Document:

Prepared by MERRILL CORPORATION

AGREEMENT

This

Agreement (this “Agreement”) is entered into as of December 13, 2001, by and

among the holders of the Series A 10% Noncumulative Convertible Preferred Stock

(the “Series

A Preferred”) of South Bay Bank, National Association (“SBB”)

whose names are set forth below (each, a “Holder,” and collectively, the “Holders”),

SBB and National Mercantile Bancorp, a California corporation (“NMB”).  Each initially capitalized term not

otherwise defined herein shall have the meaning set forth in the Consolidation

Agreement (as defined below).

RECITALS

WHEREAS,

the Agreement and Plan of Reorganization (the “Consolidation Agreement”),

dated July 18, 2001, by and between SBB and NMB, and the Redemption

Agreement (the “Redemption Agreement”), dated July 18, 2001, by and among

SBB and the Holders, contemplate that SBB would redeem all outstanding shares

of Series A Preferred upon the terms set forth in the Redemption Agreement

prior to the closing of the consolidation of SBB and an interim bank subsidiary

of NMB pursuant to the Consolidation Agreement (the “Consolidation Closing”);

WHEREAS,

NMB has determined that it would be preferable if SBB did not redeem all of the

Series A Preferred held by the Holders, and concurrently herewith NMB and

SBB are amending the Consolidation Agreement to provide that SBB will redeem

only the shares of Series A Preferred which NMB requests be redeemed;

WHEREAS,

NMB has determined to request that SBB redeem only the shares of Series A

Preferred held by Willard W. McLagen (the “McLagen Shares”), and the other Holders are

willing to permit SBB to redeem the McLagen Shares without redeeming their

shares of Series A Preferred;

WHEREAS,

NMB has requested that SBB and the Holders agree to amend the terms and

conditions of the Series A Preferred, and on the terms and subject to the

conditions of this Agreement, SBB and the Holders are willing to agree to such

amendments;

NOW,

THEREFORE, in consideration of the mutual promises contained herein, and other

good and valuable consideration, the sufficiency of which is hereby

acknowledged, the parties agree as follows:

1.             Amendments

to Articles of Association.

 

1.1           The

Holders hereby agree to vote (by vote or written consent) for the following

amendments (the “Amendments”)to

the Articles of Association of SBB (the “Articles”) to be effective if and only if

the Consolidation Closing occurs:

1.1.1            Dividends.  Article Fifth, Section 2 of the

Articles shall be amended as follows:

Section

2(a) shall be amended in its entirety to read as follows:

“(i) Holders

of shares of Series A Preferred shall be entitled to receive noncumulative

cash dividends, payable quarterly in arrears for such quarter, when, as and if

declared by the Board of Directors out of funds legally available therefor, for

each quarterly period (each, a “Dividend Period”) commencing on the

first day of each January, April, July and October and ending on and including

the day next preceding the first day of the next Dividend Period, at a rate of

10.0% per annum per stated value of each share through ________, and at a rate

of 8.5% per annum per stated value of each share thereafter.

“(ii) Dividends

for any Dividend Period shall be declared (if at all) no later than 30 days

following the end of such Dividend Period. 

In connection with the declaration of any dividend on the Series A

Preferred, the Board of Directors shall specify to which Dividend Period the

dividends apply.

The

blank shall be completed with the date of Consolidation Closing.

Section

2 shall be amended by adding new paragraph (e) to read as follows:

“(e)         For purposes of this Section 2,

references to the ‘current Dividend Period’ as of any date shall mean the

Dividend Period in which such date occurs unless such date is within the first

calendar month of a Dividend Period, in which event such reference shall mean

the immediately preceding Dividend Period. 

As an example, for the period of January 2002, the ‘current Dividend

Period’ would be the calendar quarter ending December 31, 2001.”

1.1.2            Conversion

Right.  Article Fifth, Section 5,

of the Articles shall be deleted in its entirety, such that the Holders shall

have no conversion rights with respect to their shares of Series A

Preferred.

1.1.3            Designation

of Series A Preferred.  Article

Fifth, Section 1(a) shall be amended in its entirety to read as follows:

“(a)  The designation of such series of serial

preferred stock shall be the Series A 8.5% Noncumulative Perpetual Preferred

Stock (the “Series A Preferred”). 

The Series A Preferred shall have a stated value of $25.00 per share,

and the number of shares of such series is 200,000.”

1.2           SBB

represents that the Board of Directors of SBB has approved the Amendments, and

agrees to take such actions as may be necessary or appropriate to effect the

Amendments, assuming the Consolidation Closing occurs.

1.3           The

Holders agree to execute such written consent or consents, or attend and vote

in person or by proxy at a meeting, before and/or after the Consolidation

Closing, as may be required to approve Amendments under applicable law and regulation

and the Articles and Bylaws of SBB.

2.             Exchange Right.  If the Consolidation Closing

occurs, NMB agrees that the Holders may exchange their Series A Preferred

for shares of NMB Common Stock (“NMB Common”) on the following terms and

subject to the following conditions:

2.1           Each

share of Series A Preferred shall be exchangeable at any time and from time to

time after June 30, 2005, at the option of the Holder thereof, into the

number of shares of NMB Common equal to the result obtained by dividing the

stated value of $25.00 per share by the Exchange Price.  The “Exchange Price” shall be an amount equal to

50% of the book value per share of the NMB Common, on a fully diluted basis, as

of June 30, 2005, as determined by the Board of Directors of NMB in

accordance with generally accepted accounting principles as then applied to

NMB, subject to adjustment from time to time as provided in this

Section 2.  NMB shall notify each

Holder of the Exchange Price as soon as is practicable following June 30,

2005.

2.2           The

exchange of shares of Series A Preferred may be effected by any Holder

upon the surrender for transfer to NMB at the principal office of NMB of the

certificate or certificates for such shares of Series A Preferred to be

exchanged, duly endorsed for transfer to NMB, accompanied by a written notice

stating that such Holder elects to exchange all or a specified whole number of

such shares in accordance with the provisions of this Section 2.  Such exchange shall be deemed to have been

made at the close of business on the date of giving such notice and of such

surrender of the certificate or certificates representing the shares of

Series A Preferred to be exchanged, so that all rights of the Holder

thereof as to the shares being exchanged shall cease except for the right to

receive shares of NMB Common and accrued and unpaid dividends previously

declared with respect to the shares of Series A Preferred being exchanged

as of the end of the fiscal quarter of SBB immediately preceding the date of

such exchange, in each case in accordance herewith.

2.3           In

case any shares of Series A Preferred are to be called by NMB pursuant to

Section 3 below, the right of exchange set forth in this Section 2

shall cease and terminate as to the shares of Series A Preferred to be so

called by NMB, at the close of business on the business day immediately

preceding the date fixed for such call unless NMB shall default in the payment

of the call price therefor, as provided below.

2.4           In

connection with the exchange of any shares of Series A Preferred, no

fractions of shares of NMB Common shall be issued, but in lieu thereof, NMB

shall pay a cash adjustment in respect of such fractional interest in an amount

equal to such fractional interest multiplied by the Exchange Price.  If more than one share of Series A

Preferred shall be surrendered for exchange by the same Holder at the same

time, the number of full shares of NMB Common issuable on exchange thereof

shall be computed on the basis of the total number of shares of Series A

Preferred so surrendered.

2.5           NMB

shall at all times from and after the Consolidation Closing reserve and keep

available, free from preemptive rights, for issuance upon the exchange of

shares of Series A Preferred, such number of its authorized but unissued shares

of NMB Common as will from time to time be sufficient to permit the exchange of

all outstanding shares of Series A Preferred.  Prior to the delivery of any securities that NMB shall be

obligated to deliver upon exchange of the Series A Preferred, NMB shall

comply with all applicable federal and state laws and regulations requiring

action to be taken by NMB; provided, however, that NMB may refuse

to permit exchange of any shares of Series A Preferred if the Board of

Directors shall determine that the issuance of NMB Common in connection with

such exchange cannot be effected pursuant to available exemptions from

registration and qualification under applicable federal and state securities

laws and regulations, unless the Holder seeking to exchange such shares agrees

to pay all costs and expenses of NMB in connection with such registration and

qualification.  All shares of NMB Common

delivered upon exchange of the Series A Preferred will upon delivery be

duly and validly issued and fully paid and nonassessable, free of all liens and

charges and not subject to any preemptive rights.

2.6           The

Exchange Price shall be subject to adjustment from time to time as follows:

2.6.1            Stock

Splits and Combinations.  In case

NMB shall at any time or from time to time after June 30, 2005

(a) subdivide or split the outstanding shares of NMB Common,

(b) combine or reclassify the outstanding shares of NMB Common into a

smaller number of shares, (c) pay any dividend respecting the NMB Common

in shares of NMB Common, or (d) issue by reclassification of the shares of

NMB Common any shares of capital stock of NMB, then, and in each such case, the

Exchange Price in effect immediately prior to such event or the record date

therefor, whichever is earlier, shall be adjusted so that the Holder of any

shares of Series A Preferred thereafter surrendered for exchange shall be

entitled to receive the number of shares of NMB Common or other securities of

NMB such Holder would have owned or have been entitled to receive after the

occurrence of any of the events described above, had such shares of

Series A Preferred been surrendered for exchange immediately prior to the

occurrence of such event or the record date therefor, whichever is

earlier.  An adjustment made pursuant to

this Section 2.6.1 shall become effective at the close of business on the

day upon which such corporate action becomes effective.  Such adjustment shall be made successively

whenever any event listed above shall occur.

2.6.2            Issuance

of Rights or Warrants.  In case NMB

shall issue after June 30, 2005 to all holders of the NMB Common rights or

warrants expiring within 45 days entitling such holders to subscribe for

or purchase NMB Common at a price per share less than the Current Market Price

(as defined below), the Exchange Price in effect immediately prior to the close

of business on the record date fixed for determination of shareholders entitled

to receive such rights or warrants shall be reduced by multiplying such

Exchange Price by a fraction, the numerator of which is the sum of (a) the

number of shares of NMB Common outstanding at the close of business on such

record date and (b) the number of shares of NMB Common that the aggregate

offering price of the total number of shares of NMB Common so offered for subscription

or purchase would purchase at such Current Market Price, and the denominator of

which is the sum of (c) the number of shares of NMB Common outstanding at

the close of business on such record date and (d) the number of additional

shares of NMB Common so offered for subscription or purchase.  For purposes of this Section 2.6.2, the

issuance of rights or warrants to subscribe for or purchase securities

convertible into NMB Common shall be deemed to be the issuance of rights or

warrants to purchase NMB Common into which such securities are convertible, at

an aggregate offering price equal to the sum of the aggregate offering price of

such securities and the minimum aggregate amount (if any) payable upon

conversion of such securities into NMB Common. 

Such adjustment shall be made successively whenever any such event shall

occur.  The “Current Market Price” shall

mean, as applicable, the average daily closing prices for shares of the NMB

Common for the five consecutive trading days selected by the Board of Directors

of NMB commencing not more than 20 trading days before, and ending not later

than the date of such event and the date immediately preceding the record date

fixed in connection with such event, utilizing for any day within such five-day

period for which actual trades are not reported, the mid-point between the

closing bid and asked prices for such day as reported on NASDAQ, or on any

exchange on which the NMB Common is then listed or, if not so listed, by the

principal market maker then making a market in such shares, or if such shares

are not listed on any exchange or the NASD Stock Market, or traded by a market

maker, the price determined in good faith by the Board of Directors of NMB.

2.6.3            Distribution

of Indebtedness, Securities or Assets. 

In case NMB shall distribute to all holders of the NMB Common after

June 30, 2005 (whether by dividend, or in a merger, or consolidation, or

otherwise) evidences of indebtedness, shares of capital stock of any class or

series, other securities, cash or assets, the Exchange Price in effect

immediately prior to the close of business on the record date fixed for

determination of shareholders entitled to receive such distribution shall be

reduced by multiplying such Exchange Price by a fraction, the numerator of

which is the Current Market Price on such record date less the fair market

value (as determined by the Board of Directors of NMB, whose determination in

good faith shall be conclusive) of the portion of such evidences of

indebtedness, shares of capital stock, other securities, cash and assets so

distributed applicable to one share of NMB Common, and the denominator of which

is the Current Market Price. Such adjustment shall be made successively

whenever any such event shall occur.

2.7           It

shall be a condition to the Holder’s right to exchange shares of Series A

Preferred for NMB Common that the representations and warranties in

Section 4 shall be true and correct as of the date of exercise of the

right.

2.8           Anything

in this Section 2 to the contrary notwithstanding, NMB shall not be

required to give effect to any adjustment in the Exchange Price unless and

until the net effect of one or more adjustments (each of which shall be carried

forward until counted toward adjustment), determined as above provided, shall

have resulted in a change of the Exchange Price by at least 1%, and when the

cumulative net effect of more than one adjustment so determined shall be to

change the Exchange Price by at least 1%, such change in the Exchange Price

shall thereupon be given effect.  In the

event that, at any time as a result of the provisions of this Section 5,

the holder of shares of Series A Preferred upon subsequent conversion

shall become entitled to receive any shares of capital stock of NMB other than

NMB Common, the number of such other shares so receivable upon conversion of

shares of Series A Preferred shall thereafter be subject to adjustment

from time to time in a manner and on terms as nearly equivalent as practicable

to the provisions contained herein.

2.9           In

case any transaction or event (including, without limitation, any merger,

consolidation, sale of assets, tender or exchange offer, reclassification,

compulsory share exchange or liquidation) shall occur after the date of the

Consolidation Closing, in which all or substantially all outstanding NMB Common

is converted into or exchanged for stock, other securities, cash or assets

(each, a “Fundamental

Change”), the Holder of each share of Series A Preferred

outstanding immediately prior to the occurrence of such Fundamental Change

shall have the right upon any subsequent exchange made pursuant to this

Agreement to receive (but only out of legally available funds, to the extent

required by applicable law) the kind and amount of stock, other securities,

cash and assets that such Holder would have received if such share had been

exchanged for NMB Common immediately prior thereto.

2.10         There

shall be no adjustment of the Exchange Price in case of the issuance of any

stock of NMB in a merger, consolidation, reorganization, acquisition,

reclassification, recapitalization or other similar transaction except as set

forth in this Section 2.

2.11         In

any case in which this Section 2 requires that an adjustment as a result

of any event become effective from and after a record date, NMB may elect to

defer until after the occurrence of such event (a) issuing to the Holder

of any shares of Series A Preferred exchanged after such record date and

before the occurrence of such event the additional shares of NMB Common

issuable upon such exchange over and above the shares issuable on the basis of

the Exchange Price in effect immediately prior to adjustment and

(b) paying to such Holder any amount in cash in lieu of a fractional share

of NMB Common.

2.12         If

NMB shall take a record of the holders of NMB Common for the purpose of

entitling them to receive a dividend or other distribution, and shall

thereafter and before the distribution to shareholders thereof legally abandon

its plan to pay or deliver such dividend or distribution, then thereafter no

adjustment in the number of shares of NMB Common issuable upon exercise of the

right of exchange granted by this Section 2 or in the Exchange Price then

in effect shall be required by reason of the taking of such record.

2.13         The

Board of Directors of NMB shall have the power to resolve any ambiguity or

correct any error in this Section 2, and its action in so doing shall be

final and conclusive.

2.14         The

Holders hereby acknowledge that notwithstanding anything in this Agreement or

the Articles to the contrary, the occurrence of the Consolidation Closing will

not entitle them to convert their Series A Preferred into common stock of

SBB or into the consideration being received by the holders of SBB Common Stock

in the Consolidation.

3.             Call Option of NMB.  NMB may, at

its sole option, at any time or from time to time after the Consolidation

Closing, call all and not less than all of the shares of Series A

Preferred then outstanding, on the following terms and subject to the following

conditions:

3.1           Consideration.  The consideration for each share

Series A Preferred called by NMB shall be either (at the option of NMB)

(a) cash in an amount equal to $25.00 plus dividends declared and unpaid

for the then-current Dividend Period (as defined in the Articles) (without

accumulation of accrued and unpaid dividends for prior Dividend Periods unless

previously declared and without interest) to the date fixed for such demand

(the “Call

Price”); or (b) that number of shares of NMB Common as each

Holder would be entitled to if the shares of Series A Preferred subject to

the call were exchanged in accordance with the provisions of Section 2

above at the then-current Exchange Price, except that if the Call Date is prior

to June 30, 2005, the “Exchange Price” shall be an amount equal to

50% of the book value per share of the NMB Common, on a fully diluted basis, as

of the end of the fiscal quarter most recently ended as of the Call Date.

3.2           Notice

of Call.  In the event NMB shall

call shares of Series A Preferred, notice of such call shall be given by

first-class mail, postage pre-paid, mailed not less than 20 days nor more

than 60 days prior to the date fixed for the call, to each Holder, at such

Holder’s address as the same appears on the books of SBB.  Each notice shall state:  (a) the date fixed for the call (the “Call Date”);

(b) the Call Price (specifying the amount of declared and unpaid dividends

to be included therein) and the manner in which such Call Price is to be paid

and delivered; and (c) the place or places where certificates for such

shares are to be surrendered for payment of the Call Price.  No defect in the notice of the call or in

the mailing thereof shall affect the validity of the call proceedings, and the

failure to give notice to any Holder to be so called shall not affect the

validity of the notice given to the other Holders.

3.3           Effect

of Date of Call; Failure to Surrender Certificate.  If such notice of call shall have been duly

mailed, then, notwithstanding that any certificate for shares of Series A Preferred

so called shall not have been surrendered for transfer to NMB, all shares of

Series A Preferred so called shall no longer be deemed to be owned by the

Holder thereof and all rights with respect to such shares of Series A

Preferred shall forthwith be deemed to have been transferred to NMB upon the

Call Date, except for the right of the Holders thereof to receive from NMB at

any time thereafter consideration from NMB in the form of either the Call Price

or shares of NMB Common, as the case may be. 

SBB agrees not to effect any transfers of the Series A Preferred by a

Holder following the Call Date, except for the transfer to NMB or its

assigns.  All dividends and

distributions which are declared with respect to the Series A Preferred

following the Call Date shall be payable to NMB or its assigns, and not to the

Holders and each Holder hereby authorizes and instructs SBB to pay such

dividends and distributions directly to NMB or its assigns.  Each Holder hereby irrevocably appoints NMB,

with full power of substitution, as its proxy any time after the Call Date to

vote its shares of Series A Preferred, and instructs SBB to ignore any

voting instructions or consents by such Holder from and after the Call

Date.  No interest shall accrue on the

Call Price or any shares of NMB Common issuable in exchange for the

Series A Preferred.  The procedure

for surrender of certificates upon any such call will be as set forth in

Section 2.2.

3.4           Limitation

on Exercise of Call Right.  NMB may

not exercise its call right under this Section 3 after June 30, 2005 with

respect to a Holder’s shares of Series A Preferred if prior to such exercise

the Holder has properly exercised his exchange right under Section 2 of this

Agreement.

4.             Representations, Warranties and Agreements of the Holders. 

Each Holder represents and warrants to NMB that as of the date hereof

and at the time of any exchange of shares of Series A Preferred pursuant

to Section 2 of this Agreement, and agrees with NMB, as follows:

4.1           Holder

will acquire the shares of NMB Common (the “Shares”) for such Holder’s

own account, for investment purposes only.

4.2           Holder

is an “accredited investor” as that term is defined in Rule 501(a) under

Regulation D promulgated pursuant to the Securities Act of 1933, as amended (the

“Securities

Act”).

4.3           Holder

has such knowledge and experience in financial and business matters that Holder

is capable of evaluating the merits and risks of an investment in the Shares

and in protecting his or her own interest in connection with the investment.

4.4           Holder

understands that the Shares have not been registered under the Securities Act

or under any state securities laws. 

Holder is familiar with the provisions of the Securities Act and

Rule 144 thereunder and understands that the restrictions on transfer

placed on the Shares may result in Holder being required to hold the Shares for

an indefinite period of time.

4.5           Holder

believes that he or she has received all the information he or she considers

necessary or appropriate for deciding whether to invest in the Shares, and

Holder has had an opportunity to ask questions and receive answers from NMB and

its officers and directors regarding the business, prospects and financial

condition of NMB.

4.6           Holder

agrees not to sell, assign, transfer or otherwise dispose of, with or without

consideration (“Transfer”) any of the Shares except pursuant to an effective

registration statement under the Securities Act or an exemption from

registration.  As a further condition to

any such Transfer, except in the event that such Transfer is made pursuant to

an effective registration statement under the Securities Act, if in the

reasonable opinion of counsel to NMB any Transfer of the Shares by the

contemplated transferee thereof would not be exempt from the registration and

prospectus delivery requirements of the Securities Act, NMB may require the

contemplated transferee to furnish NMB with an investment letter setting forth

such information and agreements as may be reasonably requested by NMB to ensure

compliance by such transferee with the Securities Act.  Holder agrees to comply with any and all

procedures for any such sale, assignment or transfer of the Shares set forth in

this Agreement.

4.7           Each

certificate evidencing the Shares will bear either the following legends

or  similar legends:

“THE

SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933 (THE “ACT”) AND ARE “RESTRICTED SHARES” AS THAT TERM IS

DEFINED IN RULE 144 UNDER THE ACT. 

THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED

EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR

PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT.”

“THE

SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CALL OPTION AND PROXY IN

FAVOR OF BY NATIONAL MERCANTILE BANCORP PURSUANT TO AN AGREEMENT BETWEEN

NATIONAL MERCANTILE BANCORP AND THE REGISTERED HOLDER HEREOF, A COPY OF WHICH

IS ON FILE AT THE OFFICE OF THE ISSUER.”

Each

Holder agrees to deliver to NMB upon demand the certificate or certificates

evidencing such Holder’s Series A Preferred for inclusion of these legends.

4.8           All

shares of Series A Preferred delivered to NMB in exchange for shares of

NMB Common will upon surrender to NMB be free of all liens and charges.

5.             Registration

Rights.

 

5.1           If

at any time after the earlier of the Commencement Date or June 30, 2005,

NMB shall determine to register any NMB Common under the Securities Act for

sale in connection with a public offering of NMB Common for cash (other than

pursuant to an employee benefit plan), NMB will give written notice thereof to

the holders of Registrable Shares, and will include in such registration any

Registrable Shares which such holders (“Requesting Holders”) may request be

included delivered to NMB within 15 days after the notice given by NMB; provided,

however, if the representative of the underwriters of the offering shall

refuse in writing to include in the offering all of the shares of NMB Common

requested by NMB and others (including Requesting Holders), the shares to be

included shall be allocated first to NMB, second to persons with contractual

priority as to inclusion in such registration, including without limitation the

registration rights of certain registration rights holders under that certain

Registration Rights Agreement dated June 30, 1997 between NMB and the Conrad

Company, and third among the Requesting Holders and others based on the

respective number of shares of NMB Common held by such persons (the Registrable

Shares which are included in the registration shall be referred to as the “Included

Shares”).  If NMB decides not

to, and does not, file a registration statement with respect to such

registration, or after filing determines to withdraw the same before the

effective date there of, NMB will so inform the Requesting Holders, and NMB

will not be obligated to complete the registration of the Included Shares

included therein.

5.2           If

NMB shall receive from any Holder(s) (the “Initiating Holders”) whose Registrable

Shares constitute more than 25% of the Registrable Shares a written request

that NMB effect a registration of such shares under the Securities Act, NMB

will, as soon as reasonably practicable thereafter, send notice thereof to the

other Holders and effect such registration to permit or facilitate the sale and

distribution of the Registrable Shares requested to be included in the

registration by the Initiating Holders and all other Holders who request that

Registrable Shares be included by written notice to NMB within 15 days

after the notice given by NMB (the “Included Shares”); provided, however,

that NMB:  (a) shall not be

obligated to effect such registration, qualification or compliance hereunder:

(i) prior to the Commencement Date; or (ii) on more than one

occasion; and (b) shall not be obligated to maintain the effectiveness of

the registration statement more than 90 days; and (c) may delay the filing

of any such registration statement by up to 90 days if the Board of

Directors of NMB determines that the filing would be materially detrimental to

NMB because of potential corporate transactions or events pending which may be

required to be disclosed in such registration statement and with respect to

which disclosure would be damaging to NMB; (d) acknowledges that the registration

rights contemplated by this Section 5.2 are subordinate to the rights of

certain registration rights holders including, without limitation, the holders

of certain registration rights under that certain Registration Rights Agreement

dated June 30, 1997 between NMB and the Conrad Company.

5.3           In

connection with any registration under this Section 5, NMB will:

5.3.1            furnish

to each Requesting Holder a copy of the registration statement and each

amendment to the registration statement and such number of copies of the final

prospectus included in the registration statement as the Requesting Holder may

reasonably request in order to facilitate the distribution of the Included

Shares owned by such Holder;

5.3.2            notify

the Requesting Holders of the issuance of any stop order by the SEC in

connection with the registration statement; and

5.3.3            pay

all costs and expenses of such registration other than underwriting discounts

or brokerage fees or commissions in connection with the sale of Included Shares

and fees and costs of accountants, attorneys or others retained by Requesting

Holders.

5.4           As

a condition to including Registrable Shares in the registration statement, each

Requesting Holder must provide (a) to NMB such information regarding

itself, the Registrable Shares held by it and the intended method of

distribution of such Shares as shall be required to effect the registration of

the Registrable Shares and, (b) if the offering is being underwritten, to

the underwriters such powers of attorney, indemnities and other documents as

may be reasonably requested by the managing underwriter.

5.5           Following

the effectiveness of the registration statement, upon receipt from NMB of a

notice that the registration statement contains an untrue statement of material

fact or omits to state any material fact required to be stated therein or

necessary to make the statements therein not misleading in light of the

circumstances under which they were made, each Requesting Holder will

immediately discontinue disposition of Included Shares pursuant to the

registration statement until NMB notifies the Requesting Holder that it may

resume sales of Included Shares and, if necessary, provides to the Requesting

Holder copies of the supplemental or amended prospectus.  In such event, each Requesting Holder agrees

to deliver to NMB all copies, other than permanent file copies then in Holder’s

possession, of the most recent prospectus covering the Included Shares.  If the registration is a demand registration

pursuant to Section 5.2, NMB will use its best efforts to do all things

necessary, as soon as reasonably practicable, to amend, modify or otherwise

correct the registration statement and the untrue statement of material fact or

omission of material fact unless the same relates to a material corporate

transaction, event or development, the disclosure of which would be, in the

judgment of the Board of Directors of NMB, materially detrimental to NMB, in

which event NMB may delay the amendment of the registration statement for up to

90 days; provided, however, that amount of time for any such

delay shall be added to amount of time NMB shall be required to maintain the

registration statement effective under Section 5.2.

5.6           In

connection with any registration pursuant to this Section 5, NMB agrees to

indemnify and hold harmless each Requesting Holder, its officers, directors and

agents, and each person, if any, who controls such Requesting Holder within the

meaning of Section 15 of the Securities Act or Section 20 of the

Exchange Act from and against any and all losses, claims, damages and

liabilities caused by (a) any violation or alleged violation by NMB of the

Securities Act, Exchange Act, any state securities laws or any rule or

regulation promulgated under the Securities Act, Exchange Act or any state

securities laws, (b) any untrue statement or alleged untrue statement of a

material fact contained in any registration statement or prospectus relating to

the Included Shares (as amended or supplemented if NMB shall have furnished any

amendments or supplements thereto) or any preliminary prospectus, or

(c) caused by any omission or alleged omission to state therein a material

fact required to be stated therein or necessary to make the statements therein

not misleading in light of the circumstances under which they were made, except

insofar as such losses, claims, damages or liabilities are caused by any such

untrue statement or omission or alleged untrue statement or omission based upon

information furnished in writing to NMB by the Requesting Holder or on such

Holder’s behalf expressly for use therein; provided that with respect to

any untrue statement or omission or alleged untrue statement or omission made

in any preliminary prospectus, or in any prospectus, as the case may be, the

indemnity agreement contained in this paragraph shall not apply to the extent

that any such loss, claim, damage, liability or expense results from the fact

that a current copy of the prospectus (or, in the case of a prospectus, the

prospectus as amended or supplemented) was not sent or given to the person

asserting any such loss, claim, damage, liability or expense at or prior to the

written confirmation of the sale of the Included Shares concerned to such

person.

5.7           Each

Requesting Holder agrees to indemnify and hold harmless NMB, its officers,

directors and agents and each person, if any, who controls NMB within the

meaning of either Section 15 of the Securities Act or Section 20 of

the Exchange Act to the same extent as the foregoing indemnity from NMB to the Requesting

Holder, but only (i) with respect to information furnished in writing by

the Requesting Holder or on such Holder’s behalf expressly for use in any

registration statement or prospectus relating to the Registrable Shares, or any

amendment or supplement thereto, or any preliminary prospectus or (ii) to

the extent that any loss, claim, damage, liability or expense described in

Section 5.6 results from the fact that a current copy of the prospectus

(or, in the case of a prospectus, the prospectus as amended or supplemented)

was not sent or given to the person asserting any such loss, claim, damage,

liability or expense at or prior to the written confirmation of the sale of the

Registrable Shares concerned to such person.

5.8           In

case any proceeding (including any governmental investigation) shall be

instituted involving any person in respect of which indemnity may be sought

pursuant to this Section 5, such person (an “Indemnified Party”) shall

promptly notify the person against whom such indemnity may be sought (the “Indemnifying

Party”) in writing and the Indemnifying Party shall assume the

defense thereof, including the employment of counsel reasonably satisfactory to

such Indemnified Party, and shall assume the payment of all fees and expenses; provided

that the failure or delay of any Indemnified Party so to notify the

Indemnifying Party shall not relieve the Indemnifying Party of its obligations

hereunder except to the extent that the Indemnifying Party is materially

prejudiced by such failure or delay to notify. 

In any such proceeding, any Indemnified Party shall have the right to

retain its own counsel, but the fees and expenses of such counsel shall be at

the expense of such Indemnified Party unless (a) the Indemnifying Party

and the Indemnified Party shall have mutually agreed to the retention of such

counsel or (b) in the reasonable judgment of such Indemnified Party

representation of both parties by the same counsel would be inappropriate due

to actual or potential differing interests between them.  It is understood that the Indemnifying Party

shall not, in connection with any proceeding or related proceedings in the same

jurisdiction, be liable for the reasonable fees and expenses of more than one

separate firm of attorneys (in addition to any local counsel) at any time for

all such Indemnified Parties (including all of the Requesting Holders) and that

all such fees and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for

the Indemnified Parties, the Indemnified Parties shall designate such firm in

writing to the Indemnifying Party.  The

Indemnifying Party shall not be liable for any settlement of any proceeding

effected without its written consent (which consent shall not be unreasonably

withheld or delayed), but if settled with such consent, or if there be a final

judgment for the plaintiff, the Indemnifying Party shall indemnify and hold

harmless such Indemnified Parties from and against any loss or liability (to

the extent stated above) by reason of such settlement or judgment.  No Indemnifying Party shall, without the

prior written consent of the Indemnified Party, effect any settlement of any

pending or threatened proceeding in respect of which any Indemnified Party is

or could have been a party and indemnity could have been sought hereunder by

such Indemnified Party, unless such settlement includes an unconditional

release of such Indemnified Party from all liability arising out of such

proceeding.

5.9           The

registration rights under this Section 5 for any Holder shall terminate at

the earlier to occur of:  (a) such

time after one year from the date that the Holder acquires the Registrable

Shares that such shares first represent less than 1% of the outstanding NMB

Common; and (b) two years following the Commencement Date.

5.10         For

purposes of this Agreement, the “Commencement Date” shall mean the date any

Holder receives NMB Common in exchange for its Series A Preferred and the

“Registrable

Shares” means the NMB Common acquired or which may be acquired upon

exchange of the Series A Preferred and any shares of NMB Common issued as

a dividend on such shares or as a result of a stock split with respect to such

shares, provided that any such shares shall cease being Registrable

Shares when sold pursuant to Rule 144 (or a successor rule) or pursuant to

an effective registration statement under the Securities Act.

6.             Missed Dividends on Series A Preferred.

6.1           NMB

agrees that if the Consolidation Closing occurs, for any Dividend Period (as

defined in the Articles) commencing with the first Dividend Period after the

Consolidation Closing and ending with the Dividend Period for the quarter

ending June 30, 2005, if the Capital Condition exists and SBB does not declare

the full dividend under Section 2 of the Articles by the end of the calendar

month following the Dividend Period, NMB will issue to each holder of Series A

Preferred (other than NMB) a number of shares of NMB Common equal to (rounded

to the nearest whole number of shares): (a) the dollar amount of the missed

dividends payable with respect to such holder’s Series A Preferred for such

Dividend Period, divided by (b) the book value per share of NMB Common, on a

fully diluted basis, as of the last day of the related Dividend Period.

6.2           The

“Capital

Condition” shall be deemed to exist for a Dividend Period if: (a) as

of the last day of such Dividend Period, and assuming payment of the full

dividends on the Series A Preferred under Section 2 of the Articles for such

Period, SBB would be in compliance with all applicable regulatory capital

requirements and would be “well-capitalized” under the Prompt Corrective Action

rules applicable to national banks (or any successor category which is the

highest rated category under such rules or any successor rules); (b) the

payment of such dividend would not violate any law, rule, regulation, order,

consent decree or regulatory agreement or directive applicable to SBB; and (c)

any regulatory approval required with respect to the payment of such dividend

shall have been obtained without the imposition of any condition which the

Board of Directors of SBB or NMB deems unacceptable.

7.             Appointment as Directors.  

7.1           NMB

agrees that if the Consolidation Closing occurs, until the Dunn Termination

Date and for long as NMB controls SBB, NMB shall cause Stanley L. Dunn (“Dunn”)

to be elected or appointed as a director of SBB.  The “Dunn Termination Date” shall mean the

earliest to occur of the date: (a) the John C. Dunn Trust (the “Dunn Trust”)

owns of record less than 40,000 shares of Series A Preferred; (b) the OCC, the

FRB or any other applicable regulatory agency or body issues any order or

directive to the effect that Dunn may not, or otherwise advises NMB or SBB in

writing that Dunn should not, be a director of SBB or should be removed as a director

of SBB; (c) the date Dunn becomes subject to any matter described in Item

401(f) of Regulation S-K which would be required to be disclosed in a proxy

statement filed with the SEC under Section 14 of the Securities Exchange Act of

1934, as amended (and regardless of whether SBB files proxy statements under

such Section 14); or (d) the death or disability of Dunn.

7.2           NMB

agrees that if the Consolidation Closing occurs, until the Diorio Termination

Date and for long as NMB controls SBB, NMB shall cause Philip C. Diorio (‘Diorio”)

to be elected or appointed as a director of SBB.  The “Diorio Termination Date” shall mean the

earliest to occur of the date: (a) the Philip C. Diorio, M.D. Inc. Retirement

Trust Fund (the “Diorio Trust”) owns of record less than 10,000 shares of

Series A Preferred; (b) the OCC, the FRB or any other applicable regulatory

agency or body issues any order or directive to the effect that Diorio may not,

or otherwise advises NMB or SBB in writing that Diorio should not, be a director

of SBB; (c) the date Diorio becomes subject to any matter described in Item

401(f) of Regulation S-K which would be required to be disclosed in a proxy

statement filed with the SEC under Section 14 of the Securities Exchange Act of

1934, as amended (and regardless of whether SBB files proxy statements under

such Section 14); or (d) the death or disability of Diorio.

8.             Transfer of Series A Preferred.  No Holder

may Transfer any shares of Series A Preferred other than to NMB or its

assigns unless the transferee agrees in writing, in form and substance

reasonably satisfactory to NMB, to be bound by the obligations of the

transferor under this Agreement.  SBB

agrees not to register any such transfer unless this condition has been

satisfied.

9.             Redemption of McLagen Shares.  Assuming the

Consolidation Closing is to occur, NMB agrees to request that SBB redeem the

McLagen Shares, and the other Holders acknowledge and agree that SBB may redeem

the McLagen Shares without redeeming any of their shares of Series A Preferred.

10.           Termination. 

This Agreement shall terminate upon the termination of the Consolidation

Agreement if such termination occurs without the Consolidation Closing

occurring.

11.           Miscellaneous.

 

11.1         Notices.  All notices, demands or other communications

hereunder shall be in writing and shall be deemed to have been duly given if

(a) delivered in person, on the date actually given, (b) by United

States mail, certified or registered, with return receipt requested, on the

date which is two Business Days after the date of mailing, or (c) if sent

by facsimile transmission, with a copy mailed on the same day in the manner

provided in (a) above, on the date transmitted provided receipt is

confirmed by telephone:

	

  (i)            If to NMB to:

  
	

   

  
	

  National Mercantile Bancorp

  1840 Century Park East

  Los Angeles, CA  90067

  Attention: Scott A.

  Montgomery, CEO

  Telecopy No.: (310)

  201-0629

  
	

   

  
	

  With copies to:

  
	

   

  
	

  Troy &

  Gould, P.C.

  1801 Century Park East

  Los Angeles, California 90067

  Attention: Alan B. Spatz

  Telecopy No.:

  (310) 789-1431

  
	

   

  
	

  (ii)           If to the Holders or any Holder to

  the address set forth next to the name of each such Holder on the attached

  Exhibit A

   

  
	

  (iii)          If to South Bay Bank:

  
	

   

  
	

  South Bay Bank, N.A.

  2200 Sepulvada

  Boulevard

  Torrance, California

  90501

  Attention:  Chief Executive Officer

  
	

   

  

or

at such other address as may have been furnished by such Person in writing to

the other parties.

11.2         Severability.  Should any Section or any part of a Section

within this Agreement be rendered void, invalid or unenforceable by any court

of law for any reason, such invalidity or unenforceability shall not void or

render invalid or unenforceable any other Section or part of a Section in this

Agreement.

11.3         Governing

Law.  THIS AGREEMENT SHALL BE

GOVERNED BY AND CONSTRUED BOTH AS TO VALIDITY AND PERFORMANCE AND ENFORCED IN

ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO

THE CHOICE OF LAW PRINCIPLES THEREOF.

11.4         Headings.  Section headings and subheadings used in

this Agreement are for convenience only and shall not affect the meaning or

construction of this Agreement.

11.5         No

Adverse Construction.  The rule that

a contract is to be construed against the party drafting the contract is hereby

waived, and shall have no applicability in construing this Agreement.

11.6         Counterparts.  This Agreement may be executed in one or

more counterparts, each of which shall be deemed an original but all of which

together shall constitute one and the same instrument.

11.7         Costs

and Attorneys’ Fees.  In the event

that any lawsuit, proceeding or other similar action is instituted concerning

or arising out of this Agreement,  the

prevailing party shall recover all of such party’s costs, and reasonable

attorneys’ fees incurred in each and every such Action, including any and all

appeals or petitions therefrom.

11.8         Successors

and Assigns.  All rights, covenants

and agreements of the parties contained in this Agreement shall, except as

otherwise provided herein, be binding upon and inure to the benefit of their

respective successors and assigns.

11.9         Amendment.  This Agreement may be amended at any time

only by the mutual written agreement of NMB and the Holders and, if the

amendment affects SBB directly, the agreement of SBB.

11.10       Entire

Agreement.  This Agreement and the attached

Exhibit, contain the entire understanding of the parties and there are no

further or other agreements or understandings, written or oral, in effect

between the parties relating to the subject matter hereof unless expressly

referred to herein.

IN WITNESS WHEREOF, the parties hereto have executed

and delivered this Agreement as of the date first above written.

	

   

  	

  National Mercantile

  Bancorp

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Scott A. Montgomery

  	

   

  
	

   

  	

   

  	

  Scott A. Montgomery,

  Chief Executive Officer 

  and President

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ David Brown

  	

   

  
	

   

  	

   

  	

  David Brown, Chief

  Financial Officer

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  South Bay Bank,

  National Association

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Kenneth M. Miller

  	

   

  
	

   

  	

   

  	

  Kenneth M. Miller, Chairman of the Board

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Charles W. Calhoun

  	

   

  
	

   

  	

   

  	

  Charles W. Calhoun, Chief Executive Officer 

  and President

  	

   

  
					

 

	

   

  	

  THE HOLDERS  

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  JOHN C. DUNN TRUST

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  /s/ Stanley L. Dunn 

  	

   

  
	

   

  	

  By:

  	

  Stanley L. Dunn 

  	

   

  
	

   

  	

  Its:

  	

  Trustee

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  /s/ John C. Dunn, Jr.

  	

   

  
	

   

  	

  By:

  	

  John C. Dunn, Jr.

  	

   

  
	

   

  	

  Its:

  	

  Trustee

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  PHILIP C. DIORIO, M.D.,

  INC.,

  	

   

  
	

   

  	

  A RETIREMENT TRUST FUND

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  /s/ Philip C. Diorio

  	

   

  
	

   

  	

  By:

  	

  Philip C. Diorio

  	

   

  
	

   

  	

  Its:

  	

  Trustee

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  /s/ Willard W. McLagen

  	

   

  
	

   

  	

  Willard W. McLagen<PAGE>

                                   EXHIBIT 4.1

                                       7
<PAGE>

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

                          LONG BEACH SECURITIES CORP.,
                                    Depositor

                          LONG BEACH MORTGAGE COMPANY,
                                 Master Servicer

                     FEDERAL NATIONAL MORTGAGE ASSOCIATION,
              Guarantor (with respect to the Class I-A Certificates
                         and the Class I-S Certificates)

                           FIRST UNION NATIONAL BANK,
                                     Trustee

                                       and

                   BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                               Trust Administrator

                         POOLING AND SERVICING AGREEMENT
                          Dated as of December 1, 2001

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

                      Long Beach Mortgage Loan Trust 2001-4

                    Asset-Backed Certificates, Series 2001-4

================================================================================
<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                             <C>
ARTICLE I DEFINITIONS ...........................................................................................11
   Section 1.01   Defined Terms..................................................................................11
   Section 1.02   Accounting.....................................................................................76
   Section 1.03   Allocation of Certain Interest Shortfalls......................................................76
   Section 1.04   Rights of the NIMS Insurer and the Guarantor...................................................79
   Section 1.05   Guarantor Purchase Option......................................................................80

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES.......................................80
   Section 2.01   Conveyance of Mortgage Loans...................................................................80
   Section 2.02   Acceptance of REMIC 0A and REMIC 0B by the Trustee.............................................83
   Section 2.03   Cure, Repurchase or Substitution of Mortgage Loans by the Seller; Remedies for
                     Breaches by Depositor or Master Servicer; Remedies for Breaches Relating to
                     Prepayment Charges..........................................................................84
   Section 2.04   Representations, Warranties and Covenants of the Master Servicer...............................87
   Section 2.05   Representations and Warranties of the Depositor................................................89
   Section 2.06   Issuance of Certificates.......................................................................91
   Section 2.07   Conveyance of the Subsequent Mortgage Loans....................................................91
   Section 2.08   Conveyance of REMIC Regular Interests and Acceptance of REMIC 1A and REMIC 1B
                     by the Trustee; Issuance of Certificates....................................................95

ARTICLE III ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS...................................................97
   Section 3.01   Master Servicer to Act as Master Servicer......................................................97
   Section 3.02   Sub-Servicing Agreements Between the Master Servicer and Sub-Servicers.........................99
   Section 3.03   Successor Sub-Servicers.......................................................................100
   Section 3.04   Liability of the Master Servicer..............................................................101
   Section 3.05   No Contractual Relationship Between Sub-Servicers and the NIMS Insurer, the
                     Guarantor, the Trustee, the Trust Administrator or Certificateholders......................101
   Section 3.06   Assumption or Termination of Sub-Servicing Agreements by Trust Administrator..................101
   Section 3.07   Collection of Certain Mortgage Loan Payments..................................................102
   Section 3.08   Sub-Servicing Accounts........................................................................103
   Section 3.09   Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................103
   Section 3.10   Collection Account and Distribution Account...................................................104
   Section 3.11   Withdrawals from the Collection Account and Distribution Account..............................107
   Section 3.12   Investment of Funds in the Collection Account and the Distribution Account....................108
   Section 3.13   Agreement to Appoint a Special Servicer.......................................................110
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                                            <C>
   Section 3.14   Maintenance of Hazard Insurance and Errors and Omissions and Fidelity Coverage................112
   Section 3.15   Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................113
   Section 3.16   Realization Upon Defaulted Mortgage Loans.....................................................115
   Section 3.17   Trustee and Trust Administrator to Cooperate; Release of Mortgage Files.......................117
   Section 3.18   Servicing Compensation........................................................................118
   Section 3.19   Reports to the Trustee and the Trust Administrator; Collection Account
                     Statements.................................................................................119
   Section 3.20   Statement as to Compliance....................................................................119
   Section 3.21   Independent Public Accountants' Servicing Report..............................................119
   Section 3.22   Access to Certain Documentation...............................................................120
   Section 3.23   Title, Management and Disposition of REO Property.............................................120
   Section 3.24   Obligations of the Master Servicer in Respect of Prepayment Interest
                     Shortfalls.................................................................................124
   Section 3.25   Obligations of the Master Servicer in Respect of Mortgage Rates and Monthly
                     Payments...................................................................................124
   Section 3.26   Reserve Funds.................................................................................124
   Section 3.27   Advance Facility..............................................................................126

ARTICLE IV FLOW OF FUNDS........................................................................................127
   Section 4.01   Distributions.................................................................................127
   Section 4.02   Preference Claims.............................................................................136
   Section 4.03   Statements....................................................................................137
   Section 4.04   Remittance Reports; Advances..................................................................141
   Section 4.05   Distributions on the REMIC Regular Interests..................................................142
   Section 4.06   Allocation of Realized Losses.................................................................148
   Section 4.07   Compliance with Withholding Requirements......................................................150
   Section 4.08   Commission Reporting..........................................................................150
   Section 4.09   The Guaranty..................................................................................151
   Section 4.10   Pre-Funding Accounts..........................................................................151

ARTICLE V THE CERTIFICATES......................................................................................152
   Section 5.01   The Certificates..............................................................................152
   Section 5.02   Registration of Transfer and Exchange of Certificates.........................................154
   Section 5.03   Mutilated, Destroyed, Lost or Stolen Certificates.............................................159
   Section 5.04   Persons Deemed Owners.........................................................................159

ARTICLE VI THE MASTER SERVICER AND THE DEPOSITOR................................................................160
   Section 6.01   Liability of the Master Servicer and the Depositor............................................160
   Section 6.02   Merger or Consolidation of the Depositor or the Master Servicer...............................160
   Section 6.03   Limitation on Liability of the Depositor, the Master Servicer and Others......................160
   Section 6.04   Limitation on Resignation of Master Servicer..................................................162
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                                                             <C>
   Section 6.05   Rights of the Depositor, the NIMS Insurer, the Guarantor, the Trustee and the
                     Trust Administrator in Respect of the Master Servicer......................................162

ARTICLE VII DEFAULT ............................................................................................163
   Section 7.01   Master Servicer Events of Default.............................................................163
   Section 7.02   Trust Administrator to Act; Appointment of Successor..........................................165
   Section 7.03   Notification to Certificateholders............................................................167
   Section 7.04   Waiver of Master Servicer Events of Default...................................................168

ARTICLE VIII THE TRUSTEE AND THE TRUST ADMINISTRATOR............................................................168
   Section 8.01   Duties of Trustee and Trust Administrator.....................................................168
   Section 8.02   Certain Matters Affecting the Trustee and the Trust Administrator.............................169
   Section 8.03   Neither Trustee nor Trust Administrator Liable for Certificates or Mortgage
                     Loans......................................................................................172
   Section 8.04   Trustee and Trust Administrator May own Certificates..........................................172
   Section 8.05   Trustee's and Trust Administrator's Fees and Expenses.........................................172
   Section 8.06   Eligibility Requirements for Trustee and Trust Administrator..................................173
   Section 8.07   Resignation or Removal of Trustee and Trust Administrator.....................................173
   Section 8.08   Successor Trustee or Trust Administrator......................................................175
   Section 8.09   Merger or Consolidation of Trustee or Trust Administrator.....................................175
   Section 8.10   Appointment of Co-Trustee or Separate Trustee.................................................175
   Section 8.11   Appointment of Custodians.....................................................................177
   Section 8.12   Appointment of Office or Agency...............................................................177
   Section 8.13   Representations and Warranties of the Trustee and the Trust Administrator.....................177

ARTICLE IX TERMINATION..........................................................................................178
   Section 9.01   Termination Upon Purchase or Liquidation of All Mortgage Loans................................178
   Section 9.02   Additional Termination Requirements...........................................................180

ARTICLE X REMIC PROVISIONS......................................................................................182
   Section 10.01     REMIC Administration.......................................................................182
   Section 10.02     Prohibited Transactions and Activities.....................................................185
   Section 10.03     Trustee, Trust Administrator, Master Servicer and Depositor Indemnification................186

ARTICLE XI MISCELLANEOUS PROVISIONS.............................................................................186
   Section 11.01     Amendment..................................................................................186
   Section 11.02     Recordation of Agreement; Counterparts.....................................................188
   Section 11.03     Limitation on Rights of Certificateholders.................................................188
   Section 11.04     Governing Law; Jurisdiction................................................................189
   Section 11.05     Notices....................................................................................189
   Section 11.06     Severability of Provisions.................................................................190
</TABLE>

                                      iii
<PAGE>
<TABLE>
<S>                                                                                                            <C>
   Section 11.07     Notice to the Rating Agencies, the NIMS Insurer and the Guarantor..........................190
   Section 11.08     Article and Section References.............................................................191
   Section 11.09     NIMS Insurer's Rights......................................................................191
   Section 11.10     Grant of Security Interest.................................................................191
</TABLE>

                                       iv
<PAGE>

                                    Exhibits
                                    --------

Exhibit A-1   Form of Class I-A Certificates
Exhibit A-2   Form of Class II-A1 Certificates
Exhibit A-3   Form of Class II-A2 Certificates
Exhibit A-4   Form of Class II-A3 Certificates
Exhibit A-5   Form of Class I-S Certificates
Exhibit A-6   Form of Class II-S Certificates
Exhibit A-7   Form of Class II-M1 Certificates
Exhibit A-8   Form of Class M2 Certificates
Exhibit A-9   Form of Class M3 Certificates
Exhibit A-10  Form of Class I-C Certificates
Exhibit A-11  Form of Class II-C Certificates
Exhibit A-12  Form of Class I-P Certificates
Exhibit A-13  Form of Class II-P Certificates
Exhibit A-14  Form of Class R Certificates
Exhibit A-15  Form of Class R-X Certificates
Exhibit B     [Reserved]
Exhibit C     Form of Mortgage Loan Purchase Agreement
Exhibit D     Mortgage Loan Schedule
Exhibit E-1   Request for Release (for Trust Administrator/Custodian)
Exhibit E-2   Request for Release (Certificate - Mortgage Loan Paid in Full)
Exhibit F-1   Form of Trust Administrator's Initial Certification
Exhibit F-2   Form of Trust Administrator's Final Certification
Exhibit G     [Reserved]
Exhibit H     Form of Lost Note Affidavit
Exhibit I     Form of ERISA Representation
Exhibit J     Form of Investment Letter
Exhibit K     Form of Class R Certificate and Class R-X Certificate Transfer
                 Affidavit
Exhibit L     Form of Transferor Certificate
Exhibit M     Form of Subsequent Transfer Instrument
Exhibit N     Form of Addition Notice

                                    Schedules
                                    ---------

Schedule I    Prepayment Charge Schedule

                                       v
<PAGE>

         This POOLING AND SERVICING AGREEMENT is dated as of December 1, 2001
(the "Agreement"), among LONG BEACH SECURITIES CORP., as depositor (the
"Depositor"), LONG BEACH MORTGAGE COMPANY, as master servicer (the "Master
Servicer"), FEDERAL NATIONAL MORTGAGE ASSOCIATION, as Guarantor of the Class I-A
Certificates and the Class I-S Certificates (the "Guarantor"), FIRST UNION
NATIONAL BANK, as trustee (the "Trustee"), and BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as trust administrator (the "Trust Administrator").

                             PRELIMINARY STATEMENT:

         The Depositor intends to sell pass-through certificates (collectively,
the "Certificates"), to be issued hereunder in multiple classes, which in the
aggregate will evidence the entire beneficial ownership interest in the Trust
Fund created hereunder. The Certificates will consist of fifteen classes of
certificates, designated as (i) the Class I-A Certificates, (ii) the Class II-A1
Certificates, (iii) the Class II-A2 Certificates, (iv) the Class II-A3
Certificates, (v) the Class I-S Certificates, (vi) the Class II-S Certificates,
(vii) the Class II-M1 Certificates, (viii) the Class M2 Certificates, (ix) the
Class M3 Certificates, (x) the Class I-C Certificates, (xi) the Class II-C
Certificates, (xii) the Class I-P Certificates, (xiii) the Class II-P
Certificates, (xiv) the Class R Certificates and (xv) the Class R-X
Certificates. For purposes of determining distributions of principal and
interest and the allocation of losses realized on Mortgage Loans, the Class M2
Certificates will consist of two Components: I-M2 Component and II-M2 Component,
and the Class M3 Certificates will consist of two components: I-M3 Component and
II-M3 Component. For federal and state income tax purposes, each Component will
be treated as a separate regular interest in a REMIC.

                                       1
<PAGE>

                                    REMIC 0A

         As provided herein, the Trust Administrator will make an election to
treat the segregated pool of assets consisting of the Group I Mortgage Loans and
certain other related assets subject to this Agreement (exclusive of the Group I
Pre-Funding Account, the Group I Reserve Fund and the Master Servicer Prepayment
Charge Payment Amounts with respect to the Group I Mortgage Loans) as a real
estate mortgage investment conduit (a "REMIC") for federal income tax purposes,
and such segregated pool of assets will be designated as "REMIC 0A." The Class
R-0A Interest will represent the sole class of "residual interests" in REMIC 0A
for purposes of the REMIC Provisions (as defined herein) under federal income
tax law. The following table irrevocably sets forth the designation, the
Uncertificated REMIC 0A Pass-Through Rate, the initial Uncertificated Principal
Balance, and solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC
0A Regular Interests. None of the REMIC 0A Regular Interests will be
certificated.

             Uncertificated REMIC 0A   Initial Uncertificated    Assumed Final
Designation     Pass-Through Rate        Principal Balance      Maturity Date(1)
-----------     -----------------        -----------------      ----------------
   LT0A-1           Variable(2)            $1,065,665,655.00      March 2032
   LT0A-2           Variable(2)              $312,334,245.00      March 2032
   LT0A-P           Variable(2)                      $100.00      March 2032

----------

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC 0A
         Regular Interest.

(2)      Calculated in accordance with the definition of "Uncertificated REMIC
         0A Pass-Through Rate" herein.

                                       2
<PAGE>

                                    REMIC 0B

         As provided herein, the Trust Administrator will make an election to
treat the segregated pool of assets consisting of the Group II Mortgage Loans
and certain other related assets subject to this Agreement (exclusive of the
Group II Pre-Funding Account, the Group II Reserve Fund and the Master Servicer
Prepayment Charge Payment Amounts with respect to Group II Mortgage Loans) as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC 0B." The Class R-0B Interest will represent the sole
class of "residual interests" in REMIC 0B for purposes of the REMIC Provisions
(as defined herein) under federal income tax law. The following table
irrevocably sets forth the designation, the Uncertificated REMIC 0B Pass-Through
Rate, the initial Uncertificated Principal Balance, and solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC 0B Regular Interests. None of the REMIC 0B
Regular Interests will be certificated.

             Uncertificated REMIC 0B  Initial Uncertificated    Assumed Final
Designation     Pass-Through Rate       Principal Balance      Maturity Date(1)
-----------     -----------------       -----------------      ----------------
   LT0B-1           Variable(2)           $503,325,854.00         March 2032
   LT0B-2           Variable(2)           $118,674,046.00         March 2032
   LT0B-P           Variable(2)                   $100.00         March 2032

----------

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC 0B
         Regular Interest.

(2)      Calculated in accordance with the definition of "Uncertificated REMIC
         0B Pass-Through Rate" herein.

                                       3
<PAGE>

                                    REMIC 1A

         As provided herein, the Trust Administrator will make an election to
treat the segregated pool of assets consisting of the REMIC 0A Regular Interests
as a REMIC for federal income tax purposes, and such segregated pool of assets
will be designated as "REMIC 1A." The Class R-1A Interest will represent the
sole class of "residual interests" in REMIC 1A for purposes of the REMIC
Provisions (as defined herein) under federal income tax law. The following table
irrevocably sets forth the designation, the Uncertificated REMIC 1A Pass-Through
Rate, the initial Uncertificated Principal Balance, and solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC 1A Regular Interests. None of the REMIC 1A
Regular Interests will be certificated.

              Uncertificated REMIC 1A  Initial Uncertificated    Assumed Final
Designation      Pass-Through Rate       Principal Balance      Maturity Date(1)
-----------      -----------------       -----------------      ----------------
   LT1A-1            Variable(2)          $1,222,974,900.00        March 2032
   LT1A-2            Variable(2)            $137,800,000.00        March 2032
   LT1A-3            Variable(2)             $17,225,000.00        March 2032
   LT1A-P            Variable(2)                    $100.00        March 2032

----------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC 1A
         Regular Interest.

(2)      Calculated in accordance with the definition of "Uncertificated REMIC
         1A Pass-Through Rate" herein.

                                       4
<PAGE>

                                    REMIC 1B

         As provided herein, the Trust Administrator will make an election to
treat the segregated pool of assets consisting of the REMIC 0B Regular Interests
as a REMIC for federal income tax purposes, and such segregated pool of assets
will be designated as "REMIC 1B." The Class R-1B Interest will represent the
sole class of "residual interests" in REMIC 1B for purposes of the REMIC
Provisions (as defined herein) under federal income tax law. The following table
irrevocably sets forth the designation, the Uncertificated REMIC 1B Pass-Through
Rate, the initial Uncertificated Principal Balance, and solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC 1B Regular Interests. None of the REMIC 1B
Regular Interests will be certificated.

              Uncertificated REMIC 1B   Initial Uncertificated   Assumed Final
Designation      Pass-Through Rate         Principal Balance    Maturity Date(1)
-----------      -----------------         -----------------    ----------------
   LT1B-1            Variable(2)            $552,024,900.00        March 2032
   LT1B-2            Variable(2)             $62,200,000.00        March 2032
   LT1B-3            Variable(2)              $7,775,000.00        March 2032
   LT1B-P            Variable(2)                    $100.00        March 2032

----------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC 1B
         Regular Interest.

(2)      Calculated in accordance with the definition of "Uncertificated REMIC
         1B Pass-Through Rate" herein.

                                       5
<PAGE>

                                     REMIC 2

         As provided herein, the Trust Administrator shall make an election to
treat the segregated pool of assets consisting of the REMIC 1A Regular Interests
and the REMIC 1B Regular Interests as a REMIC for federal income tax purposes,
and such segregated pool of assets will be designated as "REMIC 2". The Class
R-2 Interest represents the sole class of "residual interests" in REMIC 2 for
purposes of the REMIC Provisions. The following table irrevocably sets forth the
designation, the Uncertificated REMIC 2 Pass-Through Rate, the initial
Uncertificated Principal Balance, and solely for purposes of satisfying Treasury
regulation Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for
each of the REMIC 2 Regular Interests. None of the REMIC 2 Regular Interests
will be certificated.

<TABLE>
<CAPTION>
                Uncertificated REMIC 2    Initial Uncertificated       Assumed Final
Designation       Pass-Through Rate          Principal Balance        Maturity Date(1)
-----------       -----------------          -----------------        ----------------
<S>                    <C>                    <C>                         <C>
  LT2A-1               Variable(2)            $1,350,439,902.00           March 2032
  LT2B-1               Variable(2)               $12,229,750.00           March 2032
  LT2C-1               Variable(2)                  $826,800.00           March 2032
  LT2D-1               Variable(2)                  $551,200.00           March 2032
  LT2E-1               Variable(2)               $13,952,248.00           March 2032
  LT2A-2               Variable(2)              $609,559,902.00           March 2032
  LT2B-2               Variable(2)                $4,155,900.00           March 2032
  LT2C-2               Variable(2)                  $590,000.00           March 2032
  LT2D-2               Variable(2)                  $510,000.00           March 2032
  LT2E-2               Variable(2)                  $357,650.00           March 2032
  LT2F-2               Variable(2)                  $326,550.00           March 2032
  LT2G-2               Variable(2)                  $202,150.00           March 2032
  LT2H-2               Variable(2)                $6,297,748.00           March 2032
  LT2S-1A              Variable(3)                          N/A(7)        March 2032
  LT2S-1B              Variable(4)                          N/A(7)        March 2032
  LT2S-1C              Variable(5)                          N/A(7)        March 2032
  LT2S-1D              Variable(6)                          N/A(8)        March 2032
  LT2S-2A              Variable(3)                          N/A(9)        March 2032
  LT2S-2B              Variable(4)                          N/A(9)        March 2032
  LT2S-2C              Variable(5)                          N/A(9)        March 2032
  LT2S-2D              Variable(6)                          N/A(10)       March 2032
  LT2P-1               Variable(2)                      $100.00           March 2032
  LT2P-2               Variable(2)                      $100.00           March 2032
</TABLE>

-------------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC 2
         Regular Interest.

(2)      Calculated in accordance with the definition of "Uncertificated REMIC 2
         Pass-Through Rate" herein.

(3)      3.75% per annum for the first 30 Distribution Dates and 0.00% per annum
         thereafter.

(4)      1.50% per annum for the first 20 Distribution Dates and 0.00% per annum
         thereafter.

(5)      0.75% per annum for the first 10 Distribution Dates and 0.00% per annum
         thereafter.

                                       6
<PAGE>

(6)      6.00% per annum for the first 10 Distribution Dates and 0.00% per annum
         thereafter.

(7)      REMIC 2 Regular Interest LT2S-1A, REMIC 2 Regular Interest LT2S-1B and
         REMIC 2 Regular Interest LT2S-1C will not have Uncertificated Principal
         Balances, but will accrue interest on their respective Uncertificated
         Notional Amounts outstanding from time to time which, in each case,
         shall equal the Uncertificated Principal Balance of REMIC 1A Regular
         Interest LT1A-2.

(8)      REMIC 2 Regular Interest LT2S-1D, will not have an Uncertificated
         Principal Balance, but will accrue interest on its Uncertificated
         Notional Amount outstanding from time to time which shall equal the
         Uncertificated Principal Balance of REMIC 1A Regular Interest LT1A-3.

(9)      REMIC 2 Regular Interest LT2S-2A, REMIC 2 Regular Interest LT2S-2B and
         REMIC 2 Regular Interest LT2S-2C will not have Uncertificated Principal
         Balances, but will accrue interest on their respective Uncertificated
         Notional Amounts outstanding from time to time which in each case shall
         equal the Uncertificated Principal Balance of REMIC 1B Regular Interest
         LT1B-2.

(10)     REMIC 2 Regular Interest LT2S-2D, will not have an Uncertificated
         Principal Balance, but will accrue interest on its Uncertificated
         Notional Amount outstanding from time to time which shall equal the
         Uncertificated Principal Balance of REMIC 1B Regular Interest LT1B-3.

                                       7
<PAGE>

                                     REMIC 3

         As provided herein, the Trust Administrator shall make an election to
treat the segregated pool of assets consisting of the REMIC 2 Regular Interests
as a REMIC for federal income tax purposes, and such segregated pool of assets
will be designated as "REMIC 3." The Class R-3 Interest represents the sole
class of "residual interests" in REMIC 3 for purposes of the REMIC Provisions.

         The following table sets forth (or describes) the Class designation,
Pass-Through Rate and Original Class Certificate Principal Balance for each
Class of Certificates that represents one or more of the "regular interests" in
REMIC 3 and each class of uncertificated "regular interests" in REMIC 3:

<TABLE>
<CAPTION>
                            Original Class Certificate        Pass-Through              Assumed Final
Class Designation               Principal Balance                 Rate                  Maturity Date(1)
-----------------               -----------------                 ----                  ----------------
<S>                              <C>                           <C>                      <C>
 Class I-A                       $1,222,975,000.00             Variable(2)               March 2032
 Class II-A1                       $415,590,000.00             Variable(2)               March 2032
 Class II-A2                        $59,000,000.00             Variable(2)               March 2032
 Class II-A3                        $51,000,000.00             Variable(2)               March 2032
 Class II-M1                        $35,765,000.00             Variable(2)               March 2032
 Class M2                          $115,335,000.00(3)          Variable(2)               March 2032
 Class M3                           $75,335,000.00(4)          Variable(2)               March 2032
 Class I-S                                     N/A(5)               N/A(5)               March 2032
 Class II-S                                    N/A(6)               N/A(6)               March 2032
 LT3-IC                            $17,224,900.007             Variable(2)               March 2032
 LT3-IIC                            $7,774,900.008             Variable(2)               March 2032
 LT3-IP                                    $100.00                  N/A(9)               March 2032
 LT3-IIP                                   $100.00                  N/A(9)               March 2032
</TABLE>

----------

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each Class of
         Certificates or uncertificated interests that represents one or more of
         the "regular interests" in REMIC 3.

(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.

(3)      The Class M2 Certificate consists of two Components: the I-M2 Component
         and the II-M2 Component. The Certificate Principal Balance with respect
         to any Distribution Date (and the related Accrual Period) will equal
         the sum of the Component Principal Balances of the I-M2 Component and
         the II-M2 Component. The initial Component Principal Balance for the
         I-M2 Component is $82,680,000 and for the II-M2 Component is
         $32,655,000. For federal income tax purposes, the I-M2 Component and
         the II-M2 Component will be treated as separate regular interests in
         REMIC 3.

(4)      The Class M3 Certificate consists of two Components: the I-M3 Component
         and the II-M3 Component. The Certificate Principal Balance with respect
         to any Distribution Date (and the related Accrual Period) will equal
         the sum of the Component Principal Balances of the I-M3 Component and
         the II-M3 Component. The initial Component Principal Balance for the
         I-M3 Component is $55,120,000 and for the II-M3 Component is
         $20,215,000. For federal income tax purposes, the I-M3 Component and
         the II-M3 Component will be treated as separate regular interests in
         REMIC 3.

(5)      The Class I-S Certificates will receive all amounts distributed to
         REMIC 2 Regular Interest LT2S-1A, REMIC 2 Regular Interest LT2S-1B,
         REMIC 2 Regular Interest LT2S-1C and REMIC 2 Regular Interest LT2S-1D.

                                       8
<PAGE>

(6)      The Class II-S Certificates will receive all amounts distributed to
         REMIC 2 Regular Interest LT2S-2A, REMIC 2 Regular Interest LT2S-2B,
         REMIC 2 Regular Interest LT2S-2C and REMIC 2 Regular Interest LT2S-2D.

(7)      REMIC 3 Uncertificated Regular Interest LT3-IC will accrue interest at
         its variable Pass-Through Rate on its Notional Amount outstanding from
         time to time, which shall equal the aggregate of the Uncertificated
         Principal Balances of the REMIC 2 Group I Regular Interests. REMIC 3
         Uncertificated Regular Interest LT3-IC will not accrue interest on its
         Uncertificated Principal Balance.

(8)      REMIC 3 Uncertificated Regular Interest LT3-IIC will accrue interest at
         its variable Pass-Through Rate on its Notional Amount outstanding from
         time to time, which shall equal the aggregate of the Uncertificated
         Principal Balances of the REMIC 2 Group II Regular Interests. REMIC 3
         Uncertificated Regular Interest LT3-IIC will not accrue interest on its
         Uncertificated Principal Balance.

(9)      REMIC 3 Uncertificated Regular Interest LT3-IP and REMIC 3
         Uncertificated Regular Interest LT3-IIP will not accrue interest.

