Document:

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                         POOLING AND SERVICING AGREEMENT

                          Dated as of February 1, 1999
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           FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.,
                                  as Depositor

                           FIRST UNION NATIONAL BANK,
               as Seller, Master Servicer and Trust Administrator

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
                        as Trustee and Document Custodian

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                        FURST MORTGAGE LOAN TRUST 1999-A

                       MORTGAGE PASS-THROUGH CERTIFICATES

                                  Series 1999-A

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                                TABLE OF CONTENTS

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ARTICLE I  DEFINITIONS............................................................................................1
         Section 1.1. Definitions.................................................................................1
         Section 1.2. Other Definitional Provisions..............................................................68
         Section 1.3. Calculations...............................................................................68
ARTICLE II   CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES.....................................68
         Section 2.1. Conveyance of Mortgage Loans...............................................................68
         Section 2.2. Acceptance by Trustee; Retransfer of Mortgage Loans........................................72
         Section 2.3. Representations and Warranties Regarding the Depositor.....................................73
         Section 2.4. Representations and Warranties Regarding the Master Servicer...............................75
         Section 2.5. Representations and Warranties Regarding the Seller........................................77
         Section 2.6. Representations and Warranties of the Seller Regarding this Agreement and the Mortgage
         Loans; Transfer of Certain Mortgage Loans...............................................................78
         Section 2.7. Substitution of Mortgage Loans.............................................................87
         Section 2.8. Execution and Authentication of Certificates...............................................88
         Section 2.9. REMIC Provisions...........................................................................88
ARTICLE III  ADMINISTRATION AND SERVICING OF MORTGAGE LOANS......................................................90
         Section 3.1. The Master Servicer........................................................................90
         Section 3.2. Collection of Certain Mortgage Loan Payments...............................................92
         Section 3.3. Withdrawals from the Collection Account....................................................94
         Section 3.4. Monthly Advances; Compensating Interest....................................................95
         Section 3.5. Maintenance of Hazard Insurance; Property Protection Expenses..............................95
         Section 3.6. Assumption and Modification Agreements.....................................................96
         Section 3.7. Realization Upon Defaulted Mortgage Loans..................................................96
         Section 3.8. Trustee to Cooperate.......................................................................98
         Section 3.9. Servicing Compensation; Payment of Certain Expenses by Master Servicer.....................99
         Section 3.10. Annual Statement as to Compliance........................................................100
         Section 3.11. Annual Servicing Report..................................................................100
         Section 3.12. Access to Certain Documentation and Information Regarding the Mortgage Loans.............100
         Section 3.13. Maintenance of Certain Insurance Policies................................................100
         Section 3.14. Reports of Foreclosures and Abandonments of Mortgaged Property, Returns Relating to
         Mortgage Interest Received from Individuals and Returns Relating to Cancellation of Indebtedness.......101
         Section 3.15. Reports to the Securities and Exchange Commission........................................102
         Section 3.16. Custody of Mortgage Files................................................................102
         Section 3.17. Duties of Document Custodian; Authority; Indemnification.................................102
         Section 3.18. [RESERVED]...............................................................................104
         Section 3.19. Payment of Taxes, Insurance and Other Charges............................................104
ARTICLE IV  DISTRIBUTIONS IN RESPECT  OF CERTIFICATES; SERVICING CERTIFICATES...................................104
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         Section 4.1.  Distributions............................................................................104
         Section 4.2.  Allocation of Realized Losses............................................................111
         Section 4.3.  Servicing Certificate....................................................................113
ARTICLE V  PAYMENTS; STATEMENTS TO CERTIFICATEHOLDERS; RIGHTS OF CERTIFICATEHOLDERS;............................114
         Section 5.1. Payments..................................................................................114
         Section 5.2. Statements................................................................................115
         Section 5.3. Distribution Account......................................................................118
         Section 5.4. Investment of Accounts....................................................................118
         Section 5.5. [RESERVED]................................................................................119
ARTICLE VI  THE CERTIFICATES....................................................................................119
