EXHIBIT 10.1

                 MASTER REPURCHASE AGREEMENT GOVERNING
                 PURCHASES AND SALES OF MORTGAGE LOANS


                       Dated as of July __, 1998


                                Between

                     LEHMAN COMMERCIAL PAPER INC.,

                                as Buyer

                                  and

                           FHB FUNDING CORP.,

                               as Seller

1.    APPLICABILITY

            From time to time for a period of 364 days from the date hereof, the
parties hereto may, subject to the terms hereof, enter into transactions in
which FHB Funding Corp. ("Seller") agrees to transfer to Lehman Commercial Paper
Inc. ("Buyer") Mortgage Loans against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Mortgage Loans at a
date certain not later than the date of transfer specified in the Confirmation,
against the transfer of funds by Seller. Each such transaction shall be referred
to herein as a "Transaction" and shall be governed by this Agreement and the
related Confirmation, unless otherwise agreed in writing. Each Transaction shall
commence on the Purchase Date and terminate on the Repurchase Date therefor and
shall be limited to a maximum of 30 days, after which, subject to Section 20
below, Buyer and Seller may agree to roll such Transaction into a new
Transaction that shall likewise have a maximum term of 30 days. This Agreement
does not constitute a commitment of Buyer or Seller to enter into Transactions
but rather sets forth the procedures to be followed in connection with requests
to enter into Transactions by Seller to Buyer. Seller hereby acknowledges that
Buyer is under no obligation to agree to enter into Transactions under this
Agreement.

2.    DEFINITIONS

            "Act of Insolvency" means, with respect to any party and its
Affiliates, (i) the filing of a petition, commencing, or authorizing the
commencement of any case


                                  

HOFS02...:\92\54892\0011\1612\AGR7308K.49A

<PAGE>
or proceeding under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law relating to the protection of creditors, or suffering
any such petition or proceeding to be commenced by another which is consented
to, not timely contested or results in entry of an order for relief; (ii) the
seeking the appointment of a receiver, trustee, custodian or similar official
for such party or an Affiliate or any substantial part of the property of
either, (iii) the appointment of a receiver, conservator, or manager for such
party or an Affiliate by any governmental agency or authority having the
jurisdiction to do so; (iv) the making or offering by such party or an Affiliate
of a composition with its creditors or a general assignment for the benefit of
creditors, (v) the admission by such party or an Affiliate of such party of its
inability to pay its debts or discharge its obligations as they become due or
mature; or (vi) that any governmental authority or agency or any person, agency
or entity acting or purporting to act under governmental authority shall have
taken any action to condemn, seize or appropriate, or to assume custody or
control of, all or any substantial part of the property of such party or of any
of its Affiliates, or shall have taken any action to displace the management of
such party or of any of its Affiliates or to curtail its authority in the
conduct of the business of such party or of any of its Affiliates.

            "Additional Loans" means Mortgage Loans or cash provided by Seller
to Buyer or its designee pursuant to Section 4(a).

            "Affiliate" means an affiliate of a party as such term is defined in
the United States Bankruptcy Code in effect from time to time.

            "Agency" means FNMA, FHLMC or GNMA.

            "Agreement" means this Master Repurchase Agreement Governing
Purchases and Sales of Mortgage Loans between Buyer and Seller, as amended from
time to time.

            "Balloon Mortgage Loan" means any Mortgage Loan with a maturity date
of under fifteen (15) years that provided on the date of origination for
scheduled payments by the Mortgagor based upon an amortization schedule
extending beyond its maturity date.

            "Business Day" means a day other than (i) a Saturday or Sunday, or
(ii) a day on which the Buyer or the New York Stock Exchange is authorized or
obligated by law or executive order to be closed.

            "Buyer" has the meaning specified in Section 1.

            "Capital Lease" shall mean any lease or similar arrangement which is
of such a nature that payment obligations of the lessee or obligor thereunder
are


                                  2

<PAGE>
required to be capitalized and shown as liabilities upon a balance sheet of such
lessee or obligor prepared in accordance with GAAP or for which the amount of
the asset and liability thereunder as if so capitalized should be disclosed in a
note to such balance sheet.

            "Collateral" has the meaning specified in Section 6.

            "Collateral Amount" means, with respect to any Transaction, the
amount obtained by application of the applicable Collateral Amount Percentage to
the related Repurchase Price for such Transaction.

            "Collateral Amount Percentage" means the amount set forth in the
Confirmation which, in any event, (i) shall not be less than 103% with respect
to all Mortgage Loans in determining whether a Market Value Collateral Deficit
exists pursuant to the first sentence of Section 4(a) hereof and (ii) shall not
be less than 105% with respect to all Mortgage Loans in determining whether a
Securitization Value Collateral Deficit exists pursuant to the second sentence
of Section 4(a) hereof.

            "Collateral Deficit" means either a Market Value Collateral Deficit
or a Securitization Value Collateral Deficit.

            "Collateral Information" means the following information with
respect to each Mortgage Loan: (i) Seller's loan number, (ii) the Mortgagor's
name, (iii) the address of the Mortgaged Property, (iv) the current interest
rate, (v) the original balance, (vi) current balance as of the last day of the
immediately preceding month, (vii) the paid to date, (viii) the appraisal value
of the Mortgaged Property as of origination, (ix) whether interest rate is fixed
or adjustable (and if adjustable, the ARM terms, including the index, spread,
adjustment frequency, next adjustment date, caps and floors), (x) the occupancy
status of the Mortgaged Property as of origination (including whether owner
occupied), (xi) whether the Mortgage Loan is a Balloon Loan, (xii) the first
payment date, (xiii) the maturity date, (xiv) the principal and interest
payment, (xv) the property type of the Mortgaged Property as of origination,
(xvi) the applicable credit grade, (xvii) the note date, (xviii) whether the
Mortgage Loan is a Wet Ink Mortgage Loan, and (xix) the lien position of the
Mortgage Loan.

            "Confirmation" has the meaning specified in Section 3(a).

            "Custodial Agreement" means that certain custodial agreement, dated
as of July __, 1998, by and among Buyer, Seller and the Custodian, who will
initially be The Bank of New York.

            "Custodial Delivery" means the form executed by Seller in order to
deliver the Mortgage Loan Schedule and/or the Mortgage File to Buyer or its


                                  3

<PAGE>
designee (including the Custodian) pursuant to Section 7, a form of which is
attached hereto as Exhibit II. Such form shall indicate any Mortgage Loans which
are Wet Ink Mortgage Loans or Correspondent Loans.

            "Custodian" means the custodian under the Custodial Agreement.

            "'C' Loan" means a Mortgage Loan made by Seller to a Mortgagor with
a 'C' or 'C-' credit history which is underwritten in accordance with Seller's
underwriting guidelines for 'C'or 'C-' credit Mortgage Loans, a copy of which is
attached as Exhibit VI hereto.

            "Delinquent" means, with respect to any Mortgage Loan, the period of
time from the date on which a Mortgagor fails to pay an obligation under the
terms of such Mortgage Loan (without regard to any applicable grace periods) to
the date on which such payment is made.

            "Event of Default" has the meaning specified in Section 13.

            "First Mortgage" means a Mortgage that is a first lien on the
related Mortgaged Property.

            "FHLMC" means the Federal Home Loan Mortgage Corporation.

            "FNMA" means the Federal National Mortgage Association.

            "GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States.

            "GNMA" means the Government National Mortgage Association.

            "Hedge" means, with respect to any or all of the Purchased Mortgage
Loans, any interest rate swap, cap or collar agreement or similar arrangements
providing for protection against fluctuations in interest rates or the exchange
of nominal interest obligations, either generally or under specific
contingencies, entered into by Seller with Buyer or its Affiliates, and
reasonably acceptable to the Buyer.

            "HUD" means the United States Department of Housing and Urban
Development.

            "Income" means, with respect to any Purchased Mortgage Loan at any
time, any principal thereof then payable and all interest or other distributions
payable thereon less any related servicing fee(s) charged by a subservicer.



                                  4

<PAGE>
            "LIBOR" means the London Interbank Offered Rate for one-month United
States dollar deposits as set forth on page 3750 of Telerate as of 11:00 a.m.,
London time, on the date that a Transaction is entered into.

            "Loan-to-Value Ratio" means with respect to any Mortgage Loan as of
any date, the fraction, expressed as a percentage, the numerator of which is the
principal balance of such Mortgage Loan at the date of determination and the
denominator of which is the value of the related Mortgaged Property as set forth
in the appraisal of such Mortgaged Property obtained in connection with the
origination of such Mortgage Loan. For purposes of calculating a Mortgage Loan
secured by a Second Mortgage, the principal balance of the related First
Mortgage as well as the Second Mortgage shall be included in the numerator.

            "Market Value" means as of any date with respect to any Mortgage
Loan, the price at which such Mortgage Loan could readily be sold as determined
by Buyer in its sole discretion; provided, however, that Buyer shall not take
into account, for purposes of calculating Market Value, any Mortgage Loan (i)
which has been subject to Transactions hereunder for more than 90 days, (ii)
which, together with the other Mortgage Loans subject to then outstanding
Transactions, would cause the 30+ Delinquency Percentage to exceed 3.0%, (iii)
which is a Wet Ink Mortgage Loan for more than 7 Business Days, (iv) which are
more than 59 days Delinquent (v) which, together with the other Mortgage Loans
subject to then outstanding Transactions, would cause the 60+Percentage to
exceed 10.0%, or (vi) with respect to which there is a breach of a
representation, warranty or covenant made by Seller in this Agreement that
materially adversely affects Buyer's interest in such Mortgage Loan and which
breach has not been cured, within the specified time period.

            "Market Value Collateral Deficit" has the meaning specified in
Section 4(a).

            "Mortgage" means a mortgage, deed of trust, deed to secure debt or
other instrument, creating a valid and enforceable first or second lien on or a
first or second priority ownership interest in an estate in fee simple in real
property and the improvements thereon, securing a mortgage note or similar
evidence of indebtedness.

            "Mortgage File" means the documents specified as the "Mortgage File"
in Section 7(d), together with any additional documents and information required
to be delivered to Buyer or its designee (including the Custodian) pursuant to
this Agreement.

            "Mortgage Loan" means (i) a non-securitized whole loan, namely a
conventional mortgage loan secured by a first or second lien on a one-to-four
family residential property which conforms to Seller's underwriting guidelines,
as amended


                                  5

<PAGE>
from time to time (including, without limitation, Wet-Ink Mortgage Loans) or
(ii) another type of non-securitized whole loan as may be agreed upon in writing
by the parties hereto from time to time.

            "Mortgage Loan Schedule" means a schedule of Mortgage Loans
attached to each Trust Receipt, Confirmation and Custodial Delivery.

            "Mortgage Note" means a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage.

            "Mortgaged Property" means the real property securing repayment of
the debt evidenced by a Mortgage Note.