                                       9
<PAGE>

                                     REMIC X

         As provided herein, the Trust Administrator will make an election to
treat the segregated pool of assets consisting of REMIC 3 Uncertificated Regular
Interest LT3-IC, REMIC 3 Uncertificated Regular Interest LT3-IIC, REMIC 3
Uncertificated Regular Interest LT3-IP, and REMIC 3 Uncertificated Regular
Interest LT3-IIP as a REMIC for federal income tax purposes, and such segregated
pool of assets will be designated as "REMIC X." The Class R-X Interest will
represent the sole class of "residual interests" in REMIC X for purposes of the
REMIC Provisions (as defined herein) under federal income tax law. The following
table irrevocably sets forth the designation, the Pass-Through Rate, Original
Class Certificate Principal Balance, and solely for purposes of satisfying
Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible maturity
date" for each of the REMIC X Regular Interests.

<TABLE>
<CAPTION>
               Uncertificated REMIC X         Initial Uncertificated      Assumed Final
Designation       Pass-Through Rate              Principal Balance       Maturity Date(1)
-----------       -----------------              -----------------       ----------------
<S>                  <C>                         <C>                        <C>
Class I-C            Variable(2)                 $17,224,900.00(4)          March 2032
Class II-C           Variable(2)                  $7,774,900.00(4)          March 2032
Class I-P                 N/A(3)                        $100.00             March 2032
Class II-P                N/A(3)                        $100.00             March 2032
</TABLE>

----------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC X
         Regular Interest.

(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.

(3)      The Class P Certificates will not accrue interest.

(4)      The Class I-C Certificates and Class II-C Certificates will accrue
         interest at their variable Pass-Through Rates on their respective
         Notional Amounts outstanding from time to time, which shall equal the
         Notional Amounts of REMIC 3 Uncertificated Regular Interest LT3-IC and
         REMIC 3 Uncertificated Regular Interest LT3-IIC, respectively. The
         Class I-C Certificates and Class II-C Certificates will not accrue
         interest on their respective Certificate Principal Balances.

                                       10
<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

Section 1.01  Defined Terms.

         Whenever used in this Agreement or in the Preliminary Statement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article. Unless otherwise specified, all
calculations in respect of interest on the Class I-A Certificates, Class II-A
Certificates, Mezzanine Certificates and Mezzanine Components shall be made on
the basis of the actual number of days elapsed on the basis of a 360-day year
and all other calculations of interest described herein shall be made on the
basis of a 360-day year consisting of twelve 30-day months. The Class P
Certificates and the Residual Certificates are not entitled to distributions in
respect of interest and, accordingly, will not accrue interest.

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

         "I-M2 Component":.The Component of the Class M2 Certificate,
representing rights to distributions as set forth herein.

         "I-M2 Component Principal Distribution Amount": With respect to any
Distribution Date on or after the Group I Stepdown Date and on which a Group I
Trigger Event is not in effect, the amount equal to the lesser of (I) the
Component Principal Balance of the I-M2 Component immediately prior to such
Distribution Date and (II) the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the Class I-A Certificates (after taking into
account the payment of the Class I-A Principal Distribution Amount on such
Distribution Date) and (ii) the aggregate Component Principal Balance of the
I-M2 Component immediately prior to such Distribution Date over (y) the lesser
of (A) the product of (i) 89.50% and (ii) the aggregate Stated Principal Balance
of the Group I Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period) and (B) the aggregate
Stated Principal Balance of the Group I Mortgage Loans as of the last day of the
related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) minus the Group I Overcollateralization Floor.

                                       11
<PAGE>

         "I-M3 Component":.The Component of the Class M3 Certificate,
representing rights to distributions as set forth herein.

         "I-M3 Component Principal Distribution Amount": With respect to any
Distribution Date on or after the Group I Stepdown Date and on which a Group I
Trigger Event is not in effect, the amount equal to the lesser of the (I) the
Component Principal Balance of the I-M3 Component immediately prior to such
Distribution Date and (II) the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the I-A Certificate (after taking into account
the payment of the Class I-A Principal Distribution Amount on such Distribution
Date), (ii) the aggregate Component Principal Balance of the I-M2 Component
(after taking into account the payment of the I-M2 Component Principal
Distribution Amount on such Distribution Date) and (iii) the aggregate Component
Principal Balance of the I-M3 Component immediately prior to such Distribution
Date over (y) the lesser of (A) the product of (i) 97.50% and (ii) the aggregate
Stated Principal Balance of the Group I Mortgage Loans as of the last day of the
related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) and (B) the aggregate Stated Principal Balance of the Group I Mortgage
Loans as of the last day of the related Due Period (after giving effect to
scheduled payments of principal due during the related Due Period, to the extent
received or advanced, and unscheduled collections of principal received during
the related Prepayment Period) minus the Group I Overcollateralization Floor.

         "II-M2 Component": The Component of the Class M2 Certificate,
representing rights to distributions as set forth herein.

         "II-M2 Component Principal Distribution Amount": With respect to any
Distribution Date on or after the Group II Stepdown Date and on which a Group II
Trigger Event is not in effect, the amount equal to the lesser of the (I) the
Component Principal Balance of the II-M2 Component immediately prior to such
Distribution Date and (II) the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the Class II-A Certificates (after taking into
account the payment of the Class II-A Principal Distribution Amount on such
Distribution Date), (ii) the aggregate Certificate Principal Balance of the
Class II-M1 Certificates (after taking into account the payment of the Class
II-M1 Principal Distribution Amount on such Distribution Date) and (iii) the
aggregate Component Principal Balance of the II-M2 Component immediately prior
to such Distribution Date over (y) the lesser of (A) the product of (i) 91.00%
and (ii) the aggregate Stated Principal Balance of the Group II Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period) and (B) the aggregate Stated Principal Balance of the
Group II Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period) minus the Group II
Overcollateralization Floor.

                                       12
<PAGE>

         "II-M3 Component": The Component of the Class M3 Certificate,
representing rights to distributions as set forth herein.

         "II-M3 Component Principal Distribution Amount": With respect to any
Distribution Date on or after the Group II Stepdown Date and on which a Group II
Trigger Event is not in effect, the amount equal to the lesser of the (I) the
Component Principal Balance of the II-M3 Component immediately prior to such
Distribution Date and (II) the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the Class II-A Certificates (after taking into
account the payment of the Class II-A Principal Distribution Amount on such
Distribution Date), (ii) the aggregate Certificate Principal Balance of the
Class II-M1 Certificate (after taking into account the payment of the Class
II-M1 Principal Distribution Amount on such Distribution Date), (iii) the
aggregate Component Principal Balance of the II-M2 Component (after taking into
account the payment of the II-M2 Component Principal Distribution Amount on such
Distribution Date) and (iv) the aggregate Component Principal Balance of the
II-M3 Component immediately prior to such Distribution Date over (y) the lesser
of (A) the product of (i) 97.50% and (ii) the aggregate Stated Principal Balance
of the Group II Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period) and (B) the aggregate
Stated Principal Balance of the Group II Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) minus the Group II Overcollateralization Floor.

         "Account":  Either of the Collection Account and Distribution Account.

         "Accrual Period": With respect to the Class S Certificates, Class C
Certificates, the REMIC 0A Regular Interests, the REMIC 0B Regular Interests,
the REMIC 1A Regular Interests, the REMIC 1B Regular Interests, the REMIC 2
Regular Interests, the REMIC 3 Uncertificated Regular Interest LT3-IC and REMIC
3 Uncertificated Regular Interest LT3-IIC, and each Distribution Date, the
calendar month prior to the month of such Distribution Date. With respect to the
Class A Certificates, the Mezzanine Certificates, the Mezzanine Components and
each Distribution Date, the period commencing on the immediately preceding
Distribution Date (or in the case of the first such Accrual Period, commencing
on the Closing Date) and ending on the day immediately preceding such
Distribution Date.

         "Addition Notice": With respect to a transfer of Subsequent Mortgage
Loans to the Trust Fund pursuant to Section 2.07, a notice of the Depositor's
designation of the Subsequent Mortgage Loans to be sold to the Trust Fund and
the aggregate principal balance of such Subsequent Mortgage Loans as of the
related Subsequent Cut-off Date. The Addition Notice shall be given not later
than three Business Days prior to the related Subsequent Transfer Date and shall
be substantially in the form attached hereto as Exhibit N.

         "Adjustable Rate Mortgage Loan": A Mortgage Loan which provides for an
adjustable Mortgage Rate payable with respect thereto.

         "Adjusted Net Maximum Mortgage Rate": With respect to any Mortgage Loan
(or the related REO Property), as of any date of determination, a per annum rate
of interest equal to the Maximum Mortgage Rate for such Mortgage Loan (if such
Mortgage Loan is an Adjustable Rate Mortgage Loan) or the Mortgage Rate for such
Mortgage Loan (if such Mortgage Loan is a Fixed Rate Mortgage Loan), in either
such case as of the first day of the month preceding the month in which the
Distribution Date occurs, minus the Servicing Fee Rate.

         "Adjusted Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the Mortgage Rate for such Mortgage Loan as of the first day
of the month preceding the month in which the Distribution Date occurs, minus
the Servicing Fee Rate.

         "Adjustment Date": With respect to each Adjustable Rate Mortgage Loan,
each adjustment date, on which the Mortgage Rate of such Mortgage Loan changes
pursuant to the related Mortgage Note. The first Adjustment Date following the
Cut-off Date as to each Adjustable Rate Mortgage Loan is set forth in the
Mortgage Loan Schedule.

                                       13
<PAGE>

         "Advance": As to any Mortgage Loan or REO Property, any advance made by
the Master Servicer in respect of any Distribution Date pursuant to Section
4.04.

         "Advancing Person": As defined in Section 3.27 hereof.

         "Adverse REMIC Event": As defined in Section 10.01(f) hereof.

         "Affiliate": With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.

         "Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.

         "Allocated Realized Loss Amount": With respect to any Distribution Date
and the Class II-M1 Certificates or any of the Mezzanine Components, the sum of
(i) any Realized Losses allocated to such Class of Certificates or Components on
any Distribution Date and (ii) the amount of any Allocated Realized Loss Amount
for such Class of Certificates or Components remaining unpaid from the previous
Distribution Date.

         "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form (excepting therefrom, if applicable,
the mortgage recordation information which has not been required pursuant to
Section 2.01 hereof or returned by the applicable recorder's office), which is
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect or record the sale of the Mortgage.

         "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.

         "Bankruptcy Loss": With respect to any Mortgage Loan, a Realized Loss
resulting from a Deficient Valuation or Debt Service Reduction.

         "Book-Entry Certificates": Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a Person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.02 hereof). On the Closing
Date, the Class A Certificates, the Class S Certificates and the Mezzanine
Certificates shall be Book-Entry Certificates.

         "Book-Entry Custodian": The custodian appointed pursuant to Section
5.01.

         "Business Day": Any day other than a Saturday, a Sunday or a day on
which the Guarantor or banking or savings institutions in the State of
California, the State of Delaware, the State of Maryland, the State of
Minnesota, the State of New York, the Commonwealth of Pennsylvania, the State of
Washington, or in the city in which the Corporate Trust Office of the Trust
Administrator or the Corporate Trust Office of the Trustee is located, are
authorized or obligated by law or executive order to be closed.

                                       14
<PAGE>

         "Certificate": Any Regular Certificate or Residual Certificate.

         "Certificate Margin": With respect to the Class I-A Certificates on
each Distribution Date (A) on or prior to the Optional Termination Date, 0.16%
per annum and (B) after the Optional Termination Date, 0.32% per annum. With
respect to the Class II-A1 Certificates on each Distribution Date (A) on or
prior to the Optional Termination Date, 0.35% per annum and (B) after the
Optional Termination Date, 0.70% per annum. With respect to the Class II-A2
Certificates on each Distribution Date (A) on or prior to the Optional
Termination Date, 0.24% per annum and (B) after the Optional Termination Date,
0.48% per annum. With respect to the Class II-A3 Certificates on each
Distribution Date (A) on or prior to the Optional Termination Date, 0.50% per
annum and (B) after the Optional Termination Date, 1.00% per annum. With respect
to the Class II-M1 Certificates on each Distribution Date (A) on or prior to the
Optional Termination Date, 0.95% per annum and (B) after the Optional
Termination Date, 1.425% per annum. With respect to the I-M2 Component on each
Distribution Date (A) on or prior to the Optional Termination Date, 1.65% per
annum and (B) after the Optional Termination Date, 2.475% per annum. With
respect to the II-M2 Component on each Distribution Date (A) on or prior to the
Optional Termination Date, 1.65% per annum and (B) after the Optional
Termination Date, 2.475% per annum. With respect to the I-M3 Component on each
Distribution Date (A) on or prior to the Optional Termination Date, 2.75% per
annum and (B) after the Optional Termination Date, 4.125% per annum. With
respect to the II-M3 Component on each Distribution Date (A) on or prior to the
Optional Termination Date, 2.75% per annum and (B) after the Optional
Termination Date, 4.125% per annum.

         "Certificate Owner": With respect to each Book-Entry Certificate, any
beneficial owner thereof.

         "Certificate Principal Balance": With respect to any Class A
Certificates, Class II-M1 Certificates or Class P Certificates immediately prior
to any Distribution Date, an amount equal to the Initial Certificate Principal
Balance thereof reduced by the sum of all amounts actually distributed in
respect of principal of such Class and, in the case of a Class II-M1
Certificate, Realized Losses allocated thereto on all prior Distribution Dates.
With respect to any M2 Certificates and any date of determination, an amount
equal to the sum of the Component Principal Balances of the I-M2 Component and
the II-M2 Component. With respect to any M3 Certificates and any date of
determination, an amount equal to the sum of the Component Principal Balances of
the I-M3 Component and the II-M3 Component. With respect to any Class I-C
Certificates as of any date of determination, an amount equal to the
Uncertificated Principal Balance of REMIC 3 Uncertificated Regular Interest
LT3-IC. With respect to any Class II-C Certificates as of any date of
determination, an amount equal to the Uncertificated Principal Balance of REMIC
3 Uncertificated Regular Interest LT3-IIC. The Class S Certificates will not
have a Certificate Principal Balance.

         "Certificate Register": The register maintained pursuant to Section
5.02 hereof.

                                       15
<PAGE>

         "Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register, except that a Disqualified
Organization or a Non-United States Person shall not be a Holder of a Residual
Certificate for any purposes hereof and, solely for the purposes of giving any
consent pursuant to this Agreement, any Certificate registered in the name of
the Depositor or the Master Servicer or any Affiliate thereof shall be deemed
not to be outstanding and the Voting Rights to which it is entitled shall not be
taken into account in determining whether the requisite percentage of Voting
Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 11.01. The Trustee, the Trust Administrator, the
NIMS Insurer and the Guarantor may conclusively rely upon a certificate of the
Depositor or the Master Servicer in determining whether a Certificate is held by
an Affiliate thereof. All references herein to "Holders" or "Certificateholders"
shall reflect the rights of Certificate Owners as they may indirectly exercise
such rights through the Depository and participating members thereof, except as
otherwise specified herein; provided, however, that the Trustee, the Trust
Administrator, the NIMS Insurer and the Guarantor shall be required to recognize
as a "Holder" or "Certificateholder" only the Person in whose name a Certificate
is registered in the Certificate Register.

         "Class": Collectively, Certificates which have the same priority of
payment and bear the same class designation and the form of which is identical
except for variation in the Percentage Interest evidenced thereby.

         "Class I-A Certificate": Any one of the Class I-A Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-1 executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the rights to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

         "Class I-A Principal Distribution Amount": With respect to any
Distribution Date on or after the Group I Stepdown Date and on which a Group I
Trigger Event is not in effect, the amount equal to the lesser of (I) the
aggregate Certificate Principal Balance of the Class I-A Certificates
immediately prior to such Distribution Date and (II) the excess of (x) the
aggregate Certificate Principal Balance of the Class I-A Certificates
immediately prior to such Distribution Date over (y) the lesser of (A) the
product of (i) 77.50% and (ii) the aggregate Stated Principal Balance of the
Group I Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period) and (B) the aggregate
Stated Principal Balance of the Group I Mortgage Loans as of the last day of the
related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) minus $6,890,000.

         "Class I-C Certificate": Any one of the Class I-C Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-10, executed, authenticated and delivered by the Trust Administrator
on behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC X.

         "Class I-P Certificate": Any one of the Class I-P Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-12, executed, authenticated and delivered by the Trust Administrator
on behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC X.

                                       16
<PAGE>

         "Class I-S Certificate": Any one of the Class I-S Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-5, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

         "Class II-A Certificates": The Class II-A1 Certificates, the Class
II-A2 Certificates and the Class II-A3 Certificates.

         "Class II-A Principal Distribution Amount": With respect to any
Distribution Date on or after the Group II Stepdown Date and on which a Group II
Trigger Event is not in effect, the amount equal to the lesser of (I) the
aggregate Certificate Principal Balance of the Class II-A Certificates
immediately prior to such Distribution Date and (II) the excess of (x) the
aggregate Certificate Principal Balance of the Class II-A Certificates
immediately prior to such Distribution Date over (y) the lesser of (A) the
product of (i) 69.00% and (ii) the aggregate Stated Principal Balance of the
Group II Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period) and (B) the aggregate
Stated Principal Balance of the Group II Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) minus $3,110,000.

         "Class II-A Remaining Principal Distribution Amount": For any
Distribution Date, prior to the Group II Stepdown Date or on which a Group II
Trigger Event is in effect, an amount equal to the Group II Principal
Distribution Amount minus the Class II-A1 Principal Distribution Amount for such
Distribution Date and, for any Distribution Date, on or after the Group II
Stepdown Date and on which a Group II Trigger Event is not in effect, an amount
equal to the Class II-A Principal Distribution Amount minus the Class II-A1
Principal Distribution Amount for such Distribution Date.

         "Class II-A1 Allocation Percentage": For any Distribution Date, the
percentage obtained by dividing (x) the aggregate Certificate Principal Balance
of the Class II-A1 Certificates immediately prior to such Distribution Date by
(y) the aggregate Certificate Principal Balances of the Class II-A1
Certificates, Class II-A2 Certificates and the Class II-A3 Certificates
immediately prior to such Distribution Date.

         "Class II-A1 Certificate": Any one of the Class II-A1 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-2, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

         "Class II-A1 Principal Distribution Amount": For any Distribution Date,
prior to the Group II Stepdown Date or on which a Group II Trigger Event is in
effect, an amount equal to the lesser of (I) the aggregate of the Certificate
Principal Balance of the Class II-A1 Certificates immediately prior to such
Distribution Date and (II) the product of (x) the Group II Principal
Distribution Amount and (y) the Class II-A1 Allocation Percentage for such
Distribution Date and, for any Distribution Date, on or after the Group II
Stepdown Date and on which a Group II Trigger Event is not in effect, an amount
equal to the lesser of (I) the aggregate of the Certificate Principal Balance of
the Class II-A1 Certificates immediately prior to such Distribution Date and
(II) the product of (x) the Class II-A Principal Distribution Amount and (y) the
Class II-A1 Allocation Percentage for such Distribution Date.

                                       17
<PAGE>

         "Class II-A2 Certificate": Any one of the Class II-A2 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-3, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

         "Class II-A3 Certificate": Any one of the Class II-A3 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-4, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

         "Class II-C Certificate": Any one of the Class II-C Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-11, executed, authenticated and delivered by the Trust Administrator
on behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC X.

         "Class II-M1 Certificate": Any one of the Class II-M1 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-7, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

         "Class II-M1 Principal Distribution Amount": With respect to any
Distribution Date on or after the Group II Stepdown Date and on which a Group II
Trigger Event is not in effect, an amount equal to the lesser of (I) the
aggregate Certificate Principal Balance of the Class II-M1 Certificate
immediately prior to such Distribution Date and (II) the excess of (x) the sum
of (i) the aggregate Certificate Principal Balance of the Class II-A
Certificates (after taking into account the payment of the Class II-A Principal
Distribution Amount on such Distribution Date) and (ii) the aggregate
Certificate Principal Balance of the Class II-M1 Certificates immediately prior
to such Distribution Date over (y) the lesser of (A) the product of (i) 80.50%
and (ii) the aggregate Stated Principal Balance of the Group II Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period) and (B) the aggregate Stated Principal Balance of the
Group II Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period) minus the Group II
Overcollateralization Floor.

         "Class II-P Certificate": Any one of the Class II-P Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-13, executed, authenticated and delivered by the Trust Administrator
on behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC X.

         "Class II-S Certificate": Any one of the Class II-S Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-6, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing a Regular Interest in REMIC 3.

                                       18
<PAGE>

         "Class A Certificates": The Class I-A Certificates and the Class II-A
Certificates.

         "Class A Principal Distribution Amount": With respect to any
Distribution Date, the Class I-A Principal Distribution Amount or the Class II-A
Principal Distribution Amount.

         "Class C Certificates": The Class I-C Certificates and the Class II-C
Certificates.

         "Class Factors": The Trustee will determine a Class Factor (carried to
eight decimal places) for each Class of Regular Certificates in connection with
each Distribution Date. When the Class Factor is multiplied by the Original
Class Certificate Principal Balance (or original Notional Amount) of a
Certificate of that Class, the product will equal the Certificate Principal
Balance (or Notional Amount) of such Certificate (after giving effect to the
distribution to Certificateholders on such Distribution Date of, to the extent
part of the Group I Available Funds or the Group II Available Funds, as
applicable, for such Distribution Date, scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period).

         "Class M2 Certificate": Any one of the Class M2 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-8, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing two Regular Interests in REMIC 3, the I-M2
Component and the II-M2 Component.

         "Class M3 Certificate": Any one of the Class M3 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-9, executed, authenticated and delivered by the Trust Administrator on
behalf of the Trustee, representing the right to distributions as set forth
herein and therein and evidencing two Regular Interests in REMIC 3, the I-M3
Component and the II-M3 Component.

         "Class P Certificates": The Class I-P Certificates and the Class II-P
Certificates.

         "Class R Certificate": Any one of the Class R Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-14, executed, authenticated and delivered by the Trust Administrator
on behalf of the Trustee, evidencing the ownership of the Class R-0A Interest,
the Class R-0B Interest, the Class R-1A Interest, the Class R-1B Interest, the
Class R-2 Interest and the Class R-3 Interest.

         "Class R-0A Interest": The Residual Interest in REMIC 0A.

         "Class R-0B Interest": The Residual Interest in REMIC 0B.

         "Class R-1A Interest": The Residual Interest in REMIC 1A.

         "Class R-1B Interest": The Residual Interest in REMIC 1B

                                       19
<PAGE>

         "Class R-2 Interest": The Residual Interest in REMIC 2.

         "Class R-3 Interest": The Residual Interest in REMIC 3.

         "Class R-X Certificate": Any one of the Class R-X Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-15, executed, authenticated and delivered by the Trust Administrator
on behalf of the Trustee, evidencing the ownership of the Class R-X Interest.

         "Class R-X Interest": The Residual Interest in REMIC X, which interest
may or may not be separately certificated.

         "Class S Certificates": The Class I-S Certificates and the Class II-S
Certificates.

         "Close of Business": As used herein, with respect to any Business Day,
5:00 p.m. (New York time).

         "Closing Date": December 3, 2001.

         "Closing Date Mortgage Loans": The Group I Closing Date Mortgage Loans
and the Group II Closing Date Mortgage Loans.

         "Code": The Internal Revenue Code of 1986, as amended.

         "Collection Account": The account or accounts created and maintained by
the Master Servicer pursuant to Section 3.10(a), which shall be entitled
"Bankers Trust Company of California, N.A., as Trust Administrator for the
benefit of First Union National Bank, as Trustee, in trust for registered
Holders of Long Beach Mortgage Loan Trust 2001-4, Asset-Backed Certificates,
Series 2001-4," which must be an Eligible Account.

         "Commission": The Securities and Exchange Commission.

         "Compensating Interest": As defined in Section 3.24.

         "Component": Any one of the Mezzanine Components.

         "Component Certificates": The Class M2 Certificates and the Class M3
Certificates.

         "Component Principal Balance": With respect to any Mezzanine Components
immediately prior to any Distribution Date, will be an amount equal to the
Initial Component Principal Balance thereof reduced by the sum of all amounts
distributed in respect of principal of such Component pursuant to Section 4.01
and Realized Losses allocated thereto on all prior Distribution Dates.

                                       20
<PAGE>

         "Corporate Trust Office": The principal corporate trust office of the
Trust Administrator or the Trustee at which at any particular time its corporate
trust business in connection with this Agreement shall be administered, which
office with respect to the Trust Administrator at the date of the execution of
this instrument is located at 1761 East St. Andrew Place, Santa Ana, California
92705, or at such other address as the Trust Administrator may designate from
time to time by notice to the Certificateholders, the Depositor, the Trustee and
the Master Servicer, and which office with respect to the Trustee at the date of
the execution of this instrument is located at 401 South Tryon Street, NC 1179,
12th Floor, Charlotte, North Carolina, 28288-1179, or at such other address as
the Trustee may designate from time to time by notice to the Certificateholders,
the Depositor, the Trust Administrator and the Master Servicer.

         "Corresponding Certificates": With respect to (i) REMIC 2 Regular
Interest LT2B-1, (ii) REMIC 2 Regular Interest LT2C-1 and REMIC 2 Regular
Interest LT2F-2, (iii) REMIC 2 Regular Interest LT2D-1 and REMIC 2 Regular
Interest LT2G-2, (iv) REMIC 2 Regular Interest LT2B-2 (v) REMIC 2 Regular
Interest LT2C-2, (vi) REMIC 2 Regular Interest LT2D-2, (vii) REMIC 2 Regular
Interest LT2E-2, (viii) REMIC 2 Regular Interest LT2P-1 and (ix) REMIC 2 Regular
Interest LT2P-2, (i) the Class I-A Certificates, (ii) the Class M2 Certificates,
(iii) the Class M3 Certificates, (iv) the Class II-A1 Certificates, (v) the
Class II-A2 Certificates, (vi) the Class II-A3 Certificates, (vii) the Class
II-M1 Certificates, (viii) REMIC 3 Uncertificated Regular Interest LT3-IP and
(ix) REMIC 3 Uncertificated Regular Interest LT3-IIP, respectively.

         "Cumulative Loss Percentage": With respect to any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from the Cut-off Date to the last day of the
preceding calendar month and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date.

         "Custodial Agreement": An agreement that may be entered into or an
agreement assigned to the Trustee with respect to the Mortgage Loans.

         "Custodian": A custodian, which shall not be the Depositor, the Master
Servicer, the Seller or any affiliate of any of them, appointed pursuant to a
Custodial Agreement.

         "Cut-off Date": With respect to each Closing Date Mortgage Loan,
December 1, 2001; and with respect to each Qualified Substitute Mortgage Loan,
its date of substitution, as applicable.

         "Cut-off Date Aggregate Principal Balance": The aggregate of the
Cut-off Date Principal Balances of the Mortgage Loans.

         "Cut-off Date Principal Balance": With respect to any Mortgage Loan,
the unpaid principal balance thereof as of the Cut-off Date (with respect to an
Closing Date Mortgage Loan); Subsequent Cut-off Date (with respect to a
Subsequent Mortgage Loan); or as of the applicable date of substitution (with
respect to a Qualified Substitute Mortgage Loan), after giving effect to
scheduled payments due on or before the Cut-off Date, whether or not received.

         "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.

                                       21
<PAGE>

         "Deficiency Amount": With respect to any Distribution Date, the sum of
(i) the Guaranteed Interest Distribution Amount and (ii) the Guaranteed
Principal Distribution Amount.

         "Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code.

         "Definitive Certificates": As defined in Section 5.01(b) hereof.

         "Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
one or more Qualified Substitute Mortgage Loans.

         "Delinquent": With respect to any Mortgage Loan and related Monthly
Payment, the Monthly Payment due on a Due Date which is not made by the Close of
Business on the next scheduled Due Date for such Mortgage Loan. For example, a
Mortgage Loan is 60 or more days Delinquent if the Monthly Payment due on a Due
Date is not made by the Close of Business on the second scheduled Due Date after
such Due Date.

         "Depositor": Long Beach Securities Corp., a Delaware corporation, or
any successor in interest.

         "Depository": The initial Depository shall be The Depository Trust
Company, whose nominee is Cede & Co., or any other organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. The Depository shall initially be the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.

         "Depository Participant": A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.

         "Determination Date": With respect to any Distribution Date, the 15th
day of the calendar month in which such Distribution Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.

         "Directly Operate": With respect to any REO Property, the furnishing or
rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the REMIC other than through an
Independent Contractor; provided, however, that the Trustee or the Trust
Administrator (or the Master Servicer on behalf of the Trustee or the Trust
Administrator) shall not be considered to Directly Operate an REO Property
solely because the Trustee or the Trust Administrator (or the Master Servicer on
behalf of the Trustee or the Trust Administrator) establishes rental terms,
chooses tenants, enters into or renews leases, deals with taxes and insurance,
or makes decisions as to repairs or capital expenditures with respect to such
REO Property.

                                       22
<PAGE>

         "Disqualified Organization": Any: (A) "disqualified organization" under
Section 860E of the Code, which as of the Closing Date is any of (i) the United
States, any state or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (ii) any organization (other than a cooperative described in Section
521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code
unless such organization is subject to the tax imposed by Section 511 of the
Code, or (iii) any organization described in Section 1381(a)(2)(C) of the Code;
(B) "electing large partnership" within the meaning of Section 775 of the Code;
or (C) other Person so designated by the Trustee based upon an Opinion of
Counsel provided by nationally recognized counsel to the Trustee that the
holding of an ownership interest in a Residual Certificate by such Person may
cause the Trust Fund or any Person having an ownership interest in any Class of
Certificates (other than such Person) to incur liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the transfer
of an ownership interest in a Residual Certificate to such Person. A corporation
will not be treated as an instrumentality of the United States or of any state
or political subdivision thereof if all of its activities are subject to income
tax and a majority of its board of directors is not selected by a governmental
unit. The term "United States," "state" and "international organization" shall
have the meanings set forth in Section 7701 of the Code.

         "Distribution Account": The trust account or accounts created and
maintained by the Trust Administrator pursuant to Section 3.10(b) which shall be
entitled "Distribution Account, Bankers Trust Company of California, N.A., as
Trust Administrator for the benefit of First Union National Bank, as Trustee, in
trust for the registered Certificateholders of Long Beach Mortgage Loan Trust
2001-4, Asset-Backed Certificates, Series 2001-4" and which must be an Eligible
Account.

         "Distribution Date": The 25th day of any calendar month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in January 2002.

         "Due Date": With respect to each Distribution Date, the first day of
the calendar month in which such Distribution Date occurs, which is the day of
the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of
any days of grace.

         "Due Period": With respect to any Distribution Date, the period
commencing on the second day of the month preceding the month in which such
Distribution Date occurs and ending on the first day of the month in which such
Distribution Date occurs.

         "Eligible Account": Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated P-1 by Moody's, F-1 by Fitch or A-1+ by S&P (or comparable ratings if
Moody's, Fitch and S&P are not the Rating Agencies) at the time any amounts are
held on deposit therein, (ii) an account or accounts the deposits in which are
fully insured by the FDIC (to the limits established by such corporation), the
uninsured deposits in which account are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to the Trustee, the Trust
Administrator and to each Rating Agency, the Certificateholders will have a
claim with respect to the funds in such account or a perfected first priority
security interest against such collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
maintained, (iii) a trust account or accounts maintained with the trust
department of a federal or state chartered depository institution, national
banking association or trust company acting in its fiduciary capacity or (iv) an
account otherwise acceptable to each Rating Agency without reduction or
withdrawal of their then current ratings of the Certificates as evidenced by a
letter from each Rating Agency to the Trust Administrator. Eligible Accounts may
bear interest.

                                       23
<PAGE>

         "ERISA": The Employee Retirement Income Security Act of 1974, as
amended.

         "Extraordinary Trust Fund Expense": Any amounts reimbursable to the
Trustee or the Trust Administrator, or any director, officer, employee or agent
of the Trustee or the Trust Administrator, from the Trust Fund pursuant to
Section 8.05, any amounts payable from the Distribution Account in respect of
taxes pursuant to Section 10.01(g)(iii), any amounts payable from the
Distribution Account in respect of any REMIC pursuant to Section 10.01(c), any
amounts payable from the Trust Fund as a trustee fee for any successor trustee
and any amounts payable by the Trustee or the Trust Administrator for the
recording of the assignments of mortgage pursuant to Section 2.01.

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

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

         "Final Recovery Determination": With respect to any defaulted Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the Seller or the Master Servicer pursuant to or as contemplated by Section
2.03 or 9.01), a determination made by the Master Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Master Servicer shall
maintain records, prepared by a Servicing Representative, of each Final Recovery
Determination made thereby.

         "Fitch": Fitch, Inc., or its successor in interest.

         "Fixed Rate Mortgage Loan": A Mortgage Loan which provides for a fixed
Mortgage Rate payable with respect thereto.

         "Formula Rate": For any Distribution Date and the Class I-A
Certificates, the Class II-A Certificates, the Class II-M1 Certificates and the
Mezzanine Components, the lesser of (i) LIBOR plus the related Certificate
Margin and (ii) the related Maximum Cap Rate.

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

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

                                       24
<PAGE>

         "Group I Available Funds": With respect to any Distribution Date, an
amount equal to the excess of (i) the sum of (a) the aggregate of the Monthly
Payments on the Group I Mortgage Loans due on the related Due Date and received
on or prior to the related Determination Date, (b) Liquidation Proceeds,
Insurance Proceeds, Principal Prepayments and other unscheduled recoveries of
principal and interest in respect of the Group I Mortgage Loans during the
related Prepayment Period (other than any Prepayment Charges collected by the
Master Servicer in connection with the full or partial prepayment of any of the
Group I Mortgage Loans and any Master Servicer Prepayment Charge Payment Amount
in connection with Group I Mortgage Loans), (c) the aggregate of any amounts
received in respect of an REO Property acquired in respect of a Group I Mortgage
Loan withdrawn from any REO Account and deposited in the Collection Account for
such Distribution Date, (d) the aggregate of any amounts deposited in the
Collection Account by the Master Servicer in respect of related Prepayment
Interest Shortfalls on the Group I Mortgage Loans for such Distribution Date,
(e) the aggregate of any Advances made by the Master Servicer or the Trust
Administrator for such Distribution Date with respect to the Group I Mortgage
Loans, (f) the aggregate of any related advances made by or on behalf of the
Trust Administrator for such Distribution Date with respect to the Group I
Mortgage Loans pursuant to Section 7.02(b), (g) the aggregate of any amounts
constituting proceeds of repurchases or substitutions of the Group I Mortgage
Loans occurring during the related Prepayment Period and (h) with respect to the
Distribution Date immediately following the end of the Group I Pre-Funding
Period, any excess amounts transferred from the Group I Pre-Funding Account
(exclusive of investment income therein) after giving effect to any purchase of
Subsequent Mortgage Loans over (ii) the sum of (a) amounts reimbursable or
payable to the Depositor, the Master Servicer, the Trustee, the Trust
Administrator, the Seller, the Guarantor, the NIMS Insurer or any Sub-Servicer
pursuant to Section 3.11 or Section 3.12 in respect of the Group I Mortgage
Loans or otherwise payable in respect of Extraordinary Trust Fund Expenses in
connection with the Group I Mortgage Loans, (b) amounts deposited in the
Collection Account or the Distribution Account pursuant to clauses (i)(a)
through (h) above, as the case may be, in connection with the Group I Mortgage
Loans, in error, (c) Stayed Funds in connection with the Group I Mortgage Loans,
(d) any indemnification payments or expense reimbursements made by the Trust
Fund pursuant to Section 8.05 in connection with the Group I Mortgage Loans and
(e) amounts reimbursable to the Trust Administrator for an advance made pursuant
to Section 7.02(b) in connection with the Group I Mortgage Loans which advance
the Trust Administrator has determined to be nonrecoverable from the Stayed
Funds in respect of which it was made.

         "Group I Certificates": The Class I-A Certificates, the Class I-S
Certificates, the Class I-C Certificates and the Class I-P Certificates.

         "Group I Closing Date Mortgage Loan": Any of the Group I Mortgage Loans
included in the Trust Fund as of the Closing Date. The aggregate principal
balance of the Group I Closing Date Mortgage Loans as of the Cut-off Date is
equal to $1,065,665,351.54.

         "Group I Credit Enhancement Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is (x) the sum of
the aggregate Component Principal Balances of the Group I Mezzanine Components
and the Uncertificated Principal Balance of REMIC 3 Uncertificated Regular
Interest LT3-IC, and the denominator of which is (y) the sum of the aggregate
Stated Principal Balance of the Group I Mortgage Loans plus the amount of any
remaining funds in the Group I Pre-Funding Account, calculated prior to taking
into account payments of principal on the Group I Mortgage Loans due on the
related Due Date or received during the related Prepayment Period and
distribution of the Group I Principal Distribution Amount in respect of the
Certificates and Components then entitled to distributions of principal on such
Distribution Date.

                                       25
<PAGE>

         "Group I Delinquency Percentage": For any Distribution Date, the
percentage obtained by dividing (x) the aggregate Principal Balance of Group I
Mortgage Loans Delinquent 60 days or more by (y) the aggregate Principal Balance
of the Group I Mortgage Loans, in each case, as of the last day of the previous
calendar month.

         "Group I Excess Overcollateralized Amount": With respect to the Class
I-A Certificates and the Group I Mezzanine Components and any Distribution Date,
the excess, if any, of (i) the Group I Overcollateralized Amount for such
Distribution Date (assuming that 100% of the Group I Principal Remittance Amount
is applied as a principal payment on such Distribution Date) over (ii) the Group
I Overcollateralization Target Amount for such Distribution Date.

         "Group I Extra Principal Distribution Amount": With respect to any
Distribution Date, the lesser of (x) the Group I Net Monthly Excess Cashflow for
such Distribution Date and (y) the Group I Overcollateralization Deficiency
Amount for such Distribution Date.

         "Group I Interest Remittance Amount": With respect to any Distribution
Date, that portion of the Group I Available Funds for such Distribution Date
attributable to interest received or advanced with respect to the Group I
Mortgage Loans or to Compensating Interest paid by the Master Servicer with
respect to the Group I Mortgage Loans.

         "Group I Mezzanine Components": The I-M2 Component and the I-M3
Component.

         "Group I Mortgage Loans": Those Mortgage Loans identified as Group I
Mortgage Loans on the Mortgage Loan Schedule.

         "Group I Net Monthly Excess Cashflow": With respect to each
Distribution Date, the sum of (a) any Group I Overcollateralization Release
Amount for such Distribution Date and (b) the excess of (x) Group I Available
Funds for such Distribution Date over (y) the sum for such Distribution Date of
(A) the Monthly Interest Distributable Amounts for the Class I-A Certificates,
the Class I-S Certificates and the Group I Mezzanine Components, (B) the Unpaid
Interest Shortfall Amounts for the Class I-A Certificates and the Class I-S
Certificates, (C) the Group I Principal Remittance Amount, (D) the Guarantor
Reimbursement Amount and (E) the Guaranty Fee.

         "Group I Original Pre-Funded Amount": The amount deposited by the
Depositor in the Group I Pre-Funding Account on the Closing Date, which amount
is $312,332,448.46.

         "Group I Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which the Group I
Overcollateralization Target Amount exceeds the Group I Overcollateralized
Amount on such Distribution Date (assuming that 100% of the aggregate Group I
Principal Remittance Amount is applied as a principal payment on such
Distribution Date).

                                       26
<PAGE>

         "Group I Overcollateralization Floor": $6,890,000.

         "Group I Overcollateralization Release Amount": With respect to any
Distribution Date, the lesser of (x) the aggregate Group I Principal Remittance
Amount for such Distribution Date and (y) the Group I Excess Overcollateralized
Amount.

         "Group I Overcollateralization Target Amount": With respect to any
Distribution Date (i) prior to the Group I Stepdown Date, $17,225,000, (ii) on
or after the Group I Stepdown Date provided a Group I Trigger Event is not in
effect, the greater of (x) 2.50% of the aggregate Stated Principal Balance of
the Group I Mortgage Loans on the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period and after giving effect
to the distributions of principal to be made on such Distribution Date) and (y)
the Group I Overcollateralization Floor, and (iii) on or after the Group I
Stepdown Date if a Group I Trigger Event is in effect, the Group I
Overcollateralization Target Amount for the immediately preceding Distribution
Date. Notwithstanding the foregoing, the Group I Overcollateralization Target
Amount shall never exceed the initial Group I Overcollateralization Target
Amount.

         "Group I Overcollateralized Amount": For any Distribution Date, the
amount, if any, by which (i) the sum of the aggregate Stated Principal Balance
of the Group I Mortgage Loans on the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period and after giving effect
to distributions of principal to be made on such Distribution Date) plus the
amount of any remaining funds in the Group I Pre-Funding Account (exclusive of
any investment income therein) exceeds (ii) the sum of the aggregate Certificate
Principal Balances of the Class I-A Certificates, the Uncertificated Principal
Balance of REMIC 3 Uncertificated Regular Interest LT3-IP and the aggregate
Component Principal Balances of the Group I Mezzanine Components as of such
Distribution Date (after giving effect to distributions to be made on such
Distribution Date).

         "Group I Pre-Funding Account": The Account established and maintained
pursuant to Section 4.10, as defined therein.

         "Group I Pre-Funding Period": The period beginning on the Closing Date
and ending on the earlier to occur of (a) the date upon which the amount on
deposit in the Group I Pre-Funding Account (exclusive of investment income
therein) has been reduced to zero or (b) December 31, 2001.

         "Group I Principal Distribution Amount": The sum of (i) (x) the Group I
Principal Remittance Amount minus (y) the amount of any Group I
Overcollateralization Release Amount for such Distribution Date, and (ii) the
Group I Extra Principal Distribution Amount for such Distribution Date.

         "Group I Principal Remittance Amount": With respect to any Distribution
Date, the sum of (i) all scheduled payments of principal collected or advanced
on the Group I Mortgage Loans by the Master Servicer that were due during the
related Due Period, (ii) all partial and full principal prepayments of the Group
I Mortgage Loans applied by the Master Servicer during the related Prepayment
Period, (iii) the principal portion of all Net Liquidation Proceeds and
Insurance Proceeds received during the related Prepayment Period with respect to
the Group I Mortgage Loans, (iv) that portion of the Purchase Price,
representing principal of any repurchased Group I Mortgage Loan, deposited to
the Collection Account during the related Prepayment Period, (v) the principal
portion of any Substitution Adjustments deposited in the Collection Account
during the related Prepayment Period with respect to the Group I Mortgage Loans,
(vi) in the case of the Distribution Date immediately following the end of the
Group I Pre-Funding Period, the amount of any remaining funds in the Group I
Pre-Funding Account not used by the Trustee to purchase Subsequent Mortgage
Loans and (vii) on the Distribution Date on which the Trust is to be terminated
in accordance with this Agreement, that portion of the Termination Price
representing principal with respect to the Group I Mortgage Loans.

                                       27
<PAGE>

         "Group I Reserve Fund": The reserve fund established pursuant to
Section 3.26.

         "Group I Stepdown Date": The earlier of (a) the Distribution Date in
January 2005 and (b) the date on which the aggregate Certificate Principal
Balance of the Class I-A Certificates has been reduced to zero.

         "Group I Subsequent Mortgage Loan": A Group I Mortgage Loan sold by the
Depositor to the Trust Fund pursuant to Section 2.07, such Mortgage Loan being
identified on the Mortgage Loan Schedule attached to a Subsequent Transfer
Instrument.

         "Group I Trigger Event": A Group I Trigger Event has occurred with
respect to a Distribution Date if the Group I Delinquency Percentage exceeds 80%
of the Group I Credit Enhancement Percentage.

         "Group II Available Funds": With respect to any Distribution Date, an
amount equal to the excess of (i) the sum of (a) the aggregate of the Monthly
Payments on the Group II Mortgage Loans due on the related Due Date and received
on or prior to the related Determination Date, (b) Liquidation Proceeds,
Insurance Proceeds, Principal Prepayments and other unscheduled recoveries of
principal and interest in respect of the Group II Mortgage Loans during the
related Prepayment Period (other than any Prepayment Charges collected by the
Master Servicer in connection with the full or partial prepayment of any of the
Group II Mortgage Loans and any Master Servicer Prepayment Charge Payment Amount
in connection with Group II Mortgage Loans), (c) the aggregate of any amounts
received in respect of an REO Property acquired in respect of a Group II
Mortgage Loan withdrawn from any REO Account and deposited in the Collection
Account for such Distribution Date, (d) the aggregate of any amounts deposited
in the Collection Account by the Master Servicer in respect of related
Prepayment Interest Shortfalls on the Group II Mortgage Loans for such
Distribution Date, (e) the aggregate of any Advances made by the Master Servicer
or the Trust Administrator for such Distribution Date with respect to the Group
II Mortgage Loans, (f) the aggregate of any related advances made by or on
behalf of the Trust Administrator for such Distribution Date with respect to the
Group II Mortgage Loans pursuant to Section 7.02(b), (g) the aggregate of any
amounts constituting proceeds of repurchases or substitutions of the Group II
Mortgage Loans occurring during the related Prepayment Period and (h) with
respect to the Distribution Date immediately following the end of the Group II
Pre-Funding Period, any excess amounts transferred from the Group II Pre-Funding
Account (exclusive of investment income therein) after giving effect to any
purchase of Subsequent Mortgage Loans over (ii) the sum of (a) amounts
reimbursable or payable to the Depositor, the Master Servicer, the Trustee, the
Trust Administrator, the Seller, the Guarantor, the NIMS Insurer or any
Sub-Servicer pursuant to Section 3.11 or Section 3.12 in respect of the Group II
Mortgage Loans or otherwise payable in respect of Extraordinary Trust Fund
Expenses in connection with the Group II Mortgage Loans, (b) amounts deposited
in the Collection Account or the Distribution Account pursuant to clauses (i)(a)
through (h) above, as the case may be, in connection with the Group II Mortgage
Loans, in error, (c) Stayed Funds in connection with the Group II Mortgage
Loans, (d) any indemnification payments or expense reimbursements made by the
Trust Fund pursuant to Section 8.05 in connection with the Group II Mortgage
Loans and (e) amounts reimbursable to the Trust Administrator for an advance
made pursuant to Section 7.02(b) in connection with the Group II Mortgage Loans
which advance the Trust Administrator has determined to be nonrecoverable from
the Stayed Funds in respect of which it was made.

                                       28
<PAGE>

         "Group II Certificates": The Class II-A Certificates, the Class II-S
Certificates, the Group II-M1 Certificates, the Class II-C Certificates and the
Class II-P Certificates.

         "Group II Closing Date Mortgage Loan": Any of the Group II Mortgage
Loans included in the Trust Fund as of the Closing Date. The aggregate principal
balance of the Group II Closing Date Mortgage Loans as of the Cut-off Date is
equal to $503,325,389.61.

         "Group II Credit Enhancement Percentage": For any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is (x) the sum
of the aggregate Certificate Principal Balances of the Class II-M1 Certificates,
the Uncertificated Principal Balance of REMIC 3 Uncertificated Regular Interest
LT3-IIC and the aggregate Component Principal Balances of the Group II Mezzanine
Components, and the denominator of which is (y) the sum of the aggregate Stated
Principal Balance of the Group II Mortgage Loans plus the amount of any
remaining funds in the Group II Pre-Funding Account, calculated prior to taking
into account payments of principal on the Group II Mortgage Loans due on the
related Due Date or received during the related Prepayment Period and
distribution of the Group II Principal Distribution Amount in respect of the
Certificates and Components then entitled to distributions of principal on such
Distribution Date.

         "Group II Delinquency Percentage": For any Distribution Date, the
percentage obtained by dividing (x) the aggregate Principal Balance of Group II
Mortgage Loans Delinquent 60 days or more by (y) the aggregate Principal Balance
of the Group II Mortgage Loans, in each case, as of the last day of the previous
calendar month.

         "Group II Excess Overcollateralized Amount": With respect to the Class
II-A Certificates, the Class II-M1 Certificates and the Group II Mezzanine
Components and any Distribution Date, the excess, if any, of (i) the Group II
Overcollateralized Amount for such Distribution Date (assuming that 100% of the
Group II Principal Remittance Amount is applied as a principal payment on such
Distribution Date) over (ii) the Group II Overcollateralization Target Amount
for such Distribution Date.

         "Group II Extra Principal Distribution Amount": With respect to any
Distribution Date, the lesser of (x) the Group II Net Monthly Excess Cashflow
for such Distribution Date and (y) the Group II Overcollateralization Deficiency
Amount for such Distribution Date.

                                       29
<PAGE>

         "Group II Interest Remittance Amount": With respect to any Distribution
Date, that portion of the Group II Available Funds for such Distribution Date
attributable to interest received or advanced with respect to the Group II
Mortgage Loans or to Compensating Interest paid by the Master Servicer with
respect to the Group II Mortgage Loans.

         "Group II Mezzanine Components": The II-M2 Component and the Class
II-M3 Component.

         "Group II Mortgage Loans": Those Mortgage Loans identified as Group II
Mortgage Loans on the Mortgage Loan Schedule.

         "Group II Net Monthly Excess Cashflow": With respect to each
Distribution Date, the sum of (a) any Group II Overcollateralization Release
Amount for such Distribution Date and (b) the excess of (x) Group II Available
Funds for such Distribution Date over (y) the sum for such Distribution Date of
(A) the Monthly Interest Distributable Amounts for the Class II-A Certificates,
the Class II-S Certificates, the Class II-M1 Certificates and the Group II
Mezzanine Components, (B) the Unpaid Interest Shortfall Amounts for the Class
II-A Certificates and the Class II-S Certificates and (C) the Group II Principal
Remittance Amount.

         "Group II Original Pre-Funded Amount": The amount deposited by the
Depositor in the Group II Pre-Funding Account on the Closing Date, which amount
is $118,674,610.39.

         "Group II Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which the Group II
Overcollateralization Target Amount exceeds the Group II Overcollateralized
Amount on such Distribution Date (assuming that 100% of the aggregate Group II
Principal Remittance Amount is applied as a principal payment on such
Distribution Date).

         "Group II Overcollateralization Floor": $3,110,000.

         "Group II Overcollateralization Release Amount": With respect to any
Distribution Date, the lesser of (x) the aggregate Group II Principal Remittance
Amount for such Distribution Date and (y) the Group II Excess Overcollateralized
Amount.

         "Group II Overcollateralization Target Amount": With respect to any
Distribution Date (i) prior to the Group II Stepdown Date, $7,775,000, (ii) on
or after the Group II Stepdown Date provided a Group II Trigger Event is not in
effect, the greater of (x) 2.50% of the aggregate Stated Principal Balance of
the Group II Mortgage Loans on the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period and after giving effect
to the distributions of principal to be made on such Distribution Date) and (y)
the Group II Overcollateralization Floor, and (iii) on or after the Group II
Stepdown Date if a Group II Trigger Event is in effect, the Group II
Overcollateralization Target Amount for the immediately preceding Distribution
Date. Notwithstanding the foregoing, the Group II Overcollateralization Target
Amount shall never exceed the initial Group II Overcollateralization Target
Amount.

                                       30
<PAGE>

         "Group II Overcollateralized Amount": For any Distribution Date, the
amount, if any, by which (i) the sum of the aggregate Stated Principal Balance
of the Group II Mortgage Loans on the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due
Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period and after giving effect
to the distributions of principal to be made on such Distribution Date) plus the
amount of any remaining funds in the Group II Pre-Funding Account (exclusive of
any investment income therein) exceeds (ii) the sum of the aggregate Certificate
Principal Balances of the Class II-A Certificates and the Class II-M1
Certificates, the Uncertificated Principal Balance of REMIC 3 Uncertificated
Regular Interest LT3-IIP, and the aggregate Component Principal Balances of the
Group II Mezzanine Components as of such Distribution Date (after giving effect
to distributions to be made on such Distribution Date).

         "Group II Pre-Funding Account": The Account established and maintained
pursuant to Section 4.10, as defined therein.

         "Group II Pre-Funding Period": The period beginning on the Closing Date
and ending on the earlier to occur of (a) the date upon which the amount on
deposit in the Group II Pre-Funding Account (exclusive of investment income
therein) has been reduced to zero or (b) December 31, 2001.

         "Group II Principal Distribution Amount": With respect to any
Distribution Date, the sum of (i) (x) the Group II Principal Remittance Amount
minus (y) the amount of any Group II Overcollateralization Release Amount for
such Distribution Date, and (ii) the Group II Extra Principal Distribution
Amount for such Distribution Date.

         "Group II Principal Remittance Amount": With respect to any
Distribution Date, the sum of (i) all scheduled payments of principal collected
or advanced on the Group II Mortgage Loans by the Master Servicer that were due
during the related Due Period, (ii) all partial and full principal prepayments
of the Group II Mortgage Loans applied by the Master Servicer during the related
Prepayment Period, (iii) the principal portion of all Net Liquidation Proceeds
and Insurance Proceeds received during the related Prepayment Period with
respect to the Group II Mortgage Loans, (iv) that portion of the Purchase Price,
representing principal of any repurchased Group II Mortgage Loan, deposited to
the Collection Account during the related Prepayment Period, (v) the principal
portion of any Substitution Adjustments deposited in the Collection Account
during the related Prepayment Period with respect to the Group II Mortgage
Loans, (vi) in the case of the Distribution Date immediately following the end
of the Group II Pre-Funding Period, the amount of any remaining funds in the
Group II Pre-Funding Account not used by the Trustee to purchase Subsequent
Mortgage Loans and (vii) on the Distribution Date on which the Trust is to be
terminated in accordance with this Agreement, that portion of the Termination
Price representing principal with respect to the Group II Mortgage Loans.

         "Group II Reserve Fund": The reserve fund established pursuant to
Section 3.26.

         "Group II Stepdown Date": The earlier of (a) the Distribution Date in
January 2005 and (b) the date on which the aggregate Certificate Principal
Balance of the Class II-A Certificates has been reduced to zero.

                                       31
<PAGE>

         "Group II Subsequent Mortgage Loan": A Group II Mortgage Loan sold by
the Depositor to the Trust Fund pursuant to Section 2.07, such Mortgage Loan
being identified on the Mortgage Loan Schedule attached to a Subsequent Transfer
Instrument.

         "Group II Trigger Event": A Group II Trigger Event has occurred with
respect to a Distribution Date if the Group II Delinquency Percentage exceeds
50% of the Group II Credit Enhancement Percentage.

         "Guaranteed Certificates": The Class I-A Certificates and the Class I-S
Certificates.

         "Guaranteed Interest Distribution Amount": For any Distribution Date
and the Guaranteed Certificates, the amount, if any, after giving effect to the
distributions of the Guaranty Fee and the Guarantor Reimbursement Amount to the
Guarantor and the Monthly Interest Distributable Amount and any Unpaid Interest
Shortfall Amount to the Guaranteed Class I-S Certificates, by which the (i) sum
of (x) the Monthly Interest Distributable Amount and the Unpaid Interest
Shortfall Amount payable on the Guaranteed Certificates for such Distribution
Date and (y) the Net Prepayment Interest Shortfalls and the Relief Act Interest
Shortfalls allocated to the Guaranteed Certificates for such Distribution Date
exceeds (ii) the amount of interest actually paid (without giving effect to any
Guarantor Payment) to the Holders of the related Classes of Guaranteed
Certificates on such Distribution Date.

         "Guaranteed Principal Distribution Amount": With respect to any
Distribution Date, the amount, if any, by which (i) the aggregate Certificate
Principal Balance of the Class I-A Certificates (after giving effect to all
amounts distributable and allocable to principal on such Class I-A Certificates
but prior to giving effect to any Guarantor Payment on such Distribution Date)
exceeds (ii) the sum of the aggregate Stated Principal Balance of the Group I
Mortgage Loans (after giving effect to the principal portion of Monthly Payments
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) plus the amount of any remaining funds in the Group I Pre-Funding
Account (exclusive of any investment income therein).

         "Guarantor": Fannie Mae, or its successor in interest.

         "Guarantor Interest Reimbursement Amount": With respect to any
Distribution Date, (i) the sum of any accrued but unpaid Guaranty Fees, not
including the Guaranty Fee due on such Distribution Date, and (ii) the sum of
all amounts paid by the Guarantor in respect of Guaranteed Interest Distribution
Amounts on all prior Distribution Dates to the extent not previously reimbursed.

         "Guarantor Payment": Any payment made by the Guarantor in respect of a
Guaranteed Interest Distribution Amount or a Guaranteed Principal Distribution
Amount.

         "Guarantor Principal Reimbursement Amount": With respect to any
Distribution Date, the sum of all amounts paid by the Guarantor in respect of
Guaranteed Principal Distribution Amounts on all prior Distribution Dates to the
extent not previously reimbursed.

                                       32
<PAGE>

         "Guarantor Reimbursement Amount": With respect to any Distribution
Date, the sum of Guarantor Interest Reimbursement Amount and the Guarantor
Principal Reimbursement Amount.

         "Guaranty": The obligations of the Guarantor pursuant to Section 4.09.

         "Guaranty Fee": For any Distribution Date and with respect to the
Guaranteed Certificates, the fee payable to the Guarantor in respect of its
services as Guarantor that accrues at the applicable Guaranty Fee Rate for such
Guaranteed Certificates on a balance equal to the aggregate Certificate
Principal Balance of the Class I-A Certificates immediately prior to such
Distribution Date, computed on the basis of a 360-day year and the actual number
of days elapsed in the related Accrual Period.

         "Guaranty Fee Rate": The per annum rate set forth in a side letter of
the Guarantor, addressed to the Trustee, the Trust Administrator, the Seller and
the Master Servicer.

         "Independent": When used with respect to any specified Person, any such
Person who (a) is in fact independent of the Depositor, the Master Servicer and
their respective Affiliates, (b) does not have any direct financial interest in
or any material indirect financial interest in the Depositor or the Master
Servicer or any Affiliate thereof, and (c) is not connected with the Depositor
or the Master Servicer or any Affiliate thereof as an officer, employee,
promoter, underwriter, trustee, trust administrator, partner, director or Person
performing similar functions; provided, however, that a Person shall not fail to
be Independent of the Depositor or the Master Servicer or any Affiliate thereof
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Depositor or the Master Servicer or any Affiliate
thereof, as the case may be.

         "Independent Contractor": Either (i) any Person (other than the Master
Servicer) that would be an "independent contractor" with respect to any of the
REMICs created hereunder within the meaning of Section 856(d)(3) of the Code if
such REMIC were a real estate investment trust (except that the ownership tests
set forth in that Section shall be considered to be met by any Person that owns,
directly or indirectly, 35% or more of any Class of Certificates), so long as
each such REMIC does not receive or derive any income from such Person and
provided that the relationship between such Person and such REMIC is at arm's
length, all within the meaning of Treasury Regulation Section 1.856-4(b)(5), or
(ii) any other Person (including the Master Servicer) if the Trustee and the
Trust Administrator have received an Opinion of Counsel to the effect that the
taking of any action in respect of any REO Property by such Person, subject to
any conditions therein specified, that is otherwise herein contemplated to be
taken by an Independent Contractor will not cause such REO Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code), or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property.

                                       33
<PAGE>

         "Index": With respect to each Adjustable Rate Mortgage Loan and with
respect to each related Adjustment Date, the index as specified in the related
Mortgage Note.

         "Information Supplement": The Information Supplement of the Depositor
dated November 27, 2001, relating to the Guaranteed Certificates.

         "Initial Certificate Principal Balance": With respect to any Regular
Certificate (other than any Class S Certificate), the amount designated "Initial
Certificate Principal Balance" on the face thereof.

         "Initial Component Principal Balance": With respect to the I-M2
Component, $82,680,000; the II-M2 Component, $32,655,000; the I-M3 Component,
$55,120,000; and the II-M3 Component, $20,215,000.

         "Insured Indenture": The indenture, if any, entered into following the
Closing Date, among Long Beach Asset Holdings Corp. CI-1, as Issuer, Long Beach
Asset Holdings CI-1 LLC, as co-issuer, and Bankers Trust Company of California,
N.A., as indenture trustee, relating to the Insured NIM Notes to be issued
thereunder.

         "Insured NIM Notes": Those certain net interest margin securities
issued by Long Beach Asset Holdings Corp. CI-1 which are backed by certain Class
C Certificates and Class P Certificates and insured by the NIMS Insurer.

         "Initial Notional Amount": With respect to any Class S Certificate or
Class C Certificate, the amount designated "Initial Notional Amount" on the face
thereof.

         "Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy covering a Mortgage Loan or the related Mortgaged
Property, to the extent such proceeds are not to be applied to the restoration
of the related Mortgaged Property or released to the Mortgagor in accordance
with the procedures that the Master Servicer would follow in servicing mortgage
loans held for its own account, subject to the terms and conditions of the
related Mortgage Note and Mortgage.

         "Interest Determination Date": With respect to the Class A
Certificates, the Mezzanine Certificates and the Mezzanine Components and each
Accrual Period, the second LIBOR Business Day preceding the commencement of such
Accrual Period.

         "Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any related
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent on a
contractual basis for such Due Period and not previously recovered.

         "LIBOR": With respect to each Accrual Period, the rate determined by
the Trust Administrator on the related Interest Determination Date on the basis
of the "Interest Settlement Rate" for United States dollar deposits of one-month
maturity set forth by the British Bankers' Association (the "BBA"), as such rate
appears on the Telerate Page 3750, as of 11:00 a.m. (London time) on such
Interest Determination Date. With respect to any Interest Determination Date, if
the BBA's Interest Settlement Rate does not appear on Telerate Page 3750 as of
11:00 a.m. (London time) on such date, or if Telerate Page 3750 is not available
on such date the Trust Administrator will obtain such from Reuters Monitor Money
Rates Service page "LIBOR01" or Bloomberg L.P. page "BBAM." Alternatively, the
Trust Administrator may request the principal London office of each of the
Reference Banks to provide a quotation of its rate. On such Interest
Determination Date, LIBOR for the related Accrual Period will be established by
the Trust Administrator as follows:

                                       34
<PAGE>

                  (i) If on such Interest Determination Date two or more
         Reference Banks provide such offered quotations, LIBOR for the related
         Accrual Period shall be the arithmetic mean of such offered quotations
         (rounded upwards if necessary to the nearest whole multiples of
         0.03125%); and

                  (ii) If on such Interest Determination Date fewer than two
         Reference Banks provide such offered quotations, LIBOR for the related
         Accrual Period shall be the higher of (i) LIBOR as determined on the
         previous Interest Determination Date and (ii) the Reserve Interest
         Rate.

         The Trust Administrator will select a particular index as the
alternative index only if it receives an Opinion of Counsel that the selection
of such index will not cause any REMIC to lose its classification as a REMIC for
federal income tax purposes.

         "LIBOR Business Day": Any day on which banks in London, England and The
City of New York are open for conducting transactions in foreign currency and
exchange.

         "Liquidated Mortgage Loan": As to any Distribution Date, any Mortgage
Loan in respect of which the Master Servicer has determined, in accordance with
the servicing procedures specified herein, as of the end of the related
Prepayment Period, that all Liquidation Proceeds which it expects to recover
with respect to the liquidation of the Mortgage Loan or disposition of the
related REO Property have been recovered.

         "Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan or (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03 or Section 9.01. With respect to
any REO Property, either of the following events: (i) a Final Recovery
Determination is made as to such REO Property or (ii) such REO Property is
removed from the Trust Fund by reason of its being sold or purchased pursuant to
Section 3.23 or Section 9.01.

         "Liquidation Proceeds": The amount (other than amounts received in
respect of the rental of any REO Property prior to REO Disposition) received by
the Master Servicer in connection with (i) the taking of all or a part of a
Mortgaged Property by exercise of the power of eminent domain or condemnation,
(ii) the liquidation of a defaulted Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise or (iii) the repurchase, substitution or sale of a
Mortgage Loan or an REO Property pursuant to or as contemplated by Section 2.03,
Section 3.23 or Section 9.01.

         "Loan Group I":  All of the Group I Mortgage Loans collectively.

         "Loan Group II":  All of the Group II Mortgage Loans collectively.

         "Loan-to-Value Ratio": As of any date and as to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the (x) Principal
Balance of the Mortgage Loan (if such Mortgage Loan is secured by a first lien
on the related Mortgaged Property) or the sum of the Principal Balance of the
Mortgage Loan and any other mortgage loan secured by a senior lien on the
related Mortgaged Property (if such Mortgage Loan is secured by a junior lien on
the related Mortgaged Property) and the denominator of which is (y) the Value of
the related Mortgaged Property.

                                       35
<PAGE>

         "Lost Note Affidavit": With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost or destroyed (together with a copy of the related
Mortgage Note and indemnifying the Trust against any loss, cost or liability
resulting from the failure to deliver the original Mortgage Note) in the form of
Exhibit H hereto.

         "Marker Rate 1": With respect to REMIC 3 Uncertificated Regular
Interest LT3-IC and any Distribution Date other than the first Distribution
Date, a per annum rate equal to 2 times the weighted average of the
Uncertificated REMIC 2 Pass-Through Rates for REMIC 2 Regular Interest LT2B-1,
REMIC 2 Regular Interest LT2C-1, REMIC 2 Regular Interest LT2D-1, and REMIC 2
Regular Interest LT2E-1, with the rate on REMIC 2 Regular Interest LT2B-1
subject to a cap equal to the lesser of (i) LIBOR plus the Certificate Margin of
the Class I-A Certificates and (ii) the lower of the Net WAC Rate and the
Maximum Cap Rate applicable to the Class I-A Certificates, with the rate on
REMIC 2 Regular Interest LT2C-1 subject to a cap equal to the lesser of (i)
LIBOR plus the Certificate Margin of the I-M2 Component and (ii) the lower of
the Net WAC Rate and the Maximum Cap Rate applicable to the Group I Mezzanine
Components, with the rate on REMIC 2 Regular Interest LT2D-1 subject to a cap
equal to the lesser of (i) LIBOR plus the Certificate Margin of the I-M3
Component and (ii) the lower of the Net WAC Rate and the Maximum Cap Rate
applicable to the Group I Mezzanine Components, with the rate on REMIC 2 Regular
Interest LT2E-1 subject to a cap of zero for the purpose of this calculation,
provided that in each case the rate used herein shall be multiplied by a
fraction the numerator of which is the actual number of days elapsed in the
Accrual Period and the denominator of which is 30. With respect to REMIC 3
Uncertificated Regular Interest LT3-IC and the first Distribution Date, a per
annum rate equal to the weighted average of the Uncertificated REMIC 2
Pass-Through Rates for REMIC 2 Regular Interest LT2B-1, REMIC 2 Regular Interest
LT2C-1, REMIC 2 Regular Interest LT2D-1, and REMIC 2 Regular Interest LT2E-1.

         "Marker Rate 2": With respect to REMIC 3 Uncertificated Regular
Interest LT3-IIC and any Distribution Date other than the first Distribution
Date, a per annum rate equal to 2 times the weighted average of the
Uncertificated REMIC 2 Pass-Through Rates for REMIC 2 Regular Interest LT2B-2,
REMIC 2 Regular Interest LT2C-2, REMIC 2 Regular Interest LT2D-2, REMIC 2
Regular Interest LT2E-2, REMIC 2 Regular Interest LT2F-2, REMIC 2 Regular
Interest LT2G-2, and REMIC 2 Regular Interest LT2H-2 with the rate on REMIC 2
Regular Interest LT2B-2 subject to a cap equal to the lesser of (i) LIBOR plus
the Certificate Margin of the Class II-A1 Certificates and (ii) the lower of the
Net WAC Rate and the Maximum Cap Rate applicable to the Class II-A Certificates,
with the rate on REMIC 2 Regular Interest LT2C-2 subject to a cap equal to the
lesser of (i) LIBOR plus the Certificate Margin of the Class II-A2 Certificates
and (ii) the lower of the Net WAC Rate and the Maximum Cap Rate applicable to
the Class II-A Certificates, with the rate on REMIC 2 Regular Interest LT2D-2
subject to a cap equal to the lesser of (i) LIBOR plus the Certificate Margin of
the Class II-A3 Certificates and (ii) the lower of the Net WAC Rate and the
Maximum Cap Rate applicable to the Class II-A Certificates, with the rate on
REMIC 2 Regular Interest LT2E-2 subject to a cap equal to the lesser of (i)
LIBOR plus the Certificate Margin of the Class II-M1 Certificates and (ii) the
lower of the Net WAC Rate and the Maximum Cap Rate applicable to the Group II
Mezzanine Certificates, with the rate on REMIC 2 Regular Interest LT2F-2 subject
to a cap equal to the lesser of (i) LIBOR plus the Certificate Margin of the
II-M2 Component and (ii) the lower of the Net WAC Rate and the Maximum Cap Rate
applicable to the Group II Mezzanine Components, with the rate on REMIC 2
Regular Interest LT2G-2 subject to a cap equal to the lesser of (i) LIBOR plus
the Certificate Margin of the II-M3 Component and (ii) the lower of the Net WAC
Rate and the Maximum Cap Rate applicable to the Group II Mezzanine Components,
with the rate on REMIC 2 Regular Interest LT2H-2 subject to a cap of zero for
the purpose of this calculation, provided that in each case the rate used herein
shall be multiplied by a fraction the numerator of which is the actual number of
days in the Accrual Period and the denominator of which is 30. With respect to
REMIC 3 Uncertificated Regular Interest LT3-IIC and the first Distribution Date,
a per annum rate equal to the weighted average of the Uncertificated REMIC 2
Pass-Through Rates for REMIC 2 Regular Interest LT2B-2, REMIC 2 Regular Interest
LT2C-2, REMIC 2 Regular Interest LT2D-2, REMIC 2 Regular Interest LT2E-2, REMIC
2 Regular Interest LT2F-2, REMIC 2 Regular Interest LT2G-2, and REMIC 2 Regular
Interest LT2H-2.