         Section 6.1. The Certificates..........................................................................119
         Section 6.2. Registration of Transfer and Exchange of the Certificates.................................120
         Section 6.3. Mutilated, Destroyed, Lost or Stolen Certificates.........................................126
         Section 6.4. Persons Deemed Owners.....................................................................126
         Section 6.5. Appointment of Paying Agent...............................................................127
         Section 6.6. Maintenance of Office or Agency...........................................................127
ARTICLE VII  THE DEPOSITOR, THE SELLER, THE MASTER SERVICER AND THE TRUST ADMINISTRATOR.........................127
         Section 7.1. Liability of the Depositor, the Seller, the Master Servicer and the Trust Administrator...127
         Section 7.2. Merger or Consolidation of, or Assumption of the Obligations of, the Seller, the Master
         Servicer or the Trust Administrator....................................................................128
         Section 7.3. Limitation on Liability of the Master Servicer, the Trust Administrator and Others........128
         Section 7.4. Master Servicer Not to Resign.............................................................129
         Section 7.5. Delegation of Duties......................................................................129
         Section 7.6. Indemnification of the Trust by the Seller and Master Servicer............................130
ARTICLE VIII  DEFAULT...........................................................................................130
         Section 8.1. Events of Default.........................................................................130
         Section 8.2. Trustee to Act; Appointment of Successor..................................................133
         Section 8.3. Waiver of Defaults........................................................................134
         Section 8.4. Notification to Certificateholders........................................................134
ARTICLE IX  THE TRUSTEE.........................................................................................134
         Section 9.1. Duties of Trustee.........................................................................134
         Section 9.2. Certain Matters Affecting the Trustee.....................................................135
         Section 9.3. Trustee Not Liable for Certificates or Mortgage Loans.....................................137
         Section 9.4. Trustee May Own Certificates..............................................................138
         Section 9.5. Trustee's and Document Custodian's Expenses...............................................138
         Section 9.6. Eligibility Requirements for Trustee......................................................138
         Section 9.7. Resignation or Removal of Trustee.........................................................139
         Section 9.8. Successor Trustee.........................................................................140
         Section 9.9. Merger or Consolidation of Trustee........................................................140
         Section 9.10. Appointment of Co-Trustee or Separate Trustee............................................140
         Section 9.11. Limitation of Liability..................................................................142
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         Section 9.12. Trustee May Enforce Claims Without Possession of Certificates............................142
         Section 9.13. Suits for Enforcement....................................................................142
         Section 9.14. Waiver of Bond Requirement...............................................................142
         Section 9.15. Waiver of Inventory, Accounting and Appraisal Requirement................................143
ARTICLE X  TERMINATION..........................................................................................143
         Section 10.1. Termination..............................................................................143
         Section 10.2. Additional Termination Requirements......................................................144
ARTICLE XI  REMIC ADMINISTRATION................................................................................145
         Section 11.1. REMIC Administration.....................................................................145
         Section 11.2. Prohibited Transactions and Activities...................................................148
         Section 11.3. Indemnification with Respect to Certain Taxes and Loss of REMIC Status...................148
ARTICLE XII  MISCELLANEOUS PROVISIONS...........................................................................149
         Section 12.1. Amendment................................................................................149
         Section 12.2. Recordation of Agreement.................................................................150
         Section 12.3. Limitation on Rights of Certificateholders...............................................151
         Section 12.4. Governing Law............................................................................151
         Section 12.5. Notices..................................................................................151
         Section 12.6. Severability of Provisions...............................................................152
         Section 12.7. Certificates Nonassessable and Fully Paid................................................152
         Section 12.8. Third-Party Beneficiaries................................................................152
         Section 12.9. Counterparts.............................................................................153
         Section 12.10. Effect of Headings and Table of Contents................................................153
         Section 12.11. Provision of Information to Prospective Purchasers; Rule 144A...........................153
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EXHIBITS

