Document:

<Page>

                                                                    Exhibit 10.4

                                                                  CONFORMED COPY

            SECOND AMENDMENT (this "AMENDMENT"), dated as of February 21, 2002,
to the FIVE YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT AGREEMENT dated as of
March 4, 1997, as amended and restated through February 28, 2000 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
by and among PHH CORPORATION, a Maryland corporation (the "BORROWER"), the
financial institutions parties thereto (the "LENDERS"), JPMORGAN CHASE BANK
(formerly known as The Chase Manhattan Bank), a New York banking corporation, as
agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT").

                              W I T N E S S E T H:

            WHEREAS, the Borrower has requested that certain provisions of the
Credit Agreement be amended as set forth herein; and

            WHEREAS, the Lenders are willing to agree to such amendments on the
terms set forth herein;

            NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the undersigned hereby agree as follows:

            I. DEFINED TERMS. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

            II. AMENDMENT TO SECTION 1. Section 1 of the Credit Agreement is
hereby amended as follows:

            (a) by deleting the definition of the defined term "Chase" in its
entirety and substituting in lieu thereof the following definition in its
appropriate alphabetical order:

            "JPMORGAN CHASE BANK" shall mean JPMorgan Chase Bank (formerly known
      as The Chase Manhattan Bank), a New York banking corporation.

            (b) by deleting the definition of the following defined terms in
their entirety and substituting in lieu thereof the following definitions:

            "AVIS FLEET TRANSACTION" shall mean the transaction pursuant to
      which, after the consummation of the Avis Merger, the Borrower purchased
      Avis Fleet from Avis.

            "AVIS MERGER" shall mean the transaction pursuant to the Agreement
      and Plan of Merger, dated as of November 11, 2000 (the "MERGER
      AGREEMENT"), by and among Avis, Cendant Corporation, a Delaware
      corporation ("CENDANT"), the Borrower (an indirect wholly-owned subsidiary
      of Cendant) and Avis Acquisition Corp., a Delaware corporation and a
      wholly-owned subsidiary of the Borrower ("MERGER SUB") in which Merger Sub
      merged with and into Avis and each outstanding share of class A common
      stock, par value $.01 per share of Avis (the "COMMON STOCK"), other than
      shares of Common Stock held by any subsidiary of Avis, held in Avis'
      treasury, held by Cendant

<Page>
                                                                               2

      or any subsidiary of Cendant or held by stockholders who perfect their
      appraisal rights under Delaware law, was converted into the right to
      receive $33.00 in cash.

            "CASH EQUIVALENTS" shall mean (i) investments in commercial paper
      maturing in not more than 270 days from the date of issuance which at the
      time of acquisition is rated at least A-1 or the equivalent thereof by
      S&P, or P-1 or the equivalent thereof by Moody's, (ii) investments in
      direct obligations or obligations which are guaranteed or insured by the
      United States or any agency or instrumentality thereof (provided that the
      full faith and credit of the United States is pledged in support thereof)
      having a maturity of not more than three years from the date of
      acquisition, (iii) investments in certificates of deposit maturing not
      more than one year from the date of origin issued by a Lender or a bank or
      trust company organized or licensed under the laws of the United States or
      any state or territory thereof having capital, surplus and undivided
      profits aggregating at least $500,000,000 and in each case A rated or
      better by S&P or Moody's, (iv) money market mutual funds having assets in
      excess of $2,000,000,000, (v) investments in asset-backed or
      mortgage-backed securities, including investments in collateralized,
      adjustable rate mortgage securities and those mortgage-backed securities
      which are rated at least AA by S&P or Aa by Moody's or are of comparable
      quality at the time of investment, and (vi) banker's acceptances maturing
      not more than one year from the date of origin issued by a bank or trust
      company organized or licensed under the laws of the United States or any
      state or territory thereof and having capital, surplus and undivided
      profits aggregating at least $500,000,000, and rated A or better by S&P or
      Moody's.

            "EXCESS UTILIZATION DAY" shall mean each day on which the Commitment
      Utilization Percentage exceeds 25%.

            "LEAF TRUST TRANSACTION" means the financing of motor vehicles and
      other equipment or personal property pursuant to that certain Amended and
      Restated Purchase Agreement, dated as of March 1, 2001, among LEAF Trust,
      a trust established under the laws of the Province of Ontario, the
      Canadian Imperial Bank of Commerce, as Administrative Agent and PHH
      Vehicle Management Services, Inc., a corporation amalgamated under the
      laws of Canada (the "PURCHASE AGREEMENT"), including any amendments,
      supplements, modifications, extensions, renewals, restatements or
      refundings thereof and any facilities or agreements that replace, refund
      or refinance, in whole or in part, the Purchase Agreement.

            (c) by deleting the following proviso from the definition of
"Indebtedness" in its entirety and substituting in lieu thereof a period ("."):

            ; PROVIDED that on the date of the Avis Merger and for a period of
            thirty (30) days thereafter, any Indebtedness of Avis or any of its
            Subsidiaries shall not be deemed Indebtedness for the purposes of
            this definition.

            III. AMENDMENTS TO SECTION 2.

            (a) Section 2.7 of the Credit Agreement is hereby amended by
deleting the "." at the end of Section 2.7(a) and substituting in lieu thereof
the following:

<Page>
                                                                               3

            ; PROVIDED, that if any Lender continues to have any outstanding
      Loans after its Commitment terminates, then such Facility Fee shall
      continue to accrue on the daily aggregate principal amount of such
      Lender's Loans for each day from and including the date on which its
      Commitment terminates to but excluding the date on which such Lender
      ceases to have any outstanding Loans.

            (b) Section 2.7 of the Credit Agreement is hereby further amended by
deleting Section 2.7(b) in its entirety and substituting in lieu thereof the
following:

                  (b) The Borrower agrees to pay to each Lender, through the
            Administrative Agent, on each March 31, June 30, September 30 and
            December 31, and on the date on which the Commitment of such Lender
            shall be terminated as provided herein, a utilization fee (a
            "UTILIZATION FEE") at a rate per annum equal to .25% for each day on
            which the Commitment Utilization Percentage exceeds 25%, which fee
            shall accrue on the daily amount of the Commitment of such Lender
            (whether used or unused) for each Excess Utilization Day during the
            period from and including February 21, 2002 to but excluding the
            date on which such Commitment terminates; PROVIDED that, if such
            Lender continues to have any outstanding Loans after its Commitment
            terminates, then such Utilization Fee shall continue to accrue on
            the daily aggregate principal amount of such Lender's Loans for each
            Excess Utilization Day from and including the date on which its
            Commitment terminates to but excluding the date on which such Lender
            ceases to have any outstanding Loans. All Utilization Fees shall be
            computed on the basis of the actual number of days elapsed in a year
            of 360 days and shall be payable in arrears.

            (c) Section 2.22 of the Credit Agreement is hereby amended by
deleting the first sentence thereof and the table set forth therein in their
respective entireties and substituting in lieu thereof the following:

            The Facility Fee and the applicable LIBOR Spread in effect from time
      to time from and including February 21, 2002 shall be determined in
      accordance with the following table:

<Table>
<Caption>
         S&P/Moody's Rating
         Equivalent of the
     Borrower's senior unsecured              Facility Fee                  Applicable LIBOR
           long-term debt                  (in Basis Points)            Spread (in Basis Points)
           --------------                  -----------------            ------------------------
<S>                                                <C>                              <C>
A/A2 or better                                     10.0                              52.5
A-/A3                                              12.5                              62.5
BBB+/Baa1                                          15.0                              72.5
BBB/Baa2                                           17.5                              82.5
BBB-/Baa3                                          22.5                              90.0
BB+/Ba1 or worse                                   37.5                             137.5
</Table>

            IV. AMENDMENTS TO SECTION 6.

<Page>
                                                                               4

            (a) Section 6.1 of the Credit Agreement is hereby amended by
deleting Section 6.1(i) thereof in its entirety and substituting in lieu thereof
the following:

            (i) Indebtedness (other than Indebtedness of Asset Securitization
      Subsidiaries incurred to finance asset securitization transactions
      permitted by this Agreement) consisting of the obligation to repurchase
      mortgages and related assets or secured by mortgages and related assets in
      connection with other mortgage warehouse financing arrangements, if the
      aggregate principal amount of all such Indebtedness does not exceed
      $900,000,000; and

            (b) Section 6.1 of the Credit Agreement is hereby amended by
deleting clause (j) thereof and making clause (k) thereof into clause (j)
thereof.

            (c) Section 6.3 of the Credit Agreement is hereby amended by
deleting said section in its entirety and substituting in lieu thereof the
following:

            SECTION 6.3. LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into
      any transaction, including, without limitation, any purchase, sale, lease
      or exchange of property or the rendering of any service, with any
      Affiliate (other than the Borrower or a wholly-owned Subsidiary of the
      Borrower) unless such transaction is (a) otherwise permitted under this
      Agreement and (b) upon fair and reasonable terms no less favorable to the
      Borrower or such Subsidiary, as the case may be, than it would obtain in a
      comparable arm's length transaction with a Person which is not an
      Affiliate.

            (d) Section 6.4 of the Credit Agreement is hereby amended by
deleting clause (ii) of Section 6.4(a) thereof in its entirety and substituting
in lieu thereof the following:

            (ii) in which the surviving entity becomes a Material Subsidiary of
      the Borrower immediately upon the effectiveness of such merger,
      consolidation, dissolution or liquidation or

            (e) Section 6.5 of the Credit Agreement is hereby amended by
deleting Section 6.5(o) thereof in its entirety and substituting in lieu thereof
the following:

            (o) Liens on mortgages and related assets securing obligations to
      the extent such obligations are permitted by Section 6.1(i); and

            (f) Section 6.5 of the Credit Agreement is hereby further amended by
deleting Section 6.5(p) and (q) thereof in their respective entireties, and
substituting in lieu thereof the following:

            (p) any Liens securing Indebtedness and related obligations of the
      Borrower or any of the Material Subsidiaries that principally transact
      business in the United States to the extent such Indebtedness and related
      obligations are permitted under Section 6.1(j) hereof.

            (g) Section 6.6 of the Credit Agreement is hereby amended by
deleting said section in its entirety and substituting in lieu thereof the
following:

<Page>
                                                                               5

            SECTION 6.6. SALE AND LEASEBACK. Enter into any arrangement with any
      Person or Persons, whereby in contemporaneous transactions the Borrower or
      any of its Subsidiaries sells essentially all of its right, title and
      interest in a material asset and the Borrower or any of its Subsidiaries
      acquires or leases back the right to use such property except that the
      Borrower or any of its Subsidiaries may enter into sale-leaseback
      transactions relating to assets not in excess of $100,000,000 in the
      aggregate on a cumulative basis, and except (a) any arrangements of Avis
      Fleet or any of its Subsidiaries (other than the LEAF Trust Transaction)
      existing as of the date of the Avis Fleet Transaction and any renewals,
      extensions or modifications thereof so long as such renewals, extensions
      or modifications are effected on substantially the same terms or on terms
      which, in the aggregate, are not more adverse to the Lenders in any
      material respect; (b) the LEAF Trust Transaction; and (c) without limiting
      either of the foregoing clauses (a) and (b), any sale-leaseback
      transaction entered into in connection with an asset securitization
      transaction the indebtedness or Indebtedness relating to which is
      permitted to be secured pursuant to Section 6.5(l) or 6.5(n).

            (h) Section 6.7 of the Credit Agreement is hereby amended by
deleting said section in its entirety and substituting in lieu thereof the
following:

            SECTION 6.7. CONSOLIDATED NET WORTH. Permit Consolidated Net Worth
      on the last day of any fiscal quarter to be less than the sum of (i)
      $1,250,000,000 PLUS (ii) 25% of Consolidated Net Income, if positive, for
      each fiscal quarter after December 31, 2001.

            (i) Section 6.10 of the Credit Agreement is hereby amended by
deleting said section in its entirety and substituting in lieu thereof the
following:

            SECTION 6.10. RESTRICTIONS AFFECTING SUBSIDIARIES. Enter into, or
      suffer to exist, any Contractual Obligation with any Person, which
      prohibits or limits the ability of any Material Subsidiary (other than
      Special Purpose Vehicle Subsidiaries and Asset Securitization
      Subsidiaries) to (a) pay dividends or make other distributions or pay any
      Indebtedness owed to the Borrower or any other Subsidiary, (b) make loans
      or advances to the Borrower or any other Subsidiary or (c) transfer any of
      its properties or assets to the Borrower or any other Subsidiary, except
      in each case any Contractual Obligation of Avis Fleet or any of its
      Subsidiaries (other than Asset Securitization Subsidiaries or Special
      Purpose Vehicle Subsidiaries) existing as of the date of the Avis Fleet
      Transaction and any renewals, extensions or modifications thereof so long
      as such renewals, extensions or modifications are effected on
      substantially the same terms or on terms which, in the aggregate, are not
      more adverse to the Lenders in any material respect.

            (j) Section 6.12 of the Credit Agreement is hereby amended by
deleting said section in its entirety.

            V. AMENDMENTS TO SECTION 9.

            (a) Section 9.1 of the Credit Agreement is hereby amended by
deleting the reference to "11333 McCormick Road, Hunt Valley, Maryland
21031-1000" set forth therein and substituting in lieu thereof "1 Campus Drive,
Parsippany, New Jersey 07054-0642".

<Page>
                                                                               6

            (b) Section 9.3 of the Credit Agreement is hereby amended by
deleting clause (3) of the proviso to Section 9.3(b)(ii) in its entirety and
substituting in lieu thereof the following:

            (3) the amount of the Commitment or Competitive Loans, as the case
      may be, of the assigning Lender subject to each such assignment
      (determined as of the date the Assignment and Acceptance with respect to
      such assignment is delivered to the Lender) shall be in a minimum Dollar
      Equivalent Amount of $10,000,000 unless such assignment is an assignment
      of all of the assigning Lender's rights and obligations under this
      Agreement or unless otherwise agreed by the Borrower and the
      Administrative Agent and

            (c) Section 9.3 of the Credit Agreement is hereby further amended by
deleting Section 9.3(h) thereof in its entirety and substituting in lieu thereof
the following:

            (h) The Lenders may, in connection with any assignment or
      participation or proposed assignment or participation pursuant to this
      Section 9.3, disclose to the assignee or participant or proposed assignee
      or participant, any information relating to the Borrower furnished to the
      Administrative Agent or the Lenders by or on behalf of the Borrower.

            (d) Section 9 of the Credit Agreement is hereby amended by adding
thereto the following Section 9.17:

            SECTION 9.17. CONFIDENTIALITY. Each of the Administrative Agent and
      the Lenders agrees to keep confidential all non-public information
      provided to it by the Borrower and its Subsidiaries pursuant to this
      Agreement that is designated by the Borrower as confidential; PROVIDED
      that nothing herein shall prevent the Administrative Agent or any Lender
      from disclosing any such information (a) to the Administrative Agent, any
      other Lender or any affiliate of any Lender, (b) to any participant or
      assignee (each, a "TRANSFEREE") of such Lender or prospective Transferee
      which agrees to comply with the provisions of this Section, (c) to any of
      its employees, directors, agents, attorneys, accountants and other
      professional advisors, (d) upon the request or demand of any governmental
      or regulatory authority having jurisdiction over it, (e) in response to
      any order of any court or other governmental authority or as may otherwise
      be required pursuant to any requirement of law, (f) if requested or
      required to do so in connection with any litigation or similar proceeding,
      (g) which has been publicly disclosed other than in breach of this Section
      9.17, (h) to the National Association of Insurance Commissioners or any
      similar organization or any nationally recognized rating agency that
      requires access to information about a Lender's investment portfolio in
      connection with ratings issued with respect to such Lender or (i) in
      connection with the exercise of any remedy hereunder or under any other
      Fundamental Document.

            VI. GLOBAL AMENDMENT. References in the Credit Agreement to "Chase"
shall be deemed to be references to "JPMorgan Chase Bank".

            VII. EFFECTIVE DATE. This Amendment shall become effective on the
date (the "EFFECTIVE DATE") on which the Borrower, the Administrative Agent and
the Required Lenders under the Credit Agreement shall have duly executed and
delivered to the Administrative Agent this Amendment, and the Administrative
Agent shall have received evidence of the effectiveness

<Page>
                                                                               7

of the Two Year Competitive Advance and Revolving Credit Agreement, dated as of
March 4, 1997, as amended and restated through February 21, 2002, among PHH, the
lenders parties thereto and JPMorgan Chase Bank, as administrative agent.

            VIII. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants that, except as disclosed in the Borrower's filings with the
Securities and Exchange Commission prior to February 21, 2002, (a) each of the
representations and warranties in Section 3 of the Credit Agreement (other than
those set forth in Section 3.5, which shall be deemed made only on the Closing
Date) shall be, after giving effect to this Amendment, true and correct in all
material respects as if made on and as of the Effective Date (unless such
representations and warranties are stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct in
all material respects as of such earlier date) and (b) after giving effect to
this Amendment, no Default or Event of Default shall have occurred and be
continuing.

            IX. NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended
hereby, the provisions of the Credit Agreement and each of the Fundamental
Documents are and shall remain in full force and effect.

            X. GOVERNING LAW. This Amendment and the rights and obligations of
the parties hereto shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.

            XI. COUNTERPARTS. This Amendment may be executed by one or more of
the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.

<Page>

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

                                     PHH CORPORATION

                                     By: /s/ Duncan H. Corcroft
                                         ---------------------------------
                                         Name: Duncan H. Corcroft
                                         Title: EVP--Finance and Treasurer

                                     JPMORGAN CHASE BANK, individually and as
                                     Administrative Agent

                                     By: /s/ Randolph E. Cates
                                         ---------------------------------
                                         Title: Randolph E. Cates
                                         Name: Vice President

<Page>

                                     ALLFIRST BANK

                                     By: /s/ Susan Elliott Benninghoff
                                         ---------------------------------
                                         Name: Susan Elliott Benninghoff
                                         Title: Vice President

<Page>

                                     BANK ONE, NA

                                     By: /s/ Janet S. Leong
                                         ---------------------------------
                                         Name: Janet S. Leong
                                         Title: Director

<Page>

                                     BANK OF AMERICA, N.A.

                                     By: /s/ Igor Suica
                                         ---------------------------------
                                         Name: Igor Suica
                                         Title: Vice President

<Page>

                                     BANK OF MONTREAL

                                     By: /s/ Brian L. Banke
                                         ---------------------------------
                                         Name: Brian L. Banke
                                         Title: Vice President

<Page>

                                     THE BANK OF NEW YORK

                                     By: /s/ James J. Ducey
                                         ---------------------------------
                                         Name: James J. Ducey
                                         Title: Vice President

<Page>

                                     THE BANK OF NOVA SCOTIA

                                     By: /s/ Brian Allen
                                         ---------------------------------
                                         Name: Brian Allen
                                         Title: Managing Director

<Page>

                                     BANK OF TOKYO-MITSUBISHI TRUST COMPANY

                                     By: /s/ Jeffrey K. Stanton
                                         ---------------------------------
                                         Name: Jeffrey K. Stanton
                                         Title: Vice President

<Page>

                                     CREDIT LYONNAIS NEW YORK BRANCH

                                     By: /s/ Rod Hurst
                                         ---------------------------------
                                         Name: Rod Hurst
                                         Title: Vice President

<Page>

                                     CREDIT SUISSE FIRST BOSTON

                                     By: /s/ BILL O'DALY
                                         ---------------------------------
                                         Name: Bill O'Daly
                                         Title: Director

                                     By: /s/ Cassandra Droogan
                                         ---------------------------------
                                         Name: Cassandra Droogan
                                         Title: Associate

<Page>

                                     FIRST UNION NATIONAL BANK

                                     By: /s/ William R. Goley
                                         ---------------------------------
                                         Name: William R. Goley
                                         Title: Vice President

<Page>

                                     FLEET NATIONAL BANK

                                     By: ______________________________
                                         Name:
                                         Title:

<Page>

                                     THE FUJI BANK, LIMITED

                                     By: ______________________________
                                         Name:
                                         Title:

<Page>

                                     THE INDUSTRIAL BANK OF JAPAN, LIMITED

                                     By: /s/ Akihiko Mabuchi
                                         ---------------------------------
                                         Name: Akihiko Mabuchi
                                         Title: Senior Vice President

<Page>

                                     MELLON BANK, N.A.

                                     By: /s/ J. Wade Bell
                                         ---------------------------------
                                         Name: J. Wade Bell
                                         Title: Vice President

<Page>

                                     THE NORTHERN TRUST COMPANY

                                     By: ______________________________
                                         Name:
                                         Title:

<Page>

                                     THE ROYAL BANK OF SCOTLAND PLC,
                                     ACTING AS AGENT FOR NATIONAL
                                     WESTMINSTER BANK PLC

                                     By: /s/ Stephen Burton
                                         ---------------------------------
                                         Name: Stephen Burton
                                         Title:

<Page>

                                     ROYAL BANK OF CANADA

                                     By: ______________________________
                                         Name:
                                         Title:

<Page>

                                     SUMITOMO MITSUI BANKING
                                     CORPORATION (formerly known as The
                                     Sumitomo Bank, Limited)

                                     By: /s/ Suresh Tata
                                         ---------------------------------
                                         Name: Suresh Tata
                                         Title: Senior Vice President

<Page>

                                     WELLS FARGO BANK, N.A.

                                     By: /s/ Lauren Downum
                                         ---------------------------------
                                         Name: Lauren Downum
                                         Title: Vice President

                                     By: /s/ Roger Fleischmann
                                         ---------------------------------
                                         Name: Roger Fleischmann
                                         Title: Senior Vice President

<Page>

                                     WESTDEUTSCHE LANDESBANK
                                     GIROZENTRALE, NEW YORK BRANCH

                                     By: /s/ Alan S. Bookspan
                                         ---------------------------------
                                         Name: Alan S. Bookspan
                                         Title: Director

                                     By: /s/ Barry S. Wadler
                                         ---------------------------------
                                         Name: Barry S. Wadler
                                         Title: Associate Director<Page>
                                                                   Exhibit 10.13

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

                    BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST,

                                  AS PURCHASER,

                          CENDANT MORTGAGE CORPORATION,

                             AS SELLER AND SERVICER,

                                       AND

                                PHH CORPORATION,

                                  AS GUARANTOR

                           SECOND AMENDED AND RESTATED
                 MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT

                          DATED AS OF OCTOBER 31, 2000
--------------------------------------------------------------------------------

<Page>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                     Page
<S>           <C>                                                                                     <C>
                                                 ARTICLE I

DEFINITIONS...................................................................................          3

                                                ARTICLE II

                           SALE OF ELIGIBLE LOANS; POSSESSION OF MORTGAGE FILES;
                                  BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
                                           DELIVERY OF DOCUMENTS

Section 2.1   Sale of Eligible Loans; Possession of Mortgage Loan Files;
              Maintenance of Mortgage Loan Files .............................................         23
Section 2.2   Determination of Purchase Price; Deposit by Seller and the Additional Seller ...         27
Section 2.3   Purchase Commitment Term .......................................................         28
Section 2.4   Books and Records; Transfers of Eligible Loans .................................         28
Section 2.5   Custodial Agreement ............................................................         29

                                                ARTICLE III

                                      REPRESENTATIONS AND WARRANTIES;
                                      COVENANTS; REMEDIES AND BREACH

Section 3.1   Representations and Warranties of the Company and the
              Additional Seller ..............................................................         30
Section 3.2   Representations and Warranties Regarding Individual Mortgage Loans;
              Eligibility Representations ....................................................         36
Section 3.3   Remedies for Breach of Representations and Warranties ..........................         46
Section 3.4   Conditions to Closing ..........................................................         47
Section 3.5   Covenants of the Purchaser, the Company and the Additional Seller ..............         47

                                                ARTICLE IV

                              ADMINISTRATION AND SERVICING OF ELIGIBLE LOANS

Section 4.1   The Company to Act as Servicer; Servicing and Administration of the
              Eligible Loans .................................................................         48
</Table>

                                       ii
<Page>

<Table>
<Caption>
                                                                                        Page
                                                                                        ----
<S>           <C>                                                                        <C>
Section 4.2   Sales and Securitizations............................................      50
Section 4.3   Liquidation of Eligible Loans........................................      53
Section 4.4   Collection of Eligible Loan Payments.................................      53
Section 4.5   Establishment of, and Deposits to, Collection Account................      53
Section 4.6   Permitted Withdrawals From Collection Account; Deposit into the
              Collateral Account...................................................      54
Section 4.7   Establishment of, and Deposits to, Escrow Account....................      55
Section 4.8   Permitted Withdrawals From Escrow Account............................      56
Section 4.9   Payment of Taxes, Insurance and Other Charges........................      57
Section 4.10  Protection of Accounts...............................................      57
Section 4.11  Maintenance of Hazard Insurance......................................      57
Section 4.12  Maintenance of Mortgage Impairment Insurance.........................      59
Section 4.13  Maintenance of Fidelity Bond and Errors and Omissions Insurance......      59
Section 4.14  Inspections..........................................................      60
Section 4.15  Restoration of Mortgaged Property....................................      60
Section 4.16  Maintenance of PMI Policy; Claims....................................      61
Section 4.17  Title, Management and Disposition of REO Property....................      61
Section 4.18  Servicer Reports.....................................................      62
Section 4.19  Real Estate Owned Reports............................................      62
Section 4.20  Liquidation Reports..................................................      63
Section 4.21  Reports of Foreclosures and Abandonments of Mortgaged Property.......      63
Section 4.22  Servicer Advance Report..............................................      63
Section 4.23  Secondary Market Trading Report......................................      63

                                          ARTICLE V

                                      SERVICER ADVANCES

Section 5.1   Servicer Monthly Advances............................................      64

                                          ARTICLE VI

                                 GENERAL SERVICING PROCEDURES

Section 6.1   Transfers of Mortgaged Property......................................      64
Section 6.2   Satisfaction of Mortgages and Release of Mortgage Loan Files.........      65
Section 6.3   Servicing Compensation...............................................      65
Section 6.4   Annual Statement as to Compliance....................................      65
</Table>

                                       iii
<Page>

<Table>
<Caption>
                                                                                     Page
                                                                                     ----
<S>           <C>                                                                     <C>
Section 6.5   Annual Independent Public Accountants' Servicing Report..............   66
Section 6.6   Right to Examine Servicer Records....................................   66

                                        ARTICLE VII

                                   REPURCHASE OBLIGATION

Section 7.1   Servicer's Repurchase Obligations....................................   66

                                       ARTICLE VIII

                                   SERVICER TO COOPERATE

Section 8.1   Provision of Information.............................................   67

                                        ARTICLE IX

                                       THE SERVICER

Section 9.1   Indemnification of Third-Party Claims................................   68
Section 9.2   Corporate Existence of the Servicer..................................   68
Section 9.3   Limitation on Liability of Servicer and Others.......................   68
Section 9.4   Limitation on Resignation and Assignment by the Servicer.............   69
Section 9.5   Limitation on Assignment of Right....................................   69

                                         ARTICLE X

                                          DEFAULT

Section 10.1  Servicer Events of Default...........................................   70
Section 10.2  Waiver of Defaults...................................................   72

                                        ARTICLE XI

                                        TERMINATION

Section 11.1  Termination of Agreement.............................................   72
Section 11.2  Termination of Purchase Obligations..................................   72
</Table>

                                       iv
<Page>

<Table>
<Caption>
                                                                                     Page
                                                                                     ----
<S>           <C>                                                                     <C>
Section 11.3  Termination of Servicing With Respect to Any Eligible Loan...........    75

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

Section 12.1  Successor to Servicer................................................    76
Section 12.2  Amendment............................................................    77
Section 12.3  Governing Law........................................................    77
Section 12.4  Duration of Agreement................................................    77
Section 12.5  Notices..............................................................    77
Section 12.6  Severability of Provisions...........................................    78
Section 12.7  Relationship of Parties..............................................    78
Section 12.8  Execution; Successors and Assigns....................................    79
Section 12.9  Recordation of Assignments of Mortgage...............................    79
Section 12.10 Assignment by Purchaser..............................................    79
Section 12.11 Non-Petition Agreement...............................................    79
Section 12.12 Waiver of Offset.....................................................    79
Section 12.13 Limited Recourse.....................................................    80
Section 12.14 Limitation of Liability..............................................    80
Section 12.15 Binding Effect on Voting Group.......................................    80

                                  ARTICLE XIII

                            PHH CORPORATION GUARANTEE

Section 13.1  Guarantee of Servicer's Performance and Payment Obligations..........    81

                                   ARTICLE XIV

                                   ASSIGNMENT

Section 14.1  Assignment...........................................................    82

                                   ARTICLE XV

                                 COMMITMENT FEE

Section 15.1  Commitment Fee.......................................................    83
</Table>

                                        v
<Page>

<Table>
<Caption>
                                                                            Page
                                                                            ----
<S>           <C>                                                            <C>
                                   ARTICLE XVI

                                ADDITIONAL SELLER

Section 16.1  Criteria for Additional Seller....................................83

                                    EXHIBITS

EXHIBIT A-1   TRANSFER SUPPLEMENT............................................A-1-1
EXHIBIT A-2   TRANSFER SUPPLEMENT............................................A-2-1
EXHIBIT B     RATED BIDDER LETTER............................................B-1
EXHIBIT C     FORM OF MONTHLY REPORT.........................................C-1
EXHIBIT D     FORM OF MONTHLY SERVICER ADVANCE REPORT........................D-1
EXHIBIT E     FORM OF ADDITIONAL SELLER OFFICER'S CERTIFICATE................E-1
EXHIBIT F     FORM OF SERVICING RIGHTS PURCHASE AND SALE AGREEMENT...........F-1
EXHIBIT G     FORM OF ADDITIONAL SELLER AGREEMENT............................G-1
EXHIBIT H     FORM OF INSOLVENCY OPINION.....................................H-1
</Table>

                                       vi
<Page>

            SECOND AMENDED AND RESTATED MORTGAGE LOAN PURCHASE AND SERVICING
AGREEMENT, dated as of October 31, 2000 (as amended, supplemented or otherwise
modified and in effect from time to time, the "AGREEMENT" or the "PURCHASE
AGREEMENT"), between Bishop's Gate Residential Mortgage Trust, a Delaware
business trust, as Purchaser (the "PURCHASER" or the "TRUST"), Cendant Mortgage
Corporation, a New Jersey corporation (the "COMPANY"), as Seller and Servicer
(in its capacity as Seller hereunder, the "SELLER," and in its capacity as
Servicer hereunder, the "SERVICER"), any additional seller of Eligible Loans
pursuant to the terms hereof (collectively, the "ADDITIONAL SELLER"), and PHH
Corporation, a Maryland corporation, as Guarantor (the "GUARANTOR") of the
Servicer's obligations.

                               W I T N E S S E T H

            WHEREAS, the Purchaser and the Seller have entered into that certain
Amended and Restated Mortgage Loan Purchase and Servicing Agreement, dated as of
December 11, 1998 (the "AMENDED AND RESTATED PURCHASE AGREEMENT"), and pursuant
thereto the Purchaser has agreed to purchase from the Seller and the Seller has
agreed to sell to the Purchaser from time to time mortgage loans constituting
Eligible Loans;

            WHEREAS, pursuant to the Amended and Restated Purchase Agreement,
the Purchaser and the Company, as Seller and Servicer, have prescribed the
manner of purchase of each Eligible Loan and the management, control and
servicing of the Eligible Loans, including the method and manner by which the
Servicer will arrange for the sale and Securitization of each Eligible Loan;

            WHEREAS, the Purchaser, the Seller and the Servicer desire to amend
and restate the Amended and Restated Purchase Agreement in its entirety for the
purpose of, among other things, adding the Additional Seller meeting the
criteria described herein as a seller of Mortgage Loans to the Trust pursuant to
this Purchase Agreement; and

            WHEREAS, pursuant to SECTION 12.2 of the Amended and Restated
Purchase Agreement, the Purchaser, the Seller, the Controlling Majority, the
Required Banks, the Swap Counterparties, the holders of a majority of the
principal amount of all Series of Certificates and the Servicer have provided
their written consent to the amendment and restatement of the Amended and
Restated Purchase Agreement, and written notice of such amendment has been
provided to each Rating Agency. In connection with the execution of this
Purchase Agreement, the Purchaser has received Rating Agency Confirmation.

            NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which is hereby

<Page>

acknowledged, the Purchaser, the Seller, the Additional Seller, the Servicer and
the Guarantor agree as follows:

                                       2
<Page>

                                    ARTICLE I

                                   DEFINITIONS

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

            ACCEPTED SERVICING PRACTICES: The Servicer's Customary Servicing
Procedures and the servicing practices required by the Guidelines.

            ACQUISITION DATE ACCRUED INTEREST: With respect to any Eligible
Loan, the amount of interest, if any, accrued and unpaid on the date of
acquisition of such Eligible Loan by the Purchaser.

            ADDITIONAL SELLER: Collectively, any Affiliate of the Company
meeting the criteria specified in ARTICLE XVI herein.

            ADMINISTRATION AGREEMENT: The Amended and Restated Administration
Agreement, dated as of December 11, 1998, between the Trust and the
Administrator, as the same may at any time be amended, modified or supplemented.

            ADMINISTRATOR: Cendant Mortgage Corporation, in its capacity as
Administrator under the Administration Agreement, or any successor Administrator
under the Administration Agreement.

            AFFILIATE: With respect to the origination and sale of Eligible
Loans pursuant to this Purchase Agreement, Affiliate means any entity controlled
by or under common control of Cendant Mortgage Corporation. With respect to any
specified Person, Affiliate means any other Person controlling or controlled by
or under common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities (including,
without limitation, partnership interests), by contract or otherwise and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

            AGENCY: Any of GNMA, FNMA or FHLMC, as applicable.

            AGENCY CUSTODIAL AGREEMENT: The custodial agreement entered into
with GNMA, FNMA or FHLMC, as applicable, pursuant to which the Custodian will
act as document custodian for a pool or pools of mortgage loans to be formed to
back Agency Securities.

            AGENCY SECURITIES: Securities backed by a pool or pools of mortgage
loans owned by the Trust, which are issued and guaranteed by the applicable
Agency.

                                       3
<Page>

            AGENT: The Chase Manhattan Bank, in its capacity as Agent for the
Liquidity Banks under the Liquidity Agreement, or any successor Agent under the
Liquidity Agreement.

            AGREEMENT or PURCHASE AGREEMENT: This Second Amended and Restated
Mortgage Loan Purchase and Servicing Agreement and all amendments hereof and
supplements hereto, including as the context requires, any Transfer Supplement.

            APPRAISED VALUE: The value set forth in an appraisal made in
connection with the origination of the related Eligible Loan as the value of the
Mortgaged Property.

            APPROVED SELLER/SERVICER: An approved seller and servicer under the
Guidelines.

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

            BASE INDENTURE: The Base Indenture, dated as of December 11, 1998,
between the Purchaser and the Indenture Trustee, as the same may be at any time
amended, modified or supplemented, exclusive of Supplements creating a new
Series of Notes.

            BASE TRUST AGREEMENT: The Third Amended and Restated Trust
Agreement, dated as of December 11, 1998, between the Depositor and the Owner
Trustee, as the same may at any time be amended, modified or supplemented.

            BEST'S: The meaning specified in SECTION 4.11 of this Agreement.

            BIF: The Bank Insurance Fund or any successor thereto.

            BUSINESS DAY: Any day other than (i) Saturday and Sunday, or (ii) a
day on which banking institutions or foreign exchange markets in New York City
are authorized or required by law, regulation or executive order to be closed
for business.

            CALCULATION AGENT: The Servicer.

            CERTIFICATE PURCHASE AGREEMENT: The certificate purchase agreements,
dated as of December 4, 1998 and November 4, 1999, respectively, by and among
Lehman Brothers Inc., the Purchaser and the Company, for the Variable Rate
Residential Mortgage Loan Extendible Trust Certificates, Series 1998-1 and
Series 1998-2, and the Variable Rate Extendible Trust Certificates, Series
1999-1, respectively, and each certificate purchase agreement, if any, entered
into by the

                                       4
<Page>

Purchaser, the Company and the purchasers thereof in connection with the
issuance of any Series of Certificates.

            CERTIFICATES: The Variable Rate Residential Mortgage Loan Extendible
Trust Certificates, Series 1998-1, Variable Rate Residential Mortgage Loan
Extendible Trust Certificates, Series 1998-2, Variable Rate Extendible Trust
Certificates, Series 1999-1, and any additional Series of certificates that may
be issued from time to time pursuant to the Base Trust Agreement and any
supplement thereto.

            CLOSING DATE: The Closing Date specified in any Transfer Supplement,
which is the date as to which the sale of any Portfolio is designated to occur.

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

            COLLATERAL ACCOUNT: A single, segregated trust account established
and maintained by the Collateral Agent pursuant to the terms of the Security
Agreement for the purposes described in SECTION 4.6 hereof.

            COLLATERAL AGENT: Bank One, National Association (formerly The First
National Bank of Chicago), as Collateral Agent for the Secured Parties under the
Security Agreement, or any successor Collateral Agent under the Security
Agreement.

            COLLECTION ACCOUNT: As to any Eligible Loan, any separate account or
accounts created and maintained pursuant to SECTION 4.5 of this Agreement for
the collection of all payments made on such Eligible Loan.

            COMMERCIAL PAPER or COMMERCIAL PAPER NOTES: The short-term
promissory notes of the Trust issued pursuant to the Depositary Agreement.

            COMMERCIAL PAPER DEALER AGREEMENT: The commercial paper dealer
agreement, dated as of July 21, 2000, among the Trust and the CP Dealers.

            COMMITMENT FEE: The meaning assigned to such term in SECTION 15.1
hereof.

            COMPANY: Cendant Mortgage Corporation, a New Jersey corporation, as
Seller and Servicer of the Eligible Loans purchased by the Purchaser pursuant to
the terms of this Agreement.

            COMPANY EMPLOYEES: The meaning specified in SECTION 4.13 hereof.

                                       5
<Page>

            CONDEMNATION PROCEEDS: As to any Eligible Loan, all awards or
settlements in respect of a Mortgaged Property, whether permanent or temporary,
partial or entire, by exercise of the power of eminent domain or condemnation,
to the extent not required to be released to a Mortgagor in accordance with the
terms of the related Loan Documents.

            CONFORMING LOAN: An Eligible Loan which conforms to the Guidelines
of GNMA, FNMA or FHLMC, as amended for the Seller.

