Document:

<PAGE>

                                                                  Exhibit 10.(d)

                ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT

      This is an Assignment, Assumption and Recognition Agreement (the
"Agreement") made this 3rd day of October, 1997, among People's Bank of
California (the "Seller"), People's Preferred Capital Corporation (the
"Purchaser"), and Temple-Inland Mortgage Corporation (the "Servicer").

      In consideration of the mutual promises contained herein, the parties
hereto agree as follows with respect to the mortgage loans (the "Mortgage
Loans") identified on the Mortgage Loan Schedule attached hereto as Schedule A.
The Mortgage Loans are currently being serviced by the Servicer, pursuant to
that certain Loan Servicing Agreement, dated as of March 31, 1997 (the
"Servicing Agreement"), among the Servicer, and the Seller as Investor
thereunder. A true, accurate and complete copy of the Servicing Agreement is
attached hereto as Exhibit Two.

                                   WARRANTIES

      1. The Seller and Purchaser warrant and represent to the Servicer that
attached hereto as Exhibit One is a true, accurate and complete copy of the
Residential Mortgage Loan Purchase and Warranties Agreement (the "Purchase
Agreement"), dated as of October 3, 1997 between the Seller and the Purchaser,
with respect to Seller's sale and Purchaser's purchase of the Mortgage Loans.
The Purchase Agreement is in full force and effect as of the date hereof and no
notice of termination has been given thereunder.

      2. The Seller warrants and represents to Servicer that immediately prior
to payment of the purchase price for the Mortgage Loans as specified in the
Purchase Agreement, the Seller is the lawful owner of the Mortgage Loans and has
the full right to transfer the Mortgage Loans subject to Article Seven of the
Servicing Agreement, free from any and all claims and encumbrances whatsoever.

                            ASSIGNMENT AND ASSUMPTION

      3. (a) Seller grants, transfers and assigns to the Purchaser all of its
right, title and interest in and to the Mortgage Loans pursuant to the Purchase
Agreement, and the Purchaser hereby assumes all of the Seller's obligations as
Investor under the Servicing Agreement with respect to the Mortgage Loans from
and after the date hereof.

            (b) It is hereby acknowledged and agreed that the Purchaser,
pursuant to this Agreement and the execution of the Purchase Agreement, shall be
entitled to all payments of principal and interest on the Mortgage Loans
collected after September 22, 1997.

                          RECOGNITION OF THE PURCHASER

      4. From and after the date hereof, the Seller and the Servicer shall
recognize the Purchaser
<PAGE>

as the owner of the Mortgage Loans. The Servicer shall service the Mortgage
Loans for the Purchaser as if the Purchaser and the Servicer had entered into a
separate servicing agreement for the servicing of the Mortgage Loans in the form
of the Servicing Agreement with the Seller, the terms of which are incorporated
herein by reference with respect to the Mortgage Loans, and as if the Purchaser
is the Investor thereunder; provided, however, that (i) it is the intention of
the Seller, the Servicer and the Purchaser that this Agreement will be a
separate and distinct servicing agreement, and the entire agreement, among the
Servicer, the Seller and the Purchaser with respect to the servicing of the
Mortgage Loans, shall be binding upon and for the benefit of the respective
successors and assigns of such parties hereto; (ii) the Servicer shall remit all
payments and proceeds (that the Purchaser is entitled to pursuant to the
provisions of this Agreement and the Servicing Agreement) with respect to the
Mortgage Loans to Account Number 91-220806, ABA Number 322270466 (short name:
Peoples Bk Ca LA), Attention: J. Michael Holmes.

                          REPRESENTATIONS OF THE SELLER

      5. The Seller hereby represents and warrants that the representations and
warranties contained in Article V of that certain Mortgage Servicing Purchase
and Sale Agreement between Seller and Servicer dated as of March 31, 1997 ("P &
S Agreement") were true and correct with respect to the Mortgage Loans on the
date such representations and warranties were made by the Seller pursuant to the
P & S Agreement.

                                     NOTICES

      6. All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered or mailed by
registered mail, postage prepaid, return receipt requested, to the following
addresses: if to the Purchaser, addressed to the Purchaser at 5900 Whilshire
Boulevard, 16th Floor, Los Angeles, CA 90036, Attention: J. Michael Holmes, or
to such other address as the Purchaser may designate in writing to the Seller;
or if to the Seller, addressed to the Seller at 5900 Wilshire Boulevard 16th
Floor, Los Angeles, CA 90036, Attention: J. Michael Holmes, or to such other
address as the Seller may designate in writing; or if to the Servicer, addressed
to the Interim Servicer at 301 Congress Avenue, Suite 375, Austin, Texas 78701,
Attention: Richard Magel or to such other address as the Interim Servicer may
designate in writing.
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.

                          PEOPLE'S BANK OF CALIFORNIA,
                                     Seller

                           By: /s/ J. Michael Holmes
                              -------------------------
                           Name: J. Michael Holmes
                                -----------------------
                           Title: Executive Vice President/
                                  -------------------------
                                  Chief Financial Officer
                                  -------------------------

                           By: /s/ William W. Flader
                              ------------------------
                           Name: William W. Flader
                                ----------------------
                           Title: Executive Vice President
                                 ---------------------------

                           PEOPLE'S PREFERRED CAPITAL
                           CORPORATION,
                                   Purchaser

                           By: /s/ J. Michael Holmes
                              --------------------------
                           Name: J. Michael Holmes
                                ------------------------
                           Title: Exexutive Vice President/
                                  -------------------------
                                  Chief Financial Officer
                                  -----------------------

                           TEMPLE-INLAND MORTGAGE
                           CORPORATION,
                                    Servicer

                           By: /s/ Richard K. Magel
                              ------------------------
                           Name: Richard K. Magel
                                ----------------------
                           Title: Senior Vice President
                                 ------------------------
<PAGE>

                                   SCHEDULE A

                             MORTGAGE LOAN SCHEDULE<PAGE>

                                                                  Exhibit 10.(e)

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

                         COMMERCIAL SERVICING AGREEMENT

                                     BETWEEN

                     PEOPLE'S PREFERRED CAPITAL CORPORATION
                                    PURCHASER

                           PEOPLE'S BANK OF CALIFORNIA
                                     SELLER

                           DATED AS OF OCTOBER 3, 1997

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

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

                                    ARTICLE I
                                   DEFINITIONS

Section 1.     Definitions...............................................    1

                                   ARTICLE II
                                    SERVICING

Section 2.01   Seller to Act as Servicer.................................    5
Section 2.02   Liquidation of Mortgage Loans.............................    6
Section 2.03   Collection of Mortgage Loan Payments......................    7
Section 2.04   Establishment of and Deposits to Custodial Account........    8
Section 2.05   Permitted Withdrawals From Custodial Account..............    9
Section 2.06   Establishment of and Deposits to Escrow Account...........   10
Section 2.07   Permitted Withdrawals From Escrow Account.................   10
Section 2.08   Payment of Taxes, Insurance and Other Charges,............
                    Tax Contracts........................................   11
Section 2.09   Protection of Accounts....................................   12
Section 2.10   Maintenance of Hazard Insurance...........................   12
Section 2.11   Maintenance of Mortgage Impairment Insurance..............   13
Section 2.12   Maintenance of Fidelity Bond and Errors and Omissions.....
                    Insurance............................................   14
Section 2.13   Inspections...............................................   14
Section 2.14   Restoration of Mortgaged Property.........................   14
Section 2.15   Deteriorating Mortgage Loans..............................   15
Section 2.16   Title, Management and Disposition of REO Property.........   15
Section 2.17   Permitted Withdrawals with respect to REO Property........   16
Section 2.18   Real Estate Owned Reports.................................   17
Section 2.19   [Reserved]................................................   17
Section 2.20   Reports Of Foreclosures and Abandonments..................   17
Section 2.21   Notification of Adjustments...............................   17
Section 2.22   Notification of Maturity Date.............................   17

                                   ARTICLE III
                              PAYMENTS TO PURCHASER

Section 3.01   Remittances...............................................   18
Section 3.02   Statements to Purchaser...................................   18
<PAGE>

                                  ARTICLE IV
                         GENERAL SERVICING PROCEDURES

Section 4.01   Transfers of Mortgaged Property...........................   19
Section 4.02   Satisfaction of Mortgages and Release of Mortgage Files...   20
Section 4.03   Servicing Compensation....................................   20
Section 4.04   Annual Statement as to Compliance.........................   20
Section 4.05   Annual Independent Public Accountants' Servicing Report...   21
Section 4.06   Right to Examine Seller Records...........................   21

                                   ARTICLE V
                              SELLER TO COOPERATE

Section 5.01   Provision of Information..................................   21
Section 5.02   Financial Statements; Servicing Facilities................   21

                                  ARTICLE VI
                                  TERMINATION

Section 6.01   Damages...................................................   22
Section 6.02   Termination...............................................   22
Section 6.03   Termination Without Cause.................................   22

                                  ARTICLE VII
                               BOOKS AND RECORDS

Section 7.01   Possession of Servicing Files.............................   23

                                 ARTICLE VIII
                        INDEMNIFICATION AND ASSIGNMENT

Section 8.01   Indemnification...........................................   23
Section 8.02   Limitation on Liability of Seller and Others..............   24
Section 8.03   Limitation on Registration and Assignment by Seller.......   24
Section 8.04   Assignment by Purchaser...................................   25
Section 8.05   Merger or Consolidation of the Seller.....................   25
Section 8.06   Successor to the Seller...................................   25

                                  ARTICLE IX
            REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER

Section 9.01   Due Organization and Authority............................   26
Section 9.02   No Conflicts..............................................   27
Section 9.03   Ability to Perform........................................   27
Section 9.04   No Litigation Pending.....................................   27
<PAGE>

Section 9.05   No Consent Required.......................................   27
Section 9.06   Assistance................................................   27

                                   ARTICLE X
                   REPRESENTATIONS AND WARRANTIES OF SELLER

Section 10.01  Due Organization and Authority............................   28
Section 10.02  Ordinary Course of Business...............................   28
Section 10.03  No Conflicts..............................................   28
Section 10.04  Ability to Service........................................   28
Section 10.05  Ability to Perform........................................   28
Section 10.06  No Litigation Pending.....................................   28
Section 10.07  No Consent Required.......................................   29
Section 10.08  No Untrue Information.....................................   29
Section 10.09  Reasonable Servicing Fee..................................   29
Section 10.10  Financial Statements......................................   29
Section 10.11  Conflict of Interest......................................   29

                                  ARTICLE XI
                                    DEFAULT

Section 11.01  Events of Default.........................................   30
Section 11.02  Waiver of Defaults........................................   31

                                  ARTICLE XII
                           MISCELLANEOUS PROVISIONS

Section 12.01  Notices...................................................   31
Section 12.02  Waivers...................................................   32
Section 12.03  Entire Agreement; Amendment...............................   32
Section 12.04  Execution; Binding Effect.................................   32
Section 12.05  Headings..................................................   32
Section 12.06  Applicable Law............................................   32
Section 12.07  Relationship of Parties...................................   33
Section 12.08  Severability of Provisions................................   33
Section 12.09  Exhibits..................................................   33
<PAGE>

                                    EXHIBITS

EXHIBIT A      Form of Monthly Remittance Advice
EXHIBIT B      Form of Custodial Account Certification
EXHIBIT C      Form of Custodial Account Letter Agreement
EXHIBIT D      Form of Escrow Account Certification
EXHIBIT E      Form of Escrow Account Letter Agreement
<PAGE>

                         COMMERCIAL SERVICING AGREEMENT

      This Commercial Servicing Agreement (the "Servicing Agreement" or the
"Agreement") is entered into as of October 3, 1997, by and between PEOPLE'S BANK
OF CALIFORNIA (the "Seller"), a federal stock savings bank incorporated under
the laws of the United States, and PEOPLE'S PREFERRED CAPITAL CORPORATION, a
Maryland corporation (the "Purchaser").