                                       36
<PAGE>

         "Master Servicer": Long Beach Mortgage Company, a Delaware corporation,
or any successor servicer appointed as herein provided, in its capacity as
Master Servicer hereunder.

         "Master Servicer Event of Default": One or more of the events described
in Section 7.01.

         "Master Servicer Prepayment Charge Payment Amount": The amounts (i)
payable by the Master Servicer in respect of any Prepayment Charges waived other
than in accordance with the standard set forth Section 2.04(a)(viii) or (ii)
collected from the Master Servicer in its capacity as Seller in respect of a
remedy for the breach of the representation and warranty made by the Master
Servicer in its capacity as Seller set forth in Section 2.04(a)(vii).

         "Master Servicer Remittance Date": With respect to any Distribution
Date, 3:00 p.m. New York time on the Business Day preceding the Distribution
Date.

         "Master Servicer Termination Test": With respect to any Distribution
Date, the Master Servicer Termination Test will be failed with respect to the
Master Servicer if the Cumulative Loss Percentage exceeds 6.125%.

         "Maximum Cap Rate":

         For any Distribution Date and the Class I-A Certificates and the Group
I Mezzanine Components, (a) a per annum rate equal to the excess, if any, of (i)
the weighted average of the Adjusted Net Maximum Mortgage Rates of the Group I
Mortgage Loans, weighted on the basis of the Stated Principal Balances thereof
as of the Due Date in the month preceding the month of such Distribution Date,
over (ii) the sum of (A) the product of (I) the Guaranty Fee Rate and (II) the
percentage equivalent of a fraction, the numerator of which is (w) the
Certificate Principal Balance of the Class I-A Certificates, and the denominator
of which is (x) the aggregate Stated Principal Balance of the Group I Mortgage
Loans as of the first day of the month preceding the month of such Distribution
Date and (B) the percentage equivalent of a fraction, the numerator of which is
(y) the Pass-Through Rate for the Class I-S Certificates for such Distribution
Date multiplied by the I-S Notional Amount and the denominator of which is (z)
the aggregate Stated Principal Balance of the Group I Mortgage Loans as of the
Due Date in the month preceding the month of such Distribution Date multiplied
by (b) a fraction the numerator of which is 30 and the denominator of which is
the actual number of days elapsed in the related Accrual Period.

                                       37
<PAGE>

         For any Distribution Date and the Class II-A Certificates, Class II-M1
Certificates and the Group II Mezzanine Components, (a) a per annum rate equal
to the excess, if any, of (i) the weighted average of the Adjusted Net Maximum
Mortgage Rates of the Group II Mortgage Loans, weighted on the basis of the
Stated Principal Balances thereof as of the Due Date in the month preceding the
month of such Distribution Date, over (ii) the percentage equivalent of a
fraction, the numerator of which is (y) the Pass-Through Rate for the Class II-S
Certificates for such Distribution Date multiplied by the II-S Notional Amount
and the denominator of which is (z) the aggregate Stated Principal Balance of
the Group II Mortgage Loans as of the Due Date in the month preceding the month
of such Distribution Date multiplied by (b) a fraction the numerator of which is
30 and the denominator of which is the actual number of days elapsed in the
related Accrual Period.

         "Maximum LT2E-1 Uncertificated Accrued Interest Deferral Amount": With
respect to any Distribution Date, the sum of:

         (A)      the excess of (a) accrued interest at the Uncertificated REMIC
                  2 Pass-Through Rate applicable to REMIC 2 Regular Interest
                  LT2E-1 for such Distribution Date on a balance equal to the
                  Uncertificated Principal Balance of REMIC 2 Regular Interest
                  LT2E-1 minus the REMIC 2 Overcollateralized Amount 1, in each
                  case for such Distribution Date, over (b) Uncertificated
                  Accrued Interest on REMIC 2 Regular Interest LT2B-1 with the
                  rate on REMIC 2 Regular Interest LT2B-1 subject to a cap equal
                  to the lesser of (i) LIBOR plus the Certificate Margin of the
                  Class I-A Certificates and (ii) the lower of the Net WAC Rate
                  and the Maximum Cap Rate applicable to the Class I-A
                  Certificates, Uncertificated Accrued Interest on REMIC 2
                  Regular Interest LT2C-1 with the rate on REMIC 2 Regular
                  Interest LT2C-1 subject to a cap equal to the lesser of (i)
                  LIBOR plus the Certificate Margin of the I-M2 Component and
                  (ii) the lower of the Net WAC Rate and the Maximum Cap Rate
                  applicable to the Group I Mezzanine Components, Uncertificated
                  Accrued Interest on REMIC 2 Regular Interest LT2D-1 with the
                  rate on REMIC 2 Regular Interest LT2D-1 subject to a cap equal
                  to the lesser of (i) LIBOR plus the Certificate Margin of the
                  I-M3 Component and (ii) the lower of the Net WAC Rate and the
                  Maximum Cap Rate applicable to the Group I Mezzanine
                  Components, provided, that in each case the rates set forth in
                  clauses (i) above shall be multiplied by a fraction the
                  numerator of which is the actual number of days elapsed in the
                  Accrual Period and the denominator of which is 30, and

         (B)      the REMIC 2 Group I Diverted Excess Spread.

         "Maximum LT2H-2 Uncertificated Accrued Interest Deferral Amount": With
respect to any Distribution Date, the sum of:

                                       38
<PAGE>

         (A)      the excess of (a) accrued interest at the Uncertificated REMIC
                  2 Pass-Through Rate applicable to REMIC 2 Regular Interest
                  LT2H-2 for such Distribution Date on a balance equal to the
                  Uncertificated Principal Balance of REMIC 2 Regular Interest
                  LT2H-2 minus the REMIC 2 Overcollateralized Amount 2, in each
                  case for such Distribution Date, over (b) Uncertificated
                  Accrued Interest on REMIC 2 Regular Interest LT2B-2 with the
                  rate on REMIC 2 Regular Interest LT2B-2 subject to a cap equal
                  to the lesser of (i) LIBOR plus the Certificate Margin of the
                  Class II-A1 Certificates and (ii) the lower of the Net WAC
                  Rate and the Maximum Cap Rate applicable to the Class II-A
                  Certificates, Uncertificated Accrued Interest on REMIC 2
                  Regular Interest LT2C-2 with the rate on REMIC 2 Regular
                  Interest LT2C-2 subject to a cap equal to the lesser of (i)
                  LIBOR plus the Certificate Margin of the Class II-A2
                  Certificates and (ii) the lower of the Net WAC Rate and the
                  Maximum Cap Rate applicable to the Class II-A Certificates,
                  Uncertificated Accrued Interest on REMIC 2 Regular Interest
                  LT2D-2 with the rate on REMIC 2 Regular Interest LT2D-2
                  subject to a cap equal to the lesser of (i) LIBOR plus the
                  Certificate Margin of the Class II-A3 Certificates and (ii)
                  the lower of the Net WAC Rate and the Maximum Cap Rate
                  applicable to the Class II-A Certificates, Uncertificated
                  Accrued Interest on REMIC 2 Regular Interest LT2E-2 with the
                  rate on REMIC 2 Regular Interest LT2E-2 subject to a cap equal
                  to the lesser of (i) LIBOR plus the Certificate Margin of the
                  Class II-M1 Certificates and (ii) the lower of the Net WAC
                  Rate and the Maximum Cap Rate applicable to the Group II
                  Mezzanine Certificates, Uncertificated Accrued Interest on
                  REMIC 2 Regular Interest LT2F-2 with the rate on REMIC 2
                  Regular Interest LT2F-2 subject to a cap equal to the lesser
                  of (i) LIBOR plus the Certificate Margin of the II-M2
                  Component and (ii) the lower of the Net WAC Rate and the
                  Maximum Cap Rate applicable to the Group II Mezzanine
                  Components, and Uncertificated Accrued Interest on REMIC 2
                  Regular Interest LT2G-2 with the rate on REMIC 2 Regular
                  Interest LT2G-2 subject to a cap equal to the lesser of (i)
                  LIBOR plus the Certificate Margin of the II-M3 Component and
                  (ii) the lower of the Net WAC Rate and the Maximum Cap Rate
                  applicable to the Group II Mezzanine Components, provided,
                  that in each case the rates set forth in clauses (i) above
                  shall be multiplied by a fraction the numerator of which is
                  the actual number of days elapsed in the Accrual Period and
                  the denominator of which is 30, and

         (B)      the REMIC 2 Group II Diverted Excess Spread.

         "Maximum Mortgage Rate": With respect to each Mortgage Loan, the
percentage set forth in the related Mortgage Note as the maximum Mortgage Rate
thereunder.

         "Mezzanine Certificates": The Class II-M1 Certificates, the Class M2
Certificates and the Class M3 Certificates.

         "Mezzanine Components": The Group I Mezzanine Components and the Group
II Mezzanine Components.

         "Minimum Mortgage Rate": With respect to each Mortgage Loan, the
percentage set forth in the related Mortgage Note as the minimum Mortgage Rate
thereunder.

                                       39
<PAGE>

         "Monthly Interest Distributable Amount": With respect to the Class A
Certificates, the Class II-M1 Certificates, the Mezzanine Components, the Class
S Certificates, REMIC 3 Uncertificated Regular Interest LT3-IC and REMIC 3
Uncertificated Regular Interest LT3-IIC and any Distribution Date, the amount of
interest accrued during the related Accrual Period at the related Pass-Through
Rate on the Certificate Principal Balance (or Notional Amount in the case of the
Class S Certificates, REMIC 3 Uncertificated Regular Interest LT3-IC and REMIC 3
Uncertificated Regular Interest LT3-IIC) of such Class or on the Component
Principal Balance, in the case of the Mezzanine Components, on such Component
immediately prior to such Distribution Date, in each case, reduced by any Net
Prepayment Interest Shortfalls and Relief Act Interest Shortfalls and in each
case as such shortfall allocations are set forth in Section 1.03. With respect
to the Class I-C Certificates and any Distribution Date, the Monthly Interest
Distributable Amount shall equal the Monthly Interest Distributable Amount for
REMIC 3 Uncertificated Regular Interest LT3-IC for such Distribution Date. With
respect to the Class II-C Certificates and any Distribution Date, the Monthly
Interest Distributable Amount shall equal the Monthly Interest Distributable
Amount for REMIC 3 Uncertificated Regular Interest LT3-IIC for such Distribution
Date. Notwithstanding the foregoing, for federal income tax purposes and under
the REMIC Provisions, the Monthly Interest Distributable Amount for the Class
I-S Certificates and any Distribution Date will be deemed to be the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1A,
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1B,
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1C, and
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1D for such
Distribution Date and the Monthly Interest Distributable Amount for the Class
II-S Certificates and any Distribution Date will be deemed to be the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2A,
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2B,
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2C, and
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2D for such
Distribution Date.

         "Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Sections 3.01 and 3.07; and (c) on the
assumption that all other amounts, if any, due under such Mortgage Loan are paid
when due.

         "Moody's": Moody's Investors Service, Inc. or its successor in
interest.

         "Mortgage": The mortgage, deed of trust or other instrument creating a
first lien or second lien on, or first priority security interest or second
priority security interest in, a Mortgaged Property securing a Mortgage Note.

         "Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

                                       40
<PAGE>

         "Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee and delivered to the Trust Administrator pursuant to Section 2.01 or
Section 2.03(d) as from time to time held as a part of the Trust Fund, the
Mortgage Loans so held being identified in the Mortgage Loan Schedule.

         "Mortgage Loan Purchase Agreement": The agreement between the Master
Servicer, in its capacity as Seller, and the Depositor, regarding the transfer
of the Mortgage Loans by the Seller to or at the direction of the Depositor,
substantially in the form attached hereto as Exhibit C.

         "Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in REMIC 0A and REMIC 0B on such date, attached hereto as Exhibit D, as
supplemented by each schedule of Subsequent Mortgage Loans attached to a
Subsequent Transfer Instrument. The Mortgage Loan Schedule shall be prepared by
the Seller and shall set forth the following information as of the Cut-off Date
with respect to each Mortgage Loan, as applicable:

                  (i)      the Mortgagor's name and the Master Servicer's
                           Mortgage Loan identifying number;

                  (ii)     the street address of the Mortgaged Property
                           including the state and zip code;

                  (iii)    a code indicating whether the Mortgaged Property is
                           owner-occupied;

                  (iv)     the type of Residential Dwelling constituting the
                           Mortgaged Property;

                  (v)      the original months to maturity;

                  (vi)     the Loan-to-Value Ratio and the combined
                           Loan-to-Value Ratio at origination;

                  (vii)    the Mortgage Rate in effect immediately following the
                           Cut-off Date (or Subsequent Cut-off Date, with
                           respect to a Subsequent Mortgage Loan);

                  (viii)   the date on which the first Monthly Payment was due
                           on the Mortgage Loan;

                  (ix)     the stated maturity date;

                  (x)      the amount of the Monthly Payment due on the first
                           Due Date after the Cut-off Date (or Subsequent
                           Cut-off Date, with respect to a Subsequent Mortgage
                           Loan);

                  (xi)     the last Due Date on which a Monthly Payment was
                           actually applied to the unpaid Stated Principal
                           Balance;

                  (xii)    the original principal amount of the Mortgage Loan;

                                       41
<PAGE>

                  (xiii)   the Stated Principal Balance of the Mortgage Loan as
                           of the Close of Business on the Cut-off Date (or
                           Subsequent Cut-off Date, with respect to a Subsequent
                           Mortgage Loan);

                  (xiv)    whether such Mortgage Loan is a Fixed Rate Mortgage
                           Loan or an Adjustable Rate Mortgage Loan, and with
                           respect to each Adjustable Rate Mortgage Loan: (a)
                           the Gross Margin, (b) the Maximum Mortgage Rate, (c)
                           the Minimum Mortgage Rate, (d) the Periodic Rate Cap
                           for the first Adjustment Date and each subsequent
                           Adjustment Date and (e) the next Adjustment Date
                           immediately following the Cut-off Date (or Subsequent
                           Cut-off Date, with respect to a Subsequent Mortgage
                           Loan);

                  (xv)     a code indicating the purpose of the Mortgage Loan
                           (i.e., purchase financing, rate/term refinancing,
                           cash-out refinancing);

                  (xvi)    the Mortgage Rate at origination;

                  (xvii)   a code indicating the documentation program;

                  (xviii)  the Seller's risk grade and the FICO score;

                  (xix)    the Value of the Mortgaged Property;

                  (xx)     the sale price of the Mortgaged Property, if
                           applicable;

                  (xxi)    whether such Mortgage Loan is secured by a first lien
                           or a second lien on the related Mortgaged Property;

                  (xxii)   the date of origination;

                  (xxiii)  the stated remaining months to maturity as of the
                           Cut-off Date (or related Subsequent Cut-off Date,
                           with respect to a Subsequent Mortgage Loan);

                  (xxiv)   the current principal and interest payment of the
                           Mortgage Loan as of the Cut-off Date (or related
                           Subsequent Cut-off Date, with respect to a Subsequent
                           Mortgage Loan);

                  (xxv)    the interest "paid to date" of the Mortgage Loan as
                           of the Cut-off Date (or related Subsequent Cut-off
                           Date, with respect to a Subsequent Mortgage Loan);

                  (xxvi)   a code indicating whether the Mortgage Loan is a
                           Group I Mortgage Loan or a Group II Mortgage Loan;

                  (xxvii)  a code indicating the Index that is associated with
                           such Mortgage Loan (if such Mortgage Loan is an
                           Adjustable Rate Mortgage Loan);

                                       42
<PAGE>

                  (xxviii) the rate adjustment frequency (if such Mortgage Loan
                           is an Adjustable Rate Mortgage Loan); and

                  (xxix)   the number of years the prepayment penalty is in
                           effect.

         The Mortgage Loan Schedule shall set forth the following information,
with respect to the Mortgage Loans in the aggregate as of the Cut-off Date (or
each Subsequent Cut-off Date, with respect to Subsequent Mortgage Loans): (1)
the number of Mortgage Loans; (2) the Cut-off Date Principal Balance of the
Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage Loans and
(4) the weighted average maturity of the Mortgage Loans. The Mortgage Loan
Schedule shall be amended from time to time by the Master Servicer in accordance
with the provisions of this Agreement. With respect to any Qualified Substitute
Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date for such
Mortgage Loan, determined in accordance with the definition of Cut-off Date
herein. The Mortgage Loan Schedule shall clearly identify the Mortgage Loans
that are included in Group I Mortgage Loans, and therefore in REMIC 0A, and
those that are included in Group II Mortgage Loans and therefore in REMIC 0B.

         "Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

         "Mortgage Pool": The pool of Mortgage Loans, identified on Exhibit D
from time to time, and any REO Properties acquired in respect thereof and as
supplemented by any Subsequent Mortgage Loans identified on each schedule of
Subsequent Mortgage Loans attached to a Subsequent Transfer Instrument.

         "Mortgage Rate": With respect to each Fixed Rate Mortgage Loan, the
annual rate set forth in the related Mortgage Note, as amended, modified or
supplemented from time to time. With respect to each Adjustable Rate Mortgage
Loan, the annual rate at which interest accrues on such Mortgage Loan from time
to time in accordance with the provisions of the related Mortgage Note, which
rate (A) as of any date of determination until the first Adjustment Date
following the Cut-off Date (or related Subsequent Cut-off Date, with respect to
a Subsequent Mortgage Loan) shall be the rate set forth in the Mortgage Loan
Schedule as the Mortgage Rate in effect immediately following the Cut-off Date
(or related Subsequent Cut-off Date, with respect to a Subsequent Mortgage Loan)
and (B) as of any date of determination thereafter shall be the rate as adjusted
on the most recent Adjustment Date, to equal the sum, rounded to the next
highest or nearest 0.125% (as provided in the Mortgage Note), of the Index,
determined as set forth in the related Mortgage Note, plus the related Gross
Margin subject to the limitations set forth in the related Mortgage Note. With
respect to each Mortgage Loan that becomes an REO Property, as of any date of
determination, the annual rate determined in accordance with the immediately
preceding sentence as of the date such Mortgage Loan became an REO Property.

         "Mortgaged Property": The underlying property securing a Mortgage Loan,
including any REO Property, consisting of a fee simple estate in a parcel of
real property improved by a Residential Dwelling.

         "Mortgagor":  The obligor on a Mortgage Note.

                                       43
<PAGE>

         "Net Liquidation Proceeds": With respect to any Liquidated Mortgage
Loan or any other disposition of related Mortgaged Property (including REO
Property), the related Liquidation Proceeds net of Advances, Servicing Advances,
Servicing Fees and any other Servicing Fees received and retained in connection
with the liquidation of such Mortgage Loan or Mortgaged Property in accordance
with the terms of this Agreement.

         "Net Monthly Excess Cashflow": With respect to each Distribution Date,
the Group I Net Monthly Excess Cashflow or Group II Net Monthly Excess Cashflow.

         "Net Mortgage Rate": With respect to any Mortgage Loan (or the related
REO Property), as of any date of determination, a per annum rate of interest
equal to the then applicable Mortgage Rate for such Mortgage Loan minus the
Servicing Fee Rate.

         "Net Prepayment Interest Shortfall": With respect to any Distribution
Date, the excess, if any, of any Prepayment Interest Shortfalls for such date
over the related Compensating Interest.

         "Net WAC Rate":

         For any Distribution Date (other than the first Distribution Date) and
the Class I-A Certificates and the Group I Mezzanine Components, (a) a per annum
rate equal to the excess, if any, of (i) the weighted average of the Adjusted
Net Mortgage Rates of the Group I Mortgage Loans, weighted on the basis of the
Stated Principal Balances thereof as of the Due Date in the month preceding the
month of such Distribution Date, over (ii) the sum of (A) the product of (I) the
Guaranty Fee Rate and (II) the percentage equivalent of a fraction, the
numerator of which is (w) the Certificate Principal Balance of the Class I-A
Certificates, and the denominator of which is (x) the aggregate Stated Principal
Balance of the Group I Mortgage Loans as of the first date of the month
preceding the month of such Distribution Date and (B) the percentage equivalent
of a fraction, the numerator of which is (x) the Pass-Through Rate for the Class
I-S Certificates for such Distribution Date multiplied by the Class I-S Notional
Amount and the denominator of which is (y) the aggregate Stated Principal
Balance of the Group I Mortgage Loans as of the first day of the month preceding
the month of such Distribution Date multiplied by (b) a fraction the numerator
of which is 30 and the denominator of which is the actual number of days elapsed
in the related Accrual Period.

         For any Distribution Date (other than the first Distribution Date) and
the Class II-A Certificates, the Class II-M1 Certificates and the Group II
Mezzanine Components, (a) a per annum rate equal to the excess, if any, of (i)
the weighted average of the Adjusted Net Mortgage Rates of the Group II Mortgage
Loans, weighted on the basis of the Stated Principal Balances thereof as of the
Due Date in the month preceding the month of such Distribution Date, over (ii)
the percentage equivalent of a fraction, the numerator of which is (x) the
Pass-Through Rate for the Class II-S Certificates for such Distribution Date
multiplied by the Class II-S Notional Amount and the denominator of which is (y)
the aggregate Stated Principal Balance of the Group II Mortgage Loans as of the
Due Date preceding the month of such Distribution Date multiplied by (b) a
fraction the numerator of which is 30 and the denominator of which is the actual
number of days elapsed in the related Accrual Period.

                                       44
<PAGE>

         "Net WAC Rate Carryover Amount": With respect to the Class A
Certificates, the Class II-M1 Certificates and the Mezzanine Components and any
Distribution Date for which the Pass-Through Rate for such Class of Certificates
or such Component for such Distribution Date is the Net WAC Rate, the sum of (i)
the positive excess of (A) the amount of interest that would have been payable
to such Class of Certificates or such Component on such Distribution Date if the
Pass-Through Rate for such Class of Certificates or such Component for such
Distribution Date were calculated at the related Formula Rate over (B) the
amount of interest payable on such Class of Certificates or such Component at
the Net WAC Rate for such Distribution Date and (ii) the related Net WAC Rate
Carryover Amount for the previous Distribution Date not previously paid together
with interest thereon at a rate equal to the related Formula Rate for such Class
of Certificates or such Component for the most recently ended Accrual Period.

         "New Lease": Any lease of REO Property entered into on behalf of the
Trust, including any lease renewed or extended on behalf of the Trust if the
Trust has the right to renegotiate the terms of such lease.

         "NIM Notes": Insured NIM Notes and/or the Uninsured NIM Notes, as
applicable.

         "NIMS Insurer": Radian Insurance Inc. or any successor thereto that
shall be the insurer under an insurance policy insuring certain payments on NIM
Notes, if any, issued by Long Beach Asset Holdings Corp. CI-1, and backed by the
Class C Certificates and the Class P Certificates; provided, however, upon the
occurrence of a Note Insurer Switch Event (as defined in the Insured Indenture),
the NIMS Insurer shall be Financial Security Assurance Inc.

         "Nonrecoverable Advance": Any Advance or Servicing Advance previously
made or proposed to be made in respect of a Mortgage Loan or REO Property that,
in the good faith business judgment of the Master Servicer, will not or, in the
case of a proposed Advance or Servicing Advance, would not be ultimately
recoverable from related late payments, Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.

         "Notional Amount": With respect to the Class I-S Certificates,
immediately prior to any Distribution Date up to and including the Distribution
Date in October 2002, the sum of the Uncertificated Principal Balances of REMIC
1A Regular Interest LT1A-2 and REMIC 1A Regular Interest LT1A-3, and,
immediately prior to any subsequent Distribution Date, an amount equal to the
Uncertificated Principal Balance of REMIC 1A Regular Interest LT1A-2. With
respect to the Class II-S Certificates, immediately prior to any Distribution
Date up to and including the Distribution Date in October 2002, the sum of the
Uncertificated Principal Balances of REMIC 1B Regular Interest LT1B-2 and REMIC
1B Regular Interest LT1B-3, and, immediately prior to any subsequent
Distribution Date, an amount equal to the Uncertificated Principal Balance of
REMIC 1B Regular Interest LT1B-2. With respect to REMIC 3 Uncertificated Regular
Interest LT3-IC, immediately prior to any Distribution Date, an amount equal to
the aggregate of the Uncertificated Principal Balances of the REMIC 2 Group I
Regular Interests. With respect to the REMIC 3 Uncertificated Regular Interest
LT3-IIC, immediately prior to any Distribution Date, an amount equal to the
aggregate of the Uncertificated Principal Balances of the REMIC 2 Group II
Regular Interests. With respect to the Class I-C Certificates, immediately prior
to any Distribution Date, an amount equal to the Notional Amount of REMIC 3
Uncertificated Regular Interest LT3-IC. With respect to the Class II-C
Certificates, immediately prior to any Distribution Date, an amount equal to the
Notional Amount of REMIC 3 Uncertificated Regular Interest LT3-IIC.

                                       45
<PAGE>

         "Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Master Servicer, the Seller
or the Depositor, as applicable.

         "Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be a salaried counsel for the Depositor or the Master Servicer,
reasonably acceptable to the Trustee, if such opinion is delivered to the
Trustee, or the Trust Administrator, if such opinion is delivered to the Trust
Administrator, except that any opinion of counsel relating to (a) the
qualification of any Trust REMIC as a REMIC or (b) compliance with the REMIC
Provisions must be an opinion of Independent counsel.

         "Optional Termination Date": The first Distribution Date on which the
Terminator may elect to terminate the Trust Fund pursuant to Section 9.01.

         "Original Class Certificate Principal Balance": With respect to the
Class A Certificates, the Mezzanine Certificates and the Class P Certificate,
the corresponding Certificate Principal Balance on the Closing Date.

         "Original Class Notional Amount": With respect to the Class I-S
Certificates, $155,025,000. With respect to the Class II-S Certificates,
$69,975,000. With respect to REMIC 3 Uncertificated Regular Interest LT3-IC and
the Class I-C Certificates, $1,378,000,000. With respect to REMIC 3
Uncertificated Regular Interest LT3-IIC and the Class II-C Certificates,
$622,000,000.

         "Original Pre-Funded Amount": The sum of the Group I Original
Pre-Funded Amount and the Group II Original Pre-Funded Amount.

         "Ownership Interest": As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.

         "Pass-Through Rate":

         With respect to the Class A Certificates, the Class II-M1 Certificates
and the Mezzanine Components and any Distribution Date (other than the first
Distribution Date), the lesser of (x) the related Formula Rate for such
Distribution Date and (y) the related Net WAC Rate for such Certificates or
Components for such Distribution Date. With respect to the Class A Certificates,
the Class II-M1 Certificates and the Mezzanine Components and the first
Distribution Date, the related Formula Rate for such Distribution Date.

                                       46
<PAGE>

         With respect to the Class S Certificates and any Distribution Date, a
per annum rate equal to 6.00% for the Distribution Date in January 2002 through
the Distribution Date in October 2002, 5.25% for the Distribution Date in
November 2002 through the Distribution Date in August 2003, 3.75% for the
Distribution Date in September 2003 through the Distribution Date in June 2004
and 0.00% thereafter; provided, however, for federal income tax purposes and
under the REMIC Provisions, (A) the Class S Certificates will not have a
Pass-Through Rate, (B) the Monthly Interest Distributable Amount for the Class
I-S Certificates and any Distribution Date will be deemed to be the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1A, the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1B, the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1C, and the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-1D for such
Distribution Date, (C) the Monthly Interest Distributable Amount for the Class
II-S Certificates and any Distribution Date will be deemed to be the
Uncertificated Accrued Interest for REMIC 2 Regular Interests LT2S-2A, the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2B, the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2C, and the
Uncertificated Accrued Interest for REMIC 2 Regular Interest LT2S-2D for such
Distribution Date, (D) the sum of the Monthly Interest Distributable Amount and
the Unpaid Interest Shortfall Amount for the Class I-S Certificates and any
Distribution Date will be deemed to be 100% of the Uncertificated Accrued
Interest for REMIC 2 Regular Interest LT2S-1A, the Uncertificated Accrued
Interest for REMIC 2 Regular Interest LT2S-1B, the Uncertificated Accrued
Interest for REMIC 2 Regular Interest LT2S-1C, and the Uncertificated Accrued
Interest for REMIC 2 Regular Interest LT2S-1D for such Distribution Date, and
(E) the sum of the Monthly Interest Distributable Amount and the Unpaid Interest
Shortfall Amount for the Class II-S Certificates and any Distribution Date will
be deemed to be 100% of the Uncertificated Accrued Interest for REMIC 2 Regular
Interest LT2S-2A, the Uncertificated Accrued Interest for REMIC 2 Regular
Interest LT2S-2B, the Uncertificated Accrued Interest for REMIC 2 Regular
Interest LT2S-2C, and the Uncertificated Accrued Interest for REMIC 2 Regular
Interest LT2S-2D.

         With respect to REMIC 3 Uncertificated Regular Interest LT3-IC and any
Distribution Date, a per annum rate equal to the percentage equivalent of a
fraction, the numerator of which is the excess of (a) the sum of the amounts
calculated pursuant to clauses (A) through (F) below over (b) the Guarantee Fee
for such Distribution Date, and the denominator of which is the aggregate of the
Uncertificated Principal Balances of the REMIC 2A Regular Interests. For
purposes of calculating the Pass-Through Rate for REMIC 3 Uncertificated Regular
Interest LT3-IC, the numerator is equal to the sum of the following components:

                  (A) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2A-1 minus Marker Rate 1, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2A-1;

                  (B) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2B-1 minus Marker Rate 1, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2B-1;

                  (C) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2C-1 minus Marker Rate 1, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2C-1;

                  (D) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2D-1 minus Marker Rate 1, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2D-1;

                  (E) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2E-1 minus Marker Rate 1, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2E-1; and

                                       47
<PAGE>

                  (F) 100% of the interest on REMIC 2 Regular Interest LT2P-1;

         With respect to REMIC 3 Uncertificated Regular Interest LT3-IIC and any
Distribution Date, a per annum rate equal to the percentage equivalent of a
fraction, the numerator of which is the sum of the amounts calculated pursuant
to clauses (A) through (I) below for such Distribution Date, and the denominator
of which is the aggregate of the Uncertificated Principal Balances of the REMIC
2B Regular Interests. For purposes of calculating the Pass-Through Rate for
REMIC 3 Uncertificated Regular Interest LT3-IIC, the numerator is equal to the
sum of the following components:

                  (A) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2A-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2A-2;

                  (B) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2B-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2B-2;

                  (C) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2C-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2C-2;

                  (D) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2D-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2D-2;

                  (E) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2E-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2E-2;

                  (F) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2F-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2F-2;

                  (G) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2G-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2G-2;

                  (H) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2H-2 minus Marker Rate 2, applied to an amount equal to the
Uncertificated Principal Balance of REMIC 2 Regular Interest LT2H-2; and

                  (I) 100% of the interest on REMIC 2 Regular Interest LT2P-2.

                  With respect to the Class I-C Certificates and any
Distribution Date, a per annum rate equal to the Pass-Through Rate on REMIC 3
Uncertificated Regular Interest LT3-IC for such Distribution Date, and with
respect to the Class II-C Certificates and any Distribution Date, a per annum
rate equal to the Pass-Through Rate on REMIC 3 Uncertificated Regular Interest
LT3-IIC for such Distribution Date; provided, however, for federal income tax
purposes and under the REMIC Provisions, (A) the Class C Certificates will not
have a Pass-Through Rate, (B) the Monthly Interest Distributable Amount for the
Class I-C Certificates and any Distribution Date will be deemed to be the
Monthly Interest Distributable Amount for REMIC 3 Uncertificated Regular
Interest LT3-IC for such Distribution Date, and (C) the Monthly Interest
Distributable Amount for the Class II-C Certificates and any Distribution Date
will be deemed to be the Monthly Interest Distributable Amount for REMIC 3
Uncertificated Regular Interest LT3-IIC for such Distribution Date.

                                       48
<PAGE>

         "Percentage Interest": With respect to any Certificate (other than a
Class R Certificate), a fraction, expressed as a percentage, the numerator of
which is the Initial Certificate Principal Balance or Initial Notional Amount
represented by such Certificate and the denominator of which is the Original
Class Certificate Principal Balance or Original Class Notional Amount of the
related Class. With respect to a Class R Certificate, the portion of the Class
evidenced thereby, expressed as a percentage, as stated on the face of such
Certificate; provided, however, with respect to each Class referred to in this
paragraph, that the sum of all such percentages for each such Class totals 100%.

         "Periodic Rate Cap": With respect to each Adjustable Rate Mortgage Loan
and any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date.

         "Permitted Investments": Any one or more of the following obligations
or securities acquired at a purchase price of not greater than par, regardless
of whether issued or managed by the Depositor, the Master Servicer, the NIMS
Insurer, the Trustee, the Trust Administrator or any of their respective
Affiliates or for which an Affiliate of the NIMS Insurer, the Trustee or the
Trust Administrator serves as an advisor:

                  (i) direct obligations of, or obligations fully guaranteed as
         to timely payment of principal and interest by, the United States or
         any agency or instrumentality thereof, provided such obligations are
         backed by the full faith and credit of the United States;

                  (ii) (A) demand and time deposits in, certificates of deposit
         of, bankers' acceptances issued by or federal funds sold by any
         depository institution or trust company (including the Trustee, the
         Trust Administrator or their respective agents acting in their
         commercial capacities) incorporated under the laws of the United States
         of America or any state thereof and subject to supervision and
         examination by federal and/or state authorities, so long as, at the
         time of such investment or contractual commitment providing for such
         investment, such depository institution or trust company (or, if the
         only Rating Agency is S&P, in the case of the principal depository
         institution in a depository institution holding company, debt
         obligations of the depository institution holding company) or its
         ultimate parent has a short-term uninsured debt rating in one of the
         two highest available ratings of Fitch and the highest available rating
         category of Moody's and S&P and provided that each such investment has
         an original maturity of no more than 365 days; and provided further
         that, if the only Rating Agency is S&P and if the depository or trust
         company is a principal subsidiary of a bank holding company and the
         debt obligations of such subsidiary are not separately rated, the
         applicable rating shall be that of the bank holding company; and,
         provided further that, if the original maturity of such short-term
         obligations of a domestic branch of a foreign depository institution or
         trust company shall exceed 30 days, the short-term rating of such
         institution shall be A-1+ in the case of S&P if S&P is the Rating
         Agency; and (B) any other demand or time deposit or deposit which is
         fully insured by the FDIC;

                                       49
<PAGE>

                  (iii) repurchase obligations with a term not to exceed 30 days
         with respect to any security described in clause (i) above and entered
         into with a depository institution or trust company (acting as
         principal) rated F-1+ or higher by Fitch, rated A-1+ or higher by S&P
         and rated A2 or higher by Moody's;

                  (iv) securities bearing interest or sold at a discount that
         are issued by any corporation incorporated under the laws of the United
         States of America or any State thereof and that are rated by a Rating
         Agency in its highest long-term unsecured rating category at the time
         of such investment or contractual commitment providing for such
         investment;

                  (v) commercial paper (including both non-interest-bearing
         discount obligations and interest-bearing obligations payable on demand
         or on a specified date not more than 30 days after the date of
         acquisition thereof) that is rated by a Rating Agency in its highest
         short-term unsecured debt rating available at the time of such
         investment;

                  (vi) units of money market funds that have been rated "AAA" by
         Fitch (if rated by Fitch), "AAAm" or "AAAm-G" by S&P and "Aaa" by
         Moody's; and

                  (vii) if previously confirmed in writing to the Trustee and
         the Trust Administrator, any other demand, money market or time
         deposit, or any other obligation, security or investment, as may be
         acceptable to the Rating Agencies in writing as a permitted investment
         of funds backing securities having ratings equivalent to its highest
         initial rating of the Class A Certificates;

provided, that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.

         "Permitted Transferee": Any transferee of a Residual Certificate other
than a Disqualified Organization or a non-U.S. Person.

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

         "Plan": Any employee benefit plan or certain other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and bank collective investment funds and insurance company general or
separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA or Section 4975 of the Code.

                                       50
<PAGE>

         "Prepayment Assumption": The pricing prepayment assumption as described
in the Prospectus Supplement.

         "Pre-Funding Account": The Group I Pre-Funding Account or the Group II
Pre-Funding Account.

         "Pre-Funding Period": The Group I Pre-Funding Period or the Group II
Pre-Funding Period.

         "Prepayment Charge": With respect to any Mortgage Loan, the charges or
premiums, if any, due in connection with a full or partial prepayment of such
Mortgage Loan in accordance with the terms thereof (other than any Master
Servicer Prepayment Charge Payment Amount).

         "Prepayment Charge Schedule": As of the Cut-off Date, a list attached
hereto as Schedule I (including the Prepayment Charge Summary attached thereto),
setting forth the following information with respect to each Prepayment Charge:

                  (i)      the Mortgage Loan identifying number;

                  (ii)     a code indicating the type of Prepayment Charge;

                  (iii)    the state of origination of the related Mortgage
                           Loan;

                  (iv)     the date on which the first monthly payment was due
                           on the related Mortgage Loan;

                  (v)      the term of the related Prepayment Charge; and

                  (vi)     the principal balance of the related Mortgage Loan as
                           of the Cut-off Date (or Subsequent Cut-off Date, with
                           respect to a Subsequent Mortgage Loan).

         The Prepayment Charge Schedule shall be amended from time to time by
the Master Servicer in accordance with the provisions of this Agreement and a
copy of each related amendment shall be furnished by the Master Servicer to the
NIMS Insurer.

         "Prepayment Interest Shortfall": With respect to any Distribution Date,
for each Mortgage Loan that was during the related Prepayment Period the subject
of a Principal Prepayment in full or in part that was applied by the Master
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Prepayment Period, an amount equal to
interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Master Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.

                                       51
<PAGE>

         "Prepayment Period": With respect to any Distribution Date, the
calendar month immediately preceding the calendar month in which such
Distribution Date occurs.

         "Prime Rate": The prime rate of United States money center commercial
banks as published in The Wall Street Journal.

         "Principal Balance": As to any Mortgage Loan other than a Liquidated
Mortgage Loan, and any day, the related Cut-off Date Principal Balance, minus
all collections credited against the Cut-off Date Principal Balance of any such
Mortgage Loan. For purposes of this definition, a Liquidated Mortgage Loan shall
be deemed to have a Principal Balance equal to the Principal Balance of the
related Mortgage Loan as of the final recovery of related Liquidation Proceeds
and a Principal Balance of zero thereafter. As to any REO Property and any day,
the Principal Balance of the related Mortgage Loan shall equal the Principal
Balance of the related Mortgage Loan immediately prior to such Mortgage Loan
becoming REO Property minus any REO Principal Amortization received with respect
thereto on or prior to such day.

         "Principal Distribution Amount": With respect to any Distribution Date,
the sum of the Group I Principal Distribution Amount and the Group II Principal
Distribution Amount.

         "Principal Prepayment": Any payment of principal made by the Mortgagor
on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing the full amount
of scheduled interest due on any Due Date in any month or months subsequent to
the month of prepayment.

         "Principal Remittance Amount": With respect to any Distribution Date,
the sum of the Group I Principal Remittance Amount and the Group II Principal
Remittance Amount.

         "Prospectus Supplement": That certain Prospectus Supplement dated
November 30, 2001 relating to the public offering of the Class II-A
Certificates, the Class II-S Certificates and the Mezzanine Certificates.

         "Purchase Price": With respect to any Mortgage Loan or REO Property to
be purchased pursuant to or as contemplated by Section 2.03, Section 3.16(c) or
Section 9.01, and as confirmed by an Officers' Certificate from the Master
Servicer to the Trustee and the Trust Administrator, an amount equal to the sum
of (i) 100% of the Stated Principal Balance thereof as of the date of purchase
(or such other price as provided in Section 9.01), (ii) in the case of (x) a
Mortgage Loan, accrued interest on such Stated Principal Balance at the
applicable Net Mortgage Rate in effect from time to time from the Due Date as to
which interest was last paid by the Mortgagor or by an advance by the Master
Servicer through the end of the calendar month in which the purchase is to be
effected and (y) an REO Property, the sum of (1) accrued interest on such Stated
Principal Balance at the applicable Net Mortgage Rate in effect from time to
time from the Due Date as to which interest was last paid by the Mortgagor or by
an advance by the Master Servicer through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, plus (2) REO Imputed Interest for such REO Property for each calendar
month commencing with the calendar month in which such REO Property was acquired
and ending with the calendar month in which such purchase is to be effected, net
of the total of all net rental income, Insurance Proceeds, Liquidation Proceeds
and Advances that as of the date of purchase had been distributed in respect of
REO Imputed Interest pursuant to Section 4.01, (iii) any unreimbursed Servicing
Advances, Advances and Nonrecoverable Advances and any unpaid Servicing Fees
allocable to such Mortgage Loan or REO Property, (iv) any amounts previously
withdrawn from the Collection Account in respect of such Mortgage Loan or REO
Property pursuant to Section 3.11 (a)(ix) and Section 3.16(b), and (v) in the
case of a Mortgage Loan required to be purchased pursuant to Section 2.03,
enforcement expenses reasonably incurred or to be incurred by the NIMS Insurer,
the Master Servicer, the Guarantor, the Trustee or the Trust Administrator in
respect of the breach or defect giving rise to the purchase obligation.

                                       52
<PAGE>

         Notwithstanding the foregoing, if an amount of Mortgage Loans that is
in excess of 2% of the sum of the aggregate principal balance of the Closing
Date Mortgage Loans as of the Cut-off Date and the Original Pre-Funded Amount
(measured by the aggregate principal balance) of Mortgage Loans have previously
been repurchased (exclusive of any Mortgage Loans purchased by the Master
Servicer pursuant to Section 3.16(c)) or substituted for, then in addition to
those requirements set forth above, the Purchase Price shall include the amount
of any related Prepayment Charge (other than with respect to a Purchase Price
paid in connection with Section 9.01).

         "Qualified Insurer":  Any insurance company acceptable to Fannie Mae.

         "Qualified Substitute Mortgage Loan": A mortgage loan substituted for a
Deleted Mortgage Loan pursuant to the terms of this Agreement or the Mortgage
Loan Purchase Agreement which must, on the date of such substitution, (i) have
an outstanding principal balance (or in the case of a substitution of more than
one mortgage loan for a Deleted Mortgage Loan, an aggregate principal balance),
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of, and not more than 5.00%
less than, the outstanding principal balance of the Deleted Mortgage Loan as of
the Due Date in the calendar month during which the substitution occurs, (ii)
have a Mortgage Rate not less than (and not more than one percentage point in
excess of) the Mortgage Rate of the Deleted Mortgage Loan, (iii) if the
Qualified Substitute Mortgage Loan is an Adjustable Rate Mortgage Loan, have a
Maximum Mortgage Rate not greater than the Maximum Mortgage Rate on the Deleted
Mortgage Loan and have a Minimum Mortgage Rate not less than the Minimum
Mortgage Rate of the Deleted Mortgage Loan, (iv) if the Qualified Substitute
Mortgage Loan is an Adjustable Rate Mortgage Loan, have a Gross Margin equal to
or greater than the Gross Margin of the Deleted Mortgage Loan, (v) if the
Qualified Substitute Mortgage Loan is an Adjustable Rate Mortgage Loan, have a
next Adjustment Date not more than two months later than the next Adjustment
Date on the Deleted Mortgage Loan, (vi) have a remaining term to maturity not
greater than (and not more than one year less than) that of the Deleted Mortgage
Loan, (vii) be current (with no contractual delinquencies outstanding) as of the
date of substitution, (viii) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (ix) have a risk grading determined by the Seller
at least equal to the risk grading assigned on the Deleted Mortgage Loan, (x)
have been underwritten or reunderwritten by the Seller in accordance with the
same or, as determined by the Seller, more favorable, underwriting criteria and
guidelines as the Deleted Mortgage Loan, (xi) with respect to Qualified
Substituted Mortgage Loans substituted for Deleted Mortgage Loans that are Group
I Mortgage Loans, have had an original Principal Balance that conformed to
Fannie Mae loan limits as of the date of its origination and be otherwise
acceptable to the Guarantor, (xii) be secured by the same property type as the
Deleted Mortgage Loan, (xiii) have a lien priority equal to or superior to that
of the Deleted Mortgage Loan, and (xiv) conform to each representation and
warranty set forth in Section 3.01 of the Mortgage Loan Purchase Agreement
applicable to the Deleted Mortgage Loan. In the event that one or more mortgage
loans are substituted for one or more Deleted Mortgage Loans, the amounts
described in clause (i) hereof shall be determined on the basis of aggregate
principal balances, the Mortgage Rates described in clauses (ii) through (v)
hereof shall be satisfied for each such mortgage loan, the risk gradings
described in clause (ix) hereof shall be satisfied as to each such mortgage
loan, the terms described in clause (vi) hereof shall be determined on the basis
of weighted average remaining term to maturity (provided that no such mortgage
loan may have a remaining term to maturity longer than the Deleted Mortgage
Loan), the Loan-to-Value Ratios described in clause (viii) hereof shall be
satisfied as to each such mortgage loan and, except to the extent otherwise
provided in this sentence, the representations and warranties described in
clause (xiv) hereof must be satisfied as to each Qualified Substitute Mortgage
Loan or in the aggregate, as the case may be.

                                       53
<PAGE>

         Notwithstanding the foregoing, if an amount of Mortgage Loans that is
in excess of 2% of the sum of the aggregate principal balance of the Closing
Date Mortgage Loans as of the Cut-off Date and the Original Pre-Funded Amount
(measured by the aggregate principal balance) of Mortgage Loans have previously
been repurchased (exclusive of any Mortgage Loans purchased by the Master
Servicer pursuant to Section 3.16(c)) or substituted for, then in addition to
clauses (i) through (xiv) above, each Qualified Substitute Mortgage Loan shall
also have a Prepayment Charge provision at least as favorable to the Holders of
the related Class P Certificates as the Prepayment Charge provisions in the
Deleted Mortgage Loan.

         "Rating Agency or Rating Agencies": Fitch, Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor, notice of
which designation shall be given to the Trustee, the Trust Administrator and
Master Servicer.

         "Realized Loss": With respect to any Liquidated Mortgage Loan, the
amount of loss realized equal to the portion of the Principal Balance remaining
unpaid after application of all Net Liquidation Proceeds and Insurance Proceeds
in respect of such Mortgage Loan.

         "Record Date": With respect to (i) the Class S Certificates, the Class
P Certificates, the Class C Certificates, the Residual Certificates and any
Definitive Certificates, the Close of Business on the last Business Day of the
calendar month preceding the month in which the related Distribution Date occurs
and (ii) with respect to the Class A Certificates and the Mezzanine
Certificates, the Close of Business on the Business Day immediately preceding
the related Distribution Date; provided, however, that following the date on
which Definitive Certificates for a Class A Certificate or a Mezzanine
Certificate are available pursuant to Section 5.02, the Record Date for such
Certificates shall be the last Business Day of the calendar month preceding the
month in which the related Distribution Date occurs.

         "Reference Banks": Those banks (i) with an established place of
business in London, England, (ii) not controlling, under the control of or under
common control with the Depositor, the Seller or the Master Servicer or any
affiliate thereof and (iii) which have been designated as such by the Trust
Administrator with the consent of the NIMS Insurer; provided, however, that if
fewer than two of such banks provide a LIBOR rate, then any leading banks
selected by the Trust Administrator with the consent of the NIMS Insurer which
are engaged in transactions in United States dollar deposits in the
international Eurocurrency market.

                                       54
<PAGE>

         "Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.

         "Regular Certificate": The Class A Certificates, the Class S
Certificates, the Mezzanine Certificates, the Class C Certificates and the Class
P Certificates.

         "Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

         "Relief Act Interest Shortfall": With respect to any Distribution Date,
for any Mortgage Loan with respect to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Due Period as
a result of the application of the Relief Act, the amount by which (i) interest
collectible on such Mortgage Loan during such Due Period is less than (ii) one
month's interest on the Principal Balance of such Mortgage Loan at the Mortgage
Rate for such Mortgage Loan before giving effect to the application of the
Relief Act.

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

         "REMIC 0A": The segregated pool of assets subject hereto, constituting
a primary trust created hereby and to be administered hereunder, with respect to
which a REMIC election is to be made consisting of: (i) such Group I Mortgage
Loans as from time to time are subject to this Agreement, together with the
Mortgage Files relating thereto, and together with all collections thereon and
proceeds thereof, (ii) any REO Property acquired with respect to a Group I
Mortgage Loan, together with all collections thereon and proceeds thereof, (iii)
the Trustee's rights with respect to the Group I Mortgage Loans under all
insurance policies required to be maintained pursuant to this Agreement and any
proceeds thereof, (iv) the Depositor's rights with respect to the Group I
Mortgage Loans under the Mortgage Loan Purchase Agreement (including any
security interest created thereby), (v) the obligations of the Guarantor to the
Holders of the Guaranteed Certificates under the Guaranty and, (vi) solely to
the extent that they relate to the Group I Mortgage Loans or payments or
property received on or with respect to the Group I Mortgage Loans, the
Collection Account, the Distribution Account (subject to the last sentence of
this definition) and any REO Account and such assets that are deposited therein
from time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, a REMIC election will not be made with respect to the Pre-Funding
Accounts, the Reserve Funds and Master Servicer Prepayment Charge Payment
Amounts.

         "REMIC 0A Regular Interest LT0A-1": One of the separate
non-certificated beneficial ownership interests in REMIC 0A issued hereunder and
designated as a Regular Interest in REMIC 0A. REMIC 0A Regular Interest LT0A-1
shall accrue interest at the related Uncertificated REMIC 0A Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 0A Regular Interest LT0A-2": One of the separate
non-certificated beneficial ownership interests in REMIC 0A issued hereunder and
designated as a Regular Interest in REMIC 0A. REMIC 0A Regular Interest LT0A-2
shall accrue interest at the related Uncertificated REMIC 0A Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

                                       55
<PAGE>

         "REMIC 0A Regular Interest LT0A-P": One of the separate
non-certificated beneficial ownership interests in REMIC 0A issued hereunder and
designated as a Regular Interest in REMIC 0A. REMIC 0A Regular Interest LT0A-P
shall accrue interest at the related Uncertificated REMIC 0A Pass-Through Rate
in effect from time to time, and shall be entitled to any Prepayment Charges
relating to the Group I Mortgage Loans collected by the Master Servicer and to a
distribution of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

         "REMIC 0A Regular Interests": REMIC 0A Regular Interest LT0A-1, REMIC
0A Regular Interest LT0A-2, and REMIC 0A Regular Interest LT0A-P.

         "REMIC 0B": The segregated pool of assets subject hereto, constituting
a primary trust created hereby and to be administered hereunder, with respect to
which a REMIC election is to be made consisting of: (i) such Group II Mortgage
Loans as from time to time are subject to this Agreement, together with the
Mortgage Files relating thereto, and together with all collections thereon and
proceeds thereof, (ii) any REO Property acquired with respect to a Group II
Mortgage Loan, together with all collections thereon and proceeds thereof, (iii)
the Trustee's rights with respect to the Group II Mortgage Loans under all
insurance policies required to be maintained pursuant to this Agreement and any
proceeds thereof, (iv) the Depositor's rights with respect to the Group II
Mortgage Loans under the Mortgage Loan Purchase Agreement (including any
security interest created thereby), and (v) solely to the extent that they
relate to the Group II Mortgage Loans or payments or property received on or
with respect to the Group II Mortgage Loans, the Collection Account, the
Distribution Account (subject to the last sentence of this definition) and any
REO Account and such assets that are deposited therein from time to time and any
investments thereof, together with any and all income, proceeds and payments
with respect thereto. Notwithstanding the foregoing, however, a REMIC election
will not be made with respect to the Pre-Funding Accounts, the Reserve Funds and
Master Servicer Prepayment Charge Payment Amounts.

         "REMIC 0B Regular Interest LT0B-1": One of the separate
non-certificated beneficial ownership interests in REMIC 0B issued hereunder and
designated as a Regular Interest in REMIC 0B. REMIC 0B Regular Interest LT0B-1
shall accrue interest at the related Uncertificated REMIC 0B Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 0B Regular Interest LT0B-2": One of the separate
non-certificated beneficial ownership interests in REMIC 0B issued hereunder and
designated as a Regular Interest in REMIC 0B. REMIC 0B Regular Interest LT0B-2
shall accrue interest at the related Uncertificated REMIC 0B Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

                                       56
<PAGE>

         "REMIC 0B Regular Interest LT0B-P": One of the separate
non-certificated beneficial ownership interests in REMIC 0B issued hereunder and
designated as a Regular Interest in REMIC 0B. REMIC 0B Regular Interest LT0B-P
shall accrue interest at the related Uncertificated REMIC 0B Pass-Through Rate
in effect from time to time, and shall be entitled to any Prepayment Charges
relating to the Group II Mortgage Loans collected by the Master Servicer and to
a distribution of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

         "REMIC 0B Regular Interests": REMIC 0B Regular Interest LT0B-1, REMIC
0B Regular Interest LT0B-2, and REMIC 0B Regular Interest LT0B-P.

         "REMIC 1A": The segregated pool of assets consisting of all of the
REMIC 0A Regular Interests conveyed in trust to the Trustee, for the benefit of
REMIC 2, as holder of the REMIC 1A Regular Interests and the Class R
Certificateholders, as holders of the Class R-1A Interest, pursuant to Article
II hereunder, and all amounts deposited therein, with respect to which a
separate REMIC election is to be made.

         "REMIC 1A Regular Interest LT1A-1": One of the separate
non-certificated beneficial ownership interests in REMIC 1A issued hereunder and
designated as a Regular Interest in REMIC 1A. REMIC 1A Regular Interest LT1A-1
shall accrue interest at the related Uncertificated REMIC 1A Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 1A Regular Interest LT1A-2": One of the separate
non-certificated beneficial ownership interests in REMIC 1A issued hereunder and
designated as a Regular Interest in REMIC 1A. REMIC 1A Regular Interest LT1A-2
shall accrue interest at the related Uncertificated REMIC 1A Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 1A Regular Interest LT1A-3": One of the separate
non-certificated beneficial ownership interests in REMIC 1A issued hereunder and
designated as a Regular Interest in REMIC 1A. REMIC 1A Regular Interest LT1A-3
shall accrue interest at the related Uncertificated REMIC 1A Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 1A Regular Interest LT1A-P": One of the separate
non-certificated beneficial ownership interests in REMIC 1A issued hereunder and
designated as a Regular Interest in REMIC 1A. REMIC 1A Regular Interest LT1A-P
shall accrue interest at the related Uncertificated REMIC 1A Pass-Through Rate
in effect from time to time, and shall be entitled to any amounts distributed to
REMIC 0A Regular Interest LT0A-P.

                                       57
<PAGE>

         "REMIC 1A Regular Interests": REMIC 1A Regular Interest LT1A-1, REMIC
1A Regular Interest LT1A-2, REMIC 1A Regular Interest LT1A-3 and REMIC 1A
Regular Interest LT1A-P.

         "REMIC 1B": The segregated pool of assets consisting of all of the
REMIC 0B Regular Interests conveyed in trust to the Trustee, for the benefit of
REMIC 2, as holder of the REMIC 1B Regular Interests and the Class R
Certificateholders, as holders of the Class R-1B Interest, pursuant to Article
II hereunder, and all amounts deposited therein, with respect to which a
separate REMIC election is to be made.

         "REMIC 1B Regular Interest LT1B-1": One of the separate
non-certificated beneficial ownership interests in REMIC 1B issued hereunder and
designated as a Regular Interest in REMIC 1B. REMIC 1B Regular Interest LT1B-1
shall accrue interest at the related Uncertificated REMIC 1B Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 1B Regular Interest LT1B-2": One of the separate
non-certificated beneficial ownership interests in REMIC 1B issued hereunder and
designated as a Regular Interest in REMIC 1B. REMIC 1B Regular Interest LT1B-2
shall accrue interest at the related Uncertificated REMIC 1B Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 1B Regular Interest LT1B-3": One of the separate
non-certificated beneficial ownership interests in REMIC 1B issued hereunder and
designated as a Regular Interest in REMIC 1B. REMIC 1B Regular Interest LT1B-3
shall accrue interest at the related Uncertificated REMIC 1B Pass-Through Rate
in effect from time to time, and shall be entitled to distributions of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

         "REMIC 1B Regular Interest LT1B-P": One of the separate
non-certificated beneficial ownership interests in REMIC 1B issued hereunder and
designated as a Regular Interest in REMIC 1B. REMIC 1B Regular Interest LT1B-P
shall accrue interest at the related Uncertificated REMIC 1B Pass-Through Rate
in effect from time to time, and shall be entitled to any amounts distributed to
REMIC 0B Regular Interest LT0B-P.

         "REMIC 1B Regular Interests": REMIC 1B Regular Interest LT1B-1, REMIC
1B Regular Interest LT1B-2, REMIC 1B Regular Interest LT1B-3, and REMIC 1B
Regular Interest LT1B-P.

                                       58
<PAGE>

         "REMIC 2": The segregated pool of assets consisting of all of the REMIC
1A Regular Interests and the REMIC 1B Regular Interests conveyed in trust to the
Trustee, for the benefit of REMIC 3, as holder of the REMIC 2 Regular Interests
and the Class R Certificateholders, as holders of the Class R-2 Interest,
pursuant to Article II hereunder, and all amounts deposited therein, with
respect to which a separate REMIC election is to be made.

         "REMIC 2 Group I Diverted Excess Spread": 1% of any amount of Group I
Net Monthly Excess Cash Flow that, pursuant to Section 4.01(d)(i)(b), is used to
make payments to the Class II-A Certificates, the Class II-M1 Certificates, or a
Group II Mezzanine Component.

         "REMIC 2 Group I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the sum of the
aggregate Principal Balance of the Group I Mortgage Loans and related REO
Properties then outstanding plus the amount of any remaining funds in the Group
I Pre-Funding Account and (ii) the Uncertificated REMIC 2 Pass-Through Rate for
REMIC 2 Regular Interest LT2A-1 minus Marker Rate 1, divided by (b) 12.

         "REMIC 2 Group I Regular Interests": REMIC 2 Regular Interest LT2A-1,
REMIC 2 Regular Interest LT2B-1, REMIC 2 Regular Interest LT2C-1, REMIC 2
Regular Interest LT2D-1, REMIC 2 Regular Interest LT2E-1, and REMIC 2 Regular
Interest LT2P-1.

         "REMIC 2 Group II Diverted Excess Spread": 1% of any amount of Group II
Net Monthly Excess Cash Flow that, pursuant to Section 4.01(d)(ii)(b), is ued to
make payments to the Class I-A Certificates or a Group II Mezzanine Component.

         "REMIC 2 Group II Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the sum of the
aggregate Principal Balance of the Group II Mortgage Loans and related REO
Properties then outstanding plus the amount of any remaining funds in the Group
II Pre-Funding Account and (ii) the Uncertificated REMIC 2 Pass-Through Rate for
REMIC 2 Regular Interest LT2A-2 minus Marker Rate 2, divided by (b) 12.

         "REMIC 2 Group II Regular Interests": REMIC 2 Regular Interest LT2A-2,
REMIC 2 Regular Interest LT2B-2, REMIC 2 Regular Interest LT2C-2, REMIC 2
Regular Interest LT2D-2, REMIC 2 Regular Interest LT2E-2, REMIC 2 Regular
Interest LT2F-2, REMIC 2 Regular Interest LT2G-2, REMIC 2 Regular Interest
LT2H-2, REMIC 2 Regular Interest LT2P-2.

         "REMIC 2 Overcollateralization Target Amount 1": 1% of the Group I
Overcollateralization Target Amount.

         "REMIC 2 Overcollateralization Target Amount 2": 1% of the Group II
Overcollateralization Target Amount.

         "REMIC 2 Overcollateralized Amount 1": With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Principal Balances of the
REMIC 2 Regular Interest LT2A-1, REMIC 2 Regular Interest LT2B-1, REMIC 2
Regular Interest LT2C-1, REMIC 2 Regular Interest LT2D-1, REMIC 2 Regular
Interest LT2E-1, and REMIC 2 Regular Interest LT2P-1 minus (ii) the aggregate of
the Uncertificated Principal Balances of REMIC 2 Regular Interest LT2B-1, REMIC
2 Regular Interest LT2C-1, and REMIC 2 Regular Interest LT2D-1, in each case as
of such date of determination.

                                       59
<PAGE>

         "REMIC 2 Overcollateralized Amount 2": With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Principal Balances of the
REMIC 2 Regular Interest LT2A-2, REMIC 2 Regular Interest LT2B-2, REMIC 2
Regular Interest LT2C-2, REMIC 2 Regular Interest LT2D-2, REMIC 2 Regular
Interest LT2E-2, REMIC 2 Regular Interest LT2F-2, REMIC 2 Regular Interest
LT2G-2, REMIC 2 Regular Interest LT2H-2, and REMIC 2 Regular Interest LT2P-2
minus (ii) the aggregate of the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2B-2, REMIC 2 Regular Interest LT2C-2, REMIC 2 Regular
Interest LT2D-2, REMIC 2 Regular Interest LT2E-2, REMIC 2 Regular Interest
LT2F-2, and REMIC 2 Regular Interest LT2G-2, in each case as of such date of
determination.

         "REMIC 2 Principal Loss Allocation Amount 1": With respect to any
Distribution Date, an amount equal to the product of (i) the sum of the
aggregate Principal Balance of the Group I Mortgage Loans and related REO
Properties then outstanding plus the amount of any remaining funds in the Group
I Pre-Funding Account and (ii) 1 minus a fraction, the numerator of which is 2
times the aggregate of the Uncertificated Principal Balances of REMIC 2 Regular
Interest LT2B-1, REMIC 2 Regular Interest LT2C-1, and REMIC 2 Regular Interest
LT2D-1 and the denominator of which is the aggregate of the Uncertificated
Principal Balances of REMIC 2 Regular Interest LT2B-1, REMIC 2 Regular Interest
LT2C-1, REMIC 2 Regular Interest LT2D-1, and REMIC 2 Regular Interest LT2E-1.

         "REMIC 2 Principal Loss Allocation Amount 2": With respect to any
Distribution Date, an amount equal to the product of (i) the sum of the
aggregate Principal Balance of the Group II Mortgage Loans and related REO
Properties then outstanding plus the amount of any remaining funds in the Group
II Pre-Funding Account and (ii) 1 minus a fraction, the numerator of which is 2
times the aggregate of the Uncertificated Principal Balances of REMIC 2 Regular
Interest LT2B-2, REMIC 2 Regular Interest LT2C-2, REMIC 2 Regular Interest
LT2D-2, REMIC 2 Regular Interest LT2E-2, REMIC 2 Regular Interest LT2F-2, and
REMIC 2 Regular Interest LT2G-2 and the denominator of which is the aggregate of
the Uncertificated Principal Balances of REMIC 2 Regular Interest LT2B-2, REMIC
2 Regular Interest LT2C-2, REMIC 2 Regular Interest LT2D-2, REMIC 2 Regular
Interest LT2E-2, REMIC 2 Regular Interest LT2F-2, REMIC 2 Regular Interest
LT2G-2, and REMIC 2 Regular Interest LT2H-2.

         "REMIC 2 Regular Interest LT2A-1": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2A-1 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2A-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2A-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

                                       60
<PAGE>

         "REMIC 2 Regular Interest LT2B-1": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2B-1 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2B-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2B-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2C-1": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2C-1 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2C-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2C-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2D-1": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2D-1 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2D-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2D-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2E-1": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2E-1 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

                                       61
<PAGE>

         "REMIC 2 Regular Interest LT2E-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2E-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2F-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2F-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2G-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2G-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2H-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2H-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 2 Regular Interest LT2P-1": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2P-1 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to any amounts distributed to REMIC 1A
Regular Interest LT1P-1.

         "REMIC 2 Regular Interest LT2P-2": One of the separate non-certificated
beneficial ownership interests in REMIC 2 issued hereunder and designated as a
Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2P-2 shall accrue
interest at the related Uncertificated REMIC 2 Pass-Through Rate in effect from
time to time, and shall be entitled to any amounts distributed to REMIC 1B
Regular Interest LT1P-2.

         "REMIC 2 Regular Interest LT2S-1A": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-1A
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

                                       62
<PAGE>

         "REMIC 2 Regular Interest LT2S-1B": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-1B
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interest LT2S-1C": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-1C
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interest LT2S-1D": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-1D
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interest LT2S-2A": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-2A
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interest LT2S-2B": One of the separate
non-certificated beneficial ownership interests in REMIC-2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-2B
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interest LT2S-2C": One of the separate
non-certificated beneficial ownership interests in REMIC-2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-2C
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interest LT2S-2D": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a Regular Interest in REMIC 2. REMIC 2 Regular Interest LT2S-2D
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

         "REMIC 2 Regular Interests": REMIC 2 Regular Interest LT2A-1, REMIC 2
Regular Interest LT2B-1, REMIC 2 Regular Interest LT2C-1, REMIC 2 Regular
Interest LT2D-1, REMIC 2 Regular Interest LT2E-1, REMIC 2 Regular Interest
LT2P-1, REMIC 2 Regular Interest LT2S-1A, REMIC 2 Regular Interest LT2S-1B,
REMIC 2 Regular Interest LT2S-1C, REMIC 2 Regular Interest LT2S-1D, REMIC 2
Regular Interest LT2A-2, REMIC 2 Regular Interest LT2B-2, REMIC 2 Regular
Interest LT2C-2, REMIC 2 Regular Interest LT2D-2, REMIC 2 Regular Interest
LT2E-2, REMIC 2 Regular Interest LT2F-2, REMIC 2 Regular Interest LT2G-2, REMIC
2 Regular Interest LT2H-2, REMIC 2 Regular Interest LT2P-2, REMIC 2 Regular
Interest LT2S-2A, REMIC 2 Regular Interest LT2S-2B, REMIC 2 Regular Interest
LT2S-2C, and REMIC 2 Regular Interest LT2S-2D.

                                       63
<PAGE>

         "REMIC 3": The segregated pool of assets consisting of all of the REMIC
2 Regular Interests conveyed in trust to the Trustee, for the benefit of the
Holders of the Regular Certificates (other than the Class C Certificates and the
Class P Certificates), REMIC X, as the holder of REMIC 3 Uncertificated Regular
Interests, and the Class R Certificateholders, as holders of the Class R-3
Interest, pursuant to Article II hereunder, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.

         "REMIC 3 Uncertificated Regular Interest LT3-IC": One of the separate
non-certificated beneficial ownership interests in REMIC 3 issued hereunder and
designated as an Uncertificated Regular Interest in REMIC 3. REMIC 3
Uncertificated Regular Interest LT3-IC shall accrue interest at the related
Pass-Through Rate in effect from time to time on its Notional Amount outstanding
from time to time, and shall be entitled to distributions of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 3 Uncertificated Regular Interest LT3-IP": One of the separate
non-certificated beneficial ownership interests in REMIC 3 issued hereunder and
designated as an Uncertificated Regular Interest in REMIC 3. REMIC 3
Uncertificated Regular Interest LT3-IP shall be entitled to any amounts
distributed to REMIC 2 Regular Interest LT2P-1.

