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                                                                   EXHIBIT 10(l)


                          SECOND AMENDED AND RESTATED
                    SECURITY AND COLLATERAL AGENCY AGREEMENT


       THIS SECOND AMENDED AND RESTATED SECURITY AND COLLATERAL AGENCY AGREEMENT
(the "Security Agreement") is made and dated as of November 12, 1996, by and
among SOURCE ONE MORTGAGE SERVICES CORPORATION, a Delaware corporation (the
"Company"), THE MORTGAGE AUTHORITY, a Delaware corporation ("TMA"), CENTRAL
PACIFIC MORTGAGE COMPANY, a California corporation ("CPM"), THE FIRST NATIONAL
BANK OF CHICAGO, a national banking association, acting in its capacity as
administrative agent for the lenders from time to time participating in the
Credit Agreement (as defined below) (in such capacity, the "Credit Agent"),
NORWEST BANK MINNESOTA, N.A., as the successor trustee under the Indentures (as
defined below) (the "Note Trustee") and NATIONAL CITY BANK OF KENTUCKY, a
national banking association, as collateral agent for the Secured Parties (as
defined below) (in such capacity, the "Collateral Agent").


                                    RECITALS

       A.      This Second Amended and Restated Security and Collateral Agency
Agreement amends and restates in its entirety that certain Amended and Restated
Security and Collateral Agency Agreement dated as of March 24, 1995 by and
among the parties hereto (other than CPM).  Pursuant to Section 22 of such
March 24, 1995 Agreement, execution of this Second Amended and Restated
Security and Collateral Agency Agreement by the Note Trustee is not required.

       B.      Pursuant to that certain Second Amended and Restated Revolving
Credit Agreement of even date herewith (the "Credit Agreement"), the Lenders
agreed to extend credit to the Company, TMA and CPM on the terms and subject to
the conditions set forth therein.  The Credit Agreement amends and restates in
its entirety that certain Amended and Restated Revolving Credit Agreement dated
as of March 24, 1995 by and among the Company, TMA, First Chicago and certain
of the other Lenders.  Capitalized terms not otherwise defined herein are used
with the same meanings as in the Credit Agreement.

       C.      TMA and CPM (each a "Borrowing Subsidiary") are wholly-owned
subsidiaries of the Company.  Up to $1,000,000 of the Aggregate Commitment is
available to TMA and up to $10,000,000 of Swingline Advances are available to
CPM.  Also, portions of the funds loaned to the Company under the Credit
Agreement may also be distributed by the Company to the Borrowing Subsidiaries
to enable the Borrowing Subsidiaries to originate or acquire Mortgage Loans,
which Mortgage Loans may constitute a portion of the Collateral.

       D.      The Note Trustee is the current trustee for the holders of the
Ratable-Medium Term Notes (the "Noteholders"), which notes are required to be
ratably secured with certain other secured debt of the Company pursuant to (i)
an Indenture, dated as of September
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15, 1986, between Fireman's Fund Mortgage Corporation (predecessor in interest
to the Company) and National Bank of Detroit, as trustee, as supplemented by
certain supplemental indentures and (ii) an Indenture, dated as of November 21,
1988, between Fireman's Fund Mortgage Corporation and The First National Bank
of Chicago, as trustee, as supplemented by certain supplemental indentures
(collectively, as supplemented, the "Indentures").

       E.      As a condition precedent to the effectiveness of the Credit
Agreement, the Credit Agent has required the execution and delivery of this
Security Agreement in order to, among other things, create a first priority
perfected security interest in the Collateral in favor of the Lenders, the
Non-Lender Balance Banks (to the extent of any Credit Indebtedness owed to such
Non-Lender Balance Banks), the Credit Agent, the Collateral Agent, the Note
Trustee and the Noteholders (collectively, the "Secured Parties") to secure
payment of the Credit Indebtedness and all amounts outstanding under the
Ratable Medium-Term Notes or otherwise due under the terms of the Indentures
(collectively, the "Secured Debt").

       NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:

                                   AGREEMENTS

     1.        Appointment of Collateral Agent.  The Note Trustee hereby
appoints, and each Lender and Non-Lender Balance Bank has, pursuant to the
terms of the Credit Agreement, appointed the Collateral Agent to act as secured
party, agent, bailee and custodian for the exclusive benefit of the Secured
Parties with respect to the Collateral.  The Collateral Agent hereby accepts
such appointment and agrees to maintain and hold, or cause to be maintained and
held, all Collateral at any time delivered to it or any of its subagents as
secured party, agent, bailee and custodian for the exclusive benefit of the
Secured Parties.  The Collateral Agent, the Borrowing Subsidiaries and the
Company agree that the Collateral Agent is acting and will act with respect to
the Collateral for the exclusive benefit of the Secured Parties and is not, and
shall not at any time in the future be, subject, with respect to the
Collateral, in any manner or to any extent, to the direction or control of the
Company or any Borrowing Subsidiary except as expressly permitted hereunder and
under the other Credit Documents.  The Collateral Agent agrees to act in
accordance with this Security Agreement and in accordance with any written
instructions properly delivered pursuant hereto.  Under no circumstances shall
the Collateral Agent deliver, or cause to be delivered, possession of
Collateral to the Company or any Borrowing Subsidiary except in accordance with
the express terms of this Security Agreement or the other Credit Documents.

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     2.        Delivery and Categorization of Collateral.

               (a)      Mortgage Loans.  The Company and each Borrowing
Subsidiary (each such entity, with respect to any Pledged Item owned by such
entity, is referred to herein as the "Pledgor") shall deliver Collateral
Transmittals to the Collateral Agent from time to time identifying Mortgage
Loans that the Pledgor intends to include in Collateral by delivering to the
Collateral Agent the Required Mortgage Documents (as described on Schedule A
attached hereto) for such Mortgage Loans.  Such delivery shall be made prior to
inclusion of such Mortgage Loans in Collateral, other than for AP Mortgages
identified in the Collateral Transmittal and covered by an AP Notice.  The
Collateral Agent shall review the Required Mortgage Documents in accordance
with the review steps described on Exhibit 1 hereto.

               (b)      AP Notices.  The Collateral Agent, upon receipt of a
Collateral Transmittal describing the AP Mortgages to be covered by an AP
Notice and an AP Notice as of that date, shall (subject to the eligibility
requirements set forth in the Credit Agreement) include such AP Mortgages as
Eligible Collateral in the Collateral Value Determination (as defined Paragraph
6(a) below).  The Pledgor shall deliver the Required Mortgage Documents for
each such AP Mortgage not later than the tenth (10th) Business Day after the
date such AP Mortgage is first so included as an Eligible AP Mortgage.  If the
Required Mortgage Documents for any AP Mortgage are not delivered by such 10th
Business Day, the Credit Agent or the Collateral Agent may request that the
Pledgor advise the Collateral Agent and the Credit Agent in writing of the
specific reason that such Required Mortgage Documents were not delivered, and
the Pledgor shall so advise the Collateral Agent and the Credit Agent within 30
days after such request.

               (c)      Securities.  The Pledgor may, from time to time,
deliver Securities to the Collateral Agent or an Approved MBS Custodian and
shall provide such evidence that such Securities are either (a) in a
certificated form, with the certificates evidencing such Securities being
delivered to the Collateral Agent or such Approved MBS Custodian, or (b) in
book entry or uncertificated form with evidence that the Collateral Agent or
such Approved MBS Custodian has been identified as the nominal owner of such
Securities in the records of a Federal Reserve Bank or other institution
authorized by the applicable Federal Agency to maintain ownership records in
respect of such Securities.

               (d)      Repurchased Agency Loans and Receivables.  The Company
shall identify Repurchased Agency Loans and Receivables from time to time by
providing a list of such items to the Collateral Agent.  Such list shall
include statements indicating (i) the identification number of each such
Mortgage Loan, (ii) its unpaid principal balance, (iii) the "paid-to" date for
such





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Mortgage Loan, (iv) the date on which such Mortgage Loan was purchased by the
Company out of the applicable pool, (v) whether or not such Mortgage Loan has
been reinstated and the payment defaults thereunder cured by the mortgagor,
(vi) the date on which any foreclosure sale with respect to such Mortgage Loan
has occurred, (vii) the status of the related claim against the VA or FHA or
HUD, and (viii) whether the borrower of the Mortgage Loan filed a voluntary
bankruptcy petition or had an involuntary bankruptcy petition filed against it
while the payments on such Mortgage Loan were past due.  The Company shall
provide a weekly update of such information to the Collateral Agent by 9:00
a.m. (Chicago time) on the first Business Day of each week with regard to any
Repurchased Agency Loans and Receivables previously identified as being
included in Collateral.  The Collateral Agent shall have the right at any time
at the direction of the Aggregate Required Lenders, to require the Company to
submit all Required Mortgage Documents and item number 4 from the Additional
Required Mortgage Documents for any Repurchased Agency Loan and Receivable then
being included in Collateral, and the Collateral Agent shall request the
submission of such documents at the direction of the Credit Agent.  In
addition, the Company shall provide, at the request of the Collateral Agent or
the Credit Agent, claim forms to FHA or VA or HUD for each such Repurchased
Agency Loan and Receivable, identifying the Collateral Agent as the "investor"
thereunder so that any payments made by FHA or VA or HUD with respect to such
Mortgage Loan shall be paid to the Collateral Agent rather than the Company.
In addition, with respect to those Repurchased Agency Loans and Receivables for
which there has been a foreclosure sale of the underlying property, the Credit
Agent shall have the right to require the Company to provide a new mortgage in
favor of the Collateral Agent on the real estate and improvements that
previously secured such Repurchased Agency Loan and Receivable, all in form
satisfactory to the Credit Agent and Collateral Agent and at the Company's sole
cost and expense, including the cost of recording such mortgage if required by
the Credit Agent.

               (e)      Pledged Servicing.  The Company shall deliver to the
Collateral Agent fully executed copies of (i) the Acknowledgment Agreements
with FNMA and FHLMC, and (ii) Acknowledgment Agreements with all other Federal
Agencies (excluding GNMA unless and until the Agent or Required Lenders require
that an Acknowledgement Agreement with GNMA be obtained) covering all other
Servicing Agreements constituting Eligible Pledged Servicing.  In the event the
Agent or the Required Lenders request that Acknowledgement Agreements with GNMA
be obtained, the Company shall deliver to the Collateral Agent fully executed
copies of Acknowledgement Agreements with GNMA covering all Pledged Servicing
with GNMA.

               (f)      Servicing Sale Receivables.  The Company may, in
connection with a sale of Servicing Agreements from the Company to a Servicing
Purchaser, pledge the Servicing Sale Receivables due in





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connection with such sale to the Collateral Agent as Collateral.  If the
Company so pledges Servicing Sale Receivables to the Collateral Agent, the
Company shall (i) deliver to the Credit Agent and the Collateral Agent a
complete executed copy of the related purchase agreement and written
confirmation from the Servicing Purchaser as to the amount of such Pledged
Servicing Sale Receivables, (ii) assign its rights to such Pledged Servicing
Sale Receivables to the Collateral Agent for the benefit of the Secured Parties
pursuant to an assignment in form and content satisfactory to the Required
Lenders, and (iii) cause the Servicing Purchaser of the applicable sold
Servicing Agreements to execute an agreement in form and content satisfactory
to the Required Lenders pursuant to which the Servicing Purchaser shall agree
to (A) pay such Pledged Servicing Sale Receivables directly to the Collateral
Agent for the benefit of the Secured Parties, and (B) provide simultaneous
written notice to the Credit Agent and the Collateral Agent of any claims made
against or notices given to the Company which would constitute an offset to or
reduction in the amount of such Pledged Servicing Sale Receivables.

               (g)      Identification of Collateral.  All Mortgage Loans and
Securities at any time delivered to the Collateral Agent hereunder shall be
held by the Collateral Agent in a fire resistant vault, drawer or other
suitable depositary maintained in accordance with Federal Agency standards and
controlled solely by the Collateral Agent, conspicuously marked to show the
respective interests of the Secured Parties therein and not commingled with any
other assets or property of, or held by, the Collateral Agent.  Accordingly, if
(pursuant to Paragraph 7(b) below) the Collateral Agent receives a shipping
request pursuant to which National City Bank of Kentucky is to retain physical
possession of the applicable Mortgage Loans or Securities as an agent for any
Person other than the Secured Parties, the Collateral Agent shall physically
separate such Mortgage Loans or Securities from the remainder of the Collateral
and shall execute any transmittal letters required under Paragraph 7(b) below.

     3.        Grant of Security Interest.  The Company, with respect to
Collateral owned by the Company, and each Borrowing Subsidiary, with respect to
Collateral owned by the applicable Borrowing Subsidiary, hereby pledges,
assigns and grants to the Collateral Agent for the benefit of the Secured
Parties, a first priority security interest in the property described in
Paragraph 4 below (collectively and severally, the "Collateral"), to secure
payment of the Secured Debt.  Furthermore, each AP Notice shall create a
security interest in favor of the Collateral Agent for the benefit of the
Secured Parties in the AP Mortgages identified therein.  By delivering an AP
Notice, the Company represents and warrants that each AP Mortgage identified
therein constitutes an Eligible AP Mortgage.  The Company agrees that while it
is in possession of any Required Mortgage Documents for an AP Mortgage, it will
hold same





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in trust and as agent and bailee for the Collateral Agent for the benefit of
the Secured Parties, without authority to make any other disposition thereof,
or of the proceeds thereof.  The Company assumes the responsibility for loss or
destruction of any such Required Mortgage Documents until the same are
delivered to the Collateral Agent.

       Unless so directed by the Credit Agent when an Event of Default has
occurred and is continuing, the Collateral Agent shall not record the
assignment of mortgage or deed of trust delivered in connection with any
Pledged Mortgage.

     4.        Collateral.  The Collateral shall consist of all right, title
and interest of the Company and the Borrowing Subsidiaries, as applicable, of
every kind and nature, in and to all of the following property, assets and
rights of the Company and the Borrowing Subsidiaries wherever located, whether
now existing or hereafter arising, and whether now or hereafter owned or
acquired by or accruing or owing to the Company or a Borrowing Subsidiary, and
all proceeds and products thereof (including all proceeds in the Settlement
Account and Custodian Settlement Accounts from time to time):

               (a)      all Pledged Mortgages;

               (b)      all Pledged Securities;

               (c)      any commitments or other agreements issued by any
private mortgage insurer or by the FHA or VA to insure or guarantee any Pledged
Mortgage;

               (d)      all commitments of FNMA, FHLMC or other Persons to
purchase Pledged Items from the Company or any Borrowing Subsidiary or exchange
Securities with the Company or any Borrowing Subsidiary for Pledged Items;

               (e)      any options to sell or purchase Securities, future
contracts, or any other interest rate protection products which directly or
indirectly protect the Company or any Borrowing Subsidiary against reductions
in value of such Pledged Items due to changes in mortgage interest rates;

               (f)      the Settlement Account and any Custodian Settlement
Accounts and any amounts standing to the credit of the Settlement Account and
any Custodian Settlement Accounts then in existence with Approved MBS
Custodians, as described in Paragraph 7(c) of this Security Agreement;

               (g)      all VA Mortgage Loans or FHA Mortgage Loans (plus any
REO or accounts receivable from FHA or VA resulting therefrom, including
guaranty claims against VA and insurance claims against





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FHA or HUD) which are repurchased by the Company from Security holders and
pledged to the Collateral Agent as security for the Secured Debt;

               (h)      all cash and Cash Equivalents held by the Credit Agent
or Collateral Agent as security for the Secured Debt;

               (i)      all right, title and interest of the Company, of every
kind and nature, whether now existing or hereafter arising, in and to all
Servicing Agreements now or hereafter existing, including without limitation
all rights of the Company to sell or assign its interest therein and all
amounts payable to the Company thereunder arising out of any termination
thereof, and all files, surveys, certificates, correspondence, appraisals,
computer programs, tapes, disks, cards, accounting records and other records
and data of the Company related to the Mortgage Loans covered by such Servicing
Agreements and all proceeds and products thereof;

               (j)      all Pledged Servicing Sale Receivables; and

               (k)      all property and proceeds related to the foregoing,
including without limitation, the right to service Pledged Mortgages while
owned by the Company or any Borrowing Subsidiary, all accounts and general
intangibles of whatsoever kind so related and all documents or instruments
delivered to the Credit Agent or the Collateral Agent in respect of any Pledged
Item, including, without limitation, the right to receive all insurance
proceeds and condemnation awards which may be payable in respect of the
premises encumbered by any Pledged Mortgage.