      WHEREAS, the Purchaser and the Seller entered into a Commercial Mortgage
Loan Purchase and Warranties Agreement dated as of October 3, 1997 (the
"Purchase Agreement") pursuant to which the Purchaser agreed to purchase from
the Seller certain commercial, first mortgage loans (the "Mortgage Loans") to be
delivered as whole loans, with the Seller retaining servicing rights in
connection with the purchase of such Mortgage Loans; and

      WHEREAS, the Purchaser desires to have the Seller service the Mortgage
Loans, the Seller desires to service and administer the Mortgage Loans on behalf
of the Purchaser, and the parties desire to provide the terms and conditions of
such servicing by the Seller.

      NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein and for other good and valuable consideration, the receipt and the
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

      SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein
have the respective meanings set forth in the Purchase Agreement. The following
terms are defined as follows:

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

      "Ancillary Income" means all late charges, reconveyance fees,
not-sufficient funds charges, optional insurance fees, assumption fees, escrow
account benefits, reinstatement fees, and similar types of fees arising from or
in connection with any Mortgage Loan to the extent not otherwise payable to the
Mortgagee under applicable law or pursuant to the terms of the related Mortgage
Note.

      "Best's" means Best's Key Rating Guide.

      "BIF" means The Bank Insurance Fund, or any successor thereto.
<PAGE>

      "Closing Date" means the Initial Closing Date and any other date as is
mutually agreed upon by the parties hereto.

      "Code" means the Internal Revenue Code of 1986, as amended.

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

      "Custodial Account" means the separate account or accounts created and
maintained pursuant to Section 2.04.

      "Cut-off Date" means September 22, 1997 and the last business day of each
calendar month.

      "Errors and Omissions Insurance Policy" means an errors and omissions
insurance policy to be maintained by the Seller pursuant to Section 2.12.

      "Escrow Account" means the separate account or accounts created and
maintained pursuant to Section 2.06.

      "Escrow Payment" means, with respect to any Mortgage Loan, any payments
required to be escrowed by the Mortgagor with the mortgagee pursuant to the
Mortgage or any other document (whether referred to as escrow, impound or
otherwise), including, without limitation, the amounts constituting ground
rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage
insurance premiums, fire and hazard insurance premiums.

      "Event of Default" means any one of the conditions or circumstances
enumerated in Section 11.01.

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

      "Fidelity Bond" means a fidelity bond to be maintained by the Seller
pursuant to Section 2.12.

      "Initial Closing Date" means October 3, 1997, or such other date as the
parties hereto may mutually agree.

      "Insurance Proceeds" means, with respect to each Mortgage Loan, proceeds
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.

      "Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale,

                                      2
<PAGE>

foreclosure sale or otherwise, or the sale of the related Mortgaged Property if
the Mortgaged Property is acquired in satisfaction of the Mortgage Loan.

      "Monthly Remittance Advice" means the monthly remittance advice, in the
form of Exhibit A annexed hereto, to be provided to the Purchaser pursuant to
Section 3.02.

      "Mortgage Impairment Insurance Policy" means a mortgage impairment or
blanket hazard insurance policy as described in Section 2.11.

      "Nonrecoverable Advance" means any advance of principal and interest
previously made or proposed to be made in respect of a Mortgage Loan which, in
the good faith judgment of the Seller, will not or, in the case of a proposed
advance of principal and interest, would not, be ultimately recoverable from
related Insurance Proceeds, Liquidation Proceeds or otherwise. The determination
by the Seller that it has made a Nonrecoverable Advance or that any proposed
advance of principal and interest, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by an Officers' Certificate delivered to the
Purchaser.

      "OTS" means Office of Thrift Supervision, or any successor thereto.

      "Officer's Certificate" means a certificate signed by the Chairman of the
Board or the Vice Chairman of the Board or a President or a Vice President and
by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Seller, and delivered to the Purchaser as required
by this Agreement.

      "Prime Rate" means the prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal (Western
edition).

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

      "Purchase Agreement" means the Commercial Mortgage Loan Purchase and
Warranties Agreement between the Purchaser and the Seller related to the
purchase of the Mortgage Loans dated as of October 3, 1997.

      "Qualified Depository" means a depository the accounts of which are
insured by the FDIC through the BIF or the SAIF, and shall include the Seller.

      "Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided, and in the two
highest rating categories by Best's with respect to hazard and flood
insurance.

                                        3
<PAGE>

      "Record Date" means the close of business of the last Business Day of the
month preceding the month of the related Remittance Date.

      "Remittance Date" means the 18th day (or if such 18th day is not a
Business Day, the first Business Day immediately following) of any month
following a Cut-off Date, beginning with the first Remittance Date on October
18, 1997.

      "REO Property" means a Mortgaged Property acquired by the Seller on behalf
of the Purchaser through foreclosure or by deed in lieu of foreclosure, as
described in Section 2.16.

      "SAIF" means the Savings Association Insurance Fund, or any successor
thereto.

      "Servicing Advances" means all customary, reasonable and necessary "out
of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Seller of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
judicial proceedings, including foreclosures, (c) the management and
liquidation of the Mortgaged Property if the Mortgaged Property is acquired
in satisfaction of the Mortgage and (d) compliance with the obligations under
Sections 2.08, 2.10 and 2.16.

      "Servicing Agreement" means this agreement between the Purchaser and the
Seller for the servicing and administration of the Mortgage Loans.

      "Servicing Fee" means, with respect to each Mortgage Loan, the amount of
the annual fee the Purchaser shall pay to the Seller, which shall, for a period
of one (1) full month, be equal to one-twelfth of the product of the Servicing
Fee Rate and (2) the Stated Principal Balance of such Mortgage Loan. Such fee
shall be payable monthly, computed on the basis of the same principal amount and
period in respect of which any related interest payment on a Mortgage Loan is
computed and shall be pro rated for any portion of a month during which the
Mortgage Loan is serviced by the Seller under this Agreement. The obligation of
the Purchaser to pay the Servicing Fee is limited to, and the Servicing Fee is
payable solely from, the interest portion (including recoveries with respect to
interest from Liquidation Proceeds, to the extent permitted by Section 4.03) of
such Monthly Payment collected by the Seller, or as otherwise provided under
Section 4.03.

      "Servicing Fee Rate" means, with respect to each Mortgage Loan serviced
pursuant to this Agreement 0.25%. per annum.

      "Servicing File" means, with respect to each Mortgage Loan, the file
retained by the Seller consisting of originals of all documents in the Mortgage
File which are not delivered to the Purchaser or its designee and copies of the
Mortgage Loan Documents listed on Exhibit A to the Purchase Agreement.

                                      4
<PAGE>

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

      "Termination Fee" means the amount paid by the Purchaser to the Seller in
the event of the Seller's termination, without cause, as servicer. Such fee
shall equal the percentage amount set forth in Section 6.03 hereof of the then
current aggregate unpaid principal balance of the related Mortgage Loans.

                                   ARTICLE II
                                    SERVICING

      SECTION 2.01 SELLER TO ACT AS SERVICER. From and after the Closing Date,
the Seller, as an independent contractor, shall service and administer the
Mortgage Loans and shall have full power and authority, acting alone, to do any
and all things in connection with such servicing and administration which the
Seller may deem necessary or desirable, consistent with the terms of this
Agreement and with Accepted Servicing Practices.

      Consistent with the terms of this Agreement, the Seller may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement
of compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Seller's reasonable and prudent determination such
waiver, modification, postponement or indulgence is not materially adverse to
the Purchaser, provided, however, that unless the Seller has obtained the
prior written consent of the Purchaser, the Seller shall not permit any
modification with respect to any Mortgage 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) or change the final maturity date on such Mortgage Loan. Without
limiting the generality of the foregoing, the Seller 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 Mortgage Loans and with respect to the Mortgaged Properties.
If reasonably required by the Seller, the Purchaser shall furnish the Seller
with any powers of attorney and other documents necessary or appropriate to
enable the Seller to carry out its servicing and administrative duties under
this Agreement.

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

                                      5
<PAGE>

      The Seller shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Seller
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, Seller shall be under no obligation to deal with
any Person with respect to this Agreement or the Mortgage Loans unless the
Seller has been notified of such transfers as provided in this Section 2.01.
The Purchaser may sell and transfer, in whole or in part, the Mortgage Loans,
provided that no such sale and transfer shall be binding upon the Seller
unless such transferee shall agree in writing in the form of the Assignment
and Assumption Agreement attached to the Purchase Agreement as Exhibit G, to
be bound by the terms of this Agreement and the Purchase Agreement, and an
executed copy of the same shall have been delivered to the Seller. Upon
receipt thereof, the Seller shall mark its books and records to reflect the
ownership of the Mortgage Loans by such assignee, and the previous Purchaser
shall be released from its obligations hereunder, subject to receipt by
Seller of all unpaid but due Servicing Advances, Servicing Fees and other
payments due to Seller on or before the date of such transfer pursuant to
this Agreement. The Seller shall be required to remit all amounts required to
be remitted to the Purchaser hereunder to said transferee commencing with the
first Remittance Date falling after receipt of said copy of the related
Assignment and Assumption Agreement provided that the Seller receives said
copy no later than three (3) Business Days immediately prior to the first day
of the month of the related Remittance Date. This Agreement shall be binding
upon and inure to the benefit of the Purchaser and the Seller and their
permitted successors, assignees and designees.