            CONTROLLING MAJORITY: The Liquidity Banks and holders of the Notes
holding 51% of the sum of the (i) the aggregate principal amount of all Series
of Notes outstanding, and (ii) Credits Outstanding (for purposes of this
calculation, (i) the Liquidity Banks percentage of the Controlling Majority
shall equal the Credits Outstanding divided by the sum of the (x) the aggregate
principal amount of all Series of Notes outstanding, and (y) the Credits
Outstanding, and (ii) the Noteholders' percentage of the Controlling Majority
shall equal the aggregate principal amount of all Series of Notes outstanding
divided by the sum of (x) the aggregate principal amount of all Series of Notes
outstanding, and (y) the Credits Outstanding). For the purposes of determining
the Controlling Majority, "Credits Outstanding" shall be determined without
reference to clause (3) of the definition thereof.

            CP DEALER: Lehman Commercial Paper Inc., Banc of America Securities
LLC and Goldman, Sachs & Co., each as a Commercial Paper dealer pursuant to the
Program Documents.

            CREDIT-ADJUSTED PRICE: The hypothetical sales price (expressed as a
percentage of par), as determined in good faith by the Calculation Agent, as of
each date of a Partial Termination occurring with respect to a Delinquent or
Defaulted Loan equal to the price that a Reference Mortgage Loan would be sold
to a Qualified Purchaser.

            CREDITS OUTSTANDING: As of the close of business on any day, (i) the
aggregate principal amount of outstanding Commercial Paper, plus (ii) the
aggregate principal amount of outstanding Loans, minus (iii) funds allocable to
Commercial Paper and Loans outstanding then on deposit in the Collateral
Account, except to the extent that such funds are then subject to any writ,
order, stay, judgment, warrant of attachment or execution or similar process.

            CUSTODIAL AGREEMENT: The Amended and Restated Custodial Agreement,
dated as of December 11, 1998, among the Trust, the Custodian and the Collateral
Agent, as the same may at any time be amended, modified or supplemented.

            CUSTODIAN: Bank One, National Association (formerly The First
National Bank of Chicago), in its capacity as Custodian under the Custodial
Agreement, or any successor Custodian under the Custodial Agreement.

                                       6
<Page>

            CUSTOMARY SERVICING PROCEDURES: Procedures (including collection
procedures) that the Servicer customarily employs and exercises in servicing and
administering mortgage loans for its own account and arranging for the sale and
Securitization of mortgage loans and which are in accordance with accepted
mortgage servicing practices of prudent lending institutions in the jurisdiction
in which the Mortgaged Property is situated for properties of a similar type.

            DEFAULTED LOAN: Any Eligible Loan where (i) the obligor thereon has
failed to make a required payment for 90 days or more after the Due Date of such
required payment, (ii) such Eligible Loan is a Delinquent Loan for which the
Servicer has not made a Servicer Monthly Advance and the Servicer has delivered
a certificate pursuant to SECTION 5.1 hereof, or (iii) any other event has
occurred which gives the holder the right to accelerate payment and/or take
steps to foreclose on the mortgage securing the Eligible Loan under the Eligible
Loan documentation.

            DELINQUENT LOAN: Any Eligible Loan which has a payment which is 30
days or more past its Due Date without giving effect to any Servicer Monthly
Advance.

            DEPOSITARY: First Chicago Trust Company of New York, in its capacity
as Depositary under the Depositary Agreement, or any successor Depositary under
the Depositary Agreement.

            DEPOSITARY AGREEMENT: The Amended and Restated Depositary Agreement,
dated as of December 11, 1998, entered into by the Trust and the Depositary, as
the same may at any time be amended, modified or supplemented.

            DEPOSITOR: Cendant Mortgage Corporation, in its capacity as
Depositor, or any successor Depositor.

            DETERMINATION DATE: With respect to a Due Period, the 16th day (or
if such day is not a Business Day, the Business Day immediately succeeding such
day) of the calendar month following such Due Period.

            DUE DATE: The first day of the month in which the related Monthly
Payment is due on an Eligible Loan, exclusive of any days of grace.

            DUE PERIOD: With respect to each Payment Date, the period commencing
on the first day of the month preceding the month of the Payment Date and ending
on the last day of the month preceding the month in which the Payment Date
occurred.

            EARLY AMORTIZATION EVENT: With respect to each Series, if any of the
following shall have occurred prior to the applicable Final Scheduled
Distribution Date: (i) a Termination Event, (ii) the Trust's commitment to
purchase Mortgage Loans has terminated prior to the Final Scheduled

                                       7
<Page>

Distribution Date of any Series of Certificates, (iii) an Indenture Event of
Default, (iv) a Liquidity Agreement Event of Default (v) an Interest Rate Swap
Termination Event, (vi) an Interest Rate Swap Event of Default.

            ELIGIBLE INVESTMENTS: Investments which mature no later than the
next following Payment Date in the following:(i) obligations issued by, or the
full and timely payment of principal of and interest on which is fully
guaranteed by, the United States of America or any agency or instrumentality
thereof (which agency or instrumentality is backed by the full faith and credit
of the United States of America), (ii) commercial paper (other than the
Commercial Paper) rated (at the time of purchase) at least "A-l" by S&P, "P-1"
by Moody's and, if rated by Fitch, "F1," (iii) certificates of deposit, other
deposits or bankers' acceptances issued by or established with commercial banks
having short-term deposit ratings (at the time of purchase) of at least "A-l" by
S&P, "P-1" by Moody's and, if rated by Fitch, "F1," (iv) repurchase agreements
involving any of the Eligible Investments described in clauses (i) through (iii)
hereof so long as the other party to the repurchase agreement has short-term
unsecured debt obligations or short-term deposits rated (at the time of
purchase) at least "A-l" by S&P, "P-1" by Moody's and, if rated by Fitch, "F1,"
and (v) if approved in writing by Moody's, direct obligations of any money
market fund or other similar investment company all of whose investments consist
of obligations described in the foregoing clauses of this definition and that is
rated "AAm" by S&P, "Aam" by Moody's and, if rated by Fitch, "AA/V-1+" or
higher. In addition, any such Eligible Investment shall not have an "r"
highlighter affixed to its rating, and its term shall have a predeter mined
fixed dollar amount of principal due at maturity that cannot vary or change.
Interest on any Eligible Investment shall be tied to a single interest rate
index plus a single fixed spread, if any, and move proportionately with that
index.

            ELIGIBLE LOAN: Conforming Loans and Jumbo Loans that satisfy the
Eligibility Criteria and the Portfolio Criteria. An Eligible Loan includes,
without limitation, the Mortgage Loan File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, VA
Guaranty Proceeds, REO Disposition Proceeds and all other rights, benefits,
proceeds and obligations arising from or in connection with such Eligible Loan.

            ELIGIBILITY CRITERIA: In connection with the Purchaser's purchase of
mortgage loans on any day, the mortgage loans acquired on such day must satisfy
the following criteria: (i) each mortgage loan must be either a Conforming Loan
or a Jumbo Loan, (ii) each mortgage loan must have been originated or purchased
by the Seller or the Additional Seller, as applicable, in accordance with its
then-current origination or acquisition underwriting practices within 60 days
prior to the acquisition thereof by the Purchaser, (iii) the aggregate Initial
Purchase Price of all mortgage loans secured by properties located in California
and acquired on such day may not exceed 30% of the aggregate Initial Purchase
Price of all mortgage loans acquired on such day, (iv) the aggregate Initial
Purchase Price of all mortgage loans secured by properties located in any state
other than California and acquired on such day may not exceed 15% of the
aggregate Initial Purchase Price of all mortgage loans acquired

                                       8
<Page>

on such day, (v) the aggregate Initial Purchase Price of all mortgage loans
guaranteed by either the Federal Housing Authority or the Veterans
Administration and acquired on such day may not exceed 30% of the aggregate
Initial Purchase Price of all mortgage loans acquired on such day, (vi) the
aggregate Initial Purchase Price of all Jumbo Loans acquired on such day may not
exceed 35% of the aggregate Initial Purchase Price of all mortgage loans
acquired on such day and (vii) each mortgage loan may not be made to a borrower
that is generally referred to as "sub-prime borrower." In addition, the
representations and warranties made by the Seller and the Servicer (in its own
capacity and on behalf of the Additional Seller) in this Agreement must be true
and correct in all material respects on such day.

            ELIGIBILITY REPRESENTATIONS: The representations and warranties made
by the Seller and the Servicer (on behalf of the Additional Seller) with respect
to each mortgage loan, set forth in SECTION 3.2 herein.

            EQUIVALENT SECURITY: With respect to a mortgage loan, a
mortgage-backed security issued by FHLMC, FNMA or GNMA having a term to final
maturity equal to the remaining term to maturity of such mortgage loan and an
interest or pass-through rate equal to the interest rate on such mortgage loan
(net of servicing fees).

            EQUIVALENT SECURITY PRICE: With respect to a mortgage loan, the
price (expressed as a percentage of the principal amount) of the Equivalent
Security for such mortgage loan. The price of an Equivalent Security shall be
determined by the Servicer on any date by reference to an independent market
price reference such as Telerate.

            ERRORS AND OMISSIONS INSURANCE POLICY: An errors and omissions
insurance policy or policies to be maintained by the Servicer pursuant to
SECTION 4.13 hereof.

            ESCROW ACCOUNT: As to any Eligible Loan, any separate account or
accounts created and maintained pursuant to SECTION 4.7 hereof.

            ESCROW PAYMENTS: With respect to any Eligible Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, and any other payments required by the Mortgagee to be escrowed by the
Mortgagee pursuant to the Mortgage or any other related document.

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

            FHA: The Federal Housing Administration, an agency within the United
States Department of Housing and Urban Development, or any successor thereto and
including the Federal

                                       9
<Page>

Housing Commissioner and the Secretary of Housing and Urban Development where
appropriate under the FHA Regulations.

            FHA APPROVED MORTGAGEE: A corporation or institution approved as a
mortgagee by the FHA under the Act and applicable FHA Regulations, and eligible
to own and service mortgage loans such as the FHA Loans.

            FHA LOAN: An Eligible Loan which is the subject of an FHA Mortgage
Insurance Contract.

            FHA MORTGAGE INSURANCE: Mortgage insurance authorized under Sections
203(b), 213, 221(d)(2), 222, and 235 of the Act and provided by the FHA.

            FHA MORTGAGE INSURANCE CONTRACT: The contractual obligation of the
FHA respecting the insurance of an Eligible Loan.

            FHA REGULATIONS: Regulations promulgated by HUD under the Federal
Housing Administration Act, codified in 24 Code of Federal Regulations, and
other HUD issuances relating to FHA Loans, including the related handbooks,
circulars, notices and mortgagee letters.

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

            FHLMC GUIDES: The Federal Home Loan Mortgage Corporation Sellers'
Guide and the Federal Home Loan Mortgage Corporation Servicers' Guide and all
amendments or additions thereto.

            FICO SCORE: A statistical credit score obtained by many mortgage
lenders in connection with a loan application to help assess a borrower's
creditworthiness. A FICO score is generated by models developed by a third party
and made available to lenders through three national credit bureaus. The FICO
score is based on a borrower's historical credit data, including, among other
things, payment history, delinquencies on accounts, levels of outstanding
indebtedness, length of credit history, types of credit and bankruptcy
experience.

            FIDELITY BOND: A fidelity bond to be maintained by the Servicer
pursuant to SECTION 4.13 hereof.

            FINAL SCHEDULED DISTRIBUTION DATE: With respect to any Series of
Certificates, the final scheduled distribution date set forth in the applicable
Series Trust Agreement Supplement, as modified in the manner set forth in
SECTION 3.4(b), 3.4(c) or 3.4(d) of the Base Trust Agreement.

                                       10
<Page>

            FITCH: Fitch IBCA Inc., or any successor thereto.

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

            FNMA GUIDES: The FNMA Selling and Servicing Guides and all
amendments or additions thereto.

            GNMA: The Government National Mortgage Association, or any successor
thereto.

            GNMA GUIDES: The GNMA Handbooks 5500.1 and 5500.2 and all amendments
or additions thereto.

            GUARANTEE: The full, unconditional and irrevocable guarantee of the
Servicer's performance and payment obligations, set forth in ARTICLE XIII
hereof.

            GUARANTOR: PHH Corporation, a Maryland corporation, in its capacity
as Guarantor, or any successor Guarantor.

            GUIDELINES: The GNMA Guides, the FNMA Guides and the FHLMC Guides,
as such Guides have been amended from time to time with respect to the Seller.

            HUD: The Department of Housing and Urban Development, or any federal
agency or official thereof which may from time to time succeed to the functions
thereof with regard to FHA Mortgage Insurance. The term "HUD," for purposes of
this Agreement, is also deemed to include subdivisions thereof such as the FHA
and GNMA.

            INDENTURE: The Base Indenture, together with all Supplements
thereto, as the same may at any time be amended, modified or supplemented.

            INDENTURE EVENT OF DEFAULT: An event of default under the Indenture.

            INDENTURE TRUSTEE: The Bank of New York, not in its individual
capacity, but solely as Indenture Trustee under the Indenture, or any successor
Indenture Trustee as provided in the Indenture.

            INITIAL PURCHASE PRICE: The sum of the Original Principal Purchase
Price of an Eligible Loan plus the Acquisition Date Accrued Interest.

            INSURANCE PROCEEDS: With respect to any Eligible Loan, proceeds of
insurance policies insuring the Eligible Loan or the related Mortgaged Property.

                                       11
<Page>

            INSURED AMOUNT: The meaning specified in SECTION 4.10 of this
Agreement.

            INTEREST RATE SWAPS: The amended and restated interest rate swap
agreements, each dated as of December 11, 1998, and any other interest rate swap
agreement entered into, between the Trust and each Swap Counterparty separately
or any substitute interest rate swaps entered into pursuant to the provisions of
the Interest Rate Swaps, as any of the same may at any time be amended, modified
or supplemented.

            INTEREST RATE SWAP EVENT OF DEFAULT: An event of default under an
Interest Rate Swap.

            INTEREST RATE SWAP TERMINATION EVENT: A termination event under an
Interest Rate Swap.

            JUMBO LOAN: A mortgage loan which substantially conforms to the
Guidelines except (i) the principal amount thereof may exceed the principal
amount of a loan which conforms to the Guidelines, and (ii) for other specified
exceptions to the Guidelines which are consistent with the Seller's Jumbo Loan
underwriting standards. Jumbo Loans will not include mortgage loans made to
borrowers that are generally referred to as "sub-prime" borrowers.

            JUMBO PRICE SPREAD: With respect to Jumbo Loans, the reduction in
Equivalent Security Price, as agreed to by the Seller, the Purchaser and the
Agent.

            LIQUIDATION PROCEEDS: All amounts received and retained in
connection with the liquidation of Defaulted Loans.

            LIQUIDITY AGREEMENT: The Amended and Restated Liquidity Agreement,
dated as of December 11, 1998, among the Purchaser, the Liquidity Banks and the
Agent, as the same may at any time be amended, modified or supplemented.

            LIQUIDITY AGREEMENT EVENT OF DEFAULT: An event of default under the
Liquidity Agreement, as set forth in SECTION 9.01 of the Liquidity Agreement.

            LIQUIDITY BANKS: The banks or other financial institutions which are
parties to the Liquidity Agreement.

            LOAN: A loan made by Liquidity Banks pursuant to the Liquidity
Agreement.

            LOAN DOCUMENTS: The documents listed in SECTION 2.1 of this
Agreement.

                                       12
<Page>

            LOAN TERMINATION DATE: Each day on which a deposit is made into the
Collateral Account in respect of Terminated Loans.

            LOAN-TO-VALUE RATIO OR LTV: With respect to any Eligible Loan, the
ratio expressed as a percentage of the Scheduled Principal Balance of the
Eligible Loan as of the date of origination (unless otherwise indicated) to the
lesser of (i) the Appraised Value of the Mortgaged Property, and (ii) if the
Eligible Loan was made to finance the acquisition of the related Mortgaged
Property, the purchase price of the Mortgaged Property.

            MARK TO MARKET PRICE: With respect to a mortgage loan, (i) the Mark
to Market Price of a Conforming Loan shall be the Equivalent Security Price
multiplied by the unpaid principal amount of such Conforming Loan and (ii) the
Mark to Market Price of a Jumbo Loan shall be the Equivalent Security Price
reduced by the Jumbo Price Spread multiplied by the unpaid principal amount of
such Jumbo Loan.

            MATERIAL ADVERSE EFFECT: A material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Purchaser, (b) the ability of any of the Purchaser, the Seller, the
Additional Seller, the Servicer or the Guarantor to perform any of its
obligations under this Mortgage Loan Purchase and Servicing Agreement or any of
the other Program Documents.

            MONTHLY PAYMENT: The scheduled monthly payment of principal and
interest on an Eligible Loan.

            MONTHLY SERVICER ADVANCE REPORT: The meaning specified in SECTION
4.22 hereof.

            MOODY'S: Moody's Investors Service, Inc., and any successors
thereto.

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

            MORTGAGE IMPAIRMENT INSURANCE POLICY: A mortgage impairment or
blanket hazard insurance policy as described in SECTION 4.12 hereof.

            MORTGAGE INTEREST RATE: The annualized regular rate of interest
borne on a Mortgage Note.

            MORTGAGE LOAN FILE: The items pertaining to each Eligible Loan
referred to in SECTION 2.1 hereof, and any additional documents required to be
added to the Mortgage Loan File pursuant to this Agreement.

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            MORTGAGE LOAN SCHEDULE: A schedule of Eligible Loans annexed to the
Transfer Supplement and delivered to the Purchaser on the related Closing Date,
such schedule setting forth the following information with respect to each
Eligible Loan: (1) the identifying number for the Eligible Loan; (2) the
Mortgagor's name; (3) the street address of the Mortgaged Property including the
state code; (4) a code indicating whether the Mortgaged Property is a one family
residence or a 2-4 family residence; (5) the months to maturity from the Closing
Date based on the amortization schedule for such Eligible Loan; (6) the
Loan-to-Value Ratio at the Closing Date; (7) the Mortgage Interest Rate; (8) the
stated maturity date; (9) the amount of the Monthly Payment; (10) the original
principal balance; (11) the PMI Policy certificate number, if any; (12) the
Qualified Insurer, if any; (13) the type of loan (FHA, VA, Conforming, Jumbo);
(14) payment type (fixed rate or adjustable rate); and (15) purchase price. With
respect to any Portfolio in the aggregate, the Mortgage Loan Schedule shall set
forth the following information, as of the related Closing Date: (1) the number
of Eligible Loans; (2) the current aggregate outstanding principal balance of
the Eligible Loans; (3) the weighted average Mortgage Interest Rate of the
Eligible Loans; and (4) the weighted average maturity of the Eligible Loans.

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

            MORTGAGEE: The lender on a Mortgage Note.

            MORTGAGED PROPERTY: The real property securing repayment of the debt
evidenced by a Mortgage Note.

            MORTGAGOR: The obligor on a Mortgage Note.

            MERS: Mortgage Electronic Registration Systems, Inc.

            NOTE PURCHASE AGREEMENT: The note purchase agreements, dated as of
December 4, 1998 and November 4, 1999, respectively, by and among the Purchaser,
the Company, the Seller, the Indenture Trustee and Lehman Brothers Inc., as
representative of the initial purchasers, for the Variable Rate Residential
Mortgage Loan Medium-Term Notes, Series 1998-2 and the Variable Rate Term Notes,
Series 1999-1, respectively, and each note purchase agreement, if any, entered
into by the Purchaser, the Company, the Indenture Trustee and the purchasers
thereof in connection with the issuance of any Series of Notes.

            NOTES: The Variable Rate Residential Mortgage Loan Medium-Term
Notes, Series 1998-2, the Variable Rate Term Notes, Series 1999-1 and any
additional Series of notes issued pursuant to the Base Indenture and any
Supplement.

                                       14
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            OFFICER'S CERTIFICATE: A certificate signed by the Chairman of the
Board and Chief Executive Officer, the President, any Executive Vice President
or any Senior Vice President or of the Seller, the Additional Seller, the
Servicer or the Guarantor, as applicable, and delivered to the Purchaser as
required by this Agreement.

            OPINION OF COUNSEL: A written opinion of counsel, who may be an
employee of the Seller, the Additional Seller, the Servicer or the Guarantor, as
applicable, in a form reasonably acceptable to the Purchaser.

            ORIGINAL PRINCIPAL PURCHASE PRICE: With respect to each mortgage
loan, the Mark to Market Price at the close of business on the second Business
Day immediately preceding the Closing Date of the sale of such mortgage loan by
the Seller or the Additional Seller to the Purchaser.

            OUTSTANDING PURCHASE PRICE: With respect to any Eligible Loan and
any date of determination, (i) the Initial Purchase Price of such mortgage loan
less (ii) the amount of any payments received by the Purchaser and deposited in
the Collateral Account in respect of Acquisition Date Accrued Interest, less
(iii) the product of (x) the aggregate of all previous principal payments made
on such mortgage loan and deposited into the Collateral Account on or prior to
such date of determina tion, and (y) the related Purchase Price Adjustment
Factor; PROVIDED, HOWEVER, the Outstanding Purchase Price of a mortgage loan
(other than a Terminated Loan) shall only be reduced on a Payment Date and the
Outstanding Purchase Price of a Terminated Loan shall be reduced on the related
Loan Termination Date; PROVIDED, FURTHER, that solely for calculating a Partial
Termination Payment with respect to a Terminated Loan which is sold by the
Servicer on behalf of the Purchaser to a third party, the Outstanding Purchase
Price shall be deemed to exclude the product of (i) Retained Payment with
respect to such Terminated Loan, and (ii) the Purchase Price Adjustment Factor;
PROVIDED, FURTHER, that after any Loan Termination Date the Outstanding Purchase
Price of a Terminated Loan shall be zero except that the Outstanding Purchase
Price of a Terminated Loan which is sold by the Servicer on behalf of the
Purchaser to a third party shall be the amount of the Retained Payment.

            OWNER TRUSTEE: First Union Trust Company, National Association,
acting not in its individual capacity, but solely on behalf of the Purchaser as
owner trustee under the Base Trust Agreement.

            PARTIAL TERMINATION PAYMENT: An amount, which may be positive or
negative, calculated with respect to each Terminated Loan (I) which is sold by
the Trust to a third party or securitized equal to the product of (i) the unpaid
principal balance of the Eligible Loan to which the loan termination relates and
(ii) the difference between (x) the Purchase Price Adjustment Factor for such
Eligible Loan and (y) (A) if the loan termination occurs with respect to a
non-Delinquent or non-Defaulted Loan, the sales price (expressed as a percentage
of par) of the Eligible Loan to which the loan termination relates (which sales
price in the case of a bundled whole loan sale or a Securitization shall equal
the sales

                                       15
<Page>

price for the related bundle of loans or Securitization) or (B) if the loan
termination occurs with respect to a Delinquent or Defaulted Loan, the
Credit-Adjusted Price or (II) which results from a prepayment in full of such
Eligible Loan equal to the product of (x) the related Purchase Price Adjustment
Factor less 100% and (y) the principal payments that were deposited in the
Collateral Account on such date.

            PAYMENT DATE: The 20th day (or if such day is not a Business Day,
the immediately succeeding Business Day) of any month.

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

            PHH CORPORATION: A Maryland corporation.

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

            POOLING DATE: With respect to any Terminated Loan sold by the
Servicer on behalf of the Purchaser to a third party, the date on which the pool
in which such Terminated Loan is included is cut by the Servicer.

            PORTFOLIO: An Eligible Loan or pool of Eligible Loans sold to the
Purchaser on a given day pursuant to the terms hereof and the applicable
Transfer Supplement.

            PORTFOLIO AGING LIMITATIONS: With respect to the age of the Eligible
Loans owned by the Purchaser on any day, the following limitations shall apply:

            (i) the aggregate Outstanding Purchase Price of Eligible Loans
acquired by the Purchaser more than three (3) months prior to such day may not
exceed 30% of the then-current Program Size; (ii) the aggregate Outstanding
Purchase Price of Eligible Loans acquired by the Purchaser more than six (6)
months prior to such day may not exceed 5% of the then-current Program Size; and
(iii) the Purchaser must securitize or sell each Eligible Loan acquired by it
within one (1) year of the date of acquisition; PROVIDED, HOWEVER, that, subject
to Rating Agency Confirmation, the Controlling Majority with the consent of the
Required Banks and the Required Certificateholders may waive any of the
requirements of clauses (i) and (ii) above.

            PORTFOLIO CRITERIA: On any day, after giving effect to the
Purchaser's purchase and sale of mortgage loans on such day, the mortgage loans
owned by the Purchaser in the aggregate must satisfy the following criteria: (i)
the aggregate Outstanding Purchase Price of mortgage loans secured by property
in California may not on such date exceed 30% of the then-current Program Size;
(ii) the

                                       16
<Page>

aggregate Outstanding Purchase Price of mortgage loans secured by property in a
single state other than California may not on such date exceed 15% of the then
current Program Size; (iii) the aggregate Outstanding Purchase Price of mortgage
loans insured or guaranteed by either the FHA or VA may not on such date exceed
30% of the then-current Program Size; (iv) the aggregate Outstanding Purchase
Price of Jumbo Loans may not on such date exceed 35% of the then-current Program
Size; (v) the mortgage loans owned by the Trust must have a weighted average
FICO Score of at least 675 (excluding loans insured or guaranteed by the FHA or
VA); and (vi) the weighted average loan to value ratio of the mortgage loans
owned by the Trust must not on such date exceed 85% (excluding loans insured or
guaranteed by the FHA or VA).

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

            PROGRAM DOCUMENTS: The Liquidity Agreement, the Indenture, the
Security Agreement, the Custodial Agreement, this Purchase Agreement, the
Guarantee, the Trust Agreement, the Depositary Agreement, the Interest Rate
Swaps, the Commercial Paper Dealer Agreement, the Administration Agreement and
the Note Purchase Agreement and the Certificate Purchase Agreement.

            PROGRAM SIZE: The sum of the Series Program Sizes, as such limit may
be increased or decreased in accordance with the Program Documents.

            PURCHASE PRICE ADJUSTMENT FACTOR: With respect to any Eligible Loan,
the Original Principal Purchase Price of such Eligible Loan expressed as a
percentage of par.

            PURCHASER OR TRUST: Bishop's Gate Residential Mortgage Trust, a
Delaware business trust.

            QUALIFIED DEPOSITORY: Any depository the accounts of which are
insured by the FDIC through the BIF or the SAIF and the debt obligations of
which are rated "A2" and "A" or better by Moody's and S&P, respectively, or such
depository as shall be acceptable to Moody's and S&P, as applicable.

            QUALIFIED INSURER: A mortgage guaranty insurance company duly
authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by FHLMC, FNMA or GNMA.

                                       17
<Page>

            QUALIFIED PURCHASER: A leading purchaser in the market for mortgage
loans having the highest credit standing which satisfy all the criteria that the
Calculation Agent would apply generally at such time in determining whether to
offer or make an extension of credit thereto.

            RATED BIDDER: Shall have the meaning set forth in SECTION 11.3.

            RATING AGENCY: S&P, Moody's and Fitch.

            RATING AGENCY CONFIRMATION: A written confirmation from each Rating
Agency that the proposed action will not cause the reduction or withdrawal of
their respective then current ratings on any outstanding Series of Certificates,
any outstanding Series of Notes or any outstanding Commercial Paper.

            RECONCILIATION DATE: The first and fifteenth day of each calendar
month (or, if such day is not a Business Day, the next following Business Day).

            REFERENCE MORTGAGE LOAN: A hypothetical mortgage loan used by the
Calculation Agent for the purposes of determining the Credit-Adjusted Price
which is otherwise identical to the Delinquent or Defaulted Loan in all
respects, including interest rate, principal balance, cash flows and all other
payment characteristics except that such mortgage loan is not a Delinquent or
Defaulted Loan.

            REMARKETING AGENT: Lehman Brothers Inc., in its capacity as
Remarketing Agent, or any successor Remarketing Agent for all Series of
Certificates, pursuant to a mutually acceptable remarketing agent agreement.

            REO DISPOSITION: The final sale by the Servicer of any REO Property.

            REO DISPOSITION PROCEEDS: All amounts received with respect to an
REO Disposition (net of costs related thereto) pursuant to SECTION 4.17 hereof.

            REO PROPERTY: A Mortgaged Property acquired by the Servicer on
behalf of the Purchaser through foreclosure or by deed in lieu of foreclosure,
as described in SECTION 4.17 hereof.

            REPURCHASE PRICE: With respect to any mortgage loan that is
repurchased by the Seller or Servicer in accordance with SECTIONS 3.3, 6.2 and
7.1 hereof, the Outstanding Purchase Price of such loan plus accrued interest
through the date of repurchase.

            REQUIRED BANKS: Liquidity Banks having an aggregate principal amount
of outstanding Liquidity Loans and available commitments under the Liquidity
Agreement equal to 51% of the

                                       18
<Page>

aggregate principal amount of outstanding Liquidity Loans and available
commitments for all Liquidity Banks.

            REQUIRED CERTIFICATEHOLDERS: A majority in principal amount of all
Series of Certificates, voting together as a class.

            REQUIRED NOTEHOLDERS: A majority in principal amount of all Series
of Notes, voting together as a single class.

            RESERVE FUND: The segregated trust account established and
maintained by the Collateral Agent for the benefit of the Secured Parties and
the holders of all Series of Certificates, as set forth in SECTION 5.05 of the
Security Agreement.

            RESERVE FUND AVAILABLE AMOUNT: On any day, the amount on deposit in
the Reserve Fund as of such day.

            RETAINED PAYMENT: With respect to any Terminated Loan sold by the
Servicer on behalf of the Purchaser to a third party or securitized, the sum of
(A) with respect to any such Terminated Loan which has a Pooling Date prior to
the 15th day of the month, the amount of principal payments which are scheduled
to be received by the Purchaser in the month in which the Loan Termination Date
for such Terminated Loan occurs and (B) the amount of Principal Prepayments not
deposited into the Collateral Account and received by the Purchaser prior to the
Pooling Date where the next Reconciliation Date occurs prior to such Pooling
Date.

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

            SCHEDULED PRINCIPAL BALANCE: With respect to any Eligible Loan, as
of any date of determination, the original principal balance thereof, reduced by
the principal portion of all Monthly Payments then due on or before such date of
determination, whether or not received.

            SECURED PARTIES: The Swap Counterparties, the Liquidity Banks, the
Agent, the holders of all Series of Notes, the Indenture Trustee and the holders
of the Commercial Paper.

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

            SECURITIES or SECURITIZATION SECURITIES: Any note, bond or
pass-through certificate that is, directly or indirectly, secured by or
represents an interest in any Eligible Loan or pool of Eligible Loans.

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<Page>

            SECURITIZATION or SECURITIZED: A transaction in which any Eligible
Loan or pool of Eligible Loans designated by the Purchaser is financed through
or sold to a Securitization Vehicle, which vehicle issues Securities in the
capital markets.

            SECURITIZATION VEHICLE: FHLMC, FNMA, GNMA or any trust, partnership,
corporation, limited liability corporation, limited liability partnership or
other state law entity that is created for the principal purpose of owning or
holding an Eligible Loan or Eligible Loans which are the subject of a
Securitization.

            SECURITY AGREEMENT: The Amended and Restated Security Agreement,
dated as of December 11, 1998, among the Purchaser, the Agent, the Indenture
Trustee and the Collateral Agent, as the same may at any time be amended,
modified or supplemented.

            SELLER: Cendant Mortgage Corporation, a New Jersey corporation.

            SERIES: Shall mean (x) any Series of Notes, (y) the Commercial Paper
and Liquidity Loans (such Commercial Paper and Liquidity Loans taken together as
one Series), or (z) any Series of Certificates, as the context may require.

            SERIES PROGRAM SIZE: Shall mean, with respect to each Series of
Notes, the amount set forth in the Series Supplement for such Series of Notes
(including, without limitation, the amount of Certificates required to be issued
in connection therewith) and, with respect to the Series of Liquidity Loans and
Commercial Paper, $1,546,400,000 (as such size may be increased or decreased in
accordance with the Program Documents).

            SERIES TRUST AGREEMENT SUPPLEMENT: With respect to each Series of
Certificates, the related supplement to the Base Trust Agreement.

            SERVICER: Cendant Mortgage Corporation, a New Jersey corporation, or
any successor Servicer as provided herein.

            SERVICER EVENT OF DEFAULT: Any one of the conditions or
circumstances enumerated in SECTION 10.1 hereof.

            SERVICER MONTHLY ADVANCE: Amounts advanced by the Servicer in
respect of Delinquent Loans pursuant to SECTION 5.1 hereof.

            SERVICER REPORT: The meaning specified in SECTION 4.18 hereof.

                                       20
<Page>

            SERVICING ADVANCES: All customary, reasonable and necessary "out of
pocket" costs and expenses other than Servicer Monthly Advances (including
reasonable attorneys' fees and disbursements) incurred in the performance by the
Servicer in connection with a default or other unanticipated occurrence with
respect to an Eligible Loan owned by the Purchaser (and not including the
performance of its ordinary and customary activities as Servicer), including,
but not limited to, the cost of (a) the preservation, restoration and protection
of the Mortgaged Property, (b) any enforcement or judicial proceedings,
including foreclosures, (c) the management and liquidation of any REO Property
and (d) any advances of taxes and insurance premiums made pursuant to SECTION
4.9 hereof as a consequence of the default by the Mortgagor on its obligation to
pay such amounts.

            SERVICING FEE: With respect to the services provided by the Servicer
pursuant to this Agreement, an annual servicing fee of 3/8 of 1% on the average
monthly balance of Eligible Loans held by the Purchaser during such month plus
the excess fee, if any, pursuant to SECTION 5.03(b)(xi) of the Security
Agreement.

            S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, or any successor thereto.

            SUPPLEMENT: A supplement to the Base Indenture with respect to any
Series of Notes.

            SWAP COUNTERPARTY: Each of The Bank of Nova Scotia, Bank of America,
N.A. (formerly NationsBank, N.A.), Barclay's Bank or any other swap counterparty
which is a commercial bank or financial institutions having short-term credit
ratings of "A-1+" and "P-1" from S&P and Moody's and "F1+," if rated by Fitch,
and long-term credit ratings of at least "AA-" and "Aa3" from S&P and Moody's
and "AA-," if rated by Fitch .

            TERMINATED LOAN: Each Eligible Loan which is (1) sold or Securitized
or (2) prepaid in full.

            TERMINATION EVENT: The meaning specified in SECTION 11.2 hereof.

            TERMINATION EVENT AUCTION: Shall have the meaning set forth in
SECTION 11.2 hereof.

            TRANSFER SUPPLEMENT: The document pursuant to which each Eligible
Loan or Eligible Loans are sold by the Seller or the Additional Seller to the
Purchaser, a form of which is attached hereto as EXHIBIT A-1 and EXHIBIT A-2,
respectively.

            TRUST AGREEMENT: The Base Trust Agreement, together with all Series
Trust Agreement Supplements thereto, as the same may at any time be amended,
modified or supplemented.

                                       21
<Page>

            VA: The U.S. Department of Veterans Affairs, an agency of the United
States of America, or any successor thereto including the Secretary of Veterans
Affairs.

            VA APPROVED LENDER: Those lenders which are approved by the VA to
act as a lender in connection with the origination of VA Loans.

            VA GUARANTY PROCEEDS: The proceeds of any payment of a VA Loan
Guaranty Certificate.

            VA LOAN: An Eligible Loan which is the subject of a VA Loan Guaranty
Certificate as evidenced by a VA Loan Guaranty Certificate, or an Eligible Loan
which is a vendee loan sold by the VA.

            VA LOAN GUARANTY CERTIFICATE: The obligation of the United States to
pay a specific percentage of an Eligible Loan (subject to a maximum amount) upon
default of the Mortgagor pursuant to the Servicemen's Readjustment Act, as
amended.

            VA REGULATIONS: Regulations promulgated by the U.S. Department of
Veterans Affairs pursuant to the Servicemen's Readjustment Act, as amended,
codified in 38 Code of Federal Regulations, and other VA issuances relating to
VA Loans, including related handbooks, circulars and notices.

            VOTING GROUP: The meaning specified in SECTION 12.4 hereof.

            WET FUNDED LOAN: A mortgage loan that is originated by the Seller or
the Additional Seller and purchased by the Purchaser, prior to the delivery of
the Mortgage Note to the Custodian.

            WET FUNDED LOAN LIMITATION: On any day, if the ratings of PHH
Corporation are below "BBB+" or "Baa1", the aggregate Outstanding Purchase Price
of Wet Funded Loans may not exceed 30% of the then-current Program Size.

                                       22
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                                   ARTICLE II

              SALE OF ELIGIBLE LOANS; POSSESSION OF MORTGAGE FILES;
                     BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
                              DELIVERY OF DOCUMENTS

            Section 2.1 SALE OF ELIGIBLE LOANS; POSSESSION OF MORTGAGE LOAN
FILES; MAINTENANCE OF MORTGAGE LOAN FILES.

            (a) (i) From time to time, pursuant to any Transfer Supplement, the
Seller or the Additional Seller, as applicable, may sell, transfer, assign, set
over and convey to the Purchaser, without recourse, but subject to the terms of
this Agreement, all the right, title and interest (not including servicing
rights with respect to the Eligible Loans, which shall be retained by the Seller
or the Servicer, as applicable, subject to and in accordance with this
Agreement) of the Seller or the Additional Seller, as applicable, in and to any
Eligible Loans, including Wet Funded Loans, originated by the Seller or the
Additional Seller, as applicable; PROVIDED, HOWEVER, that the Purchaser shall
not at any time be required to purchase Eligible Loans having an aggregate
Outstanding Purchase Price greater than the then-current Program Size; PROVIDED,
FURTHER, that mortgage loans transferred on each Closing Date must satisfy the
Eligibility Criteria. The Seller or the Servicer (on behalf of the Additional
Seller), as applicable, shall provide a notice to the Purchaser, the Indenture
Trustee, the Agent, the Collateral Agent and the Swap Counterparties not later
then 4:00 p.m., New York City time, one Business Day prior to the execution of
any Transfer Supplement of its intention to sell a Portfolio to the Purchaser
pursuant to a Transfer Supplement. In such notice, the Seller or the Servicer
(on behalf of the Additional Seller), as applicable, shall inform the Purchaser
of the aggregate principal balance of the Eligible Loans that it intends to sell
on such date. The subject Portfolio shall be sold by the Seller or the
Additional Seller, as applicable, to the Purchaser as described in SECTION 2.2
hereof. Each Transfer Supplement shall be executed by the Seller or the Servicer
(on behalf of the Additional Seller), as applicable, and the Purchaser at the
time of the sale of the subject Portfolio. Notwithstand ing the foregoing, the
Purchaser, the Seller, the Additional Seller and the Servicer, each acknowledge
and agree that, subject to and in accordance with this Agreement, the Seller or
the Servicer, as applicable, is the owner of the servicing rights with respect
to the Eligible Loans sold to the Purchaser by the Seller or the Additional
Seller, as applicable, and the Seller or the Servicer, as applicable, is
responsible for all servicing duties.