     5.        Collateral Agent's Review of Collateral.  Upon any receipt of
Required Mortgage Documents for any Mortgage Loan, the Collateral Agent shall
review the same and verify that:

               (a)      All Required Mortgage Documents relating to such
Mortgage Loan appear regular on their face (as determined by the Collateral
Agent in its reasonable discretion) and are in the Collateral Agent's
possession; and

               (b)      The statements set forth on Exhibit 1 hereto are
accurate and complete in all material respects.

If the Collateral Agent notes any exception in the review described in
subparagraph (a) or (b) above or questions, in its reasonable discretion, the
genuineness, regularity, propriety, or accuracy of any item of Collateral, the
Collateral Agent shall not include such item as Eligible Collateral in its next
Collateral Value Determination (as defined in Paragraph 6(a) below) delivered
to the Credit Agent.  In the event that the Pledgor has been requested by the
Credit Agent or the Collateral Agent to deliver the "Additional Required
Mortgage Documents" (as described on Schedule B attached





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hereto) with respect to any Mortgage Loan, the Collateral Agent shall review
and verify such Additional Required Mortgage Documents consistent with the
obligations of the Collateral Agent above.

     6.        Collateral Value Determination; Determination Assumptions.

               (a)      On each Business Day the Collateral Agent shall compute
the value of the Aggregate Borrowing Base and the Warehouse Borrowing Base
(collectively, the "Borrowing Bases") and notify the Credit Agent thereof (a
"Collateral Value Determination") by telephone and by sending a facsimile copy
of a report ("Borrowing Base Report") in the form of Schedule C hereto (or such
other form as may be mutually agreed to by the Collateral Agent and the Credit
Agent) prior to 11:00 a.m. (Chicago time).  With respect to any Required
Mortgage Documents delivered to the Collateral Agent by 10:00 a.m. (Chicago
time) on any Business Day, the Collateral Agent shall review such Required
Mortgage Documents in the manner set forth in Paragraph 5 above in time to
include the related Mortgage Loans (to the extent they constitute Eligible
Collateral) in the Borrowing Base Report delivered at 11:00 a.m. (Chicago time)
on such Business Day.  If the Company or the Credit Agent reasonably believes
that the value of the Borrowing Bases has changed since the 11:00 Borrowing
Base Report, the Collateral Agent shall, at the request of the Company or the
Credit Agent made by facsimile prior to 2:00 p.m. (Chicago time) on any
Business Day, recompute the Borrowing Bases and notify the Credit Agent thereof
by telephone and by a facsimile transmission of a Borrowing Base Report.
Notwithstanding the foregoing, so long as the security interest in the
Collateral is abated as described in Paragraph 8, the Company shall perform all
of the obligations of the Collateral Agent with respect to determining the
Borrowing Bases, and the Collateral Agent shall have no duty to compute the
Borrowing Bases or submit Borrowing Base Reports.

               (b)      In making any Collateral Value Determination or other
calculation involving a determination of the value of the Borrowing Bases, the
Collateral Agent shall be permitted to rely, without independent investigation
of the correctness thereof, on:

                        (1)     The information supplied by the Company to the
       Collateral Agent with respect to (i) the aggregate principal balance of
       the Mortgage Loans serviced by the Company pursuant to Servicing
       Agreements constituting Eligible Pledged Servicing, which information
       shall be provided by the Company within the first five days of each
       month and (ii) the acquisition price paid by the Company to acquire any
       Pledged Servicing;

                        (2)     The information supplied by the Pledgor to the
       Collateral Agent on the related Collateral Transmittal, with





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       respect to the net acquisition cost (including any discounts and
       excluding any servicing released premium) of any Mortgage Loan, the
       unpaid principal balance of any Mortgage Loan as of the Pledge Date
       therefor, and the weighted average purchase price (expressed as a
       percentage of par) committed to under those Approved Investor
       Commitments which could cover such Mortgage Loan;

                        (3)     The most recent information supplied by the
       Company to the Collateral Agent with respect to (i) the number of days
       by which payments on any Mortgage Loan constituting Collateral are past
       due, (ii) the date of any foreclosure sale or transfer in lieu of
       foreclosure with respect to a repurchased Mortgage Loan constituting a
       Repurchased Agency Loan and Receivable, (iii) the date of any
       reinstatement of any Repurchased Agency Loans and Receivables, (iv) the
       value of any REO and accounts receivable (including proceeds of FHA
       insurance or VA guaranties) acquired in connection with a foreclosure
       sale or a transfer in lieu of foreclosure of Eligible Repurchased Agency
       Loans and Receivables, and (v) whether the borrower of any Mortgage Loan
       which is included in Repurchased Agency Loans and Receivables filed a
       voluntary bankruptcy petition or had an involuntary bankruptcy petition
       filed against it while the payments on such Mortgage Loan were past due;

                        (4)     The information supplied by the Company to the
       Collateral Agent, whether written or in any other form acceptable to the
       Collateral Agent, with respect to a determination as to whether amounts
       received in the Settlement Account represent the purchase price paid for
       a specific Mortgage Loan or Security and, consequently, whether the
       Mortgage Collateral Value of such Mortgage Loan or MBS Value of such
       Security should be removed from such calculation;

                        (5)     The most recent information supplied by the
       Credit Agent to the Collateral Agent with respect to (i) the amount of
       the then current Aggregate Commitment, and (ii) the current balance in
       the Settlement Account;

                        (6)     The most recent information supplied by the
       Company and the Servicing Purchaser(s) to the Collateral Agent with
       respect to the amount of Servicing Sale Receivables; and

                        (7)     Any information supplied by the Credit Agent,
       the Company, or any other custodian of any of the Collateral, to the
       Collateral Agent unless the Collateral Agent has actual knowledge that
       such information is untrue or unreliable.

               Furthermore, the Collateral Agent may rely on information
supplied by the Company with respect to the effect of the Borrowing





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Base Sublimits on the value of the Borrowing Bases attributable to Repurchased
Agency Loans and Receivables, which information shall be supplied by the
Company on the first Business Day of each week with respect to the value of the
Borrowing Bases attributable to Repurchased Agency Loans and Receivables as of
the close of the last Business Day of the preceding week; provided, however,
that the Collateral Agent shall (on the last Business Day of each month) verify
the accuracy of the information supplied by the Company in the most recent
report of such information and report to the Credit Agent any discrepancies
between such information as supplied by the Company and such information as
calculated by the Collateral Agent.  The information as calculated by the
Collateral Agent shall be included in each daily Borrowing Base Report until
the Company again provides its next weekly report of the value of the Borrowing
Bases attributable to Repurchased Agency Loans and Receivables.

               (c)      The Collateral Agent is hereby authorized by the Credit
Agent to grant temporary waivers of strict compliance by the Company with the
eligibility requirements regarding qualification of any item of Collateral as
Eligible Collateral or with the Borrowing Base Sublimits when the Collateral
Agent deems it appropriate, in its sole discretion, (i) up to any amount for up
to three (3) Business Days, if the satisfaction of such eligibility
requirements or sublimits cannot be independently determined because of events
beyond the reasonable control of the Company (e.g. natural disasters,
transmission failures, etc.), provided that, if such determination cannot be
made for more than one (1) Business Day, the Company certifies in writing that
all such eligibility requirements and sublimits are in fact satisfied, or (ii)
if the aggregate amount of the portion of the Aggregate Borrowing Base
attributable thereto does not exceed the lesser of (A) $25,000,000 or (B) five
percent (5%) of the Aggregate Commitment at any time; provided that the waivers
permitted under this clause (ii) shall be limited to waivers of Borrowing Base
Sublimits and time limitations set forth in the eligibility requirements (e.g.
number of days eligible in the Aggregate Borrowing Base, number of days out on
Company Trust Receipts, etc.); and further provided that in no event shall any
Pledged Mortgage be included as Eligible Collateral while such Pledged Mortgage
is held by the Company under a Company Trust Receipt if the Company has held
such Pledged Mortgage under a Company Trust Receipt for more than 21 days.

     7.        Handling of Collateral; Settlement Account.

               (a)      From time to time until otherwise notified in writing
by the Required Lenders, the Collateral Agent is hereby authorized to release
documentation relating to Mortgage Loans to the Company against a trust receipt
executed by the Company in the form of Exhibit 2 hereto.  The Collateral Agent
will maintain all original trust receipts in a vault, drawer or other suitable





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depositary with a one hour fire rating maintained in accordance with Federal
Agency requirements and controlled solely by Collateral Agent.  The Company
hereby represents and warrants that any request by the Company for release of
Collateral under this subparagraph (a) shall be solely for the purposes of
correcting clerical or other non-substantial documentation problems in
preparation of returning such Collateral to the Collateral Agent for ultimate
sale or exchange and that the Company has requested such release in compliance
with all terms and conditions of such release set forth herein and in the
Credit Agreement, including, without limitation, Section 4.1(b)(iv) thereof.

               (b)      Prior to the occurrence of an Event of Default, upon
delivery by the Company to the Collateral Agent of a shipping request
substantially in the form of that attached hereto as Exhibit 3, the Collateral
Agent will transmit, or cause to be transmitted, Mortgage Loans and Securities
held by it or any Approved MBS Custodian as directed by the Company as follows:

                        (1)     If the transmittal is of documentation for
       Mortgage Loans or Securities in the possession of the Collateral Agent
       or an Approved MBS Custodian in connection with the sale thereof to an
       Approved Investor, such transmittal will be under cover of a transmittal
       letter substantially in the form of that attached hereto as Exhibit 4
       (or such other form as may be approved by the Credit Agent or required
       under any Federal Agency program pursuant to which the relevant Mortgage
       Loans or Securities are being shipped), subject to modification of such
       Exhibit 4 pursuant to Paragraph 7(g) hereof at the request of the Agent.

                        (2)     If the transmittal is of documentation for
       Mortgage Loans or Securities in connection with the shipment to a
       custodian or trustee in connection with the formation of a mortgage pool
       supporting a Security (any such Security secured or otherwise supported
       by any such Mortgage Loan or Security being referred to herein as a
       "Warehouse-Related Security"), such transmittal will be under cover of a
       transmittal letter substantially in the form of that attached hereto as
       Exhibit 5 (or such other form as may be approved by the Credit Agent or
       required if the Security is being issued under any Federal Agency
       program), subject to modification of such Exhibit 5 pursuant to
       Paragraph 7(g) hereof at the request of the Agent, and, in addition,
       will be conditioned upon the facts that:

                                  (i)  If the Warehouse-Related Security is
               being issued under a Federal Agency program, there has been
               delivered for the Warehouse-Related Security such form as may be
               required under the Federal Agency program pursuant to which such
               Warehouse-Related Security is





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               being issued (which form shall name the Collateral Agent or an
               Approved MBS Custodian (as defined below) as the subscriber and
               the Person to whom the Warehouse-Related Security is to be
               delivered);

                                 (ii)  If the Warehouse-Related Security is
               being issued pursuant to a program other than a Federal Agency
               program, there has been delivered to and acknowledged by the
               trustee and collateral agent or custodian for the underlying
               mortgage pool a letter in form acceptable to the Collateral
               Agent;

                                (iii)  The Person to whom such
               Warehouse-Related Security is to be delivered upon issuance in
               exchange for the Mortgage Loans or Securities being shipped is
               either (a) a Person approved by the Collateral Agent and the
               Credit Agent which has agreed to hold such Warehouse-Related
               Security and the proceeds of any sale or other disposition
               thereof as custodian, agent and bailee for the benefit of the
               Secured Parties pursuant to a custodial agreement substantially
               in the form of that attached hereto as Exhibit 6 (a "Custodial
               Agreement"), (b) the Collateral Agent or an Affiliate thereof or
               (c) such other Person as is approved by the Collateral Agent and
               the Credit Agent (any Person acting in such capacity being
               referred to herein as an "Approved MBS Custodian");

                                 (iv)  There has been delivered to the Approved
               MBS Custodian a letter in the form attached to the Custodial
               Agreement (Exhibit A to Exhibit 6 hereto); and

                                 (v)  At the request of the Agent pursuant to
               Paragraph 7(g) hereof, any Warehouse Related Security delivered
               to the Collateral Agent or an Approved MBS Custodian pursuant to
               subparagraphs (i) through (iv) shall be in a face amount of not
               less than the amount of the Aggregate Borrowing Base which is
               attributable to the Mortgage Loans so delivered in exchange for
               such Warehouse Related Security.

In no event shall the Collateral Agent have any obligation to obtain written
acknowledgement of receipt from the addressee of any transmittal letter or
other communication sent by the Collateral Agent hereunder.

               (c)      All amounts payable on account of the sale of Pledged
Items (including, but not limited to, a sale pursuant to a repurchase
agreement) will be instructed to be paid directly by the purchaser to the
Settlement Account or, in the case of Pledged Securities delivered to an
Approved MBS Custodian, to a demand





                                    -12-
<PAGE>   13

deposit account maintained with such Approved MBS Custodian (a "Custodian
Settlement Account") and, thereafter, to the Settlement Account as provided in
the applicable Custodial Agreement.  Pursuant to Paragraph 3 above the Company
has granted a security interest in and lien upon the Settlement Account and in
all Custodian Settlement Accounts and in any and all amounts at any time held
therein as collateral security for the benefit of the Secured Parties.  This
Paragraph 7(c) shall constitute notice to the Collateral Agent and any Approved
MBS Custodian of such security interest pursuant to the Uniform Commercial Code
of all relevant jurisdictions and any other law or regulation requiring such
notice.  This Paragraph 7(c) shall further constitute irrevocable notice to the
Collateral Agent and any Approved MBS Custodian that the accounts referred to
in Paragraph 4(f) above are "no access" accounts to the Company and the
Collateral Agent except to the extent expressly permitted hereunder.  The
Collateral Agent shall hold such security interest in and lien upon the
accounts referred to in Paragraph 4(f) above and all funds at any time held
therein for the benefit of the Secured Parties with all rights of a secured
party under the Uniform Commercial Code of all relevant jurisdictions.

               (d)      Prior to the occurrence of an Event of Default, the
Collateral Agent and any Approved MBS Custodian shall take such steps as they
may be reasonably directed from time to time by the Company in writing which
are not inconsistent with the provisions of this Security Agreement and the
other Credit Documents and which the Company deems necessary to enable the
Company to perform and comply with Approved Investor Commitments and with other
agreements for the sale or other disposition in whole or in part of Mortgage
Loans and Securities.

               (e)      The Collateral Agent may deliver any item of Collateral
to the Company or any other Person in accordance with the provisions of the
Credit Documents; provided, however, that the Collateral Agent shall not
deliver and shall incur no liability to the Company or any other Person for
refusing to deliver any item of Collateral to the Company or any other Person
(other than under existing Approved Investor Commitments) while an Event of
Default exists if the Collateral Agent has been directed to refrain from so
delivering Collateral by (i) the holders of more than 50% of the Secured Debt
then outstanding (the "Majority Debtholders") voting through the Credit Agent
or the Note Trustee, as applicable, as agents for the holders of the Secured
Debt as set forth in Paragraph 23 hereof, or (ii) the Required Lenders.

