans.

            From and after the sale of the Mortgage Loans to the Purchaser all
rights arising out of the Mortgage Loans in a Mortgage Loan Package  including
but not limited to all funds  received on or in  connection  with the Mortgage
Loan,  shall be  received  and held by the Company in trust for the benefit of
the  Purchaser as owner of the Mortgage  Loans,  and the Company  shall retain
record title to the related Mortgages for the sole purpose of facilitating the
servicing and the supervision of the servicing of the Mortgage Loans.

            The sale of each Mortgage Loan in a Mortgage Loan Package shall be
reflected on the Company's  balance sheet and other financial  statements as a
sale  of  assets  by  the  Company.  The  Company  shall  be  responsible  for
maintaining,  and shall maintain, a complete set of books and records for each
Mortgage  Loan which shall be marked  clearly to reflect the ownership of each
Mortgage Loan by the Purchaser.  In particular,  the Company shall maintain in
its possession, available for inspection by the Purchaser, or its designee and
shall deliver to the Purchaser  upon demand,  evidence of compliance  with all
federal,  state and local laws,  rules and  regulations,  and  requirements of
Fannie Mae or Freddie Mac,  including but not limited to  documentation  as to
the method used in  determining  the  applicability  of the  provisions of the
Flood Disaster  Protection Act of 1973, as amended, to the Mortgaged Property,
documentation evidencing insurance coverage and eligibility of any condominium
project for approval by Fannie Mae and periodic inspection reports as required
by Section 4.13.  To the extent that  original  documents are not required for
purposes  of  realization  of  Liquidation  Proceeds  or  Insurance  Proceeds,
documents  maintained  by the  Company  may be in the  form  of  microfilm  or
microfiche  or such other  reliable  means of recreating  original  documents,
including  but not  limited  to,  optical  imagery  techniques  so long as the
Company complies with the requirements of the Fannie Mae Selling and Servicing
Guide, as amended from time to time.

            The Company shall  maintain with respect to each Mortgage Loan and
shall make  available  for  inspection  by any  Purchaser  or its designee the
related  Servicing File during the time the Purchaser  retains  ownership of a
Mortgage  Loan  and  thereafter  in  accordance   with   applicable  laws  and
regulations.

            The Company shall keep at its  servicing  office books and records
in which,  subject to such  reasonable  regulations as it may  prescribe,  the
Company shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan
may be made unless such transfer is in compliance  with the terms hereof.  For
the purposes of this  Agreement,  the Company  shall be under no obligation to
deal with any person with  respect to this  agreement  or the  Mortgage  Loans
unless the books and  records  show such  person as the owner of the  Mortgage
Loan.  The Purchaser  may,  subject to the terms of this  Agreement,  sell and
transfer one or more of the Mortgage Loans,  provided,  however,  that (i) the
transferee  will not be deemed to be a Purchaser  hereunder  binding  upon the
Company unless such transferee shall agree in writing to be bound by the terms
of this  Agreement and an original  counterpart  of the instrument of transfer
and an assignment  and  assumption of this  Agreement in the form of Exhibit G
hereto  executed by the  transferee  shall have been delivered to the Company,
and (ii) with respect to each Mortgage  Loan Package,  in no event shall there
be more than five  Persons at any given time having the status of  "Purchaser"
hereunder.  The Purchaser also shall advise the Company of the transfer.  Upon
receipt  of notice  of the  transfer,  the  Company  shall  mark its books and
records to reflect the ownership of the Mortgage Loans of such  assignee,  and
shall  release the previous  Purchaser  from its  obligations  hereunder  with
respect to the  Mortgage  Loans sold or  transferred.  Purchaser  shall not to
transfer  to any  assignee  any  pool  of  Mortgage  Loans  with  a  aggregate
outstanding  principal balance of less than $10,000,000 without the consent of
the  Company;  provided,  however,  if the  Company  fails to  consent  to the
transfer  of a pool of  Mortgage  Loans  as  contemplated  in  this  sentence,
Purchaser  shall have the right to purchase the  servicing  rights  associated
with such  Mortgage  Loans at a price to mutually  agreed to by Purchaser  and
Company, exercising good faith.


                                     - 14 -
<PAGE>

            Section 2.03 Delivery of Documents.

            On or before the date which is agreed  upon by the  Purchaser  and
the Company in the related Confirmation, the Company shall deliver and release
to the Custodian  those  Mortgage Loan Documents as required by this Agreement
with respect to each Mortgage Loan in the related Mortgage Loan Package a list
of which is attached to the related Assignment and Conveyance.

            On or prior to the  related  Closing  Date,  the  Custodian  shall
certify  its  receipt  of all such  Mortgage  Loan  Documents  required  to be
delivered  pursuant to the  Custodial  Agreement,  as evidenced by the Initial
Certification of the Custodian in the form annexed to the Custodial Agreement.
The Company shall be responsible for  maintaining the Custodial  Agreement for
the benefit of the Purchaser. Purchaser shall pay all fees and expenses of the
Custodian.

            The Company  shall  forward to the  Custodian  original  documents
evidencing  an  assumption,  modification,  consolidation  or extension of any
Mortgage Loan entered into in accordance  with Section 4.01 or 6.01 within one
week of their execution, provided, however, that the Company shall provide the
Custodian  with a  certified  true  copy of any such  document  submitted  for
recordation  within one week of its execution,  and shall provide the original
of any document submitted for recordation or a copy of such document certified
by the appropriate  public  recording office to be a true and complete copy of
the original within 180 days of its submission for recordation.

            In the event an Officer's  Certificate of the Company is delivered
to the Custodian  because of a delay caused by the public  recording office in
returning any recorded  document,  the Company shall deliver to the Custodian,
within 180 days of the related  Closing Date, an Officer's  Certificate  which
shall (i)  identify  the  recorded  document,  (ii)  state  that the  recorded
document has not been  delivered to the Custodian due solely to a delay caused
by the public  recording  office,  (iii)  state the  amount of time  generally
required by the  applicable  recording  office to record and return a document
submitted for recordation,  and (iv) specify the date the applicable  recorded
document will be delivered to the Custodian.  The Company shall be required to
deliver  to the  Custodian  the  applicable  recorded  document  by  the  date
specified in (iv) above.  An extension of the date specified in (iv) above may
be requested  from the  Purchaser,  which  consent  shall not be  unreasonably
withheld.


                                     - 15 -
<PAGE>

            On or prior to the date which is three  Business Days prior to the
related  Closing Date,  the Company shall deliver to the Purchaser the related
Mortgage Loan Schedule.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES;
                               REMEDIES AND BREACH

            Section 3.01 Company Representations and Warranties.

            The Company  represents  and warrants to the Purchaser  that as of
each Closing Date:

            (a) Due Organization  and Authority.  The Company is a corporation
duly  organized,  validly  existing and in good standing under the laws of the
State of New York and has all  licenses  necessary to carry on its business as
now being  conducted  and is licensed,  qualified and in good standing in each
state where a Mortgaged  Property is located if the laws of such state require
licensing or  qualification in order to conduct business of the type conducted
by the Company, and in any event the Company is in compliance with the laws of
any such state to the extent  necessary  to ensure the  enforceability  of the
related  Mortgage  Loan and the  servicing of such Mortgage Loan in accordance
with the terms of this Agreement; the Company has the full corporate power and
authority to execute and deliver this  Agreement  and to perform in accordance
herewith; the execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this Agreement) by the
Company and the consummation of the transactions contemplated hereby have been
duly and validly authorized;  this Agreement evidences the valid,  binding and
enforceable  obligation of the Company; and all requisite corporate action has
been taken by the Company to make this  Agreement  valid and binding  upon the
Company in accordance with its terms;

            (b)  Ordinary  Course  of  Business.   The   consummation  of  the
transactions  contemplated  by this  Agreement  are in the ordinary  course of
business of the Company,  and the transfer,  assignment  and conveyance of the
Mortgage Notes and the Mortgages by the Company pursuant to this Agreement are
not subject to the bulk transfer or any similar statutory provisions in effect
in any applicable jurisdiction;

            (c) No  Conflicts.  Neither  the  execution  and  delivery of this
Agreement,  the acquisition of the Mortgage Loans by the Company,  the sale of
the Mortgage Loans to the Purchaser or the transactions  contemplated  hereby,
nor the  fulfillment  of or compliance  with the terms and  conditions of this
Agreement,  will  conflict  with or result  in a breach  of any of the  terms,
conditions  or  provisions  of the  Company's  charter or by-laws or any legal
restriction or any agreement or instrument to which the Company is now a party
or by which it is bound,  or constitute a default or result in an acceleration
under  any of the  foregoing,  or result in the  violation  of any law,  rule,
regulation,  order, judgment or decree to which the Company or its property is
subject,  or impair the ability of the  Purchaser  to realize on the  Mortgage
Loans, or impair the value of the Mortgage Loans;


                                     - 16 -
<PAGE>

            (d) Ability to Service. The Company is an approved seller/servicer
of conventional residential mortgage loans for Fannie Mae or Freddie Mac, with
the facilities,  procedures, and experienced personnel necessary for the sound
servicing  of  mortgage  loans of the same  type as the  Mortgage  Loans.  The
Company is in good  standing to sell  mortgage  loans to and service  mortgage
loans for Fannie Mae or Freddie Mac, and no event has occurred,  including but
not limited to a change in  insurance  coverage,  which would make the Company
unable to comply with Fannie Mae or Freddie Mac  eligibility  requirements  or
which would require notification to either Fannie Mae or Freddie Mac;

            (e) Reasonable  Servicing Fee. The Company acknowledges and agrees
that the Servicing  Fee, as  calculated at the Servicing Fee Rate,  represents
reasonable  compensation  for  performing  such  services  and that the entire
Servicing  Fee  shall  be  treated  by the  Company,  for  accounting  and tax
purposes, as compensation for the servicing and administration of the Mortgage
Loans pursuant to this Agreement.

            (f) Ability to Perform.  The Company does not believe, nor does it
have any reason or cause to  believe,  that it cannot  perform  each and every
covenant  contained in this Agreement.  The Company is solvent and the sale of
the Mortgage  Loans is not  undertaken to hinder,  delay or defraud any of the
Company's creditors;

            (g) No Litigation Pending. There is no action, suit, proceeding or
investigation  pending or to the best of the  Company's  knowledge  threatened
against the Company which, either in any one instance or in the aggregate, may
result in any material adverse change in the business,  operations,  financial
condition,  properties or assets of the Company, or in any material impairment
of the right or ability of the Company to carry on its business  substantially
as now conducted,  or in any material liability on the part of the Company, or
which would draw into question the validity of this  Agreement or the Mortgage
Loans or of any action taken or to be taken in connection with the obligations
of the  Company  contemplated  herein,  or which  would be  likely  to  impair
materially  the  ability of the  Company  to  perform  under the terms of this
Agreement;

            (h) No Consent Required.  No consent,  approval,  authorization or
order  of any  court  or  governmental  agency  or  body is  required  for the
execution,  delivery and  performance  by the Company of or  compliance by the
Company with this  Agreement or the sale of the Mortgage Loans as evidenced by
the  consummation of the  transactions  contemplated by this Agreement,  or if
required, such approval has been obtained prior to the related Closing Date;

            (i) Selection Process. The Mortgage Loans were selected from among
the  adjustable  rate  one- to  four-family  mortgage  loans in the  Company's
portfolio  at the related  Closing  Date as to which the  representations  and
warranties  set forth in Section 3.02 could be made and such selection was not
made in a manner so as to affect adversely the interests of the Purchaser;


                                     - 17 -
<PAGE>

            (j) Pool  Characteristics.  With  respect  to each  Mortgage  Loan
Package,  the  Mortgage  Loan  characteristics  set forth on  Exhibit 2 to the
related Assignment and Conveyance are true and complete.

            (k)  No  Untrue  Information.   Neither  this  Agreement  nor  any
statement,  report or other document  furnished or to be furnished pursuant to
this  Agreement or in connection  with the  transactions  contemplated  hereby
contains any untrue  statement  of fact or omits to state a fact  necessary to
make the statements contained therein not misleading;

            (l)  Sale   Treatment.   The  Company  has  determined   that  the
disposition  of the Mortgage Loans pursuant to this Agreement will be afforded
sale treatment for accounting and tax purposes;

            (m)  Financial  Statements.  There  has  been  no  change  in  the
business, operations, financial condition, properties or assets of the Company
since the date of the Company's most recent  financial  statements  that would
have a material adverse effect on its ability to perform its obligations under
this Agreement;

            (n) No Brokers'  Fees.  The Company has not dealt with any broker,
investment  banker,  agent  or  other  person  that  may  be  entitled  to any
commission or compensation in connection with the sale of the Mortgage Loans;

            (o) Origination.  The Company's decision to originate any mortgage
loan or to deny any mortgage loan application is an independent decision based
upon Company's Underwriting  Guidelines,  and is in no way made as a result of
Purchaser's decision to purchase,  or not to purchase,  or the price Purchaser
may offer to pay for, any such mortgage loan, if originated; and

            (p) MERS.  The Company is a member of MERS in good  standing,  and
will comply in all material  respects with the rules and procedures of MERS in
connection  with the servicing of the MERS Mortgage  Loans for as long as such
Mortgage Loans are registered with MERS;

                  Section 3.02  Representations and Warranties Regarding
                                Individual Mortgage Loans.

            As to each  Mortgage  Loan,  the  Company  hereby  represents  and
warrants to the Purchaser that as of the related Closing Date:

            (a) Mortgage Loans as Described. The information set forth in each
Mortgage Loan Schedule is complete, true and correct in all material respects;

            (b) Payments  Current.  All payments required to be made up to the
related  Closing  Date for the  Mortgage  Loan under the terms of the Mortgage
Note have been made and credited.  No payment required under the Mortgage Loan
has been more than 30 days  delinquent  at any time in the twelve months prior
to the related  Closing  Date.  The first  Monthly  Payment shall be made with
respect to the Mortgage Loan on its Due Date or within the grace  period,  all
in accordance with the terms of the related Mortgage Note;


                                     - 18 -
<PAGE>

            (c) No  Outstanding  Charges.  There are no defaults in  complying
with the terms of the  Mortgages,  and all  taxes,  governmental  assessments,
insurance premiums, water, sewer and municipal charges,  leasehold payments or
ground  rents  which  previously  became due and owing  have been paid,  or an
escrow of funds has been established in an amount  sufficient to pay for every
such item which remains  unpaid and which has been assessed but is not yet due
and payable.  The Company has not  advanced  funds,  or induced,  solicited or
knowingly  received any advance of funds by a party other than the  Mortgagor,
directly  or  indirectly,  for the  payment of any amount  required  under the
Mortgage Loan, except for interest accruing from the date of the Mortgage Note
or date of disbursement  of the Mortgage Loan proceeds,  whichever is greater,
to the day which  precedes by one month the Due Date of the first  installment
of principal and interest;

            (d) Original Terms Unmodified.  The terms of the Mortgage Note and
Mortgage have not been impaired,  waived,  altered or modified in any respect,
except by a  written  instrument  which has been  recorded,  if  necessary  to
protect the  interests of the  Purchaser  and which has been  delivered to the
Custodian.  The substance of any such waiver,  alteration or modification  has
been  approved by the issuer of any related PMI Policy and the title  insurer,
to the extent  required  by the  policy,  and its terms are  reflected  on the
related Mortgage Loan Schedule. No Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement approved by the issuer
of any related PMI Policy and the title insurer, to the extent required by the
policy,  and which  assumption  agreement  is part of the  Mortgage  Loan File
delivered to the Custodian and the terms of which are reflected in the related
Mortgage Loan Schedule;

            (e) No Defenses.  The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury,  nor will the  operation of any of the terms of the Mortgage
Note or the Mortgage,  or the exercise of any right thereunder,  render either
the  Mortgage  Note or the  Mortgage  unenforceable,  in whole or in part,  or
subject  to  any  right  of  rescission,  set-off,  counterclaim  or  defense,
including  without  limitation  the  defense  of usury,  and no such  right of
rescission,  set-off,  counterclaim  or defense has been asserted with respect
thereto,  and no Mortgagor was a debtor in any state or federal  bankruptcy or
insolvency proceeding at the time the Mortgage Loan was originated;

            (f) Hazard Insurance.  Pursuant to the terms of the Mortgage,  all
buildings or other  improvements upon the Mortgaged  Property are insured by a
generally  acceptable  insurer  against  loss by  fire,  hazards  of  extended
coverage  and such  other  hazards  as are  customary  in the area  where  the
Mortgaged Property is located pursuant to insurance policies conforming to the
requirements  of Section 4.10. If upon  origination  of the Mortgage Loan, the
Mortgaged  Property was 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) a flood insurance  policy meeting the
requirements  of  the  current  guidelines  of  the  Federal  Flood  Insurance
Administration  is in effect  which  policy  conforms to the  requirements  of
Section 4.10. All individual  insurance  policies contain a standard mortgagee
clause naming the Company and its successors and assigns as mortgagee, and all
premiums  thereon  have  been  paid.  The  Mortgage  obligates  the  Mortgagor
thereunder to maintain the hazard insurance policy at the Mortgagor's cost and
expense, and on the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such  insurance at such  Mortgagor's  cost and
expense, and to seek reimbursement therefor from the Mortgagor. Where required
by state law or  regulation,  the Mortgagor has been given an  opportunity  to
choose the carrier of the required  hazard  insurance,  provided the policy is
not a "master"  or  "blanket"  hazard  insurance  policy  covering  the common
facilities of a planned unit  development.  The hazard insurance policy is the
valid and binding obligation of the insurer,  is in full force and effect, and
will be in full  force and effect  and inure to the  benefit of the  Purchaser
upon the consummation of the transactions  contemplated by this Agreement. The
Company has not engaged in, and has no  knowledge  of the  Mortgagor's  or any
Subservicer's  having  engaged in, any act or omission  which would impair the
coverage of any such  policy,  the  benefits of the  endorsement  provided for
herein,  or the  validity  and  binding  effect of either,  including  without
limitation,  no unlawful fee, unlawful commission,  unlawful kickback or other
unlawful  compensation  or value  of any  kind  has been or will be  received,
retained or realized by any attorney,  firm or other person or entity,  and no
such unlawful items have been received, retained or realized by the Company;


                                     - 19 -
<PAGE>

            (g) Compliance with Applicable  Laws. Any and all  requirements of
any  federal,  state  or  local  law  including,  without  limitation,  usury,
truth-in-lending,   real  estate   settlement   procedures,   consumer  credit
protection,  equal credit  opportunity  or disclosure  laws  applicable to the
Mortgage Loan have been complied  with,  and the Company shall maintain in its
possession, available for the Purchaser's inspection, and shall deliver to the
Purchaser upon demand, evidence of compliance with all such requirements;

            (h) No  Satisfaction  of  Mortgage.  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. The Company has not
waived the  performance  by the  Mortgagor of any action,  if the  Mortgagor's
failure to perform such action would cause the Mortgage Loan to be in default,
nor has the Company  waived any default  resulting from any action or inaction
by the Mortgagor;

            (i)  Location  and  Type  of  Mortgaged  Property.  The  Mortgaged
Property  is a fee  simple  property  located in the state  identified  in the
related  Mortgage Loan Schedule and consists of a parcel of real property with
a  detached  single  family  residence  erected  thereon,   or  an  individual
condominium unit in a low-rise condominium project, or an individual unit in a
planned unit development,  provided,  however, that any condominium project or
planned  unit  development  shall  conform  with  the  Company's  Underwriting
Guidelines regarding such dwellings,  and no residence or dwelling is a mobile
home or a manufactured  dwelling. No portion of the Mortgaged Property is used
for commercial purposes;


                                     - 20 -
<PAGE>

            (j)  Valid  First  Lien.  The  Mortgage  is a  valid,  subsisting,
enforceable and perfected first lien on the Mortgaged Property,  including all
buildings and  improvements  on the  Mortgaged  Property,  and all  additions,
alterations and  replacements  made at any time with respect to the foregoing.
The lien of the Mortgage is 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  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 (i) referred to or
      to otherwise  considered in the appraisal made for the originator of the
      Mortgage Loan or (ii) which do not adversely  affect the Appraised Value
      of the Mortgaged Property set forth in such appraisal; 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 or the use, enjoyment,  value or
      marketability of the related Mortgaged Property.