      (ii) Upon execution of any Transfer Supplement by the Seller or the
Servicer (on behalf of the Additional Seller), as applicable, and the Trust and
receipt of the purchase price therefor, the Seller or the Additional Seller, as
applicable, hereby sells, assigns, transfers, sets over and conveys to the Trust
all right, title and interest of the Seller or the Additional Seller, as
applicable, in, to and under each mortgage loan identified on the such Transfer
Supplement. It is intended that the transfer, assignment and conveyance herein
contemplated constitute a sale of the mortgage loans, conveying

                                       23
<Page>

good title thereto free and clear of any Liens, by the Seller or the Additional
Seller, as applicable, to the Trust and that the mortgage loans not be part of
the Seller's or the Additional Seller's, as applicable, estate in the event of
insolvency. In the event that the mortgage loans are held to be property of the
Seller or the Additional Seller, as applicable, or if for any other reason the
Transfer Supplement is held or deemed to create a security interest in the
mortgage loans, the parties intend that the Seller or the Additional Seller, as
applicable, shall be deemed to have granted, and shall have granted, to the
Trust a first-priority perfected security interest in the mortgage loans and all
Collateral related thereto now existing or hereafter arising for the purpose of
securing the rights of the Trust under this Agreement, and that this Agreement
and the Transfer Supplement shall each constitute a security agreement under
applicable law.

            (b) Pursuant to SECTION 2.5, as soon as practicable, but in any
event on or before the date which is 21 days after any sale of Eligible Loans to
the Purchaser, the Seller or the Servicer (on behalf of the Additional Seller),
as applicable, shall deliver each Mortgage Note, including Mortgage Notes on Wet
Funded Loans (subject to the Wet Funded Loan Limitation), to the Custodian as
agent of the Collateral Agent. The Seller or the Servicer (on behalf of the
Additional Seller), as applicable, shall deliver the related Loan Documents to
the Servicer and the contents of each Mortgage Loan File shall be held in trust
by the Servicer for the benefit of the Purchaser. The possession of each
Mortgage Loan File by the Servicer is at the will of the Purchaser for the sole
purpose of servicing the related Eligible Loan and such retention and possession
by the Servicer is in a custodial capacity only. Upon the sale of the Eligible
Loans, the ownership of each Mortgage Note, the related Mortgage and the related
Mortgage Loan File shall vest immediately in the Purchaser, and the ownership of
all records and documents with respect to the related Eligible Loan prepared by
or which come into the possession of the Servicer shall vest immediately in the
Purchaser and shall be retained and maintained by the Servicer, in trust, at the
will of the Purchaser and the Collateral Agent and only in such custodial
capacity. Each Mortgage Loan File and the Servicer's books and records shall
each be marked appropriately to reflect clearly the sale of the related Eligible
Loans to the Purchaser. The Custodian shall only release its custody of the
contents of any Mortgage Loan File in its possession accordance with the
Custodial Agreement.

      The Mortgage Loan File shall consist of the following documents
(constituting, collectively, the "LOAN DOCUMENTS") and such other documents as
Purchaser may require from time to time:

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

                  (ii) the original Mortgage with evidence of recording thereon.
      If in connection with any Eligible Loan, the Seller or the Servicer (on
      behalf of the Additional Seller), as applicable, cannot deliver or cause
      to be delivered the original Mortgage with evidence of recording thereon
      on or prior to the Closing Date because

                                       24
<Page>

      of a delay caused by the public recording office where such Mortgage has
      been delivered for recordation or because such Mortgage has been lost or
      because such public recording office retains the original recorded
      Mortgage, the Seller or the Servicer (on behalf of the Additional Seller),
      as applicable, shall deliver or cause to be delivered to the Servicer, a
      photocopy of such Mortgage, together with (i) in the case of a delay
      caused by the public recording office, an officer's certificate of the
      Seller or the Servicer (on behalf of the Additional Seller), as
      applicable, stating that such Mortgage has been dispatched to the
      appropriate public recording office for recordation and that the original
      recorded Mortgage or a copy of such Mortgage certified by such public
      recording office to be a true and complete copy of the original recorded
      Mortgage will be promptly delivered to the Servicer upon receipt thereof
      by the Seller or the Servicer (on behalf of the Additional Seller), as
      applicable; or (ii) in the case of a Mortgage where a public recording
      office retains the original recorded Mortgage or in the case where a
      Mortgage is lost after recordation in a public recording office, a copy of
      such Mortgage certified by such public recording office to be a true and
      complete copy of the original recorded Mortgage;

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

                  (iv) unless the original Mortgage was recorded in the name of
      MERS, an Assignment of Mortgage for each Eligible Loan, in form and
      substance acceptable for recording, and all interim assignments with
      evidence of recording thereon, if any; if the Eligible Loan was acquired
      by the Seller or the Additional Seller, as applicable, in a merger, any
      Assignment of Mortgage (other than an original Mortgage recorded in the
      name of MERS) must be made by "[Seller] [Additional Seller], successor by
      merger to [name of predecessor]." If the Eligible Loan was acquired or
      originated by the Seller or the Additional Seller, as applicable, while
      doing business under another name, any Assignment of Mortgage (other than
      an original Mortgage recorded in the name of MERS) must be by "[Seller]
      [Additional Seller], formerly known as [previous name]." If the Eligible
      Loan was acquired by the Seller or the Additional Seller, as applicable,
      as receiver for another entity, any Assignment of Mortgage (other than an
      original Mortgage recorded in the name of MERS) must be by "[Seller]
      [Additional Seller], receiver for [name of entity in receivership]." Any
      Assignment of Mortgage must be duly recorded only if recordation is either
      necessary under applicable law to perfect or on direction of the Purchaser
      as provided in this Agreement. If any Assignment of Mortgage is to be
      recorded, the Mortgage shall be assigned to the Servicer, as Custodian. If
      any Assignment of Mortgage is not to be recorded, such Assignment of
      Mortgage shall be delivered in blank;

                                       25
<Page>

                  (v) the originals of all intervening assignments of mortgage
      with evidence of recording thereon, or if any such intervening assignment
      has not been returned from the applicable recording office or has been
      lost or if such public recording office retains the original recorded
      assignments of mortgage, the Seller or the Servicer (on behalf of the
      Additional Seller), as applicable, shall deliver or cause to be delivered
      to the Servicer, a photocopy of such intervening assignment, together with
      (i) in the case of a delay caused by the public recording office, an
      officer's certificate of the Seller or the Servicer (on behalf of the
      Additional Seller), as applicable, stating that such intervening
      assignment of mortgage has been dispatched to the appropriate public
      recording office for recordation and that such original recorded
      intervening assignment of mortgage or a copy of such intervening
      assignment of mortgage certified by the appropriate public recording
      office to be a true and complete copy of the original recorded intervening
      assignment of mortgage will be promptly delivered to the Servicer upon
      receipt thereof by the Seller or the Servicer (on behalf of the Additional
      Seller), as applicable; or (ii) in the case of an intervening assignment
      where a public recording office retains the original recorded intervening
      assignment or in a case where an intervening assignment is lost after
      recordation in a public recording office, a copy of such intervening
      assignment certified by such public recording office to be a true and
      complete copy of the original recorded intervening assignment;

                  (vi) if available, the original mortgagee title insurance
      policy or attorney's opinion of title and abstract of title, or if the
      policy has not yet been issued, (a) the irrevocable written commitment,
      interim binder or marked up binder for a title insurance policy issued by
      the title insurance company dated and certified as of the date the
      Eligible Loan was funded, or (b) a copy of the applicable escrow
      instructions indicating the name of the title company with, in either
      case, a statement by the title insurance company or closing attorney on
      such binder or commitment or escrow instructions that the priority of the
      lien on the related Mortgage during the period between the date of the
      funding of the related Eligible Loan and the date of the related title
      policy is insured;

                  (vii) the original of any security agreement, chattel mortgage
      or equivalent document executed in connection with the Mortgage;

                  (viii) the original of any primary mortgage insurance policy
      (if any); and

                  (ix) if the Eligible Loans are sold to the Agencies, the
      originals of other documents, forms, releases, certifications and papers
      required by the applicable Agency Custodial Agreement.

                                       26
<Page>

            (c) On the date hereof and on the date of each other increase in the
      then-current Program Size, the Seller or the Servicer (on behalf of the
      Additional Seller) shall deposit an amount into the Reserve Fund from the
      proceeds of the sale of the Eligible Loans to the Purchaser so that the
      amount on deposit in the Reserve Fund equals 0.60% of the then-current
      Program Size.

            (d) It is the intention of this Agreement that each conveyance of
the Seller's or the Additional Seller's, as applicable, right, title and
interest in and to the Eligible Loans (not including servicing rights with
respect to the Eligible Loans, which shall be retained by the Seller or the
Servicer, as applicable) pursuant to this Agreement shall constitute a purchase
and sale and not a loan.

            Section 2.2 DETERMINATION OF PURCHASE PRICE; DEPOSIT BY SELLER AND
THE ADDITIONAL SELLER.

            (a) Upon notice from the Seller or the Servicer (on behalf of the
Additional Seller), as applicable, to the Purchaser of the prospective sale of a
Portfolio by the Seller or the Additional Seller, as applicable, to the
Purchaser under SECTION 2.1 hereof, the Seller or the Servicer (on behalf of the
Additional Seller), as applicable, shall submit to the Purchaser (i) a Mortgage
Loan Schedule and (ii) the Closing Date for the sale of the Portfolio. The
Seller or the Servicer (on behalf of the Additional Seller), as applicable,
shall not choose a preliminary Closing Date which is less than one Business Day
from the date that the Purchaser receives the items specified in the preceding
sentence. Not later than 8 a.m. on the Closing Date, the Seller or the Servicer
(on behalf of the Additional Seller), as applicable, shall notify the Purchaser
of its calculation of the Original Principal Purchase Price and the Initial
Purchase Price for the Portfolio. If the Purchaser does not agree with such
calculation or the sale does not close for any other reason, the Closing Date
for the Portfolio shall be rescheduled to a later date, at its option, by the
Seller or the Servicer (on behalf of the Additional Seller), as applicable. The
Purchaser and the Seller or the Servicer (on behalf of the Additional Seller),
as applicable, shall use their best efforts to close the sale of any Portfolio
on any such Closing Date. The Purchaser shall pay to the Seller or the Servicer
(on behalf of the Additional Seller), as applicable, the Initial Purchase Price
of any Eligible Loans purchased by it hereunder in immediately available funds
not later than 2:00 p.m., New York City time, on the Closing Date. Each mortgage
loan must satisfy the Eligibility Criteria and the Eligibility Representations.

            (b) With respect to any Eligible Loan which will not have a
scheduled interest payment due on the first day of the month following the month
in which the Closing Date occurs for the purchase of such Eligible Loan (the
"CLOSING MONTH"), the Seller or the Servicer (on behalf of the Additional
Seller), as applicable, will deposit in the Collateral Account on the Closing
Date an amount equal to interest on the principal amount of such Eligible Loan
for the number of days remaining from and including the Closing Date to and
including the last day of the Closing Month at the contract rate for such
Eligible Loan.

                                       27
<Page>

            Section 2.3 PURCHASE COMMITMENT TERM.

            Subject to the terms and conditions of the Program Documents, the
commitment of the Purchaser under this Agreement shall expire on the termination
of this agreement, in accordance with SECTION 11.1 or 11.2 herein.

            Section 2.4 BOOKS AND RECORDS; TRANSFERS OF ELIGIBLE LOANS.

            From and after each related Closing Date, all rights arising with
respect to the Eligible Loans sold (not including servicing rights with respect
to the Eligible Loans, which shall be retained by the Seller or the Servicer, as
applicable, subject to and in accordance with this Agreement) pursuant to any
Transfer Supplement including but not limited to all funds received on or in
connection with the Eligible Loans, shall be received and held by the Servicer
in trust for the benefit of the Purchaser. Pursuant to the Custodial Agreement,
the Custodian shall hold all of the Mortgage Notes as described in such
Custodial Agreement.

            The sale of each Eligible Loan shall be reflected on the Seller's or
the Additional Seller's, as applicable, balance sheet and other financial
statements as a sale of assets by the Seller or the Additional Seller, as
applicable. The Seller or the Additional Seller, as applicable, intends to treat
the transfer of any Eligible Loans to the Purchaser pursuant to this Agreement
as a sale for accounting and tax purposes with respect to the Seller or the
Additional Seller, as applicable. The Servicer shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Eligible Loan which shall be marked clearly to reflect the ownership of each
Eligible Loan by the Purchaser. In particular, the Servicer shall maintain in
its possession, available for inspection by the Purchaser, the Collateral Agent,
the Indenture Trustee (acting at the written direction of the Required
Noteholders), the Agent or their respective designees, evidence of compliance
with applicable laws, rules and regulations. To the extent that original
documents are not required for purposes of realization of Liquidation Proceeds,
Insurance Proceeds, VA Guaranty Proceeds, FHA Proceeds or Securitization
proceeds, documents maintained by the Servicer may be in the form of microfilm
or microfiche or such other reliable means of recreating original documents,
including but not limited to, optical imagery techniques so long as the Servicer
complies with the requirements of the Guidelines.

            The Servicer shall maintain with respect to each Eligible Loan and
shall make available for inspection, upon reasonable advance notice, at the
offices of the Servicer during normal business hours by the Purchaser, the
Collateral Agent, the Indenture Trustee (acting at the written direction of the
Required Noteholders), the Agent, the Remarketing Agent, any CP Dealer or their
respective designees the related Mortgage Loan File during the time the
Purchaser retains ownership of an Eligible Loan and thereafter in accordance
with applicable laws and regulations.

                                       28
<Page>

            Section 2.5 CUSTODIAL AGREEMENT.

            Pursuant to the Custodial Agreement delivered to the Purchaser in
connection with the Amended and Restated Purchase Agreement, the Seller or the
Servicer (on behalf of the Additional Seller), as applicable, shall, from time
to time in connection with each purchase of Eligible Loans pursuant to the terms
of this Agreement, deliver to the Custodian, on or before the date which is 21
days after the related Closing Date, the Mortgage Note with respect to each
Eligible Loan transferred. The Custodian shall hold all Mortgage Notes in trust
for the Purchaser as agent for the Collateral Agent.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES;
                         COVENANTS; REMEDIES AND BREACH

            Section 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
                        ADDITIONAL SELLER.

            (a) The Company, as Seller and Servicer, represents and warrants to
the Purchaser (and for the benefit of the Collateral Agent) that as of each
applicable Closing Date and as of the date of the sale or Securitization of each
Eligible Loan:

                  (i) DUE ORGANIZATION AND AUTHORITY. The Company is duly
      organized, validly existing and in good standing under the laws of New
      Jersey and has all licenses necessary to carry on its business as now
      being conducted and is licensed, qualified and in good standing in each
      state where a Mortgaged Property is located if required to conduct
      business of the type conducted by it, and in any event the Company is in
      compliance with the laws of any such state to the extent necessary to
      ensure the enforceability of any Eligible Loan sold hereunder and the
      servicing of any such Eligible Loan in accordance with the terms of this
      Agreement and any Transfer Supplement; the Company has the full power and
      authority to execute and deliver this Agreement and any Transfer
      Supplement and to perform its obligations in accordance herewith and
      therewith; the execution, delivery and performance of this Agreement and
      any Transfer Supplement by the Company and the consummation of the
      transactions contemplated hereby and thereby have been duly and validly
      authorized by the Company; all requisite corporate action has been taken
      by the Company to make this Agreement and any Transfer Supplement valid
      and binding upon the Company in accordance with its terms; this Agreement
      and any Transfer Supplement each evidences the valid, binding and
      enforceable obligation of the Company, except that (i) the enforceability
      thereof may be limited by bankruptcy, insolvency, moratorium,

                                       29
<Page>

      receivership and other similar laws relating to creditors' rights
      generally and (ii) the remedy of specific performance and injunctive and
      other forms of equitable relief may be subject to equitable defenses and
      to the discretion of the court before which any proceeding therefor may be
      brought.

                  (ii) ORDINARY COURSE OF BUSINESS. The consummation of the
      transactions contemplated by this Agreement are in the ordinary course of
      business of the Company, and the transfer, assignment and conveyance of
      the Mortgage Notes and the Mortgages by the Company pursuant to this
      Agreement are not subject to the bulk transfer or any similar statutory
      provisions in effect in any applicable jurisdiction.

                  (iii) NO CONFLICTS. Neither the execution and delivery of this
      Agreement or any Transfer Supplement, the acquisition of Eligible Loans by
      the Company, the sale of Eligible Loans to the Purchaser or the
      transactions contemplated hereby or thereby, nor the fulfillment of or
      compliance with the terms and conditions of this Agreement or any Transfer
      Supplement, will conflict with or result in a breach of any of the terms,
      conditions or provisions of the Company's charter or by-laws or any
      material agreement or instrument to which the Company is now a party or by
      which it is bound, or constitute a default or result in an acceleration
      under any of the foregoing, or result in the violation in any material
      respect of any applicable law, rule, regulation, order, judgment or decree
      to which the Company or its property is subject, or impair the ability of
      the Purchaser to realize on the Eligible Loans in any material respect, or
      impair the value of the Eligible Loans in any material respect, or impair
      in any material respect the ability of the Purchaser to realize the full
      mortgage insurance benefits (i) of the FHA Mortgage Insurance Contract
      with respect to FHA Loans; (ii) of the VA Loan Guaranty Certificate with
      respect to VA Loans; or (iii) other insurance benefits accruing pursuant
      to this Agreement, including but not limited to any PMI Policy.

                  (iv) ABILITY TO SERVICE. The Company is an Approved
      Seller/Servicer of Eligible Loans for at least two of FNMA, FHLMC and GNMA
      with the facilities, procedures, and experienced personnel necessary for
      the servicing of Eligible Loans. The Company is in good standing to sell
      mortgage loans to and service mortgage loans for at least two of FNMA,
      FHLMC and GNMA, and no event has occurred, including but not limited to a
      change in insurance coverage, which would make the Company unable to
      comply with the eligibility requirements in all material respects of at
      least of two of FNMA, FHLMC and GNMA or which would require notification
      to FNMA, FHLMC or GNMA. As of the Closing Date the Company is an FHA
      Approved Mortgagee and a VA Approved Lender and has the facilities,
      procedures, and experienced personnel necessary for the servicing of
      mortgage loans of the same type

                                       30
<Page>

      as the Eligible Loans. As of the Closing Date, the Company is in good
      standing to service mortgage loans for FHA and VA, and no event has
      occurred, including but not limited to a change in insurance coverage,
      which would make the Company unable to comply with FHA or VA eligibility
      requirements in all material respects, or which would require notification
      to either the FHA or VA.

                  (v) REASONABLE SERVICING FEE. The Servicer acknowledges and
      agrees that the Servicing Fee represents reasonable compensation for
      performing such services as compensation for the servicing and
      administration and arranging for the sale or Securitization of the
      Eligible Loans pursuant to this Agreement and shall be treated by the
      Servicer, for accounting and tax purposes, as compensation for the
      servicing and administration of the Eligible Loans pursuant to this
      Agreement.

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

                  (vii) NO CONSENT REQUIRED. No consent, approval, authorization
      or order of any court or governmental agency or body including, without
      limitation, HUD, FHA or VA, is required for the execution, delivery and
      performance by the Company of or compliance by it with this Agreement or
      any Transfer Supplement or the sale of the Eligible Loans, or if required,
      such approval has been obtained.

                  (viii) SELECTION PROCESS. Any Portfolio of mortgage loans sold
      pursuant to a Transfer Supplement was selected from mortgage loans
      originated by the Seller or purchased by the Seller from third parties and
      are Eligible Loans which satisfy the Eligibility Representations and any
      selection process employed by it was not made in a manner so as to
      materially adversely affect the interest of the Purchaser.

                  (ix) NO UNTRUE INFORMATION. Neither this Agreement, any
      Transfer Supplement nor any statement, report or other document prepared
      by the Seller or to be prepared by the Seller pursuant to this Agreement
      or in connection with the

                                       31
<Page>

      transactions contemplated hereby contains any untrue statement of a
      material fact relating to the Seller or the Eligible Loans or omits to
      state a fact necessary to make the statements herein or therein not
      materially misleading.

                  (x) FINANCIAL STATEMENTS. The Company has delivered to the
      Purchaser consolidated financial statements of PHH Corporation as to its
      last three complete fiscal years and any later quarter ended more than 60
      days prior to the execution of this Agreement. All such financial
      statements fairly present the pertinent results of operations and changes
      in financial position at the end of each such period of PHH Corporation
      and its subsidiaries and have been prepared in accordance with generally
      accepted accounting principles consistently applied throughout the periods
      involved, except as set forth in the notes thereto. There has been no
      change in the business, operations, financial condition, properties or
      assets of the Company since the date of PHH Corporation's most recently
      provided financial statements that would have a material adverse effect on
      its ability to perform its obligations under this Agreement.

                  (xi) NO BROKERS' FEES. The Seller has not dealt with any
      broker, investment banker, agent or other Person that may be entitled to
      any commission or compensation in connection with the sale of any Eligible
      Loans to the Purchaser.

                  (xii) FAIR CONSIDERATION. The consideration received by the
      Seller upon the sale of the Eligible Loans under this Agreement
      constitutes fair consideration and reasonably equivalent value for the
      Eligible Loans.

                  (xiii) ABILITY TO PERFORM. The Company does not believe, nor
      does it have any reason or cause to believe, that it cannot perform each
      and every covenant contained in this Agreement in all material respects.
      The Company is solvent and the sale of the Eligible Loans is not
      undertaken to hinder, delay or defraud any of the Company's creditors.

                  (xiv) SALE TREATMENT. The Seller has determined that the
      disposition of the Eligible Loans pursuant to this Agreement will be
      afforded sale treatment for accounting and tax purposes.

            (b) The Additional Seller represents and warrants to the Purchaser
(and for the benefit of the Collateral Agent) that as of each applicable Closing
Date and as of the date of the sale or Securitization of each Eligible Loan:

                  (i) DUE ORGANIZATION AND AUTHORITY. The Additional Seller is
      duly formed, validly existing and in good standing under the laws of the
      jurisdiction where

                                       32
<Page>

      it was duly formed and has as all licenses necessary to carry on its
      business as now being conducted and is licensed, qualified and in good
      standing in each state where a Mortgaged Property is located if required
      to conduct business of the type conducted by it, and in any event the
      Additional Seller is in compliance with the laws of any such state to the
      extent necessary to ensure the enforceability of any Eligible Loan sold
      hereunder and any Transfer Supplement; the Additional Seller has the full
      power and authority to execute and deliver this Agreement and any Transfer
      Supplement and to perform its obligations in accordance herewith and
      therewith; the execution, delivery and performance of this Agreement and
      any Transfer Supplement by the Additional Seller and the consummation of
      the transactions contemplated hereby and thereby have been duly and
      validly authorized by the Additional Seller; all requisite corporate
      action and/or limited liability company action has been taken by the
      Additional Seller to make this Agreement and any Transfer Supplement valid
      and binding upon the Additional Seller in accordance with its terms; this
      Agreement and any Transfer Supplement each evidences the valid, binding
      and enforceable obligation of the Additional Seller, except that (i) the
      enforceability thereof may be limited by bankruptcy, insolvency,
      moratorium, receivership and other similar laws relating to creditors'
      rights generally and (ii) the remedy of specific performance and
      injunctive and other forms of equitable relief may be subject to equitable
      defenses and to the discretion of the court before which any proceeding
      therefor may be brought.

                  (ii) ORDINARY COURSE OF BUSINESS. The consummation of the
      transactions contemplated by this Agreement are in the ordinary course of
      business of the Additional Seller, and the transfer, assignment and
      conveyance of the Mortgage Notes and the Mortgages by the Additional
      Seller pursuant to this Agreement are not subject to the bulk transfer or
      any similar statutory provisions in effect in any applicable jurisdiction.

                  (iii) NO CONFLICTS. Neither the execution and delivery of this
      Agreement or any Transfer Supplement, the acquisition of Eligible Loans by
      the Additional Seller, the sale of Eligible Loans to the Purchaser or the
      transactions contemplated hereby or thereby, nor the fulfillment of or
      compliance with the terms and conditions of this Agreement or any Transfer
      Supplement, will conflict with or result in a breach of any of the terms,
      conditions or provisions of the Additional Seller's charter and/or limited
      liability company agreement or any material agreement or instrument to
      which the Additional Seller is now a party or by which it is bound, or
      constitute a default or result in an acceleration under any of the
      foregoing, or result in the violation in any material respect of any
      applicable law, rule, regulation, order, judgment or decree to which the
      Additional Seller or its property is subject, or impair the ability of the
      Purchaser to realize on the Eligible Loans in any material respect, or

                                       33
<Page>

      impair the value of the Eligible Loans in any material respect, or impair
      in any material respect the ability of the Purchaser to realize the full
      mortgage insurance benefits (i) of the FHA Mortgage Insurance Contract
      with respect to FHA Loans; (ii) of the VA Loan Guaranty Certificate with
      respect to VA Loans; or (iii) other insurance benefits accruing pursuant
      to this Agreement, including but not limited to any PMI Policy.

                  (iv) NO LITIGATION PENDING. There is no action, suit,
      proceeding or investigation pending or to its knowledge threatened against
      the Additional 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 the Additional
      Seller, or in any material impairment of the right or ability of the
      Additional Seller to carry on its business substantially as now conducted,
      or in any material liability on the part of the Additional Seller, or
      which would draw into question the validity of this Agreement or any
      Transfer Supplement or the Eligible Loans or of any action taken or to be
      taken in connection with the obligations of the Additional Seller
      contemplated herein, or which would be likely to impair materially the
      ability of the Additional Seller to perform under the terms of this
      Agreement or any Transfer Supplement.

                  (v) NO CONSENT REQUIRED. No consent, approval, authorization
      or order of any court or governmental agency or body including, without
      limitation, HUD, FHA or VA, is required for the execution, delivery and
      performance by the Additional Seller of or compliance by it with this
      Agreement or any Transfer Supplement or the sale of the Eligible Loans, or
      if required, such approval has been obtained.

                  (vi) SELECTION PROCESS. Any Portfolio of mortgage loans sold
      pursuant to a Transfer Supplement was selected from mortgage loans
      originated by the Additional Seller or purchased by the Additional Seller
      from third parties and are Eligible Loans which satisfy the Eligibility
      Representations and any selection process employed by it was not made in a
      manner so as to materially adversely affect the interest of the Purchaser.

                  (vii) NO UNTRUE INFORMATION. Neither this Agreement, any
      Transfer Supplement nor any statement, report or other document prepared
      by the Additional Seller or to be prepared by the Additional Seller
      pursuant to this Agreement or in connection with the transactions
      contemplated hereby contains any untrue statement of a material fact
      relating to the Additional Seller or the Eligible Loans or omits to state
      a fact necessary to make the statements herein or therein not materially
      misleading.

                                       34
<Page>

                  (viii) NO BROKERS' FEES. The Additional Seller has not dealt
      with any broker, investment banker, agent or other Person that may be
      entitled to any commission or compensation in connection with the sale of
      any Eligible Loans to the Purchaser.

                  (ix) FAIR CONSIDERATION. The consideration received by the
      Additional Seller upon the sale of the Eligible Loans under this Agreement
      constitutes fair consideration and reasonably equivalent value for the
      Eligible Loans.

                  (x) ABILITY TO PERFORM. The Additional 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 in all
      material respects. The Additional Seller is solvent and the sale of the
      Eligible Loans is not undertaken to hinder, delay or defraud any of the
      Additional Seller's creditors.

                  (xi) SALE TREATMENT. The Additional Seller has determined that
      the disposition of the Eligible Loans pursuant to this Agreement will be
      afforded sale treatment for accounting and tax purposes.

            Section 3.2 REPRESENTATIONS AND WARRANTIES REGARDING INDIVIDUAL
MORTGAGE LOANS; ELIGIBILITY REPRESENTATIONS.

            As to each Eligible Loan sold in each Portfolio, the Seller and the
Servicer (on behalf of the Additional Seller) hereby represents and warrants to
the Purchaser that as of each applicable Closing Date and (excluding SECTION
3.2(d) hereof) as of the date of the Securitization or sale of each Eligible
Loan:

            (a) ELIGIBILITY OF MORTGAGE LOANS. The mortgage loan is an Eligible
Loan.

            (b) ELIGIBLE LOANS AS DESCRIBED. The information set forth in the
Mortgage Loan Schedule attached to the applicable Transfer Supplement is
complete, true and correct in all material respects.

            (c) VALID FIRST LIEN. The Mortgage is a valid first lien on the
Mortgaged Property. The Mortgaged Property is free and clear of all prior liens
and encumbrances and no rights or condition may exist that could give rise to
such liens, except for liens for real estate taxes and special assessments not
yet due and payable. The Mortgage is a legal, valid and binding obligation of
the related borrower, enforceable according to its terms and conditions, except
that (i) the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws

                                       35
<Page>

relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, and free from any right of set-off,
counterclaim or other claim or defense. No part of the Mortgaged Property has
been released from the Mortgage. The terms of the Mortgage have not in any
material manner been modified, amended or in any way waived or changed, except
as stated in a written modification agreement that is acceptable to and
delivered to the Seller and Servicer (in its own capacity and on behalf of the
Additional Seller).

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

            (d) OWNERSHIP. The Seller or the Additional Seller, as applicable,
is the sole owner of record and holder of the Eligible Loan. The Eligible Loan
is not assigned or pledged, and the Seller or the Additional Seller, as
applicable, has good and marketable title thereto, and has full right to
transfer and sell the Eligible Loan to the Purchaser free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to sell and assign each
Eligible Loan pursuant to the related Transfer Supplement.

            (e) 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 SECTION 3.2(c) above.

            (f) CONFORMANCE WITH UNDERWRITING STANDARDS. The Eligible Loan was
underwritten in accordance with (i) the Seller's underwriting standards in
effect on the date of origination of such Eligible Loan, and (ii) the
Guidelines.

            (g) PAYMENTS CURRENT. As of the Closing Date, no payments due with
respect to the Eligible Loan are 30 days or more past their contractual due
date.

            (h) NO MORTGAGOR BANKRUPTCY; DELINQUENCIES. To the best of the
Seller's and the Servicer's (on behalf of the Additional Seller) knowledge and
belief, no Mortgagor is the subject of a bankruptcy or similar proceeding. All
payments required to be made up to the Closing Date for each Eligible Loan under
the terms of the related Mortgage Note have been made. As of the Closing date,

                                       36
<Page>

no payment required under any such purchased Eligible Loan has ever been
delinquent more than 30 days.

            (i) NO OUTSTANDING CHARGES. There are no defaults in complying with
the terms of the Mortgages, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable.
Neither the Seller nor the Servicer (on behalf of the Additional Seller) has
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 Eligible Loan, except for interest accruing from
the date of the Mortgage Note or date of disbursement of the Eligible Loan
proceeds, whichever is greater, to the day which precedes by one month the Due
Date of the first installment of principal and interest.

            (j) ORIGINAL TERMS UNMODIFIED. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any material
respect (i) from the date of final endorsement of the Mortgage Note by HUD with
respect to FHA Loans, and (ii) from the date of origination with respect to VA
Loans, except by a written instrument which has been recorded, if necessary to
protect the interest of the Purchaser and which has been delivered to the
Custodian. The substance of any such waiver, alteration or modification has been
approved by the issuer of any related PMI Policy and the title insurer, to the
extent required by the policy, and by the FHA for the related FHA Loans, and the
VA for the related VA Loans, and its terms are reflected on the related Mortgage
Loan Schedule. No Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement approved by the issuer of any related
PMI Policy and the title insurer, to the extent required by the policy, and by
the FHA for the related FHA Loans, and the VA for the related VA Loans, and
which assumption agreement is part of the Mortgage Loan File delivered to the
Custodian and the terms of which are reflected in the related Mortgage Loan
Schedule.

            (k) NO DEFENSES. The Eligible Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part, or, with
respect to FHA Loans, impair the Purchaser's ability to collect full insurance
benefits under the FHA Mortgage Insurance Contract, without indemnity to HUD,
or, with respect to VA Loans, impair the Purchaser's ability to collect full
value under the VA Loan Guaranty Certificate upon the Mortgagor's default, or
subject to any right of rescission, set-off, counterclaim or defense, including
without limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto, and no
Mortgagor was a debtor in any state or federal bankruptcy or insolvency
proceeding at the time the Eligible Loan was originated.

                                       37
<Page>

            (l) HAZARD INSURANCE. Pursuant to the terms of the Mortgage, all
buildings or other improvements upon the Mortgaged Property are insured by (i)
an FHA approved insurer with respect to each FHA Loan, (ii) a VA approved
insurer with respect to each VA Loan or (iii) a generally acceptable insurer
against loss by fire and extended coverage and coverage for such other hazards
as are customary in the area where the Mortgaged Property is located pursuant to
insurance policies conforming to the requirements of SECTION 4.11 hereof and of
FHA and VA, if applicable. If upon origination of the Eligible Loan, the
Mortgaged Property was in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) a flood insurance policy meeting the
requirements of the current guidelines of the Flood Insurance Administration is
in effect which policy conforms to the requirements of SECTION 4.11 hereof and
of FHA and VA, if applicable. All individual insurance policies contain a
standard mortgagee clause naming the Seller or the Additional Seller, as
applicable, and its respective successors and assigns as mortgagee, and all
premiums thereon have been paid. The Mortgage obligates the Mortgagor thereunder
to maintain the hazard insurance policy at the Mortgagor's cost and expense, and
on the Mortgagor's failure to do so, authorizes the holder of the Mortgage to
obtain and maintain such insurance at such Mortgagor's cost and expense, and to
seek reimbursement therefor from the Mortgagor. Where required by state law or
regulation, the Mortgagor has been given an opportunity to choose the carrier of
the required hazard insurance, provided the policy is not a "master" or
"blanket" hazard insurance policy covering the common facilities of a planned
unit development. The hazard insurance policy is the valid and binding
obligation of the insurer and is in full force and effect. Neither the Seller
nor the Additional Seller has engaged in, and has no knowledge of the
Mortgagor's having engaged in, any act or omission which would impair the
coverage of any such policy, the benefits of the endorsement provided for
herein, or the validity and binding effect of either.

            (m) COMPLIANCE WITH APPLICABLE LAWS. Any applicable requirements of
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 and FHA Regulations and VA
Regulations applicable to the Eligible Loan have been complied with in all
material respects.

            (n) NO SATISFACTION OF MORTGAGE. The Mortgage has not been
satisfied, cancelled, 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. Neither the Seller nor the
Servicer (on behalf of the Additional Seller) has waived the performance by the
Mortgagor of any action, if the Mortgagor's failure to perform such action would
cause the Eligible Loan to be in default, nor has the Seller or the Servicer (on
behalf of the Additional Seller) waived any default resulting from any action or
inaction by the Mortgagor.

                                       38
<Page>

            (o) LOCATION AND TYPE OF MORTGAGED PROPERTY. The Mortgaged Property
is located in the state identified in the Mortgage Loan Schedule and consists 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,
or an individual unit in a planned unit development; PROVIDED, HOWEVER, that any
condominium unit or planned unit development shall conform with the applicable
FHA and VA requirements regarding such dwellings, if applicable, and no
residence or dwelling is a mobile home or a manufactured dwelling. To the best
of the Seller's and the Servicer's (on behalf of the Additional Seller)
knowledge and belief, no portion of the Mortgaged Property is used for
commercial purposes.

            (p) 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, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. All parties to the Mortgage Note and the Mortgage and any
other related agreement had legal capacity to enter into the Eligible Loan and
to execute and deliver the Mortgage Note and the Mortgage and any other related
agreement, and the Mortgage Note and the Mortgage have been duly and properly
executed by such parties. To the best of the Seller's and the Servicer's (on
behalf of the Additional Seller) knowledge and belief, 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 materially misleading. No fraud was committed in
connection with the origination of the Eligible Loan.

            (q) FULL DISBURSEMENT OF PROCEEDS. Each Eligible Loan has been
closed and its proceeds 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 Eligible 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.

            (r) DOING BUSINESS. All parties which have had any interest in the
Eligible 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 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) not required
to qualify to do business in such state.

            (s) LTV, PMI POLICY. The original LTV of the Eligible Loan other
than an FHA Loan or a VA Loan either was not more than 80% or the excess over
80% is and will be insured as to

                                       39
<Page>

payment defaults by a PMI Policy until the LTV of such Eligible Loan is reduced
to 80%. All material provisions of such PMI Policy have been and are being
complied with, such policy is in full force and effect, and all premiums due
thereunder have been paid. No action, inaction, or event has occurred and no
state of facts exists that has, or will result in the exclusion from, denial of,
or defense to coverage. Any Eligible Loan subject to a PMI Policy obligates the
Mortgagor thereunder to maintain the PMI Policy and to pay all premiums and
charges in connection therewith. The Mortgage Interest Rate for the Eligible
Loan as set forth on the Mortgage Loan Schedule is net of any such insurance
premium.