         "REMIC 3 Uncertificated Regular Interest LT3-IIC": One of the separate
non-certificated beneficial ownership interests in REMIC 3 issued hereunder and
designated as an Uncertificated Regular Interest in REMIC 3. REMIC 3
Uncertificated Regular Interest LT3-IIC shall accrue interest at the related
Pass-Through Rate in effect from time to time on its Notional Amount outstanding
from time to time, and shall be entitled to distributions of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 3 Uncertificated Regular Interest LT3-IIP": One of the separate
non-certificated beneficial ownership interests in REMIC 3 issued hereunder and
designated as an Uncertificated Regular Interest in REMIC 3. REMIC 3
Uncertificated Regular Interest LT3-IIP shall be entitled to any amounts
distributed to REMIC 2 Regular Interest LT2P-2.

         "REMIC 3 Uncertificated Regular Interests": REMIC 3 Uncertificated
Regular Interest LT3-IC, REMIC 3 Uncertificated Regular Interest LT3-IIC, REMIC
3 Uncertificated Regular Interest LT3-IP, and REMIC 3 Uncertificated Regular
Interest LT3-IIP.

         "REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and rulings promulgated thereunder, as the foregoing may be in
effect from time to time.

                                       64
<PAGE>

         "REMIC Regular Interests": The REMIC 0A Regular Interests, the REMIC 0B
Regular Interests, the REMIC 1A Regular Interests, the REMIC 1B Regular
Interests, the REMIC 2 Regular Interests and the REMIC 3 Uncertificated Regular
Interests.

         "REMIC X": The segregated pool of assets consisting of the REMIC 3
Uncertificated Regular Interests, conveyed in trust to the Trustee, for the
benefit of the Holders of the Class C Certificates, the Class P Certificates,
and the Class R-X Certificates, pursuant to Article II hereunder, and all
amounts deposited therein, with respect to which a separate REMIC election is to
be made.

         "Remittance Report": A report prepared by the Master Servicer and
delivered to the NIMS Insurer, the Guarantor, the Trust Administrator and the
Trustee pursuant to Section 4.04.

         "Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code.

         "REO Account": The account or accounts maintained by the Master
Servicer in respect of an REO Property pursuant to Section 3.23.

         "REO Disposition": The sale or other disposition of an REO Property on
behalf of the Trust Fund.

         "REO Imputed Interest": As to any REO Property, for any calendar month
during which such REO Property was at any time part of the Trust Fund, one
month's interest at the applicable Net Mortgage Rate on the Principal Balance of
such REO Property (or, in the case of the first such calendar month, of the
related Mortgage Loan if appropriate) as of the Close of Business on the
Distribution Date in such calendar month.

         "REO Principal Amortization": With respect to any REO Property, for any
calendar month, the excess, if any, of (a) the aggregate of all amounts received
in respect of such REO Property during such calendar month, whether in the form
of rental income, sale proceeds (including, without limitation, that portion of
the Termination Price paid in connection with a purchase of all of the Mortgage
Loans and REO Properties pursuant to Section 9.01 that is allocable to such REO
Property) or otherwise, net of any portion of such amounts (i) payable pursuant
to Section 3.23 in respect of the proper operation, management and maintenance
of such REO Property or (ii) payable or reimbursable to the Master Servicer
pursuant to Section 3.23 for unpaid Servicing Fees in respect of the related
Mortgage Loan and unreimbursed Servicing Advances and Advances in respect of
such REO Property or the related Mortgage Loan, over (b) the REO Imputed
Interest in respect of such REO Property for such calendar month.

         "REO Property": A Mortgaged Property acquired by the Master Servicer on
behalf of the Trust Fund through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.23.

                                       65
<PAGE>

         "Request for Release": A release signed by a Servicing Representative,
in the form of Exhibit E-1 or E-2 attached hereto.

         "Reserve Funds": The Group I Reserve Fund and the Group II Reserve
Fund.

         "Reserve Interest Rate": With respect to any Interest Determination
Date, the rate per annum that the Trust Administrator determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 0.03125%) of the one-month United States dollar lending rates which
banks in The City of New York selected by the Trust Administrator with the
consent of the NIMS Insurer are quoting on the relevant Interest Determination
Date to the principal London offices of leading banks in the London interbank
market or (ii) in the event that the Trust Administrator can determine no such
arithmetic mean, in the case of any Interest Determination Date after the
initial Interest Determination Date, the lowest one-month United States dollar
lending rate which such New York banks selected by the Trust Administrator with
the consent of the NIMS Insurer are quoting on such Interest Determination Date
to leading European banks.

         "Residential Dwelling": Any one of the following: (i) a detached
one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a
one-family dwelling unit in a Fannie Mae eligible condominium project, (iv) a
manufactured home, or (v) a detached one-family dwelling in a planned unit
development, none of which is a co-operative or mobile home.

         "Residual Certificates": The Class R Certificates and the Class R-X
Certificates.

         "Residual Interest": The sole class of "residual interests" in a REMIC
within the meaning of Section 860G(a)(2) of the Code.

         "Responsible Officer": When used with respect to the Trustee or the
Trust Administrator, the Chairman or Vice Chairman of the Board of Directors or
trustees, the Chairman or Vice Chairman of the Executive or Standing Committee
of the Board of Directors or trustees, the President, any vice president, any
assistant vice president, the Secretary, any assistant secretary, the Treasurer,
any assistant treasurer, the Cashier, any assistant cashier, any trust officer
or assistant trust officer, the Controller and any assistant controller or any
other officer of the Trustee or the Trust Administrator, respectively,
customarily performing functions similar to those performed by any of the above
designated officers and, with respect to a particular matter, to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.

         "S&P": Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or its successor in interest.

         "Seller": Long Beach Mortgage Company, a Delaware corporation, or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.

         "Servicing Account": The account or accounts created and maintained
pursuant to Section 3.09.

                                       66
<PAGE>

         "Servicing Advances": All customary, reasonable and necessary "out of
pocket" costs and expenses (including reasonable attorneys' fees and expenses)
incurred by the Master Servicer in the performance of its servicing obligations
in connection with a default, delinquencies or other unanticipated event or
where reimbursement is otherwise permitted in accordance with any of the terms
of this Agreement, including, but not limited to, the cost of (i) the
preservation, restoration, inspection and protection of the Mortgaged Property,
(ii) any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property and (iv) compliance with the
obligations under Sections 3.01, 3.09, 3.16, and 3.23.

         "Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which interest on such Mortgage Loan accrues for such calendar month. A
portion of such Servicing Fee may be retained by any Sub-Servicer as its
servicing compensation.

         "Servicing Fee Rate": 0.50% per annum.

         "Servicing Representative": Any officer or employee of the Master
Servicer involved in, or responsible for, the administration and servicing of
Mortgage Loans, whose name and specimen signature appear on a list of servicing
representatives furnished by the Master Servicer to the Trustee, the Trust
Administrator and the Depositor on the Closing Date, as such list may from time
to time be amended.

         "Specially Serviced Mortgage Loan": A Mortgage Loan that (i) has been
delinquent in payment with respect to three or more monthly payments (provided,
however, that the third such payment shall not be deemed to be delinquent for
purposes of this clause (i) until the close of business on the last day of the
month in which such payment first became due), and (ii) has been transferred to
the Special Servicer in accordance with Section 3.13.

         "Startup Day": As defined in Section 10.01(b) hereof.

         "Stated Principal Balance": With respect to any Mortgage Loan: (a) as
of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the related Cut-off Date Principal Balance, as shown
in the Mortgage Loan Schedule, minus the sum of (i) the principal portion of
each Monthly Payment due on a Due Date subsequent to the Cut-off Date (or any
Subsequent Cut-off Date, as applicable), to the extent received from the
Mortgagor or advanced by the Master Servicer and distributed pursuant to Section
4.01 on or before such date of determination, (ii) all Principal Prepayments
received after the Cut-off Date (or any Subsequent Cut-off Date, as applicable),
to the extent distributed pursuant to Section 4.01 on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds to the
extent distributed pursuant to Section 4.01 on or before such date of
determination, and (iv) any Realized Loss incurred with respect thereto as a
result of a Deficient Valuation made during or prior to the Due Period for the
most recent Distribution Date coinciding with or preceding such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of determination up to but
not including the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, an
amount (not less than zero) equal to the Stated Principal Balance of the related
Mortgage Loan as of the date on which such REO Property was acquired on behalf
of the Trust Fund, minus the aggregate amount of REO Principal Amortization in
respect of such REO Property for all previously ended calendar months, to the
extent distributed pursuant to Section 4.01 on or before such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.

                                       67
<PAGE>

         "Stayed Funds": If the Master Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 7.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds that are in the custody of the Master Servicer, a trustee in bankruptcy or
a federal bankruptcy court and should have been the subject of such Remittance
absent such prohibition.

         "Stepdown Date": The Group I Stepdown Date or the Group II Stepdown
Date.

         "Subsequent Cut-off Date": With respect to those Subsequent Mortgage
Loans sold to the Trust pursuant to a Subsequent Transfer Instrument, the later
of (i) first day of the month in which the related Subsequent Transfer Date
occurs or (ii) the date of origination of such Mortgage Loan.

         "Subsequent Mortgage Loan": Any of the Group I Subsequent Mortgage Loan
or the Group II Subsequent Mortgage Loan.

         "Subsequent Transfer Date": With respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Mortgage Loans are sold to
the Trust Fund.

         "Subsequent Transfer Instrument": Each Subsequent Transfer Instrument,
dated as of a Subsequent Transfer Date, executed by the Trustee and the
Depositor substantially in the form attached hereto as Exhibit M, by which
Subsequent Mortgage Loans are transferred to the Trust Fund.

         "Sub-Servicer": Any Person with which the Master Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.

         "Sub-Servicing Account": An account established by a Sub-Servicer which
meets the requirements set forth in Section 3.08 and is otherwise acceptable to
the applicable Master Servicer.

         "Sub-Servicing Agreement": The written contract between the Master
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.

                                       68
<PAGE>

         "Substitution Adjustment": An amount equal to the excess of the
Principal Balance of the related Deleted Mortgage Loan over the Principal
Balance of such Qualified Substitute Mortgage Loan that the Seller is required
to deposit in the Collection Account on or prior to the next succeeding
Determination Date in connection with a substitution of a Qualified Substitute
Mortgage Loan.

         "Substitution Shortfall Amount": As defined in Section 2.03(d) hereof.

         "Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of the REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed by the Trustee on behalf of each REMIC, together with any and
all other information reports or returns that may be required to be furnished to
the Certificateholders or filed with the Internal Revenue Service or any other
governmental taxing authority under any applicable provisions of federal, state
or local tax laws.

         "Telerate Page 3750": The display designated as page "3750" on the Dow
Jones Telerate Capital Markets Report (or such other page as may replace page
3750 on that report for the purpose of displaying London interbank offered rates
of major banks).

         "Termination Price": As defined in Section 9.01(a) hereof.

         "Terminator":  As defined in Section 9.01.

         "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.

         "Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.

         "Transferor": Any Person who is disposing by Transfer of any Ownership
Interest in a Certificate.

         "Trigger Event": The Group I Trigger Event or the Group II Trigger
Event.

         "Trust": Long Beach Mortgage Loan Trust 2001-4, the trust created
hereunder.

         "Trust Administrator": Bankers Trust Company of California, N.A., a
national banking association, or its successor in interest, or any successor
Trust Administrator appointed as herein provided.

         "Trust Fund": All of the assets of the Trust, which is the trust
created hereunder consisting of REMIC 0A, REMIC 0B, REMIC 1A, REMIC 1B, REMIC 2,
REMIC 3, REMIC X, the Pre-Funding Accounts, the Reserve Funds and any Master
Servicer Prepayment Charge Payment Amounts.

         "Trust REMIC": Any of REMIC 0A, REMIC 0B, REMIC 1A, REMIC 1B, REMIC 2,
REMIC 3 and/or REMIC X.

                                       69
<PAGE>

         "Trustee": First Union National Bank, a national banking association,
or its successor in interest, or any successor trustee appointed as herein
provided.

         "Uncertificated Accrued Interest": With respect to each REMIC Regular
Interest on each Distribution Date, an amount equal to one month's interest at
the related Uncertificated Pass-Through Rate on the Uncertificated Principal
Balance or Uncertificated Notional Amount of such REMIC Regular Interest. In
each case, Uncertificated Accrued Interest will be reduced by any Net Prepayment
Interest Shortfalls and Relief Act Interest Shortfalls allocated to such REMIC
Regular Interests pursuant to Section 1.03.

         "Uncertificated Notional Amount":

         (a) With respect to REMIC 2 Regular Interest LT2S-1A and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1A Regular
Interest LT1A-2 for such Distribution Date;

         (b) With respect to REMIC 2 Regular Interest LT2S-1B and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1A Regular
Interest LT1A-2 for such Distribution Date;

         (c) With respect to REMIC 2 Regular Interest LT2S-1C and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1A Regular
Interest LT1A-2 for such Distribution Date;

         (d) With respect to REMIC 2 Regular Interest LT2S-1D and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1A Regular
Interest LT1A-3 for such Distribution Date;

         (e) With respect to REMIC 2 Regular Interest LT2S-2A and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1B Regular
Interest LT1B-2 for such Distribution Date;

         (f) With respect to REMIC 2 Regular Interest LT2S-2B and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1B Regular
Interest LT1B-2 for such Distribution Date; and

         (g) With respect to REMIC 2 Regular Interest LT2S-2C and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1B Regular
Interest LT1B-2 for such Distribution Date.

         (h) With respect to REMIC 2 Regular Interest LT2S-2D and any
Distribution Date, the Uncertificated Principal Balance of REMIC 1B Regular
Interest LT1B-3 for such Distribution Date;

         "Uncertificated Pass-Through Rate": The Uncertificated REMIC 0A
Pass-Through Rate, the Uncertificated REMIC 0B Pass-Through Rate, the
Uncertificated REMIC 1A Pass-Through Rate, the Uncertificated REMIC 1B
Pass-Through Rate, or the Uncertificated REMIC 2 Pass-Through Rate.

                                       70
<PAGE>

         "Uncertificated Principal Balance": With respect to each REMIC Regular
Interest (other than REMIC 2 Regular Interest LT2S-1A, REMIC 2 Regular Interest
LT2S-1B, REMIC 2 Regular Interest LT2S-1C, REMIC 2 Regular Interest LT2S-1D,
REMIC 2 Regular Interest LT2S-2A, REMIC 2 Regular Interest LT2S-2B, REMIC 2
Regular Interest LT2S-2C, and REMIC 2 Regular Interest LT2S-2D) the amount of
such REMIC Regular Interest outstanding as of any date of determination. As of
the Closing Date, the Uncertificated Principal Balance of each REMIC Regular
Interest (other than REMIC 2 Regular Interest LT2S-1A, REMIC 2 Regular Interest
LT2S-1B, REMIC 2 Regular Interest LT2S-1C, REMIC 2 Regular Interest LT2S-1D,
REMIC 2 Regular Interest LT2S-2A, REMIC 2 Regular Interest LT2S-2B, REMIC 2
Regular Interest LT2S-2C, and REMIC 2 Regular Interest LT2S-2D) shall equal the
amount set forth in the Preliminary Statement hereto as its initial
Uncertificated Principal Balance. On each Distribution Date, the Uncertificated
Principal Balance of each REMIC Regular Interest shall be reduced by all
distributions of principal made on such REMIC Regular Interest on such
Distribution Date pursuant to Section 4.05 and, if and to the extent necessary
and appropriate, shall be further reduced on such Distribution Date by Realized
Losses as provided in Section 4.06, and the Uncertificated Principal Balances of
REMIC 2 Regular Interest LT2E-1 and REMIC 2 Regular Interest LT2H-2 shall be
increased by interest deferrals as provided in Section 4.05. The Uncertificated
Principal Balance of each REMIC Regular Interest that has an Uncertificated
Principal Balance shall never be less than zero. REMIC 2 Regular Interest
LT2S-1A, REMIC 2 Regular Interest LT2S-1B, REMIC 2 Regular Interest LT2S-1C,
REMIC 2 Regular Interest LT2S-1D, REMIC 2 Regular Interest LT2S-2A, REMIC 2
Regular Interest LT2S-2B, REMIC 2 Regular Interest LT2S-2C, and REMIC 2 Regular
Interest LT2S-2D will not have Uncertificated Principal Balances.
Notwithstanding the foregoing, the Uncertificated Principal Balance of (i) REMIC
3 Uncertificated Regular Interest LT3-IC shall always be equal to the excess, if
any, of (A) the then aggregate Uncertificated Principal Balances of the REMIC 2
Group I Regular Interests over (B) the sum of the Certificate Principal Balance
of the Class I-A Certificates, the Uncertificated Principal Balance of REMIC 3
Uncertificated Regular Interest LT3-IP, and the then aggregate Component
Principal Balance of the Group I Mezzanine Components and (ii) REMIC 3
Uncertificated Regular Interest LT3-IIC shall always be equal to the excess, if
any, of (A) the then aggregate Uncertificated Principal Balances of the REMIC 2
Group II Regular Interests over (B) the sum of the Certificate Principal
Balances of the Class II-A Certificates and Class II-M1 Certificates, the
Uncertificated Principal Balance of REMIC 3 Uncertificated Regular Interest
LT3-IIP, and the then aggregate Component Principal Balance of the Group II
Mezzanine Components.

         "Uncertificated REMIC 0A Pass-Through Rate": For any Distribution Date,
for REMIC 0A Regular Interest LT0A-1 and REMIC 0A Regular Interest LT0A-P, a per
annum rate equal to the weighted average of the Adjusted Net Mortgage Rates of
the Group I Mortgage Loans, weighted on the basis of the sum of the Stated
Principal Balances of the Group I Mortgage Loans as of the Due Date preceding
the month of such Distribution Date. For any Distribution Date other than the
first Distribution Date, for REMIC 0A Regular Interest LT0A-2, a per annum rate
equal to the weighted average of the Adjusted Net Mortgage Rates of the Group I
Mortgage Loans, weighted on the basis of the sum of the Stated Principal
Balances of the Group I Mortgage Loans as of the Due Date preceding the month of
such Distribution Date. For the first Distribution Date, for REMIC 0A Regular
Interest LT0A-2, zero.

                                       71
<PAGE>

         "Uncertificated REMIC 0B Pass-Through Rate": For any Distribution Date,
for REMIC 0B Regular Interest LT0B-1 and REMIC 0B Regular Interest LT0B-P, a per
annum rate equal to the weighted average of the Adjusted Net Mortgage Rates of
the Group II Mortgage Loans, weighted on the basis of the sum of the Stated
Principal Balances of the Group II Mortgage Loans as of the Due Date preceding
the month of such Distribution Date. For any Distribution Date other than the
first Distribution Date, for REMIC 0B Regular Interest LT0B-2, a per annum rate
equal to the weighted average of the Adjusted Net Mortgage Rates of the Group II
Mortgage Loans, weighted on the basis of the sum of the Stated Principal
Balances of the Group II Mortgage Loans as of the Due Date preceding the month
of such Distribution Date. For the first Distribution Date, for REMIC 0B Regular
Interest LT0B-2, zero.

         "Uncertificated REMIC 1A Pass-Through Rate": For any Distribution Date,
for REMIC 1A Regular Interest LT1A-1, REMIC 1A Regular Interest LT1A-2, REMIC 1A
Regular Interest LT1A-3, and REMIC 1A Regular Interest LT1A-P, a per annum rate
equal to the weighted average of the Uncertificated REMIC 0A Pass-Through Rates
for each REMIC 0A Regular Interest as of such Distribution Date.

         "Uncertificated REMIC 1B Pass-Through Rate": For any Distribution Date,
for REMIC 1B Regular Interest LT1B-1, REMIC 1B Regular Interest LT1B-2, REMIC 1B
Regular Interest LT1B-3, and REMIC 1B Regular Interest LT1B-P, a per annum rate
equal to the weighted average of the Uncertificated REMIC 0B Pass-Through Rates
for each REMIC 0B Regular Interest as of such Distribution Date.

         "Uncertificated REMIC 2 Pass-Through Rate":

         (a) With respect to REMIC 2 Regular Interest LT2A-1, REMIC 2 Regular
Interest LT2B-1, REMIC 2 Regular Interest LT2C-1, REMIC 2 Regular Interest
LT2D-1, REMIC 2 Regular Interest LT2E-1, and REMIC 2 Regular Interest LT2P-1,
and any Distribution Date, a per annum rate equal to the weighted average of (x)
the Uncertificated REMIC 1A Pass-Through Rate with respect to REMIC 1A Regular
Interest LT1A-1 and REMIC 1 Regular Interest LT1A-P for such Distribution Date,
(y) the excess, if any, of (i) the Uncertificated REMIC 1A Pass-Through Rate
with respect to REMIC 1A Regular Interest LT1A-2 for such Distribution Date over
(ii) 6.00% per annum (in the case of the Distribution Date in January 2002
through the Distribution Date in October 2002), 5.25% per annum (in the case of
the Distribution Date in November 2002 through the Distribution Date in August
2003), 3.75% per annum (in the case of the Distribution Date in September 2003
through the Distribution Date in June 2004) or 0.00% per annum (in the case of
any Distribution Date thereafter), and (z) the excess, if any, of (i) the
Uncertificated REMIC 1A Pass-Through Rate with respect to REMIC 1A Regular
Interest LT1A-3 for such Distribution Date over (ii) 6.00% per annum (in the
case of the Distribution Date in January 2002 through the Distribution Date in
October 2002) or 0.00% per annum (in the case of any Distribution Date
thereafter),weighted on the basis of the Uncertificated Principal Balances of
REMIC 1A Regular Interest LT1A-1, REMIC 1A Regular Interest LT1A-P, REMIC 1A
Regular Interest LT1A-2, and REMIC 1A Regular Interest LT1A-3, respectively, and
multiplied by a fraction, the numerator of which is 30 and the denominator of
which is the actual number of days elapsed in the related Accrual Period;

                                       72
<PAGE>

         (b) With respect to REMIC 2 Regular Interest LT2A-2, REMIC 2 Regular
Interest LT2B-2, REMIC 2 Regular Interest LT2C-2, REMIC 2 Regular Interest
LT2D-2, REMIC 2 Regular Interest LT2E-2, REMIC 2 Regular Interest LT2F-2, REMIC
2 Regular Interest LT2G-2, REMIC 2 Regular Interest LT2H-2 and REMIC 2 Regular
Interest LT2P-2 and any Distribution Date, a per annum rate equal to the
weighted average of (x) the Uncertificated REMIC 1B Pass-Through Rate with
respect to REMIC 1B Regular Interest LT1B-1 and REMIC 1B Regular Interest LT1B-P
for such Distribution Date, (y) the excess, if any, of (i) the Uncertificated
REMIC 1B Pass-Through Rate with respect to REMIC 1B Regular Interest LT1B-2 for
such Distribution Date over (ii) 6.00% per annum (in the case of the
Distribution Date in January 2002 through the Distribution Date in October
2002), 5.25% per annum (in the case of the Distribution Date in November 2002
through the Distribution Date in August 2003), 3.75% per annum (in the case of
the Distribution Date in September 2003 through the Distribution Date in June
2004) or 0.00% per annum (in the case of any Distribution Date thereafter), and
(z) the excess, if any, of (i) the Uncertificated REMIC 1B Pass-Through Rate
with respect to REMIC 1B Regular Interest LT1B-3 for such Distribution Date over
(ii) 6.00% per annum (in the case of the Distribution Date in January 2002
through the Distribution Date in October 2002) or 0.00% per annum (in the case
of any Distribution Date thereafter), weighted on the basis of the
Uncertificated Principal Balances of REMIC 1B Regular Interest LT1B-1, REMIC 1B
Regular Interest LT1B-P, REMIC 1B Regular Interest LT1B-2, and REMIC 1B Regular
Interest LT1B-3, respectively, multiplied by a fraction, the numerator of which
is 30 and the denominator of which is the actual number of days elapsed in the
related Accrual Period;

         (c) With respect to REMIC 2 Regular Interest LT2S-1A and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in June 2004, 3.75% per annum; with respect to REMIC 2 Regular
Interest LT2S-1A and any Distribution Date thereafter, 0.00% per annum;

         (d) With respect to REMIC 2 Regular Interest LT2S-1B and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in August 2003, 1.50% per annum; with respect to REMIC 2
Regular Interest LT2S-1B and any Distribution Date thereafter, 0.00% per annum;

         (e) With respect to REMIC 2 Regular Interest LT2S-1C and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in October 2002, 0.75% per annum; with respect to REMIC 2
Regular Interest LT2S-1C and any Distribution Date thereafter, 0.00% per annum.

         (f) With respect to REMIC 2 Regular Interest LT2S-1D and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in October 2002, 6.00% per annum; with respect to REMIC 2
Regular Interest LT2S-1D and any Distribution Date thereafter, 0.00% per annum.

         (g) With respect to REMIC 2 Regular Interest LT2S-2A and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in June 2004, 3.75% per annum; with respect to REMIC 2 Regular
Interest LT2S-2A and any Distribution Date thereafter, 0.00% per annum;

         (h) With respect to REMIC 2 Regular Interest LT2S-2B and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in August 2003, 1.50% per annum; with respect to REMIC 2
Regular Interest LT2S-2B and any Distribution Date thereafter, 0.00% per annum;
and

                                       73
<PAGE>

         (i) With respect to REMIC 2 Regular Interest LT2S-2C and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in October 2002, 0.75% per annum; with respect to REMIC 2
Regular Interest LT2S-2C and any Distribution Date thereafter, 0.00% per annum.

         (j) With respect to REMIC 2 Regular Interest LT2S-2D and any
Distribution Date from the Distribution Date in January 2002 through the
Distribution Date in October 2002, 6.00% per annum; with respect to REMIC 2
Regular Interest LT2S-2D and any Distribution Date thereafter, 0.00% per annum.

         "Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to Section 3.14.

         "Uninsured Indenture": The indenture, if any, entered into following
the Closing Date, among Long Beach Asset Holdings Corp. CI-2, as issuer, Long
Beach Asset Holdings CI-1 LLC, as co-issuer, and Bankers Trust Company of
California, N.A., as indenture trustee, relating to the Uninsured NIM Notes to
be issued thereunder.

         "Uninsured NIM Notes": Those certain uninsured net interest margin
securities issued by Long Beach Asset Holdings Corp. CI-2 which are backed by
certain Class C Certificates and Class P Certificates.

         "United States Person" or "U.S. Person": (i) A citizen or resident of
the United States; (ii) a corporation, partnership or other entity classified as
a corporation or partnership for tax purposes created or organized in, or under
the laws of, the United States or any political subdivision thereof (except, in
the case of a partnership or entity treated as a partnership, to the extent
provided in regulations) provided that, solely for purposes of the restrictions
on the transfer of the Residual Certificates, no partnership or other entity
treated as a partnership shall be treated as a United States Person unless all
persons that own an interest in such partnership or other entity, either
directly or through any entity that is not a corporation for United States
federal income tax purposes, are required by the applicable operative agreement
to be United States Persons; (iii) an estate the income of which is subject to
United States federal income taxation regardless of its source, or (iv) a trust
if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States Persons have the
authority to control all substantial decisions of the trust or if the trust was
in existence on August 20, 1996, was treated as a United States Person on August
19, 1996, and made a valid election to continue to be treated as a United States
Person. The term "United States" shall have the meaning set forth in Section
7701 of the Code or successor provisions.

         "Unpaid Interest Shortfall Amount": With respect to the Class A
Certificates, the Class S Certificates, the Class II-M1 Certificates and the
Mezzanine Components and (i) the first Distribution Date, zero, and (ii) any
Distribution Date after the first Distribution Date, the amount, if any, by
which (a) the sum of (1) the Monthly Interest Distributable Amount for such
Class of Certificates or such Component for the immediately preceding
Distribution Date and (2) the outstanding Unpaid Interest Shortfall Amount, if
any, for such Class of Certificates or such Component for such preceding
Distribution Date exceeds (b) the aggregate amount distributed on such Class of
Certificates or such Component in respect of interest pursuant to clause (a) of
this definition on such preceding Distribution Date, plus interest on the amount
of interest due but not paid on such Class of Certificates or such Component on
such preceding Distribution Date, to the extent permitted by law, at the
Pass-Through Rate for such Class of Certificates or such Component for the
related Accrual Period.

                                       74
<PAGE>

         "Value": With respect to any Mortgaged Property, the lesser of (i) the
value thereof as determined by an appraisal made for the originator of the
Mortgage Loan at the time of origination of the Mortgage Loan by an appraiser
who met the minimum requirements of Fannie Mae, and (ii) the purchase price paid
for the related Mortgaged Property by the Mortgagor with the proceeds of the
Mortgage Loan, provided, however, in the case of a Refinanced Mortgage Loan,
such value of the Mortgaged Property is based solely upon the value determined
by an appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of Fannie Mae.

         "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. At all times the Class A
Certificates, the Mezzanine Certificates and the Class C Certificates shall have
97% of the Voting Rights (allocated among the Holders of the Class A
Certificates, the Mezzanine Certificates and the Class C Certificates in
proportion to the then outstanding Certificate Principal Balances of their
respective Certificates), the Class S Certificates shall have 1% of the Voting
Rights, the Class P Certificates shall have 1% of the Voting Rights and the
Class R Certificates shall have 1% of the Voting Rights, provided that, if and
for so long as the Class C Certificates and Class P Certificates are held by a
foreign entity and serve as collateral for the NIM Notes, the total combined
voting power of such Classes of Certificates shall not exceed 9.9%. The Voting
Rights allocated to any Class of Certificates (other than the Class P
Certificates and the Class R Certificates) shall be allocated among all Holders
of each such Class in proportion to the outstanding Certificate Principal
Balance or Notional Amount of such Certificates and the Voting Rights allocated
to the Class P Certificates and the Class R Certificates shall be allocated
among all Holders of each such Class in proportion to such Holders' respective
Percentage Interest; provided, however, that when none of the Regular
Certificates are outstanding, 100% of the Voting Rights shall be allocated among
Holders of the Class R Certificates in accordance with such Holders' respective
Percentage Interests in the Certificates of such Class. Notwithstanding any of
the foregoing, on any date on which any Guaranteed Certificates are outstanding
or any amounts are owed the Guarantor under this Agreement, all of the Voting
Rights allocated to the Guaranteed Certificates shall be vested in the
Guarantor.

Section 1.02  Accounting.

         Unless otherwise specified herein, for the purpose of any definition or
calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account, such definition or calculation and any
related definitions or calculations shall be determined without duplication of
such functions.

Section 1.03  Allocation of Certain Interest Shortfalls.

         For purposes of calculating the amount of the Monthly Interest
Distributable Amount for the Class I-A Certificates, the Class I-S Certificates,
the Group I Mezzanine Components and REMIC 3 Uncertificated Regular Interest
LT3-IC for any Distribution Date, (1) the aggregate amount of any Net Prepayment
Interest Shortfalls and any Relief Act Interest Shortfalls incurred in respect
of the Group I Mortgage Loans for any Distribution Date shall be allocated
first, to REMIC 3 Uncertificated Regular Interest LT3-IC to the extent of one
month's interest at the then applicable Pass-Through Rate on the Notional Amount
of such Regular Interest and, thereafter, among the Class I-A Certificates, the
Class I-S Certificates and the Group I Mezzanine Components on a pro rata basis
based on, and to the extent of, interest for the related Accrual Period at the
then applicable respective Pass-Through Rate on the respective Certificate
Principal Balance or Notional Amount of each such Certificate or the respective
Component Principal Balance of each such Component and (2) the aggregate amount
of any Realized Losses and Net WAC Rate Carryover Amounts incurred in respect of
Group I Mortgage Loans for any Distribution Date shall be allocated to REMIC 3
Uncertificated Regular Interest LT3-IC to the extent of, interest for the
related Accrual Period at the then applicable Pass-Through Rate on the Notional
Amount of such Regular Interest.

                                       75
<PAGE>

         For purposes of calculating the amount of the Monthly Interest
Distributable Amount for the Class II-A Certificates, the Class II-S
Certificates, the Class II-M1 Certificates, the Group II Mezzanine Components
and REMIC 3 Uncertificated Regular Interest LT3-IIC for any Distribution Date,
(1) the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group II Mortgage
Loans for any Distribution Date shall be allocated first, to REMIC 3
Uncertificated Regular Interest LT3-IIC to the extent of one month's interest at
the then applicable Pass-Through Rate on the Notional Amount of such Regular
Interest and, thereafter, among the Class II-A Certificates, the Class II-S
Certificates, the Class II-M1 Certificates, and the Group II Mezzanine
Components on a pro rata basis based on, and to the extent of, interest for the
related Accrual Period at the then applicable respective Pass-Through Rate on
the respective Certificate Principal Balance or Notional Amount of each such
Certificate or the respective Component Principal Balance of each such Component
and (2) the aggregate amount of any Realized Losses and Net WAC Rate Carryover
Amounts incurred in respect of the Group II Mortgage Loans for any Distribution
Date shall be allocated to REMIC 3 Uncertificated Regular Interest LT3-IIC to
the extent of interest for the related Accrual Period at the then applicable
Pass-Through Rate on the Notional Amount of such Regular Interest.

         For purposes of calculating the amount of the Monthly Interest
Distributable Amount for the Class I-C Certificates for any Distribution Date,
(1) the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls allocated to REMIC 3 Uncertificated Regular
Interest LT3-IC pursuant to the paragraphs above shall be allocated among the
Class I-C Certificates on a pro rata basis based on one month's interest at the
then applicable Pass-Through Rate on the Notional Amount of each such
Certificate, and (2) the aggregate amount of any Realized Losses and Net WAC
Rate Carryover Amounts allocated to REMIC 3 Uncertificated Regular Interest
LT3-IC pursuant to the paragraphs above shall be allocated among the Class I-C
Certificates on a pro rata basis based on interest for the related Accrual
Period at the then applicable Pass-Through Rate on the Notional Amount of each
such Certificate.

         For purposes of calculating the amount of the Monthly Interest
Distributable Amount for the Class II-C Certificates for any Distribution Date,
(1) the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls allocated to REMIC 3 Uncertificated Regular
Interest LT3-IIC pursuant to the paragraphs above shall be allocated among the
Class II-C Certificates on a pro rata basis based on one month's interest at the
then applicable Pass-Through Rate on the Notional Amount of each such
Certificate, and (2) the aggregate amount of any Realized Losses and Net WAC
Rate Carryover Amounts allocated to REMIC 3 Uncertificated Regular Interest
LT3-IIC pursuant to the paragraphs above shall be allocated among the Class II-C
Certificates on a pro rata basis based on interest for the related Accrual
Period at the then applicable Pass-Through Rate on the Notional Amount of each
such Certificate.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertificated REMIC 0A Regular Interests for any Distribution
Date, the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group I Mortgage Loans
for any Distribution Date shall be allocated to REMIC 0A Regular Interest LT0A-1
and REMIC 0A Regular Interest LT0A-2, pro rata based on, and to the extent of
interest for the related Accrual Period at the then applicable respective
Uncertificated REMIC 0A Pass-Through Rate on the respective Uncertificated
Principal Balance of each such REMIC 0A Regular Interest.

                                       76
<PAGE>

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertified REMIC 0B Regular Interests for any Distribution
Date, the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group II Mortgage
Loans for any Distribution Date shall be allocated to REMIC 0B Regular Interest
LT0B-1 and REMIC 0B Regular Interest LT0B-2, pro rata based on, and to the
extent of interest for the related Accrual Period at the then applicable
respective Uncertificated REMIC 0B Pass-Through Rate on the respective
Uncertificated Principal Balance of each such REMIC 0B Regular Interest.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertificated REMIC 1A Regular Interests for any Distribution
Date, the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group I Mortgage Loans
for any Distribution Date shall be allocated first to REMIC 1A Regular Interest
LT1A-1 and then pro rata to REMIC 1A Regular Interest LT1A-2 and REMIC 1A
Regular Interest LT1A-3, in each case to the extent of interest for the related
Accrual Period at the then applicable respective Uncertificated REMIC 1A
Pass-Through Rate on the respective Uncertificated Principal Balance of each
such REMIC 1A Regular Interest.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertified REMIC 1B Regular Interests for any Distribution
Date, the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group II Mortgage
Loans for any Distribution Date shall be allocated first to REMIC 1B Regular
Interest LT1B-1 and then pro rata to REMIC 1B Regular Interest LT1B-2 and REMIC
1B Regular Interest LT1B-3, in each case to the extent of interest for the
related Accrual Period at the then applicable respective Uncertificated REMIC 1B
Pass-Through Rate on the respective Uncertificated Principal Balance of each
such REMIC 1B Regular Interest.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the REMIC 2 Regular Interests for any Distribution Date, the
aggregate amount of any Net Prepayment Interest Shortfalls and any Relief Act
Interest Shortfalls incurred in respect of the Group I Mortgage Loans for any
Distribution Date shall be allocated first, pro rata to REMIC 2 Regular Interest
LT2A-1 and REMIC 2 Regular Interest LT2E-1, up to an aggregate amount equal to
the REMIC 2 Group I Interest Loss Allocation Amount, with allocations between
REMIC 2 Regular Interest LT2A-1 and REMIC 2 Regular Interest LT2E-1 being made
98% and 2%, respectively. Thereafter, Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group I Mortgage Loans
for any Distribution Date shall be allocated pro rata among REMIC 2 Regular
Interest LT2A-1, REMIC 2 Regular Interest LT2B-1, REMIC 2 Regular Interest
LT2C-1, REMIC 2 Regular Interest LT2D-1, REMIC 2 Regular Interest LT2E-1, REMIC
2 Regular Interest LT2S-1A, REMIC 2 Regular Interest LT2S-1B, REMIC 2 Regular
Interest LT2S-1C, and REMIC 2 Regular Interest LT2S-1D.

                                       77
<PAGE>

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the REMIC 2 Regular Interests for any Distribution Date, the
aggregate amount of any Net Prepayment Interest Shortfalls and any Relief Act
Interest Shortfalls incurred in respect of the Group II Mortgage Loans for any
Distribution Date shall be allocated first, pro rata to REMIC 2 Regular Interest
LT2A-2 and REMIC 2 Regular Interest LT2H-2, up to an aggregate amount equal to
the REMIC 2 Group II Interest Loss Allocation Amount, with allocations between
REMIC 2 Regular Interest LT2A-2 and REMIC 2 Regular Interest LT2H-2 being made
98% and 2%, respectively. Thereafter, Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Group II Mortgage
Loans for any Distribution Date shall be allocated pro rata among REMIC 2
Regular Interest LT2A-2, REMIC 2 Regular Interest LT2B-2, REMIC 2 Regular
Interest LT2C-2, REMIC 2 Regular Interest LT2D-2, REMIC 2 Regular Interest
LT2E-2, REMIC 2 Regular Interest LT2F-2, REMIC 2 Regular Interest LT2G-2, REMIC
2 Regular Interest LT2H-2, REMIC 2 Regular Interest LT2S-2A, REMIC 2 Regular
Interest LT2S-2B, REMIC 2 Regular Interest LT2S-2C, and REMIC 2 Regular Interest
LT2S-2D.

         For purposes of the preceding six paragraphs, pro rata allocations
shall be based on interest for the related Accrual Period at the then applicable
respective Uncertificated REMIC 2 Pass-Through Rate, Uncertificated REMIC 0A
Pass-Through Rate, Uncertificated REMIC 0B Pass-Through Rate, Uncertificated
REMIC 1A Pass-Through Rate or Uncertificated REMIC 1B Pass-Through Rate on the
respective Uncertificated Principal Balance or Uncertificated Notional Amount of
each such Uncertificated REMIC 2 Regular Interest, Uncertificated REMIC 0A
Regular Interest, Uncertificated REMIC 0B Regular Interest, Uncertificated REMIC
1A Regular Interest or Uncertificated REMIC 1B Regular Interest.

Section 1.04 Rights of the NIMS Insurer and the Guarantor.

         (a) Each of the rights of the NIMS Insurer set forth in this Agreement
shall exist so long as the notes issued pursuant to the Indenture remain
outstanding; provided, however, the Insured NIMS Insurer shall not have any
rights hereunder (except as provided in Section 9.01) so long as any default has
occurred and is continuing under the insurance policy issued by the NIMS Insurer
with respect to such notes.

         (b) If and when (i) no notes issued pursuant to the Insured Indenture
remain outstanding, (ii) any Guaranteed Certificates remain outstanding and
(iii) no default under the Guaranty shall have occurred and be continuing, the
Guarantor shall be entitled to exercise the rights of the NIMS Insurer set forth
in this Agreement.

         (c) Notwithstanding anything to the contrary anywhere in this
Agreement, all rights of the Guarantor hereunder, except any rights to
indemnification, shall permanently terminate upon the later to occur of (A) such
time as the Guaranteed Certificates shall no longer be outstanding and (B) the
payment in full to the Guarantor of any amounts owed to the Guarantor in respect
of its guarantee of payment on the Guaranteed Certificates; provided that the
Guarantor shall not have any rights hereunder, except indemnification rights, so
long as any default has occurred and is continuing under the Guaranty.

                                       78
<PAGE>

         (d) Notwithstanding anything to the contrary anywhere in this
Agreement, all rights and benefits of the NIMS Insurer hereunder shall
permanently terminate upon such time as the Insured NIM Notes shall no longer
be outstanding.

         (e) The rights of the NIMS Insurer or Guarantor referenced in Sections
3.02(a), 3.03, 3.05, 3.16(b), 3.27(a), 6.04, 7.02(a), 7.04, 8.07 and 8.10 of
this Agreement shall be applied as follows:

                  (i) In the event that the Class II-M1 Certificates are rated
at least "AA" (in the case of Fitch and/or S&P) or "Aa2" (in the case of
Moody's), the NIMS Insurer shall have the right to act, after consultation with
the Guarantor;

                  (ii) In the event that (x) the rating of the Class II-M1
Certificates is reduced by two of the three Rating Agencies to less than "AA" or
"Aa2" and (y) the Class M2 Certificates and Class M3 Certificates have an
aggregate Certificate Principal Balance greater than zero and/or the Group I
Overcollateralized Amount or the Group II Overcollateralized Amount is greater
than zero, the NIMS Insurer and the Guarantor each shall have the right to act,
upon the receipt of the reasonable consent of the other; and

                  (iii) In the event that (x) the rating of the Class II-M1
Certificates is reduced by two of the three Rating Agencies to less than "AA" or
"Aa2" and (y) the I-M3 Component has no aggregate Component Principal Balance
and the Group I Overcollateralized Amount or the Group II Overcollateralized
Amount is equal to zero, the Guarantor shall have the sole right to act.

         The NIMS Insurer and the Guarantor shall promptly consult each other
with regard to the rights referred to in this sub-section. If this consultation
would create a delay that would have a material adverse effect on this
Agreement, each party may act individually with respect to their rights and
consult with the other party after such action has been taken. Any consents
required between the NIMS Insurer and the Guarantor shall not be unreasonably
withheld or delayed.

Section 1.05 Guarantor Purchase Option.

         If neither the Master Servicer nor the NIMS Insurer has exercised its
right to purchase all of the Mortgage Loans and each REO Property in both Loan
Groups remaining in REMIC 0A and REMIC 0B pursuant to Sections 9.01(a) and (b)
and the Class I-A Certificates are outstanding, the Guarantor shall have the
right to purchase all of the Group I Mortgage Loans and each REO Property in
Loan Group I remaining in REMIC 0A during any Prepayment Period following the
Group I Stepdown Date and the Optional Termination Date; provided, that the
aggregate Stated Principal Balance of the Group I Mortgage Loans and each REO
Property in Loan Group I remaining in the Trust Fund on the immediately
preceding Distribution Date is equal to or less than 5% of the sum of the
aggregate Stated Principal Balance of the Group I Closing Date Mortgage Loans as
of the Cut-off Date and the Group I Original Pre-Funded Amount. The price
payable by the Guarantor upon the exercise of the foregoing option shall be
equal to the aggregate Purchase Price of all of the Mortgage Loans included in
REMIC 0A, plus the appraised value of each REO Property (if any) in REMIC 0A,
such appraisal to be conducted by an appraiser mutually agreed upon by the
Master Servicer, the Guarantor, the Trustee and the Trust Administrator in their
reasonable discretion, plus any unpaid Guarantor Reimbursement Amount and unpaid
Guaranty Fee, any amounts necessary to reimburse the NIMS Insurer for all
amounts paid under the NIMs Insurance Policy, any other amounts reimbursable or
otherwise payable to the NIMS Insurer, in each case with interest thereon at the
applicable rate set forth in the Insured Indenture and to the extent not
previously reimbursed or paid, and any additional amounts necessary to pay all
interest accrued on, as well as amounts necessary to pay in full the principal
balance of, the NIM Notes and the Class I-A Certificates.

                                       79
<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

Section 2.01 Conveyance of Mortgage Loans.

         The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee
without recourse for the benefit of the Certificateholders all the right, title
and interest of the Depositor, including any security interest therein for the
benefit of the Depositor, in and to the Mortgage Loans identified on the
Mortgage Loan Schedule, the rights of the Depositor under the Mortgage Loan
Purchase Agreement (other than the Depositor's rights under Section 17 thereof),
and all other assets included or to be included in REMIC 0A or REMIC 0B. Such
assignment includes all interest and principal received by the Depositor or the
Master Servicer on or with respect to the Mortgage Loans (other than payments of
principal and interest due on such Mortgage Loans on or before the Cut-off Date
with respect to the Mortgage Loans). The Depositor herewith delivers to the
Trust Administrator on behalf of the Trustee an executed copy of the Mortgage
Loan Purchase Agreement.

         If the assignment and transfer of the Mortgage Loans and the other
property specified in Section 2.01 from the Depositor to the Trustee pursuant to
this Agreement is held or deemed not to be a sale or is held or deemed to be a
pledge of security for a loan, the Depositor intends that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, (i) the Depositor shall be deemed to have
granted and does hereby grant to the Trustee as of the Closing Date a perfected,
first priority security interest in the entire right, title and interest of the
Depositor in and to the Mortgage Loans and all other property conveyed to the
Trust Fund pursuant to this Section 2.01 and all proceeds thereof and (ii) this
Agreement shall constitute a security agreement under applicable law.

         In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the Trust Administrator as custodian for
the Trustee (in which capacity it will, unless otherwise specified, be acting
under this Article II) the following documents or instruments with respect to
each Closing Date Mortgage Loan so transferred and assigned and the Depositor,
shall, in accordance with Section 2.07, deliver or cause to be delivered to the
Trust Administrator with respect to each Subsequent Mortgage Loan, the following
documents or instruments (with respect to each Mortgage Loan, a "Mortgage
File"):

                                       80
<PAGE>

         (a) the original Mortgage Note, endorsed in blank or in the following
form: "Pay to the order of Bankers Trust Company of California, N.A., as Trust
Administrator for the benefit of First Union National Bank, as Trustee under the
applicable agreement, without recourse," with all prior and intervening
endorsements showing a complete chain of endorsement from the originator to the
Person so endorsing to the Trustee or (in the case of not more than 1.00% of the
Mortgage Loans, by aggregate principal balance as of the Cut-off Date or the
related Subsequent Cut-off Date, as applicable) a copy of such original Mortgage
Note with an accompanying Lost Note Affidavit executed by the Seller;

         (b) the original Mortgage with evidence of recording thereon, and a
copy, certified by the appropriate recording office, of the recorded power of
attorney, if the Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;

         (c) an original Assignment in blank;

         (d) the original recorded Assignment or Assignments showing a complete
chain of assignment from the originator to the Person assigning the Mortgage to
the Trustee or in blank;

         (e) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and

         (f) the original lender's title insurance policy, together with all
endorsements or riders issued with or subsequent to the issuance of such policy,
insuring the priority of the Mortgage as a first lien on the Mortgaged Property
represented therein as a fee interest vested in the Mortgagor, or in the event
such original title policy is unavailable, a written commitment or uniform
binder or preliminary report of title issued by the title insurance or escrow
company.

         The Master Servicer, in its capacity as Seller, shall promptly (and in
no event later than thirty (30) Business Days, subject to extension upon a
mutual agreement between the Master Servicer and the Trustee), following the
later of the Closing Date (or each Subsequent Transfer Date, with respect to
Subsequent Mortgage Loans) and the date of receipt by the Master Servicer of the
recording information for a Mortgage submit or cause to be submitted for
recording, at no expense to the Trust Fund, the Trustee, the Trust Administrator
or the Depositor, in the appropriate public office for real property records,
each Assignment referred to in Sections 2.01(c) and (d) above and shall execute
each original Assignment referred to in clause (c) above in the following form:
"Bankers Trust Company of California, N.A., as Trust Administrator for the
benefit of First Union National Bank, as Trustee under applicable agreement,
without recourse." In the event that any such Assignment is lost or returned
unrecorded because of a defect therein, the Master Servicer, in its capacity as
Seller, shall promptly prepare or cause to be prepared a substitute Assignment
or cure or cause to be cured such defect, as the case may be, and thereafter
cause each such Assignment to be duly recorded. Notwithstanding the foregoing,
however, for administrative convenience and facilitation of servicing and to
reduce closing costs, the Assignments shall not be required to be completed and
submitted for recording with respect to any Mortgage Loan if either (x) the
Trustee, the Trust Administrator, the NIMS Insurer, the Guarantor and each
Rating Agency has received an opinion of counsel, reasonably satisfactory to the
Trustee, the Trust Administrator, the NIMS Insurer, the Guarantor and each
Rating Agency, to the effect that the recordation of such Assignments in any
specific jurisdiction is not necessary to protect the Trust's interest in the
related Mortgage Note or (y) each Rating Agency shall have determined that no
such opinion is required in order for such Rating Agency to assign the initial
ratings to the Class A Certificates, the Class S Certificates, the Mezzanine
Certificates and the NIM Notes; provided further, however, notwithstanding the
delivery of any opinion of counsel, each Assignment shall be submitted for
recording by the Master Servicer, in its capacity as Seller, in the manner
described above, at no expense to the Trust Fund, the Trustee, or the Trust
Administrator, upon the earliest to occur of: (i) reasonable direction by
Holders of Certificates entitled to at least 25% of the Voting Rights, (ii) the
occurrence of a Master Servicer Event of Default, (iii) the occurrence of a
bankruptcy, insolvency or foreclosure relating to the Seller, (iv) the
occurrence of a servicing transfer as described in Section 7.02 hereof and (iv)
if the Seller is not the Master Servicer and with respect to any one Assignment,
the occurrence of a bankruptcy, insolvency or foreclosure relating to the
Mortgagor under the related Mortgage. Notwithstanding the foregoing, if the
Master Servicer is unable to pay the cost of recording the Assignments, such
expense will be paid by the Trust Administrator and shall be reimbursable to the
Trust Administrator as an Extraordinary Trust Fund Expense.

                                       81
<PAGE>

         If any of the documents referred to in Sections 2.01(b), (c), (d) or
(e) above has as of the Closing Date (or each Subsequent Transfer Date, with
respect to Subsequent Mortgage Loans) been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Depositor to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Trust Administrator of a copy of
each such document certified by the Seller in the case of (x) above or the
applicable public recording office in the case of (y) above to be a true and
complete copy of the original that was submitted for recording and (2) if such
copy is certified by the Seller, delivery to the Trust Administrator promptly
upon receipt thereof, and in any event no later than one year after the Closing
Date (or each Subsequent Transfer Date, with respect to Subsequent Mortgage
Loans), of either the original or a copy of such document certified by the
applicable public recording office to be a true and complete copy of the
original. If the original lender's title insurance policy was not delivered
pursuant to Section 2.01(f) above, the Depositor shall deliver or cause to be
delivered to the Trust Administrator promptly after receipt thereof, and in any
event within 120 days after the Closing Date (or each Subsequent Transfer Date,
with respect to Subsequent Mortgage Loans), the original lender's title
insurance policy. The Depositor shall deliver or cause to be delivered to the
Trust Administrator promptly upon receipt thereof any other original documents
constituting a part of a Mortgage File received with respect to any Mortgage
Loan, including, but not limited to, any original documents evidencing an
assumption or modification of any Mortgage Loan.

         All original documents relating to the Mortgage Loans that are not
delivered to the Trust Administrator are and shall be held by or on behalf of
the Seller, the Depositor or the Master Servicer, as the case may be, in trust
for the benefit of the Trustee on behalf of the Certificateholders. In the event
that any such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be delivered
promptly to the Trust Administrator. Any such original document delivered to or
held by the Depositor that is not required pursuant to the terms of this Section
to be a part of a Mortgage File, shall be delivered promptly to the Master
Servicer.

                                       82
<PAGE>

Section 2.02  Acceptance of REMIC 0A and REMIC 0B by the Trustee.

         Subject to the provisions of Section 2.01 and subject to any exceptions
noted on the exception report described in the next paragraph below, the Trust
Administrator on behalf of the Trustee acknowledges receipt of the documents
referred to in Section 2.01 above and all other assets included in the
definition of "REMIC 0A" under clauses (i), (iii), (iv) and (vi) (to the extent
of amounts deposited into the Distribution Account) and the definition of REMIC
0B under clauses (i), (iii), (iv) and (v) (to the extent of amounts deposited
into the Distribution Account) and declares that it holds and will hold such
documents and the other documents delivered to it constituting the Mortgage
File, and all such assets and such other assets included in the definition of
"REMIC 0A" and "REMIC 0B" in trust for the exclusive use and benefit of all
present and future Certificateholders.

         The Trust Administrator agrees, for the benefit of the
Certificateholders, to review each Mortgage File on or before the Closing Date,
with respect to each Mortgage Loan or the Subsequent Transfer Date, with respect
to each Subsequent Mortgage Loan and to certify to the Trustee, the Guarantor,
the NIMS Insurer, the Depositor and the Master Servicer in substantially the
form attached hereto as Exhibit F-1 that, as to each Closing Date Mortgage Loan
and Subsequent Mortgage Loans listed in the Mortgage Loan Schedule (other than
any Mortgage Loan paid in full or any Mortgage Loan specifically identified in
the exception report annexed thereto as not being covered by such
certification), (i) all documents constituting part of such Mortgage File (other
than such documents described in Section 2.01(e)) required to be delivered to it
pursuant to this Agreement are in its possession, (ii) such documents have been
reviewed by the Trust Administrator and are not mutilated, torn or defaced
unless initialed by the related borrower and relate to such Mortgage Loan and
(iii) based on the Trust Administrator's examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i), (ii), (ix), (xii), (xiv) (to the extent of the
Periodic Rate Cap for the first Adjustment Date and subsequent Adjustment Dates)
and (xvi) of the definition of "Mortgage Loan Schedule" accurately reflects
information set forth in the Mortgage File. It is herein acknowledged that, in
conducting such review, the Trust Administrator was under no duty or obligation
(i) to inspect, review or examine any such documents, instruments, certificates
or other papers to determine whether they are genuine, enforceable, or
appropriate for the represented purpose (including with respect to Section
2.01(f), whether such title insurance policy (a) contains all necessary
endorsements, (b) insures the priority of the Mortgage as a first lien or (c)
whether the interest vested in the Mortgagor is a fee interest) or whether they
have actually been recorded or that they are other than what they purport to be
on their face or (ii) to determine whether any Mortgage File should include any
of the documents specified in clause (e) of Section 2.01.

         Prior to the first anniversary date of this Agreement, the Trust
Administrator shall deliver to the Depositor, the Master Servicer, the Trustee,
the NIMS Insurer and the Guarantor a final certification in the form annexed
hereto as Exhibit F-2 evidencing the completeness of the Mortgage Files, with
any applicable exceptions noted thereon.

                                       83
<PAGE>

         If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trust
Administrator finds any document or documents constituting a part of a Mortgage
File to be missing or defective in any material respect, at the conclusion of
its review the Trust Administrator shall so notify the Depositor, the Seller,
the Trustee, the Guarantor, the NIMS Insurer and the Master Servicer. In
addition, upon the discovery by the Depositor, the Master Servicer, the
Guarantor, the Trustee or the Trust Administrator of a breach of any of the
representations and warranties made by the Seller in the Mortgage Loan Purchase
Agreement in respect of any Mortgage Loan which materially and adversely affects
the value of such Mortgage Loan or the interests of the related
Certificateholders in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties.

Section 2.03 Cure, Repurchase or Substitution of Mortgage Loans by the Seller;
Remedies for Breaches by Depositor or Master Servicer; Remedies for Breaches
Relating to Prepayment Charges.

         (a) Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, the Mortgage File or of the
breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan which
materially and adversely affects the value of such Mortgage Loan or the interest
therein of the Certificateholders (in the case of any such representation or
warranty made to the knowledge or the best of knowledge of the Seller, as to
which the Seller has no knowledge, without regard to the Seller's lack of
knowledge with respect to the substance of such representation or warranty being
inaccurate at the time it was made), the Trust Administrator shall promptly
notify the Depositor, the Seller, the NIMS Insurer, the Guarantor and the Master
Servicer of such defect, missing document or breach and request that the Seller
deliver such missing document or cure such defect or breach within 90 days from
the date the Seller was notified of such missing document, defect or breach, and
if the Seller does not deliver such missing document or cure such defect or
breach in all material respects during such period, the Master Servicer (or, in
accordance with Section 3.02(b), the Trustee or the Trust Administrator) shall
enforce the obligations of the Seller under the Mortgage Loan Purchase Agreement
to repurchase such Mortgage Loan from REMIC 0A or REMIC 0B at the Purchase Price
within 90 days after the date on which the Seller was notified (subject to
Section 2.03(e)) of such missing document, defect or breach, if and to the
extent that the Seller is obligated to do so under the Mortgage Loan Purchase
Agreement. The Purchase Price for the repurchased Mortgage Loan shall be
deposited in the Collection Account, and the Trust Administrator, upon receipt
of written certification from the Master Servicer of such deposit, shall release
to the Seller the related Mortgage File, and the Trust Administrator, on behalf
of the Trustee, shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Seller shall furnish to it and
as shall be necessary to vest in the Seller any Mortgage Loan released pursuant
hereto, and neither the Trustee nor the Trust Administrator shall have any
further responsibility with regard to such Mortgage File. In lieu of
repurchasing any such Mortgage Loan as provided above, if so provided in the
Mortgage Loan Purchase Agreement, the Seller may cause such Mortgage Loan to be
removed from REMIC 0A or REMIC 0B (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.03(d). It is
understood and agreed that the obligation of the Seller to cure or to repurchase
(or to substitute for) any Mortgage Loan as to which a document is missing, a
material defect in a constituent document exists or as to which such a breach
has occurred and is continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Certificateholders, the Trust
Administrator on behalf of the Trustee, the Trustee on behalf of the
Certificateholders, and the NIMS Insurer and the Guarantor.

                                       84
<PAGE>

         (b) Within 90 days of the earlier of discovery by the Depositor or
receipt of notice by the Depositor of the breach of any representation or
warranty of the Depositor set forth in Section 2.05 with respect to any Mortgage
Loan, which materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Depositor shall cure such breach
in all material respects.

         (c) As promptly as practicable (and no later than 90 days) after the
earlier of discovery by the Master Servicer or receipt of notice by the Master
Servicer of the breach of any representation, warranty or covenant of the Master
Servicer set forth in Section 2.04 which materially and adversely affects the
value of any Mortgage Loan or the interests of the Certificateholders in any
Mortgage Loan, the Master Servicer shall cure such breach in all material
respects.

         Within 90 days of the earlier of discovery by the Master Servicer or
receipt of notice by the Master Servicer of the breach of any representation,
warranty or covenant of the Master Servicer set forth in Section 2.04(a)(vii) or
(viii) which materially and adversely affects the interests of the Holders of
the Class P Certificates to any Prepayment Charge, the Master Servicer shall
cure such breach in all material respects. If the representation made by the
Master Servicer in its capacity as Seller in Section 2.04(a)(vii) is breached,
the Master Servicer in its capacity as Seller shall pay into the Collection
Account the amount of the scheduled Prepayment Charge, less any amount
previously collected and deposited by, or paid by, the Master Servicer into the
Collection Account; and if the covenant made by the Master Servicer in Section
2.04(a)(viii) is breached, the Master Servicer shall pay into the Collection
Account the amount of the waived Prepayment Charge.

         (d) Any substitution of Qualified Substitute Mortgage Loans for Deleted
Mortgage Loans made pursuant to Section 2.03(a) shall be effected prior to the
date which is two years after the Startup Date for REMIC 0A or REMIC 0B.

         As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans, such substitution shall be effected
by the Seller delivering to the Trust Administrator on behalf of the Trustee,
for such Qualified Substitute Mortgage Loan or Loans, the Mortgage Note, the
Mortgage, the Assignment to the Trustee, and such other documents and
agreements, with all necessary endorsements thereon, as are required by Section
2.01, together with an Officers' Certificate providing that each such Qualified
Substitute Mortgage Loan satisfies the definition thereof and specifying the
Substitution Shortfall Amount (as described below), if any, in connection with
such substitution. The Trust Administrator shall acknowledge receipt for such
Qualified Substitute Mortgage Loan or Loans and, within ten Business Days
thereafter, review such documents as specified in Section 2.02 and deliver to
the Depositor, the Master Servicer, the Trustee, the NIMS Insurer and the
Guarantor, with respect to such Qualified Substitute Mortgage Loan or Loans, a
certification substantially in the form attached hereto as Exhibit F-1, with any
applicable exceptions noted thereon. Within one year of the date of
substitution, the Trust Administrator shall deliver to the Depositor, the
Seller, the Trustee, the NIMS Insurer, the Guarantor and the Master Servicer a
certification substantially in the form of Exhibit F-2 hereto with respect to
such Qualified Substitute Mortgage Loan or Loans, with any applicable exceptions
noted thereon. Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution are not part of REMIC 0A or REMIC
0B, as the case may be, and will be retained by the Seller. For the month of
substitution, distributions to Certificateholders will reflect the Monthly
Payment due on such Deleted Mortgage Loan on or before the Due Date in the month
of substitution, and the Seller shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted Mortgage Loan. The
Trust Administrator shall give or cause to be given written notice to the
Guarantor, the Trustee, the NIMS Insurer and the Certificateholders that such
substitution has taken place, and the Master Servicer shall amend or cause to be
amended the Mortgage Loan Schedule to reflect the removal of such Deleted
Mortgage Loan from the terms of this Agreement and the substitution of the
Qualified Substitute Mortgage Loan or Loans and shall deliver a copy of such
amended Mortgage Loan Schedule to the Guarantor, the NIMS Insurer, the Trust
Administrator and the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and the Mortgage Loan
Purchase Agreement, including all applicable representations and warranties
thereof included in the Mortgage Loan Purchase Agreement as of the date of
substitution.

                                       85
<PAGE>

         For any month in which the Seller substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Master
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate of, as to each such Qualified Substitute Mortgage Loan,
the Stated Principal Balance thereof as of the date of substitution, together
with one month's interest on such Stated Principal Balance at the applicable Net
Mortgage Rate, plus all outstanding Advances and Servicing Advances with respect
to such Deleted Mortgage Loan. On the date of such substitution, the Seller will
deliver or cause to be delivered to the Master Servicer for deposit in the
Collection Account an amount equal to the Substitution Shortfall Amount, if any,
and the Trust Administrator, upon receipt of the related Qualified Substitute
Mortgage Loan or Loans and certification by the Master Servicer of such deposit,
shall release to the Seller the related Mortgage File or Files and the Trust
Administrator, on behalf of the Trustee, or the Trustee shall execute and
deliver such instruments of transfer or assignment, without recourse, as the
Seller shall deliver to it and as shall be necessary to vest therein any Deleted
Mortgage Loan released pursuant hereto.

         In addition, the Master Servicer in its capacity as Seller shall obtain
at its own expense and deliver to the NIMS Insurer, the Guarantor, the Trust
Administrator and the Trustee an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on REMIC 0A or
REMIC 0B, created hereunder, including without limitation, any federal tax
imposed on "prohibited transactions" under Section 860F(a)(1) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code, or
(b) any Trust REMIC hereunder to fail to qualify as a REMIC at any time that any
Certificate is outstanding.

                                       86
<PAGE>

         (e) Upon discovery by the Depositor, the Seller, the Master Servicer,
the Trust Administrator or the Trustee that any Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other parties. In connection therewith, the Master
Servicer in its capacity as Seller shall repurchase or, subject to the
limitations set forth in Section 2.03(d), substitute one or more Qualified
Substitute Mortgage Loans for the affected Mortgage Loan within 90 days of the
earlier of discovery or receipt of such notice with respect to such affected
Mortgage Loan. Any such repurchase or substitution shall be made in the same
manner as set forth in Section 2.03(a). The Trustee and the Trust Administrator
shall reconvey to the Seller the Mortgage Loan to be released pursuant hereto in
the same manner, and on the same terms and conditions, as it would a Mortgage
Loan repurchased for breach of a representation or warranty.

Section 2.04 Representations, Warranties and Covenants of the Master Servicer.

         (a) The Master Servicer hereby represents, warrants and covenants to
the Trust Administrator and the Trustee, for the benefit of the Trust
Administrator, the Trustee and the Certificateholders, and to the Guarantor and
Depositor, that as of the Closing Date or as of such date specifically provided
herein:

                  (i) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, is duly authorized and qualified to transact any and all business
contemplated by this Agreement and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good standing
in the states where the Mortgaged Properties are located if the laws of such
state require licensing or qualification in order to conduct business of the
type conducted by the Master Servicer or to ensure the enforceability or
validity of each Mortgage Loan and, in any event, is in compliance with the
doing business laws of any such State, to the extent necessary to ensure its
ability to enforce each Mortgage Loan and to service the Mortgage Loans in
accordance with the terms of this Agreement;

                  (ii) The Master Servicer has the full power and authority to
service each Mortgage Loan, to execute, deliver and perform, and to enter into
and consummate the transactions contemplated by this Agreement and has duly
authorized by all necessary action on the part of the Master Servicer the
execution, delivery and performance of this Agreement; and this Agreement,
assuming the due authorization, execution and delivery thereof by the Depositor,
the Guarantor, the Trust Administrator and the Trustee, constitutes a legal,
valid and binding obligation of the Master Servicer, enforceable against the
Master Servicer in accordance with its terms, except to the extent that (a) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.

                  (iii) The execution and delivery of this Agreement by the
Master Servicer, the servicing of the Mortgage Loans by the Master Servicer
hereunder, the consummation by the Master Servicer of any other of the
transactions herein contemplated, and the fulfillment of or compliance with the
terms hereof are in the ordinary course of business of the Master Servicer and
will not (A) result in a breach of any term or provision of the charter or
by-laws of the Master Servicer or (B) conflict with, result in a breach,
violation or acceleration of, or result in a default under, the terms of any
other material agreement or instrument to which the Master Servicer is a party
or by which it may be bound, or any statute, order or regulation applicable to
the Master Servicer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Master Servicer; and the Master
Servicer is not a party to, bound by, or in breach or violation of any indenture
or other agreement or instrument, or subject to or in violation of any statute,
order or regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and adversely
affects or, to the Master Servicer's knowledge, would in the future materially
and adversely affect, (x) the ability of the Master Servicer to perform its
obligations under this Agreement or (y) the business, operations, financial
condition, properties or assets of the Master Servicer taken as a whole;

                                       87
<PAGE>

                  (iv) The Master Servicer is an approved seller/servicer for
Fannie Mae or Freddie Mac in good standing and is a HUD approved mortgagee
pursuant to Section 203 and Section 211 of the National Housing Act;

                  (v) No litigation is pending against the Master Servicer that
would materially and adversely affect the execution, delivery or enforceability
of this Agreement or the ability of the Master Servicer to service the Mortgage
Loans or to perform any of its other obligations hereunder in accordance with
the terms hereof;

                  (vi) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Master Servicer of, or compliance by the Master Servicer
with, this Agreement or the consummation by the Master Servicer of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations or orders, if any, that have been obtained prior to
the Closing Date;

                  (vii) The information set forth in the Prepayment Charge
Schedule is complete, true and correct in all material respects at the date or
dates respecting which such information is furnished and each Prepayment Charge
is permissible and enforceable in accordance with its terms under applicable law
upon the Mortgagor's full and voluntary principal prepayment (except to the
extent that: (1) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally; or (2) the collectability thereof may be limited
due to acceleration in connection with a foreclosure or other involuntary
prepayment); provided that the representation, warranty and covenant contained
in this clause (vii) is made by the Master Servicer only in its capacity as
Seller; and

                  (viii) The Master Servicer will not waive any Prepayment
Charge or part of a Prepayment Charge unless such waiver is related to a default
or a reasonably foreseeable default and would maximize recovery of total
proceeds taking into account the value of such Prepayment Charge and related
Mortgage Loan and doing so is standard and customary in servicing mortgage loans
similar to the Mortgage Loans (including any waiver of a Prepayment Charge in
connection with a refinancing of a Mortgage Loan that is related to a default or
a reasonably foreseeable default).