      The Servicing File retained by the Seller pursuant to this Agreement shall
be appropriately marked and identified in the Seller's computer system to
clearly reflect the sale of the related Mortgage Loan to the Purchaser. The
Seller shall release from its custody the contents of any Servicing File
retained by it only in accordance with this Agreement, except when such release
is required in connection with a repurchase of any such Mortgage Loan pursuant
to Section 8.03 of the Purchase Agreement.

      The Seller must have an internal quality control program that verifies, on
a regular basis, the existence and accuracy of the legal documents, credit
documents, property appraisals, and underwriting decisions. The program must be
capable of evaluating and monitoring the overall quality of its loan production
and servicing activities. The program is to ensure that the Mortgage Loans are
serviced in accordance with prudent mortgage banking practices and accounting
principles; guard against dishonest, fraudulent, or negligent acts; and guard
against errors and omissions by officers, employees, or other authorized
persons.

      SECTION 2.02 LIQUIDATION OF MORTGAGE LOANS. In the event that any payment
due under any Mortgage Loan and not postponed pursuant to Section 2.01 is not
paid when the same becomes due and payable, or in the event the Mortgagor fails
to perform any other covenant or obligation under the Mortgage Loan and such
failure continues beyond any applicable grace period, the Seller shall take such
action as (1) the Seller would take under similar circumstances with respect to
a similar mortgage loan held for its own account for investment, (2) shall be
consistent with Accepted Servicing Practices and (3) the Seller shall determine
prudently to be in the best interest of

                                      6
<PAGE>

Purchaser. In addition to the foregoing, in the event that any payment due under
any Mortgage Loan is not postponed pursuant to Section 2.01 and remains
delinquent for a period of ninety (90) days or any other default continues for a
period of ninety (90) days beyond the expiration of any grace or cure period (or
such other period as is required by law in the jurisdiction where the related
Mortgaged Property is located), the Seller shall commence and be responsible for
the processing of foreclosure proceedings, PROVIDED THAT, prior to commencing
foreclosure proceedings, the Seller shall notify the Purchaser in writing of the
Seller's intention to do so, and the Seller shall not commence foreclosure
proceedings if the Purchaser objects to such action within ten (10) Business
Days of receiving such notice or, if the provisions of the next two paragraphs
apply, in any event without the prior written consent of Purchaser, and
PROVIDED, FURTHER, that the Seller may, in its good faith business judgement,
determine to commence foreclosure proceedings earlier than the expiration of the
foregoing grace or cure period, subject to the requirements of the preceding
proviso. In such connection, the Seller shall from its own funds make all
necessary and proper Servicing Advances, provided, however, that the Seller
shall not be required to expend its own funds in connection with any foreclosure
or towards the restoration or preservation of any Mortgaged Property, unless it
shall determine (a) that such preservation, restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan to Purchaser after
reimbursement to itself for such expenses and (b) that such expenses will be
recoverable by it either through Liquidation Proceeds (in respect of which it
shall have priority for purposes of withdrawals from the Custodial Account
pursuant to Section 2.05) or through Insurance Proceeds (in respect of which it
shall have similar priority). The Purchaser shall execute any instruments or
documents reasonably necessary in furtherance of all actions to be taken by
Seller pursuant to this Section 2.02.

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

      After reviewing the environmental inspection report, the Purchaser shall
determine how the Seller shall proceed with respect to the Mortgaged Property.
In the event (a) the environmental inspection report indicates that the
Mortgaged Property is contaminated by hazardous or toxic substances or wastes
and (b) the Purchaser directs the Seller to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Seller shall be reimbursed for
all reasonable costs associated with such foreclosure or acceptance of a deed in
lieu of foreclosure and any related environmental clean up costs, as applicable,
from the related Liquidation Proceeds, or if the Liquidation Proceeds are
insufficient to fully reimburse the Seller, the Seller shall be entitled to be
reimbursed from amounts in the Custodial Account pursuant to Section 2.05 hereof
and to the extent amounts in the Custodial Account are insufficient to fully
reimburse the Seller,the Seller shall be entitled to be reimbursed by the
Purchaser for such deficiencies (upon presentation of evidence of such
deficiency). In the event the Purchaser directs the Seller not to proceed with
foreclosure or

                                      7
<PAGE>

acceptance of a deed in lieu of foreclosure, the Seller shall be reimbursed for
all Servicing Advances made with respect to the related Mortgaged Property from
the Custodial Account pursuant to Section 2.05 hereof.

      SECTION 2.03 COLLECTION OF MORTGAGE LOAN PAYMENTS. Continuously from the
Closing Date the Seller shall proceed diligently to collect all payments due
under each of the Mortgage Loans when the same shall become due and payable and
shall take special care in ascertaining and estimating Escrow Payments and all
other charges that will become due and payable with respect to the Mortgage
Loans and each related Mortgaged Property, to the end that the installments
payable by the Mortgagors will be sufficient to pay such charges as and when
they become due and payable.

      SECTION 2.04 ESTABLISHMENT OF AND DEPOSITS TO CUSTODIAL ACCOUNT. The
Seller shall segregate and hold all funds collected and received pursuant to the
Mortgage Loans separate and apart from any of its own funds and general assets
and shall establish and maintain one or more Custodial Accounts, in the form of
time deposit or demand accounts, titled "People's Bank of California in trust
for People's Preferred Capital Corporation". The Custodial Account shall be
established with a Qualified Depository acceptable to the Purchaser. Any funds
deposited in the Custodial Account shall at all times be fully insured to the
full extent permitted under applicable law; provided, however, that to the
extent the Custodial Account is established with the Seller, the Seller may
maintain the Custodial Account as a single account. Funds deposited in the
Custodial Account may be drawn on by the Seller in accordance with Section 2.05.
The creation of any Custodial Account shall be evidenced by a certification in
the form of Exhibit B hereto, in the case of an account established with the
Seller, or by a letter agreement in the form of Exhibit C hereto, in the case of
an account held by a depository other than the Seller. A copy of such
certification or letter agreement shall be furnished to the Purchaser and, upon
request, to any subsequent Purchaser.

      The Seller shall deposit in the Custodial Account within one Business Day
of receipt, and retain therein, the following collections received by the Seller
and payments made by the Seller after the Closing Date (other than payments of
principal and interest due on or before the Closing Date) or received by the
Seller prior to the Closing Date but allocable to a period subsequent thereto:

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

      (ii)  all payments on account of interest on the Mortgage;

      (iii) all Liquidation Proceeds and any amount received with respect to REO
            Property;

      (iv)  all Insurance Proceeds including amounts required to be deposited
            pursuant to Section 2.10 (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
            Section 2.14), and Section 2.11;

                                      8
<PAGE>

      (v)   all Condemnation Proceeds which are not applied to the restoration
            or repair of the Mortgaged Property or released to the Mortgagor in
            accordance with Section 2.14;

      (vi)  any amount required to be deposited in the Custodial Account
            pursuant to Section 2.16, 3.01, or 4.02;

      (vii) any amounts payable in connection with the repurchase of any
            Mortgage Loan pursuant to Section 8.03 of the Purchase Agreement;
            and

     (viii) any amounts required to be deposited by the Seller pursuant to
            Section 2.11 in connection with the deductible clause in any blanket
            hazard insurance policy.

      The foregoing requirements for deposit into the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, Ancillary Income need not be deposited by the Seller into the
Custodial Account. Any interest paid on funds deposited in the Custodial Account
by the depository institution shall accrue to the benefit of the Seller and the
Seller shall be entitled to retain and withdraw such interest from the Custodial
Account pursuant to Section 2.05.

      SECTION 2.05 PERMITTED WITHDRAWALS FROM CUSTODIAL ACCOUNT. Subject to
Section 2.16 hereof, the Seller shall, from time to time, withdraw funds from
the Custodial Account for the following purposes:

      (i)   to make payments to the Purchaser in the amounts and in the manner
            provided for in Section 3.01;

      (ii)  to pay to itself the Servicing Fee;

      (iii) to reimburse itself for unreimbursed Servicing Advances (except to
            the extent reimbursed pursuant to Section 2.07), any accrued but
            unpaid Servicing Fees and for unreimbursed advances of Seller funds
            made pursuant to Section 2.16, the Seller's right to reimburse
            itself pursuant to this subclause (iii) with respect to any Mortgage
            Loan being limited to related Liquidation Proceeds, Condemnation
            Proceeds, Insurance Proceeds and such other amounts as may be
            collected by the Seller from the Mortgagor or otherwise relating to
            the Mortgage Loan, it being understood that, in the case of any such
            reimbursement, the Seller's right thereto shall be prior to the
            rights of the Purchaser except that, where the Seller is required to
            repurchase a Mortgage Loan pursuant to Section 8.03 of the Purchase
            Agreement or Section 4.02 of this Agreement, respectively, the
            Seller's right to such reimbursement shall be subsequent to the
            payment to the Purchaser of the Repurchase Price pursuant to such
            sections and all other amounts required to be paid to the Purchaser
            with respect to such Mortgage Loan;

                                      9
<PAGE>

      (iv)  to pay itself any interest earned on funds deposited in the
            Custodial Account (all such interest to be withdrawn monthly not
            later than each Remittance Date); and

      (v)   to clear and terminate the Custodial Account upon the termination of
            this Agreement.

      In the event that the Custodial Account is interest bearing, on each
Remittance Date, the Seller shall withdraw all funds from the Custodial Account
except for those amounts which, pursuant to Section 3.01, the Seller is not
obligated to remit on such Remittance Date. The Seller may use such withdrawn
funds only for the purposes described in this Section 2.05.

      SECTION 2.06 ESTABLISHMENT OF AND DEPOSITS TO ESCROW ACCOUNT. The Seller
shall segregate and hold all funds collected and received pursuant to a Mortgage
Loan constituting Escrow Payments separate and apart from any of its own funds
and general assets and shall establish and maintain one or more Escrow Accounts,
in the form of time deposit or demand accounts. The Escrow Account or Accounts
shall be established with a Qualified Depositary, in a manner which shall
provide maximum available insurance thereunder. Funds deposited in the Escrow
Accounts may be drawn on by the Seller in accordance with Section 2.07. The
creation of any Escrow Account shall be evidenced by a certification in the form
of Exhibit D hereto, in the case of an account established with the Seller, or
by a letter agreement in the form of Exhibit E hereto, in the case of an account
held by a depository other than the Seller. A copy of such certification shall
be furnished to the Purchaser and, upon request, to any subsequent Purchaser.