Any security agreement, chattel mortgage or equivalent document related to and
delivered in  connection  with the  Mortgage  Loan  establishes  and creates a
valid,  subsisting  and  enforceable  first lien and first  priority  security
interest on the property  described  therein and the Company has full right to
sell and assign the same to the Purchaser.  The Mortgaged Property was not, as
of the date of origination of the Mortgage Loan,  subject to a mortgage,  deed
of trust,  deed to secured debt or other security  instrument  creating a lien
subordinate to the lien of the Mortgage;

            (k)  Validity of Mortgage  Documents.  The  Mortgage  Note and the
Mortgage are genuine,  and each is the legal,  valid and binding obligation of
the maker thereof enforceable in accordance with its terms. All parties to the
Mortgage  Note and the  Mortgage  and any other  related  agreement  had legal
capacity  to enter into the  Mortgage  Loan and to  execute  and  deliver  the
Mortgage  Note and the  Mortgage  and any  other  related  agreement,  and the
Mortgage  Note and the Mortgage  have been duly and properly  executed by such
parties.  No fraud was committed by the Company, or to the Company's knowledge
by  any  other  person  including  the  Mortgagor,   in  connection  with  the
origination or servicing of the Mortgage Loan. The Company has reviewed all of
the documents  constituting  the Servicing File and has made such inquiries as
it deems necessary to make and confirm the accuracy of the representations set
forth herein;

            (l) Full  Disbursement  of Proceeds.  The  Mortgage  Loan has been
closed and 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;


                                     - 21 -
<PAGE>

            (m) Ownership.  The Company is the sole owner of record and holder
of the Mortgage  Loan.  The Mortgage Loan is not assigned or pledged,  and the
Company has good and marketable title thereto,  and has full right to transfer
and sell the  Mortgage  Loan  therein to the  Purchaser  free and clear of any
encumbrance,  equity,  participation interest,  lien, pledge, charge, claim or
security interest,  and has full right and authority subject to no interest or
participation  of, or agreement with, any other party, to sell and assign each
Mortgage Loan pursuant to this Agreement;

            (n) Doing Business. All parties which have had any interest in the
Mortgage Loan, 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,  or (3)  qualified to do business in such state,
or (4)  federal  savings  and  loan  associations  or  national  banks  having
principal offices in such state, or (5) not doing business in such state;

            (o) LTV, PMI Policy.  Any Mortgage Loan with an LTV over 80% has a
PMI Policy insuring, as to payment defaults,  the excess LTV over 71% (or such
other percentage as stated in the related Confirmation) of the Appraised Value
until the LTV of such Mortgage Loan is reduced to 80%. All  provisions of such
PMI Policy have been and are being complied with, such policy is in full force
and  effect,  and all  premiums  due  thereunder  have been  paid.  No action,
inaction, or event has occurred and no state of facts exists that has, or will
result in the exclusion from, denial of, or defense to coverage.  Any Mortgage
Loan subject to a PMI Policy  obligates the  Mortgagor  thereunder to maintain
the PMI Policy and to pay all  premiums and charges in  connection  therewith;
provided,  that,  with  respect  to  LPMI  Loans,  the  Company  is  obligated
thereunder  to maintain the LPMI Policy and to pay all premiums and charges in
connection therewith.  The Mortgage Interest Rate for the Mortgage Loan as set
forth on the Mortgage Loan Schedule is net of any insurance  premium  excluded
any premium for the LPMI Policy;

            (p) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's  opinion of title and  abstract of title the form and  substance of
which is acceptable to mortgage lending  institutions making mortgage loans in
the area where the  Mortgaged  Property  is  located or (ii) an ALTA  lender's
title  insurance  policy  or other  generally  acceptable  form of  policy  of
insurance  acceptable to Fannie Mae or Freddie Mac,  issued by a title insurer
acceptable  to Fannie Mae or Freddie Mac and  qualified  to do business in the
jurisdiction  where the Mortgaged  Property is located,  insuring the Company,
its successors  and assigns,  as to the first priority lien of the Mortgage in
the original  principal  amount of the Mortgage  Loan (or to the extent that a
Mortgage  Note  provides  for  negative  amortization,  the maximum  amount of
negative  amortization in accordance with the Mortgage),  and against any loss
by reason of the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage  providing for adjustment in the Mortgage  Interest
Rate and Monthly Payment,  subject only to the exceptions contained in clauses
(1), (2) and (3) of  paragraph  (j) of this Section  3.02.  Where  required by
state law or  regulation,  the  Mortgagor  has been given the  opportunity  to
choose the carrier of the required  mortgage  title  insurance.  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.  The Company is the sole  insured of such  lender's  title  insurance
policy,  and such lender's title insurance  policy is in full force and effect
and will be in force and  effect  upon the  consummation  of the  transactions
contemplated by this  Agreement.  No claims have been made under such lender's
title  insurance  policy,  and no prior holder of the Mortgage,  including the
Company,  has done,  by act or  omission,  anything  which  would  impair  the
coverage of such lender's title insurance policy including without limitation,
no unlawful fee, commission,  kickback or other unlawful compensation or value
of any  kind  has  been or will  be  received,  retained  or  realized  by any
attorney, firm or other person or entity, and no such unlawful items have been
received, retained or realized by the Company;


                                     - 22 -
<PAGE>

            (q) No Defaults.  There is no default,  breach, violation or event
of acceleration  existing under the Mortgage or the Mortgage Note and 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 neither the  Company nor its  predecessors  have waived any
default, breach, violation or event of acceleration;

            (r) No Mechanics' Liens.  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 the law could give rise to such liens)  affecting  the
related  Mortgaged  Property  which are or may be liens  prior to, or equal or
coordinate with, the lien of the related Mortgage;

            (s) Location of Improvements;  No Encroachments.  All improvements
which were  considered in  determining  the  Appraised  Value of the 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.  No improvement  located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or regulation;

            (t)  Origination;  Payment Terms. The Mortgage Loan was originated
by  either  i) the  Company,  which  is a  FNMA-approved,  FHLMC-approved  and
HUD-approved  mortgage  banker,  or ii) an  entity  that  is a  FNMA-approved,
FHLMC-approved  and  HUD-approved  mortgage  banker,  or a  savings  and  loan
association,  a savings bank, a commercial bank or similar banking institution
which is supervised and examined by a Federal or state authority. The interest
rate on the related Mortgage Note is adjusted annually in the case of Treasury
Rate Mortgage Loans and LIBOR Mortgage Loans on each Interest Rate  Adjustment
Date to equal the Index plus the Gross  Margin,  subject to the  Initial  Rate
Cap,  Periodic  Rate Cap and the Lifetime  Mortgage  Interest  Rate Cap as set
forth in the Mortgage Note. The Mortgage  Interest Rate for a 5/1 ARM Mortgage
Loan and a 3/1 ARM  Mortgage  Loan is adjusted  annually  commencing  from and
after the  sixtieth  Monthly  Payment and the  thirty-sixth  Monthly  Payment,
respectively,  in the same manner as a Treasury  Rate  Mortgage Loan and LIBOR
Mortgage Loan, provided, however, that the Periodic Rate Cap does not apply to
the initial  Interest Rate Adjustment Date for such 5/1 ARM Mortgage Loan (the
Initial  Rate Cap does  apply).  The  Mortgage  Note is payable  each month in
monthly installments of principal and interest,  with interest in arrears, and
requires  Monthly  Payments  sufficient  to amortize  the  original  principal
balance  of the  Mortgage  Loan  over a term of no more  than 30  years.  Each
Convertible  Mortgage  Loan  contains a  provision  whereby the  Mortgagor  is
permitted to convert the Mortgage  Loan to a fixed-rate  mortgage  loan at any
time  between  the first  and  fifth  anniversary  of the  origination  of the
Mortgage Loan. No Mortgage Loan has a provision for negative amortization;


                                     - 23 -
<PAGE>

            (u)  Customary  Provisions.  The Mortgage  contains  customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof  adequate for the  realization  against the Mortgaged  Property of the
benefits of the security  provided  thereby,  including,  (i) in the case of a
Mortgage  designated as a deed of trust, by trustee's sale, and (ii) otherwise
by judicial  foreclosure.  Upon default by a Mortgagor on a Mortgage  Loan and
foreclosure on, or trustee's sale of, the Mortgaged  Property  pursuant to the
proper  procedures,  the holder of the  Mortgage  Loan will be able to deliver
good and merchantable title to the Mortgaged  Property.  There is no homestead
or other  exemption  available to a Mortgagor  which would  interfere with the
right to sell the  Mortgaged  Property  at a  trustee's  sale or the  right to
foreclose the Mortgage;

            (v) Conformance with  Underwriting  Guidelines.  The Mortgage Loan
was underwritten in accordance with the Company's  Underwriting  Guidelines in
effect at the time the Mortgage Loan was originated.;

            (w) Occupancy of the Mortgaged Property. As of the related Closing
Date the Mortgaged  Property is lawfully  occupied under  applicable  law. 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 and fire underwriting  certificates,  have been made
or obtained from the appropriate authorities. The Mortgagor represented at the
time of origination  of the Mortgage Loan that the Mortgagor  would occupy the
Mortgaged Property as the Mortgagor's primary residence;

            (x) No Additional Collateral. The Mortgage Note is not and has not
been secured by any collateral except the lien of the  corresponding  Mortgage
and the  security  interest of any  applicable  security  agreement or chattel
mortgage referred to in (j) above;

            (y) Deeds of Trust.  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  Purchasers  to the
trustee under the deed of trust,  except in connection  with a trustee's  sale
after default by the Mortgagor;

            (z)  Acceptable  Investment.  The Company has no  knowledge of any
circumstances  or  conditions  with  respect to the  Mortgage,  the  Mortgaged
Property, the Mortgagor or the Mortgagor's credit standing that can reasonably
be expected to cause  private  institutional  investors to regard the Mortgage
Loan  as an  unacceptable  investment,  cause  the  Mortgage  Loan  to  become
delinquent,  or adversely  affect the value or  marketability  of the Mortgage
Loan;

            (aa)  Delivery of  Mortgage  Documents.  The  Mortgage  Note,  the
Mortgage,  the Assignment of Mortgage and any other  documents  required to be
delivered  for the Mortgage  Loan by the Company  under this  Agreement as set
forth in Exhibit C attached  hereto have been delivered to the Custodian.  The
Company is in  possession  of a complete,  true and accurate  Mortgage File in
compliance  with Exhibit B, except for such  documents  the originals of which
have been delivered to the Custodian;


                                     - 24 -
<PAGE>

            (bb)  Condominiums/Planned  Unit  Developments.  If the  Mortgaged
Property is a condominium unit or a planned unit development  (other than a de
minimus planned unit development) such condominium or planned unit development
project  meets  Company's   Underwriting   Guidelines  with  respect  to  such
condominium or planned unit development;

            (cc) Transfer of Mortgage Loans.  The Assignment of Mortgage is in
recordable  form  and is  acceptable  for  recording  under  the  laws  of the
jurisdiction in which the Mortgaged Property is located;

            (dd) Due on Sale. The Mortgage  contains an enforceable  provision
for the  acceleration  of the payment of the unpaid  principal  balance of the
Mortgage Loan in the event that the Mortgaged  Property is sold or transferred
without the prior written consent of the Mortgagor thereunder;

            (ee) No Buydown  Provisions;  No Graduated  Payments or Contingent
Interests.  The Mortgage  Loan does not contain  provisions  pursuant to which
Monthly  Payments  are paid or  partially  paid with  funds  deposited  in any
separate account established by the Company, the Mortgagor or anyone on behalf
of the  Mortgagor,  or paid by any source other than the Mortgagor nor does it
contain any other similar provisions  currently in effect which may constitute
a "buydown"  provision.  The Mortgage Loan is not a graduated payment mortgage
loan and the  Mortgage  Loan  does not  have a  shared  appreciation  or other
contingent interest feature;

            (ff)  Consolidation of Future  Advances.  Any future advances made
prior to the related Cut-off Date have been  consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the  Mortgage  securing  the  consolidated  principal  amount is  expressly
insured  as  having  first  lien  priority  by a title  insurance  policy,  an
endorsement to the policy insuring the mortgagee's consolidated interest or by
other  title   evidence   acceptable  to  Fannie  Mae  and  Freddie  Mac.  The
consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan;

            (gg) Mortgaged Property Undamaged.  There is no proceeding pending
or,  to the  best of the  Company's  knowledge,  threatened  for the  total or
partial  condemnation  of the Mortgaged  Property.  The Mortgaged  Property is
undamaged by waste,  fire,  earthquake or earth  movement,  windstorm,  flood,
tornado or other casualty so as to affect adversely the value of the Mortgaged
Property as security for the  Mortgage  Loan or the use for which the premises
were intended; and

            (hh)  Collection  Practices;  Escrow  Deposits.  The  origination,
servicing and collection practices used with respect to the Mortgage Loan have
been in accordance  with Accepted  Servicing  Practices,  and have been in all
respects in compliance with all applicable laws and regulations.  With respect
to  escrow  deposits  and  Escrow  Payments,  all  such  payments  are  in the
possession  of the  Company  and there  exist no  deficiencies  in  connection
therewith for which customary arrangements for repayment thereof have not been
made. All Escrow  Payments have been collected in full  compliance  with state
and federal law. An escrow of funds is not  prohibited by  applicable  law and
has been  established  in an amount  sufficient  to pay for every  item  which
remains unpaid and which has been assessed but is not yet due and payable.  No
escrow  deposits  or Escrow  Payments  or other  charges or  payments  due the
Company have been  capitalized  under the Mortgage or the Mortgage  Note.  All
Mortgage  Interest Rate adjustments  have been made in strict  compliance with
state and federal law and the terms of the related Mortgage Note. Any interest
required to be paid pursuant to state and local law has been properly paid and
credited;


                                     - 25 -
<PAGE>

            (ii)  Appraisal.  The Mortgage  File  contains an appraisal of the
related  Mortgage  Property  signed prior to the approval of the Mortgage Loan
application by a qualified  appraiser,  duly appointed by the Company, who had
no interest,  direct or indirect in the Mortgaged Property or in any loan made
on the  security  thereof;  and  whose  compensation  is not  affected  by the
approval or  disapproval of the Mortgage Loan, and the appraisal and appraiser
both satisfy the  requirements  of Fannie Mae,  Freddie Mac or Title XI of the
Federal  Institutions  Reform,  Recovery,  and Enforcement Act of 1989 and the
regulations promulgated thereunder,  all as in effect on the date the Mortgage
Loan was originated;

            (jj)  Soldiers'  and Sailors'  Relief Act. The  Mortgagor  has not
notified the Company, and the Company has no knowledge of any relief requested
or allowed to the Mortgagor  under the Soldiers' and Sailors' Civil Relief Act
of 1940;

            (kk)  Environmental  Matters.  The Mortgaged Property is free from
any and all toxic or hazardous substances and there exists no violation of any
local, state or federal environmental law, rule or regulation.  To the best of
the Company's  knowledge,  there is no pending  action or proceeding  directly
involving  any  Mortgaged  Property  of which  the  Company  is aware in which
compliance with any environmental  law, rule or regulation is an issue; and to
the best of the Company's  knowledge,  nothing  further  remains to be done to
satisfy  in  full  all  requirements  of each  such  law,  rule or  regulation
consisting a prerequisite to use and enjoyment of said property;

            (ll)  No  Construction   Loans.  No  Mortgage  Loan  was  made  in
connection with (i) the construction or rehabilitation of a Mortgaged Property
or (ii) facilitating the trade-in or exchange of a Mortgaged Property;

            (mm)  Insurance.  The  Company  has  caused  or will  cause  to be
performed any and all acts required to preserve the rights and remedies of the
Purchaser  in  any  insurance  policies   applicable  to  the  Mortgage  Loans
including,  without  limitation,  any  necessary  notifications  of  insurers,
assignments of policies or interests therein, and establishments of coinsured,
joint loss payee and mortgagee  rights in favor of the  Purchaser;  No action,
inaction,  or event has  occurred  and no state of fact  exists or has existed
that has resulted or will result in the exclusion from,  denial of, or defense
to  coverage  under any  applicable  pool  insurance  policy,  special  hazard
insurance policy, PMI Policy or bankruptcy bond,  irrespective of the cause of
such  failure  of  coverage.  In  connection  with the  placement  of any such
insurance,  no  commission,  fee,  or other  compensation  has been or will be
received by the Company or any designee of the Company or any  corporation  in
which the  Company or any  officer,  director,  or  employee  had a  financial
interest at the time of placement of such insurance;


                                     - 26 -
<PAGE>

            (nn) Regarding the Mortgagor. The Mortgagor is one or more natural
persons  and/or  trustees  for an  Illinois  land  trust or a trustee  under a
"living  trust"  and such  "living  trust" is in  compliance  with  Fannie Mae
guidelines for such trusts.

            (oo) Predatory Lending  Regulations;  High Cost Loans. None of the
Mortgage  Loans  are  classified  as (a)  "high  cost"  loans  under  the Home
Ownership and Equity  Protection Act of 1994 or (b) "high cost,"  "threshold,"
or "predatory" loans under any other applicable state, federal or local law.

            (pp) Simple Interest  Mortgage  Loans.  None of the Mortgage Loans
are simple interest Mortgage Loans.

            (qq) Single Premium Credit Life Insurance. None of the proceeds of
the Mortgage Loan were used to finance  single-premium  credit life  insurance
policies.

            (rr) Tax Service Contract The Company has obtained a life of loan,
transferable  real estate Tax Service  Contract on each Mortgage Loan and such
contract is assignable without penalty, premium or cost to the Purchaser;

            (ss) Flood Certification Contract. The Company has obtained a life
of loan,  transferable  flood  certification  contract  with a Approved  Flood
Certification  Provider for each Mortgage Loan and such contract is assignable
without penalty, premium or cost to the Purchaser;

            (tt) FICO Scores. Each Mortgage Loan has a non-zero FICO score;

            (uu) Prepayment Fee. With respect to each Mortgage Loan that has a
prepayment fee feature,  each such  prepayment fee is enforceable  and will be
enforced by the Company,  and each prepayment penalty in permitted pursuant to
federal,  state and local  law.  No  Mortgage  Loan will  impose a  prepayment
penalty  for a term in excess of five years from the date such  Mortgage  Loan
was  originated.  Except as otherwise  set forth in the related  Mortgage Loan
Schedule,  with respect to each Mortgage Loan that contains a prepayment  fee,
such  prepayment fee is at least equal to the lesser of (A) the maximum amount
permitted  under  applicable  law and (B) six months  interest  at the related
Mortgage  Interest Rate on the amount prepaid in excess of 20% of the original
principal balance of such Mortgage Loan; and

            (vv) Recordation.  Each original Mortgage was recorded and, except
for those  Mortgage  Loans  subject  to the MERS  identification  system,  all
subsequent  assignments of the original Mortgage (other than the assignment to
the Purchaser)  have been recorded in the  appropriate  jurisdictions  wherein
such recordation is necessary to perfect the lien thereof as against creditors
of the Company, or is in the process of being recorded;

            (ww) Leaseholds.  If the Mortgaged Property is subject to a ground
lease or any other  type of  leasehold  interest,  the  ground  lease or other
leasehold interest exceeds the remaining term of the related Mortgage Loan.


                                     - 27 -
<PAGE>

            Section   3.03   Remedies  for  Breach  of   Representations   and
Warranties.

            It  is  understood  and  agreed  that  the   representations   and
warranties  set forth in Sections  3.01 and 3.02 shall survive the sale of the
Mortgage  Loans  to the  Purchaser  and  the  delivery  of the  Mortgage  Loan
Documents to the  Custodian  and shall inure to the benefit of the  Purchaser,
notwithstanding any restrictive or qualified  endorsement on any Mortgage Note
or  Assignment  of  Mortgage  or the  examination  or failure  to examine  any
Mortgage  File.  Upon  discovery  by either the Company or the  Purchaser of a
breach of any of the foregoing representations and warranties which materially
and adversely  affects the value of the Mortgage  Loans or the interest of the
Purchaser,  or  which  materially  and  adversely  affects  the  interests  of
Purchaser in the related  Mortgage  Loan in the case of a  representation  and
warranty  relating to a  particular  Mortgage  Loan (in the case of any of the
foregoing,  a "Breach"),  the party  discovering such Breach shall give prompt
written notice to the other.