                                       88
<PAGE>

                  (ix) For each Mortgage Loan, the Master Servicer will
accurately, fully and in a timely manner report its borrower credit files to
each of Equifax, Transunion, and Experian (the "Credit Repositories").

         (b) It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.04 shall survive delivery of the
Mortgage Files to the Trust Administrator and shall inure to the benefit of the
Trust Administrator, the Trustee, the Depositor and the Certificateholders. Upon
discovery by any of the Depositor, the Master Servicer, the Trust Administrator
or the Trustee of a breach of any of the foregoing representations, warranties
and covenants which materially and adversely affects the value of any Mortgage
Loan, Prepayment Charge or the interests therein of the Certificateholders, the
party discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the other of such
parties. The obligation of the Master Servicer set forth in Section 2.03(c) to
cure breaches (or, in the case of (a)(vii) or (a)(viii) above, to pay a Master
Servicer Prepayment Charge Payment Amount) shall constitute the sole remedy
against the Master Servicer available to the Certificateholders, the Depositor,
the Guarantor, the Trust Administrator or the Trustee on behalf of the
Certificateholders respecting a breach of the representations, warranties and
covenants contained in this Section 2.04. The preceding sentence shall not,
however, limit any remedies available to the Certificateholders, the Depositor,
the Guarantor, the Trust Administrator or the Trustee on behalf of the
Certificateholders, (i) pursuant to the Mortgage Loan Purchase Agreement signed
by the Master Servicer in its capacity as Seller, respecting a breach of the
representations, warranties and covenants of the Master Servicer in its capacity
as Seller contained in the Mortgage Loan Purchase Agreement or (ii) pursuant to
Section 7.01 hereof.

Section 2.05 Representations and Warranties of the Depositor.

         The Depositor hereby represents, warrants and covenants to the Trust
Administrator, and the Trustee, for the benefit of the Trust Administrator, the
Trustee and the Certificateholders, and to the Guarantor and the Master
Servicer, that as of the Closing Date or as of such date specifically provided
herein:

                  (i) Each of this Agreement and the Mortgage Loan Purchase
Agreement constitutes a legal, valid and binding obligation of the Depositor,
enforceable against the Depositor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity);

                  (ii) Immediately prior to the sale and assignment by the
Depositor to the Trustee on behalf of the Trust of each Mortgage Loan, the
Depositor had good and marketable title to each Mortgage Loan subject to no
prior lien, claim, participation interest, mortgage, security interest, pledge,
charge or other encumbrance or other interest of any nature;

                  (iii) As of the Closing Date, the Depositor has transferred
all right, title interest in the Mortgage Loans to the Trustee on behalf of the
Trust;

                                       89
<PAGE>

                  (iv) The Depositor is solvent and will not be made insolvent
by the transfer of the Mortgage Loans. The Depositor has not transferred the
Mortgage Loans to the Trustee with any intent to hinder, delay or defraud any of
its creditors;

                  (v) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware, with full
corporate power and authority to own its assets and conduct its business as
presently being conducted;

                  (vi) The Depositor is not in violation of its articles of
incorporation or by-laws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Depositor is a party or by which it or its properties may be bound, which
default might result in any material adverse changes in the financial condition,
earnings, affairs or business of the Depositor or which might materially and
adversely affect the properties or assets, taken as a whole, of the Depositor;

                  (vii) The execution, delivery and performance of this
Agreement and the Mortgage Loan Purchase Agreement by the Depositor, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not result in a material breach or violation of any of the terms or
provisions of, or, to the knowledge of the Depositor, constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Depositor is a party or by which the Depositor is
bound or to which any of the property or assets of the Depositor is subject, nor
will such actions result in any violation of the provisions of the articles of
incorporation or by-laws of the Depositor or, to the best of the Depositor's
knowledge without independent investigation, any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Depositor or any of its properties or assets (except for such conflicts,
breaches, violations and defaults as would not have a material adverse effect on
the ability of the Depositor to perform its obligations under this Agreement or
the Mortgage Loan Purchase Agreement);

                  (viii) To the best of the Depositor's knowledge without any
independent investigation, no consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency or
body of the United States or any other jurisdiction is required for the issuance
of the Certificates, or the consummation by the Depositor of the other
transactions contemplated by this Agreement or the Mortgage Loan Purchase
Agreement, except such consents, approvals, authorizations, registrations or
qualifications as (a) may be required under State securities or blue sky laws,
(b) have been previously obtained or (c) the failure of which to obtain would
not have a material adverse effect on the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement or the
Mortgage Loan Purchase Agreement;

                  (ix) There are no actions, proceedings or investigations
pending before or, to the Depositor's knowledge, threatened by any court,
administrative agency or other tribunal to which the Depositor is a party or of
which any of its properties is the subject: (a) which if determined adversely to
the Depositor would have a material adverse effect on the business, results of
operations or financial condition of the Depositor; (b) asserting the invalidity
of this Agreement, the Mortgage Loan Purchase Agreement or the Certificates; (c)
seeking to prevent the issuance of the Certificates or the consummation by the
Depositor of any of the transactions contemplated by this Agreement or the
Mortgage Loan Purchase Agreement, as the case may be; or (d) which might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement or the
Mortgage Loan Purchase Agreement; and

                                       90
<PAGE>

                  (x) The Depositor has the full power and authority to execute,
deliver and perform, and to enter into and consummate the transactions
contemplated by this Agreement and has duly authorized by all necessary action
on the part of the Depositor the execution, delivery and performance of this
Agreement and this Agreement, assuming the due authorization, execution and
delivery thereof by the parties thereto other than the Depositor, constitutes a
legal, valid and binding obligation of the Depositor, enforceable against the
Depositor in accordance with its terms, except to the extent that (a) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.

Section 2.06 Issuance of Certificates.

         The Trustee acknowledges the assignment to it (or the Trust
Administrator) of the Mortgage Loans and the delivery to it of the Mortgage
Files, subject to the provisions of Sections 2.01 and 2.02, together with the
assignment to it of all other assets included in the Trust Fund, receipt of
which is hereby acknowledged. Concurrently with such assignment and delivery and
in exchange therefor, the Trust Administrator, pursuant to the written request
of the Depositor executed by an officer of the Depositor, has executed,
authenticated and delivered to or upon the written order of the Depositor, the
Certificates in authorized denominations. The interests evidenced by the
Certificates constitute the entire beneficial ownership interest in the Trust
Fund.

Section 2.07 Conveyance of the Subsequent Mortgage Loans.

         (a) Subject to the conditions set forth in paragraph (b) below in
consideration of the Trustee's delivery on each Subsequent Transfer Date to or
upon the order of the Depositor of all or a portion of the balance of funds in
the related Pre-Funding Account, the Depositor shall on each Subsequent Transfer
Date sell, transfer, assign, set over and convey without recourse to the Trust
but subject to the other terms and provisions of this Agreement all of the
right, title and interest of the Depositor in and to (i) the Subsequent Mortgage
Loans identified on the Mortgage Loan Schedule attached to the related
Subsequent Transfer Instrument delivered by the Depositor on such Subsequent
Transfer Date, (ii) all interest accruing thereon on and after the related
Subsequent Cut-off Date and all collections in respect of interest and principal
due after such Subsequent Cut-off Date and (iii) all items with respect to such
Subsequent Mortgage Loans to be delivered pursuant to Section 2.01 and the other
items in the related Mortgage Files; provided, however, that the Depositor
reserves and retains all right, title and interest in and to principal received
and interest accruing on Subsequent Mortgage Loans prior to the related
Subsequent Cut-off Date. The transfer to the Trustee for deposit in the Trust
Fund by the Depositor of the Subsequent Mortgage Loans identified on the
Mortgage Loan Schedule shall be absolute and is intended by the Depositor, the
Master Servicer, the Trustee and the Certificateholders to constitute and to be
treated as a sale of such Subsequent Mortgage Loans by the Depositor to the
Trust. The related Mortgage File for each Subsequent Mortgage Loan shall be
delivered to the Trust Administrator at least three Business Days prior to the
related Subsequent Transfer Date.

                                       91
<PAGE>

         The purchase price paid by the Trustee from amounts released from the
Group I Pre-Funding Account or Group II Pre-Funding Account shall be one-hundred
percent (100%) of the aggregate Stated Principal Balance of the Group I
Subsequent Mortgage Loans or Group II Subsequent Mortgage Loans, respectively,
so transferred (as identified on the Mortgage Loan Schedule provided by the
Depositor). Funds in the Group I Pre-Funding Account shall not be used to
purchase Group II Subsequent Mortgage Loans and funds in the Group II
Pre-Funding Account shall not be used to purchase Group I Subsequent Mortgage
Loans. This Agreement shall constitute a fixed-price purchase contract in
accordance with Section 860G(a)(3)(A)(ii) of the Code.

         (b) The Depositor shall transfer to the Trustee for deposit in the
Trust Fund the Subsequent Mortgage Loans and the other property and rights
related thereto as described in paragraph (a) above, and the Trustee shall
release funds from the applicable Pre-Funding Account, only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:

                  (i) the Depositor shall have provided the Trustee, the Trust
Administrator, the NIMS Insurer, the Guarantor and the Rating Agencies with a
timely Addition Notice and shall have provided any information reasonably
requested by the Trust Administrator with respect to the Subsequent Mortgage
Loans;

                  (ii) the Depositor shall have delivered to the Trustee, the
Trust Administrator, the NIMS Insurer and the Guarantor a duly executed
Subsequent Transfer Instrument, substantially in the form of Exhibit M, which
shall include a Mortgage Loan Schedule listing the related Subsequent Mortgage
Loans, and the Master Servicer, in its capacity as Seller, shall have delivered
a computer file containing such Mortgage Loan Schedule to the Trust
Administrator at least three Business Days prior to the related Subsequent
Transfer Date;

                  (iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Subsequent Transfer Instrument, the Depositor shall not be
insolvent nor shall it have been rendered insolvent by such transfer nor shall
it be aware of any pending insolvency;

                  (iv) such sale and transfer shall not result in a material
adverse tax consequence to the Trust Fund or the Certificateholders;

                  (v) the related Pre-Funding Period shall not have terminated;

                  (vi) the Depositor shall not have selected the Subsequent
Mortgage Loans in a manner that it believed to be adverse to the interests of
the Certificateholders;

                  (vii) the Depositor and the Seller shall have delivered to the
Trustee, the Trust Administrator, the Guarantor and the NIMS Insurer a
Subsequent Transfer Instrument confirming the satisfaction of the conditions
precedent specified in this Section 2.07 and, pursuant to the Subsequent
Transfer Instrument, the Seller shall have assigned to the Depositor, and the
Depositor shall have assigned to the Trustee, in each case, without recourse for
the benefit of the Certificateholders all the right, title and interest of the
Seller or the Depositor, as the case may be, in, to and under the related
Subsequent Mortgage Loans;

                                       92
<PAGE>

                  (viii) with respect to the last Subsequent Transfer Date in
the related Pre-Funding Period, the Depositor shall have delivered to the
Trustee, the Trust Administrator, the Guarantor and the NIMS Insurer a letter
from an Independent accountant (with copies provided to each Rating Agency)
stating that the characteristics of the Subsequent Mortgage Loans conform to the
characteristics set forth in paragraphs (c) and (d) below;

                  (ix) the Depositor shall have delivered to the Trustee, the
Trust Administrator, the Guarantor and the NIMS Insurer an Opinion of Counsel
addressed to the Trustee, the Trust Administrator, the Guarantor, the NIMS
Insurer and the Rating Agencies with respect to the transfer of the Subsequent
Mortgage Loans substantially in the form of the Opinion of Counsel delivered to
the Trustee and the Trust Administrator on the Closing Date regarding the true
sale of the Subsequent Mortgage Loans; and

                  (x) the Depositor shall have received the consent of the NIMS
Insurer and the Guarantor to the transfer of such Subsequent Mortgage Loans.

         (c) The obligation of the Trust Fund to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the satisfaction of the
conditions set forth in the paragraph (d) below and the accuracy of the
following representations and warranties with respect to each such Subsequent
Mortgage Loan determined as of the applicable Subsequent Cut-off Date: (i) the
Subsequent Mortgage Loan must be current (with no contractual delinquencies
outstanding) as of the last day of the calendar month preceding the related
Subsequent Cut-off Date; (ii) the original term to stated maturity of the
Subsequent Mortgage Loan will not be less than 120 months and will not exceed
360 months; (iii) the Subsequent Mortgage Loan may not provide for negative
amortization; (iv) the Subsequent Mortgage Loan will not have a Loan-to-Value
ratio greater than 90% (in the case of a Group I Mortgage Loan) and 100% (in the
case of a Group II Mortgage Loan); (v) the Subsequent Mortgage Loans will have,
as of the related Subsequent Cut-off Date, a weighted average remaining term to
maturity since origination not in excess of 360 months (in the case of Group I
Mortgage Loans) and 360 months (in the case of Group II Mortgage Loans); (vi)
the Subsequent Mortgage Loan, if a fixed- rate Mortgage Loan, shall have a
Mortgage Rate that is not less than 6.5% per annum or greater than 15.5% per
annum (in the case of a Group I Mortgage Loan) and not less than 6.0% per annum
or greater than 16.0% per annum (in the case of a Group II Mortgage Loan); (vii)
the Subsequent Mortgage Loan shall have been serviced by the Master Servicer
since origination or since the date of purchase; (viii) the Subsequent Mortgage
Loan must have a first payment date occurring on or before March 1, 2002; (ix)
if the Subsequent Mortgage Loan is an Adjustable-rate Mortgage Loan, the
Subsequent Mortgage Loan will have a Gross Margin not less than 4.5% per annum
(in the case of a Group I Mortgage Loan) and 4.5% per annum (in the case of a
Group II Mortgage Loan), will have a Maximum Mortgage Rate not less than 10.0%
per annum (in the case of a Group I Mortgage Loan) and 10.0% per annum (in the
case of a Group II Mortgage Loan) and will have a Minimum Mortgage Rate not less
than 5.0% per annum (in the case of a Group I Mortgage Loan) and 5.0% per annum
(in the case of a Group II Mortgage Loan), (x) if the Subsequent Mortgage Loan
is a Group I Mortgage Loan, the Subsequent Mortgage Loan has had an original
principal balance that conformed to Fannie Mae loan limits as of the date of its
origination; (xi) if the Subsequent Mortgage Loan is a Group I Mortgage Loan,
the Subsequent Mortgage Loan shall be a first-lien Mortgage Loan and (xii) the
Subsequent Mortgage Loan shall have been underwritten in accordance with the
criteria set forth under "Long Beach Mortgage Company--Underwriting Standards"
in the Prospectus Supplement.

                                       93
<PAGE>

         (d) In addition, following the purchase of Subsequent Mortgage Loans by
the Trust, at the end of the Group I Pre-Funding Period and Group II Pre-Funding
Period, whichever is later, all of the Mortgage Loans (including the Subsequent
Mortgage Loans) as of the immediately prior Subsequent Cut-off Date: (i) will
have a weighted average original term to stated maturity of not more than 360
months; (ii) will have a weighted average Mortgage Rate of not less than 9.20%
per annum and not more than 10.25% per annum; (iii) will have a weighted average
loan-to-value ratio of not more than 80.0%; (iv) will have no Mortgage Loan with
a Principal Balance in excess of $1,000,000; (v) will consist of Mortgage Loans
with prepayment charges representing no less than approximately 80.0% by
aggregate Principal Balance of the Mortgage Loans and (vi) have no more than
10.0% of fixed-rate Mortgage Loans by aggregate Principal Balance of the
Mortgage Loans. In addition, the Adjustable-rate Mortgage Loans will have a
weighted average Gross Margin not less than 5.25% per annum by the aggregate
Principal Balance of the Adjustable Rate Mortgage Loans.

         In addition, following the purchase of Group I Subsequent Mortgage
Loans by the Trust, at the end of the Group I Pre-Funding Period all of the
Group I Mortgage Loans (including the Group I Subsequent Mortgage Loans) as of
the immediately prior Subsequent Cut-off Date: (i) will have a weighted average
original term to stated maturity of not more than 360 months; (ii) will have a
weighted average Mortgage Rate of not less than 9.20% per annum and not more
than 10.5% per annum; (iii) will have a weighted average loan-to-value ratio of
not more than 80.0%; (iv) will have no Mortgage Loan with a Principal Balance in
excess of $800,000; (v) will consist of Mortgage Loans with prepayment charges
representing no less than approximately 80.0% by aggregate Principal Balance of
the Group I Mortgage Loans and (vi) have no more than 10.0% of fixed-rate
Mortgage Loans by aggregate Principal Balance of the Group I Mortgage Loans. In
addition, the Adjustable-rate Mortgage Loans will have a weighted average Gross
Margin not less than 5.25% per annum by the aggregate Principal Balance of the
Adjustable Rate Mortgage Loans that are Group I Mortgage Loans.

         In addition, following the purchase of Group II Subsequent Mortgage
Loans by the Trust, at the end of the Group II Pre-Funding Period all of the
Group II Mortgage Loans (including the Group II Subsequent Mortgage Loans) as of
the immediately prior Subsequent Cut-off Date: (i) will have a weighted average
original term to stated maturity of not more than 360 months; (ii) will have a
weighted average Mortgage Rate of not less than 8.75% per annum and not more
than 10.5% per annum; (iii) will have a weighted average loan-to-value ratio of
not more than 80.0%; (iv) will have no Mortgage Loan with a Principal Balance in
excess of $1,000,000; (v) will consist of Mortgage Loans with prepayment charges
representing no less than approximately 80.0% by aggregate Principal Balance of
the Group II Mortgage Loans and (vi) have no more than 10.0% of fixed-rate
Mortgage Loans by aggregate Principal Balance of the Group II Mortgage Loans. In
addition, the Adjustable-rate Mortgage Loans will have a weighted average Gross
Margin not less than 5.5% per annum by the aggregate Principal Balance of the
Adjustable Rate Mortgage Loans that are Group II Mortgage Loans.

                                       94
<PAGE>

         (e) Notwithstanding the foregoing, any Subsequent Mortgage Loan may be
rejected by the NIMS Insurer, the Guarantor or a Rating Agency if the inclusion
of any such Subsequent Mortgage Loan would adversely affect the ratings of any
Class of Certificates or the NIM Notes. At least one Business Day prior to the
Subsequent Transfer Date, each of the NIMS Insurer, the Guarantor and each
Rating Agency shall notify the Trustee, the Trust Administrator, the Master
Servicer and the Depositor as to which Subsequent Mortgage Loans, if any, shall
not be included in the transfer on the Subsequent Transfer Date; provided,
however, that the Master Servicer, in its capacity as Seller, shall have
delivered to each of the NIMS Insurer, the Guarantor and each Rating Agency at
least three Business Days prior to such Subsequent Transfer Date a computer file
acceptable to each Rating Agency describing the characteristics specified in
paragraphs (c) and (d) above.

Section 2.08 Conveyance of REMIC Regular Interests and Acceptance of REMIC 1A
and REMIC 1B by the Trustee; Issuance of Certificates.

         (a) The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC 0A Regular Interests for the benefit of the holders of the
REMIC 1A Regular Interests and the Class R-1A Interest. The Depositor,
concurrently with the execution and delivery hereof, does hereby transfer,
assign, set over and otherwise convey in trust to the Trustee without recourse
all the right, title and interest of the Depositor in and to the REMIC 0B
Regular Interests for the benefit of the holders of the REMIC 1B Regular
Interests and the Class R-1B Interest. The Trustee acknowledges receipt of the
REMIC 0A Regular Interests (which are uncertificated) and declares that it holds
and will hold the same in trust for the exclusive use and benefit of the holders
of the REMIC 1A Regular Interests and the Class R-1A Interest. The Trustee
acknowledges receipt of the REMIC 0B Regular Interests (which are
uncertificated) and declares that it holds and will hold the same in trust for
the exclusive use and benefit of the holders of the REMIC 1B Regular Interests
and the Class R-1B Interest. The interests evidenced by the Class R-1A Interest,
together with the REMIC 1A Regular Interests, constitute the entire beneficial
ownership interest in REMIC 1A. The interests evidenced by the Class R-1B
Interest, together with the REMIC 1B Regular Interests, constitute the entire
beneficial ownership interest in REMIC 1B.

         (b) The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC 1A Regular Interests for the benefit of the holders of the
REMIC 2 Regular Interests and the Class R-2 Interest. The Depositor,
concurrently with the execution and delivery hereof, does hereby transfer,
assign, set over and otherwise convey in trust to the Trustee without recourse
all the right, title and interest of the Depositor in and to the REMIC 1B
Regular Interests for the benefit of the holders of the REMIC 2 Regular
Interests and the Class R-2 Interest. The Trustee acknowledges receipt of the
REMIC 1A Regular Interests (which are uncertificated) and declares that it holds
and will hold the same in trust for the exclusive use and benefit of the holders
of the REMIC 2 Regular Interests and the Class R-2 Interest. The Trustee
acknowledges receipt of the REMIC 1B Regular Interests (which are
uncertificated) and declares that it holds and will hold the same in trust for
the exclusive use and benefit of the holders of the REMIC 2 Regular Interests
and the Class R-2 Interest. The interests evidenced by the Class R-2 Interest,
together with the REMIC 2 Regular Interests, constitute the entire beneficial
ownership interest in REMIC 2.

                                       95
<PAGE>

         (c) The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC 2 Regular Interests for the benefit of the holders of the
Certificates (other than the Class C Certificates, the Class P Certificates and
the Class R-X Certificates), and REMIC X, as holder of REMIC 3 Uncertificated
Regular Interests. The Trustee acknowledges receipt of the REMIC 2 Regular
Interests (which are uncertificated) and declares that it holds and will hold
the same in trust for the exclusive use and benefit of the holders of the
Certificates (other than the Class C Certificates, the Class P Certificates and
the Class R-X Certificates), and REMIC X, as holder of REMIC 3 Uncertificated
Regular Interests. The interests evidenced by the Class R-3 Interest, the
Regular Certificates (other than the Class C Certificates and the Class P
Certificates), and the REMIC 3 Uncertificated Regular Interests, constitute the
entire beneficial ownership interest in REMIC 3.

         (d) In exchange for the REMIC 2 Regular Interests and, concurrently
with the assignment to the Trustee thereof, pursuant to the written request of
the Depositor executed by an officer of the Depositor, the Trust Administrator
has executed, authenticated and delivered to or upon the order of the Depositor,
the Regular Certificates (other than the Class C Certificates and the Class P
Certificates) and the REMIC 3 Uncertificated Regular Interests in authorized
denominations evidencing (together with the Class R-3 Interest) the entire
beneficial ownership interest in REMIC 3.

         (e) The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC 3 Uncertificated Regular Interests for the benefit of the
holders of the Class C Certificates, the Class P Certificates, and the Class R-X
Certificates. The Trustee acknowledges receipt of the REMIC 3 Uncertificated
Regular Interests and declares that it holds and will hold the same in trust for
the exclusive use and benefit of the holders of the Class C Certificates, the
Class P Certificates, and the Class R-X Certificates. The interests evidenced by
the Class C Certificates, the Class P Certificates, and the Class R-X
Certificates constitute the entire beneficial ownership interest in REMIC X.

         (f) In exchange for the REMIC 3 Uncertificated Regular Interests and,
concurrently with the assignment to the Trustee thereof, pursuant to the written
request of the Depositor executed by an officer of the Depositor, the Trust
Administrator has executed, authenticated and delivered to or upon the order of
the Depositor, the Class C Certificates and the Class P Certificates in
authorized denominations evidencing (together with the Class R-X Interest) the
entire beneficial ownership interest in REMIC X.

         (g) Concurrently with (i) the assignment and delivery to the Trustee of
REMIC 0A (including the Residual Interest therein represented by the Class R-0A
Interest) and the acceptance by the Trustee thereof, pursuant to Section 2.01,
Section 2.02 and Section 2.08(a), (ii) the assignment and delivery to the
Trustee of REMIC 0B (including the Residual Interest therein represented by the
Class R-0B Interest) and the acceptance by the Trustee thereof, pursuant to
Section 2.01, Section 2.02 and Section 2.08(a), (iii) the assignment and
delivery to the Trustee of REMIC 1A (including the Residual Interest therein
represented by the Class R-1A Interest) and the acceptance by the Trustee
thereof, pursuant to Section 2.01, Section 2.02 and Section 2.08(b), (iv) the
assignment and delivery to the Trustee of REMIC 1B (including the Residual
Interest therein represented by the Class R-1B Interest) and the acceptance by
the Trustee thereof, pursuant to Section 2.01, Section 2.02 and Section 2.08(b),
and (v) the assignment and delivery to the Trustee of REMIC 2 (including the
Residual Interest therein represented by the Class R-2 Interest) and the
acceptance by the Trustee thereof, pursuant to Section 2.08(c), and (vi) the
assignment and delivery to the Trustee of the REMIC 3 Uncertificated Regular
Interests and the Residual Interest in REMIC 3 represented by the Class R-3
Interest, and the acceptance by the Trustee thereof, pursuant to Section
2.08(e), the Trust Administrator, pursuant to the written request of the
Depositor executed by an officer of the Depositor, has executed, authenticated
and delivered to or upon the order of the Depositor, the Class R Certificates in
authorized denominations evidencing the Class R-0A Interest, the Class R-0B
Interest, the Class R-1A Interest, the Class R-1B Interest, the Class R-2
Interest and the Class R-3 Interest, and the Class R-X Certificates evidencing
the Class R-X Interest.

                                       96
<PAGE>

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

Section 3.01 Master Servicer to Act as Master Servicer.

         The Master Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and the Trust Administrator and in the best interests of
and for the benefit of the Certificateholders (as determined by the Master
Servicer in its reasonable judgment) in accordance with the terms of this
Agreement and the respective Mortgage Loans and, to the extent consistent with
such terms, in the same manner in which it services and administers similar
mortgage loans for its own portfolio, giving due consideration to customary and
usual standards of practice of mortgage lenders and loan servicers administering
similar mortgage loans but without regard to:

                  (i) any relationship that the Master Servicer, any
         Sub-Servicer or any Affiliate of the Master Servicer or any
         Sub-Servicer may have with the related Mortgagor;

                  (ii) the ownership or non-ownership of any Certificate by the
         Master Servicer or any Affiliate of the Master Servicer;

                  (ii) the Master Servicer's obligation to make Advances or
         Servicing Advances; or

                  (iv) the Master Servicer's or any Sub-Servicer's right to
         receive compensation for its services hereunder or with respect to any
         particular transaction.

         To the extent consistent with the foregoing, the Master Servicer shall
seek to maximize the timely and complete recovery of principal and interest on
the Mortgage Notes. Subject only to the above-described servicing standards and
the terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration in accordance with
policies and procedures generally accepted in the mortgage banking industry.
Without limiting the generality of the foregoing, the Master Servicer in its own
name or in the name of a Sub-Servicer is hereby authorized and empowered by the
Trustee and the Trust Administrator when the Master Servicer believes it
appropriate in its best judgment in accordance with the servicing standards set
forth above, to execute and deliver, on behalf of the Certificateholders, the
Trustee and the Trust Administrator, and upon notice to the Trustee and the
Trust Administrator, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Mortgage Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Master Servicer
shall service and administer the Mortgage Loans in accordance with applicable
state and federal law and shall provide to the Mortgagors any reports required
to be provided to them thereby. The Master Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.17, the
Trust Administrator, on behalf of the Trustee, shall execute, at the written
request of the Master Servicer, and furnish to the Master Servicer and any
Sub-Servicer such documents as are necessary or appropriate to enable the Master
Servicer or any Sub-Servicer to carry out their servicing and administrative
duties hereunder, and the Trustee and the Trust Administrator each hereby grants
to the Master Servicer a power of attorney to carry out such duties including a
power of attorney to take title to Mortgaged Properties after foreclosure on
behalf of the Trust Administrator, the Trustee and the Certificateholders. The
Trustee and the Trust Administrator shall execute a separate power of attorney
in favor of the Master Servicer for the purposes described herein to the extent
necessary or desirable to enable the Master Servicer to perform its duties
hereunder. Neither the Trustee nor the Trust Administrator shall be liable for
the actions of the Master Servicer or any Sub-Servicers under such powers of
attorney.

                                       97
<PAGE>

         Subject to Section 3.09 hereof, in accordance with the standards of the
preceding paragraph, the Master Servicer shall advance or cause to be advanced
funds as necessary for the purpose of effecting the timely payment of taxes and
assessments on the Mortgaged Properties, which advances shall be Servicing
Advances reimbursable in the first instance from collections on the related
Mortgage Loans from the Mortgagors pursuant to Section 3.09, and further as
provided in Section 3.11. Any cost incurred by the Master Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.

         Notwithstanding anything in this Agreement to the contrary, the Master
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.04) and the Master Servicer shall not (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment of
the Master Servicer, reasonably foreseeable) or (ii) permit any modification,
waiver or amendment of any term of any Mortgage Loan that would both (A) effect
an exchange or reissuance of such Mortgage Loan under Section 1001 of the Code
(or final, temporary or proposed Treasury regulations promulgated thereunder)
and (B) cause any Trust REMIC to fail to qualify as a REMIC under the Code or
the imposition of any tax on "prohibited transactions" or "contributions after
the startup date" under the REMIC Provisions.

                                       98
<PAGE>

         The Master Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Master
Servicer from the responsibilities or liabilities arising under this Agreement.

         For each Mortgage Loan, the Master Servicer will accurately and fully
report its borrower credit files to each of the Credit Repositories in a timely
manner.

Section 3.02 Sub-Servicing Agreements Between the Master Servicer and
Sub-Servicers.

         (a) The Master Servicer may enter into Sub-Servicing Agreements
provided (i) that such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the ratings on any Class of Certificates or
the NIM Notes, as evidenced by a letter to that effect delivered by each Rating
Agency to the Depositor, the NIMS Insurer and the Guarantor and (ii) that,
except in the case of any Sub-Servicing Agreements the Master Servicer may enter
into with Washington Mutual, Inc. or any Affiliate thereof, the NIMS Insurer or
the Guarantor (as provided in Section 1.04) shall have consented to such
Sub-Servicing Agreements (which consent shall not be unreasonably withheld) with
Sub-Servicers, for the servicing and administration of the Mortgage Loans. The
Trustee and the Trust Administrator are hereby authorized to acknowledge, at the
request of the Master Servicer, any Sub-Servicing Agreement that meets the
requirements applicable to Sub-Servicing Agreements set forth in this Agreement
and that is otherwise permitted under this Agreement.

         Each Sub-Servicer shall be (i) authorized to transact business in the
state or states in which the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a Fannie Mae approved mortgage servicer. Each
Sub-Servicing Agreement must impose on the Sub-Servicer requirements conforming
to the provisions set forth in Section 3.08. The Master Servicer will examine
each Sub-Servicing Agreement and will be familiar with the terms thereof. The
terms of any Sub-Servicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Master Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement, and that no such amendment or different form shall
be made or entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders, without the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any
variation without the consent of the Holders of Certificates entitled to at
least 66% of the Voting Rights from the provisions set forth in Section 3.08
relating to insurance or priority requirements of Sub-Servicing Accounts, or
credits and charges to the Sub-Servicing Accounts or the timing and amount of
remittances by the Sub-Servicers to the Master Servicer, are conclusively deemed
to be inconsistent with this Agreement and therefore prohibited. The Master
Servicer shall deliver to the Guarantor, the NIMS Insurer, the Trust
Administrator and the Trustee copies of all Sub-Servicing Agreements, and any
amendments or modifications thereof, promptly upon the Master Servicer's
execution and delivery of such instruments.

                                       99
<PAGE>

         (b) As part of its servicing activities hereunder, the Master Servicer
(except as otherwise provided in the last sentence of this paragraph), for the
benefit of the Trustee, the Trust Administrator and the Certificateholders,
shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement and, subject to the last sentence of this paragraph, of
the Seller under the Mortgage Loan Purchase Agreement including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase or otherwise remedy as
contemplated herein a Mortgage Loan on account of missing or defective
documentation or on account of a breach of a representation, warranty or
covenant, as described in Section 2.03(a). Such enforcement, including, without
limitation, the legal prosecution of claims, termination of Sub-Servicing
Agreements, and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Master Servicer, in
its good faith business judgment, would require were it the owner of the related
Mortgage Loans. The Master Servicer shall pay the costs of such enforcement at
its own expense, and shall be reimbursed therefor only (i) from a general
recovery resulting from such enforcement, to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Mortgage Loans or
(ii) from a specific recovery of costs, expenses or attorneys' fees against the
party against whom such enforcement is directed. Enforcement of the Mortgage
Loan Purchase Agreement against the Seller shall be effected by the Master
Servicer to the extent it is not the Seller, and otherwise by the Trust
Administrator or the Trustee, in accordance with the foregoing provisions of
this paragraph.

Section 3.03 Successor Sub-Servicers.

         The Master Servicer, with the written consent of the NIMS Insurer or
the Guarantor (as provided in Section 1.04), shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Master Servicer without any act or deed on the part of
such Sub-Servicer or the Master Servicer, and the Master Servicer either shall
service directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.

         Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee or the Trust
Administrator without fee, in accordance with the terms of this Agreement, and
the Trustee or the Trust Administrator shall so terminate such Sub-Servicing
Agreement at the direction of the NIMS Insurer or the Guarantor (as provided in
Section 1.04) in the event that the Master Servicer (or the Trustee or the Trust
Administrator, if then acting as Master Servicer) shall, for any reason, no
longer be the Master Servicer (including termination due to a Master Servicer
Event of Default).

                                      100
<PAGE>

Section 3.04 Liability of the Master Servicer.

         Notwithstanding any Sub-Servicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Master Servicer shall remain obligated and primarily liable to
the Trustee and the Certificateholders for the servicing and administering of
the Mortgage Loans in accordance with the provisions of Section 3.01 without
diminution of such obligation or liability by virtue of such Sub-Servicing
Agreements or arrangements or by virtue of indemnification from the Sub-Servicer
and to the same extent and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the Mortgage Loans. The Master
Servicer shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Master Servicer by such Sub-Servicer and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification and no such indemnification shall be an expense of the Trust.

Section 3.05 No Contractual Relationship Between Sub-Servicers and the NIMS
Insurer, the Guarantor, the Trustee, the Trust Administrator or
Certificateholders.

         Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trust Administrator, the Trustee, the NIMS
Insurer, the Guarantor and the Certificateholders shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Sub-Servicer except as set forth in Section 3.06. The Master
Servicer shall be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to this
Agreement is sufficient to pay such fees and such fees shall not be an expense
of the Trust.

Section 3.06 Assumption or Termination of Sub-Servicing Agreements by Trust
Administrator.

         In the event the Master Servicer shall for any reason no longer be the
master servicer (including by reason of the occurrence of a Master Servicer
Event of Default), the Trust Administrator or its designee shall thereupon
assume all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee or the Trust Administrator elects to terminate any Sub-Servicing
Agreement in accordance with its terms as provided in Section 3.03. Upon such
assumption, the Trust Administrator, its designee or the successor servicer for
the Trust Administrator appointed pursuant to Section 7.02 shall be deemed,
subject to Section 3.03, to have assumed all of the Master Servicer's interest
therein and to have replaced the Master Servicer as a party to each
Sub-Servicing Agreement to the same extent as if each Sub-Servicing Agreement
had been assigned to the assuming party, except that (i) the Master Servicer
shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) none of the Trust Administrator, its designee or any successor Master
Servicer shall be deemed to have assumed any liability or obligation of the
Master Servicer that arose before it ceased to be the Master Servicer.

                                      101
<PAGE>

         The Master Servicer at its own expense and without reimbursement shall,
upon request of the Trust Administrator, deliver to the assuming party all
documents and records relating to each Sub-Servicing Agreement and the Mortgage
Loans then being serviced and an accounting of amounts collected and held by or
on behalf of it, and otherwise use its best efforts to effect the orderly and
efficient transfer of the Sub-Servicing Agreements to the assuming party.

Section 3.07 Collection of Certain Mortgage Loan Payments.

         The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or, if applicable, any penalty interest, or (ii) extend the due
dates for the Monthly Payments due on a Mortgage Note for a period of not
greater than 180 days; provided that any extension pursuant to this clause (ii)
shall not affect the amortization schedule of any Mortgage Loan for purposes of
any computation hereunder, except as provided below. In the event of any such
arrangement pursuant to clause (ii) above, the Master Servicer shall make timely
advances on such Mortgage Loan during such extension pursuant to Section 4.04
and in accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements, subject to Section 4.04(d)
pursuant to which the Master Servicer shall not be required to make any such
advances that are Nonrecoverable Advances. Notwithstanding the foregoing, in the
event that any Mortgage Loan is in default or, in the judgment of the Master
Servicer, such default is reasonably foreseeable, the Master Servicer,
consistent with the standards set forth in Section 3.01, may also waive, modify
or vary any term of such Mortgage Loan (including modifications that would
change the Mortgage Rate, forgive the payment of principal or interest or extend
the final maturity date of such Mortgage Loan no later than two years with
respect to a Group I Mortgage Loan), accept payment from the related Mortgagor
of an amount less than the Stated Principal Balance in final satisfaction of
such Mortgage Loan (such payment, a "Short Pay-off") or consent to the
postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor; provided, that in the judgment of the Master
Servicer, any such modification, waiver or amendment could reasonably be
expected to result in collections and other recoveries in respect of such
Mortgage Loans in excess of Net Liquidation Proceeds that would be recovered
upon the foreclosure of, or other realization upon, such Mortgage Loan and
provided further, that the NIMS Insurer's prior written consent shall be
required for any modification, waiver or amendment if the aggregate number of
outstanding Mortgage Loans which have been modified, waived or amended exceeds
5% of the number of Mortgage Loans as of the Cut-off Date and any Subsequent
Cut-Off Date. If the Component Principal Balance of the I-M3 Component has been
reduced to zero and Class C Certificates are no longer outstanding, the Master
Servicer shall not take any action pursuant to the preceding sentence with
respect to a Group I Mortgage Loan without obtaining the prior written consent
of the Guarantor to such modification. The Master Servicer shall submit to the
Guarantor with its request for consent, such information related to the proposed
modification as can be expected to be needed by the Guarantor to evaluate the
Master Servicer's request, including the terms of the proposed modification and
the reasons for the Master Servicer's decision that such Group I Mortgage Loan
should be modified. The Guarantor shall be deemed to have consented to the
Master Servicer's request in the event that the Guarantor does not either
provide the Master Servicer with its written consent to such requested
modification or written notice of its objection to such modification within five
Business Days of its receipt of the Master Servicer's request. Requests for
modification shall be sent to the Guarantor at: Fannie Mae, 3900 Wisconsin
Avenue, N.W., Washington, D.C. 20016, Attn: Vice President-Loss Mitigation. With
respect to each Group I Mortgage Loan which is modified with the consent of the
Guarantor, the Master Servicer shall give written notice to the NIMS Insurer to
the address set forth in Section 11.05 and to the Guarantor to the following
address: Fannie Mae, 4000 Wisconsin Avenue, N.W., Washington, D.C. 20016, Attn:
Bond Administration. Such notice shall be delivered within thirty Business Days
following such modification and shall include information with respect to the
modification, including, without limitation, the interest rate, the principal
balance and the maturity date of such Group I Mortgage Loan before and after
such modification.

                                      102
<PAGE>

Section 3.08 Sub-Servicing Accounts.

         In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer shall be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall be
entitled "Bankers Trust Company of California, N.A., as Trust Administrator for
the benefit of First Union National Bank, as Trustee, in trust for registered
Holders of Long Beach Mortgage Loan Trust 2001-4, Asset-Backed Certificates,
Series 2001-4. The Sub-Servicer shall be required to deposit in the clearing
account (which account must be an Eligible Account) in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Sub-Servicer's receipt thereof, all proceeds of
Mortgage Loans received by the Sub-Servicer less its servicing compensation to
the extent permitted by the Sub-Servicing Agreement, and shall thereafter
deposit such amounts in the Sub-Servicing Account, in no event more than two
Business Days after the deposit of such funds into the clearing account. The
Sub-Servicer shall thereafter be required to deposit such proceeds in the
Collection Account or remit such proceeds to the Master Servicer for deposit in
the Collection Account not later than two Business Days after the deposit of
such amounts in the Sub-Servicing Account. For purposes of this Agreement, the
Master Servicer shall be deemed to have received payments on the Mortgage Loans
when the Sub-Servicer receives such payments.

Section 3.09 Collection of Taxes, Assessments and Similar Items; Servicing
Accounts.

         The Master Servicer shall establish and maintain, or cause to be
established and maintained, one or more accounts (the "Servicing Accounts").
Servicing Accounts shall be Eligible Accounts. The Master Servicer shall deposit
in the clearing account (which account must be an Eligible Account) in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Master Servicer's receipt thereof, all
collections from the Mortgagors (or related advances from Sub-Servicers) for the
payment of taxes, assessments, hazard insurance premiums and comparable items
for the account of the Mortgagors ("Escrow Payments") collected on account of
the Mortgage Loans and shall thereafter deposit such Escrow Payments in the
Servicing Accounts, in no event more than two Business Days after the deposit of
such funds in the clearing account, for the purpose of effecting the payment of
any such items as required under the terms of this Agreement. Withdrawals of
amounts from a Servicing Account may be made only to (i) effect payment of
taxes, assessments, hazard insurance premiums, and comparable items; (ii)
reimburse the Master Servicer (or a Sub-Servicer to the extent provided in the
related Sub-Servicing Agreement) out of related collections for any advances
made pursuant to Section 3.01 (with respect to taxes and assessments) and
Section 3.14 (with respect to hazard insurance); (iii) refund to Mortgagors any
sums as may be determined to be overages; (iv) pay interest, if required and as
described below, to Mortgagors on balances in the Servicing Account; (v) clear
and terminate the Servicing Account upon the termination of the Master
Servicer's obligations and responsibilities in respect of the Mortgage Loans
under this Agreement in accordance with Article IX or (vi) recover amounts
deposited in error. As part of its servicing duties, the Master Servicer or
Sub-Servicers shall pay to the Mortgagors interest on funds in Servicing
Accounts, to the extent required by law and, to the extent that interest earned
on funds in the Servicing Accounts is insufficient, to pay such interest from
its or their own funds, without any reimbursement therefor. To the extent that a
Mortgage does not provide for Escrow Payments, the Master Servicer shall
determine whether any such payments are made by the Mortgagor in a manner and at
a time that avoids the loss of the Mortgaged Property due to a tax sale or the
foreclosure of a tax lien. The Master Servicer assumes full responsibility for
the payment of all such bills within such time and shall effect payments of all
such bills irrespective of the Mortgagor's faithful performance in the payment
of same or the making of the Escrow Payments and shall make advances from its
own funds to effect such payments; provided, however, that such advances shall
constitute Servicing Advances.

                                      103
<PAGE>

Section 3.10 Collection Account and Distribution Account.

         (a) On behalf of the Trust Fund, the Master Servicer shall establish
and maintain, or cause to be established and maintained, one or more accounts
(such account or accounts, the "Collection Account"), held in trust for the
benefit of the Trustee and the Certificateholders. On behalf of the Trust Fund,
the Master Servicer shall deposit or cause to be deposited in the clearing
account (which account must be an Eligible Account) in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, and shall
thereafter deposit in the Collection Account, in no event more than two Business
Days after the deposit of such funds into the clearing account, as and when
received or as otherwise required hereunder, the following payments and
collections received or made by it subsequent to the Cut-off Date or Subsequent
Cut-off Date, as applicable (other than in respect of principal or interest on
the related Mortgage Loans due on or before the Cut-off Date or Subsequent
Cut-off Date, as applicable, or payments (other than Principal Prepayments)
received by it on or prior to the Cut-off Date or Subsequent Cut-off Date, as
applicable, but allocable to a Due Period subsequent thereto):

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

                  (ii) all payments on account of interest (net of the related
         Servicing Fee) on each Mortgage Loan;

                  (iii) all Insurance Proceeds and Liquidation Proceeds (other
         than proceeds collected in respect of any particular REO Property and
         amounts paid by the Master Servicer in connection with a purchase of
         Mortgage Loans and REO Properties pursuant to Section 9.01);

                                      104
<PAGE>

                  (iv) any amounts required to be deposited pursuant to Section
         3.12 in connection with any losses realized on Permitted Investments
         with respect to funds held in the Collection Account;

                  (v) any amounts required to be deposited by the Master
         Servicer pursuant to the second paragraph of Section 3.14(a) in respect
         of any blanket policy deductibles;

                  (vi) all proceeds of any Mortgage Loan repurchased or
         purchased in accordance with Section 2.03, Section 3.16 or Section 9.01
         and all Master Servicer Prepayment Charge Payment Amounts required to
         be deposited in the Collection Account pursuant to Section 2.03;

                  (vii) all Substitution Shortfall Amounts; and

                  (viii) all Prepayment Charges collected by the Master
         Servicer.

         For purposes of the immediately preceding sentence, the Cut-off Date
with respect to any Qualified Substitute Mortgage Loan shall be deemed to be the
date of substitution.

         The foregoing requirements for deposit in the Collection Accounts shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges, NSF
fees, reconveyance fees, assumption fees and other similar fees and charges
(other than Prepayment Charges) need not be deposited by the Master Servicer in
the Collection Account and shall, upon collection, belong to the Master Servicer
as additional compensation for its servicing activities. In the event the Master
Servicer shall deposit in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the Collection
Account, any provision herein to the contrary notwithstanding.

         (b) On behalf of the Trust Fund, the Trust Administrator, as agent for
the Trustee, shall establish and maintain one or more accounts (such account or
accounts, the "Distribution Account"), held in trust for the benefit of the
Trustee and the Certificateholders. On behalf of the Trust Fund, the Master
Servicer shall deliver to the Trust Administrator in immediately available funds
for deposit in the Distribution Account on or before 3:00 p.m. New York time (i)
on the Master Servicer Remittance Date, that portion of the Group I Available
Funds and the Group II Available Funds (calculated without regard to the
references in the definition thereof to amounts that may be withdrawn from the
Distribution Account) for the related Distribution Date then on deposit in the
Collection Account, the amount of all Prepayment Charges on the Prepayment
Charge Schedule collected by the Master Servicer in connection with any of the
Mortgage Loans and any Master Servicer Prepayment Charge Payment Amounts then on
deposit in the Collection Account and the amount of any funds reimbursable to an
Advancing Person pursuant to Section 3.27 and (ii) on each Business Day as of
the commencement of which the balance on deposit in the Collection Account
exceeds $75,000 following any withdrawals pursuant to the next succeeding
sentence, the amount of such excess, but only if the Collection Account
constitutes an Eligible Account solely pursuant to clause (ii) of the definition
of "Eligible Account." If the balance on deposit in the Collection Account
exceeds $75,000 as of the commencement of business on any Business Day and the
Collection Account constitutes an Eligible Account solely pursuant to clause
(ii) of the definition of "Eligible Account," the Master Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, the Trust Administrator, the Seller or any
Sub-Servicer pursuant to Section 3.11 and shall pay such amounts to the Persons
entitled thereto.

                                      105
<PAGE>

         (c) Funds in the Collection Account and the Distribution Account may be
invested in Permitted Investments in accordance with the provisions set forth in
Section 3.12. The Master Servicer shall give notice to the Trustee, the Trust
Administrator, the NIMS Insurer, the Guarantor and the Depositor of the location
of the Collection Account maintained by it when established and prior to any
change thereof. The Trust Administrator shall give notice to the Master
Servicer, the Trustee, the NIMS Insurer, the Guarantor and the Depositor of the
location of the Distribution Account when established and prior to any change
thereof.

         (d) Funds held in the Collection Account at any time may be delivered
by the Master Servicer to the Trust Administrator for deposit in an account
(which may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee and the Trust Administrator shall
have the sole authority to withdraw any funds held pursuant to this subsection
(d). In the event the Master Servicer shall deliver to the Trust Administrator
for deposit in the Distribution Account any amount not required to be deposited
therein, it may at any time request that the Trust Administrator withdraw, and
the Trust Administrator shall withdraw, such amount from the Distribution
Account and remit to the Master Servicer any such amount, any provision herein
to the contrary notwithstanding. In addition, the Master Servicer shall deliver
to the Trust Administrator from time to time for deposit, and the Trust
Administrator shall so deposit, in the Distribution Account:

                  (i) any Advances, as required pursuant to Section 4.04, unless
         delivered directly to the Trustee or the Trust Administrator by an
         Advancing Person;

                  (ii) any amounts required to be deposited pursuant to Section
         3.23(d) or (f) in connection with any REO Property;

                  (iii) any amounts to be paid by the Master Servicer in
         connection with a purchase of Mortgage Loans and REO Properties
         pursuant to Section 9.01;

                  (iv) any amounts required to be deposited pursuant to Section
         3.24 in connection with any Prepayment Interest Shortfalls; and

                  (v) any Stayed Funds, as soon as permitted by the federal
         bankruptcy court having jurisdiction in such matters.

         (e) Promptly upon receipt of any Stayed Funds, whether from the Master
Servicer, a trustee in bankruptcy, federal bankruptcy court or other source, the
Trust Administrator shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.

                                      106
<PAGE>

Section 3.11 Withdrawals from the Collection Account and Distribution Account.

         (a) The Master Servicer shall, from time to time, make withdrawals from
the Collection Account, for any of the following purposes or as described in
Section 4.04, without priority:

                  (i) to remit to the Trust Administrator, as agent for the
         Trustee, for deposit in the Distribution Account the amounts required
         to be so remitted pursuant to Section 3.10(b) or permitted to be so
         remitted pursuant to the first sentence of Section 3.10(d);

                  (ii) subject to Section 3.16(d), to reimburse the Master
         Servicer for Advances, but only to the extent of amounts received which
         represent Late Collections (net of the related Servicing Fees) of
         Monthly Payments on the related Mortgage Loans in accordance with the
         provisions of Section 4.04;

                  (iii) subject to Section 3.16(d), to pay the Master Servicer
         or any Sub-Servicer (a) any unpaid Servicing Fees or (b) any
         unreimbursed Servicing Advances with respect to each Mortgage Loan, but
         only to the extent of any Late Collections, Liquidation Proceeds,
         Insurance Proceeds or other amounts as may be collected by the Master
         Servicer from a Mortgagor, or otherwise received with respect to such
         Mortgage Loan;

                  (iv) to pay to the Master Servicer as servicing compensation
         (in addition to the Servicing Fee) on the Master Servicer Remittance
         Date any interest or investment income earned on funds deposited in the
         Collection Account;

                  (v) to pay to the Master Servicer or the Seller, as the case
         may be, with respect to each Mortgage Loan that has previously been
         purchased or replaced pursuant to Section 2.03 or Section 3.16(c) all
         amounts received thereon subsequent to the date of purchase or
         substitution, as the case may be;

                  (vi) to reimburse the Master Servicer for any Advance or
         Servicing Advance previously made which the Master Servicer has
         determined to be a Nonrecoverable Advance in accordance with the
         provisions of Section 4.04;

                  (vii) to reimburse the Master Servicer or the Depositor for
         expenses incurred by or reimbursable to the Master Servicer or the
         Depositor, as the case may be, pursuant to Section 6.03;

                  (viii) to reimburse the Guarantor (with respect to Group I
         Mortgage Loans only), the NIMS Insurer, the Master Servicer, the Trust
         Administrator or the Trustee, as the case may be, for enforcement
         expenses reasonably incurred in respect of the breach or defect giving
         rise to the purchase obligation under Section 2.03 of this Agreement
         that were included in the Purchase Price of the Mortgage Loan,
         including any expenses arising out of the enforcement of the purchase
         obligation;

                                      107
<PAGE>

                  (ix) to pay, or to reimburse the Master Servicer for advances
         in respect of, expenses incurred in connection with any Mortgage Loan
         pursuant to Section 3.16(b); and

                  (x) to clear and terminate the Collection Account pursuant to
         Section 9.01.

         The Master Servicer shall keep and maintain separate accounting, on an
individual Mortgage Loan basis, for the purpose of justifying any withdrawal
from the Collection Account, to the extent held by or on behalf of it, pursuant
to subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The Master Servicer
shall provide written notification to the Trustee, the Trust Administrator, the
NIMS Insurer and the Guarantor, on or prior to the next succeeding Master
Servicer Remittance Date, upon making any withdrawals from the Collection
Account pursuant to subclause (vii) above.

         (b) The Trust Administrator shall, from time to time, make withdrawals
from the Distribution Account, for any of the following purposes, without
priority:

                  (i) to make distributions to Certificateholders in accordance
         with Section 4.01;

                  (ii) to pay to itself and the Trustee amounts to which it is
         entitled pursuant to Section 8.05 or to pay any other Extraordinary
         Trust Fund Expenses;

                  (iii) to pay to itself any interest income earned on funds
         deposited in the Distribution Account pursuant to Section 3.12(c);

                  (iv) to reimburse itself and the Trustee pursuant to Section
         7.02 or pursuant to Section 7.01 to the extent such amounts in Section
         7.01 were not reimbursed by the Master Servicer;

                  (v) to pay any amounts in respect of taxes pursuant to Section
         10.01(g);

                  (vi) to remit to the Master Servicer any amount deposited in
         the Distribution Account by the Master Servicer but not required to be
         deposited therein in accordance with Section 3.10(d);

                  (vii) to pay to an Advancing Person reimbursements for
         Advances and/or Servicing Advances pursuant to Section 3.27; and

                  (viii) to clear and terminate the Distribution Account
         pursuant to Section 9.01.

Section 3.12 Investment of Funds in the Collection Account and the Distribution
Account.

         (a) The Master Servicer may direct any depository institution
maintaining the Collection Account and any REO Account (for purposes of this
Section 3.12, an "Investment Account"), and the Trust Administrator, in its
individual capacity, may direct any depository institution maintaining the
Distribution Account (for purposes of this Section 3.12, the Distribution
Account is also an "Investment Account"), to invest the funds in such Investment
Account in one or more Permitted Investments bearing interest or sold at a
discount, and maturing, unless payable on demand, (i) no later than the Business
Day immediately preceding the date on which such funds are required to be
withdrawn from such account pursuant to this Agreement, if a Person other than
the Trust Administrator is the obligor thereon and (ii) no later than the date
on which such funds are required to be withdrawn from such account pursuant to
this Agreement, if the Trust Administrator is the obligor thereon. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Trust Administrator (in its capacity as such), as agent for the Trustee, or in
the name of a nominee of the Trust Administrator. The Trust Administrator shall
be entitled to sole possession (except with respect to investment direction of
funds held in the Collection Account and any REO Account and any income and gain
realized thereon) over each such investment, and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Trust Administrator or its agent, together with any document of transfer
necessary to transfer title to such investment to the Trust Administrator or its
nominee. In the event amounts on deposit in an Investment Account are at any
time invested in a Permitted Investment payable on demand, the Trust
Administrator shall:

                                      108
<PAGE>

         (x)      consistent with any notice required to be given thereunder,
                  demand that payment thereon be made on the last day such
                  Permitted Investment may otherwise mature hereunder in an
                  amount equal to the lesser of (1) all amounts then payable
                  thereunder and (2) the amount required to be withdrawn on such
                  date; and

         (y)      demand payment of all amounts due thereunder promptly upon
                  actual notice by a Responsible Officer of the Trust
                  Administrator that such Permitted Investment would not
                  constitute a Permitted Investment in respect of funds
                  thereafter on deposit in the Investment Account.

         (b) All income and gain realized from the investment of funds deposited
in the Collection Account and any REO Account held by or on behalf of the Master
Servicer shall be for the benefit of the Master Servicer and shall be subject to
its withdrawal in accordance with Section 3.11 or Section 3.23, as applicable.
The Master Servicer shall deposit in the Collection Account or any REO Account,
as applicable, the amount of any loss of principal incurred in respect of any
such Permitted Investment made with funds in such accounts immediately upon
realization of such loss.

         (c) All income and gain realized from the investment of funds deposited
in the Distribution Account held by or on behalf of the Trust Administrator
shall be for the benefit of the Trust Administrator and shall be subject to its
withdrawal at any time. The Trust Administrator shall deposit in the
Distribution Account, the amount of any loss of principal incurred in respect of
any such Permitted Investment made with funds in such accounts immediately upon
realization of such loss.

         (d) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trust Administrator may, and subject to Section 8.01 and Section
8.02(v), upon the request of the Holders of Certificates representing more than
50% of the Voting Rights allocated to any Class of Certificates shall, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate proceedings.

                                      109
<PAGE>

Section 3.13 Agreement to Appoint a Special Servicer.

         (a) The Guarantor may require the Master Servicer to enter into a
special subservicing agreement with a servicer with expertise in servicing
delinquent mortgage loans as designated by the Guarantor (the "Special
Servicer") on or after the earliest Distribution Date with respect to which the
aggregate Component Principal Balance of the I-M3 Component and the aggregate
Certificate Principal Balance of the Class C Certificates has been reduced to
zero. Such special subservicing agreement shall relate to the servicing of only
Group I Mortgage Loans that (x) have been delinquent in payment with respect to
three or more Monthly Payments (provided, however, that the third such Monthly
Payment shall not be deemed to be delinquent for purposes of this clause (x)
until the close of business on the last day of the month in which such Monthly
Payment first became due) and (y) have been transferred to the Special Servicer
in accordance with this Section 3.13 and the related special subservicing
agreement (a "Specially Serviced Mortgage Loan").

         (b) The special subservicing agreement shall be consistent with the
provisions of this Agreement, including but not limited to this Section 3.13,
Section 3.02 (a), Section 3.02 (b), and Section 3.08, except as provided
otherwise in this Section 3.13. In addition, the special subservicing agreement
shall be on terms which shall be reasonably acceptable to the Guarantor and the
Master Servicer and shall provide, at a minimum that:

                  (1) the Special Servicer shall at all times, meet the
         eligibility criteria described in Section 3.02(a);

                  (2) the Special Servicer shall service only the Specially
         Serviced Mortgage Loans in a manner consistent with the provisions with
         this Agreement except as provided otherwise in the special subservicing
         agreement;

                  (3) the Special Servicer shall use the Fannie Mae foreclosure
         network (and pay the customary fees therefor) for foreclosures and
         bankruptcies relating to Specially Serviced Mortgage Loans;

                  (4) the Special Servicer shall use the Fannie Mae disposition
         service (and pay the customary fees therefor) for the disposition of
         REO Property related to Specially Serviced Mortgage Loans;

                  (5) the Special Servicer shall make Servicing Advances on the
         Specially Serviced Mortgage Loans to the same extent and in the same
         manner as the Master Servicer with respect to the Group I Mortgage
         Loans pursuant to this Agreement;

                  (6) the Special Servicer shall be entitled to receive the
         Servicing Fee with respect to all Specially Serviced Mortgage Loans;

                  (7) prior to the transfer of servicing to the Special
         Servicer, the Master Servicer and the Special Servicer shall have
         provided all notices relating to such transfer of servicing as required
         to be delivered to the borrowers by applicable state and federal law;

                                      110
<PAGE>

                  (8) the Special Servicer shall indemnify the Master Servicer,
         the Trust Administrator and the Trustee for any liabilities to them
         arising from failures of the Special Servicer to perform its
         obligations according to the terms of the subservicing agreement;

                  (9) the Master Servicer shall promptly give notice thereof to
         the Trustee, the Trust Administrator, the NIMS Insurer and the
         Guarantor of the transfer of servicing to the Special Servicer,
         including the loan number together with the borrower's name and the
         unpaid principal balance of the transferred Mortgage Loan at the time
         of transfer;

                  (10) each of the respective obligations, duties, and
         liabilities of the Master Servicer and the Special Servicer (or either
         of them) with respect to the servicing of the Specially Serviced
         Mortgage Loans that have arisen prior to the date on which the
         servicing of such Specially Serviced Mortgage Loan was transferred to
         the Special Servicer (the "Effective Date"), or that arise on and after
         the Effective Date, under this Agreement and the subservicing agreement
         and that remain unperformed or unsatisfied shall survive any transfer
         of servicing;

                  (11) once a Group I Mortgage Loan becomes a Specially Serviced
         Mortgage Loan, such Mortgage Loan shall remain a Specially Serviced
         Mortgage Loan, and shall continue to be serviced by the Special
         Servicer, until the earlier of the liquidation or other disposition of
         such Mortgage Loan or the termination of the subservicing agreement,
         regardless of delinquency status or otherwise;

                  (12) the Guarantor may remove the Special Servicer if the
         Special Servicer at any time fails to meet any of the above criteria or
         otherwise, in the judgment of the Guarantor, fails to perform according
         to the terms of the subservicing agreement and the provisions of this
         Section 3.13; provided that prior to any such removal the Guarantor
         shall designate a successor Special Servicer meeting the requirements
         of this Section 3.13, and no removal of a Special Servicer shall be
         effective until a successor Special Servicer has entered into a special
         subservicing agreement meeting the requirements of this Section 3.13
         and agreed to assume the duties of the Special Servicer or the Master
         Servicer has undertaken such duties; and

                  (13) in connection with any transfer of a Group I Mortgage
         Loan to the Special Servicer as a Specially Serviced Mortgage Loan, the
         Master Servicer shall execute any appropriate assignments or other
         documents reasonable and necessary to further the prosecution of the
         Special Servicer obligations under the special subservicing agreement.

Section 3.14 Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.

                                      111
<PAGE>

         (a) The Master Servicer shall cause to be maintained for each Mortgage
Loan fire insurance with extended coverage on the related Mortgaged Property in
an amount which is at least equal to the least of (i) the then current principal
balance of such Mortgage Loan, (ii) the amount necessary to fully compensate for
any damage or loss to the improvements that are a part of such property on a
replacement cost basis and (iii) the maximum insurable value of the improvements
which are a part of such Mortgaged Property, in each case in an amount not less
than such amount as is necessary to avoid the application of any coinsurance
clause contained in the related hazard insurance policy. The Master Servicer
shall also cause to be maintained fire insurance with extended coverage on each
REO Property in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements which are a part of such property
and (ii) the outstanding principal balance of the related Mortgage Loan at the
time it became an REO Property, plus accrued interest at the Mortgage Rate and
related Servicing Advances. The Master Servicer will comply in the performance
of this Agreement with all reasonable rules and requirements of each insurer
under any such hazard policies. Any amounts to be collected by the Master
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the property subject to the related Mortgage or amounts
to be released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing loans held for its own account,
subject to the terms and conditions of the related Mortgage and Mortgage Note)
shall be deposited in the Collection Account, subject to withdrawal pursuant to
Section 3.11, if received in respect of a Mortgage Loan, or in the REO Account,
subject to withdrawal pursuant to Section 3.23, if received in respect of an REO
Property. Any cost incurred by the Master Servicer in maintaining any such
insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
It is understood and agreed that no earthquake or other additional insurance is
to be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property or REO Property is at any time
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards and flood insurance has been
made available, the Master Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in such
program).

         In the event that the Master Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide (or such other rating that is comparable to such
rating) insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such policy may contain a deductible clause, in which case the Master Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
prepare and present, on behalf of itself, the Trustee, the Trust Administrator
and Certificateholders, claims under any such blanket policy in a timely fashion
in accordance with the terms of such policy.

                                      112
<PAGE>

         (b) The Master Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of Fannie Mae if it were the purchaser of the Mortgage
Loans, unless the Master Servicer or any of its Affiliates has obtained a waiver
of such requirements from Fannie Mae. The Master Servicer shall also maintain a
fidelity bond in the form and amount that would meet the requirements of Fannie
Mae, unless the Master Servicer or any of its Affiliates has obtained a waiver
of such requirements from Fannie Mae. The Master Servicer shall provide the
Trustee, the Trust Administrator, the NIMS Insurer and the Guarantor (upon such
party's reasonable request) with copies of any such insurance policies and
fidelity bond. The Master Servicer shall be deemed to have complied with this
provision if an Affiliate of the Master Servicer has such errors and omissions
and fidelity bond coverage and, by the terms of such insurance policy or
fidelity bond, the coverage afforded thereunder extends to the Master Servicer.
Any such errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee and the
Trust Administrator. The Master Servicer shall also cause each Sub-Servicer to
maintain a comparable policy of insurance covering errors and omissions and a
fidelity bond meeting such requirements.

Section 3.15 Enforcement of Due-On-Sale Clauses; Assumption Agreements.

         The Master Servicer shall, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Master Servicer shall not be required to take such action if in its
sole business judgment the Master Servicer believes that the collections and
other recoveries in respect of such Mortgage Loans could reasonably be expected
to be maximized if the Mortgage Loan were not accelerated, and the Master
Servicer shall not exercise any such rights if prohibited by law from doing so.
If the Master Servicer reasonably believes it is unable under applicable law to
enforce such "due-on-sale" clause, or if any of the other conditions set forth
in the proviso to the preceding sentence apply, the Master Servicer will enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Master
Servicer may also enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the underwriting criteria of the Master Servicer and has a
credit risk rating at least equal to that of the original Mortgagor. In
connection with any assumption, modification or substitution, the Master
Servicer shall apply such underwriting standards and follow such practices and
procedures as shall be normal and usual in its general mortgage servicing
activities and as it applies to other mortgage loans owned solely by it. The
Master Servicer shall not take or enter into any assumption and modification
agreement, however, unless (to the extent practicable under the circumstances)
it shall have received confirmation, in writing, of the continued effectiveness
of any applicable hazard insurance policy, or a new policy meeting the
requirements of this Section is obtained. Any fee collected by the Master
Servicer in respect of any assumption, modification or substitution of liability
agreement will be retained by the Master Servicer as additional servicing
compensation. In connection with any such assumption, no material term of the
Mortgage Note (including but not limited to the related Mortgage Rate and the
amount of the Monthly Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Master Servicer shall notify the
Trustee, the Trust Administrator, the NIMS Insurer and the Guarantor that any
such substitution, modification or assumption agreement has been completed by
forwarding to the Trust Administrator (with a copy to the Trustee and the NIMS
Insurer) the executed original of such substitution, modification or assumption
agreement, which document shall be added to the related Mortgage File and shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. If the
aggregate Component Principal Balance of the I-M3 Component has been reduced to
zero and Class C Certificates are no longer outstanding, the Master Servicer
shall not take or enter into any substitution, assumption or modification
agreement without obtaining the prior written consent of the Guarantor to such
substitution, assumption or modification agreement. The Master Servicer shall
submit to the Guarantor with its request for consent, such information related
to the proposed substitution, assumption or modification agreement as can be
expected to be needed by the Guarantor to evaluate the Master Servicer's
request, including the terms of the proposed substitution, assumption or
modification and the reasons for the Master Servicer's decision that such
substitution, assumption or modification agreement should be taken or entered
into with respect to such Group I Mortgage Loan. The Guarantor shall be deemed
to have consented to the Master Servicer's request in the event that the
Guarantor does not either provide the Master Servicer with its written consent
to such requested substitution, assumption or modification agreement or written
notice of its objection to such substitution, assumption or modification
agreement within five Business Days of its receipt of the Master Servicer's
request. Such requests shall be sent to the Guarantor at: Fannie Mae, 3900
Wisconsin Avenue, N.W., Washington, D.C. 20016, Attn: Vice President-Loss
Mitigation. With respect to each substitution, assumption or modification
agreement which is entered into with the consent of the Guarantor, the Master
Servicer shall give written notice to the NIMS Insurer to the address set forth
in Section 11.05 and to the Guarantor to the following address: Fannie Mae, 4000
Wisconsin Avenue, N.W., Washington, D.C. 20016, Attn: Bond Administration. Such
notice shall be delivered within thirty Business Days following the date of such
substitution, assumption or modification agreement.