            (t) TITLE INSURANCE. The Eligible Loan is covered by (i) an
attorney's opinion of title and abstract of title, the form and substance of
which is acceptable to mortgage lending institutions making mortgage loans in
the area where the Mortgaged Property is located; or (ii) an ALTA lender's title
insurance policy or other generally acceptable form of policy of insurance
acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA or
FHLMC and qualified to do business in the jurisdiction where the Mortgaged
Property is located or if applicable; (iii) an attorney's opinion of title and
abstract of title, the form and substance of which is acceptable to the FHA with
respect to FHA Loans and the VA with respect to VA Loans; or (iv) an ALTA
lender's title insurance policy or other generally acceptable form of policy of
insurance acceptable to (a) the FHA with respect to the FHA Loans; and (b) the
VA with respect to the VA Loans, and each such title insurance policy is issued
by a title insurer acceptable to FHA or VA, as the case may be, and qualified to
do business in the jurisdiction where the Mortgaged Property is located,
insuring the Seller or the Additional Seller, as applicable, its successors and
assigns, as to the first priority lien of the Mortgage in the original principal
amount of the Eligible Loan, and against any loss by reason of the invalidity or
unenforceability of the lien. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress, and against encroachments by or upon
the Mortgaged Property or any interest therein. The Seller or the Additional
Seller, as applicable, is the sole insured of such lender's title insurance
policy, and such lender's title insurance policy is in full force and effect and
will be in force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such lender's
title insurance policy, and no prior holder of the Mortgage, including the
Seller or the Additional Seller, as applicable, has done, by act or omission,
anything which would impair the coverage of such lender's title insurance
policy.

            (u) NO DEFAULTS. To the best of the Seller's and the Servicer's (on
behalf of the Additional Seller) knowledge and belief, there is no default,
breach, violation or event of acceleration existing under the Mortgage or the
Mortgage Note and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration, and neither the Seller nor the Servicer (on
behalf of the Additional Seller) nor their respective predecessors have waived
any default, breach, violation or event of acceleration.

                                       40
<Page>

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

            (w) 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, to the best of the Seller's and the Servicer's (on
behalf of the Additional Seller) knowledge and belief, no improvements on
adjoining properties encroach upon the Mortgaged Property. No improvement
located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation.

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

            (y) OCCUPANCY OF THE MORTGAGED PROPERTY. As of the Closing Date, the
Mortgaged Property is lawfully occupied under applicable law. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the Eligible Loan, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities. All of the Mortgagors represented at the time of
origination of the related Eligible Loan that any such Mortgagor would occupy
the Mortgaged Property as the Mortgagor's primary residence.

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

            (aa) ACCEPTABLE INVESTMENT. The Seller and the Servicer (on behalf
of the Additional Seller) have no knowledge of any circumstances or conditions
with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the
Mortgagor's credit-standing not reflected in the representations set forth
herein, or in the documents delivered to the Custodian or in the Mortgage

                                       41
<Page>

Loan File, that could reasonably be expected to cause private institutional
investors to regard the Eligible Loan as an unacceptable investment or cause the
Eligible Loan to become delinquent or materially adversely affect the value or
the marketability of the Eligible Loan.

            (bb) DELIVERY OF MORTGAGE NOTES. With the exception of Wet Funded
Loans, the Mortgage Note endorsed in blank or to the Purchaser required to be
delivered for the Eligible Loan by the Seller or the Servicer (on behalf of the
Additional Seller), as applicable, under the Custodial Agreement has been
delivered to the Custodian on or prior to Closing Date. With respect to Wet
Funded Loans, the Mortgage Note will be delivered as soon as practicable, but in
no event later than 21 days from the Closing Date.

            (cc) TRANSFER OF ELIGIBLE LOANS. The Assignment of Mortgage (other
than an original Mortgage recorded in the name of MERS) is in recordable form
and is acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located.

            (dd) DUE ON SALE. The Mortgage contains an enforceable provision for
the acceleration of the payment of the unpaid principal balance of the Eligible
Loan in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the Mortgagee thereunder.

            (ee) NO GRADUATED PAYMENTS OR CONTINGENT INTERESTS. The Eligible
Loan is not a graduated payment mortgage loan and does not have a shared
appreciation or other contingent interest feature.

            (ff) MORTGAGED PROPERTY UNDAMAGED. There is no proceeding pending
or, to the best of the Seller's and the Servicer's (on behalf of the Additional
Seller) knowledge and belief, 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 materially adversely the value of the Mortgaged Property as security
for the Eligible 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
Eligible Loan have been in accordance with Accepted Servicing Practices, and
have been in compliance in all material respects with applicable laws and
regulations. With respect to escrow deposits and Escrow Payments, all such
payments are in the possession of the Seller or the Servicer (on behalf of the
Additional Seller), as applicable, and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not been
made or for which repayment is not provided for in the Mortgage. All Escrow
Payments have been collected in compliance with applicable state and federal
law. An escrow of funds is not prohibited by applicable law and has been
established in an amount sufficient

                                       42
<Page>

to pay for each applicable item which remains unpaid and which has been assessed
but is not yet due and payable. No escrow deposits or Escrow Payments or other
charges or payments due the Seller or the Servicer (on behalf of the Additional
Seller), as applicable, have been capitalized under the Mortgage or the Mortgage
Note. All interest rate adjustments in respect of Eligible Loans have been made
in strict compliance with state and federal law and the terms of the related
Mortgage and Mortgage Note.

            (hh) APPRAISAL. The Mortgage Loan File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the Eligible Loan
application by a qualified appraiser, duly appointed by or acceptable to the
Seller or the Servicer (on behalf of the Additional Seller), as applicable, who
had no interest, direct or indirect in the Mortgaged Property or in any loan
made on the security thereof; and whose compensation is not affected by the
approval or disapproval of the Eligible 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 that the Eligible Loan was originated
and the appraiser and appraisal both satisfy requirements of the FHA or VA, if
applicable.

            (ii) SOLDIERS' AND SAILORS' RELIEF ACT. The Mortgagor has not
notified the Seller or the Servicer (on behalf of the Additional Seller), as
applicable, and the Seller and the Servicer (on behalf of the Additional Seller)
have no knowledge of any relief requested by the Mortgagor under the Soldiers'
and Sailors' Civil Relief Act of 1940.

            (jj) ENVIRONMENTAL MATTERS. To the best of the Seller's and the
Servicer's (on behalf of the Additional Seller) knowledge and belief, 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. There is no pending action or proceeding directly involving any
Mortgaged Property of which the Seller or the Servicer (on behalf of the
Additional Seller), as applicable, is aware in which compliance with any
environmental law, rule or regulation is an issue; and, to the best of the
Seller's and the Servicer's (on behalf of the Additional Seller) knowledge,
nothing further remains to be done to satisfy in full all requirements of each
such law, rule or regulation consisting of a prerequisite to use and enjoyment
of said property.

            (kk) NO CONSTRUCTION LOANS. No Eligible Loan (i) was made in
connection with the construction or rehabilitation of a Mortgaged Property which
has not been completed or (ii) provides for future advances of funds by the
Seller or the Additional Seller, as applicable, which have not yet been advanced
or (iii) facilitates the trade-in or exchange of a Mortgaged Property.

            (ll) NO DENIAL OF INSURANCE. No action, inaction, or event has
occurred and no state of facts exists or has existed that has resulted or would
result in the exclusion from, denial of, or defense to coverage under any
applicable PMI Policy or bankruptcy bond, irrespective of the cause of

                                       43
<Page>

such failure of coverage. In connection with the placement of any such
insurance, no commission, fee, or other compensation has been or will be
received by the Seller or the Servicer (on behalf of the Additional Seller), as
applicable, or any designee of the Seller or the Servicer (on behalf of the
Additional Seller), as applicable, or any corporation in which the Seller or the
Servicer (on behalf of the Additional Seller), as applicable, or any officer,
director, or employee had a financial interest at the time of placement of such
insurance.

            (mm) REGARDING THE MORTGAGOR. The Mortgagor is one or more natural
persons.

            (nn) 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 FHA, VA and GNMA eligibility requirements for sale to GNMA or is
located in a condominium or planned unit development project which has received
FHA, VA and GNMA project approval and the representations and warranties
required by FHA, VA and GNMA with respect to such condominium or planned unit
development have been made and remain true and correct in all material respects.

            (oo) FHA MORTGAGE INSURANCE; VA LOAN GUARANTY. With respect to the
FHA Loans, the FHA Mortgage Insurance Contract is in full force and effect and
there exist no material impairments to full recovery without indemnity to HUD or
the FHA under FHA Mortgage Insurance. With respect to the VA Loans, the VA Loan
Guaranty Certificate is in full force and effect to the maximum extent stated
therein. All necessary steps have been taken to keep such guaranty or insurance
valid, binding and enforceable as of the Closing Date and each of such is the
binding, valid and enforceable obligation of the FHA and the VA, respectively,
to the full extent thereof, without surcharge, set-off or defense as of the
Closing Date.

            (pp) HUD FORM 92080. With respect to each FHA Loan, a HUD Form 92080
has been duly executed and delivered to HUD.

            Section 3.3 REMEDIES FOR BREACH OF REPRESENTATIONS AND WARRANTIES.

            It is understood and agreed that the representations and warranties
set forth in SECTIONS 3.1(a), 3.1(b), and 3.2 hereof shall survive the sale of
the Eligible Loans to the Purchaser and the delivery of the Loan Documents to
the Servicer and delivery of the Mortgage Notes to the Custodian and shall inure
to the benefit of the Purchaser notwithstanding any restrictive or qualified
endorsement on any Mortgage Note or Assignment of Mortgage or the examination or
failure to examine any Mortgage Loan File. Upon discovery by either the Seller,
the Servicer (in its own capacity and on behalf of the Additional Seller) or the
Purchaser of a breach of any of the foregoing representations and warranties
which materially and adversely affects the value of the Eligible Loans or the
interest of the Purchaser (or which materially and adversely affects the
interest of the Purchaser in the related

                                       44
<Page>

Eligible Loan in the case of a representation and warranty relating to a
particular Eligible Loan), the party discovering such breach shall give prompt
written notice to the other, the Agent, the Indenture Trustee, the Collateral
Agent and the Swap Counterparties.

            Within 60 days of the earlier of either discovery by or notice to
the Seller or the Servicer (on behalf of the Additional Seller), as applicable,
of any breach of a representation or warranty set forth in SECTION 3.2 hereof
which materially and adversely affects the value of any Eligible Loan, the
Seller or the Servicer (on behalf of the Additional Seller), as applicable,
shall use its best efforts promptly to cure such breach in all material respects
and, if such breach cannot be cured, or is not cured, within such 60 day time
period, the Seller or the Servicer (on behalf of the Additional Seller), as
applicable, shall repurchase such Eligible Loan at the Repurchase Price. In the
event that a breach shall involve any representation or warranty set forth in
SECTION 3.1 (a) and (b) hereof, and such breach cannot be cured, or is not
cured, within 60 days of the earlier of either discovery by or notice to the
Seller or the Servicer (on behalf of the Additional Seller), as applicable, of
such breach, all of the Eligible Loans shall, at the Liquidity Banks' option, be
repurchased by the Seller or the Servicer (on behalf of the Additional Seller),
as applicable, at the Repurchase Price. Upon receipt of the Repurchase Price by
the Collateral Agent, the Purchaser and the Seller or the Servicer (on behalf of
the Additional Seller) shall arrange for the reassignment of the Eligible Loan
or Eligible Loans to the Seller or the Servicer (on behalf of the Additional
Seller), as applicable, and the delivery to the Seller or the Servicer (on
behalf of the Additional Seller), as applicable, of any documents held by the
Custodian relating to the reassigned Eligible Loan or Eligible Loans.

            In addition to such repurchase obligation, the Seller (with respect
to representations and warranties made by the Seller) or the Servicer (on behalf
of the Additional Seller with respect to representations and warranties made by
the Additional Seller or the Servicer on behalf of the Additional Seller), as
applicable, shall indemnify the Purchaser and hold it harmless against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
from, a breach of the representations and warranties of the Seller, the
Additional Seller or the Servicer (on behalf of the Additional Seller), as
applicable, contained in this Agreement. It is understood and agreed that the
obligations of the Seller and the Servicer (on behalf of the Additional Seller)
set forth in this SECTION 3.3 to cure or repurchase an Eligible Loan and to
indemnify the Purchaser constitute the sole remedies of the Purchaser in respect
of a breach of the foregoing representations and warranties.

            Section 3.4 CONDITIONS TO CLOSING.

            The obligation of the Purchaser to purchase the mortgage loans that
are the subject of any Transfer Supplement shall be subject to satisfaction of
each of the following conditions on or before the related Closing Date:

                                       45
<Page>

            (a) To the best of Seller's, the Additional Seller's or the
Servicer's (on behalf of the Additional Seller) knowledge and belief, all of the
representations and warranties of the Seller, the Additional Seller (with
respect to Section 3.1(b) hereof) or the Servicer (on behalf of the Additional
Seller with respect to SECTIONS 3.2 and 3.3 hereof) contained in this Agreement
shall be true and correct in all material respects as of such Closing Date and
no event shall have occurred which, with notice or the passage of time, would
constitute a Servicer Event of Default under this Agreement;

            (b) The Seller or the Servicer (on behalf of the Additional Seller),
as applicable, shall have delivered and released to the Custodian all documents
required to be delivered to the Custodian pursuant to the Custodial Agreement;

            (c) No Termination Event shall have occurred and be continuing; and

            (d) All other material terms and conditions of this Agreement shall
have been satisfied.

            Section 3.5 COVENANTS OF THE PURCHASER, THE COMPANY AND THE
ADDITIONAL SELLER.

            (a) LICENSES. The Company or the Additional Seller, as applicable,
shall maintain its qualifications to do business and all licenses necessary to
perform its obligations hereunder.

            (b) SERVICING STANDARDS/SALES AND SECURITIZATIONS. The Servicer will
administer and service Eligible Loans, and arrange for the sale and
Securitization of Eligible Loans, in accordance with the terms of this
Agreement, the Mortgage Notes and Accepted Servicing Practices.

            (c) DELIVERY OF MORTGAGE NOTE. The Seller or the Servicer (on behalf
of the Additional Seller), as applicable, shall deliver each Mortgage Note,
including Mortgage Notes on Wet Funded Loans, to the Custodian as soon as
practicable, but in any event within twenty-one (21) days of the purchase and,
if any Mortgage Note is not delivered within twenty-one (21) days of purchase,
it shall be repurchased on such twenty-first (21st) day by the Seller or the
Servicer (on behalf of the Additional Seller), as applicable, at the Repurchase
Price.

            (d) THIRD PARTY BENEFICIARY. The Purchaser agrees that GNMA, FNMA
and FHLMC shall have all rights of a third-party beneficiary in respect of this
Agreement and restates the representations, warranties and covenants as set
forth herein for the benefit of GNMA, FNMA and FHLMC.

            (e) PORTFOLIO CRITERIA AND LIMITATIONS. As of any date of
determination, the Company and the Servicer (in its own capacity and on behalf
of the Additional Seller) covenant that

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the Eligible Loans, in the aggregate shall satisfy the Portfolio Criteria, the
Portfolio Aging Limitations and the Wet Funded Loan Limitation.

            (f) CHANGES IN ORIGINATION AND UNDERWRITING CRITERIA. The Seller
shall inform each rating agency rating any outstanding Commercial Paper, any
outstanding Notes or any outstanding Certificates of any material changes (as
determined by the Seller) in its origination and underwriting practices and
guidelines with respect to the Mortgage Loans.

                                   ARTICLE IV

                 ADMINISTRATION AND SERVICING OF ELIGIBLE LOANS

            Section 4.1 THE COMPANY TO ACT AS SERVICER; SERVICING AND
ADMINISTRATION OF THE ELIGIBLE LOANS.

            (a) The Company, as an independent contractor and owner of the
servicing rights to the Eligible Loans, shall diligently service and administer
the Eligible Loans, and shall comply with the Portfolio Criteria, Portfolio
Aging Limitations and Wet Funded Loan Limitation, and arrange for the sale and
Securitization of the Eligible Loans on behalf of the Purchaser and in the best
interest of and for the benefit of the Purchaser in accordance with applicable
law, the terms of this Agreement and the terms of the respective Eligible Loans,
with a view to the maximization of timely recovery of principal and interest on
the Mortgage Notes and in a manner which will realize for the Purchaser the
market value of any Securitization Securities with respect to any sales and
Securitizations of the Eligible Loans; PROVIDED, the Servicer shall arrange for
the sale or Securitization of all Eligible Loans (y) on or before the
termination of the Indenture and the Liquidity Agreement, and (z) upon the
occurrence of a Mortgage Loan Purchase Agreement Termination Event. The Servicer
shall arrange for the sale or Securitization of Eligible Loans (y) in an amount
such that the proceeds from such sale or Securitization are sufficient to pay
amounts due and owing on any outstanding Liquidity Loans, Series of Notes
(whether by maturity, optional redemption, or upon an Indenture Event of
Default) and Series of Certificates (whether by maturity, optional redemption,
or upon the occurrence of an Early Amortization Event) and (z) in an amount
equal to the notional amount of any expiring Interest Rate Swap to the extent
that a replacement Interest Rate Swap or Interest Rate Swaps have not been
obtained and are needed. In furtherance of and to the extent consistent with the
sale foregoing, except to the extent that this Agreement provides for a contrary
specific course of action, the Servicer will be required to service and
administer the Eligible Loans (y) in the same manner in which, and with the same
care, skill, prudence and diligence with which it services and administers
similar mortgage loans for other third-party portfolios, giving due
consideration to customary and usual standards of practice of prudent
institutional residential mortgage loan servicers used with respect to loans
comparable to the Eligible Loans, or (z) in the same manner in which, and with
the same care, skill, prudence and

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diligence with which, it services and administers similar mortgage loans which
it owns, whichever standard of care is higher, and taking into account its other
obligations under this Agreement, but without regard to (i) any other
relationship that Servicer, any sub-servicer or any affiliate of the Servicer or
any sub-servicer may have with the borrowers or any affiliate of such borrowers;
(ii) the ownership of any Certificate by Servicer or any affiliate of either;
(iii) the Servicer's obligations to make Advances or to incur servicing expenses
with respect to the Eligible Loans; (iv) the Servicer's or any sub-servicer's
right to receive compensation for its services under this Agreement or with
respect to any particular transaction; or (v) the ownership, servicing or
management for others by the Servicer or any sub-servicer of any other mortgage
loans or property. The Servicer shall maintain its qualification to do business
and all licences necessary to perform its obligations hereunder.

            (b) During the Purchase Commitment Term, the Servicer shall be
obligated to service and administer the Eligible Loans. The Servicer may enter
into additional servicing or sub-servicing agreements with third parties with
respect to any of its respective obligations hereunder, provided that any such
agreement shall be consistent with the provisions of this Agreement and no
sub-servicer (or its agent or subcontractors) shall grant any modification,
waiver or amendment to any Eligible Loan without the approval of the Servicer.
Notwithstanding any servicing or sub-servicing agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and any Person acting as servicer or sub-servicer (or its agents or
subcontractors) or any reference to action taken through any Person acting as
servicer or sub-servicer or otherwise, the Servicer shall remain obligated and
primarily liable to the Purchaser for the servicing and administering of the
Eligible Loans and arranging for the sale and Securitization of the Eligible
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such servicing or sub-servicing
agreements or arrangements or by virtue of indemnifica tion from any Person
acting as servicer or sub-servicer (or its agents or subcontractors) to the same
extent and under the same terms and conditions as if the Servicer alone were
engaging in such activities. In the event the Servicer is a sub-servicer, the
Purchaser shall be entitled to proceed directly against the Servicer as
sub-servicer to enforce the Servicer's obligations to the Purchaser.

            (c) Subject to the above-described servicing standards, the further
provisions of this Agreement, including but not limited to the Wet Funded Loan
Limitation, Portfolio Criteria and Portfolio Aging Limitation, and the terms of
the respective Eligible Loans, the Servicer shall have full power and authority,
acting alone, to do or cause to be done any and all things in connection with
such servicing and administration that it may deem necessary or desirable in
connection with the servicing and administration of the Eligible Loans. Without
limiting the generality of the foregoing, the Servicer is hereby authorized and
empowered to waive, modify or vary any term of any Eligible Loan or consent to
the postponement of compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's reasonable and prudent
determination such waiver, modification, postponement or indulgence is not
materially adverse to the Purchaser; PROVIDED, HOWEVER, that the Servicer shall
not make any future advances to a Mortgagor with respect to an Eligible Loan and

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(unless the Mortgagor is in default with respect to the Eligible Loan or such
default is, in the judgment of the Servicer, imminent) the Servicer shall not
permit any modification with respect to any Eligible Loan that would change the
Mortgage Interest Rate, defer or forgive the payment of principal or interest,
reduce or increase the outstanding principal balance (except for actual payments
of principal), release any collateral from the Eligible Loan or change the final
maturity date on such Eligible Loan. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered,
to execute and deliver on behalf of itself and the Purchaser all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the Eligible Loans and with
respect to the Mortgaged Properties. If reasonably required by the Servicer, the
Purchaser shall furnish the Servicer with any powers of attorney, in recordable
form, and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Agreement.

            Section 4.2 SALES AND SECURITIZATIONS.

            (a) Subject to the servicing standards described in SECTION 4.1, the
Servicer shall have full power and authority, acting alone, to do or cause to be
done any and all things in connection with such servicing and administration
that it may deem necessary and desirable in connection with arranging for the
Securitization of Conforming Loans and conducting sales of Jumbo Loans with
either FNMA, FHLMC, GNMA or other Securitization Vehicles or third party
purchasers. In connection with any Securitization of Eligible Loans, in the
event the Purchaser receives securities from the Securitization Vehicle in
exchange for the Eligible Loans subject to such Securitization ("SECURITIZATION
SECURITIES"), the Servicer shall, on behalf of the Purchaser, arrange for the
sale of such Securitization Securities. The Servicer shall use its best efforts
to realize for the Purchaser the market value for the Securitization Securities
but shall have no liability to the Purchaser with respect to any Securitization
or Securitization Security provided that the Servicer arranges for such
Securitization or sale in good faith in accordance with the procedures utilized
by the Servicer in connection with any Securitization and Securitization
Securities held for its own account. The proceeds of sale of any Securitization
Security and the proceeds of sale of any whole loan will be remitted to the
Collateral Agent and will be deposited into the Collateral Account maintained by
the Collateral Agent on the day of receipt.

            (b) With respect to each Securitization or sale, as the case may be,
entered into by the Purchaser, Servicer agrees, with prior notice to the
Purchaser, the Agent, the Indenture Trustee, the Collateral Agent and the Swap
Counterparties:

                  (i) To cooperate fully with the Purchaser, any prospective
      purchaser, any Securitization Vehicle or any party to any agreement
      executed in connection with such sale or Securitization, with respect to
      all reasonable requests and

                                       49
<Page>

      due diligence procedures and to use its best efforts to facilitate such
      sale or Securitization, as the case may be.

                  (ii) To execute, if the Company has agreed to continue as
      servicer with respect to the Eligible Loans sold or Securitized, all
      agreements executed in connection with such sale or Securitization that
      govern the servicing and administration of the Eligible Loans (and any
      agreements and other documents incidental thereto) as the Purchaser shall
      request, which governing documents, in the case of a Securitization, shall
      contain provisions customarily included in publicly issued or privately
      placed rated secondary mortgage market transactions with respect to like
      properties, or otherwise necessary to achieve the rating on the securities
      to be offered thereunder sought by the Purchaser and, in the case of a
      sale, shall contain servicing provisions that are substantially similar to
      those set forth herein.

                  (iii) At the direction of the Purchaser and in lieu of
      executing agreements as described in the preceding clause (ii), to consent
      to the assignment of the Purchaser's right to receive the benefits of the
      servicing provisions of this Agreement to a purchaser of any one or more
      of the Eligible Loans, or to a master servicer, in each case with such
      modifications to the servicing provisions hereof as shall be reasonably
      requested by the Purchaser, provided that the primary servicing
      responsibility shall be substantially similar to those set forth herein.

                  (iv) To restate as of each closing date of the sale or
      Securitization, as the case may be, the representations and warranties
      contained in Section 3.1(a) and (b) hereof and to state for the benefit of
      the owners of the Eligible Loans, for the benefit of the Purchaser, that
      it has no knowledge, based on its activities as servicer hereunder, that
      any representations and warranties contained in SECTION 3.2 hereof
      (excluding SECTION 3.2(d) hereof) are untrue as of the date thereof or
      stating an event or circumstance that arose after the related Closing Date
      and that would cause such representation or warranty to be inaccurate in
      any material respect.

                  (v) To deliver to the Purchaser for inclusion in any
      prospectus or other offering material such written information regarding
      the Seller, the Servicer, the Additional Seller and PHH Corporation, their
      respective financial condition, their mortgage loan origination and
      servicing experience, and their mortgage loan delinquency, foreclosure and
      loss experience as shall be reasonably requested by the Purchaser and to
      indemnify and hold harmless the Purchaser against any and all liabilities,
      losses and expenses arising under the Securities Act of 1933 in connection
      with any material misstatement contained in such written information or
      any omission

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      of a material fact the inclusion of which was necessary to make such
      written information not materially misleading.

                  (vi) To deliver to the Purchaser and to any Person designated
      by the Purchaser, such statements and audit letter of reputable, certified
      public accountants pertaining to the written information provided by the
      Servicer pursuant to clause (v) above as shall be reasonably requested by
      the Purchaser.

                  (vii) To deliver to the Purchaser, and to any Person
      designated by the Purchaser, such opinions of counsel as are customarily
      delivered by originators/servicers in connection with sales or
      Securitizations, as the case may be.

            Notwithstanding clause (ii) and clause (iii) of this SECTION 4.2(b),
no agreements, consents or modifications referred to therein shall contain any
provision that (A) reduces the servicing fee as to any mortgage loan or affects
the calculation of the servicing fee as to any mortgage loan in a manner that is
below the market standard and commercially unreasonable to the Servicer based on
customary practice or (B) affects the administration of Escrow Payments, in a
manner that is commercially unreasonable to the Servicer. In addition, in
connection with any sale, the Purchaser shall negotiate in good faith with any
prospective purchaser of the beneficial ownership of the mortgage loans to
incorporate into any agreement relating to the servicing of the mortgage loans
on behalf of such prospective purchaser servicing provisions that are similar to
those set forth herein and to the industry and market standard.

            All mortgage loans not sold or transferred pursuant to a sale or
Securitization shall continue to be serviced in accordance with the terms of
this Agreement.

            Section 4.3 LIQUIDATION OF ELIGIBLE LOANS.

            In the event that any payment due under any Eligible Loan is not
paid when the payment becomes due and payable, by Servicer Advance or otherwise,
or in the event that the Mortgagor fails to perform any other covenant or
obligation under the Eligible Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as (1) the Servicer
would take under similar circumstances with respect to a similar Eligible Loan
held for its own account for investment, (2) shall be consistent with Accepted
Servicing Practices, (3) the Servicer shall determine in accordance with
Accepted Servicing Practices to be in the best interest of the Purchaser, and
(4) is consistent with the related PMI Policy, if any; PROVIDED, HOWEVER, any
Defaulted Loan will be sold by the Servicer on behalf of the Purchaser as soon
as practicable after becoming a Defaulted Loan.

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            Section 4.4 COLLECTION OF ELIGIBLE LOAN PAYMENTS.

            The Servicer shall proceed diligently, in accordance with Accepted
Servicing Practices, to collect all payments called for under the terms and
provisions of the Eligible Loans it is obligated to service hereunder and shall
follow such collection procedures as are consistent with this Purchase Agreement
(including without limitation, the servicing standards set forth in SECTION 4.1
hereof). The Servicer shall ascertain and estimate, in accordance with Accepted
Servicing Practices, Escrow Payments and all other charges that will become due
and payable with respect to the Eligible Loans and the Mortgaged Property, to
the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable. The Servicer shall
segregate and hold all payments received by it separate and apart from any of
its funds and general assets and in trust for the Secured Parties and shall
apply such payments as provided in SECTION 4.5 hereof. The accounts established
by the Servicer pursuant to this ARTICLE IV may include any number of
sub-accounts for convenience in administering the Eligible Loans.

            Section 4.5 ESTABLISHMENT OF, AND DEPOSITS TO, COLLECTION ACCOUNT.

            The Servicer shall establish a single, segregated trust account
which shall be designated as the Collection Account, which shall be held in
trust in the name of the Collateral Agent for the benefit of the Secured
Parties, into which the Servicer shall from time to time deposit, within two
Business Days of the receipt thereof, and retain therein, the following
collections received by the Servicer: (a) all payments on account of scheduled
principal on the Eligible Loans; (b) all payments on account of interest on the
Eligible Loans (including interest accrued on the Eligible Loans prior to the
applicable Closing Date); (c) any Principal Prepayments; (d) all Liquidation
Proceeds; (e) all Insurance Proceeds including amounts required to be deposited
pursuant to SECTION 4.11 (other than proceeds to be held in the Escrow Account
and applied to the restoration or repair of the Mortgaged Property or released
to the Mortgagor in accordance with Accepted Servicing Practices as specified in
SECTION 4.15 hereof), SECTION 4.12 and SECTION 4.16 hereof; (f) all Condemnation
Proceeds which are not applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with SECTION 4.15 hereof;
(g) any amount required to be deposited in the Collection Account pursuant to
SECTION 3.3, 4.10, 6.2 or 7.1; (h) any amounts required to be deposited by the
Servicer pursuant to SECTION 4.11 hereof in connection with the deductible
clause in any blanket hazard insurance policy; (i) any amounts received with
respect to or related to any REO Property and all REO Disposition Proceeds
pursuant to SECTION 4.17 hereof; and (j) any other amounts received with respect
to or related to the mortgage loan including but not limited to late payment
charges and interest paid on funds deposited in the Collection Account or Escrow
Account, to the extent permitted by applicable law. The Collection Account shall
be established with a Qualified Depository acceptable to the Purchaser. For so
long as the Security Agreement shall be in effect, the Collection Account shall
be maintained with the Collateral Agent. Any funds deposited in the Collection
Account shall at all times be fully insured to the full extent permitted under
applicable law. Any interest earnings on amounts

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on deposit from time to time in the Collection Account shall be remitted to the
Servicer in accordance with such arrangements, as shall be agreed upon by the
Servicer and the Collateral Agent.

            Section 4.6 PERMITTED WITHDRAWALS FROM COLLECTION ACCOUNT; DEPOSIT
INTO THE COLLATERAL ACCOUNT.

            (a) In connection with any withdrawals of amounts deposited by the
Servicer into the Collection Account by mistake or overpayment or as otherwise
required to make adjustments to amounts deposited therein in accordance with
ordinary and normal servicing adjustments the Servicer shall provide the
Collateral Agent with a written request, including such information with respect
to such withdrawals as such Collateral Agent may reasonably request to justify
such withdrawal. Upon receipt of such request, the Collateral Agent shall direct
the Qualified Depository maintaining the Collection Account to make such
withdrawal from the Collection Account and deposit it with the Servicer;
PROVIDED that, if such request is for an amount less than $10,000 and the
aggregate amount withdrawn from the Collection Account under this proviso in the
current Due Period is less than $50,000, such request may be honored by the
Qualified Depository upon a telephonic or electronic request and without
direction from the Collateral Agent.

            (b) Pursuant to the terms of the Security Agreement, the Collateral
Agent shall establish a single, segregated trust account which shall be
designated as the "COLLATERAL ACCOUNT," which shall be held in trust for the
benefit of the Secured Parties and over which the Collateral Agent shall have
exclusive control and the sole right of withdrawal. The proceeds of any sales
and Securitizations, the Repurchase Price of any Eligible Loans repurchased
pursuant to SECTION 3.3, 6.2 or 7.1 and any other amounts payable in connection
with the Seller's or Servicer's repurchase of any Eligible Loan, repayments in
full of Eligible Loans and certain other amounts as more fully set forth in the
Security Agreement, shall be deposited directly into the Collateral Account on
the same day of receipt. Any and all funds at any time on deposit in, or
otherwise to the credit of, the Collateral Account shall be held in trust by the
Collateral Agent for the benefit of the Secured Parties.

            (c) The Servicer shall, on each Payment Date (or if such day is not
a Business Day the immediately following Business Day), request the Collateral
Agent to withdraw (i) all amounts deposited in the Collection Account as of the
close of business on the Determination Date (net of charges against or
withdrawals from the Collection Account pursuant to SECTION 4.6(d) hereof),
minus (ii) any amounts attributable to Monthly Payments collected but due on a
Due Date subsequent to the 15th day of the month of the Payment Date, which
amounts shall be remitted on the Payment Date next succeeding the Due Period for
such amounts and deposit such funds into the Collateral Account for application
pursuant to the terms of the Security Agreement and release funds in accordance
with the Servicer Report delivered to the Collateral Agent for such Payment
Date.

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            (d) The Servicer shall, on the day of receipt of any principal
prepayments in full, request the Collateral Agent to withdraw funds representing
such principal prepayments from the Collection Account and deposit such funds in
the Collateral Account for application pursuant to the terms of the Security
Agreement.

            (e) The Servicer shall, from time to time, by delivery of a Monthly
Servicer Advance Report, request the Collateral Agent to withdraw funds from the
Collection Account to reimburse the Servicer for Servicer Monthly Advances
pursuant to SECTION 5.1 hereof, the Servicer's right to reimbursement pursuant
to this SUBCLAUSE (d) being limited to amounts received on the related Eligible
Loan which represent late payments of principal and/or interest respecting which
any such advance was made, it being understood that, in the case of any such
reimbursement, the Servicer's right thereto shall be prior to the rights of the
Purchaser, except that, where the Servicer is required to repurchase an Eligible
Loan pursuant to SECTIONS 6.2 and 7.1 of this Purchase Agreement, the Servicer's
right to such reimbursement shall be subsequent to the payment to the Purchaser
of the Repurchase Price pursuant to such SECTIONS 6.2 and 7.1 and all other
amounts required to be paid to the Purchaser with respect to such Eligible Loan.

            Section 4.7 ESTABLISHMENT OF, AND DEPOSITS TO, ESCROW ACCOUNT.

            The Servicer shall segregate and hold all funds collected and
received pursuant to an Eligible Loan constituting Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts, in the form of time deposit or demand
accounts, in a manner which shall provide maximum available insurance
thereunder. Funds deposited in any Escrow Account may be invested by the
Servicer which shall be entitled to any investment income therefrom except as
otherwise required by law. Funds deposited in any Escrow Account may be drawn on
by the Servicer in accordance with SECTION 4.8 hereof.

            The Servicer shall deposit in such Escrow Account within two
Business Days and retain therein (a) all Escrow Payments collected on account of
the Eligible Loans, for the purpose of effecting timely payment of any such
items as required under the terms of this Agreement; and (b) all amounts
representing Insurance Proceeds or Condemnation Proceeds which are to be applied
to the restoration or repair of any Mortgaged Property.

            The Servicer shall make withdrawals from any Escrow Account only to
effect such payments as are required under this Agreement, as set forth in
SECTION 4.8 hereof. To the extent required by law, the Servicer shall pay
interest on escrowed funds to the Mortgagor notwithstanding that such Escrow
Account may be non-interest bearing or that interest paid thereon is
insufficient for such purposes.

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            Section 4.8 PERMITTED WITHDRAWALS FROM ESCROW ACCOUNT.

            Withdrawals from any Escrow Account may be made by the Servicer
only:

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

                  (2) To reimburse the Servicer for any Servicing Advances made
      by the Servicer pursuant to SECTION 4.9 hereof with respect to a related
      Eligible Loan, but only from amounts received on the related Eligible Loan
      which represent late collections of Escrow Payments thereunder;

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

                  (4) For transfer to the Collection Account and application to
      reduce the principal balance of the Eligible Loan in accordance with the
      terms of the related Mortgage and Mortgage Note;

                  (5) For application to restoration or repair of the Mortgaged
      Property in accordance with the procedures outlined in SECTION 4.15
      hereof; and

                  (6) To pay to the Mortgagor, to the extent required by law,
      any interest paid on the funds deposited in the Escrow Account.

            Section 4.9 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES.

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

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of each Mortgagor's faithful performance in the payment of an Eligible Loan or
the making of the Escrow Payments, and the Servicer shall make Servicing
Advances.

            Section 4.10 PROTECTION OF ACCOUNTS.

            Amounts on deposit in the Collection Account may at the option of
the Collateral Agent be invested in Eligible Investments; PROVIDED that in the
event that amounts on deposit in the Collection Account (which shall be properly
titled to insure the funds in such account on a loan-by-loan basis) exceed the
amount fully insured by the FDIC (the "INSURED AMOUNT") the Servicer shall be
obligated to invest the excess amount over the Insured Amount in Eligible
Investments on the next Business Day as such excess amount becomes present in
the Collection Account. Monies held in the Collection Account shall be invested
in Eligible Investments having maturities of no greater than one day; PROVIDED,
that if there is no Commercial Paper then outstanding, monies held in the
Collection Account shall be invested in Eligible Investments having maturities
of no greater than 30 days. So long as there are Eligible Investments having
maturities of greater than one day, the Purchaser shall not issue Commercial
Paper. All such Eligible Investments shall be made in the name of, and shall be
payable to, the Collateral Agent.

            Section 4.11 MAINTENANCE OF HAZARD INSURANCE.

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

            If upon origination or acquisition of the Eligible Loan, the related
Mortgaged Property was located in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available) the Servicer shall cause to be in
effect a flood insurance policy meeting the requirements of the current
guidelines of the Flood Insurance Administration with a generally acceptable
insurance carrier rated A:VI or better in Best's in an amount representing
coverage equal to the lesser of (i) the minimum amount required, under the terms
of coverage, to compensate for any damage or loss on a replacement cost basis
(or the unpaid balance of the mortgage if replacement cost coverage is not
available for the type of building insured) and (ii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973, as
amended. If at any time during the term of the Eligible Loan, the Servicer
determines in accordance with applicable law and pursuant to the Guidelines that
a Mortgaged

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Property is located in a special flood hazard area and is not covered by flood
insurance or is covered in an amount less than the amount required by the Flood
Disaster Protection Act of 1973, as amended, the Servicer shall notify the
related Mortgagor that the Mortgagor must obtain such flood insurance coverage,
and if said Mortgagor fails to obtain the required flood insurance coverage
within forty-five (45) days after such notification, the Servicer shall
immediately force place the required flood insurance on the Mortgagor's behalf.

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

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

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

            Pursuant to SECTION 4.5 hereof, any amounts collected by the
Servicer under any such policies (other than amounts to be deposited in any
Escrow Account and applied to the restoration or repair of the related Mortgaged
Property, or property acquired in liquidation of the Eligible Loan, or to be
released to the Mortgagor, in accordance with Accepted Servicing Practices as
specified in SECTION 4.15 hereof) shall be deposited in the Collection Account
subject to withdrawal pursuant to SECTION 4.6 hereof.

            Section 4.12 MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE.