               (f)      In addition to the releases of Collateral provided for
in subparagraphs (a)-(e) of this Paragraph 7, upon the request of the Company
delivered from time to time to the Credit Agent and the Collateral Agent, the
Collateral Agent shall, with the prior written approval of the Credit Agent,
release Collateral specified





                                    -13-
<PAGE>   14

in such notice from the lien of this Security Agreement.  The Credit Agent
shall give its approval of such release if, but only if, (i) at the time of
such release no Event of Default exists and no notice of a Default has been
issued that has not been cured, (ii) any payment under Section 2.14(a) of the
Credit Agreement which may be required as a result of such release has been
made (or contemporaneously with such release shall be made) so that the release
of such Collateral will not create a violation of any Lending Sublimit or
Borrowing Base Sublimit, and (iii) if the Collateral to be released is Pledged
Servicing, such release is made in connection with the sale of such Pledged
Servicing by the Company; provided, however that, while an Event of Default
exists or while a notice of Default has been issued but not cured, the
Collateral Agent may (A) release pledged Cash Equivalents which are the subject
of reverse repurchase obligations in connection with the applicable reverse
repurchase agreement, and (B) release Pledged Items in connection with the sale
of Pledged Items pursuant to an existing Approved Investor Commitment if, in
either case, the proceeds of such repurchase or sale are deposited in the
Settlement Account.  The Collateral Agent is authorized to execute and deliver
to the Company, on behalf of the Secured Parties, such UCC-3 partial release
forms or other evidence as may be required of any release permitted hereunder.

               (g)      Notwithstanding the provisions of Paragraph 7(b) above,
at the request of the Agent:

                        (i)  The second sentence of the second full paragraph
               of the form of whole loan sale transmittal letter attached
               hereto as Exhibit 4 shall be deleted and replaced with the
               following sentence:

                        "Each of the Mortgage Loans is subject to a security
                        interest in favor of National City Bank of Kentucky
                        (the "Collateral Agent") on behalf of the Secured
                        Parties, which security interest shall be automatically
                        released upon your remittance of an amount equal to the
                        greater of (1) the purchase price for such Mortgage
                        Loan (as set forth on the schedule attached hereto),
                        and (2) $__________, which is the mortgage collateral
                        value assigned by the Collateral Agent to such Mortgage
                        Loan.  Such amount shall be remitted by wire transfer
                        to the following account:",

               in which case the amount to be inserted in the blank in clause
               two of such revised provision shall be an amount equal to the
               amount of the Aggregate Borrowing Base which is attributable to
               the Mortgage Loans being delivered pursuant to the transmittal
               letter;





                                    -14-
<PAGE>   15

                        (ii)  The second sentence of the second full paragraph
               of the form of warehouse related security transmittal letter
               attached hereto as Exhibit 5 shall be deleted and replaced with
               the following sentence:

                        "Each of the Mortgage Loans is subject to a security
                        interest in favor of National City Bank of Kentucky
                        (the "Collateral Agent") for the benefit of the Secured
                        Parties, which security interest shall be automatically
                        released upon the issuance of the Warehouse-Related
                        Security in accordance with the terms of the prescribed
                        GNMA, FNMA or FHLMC form enclosed herewith, which form
                        shall name either the Collateral Agent or another
                        person designated by the Collateral Agent as the person
                        to whom the Warehouse-Related Security is to be
                        delivered and require that the principal amount of the
                        Warehouse Related Security be in an amount not less
                        than $__________, which is the mortgage collateral
                        value assigned by the Collateral Agent to such Mortgage
                        Loan.",

               in which case the amount to be inserted in the blank in such
               revised provision shall be an amount equal to the amount of the
               Aggregate Borrowing Base which is attributable to the Mortgage
               Loans being delivered pursuant to the transmittal letter.

The Agent may require that the above described modifications be made to all
such transmittal letters or only to transmittal letters to certain Approved
Investors designated by the Agent.

     8.        Abatement of Security Interest.  Upon the occurrence of a
Positive Security Event and so long as each of the Positive Security Conditions
is satisfied and no other Negative Security Event has occurred, the security
interest granted to the Secured Parties pursuant to Paragraph 3 herein shall
abate.  The Credit Agent shall advise the Collateral Agent when such abatement
is in effect promptly after the Company notifies the Credit Agent that such a
Positive Security Event has occurred and shall advise the Collateral Agent if
such abatement expires under the terms of the Credit Agreement.  The Collateral
Agent shall, at the request of the Company and after the Credit Agent has
confirmed to the Collateral Agent that a Positive Security Event has occurred
and all Positive Security Conditions are satisfied, execute and deliver such
UCC-3 financing statements as may be required to evidence the abatement of any
security interest that shall previously have been perfected by means of the
filing of financing statements.  As a condition to such abatement, the Company
and each Borrowing Subsidiary shall execute such UCC-1 financing statements and
other documentation as the Collateral Agent may request to permit the





                                    -15-
<PAGE>   16

security interest in the Collateral to be reinstated and perfected by the
Collateral Agent without further action by the Company or any Borrowing
Subsidiary if a Negative Security Event should occur thereafter.  Although the
Company and the Borrowing Subsidiaries shall continue to deliver Mortgage Loan
files and other information and documents to the Collateral Agent (in a
custodial capacity) even while the security interest is abated, so long as the
security interest is abated the Company shall perform all of the obligations of
the Collateral Agent as set forth herein with respect to determining the
Borrowing Bases and delivering Borrowing Base Reports.  During such abatement
period, (i) the remedies pertaining to the Collateral available to the
Collateral Agent, the Secured Parties and the Credit Agent under Paragraphs 16
and 17 or applicable law shall not be available, (ii) the Company shall perform
all of the obligations of the Collateral Agent with respect to determining the
Borrowing Bases, (iii) the Collateral Agent will not be required to sell the
Collateral or otherwise take any action at the direction of the Credit Agent to
realize upon the Collateral, (iv) the Collateral Agent shall be required to
sell the Collateral or otherwise take any action with regard to the disposition
of the Collateral at the direction of the Company, and (v) the Collateral shall
be deemed not to constitute security unless and until a Negative Security Event
occurs thereafter.

               Upon the occurrence of a Negative Security Event, the Company
(with respect to Collateral owned by the Company) and each Borrowing Subsidiary
(with respect to Collateral owned by the Borrowing Subsidiaries) shall be
deemed to have (i) automatically re-pledged and re-granted to the Collateral
Agent for the benefit of the Secured Parties a first priority security interest
in the Collateral to secure payment of the Secured Debt, (ii) consented to the
Collateral Agent's filing of the UCC-1 financing statements and dating and
otherwise completing, filing and/or recording, if necessary, any other
documentation previously provided by the Company or any Borrowing Subsidiary to
the Collateral Agent, and (iii) reaffirmed its appointment of the Collateral
Agent to act as its bailee pursuant to the provisions of Section 9-305 of the
Uniform Commercial Code of any applicable state.  Upon notice from the Credit
Agent that a Negative Security Event has occurred, the Collateral Agent shall
be deemed to have been informed of and accepted such appointment and shall file
UCC-1 financing statements executed by the Company and the Borrowing
Subsidiaries and other documentation as the Collateral Agent may request to
permit the security interest in the Collateral to be reinstated.  The Company
shall pay or shall reimburse the Collateral Agent for the payment of any filing
costs incurred in connection with the filing of any UCC-1 or UCC-3 statements
pursuant to this Paragraph 8.

     9.        Reports.  The Collateral Agent shall (a) deliver the Borrowing
Base Report at the times and in the manner set forth in Paragraph 6(a) above
and (b) deliver to the Credit Agent, the





                                    -16-
<PAGE>   17

Company and any Lender which makes a written request therefor, such other
reports and information as any Lender may from time to time reasonably request.
In preparing any such reports the Collateral Agent shall be entitled to rely,
without independent investigation (other than the review steps described on
Exhibit 1 hereto), on information supplied to the Collateral Agent by the
Company.

    10.        No Reliance.  The Collateral Agent shall not be responsible to
any Secured Party for any recitals, statements, representations or warranties
contained herein or in any other Credit Document; or for the execution,
effectiveness, genuineness, validity, enforceability, collectability, accuracy,
completeness or sufficiency of this Security Agreement or any other Credit
Document or instruments executed and delivered, or which could have been
executed or delivered, in connection with this Security Agreement or the other
Credit Documents, including, without limitation, the attachment, creation,
effectiveness or perfection of the security interests granted or purported to
be granted hereunder in and to the Collateral.

    11.        Costs and Expenses.  The Collateral Agent shall notify the
Company of all extraordinary costs and expenses of the Collateral Agent
directly relating to the Collateral Agent's performance of this Security
Agreement, and such extraordinary costs and expenses shall be paid promptly by
the Company or, if already paid by the Collateral Agent, the Company promptly
shall reimburse the Collateral Agent therefor.  For the purposes of this
provision, extraordinary costs and expenses shall include all costs and
expenses incurred by the Collateral Agent in performance of this Security
Agreement which have not been factored into the computation of the Collateral
Agent's fee (as agreed upon between the Company and the Collateral Agent
pursuant to a separate agreement), including, without limitation, reasonable
expenses of legal counsel to the Collateral Agent to enforce the rights of the
Collateral Agent hereunder.

    12.        Availability of Documents.  The Secured Parties and their
agents, accountants, attorneys and auditors (each an "Inspecting Party") will
be permitted from time to time upon reasonable notice to the Collateral Agent
and the Company, and at such time as may be mutually acceptable to such
Inspecting Party, the Collateral Agent and the Company to examine (to the
extent permitted by applicable law) the files, documents, records and other
papers in the possession or under the control of the Collateral Agent relating
to any or all Collateral and to make copies thereof.  Any such activity will be
at the cost and expense of the Secured Party requesting such access, except
that following the occurrence of an Event of Default, all reasonable
out-of-pocket costs and expenses associated with the exercise by the Credit
Agent or the Note Trustee of its rights under this Paragraph 12 shall be
promptly paid by the Company upon demand of the Credit Agent or the Note





                                    -17-
<PAGE>   18

Trustee, as applicable.

    13.        Representations and Warranties.  The Company, with respect to
Collateral pledged hereunder by the Company, and each Borrowing Subsidiary,
with respect to Collateral pledged hereunder by any such Borrowing Subsidiary,
hereby represents and warrants that:  (a) the Company or the Borrowing
Subsidiary, as applicable, is the sole owner of the Collateral (or, in the case
of after-acquired Collateral, at the time the Company acquires rights in the
Collateral, will be the sole owner thereof), subject only to the rights of
Approved Investors under the Approved Investor Commitments; (b) except for
security interests in favor of the Collateral Agent for the benefit of the
Secured Parties hereunder, no Person has (or, in the case of after-acquired
Collateral, at the time the Company acquires rights therein, will have) any
right, title, claim or interest in, against or to the Collateral and, in any
event, so long as the Collateral Agent complies with the procedures relating to
possession of Collateral set forth in this Security Agreement, the Collateral
Agent shall have a perfected, first priority security interest therein for the
benefit of the Secured Parties; (c) no consent of any Person is required that
has not been obtained for the granting of the security interests provided for
herein, nor will any consent be required for the Collateral Agent to exercise
its rights under this Security Agreement in accordance with the terms of this
Security Agreement (except for consents to assignments of options, futures
contracts or other interest rate protection products in favor of the Secured
Parties from the counterparties thereto, which consents shall not be required
to be obtained unless an Event of Default is continuing or the Required Lenders
request otherwise); (d) to the best of the Company's and the Borrowing
Subsidiary's knowledge, all information heretofore, herein or hereafter
supplied to the Collateral Agent or to any Lender by or on behalf of the
Company with respect to the Collateral is or will be accurate and complete; (e)
the Approved Investor Commitments covering such Collateral may be collaterally
assigned to the Collateral Agent as described herein; and (f) each Mortgage
Loan and Security is, at all dates included in the computation of the value of
the Borrowing Bases, Eligible Collateral.

    14.        Covenants of the Company and Borrowing Subsidiaries.  The
Company and the Borrowing Subsidiaries hereby agree: (a) to procure, execute
and deliver from time to time (unless a Positive Security Event has occurred
and is continuing) any endorsements, assignments, financing statements and
other writings deemed necessary or appropriate by the Collateral Agent or the
Credit Agent to perfect, maintain and protect the Collateral Agent's security
interest hereunder and the priority thereof and to deliver promptly to the
Collateral Agent all originals of any Collateral or proceeds thereof consisting
of chattel paper or instruments; (b) not to surrender or lose possession of
(other than to the





                                    -18-
<PAGE>   19

Collateral Agent), sell, encumber, or otherwise dispose of or transfer, any
Collateral or right or interest therein other than shipment of Mortgage Loans
and Securities under Approved Investor Commitments and as otherwise permitted
under Paragraph 7 above and as otherwise permitted by the Credit Agreement; (c)
except as otherwise contemplated in any Custodial Agreement, not to grant to
any Federal Agency or Approved Investor any other security interest in any
Collateral, or otherwise acknowledge the creation of any ownership rights of
any Federal Agency or Approved Investor with respect to any Collateral unless
and until the Collateral Agent has received the proceeds of such Collateral as
described herein; (d) at all times to account fully for and promptly to deliver
to the Collateral Agent, in the form received, all Collateral or proceeds
thereof received, endorsed to the Collateral Agent or in blank as appropriate
and accompanied by such assignments and powers, duly executed, as the
Collateral Agent or the Credit Agent shall request, and until so delivered all
Collateral and proceeds thereof shall be held in trust for the Collateral Agent
for the benefit of the Secured Parties, separate from all other property of the
Company and the Borrowing Subsidiaries and identified as the property of the
Collateral Agent for the benefit of the Secured Parties; (e) to keep accurate
and complete records of the Collateral and at any reasonable time and at the
Company's expense, upon demand by the Collateral Agent or the Credit Agent, to
exhibit to and allow inspection of the Collateral and the records, reports and
information concerning the Collateral by the Collateral Agent or Credit Agent
(or Persons designated by the Collateral Agent or Credit Agent); (f) to keep
the records concerning the Collateral at the location(s) set forth in Paragraph
27 below and not to remove the records from such location(s) without the prior
written consent of the Collateral Agent and the Credit Agent; (g) not to
materially modify, compromise, extend, rescind or cancel any deed of trust,
mortgage, note or other document, instrument or agreement connected with any
Mortgage Loan pledged under this Security Agreement or any document relating
thereto or connected therewith or consent to a postponement of strict
compliance on the part of any party thereto with any term or provision thereof
in any material respect; (h) to keep the Collateral insured against loss,
damage, theft, and other risks customarily covered by insurance, and such other
risks as the Collateral Agent or the Credit Agent may request; (i) to do all
acts that a prudent investor would deem necessary or desirable to maintain,
preserve and protect the Collateral; (j) not knowingly to use or permit any
Collateral to be used unlawfully or in violation of any provision of this
Security Agreement, the Credit Agreement or any applicable statute, regulation
or ordinance or any policy of insurance covering the Collateral; (k) to pay (or
require to be paid) prior to their becoming delinquent all taxes, assessments,
insurance premiums, charges, encumbrances and liens now or hereafter imposed
upon or affecting any Collateral except as otherwise permitted in the Credit
Agreement; (l) to notify the Collateral Agent and the Credit Agent before any
such change shall





                                    -19-
<PAGE>   20

occur of any change in the Company's name, identity or structure through
merger, consolidation or otherwise; (m) to appear in and defend, at the
Company's cost and expense, any action or proceeding which may affect its title
to or the Collateral Agent's interest for the benefit of the Secured Parties in
the Collateral; and (n) to comply in all material respects with all laws,
regulations and ordinances relating to the possession, operation, maintenance
and control of the Collateral.  Notwithstanding the foregoing, (1) the
requirements of clauses (g), (k) and (m) shall not apply to any Collateral
which is not required to be included in the computation of the value of any of
the Borrowing Bases in order for the Company to be in compliance with the
requirements of the Credit Agreement unless failure to comply with the
requirements of said subparagraphs would have an adverse effect on the
Collateral which is included in such computation, and (2) the failure of the
Company or any Borrowing Subsidiary to comply with its obligations under this
Paragraph 14 with respect to any Pledged Item shall cause such Pledged Item to
cease to qualify as Eligible Collateral.