Exhibit A-1    Forms of Group 1A Certificates.............................A-1-1
Exhibit A-2    Forms of Class 2A Certificates.............................A-2-1
Exhibit A-3    Form of Class M Certificate................................A-3-1
Exhibit B-1    Forms of Class B Certificates................................B-1
Exhibit B-2    Forms of Residual Certificates...............................B-3
Exhibit C      [Reserved]...................................................C-1
Exhibit D      Mortgage Loan Schedule.......................................D-1
Exhibit E      Form of Assignment...........................................E-1
Exhibit F      Form of Mortgage and Note....................................F-1
Exhibit G      Form of Officer's Certificate of Master Servicer.............G-1
Exhibit H      Form of Servicing Certificate................................H-1
Exhibit I      Form of Trust Receipt........................................I-1
Exhibit J      Form of Representation Letter................................J-1
Exhibit K      Form of Trustee Remittance Report............................K-1
Exhibit L-1    Form of Transferor Certificate for Transfers of
               Non-Registered Certificates................................L-1-1
Exhibit L-2A   Form I of Transferee Certificate for Transfers of
               Non-Registered Certificates...............................L-2A-1
Exhibit L-2B   Form II of Transferee Certificate for Transfers of
               Non-Registered Certificates...............................L-2B-1
Exhibit L-3    Form of Opinion of Counsel.................................L-3-1
Exhibit M      Form of Residual Certificateholder Affidavit.................M-1
Exhibit N      Schedule of Mortgage Loans as to which related Mortgage
               Notes will be delivered after the Closing Date...............N-1
Exhibit O      Form of Liquidation Report...................................O-1
Exhibit P      Form of Special Servicing Agreement..........................P-1
Exhibit Q      Form of Estimated Net Liquidation Analysis...................Q-1
Exhibit R      Form of Special Servicing Agreement..........................R-1
Schedule 1     Offices of the Document Custodian

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                         POOLING AND SERVICING AGREEMENT

         POOLING AND SERVICING AGREEMENT, dated as of February 1, 1999, among
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., as Depositor (the
"Depositor"), FIRST UNION NATIONAL BANK, as Seller (the "Seller"), as Master
Servicer (the "Master Servicer") and as Trust Administrator (the "Trust
Administrator") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
(the "Trustee") and as Document Custodian (the "Document Custodian").

         In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.1. DEFINITIONS.

         Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article.

Accounts:  The Collection Account and the Distribution Account.

Adjusted Principal Balance: As to any Distribution Date and any Class of
Subordinate Certificates, the greater of (A) zero and (B) (i) the Principal
Balance of such Class with respect to such Distribution Date minus (ii) the
Adjustment Amount for such Distribution Date less (a) in the case of the Class M
Certificates, the Principal Balances for all Classes of Class B Certificates
outstanding and (b) in the case of any Class of Class B Certificates, the
Principal Balances for any Classes of Class B Certificates with higher numerical
designations.

Adjustment Amount: For any Distribution Date, the difference between (A) the sum
of the Aggregate Class A Principal Balance and Subordinate Principal Balance as
of the related Determination Date and (B) the sum of (i) the sum of the
Aggregate Class A Principal Balance and Subordinate Principal Balance as of the
Determination Date succeeding such Distribution Date, (ii) the principal portion
of Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy
Losses allocated to the Certificates with respect to such Distribution Date and
(iii) the aggregate amount that would have been distributed to all Classes as
principal in accordance with Section 4.1(a) for such Distribution Date without
regard to the provisos in the definitions of Class B-1 Optimal Principal Amount,
Class B-2 Optimal Principal Amount, Class B-3 Optimal Principal Amount, Class
B-4 Optimal Principal Amount, Class B-5 Optimal Principal Amount and Class M
Optimal Principal Amount.

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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.

Aggregate Adjusted Pool Amount: With respect to any Distribution Date, the sum
of the Pool 1 Adjusted Pool Amount and Pool 2 Adjusted Pool Amount.

Aggregate Class A Principal Balance: With respect to any Determination Date, the
sum of the Group 1A Principal Balance and Group 2A Principal Balance.

Aggregate Current Bankruptcy Losses: With respect to any Distribution Date, the
sum of all Bankruptcy Losses incurred on any of the Mortgage Loans in the month
preceding the month of such Distribution Date.