            If the Servicer shall obtain and maintain a blanket policy insuring
against losses arising from fire and hazards covered under extended coverage on
all of the Eligible Loans, then, to the extent such policy provides coverage in
an amount equal to the amount required pursuant to SECTION 4.11

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hereof and otherwise complies with all other requirements of SECTION 4.11, it
shall conclusively be deemed to have satisfied its obligations as set forth in
such SECTION 4.11. Any amounts collected by the Servicer under any such policy
relating to an Eligible Loan shall be deposited in the Collection Account
subject to withdrawal pursuant to SECTION 4.6 hereof. Such policy may contain a
deductible clause, in which case, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with SECTION
4.11 hereof, and there shall have been a loss which would have been covered by
such policy, the Servicer shall deposit in the Collection Account at the time of
such loss the amount not otherwise payable under the blanket policy because of
such deductible clause, such amount to be deposited from the Servicer's funds,
without reimbursement therefor. Upon request of the Purchaser, the Servicer
shall cause to be delivered to the Purchaser a certified true copy of such
policy.

            Section 4.13 MAINTENANCE OF FIDELITY BOND AND ERRORS AND OMISSIONS
INSURANCE.

            The Servicer shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the Eligible Loans ("COMPANY EMPLOYEES"). Any such Fidelity Bond and
Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Company Employees. Such Fidelity Bond and Errors and
Omissions Insurance Policy also shall protect and insure the Servicer against
losses in connection with the release or satisfaction of an Eligible Loan
without having obtained payment in full of the indebtedness secured thereby. No
provision of this SECTION 4.13 requiring such Fidelity Bond and Errors and
Omissions Insurance Policy shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. The minimum coverage
under any such bond and insurance policy shall be at least equal to the
corresponding amounts required by the Guidelines. Upon the request of the
Purchaser, the Servicer shall cause to be delivered to the Purchaser a certified
true copy of such fidelity bond and insurance policy.

            Section 4.14 INSPECTIONS.

            The Servicer shall inspect the Mortgaged Property as often as deemed
necessary by the Servicer to assure itself that the value of the Mortgaged
Property is being preserved.

            Section 4.15 RESTORATION OF MORTGAGED PROPERTY.

            The Servicer need not obtain the approval of the Purchaser prior to
releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be
applied to the restoration or repair of the Mortgaged Property if such release
is in accordance with Accepted Servicing Practices.

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At a minimum, the Servicer shall comply with the following conditions in
connection with any such release of Insurance Proceeds or Condemnation Proceeds:

                  (1) The Servicer shall receive satisfactory independent
      verification of completion of repairs and issuance of any required
      approvals with respect thereto;

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

                  (3) The Servicer shall verify that the Eligible Loan is not in
      default; and

                  (4) Pending repairs or restoration, the Servicer shall place
      the Insurance Proceeds or Condemnation Proceeds in any Escrow Account.

            Section 4.16 MAINTENANCE OF PMI POLICY; CLAIMS.

            With respect to each Eligible Loan with a LTV in excess of 80%, the
Servicer shall, without any cost to the Purchaser, maintain or cause the
Mortgagor to maintain in full force and effect a PMI Policy insuring that
portion of the Eligible Loan in excess of 80% of value, and shall pay or shall
cause the Mortgagor to pay the premium thereon on a timely basis, until the LTV
of such Eligible Loan is reduced to 80% or less. In the event that such PMI
Policy shall be terminated, the Servicer shall, prior to any such termination,
obtain from another Qualified Insurer a comparable replacement policy, with a
total coverage equal to the remaining coverage of such terminated PMI Policy. If
the insurer shall cease to be a Qualified Insurer, the Servicer shall determine
whether recoveries under the PMI Policy are jeopardized for reasons related to
the financial condition of such insurer, it being understood that the Servicer
shall in no event have any responsibility or liability for any failure to
recover under the PMI Policy for such reason. If the Servicer determines that
recoveries are so jeopardized, it shall notify the Purchaser and the Mortgagor,
if required, and obtain from another Qualified Insurer a replacement insurance
policy. The Servicer shall not take any action which would result in noncoverage
under any applicable PMI Policy of any loss which, but for the actions of the
Servicer, would have been covered thereunder. In connection with any assumption
or substitution agreement entered into or to be entered into pursuant to SECTION
6.1 hereof, the Servicer shall promptly notify the insurer under the related PMI
Policy, if any, of such assumption or substitution of liability in accordance
with the terms of such PMI Policy and shall take all actions which may be
required by such insurer as a condition to the continuation of coverage under
such PMI Policy. If such PMI Policy is terminated as a result of such assumption
or substitution of liability, the Servicer shall obtain a replacement PMI Policy
as provided above.

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            In connection with its activities as Servicer, the Servicer agrees
to prepare and present claims to the insurer under any PMI Policy in a timely
fashion in accordance with the terms of such PMI Policy and, in this regard, to
take such action as shall be necessary to permit recovery under any PMI Policy
respecting a Defaulted Loan. Pursuant to SECTION 4.5 hereof, any amounts
collected by the Servicer under any PMI Policy shall be deposited in the
Collection Account, subject to withdrawal pursuant to SECTION 4.6 hereof.

            Section 4.17 TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY.

            In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the Servicer as agent for the Secured Parties, or
in the event the Servicer is not authorized or permitted to hold title to real
property in the state where the REO Property is located, or would be adversely
affected under the "doing business" or tax laws of such state by so holding
title, the deed or certificate of sale shall be taken in the name of such Person
or Persons as shall be reasonably acceptable to the Purchaser. The Person or
Persons holding such title other than the Servicer shall acknowledge in writing
that such title is being held as nominee for the Servicer.

            The Servicer shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition and
sale. The Servicer, either itself or through an agent selected by the Servicer,
shall manage, conserve, protect and operate the REO Property in the manner that
it manages, conserves, protects and operates other foreclosed property for its
own account, and in the manner that similar property in the locality as the REO
Property is managed. The Servicer shall attempt to sell the Eligible Loan on
such terms and conditions as the Servicer deems to be in the best interest of
the Purchaser. The Servicer shall dispose of the REO Property in accordance with
Accepted Servicing Practices as soon as possible.

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

            The disposition of REO Property shall be carried out by the Servicer
at such price and, upon such terms and conditions, as the Servicer deems to be
in the best interest of the Purchaser. The proceeds of sale of the REO Property
shall be promptly deposited in any Collection Account.

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            Section 4.18 SERVICER REPORTS.

            The Servicer shall deliver a report to the Purchaser, the Collateral
Agent, the Custodian, the Indenture Trustee, the Agent, the CP Dealers and the
Remarketing Agent on each Payment Date (the "MONTHLY REPORT"), a form of which
is attached hereto as EXHIBIT C.

            Section 4.19 REAL ESTATE OWNED REPORTS.

            The Servicer shall furnish to the Purchaser on or before the Payment
Date a statement with respect to any REO Property covering the operation of such
REO Property and the Servicer's efforts in connection with the sale of such REO
Property and any rental of such REO Property incidental to the sale thereof.
That statement shall be accompanied by such other information as the Purchaser
shall reasonably request.

            Section 4.20 LIQUIDATION REPORTS.

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

            Section 4.21 REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED
PROPERTY.

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

            Section 4.22 SERVICER ADVANCE REPORT.

            The Servicer shall deliver a report (a "MONTHLY SERVICER ADVANCE
REPORT") to the Collateral Agent from time to time pursuant to SECTION 4.6(e), a
form of which is attached hereto as EXHIBIT D.

            Section 4.23 SECONDARY MARKET TRADING REPORT. The Servicer shall on
each Payment Date deliver to the Owner Trustee, the Indenture Trustee and to the
Collateral Agent a report (the "MONTHLY SECONDARY MARKET TRADING REPORT")
setting forth the information described below with respect to sales and
Securitizations of Eligible Loans made by the Purchaser in the preceding month.
The Indenture Trustee shall have no duty to examine any such report.

            The information included in the Secondary Market Trading Report will
include (i) a photocopy of each confirmation or trading ticket with respect to
Eligible Loans sold or Securitization Securities sold in such month, (ii) a
schedule indicating the other bids considered by the Servicer on

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behalf of the Trust with respect to the Eligible Loans sold or Securitization
Securities sold in such month or, if no other bids were considered by the
Servicer, comparison materials indicating substantially contemporaneous pricing
of similar Securitization Securities or Eligible Loans to those sold by the
Trust.

            Each of the Owner Trustee, the Indenture Trustee (acting at the
written direction of the Required Noteholders) and the Collateral Agent shall
have the right to request that the Servicer provide additional comparative
pricing information to establish that the Eligible Loans sold or securitized by
the Servicer on behalf of the Purchaser were sold at the market value thereof at
the time of sale or Securitization.

                                    ARTICLE V

                                SERVICER ADVANCES

            Section 5.1 SERVICER MONTHLY ADVANCES.

            On each Determination Date, the Servicer shall deposit into the
Collection Account from its own funds an amount equal to all Monthly Payments
which were due on the Eligible Loans with respect to the applicable Due Period
and which remain unpaid at the close of business on such Determination Date or
which were deferred pursuant to SECTION 4.1 hereof. The Servicer's obligation to
make such Servicer Monthly Advances as to any Eligible Loan will continue
through the last Monthly Payment due prior to the payment in full of the
Eligible Loan or through the Payment Date for the distribution of all
Liquidation Proceeds and other payments or recoveries (including Insurance
Proceeds and Condemnation Proceeds) with respect to the Eligible Loan unless the
Servicer provides an Officer's Certificate stating that such Servicer Monthly
Advance would not be recoverable; PROVIDED, HOWEVER, that the Servicer's
obligation to make such Servicer Monthly Advances shall not continue if the
Eligible Loan has become a Defaulted Loan.

                                   ARTICLE VI

                          GENERAL SERVICING PROCEDURES

            Section 6.1 TRANSFERS OF MORTGAGED PROPERTY.

            The Servicer shall enforce any "due-on-sale" provision in accordance
with Accepted Servicing Practices and applicable law contained in any Mortgage
or Mortgage Note and to deny assumption by the Person to whom the Mortgaged
Property has been or is about to be sold whether

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by absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains liable on the Mortgage and the Mortgage Note. When the Mortgaged
Property has been conveyed by the Mortgagor, the Servicer shall, to the extent
it has knowledge of such conveyance, exercise its rights to accelerate the
maturity of such Eligible Loan under the "due-on-sale" clause applicable
thereto; PROVIDED, HOWEVER, that the Servicer shall not exercise such rights if
prohibited by law from doing so or if the exercise of such rights would impair
or threaten to impair any recovery under the related PMI Policy, if any.

            If the Servicer reasonably believes it is unable under applicable
law to enforce such "due-on-sale" clause, the Servicer shall enter into (i) an
assumption and modification agreement with the person to whom such property has
been conveyed, pursuant to which such person becomes liable under the Mortgage
Note and the original Mortgagor remains liable thereon or (ii) in the event that
the Servicer is unable under applicable law to require that the original
Mortgagor remain liable under the Mortgage Note and the Servicer has the prior
consent of the primary mortgage guaranty insurer, a substitution of liability
agreement with the purchaser of the Mortgaged Property pursuant to which the
original Mortgagor is released from liability and the purchaser of the Mortgaged
Property is substituted as Mortgagor and becomes liable under the Mortgage Note.

            Section 6.2 SATISFACTION OF MORTGAGES AND RELEASE OF MORTGAGE LOAN
FILES.

            Upon the payment in full of any Eligible Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer shall notify the Purchaser and the
Collateral Agent.

            If the Servicer satisfies or releases a Mortgage without first
having obtained payment in full of the indebtedness secured by the Mortgage or
should the Servicer otherwise prejudice any rights the Purchaser may have under
the mortgage instruments, upon written demand of the Purchaser, the Servicer
shall repurchase the related Eligible Loan at the Repurchase Price by deposit
thereof in the Collateral Account within two Business Days of receipt of such
demand by the Purchaser. The Servicer shall maintain the Fidelity Bond and
Errors and Omissions Insurance Policy as provided for in SECTION 4.13 hereof
insuring the Servicer against any loss it may sustain with respect to any
Eligible Loan not satisfied in accordance with the procedures set forth herein.

            Section 6.3 SERVICING COMPENSATION.

            As compensation for its services hereunder, Servicer shall be
entitled to the Servicing Fee.

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            Section 6.4 ANNUAL STATEMENT AS TO COMPLIANCE.

            The Servicer shall deliver to the Purchaser, the Indenture Trustee,
the Owner Trustee, the Liquidity Banks, the Remarketing Agent, the CP Dealers
and the Swap Counterparties, on or before April 5th each year beginning 1999, an
Officer's Certificate, stating that (i) a review of the activities of the
Servicer during the preceding fiscal year ended December 31st and of performance
under this Agreement has been made under such officer's supervision, (ii) the
Servicer has complied with the provisions of ARTICLE II and ARTICLE IV hereof,
and (iii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled its obligations in all material respects under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Servicer to cure such default.

            Section 6.5 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.

            On or before April 5th of each year beginning 1999, the Servicer, at
its expense, shall cause a firm of independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Purchaser, the Indenture Trustee, the Liquidity Banks, the CP
Dealers, the Remarketing Agent and the Swap Counterparties to the effect that
such firm has examined certain documents and records relating to the servicing
of the Eligible Loans and this Agreement and that such firm is of the opinion
that the provisions of ARTICLE II and ARTICLE IV hereof have been complied with,
and that, on the basis of such examination conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers, nothing has
come to their attention which would indicate that such servicing has not been
conducted in compliance therewith, except for (i) such exceptions as such firm
shall believe to be immaterial, and (ii) such other exceptions as shall be set
forth in such statement. The Indenture Trustee shall have no duty to examine
such statement.

            Section 6.6 RIGHT TO EXAMINE SERVICER RECORDS.

            The Purchaser, the Indenture Trustee (acting at the written
direction of the Required Noteholders), the Owner Trustee, the Agent and the
Collateral Agent shall each have the right to reasonable access to the books,
records, or other information of the Servicer, whether held by the Servicer or
by another on its behalf, with respect to or concerning this Agreement or the
Eligible Loans, during regular business hours or at such other times as may be
reasonable under applicable circumstances, upon reasonable advance notice.

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                                   ARTICLE VII

                              REPURCHASE OBLIGATION

            Section 7.1 SERVICER'S REPURCHASE OBLIGATIONS.

            Upon receipt by the Servicer of notice from the Purchaser of a
breach of any representation or warranty of it contained in SECTIONS 3.1 and 3.2
of this Agreement or any action resulting in prejudice to the Purchaser in
accordance with SECTION 6.2 hereof, the Servicer shall promptly notify the
Purchaser, the Agent, the Indenture Trustee, the Collateral Agent and the Swap
Counterparties and shall, at the direction of the Purchaser use its best efforts
to cure and correct any such breach, and, in the event such breach is not cured
and corrected within the applicable 60 day time period, the Servicer shall
repurchase the Eligible Loans at the Repurchase Price pursuant to SECTION 3.3
hereof.

            Upon deposit by the Servicer of the Repurchase Price in the
Collateral Account, the Custodian and the Servicer shall arrange for the
reassignment of Eligible Loans adversely affected by such breach to the Servicer
(in its own capacity and on behalf of the Additional Seller) according to the
Servicer's instructions, and the delivery to the Custodian of any documents held
by the Purchaser. In the event of a repurchase, the Servicer shall,
simultaneously with such reassignment, give written notice to the Seller, the
Additional Seller, the Agent, the Collateral Agent, the Indenture Trustee and
the Swap Counterparties that such repurchase has taken place. Upon receipt of
the Repurchase Price by the Collateral Agent, the Purchaser and the Servicer
shall arrange for the reassignment of the Eligible Loans to the Servicer (in its
own capacity and on behalf of the Additional Seller) and the Delivery to the
Servicer of any documents held by the Custodian relating to the reassigned
Eligible Loans.

                                  ARTICLE VIII

                              SERVICER TO COOPERATE

            Section 8.1 PROVISION OF INFORMATION.

            During the term of this Agreement, the Servicer shall furnish to the
Purchaser, the holders of all Series of Certificates, the holders of all Series
of Notes and the Liquidity Banks such periodic, special, or other reports or
information, including the Servicer Report required to be delivered to the
Purchaser, the Collateral Agent, the Indenture Trustee, the Owner Trustee, the
Custodian, the CP Dealers, the Remarketing Agent and the Liquidity Banks on each
Payment Date, and copies or originals of any documents contained in the Mortgage
Loan File for each Eligible Loan, whether or

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not provided for herein, as shall be necessary, reasonable, or appropriate with
respect to the Purchaser. All such reports, documents or information shall be
provided by and in accordance with all reasonable instructions and directions
which the Purchaser may give.

            The Servicer shall execute and deliver all such instruments and take
all such action as the Purchaser, the Collateral Agent, the Indenture Trustee
(acting at the written direction of the Required Noteholders), the Owner
Trustee, the Custodian, the Certificateholders and the Liquidity Banks may
reasonably request from time to time, in order to effectuate the purposes and to
carry out the terms of this Agreement.

                                   ARTICLE IX

                                  THE SERVICER

            Section 9.1 INDEMNIFICATION OF THIRD-PARTY CLAIMS.

            The Servicer agrees to indemnify and hold harmless the Purchaser,
the Collateral Agent, the Indenture Trustee, the Owner Trustee, the Remarketing
Agent, the CP Dealers and the Liquidity Banks against any and all claims,
losses, penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and any other costs, fees and expenses that the Purchaser may sustain
in any way related to the failure of the Servicer to perform its duties and
service the mortgage loans in strict compliance with the terms of this
Agreement. The Servicer shall immediately notify the Purchaser, the Collateral
Agent, the Remarketing Agent, the Indenture Trustee, the Owner Trustee, the CP
Dealers and the Liquidity Banks if a claim is made by a third party with respect
to this Agreement or the mortgage loans and the Servicer shall assume the
defense of any such claim and pay all expenses in connection therewith,
including counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against the Servicer or the Purchaser in respect of
such claim. The Servicer's indemnification obligation pursuant to this SECTION
9.1 shall survive the termination of this Agreement.

            Section 9.2 CORPORATE EXISTENCE OF THE SERVICER.

            The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and shall obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Eligible Loans and to perform its
duties under this Agreement.

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            Section 9.3 LIMITATION ON LIABILITY OF SERVICER AND OTHERS.

            Neither the Servicer nor any of the directors, officers, employees
or agents of the Servicer shall be under any liability to the Purchaser for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Servicer or any such person against any
breach of warranties or representations made herein, or failure to perform its
obligations in compliance with any standard of care set forth in this Agreement,
or any liability which would otherwise be imposed by reason of any breach of the
terms and conditions of this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document which
it in good faith reasonably believes to be genuine and have been adopted or
signed by the proper authorities respecting any matters arising hereunder. The
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its duties to service the Eligible Loans
in accordance with this Agreement and which in its opinion may involve it in any
expense or liability; PROVIDED, HOWEVER, that the Servicer may, with the consent
of the Purchaser undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto. In such event, the Servicer shall be entitled to reimbursement
from the Purchaser of the reasonable legal expenses and costs of such action.

            Section 9.4 LIMITATION ON RESIGNATION AND ASSIGNMENT BY THE
SERVICER.

            The Purchaser has entered into this Agreement with the Servicer in
reliance upon the representations as to the adequacy of its servicing
facilities, plant, personnel, records and procedures, its integrity, reputation
and financial standing, and the continuance thereof. The Servicer shall not
resign from the obligations and duties hereby imposed on it as to any Eligible
Loan except by consent of the Required Banks and the Required Noteholders, the
Swap Counterparties, the Collateral Agent and the holders of a majority in
principal amount of all Series of Certificates or upon the determination that
its duties hereunder are no longer permissible under applicable law and such
incapacity cannot reasonably be cured by the Servicer. Notice of any such
determination permitting the resignation of the Servicer shall be delivered to
each Rating Agency and any such determination shall evidenced by an Opinion of
Counsel to such effect delivered to the Purchaser which Opinion of Counsel shall
be in form and substance acceptable to the Purchaser. No such resignation shall
become effective until a successor shall have assumed the Servicer's
responsibilities and obligations hereunder in the manner provided in SECTION
12.1 hereof, subject to Rating Agency Confirmation.

            Section 9.5 LIMITATION ON ASSIGNMENT OF RIGHT. Except pursuant to a
resignation approved pursuant to SECTION 9.4 hereof, the Servicer shall not
assign, sell or otherwise transfer its right to receive any payments (including
the Servicing Fee) hereunder.

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                                    ARTICLE X

                                     DEFAULT

            Section 10.1 SERVICER EVENTS OF DEFAULT.

            Each of the following shall constitute a "SERVICER EVENT OF DEFAULT"
on the part of the Servicer:

            (a) any failure by the Servicer to observe or perform in any
material respect any of the terms, covenants or agreements on the part of the
Servicer set forth in this Agreement, any Transfer Supplement or in the
Custodial Agreement (other than those set forth in CLAUSES (h), (i) and (m)
below) which continues unremedied for a period of 45 days after the date on
which the Purchaser, the Custodian or the Agent has actual knowledge of such
failure or written notice of such failure, requiring the failure to be remedied,
shall have been given to the Servicer, the Agent, the Collateral Agent, the
Indenture Trustee, the Owner Trustee and the Swap Counterparties by the
Purchaser or by the Custodian or the Agent;

            (b) any representation, warranty, statement or certificate made by
the Servicer shall prove to have been incorrect in any material respect at the
time when made, and which continues to be incorrect in any material respect for
45 days after actual knowledge or written notice;

            (c) any failure by the Servicer to maintain any required licenses to
do business in any jurisdiction where the Mortgaged Property is located;

            (d) jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, including bankruptcy,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Servicer and a decree or order shall have remained in force undischarged or
unstayed for a period of 45 days;

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

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

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            (g) the Servicer or PHH Corporation enters into a consent agreement
or otherwise agrees in writing with any federal or state regulatory agency or
authority to restrict its activities, if the default of such agreement by the
Servicer or PHH Corporation entitles such applicable federal or state agency to
place the Servicer in receivership or conservatorship;

            (h) failure of the Servicer to cause to be delivered to the
Collateral Agent on the date of sale or Securitization of an Eligible Loan the
proceeds of any such sale or Securitization;

            (i) failure of the Servicer to cause to be delivered to the
Collateral Agent for deposit into the Collection Account not later than two
Business Days after receipt by the Servicer of any amounts required by SECTION
4.5 hereof to be deposited by the Servicer in the Collection Account;

            (j) the Seller, the Additional Seller, Servicer or PHH Corporation
shall default on any of its debt obligations in excess of $50,000,000 in the
aggregate;

            (k) failure of the Servicer to be an Approved Seller/Servicer by at
least two of GNMA, FNMA and FHLMC;

            (l) the ratings of PHH Corporation or its successors and assigns are
withdrawn or are downgraded below "BB+/Ba1" by the Rating Agencies; or

            (m) the failure on the part of the Servicer to make any payment or
deposit (not described in CLAUSE (h) or (i) above) required under this Agreement
on or before five Business Days after the date such payment or deposit is
required to be made.

            In each and every such case, so long as a Servicer Event of Default
shall not have been remedied, in addition to whatsoever rights the Purchaser may
have at law or in equity to damages, including injunctive relief and specific
performance, the Purchaser, by notice in writing to the Servicer, the Agent, the
Collateral Agent, the Indenture Trustee, the Owner Trustee, the Swap
Counterparties and the Rating Agencies may terminate all of the rights and
obligations of the Servicer under this Agreement and in and to the Eligible
Loans and the proceeds thereof other than unpaid Servicing Fees. The Purchaser
will only remove the Servicer as described above upon the affirmative vote of
the holders of a majority in principal amount of all Series of Certificates, and
the consent of the Swap Counterparties, the Collateral Agent and the Required
Banks and Required Noteholders.

            Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Eligible Loans or otherwise, shall pass to and be vested in the successor
appointed pursuant to SECTION 12.1 hereof. Upon written request from the
Purchaser, the Servicer shall prepare, execute and deliver to the successor
entity designated by the Purchaser any and all documents and other instruments,
place in such successor's possession all

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Mortgage Loan Files, and do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
including but not limited to the transfer and endorsement or assignment of the
Eligible Loans and related documents, at the Servicer's sole expense. The
Servicer shall cooperate with such successor in effecting the termination of the
Servicer's responsibilities and rights hereunder, including without limitation,
the transfer to such successor for administration by it of all cash amounts
which shall at the time be credited by the Servicer to any Collection Account or
Escrow Account or thereafter received with respect to the Eligible Loans.

            Section 10.2 WAIVER OF DEFAULTS.

            With the consent of Required Banks and Required Noteholders and the
Swap Counterparties, the Purchaser and the holders of a majority in principal
amount of all Series of Certificates, by written notice to the Collateral Agent,
may waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any waiver of a past default, such default
shall cease to exist, and any event of default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived. Notice of any such waiver shall be
given to each Rating Agency.

                                   ARTICLE XI

                                   TERMINATION

            Section 11.1 TERMINATION OF AGREEMENT.

            This Agreement shall terminate upon the final payment or other
liquidation (or any advance with respect thereto) of the last Eligible Loan sold
hereunder.

            Section 11.2 TERMINATION OF PURCHASE OBLIGATIONS.

            Upon the occurrence and continuance of any of the following
conditions, the Purchaser shall have the right subject to the consent of the
holders of a majority in principal amount of the Certificates and the Required
Banks or Required Noteholders to notify the Seller and the Additional Seller
that the commitment of the Purchaser to purchase Eligible Loans from the Seller
or the Additional Seller, as applicable, shall terminate (each, a "TERMINATION
EVENT"):

            (a) any representation, warranty, statement, or certification made
by PHH Corporation in its capacity as Guarantor of the Servicer shall prove to
have been false or misleading

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in any material respect as of the time when made, and which continues to be
incorrect in any material respect for a period of forty-five (45) days after
written notice;

            (b) the failure on the part of the Seller or the Servicer (on behalf
of the Additional Seller), as applicable, to observe or perform in any material
respect any of the terms, covenants or agreements of the Seller or the Servicer
(on behalf of the Additional Seller), as applicable, contained in the Program
Documents which failure continues unremedied for a period of forty-five (45)
days after written notice;

            (c) the appointment of a conservator or receiver or liquidator in
any insolvency, readjustment of debt, including bankruptcy, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Seller or PHH
Corporation and such decree or order shall have remained in force undischarged
or unstayed for a period of forty-five (45) days;

            (d) the Seller or PHH Corporation shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Seller or PHH Corporation or of or relating to all or
substantially all of its property;

            (e) the Seller or PHH Corporation shall admit in writing its
inability to pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency, bankruptcy or reorganization statute,
make an assignment for the benefit of its creditors, voluntarily suspend payment
of its obligations or cease its normal business operations for six (6) Business
Days;

            (f) noncompliance with the Portfolio Aging Limitations;

            (g) the occurrence of an Interest Rate Swap Termination Event under
the Interest Rate Swaps has occurred or is continuing after giving effect to any
applicable grace period;

            (h) a Liquidity Agreement Event of Default has occurred and is
continuing after giving effect to any applicable grace period;

            (i) an Indenture Event of Default has occurred and is continuing
after giving effect to any applicable grace period;

            (j) the Servicer or PHH Corporation enters into a consent agreement
or otherwise agrees in writing with any Federal or state regulatory agency or
authority to restrict its activities, if a default under such agreement by the
Servicer or PHH Corporation entitles such applicable Federal or state agency to
place the Servicer in receivership or conservatorship;

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            (k) failure of the Servicer to cause to be delivered to the
Collateral Agent for deposit into the Collateral Account on the date of sale or
Securitization of any Mortgage Loans the proceeds of any such sale or
Securitization;

            (l) failure of the Servicer to cause to be delivered to the
Collateral Agent for deposit into the Collection Account not later than two (2)
Business Days after receipt by the Servicer of any amounts required to be
deposited by the Servicer in the Collection Account;

            (m) any Servicer Event of Default has occurred and is continuing
after giving effect to any applicable grace period;

            (n) funds on deposit in the Reserve Fund shall be less than 0.60% of
the Program Size for 120 days or more;

            (o) at any time either (i) the rolling three month average of the
Outstanding Purchase Price of all Delinquent Loans shall equal more than five
percent (5%) of the rolling three month average of the Outstanding Purchase
Price of all Mortgage Loans owned by the Trust at such time or (ii) the
Outstanding Purchase Price of all Delinquent Loans shall equal more than seven
percent (7%) of the Outstanding Purchase Price of all Mortgage Loans owned by
the Trust at such time;

            (p) the failure of the Trust to maintain an agreement (in
substantially the form of EXHIBIT B attached hereto) with a Rated Bidder to the
effect that such Rated Bidder agrees to submit a binding bid for all
non-Delinquent and non-Defaulted Eligible Loans in a Termination Event Auction
which failure continues for a period of thirty (30) or more days;

            (q) the Remarketing Agent has failed to remarket any Series of
Certificates for a period of five (5) successive years; or

            (r) one or more Swap Counterparties fail to agree to any annual
extension of any Interest Rate Swap, resulting in the expiration of one or more
Interest Rate Swaps prior to the maturity of all the Trust's outstanding
obligations, and a replacement Swap Counterparty or Swap Counterparties shall
not have been obtained in a notional amount at least equal to the lesser of (x)
the notional amount of the Interest Rate Swap or Interest Rate Swaps represented
by the non-extending Swap Counterparty or Swap Counterparties, or (y) if the
Program Size has been reduced, an amount equal to (i) the then-current Program
Size, LESS (ii) the notional amount of all effective (as of such scheduled
termination date) Interest Rate Swaps, at least one year prior to the scheduled
termination date.

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            In the event that a Termination Event occurs and is continuing, the
Purchaser will no longer be permitted to purchase additional Eligible Loans and
principal payments on Eligible Loans, principal proceeds of sales and
Securitizations of Eligible Loans and amounts received by the Swap
Counterparties will be used to pay the Obligations of the Purchaser, subject to
the priorities set forth in SECTION 2.01 of the Security Agreement.

            Notwithstanding anything in this Agreement to the contrary, in the
event a Termination Event described in PARAGRAPH (n), (o) or (p) occurs and is
continuing, the Collateral Agent shall use its best efforts to sell or
Securitize all non-Delinquent and non-Defaulted Eligible Loans within sixty (60)
days of the date on which the Termination Event occurs. In the event that all
non-Delinquent and non-Defaulted Eligible Loans have not been so sold or
Securitized, on such sixtieth (60th) day the Collateral Agent shall hold an
auction (a "TERMINATION EVENT AUCTION") of the remaining non-Delinquent and
non-Defaulted Eligible Loans Eligible Loans for settlement not later than the
eighty-fifth (85th) day following the date on which such Termination Event
occurred. At least one of the bidders in such auction shall have a rating of
"P-1" from Moody's (a "RATED BIDDER").

            SECTION 11.3 TERMINATION OF SERVICING WITH RESPECT TO ANY ELIGIBLE
LOAN

            This Agreement shall terminate with respect to any Eligible Loan
upon the occurrence of the following: (i) the receipt into the Collateral
Account of the proceeds of any sale or Securitization of such Eligible Loan or
the Repurchase Price or Principal Prepayment in full of such Eligible Loan; or
(ii) the effectiveness of the termination of the Company pursuant to SECTION
12.1 hereof. No termination shall become effective until a successor shall have
assumed the Servicer's responsibilities and obligations hereunder in the manner
provided in SECTION 12.1 hereof.

            Upon written request from the Purchaser, the Servicer shall prepare,
execute and deliver to the successor entity designated by the Purchaser any and
all documents and other instruments, place in such successor's possession all
Mortgage Loan Files, and do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
including but not limited to the transfer and endorsement or assignment of the
Eligible Loans and related documents, at the Servicer's sole expense. The
Servicer shall cooperate with such successor in effecting the termination of the
Servicer's responsibilities and rights hereunder, including without limitation,
the transfer to such successor for administration by it of all cash amounts
which shall at the time be credited by the Servicer to any Collection Account or
Escrow Account or thereafter received with respect to the Eligible Loans.

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                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

            SECTION 12.1 SUCCESSOR TO SERVICER.

            Prior to termination of the Servicer's responsibilities and duties
under this Agreement pursuant to SECTIONS 9.4 or 10.1 hereof, the Purchaser
shall appoint a successor which shall succeed to all rights and assume all of
the responsibilities, duties and liabilities of the Servicer under this
Agreement prior to the termination of the Servicer's responsibilities, duties
and liabilities under this Agreement. In connection with such appointment and
assumption, the Purchaser may make such arrangements for the compensation of
such successor out of payments on Eligible Loans as it and such successor shall
agree. In the event that the Servicer's duties, responsibilities and liabilities
under this Agreement should be terminated pursuant to the aforementioned
sections, the Servicer shall discharge such duties, responsibilities and
liabilities during the period from the date it acquires knowledge of such
termination until the effective date thereof with the degree of diligence and
prudence which it is obligated to exercise under this Agreement and shall take
no action whatsoever that might impair or prejudice the rights or financial
condition of its successor. The resignation or removal of the Servicer pursuant
to the aforementioned Sections shall not become effective until (i) a successor
shall be appointed pursuant to this SECTION 12.1 and (ii) notice thereof shall
have been given to the Rating Agencies and the Purchaser shall have received
Rating Agency Confirmation, and such resignation or removal shall in no event
relieve the Servicer of the representations and warranties made pursuant to
SECTIONS 3.1(a), 3.1(b) and 3.2 hereof and the remedies available to the
Purchaser under SECTION 3.3 hereof, it being understood and agreed that the
provisions of such SECTIONS 3.1(a), 3.1(b), 3.2 and 3.3 shall be applicable to
the Servicer notwithstanding any such sale, assignment, resignation or
termination of the Servicer, or the termination of this Agreement.

            Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Servicer and the Purchaser an instrument
accepting such appointment, wherein the successor shall make the representations
and warranties set forth in SECTIONS 3.1(a), 3.1(b) and 3.2 hereof, whereupon
such successor shall become fully vested with all the rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer, with like effect
as if originally named as a party to this Agreement. Any termination or
resignation of the Servicer or termination of this Agreement pursuant to
SECTIONS 9.4, or 10.1 hereof shall not affect any claims that the Purchaser may
have against the Servicer arising out of the Servicer's actions or failure to
act prior to any such termination or resignation.

      The Servicer shall deliver promptly to the successor Servicer the funds in
any Collection Account and Escrow Account and all Mortgage Loan Files and
related documents and statements held by it hereunder and the Servicer shall
account for all funds and shall execute and

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deliver such instruments and do such other things as may reasonably be required
to more fully and definitively vest in the successor all such rights, powers,
duties, responsibilities, obligations and liabilities of the Servicer.

            SECTION 12.2 AMENDMENT.

            This Agreement may only be amended with the written consent of the
Purchaser, the Seller, the Controlling Majority with the consent of the Required
Banks, the Swap Counterparties, the holders of a majority in principal amount of
all Series of Certificates and the Servicer, and written notice of such
amendment to each Rating Agency. Any material amendment shall be subject to
Rating Agency Confirmation. The costs and expenses associated with any such
amendment shall be borne by the party requesting the amendment.

            SECTION 12.3 GOVERNING LAW.

            THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

            SECTION 12.4 DURATION OF AGREEMENT.

            This Agreement shall continue in existence and effect until
terminated as herein provided.

            SECTION 12.5 NOTICES.

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

                  (i)   if to Cendant Mortgage Corporation:

                        Cendant Mortgage Services
                        3000 Leaden-Hall Road
                        Mt. Laurel, NJ 08054
                        Attn: Joseph Suter
                        Telephone: (856) 414-4170
                        Telecopy: (856) 439-3742

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

                  (ii)  if to the Purchaser:

                        Bishop's Gate Residential Mortgage Trust
                        c/o Cendant Mortgage Corporation
                        3000 Leaden-Hall Road
                        Mt. Laurel, NJ 08054
                        Attn: Joseph Suter
                        Telephone: (856) 414-4170
                        Telecopy: (856) 439-3742

            SECTION 12.6 SEVERABILITY OF PROVISIONS.

            If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement.

            SECTION 12.7 RELATIONSHIP OF PARTIES.

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

            SECTION 12.8 EXECUTION; SUCCESSORS AND ASSIGNS.

            This Agreement may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one agreement. This Agreement shall inure to the benefit of and be
binding upon the Servicer and the Purchaser and their respective successors and
assigns; PROVIDED, HOWEVER, that the rights of the Purchaser to an indemnity
from the Servicer pursuant to SECTION 3.3 hereof are not assignable and shall
inure only to the benefit of the Purchaser and to no other Person.

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            SECTION 12.9 RECORDATION OF ASSIGNMENTS OF MORTGAGE.

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

            SECTION 12.10 ASSIGNMENT BY PURCHASER.

            The Purchaser shall have the right, to assign its interest under
this Agreement to the Collateral Agent for the benefit of the Secured Parties.

            SECTION 12.11 NON-PETITION AGREEMENT.

            The Company and the Additional Seller agree not to cause the filing
of a petition in bankruptcy against the Purchaser for failure to pay amounts due
under this Agreement until the payment in full of the Obligations and not before
one year and one day (or if longer, the applicable preference period then in
effect) have elapsed since such payment.

            SECTION 12.12 WAIVER OF OFFSET.

            The Servicer agrees to deliver to the Purchaser all amounts required
by this Agreement to be delivered by the Servicer to the Purchaser free and
clear of any offset, counterclaim or other deduction on account of, or in
respect of, any Purchaser to the Servicer hereunder.

            SECTION 12.13 LIMITED RECOURSE.

            The Servicer agrees that the obligations of the Purchaser to the
Servicer under this Agreement are limited recourse obligations of the Purchaser
payable solely from the assets of the Purchaser available for such purposes
under the Security Agreement and that, upon application of all assets of the
Purchaser available under the Security Agreement for, such purposes, the
Servicer shall have no recourse to the Purchaser for any obligations of the
Purchaser to the Servicer to the extent such application does not provide for
full satisfaction and payment of such obligation.

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            SECTION 12.14 LIMITATION OF LIABILITY.