      The Seller shall deposit in the Escrow Account or Accounts within one
Business Day of receipt, and retain therein:

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

      (ii)  all amounts representing Insurance Proceeds or Condemnation Proceeds
            which are to be applied to the restoration or repair of any
            Mortgaged Property in accordance with the Mortgage Loan Documents.

      The Seller shall make withdrawals from the Escrow Account only to effect
such payments as are required under the Mortgage Loan Documents and this
Agreement as set forth in Section 2.07. The Seller shall be entitled to retain
any interest paid on funds deposited in the Escrow Account by the depository
institution, other than interest on escrowed funds required by law to be paid to
the Mortgagor. To the extent required by law, the Seller shall pay from its own
funds interest on escrowed funds to the Mortgagor notwithstanding that the
Escrow Account may be noninterest bearing or that interest paid thereon is
insufficient for such purposes.

      SECTION 2.07 PERMITTED WITHDRAWALS FROM ESCROW ACCOUNT. Withdrawals from
each Escrow Account may be made by the Seller only:

                                      10
<PAGE>

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

      (ii)  to reimburse the Seller for any Servicing Advance made by the Seller
            pursuant to Section 2.08 (except with respect to any expenses
            incurred in procuring or transferring Tax Service Contracts) with
            respect to a related Mortgage Loan, but only from amounts received
            on the related Mortgage Loan which represent late collections of
            Escrow Payments thereunder;

      (iii) to refund to the related Mortgagor any funds found to be in excess
            of the amounts required under the terms of the related Mortgage Loan
            or applicable federal or state law or judicial or administrative
            ruling;

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

      (v)   for application to restoration or repair of the related Mortgaged
            Property in accordance with the procedures outlined in Section 2.14;

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

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

      SECTION 2.08 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES, TAX CONTRACTS.
With respect to each Mortgage Loan, the Seller shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates, sewer
rents, and other charges, as applicable, which are or may become a lien upon the
Mortgaged Property and the status of fire and hazard insurance coverage to the
extent Escrow Payments are required under the Mortgage Loan Documents, 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 Seller 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 Seller shall determine that any such payments relating to taxes or
maintaining insurance policies are made by the Mortgagor at the time they first
become due. The Seller assumes full responsibility for the payment of all such
bills to the extent it has notice of such bills and shall effect payment of all
such charges irrespective of each Mortgagor's faithful performance in the
payment of same or the making of the Escrow Payments, and the Seller shall make
advances from its own funds to effect such payments, such advances to be
reimbursable to the same extent as Servicing Advances.

                                      11
<PAGE>

      The Seller shall ensure that each of the Mortgage Loans shall be covered
by a Tax Service Contract which shall be assigned to the Purchaser or the
Purchaser's designee at the Seller's expense in the event that the Seller is
terminated as servicer of the related Mortgage Loan(s) hereunder. To the extent
that a Mortgage Loan does not have a Tax Service Contract, the Purchaser shall
procure a Tax Service Contract for such Mortgage Loan and the Seller shall
reimburse the Purchaser upon request for reasonable expenses incurred in
connection therewith.

      SECTION 2.09 PROTECTION OF ACCOUNTS. The Seller may transfer the Custodial
Account or the Escrow Account to a different Qualified Depository from time to
time. Such transfer shall be made only upon obtaining the consent of the
Purchaser, which consent shall not be withheld unreasonably.

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

      SECTION 2.10 MAINTENANCE OF HAZARD INSURANCE. The Seller shall cause to be
maintained for each Mortgage Loan, hazard insurance such that all buildings upon
the Mortgaged Property are insured by a generally acceptable insurer against
loss by fire and hazards of extended coverage, in an amount which is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan and (ii) the greater of (a) the outstanding
principal balance of the Mortgage Loan and (b) an amount such that the proceeds
thereof shall be sufficient to prevent the Mortgagor or the loss payee from
becoming a co-insurer.

      If required by the Flood Disaster Protection Act of 1973, as amended, each
Mortgage Loan is covered by a flood insurance policy meeting the requirements of
the current guidelines of the Federal Insurance Administration in effect with a
generally acceptable insurance carrier in an amount representing coverage not
less than the lesser of (i) the outstanding principal balance of the related
Mortgage Loan and (ii) the maximum amount of insurance which is available under
the Flood Disaster Protection Act of 1973, as amended. If at any time during the
term of the Mortgage Loan, the Seller determines in accordance with applicable
law that a Mortgaged Property is located in a special flood hazard area and is
not covered by flood insurance or is covered in an amount less than the amount
required by the Flood Disaster Protection Act of 1973, as amended, the Seller
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
Seller shall immediately purchase the required flood insurance on the
Mortgagor's behalf.

      The Seller shall cause to be maintained on each Mortgaged Property 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 applicable primary
mortgage guaranty insurer.

                                      12
<PAGE>

      All policies required hereunder shall name the Seller and its successors
and assigns as mortgagee and shall be endorsed with non-contributory standard
mortgagee clauses which shall provide for at least thirty (30) days' prior
written notice of any cancellation, reduction in amount or material change in
coverage.

      The Seller shall not interfere with the Mortgagor's freedom of choice in
selecting either his insurance carrier or agent, provided, however, that the
Seller 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
Seller 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. To the extent reasonably possible, the Seller 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; provided, however, that in the event that no such notice is
furnished by the Seller, the Seller shall ensure that replacement insurance
policies are in place in the required coverages and the Seller shall be solely
liable to the Purchaser only for any losses in the event such coverage is not
provided.

      Pursuant to Section 2.04, any amounts collected by the Seller under any
such policies (other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Seller's normal servicing procedures as
specified in Section 2.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 2.05.

      SECTION 2.11 MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE. In the event
that the Seller shall obtain and maintain a blanket policy insuring against
losses arising from fire and hazards covered under extended coverage on all of
the Mortgage Loans, then, to the extent such policy provides coverage in an
amount equal to the amount required pursuant to Section 2.10 and otherwise
complies with all other requirements of Section 2.10, it shall conclusively be
deemed to have satisfied its obligations as set forth in Section 2.10. Any
amounts collected by the Seller under any such policy relating to a Mortgage
Loan shall be deposited in the Custodial Account subject to withdrawal pursuant
to Section 2.05. Such policy may contain a deductible clause, in which case, in
the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 2.10, and there shall have been a loss
which would have been covered by such policy, the Seller shall deposit in the
Custodial Account at the time of such loss the amount not otherwise payable
under the blanket policy because of such deductible clause, such amount to be
deposited from the Seller's funds, without reimbursement therefor. Upon request
of the Purchaser, the Seller shall cause to be delivered to the Purchaser a
certified true copy of such policy and a statement from the insurer thereunder
that such policy shall in no event be terminated or materially modified without
thirty (30) days' prior written notice to the Purchaser.

      SECTION 2.12 MAINTENANCE OF FIDELITY BOND AND ERRORS AND OMISSIONS
INSURANCE. The Seller shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and

                                      13
<PAGE>

an Errors and Omissions Insurance Policy, with broad coverage on all officers,
employees or other persons acting in any capacity requiring such persons to
handle funds, money, documents or papers relating to the Mortgage Loans ("Seller
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 Seller against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such Seller Employees. Such Fidelity
Bond and Errors and Omissions Insurance Policy also shall protect and insure the
Seller against losses in connection with the release or satisfaction of a
Mortgage Loan without having obtained payment in full of the indebtedness
secured thereby. No provision of this Section 2.12 requiring such Fidelity Bond
and Errors and Omissions Insurance Policy shall diminish or relieve the Seller
from its duties and obligations as set forth in this Agreement. Upon the request
of the Purchaser, the Seller shall cause to be delivered to the Purchaser a
certified true copy of such Fidelity Bond and Errors and Omissions Insurance
Policy and a statement from the surety and the insurer that such Fidelity Bond
and Errors and Omissions Insurance Policy shall in no event be terminated or
materially modified without thirty (30) days' prior written notice to the
Purchaser. In the event that the surety or insurer charges the Seller a fee for
providing such evidence, the Purchaser shall reimburse the Seller for the
reasonable expense incurred by the Seller in furnishing such evidence.

      SECTION 2.13 INSPECTIONS. The Seller shall inspect the Mortgaged Property
as often as deemed necessary by the Seller to assure itself that the value of
the Mortgaged Property is being preserved. In addition, if any Mortgage Loan is
more than sixty (60) days delinquent, the Seller immediately shall inspect the
Mortgaged Property and shall conduct subsequent inspections in accordance with
Accepted Servicing Practices. The Seller shall keep a written report of each
such inspection.

      SECTION 2.14 RESTORATION OF MORTGAGED PROPERTY. The Seller 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 the terms
of the Mortgage Loan Documents. At a minimum, the Seller shall comply with the
following conditions in connection with any such release of Insurance Proceeds
or Condemnation Proceeds:

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

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

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

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

                                      14
<PAGE>

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

      SECTION 2.15 DETERIORATING MORTGAGE LOANS. If, during the term of this
Agreement, a Mortgage Loan (or interest therein) becomes at any time in
Nonaccrual Status, the Seller shall notify the Purchaser as part of the Seller's
reporting obligations under this Agreement and shall follow the procedures set
forth in Section 2.02 of this Agreement for realizing upon defaulted Mortgage
Loans.

      SECTION 2.16 TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY. In the
event that title to any Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be taken in the
name of the Purchaser, or in the event the Purchaser is not authorized or
permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws
of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such Person or Persons as shall be designated by the
Purchaser. The Person or Persons holding such title other than the Purchaser
shall acknowledge in writing that such title is being held as nominee for the
Purchaser.

      The Seller shall manage, conserve, protect and operate each REO Property
for the Purchaser solely for the purpose of its prompt disposition and sale. The
Seller, either itself or through an agent selected by the Seller and reasonably
acceptable to the Purchaser, shall manage, conserve, protect and operate the REO
Property in the same manner that it manages, conserves, protects and operates
other foreclosed property for its own account, and in the same manner that
similar property in the same locality as the REO Property is managed. The Seller
shall attempt to sell the same (and may temporarily rent the same for a period
not greater than one (1) year, except as otherwise provided below) on such terms
and conditions as the Seller deems to be in the best interest of the Purchaser.