            "Mortgagee" means the record holder of a Mortgage Note secured by a
Mortgage.

            "Mortgagor" means the obligor on a Mortgage Note and the grantor of
the related Mortgage.

            "Net Income" of any Person shall mean, for any period, the net
income (or net deficit), excluding all extraordinary, unusual, non-recurring
and/or non-operating items of such Person for such period, determined in
accordance with GAAP.

            "Periodic Payment" has the meaning specified in Section 5(b).

            "Person" means an individual, partnership, corporation, joint stock
company, trust, limited liability company, limited liability partnership or
unincorporated organization or a governmental agency or political subdivision
thereof.

            "Price Differential" means, with respect to any Transaction
hereunder as of any date, the aggregate amount obtained by daily application of
the Pricing Rate for such Transaction to the Purchase Price for such Transaction
on a 360 day per year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and ending
on (but excluding) the Repurchase Date (reduced by any amount of such Price
Differential previously paid by Seller to Buyer with respect to such
Transaction).

            "Pricing Rate" means the per annum percentage rate specified in the
Confirmation for determination of the Price Differential which shall not exceed
LIBOR plus the applicable Pricing Spread.



                                  6

<PAGE>
            "Pricing Spread" means 1.25% with respect to any Mortgage Loan;
provided that during any period for which any such Mortgage Loans are Wet Ink
Mortgage Loans, the applicable Pricing Spread in respect of such Mortgage Loan
shall be increased by an additional 0.15% and during any period for which Lehman
has funded the DDA Account (as defined in the Custody Agreement) in respect of
Mortgage Loans prior to the Custodian receiving the related Mortgage Notes, the
Pricing Spread applicable to such amounts shall be increased by an additional
 .15%

            "Prime Rate" means, with respect to any date of determination, the
rate of interest published by The Wall Street Journal, northeast edition, as the
"prime rate," as most recently available as of the date of determination.

            "Purchase Date" means the date on which Purchased Mortgage Loans are
transferred by Seller to Buyer or its designee (including the Custodian) as
specified in the Confirmation.

            "Purchase Price" means on each Purchase Date, the price at which
Purchased Mortgage Loans are transferred by Seller to Buyer or its designee
(including the Custodian); which shall in no event exceed the outstanding
principal amount of such Purchased Mortgage Loans.

            "Purchased Mortgage Loans" means the Mortgage Loans sold by Seller
            to Buyer in a Transaction, any Additional Loans and any Substituted
Mortgage Loans.

            "Replacement Loans" has the meaning specified in Section 14(b)(ii).

            "Repurchase Date" means the date on which Seller is to repurchase
the Purchased Mortgage Loans from Buyer, including any date determined by
application of the provisions of Sections 3 or 14, as specified in the
Confirmation; provided that in no event shall such date be more than 30 days
after the related Purchase Date.

            "Repurchase Price" means the price at which Purchased Mortgage Loans
are to be transferred from Buyer or its designee (including the Custodian) to
Seller upon termination of a Transaction, which will be determined in each case
(including Transactions terminable upon demand) as the sum of the Purchase Price
and the Price Differential as of the date of such determination decreased by all
cash, Income and Periodic Payments actually received by Buyer pursuant to
Sections 4(a), 5(a) and 5(b), respectively.

            "Second Mortgage" means a Mortgage that is a second lien on the
Mortgaged Property.



                                  7

<PAGE>
            "Securitization Value" means, as of any date with respect to any
Mortgage Loans, the price at which such Mortgage Loans could be securitized and
sold in a securitization as determined by Buyer in its sole discretion;
provided, however, that Buyer shall not take into account, for purposes of
calculating Securitization Value, any Mortgage Loan (i) which has been subject
to Transactions for more than 180 days, (ii) which, together with the other
Mortgage Loans subject to then outstanding Transactions, would cause the 30+
Delinquency Percentage to exceed 3.0%, (iii) which is a Wet Ink Mortgage Loan
for more than 7 Business Days, (iv) which are more than 59 days Delinquent, (v)
which, together with the other Mortgage Loans subject to then outstanding
Transactions, would cause the 60+Percentage to exceed 10.0%, or (vi) with
respect to which there is a breach of a representation, warranty or covenant
made by Seller in this Agreement that materially adversely affects Buyer's
interest in such Mortgage Loan and which breach has not been cured within the
specified time period.

            "Securitization Value Collateral Deficit" has the meaning specified
in Section 4(a).

            "Seller" has the meaning specified in Section 1.

            "Servicing Agreement" has the meaning specified in Section 25.

            "Servicing Records" has the meaning specified in Section 25.

            "60+ Percentage" means the fraction, expressed as a percentage, the
numerator of which is the aggregate Purchase Price of Purchased Mortgage Loans
subject to then outstanding Transactions which have remained subject to
Transactions for more than 60 days.

            "Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other Person of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions of such corporation, partnership or other Person
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other Person shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.

            "Substituted Mortgage Loans" means any Mortgage Loans substituted
for Purchased Mortgage Loans in accordance with Section 9 hereof.



                                  8

<PAGE>
            "30+ Delinquency Percentage" means the fraction, expressed as a
percentage, the numerator of which is the aggregate Purchase Price of Purchased
Mortgage Loans subject to then outstanding Transactions which are more than 30
days Delinquent and the denominator of which is the aggregate Purchase Price of
all Purchased Mortgage Loans subject to then outstanding Transactions.

            "Transaction" has the meaning specified in Section 1.

            "Trust Receipt" means a trust receipt issued by Custodian to Buyer
confirming the Custodian's possession of certain mortgage loan files which are
the property of and held by Custodian for the benefit of the Buyer or the
registered holder of such trust receipt.

            "Wet Ink Mortgage Loan" means a Mortgage Loan for which a Mortgage
File has not been delivered to the Custodian.

3.    INITIATION; CONFIRMATION; TERMINATION; MAXIMUM
      TRANSACTION AMOUNTS

            (a) An agreement to enter into a Transaction may be entered into
orally or in writing at the initiation of Seller. In any event, Buyer shall
confirm the terms of each Transaction by issuing a written confirmation to
Seller promptly after the parties enter into such Transaction in the form of
Exhibit I attached hereto (a "Confirmation"). Such Confirmation shall describe
the Purchased Mortgage Loans, identify Buyer and Seller and set forth (i) the
Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing Rate applicable to
the Transaction, (v) the applicable Collateral Amount Percentages and (vi)
additional terms or conditions not inconsistent with this Agreement. After
receipt of the Confirmation, Seller shall, subject to the provisions of
subsection (c) below, sign the Confirmation and promptly return it to Buyer.
With respect to any Transaction, and subject to the terms and conditions herein,
the Purchase Date shall be within 2 Business Days of the date on which Seller
initiated the Transaction pursuant to the first sentence of this paragraph.

            (b) Any Confirmation by Buyer shall be deemed to have been received
by Seller on the date actually received by Seller.

            (c) Each Confirmation, together with this Agreement, shall be
conclusive evidence of the terms of the Transaction(s) covered thereby unless
objected to in writing by Seller no more than two (2) Business Days after the
date the Confirmation was received by Seller or unless a corrected Confirmation
is sent by Buyer. An objection sent by Seller must state specifically that
writing which is an objection, must specify the provision(s) being objected to
by Seller, must set forth


                                  9

<PAGE>
such provision(s) in the manner that the Seller believes they should be stated,
and must be received by Buyer no more than two (2) Business Days after the
Confirmation was received by Seller.

            (d) In the case of Transactions terminable upon demand, such demand
shall be made by Seller by telephone or otherwise, no later than 1:00 p.m. (New
York Time) on the second Business Day prior to the day on which such termination
will be effective.

            (e) On the Repurchase Date, termination of the Transaction will be
effected by transfer to Seller or its designee of the Purchased Mortgage Loans
(and any Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price to an account of
Buyer. Seller is obligated to obtain the Mortgage Files from Buyer or its
designee at Seller's expense on the Repurchase Date.

            (f) With respect to all Transactions hereunder, the aggregate
Purchase Price for all Purchased Mortgage Loans at any one time subject to then
outstanding Transactions under this Agreement shall not exceed $200,000,000. (g)
The aggregate Purchase Price of all Purchased Mortgage Loans which relate to Wet
Ink Mortgage Loans shall not represent more than 20% of the aggregate Purchase
Price for all Purchased Mortgage Loans which are subject to then outstanding
Transactions. Seller covenants to deliver the Mortgage File to the Custodian
within 7 Business Days from its respective Purchase Date and to the cause
related Mortgage Note for each funded Mortgage Loan to be faxed to the
Custodian.

            (g) The aggregate Purchase Price of all Purchased Mortgage Loans
which are secured by a Mortgage Loan that has a Loan to Value in excess of 95%
shall be reduced by 5% and any Mortgage Loans with a Loan to Value in excess of
90% shall not represent more than the greater of $25,000,000 or 35% of the
aggregate Purchase Price for all Purchased Mortgage Loans which are subject to
then outstanding Transactions.

            (h) Seller may only sell under this Agreement its interest in
Mortgage Loans that are (x) originated and owned by Seller or (b) originated by
Innovative Funding Inc. ("Innovative") provided that (i) such Mortgage Loans
must be purchased by Seller within 45 days of funding, and (ii) such Mortgage
Loans acquired from Innovative comply with the representations and warranties
contained in Exhibit V.



                                  10

<PAGE>
4.    COLLATERAL AMOUNT MAINTENANCE

            (a) If at any time the aggregate Market Value of all Purchased
Mortgage Loans subject to then outstanding Transactions is less than the
aggregate Collateral Amount for all such Transactions (a "Market Value
Collateral Deficit"), then Buyer may by notice to Seller require Seller to
transfer to Buyer or its designee (including the Custodian) Mortgage Loans
("Additional Loans") or cash, so that the cash and aggregate Market Value of the
Purchased Mortgage Loans, including any such Additional Loans, will thereupon
equal or exceed the aggregate Collateral Amount. If at any time the aggregate
Securitization Value of all Purchased Mortgage Loans subject to then outstanding
Transactions is less than the aggregate Collateral Amount for all such
Transactions (a "Securitization Value Collateral Deficit"), then Buyer may by
notice to Seller require Seller to transfer to Buyer or its designee (including
the Custodian) Additional Loans or cash, so that the cash and aggregate
Securitization Value of such Purchased Mortgage Loans, including any such
Additional Loans, will thereupon equal or exceed the aggregate Collateral
Amount.