            This document or instrument has been executed on behalf of a
Delaware business trust by First Union Trust Company, National Association
solely in its capacity as trustee of such trust, and not in its individual
capacity. In no case shall First Union Trust Company, National Association (or
any entity acting as successor or additional trustee) be personally liable for
or on account of any of the statements, representations, warranties, covenants
or obligations of such trust hereunder, any right to assert any such liabilities
against First Union Trust Company, National Association (or any entity acting as
successor or additional trustee) being hereby waived by the other parties
hereto; PROVIDED, HOWEVER, that such waiver shall not affect the liability of
First Union Trust Company, National Association (or any entity acting as
successor or additional trustee) to any Person under any other agreement to
which it is a party and to the extent expressly agreed to in its individual
capacity thereunder.

            SECTION 12.15 BINDING EFFECT ON VOTING GROUP.

            If any provision hereof provides that either the Required Banks or
the Required Noteholders (in each case, a "VOTING GROUP"), but not both, may
consent, vote, direct or take other action, the first of either Voting Group to
so consent, vote, direct or take action shall bind the other Voting Group with
respect thereto.

                                  ARTICLE XIII

                            PHH CORPORATION GUARANTEE

            SECTION 13.1 GUARANTEE OF SERVICER'S PERFORMANCE AND PAYMENT
OBLIGATIONS. For value received, and in consideration of the financial
accommodation accorded to the Company by the Purchaser under this Purchase
Agreement, PHH Corporation (the "GUARANTOR") hereby fully, unconditionally, and
irrevocably guarantees to the Purchaser, the holders of all Series of
Certificates, the holders of all Series of Notes, the holders of the Commercial
Paper, the Indenture Trustee and the Liquidity Banks the due performance of, and
punctual payment of all amounts payable by, the Company, in its capacity as
Servicer under this Agreement when and as such obligations hereunder shall
become due and, in the case of any payments, payable. The Guarantor will ensure
the performance and payment of every act, duty, obligation, agreement and
responsibility of the Servicer set forth herein.

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            In case of the inability of the Servicer to punctually perform any
such act, duty, obligation, responsibility or agreement or to pay punctually any
such amounts, the Guarantor hereby agrees, upon written demand by the Purchaser,
to, as applicable, (i) perform any such act, duty, obligation, responsibility or
agreement and (ii) pay or cause to be paid any such amount, punctually when and
as the same shall become due and, in the case of any payment, payable (exclusive
of any grace period).

            i.    Guarantor hereby agrees that its obligations under this
                  SECTION 13.1 constitute a guarantee of performance and payment
                  when due and not of collection.

            ii.   Guarantor hereby agrees that its obligations under this
                  SECTION 13.1 shall be unconditional, irrespective of the
                  validity, regularity or enforceability of this Purchase
                  Agreement against the Servicer, the absence of any action to
                  enforce the Servicer's obligations under this Purchase
                  Agreement, any waiver or consent by the Purchaser, the holders
                  of all Series of Certificates, the holders of all Series of
                  Notes, the Indenture Trustee or the Liquidity Banks with
                  respect to any provisions thereof, the entry by the Servicer
                  and the Purchaser into additional transactions under this
                  Purchase Agreement or any other circumstance which might
                  otherwise constitute a legal or equitable discharge or defense
                  of a guarantor (other than the defenses of statute of
                  limitations or payment, which are not waived); PROVIDED,
                  however, that the Guarantor shall be entitled to exercise any
                  right that the Servicer could have exercised under this
                  Purchase Agreement to cure any default in respect of its
                  obligations under this Purchase Agreement or to set-off,
                  counterclaim or withhold payment in respect of any event of
                  default or potential event of default in respect of the
                  Purchaser or any Affiliate, but only to the extent such right
                  is provided to the Servicer under this Purchase Agreement. The
                  Guarantor acknowledges that the Servicer and the Purchaser may
                  from time to time enter into one or more transactions pursuant
                  to this Purchase Agreement and agrees that the obligations of
                  the Guarantor under this SECTION 13.1 will upon the execution
                  of any such transaction by the Servicer and the Purchaser
                  extend to all such transactions without the taking of further
                  action by the Guarantor.

            iii.  The Guarantor hereby waives (i) promptness, diligence,
                  presentment, demand of payment, protest, order and, except as
                  set forth in PARAGRAPH (a) hereof, notice of any kind in
                  connection with this Purchase Agreement and this SECTION 13.1,
                  or (ii) any requirement that the Purchaser, the holders of all
                  Series of Certificates, the holders of all Series of Notes,
                  the Indenture Trustee or the Liquidity Banks exhaust any right
                  to take any action against the Servicer or any

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                  other person prior to or contemporaneously with proceeding to
                  exercise any right against the Guarantor under this SECTION
                  13.1.

                                   ARTICLE XIV

                                   ASSIGNMENT

            SECTION 14.1 ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Purchase Agreement, the Purchaser hereby assigns, conveys,
transfers, delivers and sets over unto the Collateral Agent for the benefit of
the Secured Parties, all of its right, title and interest in, to and under,
whether now owned or existing, or hereafter acquired, this Purchase Agreement.
The Purchaser acknowledges the security interest in the Eligible Loans of the
Collateral Agent as representative secured party for the Purchaser and the
Persons or entities to whom Purchaser owes the obligations secured by such
Eligible Loans.

            The Purchaser, the Seller and the Additional Seller shall each treat
the Collateral Agent as the Purchaser under this Purchase Agreement and each
consent to such assignment and acknowledge that the Collateral Agent shall enjoy
the Purchaser's rights under this Agreement in accordance with the provisions of
this SECTION. Without limiting the generality of the foregoing, the Purchaser,
the Servicer (on behalf of the Additional Seller) and the Seller shall each
report to and correspond and communicate with the Collateral Agent and in all
other regards treat the Collateral Agent as the Purchaser hereunder with respect
to the Eligible Loans. The Collateral Agent shall have all rights of the
Purchaser to enforce the covenants and conditions set forth in this Purchase
Agreement with respect to the Eligible Loans, and the Purchaser, the Servicer
(on behalf of the Additional Seller) and the Seller, respectively, shall each
follow the instructions of the Collateral Agent under this Purchase Agreement.
The Collateral Agent shall have the right to give any waivers or consents
required or allowed under this Purchase Agreement, and such waivers and consents
shall be binding upon the Purchaser and any party for whom the Collateral Agent
acts as representative secured party as if the Purchaser or such party had given
the same. All amounts due the Purchaser under this Purchase Agreement shall be
remitted to the Collateral Agent in accordance with the Collateral Agent's
instructions and in accordance with this Purchase Agreement.

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                                   ARTICLE XV

                                 COMMITMENT FEE

            SECTION 15.1 COMMITMENT FEE. In consideration of the agreement of
the Purchaser to purchase Eligible Loans from the Seller from time to time, the
Seller has paid to the Purchaser a fee (the "COMMITMENT FEE") of $[3,801,500].

                                   ARTICLE XVI

                                ADDITIONAL SELLER

            SECTION 15.1 CRITERIA FOR ADDITIONAL SELLER SECTION. Any Affiliate
of the Company may be added as an additional seller (each, an "ADDITIONAL
SELLER"), provided that each Additional Seller meets the following criteria:

            i.    The proposed Additional Seller provides an officer's
                  certificate to the Trust substantially in the form attached
                  hereto as EXHIBIT E, with the following: (a) evidence of its
                  form and state of formation, (b) a copy of its by-laws or
                  limited liability company agreement, as applicable, (c) a copy
                  of its resolutions authorizing the proposed Additional Seller
                  to enter into the transactions contemplated pursuant to this
                  Purchase Agreement, (d) a certificate of incumbency and
                  specimen signature of an officer, (e) evidence that it has all
                  required licences and government approvals, and (f) a good
                  standing certificate;

            ii.   The Servicer obtains on behalf of the proposed Additional
                  Seller, confirmation from the Rating Agencies that the
                  addition of a particular Affiliate of the Company as an
                  Additional Seller will not adversely affect the current
                  ratings of the outstanding Series of Notes, Series of
                  Certificates and Series of Commercial Paper and Liquidity
                  Loans;

            iii.  Upon the sale of Eligible Loans by the proposed Additional
                  Seller to the Purchaser, the Additional Seller simultaneously
                  sells its servicing rights with respect to such Eligible Loans
                  to the Company, as Servicer, pursuant to a separate agreement
                  substantially in the form attached hereto as EXHIBIT F;

            iv.   Each Eligible Loan that the proposed Additional Seller intends
                  to sell to the Trust is underwritten in accordance with: (a)
                  the Seller's underwriting standards

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                  in effect on the date of origination of such Eligible Loan,
                  and (b) the Guidelines;

            v.    Each proposed Additional Seller executes an agreement,
                  substantially in the form attached hereto as EXHIBIT G,
                  thereby expressly assuming all of the obligations of an
                  Additional Seller contained in this Purchase Agreement and
                  expressly making and assuming all of the representations,
                  warranties and covenants of an Additional Seller contained in
                  this Purchase Agreement;

            vi.   The proposed Additional Seller provides the Trust with an
                  opinion to the effect that: (a) the assets and liabilities of
                  the Trust would not be substantively consolidated with those
                  of the proposed Additional Seller, the Seller or PHH
                  Corporation if the proposed Additional Seller's, the Seller's
                  or PHH Corporation's operations were to become the subject of
                  a case under the Bankruptcy Code, and (b) if the proposed
                  Additional Seller, the Seller or PHH Corporation were to
                  become the subject of a case under the Bankruptcy Code, the
                  Eligible Loans sold by the proposed Additional Seller to the
                  Trust pursuant to this Purchase Agreement would not be
                  property of the proposed Additional Seller's, the Seller's or
                  PHH Corporation's estate in such bankruptcy proceeding, and
                  such opinion shall be substantially in the form attached
                  hereto as EXHIBIT H;

            vii.  The proposed Additional Seller provides an officer's
                  certificate to the Trust stating that it is thereby making all
                  of the representations, warranties and covenants contained in
                  SECTION 3.1(b) of this Purchase Agreement, and that all of the
                  conditions of this ARTICLE XVI have been satisfied; and

            viii. The Servicer provides an officer's certificate to the Trust
                  stating that it is thereby making all of the representations,
                  warranties and covenants on behalf of the Additional Seller
                  contained in SECTIONS 3.2, 3.3 and 3.5 of this Purchase
                  Agreement, and that all of the conditions of this ARTICLE XVI
                  have been satisfied.

                                       82
<Page>

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

                                       CENDANT MORTGAGE CORPORATION,
                                        as Seller and Servicer

                                       By:______________________________________
                                          Name:
                                          Title:

                                       BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST,
                                       as Purchaser

                                       By: CENDANT MORTGAGE CORPORATION,
                                           as Administrator

                                           By:__________________________________
                                              Name:
                                              Title:

                                       PHH CORPORATION,
                                       solely in its capacity of Guarantor of
                                       the Servicer's obligations pursuant to
                                       ARTICLE XIII of this Agreement.

                                       By:______________________________________
                                          Name:
                                          Title:
<Page>

                                                                     EXHIBIT A-1

                               TRANSFER SUPPLEMENT

                                                          [ ], 2000

Bishop's Gate Residential Mortgage Trust

                              PURCHASE TERMS LETTER

Ladies and Gentlemen:

            Cendant Mortgage Corporation (the "COMPANY") and Bishop's Gate
Residential Mortgage Trust (the "PURCHASER") herewith confirm the terms and
provisions of the Second Amended and Restated Mortgage Loan Purchase and
Servicing Agreement (the "PURCHASE AGREEMENT"), entered into on [ ], 2000,
pursuant to which the Company and the Purchaser agreed upon the terms under
which the Company would from time to time sell mortgage loans to the Purchaser.
In consideration of the promises and the mutual agreements herein and therein
set forth, the Company and the Purchaser hereby agree to the terms and
provisions of the sale of the Mortgage Loans described in the Mortgage Loan
Schedule attached hereto as EXHIBIT I, as set forth below and as described in
more detail in the Purchase Agreement. Upon execution of this Transfer
Supplement by the Company and the Purchaser and receipt of the Purchase Price
therefor, the Company hereby sells, assigns, transfers, sets over and conveys to
the Purchaser all right, title and interest of the Company in, to and under each
mortgage loan identified on the attached Transfer Schedule (collectively, the
"MORTGAGE LOANS"). It is intended that the transfer, assignment and conveyance
herein contemplated constitute a sale of the Mortgage Loans, conveying good
title thereto free and clear of any liens, by the Company to the Purchaser and
that the Mortgage Loans not be part of the Company's estate in the event of
insolvency. In the event that the Mortgage Loans are held to be property of the
Company or if for any other reason this Transfer Supplement is held or deemed to
create a security interest in the Mortgage Loans, the parties intend that the
Company shall be deemed to have granted, and does hereby grant, to the Purchaser
a first-priority perfected security interest in the Mortgage Loans and all
Collateral related thereto now existing or hereafter arising for the purpose of
securing the rights of the Purchaser under the Purchase Agreement, and that the
Purchase Agreement and this Transfer Supplement shall each constitute a security
agreement under applicable law.

      i.    CLOSING DATE: o The Purchase Price shall be paid by the Purchaser to
            the Company in immediately available funds on such Closing Date.

                                     A-1-1
<Page>

      ii.   PURCHASE PRICE: The purchase price for the Mortgage Loan(s) shall be
            $__.

      iii.  THE MORTGAGE LOANS: The Mortgage Loans have the characteristics set
            forth on the Mortgage Loan Schedule, set forth as EXHIBIT I attached
            hereto.

      iv.   REPRESENTATIONS AND WARRANTIES: Each representation and warranty of
            the Company set forth in SECTIONS 3.1 and 3.2 of the Purchase
            Agreement will be true and correct on the Closing Date as they
            relate to the Mortgage Loans.

      v.    TERMS: All references herein to the Mortgage Loans shall be deemed
            to refer only to the Mortgage Loans described in the Mortgage Loan
            Schedule attached hereto. Capitalized terms used herein but not
            otherwise defined herein shall have the meanings ascribed to such
            terms in the Purchase Agreement.

                                      A-1-2
<Page>

            Kindly acknowledge your agreement and consent to the terms of this
letter by signing and returning to us the enclosed duplicate copy hereof.

                                        Very truly yours,

                                        CENDANT MORTGAGE CORPORATION

                                        By:_____________________________________
                                            Name:
                                            Title:

Date:____________________

ACCEPTED AND AGREED:

BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST

By: CENDANT MORTGAGE CORPORATION,
    as Administrator

By:_________________________________
    Name:
    Title:

                                      A-1-3
<Page>

                        EXHIBIT I TO TRANSFER SUPPLEMENT

                             MORTGAGE LOAN SCHEDULE

(1) identifying number for the Mortgage Loan:

(2) mortgagor's name:

(3) street address of the mortgage property including the state code:

(4) mortgage interest rate:

(5) stated maturity date:

(6) amount of monthly payment:

(7) original principal balance:

(8) purchase price:

(9) closing date;

(10) FHA/VA Case Number, if applicable;

(11) Note date;

(12) first Due Date; and

(13) MERS MIN#.

                                      I-1
<Page>

                                                                     EXHIBIT A-2

                               TRANSFER SUPPLEMENT

                                                         [ ], 2000

Bishop's Gate Residential Mortgage Trust

                              PURCHASE TERMS LETTER

Ladies and Gentlemen:

      Cendant Mortgage Corporation, as Servicer (on behalf of [ ] (the
"COMPANY")) and Bishop's Gate Residential Mortgage Trust (the "PURCHASER")
herewith confirm the terms and provisions of the Additional Seller Agreement
(the "AGREEMENT"), entered into on [ ], pursuant to which the Purchaser, the
Company and the Servicer, in accordance with the Second Amended and Restated
Mortgage Loan Purchase and Servicing Agreement, dated as of [ ] (the "MORTGAGE
LOAN PURCHASE AGREEMENT"), among the Purchaser, Cendant Mortgage Corporation, as
Seller and Servicer, and PHH Corporation, as Guarantor, agreed upon the terms
under which the Company would from time to time sell mortgage loans to the
Purchaser. In consideration of the promises and the mutual agreements herein and
therein set forth, the Servicer (on behalf of the Company) and the Purchaser
hereby agree to the terms and provisions of the sale of the Mortgage Loans
described in the Mortgage Loan Schedule attached hereto as EXHIBIT I, as set
forth below and as described in more detail in the Mortgage Loan Purchase
Agreement. Upon execution of this Transfer Supplement by the Servicer (on behalf
of the Company) and the Purchaser and receipt of the Purchase Price therefor,
the Company hereby sells, assigns, transfers, sets over and conveys to the
Purchaser all right, title and interest of the Company in, to and under each
mortgage loan identified on the attached Transfer Schedule (collectively, the
"MORTGAGE LOANS"). It is intended that the transfer, assignment and conveyance
herein contemplated constitute a sale of the Mortgage Loans, conveying good
title thereto free and clear of any liens, by the Company to the Purchaser and
that the Mortgage Loans not be part of the Company's estate in the event of
insolvency. In the event that the Mortgage Loans are held to be property of the
Company or if for any other reason this Transfer Supplement is held or deemed to
create a security interest in the Mortgage Loans, the parties intend that the
Company shall be deemed to have granted, and does hereby grant, to the Purchaser
a first-priority perfected security interest in the Mortgage Loans and all
Collateral related thereto now existing or hereafter arising for the purpose of
securing the rights of the Purchaser under the

                                      A-2-1
<Page>

Mortgage Loan Purchase Agreement, and that the Mortgage Loan Purchase Agreement
and this Transfer Supplement shall each constitute a security agreement under
applicable law.

      i.    CLOSING DATE: o The Purchase Price shall be paid by the Purchaser to
            the Company in immediately available funds on such Closing Date.

      ii.   PURCHASE PRICE: The purchase price for the Mortgage Loan(s) shall be
            $__.

      iii.  THE MORTGAGE LOANS: The Mortgage Loans have the characteristics set
            forth on the Mortgage Loan Schedule, set forth as EXHIBIT I attached
            hereto.

      iv.   REPRESENTATIONS AND WARRANTIES: Each representation and warranty of
            the Company set forth in SECTIONS 3.1 and 3.2 of the Mortgage Loan
            Purchase Agreement will be true and correct on the Closing Date as
            they relate to the Mortgage Loans.

      v.    TERMS: All references herein to the Mortgage Loans shall be deemed
            to refer only to the Mortgage Loans described in the Mortgage Loan
            Schedule attached hereto. Capitalized terms used herein but not
            otherwise defined herein shall have the meanings ascribed to such
            terms in the Mortgage Loan Purchase Agreement.

                                      A-2-2
<Page>

      Kindly acknowledge your agreement and consent to the terms of this letter
by signing and returning to us the enclosed duplicate copy hereof.

                                        Very truly yours,

                                        [ ],
                                        as Additional Seller

                                        By: CENDANT MORTGAGE CORPORATION,
                                            as Servicer on behalf of the
                                            Additional Seller

                                        By:_____________________________________
                                            Name:
                                            Title:

Date:____________________

ACCEPTED AND AGREED:

BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST

By: CENDANT MORTGAGE CORPORATION,
    as Administrator

By:_________________________________
    Name:
    Title:

                                      A-2-3
<Page>

                        EXHIBIT I TO TRANSFER SUPPLEMENT

                             MORTGAGE LOAN SCHEDULE

(1) identifying number for the Mortgage Loan:

(2) mortgagor's name:

(3) street address of the mortgage property including the state code:

(4) mortgage interest rate:

(5) stated maturity date:

(6) amount of monthly payment:

(7) original principal balance:

(8) purchase price:

(9) closing date;

(10) FHA/VA Case Number, if applicable;

(11) Note date;

(12) first Due Date; and

(13) MERS MIN#.

                                      I-1
<Page>

                                                                       EXHIBIT B

                          [FORM OF RATED BIDDER LETTER]
                                    [ADDRESS]

                                        [Date]

Bishop's Gate Residential Mortgage Trust
c/o Cendant Mortgage Corporation
3000 Leaden Hall
Mt. Laurel, NJ 08054
Attn: Richard Bradfield

[ ],
 as Collateral Agent
[ ]
[ ]
[ ]
Attn: [ ]

Dear Sirs:

      Reference is made to the Second Amended and Restated Mortgage Loan
Purchase and Servicing Agreement, dated as of [ ], 2000 (the "PURCHASE
AGREEMENT"), among Cendant Mortgage Corporation, as seller and servicer (in each
capacity, the "SELLER" or "SERVICER"), PHH Corporation, as guarantor, and
Bishop's Gate Residential Mortgage Trust (the "TRUST"), as purchaser.
Capitalized terms used and not defined herein shall have the meanings assigned
to such terms in the Purchase Agreement.

      Pursuant to SECTION 11.2 of the Purchase Agreement, if a Termination Event
set forth in PARAGRAPHS (n), (o) or (p) thereof occurs, the Servicer is required
to cause the Collateral Agent to use its best efforts to sell or Securitize all
non-Delinquent and non-Defaulted Eligible Loans for settlement within sixty (60)
days following the date on which such Termination Event occurs ("TERMINATION
EVENT DATE"). With respect to any non-Delinquent and non-Defaulted Eligible
Loans which have not been so sold or Securitized on such sixtieth day (60th) day
following the related Termination Event Date, the Collateral Agent is required
to sell such Eligible Loans by auction for settlement not later than the
eighty-fifth (85th) day following the related Termination Event Date (the "FINAL
SETTLEMENT DATE").

      In connection with any such auction ("TERMINATION EVENT AUCTION"), [ ]
(the "BANK"), the Servicer, the Collateral Agent and the Trust agree as follows:

                                      B-1
<Page>

            (i) the Bank shall participate in a Termination Event Auction and
      agrees to make a binding bid (the "BID") for all Eligible Loans which, as
      of the Auction Date, are non-Defaulted or non-Delinquent Eligible Loans.
      The amount the Bid shall be determined in the sole discretion of the Bank
      and such Bid shall remain in effect until the Final Settlement Date;

            (ii) if the Trust accepts the Bid, the Collateral Agent shall notify
      the Bank of such acceptance and the amount of Mortgage Loans to be
      purchased by the Bank (which amount may be all or a portion of the
      principal balance of the Eligible Loans) in writing not later than two (2)
      Business Days prior to the Final Settlement Date. Any such purchase of
      Mortgage Loans by the Bank shall be settled on or prior to the Final
      Settlement Date; and

            (iii) In consideration of the above agreement, the Trust shall pay
      the Bank such fee as shall be separately agreed between the Trust and the
      Bank.

      This agreement shall be governed by the internal laws of the State of New
York and may be executed in counterparts.

                                      B-2
<Page>

                                        Very truly yours,

                                        [RATED BIDDER]

                                        By______________________________________
                                          Name:
                                          Title:

Accepted and Agreed as of the date written above:

BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST

By: CENDANT MORTGAGE CORPORATION,
    as Administrator

    By:_________________________________
       Name:
       Title:

CENDANT MORTGAGE CORPORATION,
as Servicer

    By:_________________________________
       Name:
       Title:

[ ],
as Collateral Agent

    By:_________________________________
       Name:
       Title:

                                      B-3
<Page>

                                                                       EXHIBIT C

                             FORM OF MONTHLY REPORT

                               (See Attached form)

                                      C-1
<Page>

                                                                       EXHIBIT D

                     FORM OF MONTHLY SERVICER ADVANCE REPORT

                               (See attached form)

                                      D-1
<Page>

                                                                       EXHIBIT E

                 FORM OF ADDITIONAL SELLER OFFICER'S CERTIFICATE

                                                 [ ], 2000

      The undersigned, a duly authorized officer of [ ], a [ ]
[corporation/limited liability company] (the "COMPANY"), DOES HEREBY CERTIFY
THAT:

1.    Attached hereto as EXHIBIT A is a true and complete copy of the
      [Certificate of Incorporation/Formation] of the Company, as certified by
      the Secretary of State of [ ]. The [Certificate of
      Incorporation/Formation] is in full force and effect as of the date hereof
      and no steps as of the date hereof have been taken by the [Board of
      Directors/Members] or stockholders of the Company to modify or amend such
      [Certificate of Incorporation/Formation].

2.    Attached hereto as EXHIBIT B is a true and complete copy of the
      [By-laws/Limited Liability Company Agreement] of the Company in effect as
      of the date hereof.

3.    Attached hereto as EXHIBIT C is a true and complete copy of resolutions
      adopted by the [Board of Directors/Members] of the Company. Such
      resolutions have not been amended, rescinded or modified since their
      adoption and remain in full force and effect as of the date hereof.

4.    Attached hereto as EXHIBIT D is a Certificate of Incumbency and Specimen
      Signature of an Officer.

5.    Attached hereto as EXHIBIT E is a Certificate stating that all required
      licenses and government approvals have been obtained.

6.    Attached hereto as EXHIBIT F is a Certificate from the Office of the
      Secretary of State of [ ] as to the good standing and existence of the
      Company.

                                      E-1
<Page>

      IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate of the Company.

                                        [ ]

                                        By: CENDANT MORTGAGE CORPORATION,
                                            as Servicer on behalf of the
                                            Additional Seller

                                        By:_____________________________________
                                        Name:
                                        Title:

                                      E-2
<Page>

                                                                       EXHIBIT F

              FORM OF SERVICING RIGHTS PURCHASE AND SALE AGREEMENT

            THIS SERVICING RIGHTS PURCHASE AND SALE AGREEMENT ("PURCHASE
AGREEMENT"), dated as of _________________ , is entered into by and between
___________________________________________ ("SELLER"), and CENDANT MORTGAGE
CORPORATION ("CENDANT"), a corporation organized under the laws of the State of
New Jersey (collectively, the "PARTIES").

                                   WITNESSETH:

            WHEREAS, Seller is or will be duly licensed and authorized to
originate, close and fund Mortgage Loans;

            WHEREAS, Cendant is an Affiliate of Seller, and is a mortgage
banking company duly licensed and authorized to originate, purchase and service
Mortgage Loans;

            WHEREAS, Cendant acts as administrator of, and sells mortgage loans
servicing retained to, Bishop's Gate Residential Mortgage Trust, a Delaware
business Trust ("BGRMT"), which loans Cendant then services for BGRMT;

            WHEREAS, Seller desires to originate Mortgage Loans for sale in the
secondary mortgage market, to BGRMT, but retain the Servicing Rights associated
with such Mortgage Loans for sale to Cendant;

            WHEREAS, Seller has or will execute an agreement with BGRMT and
Cendant whereby Seller will sell Mortgage Loans (but not the Servicing Rights
relating thereto) to BGRMT;

            WHEREAS, Cendant desires to purchase from Seller the Servicing
Rights associated with the Mortgage Loans that have been closed and funded by
Seller and that Seller has sold to BGRMT;

            NOW, THEREFORE, the Parties, in consideration of the terms,
conditions, promises and agreements set forth in this Purchase Agreement, agree
as follows:

            1. DEFINITIONS. The following terms shall have the meanings
described below for purposes of this Purchase Agreement:

                  "Affiliate," when used with respect to any Person, shall mean
any other Person directly or indirectly controlling, controlled by or under
common control with, such Person. For purposes of this Agreement, "control"
shall mean (a) the direct or indirect ownership of more than five percent (5%)
of the total voting securities or other evidences of ownership interest of such
Person or (b) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person.

                                      F-1
<Page>

                  "DAMAGES" means and includes all obligations, liabilities,
damages, penalties, deficiencies, losses and judgments, in each case after the
application of any amounts recoverable under insurance contracts or similar
arrangements and from third parties by the Person claiming indemnity.

                  "EFFECTIVE DATE" means ________ __, 20__.

                  "MORTGAGE" means a mortgage, deed of trust or other instrument
creating a first lien on an unsubordinated estate in fee simple in real property
and the improvements thereon, which are used for one- to four-family residential
purposes, securing a Mortgage Note, including all riders and side agreements
supplemental thereto.

                  "MORTGAGE LOAN" means an individual mortgage loan comprising a
Mortgage Note and the related Mortgage, considered together.

                  "MORTGAGE NOTE" means the note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage including all riders and side
agreements supplemental thereto.

                  "MORTGAGOR" means the obligor on a Mortgage Note.

                  "PERSON" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization, association, pool, syndicate, sole
proprietorship, or governmental, public or quasi-public entity, political
subdivision, agency, instrumentality or office or any other form of organization
not specifically listed herein.

                  "SERVICING RIGHTS" means, with respect to the Mortgage Loans,
all of the rights and obligations of the servicer, including but not limited to
the right and obligation to service, administer, collect the payments for the
reduction of principal and application of interest, pay taxes and insurance,
remit collected payments, provide foreclosure services, provide full escrow
administration and any other obligations required by any investor or insurer in,
of, or for such Mortgage Loans, together with the right to receive (i) the
servicing fee, (ii) the excess yield, if any, on the Mortgage Loans, (iii) any
ancillary fees (e.g. late charges, returned item charges, conversion fees, etc.)
arising from or connected to such Mortgage Loans and (iv) all applicable net
interest earnings on any related custodial funds account and related escrow
funds account balances (to the extent permitted by applicable law).

            2. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Cendant that at the time it executes this Purchase Agreement and at
the time it sells the Servicing Rights associated with each Mortgage Loan to
Cendant in accordance with the terms of this Purchase Agreement:

                  a. It is duly organized and existing, and in good standing,
pursuant to the laws of the

                  b. It has the requisite authority to enter into this Purchase
Agreement under applicable federal, state, and local laws, and is in compliance
with the terms and conditions of this Purchase Agreement;

                                      F-2
<Page>

                  c. The terms and conditions of this Purchase Agreement do not
violate any provision of its articles of organization or any other
organizational document;

                  d. The terms and conditions of this Purchase Agreement do not
violate any instrument relating to the conduct of Seller's business or any other
agreement to which Seller is a party;

                  e. In connection with all Servicing Rights sold to Cendant
pursuant to this Purchase Agreement, Seller has taken no action nor has it
failed to take any action that reasonably could be expected to cause the
Servicing Rights associated with any Mortgage Loan not to be in compliance with,
or such Mortgage Loan not to have been originated in compliance with, all
applicable federal, state and local laws and regulations and the terms of this
Purchase Agreement; and

                  f. All actions of Seller pursuant to this Purchase Agreement
will be conducted in a prudent and competent manner.

            3. REPRESENTATIONS AND WARRANTIES OF CENDANT. Cendant represents and
warrants to Seller that at the time it executes this Purchase Agreement and at
the time it purchases the Servicing Rights associated with each Mortgage Loan
from Seller in accordance with the terms of this Purchase Agreement:

                  a. It is duly organized and existing, and in good standing,
pursuant to the laws of the State of New Jersey;

                  b. It has the requisite authority to enter into this Purchase
Agreement under applicable federal, state, and local laws, and compliance with
the terms and conditions of this Purchase Agreement do not violate any provision
of its articles of incorporation or its bylaws;

                  c. The terms and conditions of this Purchase Agreement do not
violate any instrument relating to the conduct of Cendant's business or any
other agreement to which Cendant is a party; and no consent or approval of any
governmental entity or any third party is required for Cendant to execute, or to
purchase the Servicing Rights associated with the Mortgage Loans pursuant to,
this Purchase Agreement;

                  d. It has made no misstatement or omission of material fact in
any written or oral representation it has made to Seller in connection with this
Purchase Agreement; and

                  e. All actions of Cendant pursuant to this Purchase Agreement
will be conducted in a prudent and competent manner.

            4. PURCHASE OF SERVICING RIGHTS.

                  a. The Seller agrees to sell to Cendant and Cendant agrees to
purchase from Seller, the Servicing Rights associated with all Mortgage Loans
that have been sold by the Seller to BGRMT.

                                      F-3
<Page>

                  b. Cendant shall purchase, and Seller shall sell, the
Servicing Rights associated with each Mortgage Loan, by wiring the "SERVICING
RELEASE PREMIUM," as described in this SECTION 4(B), on the business day on
which Seller sold the Mortgage Loan to BGRMT, to an account designated by
Seller. The amount of the Servicing Release Premium shall be established by
Cendant, with the consent of the Seller, from time to time but no more
frequently than once per month (the "RESET PERIOD"). In the event the Parties,
acting in good faith, are unable to reach agreement as to the appropriate
amounts of the Servicing Release Premium for a particular Reset Period, the
amount then in effect shall continue to apply for that Reset Period and
thereafter until such time as such agreement is reached.

            5. ASSIGNMENT OF MORTGAGE LOAN. On the business day that Seller
sells a Mortgage Loan to BGRMT, the Seller shall execute all such documents
necessary to make Cendant the mortgagee of record and the servicer of the
Mortgage Loan on behalf of BGRMT. Any recording fees or similar expenses shall
be at Cendant's expense. Any Mortgage Loan documents in the possession or under
the control of Seller that are not delivered to BGRMT shall be delivered to
Cendant as servicer for BGRMT in accordance with the reasonable requirements of
Cendant.

            6. MORTGAGE LOAN DOCUMENTS AND ORIGINATION. In connection with the
Mortgage Loans relating to the Servicing Rights to be purchased by Cendant under
the terms of this Purchase Agreement, Seller agrees to use only Cendant approved
documents, and to abide by methods and procedures as mutually determined by
Seller and Cendant. Seller may duplicate completed documents for record keeping
purposes.

            7. TERM AND TERMINATION.

                  a. This Purchase Agreement is effective on the Effective Date.

                  b. This Purchase Agreement may be terminated by mutual
agreement of the Parties hereto, and shall be terminated upon the dissolution of
Seller or the termination of the agreement between Cendant, Seller and BGRMT in
accordance with its terms; provided that such termination shall have no effect
on Servicing Rights associated with Mortgage Loans in the process of origination
at the time of such termination, which shall be purchased hereunder when the
associated Mortgage Loans are closed in accordance with the terms of this
Purchase Agreement.

            8. INDEMNIFICATION.

                  a. Cendant shall indemnify, hold harmless and defend Seller,
its directors, officers and employees and its successors and assigns and their
directors, officers and employees, with counsel approved by Seller, from and
against any and all losses, claims, damages, costs, expenses or liabilities,
including but not limited to attorneys' fees and court costs, to which Seller or
such Parties may be subject in connection with any matter arising out of,
relating to, or in connection with any representation of Cendant that was not
true when made or any breach by Cendant of its warranties or covenants or the
terms and conditions of this Purchase Agreement. Cendant's obligation to so
indemnify, hold harmless and defend Seller and any such parties shall survive
termination of this Purchase Agreement. Seller's right to indemnification, as
provided herein, shall be in addition to, and not in lieu of, all other rights
and remedies it may have under law.

                  b. Seller shall indemnify, hold harmless and defend Cendant,
its directors, officers and employees and its successors and assigns and their
directors, officers and employees, with

                                      F-4
<Page>

counsel approved by Cendant, from and against any and all losses, claims,
damages, costs, expenses or liabilities, including but not limited to attorneys'
fees and court costs, to which Cendant or any such parties may be subject in
connection with any representation made by Seller that was not true when made or
any breach by Seller of its warranties or covenants or the terms and conditions
of this Purchase Agreement. Seller's obligation to so indemnify, hold harmless
and defend Cendant and any such parties shall survive termination of this
Purchase Agreement. Cendant's right to indemnification, as provided herein,
shall be in addition to, and not in lieu of, all other rights and remedies it
may have under law.

                  c. Before either Party is entitled to indemnification as
provided in this Section 8, the Party claiming indemnification shall give notice
to the other Party of the claimed breach, and the other Party shall have sixty
(60) business days to cure such breach, which period of time shall be allowed
before any attempt is made to enforce rights to indemnification hereunder.

            9. ASSIGNMENT. Neither Party may assign this Purchase Agreement
without the express written consent of the other Party.

            10. GOVERNING LAW. Both Cendant and Seller agree that this Purchase
Agreement shall be governed by federal law and the law of the State of New
Jersey, as applicable, without reference to the conflict of laws provisions
thereof.

            11. SEVERABILITY; RELEASE. If any provisions of this Purchase
Agreement are now, or become, in violation of any local, state, or federal law,
then said provisions shall be considered null and void with all other provisions
remaining in full force and effect. Each Party expressly releases the other from
any liability in the event either of said Parties cannot fulfill any obligation
hereunder due to any provisions of local, state, or federal laws governing same.

            12. AMENDMENT. This Purchase Agreement may be amended and any
provision hereof waived, but only in writing signed by the Party against whom
such amendment or waiver is sought to be enforced.

            13. CAPTIONS. The headings and captions in this Purchase Agreement
are for ease of reference only and shall not be relied upon in construing any
provision hereof.

            14. NOTICES. All notices and statements to be given under this
Purchase Agreement are to be in writing, delivered by hand, facsimile, telegram,
overnight express or similar service, or first class United States mail, postage
prepaid and registered or certified with return receipt requested, to the
following addresses or facsimile numbers, as applicable (which addresses and
facsimile numbers may be revised by written notice):

            SELLER:

                    ______________________
                    ______________________
                    ______________________

                    Attention: ___________
                    Facsimile: ___________

with a copy each to Cendant and to:

                                      F-5
<Page>

                    ______________________
                    ______________________
                    ______________________

                    Attention: ___________
                    Facsimile: ___________

            CENDANT:

                    Cendant Mortgage Corporation
                    3000 Leaden-Hall Road
                    Mt. Laurel, NJ 08054

                    Attention: President
                    Facsimile: 856-917-6016

All written notices and statements shall be deemed given, delivered, received
and effective upon personal delivery or receipt of facsimile or telegram, one
(1) calendar day after sending by overnight express or any similar service or
five (5) calendar days after mailing by first class United States mail in the
manner set forth above.

            15. COUNTERPARTS. This Purchase Agreement may be executed in any
number of counterparts. Each counterpart so executed shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.

            16. NO WAIVERS; REMEDIES CUMULATIVE. The waiver of any breach of
this Purchase Agreement shall not be construed to be a waiver of any other or
subsequent breach. All remedies afforded by this Purchase Agreement for a breach
hereof shall be cumulative; that is, in addition to all other remedies provided
for herein or by law or in equity.

            17. BINDING EFFECT. This Purchase Agreement shall inure to the
benefit of and be binding upon the Parties hereto and, except as otherwise
limited herein, their respective successors and assigns.

            18. BENEFIT OF PARTIES ONLY. This Purchase Agreement is made for the
sole benefit of the Parties hereto and of their respective successors and
assigns. Nothing herein shall create, or be deemed to create, a relationship
between the Parties hereto, or either of them, and any third person in the
nature of a third-party beneficiary, equitable lien or fiduciary relationship.

            19. CONSTRUCTION. This Purchase Agreement shall be construed fairly
as to both Parties and not in favor of or against either Party, regardless of
which Party prepared this Purchase Agreement.