            With respect to those  representations  and  warranties  which are
made to the  best  of the  Company's  knowledge,  if it is  discovered  by the
Company  or the  Purchaser  that  the  substance  of such  representation  and
warranty is inaccurate and such  inaccuracy  materially and adversely  affects
the value of the related  Mortgage  Loan or the interest of the  Purchaser (or
which  materially  and  adversely  affects the value of a Mortgage Loan or the
interests  of the  Purchaser  in the  related  Mortgage  Loan in the case of a
representation   and  warranty  relating  to  a  particular   Mortgage  Loan),
notwithstanding  the Company's lack of knowledge with respect to the substance
of such representation and warranty,  such inaccuracy shall be deemed a breach
of the applicable representation and warranty.

            Within 60 days of the earlier of either  discovery by or notice to
the Company of any Breach of a representation  or warranty,  the Company shall
use its best  efforts  promptly to cure such Breach in all  material  respects
and, if such Breach cannot be cured,  the Company  shall,  at the  Purchaser's
option and  subject to Section  3.06,  repurchase  such  Mortgage  Loan at the
Repurchase Price. In the event that a Breach shall involve any  representation
or warranty set forth in Section 3.01,  and such Breach cannot be cured within
60 days of the earlier of either discovery by or notice to the Company of such
Breach, all of the Mortgage Loans shall, at the Purchaser's option and subject
to Section  3.06,  be  repurchased  by the  Company at the  Repurchase  Price.
However, if the Breach shall involve a representation or warranty set forth in
Section 3.02 and the Company  discovers or receives  notice of any such Breach
within  120 days of the  related  Closing  Date,  the  Company  shall,  at the
Purchaser's  option and provided  that the Company has a Qualified  Substitute
Mortgage Loan,  rather than  repurchase  the Mortgage Loan as provided  above,
remove such Mortgage Loan (a "Deleted  Mortgage  Loan") and  substitute in its
place a Qualified  Substitute  Mortgage Loan or Loans,  provided that any such
substitution  shall be  effected  not later  than 120 days  after the  related
Closing Date.  If the Company has no Qualified  Substitute  Mortgage  Loan, it
shall  repurchase  the deficient  Mortgage  Loan. Any repurchase of a Mortgage
Loan or Loans pursuant to the foregoing  provisions of this Section 3.03 shall
be  accomplished  by  deposit  in the  Custodial  Account of the amount of the
Repurchase   Price  for  distribution  to  Purchaser  on  the  next  scheduled
Remittance Date,  after deducting  therefrom any amount received in respect of
such  repurchased  Mortgage  Loan or Loans  and  being  held in the  Custodial
Account for future distribution.


                                     - 28 -
<PAGE>

            At the time of repurchase or  substitution,  the Purchaser and the
Company shall arrange for the reassignment of the Deleted Mortgage Loan to the
Company and the delivery to the Company of any documents held by the Custodian
relating  to the  Deleted  Mortgage  Loan.  In the  event of a  repurchase  or
substitution,  the Company shall, simultaneously with such reassignment,  give
written notice to the Purchaser that such repurchase or substitution has taken
place,  amend the related  Mortgage Loan Schedule to reflect the withdrawal of
the  Deleted  Mortgage  Loan  from  this  Agreement,   and,  in  the  case  of
substitution,  identify a  Qualified  Substitute  Mortgage  Loan and amend the
related  Mortgage  Loan  Schedule  to reflect the  addition of such  Qualified
Substitute  Mortgage  Loan to this  Agreement.  In  connection  with  any such
substitution,  the Company  shall be deemed to have made as to such  Qualified
Substitute  Mortgage Loan the representations and warranties set forth in this
Agreement  except that all such  representations  and  warranties set forth in
this Agreement shall be deemed made as of the date of such  substitution.  The
Company shall effect such substitution by delivering to the Custodian for such
Qualified  Substitute  Mortgage Loan the  documents  required by Section 2.03,
with the Mortgage Note  endorsed as required by Section 2.03. No  substitution
will be made in any  calendar  month  after  the  Determination  Date for such
month. The Company shall deposit in the Custodial  Account the Monthly Payment
less the Servicing Fee due on such Qualified Substitute Mortgage Loan or Loans
in the month  following the date of such  substitution.  Monthly  Payments due
with  respect  to  Qualified   Substitute  Mortgage  Loans  in  the  month  of
substitution shall be retained by the Company.  For the month of substitution,
distributions  to  Purchaser  shall  include  the  Monthly  Payment due on any
Deleted  Mortgage  Loan in the month of  substitution,  and the Company  shall
thereafter  be  entitled to retain all  amounts  subsequently  received by the
Company in respect of such Deleted Mortgage Loan.

            For any  month  in  which  the  Company  substitutes  a  Qualified
Substitute  Mortgage  Loan for a Deleted  Mortgage  Loan,  the  Company  shall
determine the amount (if any) by which the aggregate  principal balance of all
Qualified  Substitute  Mortgage Loans as of the date of  substitution  is less
than the aggregate  Stated  Principal  Balance of all Deleted  Mortgage  Loans
(after  application  of  scheduled  principal  payments  due in the  month  of
substitution)  . The  amount of such  shortfall  shall be  distributed  by the
Company in the month of substitution pursuant to Section 5.01. Accordingly, on
the date of such  substitution,  the Company  shall deposit from its own funds
into the Custodial Account an amount equal to the amount of such shortfall.

            Any cause of action against the Company relating to or arising out
of the Breach of any  representations and warranties made in Sections 3.01 and
3.02 shall accrue as to any Mortgage Loan upon (i) discovery of such Breach by
the Purchaser or notice thereof by the Company to the Purchaser,  (ii) failure
by the  Company  to cure  such  Breach or  repurchase  such  Mortgage  Loan as
specified  above,  and (iii)  demand  upon the  Company by the  Purchaser  for
compliance with this Agreement.

            Section 3.04 Indemnification.

            The Company agrees to indemnify the Purchaser and hold it harmless
from and  against  any and all  claims,  losses,  damages,  penalties,  fines,
forfeitures,  legal fees and related  costs,  judgments,  and any other costs,
fees and  expenses  that the  Purchaser  may  sustain in any way  related  any
assertion  based  on,  grounded  upon  resulting  from a Breach  of any of the
Company's  representations and warranties contained herein. In addition to the
obligations  of the Company set forth in this Section 3.04,  the Purchaser may
pursue  any  and  all  remedies  otherwise  available  at  law  or in  equity,
including,  but not limited to, the right to seek damages.  The  provisions of
this Section 3.04 shall survive termination of this Agreement.


                                     - 29 -
<PAGE>

            It is understood  and agreed that the  obligations  of the Company
set forth in Sections  3.03 and 3.04 to cure,  substitute  for or repurchase a
defective  Mortgage Loan and to indemnify the  Purchaser  constitute  the sole
remedies of the Purchaser respecting a Breach of the foregoing representations
and warranties.

            Section 3.05 Repurchase Upon Conversion.

            In the event the  Mortgagor  under any  Convertible  Mortgage Loan
elects to  convert  said  Mortgage  Loan to a fixed  rate  mortgage  loan,  as
provided in the related  Mortgage Note, then the Company shall  repurchase the
related  Mortgage  Loan in the month  the  conversion  takes  place and in the
manner prescribed in Section 3.04 at the Repurchase Price.

            Section 3.06 Restrictions and Requirements Applicable in the Event
                         that a Mortgage Loan is Acquired by a REMIC

            In  the  event  that  any  Mortgage  Loan  is  held  by  a  REMIC,
notwithstanding  any  contrary  provision  of this  Agreement,  the  following
provisions shall be applicable to such Mortgage Loan:

            (A) Repurchase of Mortgage Loans.

            With respect to any Mortgage  Loan that is not in default or as to
which no default is  imminent,  no  repurchase  or  substitution  pursuant  to
Subsection 3.03, 3.05, 3.07 or 7.02 shall be made,  unless,  if so required by
the applicable  REMIC Documents the Company has obtained an Opinion of Counsel
to the effect that such  repurchase  will not (i) result in the  imposition of
taxes on "prohibited  transactions"  of such REMIC (as defined in Section 860F
of the Code) or otherwise subject the REMIC to tax, or (ii) cause the REMIC to
fail to qualify as a REMIC at any time.

            (B) General Servicing Obligations.

            The Company shall sell any REO Property within two years after its
acquisition  by the REMIC  unless (i) the Company  applies for an extension of
such two-year period from the Internal  Revenue Service  pursuant to the REMIC
Provisions and Code Section 856(e) (3), in which event such REO Property shall
be sold within the applicable  extension  period,  or (ii) the Company obtains
for the  Purchaser an Opinion of Counsel,  addressed to the  Purchaser and the
Company,  to the effect  that the  holding  by the REMIC of such REO  Property
subsequent to such two year period will not result in the  imposition of taxes
on "prohibited  transactions"  as defined in Section 860F of the Code or cause
the  REMIC  to fail to  qualify  as a REMIC  under  the  REMIC  Provisions  or
comparable  provisions of relevant  state laws at any time.  The Company shall
manage,  conserve,  protect and operate each REO  Property  for the  Purchaser
solely for the purpose of its prompt  disposition  and sale in a manner  which
does not cause such REO Property to fail to qualify as "foreclosure  property"
within  the  meaning of Section  860G(a)  (8) or result in the  receipt by the
REMIC of any "income from non-permitted  assets" within the meaning of Section
860F(a)  (2) (B) of the Code or any "net  income  from  foreclosure  property"
which is subject to taxation under Section  860G(a) (1) of the Code.  Pursuant
to its efforts to sell such REO  Property,  the Company shall either itself or
through  an agent  selected  by the  Company  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  Purchaser,  rent the same,  or any part
thereof,  as the Company  deems to be in the best  interest of the Company and
the Purchaser for the period prior to the sale of such REO Property; provided,
however,  that any rent  received or accrued with respect to such REO Property
qualifies as "rents from real  property"  as defined in Section  856(d) of the
Code.


                                     - 30 -
<PAGE>

            (C) Additional Covenants.

            In addition to the  provision set forth in this Section 3.06, if a
REMIC election is made with respect to the arrangement  under which any of the
Mortgage Loans or REO Properties are held, then, with respect to such Mortgage
Loans and/or REO Properties,  and notwithstanding the terms of this Agreement,
the Company  shall not take any action,  cause the REMIC to take any action or
fail to take (or fail to cause to be taken) any action  that,  under the REMIC
Provisions,  if taken or not taken, as the case may be, could (i) endanger the
status of the REMIC as a REMIC or (ii) result in the  imposition of a tax upon
the REMIC  (including but not limited to the tax on "prohibited  transactions"
as defined in Section  860F(a) (2) of the Code and the tax on  "contributions"
to a REMIC set forth in Section  860G(d) of the Code)  unless the  Company has
received an Opinion of Counsel  (at the  expense of the party  seeking to take
such action) to the effect that the contemplated action will not endanger such
REMIC status or result in the imposition of any such tax.

            If a REMIC election is made with respect to the arrangement  under
which any Mortgage  Loans or REO  Properties are held, the Company shall amend
this Agreement such that it will meet all Rating Agency requirements.

            Section 3.07 Review of Mortgage Loans

            From the  related  Closing  Date  until the date 15 days after the
related  Closing  Date,  the  Purchaser  shall  have the right to  review  the
Mortgage Files and obtain BPOs and other property evaluations on the Mortgaged
Properties  relating to the Mortgage  Loans  purchased on the related  Closing
Date,  with the  results  of such BPO or  property  evaluation  reviews  to be
communicated  to the  Company  for a period up to 15 days  after  the  related
Closing  Date. In addition,  the Purchaser  shall have the right to reject any
Mortgage Loan which in the Purchaser's sole determination (i) fails to conform
to the  Underwriting  Guidelines,  (ii) the  value of the  Mortgaged  Property
pursuant to any BPO or property  evaluation  varies by more than plus or minus
15%  from the  lesser  of (A) the  original  appraised  value of the  Mortgage
Property or (B) the purchase price of the Mortgaged Property as of the date of
origination (a "Value Issue"), (iii) the Mortgage Loan is underwritten without
verification of the Borrower's income and assets and there is no credit report
and credit score or (iv) the  Purchaser  deems the Mortgage  Loan not to be an
acceptable  credit risk. The Company shall  repurchase  the rejected  Mortgage
Loan in the manner  prescribed in Section 3.03 upon receipt of notice from the
Purchaser of the rejection of such Mortgage Loan; provided, that, in the event
that the Purchaser  rejects a Mortgage Loan due to a Value Issue,  the Company
may submit to the Purchaser an additional  property evaluation for purposes of
demonstrating  that the  Mortgage  Loan  does not have a Value  Issue.  If the
Purchaser and the Company fail to resolve such Value Issue within two weeks of
the Purchaser  presenting such Value Issue to the Company,  then Company shall
have the right to promptly (a) substitute  such Mortgage Loan with a Qualified
Substitute  Mortgage Loan meeting all the terms hereof, or (b) repurchase such
Mortgage Loan in the manner  prescribed in Section 3.03. Any rejected Mortgage
Loan shall be removed from the terms of this Agreement. The Company shall make
available  all files  required by  Purchaser  in order to complete its review,
including capturing all CRA/HMDA required data fields. Any review performed by
the Purchaser prior to the related Closing Date does not limit the Purchaser's
rights or the Company's obligations under this section. To the extent that the
Purchaser's  review  discloses  that the Mortgage  Loans do not conform to the
Underwriting  Guidelines  or the terms set  forth in the  Purchaser  Price and
Terms  Letter,  the  Purchaser  may in its sole  discretion  increase  its due
diligence review and obtain  additional  BPO's or other property  evaluations.
The  additional  review may be for any  reason  including  but not  limited to
credit quality, property valuations, and data integrity.


                                     - 31 -
<PAGE>

                                   ARTICLE IV

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

            Section 4.01 Company to Act as Servicer.

            The Company shall service and  administer  the Mortgage  Loans and
shall have full power and authority, acting alone, to do any and all things in
connection with such servicing and  administration  which the Company may deem
necessary or desirable,  consistent  with the terms of this Agreement and with
Accepted Servicing Practices.

            Consistent  with the  terms of this  Agreement,  the  Company  may
waive,  modify  or vary  any  term of any  Mortgage  Loan  or  consent  to the
postponement  of strict  compliance  with any such term or in any manner grant
indulgence  to  any  Mortgagor  if in the  Company's  reasonable  and  prudent
determination  such waiver,  modification,  postponement  or indulgence is not
materially  adverse to the  Purchasers,  provided,  however,  that the Company
shall not make any future advances with respect to a Mortgage Loan and (unless
the  Mortgagor is in default with respect to the Mortgage Loan or such default
is, in the judgment of the Company,  imminent and the Company has obtained the
prior  written  consent of the  Purchaser)  the  Company  shall not permit any
modification  of  any  material  term  of  any  Mortgage  Loan  including  any
modifications  that would change the Mortgage  Interest Rate change the Index,
Lifetime  Mortgage  Interest Rate Cap, Initial Rate Cap or Gross Margin of any
Mortgage Loan,  defer or forgive the payment of principal or interest,  reduce
or increase the outstanding  principal  balance (except for actual payments of
principal) or change the final  maturity  date on such  Mortgage  Loan. In the
event of any such  modification  which  permits  the  deferral  of interest or
principal  payments on any Mortgage Loan,  the Company shall,  on the Business
Day  immediately  preceding the Remittance Date in any month in which any such
principal  or interest  payment has been  deferred,  deposit in the  Custodial
Account from its own funds,  in accordance  with Section 5.03,  the difference
between (a) such month's  principal  and one month's  interest at the Mortgage
Loan Remittance Rate on the unpaid principal balance of such Mortgage Loan and
(b) the  amount  paid by the  Mortgagor.  The  Company  shall be  entitled  to
reimbursement  for such advances to the same extent as for all other  advances
made  pursuant  to  Section  5.03.  Without  limiting  the  generality  of the
foregoing, the Company shall continue, and is hereby authorized and empowered,
to execute and deliver on behalf of itself and the Purchasers, all instruments
of satisfaction or cancellation,  or of partial or full release, discharge and
all other comparable instruments,  with respect to the Mortgage Loans and with
respect to the Mortgaged  Properties.  If reasonably  required by the Company,
the Purchaser  shall furnish the Company with any powers of attorney and other
documents  necessary  or  appropriate  to enable the  Company to carry out its
servicing and administrative duties under this Agreement.


                                     - 32 -
<PAGE>

            In servicing and  administering  the Mortgage  Loans,  the Company
shall employ  procedures  (including  collection  procedures) and exercise the
same  care  that  it  customarily  employs  and  exercises  in  servicing  and
administering mortgage loans for its own account,  giving due consideration to
Accepted  Servicing  Practices  where such  practices do not conflict with the
requirements of this Agreement, and the Purchaser's reliance on the Company.

            The Mortgage Loans may be subserviced by the Subservicer on behalf
of the Company provided that the Subservicer is a Fannie  Mae-approved  lender
or a Freddie Mac seller/servicer in good standing,  and no event has occurred,
including but not limited to a change in insurance coverage,  which would make
it unable to comply with the eligibility  requirements  for lenders imposed by
Fannie Mae or for  seller/servicers  imposed by Freddie  Mac,  or which  would
require notification to Fannie Mae or Freddie Mac. The Company may perform any
of its servicing  responsibilities  hereunder or may cause the  Subservicer to
perform any such servicing  responsibilities on its behalf, but the use by the
Company of the  Subservicer  shall not  release  the  Company  from any of its
obligations  hereunder and the Company shall remain responsible  hereunder for
all acts  and  omissions  of the  Subservicer  as  fully  as if such  acts and
omissions  were  those of the  Company.  The  Company  shall  pay all fees and
expenses of the  Subservicer  from its own funds,  and the  Subservicer's  fee
shall not exceed the Servicing Fee.

            At the cost and  expense  of the  Company,  without  any  right of
reimbursement  from the  Custodial  Account,  the Company shall be entitled to
terminate the rights and  responsibilities  of the Subservicer and arrange for
any  servicing  responsibilities  to be performed  by a successor  Subservicer
meeting the requirements in the preceding paragraph,  provided,  however, that
nothing  contained  herein shall be deemed to prevent or prohibit the Company,
at the Company's  option,  from electing to service the related Mortgage Loans
itself. In the event that the Company's responsibilities and duties under this
Agreement  are  terminated  pursuant to Section 9.04,  10.01 or 11.02,  and if
requested  to do so by the  Purchaser,  the Company  shall at its own cost and
expense terminate the rights and  responsibilities  of the Subservicer as soon
as is  reasonably  possible.  The  Company  shall  pay all fees,  expenses  or
penalties  necessary in order to terminate the rights and  responsibilities of
the Subservicer  from the Company's own funds without  reimbursement  from the
Purchaser.

            Notwithstanding  any of the provisions of this Agreement  relating
to agreements or  arrangements  between the Company and the Subservicer or any
reference  herein to actions taken through the  Subservicer or otherwise,  the
Company shall not be relieved of its obligations to the Purchaser and shall be
obligated to the same extent and under the same terms and  conditions as if it
alone were servicing and  administering  the Mortgage Loans. The Company shall
be   entitled  to  enter  into  an   agreement   with  the   Subservicer   for
indemnification  of the Company by the  Subservicer  and nothing  contained in
this Agreement shall be deemed to limit or modify such indemnification.


                                     - 33 -
<PAGE>

            Any Subservicing  Agreement and any other transactions or services
relating to the Mortgage Loans involving the Subservicer shall be deemed to be
between the  Subservicer  and Company alone,  and the Purchaser  shall have no
obligations,  duties or liabilities with respect to the Subservicer  including
no obligation,  duty or liability of Purchaser to pay the  Subservicer's  fees
and  expenses.  For  purposes  of  distributions  and  advances by the Company
pursuant to this  Agreement,  the Company  shall be deemed to have  received a
payment on a Mortgage Loan when the Subservicer has received such payment.

            Section 4.02 Liquidation of Mortgage Loans.