      The Seller shall use its best efforts to dispose of the REO Property as
soon as possible and shall sell such REO Property in any event within one year
after title has been taken to such REO Property, unless the Seller determines,
and gives an appropriate notice to the Purchaser to such effect, that a longer
period is necessary for the orderly liquidation of such REO Property. If a
period longer than one (1) year is permitted under the foregoing sentence and is
necessary to sell any REO Property, the Seller shall report monthly to the
Purchaser as to the progress being made in selling such REO Property.

      The Seller 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, flood insurance in the amount
required above.

      The disposition of REO Property shall be carried out by the Seller at such
price, and upon such terms and conditions, as the Seller deems to be in the best
interests of the Purchaser. The proceeds of sale of the REO Property shall be
promptly deposited in the Custodial Account. As soon

                                      15
<PAGE>

as practical thereafter the expenses of such sale shall be paid and the Seller
shall reimburse itself pursuant to Section 2.05(iii) hereof, as applicable, for
any related unreimbursed Servicing Advances, unpaid Servicing Fees and
unreimbursed advances made pursuant to this Section, and on the Remittance Date
immediately following the Due Period in which such sale proceeds are received
the net cash proceeds of such sale remaining in the Custodial Account shall be
distributed to the Purchaser; provided that such distribution shall, in any
event, be made within ninety (90) days from and after the closing of the sale of
such REO Property.

      In addition to the Seller's obligations set forth in this Section 2.16,
the Seller shall deliver written notice to the Purchaser whenever title to any
Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure
together with a copy of the drive-by appraisal of the related Mortgaged Property
obtained by the Seller on or prior to the date of such acquisition.
Notwithstanding anything to the contrary contained herein, the Purchaser may, at
the Purchaser's sole option, terminate the Seller as servicer of any such REO
Property without payment of any Termination Fee with respect thereto, provided
that (i) the Purchaser gives the Seller notice of such termination within ten
(10) Business Days of receipt of said written notice from the Seller which
termination shall be effective no more than fifteen (15) Business Days from and
after the date of said notice from the Purchaser and (ii) the Seller shall on
the date said termination takes effect be reimbursed by Purchaser for any
unreimbursed Servicing Advances in each case relating to the Mortgage Loan
underlying such REO Property. In the event of any such termination, the
provisions of Section 8.06 hereof shall apply to said termination and the
transfer of servicing responsibilities with respect to such REO Property to the
Purchaser or its designee.

      With respect to each REO Property, the Seller shall deposit all funds
collected and received in connection with the operation of the REO Property in
the Custodial Account. The Seller shall cause to be deposited on a daily basis
upon the receipt thereof in the Custodial Account all revenues received with
respect to the conservation and disposition of the related REO Property.

      SECTION 2.17 PERMITTED WITHDRAWALS WITH RESPECT TO REO PROPERTY. For so
long as the Seller is acting as servicer of any Mortgage Loan relating to any
REO Property, the Seller shall withdraw funds on deposit in the Custodial
Account with respect to each related REO Property necessary for the proper
operation, management and maintenance of the REO Property, including the cost of
maintaining any hazard insurance pursuant to Section 2.10 and the fees of any
managing agent acting on behalf of the Seller. The Seller shall make monthly
distributions on each Remittance Date to the Purchaser of the net cash flow from
the REO Property (which shall equal the revenues from such REO Property net of
the expenses described in Section 2.16 and of any reserves reasonably required
from time to time to be maintained to satisfy anticipated liabilities for such
expenses).

      SECTION 2.18 REAL ESTATE OWNED REPORTS. For so long as the Seller is
acting as servicer of any Mortgage Loan relating to any REO Property, the Seller
shall furnish to the Purchaser on or before the 15th day of each month a
statement with respect to any REO Property covering the operation of such REO
Property for the previous month and the Seller's efforts in connection with

                                      16
<PAGE>

the sale of such REO Property and any rental of such REO Property incidental to
the sale thereof for the previous month. That statement shall be accompanied by
such other information as the Purchaser shall reasonably request.

      SECTION 2.19 [RESERVED]

      SECTION 2.20 REPORTS OF FORECLOSURES AND ABANDONMENTS. For so long as the
Seller is acting as servicer of any Mortgage Loan relating to any REO Property,
following the foreclosure sale or abandonment of any Mortgaged Property, the
Seller shall report such foreclosure or abandonment as required pursuant to
Section 6050J of the Code.

      SECTION 2.21 NOTIFICATION OF ADJUSTMENTS. With respect to each Variable
Rate Mortgage Loan, the Seller shall adjust the Mortgage Interest Rate on the
related Interest Rate Adjustment Date and shall adjust the Monthly Payment
accordingly in compliance with the requirements of applicable law and the
related Mortgage and Mortgage Note. If, pursuant to the terms of the Mortgage
Note, another index is selected for determining the Mortgage Interest Rate, the
same index will be used with respect to each Mortgage Note which requires a new
index to be selected, provided that such selection does not conflict with the
terms of the related Mortgage Note. The Seller shall execute and deliver any and
all necessary notices required under applicable law and the terms of the related
Mortgage Note and Mortgage regarding the Mortgage Interest Rate and the Monthly
Payment adjustments. The Seller shall promptly upon written request therefor,
deliver to the Purchaser such notifications and any additional applicable data
regarding such adjustments and the methods used to calculate and implement such
adjustments. Upon the discovery by the Seller or the Purchaser that the Seller
has failed to adjust a Mortgage Interest Rate or a Monthly Payment pursuant to
the terms of the related Mortgage Note and Mortgage, the Seller shall
immediately deposit in the Custodial Account from its own funds the amount of
any interest loss actually caused the Purchaser thereby.

      SECTION 2.22 NOTIFICATION OF MATURITY DATE. With respect to each Fixed
Rate Mortgage Loan, the Purchaser shall execute and deliver to the Mortgagor any
and all necessary notices required under applicable law and the terms of the
related Mortgage Note and Mortgage regarding the maturity date if required under
applicable law.

                                   ARTICLE III
                              PAYMENTS TO PURCHASER

      SECTION 3.01 REMITTANCES. On each Remittance Date the Seller shall remit
by wire transfer of immediately available funds to the Purchaser all amounts
deposited in the Custodial Account as of the close of business on the Cut-off
Date immediately preceding such Remittance Date, except that less than full
Principal Prepayments received on or after the first day of the month in which
the Remittance Date occurs shall be remitted to the Purchaser on the next
following Remittance Date; and minus any amounts attributable to Monthly
Payments collected but due on a Due Date or Dates subsequent to the first day of
the month of the Remittance Date, which amounts shall be remitted

                                      17
<PAGE>

on the next Remittance Date, in each case, net of charges against or withdrawals
from the Custodial Account pursuant to Section 2.05.

      With respect to any Principal Prepayment in full, the Seller shall remit
such Principal Prepayment to the Purchaser within five (5) Business Days of
receipt of such Principal Prepayment by the Seller.

      With respect to any Seller's remittance received by the Purchaser after
the fifth Business Day following the Business Day on which such payment was due,
the Seller shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each change,
plus one (1) percentage point, but in no event greater than the maximum amount
permitted by applicable law. Such interest shall be deposited in the Custodial
Account by the Seller on the date such late payment is made and shall cover the
period commencing with and including the day following such fifth Business Day
and ending with the Business Day on which such payment is made, exclusive of
such Business Day; provided, however, that in the event that the Seller remits
such amounts after 11:00 A.M. (California time) on any day, such period shall
include such day. Such interest shall be remitted along with the distribution
payable on the next succeeding Remittance Date. The payment by the Seller of any
such interest shall not be deemed an extension of time for payment or a waiver
of any Event of Default by the Seller.

      SECTION 3.02 STATEMENTS TO PURCHASER. Not later than the twentieth day of
the month following the end of each calendar quarter, the Seller shall furnish
by modem and/or diskette to the Purchaser or its designee a listing of the
outstanding Mortgage Loans, including with respect to each Mortgage Loan: the
Mortgage Loan number, the actual balance, the actual paid-through dates, the
Mortgage Interest Rate and principal and interest payment, and with respect to
Variable Rate Mortgage Loans, the next Interest Rate Adjustment Date, the
Mortgage Interest Rate and the principal and interest payment effective as of
the next Interest Rate Adjustment Date (if available), and shall furnish to the
Purchaser manually a Monthly Remittance Advice, with a trial balance report
attached thereto, in the form of Exhibit A annexed hereto as to the preceding
remittance and the period ending on the preceding Cut-off Date.

      In addition, not more than sixty (60) days after the end of each calendar
year, the Seller shall furnish to each Person who was a Purchaser at any time
during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law as to the aggregate of
remittances for the applicable portion of such year.

      Such obligation of the Seller shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Seller pursuant to any requirements of the Code as from time to time are in
force.

      The Seller shall prepare and file, with respect to each Mortgage Loan, any
and all tax returns, information statements or other filings required to be
delivered to any governmental taxing authority or to the Purchaser pursuant to
any applicable law with respect to the Mortgage Loans and the

                                      18
<PAGE>

transactions contemplated hereby. In addition, the Seller shall provide the
Purchaser with such information concerning the Mortgage Loans as is necessary
for the Purchaser to prepare its federal income tax return as the Purchaser may
reasonably request from time to time.

                                   ARTICLE IV
                          GENERAL SERVICING PROCEDURES

      SECTION 4.01 TRANSFERS OF MORTGAGED PROPERTY. The Seller shall be required
to enforce any "due-on-sale" provision contained in any Mortgage or Mortgage
Note and to deny assumption by the person to whom the Mortgaged Property has
been or is about to be sold whether by absolute conveyance or by contract of
sale, whether or not the Mortgagor remains liable on the Mortgage and the
Mortgage Note, unless assumptions are permitted by the Mortgage Loan Documents.
When the Mortgaged Property has been conveyed by the Mortgagor, the Seller
shall, to the extent it has knowledge of such conveyance, exercise its rights to
accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause
applicable thereto, unless assumptions are permitted by the Mortgage Loan
Documents.

      If the Seller reasonably believes it is unable under applicable law to
enforce such "due-on-sale" clause, or if the Mortgage Loan Documents permit an
assumption of the Mortgage Loan, the Seller, in the Purchaser's name, shall, to
the extent permitted by applicable law, 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, unless the Mortgage Loan Documents
provide otherwise or (ii) in the event the Seller is unable under applicable law
or the Mortgage Loan Documents to require that the original Mortgagor remain
liable under the Mortgage Note and the Seller has the prior consent of any
applicable 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. In connection with any
such assumption, neither the Mortgage Interest Rate borne by the related
Mortgage Note, the term of the Mortgage Loan nor the outstanding principal
amount of the Mortgage Loan shall be changed unless approved by the Purchaser.