                                      113
<PAGE>

         Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Master Servicer may be restricted by law from preventing,
for any reason whatever. For purposes of this Section 3.15, the term
"assumption" is deemed to also include a sale of the Mortgaged Property subject
to the Mortgage that is not accompanied by an assumption or substitution of
liability agreement.

Section 3.16 Realization Upon Defaulted Mortgage Loans.

         (a) The Master Servicer shall use reasonable efforts consistent with
the servicing standard set forth in Section 3.01, to foreclose upon or otherwise
comparably convert the ownership of properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.07. The Master Servicer shall be responsible for all costs and
expenses incurred by it in any such proceedings; provided, however, that such
costs and expenses will constitute and be recoverable as Servicing Advances by
the Master Servicer as contemplated in Section 3.11 and Section 3.23. The
foregoing is subject to the provision that, in any case in which Mortgaged
Property shall have suffered damage from an Uninsured Cause, the Master Servicer
shall not be required to expend its own funds toward the restoration of such
property unless it shall determine in its sole and absolute discretion that such
restoration will increase the proceeds of liquidation of the related Mortgage
Loan after reimbursement to itself for such expenses.

                                      114
<PAGE>

         (b) Notwithstanding the foregoing provisions of this Section 3.16 or
any other provision of this Agreement, with respect to any Mortgage Loan as to
which the Master Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Master Servicer shall not, on behalf of the Trustee, either (i)
obtain title to such Mortgaged Property as a result of or in lieu of foreclosure
or otherwise or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trustee, the Trust Administrator, the Trust Fund or the Certificateholders
would be considered to hold title to, to be a "mortgagee-in-possession" of, or
to be an "owner" or "operator" of such Mortgaged Property within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Master
Servicer has also previously determined, based on its reasonable judgment and a
report prepared by an Independent Person who regularly conducts environmental
audits using customary industry standards, that:

                  (1) such Mortgaged Property is in compliance with applicable
                  environmental laws or, if not, that it would be in the best
                  economic interest of the Trust Fund to take such actions as
                  are necessary to bring the Mortgaged Property into compliance
                  therewith; and

                  (2) there are no circumstances present at such Mortgaged
                  Property relating to the use, management or disposal of any
                  hazardous substances, hazardous materials, hazardous wastes,
                  or petroleum-based materials for which investigation, testing,
                  monitoring, containment, clean-up or remediation could be
                  required under any federal, state or local law or regulation,
                  or that if any such materials are present for which such
                  action could be required, that it would be in the best
                  economic interest of the Trust Fund to take such actions with
                  respect to the affected Mortgaged Property.

         Notwithstanding the foregoing, with respect to the Group I Mortgage
Loans, if such environmental audit reveals, or if the Master Servicer has
knowledge or notice, that the Mortgaged Property securing such Group I Mortgage
Loan contains such wastes or substances or is within one mile of the site of
such wastes or substances, the Master Servicer shall not foreclose or accept a
deed in lieu of foreclosure without the prior written consent of the Guarantor.

         The cost of the environmental audit report contemplated by this Section
3.16 shall be advanced by the Master Servicer, subject to the Master Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.11(a)(ix), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans. It is understood
by the parties hereto that any such advance will constitute a Servicing Advance.

                                      115
<PAGE>

         If the Master Servicer determines, as described above, that it is in
the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(a)(ix), such right of
reimbursement being prior to the rights of Certificateholders to receive any
amount in the Collection Account received in respect of the affected Mortgage
Loan or other Mortgage Loans. It is understood by the parties hereto that any
such advance will constitute a Servicing Advance.

         (c) The Master Servicer may at its option purchase from REMIC 0A or
REMIC 0B, as applicable, any Mortgage Loan or related REO Property that is 90
days or more delinquent or that has been otherwise in default for 90 days or
more, which the Master Servicer determines in good faith will otherwise become
subject to foreclosure proceedings (evidence of such determination to be
delivered in writing to the Trust Administrator and the Trustee prior to
purchase), at a price equal to the Purchase Price; provided, however, that the
Master Servicer shall purchase any such Mortgage Loans or related REO Properties
on the basis of delinquency or default, purchasing first the Mortgage Loans or
related REO Properties that became delinquent or otherwise in default on an
earlier date; and provided, further, that such option shall expire as of the
last day of the calendar quarter during which such Mortgage Loan or related REO
Property became 90 days delinquent or otherwise in default for 90 days or more.
In the event the Master Servicer does not exercise its option to purchase from
REMIC 0A or REMIC 0B any such Mortgage Loan or related REO Property prior to the
expiration of such option, the NIMS Insurer shall be entitled to purchase such
Mortgage Loan or related REO Property at any time thereafter. In the event
neither the Master Servicer nor the NIMS Insurer exercises its option to
purchase from REMIC 0A any such Group I Mortgage Loan or related REO Property
prior to the expiration of such option, the Guarantor shall be entitled to
purchase such Group I Mortgage Loan or related REO Property at any time
thereafter. The Purchase Price for any Mortgage Loan or related REO Property
purchased hereunder shall be deposited in the Collection Account, and the Trust
Administrator, upon receipt of written certification from the Master Servicer of
such deposit, shall release or cause to be released to the Master Servicer, the
NIMS Insurer or the Guarantor, as applicable, the related Mortgage File and the
Trustee, or the Trust Administrator on behalf of the Trustee, shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as the Master Servicer, the NIMS Insurer or the Guarantor, as
applicable, shall furnish and as shall be necessary to vest in the Master
Servicer, the NIMS Insurer or the Guarantor, as applicable, title to any
Mortgage Loan or related REO Property released pursuant hereto.

                                      116

<PAGE>

         (d) Proceeds received (other than any Prepayment Charges received) in
connection with any Final Recovery Determination, as well as any recovery
resulting from a partial collection of Insurance Proceeds or Liquidation
Proceeds, in respect of any Mortgage Loan, will be applied in the following
order of priority: first, to reimburse the Master Servicer or any Sub-Servicer
for any related unreimbursed Servicing Advances and Advances, pursuant to
Section 3.11(a)(ii) or (a)(iii); second, to accrued and unpaid interest on the
Mortgage Loan, to the date of the Final Recovery Determination, or to the Due
Date prior to the Distribution Date on which such amounts are to be distributed
if not in connection with a Final Recovery Determination; and third, as a
recovery of principal of the Mortgage Loan. If the amount of the recovery so
allocated to interest is less than the full amount of accrued and unpaid
interest due on such Mortgage Loan, the amount of such recovery will be
allocated by the Master Servicer as follows: first, to unpaid Servicing Fees;
and second, to the balance of the interest then due and owing. The portion of
the recovery so allocated to unpaid Servicing Fees shall be reimbursed to the
Master Servicer or any Sub-Servicer pursuant to Section 3.11(a)(iii).

Section 3.17 Trustee and Trust Administrator to Cooperate; Release of Mortgage
             Files.

         (a) Upon the payment in full of any Mortgage Loan, or the receipt by
the Master Servicer of a notification that payment in full shall be escrowed in
a manner customary for such purposes, the Master Servicer will promptly notify
the Trustee and Trust Administrator by a certification in the form of Exhibit
E-2 (which certification shall include a statement to the effect that all
amounts received or to be received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 3.10 have
been or will be so deposited) of a Servicing Representative and shall request
delivery to it of the related Mortgage File. Upon receipt of such certification
and request, the Trust Administrator shall promptly release the related Mortgage
File to the Master Servicer. No expenses incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Collection Account or the Distribution Account.

         (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trust Administrator
shall, upon request of the Master Servicer and delivery to the Trust
Administrator of a Request for Release in the form of Exhibit E-l, release the
related Mortgage File to the Master Servicer, and the Trustee or the Trust
Administrator, on behalf of the Trustee, shall, at the direction of the Master
Servicer, execute such documents as shall be necessary to the prosecution of any
such proceedings and the Master Servicer shall retain such Mortgage File in
trust for the benefit of the Certificateholders. Such Request for Release shall
obligate the Master Servicer to return each and every document previously
requested from the Mortgage File to the Trust Administrator when the need
therefor by the Master Servicer no longer exists, unless the Mortgage Loan has
been liquidated and the Liquidation Proceeds relating to the Mortgage Loan have
been deposited in the Collection Account or the Mortgage File or such document
has been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the Trust
Administrator a certificate of a Servicing Representative certifying as to the
name and address of the Person to which such Mortgage File or such document was
delivered and the purpose or purposes of such delivery. Upon receipt of a
certificate of a Servicing Representative stating that such Mortgage Loan was
liquidated and that all amounts received or to be received in connection with
such liquidation that are required to be deposited into the Collection Account
have been so deposited, or that such Mortgage Loan has become an REO Property, a
copy of the Request for Release shall be released by the Trust Administrator to
the Master Servicer or its designee.

                                      117
<PAGE>

         (c) Upon written certification of a Servicing Representative, the Trust
Administrator shall execute and deliver to the Master Servicer any court
pleadings, requests for trustee's sale or other documents reasonably necessary
to the foreclosure or trustee's sale in respect of a Mortgaged Property or to
any legal action brought to obtain judgment against any Mortgagor on the
Mortgage Note or Mortgage or to obtain a deficiency judgment, or to enforce any
other remedies or rights provided by the Mortgage Note or Mortgage or otherwise
available at law or in equity, or shall exercise and deliver to the Master
Servicer a power of attorney sufficient to authorize the Master Servicer to
execute such documents on its behalf, provided that the Trust Administrator
shall be obligated to execute the documents identified above if necessary to
enable the Master Servicer to perform its duties hereunder. Each such
certification shall include a request that such pleadings or documents be
executed by the Trust Administrator and a statement as to the reason such
documents or pleadings are required.

Section 3.18 Servicing Compensation.

         As compensation for the activities of the Master Servicer hereunder,
the Master Servicer shall be entitled to the Servicing Fee with respect to each
Mortgage Loan payable solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.24. In addition, the Master Servicer shall
be entitled to recover unpaid Servicing Fees out of Late Collections, Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement;
provided, however, that the Master Servicer may pay from the Servicing Fee any
amounts due to a Sub-Servicer pursuant to a Sub-Servicing Agreement entered into
under Section 3.02.

         Additional servicing compensation in the form of assumption or
modification fees, late payment charges, NSF fees, reconveyance fees and other
similar fees and charges (other than Prepayment Charges) shall be retained by
the Master Servicer (subject to Section 3.24) only to the extent such fees or
charges are received by the Master Servicer. The Master Servicer shall also be
entitled pursuant to Section 3.11(a)(iv) to withdraw from the Collection
Account, and pursuant to Section 3.23(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.12. The Master Servicer shall be required to pay
all expenses incurred by it in connection with its servicing activities
hereunder (including premiums for the insurance required by Section 3.14, to the
extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, it being understood however, that payment of such premiums by the
Master Servicer shall constitute Servicing Advances and servicing compensation
of each Sub-Servicer, and to the extent provided herein and in Section 8.05, the
fees and expenses of the Trustee and the Trust Administrator) and shall not be
entitled to reimbursement therefor except as specifically provided herein.

Section 3.19 Reports to the Trustee and the Trust Administrator; Collection
Account Statements.

                                      118
<PAGE>

         Not later than fifteen days after each Distribution Date, the Master
Servicer shall forward to the Trustee, the Trust Administrator, the NIMS Insurer
and the Depositor (and, upon request, the Guarantor) a statement prepared by the
Master Servicer setting forth the status of the Collection Account as of the
close of business on such Distribution Date and showing, for the period covered
by such statement, the aggregate amount of deposits into and withdrawals from
the Collection Account of each category of deposit specified in Section 3.10(a)
and each category of withdrawal specified in Section 3.11. Such statement may be
in the form of the then current Fannie Mae Monthly Accounting Report for its
Guaranteed Mortgage Pass-Through Program with appropriate additions and changes,
and shall also include information as to the aggregate of the outstanding
principal balances of all of the Mortgage Loans as of the last day of the
calendar month immediately preceding such Distribution Date. Copies of such
statement shall be provided by the Trust Administrator to any Certificateholder
and to any Person identified to the Trust Administrator as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Master Servicer to the Trust
Administrator.

Section 3.20 Statement as to Compliance.

         The Master Servicer shall deliver to the Trust Administrator, the
Trustee, the Depositor, the NIMS Insurer, the Guarantor and each Rating Agency
on or before April 15 of each calendar year commencing in 2002, an Officers'
Certificate stating, as to each signatory thereof, that (i) a review of the
activities of the Master Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Master Servicer
has fulfilled all of its obligations under this Agreement throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Copies of any such statement shall be provided by the Trust
Administrator to any Certificateholder and to any Person identified to the Trust
Administrator as a prospective transferee of a Certificate, upon the request and
at the expense of the requesting party, provided that such statement is
delivered by the Master Servicer to the Trust Administrator.

Section 3.21 Independent Public Accountants' Servicing Report.

         Not later than April 15 of each calendar year commencing in 2002, the
Master Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Master Servicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Master Servicer which includes an
assertion that the Master Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, with respect to the servicing of residential mortgage loans during the
most recently completed fiscal year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of residential mortgage loans by
Sub-Servicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Sub-Servicers. Immediately upon receipt of such report, the Master
Servicer shall furnish a copy of such report to the Trust Administrator, the
Trustee, the NIMS Insurer, the Guarantor and each Rating Agency. Copies of such
statement shall be provided by the Trust Administrator to any Certificateholder
upon request at the Master Servicer's expense, provided that such statement is
delivered by the Master Servicer to the Trust Administrator. In the event such
firm of independent certified public accountants requires the Trust
Administrator to agree to the procedures performed by such firm, the Master
Servicer shall direct the Trust Administrator in writing to so agree; it being
understood and agreed that the Trust Administrator will deliver such letter of
agreement in conclusive reliance upon the direction of the Master Servicer, and
the Trust Administrator has not made any independent inquiry or investigation as
to, and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.

                                      119
<PAGE>

Section 3.22 Access to Certain Documentation.

                  (a) The Master Servicer shall provide to the Office of
Thrift Supervision, the FDIC and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder
access to the documentation regarding the Mortgage Loans serviced by the Master
Servicer under this Agreement, as may be required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans serviced by the Master Servicer under this Agreement will be
provided to any Certificateholder, the Guarantor (with respect to Group I
Mortgage Loans only), the NIMS Insurer, the Trust Administrator, the Trustee and
to any Person identified to the Master Servicer as a prospective transferee of a
Certificate, upon reasonable request during normal business hours at the offices
of the Master Servicer designated by it at the expense of the Person requesting
such access.

                  (b) For a period of two years from the Closing Date, the
Guarantor may contact the Seller to confirm that the Seller continues to
actively engage in a program to originate mortgage loans to low-income families
and to obtain other non-proprietary information about the Seller's activities
that may assist the Guarantor in completing its own regulatory requirements
during normal business hours and subject to reimbursement for expenses. The
Seller shall use reasonable efforts to provide such information to the
Guarantor.

Section 3.23 Title, Management and Disposition of REO Property.

                  (a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders. The Master Servicer, on behalf of REMIC 0A or REMIC 0B,
as applicable (and on behalf of the Trustee for the benefit of the
Certificateholders), shall sell any REO Property as soon as practicable and, in
any event, shall either sell any REO Property before the close of the third
taxable year after the year REMIC 0A or REMIC 0B, as applicable, acquires
ownership of such REO Property for purposes of Section 860G(a)(8) of the Code or
request from the Internal Revenue Service, no later than 60 days before the day
on which the three-year grace period would otherwise expire, an extension of the
three-year grace period, unless the Master Servicer shall have delivered to the
Trust Administrator, Trustee, the NIMS Insurer, the Guarantor and the Depositor
an Opinion of Counsel, addressed to the Trust Administrator, the Trustee, the
NIMS Insurer, the Guarantor and the Depositor, to the effect that the holding by
REMIC 0A or REMIC 0B of such REO Property subsequent to three years after its
acquisition will not result in the imposition on any Trust REMIC of taxes on
"prohibited transactions" thereof, as defined in Section 860F of the Code, or
cause any Trust REMIC to fail to qualify as a REMIC under Federal law at any
time that any Certificates are outstanding. If an extension of the three-year
period is granted, the Master Servicer shall sell the related REO Property no
later than 60 days prior to the expiration of such extension period. The Master
Servicer shall manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by any Trust REMIC of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code, or any "net
income from foreclosure property" which is subject to taxation under the REMIC
Provisions.

                                      120
<PAGE>

                  (b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain, or cause to be established and maintained, with respect to REO
Properties an account held in trust for the Trustee for the benefit of the
Certificateholders (the "REO Account"), which shall be an Eligible Account. The
Master Servicer may allow the Collection Account to serve as the REO Account,
subject to separate ledgers for each REO Property. The Master Servicer may
retain or withdraw any interest income paid on funds deposited in the REO
Account.

                  (c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account (which account must be an
Eligible Account) in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Master
Servicer's receipt thereof and shall thereafter deposit in the REO Account, in
no event more than two Business Days after the deposit of such funds into the
clearing account, all revenues received by it with respect to an REO Property
and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of such REO Property including, without limitation:

                  (i)   all insurance premiums due and payable in respect of
                        such REO Property;

                  (ii)  all real estate taxes and assessments in respect of such
                        REO Property that may result in the imposition of a lien
                        thereon; and

                  (iii) all costs and expenses necessary to maintain such REO
                        Property.

         To the extent that amounts on deposit in the REO Account with respect
to an REO Property are insufficient for the purposes set forth in clauses (i)
through (iii) above with respect to such REO Property, the Master Servicer shall
advance from its own funds as Servicing Advances such amount as is necessary for
such purposes if, but only if, the Master Servicer would make such advances if
the Master Servicer owned the REO Property and if such Servicing Advance would
not constitute a Nonrecoverable Advance.

                                      121
<PAGE>

         Notwithstanding the foregoing, none of the Master Servicer, the Trust
Administrator or the Trustee shall:

                  (i)      authorize the Trust Fund to enter into, renew or
                           extend any New Lease with respect to any REO
                           Property, if the New Lease by its terms will give
                           rise to any income that does not constitute Rents
                           from Real Property;

                  (ii)     authorize any amount to be received or accrued under
                           any New Lease other than amounts that will constitute
                           Rents from Real Property;

                  (iii)    authorize any construction on any REO Property, other
                           than construction permitted under Section 856(e)
                           (4)(B) of the Code; or

                  (iv)     authorize any Person to Directly Operate any REO
                           Property on any date more than 90 days after its date
                           of acquisition by the Trust Fund;

unless, in any such case, the Master Servicer has obtained an Opinion of Counsel
(the cost of which shall constitute a Servicing Advance), a copy of which shall
be provided to the NIMS Insurer, the Trust Administrator and the Trustee, to the
effect that such action will not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code at
any time that it is held by REMIC 0A or REMIC 0B, in which case the Master
Servicer may take such actions as are specified in such Opinion of Counsel.

         The Master Servicer may contract with any Independent Contractor for
the operation and management of any REO Property, provided that:

                  (i)      the terms and conditions of any such contract shall
                           not be inconsistent herewith;

                  (ii)     any such contract shall require, or shall be
                           administered to require, that the Independent
                           Contractor pay all costs and expenses incurred in
                           connection with the operation and management of such
                           REO Property, including those listed above, and remit
                           all related revenues (net of such costs and expenses)
                           to the Master Servicer as soon as practicable, but in
                           no event later than thirty days following the receipt
                           thereof by such Independent Contractor;

                  (iii)    none of the provisions of this Section 3.23(c)
                           relating to any such contract or to actions taken
                           through any such Independent Contractor shall be
                           deemed to relieve the Master Servicer of any of its
                           duties and obligations to the Trustee on behalf of
                           the Certificateholders with respect to the operation
                           and management of any such REO Property; and

                  (iv)     the Master Servicer shall be obligated with respect
                           thereto to the same extent as if it alone were
                           performing all duties and obligations in connection
                           with the operation and management of such REO
                           Property.

                                      122
<PAGE>

         The Master Servicer shall be entitled to enter into any agreement with
any Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees; provided, however, that to the extent that any payments made by such
Independent Contractor would constitute Servicing Advances if made by the Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.

                  (d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and Advances made
in respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Distribution Account in accordance
with Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).

                  (e) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Master Servicer at
such price and upon such terms and conditions as the Master Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities for similar properties.

                  (f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).

                  (g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.

Section 3.24 Obligations of the Master Servicer in Respect of Prepayment
Interest Shortfalls.

         The Master Servicer shall deliver to the Trust Administrator for
deposit into the Distribution Account on or before 3:00 p.m. New York time on
the Master Servicer Remittance Date from its own funds an amount ("Compensating
Interest") equal to the lesser of (i) the aggregate of the Prepayment Interest
Shortfalls for the related Distribution Date resulting solely from Principal
Prepayments during the related Prepayment Period and (ii) the amount of its
aggregate Servicing Fee for the most recently ended calendar month.

                                      123
<PAGE>

Section 3.25 Obligations of the Master Servicer in Respect of Mortgage Rates
and Monthly Payments.

         In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Mortgage Rates, Monthly Payments or Stated Principal Balances that were made by
the Master Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the Master Servicer, upon discovery or receipt
of notice thereof, immediately shall deliver to the Trust Administrator for
deposit in the Distribution Account from its own funds the amount of any such
shortfall and shall indemnify and hold harmless the Trust Fund, the Trust
Administrator, the Trustee, the Depositor, the Guarantor and any successor
master servicer in respect of any such liability; provided, that in the case of
the Guarantor such indemnity shall only apply with respect to Group I Mortgage
Loans. Such indemnities shall survive the termination or discharge of this
Agreement. Notwithstanding the foregoing, this Section 3.25 shall not limit the
ability of the Master Servicer to seek recovery of any such amounts from the
related Mortgagor under the terms of the related Mortgage Note, as permitted by
law and shall not be an expense of the Trust.

Section 3.26 Reserve Funds.

         No later than the Closing Date, the Trust Administrator, on behalf of
the Trustee, on behalf of the Certificateholders, shall establish and maintain
with itself two separate, segregated trust accounts titled, "Group I Reserve
Fund, Bankers Trust Company of California, N.A., as Trust Administrator for the
benefit of First Union National Bank, as Trustee, in trust for registered
Holders of Long Beach Mortgage Loan Trust 2001-4, Asset-Backed Certificates,
Series 2001-4" and "Group II Reserve Fund, Bankers Trust Company of California,
N.A., as Trust Administrator for the benefit of First Union National Bank, as
Trustee, in trust for registered Holders of Long Beach Mortgage Loan Trust
2001-4, Asset-Backed Certificates, Series 2001-4," respectively. On the Closing
Date, the Depositor shall deposit, or cause to be deposited, into each of the
Reserve Funds $1,000.

         On each Distribution Date as to which there is a Net WAC Rate Carryover
Amount payable to the Class I-A Certificates or Group I Mezzanine Components,
the Trust Administrator has been directed by the Class I-C Certificateholders
to, and therefore shall, deposit into the Group I Reserve Fund the amounts
described in Section 4.01(d)(i)(g), rather than distributing such amounts to the
Class C Certificateholders. On each Distribution Date as to which there is a Net
WAC Rate Carryover Amount payable to the Class II-A Certificates, the Class
II-M1 Certificates or Group II Mezzanine Components, the Trust Administrator has
been directed by the Class II-C Certificateholders to, and therefore shall,
deposit into the Group II Reserve Fund the amounts described in Section
4.01(d)(ii)(j), rather than distributing such amounts to the Class II-C
Certificateholders. On each such Distribution Date, the Trust Administrator
shall hold all such amounts for the benefit of the Holders of the Class A
Certificates and Mezzanine Certificates, and shall distribute such amounts in
respect of the Class A Certificates, the Class II-M1 Certificates and Mezzanine
Components in the amounts and priorities set forth in Section 4.01(d). If no Net
WAC Rate Carryover Amounts are payable on a Distribution Date, the Trust
Administrator shall deposit into each Reserve Fund on behalf of the related
Class C Certificateholders, from amounts otherwise distributable to such Class C
Certificateholders, an amount such that when added to other amounts already on
deposit in such Reserve Fund, the aggregate amount on deposit therein is equal
to $1,000.

                                      124
<PAGE>

         For federal and state income tax purposes, the Class I-C
Certificateholders shall be deemed to be the owners of the Group I Reserve Fund
and all amounts deposited into such Reserve Fund (other than the initial deposit
therein of $1,000) shall be treated as amounts distributed by REMIC 3 to REMIC X
in respect of the REMIC 3 Uncertificated Regular Interest LT3-IC, and then
distributed by REMIC X to the Holders of the Class I-C Certificates. For federal
and state income tax purposes, the Class II-C Certificateholders shall be deemed
to be the owners of the Group II Reserve Fund and all amounts deposited into
such Reserve Fund (other than the initial deposit therein of $1,000) shall be
treated as amounts distributed by REMIC 3 to REMIC X in respect of REMIC 3
Uncertificated Regular Interest LT3-IIC and then distributed by REMIC X to the
Holders of the Class II-C Certificates. Upon the termination of the Trust, or
the payment in full of the Class I-A Certificates and the reduction of the
Component Principal Balances of the Group I Mezzanine Components to zero or of
the payment in full of the Class II-A Certificates and the Class II-M1
Certificates and the reduction of the Component Principal Balances of the Group
II Mezzanine Components to zero, all amounts remaining on deposit in the related
Reserve Fund shall be released by the Trust Administrator and distributed to the
applicable Class C Certificateholders or their designees. The Reserve Funds will
be part of the Trust but not part of any REMIC and any payments in respect of
the Class A Certificates, the Class II-M1 Certificates or the Mezzanine
Components of Net WAC Rate Carryover Amounts will not be payments with respect
to a "regular interest" in a REMIC within the meaning of Code Section
860(G)(a)(1).

         By accepting a Class C Certificate, each Class C Certificateholder
shall be deemed to have directed the Trust Administrator, and the Trust
Administrator shall pursuant to such direction, deposit into the related Reserve
Fund the amounts described above on each Distribution Date as to which there is
any Net WAC Rate Carryover Amount rather than distributing such amounts to the
applicable Class C Certificateholders. By accepting a Class C Certificate, each
Class C Certificateholder further agrees that such direction is given for good
and valuable consideration, the receipt and sufficiency of which is acknowledged
by such acceptance.

         At the direction of the Holders of a majority in Percentage Interest in
the Class C Certificates, the Trust Administrator shall direct any depository
institution maintaining the Group I Reserve Fund or Group II Reserve Fund, as
applicable, to invest the funds in such account in one or more Permitted
Investments bearing interest or sold at a discount, and maturing, unless payable
on demand, (i) no later than the Business Day immediately preceding the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if a Person other than the Trust Administrator or an Affiliate
manages or advises such investment, and (ii) no later than the date on which
such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trust Administrator or an Affiliate manages or advises such
investment. If no investment direction of the Holders of a majority in
Percentage Interest in the Class C Certificates with respect to the Reserve Fund
is received by the Trust Administrator, the Trust Administrator shall invest the
funds in such account in Permitted Investments managed by the Trust
Administrator or an Affiliate of the kind described in clause (vi) of the
definition of Permitted Investments. Notwithstanding the foregoing, any funds in
the Reserve Funds shall be invested in Bankers Trust's Institutional Cash
Management Fund 1679 for so long as such investment complies with clause (vi) of
the definition of Permitted Investments. All income and gain earned upon such
investment shall be deposited into the related Reserve Fund.

                                      125
<PAGE>

         For federal tax return and information reporting, the right of the
Certificateholders to receive payment on account of the Class A Certificates,
the Class II-M1 Certificates and the Mezzanine Components from the related
Reserve Fund in respect of any Net WAC Rate Carryover Amount shall be assigned a
value of zero.

Section 3.27 Advance Facility.

                  (a) The Trust Administrator, on behalf of the Trustee and the
Trust Fund, at the direction of the Master Servicer and with the consent of the
NIMS Insurer, after consultation with the Guarantor (or, if no Insured NIM Notes
are outstanding, the Guarantor), is hereby authorized to enter into a facility
with any Person which provides that such Person (an "Advancing Person") may make
all or a portion of the Advances and/or Servicing Advances to the Trust Fund
under this Agreement, although no such facility shall reduce or otherwise affect
the Master Servicer's obligation to fund such Advances and/or Servicing
Advances. To the extent that an Advancing Person makes all or a portion of any
Advance or any Servicing Advance and provides the Trust Administrator with
notice acknowledged by the Master Servicer that such Advancing Person is
entitled to reimbursement, such Advancing Person shall be entitled to receive
reimbursement pursuant to this Agreement for such amount to the extent provided
in Section 3.27(b). Such notice from the Advancing Person shall specify the
amount of the reimbursement and shall specify which Section of this Agreement
permits the applicable Advance or Servicing Advance to be reimbursed. The Trust
Administrator shall be entitled to rely without independent investigation on the
Advancing Person's statement with respect to the amount of any reimbursement
pursuant to this Section 3.27 and with respect to the Advancing Person's
statement with respect to the Section of this Agreement that permits the
applicable Advance or Servicing Advance to be reimbursed. An Advancing Person
whose obligations are limited to the making of Advances and/or Servicing
Advances shall not be required to meet the qualifications of a Master Servicer
or a Sub-Servicer pursuant to Article VI hereof and will not be deemed to be a
Sub-Servicer under this Agreement. If the terms of a facility proposed to be
entered into with an Advancing Person by the Trust Fund would not materially and
adversely affect the interests of any Certificateholder, then the NIMS Insurer
shall not withhold its consent, after consultation with the Guarantor, to the
Trust Fund's entering into such facility.

                  (b) If an advancing facility is entered into, then the Master
Servicer shall not be permitted to reimburse itself under any Section specified
or for any amount specified by the Advancing Person in the notice described
under Section 3.27(a) above and acknowledged by the Master Servicer prior to the
remittance to the Trust Fund, but instead the Master Servicer shall include such
amounts in the applicable remittance to the Trustee made pursuant to Section
3.10(a). The Trust Administrator is hereby authorized to pay to the Advancing
Person reimbursements for Advances and Servicing Advances from the Distribution
Account to the same extent the Master Servicer would have been permitted to
reimburse itself for such Advances and/or Servicing Advances in accordance with
the specified Sections had the Master Servicer itself made such Advance or
Servicing Advance. The Trust Administrator is hereby authorized to pay directly
to the Advancing Person such portion of the Servicing Fee as the parties to any
advancing facility may agree.

                                      126
<PAGE>

                  (c) All Advances and Servicing Advances made pursuant to the
terms of this Agreement shall be deemed made and shall be reimbursed on a "first
in-first out" (FIFO) basis.

                                   ARTICLE IV

                                  FLOW OF FUNDS

Section 4.01 Distributions.

                  (a) (i) On each Distribution Date, the Trust Administrator
shall withdraw from the Distribution Account that portion of the Group I
Available Funds equal to the Group I Interest Remittance Amount for such
Distribution Date, and make the following disbursements and transfers in the
order of priority described below, in each case to the extent of the Group I
Interest Remittance Amount remaining for such Distribution Date:

                            first, to the Guarantor for payment of (i) the
                            Guaranty Fee and (ii) any Guarantor Reimbursement
                            Amount then due;

                            second, concurrently, to the Class I-A Certificates
                            and the Class I-S Certificates the related Monthly
                            Interest Distributable Amount and any Unpaid
                            Interest Shortfall Amount for such Classes,
                            allocated between the Class I-A Certificates and the
                            Class I-S Certificates pro rata;

                            third, to the I-M2 Component, the related Monthly
                            Interest Distributable Amount; and

                            fourth, to the I-M3 Component, the related Monthly
                            Interest Distributable Amount.

                  (ii) Any Group I Interest Remittance Amount remaining
undistributed pursuant to clause (i) above will be used in determining the
amount of Group I Net Monthly Excess Cashflow, if any, for such Distribution
Date.

                  (iii) On each Distribution Date the Trust Administrator shall
withdraw from the Distribution Account that portion of Group II Available Funds
equal to the Group II Interest Remittance Amount for such Distribution Date, and
make the following disbursements and transfers in the order of priority
described below, in each case to the extent of the Group II Interest Remittance
Amount remaining for such Distribution Date:

                            first, concurrently, to the Class II-A1
                            Certificates, the Class II-A2 Certificates, the
                            Class II-A3 Certificates and the Class II-S
                            Certificates the related Monthly Interest
                            Distributable Amount and any Unpaid Interest
                            Shortfall Amount for such Classes, allocated among
                            the Class II-A1 Certificates, the Class II-A2
                            Certificates, the Class II-A3 Certificates and the
                            Class II-S Certificates pro rata;

                                      127
<PAGE>

                            second, to the Class II-M1 Certificates, the related
                            Monthly Interest Distributable Amount;

                            third, to the II-M2 Component, the related Monthly
                            Interest Distributable Amount; and

                            fourth, to the II-M3 Component, the related Monthly
                            Interest Distributable Amount.

                      (iv) Any Group II Interest Remittance Amount remaining
undistributed pursuant to clause (iii) above will be used in determining the
amount of Group II Net Monthly Excess Cashflow, if any, for such Distribution
Date.

         (b) (i) On each Distribution Date (a) prior to the Group I Stepdown
Date or (b) on which a Group I Trigger Event is in effect, the Trust
Administrator shall withdraw from the Distribution Account that portion of the
Group I Available Funds equal to the Group I Principal Distribution Amount for
such Distribution Date, and make the following disbursements and transfers in
the order of priority described below, in each case to the extent of the Group I
Principal Distribution Amount remaining for such Distribution Date:

                            first, to Fannie Mae for payment of (i) the Guaranty
                            Fee and (ii) any Guarantor Reimbursement Amount then
                            due (to the extent not paid from the Group I
                            Interest Remittance Amount for such Distribution
                            Date);

                            second, to the Class I-A Certificates, until the
                            Certificate Principal Balance thereof has been
                            reduced to zero;

                            third, to the I-M2 Component, until the Component
                            Principal Balance thereof has been reduced to zero;
                            and

                            fourth, to the I-M3 Component, until the Component
                            Principal Balance thereof has been reduced to zero.

                      (ii) Any principal remaining undistributed pursuant to
clause (i) above will be used in determining the amount of Group I Net Monthly
Excess Cashflow, if any, for such Distribution Date.

                      (iii) On each Distribution Date (a) prior to the Group II
Stepdown Date or (b) on which a Group II Trigger Event is in effect, the Trust
Administrator shall withdraw from the Distribution Account that portion of Group
II Available Funds equal to the Group II Principal Distribution Amount for such
Distribution Date, and make the following disbursements and transfers in the
order of priority described below, in each case to the extent of the Group II
Principal Distribution Amount remaining for such Distribution Date:

                                      128
<PAGE>

                           first, (i) concurrently, to the Class II-A1
                           Certificates, the Class II-A1 Principal Distribution
                           Amount, until the Certificate Principal Balance of
                           the Class II-A1 Certificates has been reduced to
                           zero, and to the Class II-A2 Certificates, the Class
                           II-A Remaining Principal Distribution Amount, until
                           the Certificate Principal Balance of the Class II-A2
                           Certificates has been reduced to zero; then (ii) to
                           the Class II-A3 Certificates, any portion of the
                           Class II-A Remaining Principal Distribution Amount
                           that remains following the distribution to the Class
                           II-A2 Certificates in clause (i), until the
                           Certificate Principal Balance thereof has been
                           reduced to zero;

                           second, to the Class II-M1 Certificates, until the
                           Certificate Principal Balance thereof has been
                           reduced to zero;

                           third, to the II-M2 Component, until the Component
                           Principal Balance thereof has been reduced to zero;
                           and

                           fourth, to the II-M3 Component, until the Component
                           Principal Balance thereof has been reduced to zero.

                      (iv) Any principal remaining undistributed pursuant to
clause (iii) above will be used in determining the amount of Group II Net
Monthly Excess Cashflow, if any, for such Distribution Date.

         (c) (i) On each Distribution Date (a) on or after the Group I Stepdown
Date and (b) on which a Group I Trigger Event is not in effect, the Trust
Administrator shall withdraw from the Distribution Account that portion of the
Group I Available Funds equal to the Group I Principal Distribution Amount for
such Distribution Date, and make the following disbursements and transfers in
the order of priority described below, in each case to the extent of the Group I
Principal Distribution Amount remaining for such Distribution Date:

                           first, to Fannie Mae for payment of (i) the Guaranty
                           Fee and (ii) any Guarantor Reimbursement Amount then
                           due (to the extent not paid from the Group I Interest
                           Remittance Amount for such Distribution Date);

                           second, to the Class I-A Certificates, the Class I-A
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           third, to the I-M2 Component, the I-M2 Component
                           Principal Distribution Amount, until the Component
                           Principal Balance thereof has been reduced to zero;
                           and

                           fourth, to the I-M3 Component, the I-M3 Component
                           Principal Distribution Amount, until the Component
                           Principal Balance thereof has been reduced to zero.

                                      129
<PAGE>

                      (ii) Any principal remaining undistributed pursuant to
clause (i) above following these distributions will be used in determining the
amount of Group I Net Monthly Excess Cashflow, if any, for such Distribution
Date.

                      (iii) On each Distribution Date (a) on or after the Group
II Stepdown Date and (b) on which a Group II Trigger Event is not in effect, the
Trust Administrator shall withdraw from the Distribution Account that portion of
Group II Available Funds equal to the Group II Principal Distribution Amount for
such Distribution Date, and make the following disbursements and transfers in
the order of priority described below, in each case to the extent of the Group
II Principal Distribution Amount remaining for such Distribution Date:

                           first, (i) concurrently, to the Class II-A1
                           Certificates, the Class II-A1 Principal Distribution
                           Amount, until the Certificate Principal Balance of
                           the Class II-A1 Certificates has been reduced to
                           zero, and to the Class II-A2 Certificates, the Class
                           II-A Remaining Principal Distribution Amount, until
                           the Certificate Principal Balance of the Class II-A2
                           Certificates has been reduced to zero; then (ii) to
                           the Class II-A3 Certificates, any portion of the
                           Class II-A Remaining Principal Distribution Amount
                           that remains following the distribution to the Class
                           II-A2 Certificates in clause (i), until the
                           Certificate Principal Balance thereof has been
                           reduced to zero;

                           second, to the Class II-M1 Certificates, the Class
                           II-M1 Principal Distribution Amount, until the
                           Certificate Principal Balance thereof has been
                           reduced to zero;

                           third, to the II-M2 Component, the II-M2 Component
                           Principal Distribution Amount, until the Component
                           Principal Balance thereof has been reduced to zero;
                           and

                           fourth, to the II-M3 Component, the II-M3 Component
                           Principal Distribution Amount, until the Component
                           Principal Balance thereof has been reduced to zero.

                      (iv) Any principal remaining undistributed pursuant to
clause (iii) above will be used in determining the amount of Group II Net
Monthly Excess Cashflow, if any, for such Distribution Date.

         (d) (i) On each Distribution Date, any Group I Net Monthly Excess
Cashflow shall be paid in the following order or priority, in each case to the
extent of the Group I Net Monthly Excess Cashflow remaining undistributed:

                                    (a) to the Class I-A Certificates and Group
I Mezzanine Components then entitled to receive distributions in respect of
principal, in an amount equal to any Group I Extra Principal Distribution
Amount, payable to such Classes of Certificates or such Components as part of
the Group I Principal Distribution Amount pursuant to Section 4.01(b)(i) or
Section 4.01(c)(i) above, as applicable;

                                      130
<PAGE>

                                    (b) to the Class II-A Certificates, the
Class II-M1 Certificates and Group II Mezzanine Components then entitled to
receive distributions in respect of principal, in an amount equal to any
remaining Group II Overcollateralization Deficiency Amount, allocated among such
Group II Certificates and Group II Mezzanine Components (after giving effect to
the distribution of the Group II Principal Distribution Amount payable to such
Classes of Certificates or such Components) as distribution of Group II
Principal Distribution Amount pursuant to Section 4.01(b)(iii) or 4.01(c)(iii).

                                    (c) to the I-M2 Component, in an amount
equal to the Unpaid Interest Shortfall Amount, if any, for such Component for
such Distribution Date;

                                    (d) to the I-M2 Component, in an amount
equal to the Allocated Realized Loss Amount, if any, for such Component for such
Distribution Date;

                                    (e) to the I-M3 Component, in an amount
equal to the Unpaid Interest Shortfall Amount, if any, for such Component for
such Distribution Date;

                                    (f) to the I-M3 Component, in an amount
equal to the Allocated Realized Loss Amount, if any, for such Component for such
Distribution Date;

                                    (g) to the Group I Reserve Fund, the amount
of any Net WAC Rate Carryover Amounts with respect to the Class I-A Certificates
and Group I Mezzanine Components for such Distribution Date (or, if no Net WAC
Rate Carryover Amounts are payable to such Classes of Certificates or such
Components on such Distribution Date, to the Group I Reserve Fund, an amount
such that when added to other amounts already on deposit in the Group I Reserve
Fund, the aggregate amount on deposit therein is equal to $1,000);

                                    (h) to REMIC X, as holder of REMIC 3
Uncertificated Regular Interest LT3-IC, the Monthly Interest Distributable
Amount for such Class and any Group I Overcollateralization Release Amount for
such Distribution Date (net of such portion of amounts payable pursuant to this
clause (h) that were paid pursuant to clause (g) above);

                                    (i) to REMIC X, as holder of REMIC 3
Uncertificated Regular Interest LT3-IIC, the Monthly Interest Distributable
Amount for such Class and any Group II Overcollateralization Release Amount for
such Distribution Date to the extent not distributed pursuant to Section
4.01(d)(ii)(j);

                                    (j) if such Distribution Date follows the
Prepayment Period during which occurs the latest date on which a Prepayment
Charge may be required to be paid in respect of any Group I Mortgage Loans, to
REMIC X, as holder of REMIC 3 Uncertificated Regular Interest LT3-IP, in
reduction of the Uncertificated Principal Balance thereof, until the
Uncertificated Principal Balance thereof is reduced to zero; and

                                    (k) any remaining amounts to the Class R
Certificates (in respect of the appropriate Class R-3 Interest).

                                      131
<PAGE>

         On each Distribution Date, after making the distributions of the Group
I Available Funds as provided above, the Trust Administrator shall withdraw from
the Group I Reserve Fund the amount on deposit therein and shall distribute such
amounts to the Class I-A Certificates and Group I Mezzanine Components in the
following order and priority, in each case to the extent of amounts remaining in
the Group I Reserve Fund and in each case to the extent of the Net WAC Rate
Carryover Amount for such Classes of Certificates or such Components for such
Distribution Date: first, to the Class I-A Certificates; second, to the I-M2
Component; and third, to the I-M3 Component. Any remaining amount shall be
re-deposited into the Group I Reserve Fund (to the extent of the required amount
of $1,000).

                      (ii) On each Distribution Date, any Group II Net Monthly
Excess Cashflow shall be paid in the following order of priority, in each case
to the extent of the Group II Net Monthly Excess Cashflow remaining
undistributed:

                                    (a) to the Class II-A Certificates, the
Class II-M1 Certificates and Group II Mezzanine Components then entitled to
receive distributions in respect of principal, in an amount equal to any Group
II Extra Principal Distribution Amount, payable to such Classes of Certificates
or such Components as part of the Group II Principal Distribution Amount
pursuant to Section 4.01(b)(iii) or 4.01(c)(iii) above, as applicable;

                                    (b) to the Class I-A Certificates and Group
I Mezzanine Components then entitled to receive distributions in respect of
principal, in an amount equal to any remaining Group I Overcollateralization
Deficiency Amount, allocated among such Class I-A Certificates and Group I
Mezzanine Components (after giving effect to the distribution of the Group I
Principal Distribution Amount payable to such Classes of Certificates or such
Components) as distribution of Group I Principal Distribution Amount pursuant to
Section 4.01(b)(i) or 4.01(c)(i);

                                    (c) to the Class II-M1 Certificates, in an
amount equal to the Unpaid Interest Shortfall Amount, if any, for such Class for
such Distribution Date;

                                    (d) to the Class II-M1 Certificates, in an
amount equal to the Allocated Realized Loss Amount, if any, for such Class for
such Distribution Date;

                                    (e) to the II-M2 Component, in an amount
equal to the Unpaid Interest Shortfall Amount, if any, for such Component for
such Distribution Date;

                                    (f) to the II-M2 Component, in an amount
equal to the Allocated Realized Loss Amount, if any, for such Component for such
Distribution Date;

                                    (g) to the II-M3 Component, in an amount
equal to the Unpaid Interest Shortfall Amount, if any, for such Component for
such Distribution Date;

                                    (h) to the II-M3 Component, in an amount
equal to the Allocated Realized Loss Amount, if any, for such Component for such
Distribution Date;

                                    (i) to the Group II Reserve Fund, the amount
of any Net WAC Rate Carryover Amounts with respect to the Class II-A
Certificates and Group II Mezzanine Components for such Distribution Date (or,
if no Net WAC Rate Carryover Amounts are payable to such Classes of such
Certificates and Components on such Distribution Date, to the Group II Reserve
Fund, an amount such that when added to other amounts already on deposit in the
Group II Reserve Fund, the aggregate amount on deposit therein is equal to
$1,000);

                                      132
<PAGE>

                                    (j) to REMIC X, as holder of REMIC 3
Uncertificated Regular Interest LT3-IIC, the Monthly Interest Distributable
Amount for such Class and any Group II Overcollateralization Release Amount for
such Distribution Date (net of such portion of amounts payable pursuant to this
clause (j) that were paid pursuant to clause (k) above);

                                    (k) to REMIC X, as holder of REMIC 3
Uncertificated Regular Interest LT3-IC, the Monthly Interest Distributable
Amount for such Class and any Group I Overcollateralization Release Amount for
such Distribution Date to the extent not distributed pursuant to Section
4.01(d)(i)(h);

                                    (l) if such Distribution Date follows the
Prepayment Period during which occurs the latest date on which a Prepayment
Charge may be required to be paid in respect of any Mortgage Loans, to REMIC X,
as holder of REMIC 3 Uncertificated Regular Interest LT3-IIP, in reduction of
the Uncertificated Principal Balance thereof, until the Uncertificated Principal
Balance thereof is reduced to zero; and

                                    (m) any remaining amounts to the Class R
Certificates (in respect of the appropriate Class R-3 Interest).

         On each Distribution Date, after making the distributions of the Group
II Available Funds as provided above, the Trust Administrator shall withdraw
from the Group II Reserve Fund the amount on deposit therein and shall
distribute such amounts to the Class II-A Certificates, the Class II-M1
Certificates and Group II Mezzanine Components in the following order and
priority, in each case to the extent of amounts remaining in the Group II
Reserve Fund and in each case to the extent of the Net WAC Rate Carryover Amount
for such Classes of Certificates or such Components for such Distribution Date:
first, to the Class II-A1 Certificates, the Class II-A2 Certificates and the
Class II-A3 Certificates, pro rata; second, to the Class II-M1 Certificates; and
third, to the II-M2 Component; and fourth, to the II-M3 Component. Any remaining
amount shall be re-deposited into the Group II Reserve Fund (to the extent of
the required amount of $1,000).

         On each Distribution Date, all amounts representing Prepayment Charges
in respect of the Mortgage Loans received during the related Prepayment Period
and any Master Servicer Prepayment Charge Amounts paid by or collected by the
Master Servicer during the related Prepayment Period will be withdrawn from the
Distribution Account and distributed by the Trust Administrator to REMIC 3
Uncertificated Regular Interest LT3-IP (in respect of Group I Mortgage Loans) or
REMIC 3 Uncertificated Regular Interest LT3-IIP (in respect of Group II Mortgage
Loans) and shall not be available for distribution to any other Class of
Certificates or Component. The payment of the foregoing amounts in respect of
such Regular Interests shall not reduce the Uncertificated Principal Balance
thereof.

         Without limiting the provisions of Section 9.01(b), by acceptance of
the Residual Certificates, the Holders of the Residual Certificates agree, for
so long as the Insured NIM Notes are outstanding or any amounts are reimbursable
or payable to the NIMS Insurer in accordance with the terms of the Indenture, in
connection with any amount distributable to the Holders of the Residual
Certificates pursuant to clauses (i)(k) and (ii)(m) above, to assign and
transfer any such amounts, and to the extent received to pay any such amounts,
to the Class I-C Certificates and Class II-C Certificates, respectively.

                                      133
<PAGE>

                  (e) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in this Section 4.01 or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trust Administrator in
writing at least five Business Days prior to the Record Date immediately prior
to such Distribution Date and is the registered owner of Certificates having an
initial aggregate Certificate Principal Balance or Notional Amount that is in
excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the Original Class
Certificate Principal Balance or Original Class Notional Amount of such Class of
Certificates, or otherwise by check mailed by first class mail to the address of
such Holder appearing in the Certificate Register. Notwithstanding the
foregoing, the Holders of the Class I-A Certificates and the Class I-S
Certificates shall receive all distributions pursuant to this Section 4.01(e) by
wire transfer of immediately available funds. The final distribution on each
Certificate will be made in like manner, but only upon presentment and surrender
of such Certificate at the Corporate Trust Office of the Trust Administrator or
such other location specified in the notice to Certificateholders of such final
distribution.

         Payments to the Guarantor on each Distribution Date will be made by
wire transfer of immediately available funds to the following Federal Reserve
Account:

                  Telegraphic:  FNMA NYC
                  ABA:  021039500
                  Ref:  GR466 01-T13

         Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Certificate Owners that it represents. All such credits
and disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Certificates. None of the Trustee, the Trust Administrator, the Depositor,
the Master Servicer or the Seller shall have any responsibility therefor except
as otherwise provided by applicable law.

                  (f) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. None of the Holders of any Class of Certificates, the Trustee or the
Master Servicer shall in any way be responsible or liable to the Holders of any
other Class of Certificates in respect of amounts properly previously
distributed on the Certificates.

                                      134
<PAGE>

                  (g) Except as otherwise provided in Section 9.01, whenever the
Trust Administrator expects that the final distribution with respect to any
Class of Certificates will be made on the next Distribution Date, the Trust
Administrator shall, no later than three (3) days before the related
Distribution Date, mail to the Trustee, the NIMS Insurer, the Guarantor and each
Holder on such date of such Class of Certificates a notice to the effect that:

                      (i) the Trust Administrator expects that the final
distribution with respect to such Class of Certificates will be made on such
Distribution Date but only upon presentation and surrender of such Certificates
at the office of the Trust Administrator therein specified, and

                      (ii) no interest shall accrue on such Certificates from
and after the end of the related Accrual Period; provided, that such notice
shall be sent to the Guarantor only with respect to Guaranteed Certificates.

         Any funds not distributed to any Holder or Holders of Certificates of
such Class on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and held
in trust by the Trust Administrator and credited to the account of the
appropriate non-tendering Holder or Holders. If any Certificates as to which
notice has been given pursuant to this Section 4.01(g) shall not have been
surrendered for cancellation within six months after the time specified in such
notice, the Trust Administrator shall mail a second notice to the remaining
non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall, directly or
through an agent, mail a final notice to the remaining non-tendering
Certificateholders concerning surrender of their Certificates but shall continue
to hold any remaining funds for the benefit of non-tendering Certificateholders.
The costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in such trust fund.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall pay to
Greenwich Capital Markets, Inc. all such amounts, and all rights of
non-tendering Certificateholders in or to such amounts shall thereupon cease. No
interest shall accrue or be payable to any Certificateholder on any amount held
in trust by the Trust Administrator as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment thereof in accordance
with this Section 4.01(g).

                  (h) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate, a Class
II-M1 Certificate or the Component Principal Balance of a Mezzanine Component be
reduced more than once in respect of any particular amount both (a) allocated to
such Certificate or such Component in respect of Realized Losses pursuant to
Section 4.06 and (b) distributed to such Certificate or such Component in
reduction of the Certificate Principal Balance or Component Principal Balance
thereof pursuant to this Section 4.01 from related Net Monthly Excess Cashflow,
(ii) in no event shall the Uncertificated Principal Balance of a REMIC 2 Regular
Interest be reduced more than once in respect of any particular amount both (a)
allocated to such REMIC 2 Regular Interest in respect of Realized Losses
pursuant to Section 4.06 and (b) distributed on such REMIC 2 Regular Interest in
reduction of the Uncertificated Principal Balance thereof pursuant to Section
4.05, (iii) in no event shall the Uncertificated Principal Balance of a REMIC 1A
Regular Interest or REMIC 1B Regular Interest be reduced more than once in
respect of any particular amount both (a) allocated to such REMIC 1A Regular
Interest or REMIC 1B Regular Interest in respect of Realized Losses pursuant to
Section 4.06 and (b) distributed on such REMIC 1A Regular Interest or REMIC 1B
Regular Interest in reduction of the Uncertificated Principal Balance thereof
pursuant to Section 4.05 and (iv) in no event shall the Uncertificated Principal
Balance of a REMIC 0A Regular Interest or REMIC 0B Regular Interest be reduced
more than once in respect of any particular amount both (a) allocated to such
REMIC 0A Regular Interest or REMIC 0B Regular Interest in respect of Realized
Losses pursuant to Section 4.06 and (b) distributed on such REMIC 0A Regular
Interest or REMIC 0B Regular Interest in reduction of the Uncertificated
Principal Balance thereof pursuant to Section 4.05.

                                      135
<PAGE>

                  (i) Any amounts distributed to REMIC X on any Distribution
Date under Section 4.01(d) shall, on such Distribution Date, be distributed by
REMIC X as follows: (i) amounts received in respect of REMIC 3 Uncertificated
Regular Interest LT3-IC shall be distributed pro rata to the holders of the
Class I-C Certificates; (ii) amounts received in respect of REMIC 3
Uncertificated Regular Interest LT3-IIC shall be distributed pro rata to the
holders of the Class II-C Certificates; (iii) amounts received in respect of
REMIC 3 Uncertificated Regular Interest LT3-IP shall be distributed pro rata to
the holders of the Class I-P Certificates; and (iv) amounts received in respect
of REMIC 3 Uncertificated Regular Interest LT3-IIP shall be distributed pro rata
to the holders of the Class II-P Certificates; provided, however, that the Class
C Certificates shall not be entitled to receive more than their Monthly Interest
Distributable Amount, plus any unpaid Monthly Interest Distributable Amount from
prior periods, plus any remaining Certificate Principal Balance. Any amounts
remaining shall be distributed to the holders of the Class R-X Certificates.
Distributions that reduce the Uncertificated Principal Balance of the REMIC 3
Uncertificated Regular Interest shall reduce the Certificate Principal Balance
of the corresponding certificate by a like amount. For the avoidance of doubt,
the provisions of Sections 4.01(e), 4.01(f) and 4.01(g) shall apply to the Class
C and the Class P Certificates.

Section 4.02 Preference Claims.

         The Trustee and the Trust Administrator shall promptly notify the NIMS
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee or the Trust Administrator, as applicable,
has actual knowledge, seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership or similar law (a "Preference
Claim") of any distribution made with respect to the Class C Certificates or
Class P Certificates. Each Holder of the Class C Certificates or the Class P
Certificates, by its purchase of such Certificates, the Master Servicer, the
Trust Administrator and the Trustee hereby agree that the NIMS Insurer may at
any time during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedes or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the NIMS Insurer shall be subrogated to the rights of the Master
Servicer, the Trustee, the Trust Administrator and each Holder of the Class C
Certificates and Class P Certificates in the conduct of any such Preference
Claim, including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim; provided, however, that the NIMS Insurer will not have
any rights with respect to any Preference Claim set forth in this paragraph
unless the Trustee or the Trust Administrator, as indenture trustee with respect
to the Insured NIM Notes or the holder of any Insured NIM Notes has been
required to relinquish a distribution made on the Class C Certificates, the
Class P Certificates or the Insured NIM Notes, as applicable, and the NIMS
Insurer made a payment in respect of such relinquished amount.

                                      136
<PAGE>

Section 4.03 Statements.

                  (a) On each Distribution Date, based, as applicable, on
information provided to it by the Master Servicer, the Trust Administrator shall
prepare and make available by electronic medium (as set forth in the penultimate
paragraph of this Section 4.03(a)) to each Holder of the Regular Certificates,
the Trustee, the Master Servicer, the NIMS Insurer, the Guarantor and the Rating
Agencies, a statement as to the distributions made on such Distribution Date:

                  (i) the amount of the distribution made on such Distribution
         Date to the Holders of each Class of Regular Certificates (other than
         the Class S Certificates), including on account of the Mezzanine
         Components, separately identified, allocable to principal and the
         amount of the distribution made to the Holders of the Class P
         Certificates allocable to Prepayment Charges and Master Servicer
         Prepayment Charge Payment Amounts;

                  (ii) the amount of the distribution made on such Distribution
         Date to the Holders of each Class of Regular Certificates (other than
         the Class P Certificates), including on account of the Mezzanine
         Components, allocable to interest, separately identified;

                  (iii) the Group I Overcollateralized Amount, the Group II
         Overcollateralized Amount, the Group I Overcollateralization Release
         Amount, the Group II Overcollateralization Release Amount, the Group I
         Overcollateralization Deficiency Amount, the Group II
         Overcollateralization Deficiency Amount, the Group I
         Overcollateralization Target Amount and the Group II
         Overcollateralization Target Amount as of such Distribution Date and
         the Group I Excess Overcollateralized Amount and the Group II Excess
         Overcollateralized Amount, for such Distribution Date;

                  (iv) the aggregate amount of servicing compensation received
         by the Master Servicer with respect to the related Due Period and such
         other customary information as the Trust Administrator deems necessary
         or desirable, or which a Certificateholder reasonably requests, to
         enable Certificateholders to prepare their tax returns;

                  (v) the Deficiency Amount, the Guarantor Payments and the
         Guarantor Reimbursement Amount for such Distribution Date;

                  (vi) the aggregate amount of Advances for the related Due
         Period;

                  (vii) the aggregate Stated Principal Balance of the Mortgage
         Loans at the Close of Business at the end of the related Due Period;

                                      137
<PAGE>

                  (viii) the number, aggregate principal balance, weighted
         average remaining term to maturity and weighted average Mortgage Rate
         of the Mortgage Loans as of the related Determination Date and the
         number and aggregate principal balance of all Subsequent Mortgage Loans
         added during the preceding Prepayment Period;

                  (ix) the number and aggregate unpaid principal balance of
         Mortgage Loans (a) delinquent 30-59 days, (b) delinquent 60-89 days,
         (c) delinquent 90 or more days in each case, as of the last day of the
         preceding calendar month provided, however that any aggregate unpaid
         principal balance of Mortgage Loans shall be reported as of the last
         day of the related Due Period, (d) as to which foreclosure proceedings
         have been commenced and (e) with respect to which the related Mortgagor
         has filed for protection under applicable bankruptcy laws, with respect
         to whom bankruptcy proceedings are pending or with respect to whom
         bankruptcy protection is in force;

                  (x) with respect to any Mortgage Loan that became an REO
         Property during the preceding Prepayment Period, the unpaid principal
         balance and the Principal Balance of such Mortgage Loan as of the date
         it became an REO Property;

                  (xi) the total number and cumulative principal balance of all
         REO Properties as of the Close of Business of the last day of the
         preceding Prepayment Period;

                  (xii) the aggregate amount of Principal Prepayments made
         during the related Prepayment Period;

                  (xiii) the aggregate amount of Realized Losses incurred during
         the related Prepayment Period and the cumulative amount of Realized
         Losses;

                  (xiv) the aggregate amount of Extraordinary Trust Fund
         expenses withdrawn from the Collection Account or the Distribution
         Account for such Distribution Date;

                  (xv) the Certificate Principal Balance of the Class A
         Certificates, the Mezzanine Certificates and the Class C Certificates,
         after giving effect to the distributions made on such Distribution
         Date, the Notional Amount of the Class S Certificates and the Class C
         Certificates, after giving effect to the distributions made on such
         Distribution Date, and the Component Principal Balance of the Mezzanine
         Components, after giving effect to the distributions made on such
         Distribution Date;

                  (xvi) the Monthly Interest Distributable Amount in respect of
         the Class A Certificates, the Class S Certificates, the Mezzanine
         Certificates, the Mezzanine Components and the Class C Certificates for
         such Distribution Date and the Unpaid Interest Shortfall Amount, if
         any, with respect to the Class A Certificates, the Class S
         Certificates, the Mezzanine Certificates and the Mezzanine Components
         for such Distribution Date;

                  (xvii) the aggregate amount of any Prepayment Interest
         Shortfalls for such Distribution Date, to the extent not covered by
         payments by the Master Servicer pursuant to Section 3.24, and the
         aggregate amount of any Relief Act Interest Shortfalls for such
         Distribution Date;

                                      138
<PAGE>

                  (xviii) the Group I Credit Enhancement Percentage and the
         Group II Credit Enhancement Percentage for such Distribution Date;

                  (xix) the Net WAC Rate Carryover Amount for the Class A
         Certificates, the Mezzanine Certificates and the Mezzanine Components,
         if any, for such Distribution Date and the amount remaining unpaid
         after reimbursements therefor on such Distribution Date;

                  (xx) [reserved];

                  (xxi) the date when a Stepdown Date or a Trigger Event has
         occurred;

                  (xxii) the Group I Available Funds and Group II Available
         Funds;

                  (xxiii) the respective Pass-Through Rates applicable to the
         Class A Certificates, the Class S Certificates, the Mezzanine
         Certificates, the Mezzanine Components and the Class C Certificates for
         such Distribution Date and the Pass-Through Rate applicable to the
         Class A Certificates, the Mezzanine Certificates and the Mezzanine
         Components for the immediately succeeding Distribution Date;

                  (xxiv) the Guaranty Fee to be paid to the Guarantor with
         respect to the Guaranteed Certificates for such Distribution Date; and

                  (xxv) such other information as the Guarantor may reasonably
         request in such format as reasonably required by the Guarantor and any
         other information that is required by the Code and regulations
         thereunder to be made available to Certificateholders.

                  (xxvi) the amount on deposit in each of the Pre-Funding
         Accounts and the Reserve Funds; and

                  (xxvii) for the distribution occurring on the Distribution
         Date immediately following the end of a Pre-Funding Period, the balance
         on deposit in the related Pre-Funding Account that has not been used to
         purchase Subsequent Mortgage Loans and that is being distributed to the
         related Class A Certificates as a mandatory prepayment of principal, if
         any, on such Distribution Date.

         Subject to Section 4.03(f) below, the Trust Administrator will make
such statement (and, at its option, any additional files containing the same
information in an alternative format) available each month to
Certificateholders, the Master Servicer, the NIMS Insurer, the Guarantor and the
Rating Agencies via the Trust Administrator's internet website. The Trust
Administrator's internet website shall initially be located at
"http:\\www-apps.gis.deutsche-bank.com/invr. Assistance in using the website can
be obtained by calling the Trust Administrator's customer service desk at
1-800-735-7777. Parties that are unable to use the above distribution options
are entitled to have a paper copy mailed to them via first class mail by calling
the customer service desk and indicating such. The Trust Administrator shall
have the right to change the way such statements are distributed in order to
make such distribution more convenient and/or more accessible to the above
parties and the Trust Administrator shall provide timely and adequate
notification to all above parties regarding any such changes.

                                      139
<PAGE>

         In the case of information furnished pursuant to subclauses (i) through
(iii) above, the amounts shall be expressed in a separate section of the report
as a dollar amount for each Class for each $1,000 original dollar amount as of
the Closing Date.

                  (b) Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall, upon written request, furnish to
each Person who at any time during the calendar year was a Certificateholder of
a Regular Certificate, if requested in writing by such Person, such information
as is reasonably necessary to provide to such Person a statement containing the
information set forth in subclauses (i) through (iii) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Trust Administrator shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be prepared and furnished by the Trust Administrator to Certificateholders
pursuant to any requirements of the Code as are in force from time to time.

                  (c) On each Distribution Date, the Trust Administrator shall
forward to the Class R Certificateholders and the NIMS Insurer a copy of the
reports forwarded to the Regular Certificateholders in respect of such
Distribution Date with such other information as the Trust Administrator deems
necessary or appropriate.

                  (d) Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall deliver to each Person who at any
time during the calendar year was a Class R Certificateholder, if requested in
writing by such Person, such information as is reasonably necessary to provide
to such Person a statement containing the information provided pursuant to the
previous paragraph aggregated for such calendar year or applicable portion
thereof during which such Person was a Class R Certificateholder. Such
obligation of the Trust Administrator shall be deemed to have been satisfied to
the extent that substantially comparable information shall be prepared and
furnished to Certificateholders by the Trust Administrator pursuant to any
requirements of the Code as from time to time in force.

                  (e) On each Distribution Date the Trust Administrator shall
provide Bloomberg Financial Markets, L.P. ("Bloomberg") CUSIP level factors for
each Class of Certificates as of such Distribution Date, using a format and
media mutually acceptable to the Trust Administrator and Bloomberg.

                  (f) On the fourth Business Day preceding each Distribution
Date, the Trust Administrator shall deliver to the Guarantor (by electronic
medium as specified in the next sentence) a statement identifying the Class
Factor for each Class of Certificates. The Trust Administrator shall deliver
such statement on or before 12:00 noon (New York time) on such day via the
internet using the following domain name: bond_admin@fanniemae.com. If a
Guarantor Payment will be payable on a Distribution Date, all information
required under Section 4.03(a) must also be similarly delivered to Guarantor on
such third Business Day proceeding such Distribution Date. The second
consecutive failure by the Trust Administrator to deliver the Class Factor (or
to deliver an accurate Class Factor) to the Guarantor shall constitute an event
of default and permit the Guarantor to remove the Trust Administrator for cause;
provided that the Master Servicer had delivered the Remittance Report for the
related Distribution Date to the Trust Administrator pursuant to Section 4.04.

                                      140
<PAGE>

Section 4.04 Remittance Reports; Advances.

                  (a) Within one Business Day after each Determination Date, but
in no event later than such date which would allow the Trust Administrator to
submit a claim to the NIMS Insurer under the Insured Indenture, the Master
Servicer shall deliver to the NIMS Insurer, the Guarantor, the Trust
Administrator and the Trustee by telecopy or electronic mail (or by such other
means as the Master Servicer, the NIMS Insurer, the Guarantor, the Trust
Administrator and the Trustee, as the case may be, may agree from time to time)
a Remittance Report with respect to the related Distribution Date. Not later
than each Master Servicer Remittance Date (or, in the case of certain
information, as agreed between the Trust Administrator and the Master Servicer,
not later than four Business Days after the end of each Due Period), the Master
Servicer shall deliver or cause to be delivered to the Trust Administrator in
addition to the information provided on the Remittance Report, such other
information reasonably available to it with respect to the Mortgage Loans as the
Trust Administrator may reasonably require to perform the calculations necessary
to make the distributions contemplated by Section 4.01 and to prepare the
statements to Certificateholders contemplated by Section 4.03. The Trust
Administrator shall not be responsible to recompute, recalculate or verify any
information provided to it by the Master Servicer.

                  (b) The amount of Advances to be made by the Master Servicer
for any Distribution Date shall equal, subject to Section 4.04(d), the sum of
(i) the aggregate amount of Monthly Payments (with each interest portion thereof
net of the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans, which Monthly Payments were delinquent as of the close of
business on the related Determination Date, plus (ii) with respect to each REO
Property, which REO Property was acquired during or prior to the related
Prepayment Period and as to which such REO Property an REO Disposition did not
occur during the related Prepayment Period, an amount equal to the excess, if
any, of the Monthly Payments (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date in
respect of the related Mortgage Loans, over the net income from such REO
Property transferred to the Distribution Account pursuant to Section 3.23 for
distribution on such Distribution Date.