            In the event that any payment due under any Mortgage  Loan and not
postponed  pursuant to Section  4.01 is not paid when the same becomes due and
payable,  or in the event the Mortgagor fails to perform any other covenant or
obligation  under the  Mortgage  Loan and such  failure  continues  beyond any
applicable grace period, the Company shall take such action as (1) the Company
would take under similar circumstances with respect to a similar mortgage loan
held for its own account for investment, (2) shall be consistent with Accepted
Servicing  Practices,  (3) the Company shall determine  prudently to be in the
best interest of Purchaser, and (4) is consistent with any related PMI Policy.
In the event that any payment  due under any  Mortgage  Loan is not  postponed
pursuant to Section 4.01 and remains delinquent for a period of 90 days or any
other default  continues for a period of 90 days beyond the  expiration of any
grace or cure period,  the Company  shall  commence  foreclosure  proceedings,
provided that, prior to commencing foreclosure proceedings,  the Company shall
notify the Purchaser in writing of the  Company's  intention to do so, and the
Company shall not commence foreclosure proceedings if the Purchaser objects to
such action within 10 Business Days of receiving such notice. In the event the
Purchaser  objects  to such  foreclosure  action,  the  Company  shall  not be
required to make Monthly Advances with respect to such Mortgage Loan, pursuant
to Section 5.03,  and the Company's  obligation to make such Monthly  Advances
shall  terminate on the 90th day referred to above.  In such  connection,  the
Company  shall from its own funds  make all  necessary  and  proper  Servicing
Advances,  provided, however, that the Company shall not be required to expend
its own funds in connection with any foreclosure or towards the restoration or
preservation  of any Mortgaged  Property,  unless it shall  determine (a) that
such  preservation,  restoration and/or foreclosure will increase the proceeds
of liquidation of the Mortgage Loan to Purchaser after reimbursement to itself
for such expenses and (b) that such expenses will be  recoverable by it either
through  Liquidation  Proceeds  (respecting  which it shall have  priority for
purposes of withdrawals  from the Custodial  Account pursuant to Section 4.05)
or  through  Insurance  Proceeds  (respecting  which  it  shall  have  similar
priority) .

            Notwithstanding  anything to the  contrary  contained  herein,  in
connection  with a foreclosure or acceptance of a deed in lieu of foreclosure,
in the event the  Company  has  reasonable  cause to believe  that a Mortgaged
Property is contaminated by hazardous or toxic substances or wastes, or if the
Purchaser  otherwise  requests an  environmental  inspection or review of such
Mortgaged Property to be conducted by a qualified  inspector.  Upon completion
of the  inspection,  the Company shall  promptly  provide the Purchaser with a
written report of the environmental inspection.


                                     - 34 -
<PAGE>

            After reviewing the environmental inspection report, the Purchaser
shall  determine  how the Company  shall proceed with respect to the Mortgaged
Property. In the event (a) the environmental  inspection report indicates that
the Mortgaged  Property is  contaminated  by hazardous or toxic  substances or
wastes and (b) the Purchaser  directs the Company to proceed with  foreclosure
or  acceptance  of a deed  in  lieu  of  foreclosure,  the  Company  shall  be
reimbursed for all costs  associated with such  foreclosure or acceptance of a
deed in lieu of foreclosure and any related  environmental  clean up costs, as
applicable,  from the  related  Liquidation  Proceeds,  or if the  Liquidation
Proceeds are insufficient to fully reimburse the Company, the Company shall be
entitled to be reimbursed  from amounts in the Custodial  Account  pursuant to
Section 4.05  hereof.  In the event the  Purchaser  directs the Company not to
proceed with  foreclosure or acceptance of a deed in lieu of foreclosure,  the
Company  shall be reimbursed  for all Servicing  Advances made with respect to
the related Mortgaged  Property from the Custodial Account pursuant to Section
4.05 hereof.

            Section 4.03 Collection of Mortgage Loan Payments.

            Continuously from the date hereof until the principal and interest
on all Mortgage Loans are paid in full,  the Company shall proceed  diligently
to collect all  payments  due under each of the  Mortgage  Loans when the same
shall become due and payable and shall take special care in  ascertaining  and
estimating  Escrow  Payments  and all other  charges  that will become due and
payable with respect to the Mortgage Loan and the Mortgaged  Property,  to the
end that the installments  payable by the Mortgagors will be sufficient to pay
such charges as and when they become due and payable.

            Section 4.04 Establishment of and Deposits to Custodial Account.

            The  Company  shall  segregate  and hold all funds  collected  and
received  pursuant to a Mortgage  Loan  separate and apart from any of its own
funds  and  general  assets  and  shall  establish  and  maintain  one or more
Custodial  Accounts,  in the form of time deposit or demand  accounts,  titled
"Countrywide  Home  Loans,  Inc.  in trust for EMC  Mortgage  Corporation,  as
purchaser  of   Residential   Adjustable   Rate  Mortgage  Loans  and  various
Mortgagors".  The  Custodial  Account  shall be  established  with a Qualified
Depository  acceptable to the Purchaser.  Any funds deposited in the Custodial
Account shall at all times be fully insured to the full extent permitted under
applicable  law. Funds  deposited in the Custodial  Account may be drawn on by
the Company in  accordance  with Section  4.05.  The creation of any Custodial
Account  shall be  evidenced  by a  certification  in the form of Exhibit  D-1
hereto, in the case of an account established with the Company, or by a letter
agreement in the form of Exhibit D-2 hereto, in the case of an account held by
a depository  other than the Company.  A copy of such  certification or letter
agreement  shall be furnished  to the  Purchaser  and,  upon  request,  to any
subsequent Purchaser.

            The Company  shall  deposit in the  Custodial  Account  within two
Business  Days of  receipt,  and retain  therein,  the  following  collections
received  by the Company and  payments  made by the Company  after the related
Cut-off Date,  (other than payments of principal and interest due on or before
the related  Cut-off  Date,  or  received by the Company  prior to the related
Cut-off Date but allocable to a period  subsequent  thereto or with respect to
each LPMI Loan, in the amount of the LPMI Fee) :


                                     - 35 -
<PAGE>

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

            (ii) all  payments on account of interest  on the  Mortgage  Loans
      adjusted to the Mortgage Loan Remittance Rate;

            (iii) all Liquidation Proceeds;

            (iv) all  Insurance  Proceeds  including  amounts  required  to be
      deposited  pursuant to Section  4.10,  Section  4.11,  Section  4.14 and
      Section 4.15;

            (v)  all  Condemnation  Proceeds  which  are  not  applied  to the
      restoration  or repair of the  Mortgaged  Property  or  released  to the
      Mortgagor in accordance with Section 4.14;

            (vi) any amount required to be deposited in the Custodial  Account
      pursuant to Section 4.01, 4.09, 5.03, 6.01 or 6.02;

            (vii) any amounts payable in connection with the repurchase of any
      Mortgage  Loan  pursuant to Section  3.03,  3.05 or 3.07 and all amounts
      required to be deposited by the Company in  connection  with a shortfall
      in principal amount of any Qualified  Substitute  Mortgage Loan pursuant
      to Section 3.03;

            (viii) with  respect to each  Principal  Prepayment  in full or in
      part, the Prepayment Interest Shortfall Amount, if any, for the month of
      distribution.  Such deposit  shall be made from the Company's own funds,
      without  reimbursement  therefor up to a maximum amount per month of the
      Servicing Fee actually received for such month for the Mortgage Loans;

            (ix) any amounts  required to be deposited by the Company pursuant
      to Section 4.11 in connection with the deductible  clause in any blanket
      hazard insurance policy; and

            (x) any  amounts  received  with  respect to or related to any REO
      Property and all REO Disposition Proceeds pursuant to Section 4.16.

            The foregoing  requirements for deposit into the Custodial 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
and  assumption  fees, to the extent  permitted by Section  6.01,  need not be
deposited  by the Company into the  Custodial  Account.  Any interest  paid on
funds deposited in the Custodial  Account by the depository  institution shall
accrue to the  benefit of the  Company  and the  Company  shall be entitled to
retain and withdraw  such  interest  from the  Custodial  Account  pursuant to
Section 4.05.


                                     - 36 -
<PAGE>

            Section 4.05 Permitted Withdrawals From Custodial Account.

            The  Company  shall,  from time to time,  withdraw  funds from the
Custodial Account for the following purposes:

            (i) to make  payments to the  Purchaser  in the amounts and in the
      manner provided for in Section 5.01;

            (ii) to  reimburse  itself for Monthly  Advances of the  Company's
      funds made  pursuant to Section 5.03,  the Company's  right to reimburse
      itself pursuant to this subclause (ii) being limited to amounts received
      on the related  Mortgage Loan which represent late payments of principal
      and/or  interest  respecting  which any such advance was made,  it being
      understood  that, in the case of any such  reimbursement,  the Company's
      right thereto  shall be prior to the rights of  Purchaser,  except that,
      where the Company is required to  repurchase a Mortgage Loan pursuant to
      Section  3.03,   3.05,  3.07  or  6.02,  the  Company's  right  to  such
      reimbursement shall be subsequent to the payment to the Purchaser of the
      Repurchase  Price  pursuant  to  such  sections  and all  other  amounts
      required to be paid to the Purchaser with respect to such Mortgage Loan;

            (iii) to reimburse itself for unreimbursed Servicing Advances, and
      for any unpaid  Servicing Fees, the Company's right to reimburse  itself
      pursuant to this subclause (iii) with respect to any Mortgage Loan being
      limited  to  related  Liquidation   Proceeds,   Condemnation   Proceeds,
      Insurance  Proceeds  and such other  amounts as may be  collected by the
      Company from the Mortgagor or otherwise  relating to the Mortgage  Loan,
      it being  understood  that, in the case of any such  reimbursement,  the
      Company's right thereto shall be prior to the rights of Purchaser except
      where the Company is required to  repurchase a Mortgage Loan pursuant to
      Section 3.03,  3.05,  3.07 or 6.02, in which case the Company's right to
      such reimbursement  shall be subsequent to the payment to the Purchasers
      of the Repurchase  Price pursuant to such sections and all other amounts
      required  to be paid to the  Purchasers  with  respect to such  Mortgage
      Loan;

            (iv) to pay itself  interest on funds  deposited in the  Custodial
      Account;

            (v) to reimburse itself for expenses  incurred and reimbursable to
      it pursuant to Section 9.01;

            (vi) to pay any amount  required  to be paid  pursuant  to Section
      4.16 related to any REO Property,  it being  understood that in the case
      of any such  expenditure  or  withdrawal  related  to a  particular  REO
      Property,  the  amount  of  such  expenditure  or  withdrawal  from  the
      Custodial  Account  shall  be  limited  to  amounts  on  deposit  in the
      Custodial Account with respect to the related REO Property;

            (vii)  to clear  and  terminate  the  Custodial  Account  upon the
      termination of this Agreement; and

            (viii) to withdraw funds deposited in error.


                                     - 37 -
<PAGE>

            In the event that the Custodial  Account is interest  bearing,  on
each Remittance  Date, the Company shall withdraw all funds from the Custodial
Account except for those amounts which,  pursuant to Section 5.01, the Company
is not obligated to remit on such  Remittance  Date.  The Company may use such
withdrawn funds only for the purposes described in this Section 4.05.

            Section 4.06 Establishment of and Deposits to Escrow Account.

            The  Company  shall  segregate  and hold all funds  collected  and
received pursuant to a Mortgage Loan constituting Escrow Payments separate and
apart from any of its own funds and  general  assets and shall  establish  and
maintain  one or more Escrow  Accounts,  in the form of time deposit or demand
accounts, titled, "Countrywide Home Loans, Inc., in trust for the EMC Mortgage
Corporation,  as purchaser of Residential  Adjustable  Rate Mortgage Loans and
various Mortgagors". The Escrow Accounts shall be established with a Qualified
Depository,  in a manner  which  shall  provide  maximum  available  insurance
thereunder.  Funds  deposited  in the  Escrow  Account  may be drawn on by the
Company in accordance  with Section 4.07.  The creation of any Escrow  Account
shall be evidenced by a  certification  in the form of Exhibit E-1 hereto,  in
the case of an account  established with the Company, or by a letter agreement
in the  form of  Exhibit  E-2  hereto,  in the  case of an  account  held by a
depository  other  than the  Company.  A copy of such  certification  shall be
furnished to the Purchaser and, upon request, to any subsequent Purchaser.

            The Company shall deposit in the Escrow Account or Accounts within
two Business Days of receipt, and retain therein:

            (i) all Escrow  Payments  collected  on  account  of the  Mortgage
      Loans,  for the purpose of effecting timely payment of any such items as
      required under the terms of this Agreement; and

            (ii) all amounts  representing  Insurance Proceeds or Condemnation
      Proceeds  which are to be  applied to the  restoration  or repair of any
      Mortgaged Property.

            The Company shall make withdrawals from the Escrow Account only to
effect such  payments as are required  under this  Agreement,  as set forth in
Section  4.07.  The Company  shall be entitled to retain any interest  paid on
funds  deposited in the Escrow  Account by the depository  institution,  other
than interest on escrowed  funds  required by law to be paid to the Mortgagor.
To the extent  required  by law,  the Company  shall pay  interest on escrowed
funds  to  the  Mortgagor  notwithstanding  that  the  Escrow  Account  may be
non-interest  bearing or that interest paid thereon is  insufficient  for such
purposes.

            Section 4.07 Permitted Withdrawals From Escrow Account.

            Withdrawals from the Escrow Account or Accounts may be made by the
Company only:

            (i) to effect timely payments of ground rents, taxes, assessments,
      water rates, mortgage insurance premiums,  condominium charges, fire and
      hazard insurance  premiums or other items  constituting  Escrow Payments
      for the related Mortgage;


                                     - 38 -
<PAGE>

            (ii) to reimburse the Company for any  Servicing  Advances made by
      the Company  pursuant to Section 4.08 with respect to a related Mortgage
      Loan, but only from amounts  received on the related Mortgage Loan which
      represent late collections of Escrow Payments thereunder;

            (iii) to refund to any  Mortgagor  any funds found to be in excess
      of the amounts required under the terms of the related Mortgage Loan;

            (iv) for  transfer to the  Custodial  Account and  application  to
      reduce the principal balance of the Mortgage Loan in accordance with the
      terms of the related Mortgage and Mortgage Note;

            (v) for  application  to  restoration  or repair of the  Mortgaged
      Property in accordance with the procedures outlined in Section 4.14;

            (vi)  to pay to  the  Company,  or  any  Mortgagor  to the  extent
      required by law, any interest paid on the funds  deposited in the Escrow
      Account;

            (vii) to clear and terminate the Escrow Account on the termination
      of this Agreement; and

            (viii) to withdraw funds deposited in error.

            Section 4.08 Payment of Taxes, Insurance and Other Charges.

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

            Section 4.09 Protection of Accounts.

            The  Company  may  transfer  the  Custodial  Account or the Escrow
Account to a different  Qualified  Depository from time to time. Upon any such
transfer,  the Company shall promptly  notify the Purchaser and deliver to the
Purchaser a Custodial  Account  Certification or Escrow Account  Certification
(as applicable) in the form of Exhibit D-1 or E-1 to this agreement.


                                     - 39 -
<PAGE>

            The Company shall bear any expenses,  losses or damages  sustained
by the Purchaser  because the Custodial  Account and/or the Escrow Account are
not demand deposit accounts.

            Amounts on deposit in the Custodial Account and the Escrow Account
may at the option of the Company be invested in Eligible Investments; provided
that in the event that  amounts on  deposit  in the  Custodial  Account or the
Escrow  Account  exceed the  amount  fully  insured by the FDIC (the  "Insured
Amount") the Company  shall be obligated to invest the excess  amount over the
Insured Amount in Eligible Investments on the same Business Day as such excess
amount becomes  present in the Custodial  Account or the Escrow  Account.  Any
such Eligible  Investment  shall mature no later than the  Determination  Date
next following the date of such Eligible Investment,  provided,  however, that
if such Eligible Investment is an obligation of a Qualified  Depository (other
than the Company) that maintains the Custodial  Account or the Escrow Account,
then such Eligible  Investment  may mature on such  Remittance  Date. Any such
Eligible  Investment shall be made in the name of the Company in trust for the
benefit  of the  Purchaser.  All  income  on or gain  realized  from  any such
Eligible  Investment  shall  be for  the  benefit  of the  Company  and may be
withdrawn  at any time by the Company.  Any losses  incurred in respect of any
such  investment  shall be  deposited in the  Custodial  Account or the Escrow
Account, by the Company out of its own funds immediately as realized.

            Section 4.10 Maintenance of Hazard Insurance.

            The Company  shall cause to be  maintained  for each Mortgage Loan
hazard  insurance  such that all  buildings  upon the  Mortgaged  Property are
insured by a generally  acceptable insurer rated A:VI or better in the current
Best's Key Rating Guide ("Best's")  against loss by fire,  hazards of extended
coverage  and such  other  hazards  as are  customary  in the area  where  the
Mortgaged  Property  is located,  in an amount  which is at least equal to the
lesser of (i) the replacement value of the improvements securing such Mortgage
Loan and (ii) the  greater  of (a) the  outstanding  principal  balance of the
Mortgage  Loan and (b) an  amount  such  that the  proceeds  thereof  shall be
sufficient  to  prevent  the  Mortgagor  or the loss  payee  from  becoming  a
co-insurer.

            If a Mortgaged  Property is located in an area  identified  in the
Federal  Register by the Flood Emergency  Management  Agency as having special
flood  hazards  (and such flood  insurance  has been made  available)  a flood
insurance  policy meeting the  requirements  of the current  guidelines of the
Federal  Insurance  Administration  is in effect with a  generally  acceptable
insurance  carrier  rated  A:VI or better in Best's in an amount  representing
coverage  equal to the lesser of (i) the minimum  amount  required,  under the
terms of coverage,  to compensate for any damage or loss on a replacement cost
basis (or the unpaid balance of the mortgage if  replacement  cost coverage is
not available for the type of building insured) and (ii) the maximum amount of
insurance which is available under the Flood Disaster  Protection Act of 1973,
as amended.  If at any time during the term of the Mortgage  Loan, the Company
determines in accordance  with  applicable  law and pursuant to the Fannie Mae
Guides that a Mortgaged Property is located in a special flood hazard area and
is not  covered by flood  insurance  or is covered in an amount  less than the
amount required by the Flood Disaster Protection Act of 1973, as amended,  the
Company shall notify the related Mortgagor that the Mortgagor must obtain such
flood insurance  coverage,  and if said Mortgagor fails to obtain the required
flood insurance  coverage within forty-five (45) days after such notification,
the Company shall  immediately force place the required flood insurance on the
Mortgagor's behalf.


                                     - 40 -
<PAGE>

            If a Mortgage is secured by a unit in a condominium  project,  the
Company  shall verify that the coverage  required of the owner's  association,
including hazard, flood, liability, and fidelity coverage, is being maintained
in accordance with then current Fannie Mae  requirements,  and secure from the
owner's association its agreement to notify the Company promptly of any change
in the  insurance  coverage or of any  condemnation  or casualty loss that may
have a material effect on the value of the Mortgaged Property as security.

            The  Company  shall  cause  to be  maintained  on  each  Mortgaged
Property  earthquake or such other or additional  insurance as may be required
pursuant to such  applicable  laws and  regulations as shall at any time be in
force and as shall  require  such  additional  insurance,  or  pursuant to the
requirements of any private mortgage guaranty  insurer,  or as may be required
to conform with Accepted Servicing Practices.

            In the event that any  Purchaser  or the Company  shall  determine
that the  Mortgaged  Property  should  be  insured  against  loss or damage by
hazards and risks not covered by the  insurance  required to be  maintained by
the  Mortgagor  pursuant  to the  terms of the  Mortgage,  the  Company  shall
communicate  and consult with the Mortgagor  with respect to the need for such
insurance  and  bring  to  the  Mortgagor's   attention  the  desirability  of
protection of the Mortgaged Property.

            All  policies  required  hereunder  shall name the Company as loss
payee and shall be endorsed with standard or union mortgagee clauses,  without
contribution, which shall provide for at least 30 days prior written notice of
any cancellation, reduction in amount or material change in coverage.

            The Company shall not interfere  with the  Mortgagor's  freedom of
choice in selecting either his insurance carrier or agent, provided,  however,
that the Company shall not accept any such  insurance  policies from insurance
companies  unless  such  companies  are rated A:VI or better in Best's and are
licensed to do business in the jurisdiction in which the Mortgaged Property is
located.  The Company shall  determine that such policies  provide  sufficient
risk coverage and amounts,  that they insure the property owner, and that they
properly  describe  the property  address.  The Company  shall  furnish to the
Mortgagor a formal notice of  expiration  of any such  insurance in sufficient
time for the Mortgagor to arrange for renewal coverage by the expiration date.