    15.        Collection of Collateral Payments.

               (a)      The Company or the applicable Borrowing Subsidiary
shall, at its sole cost and expense, use its best efforts to obtain payment,
when due and payable, of all sums due or to become due with respect to any
Collateral ("Collateral Payments" or a "Collateral Payment"), consistent with
all requirements of law and contractual obligations binding upon the Company or
the applicable Borrowing Subsidiary.  Upon the request of the Collateral Agent
while an Event of Default exists, the Company or the applicable Borrowing
Subsidiary will notify and direct any party who is or might become obligated to
make any Collateral Payment, to make payment thereof to the Collateral Agent
(or to the Company or the applicable Borrowing Subsidiary in care of the
Collateral Agent) at such address as the Collateral Agent may designate.  The
Company will reimburse the Collateral Agent promptly upon demand for all
out-of-pocket costs and expenses, including reasonable attorneys' fees and
litigation expenses, incurred by the Collateral Agent in seeking to collect any
Collateral Payment.

               (b)      The Collateral Agent shall, promptly upon receipt of
any funds delivered from any Servicing Purchaser as full or partial payment of
any Pledged Servicing Sale Receivable, deposit such funds into the Collateral
Agent's Settlement Account and notify the Company of the receipt of such funds.
If the Collateral Agent receives any check from a Servicing Purchaser in
payment of Servicing Sale Receivables and such check contains a restrictive
endorsement, the Collateral Agent shall obtain the consent of the Company and
the Credit Agent before cashing any such check.

               (c)      Following the occurrence of an Event of Default, upon
the request of the Collateral Agent the Company and each





                                    -20-
<PAGE>   21

Borrowing Subsidiary will transmit and deliver to the Collateral Agent,
forthwith upon receipt and in the form received, all cash, checks, drafts and
other instruments for the payment of money (properly endorsed where required so
that such items may be collected by the Collateral Agent) which may be received
by the Company or any Borrowing Subsidiary at any time as payment on account of
any Collateral Payment and if such request shall be made, until delivery to the
Collateral Agent, such items will be held in trust for the Collateral Agent for
the benefit of the Secured Parties and will not be commingled by the Company or
any Borrowing Subsidiary with any of their other funds or property.
Thereafter, the Collateral Agent is hereby authorized and empowered to endorse
the name of the Company or the applicable Borrowing Subsidiary on any check,
draft or other instrument for the payment of money received by the Collateral
Agent on account of any Collateral Payment if the Collateral Agent believes
such endorsement is necessary or desirable for purposes of collection.

               (d)      The Company hereby agrees to indemnify, defend and save
harmless the Collateral Agent and its agents, officers, employees and
representatives from and against all reasonable liabilities and expenses on
account of any adverse claim asserted against the Collateral Agent relating to
any moneys received by the Collateral Agent on account of any Collateral
Payment (other than as a direct result of the gross negligence or willful
misconduct of the Collateral Agent) and such obligation of the Company shall
continue in effect after and notwithstanding the discharge of the Credit
Indebtedness and/or the release of the security interest granted in Paragraph 3
above.

    16.        Authorized Action by Collateral Agent.  The Company and each
Borrowing Subsidiary each hereby irrevocably appoints the Collateral Agent as
its attorney-in-fact to do (but the Collateral Agent shall not be obligated to
and shall incur no liability to the Company, any Borrowing Subsidiary or any
Secured Party or any other third party for failure so to do) at any time and
from time to time at the written request and direction, given while an Event of
Default exists, of the Required Lenders or the Majority Debtholders, any act
which the Company or any Borrowing Subsidiary is obligated by this Security
Agreement to do, and to exercise such rights and powers as the Company or any
Borrowing Subsidiary might exercise with respect to the Collateral, including,
without limitation, the right to (a) collect by legal proceedings or otherwise
and endorse, receive and receipt for all dividends, interest, payments,
proceeds and other sums and property now or hereafter payable on or on account
of the Collateral; (b) insure, process, service and preserve the Collateral;
(c) transfer the Collateral to the Collateral Agent's own or its nominee's
name; and (d) make any compromise or settlement, and take any other action it
deems advisable with respect to the Collateral.  Notwithstanding the preceding
sentence, the Collateral Agent shall endeavor to take





                                    -21-
<PAGE>   22

only such actions with respect to the Collateral as are consistent with general
servicing of such Collateral and in compliance with Federal Agency
requirements; provided, however, that the Collateral Agent shall not be liable
to the Company or any Borrowing Subsidiary for any actions taken by the
Collateral Agent absent gross negligence or willful misconduct.
Notwithstanding anything contained herein, in no event shall the Collateral
Agent be required to make any presentment, demand or protest, or give any
notice, and the Collateral Agent need not take any action to preserve any
rights against any prior party or any other person in connection with the
Secured Debt or with respect to the Collateral.

    17.        Default and Remedies.

               (a)      While an Event of Default exists under any Credit
Document or the Indentures, the Collateral Agent shall at the written request
and direction of the Majority Debtholders, without notice to or demand upon the
Company:  (a) foreclose or otherwise enforce the Collateral Agent's security
interest for the benefit of the Secured Parties in the Collateral in any manner
permitted by law or provided for hereunder; (b) sell or otherwise dispose of
the Collateral or any part thereof at one or more public or private sales or at
any broker's board or on any securities exchange, whether or not such
Collateral is present at the place of sale, for cash or credit or future
delivery and without assumption of any credit risk, on such terms and in such
manner as the Collateral Agent may determine; (c) require the Company to
assemble the Collateral and/or books and records relating thereto and make such
available to the Collateral Agent at a place to be designated by the Collateral
Agent; (d) enter into property where any Collateral or books and records
relating thereto are located and take possession thereof with or without
judicial process; and (e) prior to the disposition of the Collateral, prepare
it for disposition in any manner and to the extent the Collateral Agent deems
appropriate.  Whether or not the Collateral Agent exercises any right given
pursuant to this Paragraph 17, upon the occurrence of any Event of Default, the
Collateral Agent on behalf of the Secured Parties shall have as to any
Collateral all other rights and remedies provided for herein and all rights and
remedies of a secured party under the Illinois Uniform Commercial Code and, in
addition thereto and not in lieu thereof, all other rights or remedies at law
or in equity existing or conferred upon the Collateral Agent on behalf of the
Secured Parties by other jurisdictions or other applicable law or given to the
Collateral Agent on behalf of the Secured Parties pursuant to any security
agreement, other instrument or agreement heretofore, now, or hereafter given as
security for the Company's obligations hereunder.

               (b)      The Collateral Agent is authorized, at any such sale,
if it deems it advisable so to do, to restrict the





                                    -22-
<PAGE>   23

prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing for their own account, for investment, and not with a view
to the distribution or sale of any of the Collateral.  Upon any sale or other
disposition pursuant to this Security Agreement, the Collateral Agent shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral or portion thereof so sold or disposed of and all proceeds thereof
shall be promptly distributed as set forth in Paragraph 18 hereof.  Each
purchaser at any such sale or other disposition shall hold the Collateral free
from any claim or right of whatever kind, including any equity or right of
redemption of the Company or any Borrowing Subsidiary, and the Company and the
Borrowing Subsidiaries specifically waive (to the extent permitted by law) all
rights of redemption, stay or appraisal which they have or may have under any
rule of law or statute now existing or hereafter adopted.  The Collateral Agent
shall give the Company or the applicable Borrowing Subsidiary only such notice
and shall publish such notice as may be required by the Illinois Uniform
Commercial Code or the Kentucky Commercial Code or by other applicable law of
the intention to make any such public or private sale or sale at broker's board
or on a securities exchange.  Any such public sale shall be held at such time
or times within the ordinary business hours and at such place or places
permitted by the Illinois Uniform Commercial Code or the Kentucky Commercial
Code.  At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Collateral Agent may determine.  The Collateral
Agent may adjourn any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same may be so
adjourned.  In case of any sale of all or any part of the Collateral on credit
or for future delivery, (i) the Collateral so sold may be retained by the
Collateral Agent until the selling price is paid by the purchaser thereof, (ii)
none of the Secured Parties shall incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold, and (iii) in case
of any such failure, such Collateral may again be sold as provided herein.
Nothing contained in this Security Agreement shall prohibit any Lender or
Lenders from purchasing the Collateral at such sale.

               (c)      Notwithstanding anything herein to the contrary, with
respect to any Collateral covered by an executed Acknowledgement Agreement, the
Collateral Agent is authorized to carry out and comply with, and the Company
approves and acknowledges, all requirements regarding such a sale set forth
therein or as may otherwise be imposed by any Approved Investor which is a
party to such an Acknowledgement Agreement and agrees that such a sale in
accordance with the requirements of an Acknowledgement Agreement is
commercially reasonable.





                                    -23-
<PAGE>   24

    18.        Disposition of Proceeds.

               (a)      General.  "Net Proceeds" shall mean the proceeds
realized upon the sale or other disposition of any Collateral after deducting
therefrom the payment of the costs and expenses of such sale or disposition,
including (i) reasonable compensation to the Collateral Agent's and Credit
Agent's agents and counsel, and all expenses, liabilities and advances made or
incurred by any Secured Party acting on instructions of the Majority
Debtholders or the Required Lenders, and (ii) with respect to the Pledged
Servicing, the payment of any amounts due by the Company to FNMA or FHLMC, as
the case may be, as a condition to the transfer of the Company's interest in
any such Servicing Agreements pursuant to the terms of such Servicing
Agreements, including without limitation all amounts described in the
Acknowledgement Agreements.  All such costs and expenses shall be deducted from
the proceeds directly related thereto or, in the absence of any such direct
relationship, on a pro rata basis from all types of proceeds recovered by the
Collateral Agent.  The total of all Net Proceeds for all categories of
Collateral is referred to as "Aggregate Net Proceeds."  To the extent the
Credit Agent is holding any Net Proceeds (e.g. amounts held in the Settlement
Account), the Credit Agent shall notify the Collateral Agent of the amount of
such Net Proceeds in order to enable the Collateral Agent to calculate the
Aggregate Net Proceeds.  The Collateral Agent shall distribute the Aggregate
Net Proceeds as set forth in the following subparagraphs of this paragraph.
Each of the Credit Agent and the Note Trustee shall notify the Collateral Agent
in writing of the manner in which Aggregate Net Proceeds shall be delivered to
each such party (e.g. by providing wire transfer instructions).

               (b)      Distributions of Exempted Debt Proceeds.  To the extent
that the amount of the Aggregate Net Proceeds actually in the possession of the
Collateral Agent are sufficient, the Collateral Agent shall first distribute to
the Credit Agent for the benefit of the Lenders an amount equal to the Exempted
Amount.  "Exempted Amount" shall mean an amount equal to the lesser of (A) the
Credit Indebtedness and (B) sum of (i) 10% of the Company's Consolidated
Tangible Net Worth (as defined in the Indentures) as of June 30, 1994, and (ii)
the portion of the Credit Indebtedness constituting purchase money borrowings
by the Company or a Borrowing Subsidiary.  The parties hereto acknowledge that
10% of the Company's Consolidated Tangible Net Worth equals $50,300,000 as of
June 30, 1994.  The Collateral Agent shall be entitled to rely without
independent investigation upon the Credit Agent's determination of the amount
of Credit Indebtedness which constitutes purchase money borrowings.  The
Aggregate Net Proceeds minus the Exempted Amount is hereinafter referred to as
the "Ratable Net Proceeds".  After the Collateral Agent has distributed the
Exempted Amount to the Credit Agent, the Collateral Agent shall distribute the
Ratable Net Proceeds as set forth in the following





                                    -24-
<PAGE>   25

subparagraphs.

               (c)      Distributions to the Note Trustee.  The Collateral
Agent shall then distribute to the Note Trustee for the benefit of the
Noteholders an amount equal to the lesser of (A) the sum of the outstanding
principal balance of the Ratable Medium-Term Notes plus the accrued unpaid
interest thereon and (B) (i) the Ratable Net Proceeds from the disposition of
the Collateral multiplied by (ii) the quotient of (1) the sum of the
outstanding principal balance of the Ratable Medium-Term Notes plus the accrued
unpaid interest thereon, divided by (2) the Secured Debt minus the Exempted
Amount.  The Collateral Agent shall be entitled to rely without independent
investigation upon (A) the Note Trustee's determination of the outstanding
principal balance of the Ratable Medium-Term Notes plus the accrued unpaid
interest thereon and (B) the Credit Agent's determination of the amount of
Credit Indebtedness.  If the Credit Agent has retained more Net Proceeds than
the Lenders and the Company are entitled to (e.g. the proceeds in the
Settlement Account exceed the amount of Net Proceeds due to the Lenders and the
Company), the Credit Agent shall deliver such excess retained amount to the
Collateral Agent for distribution to the Note Trustee for the benefit of the
Noteholders.

               (d)      Distributions to the Credit Agent.  The Collateral
Agent shall then distribute to the Credit Agent for the benefit of the Lenders
an amount equal to the remainder of any Aggregate Net Proceeds held by the
Collateral Agent.

    19.        Waiver.  No Secured Party shall incur any liability as a result
of the sale of the Collateral, or any part thereof, at any public or private
sale.  The Company and each Borrowing Subsidiary each hereby waives any claims
it may have against any Secured Party arising by reason of the fact that the
price at which the Collateral may have been sold at such private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Secured Debt then outstanding.

    20.        The Collateral Agent

               (a)      Collateral Agent's Fee.  Compensation of the Collateral
Agent for its services hereunder and reimbursement for any expenses incurred by
it in the performance of its duties hereunder shall be paid by the Company
pursuant to a separate written agreement between the Collateral Agent and the
Company.

               (b)      Actions by the Collateral Agent.  The obligations of
the Collateral Agent hereunder are only those expressly set forth herein.  The
Collateral Agent shall be entitled to (but shall not be obligated to) take or
refrain from taking any discretionary powers or actions under this Security
Agreement or any other Credit





                                    -25-
<PAGE>   26

Document or the Indentures unless and until the Collateral Agent shall have
received the written direction to take or refrain from taking such action from
(i) the Required Lenders while no Event of Default exists, or (ii) the Majority
Debtholders while an Event of Default exists.  The Collateral Agent shall not
be required to take any action hereunder if it shall reasonably determine that
by so doing it may incur criminal or civil liability.

               (c)      Consultation with Experts.  The Collateral Agent may
consult with legal counsel (who may be counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.

               (d)      Liability of Collateral Agent.

               (1)      Neither the Collateral Agent nor any of its directors,
       officers, agents, or employees shall be liable for any action taken or
       not taken by it in connection herewith (i) with the consent or at the
       request of the Majority Debtholders or Required Lenders, as applicable,
       or (ii) in the absence of its own gross negligence or willful
       misconduct.

               (2)      The Collateral Agent shall not incur any liability by
       acting in reliance upon any notice, consent, certificate, statement, or
       other writing (which may be a bank wire, telex or similar writing) or
       telephone communication believed by it to be genuine or, in the case of
       a writing, to be signed by the proper party or parties.