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

      SECTION 4.02 SATISFACTION OF MORTGAGES AND RELEASE OF MORTGAGE FILES. Upon
the payment in full of any Mortgage Loan, or the receipt by the Seller of a
notification that payment in

                                      19
<PAGE>

full will be escrowed in a manner customary for such purposes, the Seller shall
notify the Purchaser in the Monthly Remittance Advice as provided in Section
3.02, and may request the release of any Mortgage Loan Documents from the
Purchaser in accordance with this Section 4.02 hereof. Upon full satisfaction of
the Mortgage Note, the Seller shall obtain discharge of the related Mortgage
Loan as of record within any related time limit required by applicable law.

      If the Seller satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage, upon
written demand of the Purchaser, the Seller shall repurchase the related
Mortgage Loan at the Repurchase Price by deposit thereof in the Custodial
Account within two (2) Business Days of receipt of such demand by the Purchaser.
Upon such repurchase, all funds maintained in the Escrow Account with respect to
such repurchased Mortgage Loan shall be transferred to the Seller. The Seller
shall maintain the Fidelity Bond and Errors and Omissions Insurance Policy as
provided for in Section 2.12 insuring the Seller against any loss it may sustain
with respect to any Mortgage Loan not satisfied in accordance with the
procedures set forth herein.

      SECTION 4.03 SERVICING COMPENSATION. As consideration for servicing the
Mortgage Loans hereunder, the Seller shall withdraw the Servicing Fee with
respect to each Mortgage Loan from the Custodial Account pursuant to Section
2.05 hereof. Such Servicing Fee shall be payable monthly, computed on the basis
of the same principal amount and period in respect of which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee shall be pro-rated
when servicing is for less than one month. The obligation of the Purchaser to
pay, and the Seller's right to withdraw, the Servicing Fee is limited to, and
the Servicing Fee is payable solely from, the interest portion (including
recoveries with respect to interest from Liquidation Proceeds, to the extent
permitted by Section 2.05), of such Monthly Payment collected by the Seller, or
as otherwise provided under Section 2.05.

      Additional servicing compensation in the form of Ancillary Income shall be
retained by the Seller and shall not be required to be deposited in the
Custodial Account. The Seller shall be required to pay all expenses incurred by
it in connection with its servicing activities hereunder and shall not be
entitled to reimbursement thereof except as specifically provided for herein.

      SECTION 4.04 ANNUAL STATEMENT AS TO COMPLIANCE. The Seller shall deliver
to the Purchaser, on or before March 31 each year beginning with March 31, 1998,
an Officer's Certificate, stating that (i) a review of the activities of the
Seller during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (ii) the Seller
has complied in all material respects with the provisions of Article II and
Article IV, and (iii) to the best of such officer's knowledge, based on such
review, the Seller has fulfilled all its obligations under this Agreement
throughout such year or part thereof, 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
Seller to cure such default.

                                      20
<PAGE>

      SECTION 4.05 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT. On
or before March 31 of each year, beginning March 31, 1998, the Seller at its
expense shall cause a firm of independent public accountants (who may also
render other services to the Seller, or any affiliate thereof) which is a member
of the American Institute of Certified Public Accountants to furnish a statement
to the Purchaser to the effect that such firm has, as part of their examination
of the financial statements of the Seller performed tests embracing the records
and documents relating to mortgage loans serviced by the Seller in accordance
with the requirements of the Uniform Single Audit Program for Mortgage Bankers
and that their examination disclosed no exceptions that, in their opinion were
material, relating to mortgage loans serviced by the Seller.

      SECTION 4.06 RIGHT TO EXAMINE SELLER RECORDS. The Purchaser, upon
reasonable notice, shall have the right to examine and audit any and all of the
books, records, or other information of the Seller, whether held by the Seller
or by another on its behalf, with respect to or concerning this Agreement or the
Mortgage Loans, during business hours or at such other times as may be
reasonable under applicable circumstances, upon reasonable advance notice.

                                    ARTICLE V
                               SELLER TO COOPERATE

      SECTION 5.01 PROVISION OF INFORMATION. During the term of this Agreement,
the Seller shall furnish to the Purchaser such periodic, special, or other
reports or information, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Purchaser or the
purposes of this Agreement. All such reports or information shall be provided by
and in accordance with all reasonable instructions and directions which the
Purchaser may give.

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

      SECTION 5.02 FINANCIAL STATEMENTS; SERVICING FACILITIES. In connection
with disposition of Mortgage Loans, the Purchaser may make available to a
prospective purchaser audited financial statements of the Seller for the most
recently completed two (2) fiscal years for which such statements are available,
as well as a Consolidated Statement of Condition at the end of the last two (2)
fiscal years covered by any Consolidated Statement of Operations. If it has not
already done so, the Seller shall furnish promptly to the Purchaser or a
prospective purchaser copies of the statements specified above; provided,
however, that prior to furnishing such statements or information to any
prospective purchaser, the Seller may require such prospective purchaser to
execute a confidentiality agreement in form reasonably satisfactory to it.

      The Seller shall make available to the Purchaser or any prospective
Purchaser a knowledgeable financial or accounting officer for the purpose of
answering questions with respect to recent developments affecting the Seller or
the financial statements of the Seller, and to permit

                                      21
<PAGE>

any prospective purchaser to inspect the Seller's servicing facilities for the
purpose of satisfying such prospective purchaser that the Seller has the ability
to service the Mortgage Loans as provided in this Agreement.

                                   ARTICLE VI
                                   TERMINATION

      SECTION 6.01 DAMAGES. The Purchaser shall have the right at any time to
seek and recover from the Seller any damages or losses suffered by it solely as
a result of any failure by the Seller to observe or perform any duties,
obligations, covenants or agreements herein contained.

      SECTION 6.02 TERMINATION. The respective obligations and responsibilities
of the Seller shall terminate upon: (i) the later of the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
serviced by the Seller or the disposition of all REO Property serviced by the
Seller and the remittance of all funds due hereunder; or (ii) by mutual consent
of the Seller and the Purchaser in writing, unless earlier terminated pursuant
to this Agreement.

      SECTION 6.03 TERMINATION WITHOUT CAUSE. The Purchaser may, at its sole
option, upon not less than thirty (30) days' prior written notice to the Seller,
terminate any rights the Seller may have hereunder with respect to any or all of
the Mortgage Loans, without cause, upon written notice, provided that the Seller
shall have an additional period of not more than sixty (60) days from and after
the date of said notice from the Purchaser within which to effect the related
transfer of servicing. Any such notice of termination shall be in writing and
delivered to the Seller as provided in Section 12.01 of this Agreement. In the
event of such termination, the Seller shall be entitled to a Termination Fee,
equal to 1.50% of the then current aggregate unpaid principal balance of the
related Mortgage Loans; provided, however, that no Termination Fee shall be
payable if the successor servicer is an Affiliate of the Seller.

                                      22
<PAGE>

                                   ARTICLE VII
                                BOOKS AND RECORDS

      SECTION 7.01 POSSESSION OF SERVICING FILES. The contents of each Servicing
File are and shall be held in trust by the Seller for the benefit of the
Purchaser as the owner thereof. The Seller shall maintain in the Servicing File
a copy of the contents of each Mortgage File and the originals of the documents
in each Mortgage File not delivered to the Purchaser. The possession of the
Servicing File by the Seller is at the will of the Purchaser for the sole
purpose of servicing the related Mortgage Loan, pursuant to this Agreement, and
such retention and possession by the Seller is in its capacity as Seller only
and at the election of the Purchaser. The Seller shall release its custody of
the contents of any Servicing File only in accordance with written instructions
from the Purchaser or other termination of the Seller with respect to the
related Mortgage Loans, unless such release is required as incidental to the
Seller's servicing of the Mortgage Loans pursuant to this Agreement, or is in
connection with a repurchase of any Mortgage Loan pursuant to Section 8.03 of
the Purchase Agreement or Section 4.02 of this Agreement.

      The Seller shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be marked
clearly to reflect the ownership of each Mortgage Loan by the Purchaser. In
particular, the Seller shall maintain in its possession, available for
inspection by the Purchaser or its designee during normal business hours, and
shall deliver to the Purchaser or its designee upon reasonable notice, evidence
of compliance with all federal, state and local laws, rules and regulations,
including but not limited to documentation as to the method used in determining
the applicability of the provisions of the Flood Disaster Protection Act of
1973, as amended, to the Mortgaged Property, documentation evidencing insurance
coverage and periodic inspection reports as required by Section 2.13. To the
extent that original documents are not required for purposes of realization of
Liquidation Proceeds or Insurance Proceeds, documents maintained by the Seller
may be in the form of microfilm or microfiche.

                                  ARTICLE VIII
                         INDEMNIFICATION AND ASSIGNMENT

      SECTION 8.01 INDEMNIFICATION. The Seller agrees to indemnify and hold the
Purchaser harmless from any liability, claim, loss or damage (including, without
limitation, any reasonable legal fees, judgments or expenses relating to such
liability, claim, loss or damage, but excluding consequential, special,
exemplary, punitive and indirect damages ("Special Damages"), except for such
Special Damages which Purchaser is required by law to pay to a third party), to
the Purchaser directly or indirectly resulting from the Seller's failure to
observe and perform any or all of Seller's duties, obligations, covenants,
agreements, warranties or representations contained in this Agreement or the
Seller's failure to comply with all applicable requirements with respect to the
transfer of servicing rights as set forth herein.

      The Seller shall notify the Purchaser as soon as reasonably possible if a
claim is made by a third party with respect to this Agreement.

                                      23
<PAGE>

      SECTION 8.02 LIMITATION ON LIABILITY OF SELLER AND OTHERS. Neither the
Seller nor any of the directors, officers, employees or agents of the Seller
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 Seller or any such person against any breach of warranties
or representations made herein, or failure to perform its obligations in
material 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 Seller and any director, officer,
employee or agent of the Seller may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person with respect to
any matter arising hereunder. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
duties to service the Mortgage Loans in accordance with this Agreement and which
in its opinion may involve it in any expense or liability, provided, however,
that the Seller may, with the prior written consent of the Purchaser, undertake
any such action which it may deem necessary or desirable in respect to this
Agreement and the rights and duties of the parties hereto. In such event, the
Seller shall be entitled to prompt reimbursement from the Purchaser of the
reasonable legal expenses and costs of such action.