Aggregate Current Fraud Losses: With respect to any Distribution Date, the sum
of all Fraud Losses incurred on any of the Mortgage Loans in the month preceding
the month of such Distribution Date.

Aggregate Current Special Hazard Losses: With respect to any Distribution Date,
the sum of all Special Hazard Losses incurred on any of the Mortgage Loans in
the month preceding the month of such Distribution Date.

Aggregate Group 1A Unpaid Interest Shortfall: As to any Distribution Date, an
amount equal to the sum of the Class A Unpaid Interest Shortfalls for the Group
1A Certificates.

Aggregate Group 2A Unpaid Interest Shortfall: As to any Distribution Date, an
amount equal to the sum of the Class A Unpaid Interest Shortfalls for the Group
2A Certificates.

Aggregate Loan Balance: As of any date of determination, the sum of the Loan
Balances of all the Pool 1 Mortgage Loans and the Pool 2 Mortgage Loans.

Aggregate Non-PO Principal Balance: As of any date of determination, the sum of
the Group 1A Non-PO Principal Balance, the Group 2A Non-PO Principal Balance and
the Subordinate Principal Balance as of such date.

Aggregate Pool 1 Foreclosure Profits: As to any Distribution Date, the aggregate
amount of Foreclosure Profits with respect to all of the Pool 1 Mortgage Loans.

Aggregate Pool 2 Foreclosure Profits: As to any Distribution Date, the aggregate
amount of Foreclosure Profits with respect to all of the Pool 2 Mortgage Loans.

Aggregate Subordinate Percentage: As to any date of determination, the
Subordinate Principal Balance divided by the sum of the Pool 1 Pool Balance
(Non-PO Portion) and the Pool 2 Pool Balance (Non-PO Portion).

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

Anniversary: Each anniversary of the Cut-Off Date.

Apportioned Interest Accrual Amount: As to any Distribution Date and either of
the Group 1 Apportioned Principal Balance or Group 2 Apportioned Principal
Balance of a Class of Subordinate Certificates, an amount equal to the product
of (i) 1/12th of the Subordinate Certificate Rate and (ii) such Group 1
Apportioned Principal Balance or Group 2 Apportioned Principal Balance as of the
Determination Date preceding such Distribution Date.

Apportioned Subordinate Principal Distribution Amount: As to any Distribution
Date and any Class of Subordinate Certificates, the product of (i) the
applicable Subordinate Principal Distribution Amount less the amount, if any,
that would have been distributable to such Class pursuant to Section 4.1(a)(ii)
that is used to pay the Class 1A-PO Deferred Amount as provided in Clause (i)
Paragraph fourth of Section 4.1(a) and (ii) the Apportionment Fraction for such
Class.

Apportionment Fraction: As to any Class of Subordinate Certificates and (i) any
Distribution Date occurring prior to the Cross-Over Date and after the Principal
Balance of each Class of Group 1A Certificates (other than the Class 1A-PO
Certificates) has been reduced to zero, a fraction, the numerator of which is
the Subordinate Pool 1 Optimal Principal Amount for such Class and the
denominator of which is the applicable Subordinate Optimal Principal Amount
without regard to the proviso thereto or (ii) any Distribution Date occurring
prior to the Cross-Over Date and after the Principal Balance of each Class of
Group 2A Certificates has been reduced to zero, a fraction, the numerator of
which is the Subordinate Pool 2 Optimal Principal Amount for such Class and the
denominator of which is the applicable Subordinate Optimal Principal Amount
without regard to the proviso thereto.

Assignment of Mortgage: With respect to any Mortgage, an assignment, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction in which the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Trustee, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties located
in the same jurisdiction.

Available Servicing Compensation: The sum of the Pool 1 Available Servicing
Compensation and the Pool 2 Available Servicing Compensation.

Bankruptcy Code:  The Bankruptcy Code of 1978, as amended.

Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation or
Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not be
deemed a Bankruptcy Loss hereunder so long as the Master Servicer or subservicer
has notified the Trustee and the Trust Administrator in writing that such
servicer is diligently pursuing any remedies that may exist

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in connection with the representations and warranties made regarding the related
Mortgage Loan and either (A) the related Mortgage Loan is not in default with
regard to payments due thereunder or (B) delinquent payments of principal and
interest under the related Mortgage Loan and any premiums on any applicable
primary hazard insurance policy and any related escrow payments in respect of
such Mortgage Loan are being advanced on a current basis by such servicer
without giving effect to any Debt Service Reduction.

Bankruptcy Loss Amount: As of any Distribution Date prior to the first
anniversary of the Cut-Off Date, the Bankruptcy Loss Amount will equal $100,000
minus the aggregate amount of Bankruptcy Losses allocated solely to the
Subordinate Certificates in accordance with Section 4.2(a) since the Cut-Off
Date. As of any Distribution Date on or after the first anniversary of the
Cut-Off Date, an amount equal to (1) the lesser of (a) the Bankruptcy Loss
Amount calculated as of the close of business on the Business Day immediately
preceding the most recent anniversary of the Cut-Off Date coinciding with or
preceding such Distribution Date (the "Relevant Anniversary") and (b) such
lesser amount which, as determined on the Relevant Anniversary will not cause
any rated Certificates to be placed on credit review status (other than for
possible upgrading) by either Rating Agency minus (2) the aggregate amount of
Bankruptcy Losses allocated solely to the Subordinate Certificates in accordance
with Section 4.2(a) since the Relevant Anniversary. On and after the Cross-Over
Date the Bankruptcy Loss Amount shall be zero.

BIF: The Bank Insurance Fund, as from time to time constituted, created under
the Financial Institutions Reform, Recovery and Enforcement Act of 1989, or if
at any time after the execution of this instrument the Bank Insurance Fund is
not existing and performing duties now assigned to it, the body performing such
duties on such date.

Book-Entry Certificates: The Group 1A Certificates (other than the Class A-R and
Class A-LR Certificate), the Class 2A Certificates, the Class M Certificates,
the Class B-1 Certificates and the Class B-2 Certificates, beneficial ownership
and transfers of which shall be made through book entries as described in
Section 6.2(b)(i).

Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on
which banking institutions in the State of North Carolina, the State of Maryland
or the State of Minnesota are authorized or obligated by law or executive order
to remain closed.

Certificate: Any one of the Certificates issued pursuant to this Agreement,
executed by the Trustee and authenticated by or on behalf of the Trustee
hereunder in substantially one of the forms set forth in Exhibits A-1, A-2, A-3,
B-1 or B-2 hereto.

Certificate Group: The Group 1A Certificates or Group 2A Certificates, as
applicable.

Certificate Owner: The Person who is a beneficial owner of a Book-Entry
Certificate.

Certificate Principal Balance: For each Certificate of any Class, the portion of
the related Class Principal Balance, if any, represented by such Certificate.

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Certificate Rate: The applicable Class A Certificate Rate or Subordinate
Certificate Rate, as applicable.

Certificate Register and Certificate Registrar: The register maintained and the
registrar appointed pursuant to Section 6.2(a).

Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Certificate registered in the name of the Depositor or any Person actually
known to a Responsible Officer of the Trustee to be an Affiliate of the
Depositor and (y) any Certificate for which the Depositor or any Person actually
known to a Responsible Officer of the Trustee to be an Affiliate of the
Depositor is the Certificate Owner shall be deemed not to be outstanding (unless
to the actual knowledge of a Responsible Officer of the Trustee (i) the
Depositor or such Affiliate is acting as trustee or nominee for a Person who is
not an Affiliate of the Depositor and who makes the voting decision with respect
to such Certificates or (ii) the Depositor or such Affiliate is the Certificate
Owner of all the Certificates) and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent, direction, waiver or
request has been obtained.

Class: With respect to each of Class 1A, Class 1A-PO, Class 1A-WIO, Class A-R,
Class 2A, Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5, all
of the Certificates of such class.

Class 1A-L Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(a) hereof.

Class 1A-LPO Interest: An uncertificated regular interest in the Lower-Tier
REMIC which is held as an asset of the Upper-Tier REMIC and is entitled to
monthly distributions as provided in Section 4.1(a) hereof.