            Pursuant to Section  4.04,  any amounts  collected  by the Company
under any such  policies  (other than  amounts to be  deposited  in the Escrow
Account and  applied to the  restoration  or repair of the  related  Mortgaged
Property,  or property  acquired in liquidation of the Mortgage Loan, or to be
released to the Mortgagor,  in accordance with the Company's  normal servicing
procedures  as specified in Section  4.14) shall be deposited in the Custodial
Account subject to withdrawal pursuant to Section 4.05.


                                     - 41 -
<PAGE>

            Section 4.11 Maintenance of Mortgage Impairment Insurance.

            In the event that the Company  shall obtain and maintain a blanket
policy  insuring  against losses  arising from fire and hazards  covered under
extended  coverage  on all of the  Mortgage  Loans,  then,  to the extent such
policy provides coverage in an amount equal to the amount required pursuant to
Section 4.10 and  otherwise  complies with all other  requirements  of Section
4.10, it shall conclusively be deemed to have satisfied its obligations as set
forth in Section  4.10.  Any amounts  collected by the Company  under any such
policy relating to a Mortgage Loan shall be deposited in the Custodial Account
subject to  withdrawal  pursuant  to Section  4.05.  Such policy may contain a
deductible  clause, in which case, in the event that there shall not have been
maintained on the related  Mortgaged  Property a policy complying with Section
4.10,  and there shall have been a loss which would have been  covered by such
policy, the Company shall deposit in the Custodial Account at the time of such
loss the amount not otherwise payable under the blanket policy because of such
deductible clause, such amount to deposited from the Company's funds,  without
reimbursement therefor. Upon request of any Purchaser, the Company shall cause
to be delivered to such  Purchaser a certified  true copy of such policy and a
statement  from the insurer  thereunder  that such policy shall in no event be
terminated or  materially  modified  without 30 days' prior written  notice to
such Purchaser.

            Section 4.12 Maintenance of Fidelity Bond and Errors and Omissions
                         Insurance.

            The Company shall maintain with responsible companies,  at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers,  employees or other persons acting in any
capacity  requiring such persons to handle funds,  money,  documents or papers
relating to the Mortgage Loans ("Company  Employees").  Any such Fidelity Bond
and Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Company against losses,
including  forgery,  theft,  embezzlement,  fraud,  errors and  omissions  and
negligent  acts of such Company  Employees.  Such Fidelity Bond and Errors and
Omissions  Insurance  Policy also shall protect and insure the Company against
losses in  connection  with the  release or  satisfaction  of a Mortgage  Loan
without having obtained payment in full of the  indebtedness  secured thereby.
No provision of this Section 4.12  requiring such Fidelity Bond and Errors and
Omissions  Insurance  Policy  shall  diminish or relieve the Company  from its
duties and  obligations as set forth in this Agreement.  The minimum  coverage
under any such bond and insurance  policy shall be acceptable to Fannie Mae or
Freddie Mac. Upon the request of any Purchaser,  the Company shall cause to be
delivered to such  Purchaser a certified  true copy of such  fidelity bond and
insurance  policy and a statement  from the surety and the  insurer  that such
fidelity  bond  and  insurance  policy  shall in no  event  be  terminated  or
materially modified without 30 days' prior written notice to the Purchaser.

            Section 4.13 Inspections.

            The  Company  shall  inspect  the  Mortgaged  Property as often as
deemed  necessary  by the  Company  to  assure  itself  that the  value of the
Mortgaged  Property is being preserved.  In addition,  if any Mortgage Loan is
more than 60 days  delinquent,  the  Company  immediately  shall  inspect  the
Mortgaged Property and shall conduct subsequent inspections in accordance with
Accepted  Servicing  Practices  or as may be required by the primary  mortgage
guaranty  insurer.  The  Company  shall  keep a  written  report  of each such
inspection.


                                     - 42 -
<PAGE>

            Section 4.14 Restoration of Mortgaged Property.

            The Company need not obtain the approval of the Purchaser prior to
releasing any Insurance Proceeds or Condemnation  Proceeds to the Mortgagor to
be applied to the  restoration  or repair of the  Mortgaged  Property  if such
release is in accordance with Accepted Servicing Practices.  At a minimum, the
Company shall comply with the following conditions in connection with any such
release of Insurance Proceeds or Condemnation Proceeds:

            (i)   the   Company   shall   receive   satisfactory   independent
      verification  of  completion  of repairs and  issuance  of any  required
      approvals with respect thereto;

            (ii) the Company  shall take all steps  necessary  to preserve the
      priority  of the lien of the  Mortgage,  including,  but not  limited to
      requiring waivers with respect to mechanics' and materialmen's liens;

            (iii) the Company  shall verify that the  Mortgage  Loan is not in
      default; and

            (iv) pending repairs or  restoration,  the Company shall place the
      Insurance Proceeds or Condemnation Proceeds in the Custodial Account.

            If the Purchaser is named as an additional loss payee, the Company
is hereby  empowered  to endorse  any loss  draft  issued in respect of such a
claim in the name of the Purchaser.

            Section 4.15 Maintenance of PMI and LPMI Policy; Claims.

            (a) With  respect  to each  Mortgage  Loan with a LTV in excess of
95%, the Company shall:

            (i) with  respect to Mortgage  Loans which are not LPMI Loans,  in
accordance  with state and federal laws and without any cost to the Purchaser,
maintain  or cause the  Mortgagor  to  maintain in full force and effect a PMI
Policy with a minimum of 35%  coverage  insuring  that portion of the Mortgage
Loan in  excess of 68% (or such  other  percentage  as  stated in the  related
Acknowledgment Agreement) of value, and shall pay or shall cause the Mortgagor
to pay the premium  thereon on a timely basis,  until the LTV of such Mortgage
Loan is reduced to 80%. In the event that such PMI Policy shall be terminated,
the  Company  shall  obtain  from  another   Qualified  Insurer  a  comparable
replacement  policy,  with a total coverage equal to the remaining coverage of
such  terminated  PMI  Policy,  at  substantially  the same fee level.  If the
insurer shall cease to be a Qualified  Insurer,  the Company  shall  determine
whether recoveries under the PMI Policy are jeopardized for reasons related to
the financial  condition of such insurer, it being understood that the Company
shall in no event have any  responsibility  or  liability  for any  failure to
recover under the PMI Policy for such reason.  If the Company  determines that
recoveries  are  so  jeopardized,  it  shall  notify  the  Purchaser  and  the
Mortgagor,   if  required,   and  obtain  from  another  Qualified  Insurer  a
replacement  insurance  policy.  The Company  shall not take any action  which
would result in noncoverage under any applicable PMI Policy of any loss which,
but for the  actions of the Company  would have been  covered  thereunder.  In
connection with any assumption or substitution agreement entered into or to be
entered into pursuant to Section 4.01, the Company shall  promptly  notify the
insurer  under  the  related  PMI  Policy,  if  any,  of  such  assumption  or
substitution  of liability in accordance with the terms of such PMI Policy and
shall take all actions which may be required by such insurer as a condition to
the  continuation  of coverage  under such PMI  Policy.  If such PMI Policy is
terminated as a result of such assumption or  substitution  of liability,  the
Company shall obtain a replacement PMI Policy as provided above.


                                     - 43 -
<PAGE>

            (ii) with respect to LPMI Loans, maintain in full force and effect
an LPMI Policy  insuring  that portion of the Mortgage  Loan with a minimum of
35% coverage  insuring  that portion of the Mortgage Loan in excess of 68% (or
such other  percentage as stated in the related  Acknowledgment  Agreement) of
value, and from time to time,  withdraw the LPMI Fee with respect to such LPMI
Loan from the  Custodial  Account  in order to pay the  premium  thereon  on a
timely  basis,  until the LTV of such  Mortgage Loan is reduced to 80%. In the
event that the interest  payments  made with respect to any LPMI Loan are less
than the LPMI Fee, the Company  shall advance from its own funds the amount of
any such  shortfall  in the LPMI Fee, in payment of the premium on the related
LPMI  Policy.  Any  such  advance  shall be a  Servicing  Advance  subject  to
reimbursement  pursuant to the  provisions  on Section 2.05. In the event that
such LPMI Policy shall be  terminated,  the Company  shall obtain from another
Qualified Insurer a comparable replacement policy, with a total coverage equal
to the remaining coverage of such terminated LPMI Policy, at substantially the
same fee level.  If the insurer  shall cease to be a  Qualified  Insurer,  the
Company  shall  determine  whether   recoveries  under  the  LPMI  Policy  are
jeopardized for reasons related to the financial condition of such insurer, it
being understood that the Company shall in no event have any responsibility or
liability for any failure to recover under the LPMI Policy for such reason. If
the Company determines that recoveries are so jeopardized, it shall notify the
Purchaser and the Mortgagor,  if required,  and obtain from another  Qualified
Insurer a replacement  insurance policy. The Company shall not take any action
which would result in noncoverage under any applicable LPMI Policy of any loss
which, but for the actions of the Company would have been covered  thereunder.
In connection with any assumption or substitution agreement entered into or to
be entered into pursuant to Section 6.01,  the Company shall  promptly  notify
the insurer  under the related  LPMI  Policy,  if any, of such  assumption  or
substitution of liability in accordance with the terms of such LPMI Policy and
shall take all actions which may be required by such insurer as a condition to
the  continuation  of coverage  under such PMI Policy.  If such LPMI Policy is
terminated as a result of such assumption or  substitution  of liability,  the
Company shall obtain a replacement LPMI Policy as provided above.

            (b) In connection  with its  activities  as servicer,  the Company
agrees to prepare and present,  on behalf of itself and the Purchaser,  claims
to the  insurer  under any PMI  Policy or LPMI  Policy in a timely  fashion in
accordance  with the terms of such PMI  Policy  or LPMI  Policy  and,  in this
regard, to take such action as shall be necessary to permit recovery under any
PMI Policy or LPMI Policy  respecting a defaulted  Mortgage Loan.  Pursuant to
Section  4.04,  any amounts  collected by the Company  under any PMI Policy or
LPMI Policy shall be deposited in the Custodial Account, subject to withdrawal
pursuant to Section 4.05.

            (c) Purchaser, in its sole discretion, at any time, may (i) either
obtain an  additional  PMI Policy on any Mortgage Loan which already has a PMI
Policy in place,  or (ii) obtain a PMI Policy for any Mortgage Loan which does
not already have a PMI Policy in place.  In any event,  the Company  agrees to
administer  such  PMI  Policies  in  accordance  with  the  Agreement  or  any
Reconstitution Agreement.


                                     - 44 -
<PAGE>

            Section 4.16 Title, Management and Disposition of REO Property.

            In the event that title to any  Mortgaged  Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the Purchaser,  or in the event the Purchaser is
not  authorized or permitted to hold title to real property in the state where
the REO Property is located,  or would be adversely  affected under the "doing
business"  or tax  laws  of  such  state  by so  holding  title,  the  deed or
certificate  of sale  shall be taken in the name of such  Person or Persons as
shall be  consistent  with an Opinion of Counsel  obtained by the Company from
any attorney duly licensed to practice law in the state where the REO Property
is located.  The Person or Persons holding such title other than the Purchaser
shall  acknowledge in writing that such title is being held as nominee for the
Purchaser.

            The Company shall manage,  conserve,  protect and operate each REO
Property for the  Purchaser  solely for the purpose of its prompt  disposition
and sale.  The  Company,  either  itself or through an agent  selected  by the
Company, shall manage,  conserve,  protect and operate the REO Property in the
same manner that it manages, conserves, protects and operates other foreclosed
property for its own account,  and in the same manner that similar property in
the same locality as the REO Property is managed. The Company shall attempt to
sell the same (and may temporarily rent the same for a period not greater than
one year, except as otherwise  provided below) on such terms and conditions as
the Company deems to be in the best interest of the Purchaser.

            The  Company  shall use its best  efforts  to  dispose  of the REO
Property  as soon as  possible  and shall sell such REO  Property in any event
within one year after  title has been taken to such REO  Property,  unless (i)
(A) a REMIC election has not been made with respect to the  arrangement  under
which the Mortgage  Loans and the REO Property are held,  and (ii) the Company
determines,  and gives an appropriate  notice to the Purchaser to such effect,
that a longer  period is  necessary  for the orderly  liquidation  of such REO
Property.  If a period  longer than one year is permitted  under the foregoing
sentence and is  necessary  to sell any REO Property the Company  shall report
monthly to the  Purchaser  as to the  progress  being made in selling such REO
Property.

            The  Company  shall also  maintain on each REO  Property  fire and
hazard  insurance with extended  coverage in amount which is at least equal to
the  maximum  insurable  value of the  improvements  which  are a part of such
property,  liability insurance and, to the extent required and available under
the Flood Disaster Protection Act of 1973, as amended,  flood insurance in the
amount required above.

            The  disposition  of REO  Property  shall  be  carried  out by the
Company at such  price,  and upon such terms and  conditions,  as the  Company
deems to be in the best  interests of the  Purchaser.  The proceeds of sale of
the REO Property shall be promptly deposited in the Custodial Account. As soon
as  practical  thereafter  the  expenses  of such  sale  shall be paid and the
Company  shall  reimburse  itself  for  any  related  unreimbursed   Servicing
Advances,  unpaid  Servicing Fees and  unreimbursed  advances made pursuant to
Section 5.03, and on the Remittance Date  immediately  following the Principal
Prepayment  Period  in which  such sale  proceeds  are  received  the net cash
proceeds of such sale remaining in the Custodial  Account shall be distributed
to the Purchaser.


                                     - 45 -
<PAGE>

            The Company shall withdraw the Custodial  Account funds  necessary
for the proper  operation,  management  and  maintenance  of the REO Property,
including the cost of  maintaining  any hazard  insurance  pursuant to Section
4.10 and the fees of any managing agent of the Company, a Subservicer,  or the
Company  itself.  The REO management fee shall be an amount that is reasonable
and customary in the area where the Mortgaged Property is located. The Company
shall make monthly  distributions on each Remittance Date to the Purchasers of
the net cash flow from the REO Property  (which shall equal the revenues  from
such REO Property  net of the  expenses  described in this Section 4.16 and of
any reserves reasonably required from time to time to be maintained to satisfy
anticipated liabilities for such expenses) .

            Section 4.17 Real Estate Owned Reports.

            Together  with the statement  furnished  pursuant to Section 5.02,
the Company shall furnish to the  Purchaser on or before the  Remittance  Date
each month a statement with respect to any REO Property covering the operation
of such REO  Property  for the  previous  month and the  Company's  efforts in
connection  with the  sale of such REO  Property  and any  rental  of such REO
Property incidental to the sale thereof for the previous month. That statement
shall  be  accompanied  by  such  other  information  as the  Purchaser  shall
reasonably request.

            Section 4.18 Liquidation Reports.

            Upon  the  foreclosure  sale  of  any  Mortgaged  Property  or the
acquisition   thereof  by  the  Purchaser  pursuant  to  a  deed  in  lieu  of
foreclosure,  the Company shall submit to the  Purchaser a liquidation  report
with respect to such Mortgaged Property.

            Section 4.19 Reports of Foreclosures and Abandonments of Mortgaged
                         Property.

            Following the  foreclosure  sale or  abandonment  of any Mortgaged
Property, the Company shall report such foreclosure or abandonment as required
pursuant to Section 6050J of the Code.

            Section 4.20 Notification of Adjustments.

            With respect to each Mortgage  Loan,  the Company shall adjust the
Mortgage  Interest Rate on the related Interest Rate Adjustment Date and shall
adjust  the  Monthly  Payment  on  the  related  Payment  Adjustment  Date  in
compliance with the  requirements  of applicable law and the related  Mortgage
and Mortgage  Note. If,  pursuant to the terms of the Mortgage  Note,  another
index is selected for determining  the Mortgage  Interest Rate, the same index
will be used with respect to each Mortgage Note which  requires a new index to
be selected,  provided that such selection does not conflict with the terms of
the related  Mortgage  Note. The Company shall execute and deliver any and all
necessary  notices  required under applicable law and the terms of the related
Mortgage  Note and  Mortgage  regarding  the  Mortgage  Interest  Rate and the
Monthly Payment  adjustments.  The Company shall promptly upon written request
thereof,  deliver  to the  Purchaser  such  notifications  and any  additional
applicable  data regarding such  adjustments and the methods used to calculate
and implement  such  adjustments.  Upon the  discovery by the Company,  or the
Purchaser that the Company has failed to adjust a Mortgage  Interest Rate or a
Monthly  Payment  pursuant  to the  terms  of the  related  Mortgage  Note and
Mortgage,  the Company shall immediately deposit in the Custodial Account from
its own funds the amount of any interest loss caused the Purchaser thereby.


                                     - 46 -
<PAGE>

                                    ARTICLE V

                              PAYMENTS TO PURCHASER

            Section 5.01 Remittances.

            On each  Remittance  Date the Company shall remit by wire transfer
of immediately  available funds to the Purchaser (a) all amounts  deposited in
the Custodial  Account as of the close of business on the  Determination  Date
(net of charges against or withdrawals from the Custodial  Account pursuant to
Section 4.05), plus (b) all amounts, if any, which the Company is obligated to
distribute  pursuant to Section 5.03,  minus (c) any amounts  attributable  to
Principal  Prepayments  received  after the  applicable  Principal  Prepayment
Period  which  amounts  shall be remitted on the  following  Remittance  Date,
together  with  any  additional  interest  required  to be  deposited  in  the
Custodial  Account in connection with such Principal  Prepayment in accordance
with Section  4.04(viii),  and minus (d) any amounts  attributable  to Monthly
Payments  collected but due on a Due Date or Dates subsequent to the first day
of the month of the  Remittance  Date,  which amounts shall be remitted on the
Remittance Date next succeeding the Due Period for such amounts.

            With respect to any remittance received by the Purchaser after the
second  Business Day following the Business Day on which such payment was due,
the Company shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate,  adjusted as of the date of each  change,
plus three percentage  points, but in no event greater than the maximum amount
permitted by applicable law. Such interest shall be deposited in the Custodial
Account by the  Company on the date such late  payment is made and shall cover
the period  commencing  with the day  following  such second  Business Day and
ending with the Business Day on which such  payment is made,  both  inclusive.
Such interest  shall be remitted  along with the  distribution  payable on the
next  succeeding  Remittance  Date.  The  payment  by the  Company of any such
interest  shall not be deemed an  extension of time for payment or a waiver of
any Event of Default by the Company.

            Section 5.02 Statements to Purchaser.

            Not later than the 10th day of each  calendar  month,  the Company
shall  furnish to the  Purchaser  a Monthly  Remittance  Advice,  with a trial
balance  report  attached  thereto,  in the form of  Exhibit F annexed  hereto
electronic  medium  mutually  acceptable  to the  parties as to the  preceding
calendar month and the Due Period in the month of remittance


                                     - 47 -
<PAGE>

            In addition,  not more than 60 days after the end of each calendar
year, the Company shall furnish to each Person who was a Purchaser at any time
during  such  calendar  year  an  annual  statement  in  accordance  with  the
requirements  of  applicable  federal  income tax law as to the  aggregate  of
remittances for the applicable  portion of such year.  Nothing in this Section
5.02 shall be deemed to require the Company to prepare any federal  income tax
return on Internal  Revenue  Service  Form 1066,  U.S.  Real  Estate  Mortgage
Investment Conduit Income Tax Return, including Schedule Q thereto,  Quarterly
Notice  to  Residual  Interest  Holders  of REMIC  Taxable  Income or Net Loss
Allocation,  or any successor  forms, to be filed on behalf of any REMIC under
the REMIC Provisions.

            Section 5.03 Monthly Advances by Company.

            On the Business Day immediately  preceding each  Remittance  Date,
either (a) the Company  shall  deposit in the  Custodial  Account from its own
funds or (b) if funds are on deposit in the  Custodial  Account  which are not
required to be remitted on the related  Remittance  Date, the Company may make
an  appropriate  entry in its records that such funds shall be applied  toward
the related  Monthly  Advance  (provided,  that any funds so applied  shall be
replaced by the Company no later than the Business Day  immediately  preceding
the next Remittance  Date), in each case, in an aggregate  amount equal to all
Monthly Payments (with interest adjusted to the Mortgage Loan Remittance Rate)
which were due on the  Mortgage  Loans  during the  applicable  Due Period and
which were  delinquent at the close of business on the  immediately  preceding
Determination  Date or which  were  deferred  pursuant  to Section  4.01.  The
Company's  obligation  to make such Monthly  Advances as to any Mortgage  Loan
will  continue  through the last  Monthly  Payment due prior to the payment in
full of the Mortgage  Loan, or through the last  Remittance  Date prior to the
Remittance Date for the  distribution  of all  Liquidation  Proceeds and other
payments  or  recoveries   (including   Insurance  Proceeds  and  Condemnation
Proceeds) with respect to the Mortgage Loan.