      SECTION 8.03 LIMITATION ON REGISTRATION AND ASSIGNMENT BY SELLER. The
Purchaser has entered into this Agreement with the Seller in reliance upon the
independent status of the Seller, and the representations as to the adequacy of
its servicing facilities, plant, personnel, records and procedures, its
integrity, reputation and financial standing, and the continuance thereof.
Therefore, the Seller shall not (i) assign this Agreement or the servicing
hereunder (other than to an affiliate of Seller) or (ii) delegate any
substantial part of its rights or duties hereunder without the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld or
conditioned provided that (a) any delegation of such rights or duties shall not
release the Seller from its obligations hereunder and the Seller shall remain
responsible hereunder for all acts and omissions of any delegee as if such acts
or omissions were those of the Seller and (b) any such assignee or designee
shall satisfy the requirements for a successor or surviving Person set forth in
Section 8.05 and Section 8.06 hereof. The Seller shall notify the Purchaser in
writing at least 30 days prior to selling or otherwise disposing of all or
substantially all of its assets and receipt of such notice shall entitle the
Purchaser to terminate this Agreement except as set forth in Section 8.06
hereof.

      The Seller shall not resign from the obligations and duties hereby imposed
on it except by mutual consent of the Seller and the Purchaser or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Seller. Any such
determination permitting the resignation of the Seller shall be evidenced by an
Opinion of Counsel to such effect delivered to the Purchaser which Opinion of
Counsel shall be in form and substance acceptable to the Purchaser. No such
resignation shall become effective until a successor shall have assumed the
Seller's responsibilities and obligations hereunder in the manner provided in
Section 8.06.

                                      24
<PAGE>

      Without in any way limiting the generality of this Section 8.03, in the
event that the Seller either shall assign this Agreement or the servicing
responsibilities hereunder or delegate its duties hereunder or any portion
thereof without (i) satisfying the requirements set forth herein or (ii) the
prior written consent of the Purchaser, then the Purchaser shall have the right
to terminate this Agreement as set forth in Section 6.03, without any additional
payment of any penalty or damages and without any liability whatsoever to the
Seller (other than with respect to accrued but unpaid Servicing Fees and
Servicing Advances remaining unpaid) or any third party.

      SECTION 8.04 ASSIGNMENT BY PURCHASER. The Purchaser shall have the right,
without the consent of the Seller, to assign, in whole or in part, its interest
under this Agreement with respect to some or all of the Mortgage Loans, and
designate any person to exercise any rights of the Purchaser hereunder, by
executing an Assignment and Assumption Agreement substantially in the form of
Exhibit G to the Purchase Agreement and the assignee or designee shall accede to
the rights and obligations hereunder of the Purchaser with respect to such
Mortgage Loans. All references to the Purchaser in this Agreement shall be
deemed to include its assignee or designee. Notwithstanding the foregoing, at
any one time there shall not be more than fifteen (15) separate Purchasers under
this Agreement.

      SECTION 8.05 MERGER OR CONSOLIDATION OF THE SELLER. The Seller will keep
in full effect its existence, rights and franchises as a corporation under the
laws of the state of its incorporation except as permitted herein, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its duties under this Agreement.

      Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the Seller,
shall be the successor of the Seller hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person shall be an institution whose deposits are insured
by FDIC or a company whose business includes the origination and servicing of
mortgage loans and shall satisfy the requirements of Section 8.06 with respect
to the qualifications of a successor to the Seller.

      SECTION 8.06 SUCCESSOR TO THE SELLER. Prior to termination of Seller's
responsibilities and duties under this Agreement pursuant to Sections 2.16,
6.03, 8.03 or 11.01, the Purchaser shall (i) succeed to and assume all of the
Seller's responsibilities, rights, duties and obligations under this Agreement,
or (ii) appoint a successor having a tangible net worth of not less than
$30,000,000 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Seller under this Agreement
prior to the termination of Seller's responsibilities, duties and liabilities
under this Agreement. In connection with such appointment and assumption, the
Purchaser may make such arrangements for the compensation of such successor out
of payments on Mortgage Loans as it and such successor shall agree. In the event
that the Seller's duties, responsibilities and

                                      25
<PAGE>

liabilities under this Agreement should be terminated pursuant to the
aforementioned sections, the Seller shall discharge such duties and
responsibilities during the period from the date it acquires knowledge of such
termination until the effective date thereof with the same degree of diligence
and prudence which it is obligated to exercise under this Agreement, and shall
take no action whatsoever that might impair or prejudice the rights or financial
condition of its successor. The resignation or removal of Seller pursuant to the
aforementioned Sections shall not become effective until a successor shall be
appointed pursuant to this Section and shall in no event relieve the Seller of
the representations, warranties and covenants made pursuant to and the remedies
available to the Purchaser with respect thereto.

      Any successor appointed as provided herein shall execute, acknowledge and
deliver to the Seller and to the Purchaser, an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Seller, with like effect as if originally named as a party to this Agreement.
Any termination of this Agreement pursuant to Section 2.16, 6.03, 8.03 or 11.01
shall not affect any claims that the Purchaser may have against the Seller
arising prior to any such termination or resignation.

      The Seller shall timely deliver to the successor the funds in the
Custodial Account and the Escrow Account and the Mortgage Files and related
documents and statements held by it hereunder and the Seller shall account for
all funds. The Seller shall execute and deliver such instruments and do such
other things all as may reasonably be required to more fully and definitely vest
and confirm in the successor all such rights, powers, duties, responsibilities,
obligations and liabilities of the Seller. The successor shall make arrangements
as it may deem appropriate to reimburse the Seller for amounts the Seller
actually expended pursuant to this Agreement which the successor is entitled to
retain hereunder and which would otherwise have been recovered by the Seller
pursuant to this Agreement but for the appointment of the successor servicer.

      Upon a successor's acceptance of appointment as such, the Seller shall
notify by mail the Purchaser of such appointment.

                                   ARTICLE IX
             REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER

      As of each Closing Date, the Purchaser warrants and represents to, and
covenants and agrees with, the Seller as follows:

      SECTION 9.01 DUE ORGANIZATION AND AUTHORITY. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Maryland. The Purchaser has the full corporate power and
authority to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby have been
duly and validly

                                      26
<PAGE>

authorized; this Agreement evidences the valid, binding and enforceable
obligation of the Purchaser; and all requisite corporate action has been taken
by the Purchaser to make this Agreement valid and binding upon the Purchaser in
accordance with its terms;

      SECTION 9.02 NO CONFLICTS. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Purchaser's charter or bylaws or any legal
restriction or any agreement or instrument to which the Purchaser is now a party
or by which it is bound, or constitute a default or result in an acceleration
under any of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Purchaser or its property is
subject;

      SECTION 9.03 ABILITY TO PERFORM. The Purchaser does not believe, nor does
it have any reason or cause to believe, that it cannot perform each and every
covenant made by it in this Agreement.

      SECTION 9.04 NO LITIGATION PENDING. There is no action, suit, proceeding
or investigation pending or threatened against the Purchaser, before any court,
administrative agency or other tribunal asserting the invalidity of this
Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or 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 Purchaser, or in
any material impairment of the right or ability of the Purchaser to carry on its
business substantially as now conducted, or in any material liability on the
part of the Purchaser, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection with the
obligations of the Purchaser contemplated herein.

      SECTION 9.05 NO CONSENT REQUIRED. No consent, approval, authorization or
order of any court or governmental agency or body is required for the execution,
delivery and performance by the Purchaser of, or compliance by the Purchaser
with, this Agreement as evidenced by the consummation of the transactions
contemplated by this Agreement, or if required, such approval has been obtained
prior to the Closing Date.

      SECTION 9.06 ASSISTANCE. To the extent reasonably possible, the Purchaser
shall cooperate with and assist the Seller as requested by the Seller, in
carrying out Seller's covenants, agreements, duties and responsibilities under
this Agreement and in connection therewith shall execute and deliver all such
papers, documents and instruments as nay be necessary and appropriate in
furtherance thereof.

                                      27

<PAGE>

                                    ARTICLE X
                    REPRESENTATIONS AND WARRANTIES OF SELLER

      As of each Closing Date, the Seller warrants and represents to, and
covenants and agrees with, the Purchaser as follows:

      SECTION 10.01 DUE ORGANIZATION AND AUTHORITY. The Seller is a federal
savings bank duly organized, validly existing and in good standing under the
laws of the United States and is licensed, qualified and in good standing in
each state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct business of the type
conducted by the Seller, and in any event the Seller is in compliance with the
laws of any such state to the extent necessary to ensure the enforceability of
the related Mortgage Loan in accordance with the terms of this Agreement; the
Seller has the full corporate power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, legal, binding and enforceable obligation of the
Seller subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the benefits
provided thereunder, regardless of whether such enforcement is sought in a
proceeding in equity or at law; and all requisite corporate action has been
taken by the Seller to make this Agreement valid and binding upon the Seller in
accordance with its terms.

      SECTION 10.02 ORDINARY COURSE OF BUSINESS. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Seller;

      SECTION 10.03 NO CONFLICTS. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Seller's charter or bylaws or any legal
restriction or any agreement or instrument to which the 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 of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is subject, or
impair the ability of the Purchaser to realize on the Mortgage Loans, or impair
the value of the Mortgage Loans, or impair the ability of the Purchaser to
realize the full amount of any mortgage insurance benefits accruing pursuant to
this Agreement.

      SECTION 10.04 ABILITY TO SERVICE. The Seller is duly qualified, licensed,
registered and otherwise authorized under all applicable federal, state and
local laws and regulations, meets the minimum capital requirements set forth by
OTS or the FDIC, and is in good standing to enforce, originate, sell mortgage
loans, and service mortgage loans in the jurisdiction wherein the Mortgaged
Properties are located.

      SECTION 10.05 ABILITY TO PERFORM. The Seller does not believe, nor does it
have any reason to believe, that it cannot perform each and every covenant
contained in this Agreement.

                                      28
<PAGE>

      SECTION 10.06 NO LITIGATION PENDING. There is no action, suit, proceeding
or investigation pending or threatened against the Seller, before any court,
administrative agency or other tribunal asserting the invalidity of this
Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or 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 Seller, or in any
material impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or in any material liability on the
part of the Seller, or which would draw into question the validity of this
Agreement or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Seller contemplated herein, or which
would be likely to impair materially the ability of the Seller to perform under
the terms of this Agreement.

      SECTION 10.07 NO CONSENT REQUIRED. No consent, approval, authorization or
order of any court or governmental agency or body is required for the execution,
delivery and performance by the Seller of or compliance by the Seller with this
Agreement or the servicing of the Mortgage Loans as evidenced by the
consummation of the transactions contemplated by this Agreement, or if required,
such approval has been obtained.