            (b) Notice required pursuant to subsection (a) above may be given by
any means of telecopier or telegraphic transmission. A notice for the payment or
delivery in respect of a Collateral Deficit received on any Business Day must be
met not later than 5:00 p.m. on the second Business Day following the Business
Day on which the notice was given. The failure of Buyer, on any one or more
occasions, to exercise its rights under subsection (a) of this Section shall not
change or alter the terms and conditions to which this Agreement is subject or
limit the right of the Buyer to do so at a later date. Buyer and Seller agree
that a failure or delay to exercise its rights under subsections (a) of this
Section shall not limit Buyer's rights under this Agreement or otherwise
existing by law or in any way create additional rights for Seller.

            (c) In the event that Seller fails to comply with the provisions of
this Section 4, Buyer shall not enter into any additional Transactions hereunder
after the date of such failure, unless such failure is satisfactorily cured or
waived.

5.    INCOME PAYMENTS

            (a) Where a particular Transaction's term extends over an Income
payment date on the Purchased Mortgage Loans subject to that Transaction such
Income shall be the property of Buyer. Notwithstanding the foregoing, so long as
no Event of Default shall have occurred and be continuing, Seller shall be
entitled to all Income with respect to Purchased Mortgage Loans subject to
Transactions. Upon the occurrence and continuance of an Event of Default, all
Income with respect to Purchased Mortgage Loans subject to Transactions shall be
held in a segregated


                                  11

<PAGE>
account established by the Custodian for the benefit of Buyer and distributed
under the Custodial Agreement.

            (b) Notwithstanding that Buyer and Seller intend that the
Transactions hereunder be sales to Buyer of the Purchased Mortgage Loans, Seller
shall pay by wire transfer to Buyer the Price Differential (less any amount of
such Price Differential previously paid by Seller to Buyer)(each such payment, a
"Periodic Payment") on the first Business Day of each month.

            (c) Buyer shall offset against the Repurchase Price of each such
Transaction all Income and Periodic Payments actually received by Buyer pursuant
to Sections 5(a) and (b), respectively.

6.    SECURITY INTEREST

            (a) Buyer and the Seller intend that the Transactions hereunder be
sales to Buyer of the Purchased Mortgage Loans and not loans from Buyer to
Seller secured by the Purchased Mortgage Loans. However, in order to preserve
Buyer's rights under this Agreement in the event that a court or other forum
recharacterizes the Transactions hereunder as loans and as security for the
performance by Seller of all of Seller's obligations to Buyer under this
Agreement and the Transactions entered into pursuant to this Agreement, Seller
grants Buyer a first priority security interest in (x) the Purchased Mortgage
Loans, the Servicing Records, the insurance relating to the Purchased Mortgage
Loans, Income, any and all Hedges, any and all custodial accounts and escrow
accounts relating to the Purchased Mortgage Loans, and any other contract
rights, general intangibles and other assets relating to the Purchased Mortgage
Loans or any interest in the Purchased Mortgage Loans and the servicing of the
Purchased Mortgage Loans and (y) any and all replacements, substitutions,
distributions on or proceeds of any and all of the foregoing (collectively, the
"Collateral").

            (b) Seller shall pay all fees and expenses associated with
perfecting Buyer's security interest in the Collateral, including, without
limitation, the cost of filing financing statements under the Uniform Commercial
Code and recording assignments of Mortgage, as and when required by Buyer in its
sole discretion, provided however that Buyer shall not file any assignments of
Mortgage prior to an Event of Default hereunder by Seller.

            (c) Seller covenants to take such further actions as are necessary
in order to perfect Buyer's first priority security interest in the Hedges.



                                  12

<PAGE>
7.    PAYMENT, TRANSFER AND CUSTODY

            (a) Unless otherwise mutually agreed in writing, all transfers of
funds hereunder shall be in immediately available funds.

            (b) On or before each Purchase Date, Seller shall deliver or cause
to be delivered to Buyer or its designee the Custodial Delivery in the form
attached hereto as Exhibit II.

            (c) On the Purchase Date for each Transaction, ownership of the
Purchased Mortgage Loans shall be transferred to the Buyer or its designee
(including the Custodian) against the simultaneous transfer of the Purchase
Price to an account of Seller specified in the Confirmation. Seller,
simultaneously with the delivery to Buyer or its designee (including the
Custodian) of the Purchased Mortgage Loans relating to each Transaction hereby
sells, transfers, conveys and assigns to Buyer or its designee (including the
Custodian) without recourse, but subject to the terms of this Agreement, all the
right, title and interest of Seller in and to the Purchased Mortgage Loans
together with all right, title and interest in and to the proceeds of any
related insurance policies.

            (d) In connection with each sale, transfer, conveyance and
assignment, on or prior to each Purchase Date with respect to each Mortgage Loan
which is not a Wet Ink Mortgage Loan (or with respect to item (vii) below within
seven Business Days after the Purchase Date), the Seller shall deliver or cause
to be delivered and released to the Custodian the following documents
(collectively the "Mortgage File"), pertaining to each of the Purchased Mortgage
Loans identified in the Custodial Delivery delivered therewith:

                  (i) the original Mortgage Note bearing all intervening
            endorsements, endorsed "Pay to the order of ________ without
            recourse, and without representation or warranty, express or
            implied" and signed in the name of the last endorsee (the "Last
            Endorsee") by an authorized officer (in the event that the Mortgage
            Loan was acquired by the Last Endorsee in a merger, the signature
            must be in the following form: "[the Last Endorsee], successor by
            merger to [name of predecessor]"; in the event that the Mortgage
            Loan was acquired or originated while doing business under another
            name, the signature must be in the following form: "[the Last
            Endorsee], formerly known as [previous name]");

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



                                  13

<PAGE>
                  (iii) the original Mortgage with evidence of recording thereon
            or copies certified by Seller [or its agent] to have been sent for
            recording;

                  (iv) the originals of all assumption, modification,
            consolidation or extension agreements, with evidence of recording
            thereon or copies certified by Seller [or its agent] to have been
            sent for recording;

                  (v) the original assignment of Mortgage in blank for each
            Mortgage Loan, in form and substance acceptable for recording and
            signed in the name of the Last Endorsee (in the event that the
            Mortgage Loan was acquired by the Last Endorsee in a merger, the
            signature must be in the following form: "[the Last Endorsee],
            successor by merger to [name of predecessor]"; in the event that the
            Mortgage Loan was acquired or originated while doing business under
            another name, the signature must be in the following form: "[the
            Last Endorsee], formerly known as [previous name]");

                  (vi) the originals of all intervening assignments of mortgage
            with evidence of recording thereon or copies certified by Seller [or
            its agent] to have been sent for recording;

                  (vii) the original policy of title insurance or a true copy
            thereof or, if such policy has not yet been delivered by the
            insurer, the commitment or binder to issue the same (which may be
            marked by the title insurance company to reflect changes); and

                  (viii) the original or a certified copy of any security
            agreement, chattel mortgage or equivalent document executed in
            connection with the Mortgage (if any).

            (e) In connection with each sale, transfer, conveyance and
assignment with respect to each Mortgage Loan which is a Wet Ink Mortgage Loan,
on or prior to the seventh Business Day following each Purchase Date, Seller
shall deliver or cause to be delivered to the Custodian a complete Mortgage
File. Further, if requested by Buyer, on the Purchase Date with respect to each
Mortgage Loan which is a Wet Ink Mortgage Loan, Seller shall fax an executed
copy of the respective Mortgage Note to the Custodian. On the date on which the
Buyer receives a Trust Receipt from the Custodian certifying that a complete
Mortgage File with respect to a Wet Ink Mortgage Loan is in the possession of
the Custodian, such Wet Ink Mortgage Loan be deemed a standard Mortgage Loan
(and no longer a Wet Ink Mortgage Loan) for all purposes hereunder including,
without limitation,


                                  14

<PAGE>
determination of the Pricing Spread and compliance with subsection (aaa) of
Exhibit V.

            (f) With respect to all of the Mortgage Loans delivered by Seller to
Buyer or its designee (including the Custodian), Seller shall execute an omnibus
power of attorney substantially in the form of Exhibit III attached hereto
irrevocably appointing Buyer, upon the occurrence and during the continuation of
an Event of Default, its attorney-in-fact with full power to complete and record
the assignment of Mortgage, complete the endorsement of the Mortgage Note and
take such other steps as may be necessary or desirable to enforce Buyer's rights
against such Mortgage Loans, the related Mortgage Files and the Servicing
Records.

            (g) Buyer shall deposit the Mortgage Files representing the
Purchased Mortgage Loans, or direct that the Mortgage Files be deposited
directly, with the Custodian. The Mortgage Files shall be maintained in
accordance with the Custodial Agreement.

            (h) Any Mortgage Files not delivered to Buyer or its designee
(including the Custodian) are and shall be held in trust by Seller or its
designee for the benefit of Buyer as the owner thereof. Seller or its designee
shall maintain a copy of the Mortgage File and the originals of the Mortgage
File not delivered to Buyer or its designee. The possession of the Mortgage File
by Seller or its designee is at the will of the Buyer for the sole purpose of
servicing the related Purchased Mortgage Loan, and such retention and possession
by the Seller or its designee is in a custodial capacity only. The books and
records (including, without limitation, any computer records or tapes) of Seller
or its designee shall be marked appropriately to reflect clearly the sale of the
related Purchased Mortgage Loan to Buyer. Seller or its designee (including the
Custodian) shall release its custody of the Mortgage File only in accordance
with written instructions from Buyer, unless such release is required as
incidental to the servicing of the Purchased Mortgage Loans or is in connection
with a repurchase of any Purchased Mortgage Loan by Seller.

8.    REHYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE
      LOANS

            Title to all Purchased Mortgage Loans shall pass to Buyer and Buyer
shall have free and unrestricted use of all Purchased Mortgage Loans. Nothing in
this Agreement shall preclude Buyer from engaging in repurchase transactions
with the Purchased Mortgage Loans or otherwise pledging, repledging,
hypothecating, or rehypothecating the Purchased Mortgage Loans, but no such
transaction shall relieve Buyer of its obligations to transfer Purchased
Mortgage Loans to Seller pursuant to this Agreement or any Confirmation, as
applicable. Nothing contained in this Agreement shall obligate Buyer to
segregate any Purchased Mortgage Loans delivered


                                  15

<PAGE>
to Buyer by Seller. In the event of a material adverse change in the repurchase
markets that results in Buyer being unable to finance its position through its
traditional repurchase counterparties, Buyer may accelerate the Repurchase Date
for any outstanding Transactions following reasonable written notice to Seller
of the occurrence of such event.

9.    SUBSTITUTION

            (a) Subject to Section 9(b), Seller may, upon one (1) Business Days'
written notice to Buyer, with a copy to Custodian, substitute other Mortgage
Loans for any Purchased Mortgage Loans. Such substitution shall be made by
transfer to Buyer or its designee (including the Custodian) of the Mortgage
Files of such other Mortgage Loans together with a Custodial Delivery and
transfer to Seller or its designee of the Purchased Mortgage Loans requested for
release. After substitution, the substituted Mortgage Loans, shall be deemed to
be Purchased Mortgage Loans subject to the same Transaction as the released
Mortgage Loans.