               (e)      Indemnification.  Subject to the limitations set forth
below, the Lenders and the Noteholders shall indemnify the Collateral Agent (to
the extent not reimbursed by the Company) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from the Collateral Agent's gross negligence
or willful misconduct) that the Collateral Agent may suffer or incur in
connection with this Security Agreement or any action taken or omitted by the
Collateral Agent hereunder (the "Indemnified Amount").  Any Indemnified Amount
due to the Collateral Agent shall be paid by the Lenders and the Noteholders
pro rata in accordance with their respective shares of the Secured Debt at the
time the Collateral Agent incurred such liability (i.e. the portion paid by the
Noteholders shall equal the total Indemnified Amount multiplied by the quotient
of (i) the outstanding principal balance of the Ratable Medium-Term Notes plus
the accrued unpaid interest thereon at such time divided by (ii) the total
Secured Debt at such time); provided, however recourse to the Noteholders for
any amounts due from the Noteholders under this Paragraph shall be paid solely
from the portion of the Ratable Net Proceeds due but not yet distributed





                                    -26-
<PAGE>   27

to the Noteholders under Paragraph 18(c) above and the remainder of any
Indemnified Amount shall be paid by the Lenders.  Each Lender shall, ratably in
accordance with its share of the Aggregate Commitment at the time the
Collateral Agent incurred such liability, pay its portion of the Indemnified
Amount due from the Lenders.   For the purposes of this Paragraph, the amounts
of (1) any Commitment of any Lender, (2) the outstanding principal balance of
the Ratable Medium-Term Notes plus the accrued unpaid interest thereon and (3)
the Credit Indebtedness shall be the highest amounts of such Commitments or
components of the Secured Debt during the course of any event for which
indemnity is sought.  The provisions of this Paragraph shall survive the
termination of this Security Agreement.

               (f)      Knowledge of Defaults.  The Collateral Agent shall not
be deemed to have knowledge or notice of the occurrence of any Event of Default
unless the Collateral Agent has received notice from a Secured Party or the
Company referring to the Credit Agreement, this Security Agreement or the
Indentures describing such Event of Default and stating that such notice is a
"Notice of Default."  Following receipt of a Notice of Default, the Collateral
Agent shall assume that the Event of Default is continuing until the Collateral
Agent receives written information to the contrary from the Credit Agent.

               (g)      Reports.  The Collateral Agent may, at its option with
the approval of the Company and the Credit Agent, alter the format of any
report required hereunder, provided such modified report contains the same
information previously furnished in the unmodified report.

               (h)      Other Transactions with Company.  The Collateral Agent
and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with, the Company or any Subsidiary or Affiliate
of the Company as if it were not the Collateral Agent hereunder.

               (i)      Resignation/Removal.  The Collateral Agent may resign
at any time by giving 90 days prior written notice thereof to the Credit Agent
and the Company.  The Collateral Agent agrees to resign within 60 days after
written notice by the Company requesting the resignation of the Collateral
Agent provided that no Event of Default has occurred and is continuing at the
time of such request.  In addition, in the event the Collateral Agent fails to
perform its obligations under this Security Agreement in any material manner
and fails to correct its performance within 30 days of receipt of written
notice of such failure given by the Credit Agent at the request of not less
than the Required Lenders, then the Collateral Agent may be removed upon 30
days written notice given by the Credit Agent at the direction of not less than
the Required Lenders.  Upon any such resignation or removal:  (i) so





                                    -27-
<PAGE>   28

long as there has not occurred and is continuing an Event of Default, the
Company shall appoint from among the Lenders (which appointment shall be
subject to the approval of the Required Lenders, such approval not to be
unreasonably withheld or delayed), a successor agent for such Collateral Agent,
and (ii) following the occurrence and during the continuance of an Event of
Default, the Required Lenders shall appoint from among the Lenders, a successor
agent for such Collateral Agent.  Following the appointment and acceptance of a
successor Collateral Agent the Credit Agent shall notify the Collateral Agent
as to who the successor Collateral Agent is and the Collateral shall be
transferred to the new Collateral Agent within 30 days after such acceptance.
If the Company and/or the Required Lenders, as applicable, are unable to agree
on the appointment of a successor agent prior to the expiration of any of the
time periods set forth above, the Credit Agent (or an Affiliate thereof
designated by the Credit Agent) shall be deemed a successor Collateral Agent
until the appointment of and acceptance by a different successor Collateral
Agent, and the Collateral Agent shall be permitted to transfer all the
Collateral held by the Collateral Agent to the Credit Agent (or an Affiliate
thereof designated by the Credit Agent) within 30 days after the
applicable time period set forth above.  Within 30 days after the appointment
of a successor Collateral Agent and the successor's acceptance of such
appointment, that successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations under this Security Agreement;
provided, however, that the retiring Collateral Agent shall not be discharged
from any liability as a result of its or its directors', officers', agents' or
employees' gross negligence or willful misconduct in connection with the
performance of its duties and obligations under this Security Agreement prior
to the effective date of its resignation or removal.  Notwithstanding the
foregoing, the Collateral Agent shall continue to hold the Pledged Items and
the security interest created hereunder for the benefit of the Secured Parties
until such Pledged Items and security interest have been effectively
transferred to the successor agent.  After the resignation or removal of any
Collateral Agent hereunder, the provisions of this Security Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was the Collateral Agent under this Security Agreement.

               (j)      Representations and Warranties.  The Collateral Agent
hereby represents and warrants:

               (1)      The Collateral Agent is a national banking association
               validly existing, in good standing and authorized to exercise
               its powers, rights and privileges and is qualified to do
               business in all jurisdictions where necessary, and has all
               requisite power and





                                    -28-
<PAGE>   29

               authority to perform all of its obligations under this Security
               Agreement;

               (2)      The execution, delivery and performance by the
               Collateral Agent of this Security Agreement and all documents
               required hereby to be executed by the Collateral Agent have been
               duly authorized by all necessary corporate action and do not and
               will not violate any existing provision of any law, rule,
               regulation, order, writ, judgment, injunction, decree,
               determination or award currently in effect having applicability
               to the Collateral Agent; and

               (3)      This Security Agreement and all documents required
               hereby to be executed by the Collateral Agent have been duly
               executed and delivered by the Collateral Agent.

    21.        Confidentiality.  The Collateral Agent agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all non-public information provided to it by the Company or any Borrowing
Subsidiary or by any other party on the Company's behalf in connection with
this Security Agreement or the Credit Documents and agrees and undertakes that
neither it nor any of its Affiliates shall disclose any such information for
any purpose or in any manner other than pursuant to the terms contemplated by
this Security Agreement or the Credit Documents.  The Collateral Agent may
disclose such information (1) to any Secured Party, (2) at the request of any
regulatory authority or in connection with an examination of the Collateral
Agent or any of its Affiliates by any such authority, (3) pursuant to subpoena
or other court process, (4) when required to do so in accordance with the
provisions of any applicable law, (5) at the express direction of any other
governmental authority of any State of the United States of America or of any
other jurisdiction in which the Collateral Agent or any of its Affiliates
conducts its business, (6) to the Collateral Agent's or any of its Affiliates'
independent auditors, attorneys and other professional advisors, (7) if such
information has become public other than through disclosure by the Collateral
Agent or any of its Affiliates or any Lender, and (8) in connection with any
litigation involving the Collateral Agent or any of its Affiliates.
Notwithstanding the foregoing, the Company authorizes the Collateral Agent to
disclose to any lending institution proposed by the Company to become a Lender
under the Credit Agreement or any prospective or actual Participants such
financial and other information in its possession (i) which has been delivered
to the Collateral Agent pursuant to the Credit Documents or which has been
delivered to the Collateral Agent by the Company prior to entering into the
Credit Documents or (ii) which is reasonably necessary to effectuate the
purposes of the Credit Agreement and this Security Agreement, provided that
unless otherwise agreed by the Company, such lending institution or





                                    -29-
<PAGE>   30

Participant shall agree in writing to keep such information confidential to the
same extent required of the Collateral Agent hereunder.

    22.        Limited Rights of Noteholders.  It is expressly acknowledged and
agreed by the Note Trustee on behalf of the Noteholders, that the Ratable
Medium-Term Notes are entitled to the benefits of this Security Agreement and
the Collateral hereunder, that this Security Agreement and the Credit Agreement
may be amended and otherwise modified and/or provisions waived from time to
time as permitted hereunder and thereunder without consultation with the Note
Trustee or any Noteholder and without the consent of the Note Trustee or any
such Noteholder (other than amendments or modifications which are made prior to
the occurrence of a Positive Security Event or after the occurrence of a
Negative Security Event and which would (i) eliminate the Noteholders as a
"Secured Parties" hereunder (ii) materially reduce the rights of the
Noteholders in the proceeds of the Collateral created hereunder, or (iii) amend
the definition of "Majority Debtholders" or any provision hereof regarding the
consent or voting of the Majority Debtholders, which amendments or
modifications shall require the prior written consent of the Note Trustee).

    23.        Voting of Debtholders.

               (a)      Required Lenders.  In all cases in which this Security
Agreement requires the consent, approval or direction of the Required Lenders
or all of the Lenders with respect to any action, the Credit Agent shall be
responsible for determining whether the Required Lenders has given such
consent, approval or direction and shall notify the Collateral Agent thereof in
writing.  The Collateral Agent shall be entitled to rely without independent
verification upon the information supplied by the Credit Agent with respect to
any consent, approval or direction of the Required Lenders (or all of the
Lenders with respect to actions which require unanimous approval of the
Lenders).

               (b)      Majority Debtholders.  In all cases in which this
Security Agreement requires the consent, approval or direction of the Majority
Debtholders with respect to any action, any of the Credit Agent, the Note
Trustee or the Collateral Agent may call for the approval of such action by the
Majority Debtholders by giving written notice (a "Voting Request") to the other
two of such Persons.  Following delivery of the Voting Requests, the Note
Trustee shall be responsible for determining the vote on behalf of the
Noteholders and the Credit Agent shall be responsible for determining the vote
on behalf of the Lenders.  The Credit Agent or the Note Trustee may request
that the other party distribute to the Noteholders or Lenders, as the case may
be, a statement setting forth the sender's reasons for recommending or opposing
that a particular action be taken.    Within ten Business Days after the





                                    -30-
<PAGE>   31

delivery of a Voting Request, each of the Credit Agent and the Note Trustee
shall notify the Collateral Agent in writing of (i) whether the Lenders or the
Noteholders (or the Trustee on behalf of the Noteholders), respectively,
approve of the proposed action, and (ii) the amount of Secured Debt then held
by the Lenders or the Noteholders, respectively.  Both the Credit Agent and the
Note Trustee may approve of the proposed action on behalf of a portion of the
Lenders or Noteholders, respectively, and disapprove of the action on behalf of
the remainder of the Lenders or Noteholders, in which case the Credit Agent or
the Note Trustee shall also notify the Collateral Agent of the amount of
Secured Debt held by the Lenders or Noteholders approving the proposed action
and the amount of Secured Debt held by those opposing the action.

       If the Credit Agent or the Note Trustee fails to respond to the Voting
Request within the ten Business Day period set forth above, all of the Lenders
or Noteholders, as applicable, shall be deemed to have approved the proposed
action.  As soon as the Collateral Agent has received the approval (through the
Credit Agent or the Note Trustee) of the holders of more than 50% of the
outstanding Secured Debt with respect to a proposed action, the action shall be
deemed approved by the Majority Debtholders even if less than all of the
holders (through the Credit Agent or the Note Trustee) shall have responded to
the Voting Request at such time.  The Credit Agent and the Note Trustee shall,
within one Business Day after a request from the Collateral Agent given at any
time, notify the Collateral Agent of the amount of Secured Debt then held by
the Lenders or Noteholders, respectively.

    24.        Binding Upon Successors.  All rights of the Collateral Agent and
the Secured Parties under this Security Agreement shall inure to the benefit of
the Collateral Agent and the Secured Parties and their successors and assigns
(including any successors to or assigns of the Note Trustee), and all
obligations of the Company and the Borrowing Subsidiaries shall bind their
successors and assigns; provided that neither the Company nor any Borrowing
Subsidiary shall have the right to assign its rights or obligations under this
Security Agreement without the consent of all the Lenders.  The parties hereto
acknowledge that the various series of Ratable Medium-Term Notes may require
representation by separate trustees following the occurrence of an Event of
Default, and the term "Note Trustee" when used herein shall be deemed to refer
to each such trustee.

    25.        Entire Agreement; Severability.  This Security Agreement
contains the entire security agreement and collateral agency agreement with
respect to the Collateral among Secured Parties, the Company and the Borrowing
Subsidiaries and supersedes all prior written or oral agreements and
understandings relating thereto.  All waivers by the Company or any Borrowing
Subsidiary provided for in this Security Agreement have been specifically
negotiated by the





                                    -31-
<PAGE>   32

parties with full cognizance and understanding of their rights.  If any of the
provisions of this Security Agreement shall be held invalid or unenforceable,
this Security Agreement shall be construed as if not containing such
provisions, and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.

    26.        Choice of Law.  This Security Agreement shall be construed in
accordance with and governed by the laws of the State of Illinois and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the Illinois Uniform Commercial Code.

    27.        Place of Business; Records.  The Company and each Borrowing
Subsidiary represents and warrants that its principal place of business and
chief executive office is at the address set forth beneath its signature below,
and that its books and records concerning the Collateral are kept at its
principal place of business and chief executive office.  Neither the Company
nor any Borrowing Subsidiary shall change its principal place of business and
chief executive office without 30 days' prior written notice to the Credit
Agent and the Collateral Agent.

    28.        Notice.  Except where instructions or notices are expressly
authorized elsewhere in this Security Agreement to be given by telephone or by
other means of transmission, all instructions, notices and other communications
to be given to any party hereto shall be in writing and shall be personally
delivered or sent by certified mail, postage prepaid, private delivery service
or by facsimile, and shall be deemed to be given for purposes of this Security
Agreement on the day (or at the time of day, if applicable) when actually
received by the intended party at its address or facsimile or telephone number
as set forth following its signature below (or as such party may specify to the
other parties in writing).

    29.        Modification of Agreement.  No provisions of this Agreement may
be amended or waived (except for waivers expressly provided for hereunder)
unless such amendment or waiver is in writing and is signed by the Company, the
Collateral Agent if the rights or duties of the Collateral Agent are affected
thereby, the Note Trustee on behalf of the Noteholders if the Note Trustee's
consent is expressly required under Paragraph 22, and the Credit Agent on
behalf of the Lenders.  The Credit Agent shall not consent to any such
amendment or waiver without the prior written consent of

               (i)      each Lender if such amendment or waiver

                            (1)  would amend or waive the method of calculating
               the Aggregate Borrowing Base; or





                                    -32-
<PAGE>   33


                             (2)  releases any Collateral beyond the releases
               expressly provided for herein or in the Credit Agreement; or
                             (3)  changes or waives any
               restriction on the Company's or any Borrowing Subsidiary's
               ability to assign its rights or obligations under any of the
               Credit Documents; or
                             (4)  changes or waives any provision herein
               regarding the indemnification of the Credit Agent, the
               Collateral Agent or such Lender; or
                             (5)  changes the definition of Required Lenders or
               Majority Debtholders or modifies any requirement for consent by
               all of the Lenders; or
                             (6)  changes or waives any provision herein
               regarding the allocation among the Secured Parties of any
               payments or proceeds received by the Collateral Agent hereunder;
               or

               (ii)     the Required Lenders in the case of all other waivers
        or amendments.