            In no event  shall the  Company  be  obligated  to make an advance
under this  section  5.03 if at the time of such advance it deems such advance
to be  non-recoverable.  The  Company  shall  promptly  deliver  an  officer's
certificate   to  the  Purchaser   upon   determining   that  any  advance  is
non-recoverable.  In the event that upon liquidation of the Mortgage Loan, the
Liquidation Proceeds are insufficient to reimburse the Company for any Monthly
Advances,  the Company shall notify the related Purchaser of such shortfall by
registered mail with sufficient  supporting  documentation  and shall have the
right to deduct  such  shortfall  from the next  remittance  to be paid to the
related Purchaser.

                                   ARTICLE VI

                          GENERAL SERVICING PROCEDURES

            Section 6.01 Transfers of Mortgaged Property.

            The   Company   shall  use  its  best   efforts  to  enforce   any
"due-on-sale" provision contained in any Mortgage or Mortgage Note and to deny
assumption by the person to whom the  Mortgaged  Property has been or is about
to be sold whether by absolute  conveyance or by contract of sale, and whether
or not the  Mortgagor  remains  liable on the Mortgage and the Mortgage  Note.
When the Mortgaged  Property has been conveyed by the  Mortgagor,  the Company
shall, to the extent it has knowledge of such conveyance,  exercise its rights
to  accelerate  the  maturity of such  Mortgage  Loan under the  "due-on-sale"
clause  applicable  thereto,  provided,  however,  that the Company  shall not
exercise  such rights if prohibited by law from doing so or if the exercise of
such rights would impair or threaten to impair any recovery  under the related
PMI or LPMI Policy, if any.


                                     - 48 -
<PAGE>

            If the Company  reasonably  believes it is unable under applicable
law to enforce such "due-on-sale"  clause, the Company shall enter into (i) an
assumption  and  modification  agreement with the person to whom such property
has been  conveyed,  pursuant to which such person  becomes  liable  under the
Mortgage Note and the original Mortgagor remains liable thereon or (ii) in the
event the Company is unable under  applicable law to require that the original
Mortgagor  remain liable under the Mortgage Note and the Company has the prior
consent of the primary mortgage guaranty insurer,  a substitution of liability
agreement with the purchaser of the Mortgaged  Property  pursuant to which the
original  Mortgagor  is  released  from  liability  and the  purchaser  of the
Mortgaged  Property is  substituted  as Mortgagor and becomes liable under the
Mortgage  Note. If an assumption  fee is collected by the Company for entering
into an assumption agreement,  a portion of such fee, up to an amount equal to
one  percent  (1.0%)  of the  outstanding  principal  balance  of the  related
Mortgage  Loan,  will be  retained  by the  Company  as  additional  servicing
compensation,  and any portion  thereof in excess one percent  (1.0%) shall be
deposited  in the  Custodial  Account  for the  benefit of the  Purchaser.  In
connection with any such assumption or substitution of liability,  neither the
Mortgage  Interest Rate borne by the related  Mortgage  Note,  the term of the
Mortgage Loan, the Index, the Lifetime Mortgage Interest Rate Cap, the Initial
Rate  Cap or the  Gross  Margin  of any  Mortgage  Loan,  nor the  outstanding
principal amount of the Mortgage Loan shall be changed.

            To the extent that any  Mortgage  Loan is  assumable,  the Company
shall inquire diligently into the creditworthiness of the proposed transferee,
and  shall use the  underwriting  criteria  for  approving  the  credit of the
proposed  transferee which are used by Fannie Mae with respect to underwriting
mortgage  loans of the same type as the Mortgage  Loans.  If the credit of the
proposed  transferee  does not meet such  underwriting  criteria,  the Company
diligently shall, to the extent permitted by the Mortgage or the Mortgage Note
and by applicable law, accelerate the maturity of the Mortgage Loan.

            Section 6.02 Satisfaction of Mortgages and Release of Mortgage
                         Files.

            Upon the payment in full of any Mortgage  Loan,  or the receipt by
the  Company of a  notification  that  payment in full will be  escrowed  in a
manner customary for such purposes,  the Company shall notify the Purchaser in
the Monthly Remittance Advice as provided in Section 5.02, and may request the
release of any Mortgage Loan Documents. In connection with any such prepayment
in  full,  the  Company  shall  comply  with  all  applicable  laws  regarding
satisfaction, release or reconveyance with respect to the Mortgage.

            If the  Company  satisfies  or releases a Mortgage  without  first
having obtained payment in full of the indebtedness secured by the Mortgage or
should the Company otherwise prejudice any rights the Purchaser may have under
the mortgage  instruments,  upon written demand of the Purchaser,  the Company
shall  repurchase the related Mortgage Loan at the Repurchase Price by deposit
thereof in the  Custodial  Account  within 2 Business  Days of receipt of such
demand by the  Purchaser.  The Company  shall  maintain the Fidelity  Bond and
Errors and Omissions Insurance Policy as provided for in Section 4.12 insuring
the Company  against any loss it may sustain with respect to any Mortgage Loan
not satisfied in accordance with the procedures set forth herein.


                                     - 49 -
<PAGE>

            Section 6.03 Servicing Compensation.

            As compensation for its services  hereunder,  the Company shall be
entitled to withdraw  from the  Custodial  Account or to retain from  interest
payments on the Mortgage  Loans the amount of its Servicing Fee. The Servicing
Fee shall be payable  monthly  and shall be  computed on the basis of the same
unpaid  principal  balance  and for the period  respecting  which any  related
interest  payment on a Mortgage  Loan is computed.  The Servicing Fee shall be
payable only at the time of and with respect to those Mortgage Loans for which
payment  is in fact made of the  entire  amount of the  Monthly  Payment.  The
obligation  of the  Purchaser  to pay the  Servicing  Fee is  limited  to, and
payable solely from, the interest portion of such Monthly  Payments  collected
by the Company.

            Additional servicing  compensation in the form of assumption fees,
to the  extent  provided  in  Section  6.01,  and  late  payment  charges  and
Prepayment  Penalties,  shall be  retained  by the  Company  to the extent not
required to be  deposited  in the  Custodial  Account.  The  Company  shall be
required to pay all expenses  incurred by it in connection  with its servicing
activities hereunder and shall not be entitled to reimbursement thereof except
as  specifically  provided  for  herein.   Notwithstanding  anything  in  this
Agreement to the contrary, in the event of a Principal Prepayment in full, the
Company  shall not waive,  and shall not permit the waiver of, any  Prepayment
Penalty or portion thereof  required by the terms of the related Mortgage Note
unless (i) the Company  determines that such waiver would maximize recovery of
Liquidations Proceeds for such Mortgage Loan, taking into account the value of
such Prepayment Penalty, or (ii) (A) the enforeceability  therefore is limited
(1) by bankruptcy, insolvency, moratorium,  receivership, or other similar law
relating  to  creditors'  rights  generally  or  (2)  due to  acceleration  in
connection  with a  foreclosure  or  other  involuntary  payment  or  (B)  the
enforceability is otherwise limited or prohibited by applicable law.

            Section 6.04 Annual Statement as to Compliance.

            The Company  shall deliver to the  Purchaser,  on or before May 31
each year beginning May 31, 2003, an Officer's Certificate, stating that (i) a
review of the activities of the Company during the preceding calendar year and
of  performance  under  this  Agreement  has been made  under  such  officer's
supervision,  and (ii) the Company has complied  fully with the  provisions of
Article II and Article IV, and (iii) to the best of such officer's  knowledge,
based on such review, the Company has fulfilled all its obligations under this
Agreement  throughout  such  year,  or,  if there  has been a  default  in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status  thereof  and the action  being taken by the
Company to cure such default.


                                     - 50 -
<PAGE>

            Section 6.05 Annual Independent Public Accountants' Servicing
Report.

            On or before May 31st of each year  beginning  May 31,  2003,  the
Company, at its expense,  shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants to
furnish  a  statement  to each  Purchaser  to the  effect  that  such firm has
examined  certain  documents  and  records  relating to the  servicing  of the
Mortgage  Loans and this  Agreement  and that such firm is of the opinion that
the provisions of Article II and Article IV have been complied with, and that,
on the basis of such  examination  conducted  substantially in compliance with
the Single Attestation Program for Mortgage Bankers, nothing has come to their
attention  which would  indicate that such servicing has not been conducted in
compliance  therewith,  except  for (i) such  exceptions  as such  firm  shall
believe to be immaterial, and (ii) such other exceptions as shall be set forth
in such statement.

            Section 6.06 Right to Examine Company Records.

            The  Purchaser  shall have the right to examine  and audit any and
all of the books,  records, or other information of the Company,  whether held
by the Company or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans,  during business hours or at such other times
as may be reasonable under applicable  circumstances,  upon reasonable advance
notice.

                                   ARTICLE VII

                     AGENCY TRANSFER; PASS-THROUGH TRANSFER

            Section 7.01 Removal of Mortgage Loans from Inclusion Under this
                         Agreement Upon an Agency Transfer, or a Pass-Through
                         Transfer on One or More Reconstitution Dates.

            The  Purchaser  and the  Company  agree  that with  respect to any
Pass-Through Transfer, Whole Loan Transfer or Agency Transfers, as applicable,
the Company shall cooperate with the Purchaser in effecting such transfers and
shall  negotiate  in good  faith  and  execute  any  Reconstitution  Agreement
required to effectuate  the  foregoing;  provided  that,  such  Reconstitution
Agreement  shall  not  materially   increase  the  Company's   obligations  or
liabilities  hereunder,  nor diminish any of the Company's rights, and provide
to any master servicer or the trustee, as applicable, and/or the Purchaser any
and  all  publicly  available  information  and  appropriate  verification  of
information which may be reasonably available to the Company,  whether through
letters of its auditors and counsel or otherwise, as the Purchaser, trustee or
a master servicer shall  reasonable  request as to the related Mortgage Loans.
Purchaser shall reimburse  Company for any and all costs or expenses  incurred
by Company (i) in  obtaining  "accountant  comfort  letters"  with  respect to
information  supplied in response to Purchaser  requests,  (ii) in  connection
with any due diligence  performed in connection  with a Pass-Through  or Whole
Loan Transfer or (iii) making the Mortgage Loan  Documents or Servicing  Files
available to parties  participating  in a Pass-Through or Whole Loan Transfer,
including without limitation, shipping costs. Such information may be included
in any  disclosure  document  prepared  in  connection  with the  Pass-Through
Transfer,  Whole Loan Transfer or Agency  Transfer,  as applicable;  provided,
however,  that Company shall  indemnify  the  Purchaser  against any liability
arising  from any  material  omissions  or  misstatements  in any  information
supplied by the Company and included in a disclosure  document;  and provided,
further,  that the Purchaser shall indemnify the Company against any liability
arising from any  information  included in a disclosure  document that was not
supplied  by  the  Company.  The  Company  shall  execute  any  Reconstitution
Agreements  required within a reasonable  period of time after receipt of such
agreements  which time shall be  sufficient  for the Company and the Company's
counsel  to review  such  agreements.  Company  shall use its Best  Efforts to
complete such review  within ten (10) Business Days after mutual  agreement as
to the terms  thereof,  but such time shall not exceed  fifteen (15)  Business
Days after mutual agreement as to the terms thereof.


                                     - 51 -
<PAGE>

            The Company  shall not be required to restate any  representations
and  warranties  as of the  date  of any  Pass-Through  Transfer,  Whole  Loan
Transfer or Agency Transfers other than the representations and warranties set
forth in Section  3.01  (provided,  that the Company  shall not be required to
restate the representation and warranty set forth in Section 3.01(j) ) .

            In the event of any Agency  Transfer,  Pass-Through  or Whole Loan
Transfer,  the Company  shall have no  obligation  to pay any  custodial  fees
charged by the Agency.

            Section 7.02 Purchaser's Repurchase and Indemnification Obligations.

            Upon receipt by the Company of notice from Fannie Mae, Freddie Mac
or the  trustee  of a  breach  of any  Purchaser  representation  or  warranty
contained in any Reconstitution  Agreement or a request by Fannie Mae, Freddie
Mac or the  trustee,  as the case may be, for the  repurchase  of any Mortgage
Loan  transferred to Fannie Mae or Freddie Mac pursuant to an Agency  Transfer
or to a  trustee  pursuant  to a  Pass-Through  Transfer,  the  Company  shall
promptly  notify the  Purchaser  of same and shall,  at the  direction  of the
Purchaser,  use its best  efforts to cure and  correct  any such breach and to
satisfy the  requests or concerns of Fannie Mae,  Freddie  Mac, or the trustee
related to such  deficiencies  of the related  Mortgage  Loans  transferred to
Fannie Mae, Freddie Mac, or the trustee.

            The Purchaser shall  repurchase from the Company any Mortgage Loan
transferred to Fannie Mae or Freddie Mac pursuant to an Agency  Transfer or to
a trustee  pursuant  to a  Pass-Through  Transfer  with  respect  to which the
Company  has been  required  by Fannie  Mae,  Freddie  Mac,  or the trustee to
repurchase  due to a  breach  of a  representation  or  warranty  made  by the
Purchaser with respect to the Mortgage Loans,  or the servicing  thereof prior
to the  transfer  date to Fannie  Mae,  Freddie  Mac,  or the  trustee  in any
Reconstitution   Agreement   and  not  due  to  a  breach  of  the   Company's
representations or obligations  thereunder or pursuant to this Agreement.  The
repurchase  price to be paid by the  Purchaser to the Company shall equal that
repurchase  price paid by the Company to Fannie Mae, Freddie Mac, or the third
party purchaser plus all reasonable costs and expenses borne by the Company in
connection with the cure of said breach of a  representation  or warranty made
by the Purchaser and in connection  with the  repurchase of such Mortgage Loan
from Fannie Mae, Freddie Mac, or the trustee,  including,  but not limited to,
reasonable and necessary attorneys' fees.

            At the time of  repurchase,  the  Custodian  and the Company shall
arrange for the reassignment of the repurchased Mortgage Loan to the Purchaser
according to the Purchaser's instructions and the delivery to the Custodian of
any documents held by Fannie Mae,  Freddie Mac, or the trustee with respect to
the  repurchased   Mortgage  Loan  pursuant  to  the  related   Reconstitution
Agreement.  In the event of a repurchase,  the Company  shall,  simultaneously
with  such  reassignment,  give  written  notice  to the  Purchaser  that such
repurchase  has taken place,  and amend the related  Mortgage Loan Schedule to
reflect the addition of the repurchased  Mortgage Loan to this  Agreement.  In
connection  with any such  addition,  the Company and the  Purchaser  shall be
deemed to have made as to such repurchased  Mortgage Loan the  representations
and warranties set forth in this Agreement.


                                     - 52 -
<PAGE>

                                  ARTICLE VIII

                              COMPANY TO COOPERATE

            Section 8.01 Provision of Information.

            During the term of this  Agreement  and provided such request will
cause the Company to violate any applicable law or statute,  the Company shall
furnish  to  the  Purchaser  such  periodic,  special,  or  other  reports  or
information  and  copies  or  originals  of  any  documents  contained  in the
Servicing File for each Mortgage Loan,  whether or not provided for herein, as
shall be necessary,  reasonable, or appropriate with respect to the Purchaser,
any regulatory requirement pertaining to the Purchaser or the purposes of this
Agreement. All such reports, documents or information shall be provided by and
in  accordance  with all  reasonable  instructions  and  directions  which the
Purchaser  may give.  Purchaser  shall pay any costs  related  to any  special
reports.

            The Company  shall  execute and deliver all such  instruments  and
take all such action as the  Purchaser  may  reasonably  request  from time to
time, in order to  effectuate  the purposes and to carry out the terms of this
Agreement.

            Section 8.02 Financial Statements; Servicing Facility.

            In connection with marketing the Mortgage Loans, the Purchaser may
make  available  to  a  prospective  Purchaser  a  Consolidated  Statement  of
Operations  of the Company for the most recently  completed  five fiscal years
for which such a statement is available,  as well as a Consolidated  Statement
of  Condition  at the  end of the  last  two  fiscal  years  covered  by  such
Consolidated  Statement of  Operations.  The Company also shall make available
any comparable  interim statements to the extent any such statements have been
prepared by or on behalf of the Company  (and are  available  upon  request to
members or stockholders  of the Company or to the public at large).  If it has
not  already  done so, the Company  shall  furnish  promptly to the  Purchaser
copies of the statement specified above.  Unless requested the Purchaser,  the
Company  shall not be  required to deliver any  documents  which are  publicly
available on EDGAR.

            The Company also shall make  available to Purchaser or prospective
Purchaser a knowledgeable  financial or accounting  officer for the purpose of
answering questions  respecting recent  developments  affecting the Company or
the  financial  statements  of the  Company,  and to  permit  any  prospective
Purchaser  to  inspect  the  Company's  servicing  facilities  or those of any
Subservicer for the purpose of satisfying such prospective  Purchaser that the
Company and any Subservicer  have the ability to service the Mortgage Loans as
provided in this Agreement.


                                     - 53 -
<PAGE>

                                   ARTICLE IX

                                   THE COMPANY

            Section 9.01 Indemnification; Third Party Claims.

            The Company  shall  indemnify  the  Purchaser and hold it harmless
against  any  and  all  claims,  losses,   damages,   penalties,   fines,  and
forfeitures, including, but not limited to reasonable and necessary legal fees
and related costs, judgments,  and any other costs, fees and expenses that the
Purchaser  may sustain in any way related to the failure of the Company to (a)
perform its duties and service the Mortgage  Loans in strict  compliance  with
the terms of this  Agreement  or any  Reconstitution  Agreement  entered  into
pursuant to Section 7.01,  and/or (b) comply with  applicable law. The Company
immediately  shall  notify the  Purchaser  if a claim is made by a third party
with respect to this Agreement or any Reconstitution Agreement or the Mortgage
Loans,  shall  promptly  notify  Fannie Mae,  Freddie Mac, or the trustee with
respect to any claim made by a third party with respect to any  Reconstitution
Agreement,  assume  (with the prior  written  consent  of the  Purchaser)  the
defense  of any such  claim  and pay all  expenses  in  connection  therewith,
including  counsel fees, and promptly pay,  discharge and satisfy any judgment
or decree in the amount of $5,000 or less,  which may be entered against it or
the  Purchaser in respect of such claim.  The Company shall follow any written
instructions  received from the Purchaser in connection  with such claim.  The
Purchaser  promptly shall reimburse the Company for all amounts advanced by it
pursuant to the preceding sentence except when the claim is in any way related
to the Company's  indemnification  pursuant to Section 3.03, or the failure of
the  Company  to (a)  service  and  administer  the  Mortgage  Loans in strict
compliance with the terms of this Agreement or any  Reconstitution  Agreement,
and/or (b) comply with applicable law.

            Section 9.02 Merger or Consolidation of the Company.

            The Company  shall keep in full effect its  existence,  rights and
franchises as a corporation,  and shall 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 duties under this Agreement.

            Any person into which the  Company may be merged or  consolidated,
or any corporation  resulting from any merger,  conversion or consolidation to
which the Company shall be a party,  or any Person  succeeding to the business
of the Company,  shall be the successor of the Company hereunder,  without the
execution  or filing of any paper or any further act on the part of any of the
parties  hereto,  anything herein to the contrary  notwithstanding,  provided,
however,  that the successor or surviving  Person shall be an institution  (i)
having a net worth of not less  than  $25,000,000,  (ii)  whose  deposits  are
insured by the FDIC  through the BIF or the SAIF,  and (iii) which is a Fannie
Mae-approved company in good standing.


                                     - 54 -
<PAGE>

            Section 9.03 Limitation on Liability of Company and Others.