            (b) Notwithstanding anything to the contrary in this Agreement,
Seller may not substitute other Mortgage Loans for any Purchased Mortgage Loans
(i) if after taking into account such substitution, a Collateral Deficit would
occur or (ii) such substitution would cause a breach of any provision of this
Agreement.

10.   REPRESENTATIONS AND WARRANTIES

            (a) Each of Buyer and Seller represents and warrants to the other
that (i) it is duly authorized to execute and deliver this Agreement, to enter
into the Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such execution,
delivery and performance; (ii) it will engage in such Transactions as principal;
(iii) the person signing this Agreement on its behalf is duly authorized to do
so on its behalf; (iv) this Agreement is legal, valid and binding obligation of
it, enforceable against it in accordance with its terms, (v) no approval,
consent or authorization of the Transactions contemplated by this Agreement from
any federal, state, or local regulatory authority having jurisdiction over it is
required or, if required, such approval, consent or authorization has been or
will, prior to the Purchase Date, be obtained; (vi) the execution, delivery, and
performance of this Agreement and the Transactions hereunder will not violate
any law, regulation, order, judgment, decree, ordinance, charter, by-law, or
rule applicable to it or its property or constitute a default (or an event
which, with notice or lapse of time, or both would constitute a default) under
or result in a breach of any agreement or other instrument by which it is bound
or by which any of its assets are affected; (vii) it has received approval and
authorization to enter into this Agreement and each and every Transaction
actually entered into hereunder pursuant to its internal policies and
procedures; and (viii) neither this Agreement nor any Transaction pursuant
hereto


                                  16

<PAGE>
are entered into in contemplation of insolvency or with intent to hinder, delay
or defraud any creditor.

            (b) Seller represents and warrants to Buyer that as of the Purchase
Date for the purchase of any Purchased Mortgage Loans by Buyer from Seller and
as of the date of this Agreement and any Transaction hereunder and at all times
while this Agreement and any Transaction hereunder is in full force and effect:

                  (i) Organization. Seller is duly organized, validly existing
            and in good standing under the laws and regulations of the state of
            New York and where required is duly licensed, qualified, and in good
            standing in every state where Seller transacts business and in any
            state where any Mortgaged Property is located if the laws of such
            state require licensing or qualification in order to conduct
            business of the type conducted by Seller therein except where the
            failure to be so licensed or qualified would not have a material
            adverse effect on the financial condition of the Seller or the
            Purchased Mortgage Loans.

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

                  (iii) No Broker. Seller has not dealt with any broker,
            investment banker, agent, or other person, except for Buyer, who may
            be entitled to any commission or compensation in connection with the
            sale of Purchased Mortgage Loans pursuant to this Agreement;

                  (iv) Good Title to Collateral. All Purchased Mortgage Loans
            shall be free and clear of any lien, encumbrance or impediment to
            transfer, and Seller has good, valid and indefeasible title and the
            right to sell and transfer such Purchased Mortgage Loans to Buyer.



                                  17

<PAGE>
                  (v) Delivery of Mortgage File. With respect to each Purchased
            Mortgage Loans which is not a Wet Ink Mortgage Loan, the Mortgage
            Note, the Mortgage, the assignment of Mortgage and any other
            documents required to be delivered under this Agreement and the
            Custodial Agreement for such Mortgage Loan have been delivered to
            the Custodian. Seller or its designee is in possession of a
            complete, true and accurate Mortgage File with respect to each
            Mortgage Loan, except for such documents the originals of which have
            been delivered to the Custodian.

                  (vi) Selection Process. The Purchased Mortgage Loans were
            selected from among the outstanding mortgage loans in Seller's
            portfolio as to which the representations and warranties set forth
            in this Agreement could be made and such selection was not made in a
            manner so as to affect adversely the interests of Buyer.

                  (vii) [reserved]

                  (viii) No Untrue Statements. To the best of Seller's
            knowledge, neither this Agreement nor any written statement made, or
            any report or other document issued or delivered or to be issued or
            delivered by Seller pursuant to this Agreement or in connection with
            the transactions contemplated hereby contains any untrue statement
            of material fact or omits to state a material fact necessary to make
            the statements contained herein or therein not misleading;

                  (ix) Origination/Acquisition Practices. The origination or
            acquisition practices used by Seller with respect to each Mortgage
            Loan (i) have been and are in all respects legal and proper in the
            mortgage origination business and (ii) are in accordance with the
            underwriting guidelines attached hereto as Exhibit VI;

                  (x) Performance of Agreement. Seller does not believe, nor
            does it have any reason or cause to believe, that it cannot perform
            each and every covenant contained in this Agreement on its part to
            be performed;

                  (xi)  Seller Not Insolvent.  Seller is not insolvent; and

                  (xii) No Event of Default. No Event of Default has occurred
            and is continuing hereunder.



                                  18

<PAGE>
            (c) Seller represents and warrants to the Buyer that each Purchased
Mortgage Loan sold hereunder and each pool of Purchased Mortgage Loans sold in a
Transaction hereunder, as of the related Purchase Date conform to the
representations and warranties set forth in Exhibit V attached hereto and that
each Mortgage Loan delivered hereunder as Additional Loans or Substituted
Mortgage Loans, as of the date of such delivery, conforms to the representations
and warranties set forth in Exhibit V hereto. Seller further represents and
warrants to the Buyer that, as of the date of its delivery, the Collateral
Information with respect to each Purchased Mortgage Loan is complete, true and
correct in all material respects. It is understood and agreed that the
representations and warranties set forth in Exhibit V hereto, if any, shall
survive delivery of the respective Mortgage File to Buyer or its designee
(including the Custodian).

            (d) On the Purchase Date for any Transaction, Buyer and Seller shall
each be deemed to have made all the foregoing representations with respect to
itself as of such Purchase Date.

11.   NEGATIVE COVENANTS OF THE SELLER

            On and as of the date of this Agreement and each Purchase Date and
until this Agreement is no longer in force with respect to any Transaction,
Seller covenants that it will not:

            (a) take any action which would materially directly or indirectly
impair or adversely affect Buyer's title to or the value of the Purchased
Mortgage Loans;

            (b) pledge, assign, convey, grant, bargain, sell, set over, deliver
or otherwise transfer any interest in the Purchased Mortgage Loans to any person
not a party to this Agreement nor will the Seller create, incur or permit to
exist any lien, encumbrance or security interest in or on the Purchased Mortgage
Loans except as described in Section 6 of this Agreement;

            (c) create, incur or permit to exist any lien, encumbrance or
security interest in or on any of the Collateral without the prior express
written consent of Buyer;

            (d) permit the ratio of Tangible Net Worth to Indebtedness to exceed
10:1 (as such terms are defined in GAAP).

12.   AFFIRMATIVE COVENANTS OF THE SELLER

            For so long as this Agreement is in effect:


                                  19

<PAGE>
            (a) Seller covenants that it will promptly notify Buyer of any
material adverse change in the business operations and/or financial condition of
the Seller;

            (b) Seller shall provide Buyer with copies of such documentation as
Buyer may reasonably request evidencing the truthfulness of the representations
set forth in Section 10, including but not limited to resolutions evidencing the
approval of this Agreement by Seller's board of directors or loan committee,
copies of the minutes of the meetings of Seller's board of directors or loan
committee at which this Agreement and the Transactions contemplated by this
Agreement were approved;

            (c) Seller shall, at Buyer's request, take all action reasonably
necessary to ensure that Buyer will have a first or second priority security
interest, as applicable, in the Collateral, including, among other things,
filing such Uniform Commercial Code financing statements as Buyer may reasonably
request;

            (d) Seller shall notify Buyer no later than one (1) Business Day
after obtaining actual knowledge thereof, if any event has occurred that
constitutes an Event of Default with respect to Seller or any event that with
the giving of notice or lapse of time, or both, would become an Event of Default
with respect to Seller;

            (e) Seller covenants that each Mortgage Loan subject to this
Agreement shall be serviced by a servicer approved by Buyer;

            (f) Seller covenants to provide Buyer with a copy of any material
changes to Seller's underwriting guidelines prior to the effectiveness of any
such change;

            (g) Seller covenants for the term of this Agreement to provide Buyer
or its designee with the exclusive option and right (but not the obligation) of
acting as lead managing underwriter or placement agent for any securities of
Seller or its Affiliates which are collateralized by, or representing interests
in, Mortgage Loans that are or were subject to Transactions hereunder (each such
transaction, a "Securitization"). Each Securitization shall contain terms
mutually acceptable to Buyer and Seller (including, without limitation,
customary and competitive compensation provisions as well as customary
provisions regarding representations and warranties, covenants, delivery terms,
conditions, indemnification, contribution and termination). If Buyer or its
affiliate declines to participate in any Securitization (and the failure to
respond to Seller within 14 days after receipt of a written offer shall be
deemed to be declining), Seller or its subsidiaries may cause such transaction
to be executed by others without prejudice to Buyer's rights as to future
transactions or without any other penalty;



                                  20
<PAGE>
            (h) Seller covenants to provide Buyer on the fifth Business Day of
each month, either by direct modem electronic transmission or via a computer
diskette, the Collateral Information in computer readable format with respect to
all Purchased Mortgage Loans then subject to Transactions;

            (i) Seller covenants to provide Buyer with the following financial
and reporting information:

                  (i) Within 90 days after the last day of its fiscal year,
            Seller's audited combined and combining statements of income and
            statements of changes in cash flow for such year and balance sheets
            as of the end of such year in each case presented fairly in
            accordance with GAAP, and accompanied, in all cases, by a report of
            a nationally recognized independent certified public accounting firm
            consented to by Buyer (which consent shall not be unreasonably
            withheld);

                  (ii) Within 60 days after the last day of the first three
            fiscal quarters in any fiscal year, Seller's combined and combining
            statements of income and statements of changes in cash flow for such
            quarter and balance sheets as of the end of such quarter presented
            fairly in accordance with GAAP;

                  (iii) Within 30 days after the last day of each calendar
            quarter an officer's certificate from a senior officer of the Seller
            addressed to Buyer certifying that, as of such calendar quarter, (x)
            Seller is in compliance with all of the terms, conditions and
            requirements of this Agreement, and (y) no Event of Default exists;
            and

                  (iv) As soon as available, copies of all proxy statements,
            financial statements, and reports which Seller sends to its
            stockholders, and copies of all regular, periodic and special
            reports, and all registration statements under the Securities Act of
            1933, as amended, which it files with the Securities and Exchange
            Commission or any government authority which may be substituted
            therefor, or with any national securities exchange.