    30.        Consent of Jurisdiction.

               THE COMPANY, EACH BORROWING SUBSIDIARY, THE NOTE TRUSTEE AND THE
COLLATERAL AGENT EACH HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY CREDIT
DOCUMENTS AND EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION THEY MAY NOW OR HEREAFTER HAVE AS TO THE VENUE
OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH
COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
CREDIT AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY, ANY
BORROWING SUBSIDIARY, THE NOTE TRUSTEE OR THE COLLATERAL AGENT IN THE COURTS OF
ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE COMPANY, ANY BORROWING
SUBSIDIARY, THE NOTE TRUSTEE OR THE COLLATERAL AGENT AGAINST THE CREDIT AGENT
OR ANY LENDER OR ANY AFFILIATE OF THE CREDIT AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY CREDIT DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.

    31.        Waiver of Jury Trial.

               EACH PARTY TO THIS SECURITY AGREEMENT HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY CREDIT DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.





                                    -33-
<PAGE>   34


       EXECUTED the day and year first above written.


                                        SOURCE ONE MORTGAGE SERVICES CORPORATION


                                        By:________________________________
                                           Name: Michael C. Allemang
                                           Title: Executive Vice President
                                                  and Chief Financial Officer

                                        Address for Notices:

                                        27555 Farmington Road
                                        Farmington Hills, MI 48334-3357
                                        Attn:  Chief Financial Officer
                                        Telephone No.:  (810) 488-8639
                                        Facsimile No.:  (810) 488-7300

                                        and
                                        Attn: Vice President/Treasury
                                        Telephone No.:  (810) 488-7338
                                        Facsimile No.:  (810) 488-7812





                                    -34-
<PAGE>   35

                                        THE MORTGAGE AUTHORITY, INC.

                                        By:________________________________
                                           Name: Larry N. Ciofu
                                           Title: Vice President/Treasury

                                        Address for Notices:

                                        27555 Farmington Road
                                        Farmington Hills, MI 48334-3357
                                        Attn:  Vice President/Treasury
                                        Telephone No.:  (810) 488-7338
                                        Facsimile No.:  (810) 488-7812


                                        CENTRAL PACIFIC MORTGAGE COMPANY

                                        By:________________________________
                                           Name: John Cassell
                                           Title: Chief Financial Officer

                                        Address for Notices:

                                        5750 Sunrise Boulevard
                                        Citrus Heights, CA 95610
                                        Attn:  Chief Financial Officer
                                        Telephone No.:  (916) 537-2603
                                        Facsimile No.:  (916) 966-7327


                                        THE FIRST NATIONAL BANK OF CHICAGO, a
                                        national banking association, as
                                        Credit Agent

                                        By:_________________________________
                                        Name:_______________________________
                                        Title:______________________________

                                        Address for notices:

                                        One First National Plaza
                                        Chicago, IL 60670
                                        Attn: William A. Sholten, III,
                                              First Vice President
                                        Telephone No.:  (312) 732-4600
                                        Facsimile No.:  (312) 732-6222





                                    -35-
<PAGE>   36

                                        NATIONAL CITY BANK OF KENTUCKY, a
                                        national banking association, as
                                        Collateral Agent

                                        By:_________________________________
                                        Name:_______________________________
                                        Title:______________________________

                                        Address for notices:

                                        421 West Market Street
                                        Louisville, Kentucky 40202
                                        Attn: Ms. Wilma Kuerzi
                                        Telephone No.:  (502) 581-4354
                                        Facsimile No.:  (502) 581-4154

                                        NORWEST BANK MINNESOTA, N.A., as Note
                                        Trustee

                                        PURSUANT TO SECTION 22 HEREOF,
                                        SIGNATURE OF NOTE TRUSTEE NOT
                                        REQUIRED FOR THIS AMENDED AND RESTATED
                                        SECURITY AGREEMENT

                                        Address for notices:

                                        Norwest Center
                                        Sixth and Marquette
                                        Minneapolis, Minnesota  55479-0069
                                        Attn: Mr. Ray Haverstock
                                        Telephone No.:  (612) 667-7364
                                        Facsimile No.:  (612) 667-9825





                                    -36-
<PAGE>   37

                             EXHIBITS AND SCHEDULES
                                       TO
                               SECURITY AGREEMENT


       SCHEDULE          DOCUMENT
       --------          --------

          A              Required Mortgage Documents

          B              Additional Required Mortgage Documents

          C              Form of Borrowing Base Report


       EXHIBIT           DOCUMENT
       -------           --------

         1               Required Review Steps

         2               Form of Company Trust Receipt

         3               Form of Shipping Request

         4               Form of Whole Loan Sale Transmittal Letter

         5               Form of Warehouse-Related MBS Transmittal

         6               Form of Custodial Agreement

         7               Form of Collateral Transmittal - Initial Mortgage
                         Information





                                    -37-
<PAGE>   38

                                                                      SCHEDULE A
                                                           TO SECURITY AGREEMENT


                          REQUIRED MORTGAGE DOCUMENTS

       1.      Original of mortgage note executed in favor of the Company or
               the applicable Borrowing Subsidiary (with a complete series of
               endorsements from the original payee thereof, through any
               subsequent holders to the Company or Borrowing Subsidiary if
               purchased by the Company or Borrowing Subsidiary) and endorsed
               by an authorized signatory of the Company or the applicable
               Borrowing Subsidiary in blank.

       2.      Recorded Mortgage or deed of trust securing the above mortgage
               note.  In lieu of a recorded document, the Collateral Agent may
               accept a copy certified as being out for recordation by the
               escrow company, title insurance company or closing agent, or in
               the case of refinanced transactions, a copy of such mortgage or
               deed of trust certified by an authorized signatory of the
               Company.

       3.      Assignment of the mortgage or deed of trust by an authorized
               signatory of the Company or the applicable Borrowing Subsidiary
               in blank, in recordable form and the original or a copy,
               certified as being out for recordation by the records office or
               escrow or title insurance company or the Company, of a proper
               assignment or assignments of the related mortgage or deed of
               trust from the original holder, through any subsequent
               transferees, to the Company or the applicable Borrowing
               Subsidiary.

       4.      A copy, certified by the title insurance company or the closing
               agent, of all applicable and necessary powers-of-attorney and
               assumed name certificates.





                                    -38-
<PAGE>   39

                                                                      SCHEDULE B
                                                           TO SECURITY AGREEMENT

                     ADDITIONAL REQUIRED MORTGAGE DOCUMENTS

       1.      The original recorded mortgage or deed of trust securing the
               mortgage note.

       2.      Evidence of fire and extended coverage insurance in an amount
               not less than the highest of the following:  (a) the amount of
               the Mortgage Loan, (b) 90% of the insurable value of the
               improvements, and (c) an amount sufficient to prevent
               co-insurance.  The Collateral Agent reserves the right to obtain
               a loss payable endorsement in its favor if it so desires.

       3.      Evidence of Notice to Customer required by the federal
               Truth-in-Lending Law and Federal Reserve Regulation Z.

       4.      In the case of an FHA mortgage note, an FHA insurance
               certificate or a commitment to deliver such; in the case of a VA
               mortgage note; a VA guaranty certificate or a commitment to
               deliver such and in the case of a conventional mortgage note, an
               appraisal.

       5.      In the case of a conventional mortgage note with a loan-to-value
               ratio in excess of 80%, the applicable private mortgage
               insurance policy.

       6.      A certified copy of the preliminary policy of or commitment for
               title insurance insuring the mortgage or deed of trust as a
               first lien on the property subject thereto written by a title
               company and in amount and containing exceptions satisfactory to
               the Collateral Agent.

       7.      Evidence of certificate of completion, as appropriate under the
               circumstances.

       8.      Other documentation as the Collateral Agent may reasonably deem
               appropriate, as well as documentation necessary to fulfill
               requirements of the Approved Investor Commitments.

       9.      Such additional documents as may be necessary in the opinion of
               the Collateral Agent to transfer to the Collateral Agent, for
               the benefit of the Secured Parties, the title to any Collateral
               pledged and/or hypothecated pursuant to the Security Agreement.





                                     -39-
<PAGE>   40

                                                                      SCHEDULE C
                                                           TO SECURITY AGREEMENT

                         FORM OF BORROWING BASE REPORT

                             Date:  _______________

       Reference is made to that certain Second Amended and Restated Revolving
Credit Agreement among the Company, Borrowing Subsidiaries, The First National
Bank of Chicago, individually and as administrative agent, and the lenders
named therein, dated as of November 12, 1996 (the "Credit Agreement").
Capitalized terms not otherwise defined herein are used with the same meanings
as in the Credit Agreement.

1.     AGGREGATE BORROWING BASE:

       Eligible Mortgage Loans
         (Mortgage Collateral Value):
               Eligible Delivered Mortgages                     $______________
               Eligible AP Mortgages                            $______________
       Eligible Pledged Securities
         (MBS Value)                                            $______________

               Total Pledged Items                              $______________

       Percentage Factor                                        98%

       (A) AGGREGATE BORROWING BASE
             FROM PLEDGED ITEMS                                 $______________

       Eligible Repurchased
       Agency Loans and Receivables                             $______________

       Percentage Factor                                        90%

       (B) AGGREGATE BORROWING BASE
             FROM REPURCHASED AGENCY LOANS
             AND RECEIVABLES                                    $______________

       (C) AGGREGATE BORROWING BASE
             FROM ELIGIBLE PLEDGED SERVICING                    $______________





____________________
        1 Based on either market value or principal balance of loans serviced
as described in Section 4.6(h) of the Credit Agreement

                                    -40-
<PAGE>   41


       Eligible Servicing Sale Receivables                    $______________

       Percentage Factor                                      75%

       (d) AGGREGATE BORROWING BASE
            FROM ELIGIBLE SERVICING SALE RECEIVABLES          $______________

       (e) BALANCE IN SETTLEMENT ACCOUNT                      $______________

       (f) CASH AND CASH EQUIVALENTS                          $______________

       SUM OF (a) - (f) ABOVE                                 $______________

             Reconciling Items:
                   Timing Difference                          $______________
                   Loan Detail Difference                     $______________

AGGREGATE BORROWING BASE                                      $______________

2.  WAREHOUSE BORROWING BASE:

       (a) AGGREGATE BORROWING BASE                           $______________

       LESS

       (b) AGGREGATE BORROWING BASE
            FROM ELIGIBLE PLEDGED SERVICING                   $______________

       LESS

       (c) AGGREGATE BORROWING BASE
            FROM ELIGIBLE SERVICING SALE RECEIVABLES          $______________

WAREHOUSE BORROWING BASE                                      $______________





                                    -41-
<PAGE>   42


                                                                       EXHIBIT 1
                                                           TO SECURITY AGREEMENT


                             REQUIRED REVIEW STEPS


       1.      All submitted documents, are consistent with the related
               Collateral Transmittal as to borrower name, loan face amount,
               loan type and the Company's or Borrowing Subsidiary's loan
               number.

       2.      The note and mortgage/deed of trust each bears an original
               signature or signatures which appear to be those of the person
               or persons named as the maker and mortgagor/trustor, or, in the
               case of a certified copy of the mortgage/deed of trust, such
               copy bears what appears to be a reproduction of such signature
               or signatures.

       3.      Except for (a) the endorsement to the Company or applicable
               Borrowing Subsidiary of the note in the event such loan was
               purchased by the Company or a Borrowing Subsidiary and (b) the
               endorsement in blank of the note by an authorized signatory of
               the Company or the applicable Borrowing Subsidiary, neither the
               note, the mortgage/deed of trust, nor the assignment(s) of the
               mortgage/deed of trust contain any irregular writings which
               appear on their face to affect the validity of any such
               endorsement or to restrict the enforceability of the document on
               which they appear.

       4.      The note is endorsed in blank by an authorized signatory of the
               Company or the applicable Borrowing Subsidiary.

       5.      The assignment of the mortgage/deed of trust bears an original
               signature of an authorized signatory of the Company or the
               applicable Borrowing Subsidiary.

       6.      Such other review steps as the Collateral Agent, in its sole
               discretion, deems appropriate.





                                    -42-
<PAGE>   43

                                                                       EXHIBIT 2
                                                           TO SECURITY AGREEMENT

                         FORM OF COMPANY TRUST RECEIPT

                                                           _______________, 19__

       The undersigned, SOURCE ONE MORTGAGE SERVICES CORPORATION, a Delaware
corporation (the "Company"), acknowledges receipt from NATIONAL CITY BANK OF
KENTUCKY, acting as agent, bailee and custodian (in such capacity "Collateral
Agent") for the exclusive benefit of the Secured Parties pursuant to the
Security Agreement (as those terms and capitalized terms not otherwise defined
herein are defined in that certain Second Amended and Restated Revolving Credit
Agreement dated as of November 12, 1996, among the Lenders, the Company, the
Borrowing Subsidiaries and The First National Bank of Chicago, as Agent) of the
following described documentation for the identified Mortgage Loans (the
"Collateral Documents"), possession of which is herewith entrusted to the
Company solely for the purpose of correcting documentary defects relating
thereto:

                                                 Loan Document
Borrower Name  Loan Number      Note Amount      Delivered
-------------  -----------      -----------      -------------

       It is hereby acknowledged that a security interest pursuant to the
Illinois Uniform Commercial Code and the Kentucky Commercial Code in the
Collateral hereinabove described and in the proceeds of said Collateral has
been granted to Collateral Agent for the benefit of the Secured Parties
pursuant to the Security Agreement.

       In consideration of the aforesaid delivery by Collateral Agent, the
Company hereby agrees to hold said Collateral in trust for Collateral Agent on
behalf of the Secured Parties as provided under and in accordance with all
provisions of the Security Agreement and to return said Collateral to
Collateral Agent no later than the close of business on the fifteenth calendar
day following the date hereof or, if such day is not a Business Day, on the
immediately succeeding Business Day.  The Company represents and warrants that
the aforesaid delivery by the Collateral Agent shall not cause any violation of
any of the Borrowing Bases or any other provision of the Credit Agreement.

                                        SOURCE ONE MORTGAGE SERVICES
                                        CORPORATION, a Delaware corporation


                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________





                                    -43-
<PAGE>   44

                                                                       EXHIBIT 3
                                                           TO SECURITY AGREEMENT

                            FORM OF SHIPPING REQUEST


Date:_______________



National City Bank of Kentucky,
as Collateral Agent
421 West Market Street
Louisville, Kentucky  40202

Attention:  ________________

This letter is to serve as authorization for you to endorse and ship the
following loans:

Loan Number             Borrower Name                             Note Amount


to the following address under Commitment #__________ (the "Commitment") from
an Approved Investor as follows:

NAME:
ADDRESS:

ATTENTION:

Please endorse the notes as follows:

Please ship the loan documents either by ____________________ or by such other
courier service as we have designated to you as "approved".  The courier shall
act as an independent contractor bailee acting solely on your behalf as
Collateral Agent for the Secured Parties (as defined in that certain Second
Amended and Restated Security and Collateral Agency Agreement dated as of
November 12, 1996, as the same may be amended, extended or replaced from time
to time), but we acknowledge and agree that you are not responsible for any
delays in shipment caused by courier or any other actions or inactions of the
courier, including, without limitation, any loss of any loan documents;
however, because the Commitment expires on _______________, 199_, we ask that
you deliver the loan documents to the courier no later than _______________,
199_.