            Neither the Company nor any of the directors,  officers, employees
or agents of the Company shall be under any liability to the Purchaser for any
action  taken or for  refraining  from the  taking of any action in good faith
pursuant to this Agreement, or for errors in judgment, provided, however, that
this  provision  shall not protect the Company or any such person  against any
Breach of warranties or representations made herein, or failure to perform its
obligations in strict  compliance  with any standard of care set forth in this
Agreement,  or any liability which would otherwise be imposed by reason of any
breach of the terms and  conditions  of this  Agreement.  The  Company and any
director,  officer, employee or agent of the Company 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 Company shall not be
under any obligation to appear in,  prosecute or defend any legal action which
is not  incidental  to its duties to service the Mortgage  Loans in accordance
with this  Agreement and which in its opinion may involve it in any expense or
liability,  provided,  however,  that the Company may, with the consent of the
Purchaser,  undertake any such action which it may deem necessary or desirable
in respect to this Agreement and the rights and duties of the parties  hereto.
In such  event,  the  Company  shall be  entitled  to  reimbursement  from the
Purchaser of the reasonable legal expenses and costs of such action.

            Section 9.04 Limitation on Resignation and Assignment by Company.

            The Purchaser has entered into this Agreement with the Company and
subsequent  Purchasers  will purchase the Mortgage  Loans in reliance upon the
independent status of the Company,  and the representations as to the adequacy
of its servicing facilities,  plant,  personnel,  records and procedures,  its
integrity,  reputation and financial  standing,  and the continuance  thereof.
Therefore,  the Company shall neither  assign this  Agreement or the servicing
hereunder or delegate its rights or duties hereunder or any portion hereof (to
other than a Subservicer) or sell or otherwise dispose of all or substantially
all of its  property  or assets  without  the  prior  written  consent  of the
Purchaser,  which consent shall be granted or withheld in the sole  discretion
of the Purchaser; provided, however, that the Company may assign its right and
obligations  hereunder to any entity that is directly or  indirectly  owned or
controlled by the Company and the Company  guarantees the  performance by such
entity of all obligations hereunder.

            The  Company  shall not  resign  from the  obligations  and duties
hereby imposed on it except by mutual consent of the Company and the Purchaser
or upon the determination  that its duties hereunder are no longer permissible
under applicable law and such incapacity  cannot be cured by the Company.  Any
such  determination  permitting  the  resignation  of  the  Company  shall  be
evidenced by an Opinion of Counsel to such effect  delivered to the  Purchaser
which  Opinion of Counsel  shall be in form and  substance  acceptable  to the
Purchaser.  No such resignation shall become effective until a successor shall
have assumed the Company's  responsibilities and obligations  hereunder in the
manner provided in Section 12.01.

            Without in any way limiting the  generality  of this Section 9.04,
in the event that the  Company  either  shall  assign  this  Agreement  or the
servicing  responsibilities  hereunder or delegate its duties hereunder or any
portion thereof (to other than a Subservicer) or sell or otherwise  dispose of
all or substantially all of its property or assets,  without the prior written
consent of the Purchaser, then the Purchaser shall have the right to terminate
this Agreement  upon notice given as set forth in Section  10.01,  without any
payment of any penalty or damages and without any liability  whatsoever to the
Company or any third party.


                                     - 55 -
<PAGE>

                                    ARTICLE X

                                     DEFAULT

            Section 10.01 Events of Default.

            Each of the following shall  constitute an Event of Default on the
part of the Company:

            (i) any  failure  by the  Company  to remit to the  Purchaser  any
      payment  required  to be made  under the terms of this  Agreement  which
      continues  unremedied  for a period  of three  days  after the date upon
      which written notice of such failure, requiring the same to be remedied,
      shall have been given to the Company by the Purchaser; or

            (ii)  failure  by the  Company  duly to  observe or perform in any
      material respect any other of the covenants or agreements on the part of
      the Company set forth in this Agreement which continues unremedied for a
      period  of 30 days  after  the  date on  which  written  notice  of such
      failure, requiring the same to be remedied, shall have been given to the
      Company by the Purchaser; or

            (iii)  failure  by the  Company  to  maintain  its  license  to do
      business in any jurisdiction  where the Mortgage  Property is located if
      such license is necessary for the Company to legally service the related
      Mortgage Loan; or

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

            (v) the Company shall consent to the  appointment of a conservator
      or receiver  or  liquidator  in any  insolvency,  readjustment  of debt,
      marshaling  of assets  and  liabilities  or  similar  proceedings  of or
      relating to the Company or of or relating to all or substantially all of
      its property; or

            (vi) the Company  shall admit in writing its  inability to pay its
      debts generally as they become due, file a petition to take advantage of
      any applicable insolvency, bankruptcy or reorganization statute, make an
      assignment for the benefit of its creditors, voluntarily suspend payment
      of its  obligations  or cease its normal  business  operations for three
      Business Days; or


                                     - 56 -
<PAGE>

            (vii) the Company  ceases to meet the  qualifications  of a Fannie
      Mae lender or servicer; or

            (viii)  the  Company  fails to  maintain  a  minimum  net worth of
      $25,000,000; or

            (ix) the  Company  attempts  to  assign  its  right  to  servicing
      compensation  hereunder or the Company attempts,  without the consent of
      the Purchaser,  to sell or otherwise dispose of all or substantially all
      of its property or assets or to assign this  Agreement or the  servicing
      responsibilities  hereunder or to delegate  its duties  hereunder or any
      portion  thereof (to other than a  Subservicer)  in violation of Section
      9.04.

            In each and every such case,  so long as an Event of Default shall
not have been  remedied,  in addition to  whatsoever  rights the Purchaser may
have at law or equity to damages,  including  injunctive  relief and  specific
performance, the Purchaser, by notice in writing to the Company, may terminate
all the rights and  obligations of the Company under this Agreement and in and
to the Mortgage Loans and the proceeds thereof.

            Upon receipt by the Company of such written notice,  all authority
and power of the Company  under this  Agreement,  whether  with respect to the
Mortgage  Loans or  otherwise,  shall  pass to and be vested in the  successor
appointed  pursuant to Section 12.01. Upon written request from any Purchaser,
the  Company  shall  prepare,  execute  and  deliver to the  successor  entity
designated by the Purchaser any and all documents and other instruments, place
in such successor's  possession all Mortgage Files, and do or cause to be done
all other acts or things  necessary or  appropriate  to effect the purposes of
such notice of  termination,  including  but not limited to the  transfer  and
endorsement or assignment of the Mortgage Loans and related documents,  at the
Company's  sole expense.  The Company shall  cooperate  with the Purchaser and
such successor in effecting the termination of the Company's  responsibilities
and rights  hereunder,  including  without  limitation,  the  transfer to such
successor for administration by it of all cash amounts which shall at the time
be  credited  by the  Company to the  Custodial  Account or Escrow  Account or
thereafter received with respect to the Mortgage Loans.

            Section 10.02 Waiver of Defaults.

            By a written  notice,  the  Purchaser may waive any default by the
Company in the performance of its obligations  hereunder and its consequences.
Upon any waiver of a past default,  such default shall cease to exist, and any
Event of Default  arising  therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right  consequent  thereon except to the extent
expressly so waived.

                                   ARTICLE XI

                                   TERMINATION

            Section 11.01 Termination.


                                     - 57 -
<PAGE>

            This Agreement shall  terminate upon either:  (i) the later of the
final payment or other  liquidation  (or any advance with respect  thereto) of
the last Mortgage Loan or the  disposition of any REO Property with respect to
the last Mortgage Loan and the remittance of all funds due hereunder;  or (ii)
mutual consent of the Company and the Purchaser in writing.

            Section 11.02 Termination Without Cause.

            The Purchaser may  terminate,  at its sole option,  any rights the
Company may have hereunder,  without cause, as provided in this Section 11.02.
Any such  notice of  termination  shall be in  writing  and  delivered  to the
Company by registered mail as provided in Section 12.05.

            In the event the Purchaser  terminates  the Company  without cause
with  respect to some or all of the Mortgage  Loans,  the  Purchaser  shall be
required to pay to the Company a Termination Fee in an amount equal to 2.0% of
the outstanding  principal balance of the terminated  Mortgage Loans as of the
date of such termination.

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

            Section 12.01 Successor to Company.

            Prior to termination of the Company's  responsibilities and duties
under this Agreement  pursuant to Sections 9.04, 10.01, 11.01 (ii) or pursuant
to Section 11.02 after the 90 day period has expired, the Purchaser shall, (i)
succeed to and assume all of the Company's  responsibilities,  rights,  duties
and obligations  under this Agreement,  or (ii) appoint a successor having the
characteristics  set forth in clauses  (i) through  (iii) of Section  9.02 and
which  shall  succeed to all  rights  and assume all of the  responsibilities,
duties  and  liabilities  of the  Company  under this  Agreement  prior to the
termination of Company's  responsibilities,  duties and liabilities under this
Agreement.  In connection with such appointment and assumption,  the Purchaser
may make such  arrangements  for the  compensation  of such  successor  out of
payments on Mortgage Loans as it and such successor  shall agree. In the event
that  the  Company's  duties,  responsibilities  and  liabilities  under  this
Agreement should be terminated  pursuant to the aforementioned  sections,  the
Company shall  discharge  such duties and  responsibilities  during the period
from the date it acquires  knowledge of such  termination  until the effective
date  thereof  with the same  degree of  diligence  and  prudence  which it is
obligated  to  exercise  under  this  Agreement,  and  shall  take  no  action
whatsoever that might impair or prejudice the rights or financial condition of
its  successor.  The  resignation  or removal of the  Company  pursuant to the
aforementioned  sections shall not become effective until a successor shall be
appointed  pursuant to this  Section  12.01 and shall in no event  relieve the
Company of the  representations  and warranties made pursuant to Sections 3.01
and 3.02 and the remedies  available to the  Purchaser  under  Sections  3.03,
3.04,  3.05 and 3.07, it being  understood  and agreed that the  provisions of
such Sections 3.01, 3.02, 3.03, 3.04, 3.05 and 3.07 shall be applicable to the
Company notwithstanding any such sale, assignment,  resignation or termination
of the Company, or the termination of this Agreement.


                                     - 58 -
<PAGE>

            Any  successor   appointed  as  provided   herein  shall  execute,
acknowledge  and  deliver to the Company and to the  Purchaser  an  instrument
accepting   such   appointment,   wherein   the   successor   shall  make  the
representations   and  warranties  set  forth  in  Section  3.01,  except  for
subsections  (f), (h), (i) and (k) thereof,  whereupon  such  successor  shall
become fully  vested with all the rights,  powers,  duties,  responsibilities,
obligations and liabilities of the Company,  with like effect as if originally
named as a party to this  Agreement.  Any  termination  or  resignation of the
Company or  termination  of this  Agreement  pursuant to Section 9.04,  10.01,
11.01 or 11.02 shall not affect any claims that any Purchaser may have against
the Company  arising out of the  Company's  actions or failure to act prior to
any such termination or resignation.

            The Company shall deliver  promptly to the successor  servicer the
Funds in the Custodial  Account and Escrow  Account and all Mortgage Files and
related  documents and  statements  held by it hereunder and the Company shall
account for all funds and shall  execute and deliver such  instruments  and do
such other things as may reasonably be required to more fully and definitively
vest in the  successor  all such  rights,  powers,  duties,  responsibilities,
obligations and liabilities of the Company.

            Upon a successor's  acceptance of appointment as such, the Company
shall notify by mail the Purchaser of such  appointment in accordance with the
procedures set forth in Section 12.05.

            Section 12.02 Amendment.

            This Agreement may be amended from time to time by the Company and
the Purchaser by written agreement signed by the Company and the Purchaser.

            Section 12.03 Governing Law.

            This Agreement  shall be construed in accordance  with the laws of
the State of New York and the obligations,  rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

            Section 12.04 Duration of Agreement.

            This  Agreement  shall  continue  in  existence  and effect  until
terminated as herein provided.  This Agreement shall continue  notwithstanding
transfers of the Mortgage Loans by the Purchaser.

            Section 12.05 Notices.

            All  demands,  notices and  communications  hereunder  shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by registered mail, postage prepaid, addressed as follows:


                                     - 59 -
<PAGE>

            (i)   if to the Company:

                  Countrywide Home Loans, Inc.,
                  4500 Park Grenada
                  Calabasas, CA 91302
                  Attention: David Spector

      or such other  address as may hereafter be furnished to the Purchaser in
      writing by the Company;

            (ii)  if to Purchaser:

                  EMC Mortgage Corporation
                  Mac Arthur Ridge II
                  909 Hidden Ridge Drive, Suite 200
                  Irving, Texas 75014-1358
                  Attention: Ralene Ruyle

            Section 12.06 Severability of Provisions.

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

            Section 12.07 Relationship of Parties.

            Nothing herein  contained shall be deemed or construed to create a
partnership  or joint venture  between the parties  hereto and the services of
the Company shall be rendered as an  independent  contractor  and not as agent
for the Purchaser.

            Section 12.08 Execution; Successors and Assigns.

            This Agreement may be executed in one or more  counterparts and by
the different parties hereto on separate counterparts,  each of which, when so
executed,  shall be deemed to be an  original;  such  counterparts,  together,
shall  constitute one and the same  agreement.  Subject to Section 8.04,  this
Agreement  shall inure to the  benefit of and be binding  upon the Company and
the Purchaser and their respective successors and assigns.

            Section 12.09 Recordation of Assignments of Mortgage.

            To the extent permitted by applicable law, each of the Assignments
of Mortgage is subject to  recordation in all  appropriate  public offices for
real property records in all the counties or other comparable jurisdictions in
which any or all of the Mortgaged  Properties  are situated,  and in any other
appropriate  public  recording  office or elsewhere,  such  recordation  to be
effected at the Company's expense in the event recordation is either necessary
under  applicable  law or  requested  by the  Purchaser  at  its  sole  option
accordance with Section 14 of the Purchase Agreement.


                                     - 60 -
<PAGE>

            Section 12.10 Assignment by Purchaser.

            The  Purchaser  shall have the right,  without  the consent of the
Company but subject to the limit set forth in Section 2.02 hereof,  to assign,
in whole or in part, its interest under this Agreement with respect to some or
all of the Mortgage Loans,  and designate any person to exercise any rights of
the Purchaser  hereunder,  by executing an Assignment and Assumption Agreement
substantially in the form of Exhibit G hereto.  Upon such assignment of rights
and  assumption of  obligations,  the assignee or designee shall accede to the
rights  and  obligations  hereunder  of the  Purchaser  with  respect  to such
Mortgage  Loans and the  Purchaser  as  assignor  shall be  released  from all
obligations  hereunder  with respect to such Mortgage Loans from and after the
date of such  assignment  and  assumption.  All references to the Purchaser in
this Agreement shall be deemed to include its assignee or designee.

            Section 12.11 No Personal Solicitation.

            From and after the related Closing Date, the Company hereby agrees
that it will not take any  action or permit or cause any action to be taken by
any  of  its  agents  or  affiliates,  or by any  independent  contractors  or
independent   mortgage  brokerage   companies  on  the  Company's  behalf,  to
personally,  by telephone or mail,  solicit the  Mortgagor  under any Mortgage
Loan for the purpose of  refinancing  such Mortgage Loan;  provided,  that the
Company may solicit any  Mortgagor for whom the Company has received a request
for  verification  of mortgage,  a request for demand for payoff,  a mortgagor
initiated  written or verbal  communication  indicating a desire to prepay the
related  Mortgage  Loan, or the mortgagor  initiates a title search,  provided
further, it is understood and agreed that promotions undertaken by the Company
or any of its  affiliates  which (i) concern  optional  insurance  products or
other additional  projects,  (ii) are directed to the general public at large,
including,  without limitation,  mass mailings based on commercially  acquired
mailing  lists,  newspaper,  radio and  television  advertisements,  (iii) are
directed to  mortgagors  who have a specific type of mortgage  (i.e.,  balloon
Mortgage  Loans,  LIBOR  Mortgage  Loans,  etc.)  or (iv)  directed  to  those
mortgagors whose mortgages fall within specific interest rate ranges shall not
constitute solicitation under this Section 12.11 nor is the Company prohibited
from responding to unsolicited requests or inquiries made by a Mortgagor or an
agent  of  a  Mortgagor.   Notwithstanding   the   foregoing,   the  following
solicitations,  if  undertaken by the Company or any affiliate of the Company,
shall not be prohibited under this Section 12.11: (i)  solicitations  that are
directed to the general public at large, including,  without limitation,  mass
mailings based on commercially  acquired  mailing lists and newspaper,  radio,
television  and  other  mass  media  advertisements;  (ii)  borrower  messages
included on, and statement inserts provided with, the monthly  statements sent
to Mortgagors;  provided,  however, that similar messages and inserts are sent
to the borrowers of other mortgage loans serviced by the Company.


                                     - 61 -
<PAGE>

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


                                        EMC MORTGAGE CORPORATION

                                        By: ____________________________________

                                        Name: Ralene Ruyle

                                        Title:   President


                                        COUNTRYWIDE HOME LOANS, INC.

                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________

<PAGE>

STATE OF NEW YORK    )
                     ) ss.:
COUNTY OF __________ )


            On the __ day of ________,  200_ before me, a Notary Public in and
for said State, personally appeared ________, known to me to be Vice President
of EMC Mortgage Corporation, the federal savings association that executed the
within  instrument  and also known to me to be the person who  executed  it on
behalf of said  corporation,  and  acknowledged  to me that  such  corporation
executed the within instrument.

            IN WITNESS WHEREOF,  I have hereunto set my hand affixed my office
seal the day and year in this certificate first above written.


                                        ________________________________________
                                        Notary Public

                                        My Commission expires __________________

<PAGE>

STATE OF             )
                     ) ss.:
COUNTY OF __________ )


            On the __ day of _______,  200_ before me, a Notary  Public in and
for  said  State,   personally  appeared   __________,   known  to  me  to  be
______________  of Countrywide Home Loans,  Inc. the corporation that executed
the within instrument and also known to me to be the person who executed it on
behalf of said  corporation,  and  acknowledged  to me that  such  corporation
executed the within instrument.

            IN WITNESS WHEREOF,  I have hereunto set my hand affixed my office
seal the day and year in this certificate first above written.


                                        ________________________________________
                                        Notary Public

                                        My Commission expires __________________

<PAGE>

                                    EXHIBIT A

                             MORTGAGE LOAN SCHEDULE


                                      A-1
<PAGE>

                                    EXHIBIT B

                         CONTENTS OF EACH MORTGAGE FILE

            With  respect  to each  Mortgage  Loan,  the  Mortgage  File shall
include each of the following  items,  which shall be available for inspection
by the Purchaser and any prospective Purchaser, and which shall be retained by
the Company in the Servicing  File or delivered to the  Custodian  pursuant to
Section 2.01 and 2.03 of the Seller's  Warranties  and Servicing  Agreement to
which this Exhibit is attached (the "Agreement") :

      1.    The original  Mortgage Note bearing all intervening  endorsements,
            endorsed  "Pay to the order of  _________  without  recourse"  and
            signed in the name of the Company by an authorized officer (in the
            event that the  Mortgage  Loan was  acquired  by the  Company in a
            merger, the signature must be in the following form:  "Countrywide
            Home Loans,  Inc.,  successor by merger to [name of predecessor]";
            and in the event that the Mortgage Loan was acquired or originated
            by the Company  while  doing  business  under  another  name,  the
            signature must be in the following form:  "Countrywide Home Loans,
            Inc., formerly known as [previous name]") .

      2.    The  original of any  guarantee  executed in  connection  with the
            Mortgage Note (if any) .

      3.    The original Mortgage,  with evidence of recording thereon.  If in
            connection  with any Mortgage  Loan, the Company cannot deliver or
            cause to be  delivered  the  original  Mortgage  with  evidence of
            recording  thereon on or prior to the related Closing Date because
            of a delay  caused  by the  public  recording  office  where  such
            Mortgage  has been  delivered  for  recordation  or  because  such
            Mortgage  has been lost or because  such public  recording  office
            retains the original recorded Mortgage,  the Company shall deliver
            or cause to be  delivered  to the  Custodian,  a photocopy of such
            Mortgage,  together  with (i) in the case of a delay caused by the
            public recording office,  an Officer's  Certificate of the Company
            stating that such Mortgage has been  dispatched to the appropriate
            public  recording  office for  recordation  and that the  original
            recorded  Mortgage or a copy of such  Mortgage  certified  by such
            public  recording  office  to be a true and  complete  copy of the
            original  recorded  Mortgage  will be  promptly  delivered  to the
            Custodian upon receipt thereof by the Company; or (ii) in the case
            of a Mortgage where a public recording office retains the original
            recorded  Mortgage  or in the case where a Mortgage  is lost after
            recordation in a public recording  office, a copy of such Mortgage
            certified  by  such  public  recording  office  or  by  the  title
            insurance  company  that issued the title  policy to be a true and
            complete copy of the original recorded Mortgage.