13.   EVENTS OF DEFAULT

            If any of the following events (each an "Event of Default") occur,
Seller and Buyer shall have the rights set forth in Section 14, as applicable:

            (a) Seller fails to satisfy or perform any material obligation or
covenant under this Agreement including the failure to perform on any Repurchase


                                  21

<PAGE>
Date; and if such failure is not related to the payment of money or delivery of
additional Collateral pursuant to Section 4 above, such failure is not cured
within 3 Business Days;

            (b) an Act of Insolvency occurs with respect to Seller;

            (c) any representation made by Seller shall have been incorrect or
untrue in any material respect when made or repeated or deemed to have been made
or repeated;

            (d) Seller shall admit its inability to, or its intention not to,
perform any of its obligations hereunder;

            (e) any governmental, regulatory, or self-regulatory authority,
including, but not limited to, the Agencies, takes any action to remove, limit,
restrict, suspend or terminate the rights, privileges, or operations of the
Seller or any of its Affiliates, including suspension as an issuer, lender or
seller/servicer of mortgage loans, which suspension has a material adverse
effect on the ordinary business operations of Seller or Seller's Affiliate, and
which continues for more than 3 Business Days;

            (f) Seller dissolves, merges or consolidates with another entity
(unless (A) it is the surviving party or (B) the entity into which it merges or
consolidates has equity and a market value of at least that of the Seller
immediately prior to such merger or consolidation and such entity expressly
assumes the obligations of the Seller at the time of such merger or
consolidation), or sells, transfers, or otherwise disposes of a material portion
of its business or assets;

            (g) Buyer, in its good faith judgment, believes that there has been
a material adverse change in the business, operations, corporate structure or
financial condition of Seller or that Seller will not meet any of its
obligations under any Transaction pursuant to this Agreement, the Custodial
Agreement or any other agreement between the parties;

            (h) Seller is in default under any other agreement for borrowed
money in an amount exceeding $1,000,000, provided, however, such a default shall
not constitute an Event of Default if the exercise of such remedies as are
available to Seller's counterparty with respect to such default would not result
in a material adverse change in the business operations or financial condition
of the Seller;

            (i) A final judgment by any competent court in the United States of
America for the payment of money in an amount of at least $100,000 is rendered
against the Seller, and the same remains undischarged or unpaid for a period of
sixty


                                  22

<PAGE>
(60) days during which execution of such judgment is not effectively stayed or
appealed or the amount in question is not placed with an escrow agent;

            (j) This Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby; or

            (k) A Market Value Collateral Deficit or Securitization Value
Collateral Deficit occurs with respect to Seller or Buyer, as applicable, and is
not eliminated within the time period specified in Section 4(b).

14.   REMEDIES

            (a) If an Event of Default occurs with respect to Seller, the
following rights and remedies are available to Buyer:

                  (i) At the option of Buyer, exercised by written notice to
            Seller (which option shall be deemed to have been exercised, even if
            no notice is given, immediately upon the occurrence of an Act of
            Insolvency), the Repurchase Date for each Transaction hereunder
            shall be deemed immediately to occur,

                  (ii) If Buyer exercises or is deemed to have exercised the
            option referred to in subsection (a)(i) of this Section,

                        (A) Seller's obligations hereunder to repurchase all
                  Purchased Mortgage Loans in such Transactions shall thereupon
                  become immediately due and payable,

                        (B) to the extent permitted by applicable law, the
                  Repurchase Price with respect to each such Transaction shall
                  be increased by the aggregate amount obtained by daily
                  application of, on a 360 day per year basis for the actual
                  number of days during the period from and including the date
                  of the exercise or deemed exercise of such option to but
                  excluding the date of payment of the Repurchase Price as so
                  increased, (x) the greater of the Prime Rate or the Pricing
                  Rate for each such Transaction to (y) the Repurchase Price for
                  such Transaction as of the Repurchase Date as determined
                  pursuant to subsection (a)(i) of this Section (decreased as of
                  any day by (I) any amounts actually in the possession of Buyer
                  pursuant to clause (C) of this subsection, (II) any proceeds
                  from the sale of Purchased Mortgage Loans applied to the
                  Repurchase Price pursuant to


                                  23

<PAGE>
                  subsection (a)(xii) of this Section, and (III) any amounts
                  applied to the Repurchase Price pursuant to subsection
                  (a)(iii) of this Section), and

                        (C) all Income actually received by the Buyer or its
                  designee (including the Custodian) pursuant to Section 5 shall
                  be applied to the aggregate unpaid Repurchase Price owed by
                  Seller.

                  (iii) After one Business Day's notice to Seller (which notice
            need not be given if an Act of Insolvency shall have occurred, and
            which may be the notice given under subsection (a)(i) of this
            Section), Buyer may (A) immediately sell, without notice or demand
            of any kind, at a public or private sale and at such price or prices
            Buyer may reasonably deem satisfactory any or all Purchased Mortgage
            Loans subject to a Transaction hereunder or (B) in its sole
            discretion elect, in lieu of selling all or a portion of such
            Purchased Mortgage Loans, to give Seller credit for such Purchased
            Mortgage Loans in an amount equal to the Market Value of the
            Purchased Mortgage Loans against the aggregate unpaid Repurchase
            Price and any other amounts owing by Seller hereunder. The proceeds
            of any disposition of Purchased Mortgage Loans shall be applied
            first to the costs and expenses incurred by Buyer in connection with
            Seller's default; second to consequential damages, including but not
            limited to costs of cover and/or related hedging transactions; third
            to the Repurchase Price; and fourth to any other outstanding
            obligation of Seller to Buyer or its Affiliates.

                  (iv) The parties recognize that it may not be possible to
            purchase or sell all of the Purchased Mortgage Loans on a particular
            Business Day, or in a transaction with the same purchaser, or in the
            same manner because the market for such Purchased Mortgage Loans may
            not be liquid. In view of the nature of the Purchased Mortgage
            Loans, the parties agree that liquidation of a Transaction or the
            underlying Purchased Mortgage Loans does not require a public
            purchase or sale and that a good faith private purchase or sale
            shall be deemed to have been made in a commercially reasonable
            manner. Accordingly, Buyer may elect, in its sole discretion, the
            time and manner of liquidating any Purchased Mortgage Loan and
            nothing contained herein shall (A) obligate Buyer to liquidate any
            Purchased Mortgage Loan on the occurrence of an Event of Default or
            to liquidate all Purchased Mortgage Loans in the same manner or on
            the same Business Day or (B) constitute a waiver of any right or
            remedy of Buyer. However, in recognition of the parties' agreement
            that the


                                  24

<PAGE>
            Transactions hereunder have been entered into in consideration of
            and in reliance upon the fact that all Transactions hereunder
            constitute a single business and contractual relationship and that
            each Transaction has been entered into in consideration of the other
            Transactions, the parties further agree that Buyer shall use its
            best efforts to liquidate all Transactions hereunder upon the
            occurrence of an Event of Default as quickly as is prudently
            possible in the reasonable judgment of Buyer.

                  (v) Buyer shall, without regard to the adequacy of the
            security for the Seller's obligations under this Agreement, be
            entitled to the appointment of a receiver by any court having
            jurisdiction, without notice, to take possession of and protect,
            collect, manage, liquidate, and sell the Collateral or any portion
            thereof, and collect the payments due with respect to the Collateral
            or any portion thereof. Seller shall pay all costs and expenses
            incurred by Buyer in connection with the appointment and activities
            of such receiver.

                  (vi) Seller agrees that Buyer may obtain an injunction or an
            order of specific performance to compel Seller to fulfill its
            obligations as set forth in Section 25, if Seller fails or refuses
            to perform its obligations as set forth therein.

                  (vii) Seller shall be liable to Buyer for the amount of all
            expenses, reasonably incurred by Buyer in connection with or as a
            consequence of an Event of Default, including, without limitation,
            reasonable legal fees and expenses and reasonable costs incurred in
            connection with hedging or covering transactions.

                  (viii) Buyer shall have all the rights and remedies provided
            herein, provided by applicable federal, state, foreign, and local
            laws (including, without limitation, the rights and remedies of a
            secured party under the Uniform Commercial Code of the State of New
            York, to the extent that the Uniform Commercial Code is applicable,
            and the right to offset any mutual debt and claim), in equity, and
            under any other agreement between Buyer and Seller.

                  (ix) Buyer may exercise one or more of the remedies available
            to Buyer immediately upon the occurrence of an Event of Default and,
            except to the extent provided in subsections (a)(i) and (iii) of
            this Section, at any time thereafter without notice to Seller. All
            rights and remedies arising under this Agreement as amended from
            time-to-time hereunder are cumulative and not exclusive of any other
            rights or remedies which Buyer may have.


                                  25

<PAGE>
                  (x) In addition to its rights hereunder, Buyer shall have the
            right to proceed against any assets of Seller which may be in the
            possession of Buyer or its designee (including the Custodian)
            including the right to liquidate such assets and to set off the
            proceeds against monies owed by Seller to Buyer pursuant to this
            Agreement. Buyer may set off cash, the proceeds of the liquidation
            of the Purchased Mortgage Loans, any Collateral or its proceeds, and
            all other sums or obligations owed by Seller to Buyer against all of
            Seller's obligations to Buyer, whether under this Agreement, under a
            Transaction, or under any other agreement between the parties, or
            otherwise, whether or not such obligations are then due, without
            prejudice to Buyer's right to recover any deficiency. Any cash,
            proceeds, or property in excess of any amounts due, or which Buyer
            reasonably believes may become due, to it from Seller shall be
            returned to Seller after satisfaction of all obligations of Seller
            to Buyer.

                  (xi) Buyer may enforce its rights and remedies hereunder
            without prior judicial process or hearing, and Seller hereby
            expressly waives any defenses Seller might otherwise have to require
            Buyer to enforce its rights by judicial process. Seller also waives
            any defense Seller might otherwise have arising from the use of
            nonjudicial process, enforcement and sale of all or any portion of
            the Collateral, or from any other election of remedies. Seller
            recognizes that nonjudicial remedies are consistent with the usages
            of the trade, are responsive to commercial necessity and are the
            result of a bargain at arm's length.

                  (xii) [reserved]

                  (xiii) Notwithstanding the foregoing remedies, if the Event of
            Default (other than an Event of Default under Section 13(a)(xi))
            arises from a breach of any representation or warranty set forth in
            Sections 10(b)(iii), (v) or (ix) or in Exhibit V attached hereto
            with respect to a Purchased Mortgage Loan, then Seller may elect to
            cure such default by repurchasing such Mortgage Loan or substituting
            for such Mortgage Loan within two (2) Business Days of such Event of
            Default, provided, however, that (ii) any such substistuted
            Collateral otherwise conforms to this Agreement and (ii) Seller
            shall not have the right to make the foregoing election if such
            breach causes a default with respect to Mortgage Loans that in the
            aggregate represent ten percent (10%) or more of the aggregate
            Purchase Price of all Purchased Mortgage Loans subject to then
            outstanding Transactions. The repurchase price for any such
            repurchase shall be the outstanding Repurchase Price of such
            Mortgage Loan, as the case may be, less any Income received by
            Buyer.