         On or before 3:00 p.m. New York time on the Master Servicer Remittance
Date, the Master Servicer shall remit in immediately available funds to the
Trust Administrator for deposit in the Distribution Account an amount equal to
the aggregate amount of Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case, it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.04, used by the
Master Servicer in discharge of any such Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of Advances to be made
by the Master Servicer with respect to the Mortgage Loans and REO Properties.
Any amounts held for future distribution and so used shall be appropriately
reflected in the Master Servicer's records and replaced by the Master Servicer
by deposit in the Collection Account on or before any future Master Servicer
Remittance Date to the extent that the Available Funds for the related
Distribution Date (determined without regard to Advances to be made on the
Master Servicer Remittance Date) shall be less than the total amount that would
be distributed to the Classes of Certificateholders pursuant to Section 4.01 on
such Distribution Date if such amounts held for future distributions had not
been so used to make Advances. The Trust Administrator will provide notice to
the NIMS Insurer, the Guarantor, the Trustee and the Master Servicer by telecopy
by the close of business on any Master Servicer Remittance Date in the event
that the amount remitted by the Master Servicer to the Trust Administrator on
such date is less than the Advances required to be made by the Master Servicer
for the related Distribution Date.

                                      141
<PAGE>

                  (c) The obligation of the Master Servicer to make such
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan, shall continue
until the Mortgage Loan is paid in full or until the recovery of all Liquidation
Proceeds thereon.

                  (d) Notwithstanding anything herein to the contrary, no
Advance or Servicing Advance shall be required to be made hereunder by the
Master Servicer if such Advance or Servicing Advance would, if made, constitute
a Nonrecoverable Advance. The determination by the Master Servicer that it has
made a Nonrecoverable Advance or that any proposed Advance or Servicing Advance,
if made, would constitute a Nonrecoverable Advance, shall be evidenced by an
Officers' Certificate of the Master Servicer delivered to the NIMS Insurer, the
Guarantor, the Depositor, the Trust Administrator and the Trustee.

Section 4.05 Distributions on the REMIC Regular Interests.

                  (a) On each Distribution Date, the Trust Administrator shall
cause the Group I Available Funds, in the following order of priority, to be
distributed by REMIC 0A to REMIC 1A on account of the REMIC 0A Regular Interests
or withdrawn from the Distribution Account and distributed to the Holders of the
Class R Certificates (in respect of the Class R-0A Interest), as the case may
be:

                  (1) first, Group I Available Funds equal to the Group I
         Interest Remittance Amount shall be distributed pro rata, based on
         Uncertificated Accrued Interest to the Holders of REMIC 0A Regular
         Interest LT0A-1, REMIC 0A Regular Interest LT0A-2, and REMIC 0A Regular
         Interest LT0A-P, in each case in an amount equal to (A) the
         Uncertificated Accrued Interest for such REMIC 0A Regular Interest for
         such Distribution Date, plus (B) any amounts in respect thereof
         remaining unpaid from previous Distribution Dates;

                  (2) second, the remainder of the Group I Available Funds after
         the distribution of the Group I Interest Remittance Amount pursuant to
         clause (1) above shall be distributed to the Holders of REMIC 0A
         Regular Interests as follows:

                           (A) to the Holders of REMIC 0A Regular Interest
                  LT0A-P, on the Distribution Date immediately following the
                  expiration of the latest Prepayment Charge as identified on
                  the Prepayment Charge Schedule or any Distribution Date
                  thereafter until $100 has been distributed pursuant to this
                  clause;

                                      142
<PAGE>

                           (B) to the Holders of REMIC 0A Regular Interest
                  LT0A-2, until the Uncertificated Principal Balance thereof is
                  reduced to zero;

                           (C) to the Holders of REMIC 0A Regular Interest
                  LT0A-1, until the Uncertificated Principal Balance thereof is
                  reduced to zero; then

                           (D) any remaining amount to the Holders of the Class
                  R Certificates (in respect of the Class R-0A Interest).

         On each Distribution Date, all amounts representing Prepayment Charges
in respect of the Group I Mortgage Loans received during the related Prepayment
Period will be distributed by REMIC 0A to the Holders of REMIC 0A Regular
Interest LT0A-P. The payment of the foregoing amounts to the Holders of REMIC 0A
Regular Interest LT0A-P shall not reduce the Uncertificated Principal Balance
thereof.

                  (b) On each Distribution Date, the Trust Administrator shall
cause the Group II Available Funds, in the following order of priority, to be
distributed by REMIC 0B to REMIC 1B on account of the REMIC 0B Regular Interests
or withdrawn from the Distribution Account and distributed to the Holders of the
Class R Certificates (in respect of the Class R-0B Interest), as the case may
be:

                  (1) first, Group II Available Funds equal to the Group II
         Interest Remittance Amount shall be distributed pro rata, based on
         Uncertificated Accrued Interest to the Holders of REMIC 0B Regular
         Interest LT0B-1, REMIC 0B Regular Interest LT0B-2, and REMIC 0B Regular
         Interest LT0B-P, in each case in an amount equal to (A) the
         Uncertificated Accrued Interest for such REMIC 0B Regular Interest for
         such Distribution Date, plus (B) any amounts in respect thereof
         remaining unpaid from previous Distribution Dates;

                  (2) second, the remainder of the Group II Available Funds
         after the distribution of the Group II Interest Remittance Amount
         pursuant to clause (1) above shall be distributed to the Holders of
         REMIC 0B Regular Interests as follows:

                           (A) to the Holders of REMIC 0B Regular Interest
                  LT0B-P, on the Distribution Date immediately following the
                  expiration of the latest Prepayment Charge as identified on
                  the Prepayment Charge Schedule or any Distribution Date
                  thereafter until $100 has been distributed pursuant to this
                  clause;

                           (B) to the Holders of REMIC 0B Regular Interest
                  LT0B-2,  until the  Uncertificated Principal Balance thereof
                  is reduced to zero;

                           (C) to the Holders of REMIC 0B Regular Interest
                  LT0B-1, until the Uncertificated Principal Balance thereof is
                  reduced to zero; then

                           (D) any remaining amount to the Holders of the Class
                  R Certificates (in respect of the Class R-0B Interest).

                                      143
<PAGE>

         On each Distribution Date, all amounts representing Prepayment Charges
in respect of the Group II Mortgage Loans received during the related Prepayment
Period will be distributed by REMIC 0B to the Holders of REMIC 0B Regular
Interest LT0B-P. The payment of the foregoing amounts to the Holders of REMIC 0B
Regular Interest LT0B-P shall not reduce the Uncertificated Principal Balance
thereof.

                  (c) On each Distribution Date, the Trust Administrator shall
cause the Group I Available Funds, in the following order of priority, to be
distributed by REMIC 1A to REMIC 2 on account of the REMIC 1A Regular Interests
or withdrawn from the Distribution Account and distributed to the Holders of the
Class R Certificates (in respect of the Class R-1A Interest), as the case may
be:

                  (1) first, Group I Available Funds equal to the Group I
         Interest Remittance Amount shall be distributed to (i) first, pro rata
         to Uncertificated Principal Balances to the Holders of REMIC 1A Regular
         Interest LT1A-2 and REMIC 1A Regular Interest LT1A-3, in each case, in
         an amount equal to (A) the Uncertificated Accrued Interest for such
         REMIC 1A Regular Interest for such Distribution Date, plus (B) any
         amounts in respect thereof remaining unpaid from previous Distribution
         Dates; (ii) second, to the Holders of REMIC 1A Regular Interest LT1A-1
         and REMIC 1A Regular Interest LT1A-P, in an amount equal to (A) the
         Uncertificated Accrued Interest for such Distribution Date, plus (B)
         any amounts in respect thereof remaining unpaid from previous
         Distribution Dates;

                  (2) second, the remainder of the Group I Available Funds after
         the distribution of the Group I Interest Remittance Amount pursuant to
         clause (1) above shall be distributed to the Holders of REMIC 1A
         Regular Interests as follows:

                           (A) to the Holders of REMIC 1A Regular Interest
                  LT1A-P, on the Distribution Date immediately following the
                  expiration of the latest Prepayment Charge as identified on
                  the Prepayment Charge Schedule or any Distribution Date
                  thereafter until $100 has been distributed pursuant to this
                  clause;

                           (B) to the Holders of REMIC 1A Regular Interest
                  LT1A-1, until the Uncertificated Principal Balance of REMIC 1A
                  Regular Interest LT1A-1 is reduced to zero;

                           (C) pro rata to Uncertificated Principal Balances to
                  the Holders of REMIC 1A Regular Interest LT1A-2 and REMIC 1A
                  Regular Interest LT1A-3, until both of the Uncertificated
                  Principal Balances thereof are reduced to zero; then

                           (D) any remaining amount to the Holders of the Class
                  R Certificates (in respect of the Class R-1A Interest).

         On each Distribution Date, all amounts representing Prepayment Charges
in respect of the Group I Mortgage Loans received during the related Prepayment
Period will be distributed by REMIC 1A to the Holders of REMIC 1A Regular
Interest LT1A-P. The payment of the foregoing amounts to the Holders of REMIC 1A
Regular Interest LT1A-P shall not reduce the Uncertificated Principal Balance
thereof.

                                      144
<PAGE>

         (d) On each Distribution Date, the Trust Administrator shall cause the
Group II Available Funds, in the following order of priority, to be distributed
by REMIC 1B to REMIC 2 on account of the REMIC 1B Regular Interests or withdrawn
from the Distribution Account and distributed to the Holders of the Class R
Certificates (in respect of the Class R-1B Interest), as the case may be:

                  (1) first, Group II Available Funds equal to the Group II
         Interest Remittance Amount shall be distributed (i) first, pro rata to
         Uncertificated Principal Balances to the Holders of REMIC 1B Regular
         Interest LT1B-2 and REMIC 1B Regular Interest LT1B-3, in each case, in
         an amount equal to (A) the Uncertificated Accrued Interest for such
         REMIC 1B Regular Interest for such Distribution Date, plus (B) any
         amounts in respect thereof remaining unpaid from previous Distribution
         Dates; (ii) second, to the Holders of REMIC 1B Regular Interest LT1B-1
         and REMIC 1B Regular Interest LT1B-P, in an amount equal to (A) the
         Uncertificated Accrued Interest for such Distribution Date, plus (B)
         any amounts in respect thereof remaining unpaid from previous
         Distribution Dates; and

                  (2) second, the remainder of the Group II Available Funds
         after the distribution of the Group II Interest Remittance Amount
         pursuant to clause (1) above shall be distributed to the Holders of
         REMIC 1B Regular Interests as follows:

                           (A) to the Holders of REMIC 1B Regular Interest
                  LT1B-P, on the Distribution Date immediately following the
                  expiration of the latest Prepayment Charge as identified on
                  the Prepayment Charge Schedule or any Distribution Date
                  thereafter until $100 has been distributed pursuant to this
                  clause;

                           (B) to the Holders of REMIC 1B Regular Interest
                  LT1B-1, until the Uncertificated Principal Balance of REMIC 1B
                  Regular Interest LT1B-1 is reduced to zero;

                           (C) pro rata to Uncertificated Principal Balances to
                  the Holders of REMIC 1B Regular Interest LT1B-2 and REMIC 1B
                  Regular Interest LT1B-3, until both of the Uncertificated
                  Principal Balances thereof are reduced to zero; then

                           (D) any remaining amount to the Holders of the Class
                  R Certificates (in respect of the Class R-1B Interest).

         On each Distribution Date, all amounts representing Prepayment Charges
in respect of the Group II Mortgage Loans received during the related Prepayment
Period will be distributed by REMIC 1B to the Holders of REMIC 1B Regular
Interest LT1B-P. The payment of the foregoing amounts to the Holders of REMIC 1B
Regular Interest LT1B-P shall not reduce the Uncertificated Principal Balance
thereof.

                                      145
<PAGE>

         (e) On each Distribution Date, the Trust Administrator shall cause in
the following order of priority, the following amounts to be distributed by
REMIC 2 to REMIC 3 on account of the REMIC 2 Regular Interests or withdrawn from
the Distribution Account and distributed to the holders of the Class R
Certificates (in respect of the Class R-2 Interest), as the case may be:

                  (1) first, Available Funds equal to the Group I Interest
         Remittance Amount shall be distributed (i) first, to the Holders of
         REMIC 2 Regular Interest LT2S-1A, REMIC 2 Regular Interest LT2S-1B,
         REMIC 2 Regular Interest LT2S-1C and REMIC 2 Regular Interest LT2S-1D,
         pro rata, in an amount equal to (A) the Uncertificated Accrued Interest
         for such Distribution Date, plus (B) any amounts in respect thereof
         remaining unpaid from previous Distribution Dates; and (ii) second, to
         Holders of REMIC 2 Regular Interest LT2A-1, REMIC 2 Regular Interest
         LT2B-1, REMIC 2 Regular Interest LT2C-1, REMIC 2 Regular Interest
         LT2D-1, REMIC 2 Regular Interest LT2E-1 and REMIC 2 Regular Interest
         LT2P-1, pro rata, in an amount equal to (A) the Uncertificated Accrued
         Interest for such Distribution Date, plus (B) any amounts in respect
         thereof remaining unpaid from previous Distribution Dates; provided,
         however, that amounts payable as Uncertificated Accrued Interest in
         respect of REMIC 2 Regular Interest LT2E-1 shall be reduced, when the
         REMIC 2 Overcollateralized Amount 1 is less than the REMIC 2
         Overcollateralization Target Amount 1, by the lesser of (x) the amount
         of such difference and (y) the Maximum LT2E-1 Uncertificated Accrued
         Interest Deferral Amount;

                  (2) second, Available Funds equal to the Group II Interest
         Remittance Amount shall be distributed (i) first, to the Holders of
         REMIC 2 Regular Interest LT2S-2A, REMIC 2 Regular Interest LT2S-2B,
         REMIC 2 Regular Interest LT2S-2C and REMIC 2 Regular Interest LT2S-1D,
         pro rata, in an amount equal to (A) the Uncertificated Accrued Interest
         for such Distribution Date, plus (B) any amounts in respect thereof
         remaining unpaid from previous Distribution Dates; and (ii) second, to
         Holders of REMIC 2 Regular Interest LT2A-2, REMIC 2 Regular Interest
         LT2B-2, REMIC 2 Regular Interest LT2C-2, REMIC 2 Regular Interest
         LT2D-2, REMIC 2 Regular Interest LT2E-2, REMIC 2 Regular Interest
         LT2F-2, REMIC 2 Regular Interest LT2G-2, REMIC 2 Regular Interest
         LT2H-2, and REMIC 2 Regular Interest LT2P-2, pro rata, in an amount
         equal to (A) the Uncertificated Accrued Interest for such Distribution
         Date, plus (B) any amounts in respect thereof remaining unpaid from
         previous Distribution Dates; provided, however, that amounts payable as
         Uncertificated Accrued Interest in respect of REMIC 2 Regular Interest
         LT2H-2 shall be reduced, when the REMIC 2 Overcollateralized Amount 2
         is less than the REMIC 2 Overcollateralization Target Amount 2, by the
         lesser of (x) the amount of such difference and (y) the Maximum LT2H-2
         Uncertificated Accrued Interest Deferral Amount;

                  (3) third, to the Holders of REMIC 2 Regular Interests, in an
         amount equal to the remainder of the Group I Available Funds for such
         Distribution Date after the distributions made pursuant to clause (1)
         above, allocated as follows:

                           (A) (i) 98% to the Holders of REMIC 2 Regular
                  Interest LT2A-1, (ii) 1.00% to the Holders of REMIC 2 Regular
                  Interest LT2B-1, REMIC 2 Regular Interest LT2C-1 and REMIC 2
                  Regular Interest LT2D-1, in the same proportion as principal
                  payments are allocated to the Corresponding Certificates, and
                  (iii) 1.00% to the Holders of REMIC 2 Regular Interest LT2E-1,
                  until the Uncertificated Principal Balance of all such
                  Uncertificated REMIC 2 Regular Interests is reduced to zero;

                                      146
<PAGE>

                           (B) then, to the Holders of REMIC 2 Regular Interest
                  LT2P-1, on the Distribution Date immediately following the
                  expiration of the latest Prepayment Charge with respect to
                  Group I Mortgage Loans as identified on the Prepayment Charge
                  Schedule or any Distribution Date thereafter until $100 has
                  been distributed pursuant to this clause; and

                           (C) then, any remaining amount to the Holders of the
                  Class R Certificates (in respect of the Class R-2 Interest);

                  (4) fourth, to the Holders of REMIC 2 Regular Interests, in an
         amount equal to the remainder of the Group II Available Funds for such
         Distribution Date after the distributions made pursuant to clause (1)
         above, allocated as follows:

                           (A) (i) 98% to the Holders of REMIC 2 Regular
                  Interest LT2A-2, (ii) 1.00% to the Holders of REMIC 2 Regular
                  Interest LT2B-2, REMIC 2 Regular Interest LT2C-2, REMIC 2
                  Regular Interest LT2D-2, REMIC 2 Regular Interest LT2E-2,
                  REMIC 2 Regular Interest LT2F-2 and REMIC 2 Regular Interest
                  LT2G-2 in the same proportion as principal payments are
                  allocated to the Corresponding Certificates, and (iii) 1.00%
                  to the Holders of REMIC 2 Regular Interest LT2H-2, until the
                  Uncertificated Principal Balance of all such Uncertificated
                  REMIC 2 Regular Interests is reduced to zero;

                           (B) then, to the Holders of REMIC 2 Regular Interest
                  LT2P-2, on the Distribution Date immediately following the
                  expiration of the latest Prepayment Charge with respect to
                  Group II Mortgage Loans as identified on the Prepayment Charge
                  Schedule or any Distribution Date thereafter until $100 has
                  been distributed pursuant to this clause;

                           (C) then, any remaining amount to the Holders of the
                  Class R Certificates (in respect of the Class R-2 Interest);
                  and

                  (5) fifth, to REMIC 2 Regular Interest LT2P-1, 100% of the
         amount of Prepayment Charges paid in respect of REMIC 1A Regular
         Interest LT1P-1, and to REMIC 2 Regular Interest LT2P-2, 100% of the
         amount of Prepayment Charges paid in respect of REMIC 1B Regular
         Interest LT1B-P

provided, however, that 98% and 2% of any principal payments that are
attributable to Group I Overcollateralization Release Amount shall be allocated
to Holders of REMIC 2 Regular Interest LT2A-1 and REMIC 2 Regular Interest
LT2E-1, respectively, and 98% and 2% of any principal payments that are
attributable to Group II Overcollateralization Release Amount shall be allocated
to Holders of REMIC 2 Regular Interest LT2A-2 and REMIC 2 Regular Interest
LT2H-2, respectively.

                                      147
<PAGE>

Section 4.06 Allocation of Realized Losses.

         (a) Prior to each Determination Date, the Master Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Bankruptcy Losses; and (iii)
the respective portions of such Realized Losses allocable to interest and
allocable to principal. Prior to each Determination Date, the Master Servicer
shall also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Prepayment Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Due Period. The information described in the two
preceding sentences that is to be supplied by the Master Servicer shall be
evidenced by an Officers' Certificate delivered to the NIMS Insurer, the Trust
Administrator and the Trustee (and upon request, to the Guarantor) by the Master
Servicer prior to the Determination Date immediately following the end of (i) in
the case of Bankruptcy Losses allocable to interest, the Due Period during which
any such Realized Loss was incurred, and (ii) in the case of all other Realized
Losses, the Prepayment Period during which any such Realized Loss was incurred.

         (b) All Realized Losses on the Group I Mortgage Loans allocated to
REMIC 3 Uncertificated Regular Interest LT3-IC and to any Group I Mezzanine
Component shall be allocated by the Trust Administrator on each Distribution
Date as follows: first, to Group I Net Monthly Excess Cashflow; second, to REMIC
3 Uncertificated Regular Interest LT3-IC, until the Uncertificated Principal
Balance thereof has been reduced to zero; third, to the I-M3 Component, until
the Component Principal Balance thereof has been reduced to zero; and fourth, to
the I-M2 Component, until the Component Principal Balance thereof has been
reduced to zero. All Realized Losses on the Group II Mortgage Loans allocated to
REMIC 3 Uncertificated Regular Interest LT3-IIC, the Class II-M1 Certificate and
to any Group II Mezzanine Component shall be allocated by the Trust
Administrator on each Distribution Date as follows: first, to Group II Net
Monthly Excess Cashflow; second, to REMIC 3 Uncertificated Regular Interest
LT3-IIC, until the Uncertificated Principal Balance thereof has been reduced to
zero; third, to the II-M3 Component, until the Component Principal Balance
thereof has been reduced to zero; fourth, to the II-M2 Component, until the
Component Principal Balance thereof has been reduced to zero; and fifth, to the
Class II-M1 Certificates, until the Certificate Principal Balance thereof has
been reduced to zero. All Realized Losses to be allocated to Uncertificated
Principal Balances of all REMIC 3 Uncertificated Regular Interests, the
Certificate Principal Balances of all Classes of Certificates and Component
Principal Balances of all Components on any Distribution Date shall be so
allocated after the actual distributions to be made on such date as provided
above. All references above to the Certificate Principal Balance of any Class of
Certificates, Uncertificated Principal Balance of any REMIC 3 Uncertificated
Regular Interest, and Component Principal Balance of any Component shall be to
the Certificate Principal Balance of such Class of Certificates, Uncertificated
Principal Balance of such REMIC 3 Uncertificated Regular Interest, or Component
Principal Balance of such Component immediately prior to the relevant
Distribution Date, before reduction thereof by any Realized Losses, in each case
to be allocated to such Class of Certificates, Components or REMIC 3
Uncertificated Regular Interest, on such Distribution Date.

                                      148
<PAGE>

         Any allocation of Realized Losses to a Mezzanine Certificate and a
Mezzanine Component on any Distribution Date shall be made by reducing the
Certificate Principal Balance or Component Principal Balance thereof by the
amount so allocated; any allocation of Realized Losses to REMIC 3 Uncertificated
Regular Interest LT3-IC or REMIC 3 Uncertificated Regular Interest LT3-IIC shall
be made by reducing the amount otherwise payable in respect thereof pursuant to
Section 4.01(d)(i)(h) and 4.01(d)(ii)(k) or Section 4.01(d)(ii)(j) and
4.01(d)(i)(i), as applicable. No allocations of any Realized Losses shall be
made to the Class A Certificates, the Class S Certificates or the Class P
Certificates. Any Realized Losses allocated to REMIC 3 Uncertificated Regular
Interest LT3-IC or REMIC 3 Uncertificated Regular Interest LT3-IIC shall be
allocated by the Trust Administrator to the Class I-C Certificates and the Class
II-C Certificates, respectively.

                  (c) All Realized Losses on the Group I Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date to REMIC 0A
Regular Interest LT0A-1 until the Uncertificated Principal Balance has been
reduced to zero and then to REMIC 0A Regular Interest LT0A-2 until the
Uncertificated Principal Balance thereof has been reduced to zero. All Realized
Losses on the Group II Mortgage Loans shall be allocated by the Trust
Administrator on each Distribution Date to REMIC 0B Regular Interest LT0B-1
until the Uncertificated Principal Balance thereof has been reduced to zero and
then to REMIC 0B Regular Interest LT0B-2 until the Uncertificated Principal
Balance thereof has been reduced to zero.

                  (d) All Realized Losses on the Group I Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date to REMIC 1A
Regular Interest LT1A-1 until the Uncertificated Principal Balance thereof has
been reduced to zero and then pro rata to REMIC 1A Regular Interest LT1A-2 and
REMIC 1A Regular Interest LT1A-3 until the Uncertificated Principal Balances
thereof have been reduced to zero. All Realized Losses on the Group II Mortgage
Loans shall be allocated by the Trust Administrator on each Distribution Date to
REMIC 1B Regular Interest LT1B-1 until the Uncertificated Principal Balance
thereof has been reduced to zero and then to pro rata REMIC 1B Regular Interest
LT1B-2 and REMIC 1B Regular Interest LT1B-3 until the Uncertificated Principal
Balances thereof have been reduced to zero.

                  (e) All Realized Losses on the Group I Mortgage Loans shall be
deemed to have been allocated in the specified percentages, as follows: first,
to Uncertificated Accrued Interest payable to the REMIC 2 Regular Interest
LT2A-1 and REMIC 2 Regular Interest LT2E-1 up to an aggregate amount equal to
the REMIC 2 Group I Interest Loss Allocation Amount, 98% and 2.00%,
respectively; second, to the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2A-1 and REMIC 2 Regular Interest LT2E-1 up to an aggregate
amount equal to the REMIC 2 Principal Loss Allocation Amount-1, 98% and 2.00%,
respectively; third, to the Uncertificated Principal Balances of REMIC 2 Regular
Interest LT2A-1, REMIC 2 Regular Interest LT2D-1 and REMIC 2 Regular Interest
LT2E-1, 98%, 1.00% and 1.00%, respectively, until the Uncertificated Principal
Balance of REMIC 2 Regular Interest LT2D-1 has been reduced to zero; and fourth,
to the Uncertificated Principal Balances of REMIC 2 Regular Interest LT2A-1,
REMIC 2 Regular Interest LT2C-1 and REMIC 2 Regular Interest LT2E-1, 98%, 1.00%
and 1.00%, respectively, until the Uncertificated Principal Balance of REMIC 2
Regular Interest LT2C-1 has been reduced to zero.

                                      149
<PAGE>

                  (f) All Realized Losses on the Group II Mortgage Loans shall
be deemed to have been allocated in the specified percentages, as follows:
first, to Uncertificated Accrued Interest payable to the REMIC 2 Regular
Interest LT2A-2 and REMIC 2 Regular Interest LT2H-2 up to an aggregate amount
equal to the REMIC 2 Group II Interest Loss Allocation Amount, 98% and 2.00%,
respectively; second, to the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2A-2 and REMIC 2 Regular Interest LT2H-2 up to an aggregate
amount equal to the REMIC 2 Principal Loss Allocation Amount 2, 98% and 2.00%,
respectively; third, to the Uncertificated Principal Balances of REMIC 2 Regular
Interest LT2A-2, REMIC 2 Regular Interest LT2G-2 and REMIC 2 Regular Interest
LT2H-2, 98%, 1.00% and 1.00%, respectively, until the Uncertificated Principal
Balance of REMIC 2 Regular Interest LT2G-2 has been reduced to zero; fourth, to
the Uncertificated Principal Balances of REMIC 2 Regular Interest LT2A-2, REMIC
2 Regular Interest LT2F-2 and REMIC 2 Regular Interest LT2H-2, 98%, 1.00% and
1.00%, respectively, until the Uncertificated Principal Balance of REMIC 2
Regular Interest LT2F-2 has been reduced to zero; and fifth, to the
Uncertificated Principal Balances of REMIC 2 Regular Interest LT2A-2, REMIC 2
Regular Interest LT2E-2 and REMIC 2 Regular Interest LT2H-2, 98%, 1.00% and
1.00%, respectively, until the Uncertificated Principal Balance of REMIC 2
Regular Interest LT2E-2 has been reduced to zero.

Section 4.07 Compliance with Withholding Requirements.

         Notwithstanding any other provision of this Agreement, the Trust
Administrator shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trust Administrator reasonably believes are applicable under the Code. The
consent of Certificateholders shall not be required for such withholding. In the
event the Trust Administrator does withhold any amount from interest or original
issue discount payments or advances thereof to any Certificateholder pursuant to
federal withholding requirements, the Trust Administrator shall indicate the
amount withheld to such Certificateholders.

Section 4.08 Commission Reporting.

                  (a) Within 15 days after each Distribution Date, the Trust
Administrator shall, in accordance with industry standards and applicable
regulations, file with the Commission via the Electronic Data Gathering Analysis
and Retrieval system, a Form 8-K with a copy of the statement to
Certificateholders for such Distribution Date as an Exhibit thereto. Prior to
January 30, 2002, the Trust Administrator shall in accordance with industry
standards file a Form 15 Suspension Notification with respect to the Trust Fund,
if applicable. Prior to March 30, 2002, the Trust Administrator shall file a
Form 10-K, in substance conforming to industry standards and applicable
regulations, with respect to the Trust Fund. The Depositor hereby grants to the
Trust Administrator a limited power of attorney to execute and file each such
document on behalf of the Depositor. Such power of attorney shall continue until
the earlier of (i) receipt by the Trust Administrator from the Depositor of
written termination of such power of attorney and (ii) the termination of the
Trust Fund. The Depositor agrees to promptly furnish to the Trust Administrator,
from time to time upon request, such further information, reports and financial
statements within its control related to this Agreement and the Mortgage Loans
as the Trust Administrator reasonably deems appropriate to prepare and file all
necessary reports with the Commission. The Trust Administrator shall have no
responsibility to file any items other than those specified in this Section.

                                      150
<PAGE>

Section 4.09 The Guaranty.

         On each Distribution Date following receipt of a statement (as set
forth in Section 4.03) that indicates a Deficiency Amount for such Distribution
Date, the Guarantor shall distribute to the Trust Administrator a Guarantor
Payment in an aggregate amount equal to the Deficiency Amount for such
Distribution Date directly to the Holders of the Guaranteed Certificates,
without first depositing such amount in the Distribution Account, as follows:
(i) the Guaranteed Interest Distribution Amount shall be distributed as interest
with respect to the Class I-A Certificates and Class I-S Certificates as
provided in Section 4.01(a)(i); and (ii) the Guaranteed Principal Distribution
Amount shall be distributed as principal with respect to the Class I-A
Certificates and Class I-S Certificates as provided in Section 4.01(b)(i) or
Section 4.01(c)(i), as applicable.

Section 4.10 Pre-Funding Accounts.

                  (a) No later than the Closing Date, the Trust Administrator
shall establish and maintain two segregated trust accounts that are Eligible
Accounts, which shall be titled "Group I Pre-Funding Account, Bankers Trust
Company of California, N.A., as Trust Administrator for the benefit of First
Union National Bank, as Trustee, for the registered holders of Long Beach
Mortgage Loan Trust 2001-4, Asset-Backed Certificates, Series 2001-4" (the
"Group I Pre-Funding Account") and "Group II Pre-Funding Account, Bankers Trust
Company of California, N.A., as Trust Administrator for the benefit of First
Union National Bank, as Trustee, for the registered holders of Long Beach
Mortgage Loan Trust 2001-4, Asset-Backed Certificates, Series 2001-4" (the
"Group II Pre-Funding Account"), respectively. The Trust Administrator shall,
promptly upon receipt, deposit in the Group I Pre-Funding Account and retain
therein the Group I Original Pre-Funded Amount and deposit in the Group II
Pre-Funding Account and retain therein the Group II Original Pre-Funded Amount,
in each case, remitted on the Closing Date to the Trust Administrator by the
Depositor. Funds deposited in the Pre-Funding Accounts shall be held by the
Trust Administrator, as agent for the Trustee, in trust for the
Certificateholders for the uses and purposes set forth herein.

                  (b) The Trust Administrator will invest funds deposited in the
Pre-Funding Accounts as directed by the Master Servicer in Permitted Investments
with a maturity date (i) no later than the Business Day immediately preceding
the date on which such funds are required to be withdrawn from such account
pursuant to this Agreement, if a Person other than the Trust Administrator or
its Affiliate manages or advises such investment, (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trust Administrator or its Affiliate manages or advises such
investment or (iii) within one Business Day of the Trust Administrator's receipt
thereof. For federal income tax purposes, the Master Servicer shall be the owner
of the Pre-Funding Accounts and shall report all items of income, deduction,
gain or loss arising therefrom. The Master Servicer shall deposit in the
Pre-Funding Accounts the amount of any net loss incurred in respect of any such
Permitted Investment immediately upon realization of such loss without any right
of reimbursement therefor. At no time will the Pre-Funding Accounts be an asset
of any REMIC created hereunder.

                                      151
<PAGE>

                  (c) Amounts on deposit in each of the Pre-Funding Accounts
shall be withdrawn by the Trust Administrator as follows:

                       (i) On any Subsequent Transfer Date, the Trust
Administrator shall withdraw from such Pre-Funding Account an amount equal to
100% of the Stated Principal Balances of the related Subsequent Mortgage Loans
transferred and assigned to the Trustee for deposit in the Trust Fund on such
Subsequent Transfer Date and pay such amount to or upon the order of the
Depositor upon satisfaction of the conditions set forth in Section 2.07 with
respect to such transfer and assignment;

                       (ii) If the amount on deposit in such Pre-Funding Account
(exclusive of investment income) has not been reduced to zero during the related
Pre-Funding Period, on the day immediately following the termination of such
Pre-Funding Period, the Trust Administrator shall deposit into the Distribution
Account any amounts remaining in such Pre-Funding Account (exclusive of
investment income) for distribution in accordance with the terms hereof;

                       (iii) To withdraw any amount not required to be deposited
in such Pre-Funding Account or deposited therein in error;

                       (iv) To clear and terminate such Pre-Funding Account upon
the earlier to occur of (A) the Distribution Date immediately following the end
of the related Pre-Funding Period and (B) the termination of this Agreement,
with any amounts remaining on deposit therein being paid to the Holders of the
Certificates then entitled to distributions in respect of principal; and

                       (v) To distribute to the Master Servicer, as the designee
of the Depositor, any income and gain realized from the investment of funds in
such Pre-Funding Account;

         Withdrawals pursuant to clauses (i), (ii), (iii) and (iv) shall be
treated as contributions of cash to REMIC 0A or REMIC 0B, as the case may be, on
the date of withdrawal.

                                   ARTICLE V

                                THE CERTIFICATES

Section 5.01 The Certificates.

                  (a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC 1A and REMIC 1B.

         The Certificates will be substantially in the forms annexed hereto as
Exhibits A-1 through A-15. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.

                                      152
<PAGE>

         Upon original issue, the Certificates shall be executed by the Trust
Administrator on behalf of the Trustee and authenticated and delivered by the
Trust Administrator, to or upon the order of the Depositor. The Certificates
shall be executed and attested by manual or facsimile signature on behalf of the
Trust Administrator by an authorized signatory. Certificates bearing the manual
or facsimile signatures of individuals who were at any time the proper officers
of the Trust Administrator shall bind the Trustee and the Trust Administrator,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Trustee or the Trust Administrator
by manual signature, and such certificate of authentication shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.

                  (b) The Book Entry Certificates shall initially be issued as
one or more Certificates held by the Book-Entry Custodian or, if appointed to
hold such Certificates as provided below, the Depository and registered in the
name of the Depository or its nominee and, except as provided below,
registration of the Book-Entry Certificates may not be transferred by the
Trustee or the Trust Administrator except to another Depository that agrees to
hold the Book-Entry Certificates for the respective Certificate Owners with
Ownership Interests therein. The Certificate Owners shall hold their respective
Ownership Interests in and to the Book-Entry Certificates through the book-entry
facilities of the Depository and, except as provided below, shall not be
entitled to definitive, fully registered Certificates ("Definitive
Certificates") in respect of such Ownership Interests. All transfers by
Certificate Owners of their respective Ownership Interests in the Book-Entry
Certificates shall be made in accordance with the procedures established by the
Depository Participant or brokerage firm representing such Certificate Owner.
Each Depository Participant shall only transfer the Ownership Interests in the
Book-Entry Certificates of Certificate Owners it represents or of brokerage
firms for which it acts as agent in accordance with the Depository's normal
procedures. The Trust Administrator is hereby initially appointed as the
Book-Entry Custodian and hereby agrees to act as such in accordance herewith and
in accordance with the agreement that it has with the Depository authorizing it
to act as such. The Book-Entry Custodian may, and if it is no longer qualified
to act as such, the Book-Entry Custodian shall, appoint, by a written instrument
delivered to the Depositor, the Master Servicer, the Trustee and if the Trust
Administrator is not the Book-Entry Custodian, the Trust Administrator and any
other transfer agent (including the Depository or any successor Depository) to
act as Book-Entry Custodian under such conditions as the predecessor Book-Entry
Custodian and the Depository or any successor Depository may prescribe, provided
that the predecessor Book-Entry Custodian shall not be relieved of any of its
duties or responsibilities by reason of any such appointment of other than the
Depository. If the Trust Administrator resigns or is removed in accordance with
the terms hereof, the Trustee, successor Trust Administrator or, if it so
elects, the Depository shall immediately succeed to its predecessor's duties as
Book-Entry Custodian. The Depositor shall have the right to inspect, and to
obtain copies of, any Certificates held as Book-Entry Certificates by the
Book-Entry Custodian.

                                      153
<PAGE>

         The Trustee, the Trust Administrator, the Master Servicer, the NIMS
Insurer and the Depositor may for all purposes (including the making of payments
due on the Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of the exercise by Certificateholders of the
rights of Certificateholders hereunder. The rights of Certificate Owners with
respect to the Book-Entry Certificates shall be limited to those established by
law and agreements between such Certificate Owners and the Depository
Participants and brokerage firms representing such Certificate Owners. Multiple
requests and directions from, and votes of, the Depository as Holder of the
Book-Entry Certificates with respect to any particular matter shall not be
deemed inconsistent if they are made with respect to different Certificate
Owners. The Trust Administrator may establish a reasonable record date in
connection with solicitations of consents from or voting by Certificateholders
and shall give notice to the Depository of such record date.

         If (i)(A) the Depositor advises the Trust Administrator in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trust
Administrator in writing that it elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Master Servicer Event
of Default, Certificate Owners representing in the aggregate not less than 51%
of the Ownership Interests of the Book-Entry Certificates advise the Trust
Administrator through the Depository, in writing, that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Certificate Owners, the Trust Administrator shall notify all Certificate
Owners, through the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trust Administrator of the Book-Entry Certificates
by the Book-Entry Custodian or the Depository, as applicable, accompanied by
registration instructions from the Depository for registration of transfer, the
Trust Administrator shall issue the Definitive Certificates. Such Definitive
Certificates will be issued in minimum denominations of $100,000, except that
any beneficial ownership that was represented by a Book-Entry Certificate in an
amount less than $100,000 immediately prior to the issuance of a Definitive
Certificate shall be issued in a minimum denomination equal to the amount
represented by such Book-Entry Certificate. None of the Depositor, the Master
Servicer, the Trust Administrator or the Trustee shall be liable for any delay
in the delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trust Administrator, to the extent applicable with respect to such
Definitive Certificates, and the Trustee and the Trust Administrator shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.

                                      154
<PAGE>

Section 5.02 Registration of Transfer and Exchange of Certificates.

                  (a) The Trust Administrator shall cause to be kept at one of
the offices or agencies to be appointed by the Trust Administrator in accordance
with the provisions of Section 8.12 a Certificate Register for the Certificates
in which, subject to such reasonable regulations as it may prescribe, the Trust
Administrator shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided.

                  (b) No transfer, sale, pledge or other disposition of any
Class C Certificate, Class P Certificate or Residual Certificate shall be made
unless such disposition is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities laws or is made in accordance with the 1933 Act and laws. In the
event of any such transfer (other than in connection with the initial transfer
of any Class C Certificate, Class P Certificate or Residual Certificates by the
Depositor to the Seller or the transfer of any Class C Certificate, Class P
Certificate or Residual Certificates by the Seller to an Affiliate of the Seller
or to a trust, the depositor of which is an Affiliate of the Seller) (i) unless
such transfer is made in reliance upon Rule 144A (as evidenced by the investment
letter delivered to the Trustee and the Trust Administrator, in substantially
the form attached hereto as Exhibit J) under the 1933 Act, the Trustee, the
Trust Administrator and the Depositor shall require a written Opinion of Counsel
(which may be in-house counsel) acceptable to and in form and substance
reasonably satisfactory to the Trustee, the Trust Administrator and the
Depositor that such transfer may be made pursuant to an exemption, describing
the applicable exemption and the basis therefor, from the 1933 Act or is being
made pursuant to the 1933 Act, which Opinion of Counsel shall not be an expense
of the Trustee, the Trust Administrator or the Depositor or (ii) the Trust
Administrator shall require the transferor to execute a transferor certificate
(in substantially the form attached hereto as Exhibit L) and the transferee to
execute an investment letter (in substantially the form attached hereto as
Exhibit J) acceptable to and in form and substance reasonably satisfactory to
the Depositor, the Trust Administrator and the Trustee certifying to the
Depositor, the Trust Administrator and the Trustee the facts surrounding such
transfer, which investment letter shall not be an expense of the Trustee, the
Trust Administrator or the Depositor. The Holder of a Class C Certificate, Class
P Certificate or Residual Certificate desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trustee, the Trust Administrator, the
Depositor and the Trust Fund against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

                  (c) Each Transferee of a Mezzanine Certificate will be deemed
to have represented by virtue of its purchase or holding of such Certificate (or
interest therein) that either (a) such Transferee is not a Plan or purchasing
such Certificate with Plan Assets, (b) it has acquired and is holding such
Certificate in reliance on Prohibited Transaction Exemption ("PTE") 90-59, 55 F.
R. 36724 (September 6, 1990), as amended by PTE 2000-58, 65 F. R. 67765
(November 13, 2000) (the "Exemption"), and that it understands that there are
certain conditions to the availability of the Exemption including that such
Certificate must be rated, at the time of purchase, not lower than "BBB-" (or
its equivalent) by a Rating Agency or (c) the following conditions are
satisfied: (i) such Transferee is an insurance company, (ii) the source of funds
used to purchase or hold such Certificate (or interest therein) is an "insurance
company general account" (as defined in U.S. Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60, and (iii) the conditions set forth
in Sections I and III of PTCE 95-60 have been satisfied.

                                      155
<PAGE>

         No transfer of a Class C Certificate, Class P Certificate or Residual
Certificate or any interest therein shall be made to any Plan subject to ERISA
or Section 4975 of the Code, any Person acting, directly or indirectly, on
behalf of any such Plan or any Person acquiring such Certificates with "Plan
Assets" of a Plan within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan Assets") unless the Depositor,
the Trustee, the Trust Administrator and the Master Servicer are provided with
an Opinion of Counsel which establishes to the satisfaction of the Depositor,
the Trustee, the Trust Administrator and the Master Servicer that the purchase
of such Certificates is permissible under applicable law, will not constitute or
result in any prohibited transaction under ERISA or Section 4975 of the Code and
will not subject the Depositor, the Master Servicer, the Trustee, the Trust
Administrator or the Trust Fund to any obligation or liability (including
obligations or liabilities under ERISA or Section 4975 of the Code) in addition
to those undertaken in this Agreement, which Opinion of Counsel shall not be an
expense of the Depositor, the Master Servicer, the Trustee, the Trust
Administrator or the Trust Fund. Neither an Opinion of Counsel nor any
certification will be required in connection with the initial transfer of any
Class C Certificate, Class P Certificate or Residual Certificates by the
Depositor to the Seller or the transfer of any Class C Certificate, Class P
Certificate or Residual Certificates by the Seller to an Affiliate of the Seller
or to a trust, the depositor of which is an Affiliate of the Seller (in which
case, the Depositor, the Seller and any such Affiliate shall have deemed to have
represented that the applicable transferee is not a Plan or a Person investing
Plan Assets) and the Trustee and the Trust Administrator shall be entitled to
conclusively rely upon a representation (which, upon the request of the Trustee
or the Trust Administrator, shall be a written representation) from the
Depositor of the status of each transferee the Seller or such an Affiliate. Each
transferee of a Class C Certificate, Class P Certificate or Residual Certificate
shall sign a letter substantially in the form of Exhibit I to demonstrate its
compliance with this Section 5.02(c) (other than in connection with the initial
transfer of any Class C Certificate, Class P Certificate or Residual
Certificates by the Depositor to the Seller or the transfer of any Class C
Certificate, Class P Certificate or Residual Certificates by the Seller to an
Affiliate of the Seller or to a trust, the depositor of which is an Affiliate of
the Seller).

         If any Mezzanine Certificate, Class C Certificate, Class P Certificate
or Residual Certificate or any interest therein is acquired or held in violation
of the provisions of the preceding paragraphs, the next preceding permitted
beneficial owner will be treated as the beneficial owner of that Certificate
retroactive to the date of transfer to the purported beneficial owner. Any
purported beneficial owner whose acquisition or holding of any such Certificate
or interest therein was effected in violation of the provisions of the preceding
paragraph shall indemnify and hold harmless the Depositor, the Master Servicer,
the Trustee, the Trust Administrator and the Trust Fund from and against any and
all liabilities, claims, costs or expenses incurred by those parties as a result
of that acquisition or holding.

                  (d) Each Person who has or who acquires any Ownership Interest
in a Residual Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably appointed the Depositor or its designee as its
attorney-in-fact to negotiate the terms of any mandatory sale under clause (v)
below and to execute all instruments of transfer and to do all other things
necessary in connection with any such sale, and the rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:

                                      156
<PAGE>

                  (i)      Each Person holding or acquiring any Ownership
                           Interest in a Residual Certificate shall be a
                           Permitted Transferee and shall promptly notify the
                           Trust Administrator of any change or impending change
                           in its status as a Permitted Transferee.

                  (ii)     No Person shall acquire an Ownership Interest in a
                           Residual Certificate unless such Ownership Interest
                           is a pro rata undivided interest.

                  (iii)    In connection with any proposed transfer of any
                           Ownership Interest in a Residual Certificate, the
                           Trust Administrator shall as a condition to
                           registration of the transfer, require delivery to it,
                           in form and substance satisfactory to it, of each of
                           the following:

                           A.    an affidavit in the form of Exhibit K hereto
                                 from the proposed transferee to the effect
                                 that such transferee is a Permitted Transferee
                                 and that it is not acquiring its Ownership
                                 Interest in the Residual Certificate that is
                                 the subject of the proposed transfer as a
                                 nominee, trustee or agent for any Person who
                                 is not a Permitted Transferee; and

                           B.    a covenant of the proposed transferee to
                                 the effect that the proposed transferee agrees
                                 to be bound by and to abide by the transfer
                                 restrictions applicable to the Residual
                                 Certificates.

                  (iv)     Any attempted or purported transfer of any Ownership
                           Interest in a Residual Certificate in violation of
                           the provisions of this Section shall be absolutely
                           null and void and shall vest no rights in the
                           purported transferee. If any purported transferee
                           shall, in violation of the provisions of this
                           Section, become a Holder of a Residual Certificate,
                           then the prior Holder of such Residual Certificate
                           that is a Permitted Transferee shall, upon discovery
                           that the registration of transfer of such Residual
                           Certificate was not in fact permitted by this
                           Section, be restored to all rights as Holder thereof
                           retroactive to the date of registration of transfer
                           of such Residual Certificate. Neither the Trustee nor
                           the Trust Administrator shall be under any liability
                           to any Person for any registration of transfer of a
                           Residual Certificate that is in fact not permitted by
                           this Section or for making any distributions due on
                           such Residual Certificate to the Holder thereof or
                           taking any other action with respect to such Holder
                           under the provisions of this Agreement so long as the
                           Trustee or the Trust Administrator received the
                           documents specified in clause (iii). The Trustee and
                           the Trust Administrator shall be entitled to recover
                           from any Holder of a Residual Certificate that was in
                           fact not a Permitted Transferee at the time such
                           distributions were made all distributions made on
                           such Residual Certificate. Any such distributions so
                           recovered by the Trustee or the Trust Administrator
                           shall be distributed and delivered by the Trust
                           Administrator to the prior Holder of such Residual
                           Certificate that is a Permitted Transferee.

                                      157
<PAGE>

                  (v)      If any Person other than a Permitted Transferee
                           acquires any Ownership Interest in a Residual
                           Certificate in violation of the restrictions in this
                           Section, then the Trustee and the Trust Administrator
                           shall have the right but not the obligation, without
                           notice to the Holder of such Residual Certificate or
                           any other Person having an Ownership Interest
                           therein, to notify the Depositor to arrange for the
                           sale of such Residual Certificate. The proceeds of
                           such sale, net of commissions (which may include
                           commissions payable to the Depositor or its
                           affiliates in connection with such sale), expenses
                           and taxes due, if any, will be remitted by the Trust
                           Administrator to the previous Holder of such Residual
                           Certificate that is a Permitted Transferee, except
                           that in the event that the Trust Administrator
                           determines that the Holder of such Residual
                           Certificate may be liable for any amount due under
                           this Section or any other provisions of this
                           Agreement, the Trust Administrator may withhold a
                           corresponding amount from such remittance as security
                           for such claim. The terms and conditions of any sale
                           under this clause (v) shall be determined in the sole
                           discretion of the Trust Administrator and it shall
                           not be liable to any Person having an Ownership
                           Interest in a Residual Certificate as a result of its
                           exercise of such discretion.

                  (vi)     If any Person other than a Permitted Transferee
                           acquires any Ownership Interest in a Residual
                           Certificate in violation of the restrictions in this
                           Section, then the Trust Administrator will provide to
                           the Internal Revenue Service, and to the persons
                           specified in Sections 860E(e)(3) and (6) of the Code,
                           information needed to compute the tax imposed under
                           Section 860E(e)(1) of the Code on transfers of
                           residual interests to disqualified organizations.

         The foregoing provisions of this Section shall cease to apply to
transfers occurring on or after the date on which there shall have been
delivered to the Trust Administrator, in form and substance satisfactory to the
Trust Administrator, (i) written notification from each Rating Agency that the
removal of the restrictions on Transfer set forth in this Section will not cause
such Rating Agency to downgrade its rating of the NIM Notes or the Certificates
and (ii) an Opinion of Counsel to the effect that such removal will not cause
any REMIC created hereunder to fail to qualify as a REMIC.

                  (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the Trust
Administrator designated from time to time for such purpose pursuant to Section
8.12, the Trust Administrator, on behalf of the Trustee, shall execute and
authenticate and deliver, in the name of the designated Transferee or
Transferees, one or more new Certificates of the same Class of a like aggregate
Percentage Interest.

                  (f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trust Administrator
maintained for such purpose pursuant to Section 8.12. Whenever any Certificates
are so surrendered for exchange the Trust Administrator, on behalf of the
Trustee, shall execute, authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall (if so required by the
Trustee) be duly endorsed by, or be accompanied by a written instrument of
transfer in the form satisfactory to the Trust Administrator duly executed by,
the Holder thereof or his attorney duly authorized in writing.

                                      158
<PAGE>

                  (g) No service charge shall be made for any registration of
transfer or exchange of Certificates of any Class, but the Trust Administrator
may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Certificates.

         All Certificates surrendered for registration of transfer or exchange
shall be canceled by the Trust Administrator and disposed of pursuant to its
standard procedures.

Section 5.03  Mutilated, Destroyed, Lost or Stolen Certificates.

         If (i) any mutilated Certificate is surrendered to the Trust
Administrator or the Trust Administrator receives evidence to its satisfaction
of the destruction, loss or theft of any Certificate and (ii) there is delivered
to the Trustee, the Trust Administrator and the Depositor and (in the case of a
Class C Certificate or Class P Certificate) the NIMS Insurer such security or
indemnity as may be required by them to save each of them, and the Trust Fund,
harmless, then, in the absence of notice to the Trust Administrator that such
Certificate has been acquired by a bona fide purchaser, the Trust Administrator,
on behalf of the Trustee, shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and Percentage Interest. Upon the issuance of any
new Certificate under this Section, the Trust Administrator may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Trust Administrator) in connection
therewith. Any duplicate Certificate issued pursuant to this Section, shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.

Section 5.04 Persons Deemed Owners.

         The Master Servicer, the Depositor, the Trustee, the Trust
Administrator, the NIMS Insurer, the Guarantor and any agent of the Master
Servicer, the Depositor, the Trustee, the Trust Administrator, the NIMS Insurer
or the Guarantor may treat the Person, including a Depository, in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 4.01 and for all other purposes
whatsoever, and none of the Master Servicer, the Depositor, the Trustee, the
Trust Administrator, the NIMS Insurer, the Guarantor nor any agent of any of
them shall be affected by notice to the contrary.

                                   ARTICLE VI

                      THE MASTER SERVICER AND THE DEPOSITOR

Section 6.01 Liability of the Master Servicer and the Depositor.

         The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Master
Servicer herein.

                                      159
<PAGE>
Section 6.02 Merger or Consolidation of the Depositor or the Master Servicer.

         Subject to the following paragraph, the Depositor will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation. Subject to the following paragraph, the
Master Servicer will keep in full effect its existence, rights and franchises as
a corporation under the laws of the jurisdiction of its incorporation and its
qualification as an approved conventional seller/servicer for Fannie Mae or
Freddie Mac in good standing. The Depositor and the Master Servicer each 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, the Certificates or
any of the Mortgage Loans and to perform its respective duties under this
Agreement.

         The Depositor or the Master Servicer may be merged or consolidated with
or into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Depositor or the Master Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master Servicer, as the case may be,
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 to
the Master Servicer shall be qualified to service mortgage loans on behalf of
Fannie Mae; and provided further that the Rating Agencies' ratings of the NIM
Notes, the Class A Certificates and the Mezzanine Certificates in effect
immediately prior to such merger or consolidation will not be qualified, reduced
or withdrawn as a result thereof (as evidenced by a letter to such effect from
the Rating Agencies to the Trust Administrator).

Section 6.03 Limitation on Liability of the Depositor, the Master Servicer and
Others.

         None of the Depositor, the Guarantor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Guarantor or the
Master Servicer shall be under any liability to the Trust Fund or the
Certificateholders 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 Depositor, the
Guarantor, the Master Servicer or any such person against any breach of
warranties, representations or covenants made herein, or against any specific
liability imposed on the Master Servicer, the Depositor, or the Guarantor, as
applicable, pursuant hereto, or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Guarantor, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Guarantor or the
Master Servicer may rely in good faith on any document of any kind which, prima
facie, is properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor, the Guarantor, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Guarantor or the
Master Servicer shall be indemnified and held harmless by the Trust Fund against
any loss, liability or expense incurred in connection with any legal action
relating to this Agreement or the Certificates, other than any loss, liability
or expense relating to any specific Mortgage Loan or Mortgage Loans (except as
any such loss, liability or expense shall be otherwise reimbursable pursuant to
this Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. None of the
Depositor, the Guarantor or the Master Servicer shall be under any obligation to
appear in, prosecute or defend any legal action unless such action is related to
its respective duties under this Agreement and, in its opinion, does not involve
it in any expense or liability; provided, however, that each of the Depositor,
the Guarantor and the Master Servicer may in its discretion undertake any such
action which it may deem necessary or desirable with respect to this Agreement
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, unless the Depositor, the Guarantor
or the Master Servicer acts without the consent of Holders of Certificates
entitled to at least 51% of the Voting Rights (which consent shall not be
necessary in the case of litigation or other legal action by either to enforce
their respective rights or defend themselves hereunder), the legal expenses and
costs of such action and any liability resulting therefrom (except any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder) shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor, the Guarantor and the Master
Servicer shall be entitled to be reimbursed therefor from the Collection Account
as and to the extent provided in Section 3.11, any such right of reimbursement
being prior to the rights of the Certificateholders to receive any amount in the
Collection Account.

                                      160
<PAGE>

         The Master Servicer (except the Trust Administrator or the Trustee to
the extent it has succeeded the Master Servicer as required hereunder)
indemnifies and holds the Trust Administrator, the Trustee, the Depositor, the
Guarantor and the Trust Fund harmless against any and all claims, losses,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and any other costs, fees and expenses that the Trust Administrator,
the Trustee, the Depositor, the Guarantor or the Trust Fund may sustain in any
way related to the failure of the Master Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement. The
Master Servicer shall immediately notify the Trust Administrator, the Trustee,
the NIMS Insurer, the Guarantor and the Depositor if a claim is made that may
result in such claims, losses, penalties, fines, forfeitures, legal fees or
related costs, judgments, or any other costs, fees and expenses, and the Master
Servicer shall assume (with the consent of the Trust Administrator) the defense
of any such claim and pay all expenses in connection therewith, including
reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against the Master Servicer, the Trust
Administrator, the Trustee, the Depositor, the Guarantor and/or the Trust Fund
in respect of such claim. The provisions of this paragraph shall survive the
termination of this Agreement and the payment of the outstanding Certificates.

Section 6.04 Limitation on Resignation of Master Servicer.

         The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that its duties hereunder are
no longer permissible under applicable law or (ii) with the written consent of
the Trust Administrator and the NIMS Insurer or the Guarantor (as provided in
Section 1.04) and written confirmation from each Rating Agency (which
confirmation shall be furnished to the Depositor and the Trust Administrator)
that such resignation will not cause such Rating Agency to reduce the then
current rating of the NIM Notes, the Class A Certificates or the Mezzanine
Certificates. Any such determination pursuant to clause (i) of the preceding
sentence permitting the resignation of the Master Servicer shall be evidenced by
an Opinion of Counsel to such effect obtained at the expense of the Master
Servicer and delivered to the Trustee and the Trust Administrator. No
resignation of the Master Servicer shall become effective until the Trust
Administrator or a successor servicer reasonably acceptable to the NIMS Insurer
or the Guarantor (as provided in Section 1.04) shall have assumed the Master
Servicer's responsibilities, duties, liabilities (other than those liabilities
arising prior to the appointment of such successor) and obligations under this
Agreement.

                                      161
<PAGE>

         Except as expressly provided herein, the Master Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, nor delegate to or subcontract with, nor authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder. The foregoing prohibition on
assignment shall not prohibit the Master Servicer from designating a
Sub-Servicer as payee of any indemnification amount payable to the Master
Servicer hereunder; provided, however, that as provided in Section 3.06 hereof,
no Sub-Servicer shall be a third-party beneficiary hereunder and the parties
hereto shall not be required to recognize any Sub-Servicer as an indemnitee
under this Agreement. If, pursuant to any provision hereof, the duties of the
Master Servicer are transferred to a successor master servicer, the entire
amount of the Servicing Fee and other compensation payable to the Master
Servicer pursuant hereto shall thereafter be payable to such successor master
servicer but in no instance shall such Servicing Fees.

Section 6.05 Rights of the Depositor, the NIMS Insurer, the Guarantor, the
Trustee and the Trust Administrator in Respect of the Master Servicer.

         The Master Servicer shall afford (and any Sub-Servicing Agreement shall
provide that each Sub-Servicer shall afford) the Depositor, the NIMS Insurer,
the Guarantor, the Trust Administrator and the Trustee, upon reasonable notice,
during normal business hours, access to all records maintained by the Master
Servicer (and any such Sub-Servicer) in respect of the Master Servicer's rights
and obligations hereunder and access to officers of the Master Servicer (and
those of any such Sub-Servicer) responsible for such obligations; provided, that
access to records for the Guarantor shall be limited to those related to Group I
Mortgage Loans. Upon request, the Master Servicer shall furnish to the
Depositor, the NIMS Insurer, the Guarantor, the Trust Administrator and the
Trustee its (and any such Sub-Servicer's) most recent financial statements and
such other information relating to the Master Servicer's capacity to perform its
obligations under this Agreement that it possesses; provided, that any such
information furnished to the Guarantor shall be limited to that which is related
to Group I Mortgage Loans. To the extent such information is not otherwise
available to the public, the Depositor, the NIMS Insurer, the Guarantor, the
Trust Administrator and the Trustee shall not disseminate any information
obtained pursuant to the preceding two sentences without the Master Servicer's
(or any such Sub-Servicer's) written consent, except as required pursuant to
this Agreement or to the extent that it is necessary to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies,
rating agencies or reinsurers or (ii) pursuant to any law, rule, regulation,
order, judgment, writ, injunction or decree of any court or governmental
authority having jurisdiction over the Depositor, the NIMS Insurer, the
Guarantor, the Trustee, the Trust Administrator or the Trust Fund, and in either
case, the Depositor, the Guarantor, the Trust Administrator or the Trustee, as
the case may be, shall use, and the NIMS Insurer shall be deemed to have agreed
with the parties hereto to use, its best efforts to assure the confidentiality
of any such disseminated non-public information. The Depositor may, but is not
obligated to, enforce the obligations of the Master Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Master Servicer under this Agreement or
exercise the rights of the Master Servicer under this Agreement; provided that
the Master Servicer shall not be relieved of any of its obligations under this
Agreement by virtue of such performance by the Depositor or its designee. The
Depositor shall not have any responsibility or liability for any action or
failure to act by the Master Servicer and is not obligated to supervise the
performance of the Master Servicer under this Agreement or otherwise.

                                      162
<PAGE>

                                  ARTICLE VII

                                     DEFAULT

Section 7.01 Master Servicer Events of Default.

         "Master Servicer Event of Default," wherever used herein, means any one
of the following events:

                  (i) any failure by the Master Servicer to remit to the Trust
                  Administrator for distribution to the Certificateholders any
                  payment (other than an Advance required to be made from its
                  own funds on any Master Servicer Remittance Date pursuant to
                  Section 4.04) required to be made under the terms of the
                  Certificates and this Agreement which continues unremedied for
                  a period of one Business Day after the date upon which written
                  notice of such failure, requiring the same to be remedied,
                  shall have been given to the Master Servicer by the Depositor,
                  the Trustee, the Trust Administrator (in which case notice
                  shall be provided by telecopy), or to the Master Servicer, the
                  Depositor, the Trust Administrator and the Trustee by the NIMS
                  Insurer, the Guarantor or the Holders of Certificates entitled
                  to at least 25% of the Voting Rights; or

                  (ii) any failure on the part of the Master Servicer duly to
                  observe or perform in any material respect any of the
                  covenants or agreements on the part of the Master Servicer
                  contained in this Agreement which continues unremedied for a
                  period of 45 days (30 days in the case of any failure to
                  maintain a Sub-Servicing Agreement with an eligible
                  Sub-Servicer to the extent required in accordance with Section
                  3.02(c)) after the earlier of (i) the date on which written
                  notice of such failure, requiring the same to be remedied,
                  shall have been given to the Master Servicer by the Depositor,
                  the Trust Administrator or the Trustee, or to the Master
                  Servicer, the Depositor, the Trust Administrator and the
                  Trustee by the NIMS Insurer, the Guarantor or the Holders of
                  Certificates entitled to at least 25% of the Voting Rights and
                  (ii) actual knowledge of such failure by a Servicing
                  Representative of the Master Servicer; or

                  (iii) a decree or order of a court or agency or supervisory
                  authority having jurisdiction in the premises in an
                  involuntary case under any present or future federal or state
                  bankruptcy, insolvency or similar law or the appointment of a
                  conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceeding, or for the winding-up or liquidation of
                  its affairs, shall have been entered against the Master
                  Servicer and if such proceeding is being contested by the
                  Master Servicer in good faith, such decree or order shall have
                  remained in force undischarged or unstayed for a period of 60
                  days or results in the entry of an order for relief or any
                  such adjudication or appointment; or

                                      163
<PAGE>

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

                  (v) the Master Servicer shall admit in writing its inability
                  to pay its debts generally as they become due, file a petition
                  to take advantage of any applicable insolvency or
                  reorganization statute, make an assignment for the benefit of
                  its creditors; or

                  (vi) any failure by the Master Servicer of the Master Servicer
                  Termination Test; or

                  (vii) any failure of the Master Servicer to make, or cause an
                  Advancing Person to make, any Advance on any Master Servicer
                  Remittance Date required to be made from its own funds
                  pursuant to Section 4.04 which continues unremedied until 3:00
                  p.m. New York time on the Business Day immediately following
                  the Master Servicer Remittance Date; or

                  (viii) the Master Servicer ceases to be an approved seller or
                  servicer of Fannie Mae.

         If a Master Servicer Event of Default described in clauses (i) through
(vi) of this Section shall occur, then, and in each and every such case, so long
as such Master Servicer Event of Default shall not have been remedied, the
Depositor or the Trustee may, and at the written direction of the NIMS Insurer,
the Guarantor, or the Holders of Certificates entitled to at least 51% of Voting
Rights, the Trustee shall, by notice in writing to the NIMS Insurer, the
Guarantor and the Master Servicer (and to the Depositor and the Trust
Administrator if given by the Trustee or to the Trustee and the Trust
Administrator if given by the Depositor), terminate all of the rights and
obligations of the Master Servicer in its capacity as Master Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans and
the proceeds thereof. If a Master Servicer Event of Default described in clauses
(vii) or (viii) hereof shall occur, the Trust Administrator shall, by notice in
writing to the Master Servicer, the Trustee, the NIMS Insurer, the Guarantor and
the Depositor, terminate all of the rights and obligations of the Master
Servicer in its capacity as Master Servicer under this Agreement and in and to
the Mortgage Loans and the proceeds thereof. On or after the receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer under this Agreement, whether with respect to the Certificates (other
than as a Holder of any Certificate) or the Mortgage Loans or otherwise, shall
pass to and be vested in the Trust Administrator pursuant to and under this
Section and, without limitation, the Trust Administrator is hereby authorized
and empowered, as attorney-in-fact or otherwise, to execute and deliver on
behalf of and at the expense of the Master Servicer, any and all documents and
other instruments and to 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. The Master Servicer agrees, at its sole cost
and expense, promptly (and in any event no later than ten Business Days
subsequent to such notice) to provide the Trust Administrator with all documents
and records requested by it to enable it to assume the Master Servicer's
functions under this Agreement, and to cooperate with the Trust Administrator
and the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights under this Agreement, including, without limitation,
the transfer within one Business Day to the Trust Administrator for
administration by it of all cash amounts which at the time shall be or should
have been credited by the Master Servicer to the Collection Account held by or
on behalf of the Master Servicer, or any REO Account or Servicing Account held
by or on behalf of the Master Servicer or thereafter be received with respect to
the Mortgage Loans or any REO Property (provided, however, that the Master
Servicer shall continue to be entitled to receive all amounts accrued or owing
to it under this Agreement on or prior to the date of such termination, whether
in respect of Advances or otherwise, and shall continue to be entitled to the
benefits of Section 6.03, notwithstanding any such termination, with respect to
events occurring prior to such termination). For purposes of this Section 7.01,
the Trust Administrator and the Trustee, as applicable, shall not be deemed to
have knowledge of a Master Servicer Event of Default unless a Responsible
Officer of the Trust Administrator or the Trustee, as applicable, assigned to
and working in the Trust Administrator's or the Trustee's Corporate Trust
Office, as the case may be, has actual knowledge thereof or unless written
notice of any event which is in fact such a Master Servicer Event of Default is
received by the Trust Administrator or the Trustee, as applicable, and such
notice references the Certificates, any of the Trust REMICs or this Agreement.

                                      164
<PAGE>

         The Trustee and the Trust Administrator, as applicable, shall be
entitled to be reimbursed by the Master Servicer (or by the Trust Fund if the
Master Servicer is unable to fulfill its obligations hereunder) for all costs
associated with the transfer of servicing from the predecessor master servicer,
including without limitation, any costs or expenses associated with the complete
transfer of all servicing data and the completion, correction or manipulation of
such servicing data as may be required by the Trust Administrator or the Trustee
to correct any errors or insufficiencies in the servicing data or otherwise to
enable the Trust Administrator or the Trustee to service the Mortgage Loans
properly and effectively.

Section 7.02 Trust Administrator to Act; Appointment of Successor.

                  (a) On and after the time the Master Servicer receives a
notice of termination, the Trust Administrator shall be the successor in all
respects to the Master Servicer in its capacity as Master Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto and
arising thereafter, which shall be assumed by the Trust Administrator (except
for any representations or warranties of the Master Servicer under this
Agreement, the responsibilities, duties and liabilities contained in Section
2.03(c) and its obligation to deposit amounts in respect of losses pursuant to
Section 3.12) by the terms and provisions hereof including, without limitation,
the Master Servicer's obligations to make Advances pursuant to Section 4.04;
provided, however, that if the Trust Administrator is prohibited by law or
regulation from obligating itself to make advances regarding delinquent Mortgage
Loans, then the Trust Administrator shall not be obligated to make Advances
pursuant to Section 4.04; and provided further, that any failure to perform such
duties or responsibilities caused by the Master Servicer's failure to provide
information required by Section 7.01 shall not be considered a default by the
Trust Administrator as successor to the Master Servicer hereunder; provided,
however, it is understood and acknowledged by the parties that there will be a
period of transition (not to exceed 90 days) before the servicing transfer is
fully effected. As compensation therefor, the Trust Administrator shall be
entitled to the Servicing Fee and all funds relating to the Mortgage Loans to
which the Master Servicer would have been entitled if it had continued to act
hereunder (other than amounts which were due or would become due to the Master
Servicer prior to its termination or resignation). Notwithstanding anything
herein to the contrary, in no event shall the Trust Administrator be liable for
any Servicing Fee or for any differential in the amount of the Servicing Fee
paid hereunder and the amount necessary to induce any successor Master Servicer
to act as successor Master Servicer under this Agreement and the transactions
set forth or provided for herein. After the Master Servicer receives a notice of
termination, notwithstanding the above and subject to the next paragraph, the
Trust Administrator may, if it shall be unwilling to so act, or shall, if it is
unable to so act or if it is prohibited by law from making advances regarding
delinquent Mortgage Loans, or if the NIMS Insurer, the Guarantor or the Holders
of Certificates entitled to at least 51% of the Voting Rights so request in
writing to the Trust Administrator, promptly appoint, or petition a court of
competent jurisdiction to appoint, an established mortgage loan servicing
institution acceptable to each Rating Agency, having a net worth of not less
than $15,000,000 and reasonably acceptable to the NIMS Insurer or the Guarantor,
as provided in Section 1.04, as the successor to the Master Servicer under this
Agreement in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer under this Agreement.