      4.    The originals of all assumption,  modification,  consolidation  or
            extension agreements, with evidence of recording thereon.


                                      B-1
<PAGE>

      5.    The original  Assignment  of Mortgage for each  Mortgage  Loan, in
            form and substance  acceptable for recording,  delivered in blank.
            If the Mortgage Loan was acquired by the Company in a merger,  the
            Assignment  of Mortgage must be made by  "Countrywide  Home Loans,
            Inc.,  successor  by  merger  to  [name of  predecessor]."  If the
            Mortgage  Loan was  acquired or  originated  by the Company  while
            doing business under another name, the Assignment of Mortgage must
            be by "Countrywide Home Loans,  Inc.,  formerly known as [previous
            name]."

      6.    Originals of all  intervening  assignments  of the  Mortgage  with
            evidence  of  recording  thereon,   or  if  any  such  intervening
            assignment  has not been  returned from the  applicable  recording
            office or has been lost or if such public recording office retains
            the original recorded  assignments of mortgage,  the Company shall
            deliver or cause to be delivered to the Custodian,  a photocopy of
            such  intervening  assignment,  together with (i) in the case of a
            delay  caused  by  the  public  recording   office,  an  Officer's
            Certificate   of  the  Company   stating  that  such   intervening
            assignment  of mortgage  has been  dispatched  to the  appropriate
            public  recording  office for  recordation  and that such original
            recorded  intervening  assignment  of  mortgage  or a copy of such
            intervening  assignment of mortgage  certified by the  appropriate
            public  recording  office or by the title  insurance  company that
            issued  the  title  policy to be a true and  complete  copy of the
            original  recorded  intervening  assignment  of  mortgage  will be
            promptly  delivered to the Custodian  upon receipt  thereof by the
            Company; or (ii) in the case of an intervening  assignment where a
            public recording office retains the original recorded  intervening
            assignment or in the case where an intervening  assignment is lost
            after  recordation in a public  recording  office,  a copy of such
            intervening  assignment  certified by such public recording office
            to  be  a  true  and  complete  copy  of  the  original   recorded
            intervening assignment.

      7.    The original  mortgagee  policy of title  insurance or  attorney's
            opinion of title and abstract of title.

      8.    Any security agreement, chattel mortgage or equivalent executed in
            connection with the Mortgage.

      9.    The  original  hazard  insurance  policy  and, if required by law,
            flood  insurance  policy,  in accordance  with Section 4.10 of the
            Agreement.

      10.   Residential loan application.

      11.   Mortgage Loan closing statement.

      12.   Verification of employment and income.

      13.   Verification  of  acceptable  evidence  of  source  and  amount of
            downpayment.

      14.   Credit report on the Mortgagor.

      15.   Residential appraisal report.


                                      B-2
<PAGE>

      16.   Photograph of the Mortgaged Property.

      17.   Survey of the Mortgaged Property.

      18.   Copy of each instrument  necessary to complete  identification  of
            any  exception  set forth in the  exception  schedule in the title
            policy,  i.e.,  map  or  plat,  restrictions,   easements,   sewer
            agreements, home association declarations, etc.

      19.   All required disclosure statements.

      20.   If available,  termite report, structural engineer's report, water
            potability and septic certification.

      21.   Sales contract.

      22.   Tax receipts,  insurance premium receipts,  ledger sheets, payment
            history  from  date  of   origination,   insurance   claim  files,
            correspondence,  current and historical  computerized  data files,
            and all other  processing,  underwriting  and  closing  papers and
            records  which are  customarily  contained in a mortgage loan file
            and which are required to document the Mortgage Loan or to service
            the Mortgage Loan.

            In the event an Officer's  Certificate of the Company is delivered
to the Custodian  because of a delay caused by the public  recording office in
returning any recorded  document,  the Company shall deliver to the Custodian,
within 180 days of the related  Closing Date, an Officer's  Certificate  which
shall (i)  identify  the  recorded  document,  (ii)  state  that the  recorded
document has not been  delivered to the Custodian due solely to a delay caused
by the public  recording  office,  (iii)  state the  amount of time  generally
required by the  applicable  recording  office to record and return a document
submitted for recordation,  and (iv) specify the date the applicable  recorded
document will be delivered to the Custodian.  The Company shall be required to
deliver  to the  Custodian  the  applicable  recorded  document  by  the  date
specified in (iv) above.  An extension of the date specified in (iv) above may
be requested  from the  Purchaser,  which  consent  shall not be  unreasonably
withheld.


                                      B-3
<PAGE>

                                    EXHIBIT C

                             MORTGAGE LOAN DOCUMENTS

            The Mortgage  Loan  Documents for each Mortgage Loan shall include
each of the  following  items,  which  shall  be  delivered  to the  Custodian
pursuant to Section 2.01 of the Seller's Warranties and Servicing Agreement to
which this Exhibit is annexed (the "Agreement") :

            (a)  the   original   Mortgage   Note   bearing  all   intervening
endorsements, endorsed "Pay to the order of ___________, without recourse" and
signed in the name of the Company by an authorized officer. To the extent that
there  is no room on the  face of the  Mortgage  Note  for  endorsements,  the
endorsement  may be  contained on an allonge,  if state law so allows.  If the
Mortgage Loan was acquired by the Company in a merger, the endorsement must be
by  "Countrywide   Home  Loans,   Inc.,   successor  by  merger  to  [name  of
predecessor]."  If the Mortgage Loan was acquired or originated by the Company
while  doing  business  under  another  name,  the  endorsement   must  be  by
"Countrywide Home Loans, Inc., formerly known as [previous name]";

            (b) the original of any guarantee  executed in connection with the
Mortgage Note;

            (c) the original Mortgage with evidence of recording thereon,  and
the original recorded power of attorney, if the Mortgage was executed pursuant
to a power of attorney, with evidence of recording thereon;

            (d) the originals of all assumption,  modification,  consolidation
or extension agreements, with evidence of recording thereon;

            (e) the original Assignment of Mortgage for each Mortgage Loan, in
form and  substance  acceptable  for  recording,  delivered  in blank,  or the
original  Assignment of Mortgage in recordable form into MERS. If the Mortgage
Loan was acquired by the Company in a merger,  the Assignment of Mortgage must
be made by  "Countrywide  Home Loans,  Inc.,  successor  by merger to [name of
predecessor]."  If the Mortgage Loan was acquired or originated by the Company
while doing business under another name, the Assignment of Mortgage must be by
"Countrywide Home Loans, Inc., formerly known as [previous name];"

            (f) the originals of all intervening  assignments of mortgage with
evidence of recording thereon, including warehousing assignments, if any;

            (g) the original mortgagee title insurance policy;

            (h) such other documents as the Purchaser may require.


                                      C-4-1
<PAGE>

                                   EXHIBIT D-1

                         CUSTODIAL ACCOUNT CERTIFICATION

                                                     _____________________, 200_

            Countrywide  Home  Loans,   Inc.  hereby  certifies  that  it  has
established  the account  described below as a Custodial  Account  pursuant to
Section 4.04 of the Seller's Warranties and Servicing  Agreement,  dated as of
September 1, 2002, Residential Adjustable Rate Mortgage Loans.

Title of Account:_Countrywide Home Loans, Inc. in trust for the Purchaser

Account Number:__________________

Address of office or branch
of the Company at
which Account is maintained:            ________________________________________

                                        ________________________________________

                                        ________________________________________

                                        ________________________________________


                                        Countrywide Home Loans, Inc.

                                        Company

                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________


                                      D-1-1
<PAGE>

                                   EXHIBIT D-2

                       CUSTODIAL ACCOUNT LETTER AGREEMENT

                                                         _________________, 200_

To: ____________________________________

    ____________________________________

    ____________________________________
    (the "Depository")

            As Company under the Seller's Warranties and Servicing  Agreement,
dated as of September 1, 2002, Residential Adjustable Rate Mortgage Loans (the
"Agreement"),  we hereby authorize and request you to establish an account, as
a  Custodial  Account  pursuant  to  Section  4.04  of  the  Agreement,  to be
designated as "[Servicer] in trust for the Purchaser - Residential  Adjustable
Rate  Mortgage  Loans."  All  deposits  in the  account  shall be  subject  to
withdrawal  therefrom  by order  signed by the  Company.  You may  refuse  any
deposit which would result in violation of the requirement that the account be
fully  insured  as  described  below.  This  letter  is  submitted  to  you in
duplicate. Please execute and return one original to us.

                                        [COUNTRYWIDE HOME LOANS, INC.]


                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________

                                        Date: __________________________________


                                      D-2-1
<PAGE>

            The  undersigned,  as Depository,  hereby certifies that the above
described account has been established under Account Number __________, at the
office of the Depository  indicated above, and agrees to honor  withdrawals on
such account as provided above.  The full amount  deposited at any time in the
account will be insured by the Federal Deposit Insurance  Corporation  through
the Bank  Insurance  Fund ("BIF") or the Savings  Association  Insurance  Fund
("SAIF") .

                                        ________________________________________
                                        Depository


                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________

                                        Date: __________________________________


                                      D-2-2
<PAGE>

                                   EXHIBIT E-1

                          ESCROW ACCOUNT CERTIFICATION

                                                        __________________, 200_

            Countrywide  Home  Loans,   Inc.  hereby  certifies  that  it  has
established  the  account  described  below as an Escrow  Account  pursuant to
Section 4.06 of the Seller's Warranties and Servicing  Agreement,  dated as of
September 1, 2002, Residential Adjustable Rate Mortgage Loans.

Title of Account: "Countrywide Home Loans, Inc. in trust for the Purchaser and
                  various Mortgagors."

Account Number: __________________

Address of office or branch
of the Company at
which Account is maintained:            ________________________________________

                                        ________________________________________

                                        ________________________________________

                                        ________________________________________


                                        [COUNTRYWIDE HOME LOANS, INC.]


                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________


                                     E-1-1
<PAGE>

                                   EXHIBIT E-2

                         ESCROW ACCOUNT LETTER AGREEMENT

                                                       ___________________, 200_

To: ____________________________________

    ____________________________________

    ____________________________________
    (the "Depository")

            As Company under the Seller's Warranties and Servicing  Agreement,
dated as of September 1, 2002 Residential  Adjustable Rate Mortgage Loans (the
"Agreement"),  we hereby authorize and request you to establish an account, as
an Escrow Account pursuant to Section 4.07 of the Agreement,  to be designated
as  "[Servicer],  in trust for the  Purchaser -  Residential  Adjustable  Rate
Mortgage  Loans." All deposits in the account  shall be subject to  withdrawal
therefrom  by order signed by the  Company.  You may refuse any deposit  which
would result in violation of the requirement that the account be fully insured
as  described  below.  This letter is submitted  to you in  duplicate.  Please
execute and return one original to us.

                                        [COUNTRYWIDE HOME LOANS, INC.]


                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________

                                        Date: __________________________________


                                     E-2-1
<PAGE>

            The  undersigned,  as Depository,  hereby certifies that the above
described  account has been  established  under Account Number ______,  at the
office of the Depository  indicated above, and agrees to honor  withdrawals on
such account as provided above.  The full amount  deposited at any time in the
account will be insured by the Federal Deposit Insurance  Corporation  through
the Bank  Insurance  Fund ("BIF") or the Savings  Association  Insurance  Fund
("SAIF") .


                                        ________________________________________
                                        Depository


                                        By: ____________________________________

                                        Name: __________________________________

                                        Title: _________________________________

                                        Date: __________________________________


                                     E-2-1
<PAGE>

                                    EXHIBIT F

                            MONTHLY REMITTANCE ADVICE


                                      F-1
<PAGE>

                                    EXHIBIT G

                            ASSIGNMENT AND ASSUMPTION

                                                         _________________, 200_

            ASSIGNMENT   AND    ASSUMPTION,    dated    __________,    between
__________________________________,  a ___________________  corporation having
an       office       at       __________________       ("Assignor")       and
_________________________________,  a __________________ corporation having an
office at __________________ ("Assignee") :

            For and in  consideration  of the sum of TEN DOLLARS  ($10.00) and
other valuable  consideration  the receipt and sufficiency of which hereby are
acknowledged, and of the mutual covenants herein contained, the parties hereto
hereby agree as follows:

            1. The Assignor  hereby grants,  transfers and assigns to Assignee
all of the right,  title and interest of Assignor,  as  purchaser,  in, to and
under that certain Seller's  Warranties and Servicing  Agreement,  Residential
Adjustable  Rate  Mortgage  Loans  (the  "Seller's  Warranties  and  Servicing
Agreement"),  dated as of  September  1, 2002,  by and  between  EMC  Mortgage
Corporation  (the   "Purchaser"),   and  Countrywide  Home  Loans,  Inc.  (the
"Company") , and the Mortgage Loans delivered thereunder by the Company to the
Assignor.

            2. The Assignor  warrants and represents  to, and covenants  with,
the Assignee that:

            a. The Assignor is the lawful owner of the Mortgage Loans with the
full right to  transfer  the  Mortgage  Loans free from any and all claims and
encumbrances whatsoever;

            b. The Assignor  has not received  notice of, and has no knowledge
of, any offsets, counterclaims or other defenses available to the Company with
respect to the Seller's  Warranties  and  Servicing  Agreement or the Mortgage
Loans;

            c. The Assignor has not waived or agreed to any waiver  under,  or
agreed to any amendment or other modification of, the Seller's  Warranties and
Servicing Agreement,  the Custodial Agreement or the Mortgage Loans, including
without  limitation  the  transfer  of the  servicing  obligations  under  the
Seller's Warranties and Servicing Agreement. The Assignor has no knowledge of,
and has not  received  notice of, any  waivers  under or  amendments  or other
modifications of, or assignments of rights or obligations  under, the Seller's
Warranties and Servicing Agreement or the Mortgage Loans; and

            d.  Neither  the  Assignor  nor  anyone  acting on its  behalf has
offered,  transferred,  pledged,  sold or  otherwise  disposed of the Mortgage
Loans, any interest in the Mortgage Loans or any other similar security to, or
solicited any offer to buy or accept a transfer,  pledge or other  disposition
of the Mortgage Loans, any interest in the Mortgage Loans or any other similar
security  from,  or otherwise  approached  or  negotiated  with respect to the
Mortgage  Loans,  any  interest  in the  Mortgage  Loans or any other  similar
security with, any person in any manner,  or made any general  solicitation by
means of general advertising or in any other manner, or taken any other action
which  would  constitute  a  distribution  of the  Mortgage  Loans  under  the
Securities Act of 1933 (the "33 Act") or which would render the disposition of
the  Mortgage  Loans  a  violation  of  Section  5 of the  33  Act or  require
registration pursuant thereto.


                                      G-1
<PAGE>

            3. The Assignee  warrants and represents  to, and covenants  with,
the Assignor and the Company that:

            a. The Assignee  agrees to be bound,  as Purchaser,  by all of the
terms,  covenants  and  conditions  of the Seller's  Warranties  and Servicing
Agreement,  the Mortgage Loans and the Custodial Agreement, and from and after
the date hereof,  the Assignee  assumes for the benefit of each of the Company
and the Assignor all of the Assignor's obligations as Purchaser thereunder;

            b. The Assignee  understands that the Mortgage Loans have not been
registered under the 33 Act or the securities laws of any state;

            c. The purchase  price being paid by the Assignee for the Mortgage
Loans are in excess of  $250,000  and will be paid by cash  remittance  of the
full purchase price within 60 days of the sale;

            d. The Assignee is acquiring the Mortgage Loans for investment for
its own account only and not for any other person. In this connection, neither
the  Assignee  nor any Person  authorized  to act  therefor  has  offered  the
Mortgage  Loans by means of any general  advertising  or general  solicitation
within the meaning of Rule 502(c) of U.S.  Securities and Exchange  Commission
Regulation D, promulgated under the 1933 Act;

            e. The  Assignee  considers  itself a  substantial,  sophisticated
institutional  investor  having such knowledge and experience in financial and
business  matters  that it is  capable of  evaluating  the merits and risks of
investment in the Mortgage Loans;

            f. The Assignee has been furnished with all information  regarding
the Mortgage Loans that it has requested from the Assignor or the Company;

            g.  Neither  the  Assignee  nor  anyone  acting on its  behalf has
offered,  transferred,  pledged,  sold or  otherwise  disposed of the Mortgage
Loans, any interest in the Mortgage Loans or any other similar security to, or
solicited any offer to buy or accept a transfer,  pledge or other  disposition
of the Mortgage Loans, any interest in the Mortgage Loans or any other similar
security  from,  or otherwise  approached  or  negotiated  with respect to the
Mortgage  Loans,  any  interest  in the  Mortgage  Loans or any other  similar
security with, any person in any manner which would  constitute a distribution
of the Mortgage  Loans under the 33 Act or which would render the  disposition
of the  Mortgage  Loans a  violation  of  Section  5 of the 33 Act or  require
registration  pursuant thereto, nor will it act, nor has it authorized or will
it  authorize  any person to act, in such manner with  respect to the Mortgage
Loans; and

            h.  Either:  (1) the  Assignee  is not an  employee  benefit  plan
("Plan") within the meaning of section 3(3) of the Employee  Retirement Income
Security Act of 1974, as amended  ("ERISA") or a plan (also "Plan") within the
meaning of section 4975(e) (1) of the Internal  Revenue Code of 1986 ("Code"),
and the Assignee is not directly or indirectly  purchasing  the Mortgage Loans
on behalf of, investment  manager of, as named fiduciary of, as Trustee of, or
with assets of, a Plan; or (2) the  Assignee's  purchase of the Mortgage Loans
will not result in a  prohibited  transaction  under  section  406 of ERISA or
section 4975 of the Code.


                                     G-2
<PAGE>

            i.  The  Assignee's  address  for  purposes  of  all  notices  and
correspondence  related to the Mortgage Loans and the Seller's  Warranties and
Servicing Agreement is:

            __________________
            __________________
            __________________

            Attention: _______

            The  Assignee's  wire  transfer  instructions  for purposes of all
remittances  and  payments  related  to the  Mortgage  Loans and the  Seller's
Warranties and Servicing Agreement are:

            __________________
            __________________
            __________________


                                     G-3
<PAGE>

            IN WITNESS  WHEREOF,  the parties have caused this  Assignment and
Assumption  to be  executed by their duly  authorized  officers as of the date
first above written.


_____________________________________   ________________________________________
Assignor                                Assignee


By:__________________________________   By:_____________________________________

Its:_________________________________   Its:____________________________________


                                     G-4
<PAGE>

                                    EXHIBIT H

                             UNDERWRITING GUIDELINES


                                      H-1
<PAGE>

                                    EXHIBIT I

                            ACKNOWLEDGMENT AGREEMENT

            On this ____ day of ____________,  200_, EMC Mortgage Corporation,
(the "Purchaser") as the Purchaser under that certain Seller's  Warranties and
Servicing  Agreement  dated as of September 1, 2002, (the  "Agreement"),  does
hereby  contract with  Countrywide  Home Loans Inc. (the "Company") as Company
under  the  Agreement,  for  the  servicing  responsibilities  related  to the
Mortgage Loans listed on the related  Mortgage Loan Schedule  attached hereto.
The Company hereby accepts the servicing  responsibilities  transferred hereby
and on the date hereof assumes all servicing  responsibilities  related to the
Mortgage  Loans  identified  on the  related  Mortgage  Loan  Schedule  all in
accordance with the Agreement. The contents of each Servicing File required to
be delivered to service the Mortgage Loans pursuant to the Agreement have been
or shall be delivered to the Company by the Purchaser in  accordance  with the
terms of the Agreement.

            With respect to the Mortgage  Loans made subject to the  Agreement
hereby, the related Closing Date shall be ___________________.

            All  other  terms  and  conditions  of this  transaction  shall be
governed by the Agreement.

            Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Agreement.

            This  Acknowledgment  Agreement may be executed  simultaneously in
any  number  of  counterparts.  Each  counterpart  shall  be  deemed  to be an
original,  and all  such  counterparts  shall  constitute  one  and  the  same
instrument.

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

                                        PURCHASER:
                                        EMC MORTGAGE CORPORATION

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        SELLER:
                                        COUNTRYWIDE HOME LOANS, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________


                                      I-1