                                  26

<PAGE>
            Any such substitution shall be performed in accordance with Section
            9 of this Agreement.

            (b) If an Event of Default occurs with respect to Buyer, the
following rights and remedies are available to Seller:

                  (i) Upon tender by Seller of payment of the aggregate
            Repurchase Price for all such Transactions, Buyer's right, title and
            interest in all Purchased Mortgage Loans subject to such
            Transactions shall be deemed transferred to Seller, and Buyer shall
            deliver or cause to be transferred all such Purchased Mortgage Loans
            to Seller or its designee at Buyer's expense.

                  (ii) If Seller exercises the option referred to in subsection
            (b)(i) of this Section and Buyer fails to deliver or cause to be
            delivered the Purchased Mortgage Loans to Seller or its designee,
            after one Business Day's notice to Buyer, Seller may (A) purchase
            Mortgage Loans ("Replacement Loans") that are as similar as is
            reasonably practicable in characteristics, outstanding principal
            amounts (as a pool) and interest rate to any Purchased Mortgage
            Loans that are not delivered by Buyer to Seller or its designee as
            required hereunder or (B) in its sole discretion elect, in lieu of
            purchasing Replacement Loans, to be deemed to have purchased
            Replacement Loans at a price therefor on such date, equal to the
            Market Value of the Purchased Mortgage Loans.

                  (iii) Buyer shall be liable to the Seller, and Buyer shall pay
            to the Seller on demand, (A) with respect to Purchased Mortgage
            Loans (other than Additional Loans), for any excess of the price
            paid (or deemed paid) by Seller for Replacement Loans therefor over
            the Repurchase Price for such Purchased Mortgage Loans and (B) with
            respect to Additional Loans, for the price paid (or deemed paid) by
            Seller for the Replacement Loans therefor. In addition, Buyer shall
            be liable to Seller for interest on such remaining liability with
            respect to each such purchase (or deemed purchase) of Replacement
            Loans calculated on a 360-day year basis for the actual number of
            days during the period from and including the date of such purchase
            (or deemed purchase) until paid in full by Buyer. Such interest
            shall be at the greater of the Pricing Rate or the Prime Rate.

                  (iv) Buyer shall be liable to Seller for the amount of all
            expenses reasonably incurred by Seller in connection with or as a
            consequence of an Event of Default, including, without limitation,
            reasonable legal expenses and reasonable expenses and losses
            incurred in


                                  27

<PAGE>
            connection with covering existing hedging transactions with respect
            to the Purchased Mortgage Loans.

                  (v) Seller shall have all the rights and remedies provided
            herein, provided by applicable federal, state, foreign, and local
            laws, in equity, and under any other agreement between Buyer and
            Seller, including, without limitation, the right to offset any debt
            or claim.

                  (vi) Seller may exercise one or more of the remedies available
            to Seller immediately upon the occurrence of an Event of Default and
            at any time thereafter without notice to Buyer. All rights and
            remedies arising under this Agreement as amended from time-to-time
            hereunder are cumulative and not exclusive of any other rights or
            remedies which Seller may have.

15.   ADDITIONAL CONDITIONS

            Seller shall, on the date of the initial Transaction hereunder and,
upon the reasonable request of Buyer (but no more than once annually), on the
date of any subsequent Transaction, cause to be delivered to Buyer, with
reliance thereon permitted as to any Person that purchases the Purchased
Mortgage Loan from Buyer in a repurchase transaction, a favorable opinion or
opinions of counsel with respect to the matters set forth in Exhibit IV attached
hereto. In addition, on the date of the initial Transaction, Seller shall
execute a letter agreement with Buyer with respect to certain fees owed
hereunder and other matters reasonably required by Buyer.

16.   SINGLE AGREEMENT

            Buyer and Seller acknowledge that, and have entered hereinto and
will enter into each Transaction hereunder in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single business and
contractual relationship and that each has been entered into in consideration of
the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to
perform all of its obligations in respect of each Transaction hereunder, and
that a default in the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that each of them
shall be entitled to set off claims and apply property held by them in respect
of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries, and other transfers
made by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries, and other transfers in
respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries, and other transfers may be applied against each other
and netted; provided, however, that the parties hereto acknowledge and agree
that each Purchased Mortgage


                                  28

<PAGE>
Loan is identified and unique and nothing in this Agreement should limit or
reduce Buyer's obligation to deliver the Purchased Mortgage Loans to Seller as
and when provided herein.

17.   NOTICES AND OTHER COMMUNICATIONS

            Unless another address is specified in writing by the respective
party to whom any written notice or other communication is to be given
hereunder, all such notices or communications shall be in writing or confirmed
in writing and delivered at the respective addresses set forth in the
Confirmation.

18.   ENTIRE AGREEMENT; SEVERABILITY

            This Agreement together with the applicable Confirmation and the
Custodial Agreement constitutes the entire understanding between Buyer and
Seller with respect to the subject matter it covers and shall supersede any
existing agreements between the parties containing general terms and conditions
for repurchase transactions involving Purchased Mortgage Loans. By acceptance of
this Agreement, Buyer and Seller acknowledge that they have not made, and are
not relying upon, any statements, representations, promises or undertakings not
contained in this Agreement. Each provision and agreement herein shall be
treated as separate and independent from any other provision or agreement herein
and shall be enforceable notwithstanding the unenforceability of any such other
provision or agreement.

19.   NON-ASSIGNABILITY

            The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by Seller without the prior written
consent of Buyer. Subject to the foregoing, this Agreement and any Transactions
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Nothing in this Agreement express or implied,
shall give to any person, other than the parties to this Agreement and their
successors hereunder, any benefit or any legal or equitable right, power, remedy
or claim under this Agreement.

20.   TERMINABILITY

            This Agreement shall terminate upon the earlier of (a) 30 days'
written notice from either party to the other to such effect or (b) 364 days
from the date hereof, except that this Agreement shall, notwithstanding the
clause above, remain applicable to any Transaction then outstanding.
Notwithstanding any such termination or the occurrence of an Event of Default,
(i) all of the representations and warranties


                                  29

<PAGE>
hereunder (including those made in Exhibit V) and (ii) the covenants of Seller
made in subsection (g) of Section 12 shall each continue and survive.

21.   GOVERNING LAW

            THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.

22.   CONSENT TO JURISDICTION AND ARBITRATION

            The parties irrevocably agree to submit to the personal jurisdiction
of the United States District Court for the Southern District of New York, the
parties irrevocably waiving any objection thereto. If, for any reason, federal
jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto. Notwithstanding the foregoing two sentences, at either
party's sole option exercisable at any time not later than thirty (30) days
after an action or proceeding has been commenced, the parties agree that the
matter may be submitted to binding arbitration in accordance with the commercial
rules of the American Arbitration Association then in effect in the State of New
York and judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof within the City, County and State of New
York; provided, however, that the arbitrator shall not amend, supplement, or
reform in any regard this Agreement or the terms of any Confirmation, the rights
or obligations of any party hereunder or thereunder, or the enforceability of
any of the terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase transactions
and the secondary mortgage market in the City, County, and State of New York.

23.   NO WAIVERS, ETC.

            No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.



                                  30

<PAGE>
24.   INTENT

            The parties understand and intend that this Agreement and each
Transaction hereunder constitute a "repurchase agreement" and a "securities
contract" as those terms are defined under the relevant provisions of Title 11
of the United States Code, as amended.

25.   SERVICING

            (a) Notwithstanding the purchase and sale of the Purchased Mortgage
Loans hereby, Seller shall continue to cause the Purchased Mortgage Loans to be
serviced and special serviced by ___________ Mortgagor or another servicer
reasonably acceptable to Buyer, respectively, for the benefit of Buyer and, if
Buyer shall exercise its rights to pledge or hypothecate the Purchased Mortgage
Loan prior to the related Repurchase Date pursuant to Section 8, Buyer's
assigns; provided, however, that the obligations of Seller to service the
Purchased Mortgage Loans shall cease, at Seller's option, upon the payment by
Seller to Buyer of the Repurchase Price therefor. Seller shall cause the
Purchased Mortgage Loans to be serviced in accordance with the servicing
standards maintained by other prudent mortgage lenders with respect to mortgage
loans similar to the Purchased Mortgage Loans.

            (b) Seller agrees that Buyer is the owner of all servicing records,
including but not limited to any and all servicing agreements, files, documents,
records, data bases, computer tapes, copies of computer tapes, proof of
insurance coverage, insurance policies, appraisals, other closing documentation,
payment history records, and any other records relating to or evidencing the
servicing of Purchased Mortgage Loans (the "Servicing Records"). Seller grants
Buyer a security interest in all servicing fees and rights relating to the
Purchased Mortgage Loans and all Servicing Records to secure the obligation of
the Seller or its designee to service in conformity with this Section and any
other obligation of Seller to Buyer. Seller covenants to safeguard such
Servicing Records and to deliver them promptly to Buyer or its designee
(including the Custodian) at Buyer's request and upon Event of Default.

            (c) Upon the occurrence and continuance of an Event of Default,
Buyer may, in its sole discretion, (i) sell its right to the Purchased Mortgage
Loans on a servicing released basis or (ii) terminate the servicers of the
Purchased Mortgage Loans with or without cause, in each case without any
obligation on the part of Buyer to pay any termination fees owed by Seller.

            (d) Seller shall not employ any servicers or special servicer other
than _____________, to service the Purchased Mortgage Loans without the prior
written approval of Buyer, which approval will not be unreasonably withheld.



                                  31

<PAGE>
            (e) Seller shall cause the servicer to execute a letter agreement
with Buyer acknowledging Buyer's security interest and agreeing that, upon
notice from Buyer (or the Custodian on its behalf) that an Event of Default has
occurred and in continuing hereunder, it shall deposit all Income with respect
to the Purchased Mortgage Loans in the account specified in the third sentence
of Section 5(a).

26.   DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

            The parties acknowledge that they have been advised that in the case
of Transactions in which one of the parties is an "insured depository
institution" as that term is defined in Section 1831(a) of Title 12 of the
United States Code, as amended, funds held by the financial institution pursuant
to a Transaction hereunder are not a deposit and therefore are not insured by
the Federal Deposit Insurance Corporation, the Savings Association Insurance
Fund or the Bank Insurance Fund, as applicable.

27.   RESERVED

28.   MISCELLANEOUS

            (a) Buyer shall be authorized to accept orders and take any other
action affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person authorized to act on
behalf of the Seller.

            (b) If there is any conflict between the terms of this Agreement or
any Transaction entered into hereunder and the Custodial Agreement, this
Agreement shall prevail.