            20. DISPUTE RESOLUTION. In the event of any disputes under this
Purchase Agreement, resolution shall occur as follows:

                                      F-6
<Page>

                  a. Upon the declaration by any party of any material legal
disagreement, dispute, controversy or claim (for purposes of this Section 20, a
"LEGAL DISPUTE") arising out of or relating to this Purchase Agreement, the
interpretation hereof, the relationship contemplated hereby, or the breach,
termination or invalidity hereof, then either party may refer the Legal Dispute
to the American Arbitration Association ("AAA") in New Jersey and shall give the
other party notice in writing of such action, all in accordance with the
provisions of the Arbitration Program appended hereto as an Exhibit and
incorporated by this reference herein.

                  b. The Legal Dispute shall be submitted to binding arbitration
in New Jersey, and judgment upon the award rendered by the arbitrators
(including but not limited to the award of Damages) may be entered in any court
having jurisdiction thereof. The General Partners agree to use their best
efforts to assure that the arbitration procedure set forth herein, once
commenced, shall be completed as expeditiously as possible.

                  c. The expenses of arbitration shall be borne by the party
against whom the decision is rendered, or apportioned in accordance with the
decision of the arbitrators in the event of a compromise decision. All notices
from one party to the other relating to any arbitration hereunder shall be in
writing and shall be effective if given in accordance with the provisions of
SECTION 14. Notwithstanding anything to the contrary herein, the arbitration
provisions set forth herein, and any arbitration conducted thereunder, shall be
governed exclusively by the Federal Arbitration Act, Title 9, United States
Code, to the exclusion of any state or municipal law of arbitration.

                  d. Nothing contained in this SECTION 20 shall be construed as
prohibiting the parties from agreeing upon an alternative procedure or forum for
the resolution of any disagreement, dispute, controversy or claim arising out of
or relating to this Purchase Agreement or the breach hereof; provided, that such
agreement shall be embodied in a written instrument executed by each of the
Parties.

                                      F-7
<Page>

            IN WITNESS WHEREOF, each of the undersigned Parties has caused this
Purchase Agreement to be duly executed and delivered by one of its duly
authorized officers, all as of the Effective Date.

      SELLER                            CENDANT MORTGAGE
                                        CORPORATION

      By:___________________________    By:_____________________________________

      Printed:______________________    Printed:________________________________

      Title:________________________    Title:__________________________________

                                      F-8
<Page>

                                                                       EXHIBIT G

                       FORM OF ADDITIONAL SELLER AGREEMENT

            Additional Seller Agreement, dated as of [ ], 2000 (as amended,
supplemented, or otherwise modified and in effect from time to time, this
"AGREEMENT"), among BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST, a Delaware
business trust, as purchaser (the "PURCHASER" or the "TRUST"), [ ], a [ ]
[corporation/limited liability company], as affiliate and additional seller (in
each capacity, the "AFFILIATE" or the "ADDITIONAL SELLER"), and CENDANT MORTGAGE
CORPORATION, a New Jersey corporation, as servicer ("SERVICER").

                             PRELIMINARY STATEMENTS

            WHEREAS, the Purchaser, Cendant Mortgage Corporation, as seller (the
"SELLER") and Servicer, and PHH Corporation, as guarantor (the "GUARANTOR"),
have entered into the Second Amended and Restated Mortgage Loan Purchase and
Servicing Agreement, dated as of [ ], 2000 (as amended, supplemented or
otherwise modified and in effect from time to time, the "MORTGAGE LOAN PURCHASE
AGREEMENT"); and

            WHEREAS, pursuant to the Mortgage Loan Purchase Agreement, the
Purchaser has agreed to purchase from an additional seller from time to time
certain mortgage loans constituting eligible loans (the "ELIGIBLE LOANS").

            NOW THEREFORE, in consideration of the mutual agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Purchaser, the Additional
Seller and the Servicer agree as follows:

                  1. DEFINITIONS. Unless otherwise defined herein, all
capitalized terms used in this Agreement, including the Preliminary Statements
hereof, shall have the meanings ascribed to such terms in the Mortgage Loan
Purchase Agreement.

                  2. AFFILIATE AS ADDITIONAL SELLER. Pursuant to the Mortgage
Loan Purchase Agreement, the Affiliate, as Additional Seller, hereby (i) agrees
to be bound by all of the applicable terms of, and fulfill all of its
obligations as an Additional Seller under, the Mortgage Loan Purchase Agreement
(including the criteria required to be an additional seller from time to time of
Eligible Loans to the Trust, in accordance with ARTICLE XVI thereunder); (ii)
makes all of the representations, warranties and covenants of an Additional
Seller contained in SECTION 3.1(b) of the Mortgage Loan Purchase Agreement and
(iii) will be entitled to all of the rights of an Additional Seller under the
Mortgage Loan Purchase Agreement.

                                      G-1
<Page>

                  3. SERVICER TO ACT ON BEHALF OF ADDITIONAL SELLER. The
Additional Seller hereby irrevocably and unconditionally appoints the Servicer
as its agent for all purposes under the Mortgage Loan Purchase Agreement insofar
as the Mortgage Loan Purchase Agreement imposes obligations on the Servicer (on
behalf of the Additional Seller), and agrees to be bound by actions taken by the
Servicer (on behalf of the Additional Seller). Pursuant to the Mortgage Loan
Purchase Agreement, the Servicer hereby (i) agrees to be bound by all of the
applicable terms of, and fulfill all of its obligations as an Additional Seller
under, the Mortgage Loan Purchase Agreement and (ii) makes all of the
representations, warranties and covenants contained in SECTIONS 3.2 and 3.5 of
the Mortgage Loan Purchase Agreement with respect to the Eligible Loans
(including the obligation to repurchase any Eligible Loan upon a breach of any
representation, warranty or covenant with respect to such Eligible Loan, in
accordance with SECTION 3.3 thereunder) on behalf of the Additional Seller. The
Servicer further agrees to (i) act as agent of the Additional Seller with
respect to the processing and transfer of the Eligible Loans to the Trust and
(ii) perform the obligations of the Servicer (on behalf of the Additional
Seller) under the Mortgage Loan Purchase Agreement, irrespective of the
Additional Seller's voluntary or involuntary bankruptcy, insolvency,
reorganization, receivership or other similar proceeding.

                  4. LIMITATION OF LIABILITY. This Agreement has been executed
on behalf of the Purchaser, a Delaware business trust by the Owner Trustee
acting on behalf of such business trust, and not in its individual capacity. In
no case shall the Owner Trustee (or any entity acting as successor or additional
owner trustee) be personally liable for or on account of any of the statements,
representations, warranties, covenants or obligations of such Owner Trustee
hereunder, any right to assert any such liabilities against the Owner Trustee
(or any entity acting as successor or additional owner trustee) being hereby
waived by the other parties hereto; PROVIDED, HOWEVER, that such waiver shall
not affect the liability of the Owner Trustee (or any entity acting as successor
or additional owner trustee) to any Person under any other agreement to which it
is a party and to the extent expressly agreed to in its individual capacity
thereunder.

                  5. TERM OF AGREEMENT. The Additional Seller's obligations and
the Servicer's obligations as agent of the Additional Seller under the Mortgage
Loan Purchase Agreement shall terminate on the date of the termination of the
Mortgage Loan Purchase Agreement, as set forth in SECTIONS 11.1 and 11.2
thereunder.

                  6. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

                  7. SEVERABILITY. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such

                                      G-2
<Page>

prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

                  8. COUNTERPARTS. This Agreement may be executed in any number
of copies, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.

                  9. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.

                  10. NOTICES. All demand, notices and communications hereunder
and under the Mortgage Loan Purchase Agreement shall be in writing and shall be
deemed to have been duly given personally at or mailed by registered mail,
postage prepaid, addressed as follows:

            (i)   if to the Additional Seller:

                  [ ]
                  c/o Cendant Mortgage Corporation
                  3000 Leaden-Hall Road
                  Mount Laurel, NJ 08054
                  Attention:
                  Telephone:

                  Facsimile:

            (ii)  if to the Purchaser:

                  Bishop's Gate Residential Mortgage Trust
                  c/o Cendant Mortgage Corporation
                  3000 Leaden-Hall Road
                  Mount Laurel, NJ 08054
                  Attention:

                  Telephone:

                  Facsimile:

            (iii) if to the Servicer:

                                      G-3
<Page>

                  Cendant Mortgage Corporation
                  3000 Leaden-Hall Road
                  Mount Laurel, NJ 08054
                  Attention:

                  Telephone:

                  Facsimile:

                  IN WITNESS WHEREOF, this Agreement has been duly executed by
the Affiliate, the Additional Seller, the Purchaser and the Servicer as of the
day and year first above written.

                                       BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST,
                                       as Purchaser

                                       By: CENDANT MORTGAGE CORPORATION,
                                       as Administrator

                                       By:______________________________________
                                       Name:
                                       Title:

                                       [ ],
                                       as Affiliate and Additional Seller

                                       By:______________________________________
                                       Name:
                                       Title:

                                       CENDANT MORTGAGE CORPORATION,
                                       as Servicer

                                       By:______________________________________
                                       Name:
                                       Title:

                                      G-4
<Page>

                                      G-5
<Page>

                                                                       EXHIBIT H

                           FORM OF INSOLVENCY OPINION

                           [            ], 2000

The Persons listed on
Schedule A attached
hereto

                  Re: [ ]

                    BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST

Ladies and Gentlemen:

                  We have acted as special counsel to [ ] (the "ADDITIONAL
SELLER"), a Delaware limited liability company, in connection with the
preparation, execution and delivery of the Second Amended and Restated Mortgage
Loan Purchase and Servicing Agreement, dated as of [ ], 2000 (as amended and
supplemented thereafter by the Additional Seller Agreement, dated as of [ ],
2000 (the "ADDITIONAL SELLER AGREEMENT"), among the Additional Seller, Bishop's
Gate Residential Mortgage Trust (the "TRUST") and Cendant Mortgage Corporation
("CENDANT"), the "MORTGAGE LOAN PURCHASE AGREEMENT"), among the Trust, Cendant,
as Seller and Servicer (in each such capacity, the "SELLER" or "SERVICER"), and
PHH Corporation ("PHH"), as performance guarantor, providing for the sale from
time to time by the Additional Seller to the Trust of Mortgage Loans.
Capitalized terms not otherwise defined herein have the meanings assigned to
such terms in the Mortgage Loan Purchase Agreement. This opinion is being
furnished to you pursuant to SECTION 16.1(vi) of the Mortgage Loan Purchase
Agreement.

                  In connection with the foregoing, we have been asked to
provide our opinion to you as to whether, in connection with any bankruptcy case
concerning the Additional Seller under Title 11 of the United States Code (the
"BANKRUPTCY CODE"), a court would have valid legal grounds to disregard the sale
by the Additional Seller to the Trust of Mortgage Loans as a "true sale" and
treat it as a loan from the Trust to the Additional Seller secured by a pledge
of the Mortgage Loans by the Additional Seller to the Trust such that the
Mortgage Loans would constitute property of the Additional Seller's estate under
Section 541 of the Bankruptcy Code, and, as a result, in such a case, the
provisions of Section 362 of the Bankruptcy Code would be applicable to the
Mortgage Loans. We also have been asked to provide our opinion to you as to
whether a party in interest, including a creditor or trustee of PHH (or PHH as
debtor in possession),

                                      H-1
<Page>

[ ], 2000
Page 2

of Cendant (or Cendant as debtor in possession) or the Additional Seller (or the
Additional Seller as debtor in possession) would have valid legal grounds to
have a court disregard the corporate form so as to cause a substantive
consolidation of the assets and liabilities of the Trust with PHH, Cendant or
the Additional Seller, as the case may be.

                  We are admitted to practice law in the State of New York and
the State of Delaware and, with your permission, we express no opinion as to the
laws of any other jurisdiction other than the federal bankruptcy laws of the
United States of America.

                  In our examination we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
statements and representations of the Initial Member, the Trust and its
officers, including the Officers' Certificates attached hereto as EXHIBITS A and
B, and other representatives and of public officials.

                  In rendering the opinions set forth herein, we have examined
and relied on original or copies of the following: (i) the certificate of trust,
dated as of November 25, 1998; (ii) the Third Amended and Restated Base Trust
Agreement, dated as of December 11, 1998 (the "BASE TRUST AGREEMENT"), by and
between First Union Trust Company, National Association, as owner trustee (the
"OWNER TRUSTEE") and Cendant, as depositor (the "DEPOSITOR"); (iii) the Series
1999-1 Trust Agreement Supplement, dated as of November 22, 1999(the "TRUST
AGREEMENT SUPPLEMENT" and, together with the Base Trust Agreement, the "TRUST
AGREEMENT"), by and between the Owner Trustee and the Depositor; (iv) the Base
Indenture, dated as of December 11, 1998 (the "BASE INDENTURE"), by and between
the Trust and The Bank of New York, as indenture trustee (the "INDENTURE
TRUSTEE"); (v) the Series 1999-2 Supplement to the Base Indenture, dated as of
November 22, 1999 (the "SERIES 1999-2 SUPPLEMENT" and, together with the Base
Indenture, the "INDENTURE"), by and between the Trust and the Indenture Trustee;
(vi) the Amended and Restated Security Agreement, dated as of December 11, 1998,
among the Trust, the Indenture Trustee, Bank One, National Association, as
collateral agent (the "COLLATERAL AGENT") and The Chase Manhattan Bank, as agent
(the "AGENT"); (vii) the Mortgage Loan Purchase Agreement; (viii) the Amended
and Restated Interest Rate Swap Agreements, dated as of December 11, 1998 (the
"INTEREST RATE SWAPS"), each by and between the Trust and Bank of America, N.A.,
The Bank of Nova Scotia and Barclays Bank PLC (each, a "SWAP COUNTERPARTY");
(ix) the Mirror Interest Rate Swap Agreements, dated as of December 11, 1998, by
and between PHH and the applicable Swap Counterparty; (x) the Amended and
Restated Custodial Agreement, dated as of December 11, 1998, among the Trust,
Cendant, the Collateral Agent and Bank One, National Association, as custodian
(the "CUSTODIAN");

                                      H-2
<Page>

[ ], 2000
Page 3

(xi) the Amended and Restated Administration Agreement, dated as of December 11,
1998, by and between the Trust and Cendant, as administrator (the
"ADMINISTRATOR"); (xii) the Amended and Restated Liquidity Agreement, dated as
of December 11, 1998, among the Trust, the Liquidity Banks named therein and the
Agent; (xiii) the Amended and Restated Depositary Agreement, dated as of
December 11, 1998, by and between the Trust and Bank One, National Association,
as depositary; (xiv) the Amended and Restated Remarketing Agreement, dated as of
December 11, 1998, by and between the Trust and Lehman Brothers Inc., as
remarketing agent; and (xv) a certificate of the Secretary of State of the State
of Delaware as to the good standing of the Trust under the laws of the State of
Delaware.

                  In addition, we have assumed, based upon the Officer's
Certificates, that the following statements are true and the following actions
have occurred on the date hereof:

                  1. The Trust is a limited purpose Delaware business trust duly
organized and validly existing under the laws of the State of Delaware. The
Trust maintains in full effect its existence, rights and franchises as a
Delaware business trust under the laws of the State of Delaware and obtains and
preserves its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect each instrument or agreement
necessary or appropriate to effect proper administration under the Mortgage Loan
Purchase Agreement or the Trust Agreement and to permit and effectuate the
transactions contemplated thereby.

                  2. The Trust was formed for the sole purpose of purchasing
Mortgage Loans from time to time from Cendant, the Additional Seller and certain
other persons who may from time to time become additional sellers (any such
person, an "OTHER ADDITIONAL SELLER"), issuing from time to time one or more
Series of Notes, issuing from time to time one or more Series of Certificates,
issuing from time to time Commercial Paper, entering into Interest Rate Swaps,
selling and securitizing the acquired Mortgage Loans to third parties and
engaging in certain related transactions.

                  3. The Trust conducts its affairs strictly in accordance with
the Trust Agreement and the laws of the State of Delaware, as well as those
restrictions required under covenants contained in the Trust Agreement, and
observes all necessary, appropriate and customary formalities, including taking
all actions appropriate under the Trust Agreement to authorize its activities.

                  4. The business and affairs of the Trust are managed by or
under the direction of the Owner Trustee.

                                      H-3
<Page>

[ ], 2000
Page 4

                  5. All of the equity of the Trust is owned by investors
unaffiliated with the Additional Seller, Cendant and PHH.

                  6. The Additional Seller is a limited liability company, duly
formed and validly existing under the laws of the State of Delaware and the
Additional Seller will use its best efforts to maintain its existence as a
limited liability company and its good standing under the laws of the State of
Delaware. Cendant is a corporation duly incorporated and validly existing under
the laws of the State of New Jersey and Cendant will use its best efforts to
maintain its existence as a corporation and its good standing under the laws of
the State of New Jersey. PHH is a corporation duly incorporated and validly
existing under the laws of Maryland and PHH will use its best efforts to
maintain its existence as a corporation and its good standing under the laws of
the State of Maryland.

                  7. Covenants of the Trust contained in the Mortgage Loan
Purchase Agreement and the Trust Agreement provide that the Trust shall maintain
accurate and separate books, records and accounts. The Trust, the Additional
Seller, Cendant and PHH each keeps or causes to be kept full and accurate
accounts of its transactions in proper books of account maintained separately
from those of any other person. The agreements and other instruments underlying
the transactions contemplated by this opinion will be continuously maintained as
official records of the Trust, the Additional Seller, Cendant and PHH.

                  8. The Trust's assets are not commingled with those of PHH,
the Additional Seller or Cendant or any affiliate of PHH, the Additional Seller,
Cendant or any other entity. Except for certain collections of Mortgage Loans by
the Servicer on behalf of the Trust, the Trust's funds will be identifiable and
will not be commingled with those of PHH, the Additional Seller or Cendant. The
Trust maintains its own bank account or accounts, separate from those of PHH,
the Additional Seller or Cendant.

                  9. The Trust currently is capitalized with $[ ] aggregate
amount of Variable Rate Extendible Certificates, $[ ] aggregate principal amount
of Variable Rate Term Notes and up to $[ ] of Commercial Paper. From time to
time, the Trust may issue additional series of Certificates, Notes and
Commercial Paper, provided that it complies with certain conditions to issuance.

                  10. On the date hereof, each of PHH, the Additional Seller,
Cendant and the Trust is solvent, has adequate capital to carry on its business,
and intends to and believes that it will be able to pay its debts as they
mature. None of PHH,

                                      H-4
<Page>

[ ], 2000
Page 5

the Additional Seller, Cendant or the Trust intends to, or believes that it
will, engage in any business for which its respective capitalization would not
be adequate. On the date hereof, none of the transactions is being entered into
with the intent to hinder, defraud or delay any of the creditors of PHH, the
Additional Seller, Cendant or the Trust.

                  11. The Additional Seller shall not advance funds to the Trust
and the Additional Seller will not otherwise supply funds to, or guaranty debts
of, the Trust.

                  12. The Trust is required to pay from its own separate assets
all material liabilities incurred by it, including material administrative
expenses, provided that expenses relating to the preparation, negotiation,
execution and delivery of the documentation with respect to the issuance of any
Series of Notes, Series of Certificates or Commercial Paper may be paid by the
Additional Seller. Except as provided in the foregoing sentence, the Trust will
continue to provide for its own material operating expenses and liabilities from
its own funds, and none of PHH, the Additional Seller or Cendant will provide
for its own operating expenses or liabilities from the funds of the Trust.

                  13. The Trust conducts and will continue to conduct its
business solely in its own name and none of PHH, the Additional Seller or
Cendant will conduct its respective businesses in the name of the Trust. Without
limiting the generality of the foregoing, (i) all Persons who purchase Mortgage
Loans from the Trust will be required to remit the purchase price for such
Mortgage Loans to the Collateral Account and to issue a confirmation of such
purchase to the Trust and (ii) all oral and written communications, including
without limitation letters, invoices, purchase orders, contracts, statements,
and applications are made and will continue to be made solely in the name of the
Trust if related to the Trust, and not in the name of the Trust if related to
PHH, the Additional Seller or Cendant.

                  14. There will be no guarantees made by PHH, the Additional
Seller or Cendant with respect to obligations of the Trust and there will be no
guarantees made by the Trust with respect to obligations of PHH, the Additional
Seller or Cendant. There will be no debt between PHH, the Additional Seller and
Cendant, on the one hand, and the Trust, on the other.

                  15. The Trust acts solely in its own name and through its own
authorized agents, including the Servicer in accordance with the provisions of
the

                                      H-5
<Page>

[ ], 2000
Page 6

Mortgage Loan Purchase Agreement. Each of PHH, the Additional Seller, Cendant
and the Trust does not and will not (i) hold itself out as having agreed to pay
or become liable for the debts of the Trust, in the case of PHH, the Additional
Seller and Cendant, or PHH, the Additional Seller or Cendant, in the case of the
Trust, (ii) fail to correct any known misrepresentation with respect to the
foregoing, (iii) seek or obtain credit or incur any obligation to any third
party based upon the assets of the Trust, in the case of PHH, the Additional
Seller and Cendant, or PHH, the Additional Seller or Cendant, in the case of the
Trust, or (iv) induce any such third party to reasonably rely on the
creditworthiness of the Trust, in the case of PHH, the Additional Seller and
Cendant, or PHH, the Additional Seller and Cendant, in the case of the Trust.

                  16. PHH, the Additional Seller and Cendant, on the one hand,
and the Trust, on the other, maintain and will continue to maintain an arm's
length relationship among themselves. The Initial Purchase Price payable by the
Trust to the Additional Seller under the Mortgage Loan Purchase Agreement in
respect of Mortgage Loans acquired by the Trust from the Additional Seller is
intended to be consistent with the terms that would be obtained in an arm's
length sale.

                  17. The financial statements of PHH, the Additional Seller and
Cendant, on the one hand, and the Trust, on the other, will clearly indicate
their separate existence and will reflect each of their respective separate
assets and liabilities, provided that the consolidated financial statements of
PHH may consolidate the Additional Seller in accordance with generally accepted
accounting principles. None of such financial statements will suggest in any way
that the assets of the Trust are available to pay the claims of creditors of
PHH, the Additional Seller or Cendant or any other entity.

                  18. The Additional Seller intends the sale of the Mortgage
Loans to constitute a true sale to the Trust of all of the Additional Seller's
right, title and interest to and in the Mortgage Loans. The Mortgage Loan
Purchase Agreement utilizes language which is consistent with an intent of the
Additional Seller and the Trust that the Mortgage Loans are intended to be sold
by the Additional Seller to the Trust for consideration. Such language reflects
the intention of the respective parties that the transfers of such Mortgage
Loans by the Additional Seller to the Trust be sales.

                  19. Immediately prior to the sale of the Mortgage Loans, the
Additional Seller owned the Mortgage Loans free and clear of any adverse claims
or liens.

                                      H-6
<Page>

[ ], 2000
Page 7

                  20. Subsequent to the sale of the Mortgage Loans, the
Additional Seller will not take any action or assert any position inconsistent
with the Trust's ownership of the Mortgage Loans.

                  21. The Additional Seller has taken all actions required under
applicable law to sell to the Trust at closing all of its right, title, and
interest to and in the Mortgage Loans.

                  22. As of the date hereof, the Additional Seller reported on
its financial records the transfer of the Mortgage Loans made by it to the Trust
as a sale under generally accepted accounting principles ("GAAP") and will
continue to do so in the future. Such GAAP financial statements, will either be
appropriately footnoted or otherwise disclose that the Mortgage Loans have been
sold to the Trust. The financial records of the Trust will report the
transactions as the purchase of all Mortgage Loans from the Additional Seller
and will continue to do so in the future.

                  23. The transfer of Mortgage Loans from the Additional Seller
to the Trust will be treated by the Additional Seller and the Trust as an
absolute transfer in exchange for cash for tax purposes.

                  24. The mortgage notes evidencing the Mortgage Loans will be
required to be delivered to the Custodian, a party not affiliated with the
Additional Seller or the Trust.

                  25. Except for the Servicer's (on behalf of the Additional
Seller) obligation in certain circumstances and upon breaches of certain
representations or warranties of the Additional Seller under the Mortgage Loan
Purchase Agreement to repurchase the subject Mortgage Loans, the sale of each
Mortgage Loan by the Additional Seller is irrevocable.

                  26. The Additional Seller is not indebted to the Trust at the
time of, or as a result of, the transactions and the Additional Seller does not
have an obligation to pay any amount to the Trust or in respect of any
indebtedness of the Trust.

                  27. No provision exists in the Mortgage Loan Purchase
Agreement (except regarding the Mortgage Loans, with respect to which the
eligibility

                                      H-7
<Page>

[ ], 2000
Page 8

criteria are not met or a representation or warranty made by the Servicer (on
behalf of the Additional Seller) has been violated) for any modification after
the date on which a given Mortgage Loan is transferred of the amount of the
consideration delivered to the Additional Seller by the Trust in exchange for
such Mortgage Loan, and we assume that no such modifications will be made.

                  28. The amount and timing of payments made to the Trust (or to
the Servicer on behalf of the Trust) from the obligors on the Mortgage Loans
cannot be directly controlled by the Additional Seller. The Trust, and not the
Additional Seller, will bear the risk of the ability to sell or securitize the
Mortgage Loans and will bear the risk of a slower or faster rate of payment on
the Mortgage Loans than anticipated at the time of the transfer of the Mortgage
Loans.

                  29. Except in limited circumstances of repurchase in
connection with the failure to meet specified eligibility criteria or the breach
by the Servicer (on behalf of the Additional Seller) of representations and
warranties, neither the Additional Seller nor any person on its behalf has any
right or obligation to repurchase or accept reassignment of the Mortgage Loans
transferred by the Additional Seller. Similarly, because the Trust cannot
require the Additional Seller or any other person to repurchase Mortgage Loans
transferred by the Additional Seller, other than in connection with the failure
to meet specified eligibility criteria or the breach by the Servicer (on behalf
of the Additional Seller) of representations and warranties, the Trust cannot
cause an early realization on or payment of the Mortgage Loans.

                  30. We understand that the Additional Seller has a valid
business reason for the sale of the Mortgage Loans. We have no reason to believe
that such sale is made with any intent to hinder, delay or defraud any entity to
which the Additional Seller is or will become indebted on or after the date of
transfer. We have no reason to believe that the Additional Seller is insolvent
or that the sale of the Mortgage Loans will render the Additional Seller
insolvent on the date of the transfer or as a result of the transfer; we have
been informed that, on the date of the transfer, the Additional Seller is not
engaged in business or about to engage in business for which the assets
remaining with it after the sale of the Mortgage Loans will be an unreasonably
small amount of capital; and we understand that, on the date of the transfer,
the Additional Seller does not intend to incur or believe that it will incur
debts beyond its ability to pay as such debts mature. We have no reason to
believe that the consideration received by the Additional Seller upon the sale
of the Mortgage Loans to the Trust will not constitute, in each case, reasonably
equivalent value and fair consideration for the

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property sold, consistent with terms that would be arrived at on an arm's-length
basis. We have no reason to believe that the sale of the Mortgage Loans by the
Additional Seller is done with any intent to evade any applicable laws or public
policy.

                  31. The Additional Seller does not guarantee or otherwise pay
to the Trust (or any assignee) a specified yield, including without limitation
if the sale or securitization of a Mortgage Loan or the collection time differs
from that anticipated at the time a particular Mortgage Loan is transferred.

                  32. To the extent that the terms of the documentation take
into consideration the credit of the Additional Seller, it is the intent of the
parties that, because the transactions are intended to be a sale of the Mortgage
Loans and not a loan by the Trust to the Additional Seller secured by Mortgage
Loans, the credit of the Additional Seller is only relevant to the extent of its
obligations with respect to Mortgage Loans for which there has been a breach of
a representation or warranty.

                  33. There is not and will not be any other agreement between
the Additional Seller and the Trust that supplements or otherwise modifies the
agreements of the Additional Seller and the Trust as expressed in the Mortgage
Loan Purchase Agreement and the other agreements delivered on or prior to the
date hereof pursuant thereto and specifically referred to therein.

                  34. The Mortgage Loan Purchase Agreement provides that it is
to be construed in accordance with the laws of the State of New York and that
the obligations, rights and remedies of the parties thereto shall be determined
in accordance with such laws.

                                   "TRUE SALE"

                  There is limited judicial authority relating to the issue of
when a transaction styled as an absolute transfer constitutes an absolute
transfer as opposed to a secured loan, and we have not located any controlling
precedent for the transactions described herein. However, the existing case law
indicates that the analysis should examine the intent of the parties as well as
the economic consequences of the transaction to determine whether they are
consistent with true sale characterization. Some of the most important factors
relevant to this economic analysis include whether the transferee has assumed
the risks inherent in the ownership of the assets purportedly transferred (that
is, whether the risk of loss has been borne by the transferee), the

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presence of fixed consideration that is not subject to further adjustment, the
level of recourse that the transferee has against the transferor, whether the
transferee's rights in the assets transferred could be extinguished by repayment
of a debt owed by the transferor or by the recovery of the consideration and
whether the transferor has the right or the obligation to repurchase or
otherwise reacquire the assets in any circumstances.

                  First, the intent of the parties is to treat the transaction
as a sale of the Mortgage Loans from the Additional Seller to the Trust and not
as a secured loan. This intent is evidenced by (i) the nomenclature used in the
Mortgage Loan Purchase Agreement, (ii) the accounting and tax treatment afforded
the transaction by both the Additional Seller and the Trust, (iii) the steps
taken by the Additional Seller to ensure the transfer of its right, title and
interest in and to the Mortgage Loans to the Trust, (iv) the computer records
storing essential information on the Mortgage Loans and similar assets of the
Additional Seller will be appropriately coded to reflect the sale of the
Mortgage Loans to the Trust, and (v) the Additional Seller has indicated that
upon inquiry regarding the Mortgage Loans, it will promptly indicate that the
Mortgage Loans have been sold to the Trust and it will not claim any ownership
interest in the Mortgage Loans.

                  Second, the economics of the transfer indicate that such
transfer is a true sale of the Mortgage Loans and not a secured Loan. The
economics of a true sale is evidenced by (i) the Trust assuming all risk of loss
inherent in the Mortgage Loans in that (a) the Additional Seller has not
guaranteed to the Trust (or to any assignee) the payment of any Mortgage Loan,
(b) the Additional Seller is not obligated to repurchase from the Trust any
Mortgage Loan which the Trust is not able to sell or securitize, (c) if losses
occur upon the sale or securitization of a Mortgage Loan or upon collection of
payments on a Mortgage Loan, such losses will be absorbed by the Trust except
for non-credit related losses upon sale or securitization of a Mortgage Loan
which are absorbed by the Interest Rate Swaps, and (d) the Trust will bear the
risk of the ability to sell or securitize the Mortgage Loans and will bear the
risk of a slower or faster rate of payment on the Mortgage Loans than
anticipated at the time of the transfer of the Mortgage Loans, (ii) the
Additional Seller relinquishing all control over the Mortgage Loans and the
Additional Seller does not have the right to receive any proceeds allocable to
any Mortgage Loan, and (iii) with the exception of the Servicer's (on behalf of
the Additional Seller) duty to repurchase Mortgage Loans in the event that the
eligibility criteria or certain representations and warranties are breached, the
consideration paid by the Trust to the Additional Seller is not subject to
modification and the sale of each Mortgage Loan by the Additional Seller is
irrevocable.

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                  With respect to (ii) above, the Additional Seller relinquishes
all control and title over the Mortgage Loans upon the transfer of each Mortgage
Loan under the Mortgage Loan Purchase Agreement. It should be noted that the
Servicer is granted such rights with respect to the Mortgage Loans as are
necessary to allow it to fulfill its obligation to the Trust to collect the
payments on the Mortgage Loans and to otherwise fulfill its obligations as
Servicer. It is our understanding that the duties delegated by the Trust to the
Servicer are consistent with the delegation to a third party for consideration
of the day-to-day administration of assets that are not owned by such third
party. The Servicer will be compensated for these servicing activities by
payment of the Servicing Fee which we understand represents a fair market value
servicing fee for the activities undertaken by the Servicer under the Mortgage
Loan Purchase Agreement.

                  With respect to (iii) above, if the eligibility criteria with
respect to a Mortgage Loan have not been met or there is a breach of certain
representations and warranties, the Servicer is required to pay a certain amount
to the Trust. The obligation to make payments with respect to noncompliance with
the such criteria or representations and warranties arises only if any such
eligibility criteria or representation was untrue at the time of transfer of the
applicable Mortgage Loan or if based upon certain action or inaction by the
Servicer, and not as a result of any subsequent decline in value of such
Mortgage Loan. Moreover, the eligibility criteria or representations and
warranties contained in the Mortgage Loan Purchase Agreement reflect practical
limitations on the ability of any prospective purchaser of the Mortgage Loans to
review fully every Mortgage Loan prior to purchase of the Mortgage Loans, and
the Servicer's (on behalf of the Additional Seller) superior knowledge of, and
access to, facts concerning such Mortgage Loans. These eligibility criteria or
representations and warranties do not confer any additional rights on a
purchaser or impose any added burden on a seller beyond those applicable under
general contract law, as well as by analogy under Section 2-608 of the Uniform
Commercial Code. Furthermore, the Servicer (on behalf of the Additional Seller)
is not obligated to repurchase from the Trust any Mortgage Loan in default,
unless any such default is attributable to a breach of its representations and
warranties with respect to such Mortgage Loan under the Mortgage Loan Purchase
Agreement.

                  Based on the foregoing, and subject to the reasoned analysis
of analogous case law (although there is no precedent directly on point), it is
our opinion that a court, in connection with a bankruptcy case concerning the
Additional Seller under Title 11 of the Bankruptcy Code, would have no valid
legal grounds to disregard

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the sale by the Additional Seller to the Trust of Mortgage Loans as a "true
sale" of the Mortgage Loans by the Additional Seller to the Trust and treat it
as a loan from the Trust to the Additional Seller secured by a pledge of the
Mortgage Loans by the Additional Seller to the Trust such that the Mortgage
Loans would constitute property of the Additional Seller 's estate under Section
541 of the Bankruptcy Code, and, as a result, in such a case, the Mortgage Loans
would not constitute property of the Additional Seller's estate under Section
541 of the Bankruptcy Code and the provisions of Section 362 of the Bankruptcy
Code would not be applicable to the Mortgage Loans. This conclusion is based on
the understanding that the opinion expressed herein is not a prediction as to
what a particular court would actually hold, but an opinion as to the decision a
court would reach if the issue were properly presented to it and the court
following existing legal precedents applicable to the subject matter or this
opinion.

                         "SUBSTANTIVE NON-CONSOLIDATION"

                  The nature and effect of the substantive consolidation of
affiliated corporations closely resembles a merger of the affected entities in
which the rights of entities' creditors and equity holders are affected:

                  Substantive consolidation usually results in, INTER ALIA,
                  pooling the assets of, and claims against, the two entities;
                  satisfying liabilities from the resulting common fund;
                  eliminating inter-company claims; and combining the creditors
                  of the two companies....

IN RE AUGIE/RESTIVO BAKING CO., 860 F.2d 515, 518 (2d Cir. 1988).

                  Because our opinion has been requested as to whether a court
might substantively consolidate the assets of the Trust with or into the estate
of Cendant, PHH or the Additional Seller in a case under Bankruptcy Code in
which Cendant, PHH or the Additional Seller is the debtor, we will focus our
analysis primarily on the circumstances in which courts HAVE ordered substantive
consolidation. There are, however, four general qualifications that limit the
ability to predict whether, on a given set of facts at some time in the future,
a court will order substantive consolidation and that therefore limit the force
of our opinion.

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                  First, there is no statutory authority specifically
authorizing substantive consolidation. The authority of a bankruptcy court to
order substantive consolidation derives from its general discretionary equitable
powers under section 105(a) of the Bankruptcy Code, which provides that the
court may issue orders necessary to carry out the provisions of the Bankruptcy
Code. IN RE DRW PROPERTY CO. 82, 54 B.R. 489, 494 (Bankr. N.D. Tex. 1985). As in
any matter that is based on the exercise of a court's discretionary equitable
authority, there may be unique factors in a particular case that a court will
consider and rely upon that differ from prior precedents and that cannot be
determined in advance.

                  Second, there are no statutorily prescribed standards for
substantive consolidation. Instead, judicially developed standards control
whether substantive consolidation should be granted in any given case, but the
courts have not developed a clear legal standard governing when the doctrine is
to be applied. Rather, the analysis is highly fact-specific. "[A]s to
substantive consolidation, precedents are of little value, thereby making each
analysis on a case by case basis." IN RE CROWN MACH. & WELDING, INC., 100 B.R.
25, 27-28 (Bankr. D. Mont. 1989); SEE FDIC V. COLONIAL REALTY CO., 966 F.2d 57
(2d Cir. 1992) (substantive consolidation analysis requires "a searching review
of the record, on a case-by-case basis"); CENTRAL CLAIMS SERVS., INC. V.
EAGLE-PICHER IND., INC. (IN RE EAGLE-PICHER IND., INC.), 192 B.R. 903, 905
(Bankr. S.D. Ohio 1996) ("[b]ecause the cases so much turn on their individual
facts, we find that the lists presented by the several courts in their
decisions, of factors which must be present in order to determine the issue of
substantive consolidation, are of limited use"). As a result the nature of the
appropriate standards to be applied, the relevant factors to be considered, the
weight to be attached to such factors, and the significance of competing
considerations offered by those opposing substantive consolidation are to some
degree unsettled.

                  Third, some courts have adopted the view that "[t]he power to
consolidate should be used sparingly" because of the potential harm to creditors
of substantive consolidation. CHEMICAL BANK NEW YORK TRUST CO. V. KHEEL, 369
F.2d 845, 847 (2d Cir. 1966). Notwithstanding the KHEEL court's admonition to
use the power to consolidate sparingly, other courts have expressed a greater
willingness to consider the appropriateness of substantive consolidation.

                  There is, however, a 'modern' or 'liberal' trend toward
                  allowing substantive consolidation, which has its genesis in
                  the increased judicial recogni-

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                  tion of the widespread use of interrelated corporate
                  structures by subsidiary corporations operating under a parent
                  entity's corporate umbrella for tax and business purposes.