      SECTION 10.08 NO UNTRUE INFORMATION. Neither this Agreement nor any
statement, tape, diskette, form, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of fact or omits to state a
fact necessary to make the statements contained therein not misleading.

      SECTION 10.09 REASONABLE SERVICING FEE. The Seller acknowledges and agrees
that the Servicing Fee represents reasonable compensation for performing such
services and that the entire Servicing Fee shall be treated by the Seller, for
accounting and tax purposes, as compensation for the servicing and
administration of the Mortgage Loans pursuant to this Agreement.

      SECTION 10.10 FINANCIAL STATEMENTS. The Servicer has delivered to the
Purchaser financial statements as to its last two complete fiscal years. All
such financial statements fairly present the pertinent results of operations and
changes in financial position for each of such periods and the financial
position at the end of each such period of the Servicer 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 Servicer since the date of the Servicer's
financial statements that would have a material adverse effect on its ability to
perform its obligations under this Agreement.

      SECTION 10.11 CONFLICT OF INTEREST. The Seller agrees that it shall
service the Mortgage Loans hereunder solely with a view toward the interests of
the Purchaser, and without regard to the interests of the Seller or its other
affiliates.

                                      29
<PAGE>

                                   ARTICLE XI
                                     DEFAULT

      SECTION 11.01 EVENTS OF DEFAULT. The following shall constitute an Event
of Default under this Agreement on the part of the Seller:

      (a) any failure by the Seller to remit to the Purchaser any payment
required to be made under the terms of this Agreement which continues unremedied
for a period of five (5) Business Days after the date upon which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Seller by the Purchaser; or

      (b) the failure by the Seller duly to observe or perform in any material
respect any other of the covenants or agreements on the part of the Seller set
forth in this Agreement which continues unremedied for a period of thirty (30)
days (except that such number of days shall be fifteen (15) in the case of a
failure to pay any premium for any insurance policy required to be maintained
under this Agreement) after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Seller by the
Purchaser; or

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

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

      (e) the Seller 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 or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or

      (f) the Seller, without the consent of the Purchaser, attempts to assign
this Agreement or the servicing responsibilities hereunder or to delegate any
substantial part of its duties hereunder or any portion thereof; or

      (g) the Seller fails to maintain its license to do business or service
commercial mortgage loans in any jurisdiction where the Mortgaged Properties are
located and such failure results in a material adverse effect on the Mortgage
Loans, the servicing of the Mortgage Loans, or the Purchaser's rights with
respect to the Mortgage Loans.

      In each and every such case, so long as an Event of Default shall not have
been remedied, in addition to whatsoever rights the Purchaser may have at law or
equity to damages, including

                                      30
<PAGE>

injunctive relief and specific performance, the Purchaser, by notice in writing
to the Seller, may terminate without compensation or reimbursement (other than
Servicing Fees previously earned but remaining unpaid and Servicing Advances
remaining unreimbursed) all the rights and obligations of the Seller under this
Agreement and in and to the Mortgage Loans and the proceeds thereof.

      Upon receipt by the Seller of such written notice, all authority and power
of the Seller under this Agreement, whether with respect to the Mortgage Loans
or otherwise, shall pass to and be vested in the successor appointed pursuant to
Section 8.06. Upon written request from the Purchaser, the Seller shall prepare,
execute and deliver any and all documents and other instruments reasonably
requested by the Purchaser, place in such successor's possession all Mortgage
Files (to the extent not properly delivered to the Purchaser by the Seller
previously), and do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise, at the Seller's sole expense. The Seller agrees
to reasonably cooperate with the Purchaser and such successor in effecting the
termination of the Seller'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 Seller to the
Custodial Account or Escrow Account or thereafter received with respect to the
Mortgage Loans, subject to the Seller's right to be paid for unreimbursed
Servicing Advances and earned and unpaid Servicing Fees.

      SECTION 11.02 WAIVER OF DEFAULTS. The Purchaser may waive any default by
the Seller in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly so waived.

                                   ARTICLE XII
                            MISCELLANEOUS PROVISIONS

      SECTION 12.01 NOTICES. All notices, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given upon the
delivery or mailing thereof, as the case may be, sent by registered or certified
mail, return receipt requested:

      (a)   If to Purchaser to:

            People's Preferred Capital Corporation
            5900 Wilshire Boulevard
            Los Angeles, California 90036
            Attention: Secretary

                                      31
<PAGE>

      (b)   If to Seller to:

            People's Bank of California
            5900 Wilshire Boulevard
            Los Angeles, California 90036
            Attention: Secretary

      SECTION 12.02 WAIVERS. Either the Seller or the Purchaser may upon consent
of all parties, by written notice to the others:

      (a) Waive compliance with any of the terms, conditions or covenants
required to be complied with by the others hereunder; and

      (b) Waive or modify performance of any of the obligations of the others
hereunder.

The waiver by any party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other subsequent breach.

      SECTION 12.03 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Purchase
Agreement constitute the entire agreement between the parties with respect to
servicing of the Mortgage Loans. This Agreement may be amended and any provision
hereof waived, but, only in writing signed by the party against whom such
enforcement is sought.

      SECTION 12.04 EXECUTION; BINDING EFFECT. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement. Subject to Sections 8.03 and 8.04, this Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns.

      SECTION 12.05 HEADINGS. Headings of the Articles and Sections in this
Agreement are for reference purposes only and shall not be deemed to have any
substantive effect.

      SECTION 12.06 APPLICABLE LAW. This Agreement shall be construed in
accordance with the laws of the State of California and the obligations, rights
and remedies hereunder shall be determined in accordance with the substantive
laws of the State of California (without regard to conflicts of laws
principles), except to the extent preempted by Federal law.

      SECTION 12.07 RELATIONSHIP OF PARTIES. Nothing herein contained shall be
deemed or construed to create a partnership or joint venture between the
parties. The duties and responsibilities of the Seller shall be rendered by it
as an independent contractor and not as an agent of the Purchaser. The Seller
shall have full control of all of its acts, doings, proceedings, relating to or
requisite in connection with the discharge of its duties and responsibilities
under this Agreement.

                                      32
<PAGE>

      SECTION 12.08 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 12.09 EXHIBITS. The exhibits to this Agreement are hereby
incorporated and made a part hereof and are integral parts of this Agreement.

                                      33
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date and year first above written.

                              PEOPLE'S PREFERRED CAPITAL CORPORATION
                              (the Purchaser)

                                  /s/ J. Michael Holmes
                              By:----------------------------
                                      J. Michael Holmes
                              Name:--------------------------
                              Title: Executive Vice President/
                                    --------------------------
                                     Chief Financial Officer
                                    --------------------------

                              PEOPLE'S BANK OF CALIFORNIA
                              (the Seller)

                                  /s/ J. Michael Holmes
                              By:----------------------------
                                      J. Michael Holmes
                              Name:--------------------------
                              Title: Executive Vice President/
                                    -------------------------
                                     Chief Financial Officer
                                    -------------------------

                                  /s/ William W. Flader
                              By:----------------------------
                                      William W. Flader
                              Name:--------------------------
                              Title: Executive Vice President
                                    -------------------------

                                       34
<PAGE>

                                    EXHIBIT A

                            MONTHLY REMITTANCE ADVICE
<PAGE>

                                    EXHIBIT B

                         CUSTODIAL ACCOUNT CERTIFICATION

                               ____________, 1997

      _________________ hereby certifies that it has established the account
described below as a Custodial Account pursuant to Section 2.04 of the
Commercial Servicing Agreement, dated as of ______, 1997.

Title of Account: "People's Bank of California, in trust for People's Preferred
                  Capital Corporation."

Account Number:   ___________________________________

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

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

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

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

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

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

                                          PEOPLE'S BANK OF CALIFORNIA

                                          By:________________________________
                                          Name:______________________________
                                          Title:_____________________________
<PAGE>

                                    EXHIBIT C

                       CUSTODIAL ACCOUNT LETTER AGREEMENT

                              ______________, 1997

To:
      --------------------
      --------------------
      --------------------
      (the "Depository")

      As Seller under the Commercial Servicing Agreement, dated as of ______,
1997, (the "Agreement"), we hereby authorize and request you to establish an
account, as a Custodial Account pursuant to Section 2.04 of the Agreement, to be
designated as "People's Bank of California, in trust for People's Preferred
Capital Corporation." All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Seller. You may refuse any deposit which would
result in violation of the requirement that the account be fully insured as
described below. This letter is submitted to you in duplicate. Please execute
and return one original to us.

                              PEOPLE'S BANK OF CALIFORNIA

                              By:______________________________
                              Name:____________________________
                              Title:___________________________

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

                              ---------------------------------
                              Depository

                              By:______________________________
                              Name:____________________________
                              Title:___________________________
                              Date:____________________________
<PAGE>

                                    EXHIBIT D

                          ESCROW ACCOUNT CERTIFICATION

                               ____________, 1997

      ______________________________hereby certifies that it has established
the account described below as an Escrow Account pursuant to Section 2.06 of
the Commercial Servicing Agreement, dated as of ________, 1997.

Title of Account: "People's Bank of California in trust for People's Preferred
                  Capital Corporation."

Account Number:   _____________________________

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

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

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

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

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

                              PEOPLE'S BANK OF CALIFORNIA

                              By:______________________________
                              Name:____________________________
                              Title:___________________________
<PAGE>

                                    EXHIBIT E

                         ESCROW ACCOUNT LETTER AGREEMENT

                              ______________, 1997

To:
      --------------------------
      --------------------------
      --------------------------
      (the "Depository")

      As Seller under the Commercial Servicing Agreement, dated as of
____________, 1997 (the "Agreement"), we hereby authorize and request you to
establish an account, as an Escrow Account pursuant to Section 2.06 of the
Agreement, to be designated as "People's Bank of California in trust for the
People's Preferred Capital Corporation." All deposits in the account shall be
subject to withdrawal therefrom by order signed by the Seller. You may refuse
any deposit which would result in violation of the requirement that the
account be fully insured as described below. This letter is submitted to you
in duplicate. Please execute and return one original to us.

                                          PEOPLE'S BANK OF CALIFORNIA

                                          By: _____________________________
                                          Name: ___________________________
                                          Title: __________________________
                                          Date:____________________________

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

                                          ---------------------------------
                                          Depository

                                          By: _____________________________
                                          Name: ___________________________
                                          Title: __________________________
                                          Date:____________________________

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