            (c) If there is any conflict between the terms of a Confirmation or
a corrected Confirmation issued by the Buyer and this Agreement, the corrected
Confirmation shall prevail.

            (d) This Agreement may be executed in counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts shall
together constitute but one and the same instrument.

            (e) Seller agrees to reimburse Buyer for all reasonable costs and
expenses of Buyer in connection with this Agreement including, without
limitation, (i) the fees, expenses and disbursement of counsel to Buyer, (ii)
due diligence expenses and (iii) on-going auditing fees; provided that with
respect to the establishment of this Agreement, Seller shall be responsible for
up to $50,000 pursuant to this paragraph.



                                  32
<PAGE>
            (f) Seller and Buyer agree to maintain the confidentiality of this
Agreement and its terms and agree not to disclose this Agreement or its terms to
any other party except as required for the enforcement of its terms or as
required by law, regulatory requirements or court order or discovery. In the
event Seller determines, in consultation with legal counsel experienced in
securities regulation, that the Agreement must be filed with the Securities and
Exchange Commission pursuant to applicable law, such filing may only be made
after consultation with Buyer and agreement upon redaction of certain terms of
the Agreement (including, without limitation, the Pricing Spread), provided that
nothing herein is intended to prevent Seller from complying with applicable laws
and requirements of the Securities Act of 1933, as amended or regulations
promulgated thereunder.

            (g) The headings in this Agreement are for convenience of reference
only and shall not affect the interpretation or construction of this Agreement.


                                            [Signature page follows.]


                                  33

<PAGE>
            IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date set forth above.

                                    LEHMAN COMMERCIAL PAPER INC.,
                                    Buyer



                            By:    
                                   -----------------------------------------
                            Title:                                         
                            Date:


                               FHB FUNDING CORP.,
                                    Seller


                            By:    
                                   ----------------------------------------- 
                            Title:                                            
                            Date:



                                  34

<PAGE>
                                EXHIBITS
                                --------


EXHIBIT I      Confirmation

EXHIBIT II     Form of Custodial Delivery 

EXHIBIT III    Form of Power of Attorney 

EXHIBIT IV     Opinion of Counsel to Seller

EXHIBIT V      Representations and Warranties Regarding Mortgage Loan

EXHIBIT VI     Seller's Underwriting Guidelines



                                  35

<PAGE>
                                EXHIBIT I

Form of Confirmation Letter

                                                                  (date)

FHB Funding Corp.

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

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

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

Attention:
           --------------------------

Confirmation No.:
                  -------------------



Ladies/Gentlemen: 


            This letter confirms our oral agreement to purchase from you the
Mortgage Loans listed in Appendix I hereto, pursuant to the Master Repurchase
Agreement Governing Purchases and Sales of Mortgage Loans between us, dated as
of July __, 1998 (the "Agreement"), as follows:

            Purchase Date:

            Mortgage Loans to be Purchased: See Appendix I hereto.
            [Appendix I to Confirmation Letter will list Mortgage Loans]

            Aggregate Principal Amount of Purchased Mortgage Loans:

            Purchase Price:

            Pricing Rate:

            Repurchase Date:

            Repurchase Price:

            Collateral Amount Percentage with respect to Market Value:



                                  36

<PAGE>
            Names and addresses for communications:

            Buyer:

            Lehman Commercial Paper Inc.
            200 Vesey Street
            9th Floor
            New York, New York  10285-0900
            Attention: Central Funding Department

            Seller:

            FHB Funding Corp.
               
            -------------------------------------

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

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

            Attention:
                       --------------------------

                                    LEHMAN COMMERCIAL PAPER INC.


                            By:    
                                   ----------------------------------------- 
                            Name:
                            Title:                                            
                            


Agreed and Acknowledged:

FHB FUNDING CORP.,
Seller

                            By:    
                                   -----------------------------------------  
                            Name:
                            Title:                                            
                            

                                  37

<PAGE>
                               EXHIBIT II

                           Form of Custodial Delivery

            On this ____ day of ___________, 199__, FHB Funding Corp.
("Seller"), as the Seller under that certain Master Repurchase Agreement
Governing Purchases and Sales of Mortgage Loans, dated as of July __, 1998 (the
"Repurchase Agreement") between the Seller and Lehman Commercial Paper Inc.
("Buyer"), does hereby deliver to __________________ ("Custodian"), as custodian
under that certain Custodial Agreement, dated as of July, 1998, among Buyer,
Seller and Custodian the Mortgage Files with respect to the Mortgage Loans to be
purchased by Buyer pursuant to the Repurchase Agreement, which Mortgage Loans
are listed on the Mortgage Loan Schedule attached hereto and which Mortgage
Loans shall be subject to the terms of the Custodial Agreement on the date
hereof.

            With respect to the Mortgage Files delivered hereby, for the
purposes of issuing the Trust Receipt, the Custodian shall review the Mortgage
Files to ascertain delivery of the documents listed in Annex A attached to the
Custodial Agreement.

            [The Mortgage Loans delivered hereby constitute Additional
Collateral delivered pursuant to Section 7 of the Custodial Agreement].][The
Mortgage Loans delivered hereby constitute Substituted Collateral pursuant to
Section 6 of the Custodial Agreement and are intended to be substituted for the
Purchased Mortgage Loans listed on the [schedule attached hereto][Request for
Release of Documents and receipt delivered herewith]. The Purchased Mortgage
Loans to be released shall be delivered to _______________.]

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

            IN WITNESS WHEREOF, the Seller has caused its name to be signed
hereto by its officer thereunto duly authorized as of the day and year first
above written.

FHB FUNDING CORP.,

Seller


By:    
       -----------------------------------------                   
Name:
Title: 


                                  38

<PAGE>
                               EXHIBIT III

                        Form of Power of Attorney

            "Know All Men by These Presents, that FHB Funding Corp. ("Seller"),
does hereby appoint Lehman Commercial Paper Inc. ("Buyer"), its attorney-in-fact
to act in Seller's name, place and stead in any way which Seller could do with
respect to (i) the completion of the endorsements of the Mortgage Notes and the
Assignments of Mortgages, (ii) the recordation of the assignments of Mortgages
and (iii) the enforcement of the Seller's rights under the Mortgage Loans
purchased by Buyer pursuant to a Master Repurchase Agreement Governing Purchases
and Sales of Mortgage Loans dated as of July _, 1998 between Seller and Buyer
(the "Master Agreement") and to take such other steps as may be necessary or
desirable to enforce Buyer's rights against such Mortgage Loans, the related
Mortgage Files and the Servicing Records to the extent that Seller is permitted
by law to act through an agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Master Agreement.

            TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES
THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS
INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE
INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE
OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY,
AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

            IN WITNESS WHEREOF Seller has caused this Power of Attorney to be
executed and the Seller's seal to be affixed this __ day of July, 1998.
FHB FUNDING CORP.

(Seal)


 By:    
        -----------------------------------------                       
 Name:
 Title: 


                                  39

<PAGE>
                               EXHIBIT IV

                       OPINION OF SELLER'S COUNSEL




                                  40

<PAGE>

                                EXHIBIT V

                     Representations and Warranties
                        Regarding Mortgage Loans

            The Seller represents and warrants to the Buyer that, with respect
to each Mortgage Loan sold in a Transaction hereunder, as of the related
Purchase Date:

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

            (b) Payments Current Within 59 Days. The Mortgage Loan, together
with the other Purchased Mortgage Loans subject to Transactions, would not cause
the 30+ Delinquency Percentage to exceed 3.0%, and is not more than 59 days
Delinquent;

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

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

            (e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of


                                  41

<PAGE>
usury, nor will the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable, in whole or in part, or subject to any right
of rescission, set-off, counterclaim or defense, including without limitation
the defense of usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;

            (f) Insurance Policies in Effect. The fire and casualty insurance
policy covering the Mortgaged Property (1) affords (and will afford) sufficient
insurance against fire and such other risks as are usually insured against in
the broad form of extended coverage insurance from time to time available, as
well as insurance against flood hazards if the Mortgaged Property is an area
identified by the Federal Emergency Management Agency as having special flood
hazards; (2) is a standard policy of insurance for the locale where the
Mortgaged Property is located, is in full force and effect, and the amount of
the insurance is in the amount of the full insurable value of the Mortgaged
Property on a replacement cost basis or the unpaid balance of the Mortgage
Loans, whichever is less; (3) names (and will name) the present owner of the
Mortgaged Property as the insured; and (4) contains a standard mortgagee loss
payable clause in favor of Seller. All individual insurance policies with
respect to the Mortgage Loan are the valid and binding obligation of the insurer
and contain a standard mortgage clause naming Seller, its successors and
assigns, as Mortgagee. All premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder to maintain all such insurance policies at
the Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;

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

            (h) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole
or in part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission;

            (i) Location and Type of Mortgaged Property. The Mortgaged Property
is located in the state identified in the Mortgage Loan Schedule and consists


                                  42

<PAGE>
of a parcel of real property with a detached single family residence erected
thereon, or a two- to four-family dwelling, or an individual condominium unit in
a condominium project, or an individual unit in a planned unit development and
no residence or dwelling is a mobile home or a manufactured dwelling which is
not permanently affixed to real property. No portion of the Mortgaged Property
is used for commercial purposes (except that up to 5% of the Purchased Mortgage
Loans can relate to mixed-use property);

            (j) Valid First or Second Lien. The Mortgage is a valid, subsisting
and enforceable first or second lien on the Mortgaged Property, including all
buildings on the Mortgaged Property and all installations and mechanical,
electrical, plumbing, heating and air conditioning systems located in or annexed
to such buildings, and all additions, alterations and replacements made at any
time with respect to the foregoing.
The lien of the Mortgage is subject only to:

                  (1)   the lien of current real property taxes and special
            assessments not yet due and payable;

                  (2) covenants, conditions and restrictions, rights of way,
            easements and other matters of the public record as of the date of
            recording acceptable to mortgage lending institutions generally and
            specifically referred to in the lender's title insurance policy
            delivered to the originator of the Mortgage Loan and (i) referred to
            or to otherwise considered in the appraisal made for the originator
            of the Mortgage Loan or (ii) which do not adversely affect the
            appraised value of the Mortgaged Property set forth in such
            appraisal;

                  (3) in the case of a Mortgaged Property that is a condominium
            or an individual unit in a planned unit development, liens for
            common charges permitted by statute;

                  (4) in the case where the Mortgage Loan is secured by a Second
            Mortgage (and represented on the Mortgage Loan Schedule as such),
            the lien of the First Mortgage; and

                  (5) other matters to which like properties are commonly
            subject which do not materially interfere with the benefits of the
            security intended to be provided by the Mortgage or the use,
            enjoyment, value or marketability of the related Mortgaged Property.