Please have the courier bill us by using our acct #__________.  If you should
have any questions, or should feel the need for additional documentation,
please do not hesitate to call





                                    -44-
<PAGE>   45

_______________.

                                        [SOURCE ONE MORTGAGE SERVICES
                                        CORPORATION, a Delaware corporation]

                                        [THE MORTGAGE AUTHORITY, a Delaware
                                        corporation]

                                        [CENTRAL PACIFIC MORTGAGE COMPANY, a
                                        California corporation]

                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________





                                    -45-
<PAGE>   46

                                                                       EXHIBIT 4
                                                           TO SECURITY AGREEMENT
                                                               (Direct Investor)

Date:____________
Name of Delivery Service:____________________________________
Airbill No.:____________________


                   FORM OF WHOLE LOAN SALE TRANSMITTAL LETTER
                        [LETTERHEAD OF COLLATERAL AGENT]


[Approved Investor]
_________________________
_________________________

       Re:     Source One Mortgage Services Corporation;
               Sale of Mortgage Loans

       Attached please find those Mortgage Loans listed separately on the
attached schedule, which Mortgage Loans are owned by SOURCE ONE MORTGAGE
SERVICES CORPORATION (the "Company"), THE MORTGAGE AUTHORITY, ("TMA"), a
wholly-owned subsidiary of the Company, or CENTRAL PACIFIC MORTGAGE COMPANY
("CPM"), a wholly-owned subsidiary of the Company, and are being delivered to
you for purchase.

       The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined herein are
defined in) that certain Second Amended and Restated Revolving Credit Agreement
dated as of November __, 1996 by and among the Company, TMA, CPM, The First
National Bank of Chicago, as Agent, and the Lenders thereunder.  Each of the
Mortgage Loans is subject to a security interest in favor of National City Bank
of Kentucky (the "Collateral Agent") on behalf of the Secured Parties which
security interest shall be automatically released upon your remittance of the
full amount of the purchase price of such Mortgage Loan (as set forth on the
schedule attached hereto) by wire transfer to the following account:

                    WIRE INSTRUCTIONS TO SETTLEMENT ACCOUNT:
                          _________________________
                          _________________________
                          _________________________

       Pending your purchase of each Mortgage Loan and until payment therefor
is received, the aforesaid security interest therein will remain in full force
and effect, and you shall hold possession of such Collateral and the
documentation evidencing same as custodian, agent and bailee for and on behalf
of the Secured Parties.  In the





                                    -46-
<PAGE>   47

event any Mortgage Loan is unacceptable for purchase, return the rejected item
directly to the Collateral Agent at the address set forth below.  The Mortgage
Loan must be so returned or sales proceeds remitted in full no later than
[forty-five (45) days][UNLESS DELIVERED TO A GOVERNMENT HOUSING PROGRAM WHICH
IS NOT A FEDERAL AGENCY] [seventy-five (75) days][IN THE CASE OF DELIVERY TO A
GOVERNMENT HOUSING WHICH IS NOT A FEDERAL AGENCY] from the date hereof.  In no
event shall any Mortgage Loan be returned or sales proceeds remitted to the
Company, TMA or CPM.  If you are unable to comply with the above instructions,
please so advise the undersigned immediately.

       NOTE:  BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS
LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE SECURED
PARTIES ON THE TERMS DESCRIBED IN THIS LETTER.  THE UNDERSIGNED, AS COLLATERAL
AGENT, REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND
THIS LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE
UNDERSIGNED; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.

                                        Sincerely,

                                        NATIONAL CITY BANK of KENTUCKY, as
                                        Collateral Agent


                                        By:________________________________
                                        Title:_____________________________

                                        Address: __________________________
                                                 __________________________
                                                 __________________________


       The undersigned Company agrees to and acknowledges the terms of this
letter and, notwithstanding any contrary understanding with or instructions to
you, the addressee of this letter, the Company instructs you to act according
to the instructions set forth in this letter.  These instructions cannot be
altered except by written instructions executed by Collateral Agent.  The
Company and the Collateral Agent agree that a counterpart facsimile of this
letter executed by the Company shall suffice as an original of the Company's
agreement to and acknowledgment of the terms of this letter.

                                        SOURCE ONE MORTGAGE SERVICES
                                        CORPORATION, a Delaware corporation


                                        By:________________________________
                                        Name:______________________________





                                    -47-
<PAGE>   48

                                        Title:_____________________________


ACKNOWLEDGEMENT OF RECEIPT

[Approved Investor]


By:_______________________________
Name:_____________________________
Title:____________________________

Date:_____________________________





                                    -48-
<PAGE>   49

                                                                       EXHIBIT 5
                                                           TO SECURITY AGREEMENT
                                                                (Pool Formation)


             FORM OF WAREHOUSE-RELATED SECURITY TRANSMITTAL LETTER
                         [COLLATERAL AGENT LETTERHEAD]

Date:___________________

[Certificating Custodian]
_________________________
_________________________

       Re:     Source One Mortgage Services Corporation;
               Shipment of Mortgage Loans for Pool Formation

       Attached please find those Mortgage Loans listed separately on the
attached schedule, which are owned by SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation (the "Company"), THE MORTGAGE AUTHORITY, ("TMA") a
wholly-owned Subsidiary of the Company or CENTRAL PACIFIC MORTGAGE COMPANY,
("CPM") a wholly-owned Subsidiary of the Company, and are being delivered to
you, as custodian/trustee (the "Certificating Custodian"), for certification in
connection with the formation of a mortgage pool supporting the issuance of a
mortgage-backed security (the "Warehouse-Related Security") described as
follows:  ______________________________.

       The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined herein are
defined in) that certain Second Amended and Restated Revolving Credit Agreement
dated as of November 12, 1996, by and among the Company, TMA, CPM, The First
National Bank of Chicago, as Agent, and the Lenders.  Each of the Mortgage
Loans is subject to a security interest in favor of National City Bank of
Kentucky ("Collateral Agent") for the benefit of the Secured Parties, which
security interest shall be automatically released upon the issuance of the
Warehouse-Related Security in accordance with the terms of the prescribed GNMA,
FNMA or FHLMC form enclosed herewith.

       Pending issuance of the Warehouse-Related Security, the aforesaid
security interest in each Mortgage Loan will remain in full force and effect,
and you shall hold such Collateral as custodian, agent and bailee for and on
behalf of the Secured Parties.  In the event any Mortgage Loan is unacceptable
for pool formation, return the rejected item directly to the undersigned, as
Collateral Agent, at the address set forth below.  Each Mortgage Loan must be
so returned or the Warehouse-Related Security issued no later than [forty-five
(45) days][UNLESS DELIVERED TO A





                                    -49-
<PAGE>   50

GOVERNMENT HOUSING PROGRAM WHICH IS NOT A FEDERAL AGENCY] [seventy-five (75)
days][IN THE CASE OF DELIVERY TO A GOVERNMENT HOUSING WHICH IS NOT A FEDERAL
AGENCY] from the date hereof.  In no event shall any Mortgage Loan be returned
or proceeds relating thereto be remitted to the Company, TMA or CPM.  If you
are unable to comply with the above instructions, please so advise the
undersigned immediately.

       NOTE:  BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS
LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE SECURED
PARTIES ON THE TERMS DESCRIBED IN THIS LETTER.  THE UNDERSIGNED, AS COLLATERAL
AGENT, REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND
THIS LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE
UNDERSIGNED; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.

                                        Sincerely,

                                        NATIONAL CITY BANK OF KENTUCKY, as
                                        Collateral Agent


                                        By:________________________________
                                        Title:_____________________________

                                        Address: __________________________
                                                 __________________________
                                                 __________________________




ACKNOWLEDGEMENT OF RECEIPT

[Certificating Custodian]


By:_______________________________
Name:_____________________________
Title_____________________________

Date:_____________________________





                                    -50-
<PAGE>   51

                                                                       EXHIBIT 6
                                                           TO SECURITY AGREEMENT


                          FORM OF CUSTODIAL AGREEMENT
                     (With Operating Instructions Attached)


                                                           _______________, 199_


_________________________
_________________________
_________________________

       Re:     Source One Mortgage Services Corporation

Ladies and Gentlemen:

       The undersigned, National City Bank of Kentucky (the "Collateral Agent")
acts in the capacity as Collateral Agent pursuant to:  (1) that certain Second
Amended and Restated Revolving Credit Agreement dated as of November 12, 1996
(as amended from time to time, the "Credit Agreement", and as capitalized terms
not otherwise defined herein are used with the same meaning as in the Credit
Agreement) by and among SOURCE ONE MORTGAGE SERVICES CORPORATION (the
"Company"), THE MORTGAGE AUTHORITY, ("TMA"), CENTRAL PACIFIC MORTGAGE COMPANY
("CPM"), the lenders participating therein (collectively, the "Lenders"), and
the FIRST NATIONAL BANK OF CHICAGO, as agent for the Lenders (the "Credit
Agent"), and (2) that certain Second Amended and Restated Security and
Collateral Agency Agreement (as amended from time to time, the "Security
Agreement") dated concurrently therewith among the Collateral Agent, the Note
Trustee, the Company, TMA, CPM and the Credit Agent.  TMA and CPM are each
referred to herein as a "Borrowing Subsidiary".

       The Collateral Agent represents and confirms that it has the power and
authority under the Credit Agreement and the Security Agreement to execute this
Custodial Agreement.  The Collateral Agent may execute any of its duties
hereunder by or through agents or attorneys-in-fact of whose appointment you
have been notified in writing.

       The Collateral Agent hereby appoints you and you hereby accept
appointment to act as agent, custodian and bailee for the benefit of the
Secured Parties (as defined in the Security Agreement) (in such capacity, the
"Approved MBS Custodian").  In such capacity, you agree to accept delivery only
on a free basis of certain mortgage-backed securities delivered to you from
time to time identified in a letter in the form attached hereto as Exhibit A





                                    -51-
<PAGE>   52

(all such mortgage-backed securities delivered to you and so identified being
referred to herein as "Subject Securities").  This Custodial Agreement governs
your rights and responsibilities as Approved MBS Custodian with respect to all
Subject Securities.

       From time to time the security interest of the Collateral Agent may be
abated upon a "Positive Security Event" under the terms of the Credit Agreement
and the Security Agreement.  The Collateral Agent will promptly advise you of
any such abatement and issue directions to you regarding the effect of such
event on your duties and obligations hereunder.

       The Collateral Agent hereby directs you, as Approved MBS Custodian, to
hold or dispose of Subject Securities deposited with you only in accordance
with the instructions of a person described as an "Authorized Collateral Agent
Representative" on a schedule from time to time delivered to you by the
Collateral Agent (the initial list of such persons being attached hereto as
Schedule I) or otherwise as expressly permitted hereunder, including without
limitation the Company's or any Borrowing Subsidiary's right to direct the sale
or disposition of the Subject Securities as described in the following
paragraph.  You are authorized, directed and instructed to act upon all
instructions from persons reasonably believed by you to be genuine and
authorized.  Any instruction given hereunder may, in your discretion, be by
telegraph, cable, facsimile or electronic communication which is received by
you.

       All Subject Securities are to be held by you in a custodial account
(Account No. __________) maintained with you (the "MBS Custodial Account").
Unless and until you have received written notice to the contrary from the
Collateral Agent at the direction of the Majority Debtholders (which notice may
be by facsimile transmission) following an Event of Default, you may from time
to time deliver Subject Securities at the direction of the Company, to, but
only to, Approved Investors (as listed on a schedule of "Approved Investors"
delivered to you from time to time by an Authorized Collateral Agent
Representative) against payment of the purchase price therefor.
Notwithstanding the preceding sentence, even after your receipt of notice from
the Collateral Agent that an Event of Default exists, you may deliver Subject
Securities at the direction of the Company, but only to Approved Investors
pursuant to then-existing Approved Investor Commitments.  The proceeds of the
sale or other disposition of all Subject Securities are to be held by you in an
account (Account No. __________) maintained with you (the "Custodian Settlement
Account") and transferred by the end of each Business Day to Account No.
19-19210 maintained in the Credit Agent's name at The First National Bank of
Chicago (the "Settlement Account") as follows:

                          _________________________
                          _________________________





                                    -52-
<PAGE>   53

                         ______________________________

       By executing this Custodial Agreement the Company and the Borrowing
Subsidiaries confirm and the Collateral Agent, the Company and the Borrowing
Subsidiaries notify you that the Company and the Borrowing Subsidiaries have
assigned and granted to the Collateral Agent a security interest in and lien
upon all now existing and hereafter arising right, title and interest of the
Company and the Borrowing Subsidiaries in the MBS Custodial Account, the
Custodian Settlement Account and the Settlement Account and in any and all
investments and proceeds at any time held therein.

       Unless and until you have received written notice from an Authorized
Collateral Agent Representative (which notice may be by facsimile transmission)
that there has occurred an Event of Default or Default, you may, at your
election, elect to make advances against Subject Securities held by you in the
MBS Custodial Account pending their sale and delivery to a purchaser thereof,
in accordance with a repo line of credit established between you and the
Company; provided, however, that:  (1) any such repo line of credit shall be on
terms and conditions customary for similar lines of credit which you provide to
customers, including, without limitation, as to advance rate and interest
charge; (2) all advances to the Company under such repo line of credit (each, a
"Repo Advance") shall be transferred to the Custodian Settlement Account; and
(3) you hereby waive any and all rights of offset, counterclaim or other
recoupment rights which you may have with respect to any Repo Advance against
the MBS Custodial Account, the Custodian Settlement Account and any Subject
Securities or proceeds thereof at any time held therein (other than the Subject
Securities which are the subject of the Repo Advance).  If, but only if and
only to the extent there has been transferred to the Custodian Settlement
Account the proceeds of a given Repo Advance, the rights of the Collateral
Agent in the Subject Securities which are the subject of the Repo Advance are
hereby automatically subordinated to your rights therein as collateral security
for the repayment of such Repo Advance, and upon receipt of such proceeds in
the Settlement Account, such rights of the Collateral Agent shall be
automatically released.

       You shall be under no duty to take or omit to take any action with
respect to Subject Securities, except as specifically set forth in this
Agreement and the Operating Instructions attached hereto as Exhibit B, unless
specifically otherwise directed by the Collateral Agent and agreed to by you in
writing.  In the event that you shall be uncertain as to your duties or rights
hereunder, you shall be entitled to refrain from taking any action until you
shall be directed otherwise by an order of a court of competent jurisdiction.
In case you should agree to our request and on our behalf to appear in,
prosecute or defend any legal or equitable





                                    -53-
<PAGE>   54

proceeding either in your own name or in the name of your nominee, you shall
first be indemnified to your satisfaction (other than against your gross
negligence and willful misconduct).

       By accepting delivery of any Subject Security, you shall be deemed to
have agreed to hold such Subject Security as Approved MBS Custodian hereunder,
free and clear of all liens, claims, interests and rights of offset in your
favor or in favor of persons claiming through you, subject only to the rights
with respect to Repo Advances described above.  Until you have been notified in
writing (including by telecopier) by an Authorized Collateral Agent
Representative of the occurrence of an Event of Default, you are hereby
authorized to return Subject Securities to the issuer/transfer agent therefor
at the Company's written request in connection with the reissuance thereof in
smaller denominations; provided, however, that any delivery of Subject
Securities for reissuance shall be covered by a transmittal letter or other
written agreement instructing that the reissued securities be returned directly
to you.  In this connection, we acknowledge familiarity with the current
securities industry practice of delivering physical securities against later
payment on the delivery date.  Notwithstanding our instructions to deliver
Subject Securities against payment, you are authorized to make delivery of such
physical securities against a temporary receipt (sometimes called a "window
ticket") in lieu of payment.  You agree to use your best efforts to obtain
payment therefor during the same business day, but we confirm our assumption of
all risks of payment for such deliveries.  You may accept certified checks in
payment for Subject Securities delivered on the Company's instruction and you
shall not be responsible for the risks of collectability of any such checks.
YOU ARE HEREBY IRREVOCABLY INSTRUCTED BY THE COMPANY, EACH BORROWING SUBSIDIARY
AND THE COLLATERAL AGENT THAT ALL PROCEEDS RECEIVED FROM THE SALE OR OTHER
DISPOSITION OF SUBJECT SECURITIES AND ALL REPO ADVANCES, UNTIL OTHERWISE
NOTIFIED IN WRITING BY THE COLLATERAL AGENT, SHALL BE WIRED TO THE SETTLEMENT
ACCOUNT AS PROVIDED ABOVE.