EASTGROUP PROPERTIES V. SOUTHERN MOTEL ASSOC., LTD., 935 F.2d 245, 248-49 (11th
Cir. 1991) (citations omitted).

                  Finally, as the court in EASTGROUP PROPERTIES noted, the law
of substantive consolidation is continuing to evolve. Further evolution in the
doctrine may lead to a result as to this Transaction that differs from the
analysis set forth in this opinion.

ALTERNATIVE TESTS FOR SUBSTANTIVE CONSOLIDATION

                  Courts have developed two principal tests for determining
whether the estates of two or more related debtors should be substantively
consolidated. The more traditional test examines the extent to which certain
elements that support substantive consolidation are present. More recently,
courts have moved away from a review only of the extent to which the traditional
elements are present. They have instead adopted a balancing test in which they
have attempted to synthesize the results of the traditional elements analysis
into general principles. No reported case since 1989 has relied solely on the
traditional elements test. ELEMENTS TESTELEMENTS TEST

                  Two sets of substantive consolidation elements are often
cited. One set of elements is similar to those that are relevant to a decision
on whether to "pierce the corporate veil" and hold a shareholder liable for the
debts of a corporation. In the cases that depend primarily on this analogy, the
following factors are cited as relevant to the issue of whether substantive
consolidation should be ordered:

                  oParent corporation owns all or a majority of the capital
stock of the subsidiary;

                  oParent and subsidiary have common officers and directors;

                  oParent finances subsidiary;

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                  oParent is responsible for incorporation of subsidiary;

                  oSubsidiary has grossly inadequate capital;

                  oParent pays salaries, expenses or losses of subsidiary;

                  oSubsidiary has substantially no business except with parent;

                  oSubsidiary has essentially no assets except for those
conveyed by parent;

                  oParent refers to subsidiary as department or division of
parent;

                  oDirectors or officers of subsidiary do not act in interests
of subsidiary, but take directions from parent; and

                  oFormal legal requirements of the subsidiary as a separate and
independent corporation are not observed.

IN RE TUREAUD, 45 B.R. 658, 662 (Bankr. N.D. Okla. 1985), AFF'D, 59 B.R. 973
(N.D. Okla. 1986) (citing FISH V. EAST, 114 F.2d 177 (10th Cir. 1940) and IN RE
GULFCO INV. CORP., 593 F.2d 921 (10th Cir. 1979)).

                  A second group of substantive consolidation elements, which
are cited in some of the more recent cases, appears in IN RE VECCO CONSTR.
INDUSTRIES:

                  oThe degree of difficulty in segregating and ascertaining
individual assets and liabilities;

                  oThe presence or absence of consolidated financial statements;

                  oThe profitability of consolidation at a single physical
location;

                  oThe commingling of assets and business functions;

                  oThe unity of interests and ownership between the various
corporate entities;

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                  oThe existence of parent and inter-corporate guarantees on
loans; and

                  oThe transfer of assets without formal observance of corporate
formalities.

IN RE VECCO CONSTR. INDUS., 4 B.R. 407, 410 (Bankr. E.D. Va. 1980).

                  No single element or group of elements is determinative in the
court's inquiry, and no conclusion about whether a court will order substantive
consolidation can be reached based solely on the presence or absence of some or
all of the elements. It is not, therefore, a foregone conclusion that a party
objecting to substantive consolidation can defeat it simply by showing the
absence of most (or a particular group) of the elements.

                  A combination of elements showing a substantial relationship
among the entities is a predicate to substantive consolidation, but the
existence of such a relationship alone will not support substantive
consolidation. For example, many of the elements are present among affiliated
companies. Common ownership or a parent/subsidiary relationship, common
directors and officers, inter-affiliate transfers, incorporation caused by
parent, the existence of inter-corporate claims, and consolidated financial
statements or tax returns are all typical of most affiliated corporations, yet
substantive consolidation is not typically ordered on the presence of the close
corporate relationship represented by these elements. Additional elements are
required.

                  Perhaps the most common group of additional elements whose
presence will result in an order for substantive consolidation are poor or
nonexistent record keeping of, or commingling of, separate assets (particularly
cash and other liquid assets) and liabilities and inter-affiliate transactions,
whether by design or otherwise, that makes it prohibitively expensive or
impossible to sort out the proper allocation of assets and liabilities. For
example, in CHEMICAL BANK NEW YORK TRUST CO. V. KHEEL, 369 F.2d 845 (2d Cir.
1966), the Second Circuit approved substantive consolidation based on the
benefits that would be realized by ALL creditors upon substantive consolidation
of estates whose financial affairs had not been segregated:

                  [I]N THE RARE CASE such as this, where the interrelationships
                  of the group are hopelessly obscured and the time and expense
                  necessary even to

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                  attempt to unscramble them so substantial as to threaten the
                  realization of any net assets for ALL the creditors, equity is
                  not helpless to reach a rough approximation of justice to some
                  rather than deny any to all.

369 F.2d at 847 (emphasis added).

                  However, the potentially prejudicial effect of substantive
consolidation cannot be justified based on a mere contention of administrative
convenience. "The sole purpose of substantive consolidation is to ensure the
equitable treatment of all creditors," IN RE AUGIE/RESTIVO BAKING CO., LTD., 860
F.2d 515, 518 (2d Cir. 1988), so "[r]esort to consolidation . . . should be used
only after it has been determined that all creditors will benefit because
untangling is either impossible or so costly as to consume the assets." ID. at
519. Thus, creditors whose interests would be adversely and unfairly affected by
consolidation must be protected, as long as separate accounting can be
accomplished. IN RE FLORA MIR CANDY CORP., 432 F.2d 1060, 1063 (2d Cir. 1970)
(financial statements for each debtor had been prepared by accountants).

                  Although the Second Circuit thus appears to have established a
stringent standard for the degree to which the debtors' affairs must be
entangled before consolidation is appropriate, other courts have not always been
so strict. The court in IN RE VECCO CONSTR. INDUS., 4 B.R. 407, 408-09 (Bankr.
E.D. Va. 1980), ordered substantive consolidation without a showing of inability
to sort out assets and liabilities where the debtors had a single operating
account and consolidated financial statements, had made no attempt to segregate
receivables, disbursements or income, had inaccurately allocated affiliate
expenses through inter-company accounts, and had filed bankruptcy schedules on a
consolidated basis. The court ordered consolidation in part because of the
absence of opposition to consolidation and because consolidation would promote
reorganization rather than liquidation. Similarly, the court in IN RE I.R.C.C.,
INC., 105 B.R. 237 (Bankr. S.D.N.Y. 1989), ordered substantive consolidation
where the evidence of financial entanglement consisted primarily of
representations by debtor's counsel and the chapter 7 trustee of inadequate
accounting practices, undocumented inter-affiliate loans, commingled bank
accounts, common use of assets, cross-funding of expenses, and consolidated tax
returns, without any showing of an inability to sort out assets and liabilities.
Thus, even though commingling of assets and liabilities and interchangeable use
of assets WITHOUT a showing of an inability to sort out separate assets and
liabilities is generally not enough to warrant substantive consolidation under
the

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"elements" standard, there remains some risk that other factors will motivate a
court to order consolidation without the showing of inability to separate assets
and liabilities.

                  Also cited as one group of elements that may result in
substantive consolidation among affiliated companies is their failure to comply
with corporate formalities in connection with interaffiliate transfers,
third-party transactions, or conduct of directors and shareholders meetings,
inadequate differentiation among affiliated entities in dealings with and
representations made to third parties, or noncompliance with any other formal
conduct required by corporate law. An examination of the cases shows, however,
that the presence of this group of elements results in substantive consolidation
only where other evidence shows that the entities were not functionally
distinct. Most typically, these are cases in which the court determines that a
corporation is merely the alter ego of its shareholder, that corporate and
shareholder accounts were used interchangeably, and that the entire corporate
form was disregarded. SOVIERO V. FRANKLIN NATL. BANK, 328 F.2d 446 (2d Cir.
1964); IN RE TUREAUD, 45 B.R. 658, 661 (Bankr. N.D. Okla. 1985), AFF'D, 59 B.R.
973 (N.D. Okla. 1986); IN RE 1438 MERIDIAN PLACE, N.W., INC., 15 B.R. 89 (Bankr.
D.D.C. 1981). ACCORD IN RE BAKER & GETTY FIN. SERV., 78 B.R. 139, 142 (Bankr.
N.D. Ohio 1987) (same, but balancing test used). Extensive commingling and an
inability to sort out the separate assets and liabilities were also present in
all of these cases. By contrast, failure to observe corporate formalities alone
does not generally support substantive consolidation. E.G., IN RE DONUT QUEEN,
LTD., 41 B.R. 706, 710 (Bankr. E.D.N.Y. 1984) ("[T]he absence of the corporate
resolutions might be indicative of both the corporate informality inherent in
the operating of a small corporation and the unity of ownership that exists
between the debtors. Without further evidence, . . . failure by these debtors to
observe corporate formalities would [not] warrant consolidation.").

                  Virtually every substantive consolidation involves prejudice
to at least some creditors of at least one of the entities:

                  This is so because separate debtors will almost always have
                  different ratios of assets to liabilities. Thus, creditors of
                  a debtor whose asset-to-liability ratio is higher than that of
                  its affiliated debtor must lose to the extent that the
                  asset-to-liability ratio of the merged estates will be lower.

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IN RE SNIDER BROS., 18 B.R. 230, 234 (Bankr. D. Mass. 1982) (citation omitted).
Thus, even when some of the more significant elements of substantive
consolidation are present, protection of the legitimate interests of creditors
potentially affected by substantive consolidation remains important. FLORA MIR
CANDY CORP., 432 F.2d 1060, 1063 (2d Cir. 1970) (consolidation denied due to
resulting unfair treatment of certain creditors); IN RE RICHTON INT'L CORP., 12
B.R. 555, 558 (Bankr. S.D.N.Y. 1981) (after analyzing the VECCO CONSTR.
"elements," court considered additional element: "substantive consolidation . .
.. will yield an equitable treatment of creditors without any undue prejudice to
any particular group"); IN RE FOOD FAIR, INC., 10 B.R. 123, 127 (Bankr. S.D.N.Y.
1981) (equitable treatment without undue prejudice is key factor).

                  Thus, under the traditional elements test, strict adherence to
maintaining separate books and records, to clear differentiation among
affiliated entities in dealings with third parties, to proper segregation of
assets, and to corporate policies designed to preserve the separateness of
corporate assets and liabilities as well as the ability to determine the
separate assets and liabilities, should make it substantially less likely that
the court would find grounds to order substantive consolidation of affiliated
companies.

BALANCING TEST

                  More recent cases have synthesized the elements of substantive
consolidation into an analysis in which, to a certain extent, the impact on
creditors of consolidation appears to have been given a greater degree of
significance. SEE, E.G., REIDER V. FDIC (IN RE REIDER), 31 F.3d 1102 (11th Cir.
1994); EASTGROUP PROPERTIES V. SOUTHERN MOTEL ASSOC., LTD., 935 F.2d 245, 249
(11th Cir. 1991); IN RE SNIDER BROS., 18 B.R. 230 (Bankr. D. Mass. 1982); IN RE
DRW PROPERTY CO. 82, 54 B.R. 489 (Bankr. N.D. Tex. 1985) (partnership
consolidation case); IN RE STEURY, 94 B.R. 553 (Bankr. N.D. Ind. 1988); IN RE
CROWN MACH. & WELDING, INC., 100 B.R. 25 (Bankr. D. Mont. 1989). Three principal
cases have led the synthesis, SNIDER BROS., EASTGROUP Properties, and
AUGIE/RESTIVO BAKING CO.

                  In the earliest of these cases, SNIDER BROS., the court
reviewed grounds for substantive consolidation, including the various
formulations of the "elements of consolidation" that are largely attributable to
the debtors' pre-petition conduct. From its review, the court concluded that:

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            equity has provided the remedy of consolidation in those instances
            where it has been shown that the possibility of economic prejudice
            which would result from continued separateness outweighed the
            minimal prejudice that consolidation would cause. While several
            courts have recently attempted to delineate what might be called
            "the elements of consolidation", [citing VECCO CONSTRUCTION and FOOD
            FAIR], I find that the only real criterion is that which I have
            referred to, namely the economic prejudice of continued debtor
            separateness versus the economic prejudice of consolidation.

IN RE SNIDER BROS., 18 B.R. 230, 234 (Bankr. D. Mass. 1982). Similarly focusing
on issues of prejudice, the Eleventh Circuit viewed the frequently cited list of
elements "as examples of information that may be useful to courts charged with
deciding whether there is substantial identity between the entities to be
consolidated and whether consolidation is necessary to avoid some harm or to
realize some benefit." EASTGROUP PROPERTIES V. SOUTHERN MOTEL ASSOC., LTD., 935
F.2d 245, 250 (11th Cir. 1991).

                  Using this standard, EASTGROUP and SNIDER permit consolidation
only if:

                  (1) there is a substantial identity of the entities to be
                  consolidated;

                  (2) there is either a necessity for consolidation or a harm to
                  be prevented or a benefit to be gained by consolidation;

                  (3) the objecting creditor did not rely on the separate credit
                  of one or more of the entities and would thereby not be
                  prejudiced by consolidation; and

                  (4) the demonstrated benefits of consolidation counterbalance
                  or heavily outweigh the harm to the objector.

The "elements" are only one factor in this showing, and the evidence must go
beyond a mere showing of commingling or unity of interest. IN RE SNIDER BROS.,
18 B.R. 230,

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238 (Bankr. D. Mass. 1982); EASTGROUP PROPERTIES V. SOUTHERN MOTEL ASSOC., LTD.,
935 F.2d 245, 249 (11th Cir. 1991) (citations omitted); ACCORD IN RE REIDER, 31
F.3d 1102, 1108 (11th Cir. 1994); IN RE EAGLE-PICHER INDUSTRIES, INC., 192 B.R.
903 (Bankr. S.D. Ohio 1996) (adopting REIDER).

                  The balancing test formulated in SNIDER BROS. has been adopted
by numerous courts, either explicitly, IN RE AUTO-TRAIN CORP., 810 F.2d 270, 276
(D.C. Cir. 1987); IN RE F.A. POTTS & CO., 23 B.R. 569, 572 (Bankr. E.D. Pa.
1982); IN RE LEWELLYN, 26 B.R. 246, 251 (Bankr. S.D. Iowa 1982); IN RE DONUT
QUEEN, Ltd., 41 B.R. 706, 709 (Bankr. E.D.N.Y. 1984); IN RE DRW PROPERTY CO. 82,
54 B.R. 489, 495 (Bankr. N.D. Tex. 1985); HOLYWELL CORP. V. BANK OF NEW YORK, 59
B.R. 340, 347 (S.D. Fla. 1986), APPEAL DISMISSED, 838 F.2d 1547 (11th Cir.
1987); IN RE BAKER & GETTY FIN. SERV., INC., 78 B.R. 139, 143 (Bankr. N.D. Ohio
1987); IN RE STEURY, 94 B.R. 553, 554 (Bankr. N.D. Ind. 1988), or implicitly. IN
RE LUTH, 28 B.R. 564, 567 (Bankr. D. Idaho 1983) (citing SNIDER BROS. test as
another "element"); IN RE HELMS, 48 B.R. 714, 717 (Bankr. D. Conn. 1985)
(balancing interests is another important factor); IN RE N.S. GARROTT & SONS, 48
B.R. 13, 18 (Bankr. E.D. Ark. 1984) (adopting SNIDER BROS. principles as
important factors); IN RE SILVER FALLS PETROLEUM CORP., 55 B.R. 495, 498 (Bankr.
S.D. Ohio 1985).

                  The Second Circuit synthesized the prior precedents slightly
differently. It viewed the extensive list of factors cited and relied upon by
other courts as being "merely variants on two critical factors: (i) whether
creditors dealt with the entities as a single economic unit and 'did not rely on
their separate identity in extending credit, . . .' or (ii) whether the affairs
of the debtors are so entangled that consolidation will benefit all
creditors...." UNION SAV. BANK V. AUGIE/RESTIVO BAKING CO., LTD. (IN RE
AUGIE/RESTIVO BAKING CO., LTD.), 860 F.2d 515, 518 (2d Cir. 1988) (citations
omitted).

                  Under AUGIE/RESTIVO, a showing of substantial identity and
creditor reliance appears to suffice for substantive consolidation, without the
additional showing of a necessity for consolidation or a harm to be prevented or
a benefit to be gained, which heavily outweighs the harm to the objector.
Alternatively, if "the affairs of the debtors are so entangled that
consolidation will benefit all creditors," even creditor reliance on the
separate credit of the entities might not be required. UNION SAV. BANK V.
AUGIE/RESTIVO BAKING CO., LTD. (IN RE AUGIE/RESTIVO BAKING CO., LTD.), 860 F.2d
515, 518 (2d Cir. 1988). Such a showing of entanglement would undoubtedly
satisfy the EASTGROUP and SNIDER tests of necessity of consolidation to prevent
harm or gain a benefit.

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ALTER EGO

                  Some courts have ordered substantive consolidation in
circumstances that would have justified application of the "piercing the
corporate veil" doctrine under applicable nonbankruptcy law. SEE, e.g., IN RE
GULFCO INV. CORP., 593 F.2d 921 (10th Cir. 1979); IN RE BAKER & GETTY FIN.
SERV., 78 B.R. 139 (Bankr. N.D. Ohio 1987); IN RE STOP & GO OF AMERICA, INC., 49
B.R. 743 (Bankr. D. Mass. 1985); IN RE TUREAUD, 45 B.R. 658 (Bankr. N.D. Okla.
1985), AFF'D, 59 B.R. 973 (N.D. Okla. 1986); IN RE 1438 MERIDIAN PLACE, N.W.,
INC., 15 B.R. 89 (Bankr. D.D.C. 1981); IN RE FOOD FAIR, INC., 10 B.R. 123
(Bankr. S.D.N.Y. 1981); IN RE VECCO CONSTR. INDUS., 4 B.R. 407 (Bankr. E.D. Va.
1980); SEE ALSO IN RE S.I. ACQUISITION, INC., 58 B.R. 454, 460 n.3 (Bankr. W.D.
Tex. 1986), REV'D ON OTHER GROUNDS, 817 F.2d 1142 (5th Cir. 1987). BUT SEE,
E.G., IN RE 599 CONSUMER ELECTRONICS, Inc., 195 B.R. 244, 249 (S.D.N.Y. 1996)
(court noted that although proponents of substantive consolidation "have
possibly . . . rais[ed] issues that could be the subject of a fraudulent
conveyance action or possibly piercing the corporate veil, they have not proved
that the Debtors should be substantively consolidated," thus suggesting that
evidence that will support veil piercing will not necessarily support
substantive consolidation).

                  The grounds for disregarding the corporate form are similar to
the traditional substantive consolidation elements. For example, under New York
law, the grounds can be either (i) fraud OR (ii) complete domination of the
corporation that results in harm to a third party. SEE WM. PASSALACQUA BUILDERS,
INC. V. RESNICK DEVELOPERS SOUTH, INC., 933 F.2d 131, 138 (2d Cir. 1991)
(excessive control by majority shareholder justified piercing corporate veil;
court noted "critical question" of whether corporation is used by individual to
accomplish his own and not the corporation's business); ITEL CONTAINERS INT'L
CORP. V. ATLANTTRAFIK EXPRESS SERV. LTD., 909 F.2d 698, 703 (2d Cir. 1990) ("New
York law allows the corporate veil to be pierced EITHER when there is fraud OR
when the corporation has been used as an alter ego."); ELECTRONIC SWITCHING
INDUS., INC. V. FARADYNE ELECS. CORP., 833 F.2d 418, 424 (2d Cir. 1987) (control
and domination must result in a "wrong, fraud or the breach of a legal duty, or
a dishonest and unjust act" before New York law will permit corporate
disregard). Control over an entity which leads to a finding of an alter ego has
been determined by the following factors: "(1) the absence of the formalities
and paraphernalia that are part and parcel of the corporate existence, (2)
inadequate capitalization, (3) whether funds are put in and taken out of the
corporation for personal rather than corporate purposes, (4) overlap in
ownership, officers, directors and personnel, (5) common office space, address
and telephone numbers of corporate entities, (6) the amount of business
discretion displayed

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by the allegedly dominated corporation, (7) whether the related corporations
deal with the dominated corporation at arms' length, (8) whether the
corporations are treated as independent profit centers, (9) the payment or
guarantee of debts of the dominated corporation by other corporations in the
group, and (10) whether the corporation in question had property that was used
by other of the corporations as if it were its own." PASSALACQUA, 933 F.2d at
139.

                  Generally, the bankruptcy law does not grant the bankruptcy
trustee of a corporation the power to pierce the corporate veil to pursue claims
against the shareholder independent of any state law right that the corporation
itself would have against the shareholder on alter ego grounds. SPARTAN TUBE AND
STEEL, INC. V. HIMMELSPACH (IN RE RCS ENGINEERED PRODS. CO., INC.), 102 F.3d 223
(6th Cir. 1996). Substantive consolidation of the corporation's and the
shareholder's estate, however, can accomplish much the same result as permitting
a corporate trustee to pursue the shareholder and thus may animate some of the
substantive consolidation decisions in alter ego situations.

                  Nevertheless, in the cases presenting an alter ego analysis in
which substantive consolidation was ordered, the fraud or domination and control
that would have supported an alter ego claim either was in addition to other,
independently sufficient grounds for substantive consolidation or itself created
those grounds. That is, the cases involved either commingling and a complete
inability to sort out assets and liabilities, SOVIERO V. FRANKLIN NATL. BANK,
328 F.2d 446 (2d Cir. 1964); IN RE BAKER & GETTY FIN. SERVS., INC. 78 B.R. 139
(Bankr. N.D. Ohio 1987); IN RE TUREAUD, 45 B.R. 658 (Bank. N.D. Okla. 1985),
AFFD. 59 B.R. 973 (N.D. Okla. 1986); IN RE 1438 MERIDIAN PLACE, N.W., INC. 15
B.R. 89 (Bankr. D.C. 1981); or some form of fraud resulting in creditor reliance
on the credit of the combined entities that justified substantive consolidation.
MURPHY V. STOP & GO SHOPS, INC. (IN RE STOP & GO OF AMERICA, INC.), 49 B.R. 743
(Bankr. D. Mass. 1985).

OPEN ISSUES

                  Notwithstanding the widespread acceptance of the SNIDER BROS.
and EASTGROUP analysis, three important issues remain unsettled: the importance
of the traditional elements, what constitutes necessity for consolidation, what
constitutes prejudice to an objecting creditor's interests, and the relationship
between creditor reliance and necessity.

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                  IMPORTANCE OF THE ELEMENTS. The precise significance of the
traditional substantive consolidation elements in the balancing analysis is
unclear. SNIDER BROS. and those cases directly following its balancing standard
tend to relegate the substantive consolidation elements to a secondary role.
That is, the elements in aggregate may be considered as a single factor in the
balancing analysis. SNIDER BROS., 18 B.R. at 234. EASTGROUP PROPERTIES views the
elements as factually relevant to a determination by the court as to substantial
identity between the entities and the necessity for consolidation. The
importance under the balancing test of factors other than the presence of the
elements of consolidation, that is, prejudice to creditors, necessity of
consolidation, and reliance by creditors on the separate credit of the separate
entities, suggests that the absence of even most of the traditional elements
does not provide the same protection against substantive consolidation that it
did before the wide-spread adoption of the balancing test.

                  WHAT CONSTITUTES NECESSITY OR BENEFIT. SNIDER BROS. and
EASTGROUP compel proponents of substantive consolidation to prove the necessity
of consolidation or the benefits to be derived or the harm to be avoided from
consolidation. The determination of necessity, benefits, or avoided harm is,
however, dependent on a court's perspective of the type of benefit that is
promoted by consolidation.

                  Some reported decisions require benefits that are
distributional, I.E., reallocation of certain creditors' rights to a greater
number of other creditors. In EASTGROUP PROPERTIES V. SOUTHERN MOTEL ASSOC.,
LTD., 935 F.2d 245, 250 (11th Cir. 1991), a relevant factor supporting
consolidation was that "absent substantive consolidation, the majority of
creditors will receive only a small portion of their claims, while the equity
interest holders may receive a substantial distribution." The Eleventh Circuit
also appears to have viewed the fact that administrative and other priority
claimants of one of the estates would receive a larger portion of their claims,
as opposed to pre-petition unsecured creditors of the other estate, if
consolidation were approved, as a factor supporting its decision to consolidate.
SEE ALSO IN RE BAKER & GETTY FIN. SERVS., INC., 78 B.R. 139, 141 (Bankr. N.D.
Ohio 1987) (substantive consolidation "to effect a MORE EQUITABLE distribution
of property among creditors") (emphasis added); IN RE LUTH, 28 B.R. 564, 568
(Bankr. D. Idaho 1983) ("The likelihood of creditors [of one of the debtors]
receiving a dividend are small or nonexistent should consolidation be denied.").

                  Other decisions require a net collective benefit for ALL
creditors, I.E., that substantive consolidation results in an economic advantage
for the consolidated

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estates that exceeds the extent of prejudice to certain creditors' interests. IN
RE I.R.C.C., INC., 105 B.R. 237, 242 (Bankr. S.D.N.Y. 1989) ("The critical issue
is whether the same trustee in bankruptcy of each entity may pool their assets
for the BENEFIT OF ALL THEIR CREDITORS COLLECTIVELY, rather than liquidating
each debtor separately...;" "The trustee's motion for substantive
consolidation... is made in furtherance of his duty to ensure the equitable
treatment of all creditors.") (emphasis added); IN RE AUGIE/RESTIVO BAKING CO.,
LTD., 860 F.2d 515, 518 (2d Cir. 1988) (purpose of substantive consolidation is
equitable treatment of ALL CREDITORS).

                  Some courts also consider whether consolidation will further
the goal of reorganization in a chapter 11 case. One court found that parent's
need for the subsidiary's cash in order to operate and the need to facilitate a
consolidated plan supported substantive consolidation, at least where the only
objecting creditor was fully secured and therefore would not be harmed. IN RE
F.A. POTTS & CO., INC., 23 B.R. 569 (Bankr. E.D. Pa. 1982). Another court, after
concluding that creditors in general and the objecting creditor in particular
could not have relied on the separate credit of the separate entities,
determined that the fact that the reorganization plan would fail without
consolidation satisfied the requirement of finding a benefit to be gained by
consolidation. CENTRAL CLAIMS SERVS., INC. V. EAGLE- PICHER IND., INC. (IN RE
EAGLE-PICHER IND., INC.), 192 B.R. 903 (Bankr. S.D. Ohio 1996).

                  CREDITOR RELIANCE AND PREJUDICE. Another area of uncertainty
is the approach taken by the courts in analyzing asserted prejudice to an
objecting creditor's interests. Some courts apply an objective standard, which
compares the effect of consolidation to the result in the bankruptcy case under
applicable law without consolidation. STEURY, 94 B.R. at 555 ("Before embarking
upon a broad discussion of the intricacies of bankruptcy law, it is appropriate
to first consider the relative rights of the debtors and their creditors under
state law. IN THIS WAY WE WILL HAVE A STANDARD AGAINST WHICH ANY PREJUDICE, THAT
MIGHT BEFALL EITHER OF THEM, CAN BE MEASURED") (emphasis added). Other courts
apply a subjective standard, which measures prejudice against a creditor's
subjective expectations at the time credit was extended based on the creditor's
reliance on the separate credit of the separate debtors. SEE SNIDER BROS., 18
B.R. at 238 (reference to harm to creditor who looked solely to credit of single
debtor); DONUT QUEEN, 41 B.R. at 709 (when creditors treat their debtor "as a
distinct and separate entity, consolidation would be manifestly prejudicial");
IN RE HELMS, 48 B.R. at 717. Some courts seem to apply both subjective and
objective standards:

                                      H-25
<Page>

                  In this case there has been no proof offered that any creditor
                  relied on solely one or the other of the entities Tyler seeks
                  to consolidate. Further, there is no evidence that a
                  consolidation would tend to improve the financial position of
                  any group of creditors as compared with another.

LEWELLYN, 26 B.R. at 252.

                  Nor have the courts given adequate guidance on what is
required to show reliance on the credit of separate debtors The objecting
creditors in EASTGROUP PROPERTIES, for example, failed in their attempt to
demonstrate adequate reliance on their debtor, with no suggestion as to what
type of proof would have sufficed:

                  [W]e do not believe that appellants have established that they
                  relied solely on SMA's separate credit in dealing with SMA.
                  Appellants point to two pieces of evidence which, they
                  contend, prove that they relied on the separate credit of SMA:
                  (1)... both GPH and SMA held themselves out to the public and
                  to their creditors as separate corporations and (2) the fact
                  that Eastgroup pursued a court fight over the identity of the
                  tenant in the lease contracts with Eastgroup.... That GPH and
                  SMA may have held themselves out to the public and to their
                  creditors as separate corporations does not mean that
                  appellants did not rely on the credit of both corporations.
                  Nor does Eastgroup's litigations over the identity of its
                  tenant satisfy its burden. That litigation only proves that
                  Eastgroup's tenant was SMA; it proves nothing about whether
                  Eastgroup relied on SMA's separate credit in deciding to deal
                  with SMA.

935 F.2d at 251-52.

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                  RELATIONSHIP BETWEEN CREDITOR RELIANCE AND NECESSITY. It also
remains unclear whether, under the Second Circuit AUGIE/RESTIVO balancing test,
an EASTGROUP or SNIDER showing of necessity for consolidation is required in
addition to substantial identity and creditor reliance and whether, under the
Eleventh Circuit EASTGROUP balancing test, creditor nonreliance is required in
cases in which financial entanglement creates a necessity of consolidation, as
it did in CHEMICAL BANK NEW YORK TRUST CO. V. KHEEL, 369 F.2d 845 (2d Cir.
1966).

OPINION AND ANALYSIS OF THE TRANSACTION.

                  Based on the facts set forth above, and subject to the
discussion contained herein and the reasoned analysis of analogous case law
(although there is no precedent directly on point), in the event that PHH,
Cendant or the Additional Seller were to be a debtor in a case under the
Bankruptcy Code, for the reasons, among others, set forth below, it is our
opinion that regardless of which of the approaches or standards a court follows,
it would not be an appropriate exercise of a court's equitable discretion to,
and a creditor or trustee of PHH or other party in interest (or PHH as debtor in
possession), of Cendant or other party in interest (or Cendant as debtor in
possession) or of the Additional Seller (or the Additional Seller as debtor in
possession) as the case may be, would not have valid legal grounds to have a
court disregard, the separate existence of the Trust so as to order substantive
consolidation under the Bankruptcy Code of the assets and liabilities of the
Trust with the bankruptcy estate of PHH, Cendant or the Additional Seller, as
the case may be, and the court, accordingly, would not order such
consolidations.

                  First, the facts set forth above indicate (and we have
assumed) that the financial and business affairs of the Trust will remain
segregated and readily distinguishable from those of PHH, Cendant and the
Additional Seller. Thus, assets and liabilities of the Trust and PHH, Cendant
and the Additional Seller will be ascertainable in bankruptcy or otherwise so as
to preclude valid assertions of financial entanglement as support for
substantive consolidation under any of the standards discussed above.

                  Second, regarding substantive consolidation between the Trust
and PHH, Cendant or the Additional Seller, as the case may be, we have assumed
that each of the Trust, PHH, Cendant and the Additional Seller will strictly
observe all organizational and other statutory formalities. As a result of
strict compliance with appropriate formalities and preservation of all indicia
of separateness, third parties should not reasonably rely on the assets of the
Trust to satisfy obligations of PHH,

                                      H-27
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Cendant or the Additional Seller, as the case may be. It should be difficult for
any such third party to persuade a court that substantive consolidation is
warranted under the balancing test or substantive consolidation "elements"
approach because of the lack of any actual prejudice to creditors' interests
associated with the recognition of separate entities.

                  Third, we have assumed the absence of the more egregious
"elements" discussed above which would support a finding that the Trust is an
alter ego or instrumentality of PHH, Cendant or the Additional Seller, and the
absence of such "elements" favors denial of substantive consolidation.
Specifically, we have assumed that (1) on the date hereof, the Trust should not
have inadequate capital for its intended purposes, (2) the Trust will provide
for its expenses on an ongoing basis, and such expenses will not be routinely
paid by PHH, Cendant or the Additional Seller, (3) the Trust will not be
referred to as a division or department of PHH, Cendant or the Additional
Seller, (4) the Administrator of the Trust is expected to act in the interests
of the Trust, and is not expected to act contrary to those interests at the
direction of PHH, Cendant or the Additional Seller, (5) all formal legal
requirements relating to the Trust will be strictly observed, (6) as indicated
above, there should be no difficulty in segregating and ascertaining respective
assets and liabilities, (7) there is no commingling of business functions or of
assets between the Trust, PHH, Cendant and the Additional Seller - the
activities of the Trust are expected to be entirely separate from whatever
business activities PHH, Cendant and the Additional Seller may otherwise be
engaged in, (8) there will be no guarantees made by the Trust or PHH, Cendant or
the Trust and the Additional Seller with respect to obligations of the other,
and (9) there will be no transfers of assets without formal observance of
corporate formalities.

                  Fourth, we do not believe that the cases in which the alter
ego elements as well as other independent elements were present affect our
opinion as to the transaction. As noted above, the courts have not ordered
substantive consolidation in cases in which the only grounds present were those
that would have supported piercing the corporate veil. Finally, the
relationships of the Trust with PHH, Cendant and the Additional Seller in the
transaction are clear from the outset, and it is assumed that their
relationships have been and will be extensively disclosed.

                  Fifth, in the case of a court applying some variation of the
balancing test, creditors of PHH, Cendant or the Additional Seller should be
unable to demonstrate any harm to be remedied by substantive consolidation with
respect to creditor reliance and expectations that the assets of the Trust would
be available to

                                      H-28
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satisfy their claims or otherwise served as a basis for extending credit.
Moreover, from a policy perspective, there would appear to be no incentive to
collapse the Trust into PHH, Cendant or the Additional Seller, as the case may
be. The Trust was not established for the purpose of perpetrating a fraud or
circumventing public policy, nor would the continued recognition of the Trust as
an entity distinct from PHH, Cendant and the Additional Seller lead to such a
result.

                  Sixth, we do not believe that the four open issues under the
balancing test described above would affect our opinion on the transaction.

            (a)   IMPORTANCE OF ELEMENTS. The structure of the transaction, as
                  it has been assumed, emphasizes the reliance by the creditors
                  of the Trust on the separate credit of the Trust and assumes
                  extensive and continuing disclosure of the separateness of the
                  Trust, PHH, Cendant and the Additional Seller and their
                  assets, which should provide the same level of protection
                  against substantive consolidation no matter what importance a
                  court gives to the traditional elements.

            (b)   WHAT CONSTITUTES NECESSITY OR BENEFIT. The absence of limits
                  on the kinds of matters that may properly be introduced in
                  showing the necessity for consolidation or a benefit to be
                  gained or harm to be avoided under the balancing test may
                  significantly reduce a proponent's burden in meeting the
                  requirements of that test. The overall structure of the
                  transaction, as assumed, however, should minimize the ability
                  to show that there is a necessity, a benefit, or a harm to be
                  avoided by consolidating the Trust into PHH, Cendant or the
                  Additional Seller, as the case may be, in the absence of a
                  court determination, such as was suggested in EAGLE-PICHER and
                  found in F.A. POTTS & CO., that consolidation should be
                  ordered simply because it provides a better prospect for
                  reorganization.

            (c)   CREDITOR RELIANCE AND PREJUDICE. The lack of clarity on the
                  appropriate standard to be applied to the objecting creditors'
                  principal defense to substantive consolidation is addressed in
                  this transaction, because creditor reliance on the separate
                  credit of the Trust is made clear throughout.

                                      H-29
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            (d)   RELATIONSHIP BETWEEN CREDITOR RELIANCE AND NECESSITY. Finally,
                  the transaction has been structured so that (and we have
                  assumed) first, the manner in which the companies deal with
                  third parties will be such as to put them on appropriate
                  notice of their separateness and to create reliance on their
                  separate credit, and second, the financial affairs of the
                  Trust, PHH, Cendant and the Additional Seller will not become
                  entangled, separate books and records will be maintained, and
                  the courts will be able to sort out the assets and liabilities
                  of each.

CONCLUSION AND GENERAL MATTERS

                  The foregoing opinion is expressly subject to there being no
material change in the law, and there being no additional facts which would
materially affect the validity of the assumptions and conclusions set forth
herein or upon which this opinion is based. However, in the course of our
representation of PHH, Cendant, the Additional Seller and the Trust, we have not
become aware of any additional facts which would materially affect the validity
of such assumptions and conclusions.

                  It is our and your understanding that the foregoing opinion is
not a guaranty as to what a particular court would actually hold, but an opinion
as to whether a creditor or trustee of PHH (or PHH as debtor in possession), of
Cendant (or Cendant as debtor in possession) or of the Additional Seller (or the
Additional Seller as debtor in possession) would have valid legal grounds to
have a court disregard the separate existence of the Trust so as to order
substantive consolidation under the Bankruptcy Code of the assets and
liabilities of the Trust with the bankruptcy estate of PHH, Cendant or the
Additional Seller, as the case may be. Furthermore, the foregoing opinion
relates solely to the application of the matters discussed in this opinion in
the event of a case under the Bankruptcy Code concerning the Additional Seller.

                  In that regard, you should be aware of the Special Report by
the TriBar Opinion Committee, OPINIONS IN THE BANKRUPTCY CONTEXT; RATING AGENCY,
STRUCTURED FINANCING AND CHAPTER 11 TRANSACTIONS, 46 Bus. Law. 717 (1991), and
we hereby incorporate herein by reference the discussion of the limitations and
inherent uncertainties involved in opinions of this nature discussed therein.

                  We express no opinion as to whether a bankruptcy judge's
ruling with respect to the subject matter of this opinion would be seen as a
final order for the

                                      H-30
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purpose of appeal or whether an appellate court would exercise its discretion to
grant leave to appeal. Furthermore, this opinion speaks only as to the ultimate
outcome of issues as a legal matter and does not deal with the availability of
temporary restraining orders, preliminary injunctions or similar orders pending
determination on the merits.

                                      H-31
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            This letter is being furnished to you solely for your benefit in
connection with the transaction described herein and is not to be used,
circulated, quoted, relied upon or otherwise referred to for any other purpose
or by any other person without our prior express written permission.

                                        Very truly yours,

                                      H-32

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