            Any security agreement, chattel mortgage or equivalent document
related to and delivered in connection with the Mortgage Loan establishes and
creates a valid, subsisting and enforceable first or second lien and first or
second priority


                                  43

<PAGE>
security interest on the property described therein and Seller has full right to
pledge and assign the same to Buyer or its designee (including the Custodian).

            (k) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage are genuine, and each is the legal, valid and binding obligation of the
maker thereof enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditor's generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law.) All
parties to the Mortgage Note and the Mortgage had legal capacity to enter into
the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage,
and the Mortgage Note and the Mortgage have been duly and properly executed by
such parties. The Mortgagor is a natural person who is a party to the Mortgage
Note and the Mortgage in an individual capacity, and not in the capacity of a
trustee or otherwise;

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

            (m) Ownership. Seller is the sole owner of record and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged except as provided
in this Agreement, and Seller has good and indefeasible title thereto, and has
full right to pledge and assign the Mortgage Loan to Buyer or its designee
(including the Custodian) free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest, and
has full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Mortgage Loan pursuant
to this Agreement (except a first lien where the Mortgage Loan is secured by a
second lien);

            (n) Doing Business. To the best of Seller's knowledge, all parties
which have had any interest in the Mortgage Loan, whether as mortgagee,
assignee, pledgee or otherwise, are (or, during the period in which they held
and disposed of such interest, were) (1) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the Mortgaged
Property is located, and (2) organized under the laws of such state, or (3)
qualified to do business in such state, or (4) federal savings and loan
associations or national banks having principal offices in such state, or (5)
not doing business in such state;


                                  44

<PAGE>
            (o) LTV. No Mortgage Loan has a Loan-to-Value Ratio of more than
100%.

            (p) Title Insurance. The Mortgage Loan is covered by an ALTA
mortgage title insurance policy or such other form of policy acceptable to FNMA
or FHLMC, issued by and constituting the valid and binding obligation of a title
insurer generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans for sale
to prudent investors in the secondary market that invest in mortgage loans such
as the Mortgage Loans and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring Seller, its successors and assigns, as
to the first or second priority lien of the Mortgage, as applicable. Seller is
the sole named insured of such mortgage title insurance policy, the assignment
to Buyer or the Custodian as assignee of Buyer of Seller's interest in such
mortgage title insurance policy does not require the consent of or notification
to the insurer or the same has been obtained, and such mortgage title insurance
policy is in full force and effect and will be in full force and effect and
inure to the benefit of Buyer upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such mortgage
title insurance policy and no prior holder of the related Mortgage, including
Seller, has done, by act or omission, anything that would impair the coverage of
such mortgage title insurance policy;

            (q) No Defaults. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event which
to the best knowledge of Seller, with the passage of time or with notice and the
expiration of any grace or cure period, other than the failure to make, prior to
expiration of the applicable grace period, the monthly payment due immediately
prior to the related Purchase Date if such Purchase Date occurs prior to the
expiration of such grace period, would constitute a default, breach, violation
or event of acceleration, and neither Seller nor its predecessors have waived
any default, breach, violation or event of acceleration;

            (r) No Mechanics' Liens. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage except those that are stated in the title
insurance policy and for which related losses are affirmatively insured against
by such title insurance policy;

            (s) Location of Improvements; No Encroachments. All improvements
which were considered in determining the appraised value of the Mortgaged
Property lay wholly within the boundaries and building restriction lines of the
Mortgaged Property and no improvements on adjoining properties encroach upon


                                  45

<PAGE>
the Mortgaged Property except those that are stated in the title insurance
policy and for which related losses are affirmatively insured against by such
title insurance policy. No improvement located on or being part of the mortgaged
property is in violation of any applicable zoning law or regulation;

            (t) Origination. The Mortgage Loan was originated, or purchased and
reunderwritten, by Seller. The documents, instruments and agreements submitted
for loan underwriting were not falsified and contain no untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the information and statements therein not misleading.

            (u) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. To the best knowledge of the Seller, there is no homestead
or other exemption available to a Mortgagor which would interfere with the right
to sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;

            (v) Occupancy of the Mortgaged Property. As of the related Purchase
Date the Mortgaged Property is capable of being lawfully occupied under
applicable law. All inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities. Either that the Mortgagor represented
at the time of origination of the Mortgage Loan that the Mortgagor would occupy
the Mortgaged Property as the Mortgagor's primary residence or second home or
the Mortgaged Property is capable of being occupied pursuant to terms that
approximate current standard market rental terms and rates;

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

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



                                  46

<PAGE>
            (y)   [reserved];

            (z) Purchase of Mortgage Documents. Each of the documents and
instruments included in the Mortgage File is duly executed and in due and proper
form and each such document or instrument is in a form generally acceptable to
prudent institutional mortgage lenders that regularly originate and purchase
mortgage loans;

            (aa) Condominiums/Planned Unit Developments. If the Mortgaged
Property is a condominium unit or a planned unit development (other than a de
minimus planned unit development) such condominium or planned unit development
project meets FNMA eligibility requirements for sale to FNMA or is located in a
condominium or planned unit development project which has received FNMA project
approval and the representations and warranties required by FNMA with respect to
such condominium or planned unit development have been made and remain true and
correct in all respects;

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

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

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

            (ee) Consolidation of Future Advances. Any future advances made
prior to the Purchase Date have been consolidated with the outstanding principal
amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having first or second lien priority, as applicable, by a title insurance
policy or an endorsement to the policy insuring the mortgagee's consolidated
interest. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;



                                  47

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

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

            (hh)  Conversion to Fixed Interest Rate. None of the Mortgage Notes
contain a provision allowing the Mortgagor to convert the Mortgage Note from an
adjustable interest rate Mortgage Note to a fixed interest rate Mortgage Note;

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

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



                                  48

<PAGE>
            (kk) Environmental Matters. The Mortgaged Property is free from any
and all toxic or hazardous substances and there exists no violation of any
local, state or federal environmental law, rule or regulation;

            (ll) Second Mortgages. The Mortgage Loan, together with the other
Purchased Mortgage Loans subject to then outstanding Transactions does not cause
the aggregate Purchase Price of all Purchased Mortgage Loans which are secured
by Second Mortgages to exceed 30% of the aggregate Purchase Price for all
Purchased Mortgage Loans which are subject to then outstanding Transactions.
With respect to each Mortgage Loan secured by a Second Mortgage lien on the
related Mortgaged Property:

                  (A) if the Loan-to-Value Ratio is higher than 70%, either the
            related First Mortgage does not provide for a balloon payment or the
            maturity date of each Mortgage Loan with respect to which a First
            Mortgage on the related Mortgaged Property provides for a balloon
            payment is prior to the maturity date of the Mortgage Loan relating
            to such first lien;

                  (B) the related first lien on any Mortgaged Property with
            respect to which the related Mortgage Loan secured by a second lien
            does not provide for negative amortization;

                  (C) either no consent for the Mortgage Loan secured by a
            Second Mortgage on the related Mortgaged Property is required by the
            holder of the related First Mortgage or such consent has been
            obtained and is contained in the Mortgage File; and

                  (D) the related First Mortgage is not held by an individual
            (to the extent the aggregate principal amount of Second Mortgages in
            which the First Mortgage is held by an individual is in excess of 5%
            of the aggregate principal amount of Mortgage Loans in the
            facility);

            (mm)  Seller Origination.  The Mortgage Loan was originated or
purchased and reunderwritten by Seller;

            (nn) "C" Loans. In the event such Mortgage Loan is a "C" Loan, the
aggregate unpaid principal balance of such Mortgage Loan, together with the
other Purchased Mortgage Loans subject to then outstanding Transactions, does
not cause the aggregate Purchase Price of all Purchased Mortgage Loans which are
"C" Loans to exceed 20% of the aggregate unpaid principal balance for all
Purchased Mortgage Loans which are subject to then outstanding Transactions;



                                  49

<PAGE>
            (oo)  No Construction Loans.  No Mortgage Loan is a construction
loan;

            (pp)  Selection by Seller.  No Mortgage Loan was selected for
            inclusion under this Agreement on any basis which was intended to
have a material adverse effect on Buyer;

            (qq) Manufactured Housing. No Mortgage Loans relate to a
manufactured housing unit which is not permanently affixed to real property. If
the Mortgage Loan relates to a permanently affixed manufactured housing unit or
mixed use property, such Mortgage Loan together with all other such Mortgage
Loans then subject to Transactions shall not exceed 3% of the aggregate Purchase
Price;

            (rr)  [reserved]

            (ss) No Bankruptcy of Mortgagor. None of the Mortgage Loans are
subject to a bankruptcy plan; (tt) Conformance to Underwriting Standards. Each
Mortgage Loan conforms to the Seller's underwriting guidelines supplied to Buyer
by Seller, or is an approved exception thereto, provided that such exception
does not materially impact the value of such Mortgage Loan;

            (uu)  Qualified Mortgage.  Each Mortgage Loan constitutes a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code;

            (vv)  [Reserved];

            (ww)  Balloon Mortgage Loans.  If the Mortgage Loan is a Balloon
Mortgage Loan, such Mortgage Loan together with all other Balloon Mortgage Loans
subject to Transactions, does not exceed 20% of the aggregate Purchase Price;

            (xx) Owner Occupied. In the event such Mortgage Loan relates to a
Mortgaged Property which is non-owner occupied, the Mortgage Loan, together with
the other Purchased Mortgage Loans subject to Transactions relating to Mortgaged
Properties which are non-owner occupied, does not exceed 20% of the aggregate
outstanding unpaid principal balance of all Purchased Mortgage Loans subject to
Transactions;

            (yy) Payment Terms. With respect to adjustable rate Mortgage Loans,
the mortgage interest rate is adjusted annually or semi-annually on each
interest rate adjustment date to equal the index plus the gross margin, rounded
up or down to the nearest 1/8%, subject to the mortgage interest rate cap. With
respect to fixed rate Mortgage Loans, the Mortgage Note is payable each month in
equal monthly


                                  50

<PAGE>
installments of principal and interest. With respect to adjustable rate Mortgage
Loans, installments of interest are subject to change due to the adjustments to
the mortgage interest rate on each interest rate adjustment date, with interest
calculated and payable in arrears, sufficient to amortize the Mortgage Loan
fully by the stated maturity date, over an original term of not more than thirty
years from commencement of amortization; and

            (aaa) Wet Ink Mortgage Loans. In the event such Mortgage Loan is a
Wet Ink Mortgage Loan, the Mortgage Loan, together with the other Wet Ink
Mortgage Loans subject to then outstanding Transactions does not cause the
aggregate unpaid principal balance of all Purchased Mortgage Loans which are Wet
Ink Mortgage Loans to exceed $40,000,000.

            It is understood and agreed that the representations and warranties
set forth in this Exhibit V shall survive delivery of the respective Mortgage
Files to the Custodian on behalf of Buyer.




                                  51