                                      165
<PAGE>

         No appointment of a successor to the Master Servicer under this
Agreement shall be effective until the assumption by the successor of all of the
Master Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Trust
Administrator may make such arrangements for the compensation of such successor
out of payments on Mortgage Loans as it and such successor shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Master Servicer as such hereunder. The Depositor, the Trustee, the
Trust Administrator and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Master Servicer under this Agreement, the
Trust Administrator shall act in such capacity as hereinabove provided.

         Upon removal or resignation of the Master Servicer, the Trust
Administrator, with the cooperation of the Depositor, (x) shall solicit bids for
a successor Master Servicer as described below and (y) pending the appointment
of a successor Master Servicer as a result of soliciting such bids, shall serve
as Master Servicer of the Mortgage Loans serviced by such predecessor Master
Servicer. The Trust Administrator shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth in the first paragraph of this
Section 7.02 (including the Trust Administrator, the Trustee or any affiliate
thereof). Such public announcement shall specify that the successor Master
Servicer shall be entitled to the servicing compensation agreed upon between the
Trust Administrator, the successor Master Servicer and the Depositor; provided,
however, that no such fee shall exceed the Servicing Fee. Within thirty days
after any such public announcement, the Trust Administrator with the cooperation
of the Depositor, shall negotiate in good faith and effect the sale, transfer
and assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Trust Administrator, upon receipt of the
purchase price shall pay such purchase price to the Master Servicer being so
removed, after deducting from any sum received by the Trust Administrator from
the successor to the Master Servicer in respect of such sale, transfer and
assignment all costs and expenses of any public announcement and of any sale,
transfer and assignment of the servicing rights and responsibilities reasonably
incurred hereunder. After such deductions, the remainder of such sum shall be
paid by the Trust Administrator to the Master Servicer at the time of such sale.

                                      166
<PAGE>

                  (b) If the Master Servicer fails to remit to the Trust
Administrator for distribution to the Certificateholders any payment required to
be made under the terms of this Agreement (for purposes of this Section 7.02(b),
a "Remittance") because the Master Servicer is the subject of a proceeding under
the Bankruptcy Code and the making of such Remittance is prohibited by Section
362 of the Bankruptcy Code, the Trust Administrator shall upon written notice of
such prohibition, regardless of whether it has received a notice of termination
under Section 7.01, shall be treated as though it had succeeded to the Master
Servicer and shall advance the amount of such Remittance by depositing such
amount in the Distribution Account on the related Distribution Date. The Trust
Administrator shall be obligated to make such advance only if (i) such advance,
in the good faith judgment of the Trust Administrator can reasonably be expected
to be ultimately recoverable from Stayed Funds and (ii) the Trust Administrator
is not prohibited by law from making such advance or obligating itself to do so.
Upon remittance of the Stayed Funds to the Trust Administrator or the deposit
thereof in the Distribution Account by the Master Servicer, a trustee in
bankruptcy or a federal bankruptcy court, the Trust Administrator may recover
the amount so advanced, without interest, by withdrawing such amount from the
Distribution Account; however, nothing in this Agreement shall be deemed to
affect the Trust Administrator's rights to recover from the Master Servicer's
own funds interest on the amount of any such advance. If the Trust Administrator
at any time makes an advance under this Subsection which it later determines in
its good faith judgment will not be ultimately recoverable from the Stayed Funds
with respect to which such advance was made, the Trust Administrator shall be
entitled to reimburse itself for such advance, without interest, by withdrawing
from the Distribution Account, out of amounts on deposit therein, an amount
equal to the portion of such advance attributable to the Stayed Funds.

Section 7.03 Notification to Certificateholders.

                  (a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trust Administrator shall give prompt
written notice thereof to Certificateholders at their respective addresses
appearing in the Certificate Register, to the NIMS Insurer and to the Guarantor.

                  (b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee or the Trust Administrator becomes aware of
the occurrence of such an event, the Trust Administrator shall transmit by mail
to all Holders of Certificates, to the NIMS Insurer and to the Guarantor notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.

                                      167
<PAGE>

Section 7.04 Waiver of Master Servicer Events of Default.

         The Holders representing at least 66% of the Voting Rights evidenced by
all Classes of Certificates affected by any default or Master Servicer Event of
Default hereunder may, with the consent of the NIMS Insurer or the Guarantor, as
provided in Section 1.04, waive such default or Master Servicer Event of
Default; provided, however, that a default or Master Servicer Event of Default
under clause (i) or (vii) of Section 7.01 may be waived only by all of the
Holders of the Regular Certificates and the NIMS Insurer or the Guarantor, as
provided in Section 1.04 (as evidenced by the written consent of the NIMS
Insurer or the Guarantor, as the case may be). Upon any such waiver of a default
or Master Servicer Event of Default, such default or Master Servicer Event of
Default shall cease to exist and shall be deemed to have been remedied for every
purpose hereunder. No such waiver shall extend to any subsequent or other
default or Master Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.

                                  ARTICLE VIII

                     THE TRUSTEE AND THE TRUST ADMINISTRATOR

Section 8.01 Duties of Trustee and Trust Administrator.

         Each of the Trustee and the Trust Administrator, prior to the
occurrence of a Master Servicer Event of Default and after the curing of all
Master Servicer Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. During a Master Servicer Event of Default, each of the Trustee and
the Trust Administrator shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee or
the Trust Administrator enumerated in this Agreement shall not be construed as a
duty.

         Each of the Trustee and the Trust Administrator, upon receipt of all
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trust Administrator which are specifically
required to be furnished pursuant to any provision of this Agreement, shall
examine them to determine whether they conform to the requirements of this
Agreement. If any such instrument is found not to conform to the requirements of
this Agreement in a material manner, the Trust Administrator shall take such
action as it deems appropriate to have the instrument corrected, and if the
instrument is not corrected to the Trust Administrator's satisfaction, the Trust
Administrator will provide notice thereof to the Certificateholders.

         No provision of this Agreement shall be construed to relieve the
Trustee or the Trust Administrator from liability for its own negligent action,
its own negligent failure to act or its own misconduct; provided, however, that:

                  (i) Prior to the occurrence of a Master Servicer Event of
         Default, and after the curing of all such Master Servicer Events of
         Default which may have occurred, the duties and obligations of the
         Trustee and the Trust Administrator shall be determined solely by the
         express provisions of this Agreement, neither the Trustee nor the Trust
         Administrator shall be liable except for the performance of such duties
         and obligations as are specifically set forth in this Agreement, no
         implied covenants or obligations shall be read into this Agreement
         against the Trustee or the Trust Administrator and, in the absence of
         bad faith on the part of the Trustee or the Trust Administrator, as
         applicable, the Trustee or the Trust Administrator, as the case may be,
         may conclusively rely, as to the truth of the statements and the
         correctness of the opinions expressed therein, upon any certificates or
         opinions furnished to the Trustee or the Trust Administrator, as the
         case may be, that conform to the requirements of this Agreement;

                                      168
<PAGE>

                  (ii) The Trustee shall not be personally liable for an error
         of judgment made in good faith by a Responsible Officer or Responsible
         Officers of the Trustee unless it shall be proved that the Trustee was
         negligent in ascertaining the pertinent facts; and

                  (iii) Neither the Trustee nor the Trust Administrator shall be
         personally liable with respect to any action taken, suffered or omitted
         to be taken by it in good faith in accordance with the direction of the
         NIMS Insurer, the Guarantor or the Holders of Certificates entitled to
         at least 25% of the Voting Rights relating to the time, method and
         place of conducting any proceeding for any remedy available to the
         Trustee or the Trust Administrator, or exercising any trust or power
         conferred upon the Trustee or the Trust Administrator, under this
         Agreement.

Section 8.02 Certain Matters Affecting the Trustee and the Trust Administrator.

                  (a) Except as otherwise provided in Section 8.01:

                  (i) Each of the Trustee and the Trust Administrator may
         request and rely conclusively upon and shall be fully protected in
         acting or refraining from acting upon any resolution, Officers'
         Certificate, certificate of auditors or any other certificate,
         statement, instrument, opinion, report, notice, request, consent,
         order, appraisal, bond or other paper or document reasonably believed
         by it to be genuine and to have been signed or presented by the proper
         party or parties and the manner of obtaining consents and evidencing
         the authorization of the execution thereof shall be subject to such
         reasonable regulations as the Trustee or the Trust Administrator, as
         applicable, may prescribe;

                  (ii) Each of the Trustee and the Trust Administrator may
         consult with counsel and any Opinion of Counsel shall be full and
         complete authorization and protection in respect of any action taken or
         suffered or omitted by it hereunder in good faith and in accordance
         with such Opinion of Counsel;

                  (iii) Neither the Trustee nor the Trust Administrator shall be
         under any obligation to exercise any of the trusts or powers vested in
         it by this Agreement or to institute, conduct or defend any litigation
         hereunder or in relation hereto at the request, order or direction of
         any of the NIMS Insurer, the Guarantor or the Certificateholders,
         pursuant to the provisions of this Agreement, unless the NIMS Insurer,
         the Guarantor or such Certificateholders shall have offered to the
         Trustee or the Trust Administrator, as applicable, security or
         indemnity satisfactory to it against the costs, expenses and
         liabilities which may be incurred therein or thereby; nothing contained
         herein shall, however, relieve the Trustee or the Trust Administrator
         of the obligation, upon the occurrence of a Master Servicer Event of
         Default (which has not been cured or waived), to exercise such of the
         rights and powers vested in it by this Agreement, and to use the same
         degree of care and skill in their exercise as a prudent person would
         exercise or use under the circumstances in the conduct of such person's
         own affairs;

                                      169
<PAGE>

                  (iv) Neither the Trustee nor the Trust Administrator shall be
         personally liable for any action taken, suffered or omitted by it in
         good faith and believed by it to be authorized or within the discretion
         or rights or powers conferred upon it by this Agreement;

                  (v) Prior to the occurrence of a Master Servicer Event of
         Default hereunder and after the curing of all Master Servicer Events of
         Default which may have occurred, neither the Trustee nor the Trust
         Administrator shall be bound to make any investigation into the facts
         or matters stated in any resolution, certificate, statement,
         instrument, opinion, report, notice, request, consent, order, approval,
         bond or other paper or document, unless requested in writing to do so
         by the NIMS Insurer, the Guarantor or the Holders of Certificates
         entitled to at least 25% of the Voting Rights; provided, however, that
         if the payment within a reasonable time to the Trustee or the Trust
         Administrator, as applicable, of the costs, expenses or liabilities
         likely to be incurred by it in the making of such investigation is, in
         the opinion of the Trustee or the Trust Administrator, as applicable,
         not reasonably assured to the Trustee or the Trust Administrator, as
         applicable, by the NIMS Insurer, the Guarantor or such
         Certificateholders, the Trustee or the Trust Administrator, as
         applicable, may require reasonable indemnity against such expense, or
         liability from the NIMS Insurer, the Guarantor or such
         Certificateholders as a condition to taking any such action;

                  (vi) Each of the Trustee and the Trust Administrator may
         execute any of the trusts or powers hereunder or perform any duties
         hereunder either directly or by or through agents custodians, nominees
         or attorneys and shall not be responsible for any willful misconduct or
         negligence of such agents, custodians, nominees or attorneys (as long
         as such agents, custodians, nominees or attorneys are appointed with
         due and proper care);

                  (vii) Neither the Trustee nor the Trust Administrator shall be
         personally liable for any loss resulting from the investment of funds
         held in the Collection Account at the direction of the Master Servicer
         pursuant to Section 3.12; and

                  (viii) Except as otherwise expressly provided herein, none of
         the provisions of this Agreement shall require the Trustee or the Trust
         Administrator to expend or risk its own funds or otherwise to incur any
         liability, financial or otherwise, in the performance of any of its
         duties hereunder, or in the exercise of any of its rights or powers
         (not including expenses, disbursements and advances incurred or made by
         the Trustee or the Trust Administrator, as applicable, including the
         compensation and the expenses and disbursements of its agents and
         counsel, in the ordinary course of the Trustee's or the Trust
         Administrator's, as applicable, performance in accordance with the
         provisions of this Agreement) if it shall have reasonable grounds for
         believing that repayment of such funds or indemnity satisfactory to it
         against such risk or liability is not assured to it.

                                      170
<PAGE>

                  (b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee or the Trust Administrator, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee or the Trust
Administrator shall be brought in its name for the benefit of all the Holders of
such Certificates, subject to the provisions of this Agreement.

Section 8.03 Neither Trustee nor Trust Administrator Liable for Certificates or
             Mortgage Loans.

         The recitals contained herein and in the Certificates (other than the
signature of the Trust Administrator, on behalf of the Trustee, the execution
and authentication of the Trust Administrator on the Certificates, the
acknowledgments of the Trust Administrator contained in Article II and the
representations and warranties of the Trustee and Trust Administrator in Section
8.13) shall be taken as the statements of the Depositor, and neither the Trustee
nor the Trust Administrator shall assume any responsibility for their
correctness. Neither the Trustee nor the Trust Administrator makes any
representations or warranties as to the validity or sufficiency of this
Agreement (other than as specifically set forth in Section 8.13) or of the
Certificates (other than execution and authentication of the Trust
Administrator, on behalf of the Trustee, on the Certificates) or of any Mortgage
Loan or related document. Neither the Trustee nor the Trust Administrator shall
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of the Certificates, or for the use or
application of any funds paid to the Depositor or the Master Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Account
by the Master Servicer, other than any funds held by or on behalf of the Trustee
or the Trust Administrator in accordance with Section 3.10.

Section 8.04 Trustee and Trust Administrator May own Certificates.

         Each of the Trustee and the Trust Administrator in its individual
capacity or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee or the Trust
Administrator, as applicable, and may transact banking and/or trust business
with the Seller, the Depositor, the Master Servicer, the Guarantor or their
Affiliates.

Section 8.05 Trustee's and Trust Administrator's Fees and Expenses.

                  (a) The Trust Administrator shall withdraw from the
Distribution Account on each Distribution Date and pay to itself one day's
interest earnings (net of losses) on amounts on deposit in the Distribution
Account. In addition to such interest earnings, the compensation to be paid to
the Trust Administrator in respect of its obligations under this Agreement will
be the amounts paid by the Seller pursuant to a letter agreement between the
Trust Administrator and the Seller. The principal compensation to be paid to the
Trustee in respect of its obligations under this Agreement will be the amounts
paid by the Trust Administrator pursuant to a letter agreement between the Trust
Administrator and the Trustee.

                                      171
<PAGE>

         Each of the Trustee and the Trust Administrator, and any director,
officer, employee or agent of the Trustee or the Trust Administrator, as
applicable, shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense (not including expenses, disbursements and advances
incurred or made by the Trustee or the Trust Administrator, as applicable,
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Trustee's or the Trust Administrator's,
as the case may be, performance in accordance with the provisions of this
Agreement) incurred by the Trustee or the Trust Administrator, as applicable,
arising out of or in connection with the acceptance or administration of its
obligations and duties under this Agreement, other than any loss, liability or
expense (i) resulting from the Master Servicer's actions or omissions in
connection with this Agreement and the Mortgage Loans, (ii) that constitutes a
specific liability of the Trustee or the Trust Administrator, as applicable,
pursuant to Section 10.01(c) or (iii) any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder, or in the case of the Trust Administrator, as a result of a breach of
the Trust Administrator's obligations under Article X hereof. Any amounts
payable to the Trustee or the Trust Administrator, as applicable, or any
director, officer, employee or agent of the Trustee or the Trust Administrator,
as applicable, in respect of the indemnification provided by this paragraph (a),
or pursuant to any other right of reimbursement from the Trust Fund that the
Trustee or the Trust Administrator, as applicable, or any director, officer,
employee or agent of the Trustee or the Trust Administrator, as applicable, may
have hereunder in its capacity as such, may be withdrawn by the Trust
Administrator from the Distribution Account at any time. Such indemnity shall
survive the termination of this Agreement and the resignation of the Trustee or
the Trust Administrator.

         As a limitation on the foregoing with respect to certain expenses of
the Trustee or the Trust Administrator, each of the Trustee and the Trust
Administrator shall receive from the Trust Fund amounts with respect to
indemnification for counsel fees and expenses (collectively, "Legal Fees") in
connection with any third-party litigation or other claims alleging violations
of laws or regulations relating to consumer lending and/or servicing of the
Trust Fund (collectively, "Third Party Claims") in an amount not greater than
$25,000 per month, and $600,000 in the aggregate (with amounts in excess of
$25,000 for any month carried-forward to subsequent months, until the $600,000
aggregate maximum is reached). Neither the Trustee nor the Trust Administrator
shall have any obligation to incur additional expenses for which reimbursement
is limited pursuant to this paragraph in excess of the aggregate limit set forth
above unless it has received reasonable security or indemnity for such
additional expenses. The Certificateholders shall hold each of the Trustee and
the Trust Administrator harmless for any consequences to such Certificateholders
resulting from any failure of the Trustee or the Trust Administrator to incur
any such additional expenses in excess of the aforementioned aggregate limit.

                  (b) Without limiting the Master Servicer's indemnification
obligations under Section 6.03, the Master Servicer agrees to indemnify, the
Trustee and the Trust Administrator from, and hold each of them harmless
against, any loss, liability or expense resulting from a breach of the Master
Servicer's obligations and duties under this Agreement. Such indemnity shall
survive the termination or discharge of this Agreement and the resignation or
removal of the Trustee or the Trust Administrator. Any payment under this
Section 8.05(b) made by the Master Servicer to the Trustee or the Trust
Administrator shall be from the Master Servicer's own funds, without
reimbursement from the Trust Fund therefor.

                                      172
<PAGE>

Section 8.06 Eligibility Requirements for Trustee and Trust Administrator.

         Each of the Trustee and the Trust Administrator hereunder shall at all
times be a corporation or an association (other than the Depositor, the Seller,
the Master Servicer or any Affiliate of the foregoing) organized and doing
business under the laws of any state or the United States of America, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority. If such corporation or association publishes reports
of conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee or the
Trust Administrator shall cease to be eligible in accordance with the provisions
of this Section, the Trustee or the Trust Administrator, as the case may be,
shall resign immediately in the manner and with the effect specified in Section
8.07.

Section 8.07 Resignation or Removal of Trustee and Trust Administrator.

         Either of the Trustee or the Trust Administrator may at any time resign
and be discharged from the trust hereby created by giving written notice thereof
to the NIMS Insurer, the Guarantor, the Depositor, the Master Servicer and the
Certificateholders and if the Trustee is resigning to the Trust Administrator,
or if the Trust Administrator is resigning, to the Trustee. Upon receiving such
notice of resignation, the Depositor shall promptly appoint a successor Trustee
or Trust Administrator by written instrument, in duplicate, which instrument
shall be delivered to the resigning Trustee or Trust Administrator and to the
successor Trustee or Trust Administrator acceptable to the NIMS Insurer or the
Guarantor, as provided in Section 1.04, and to the Holders of Certificates
entitled to at least 51% of the Voting Rights. A copy of such instrument shall
be delivered to the Certificateholders, the Trustee or the Trust Administrator,
as applicable, and the Master Servicer by the Depositor. If no successor Trustee
or Trust Administrator shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee or Trust Administrator, as applicable, may petition any court
of competent jurisdiction for the appointment of a successor Trustee or Trust
Administrator, as applicable.

         If at any time the Trustee or the Trust Administrator shall cease to be
eligible in accordance with the provisions of Section 8.06 and shall fail to
resign after written request therefor by the Depositor or the NIMS Insurer or
the Guarantor, as provided in Section 1.04 (or in the case of the Trust
Administrator, the Trustee), or if at any time the Trustee or the Trust
Administrator shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or a receiver of either of the Trustee or the Trust Administrator or
of its property shall be appointed, or any public officer shall take charge or
control of either of the Trustee or the Trust Administrator or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation, then
the Depositor or the NIMS Insurer or the Guarantor, as provided in Section 1.04
(or in the case of the Trust Administrator, the Trustee), may remove the Trustee
or the Trust Administrator, as applicable, and the Depositor may appoint a
successor Trustee or the Trust Administrator, as applicable (which may be the
same person, if both the Trustee and the Trust Administrator are removed),
acceptable to the NIMS Insurer or the Guarantor, as provided in Section 1.04,
and to the Holders of Certificates entitled to at least 51% of the Voting
Rights, by written instrument, in duplicate, which instrument shall be delivered
to the Trustee or the Trust Administrator, as applicable, so removed and to the
successor Trustee or the Trust Administrator, as applicable. A copy of such
instrument shall be delivered to the Certificateholders and the Master Servicer
by the Depositor.

                                      173
<PAGE>

         The Holders of Certificates entitled to at least 51% of the Voting
Rights, with the consent of the NIMS Insurer or the Guarantor, as provided in
Section 1.04, may at any time remove the Trustee or the Trust Administrator and
appoint a successor Trustee or the Trust Administrator by written instrument or
instruments, in triplicate, signed by the NIMS Insurer, the Guarantor or such
Holders, as applicable, or their attorneys-in-fact duly authorized, one complete
set of which instruments shall be delivered to the Depositor, one complete set
to the Trustee or the Trust Administrator, as the case may be, so removed and
one complete set to the successor so appointed. A copy of such instrument shall
be delivered to the NIMS Insurer, the Guarantor, the Certificateholders and the
Master Servicer by the Depositor. In addition, if the Trustee has knowledge that
the Trust Administrator has breached any of its duties under this Agreement, the
Trustee may remove the Trust Administrator in the same manner as provided in the
prior sentence. For purposes of this Section, the Trustee shall not be deemed to
have knowledge of a breach by the Trust Administrator of any of its duties
hereunder, unless a Responsible Officer of the Trustee, assigned to and working
in the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a breach is received by the
Trustee, and such notice references the Certificates, the Trust Fund or this
Agreement.

         Any resignation or removal of the Trustee or the Trust Administrator
and appointment of a successor Trustee or Trust Administrator pursuant to any of
the provisions of this Section shall not become effective until acceptance of
appointment by the successor Trustee or the Trust Administrator as provided in
Section 8.08. Notwithstanding the foregoing, in the event the Trust
Administrator advises the Trustee that it is unable to continue to perform its
obligations pursuant to the terms of this Agreement prior to the appointment of
a successor, the Trustee shall be obligated to perform such obligations until a
new Trust Administrator is appointed and shall be entitled to receive any fees
that would have otherwise been payable to the Trust Administrator hereunder.
Such performance shall be without prejudice to any claim by a party hereto or
beneficiary hereof resulting from the Trust Administrator's breach of its
obligations hereunder.

Section 8.08 Successor Trustee or Trust Administrator.

         Any successor Trustee or Trust Administrator appointed as provided in
Section 8.07 shall execute, acknowledge and deliver to the Depositor, and to its
predecessor Trustee or Trust Administrator, as applicable, an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Trustee or Trust Administrator shall become effective and
such successor Trustee or Trust Administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as Trustee or Trust Administrator herein. The predecessor Trustee or Trust
Administrator shall deliver to the successor Trustee or Trust Administrator all
Mortgage Files and related documents and statements, as well as all moneys, held
by it hereunder (other than any Mortgage Files at the time held by a Custodian,
which Custodian shall become the agent of any successor Trustee hereunder), and
the Depositor and the predecessor Trustee or Trust Administrator shall execute
and deliver such instruments and do such other things as may reasonably be
required for more fully and certainly vesting and confirming in the successor
Trustee or Trust Administrator all such rights, powers, duties and obligations.

                                      174
<PAGE>

         No successor Trustee or Trust Administrator shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Trustee or Trust Administrator shall be eligible under the provisions of Section
8.06 and the appointment of such successor Trustee or Trust Administrator shall
not result in a downgrading of the NIM Notes or any Class of Certificates by
either Rating Agency, as evidenced by a letter from each Rating Agency.

         Upon acceptance of appointment by a successor Trustee or Trust
Administrator as provided in this Section, the Depositor shall mail notice of
the succession of such Trustee or Trust Administrator hereunder to all Holders
of Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor Trustee or Trust Administrator, the successor
Trustee or Trust Administrator shall cause such notice to be mailed at the
expense of the Depositor.

Section 8.09 Merger or Consolidation of Trustee or Trust Administrator.

         Any corporation or association into which the Trustee or the Trust
Administrator may be merged or converted or with which it may be consolidated or
any corporation or association resulting from any merger, conversion or
consolidation to which the Trustee or the Trust Administrator, as the case may
be, shall be a party, or any corporation or association succeeding to the
business of the Trustee or the Trust Administrator, shall be the successor of
the Trustee or the Trust Administrator, respectively, hereunder, provided such
corporation or association shall be eligible under the provisions of Section
8.06, 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.

Section 8.10 Appointment of Co-Trustee or Separate Trustee.

         Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of REMIC 0A or REMIC 0B, or property securing the same may at the time be
located, the Master Servicer and the Trustee, acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee and the NIMS Insurer or the Guarantor (as
provided in Section 1.04), to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of REMIC
0A or REMIC 0B, as applicable, and to vest in such Person or Persons, in such
capacity, such title to REMIC 0A and/or REMIC 0B, or any part thereof and,
subject to the other provisions of this Section 8.10, such powers, duties,
obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. If the Master Servicer shall not have joined in
such appointment or the NIMS Insurer or the Guarantor shall (as provided in
Section 1.04) not have approved such appointment within 15 days after the
receipt by it of a request so to do, or in case a Master Servicer Event of
Default shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 8.06 hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.08 hereof. If such appointment is at the request of the Master
Servicer then any expense of the Trustee shall be deemed a Servicing Advance for
all purpose of this Agreement, otherwise it will be an expense of the Trustee
and will be payable out of the Trustee's funds.

                                      175
<PAGE>

         In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to the Master Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of title to
REMIC 0A or REMIC 0B, or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee or co-trustee at the direction
of the Trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trust conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.

         Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

Section 8.11 Appointment of Custodians.

         The Trust Administrator may, with the consent of the Depositor and the
Master Servicer, appoint one or more Custodians to hold all or a portion of the
Mortgage Files as agent for the Trust Administrator, by entering into a
Custodial Agreement. The Trust Administrator shall initially serve as the
Custodian and this Agreement shall serve as the Custodial Agreement. The
appointment of any Custodian may at any time be terminated and a substitute
Custodian appointed therefor upon the reasonable request of the Master Servicer
to the Trust Administrator and the consent of the NIMS Insurer, after
consultation with the Guarantor, the consent to which shall not be unreasonably
withheld. The Trust Administrator shall pay any and all fees and expenses of any
Custodian in accordance with each Custodial Agreement. Subject to Article VIII
hereof, the Trust Administrator agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against the
Custodian for the benefit of the Certificateholders having an interest in any
Mortgage File held by such Custodian. Each Custodian shall be a depository
institution or trust company subject to supervision by federal or state
authority, shall have combined capital and surplus of at least $10,000,000 and
shall be qualified to do business in the jurisdiction in which it holds any
Mortgage File. Each Custodial Agreement may be amended only as provided in
Section 11.01. In no event shall the appointment of any Custodian pursuant to a
Custodial Agreement diminish the obligations of the Trust Administrator
hereunder.

                                      176
<PAGE>

Section 8.12 Appointment of Office or Agency.

         The Trust Administrator will appoint an office or agency in the City of
New York where the Certificates may be surrendered for registration of transfer
or exchange, and presented for final distribution, and where notices and demands
to or upon the Trust Administrator in respect of the Certificates and this
Agreement may be served. As of the Closing Date, the Trust Administrator
designates its offices located at the office of Trust Administrator's agent,
located at BTC transfer agent services, 55 Water Street, Jeanette Park Entrance,
New York, NY 10044 for such purpose.

Section 8.13 Representations and Warranties of the Trustee and the Trust
Administrator.

         Each of the Trustee and the Trust Administrator hereby represents and
warrants, severally and not jointly, and with respect to itself only, to the
Master Servicer, the Guarantor and the Depositor and to the Trustee, in the case
of the Trust Administrator, or to the Trust Administrator, in the case of the
Trustee, as of the Closing Date, that:

                  (i) it is a national banking association duly organized,
         validly existing and in good standing under the laws of the United
         States.

                  (ii) the execution and delivery of this Agreement, and the
         performance and compliance with the terms of this Agreement, will not
         violate its charter or bylaws or constitute a default (or an event
         which, with notice or lapse of time, or both, would constitute a
         default) under, or result in the breach of, any material agreement or
         other instrument to which it is a party or which is applicable to it or
         any of its assets.

                  (iii) it has the full power and authority to enter into and
         consummate all transactions contemplated by this Agreement, has duly
         authorized the execution, delivery and performance of this Agreement,
         and has duly executed and delivered this Agreement.

                  (iv) this Agreement, assuming due authorization, execution and
         delivery by the Master Servicer and the Depositor, constitutes its
         valid, legal and binding obligation, enforceable against it in
         accordance with the terms hereof, subject to (A) applicable bankruptcy,
         insolvency, receivership, reorganization, moratorium and other laws
         affecting the enforcement of creditors' rights generally, and (B)
         general principles of equity, regardless of whether such enforcement is
         considered in a proceeding in equity or at law.

                                      177
<PAGE>

                                   ARTICLE IX

                                   TERMINATION

Section 9.01 Termination Upon Purchase or Liquidation of All Mortgage Loans.

                  (a) Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer, the
Guarantor, the Trust Administrator and the Trustee (other than the obligations
of the Master Servicer to the Trustee and the Trust Administrator pursuant to
Section 8.05 and of the Master Servicer to provide for and the Trust
Administrator to make payments in respect of the REMIC 0A Regular Interests,
REMIC 0B Regular Interests, REMIC 1A Regular Interests, REMIC 1B Regular
Interests, REMIC 2 Regular Interests, REMIC 3 Uncertificated Regular Interests,
and the Classes of Certificates as hereinafter set forth) shall terminate upon
the later of (A) the payment in full of all amounts owing to the Guarantor
hereunder unless the Guarantor shall otherwise consent and (B) payment to the
Certificateholders and the deposit of all amounts held by or on behalf of the
Trustee and required hereunder to be so paid or deposited on the Distribution
Date coinciding with or following the earlier to occur of (i) the purchase by
the Terminator (as defined below) of all Mortgage Loans and each REO Property
remaining in REMIC 0A and REMIC 0B and (ii) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan or
REO Property remaining in REMIC 0A or REMIC 0B; provided, however, that in no
event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James, living on the
date hereof. The purchase by the Terminator of all Mortgage Loans and each REO
Property remaining in REMIC 0A and REMIC 0B shall be at a price (the
"Termination Price") equal to the greater of (A) the aggregate Purchase Price of
all the Mortgage Loans included in REMIC 0A and REMIC 0B, plus the appraised
value of each REO Property, if any, included in REMIC 0A and REMIC 0B, such
appraisal to be conducted by an appraiser mutually agreed upon by the Terminator
and the Trustee in their reasonable discretion, any unpaid Guarantor
Reimbursement Amount and unpaid Guaranty Fee and (B) the aggregate fair market
value of all of the assets of REMIC 0A and REMIC 0B (as determined by the
Terminator and the Trustee, as of the close of business on the third Business
Day next preceding the date upon which notice of any such termination is
furnished to Certificateholders pursuant to the third paragraph of this Section
9.01) plus any unpaid Guarantor Reimbursement Amount and unpaid Guaranty Fee,
and in the case of both clauses (A) and (B) of this sentence, any additional
amounts necessary to pay all interest accrued on, as well as amounts necessary
to pay in full the principal balance of, the NIM Notes and any amounts necessary
to reimburse the NIMS Insurer for all amounts paid under the NIMs insurance
policy and any other amounts reimbursable or otherwise payable to the NIMS
Insurer, in each case, with interest thereon at the applicable rate set forth in
the Insured Indenture and to the extent not previously reimbursed or paid.

                  (b) The Master Servicer shall have the right and, if the
Master Servicer does not exercise such right, the NIMS Insurer, shall have the
right (the party exercising such right, the "Terminator") to purchase all of the
Mortgage Loans and each REO Property in both Loan Groups remaining in REMIC 0A
and REMIC 0B pursuant to clause (i) of the preceding paragraph no later than the
Determination Date in the month immediately preceding the Distribution Date on
which the Certificates will be retired; provided, however, that the Terminator
may elect to purchase all of the Mortgage Loans and each REO Property remaining
in REMIC 0A and REMIC 0B pursuant to clause (i) above only if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property remaining
in the Trust Fund at the time of such election is equal to or less than 10% of
the sum of the aggregate Stated Principal Balance of the Closing Date Mortgage
Loans as of the Cut-off Date and the Original Pre-Funded Amount. The Terminator
shall not be entitled to exercise this right, without the Guarantor's consent,
if the distribution of the Termination Price according to such priorities would
result in the Guarantor being required to make a Guarantor Payment on the
applicable Distribution Date. By acceptance of the Residual Certificates, the
Holders of the Residual Certificates agree, in connection with any termination
hereunder, to assign and transfer any amounts in excess of par, and to the
extent received in respect of such termination, to pay any such amounts to the
Holders of the Class C Certificates.

                                      178
<PAGE>

                  (c) Notice of the liquidation of the REMIC 0A Regular
Interests and REMIC 0B Regular Interests shall be given promptly by the Trust
Administrator by letter to Certificateholders mailed (a) in the event such
notice is given in connection with the purchase of the Mortgage Loans and each
REO Property by the Terminator, not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of the final distribution on
the Certificates or (b) otherwise during the month of such final distribution on
or before the Determination Date in such month, in each case specifying (i) the
Distribution Date upon which the Trust Fund will terminate and final payment in
respect of the REMIC 0A Regular Interests, REMIC 0B Regular Interests and the
Certificates will be made upon presentation and surrender of the related
Certificates at the office of the Trust Administrator therein designated, (ii)
the amount of any such final payment, (iii) that no interest shall accrue in
respect of the REMIC 0A Regular Interests, REMIC 0B Regular Interests or the
Certificates from and after the Accrual Period relating to the final
Distribution Date therefor and (iv) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trust
Administrator designated in such notice for purposes of such surrender. In the
event such notice is given in connection with the purchase of all of the
Mortgage Loans and each REO Property remaining in REMIC 0A and REMIC 0B by the
Terminator, the Terminator shall deliver to the Trust Administrator for deposit
in the Distribution Account not later than the last Business Day of the month
next preceding the month of the final distribution on the Certificates an amount
in immediately available funds equal to the above-described purchase price. The
Trust Administrator shall remit to the Master Servicer from such funds deposited
in the Distribution Account (i) any amounts which the Master Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and (ii) any other amounts otherwise payable by the Trust Administrator to
the Master Servicer from amounts on deposit in the Distribution Account pursuant
to the terms of this Agreement, in each case prior to making any final
distributions pursuant to Section 9.01(d) below. Upon certification to the Trust
Administrator by a Servicing Representative of the making of such final deposit,
the Trust Administrator shall promptly release or cause to be released to the
Terminator the Mortgage Files for the remaining Mortgage Loans, and the Trustee
or the Trust Administrator, on behalf of the Trustee, shall execute all
assignments, endorsements and other instruments necessary to effectuate such
transfer.

                  (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trust Administrator shall
distribute to each Certificateholder so presenting and surrendering its
Certificates the amount otherwise distributable on such Distribution Date in
accordance with Section 4.01 in respect of the Certificates so presented and
surrendered. On the final Distribution Date, the Trust Administrator will
withdraw from the Distribution Account and remit to the Guarantor amounts
otherwise payable to the Guarantor on such Distribution Date in accordance with
Section 4.01. Any funds not distributed to any Holder or Holders of Certificates
being retired on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and held
in trust by the Trust Administrator and credited to the account of the
appropriate non-tendering Holder or Holders. If any Certificates as to which
notice has been given pursuant to this Section 9.01 shall not have been
surrendered for cancellation within six months after the time specified in such
notice, the Trust Administrator shall mail a second notice to the remaining
non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall, directly or
through an agent, mail a final notice to remaining related non-tendering
Certificateholders concerning surrender of their Certificates. The costs and
expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall pay to
Greenwich Capital Markets, Inc. all such amounts, and all rights of
non-tendering Certificateholders in or to such amounts shall thereupon cease. No
interest shall accrue or be payable to any Certificateholder on any amount held
in trust by the Trust Administrator as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment thereof in accordance
with this Section 9.01.

                                      179
<PAGE>

         Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.

Section 9.02 Additional Termination Requirements.

                  (a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property or the final payment on or other
liquidation of the last Mortgage Loan or REO Property remaining in REMIC 0A and
REMIC 0B pursuant to Section 9.01, the Trust Fund shall be terminated in
accordance with the following additional requirements:

                  (i) The Trust Administrator shall specify the first day in the
                  90-day liquidation period in a statement attached to each
                  Trust REMIC's final Tax Return pursuant to Treasury regulation
                  Section 1.860F-l and shall satisfy all requirements of a
                  qualified liquidation under Section 860F of the Code and any
                  regulations thereunder, as evidenced by an Opinion of Counsel
                  delivered to the Guarantor, the Trust Administrator, the
                  Trustee, and the Depositor obtained at the expense of the
                  Terminator;

                  (ii) During such 90-day liquidation period, and at or prior to
                  the time of making of the final payment on the Certificates,
                  the Trust Administrator shall sell all of the assets of REMIC
                  0A and REMIC 0B to the Terminator for cash; and

                  (iii) At the time of the making of the final payment on the
                  Certificates, the Trust Administrator shall distribute or
                  credit, or cause to be distributed or credited, to the Holders
                  of the Residual Certificates all cash on hand in the Trust
                  Fund (other than cash retained to meet claims), and the Trust
                  Fund shall terminate at that time.

                                      180
<PAGE>

                  (b) In the event that the Guarantor purchases all the Group I
Mortgage Loans and each REO Property related to Loan Group I or the final
payment on or other liquidation of the last Mortgage Loan or REO Property in
Loan Group I remaining in REMIC 0A pursuant to Section 1.05, the REMIC 0A shall
be terminated in accordance with the following additional requirements:

                  (i) The Trust Administrator shall specify the first day in the
                  90-day liquidation period in a statement attached to each
                  REMIC 0A's final Tax Return pursuant to Treasury regulation
                  Section 1.860F-l and shall satisfy all requirements of a
                  qualified liquidation under Section 860F of the Code and any
                  regulations thereunder, as evidenced by an Opinion of Counsel
                  delivered to the Guarantor, the Trust Administrator, the
                  Trustee, and the Depositor obtained at the expense of the
                  Guarantor;

                  (ii) During such 90-day liquidation period, and at or prior to
                  the time of making of the final payment with respect to the
                  REMIC 0A Regular Interests and Class R-0A Interest, the Trust
                  Administrator shall sell all of the assets of REMIC 0A to the
                  Guarantor for cash; and

                  (iii) At the time of the making of the final payment with
                  respect to the REMIC 0A Regular Interests and Class R-0A
                  Interest, the Trust Administrator shall distribute or credit,
                  or cause to be distributed or credited, to the holders of the
                  Residual Certificates on account of the Class R-0A Interest
                  all cash on hand in the REMIC 0A (other than cash retained to
                  meet claims), and the REMIC 0A shall terminate at that time.

                  (c) At the expense of the Terminator, the Trust Administrator
shall prepare or cause to be prepared the documentation required in connection
with the adoption of a plan of liquidation of each Trust REMIC pursuant to the
Section 9.02(a). At the expense of the Guarantor, the Trustee shall prepare or
cause to be prepared the documentation required in connection with the adoption
of a plan of liquidation of REMIC 0A pursuant to the Section 9.02(b).

                  (d) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trust Administrator to specify the 90-day
liquidation period for each Trust REMIC, which authorization shall be binding
upon all successor Certificateholders.

                                      181
<PAGE>

                                   ARTICLE X

                                REMIC PROVISIONS

Section 10.01 REMIC Administration.

         (a) The Trust Administrator shall elect to treat each Trust REMIC as a
REMIC under the Code and, if necessary, under applicable state law. Each such
election will be made on Form 1066 or other appropriate federal tax or
information return (including Form 8811) or any appropriate state return for the
taxable year ending on the last day of the calendar year in which the
Certificates are issued, copies of which forms and returns shall promptly be
furnished by the Trust Administrator to the NIMS Insurer. For the purposes of
the REMIC election in respect of REMIC 0A, the REMIC 0A Regular Interests shall
be designated as the Regular Interests in REMIC 0A and the Class R-0A Interest
shall be designated as the Residual Interest in REMIC 0A. For the purposes of
the REMIC election in respect of REMIC 0B, the REMIC 0B Regular Interests shall
be designated as the Regular Interests in REMIC 0B, and the Class R-0B Interest
shall be designated as the Residual Interest in REMIC 0B. For the purposes of
the REMIC election in respect of REMIC 1A, the REMIC 1A Regular Interests shall
be designated as the Regular Interests in REMIC 1A and the Class R-1A Interest
shall be designated as the Residual Interest in REMIC 1A. For the purposes of
the REMIC election in respect of REMIC 1B, the REMIC 1B Regular Interests shall
be designated as the Regular Interests in REMIC 1B, and the Class R-1B Interest
shall be designated as the Residual Interest in REMIC 1B. For the purposes of
the REMIC election in respect of REMIC 2, the REMIC 2 Regular Interests shall be
designated as the Regular Interest in REMIC 2 and the Class R-2 Interest shall
be designated as the Residual Interests in REMIC 2. For the purposes of the
REMIC election in respect of REMIC 3, (i) the Regular Certificates (other than
the Class C Certificates and the Class P Certificates) and the REMIC 3
Uncertificated Regular Interests shall be designated as the Regular Interests in
REMIC 3 and (ii) the Class R-3 Interest shall be designated as the Residual
Interest in REMIC 3. For the purposes of the REMIC election in respect of REMIC
X, the Class C Certificates and the Class P Certificates shall be designated as
the Regular Interests in REMIC X and the Class R-X Interest shall be designated
as the Residual Interest in REMIC X. Neither the Trustee nor the Trust
Administrator shall permit the creation of any "interests" in REMIC 0A, REMIC
0B, REMIC 1A, REMIC 1B, REMIC 2, REMIC 3 or REMIC X (within the meaning of
Section 860G of the Code) other than the REMIC 0A Regular Interests, REMIC 0B
Regular Interests, REMIC 1A Regular Interests, the REMIC 1B Regular Interests,
the REMIC 2 Regular Interests, REMIC 3 Uncertificated Regular Interests and the
interests represented by the Certificates.

         (b) The Closing Date is hereby designated as the "Startup Day" of each
Trust REMIC within the meaning of Section 860G(a)(9) of the Code.

                                      182
<PAGE>

         (c) The Trust Administrator shall pay out of funds on deposit in the
Distribution Account, any and all expenses relating to any tax audit of the
Trust Fund (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect to any Trust REMIC that
involve the Internal Revenue Service or state tax authorities) unless such
expenses, professional fees or any administrative or judicial proceedings are
incurred by reason of the Trust Administrator's willful misfeasance, bad faith
or negligence. The Trust Administrator, as agent for each Trust REMIC's tax
matters person, shall (i) act on behalf of the Trust Fund in relation to any tax
matter or controversy involving any Trust REMIC and (ii) represent, after
consultation with the Guarantor and upon accommodation of the Guarantor's
reasonable requests, the Trust Fund in any administrative or judicial proceeding
relating to an examination or audit by any governmental taxing authority with
respect thereto and will be entitled to reimbursement from the Trust Fund for
any expenses incurred by the Trust Administrator in connection therewith unless
such administrative or judicial proceeding relating to an examination or audit
by any governmental taxing authority is incurred by reason of the Trust
Administrator's willful misfeasance, bad faith or negligence. The holder of the
largest Percentage Interest of the Class R Certificates shall be designated, in
the manner provided under Treasury regulations Section 1.860F-4(d) and Treasury
regulations Section 301.6231(a)(7)-1, as the tax matters person of each Trust
REMIC created hereunder other than REMIC X. The holder of the largest Percentage
Interest of Class R-X Certificates shall be designated, in the manner provided
under Treasury regulations Section 1.860F-4(d) and Treasury regulations Section
301.6231(a)(7)-1, as the tax matters person of REMIC X. By their acceptance
thereof, the holder of the largest Percentage Interest of the Residual
Certificates hereby agrees to irrevocably appoint the Trust Administrator or an
Affiliate as its agent to perform all of the duties of the tax matters person
for the Trust Fund.

         (d) The Trust Administrator shall prepare and deliver to the Trustee in
a timely manner, and the Trustee shall sign and file in a timely manner all of
the Tax Returns in respect of each REMIC created hereunder, copies of which Tax
Returns it shall be promptly furnished to the NIMS Insurer. The expenses of
preparing and filing such returns shall be borne by the Trust Administrator
without any right of reimbursement therefor. The Master Servicer shall provide
on a timely basis to the Trust Administrator or its designee such information
with respect to the assets of the Trust Fund as is in its possession and
reasonably required by the Trustee or the Trust Administrator to enable it to
perform its respective obligations under this Article.

         (e) The Trust Administrator shall perform on behalf of each Trust REMIC
all reporting and other tax compliance duties that are the responsibility of
such REMIC under the Code, the REMIC Provisions or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing authority.
Among its other duties, as required by the Code, the REMIC Provisions or other
such compliance guidance, the Trust Administrator shall provide (i) to any
Transferor of a Residual Certificate such information as is necessary for the
application of any tax relating to the transfer of a Residual Certificate to any
Person who is not a Permitted Transferee, (ii) to the Certificateholders such
information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption as required) and (iii) to
the Internal Revenue Service the name, title, address and telephone number of
the person who will serve as the representative of each Trust REMIC. The Master
Servicer shall provide on a timely basis to the Trust Administrator such
information with respect to the assets of the Trust Fund, including, without
limitation, the Mortgage Loans, as is in its possession and reasonably required
by the Trust Administrator to enable it to perform its obligations under this
subsection. In addition, the Depositor shall provide or cause to be provided to
the Trust Administrator, within ten (10) days after the Closing Date, all
information or data that the Trust Administrator reasonably determines to be
relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates. The Depositor shall also
provide such information or data to the NIMS Insurer.

                                      183
<PAGE>

         (f) The Trustee and the Trust Administrator shall take such action and
shall cause each Trust REMIC created hereunder to take such action as shall be
necessary to create or maintain the status thereof as a REMIC under the REMIC
Provisions (and the Master Servicer shall assist the Trust Administrator, to the
extent reasonably requested by the Trust Administrator to do specific actions in
order to assist in the maintenance of such status). Neither the Trustee nor the
Trust Administrator shall take any action, cause the Trust Fund to take any
action or fail to take (or fail to cause to be taken) any action that, under the
REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger
the status of any Trust REMIC as a REMIC or (ii) result in the imposition of a
tax upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee, the Trust Administrator,
the NIMS Insurer and the Guarantor have received an Opinion of Counsel,
addressed to the Trustee, the Trust Administrator, the NIMS Insurer and the
Guarantor (at the expense of the party seeking to take such action but in no
event at the expense of the Trustee or the Trust Administrator) to the effect
that the contemplated action will not, with respect to any Trust REMIC, endanger
such status or result in the imposition of such a tax, nor shall the Master
Servicer take or fail to take any action (whether or not authorized hereunder)
as to which the Trustee or the Trust Administrator has advised it in writing
that it has received an Opinion of Counsel to the effect that an Adverse REMIC
Event could occur with respect to such action; provided that the Master Servicer
may conclusively rely on such Opinion of Counsel and shall incur no liability
for its action or failure to act in accordance with such Opinion of Counsel. The
Trustee and the Trust Administrator shall deliver to the NIMS Insurer and the
Guarantor a copy of any such advice or opinion. In addition, prior to taking any
action with respect to any Trust REMIC or the respective assets of each, or
causing any Trust REMIC to take any action, which is not contemplated under the
terms of this Agreement, the Master Servicer will consult with the Trustee and
the Trust Administrator or its designee, in writing, with respect to whether
such action could cause an Adverse REMIC Event to occur with respect to a Trust
REMIC, and the Master Servicer shall not take any such action or cause any Trust
REMIC to take any such action as to which the Trustee or the Trust Administrator
has advised it in writing that an Adverse REMIC Event could occur; provided that
the Master Servicer may conclusively rely on such writing and shall incur no
liability for its action or failure to act in accordance with such writing. The
Trustee and the Trust Administrator may consult with counsel to make such
written advice, and the cost of same shall be borne by the party seeking to take
the action not permitted by this Agreement, but in no event shall such cost be
an expense of the Trustee or the Trust Administrator. At all times as may be
required by the Code, the Trustee and the Trust Administrator will ensure that
substantially all of the assets of both REMIC 0A and REMIC 0B will consist of
"qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code.

         (g) In the event that any tax is imposed on "prohibited transactions"
of any Trust REMIC created hereunder as defined in Section 860F(a)(2) of the
Code, on the "net income from foreclosure property" of such REMIC as defined in
Section 860G(c) of the Code, on any contributions to any such REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trust Administrator pursuant to Section
10.03 hereof, if such tax arises out of or results from a breach by the Trust
Administrator of any of its obligations under this Article X, (ii) to the
Trustee pursuant to Section 10.03 hereof, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Article X,
(iii) to the Master Servicer pursuant to Section 10.03 hereof, if such tax
arises out of or results from a breach by the Master Servicer of any of its
obligations under Article III or this Article X, or otherwise (iv) against
amounts on deposit in the Distribution Account and shall be paid by withdrawal
therefrom.

                                      184
<PAGE>

         (h) On or before April 15 of each calendar year, commencing April 15,
2002, the Trust Administrator shall deliver to the Master Servicer, the Trustee,
the NIMS Insurer, the Guarantor and each Rating Agency a Certificate from a
Responsible Officer of the Trust Administrator stating the Trust Administrator's
compliance with this Article X.

         (i) The Trust Administrator shall, for federal income tax purposes,
maintain books and records with respect to each Trust REMIC on a calendar year
and on an accrual basis.

         (j) Following the Startup Day, neither the Trustee nor the Trust
Administrator shall accept any contributions of assets to any Trust REMIC other
than in connection with any Qualified Substitute Mortgage Loan delivered in
accordance with Section 2.03 unless it shall have received an Opinion of Counsel
to the effect that the inclusion of such assets in the Trust Fund will not cause
any Trust REMIC to fail to qualify as a REMIC at any time that any Certificates
are outstanding or subject any Trust REMIC to any tax under the REMIC Provisions
or other applicable provisions of federal, state and local law or ordinances.

         (k) None of the Trustee, the Trust Administrator or the Master Servicer
shall enter into any arrangement by which any Trust REMIC will receive a fee or
other compensation for services nor permit any Trust REMIC to receive any income
from assets other than "qualified mortgages" as defined in Section 860G(a)(3) of
the Code or "permitted investments" as defined in Section 860G(a)(5) of the
Code.

Section 10.02 Prohibited Transactions and Activities.

         None of the Depositor, the Master Servicer, the Trust Administrator or
the Trustee shall sell, dispose of or substitute for any of the Mortgage Loans
(except in connection with (i) the foreclosure of a Mortgage Loan, including but
not limited to, the acquisition or sale of a Mortgaged Property acquired by deed
in lieu of foreclosure, (ii) the bankruptcy of REMIC 0A or REMIC 0B, (iii) the
termination of REMIC 0A or REMIC 0B pursuant to Article IX of this Agreement,
(iv) a substitution pursuant to Article II of this Agreement or (v) a purchase
of Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire
any assets for any Trust REMIC (other than REO Property acquired in respect of a
defaulted Mortgage Loan), nor sell or dispose of any investments in the
Collection Account or the Distribution Account for gain, nor accept any
contributions to any Trust REMIC after the Closing Date (other than a Qualified
Substitute Mortgage Loan delivered in accordance with Section 2.03), unless it,
the NIMS Insurer and the Guarantor have received an Opinion of Counsel,
addressed to the Trust Administrator, the Trustee, the NIMS Insurer and the
Guarantor (at the expense of the party seeking to cause such sale, disposition,
substitution, acquisition or contribution but in no event at the expense of the
Trustee or the Trust Administrator) that such sale, disposition, substitution,
acquisition or contribution will not (a) affect adversely the status of any
Trust REMIC as a REMIC or (b) cause any Trust REMIC to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.

                                      185
<PAGE>

Section 10.03 Trustee, Trust Administrator, Master Servicer and Depositor
              Indemnification.

         (a) The Trustee agrees to indemnify the Trust Fund, the Trust
Administrator, the Depositor and the Master Servicer for any taxes and costs
including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Trust Administrator, the Depositor or the Master
Servicer as a result of a breach of the Trustee's covenants set forth in this
Article X or any state, local or franchise taxes imposed upon the Trust as a
result of the location of the Trustee.

         (b) The Master Servicer agrees to indemnify the Trust Fund, the Trust
Administrator, the Depositor and the Trustee for any taxes and costs including,
without limitation, any reasonable attorneys' fees imposed on or incurred by the
Trust Fund, the Trust Administrator, the Depositor or the Trustee as a result of
a breach of the Master Servicer's covenants set forth in Article III or this
Article X or any state, local or franchise taxes imposed upon the Trust as a
result of the location of the Master Servicer or any subservicer.

         (c) The Depositor agrees to indemnify the Trust Fund, the Trust
Administrator, the Master Servicer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Trust Administrator, the Master Servicer or the
Trustee as a result of a breach of the Depositor's covenants set forth in this
Article X.

         (d) The Trust Administrator agrees to indemnify the Trust Fund, the
Trustee, the Depositor and the Master Servicer for any taxes and costs
including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Trustee, the Depositor or the Master Servicer as
a result of a breach of the Trust Administrator's covenants set forth in this
Article X or any state, local or franchise taxes imposed upon the Trust as a
result of the location of the Trust Administrator.

                                      186
<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

Section 11.01 Amendment.

         This Agreement or any Custodial Agreement may be amended from time to
time by the Depositor, the Master Servicer, the Trustee, the Trust
Administrator, the Guarantor and, if applicable, the Custodian, with the consent
of the NIMS Insurer, and without the consent of any of the Certificateholders,
(i) to cure any ambiguity or defect, (ii) to correct, modify or supplement any
provisions herein (including to give effect to the expectations of
Certificateholders), or in any Custodial Agreement, (iii) to modify, eliminate
or add to any of its provisions to such extent as shall be necessary or
desirable to maintain the qualification of the Trust Fund as a REMIC at all
times that any Certificate is outstanding or to avoid or minimize the risk of
the imposition of any tax on the Trust Fund pursuant to the Code that would be a
claim against the Trust Fund, provided that the Trustee, the Trust
Administrator, the NIMS Insurer, the Guarantor, the Depositor and the Master
Servicer have received an Opinion of Counsel to the effect that (A) such action
is necessary or desirable to maintain such qualification or to avoid or minimize
the risk of the imposition of any such tax and (B) such action will not
adversely affect the status of the Trust Fund as a REMIC or adversely affect in
any material respect the interest of any Certificateholder or (iv) to make any
other provisions with respect to matters or questions arising under this
Agreement or in any Custodial Agreement which shall not be inconsistent with the
provisions of this Agreement or such Custodial Agreement, provided that such
action shall not, as evidenced by an Opinion of Counsel delivered to the parties
hereto and the NIMS Insurer, adversely affect in any material respect the
interests of any Certificateholder and, provided, further, that (A) such action
will not affect in any material respect the permitted activities of the Trust
and (B) such action will not increase in any material respect the degree of
discretion which the Master Servicer is allowed to exercise in servicing the
Mortgage Loans. No amendment shall be deemed to adversely affect in any material
respect the interests of any Certificateholder who shall have consented thereto,
and no Opinion of Counsel shall be required to address the effect of any such
amendment on any such consenting Certificateholder.

         This Agreement or any Custodial Agreement may also be amended from time
to time by the Depositor, the Master Servicer, the Trustee, the Trust
Administrator, the Guarantor and, if applicable, the Custodian, with the consent
of the NIMS Insurer, and with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or any Custodial Agreement or of modifying in any manner the
rights of the Holders of Certificates; provided, however, that no such amendment
shall (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Holders of all Certificates then outstanding. Notwithstanding any other
provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 11.01, Certificates registered in the name of
the Depositor or the Master Servicer or any Affiliate thereof shall be entitled
to Voting Rights with respect to matters affecting such Certificates.

         Notwithstanding any contrary provision of this Agreement, the Trustee,
the Trust Administrator, the NIMS Insurer and the Guarantor shall be entitled to
receive an Opinion of Counsel to the effect that such amendment will not result
in the imposition of any tax on any Trust REMIC pursuant to the REMIC Provisions
or cause any Trust REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding.

         Promptly after the execution of any such amendment the Trust
Administrator shall furnish a copy of such amendment to each Certificateholder
and the NIMS Insurer.

         It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee or the Trust Administrator may prescribe.

                                      187
<PAGE>

         The cost of any Opinion of Counsel to be delivered pursuant to this
Section 11.01 shall be borne by the Person seeking the related amendment, but in
no event shall such Opinion of Counsel be an expense of the Trustee or the Trust
Administrator.

         Each of the Trustee and the Trust Administrator may, but shall not be
obligated to enter into any amendment pursuant to this Section that affects its
rights, duties and immunities under this Agreement or otherwise.

Section 11.02 Recordation of Agreement; Counterparts.

         To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Master Servicer at the expense of the Trust, but only upon direction of
Certificateholders accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders.

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.

Section 11.03 Limitation on Rights of Certificateholders.

         The death or incapacity of any Certificateholder shall not (i) operate
to terminate this Agreement or the Trust, (ii) entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, or (iii)
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.

         Except as expressly provided for herein, no Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth or contained in the terms of the Certificates be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.

                                      188
<PAGE>

         No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trust Administrator a written notice of default and of
the continuance thereof, as hereinbefore provided, and unless also the Holders
of Certificates entitled to at least 25% of the Voting Rights shall have made
written request upon the Trust Administrator to institute such action, suit or
proceeding in its own name as Trust Administrator hereunder and shall have
offered to the Trust Administrator such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Trust Administrator for 15 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding. It is understood and intended, and expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trust Administrator, that no one or more Holders of Certificates shall have any
right in any manner whatever by virtue of any provision of this Agreement to
affect, disturb or prejudice the rights of the Holders of any other of such
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, which priority or preference is not otherwise provided for
herein, or to enforce any right under this Agreement, except in the manner
herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 11.03 each and every Certificateholder and the Trust Administrator shall
be entitled to such relief as can be given either at law or in equity.

Section 11.04 Governing Law; Jurisdiction.

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

Section 11.05 Notices.

         All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
first class mail, postage prepaid, by facsimile or by express delivery service,
to (a) in the case of the Master Servicer, Long Beach Mortgage Company, 1100
Town & Country Road, Suite 1600, Orange, California 92868, Attention: General
Counsel (telecopy number: (714) 543-6847), or such other address or telecopy
number as may hereafter be furnished to the other parties hereto in writing by
the Master Servicer, (b) in the case of the Trust Administrator, Bankers Trust
Company of California, N.A., 1761 St. Andrew Place, Santa Ana, California
92705-6478, Attention: Trust Administration Services (telecopy number (714)
247-6000) or such other address or telecopy number as may hereafter be furnished
to the other parties hereto in writing by the Trust Administrator, (c) in the
case of the Depositor, Long Beach Securities Corp., 1100 Town & Country Road,
Suite 1600, Orange California 92868, Attention: General Counsel (telecopy
number: (714) 543-6847), or such other address or telecopy number as may be
furnished to the other parties hereto in writing by the Depositor, (d) in the
case of Guarantor, Fannie Mae, 3900 Wisconsin Avenue, NW, Washington, D.C.
20016, Attention: Vice President-Capital Markets (telecopy number (202)
752-6890), or such other addresses or telecopy number as may be furnished to the
other parties thereto in writing by the Guarantor, (e) in the case of the NIMS
Insurer, Asset Guaranty Insurance Company, 335 Madison Aveenue, New York, New
York, 10017, Attention: Manager, Asset-Backed Surveillance (telecopy number:
(212) 682-5377), or such other addresses or telecopy number as may be furnished
to the other parties thereto in writing by the NIMS Insurer, and (f) in the case
of the Trustee, First Union National Bank, 401 South Tryon Street, Charlotte,
North Carolina, 28288, or such other address or telecopy number as may hereafter
be furnished to the other parties hereto in writing by the Trustee. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Notice of any Master Servicer default shall be given by
telecopy and by certified mail. Any notice so mailed within the time prescribed
in this Agreement shall be conclusively presumed to have duly been given when
mailed, whether or not the Certificateholder receives such notice. A copy of any
notice required to be telecopied hereunder shall also be mailed to the
appropriate party in the manner set forth above.

                                      189
<PAGE>
Section 11.06 Severability of Provisions.

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

Section 11.07 Notice to the Rating Agencies, the NIMS Insurer and the Guarantor.

         The Trust Administrator shall use its best efforts promptly to provide
notice to the Rating Agencies, the NIMS Insurer and the Guarantor with respect
to each of the following of which it has actual knowledge:

         1.       Any amendment to this Agreement;

         2.       The occurrence of any Master Servicer Event of Default that
                  has not been cured or waived;

         3.       The resignation or termination of the Master Servicer, the
                  Trust Administrator or the Trustee;

         4.       The repurchase or substitution of Mortgage Loans pursuant to
                  or as contemplated by Section 2.03;

         5.       The final payment to the Holders of any Class of Certificates;

         6.       Any change in the location of the Collection Account or the
                  Distribution Account;

         7.       The Trustee or the Trust Administrator, as applicable, were it
                  to succeed as Master Servicer, is unable to make advances
                  regarding delinquent Mortgage Loans; and

         8.       The filing of any claim under the Master Servicer's blanket
                  bond and errors and omissions insurance policy required by
                  Section 3.14 or the cancellation or material modification of
                  coverage under any such instrument.

         In addition, the Trust Administrator shall promptly make available to
each Rating Agency copies of each Statement to Certificateholders described in
Section 4.03 hereof and the Master Servicer shall promptly furnish to each
Rating Agency copies of the following:

         1.       each annual statement as to compliance described in Section
                  3.20 hereof;

                                      190
<PAGE>

         2.       each annual independent public accountants' servicing report
                  described in Section 3.21 hereof.

         Any such notice pursuant to this Section 11.07 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service to Moody's
Investors Service, Inc., 99 Church Street, New York, NY 10048, Attention: MBS
Monitoring/Long Beach Mortgage Loan Trust 2001-4; Fitch, Inc., One State Street
Plaza, New York, New York 10004, Standard & Poor's Rating Services, Inc., 55
Water Street, New York, New York 10004, and the NIMS Insurer and the Guarantor
at the address provided in Section 11.05.

         In addition, each party hereto agrees that it will furnish or make
available to the NIMS Insurer a copy of any opinions, notices, reports,
schedules, certificates, statements, rating confirmation letters or other
information that are furnished hereunder to the Trustee, the Trust Administrator
or the Certificateholders.

Section 11.08 Article and Section References.

         All Article and Section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.

Section 11.09 NIMS Insurer's Rights.

         The NIMS Insurer shall be deemed a third-party beneficiary of this
Agreement, and shall be entitled to enforce such rights, in each case, as if it
were a party hereto. Notwithstanding anything to the contrary anywhere in this
Agreement, all rights of the NIMS Insurer hereunder (i) shall not be operable
whenever an Insurer Default or an Insurer Insolvency Event and a Backup Insurer
Default (as defined in the Insured Indenture) shall have occurred and be
continuing and (ii) except in the case of any right to indemnification hereunder
shall permanently cease to be operable upon the later to occur of (A) the
payment in full of the Insured NIM Notes as provided in the Insured Indenture
and (B) the payment in full to the NIMS Insurer of any amounts owed to the NIMS
Insurer as provided in the Insured Indenture.

Section 11.10 Grant of Security Interest.

         It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Depositor to the Trustee be, and be construed as, a
sale of the Mortgage Loans by the Depositor and not a pledge of the Mortgage
Loans by the Depositor to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Depositor, then, (a)
it is the express intent of the parties that such conveyance be deemed a pledge
of the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute and unconditional
sale of the Mortgage Loans and assets constituting the Trust Fund by the
Depositor to the Trustee.

                                      191
<PAGE>

         IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Guarantor,
the Trust Administrator, and the Trustee have caused their names to be signed
hereto by their respective officers thereunto duly authorized, all as of the day
and year first above written.

                                   LONG BEACH SECURITIES CORP.,
                                     as Depositor

                                   By:
                                        -------------------------------
                                   Name:      Jeffery A Sorensen
                                   Title:     Vice President

                                   LONG BEACH MORTGAGE COMPANY,
                                     as Master Servicer

                                   By:
                                        -------------------------------
                                   Name:      Jeffery A Sorensen
                                   Title:     Vice President

                                   BANKERS TRUST COMPANY OF
                                   CALIFORNIA, N.A.,
                                     as Trust Administrator

                                   By:
                                        -------------------------------
                                   Name:      Ronaldo Reyes
                                   Title:     Associate

                                   FEDERAL NATIONAL MORTGAGE
                                   ASSOCIATION,
                                   as Guarantor (with respect to the Class I-A
                                   Certificates and the Class I-S Certificates)

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

                                   FIRST UNION NATIONAL BANK,
                                   as Trustee

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

                                      192
<PAGE>

STATE OF WASHINGTON          )
                             )  ss.:
COUNTY OF KING               )

         On the ___th day of December, 2001 before me, a notary public in and
for said State, personally appeared Jeffery A Sorensen known to me to be a Vice
President of Long Beach Securities Corp., a Delaware corporation that executed
the within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.

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

                              --------------------------------------
                                          Notary Public

                                      193
<PAGE>

STATE OF WASHINGTON           )
                              )  ss.:
COUNTY OF KING                )

         On the ___th day of December, 2001 before me, a notary public in and
for said State, personally appeared Jeffery A Sorensen known to me to be a Vice
President of Long Beach Mortgage Company, a corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.

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

                              --------------------------------------
                                          Notary Public

                                      194
<PAGE>

STATE OF                      )
                              )  ss.:
COUNTY OF                     )

         On the ___th day of December, 2001 before me, a notary public in and
for said State, personally appeared ____________, known to me to be a
____________ of Bankers Trust Company of California, N.A., a national banking
association that executed the within instrument, and also known to me to be the
person who executed it on behalf of said association, and acknowledged to me
that such association executed the within instrument.

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

                              --------------------------------------
                                          Notary Public

                                      195
<PAGE>

STATE OF                      )
                              )  ss.:
COUNTY OF                     )

         On the ___th day of December, 2001 before me, a notary public in and
for said State, personally appeared ____________, known to me to be a
____________ of Federal National Mortgage Association, a ____________ that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said association, and acknowledged to me that such
association executed the within instrument.

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

                              --------------------------------------
                                          Notary Public

                                      196
<PAGE>

STATE OF                      )
                              )  ss.:
COUNTY OF                     )

         On the ___th day of December, 2001 before me, a notary public in and
for said State, personally appeared ____________, known to me to be a
____________ of First Union National Bank, a ____________ that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said association, and acknowledged to me that such association
executed the within instrument.

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

                              --------------------------------------
                                          Notary Public

                                      197

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}]]