       You will provide to the Collateral Agent on a daily basis at or before
9:30 a.m. (Chicago time) a report of the prior day's activity with respect to
the MBS Custodial Account, the Custodian Settlement Account and Repo Advances
made by you hereunder.

       You shall not be liable or accountable for any act or omission of
brokers, dealers or agents in connection with this Custodial Agreement.  In
carrying out your duties hereunder, you may use such methods or agencies as you
determine in your sole discretion, including your own facilities.

       You shall maintain regular business records documenting all instructions
transmitted to you through any authorized means and any response by you.  You
are authorized to electronically record





                                    -54-
<PAGE>   55

any telephone communications with the Company, any Borrowing Subsidiary or the
Collateral Agent arising out of this Custodial Agreement.  Your records shall
be determinative of the form, content and time of all the Company's, the
Borrowing Subsidiaries' and Collateral Agent's instructions and any response
from you.  The record of each instruction and any response thereto shall be
retained by you for at least ninety (90) days following the date of the
instruction.  Any claim against you for failure to properly follow an
instruction transmitted by the Company, any Borrowing Subsidiary or the
Collateral Agent must be made in writing and received by you within sixty (60)
days after the date such instruction was received by you.

       You shall give the Subject Securities that come into your possession
under this Custodial Agreement the same physical care and safeguards as are
afforded similar property owned by you; provided, however, your responsibility
hereunder is limited to losses occasioned directly by the gross negligence or
willful misconduct of your employees, to the extent of the market value of the
Subject Securities at the date of the discovery of such loss.  With respect to
any Subject Securities which you deliver for us to a third party, and with
respect to such delivery, you shall be deemed no more than an "intermediary" as
referenced in Section 8-306(3) of the New York Uniform Commercial Code, and the
only warranty given by you shall be the warranty provided in said Section
8-306(3).  In no event shall you be liable for any indirect, special or
consequential loss, even if you have been advised of the possibility of such
loss.  You may, at your option, make arrangements for insuring yourselves
against loss from any cause, but you shall not be under any obligation to
insure for our benefit.

       Except as expressly set forth above with respect to advances made by you
in connection with "late deliveries" and Repo Advances, none of the Subject
Securities held in the MBS Custodial Account, the funds held at any time in the
Custodian Settlement Account, the Subject Securities or any proceeds of the
sale or other disposition thereof will be subject to any right, charge,
security interest, lien, encumbrance or claim of any kind in your or your
creditors' favor.  Any claims for the payment of fees with respect to the safe
custody or administration of Subject Securities or for compensation, expenses,
commitments made by you upon instructions of the Collateral Agent,
reimbursement of taxes incurred by you for the account of the Collateral Agent,
any penalties incurred by or levied or assessed against you resulting from the
Collateral Agent's improper or incorrect instructions, or other liabilities of
the Collateral Agent to you, and for indemnity against any claim or liability
to which you are subjected by reason of any registration of Subject Securities
shall be enforceable solely against the Company and none of the Collateral
Agent, the Credit Agent or any Secured Party shall have any responsibility
therefor (except to the





                                    -55-
<PAGE>   56

extent any of the foregoing are due to the gross negligence or willful
misconduct of the Collateral Agent, the Credit Agent or any Secured Party, as
applicable).  The Collateral Agent, the Borrowing Subsidiaries and the Company
agree to make no claim against you except for any such claims or liabilities
arising, or claimed to have arisen, as a result of your gross negligence or
willful misconduct.

       The Operating Instructions attached hereto are hereby made part hereof
and any and all capitalized terms defined herein shall have the same meaning
when used therein.

       This Custodial Agreement contains the whole of the understanding between
you and the Collateral Agent concerning the subject matter hereof and no
provision hereof shall be modified or altered except in a writing signed by
both you and the Collateral Agent.

       This Custodial Agreement shall be governed by the laws of the State of
New York and shall be binding upon the Collateral Agent and upon its successors
and assigns and shall inure to your benefit and your successors and assigns and
shall be deemed continuing until terminated by either the Collateral Agent or
you upon at least sixty (60) days prior written notice to the other.

       This letter is made in triplicate and will become an agreement between
you and the Collateral Agent upon your acceptance hereof in the space provided
below at your offices in the State of New York.

                                       NATIONAL CITY BANK OF KENTUCKY, as
                                       Collateral Agent


                                       By:________________________________
                                       Title:_____________________________


AGREED TO AND ACCEPTED:

________________________________,
as Approved MBS Custodian


By:_________________________________
Name:______________________________
Title:_______________________________





                                    -56-
<PAGE>   57

                       ACKNOWLEDGEMENT AND AUTHORIZATION


       The Company and the Borrowing Subsidiaries approve the foregoing
Custodial Agreement and authorize the Approved MBS Custodian to act in
accordance with the terms thereof.  The Company and the Borrowing Subsidiaries
agree to be bound by the terms of the Custodial Agreement (including all
Exhibits thereto) to the same extent as if a party thereto.  The Company and
the Borrowing Subsidiaries each agree to indemnify the Approved MBS Custodian
for, and hold the Approved MBS Custodian harmless against, any loss, liability
or expense in connection with, arising out of or in any way related to the
transaction contemplated and relationship established by the Custodial
Agreement, or any action or omission by the Approved MBS Custodian in
connection with the Custodial Agreement, or any agent, broker or dealer
employed by the Approved MBS Custodian hereunder, including the reasonable
costs and expenses incurred in defending any such claim of liability, except
that neither the Company nor any Borrowing Subsidiary shall be liable for (i)
any loss, liability or expense that is determined by a judgment of a court of
competent jurisdiction that is binding on the Approved MBS Custodian, final and
not subject to review on appeal, to be the direct result of acts or omissions
on the Approved MBS Custodian's part constituting gross negligence or willful
misconduct, or (ii) any claim that is based on the Approved MBS Custodian's
warranty as provided in Section 8-306(3) of the New York Uniform Commercial
Code.


                                        SOURCE ONE MORTGAGE SERVICES
                                        CORPORATION, a Delaware corporation

                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________


                                        THE MORTGAGE AUTHORITY, a Delaware
                                        corporation

                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________


                                        CENTRAL PACIFIC MORTGAGE COMPANY, a
                                        California corporation

                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________





                                    -57-
<PAGE>   58

                                                                       EXHIBIT A
                                                          TO CUSTODIAL AGREEMENT


                    FORM OF LETTER TO APPROVED MBS CUSTODIAN


To:  _________________________,
  as Approved MBS Custodian

       Re:     Source One Mortgage Services Corporation;
               Custodial and Collateral Agency Instructions

Ladies and Gentlemen:

       Reference is made to the attached schedule relating to a
letter/certification to a transfer agent/trustee for the issuance of the
Security described more particularly therein, which Security is supported by a
pool of residential mortgage loans and/or mortgage-backed securities including
mortgage loans and/or mortgage-backed securities in which the undersigned as
collateral agent (in such capacity, the "Collateral Agent"), acting under that
certain Second Amended and Restated Security and Collateral Agency Agreement
dated as of November 12, 1996, as amended, extended or replaced from time to
time, holds a first priority perfected security interest.  The attached
schedule is (i) Delivery Schedule Form 11705 in the case of GNMA Securities,
(ii) Delivery Schedule Form 996 in the case of FHLMC Securities, (iii) Delivery
Schedule Form 2014 in the case of FNMA Securities, or (iv) a form containing
substantially similar information in the case of any other Securities.
Pursuant to the letter/certification, the transfer agent/trustee has been
instructed to deliver such Security to you.  You are hereby notified that the
Collateral Agent and the Secured Parties named therein have a first perfected
security interest in the Security and in all proceeds of the sale or other
disposition thereof and in all accounts into which said proceeds may be
deposited.

       This letter will confirm your agreement to hold such Security as a
"Subject Security" under and on terms and conditions set forth more
particularly in that certain Custodial Agreement, dated as of _______________,
199_ between you and the Collateral Agent.

                                        Very truly yours,

                                        NATIONAL CITY BANK OF KENTUCKY, as
                                        Collateral Agent


                                        By:________________________________





                                    -58-
<PAGE>   59


       The undersigned agree to and acknowledge the terms of this letter and,
notwithstanding any contrary understanding with or instructions to you, the
addressee of this letter, the undersigned instruct you to act according to the
instructions set forth in this letter.  These instructions cannot be altered
except by written instructions executed by Collateral Agent.

                                        SOURCE ONE MORTGAGE SERVICES
                                        CORPORATION, a Delaware corporation


                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________


                                        THE MORTGAGE AUTHORITY, a Delaware
                                        corporation


                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________


                                        CENTRAL PACIFIC MORTGAGE COMPANY, a
                                        ______________ corporation


                                        By:________________________________
                                        Name:______________________________
                                        Title:_____________________________





                                    -59-
<PAGE>   60

                                                                       EXHIBIT B
                                                          TO CUSTODIAL AGREEMENT


                             OPERATING INSTRUCTIONS


       These Operating Instructions are attached to and made a part of the
Custodial Agreement between National City Bank of Kentucky and
___________________, dated as of _______________, 199_ (as amended from time to
time, the "Custodial Agreement").  Terms defined therein shall have their same
meanings when used herein.

      1.       From time to time GNMA, FNMA and FHLMC Subject Securities will
be issued at the request of the Company or a Borrowing Subsidiary and credited
to your account with the Federal Reserve Bank of New York ("FRBNY") (in the
case of FNMA and FHLMC Subject Securities) or your account with the
Participants Trust Company ("PTC") (in the case of GNMA Subject Securities) (in
each case, to be held by you for the account of the Collateral Agent) in
accordance with the Code of Federal Regulations (in the case of FNMA and FHLMC
Subject Securities) or the rules of PTC (in the case of GNMA Subject
Securities).  Upon your receipt of confirmation that such Subject Securities
have been deposited into your account with FRBNY (in the case of FNMA and FHLMC
Subject Securities) or your account with PTC (in the case of GNMA Subject
Securities), you shall promptly issue to the Collateral Agent and the Company
your confirmation that (1) you have received such confirmation of the Fedwire
(in the case of FNMA and FHLMC Subject Securities, which confirmation will
include the number of Subject Securities deposited into your account with
FRBNY) or from PTC (in the case of GNMA Subject Securities), (2) you have made
appropriate entries on your books reflecting the interests of the Company or
the applicable Borrowing Subsidiary as beneficial owner and the Collateral
Agent as secured party with respect to such Subject Securities, and (3) there
are no security interests or any rights or claims of any third party in such
Subject Securities in your favor or known to you which have priority over the
security interest of the Collateral Agent in such Subject Securities.  You
shall be under no obligation to ensure or verify that Securities identified in
transmittal letters (in the form of Exhibit A to the Custodial Agreement) are
in fact credited to your account(s), but you shall be obligated only to report
your actual receipt of Subject Securities to the Collateral Agent and the
Company in accordance with the provision of this Instruction 1.

      2.       With respect to the delivery or transfer of Subject Securities
which you hold for the account of the Collateral Agent, you are hereby
authorized to act only upon instructions from the Collateral Agent or, to the
extent permitted by the Custodial Agreement, by the Company.  Upon notification
to you by the





                                    -60-
<PAGE>   61

Collateral Agent at the direction of the Majority Debtholders following an
"Event of Default" under the Credit Agreement, no third party, including
without limitation the Company and the Borrowing Subsidiaries, may direct you
to make any delivery or transfer of such Subject Securities other than Subject
Securities to be delivered pursuant to then-existing Approved Investor
Commitments.

      3.       The proceeds of redemptions, collections and other receipts,
including dividend and interest income, shall be credited to the Custodial
Settlement Account upon collection or payment.

      4.       You are to notify the Collateral Agent and the Company upon
receipt of notice by you of any call for conversion, redemption, subscription
rights or similar proceeding affecting the Subject Securities held in the
relevant account (any of the foregoing being referred to herein as "Account
Proceedings"), and shall take such action in respect thereof as you may be
directed in writing by the Collateral Agent; provided, however, that you shall
have no duty or responsibility to notify the Company or the Collateral Agent of
any Account Proceedings which do not appear in The Wall Street Journal (New
York Edition), The Standard & Poor's Called Bond Record for Preferred Stocks,
Financial Daily Called Bond Service, The Kenney Services or official
notifications from the Depository Trust Company or such other publications
which you may deem reasonable from time to time.  All solicitation fees payable
to you as agent in connection with such event will be retained by you unless
specifically agreed to the contrary by you.

      5.       You are authorized and empowered in the name and on behalf of
the Collateral Agent and the Company to execute any certificates of ownership
or other reports which you are or may hereafter be required to execute and
furnish under any regulation of the Internal Revenue Service, or other
authority of the United States, insofar as the same are required in connection
with any property which is now or may hereafter be in your possession by virtue
of the Custodial Agreement and these Operating Instructions, claiming no
exemptions on behalf of the Collateral Agent or the Company.  In the
preparation of such reports, the status of the Collateral Agent is to be
described as a bank, trust company or financial institution, as the case may
be, domiciled in the United States.  The Collateral Agent agrees to notify you
immediately in writing of any change in such status.

      6.       All mail communications which are to be furnished or forwarded
hereunder to the Collateral Agent or the Company shall be addressed to such
party at the last address on your records, provided that in case you in your
sole discretion shall determine that an emergency exists, you may use such
other means of communication as you shall deem advisable.





                                    -61-
<PAGE>   62

      7.       You are under no duty to supervise, recommend or advise the
Collateral Agent relative to the investment, purchase, sale, retention or other
disposition of any property held hereunder unless specifically provided for by
the Custodial Agreement.

      8.       With respect to any direction to receive securities in
transactions not placed through you, you shall have no duty or responsibility
to advise the Company of non-receipt, or to take any steps to obtain delivery
of securities from any brokers or dealers.  All dealer concessions made to you
will be retained by you unless specifically agreed to the contrary by you.

      9.       Notwithstanding anything herein to the contrary, unless
instructions are received from the Collateral Agent, specifying a different
destination than the address listed on your records for the Collateral Agent,
within ten (10) days of the receipt of any termination notice, you shall have
the right to transfer all securities and other property held by you or any
depositary in connection with the Custodial Agreement or registered in your
name to the Collateral Agent at the address listed on your records.





                                    -62-
<PAGE>   63

                                                                      SCHEDULE I
                                                          TO CUSTODIAL AGREEMENT


                  AUTHORIZED COLLATERAL AGENT REPRESENTATIVES





                                    -63-
<PAGE>   64

                                                                       EXHIBIT 7
                                                           TO SECURITY AGREEMENT


             COLLATERAL TRANSMITTAL -- INITIAL MORTGAGE INFORMATION


1.     CUSTOMER NAME ______________________________

2.     LOAN NUMBER _________________________________

3.     MORTGAGOR ___________________________________
                 SURNAME ONLY

4.     AP STATUS CODE _______________________________

5.     DEPOSIT DATE _________________________________

6.     ORIGINAL NOTE AMOUNT $_____________________

7.     ACQUISITION COST $____________________________

8.     TAKE-OUT VALUE $_____________________________

9.     NOTE DATE OR CONVERSION DATE _____________

10.    NOTE RATE ____________________________________

11.    LOAN TYPE (i.e. a group category (e.g. GNMA 15, FNMA/FHLMC 30, etc.) set
       forth on Exhibit F to the Credit Agreement)
       _________________________________




                                    -64-