Class 1A-LR Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(a) hereof.

Class 1A-LWIO Interest: An uncertificated regular interest in the Lower-Tier
REMIC which is held as an asset of the Upper-Tier REMIC and is entitled to
monthly distributions as provided in Section 4.1(a) hereof.

Class 1A-PO Certificates: The Certificates designated as "Class 1A-PO" on the
face thereof in substantially the form attached hereto as Exhibit A-1.

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Class 1A-PO Deferred Amount: For any Distribution Date prior to the Cross-Over
Date, the difference between (A) the sum of (x) the amount by which the sum of
the Class 1A-PO Optimal Principal Amounts for all prior Distribution Dates
exceeded the amounts distributed on the Class 1A-PO Certificates on such prior
Distribution Dates pursuant to clause (i) Paragraph third clause (B) of Section
4.1(a) (but only to the extent such shortfall is not attributable to Realized
Losses allocated to the Class 1A-PO Certificates pursuant to Section 4.2) and
(y) the sum of the product for each Discount Pool 1 Mortgage Loan which became a
Liquidated Mortgage Loan at any time on or prior to the last day of the
applicable Collection Period for the current Distribution Date of (a) the PO
Fraction for such Discount Pool 1 Mortgage Loan and (b) an amount equal to the
principal portion of Realized Losses (other than Bankruptcy Losses due to Debt
Service Reductions) incurred with respect to such Mortgage Loan other than
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
and (B) amounts distributed on the Class 1A-PO Certificates on prior
Distribution Dates pursuant to clause (i) Paragraph fourth of Section 4.1(a). On
and after the Cross-Over Date, the Class 1A-PO Deferred Amount will be zero. No
interest will accrue on any Class 1A-PO Deferred Amount.

Class 1A-PO Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the PO Fraction with respect to such Mortgage Loan and (y) the sum of

         (i) the scheduled payment of principal due on such Pool 1 Mortgage Loan
on the first day of the month in which the Distribution Date occurs, less, if
the Bankruptcy Loss Amount is zero, the principal portion of Debt Service
Reductions with respect to such Mortgage Loan,

         (ii) all Unscheduled Principal Receipts that were received by the
Master Servicer with respect to such Mortgage Loan during the Collection Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt.

         (iii) the Scheduled Principal Balance of each such Pool 1 Mortgage Loan
that was repurchased by the Seller during such preceding month pursuant to
Section 2.6;

         (iv) the excess of the unpaid principal balance of any defective Pool 1
Mortgage Loan for which a Mortgage Loan was substituted during the month
preceding the month in which such Distribution Date occurs over the unpaid
principal balance of such substituted Pool 1 Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances in
respect of such defective Pool 1 Mortgage Loan.

Class 1A-WIO Certificates: The Certificates designated as "Class 1A-WIO" on the
face thereof in substantially the form attached hereto as Exhibit A-1. The Class
1A-WIO Certificates are related to the Pool 1 Mortgage Loans.

Class 1A-WIO Interest Accrual Amount: As to any Distribution Date, (i) the
product of (a) 1/12th of the Class 1A-WIO Certificate Rate and (b) the Class
1A-WIO Notional Amount as of the Determination Date preceding such Distribution
Date minus (ii) the sum of (A) the Group 1 Apportioned Interest Percentage of
the Class 1A-WIO Certificates of the interest portion of any

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Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
attributable to Pool 1 Mortgage Loans with respect to such Distribution Date
pursuant to Section 4.2(e), (B) the Group 1A Interest Percentage of the interest
portion of any Realized Losses (other than Excess Special Hazard Losses, Excess
Fraud Losses and Excess Bankruptcy Losses) allocated to the Group 1A
Certificates on or after the Cross-Over Date pursuant to Section 4.2(e) and (C)
the Group 1A Interest Percentage of the Class 1A-WIO Certificates of any
Non-Supported Interest Shortfall allocated to the Class A Certificates with
respect to such Distribution Date.

Class 1A-WIO Notional Amount: With respect to any Distribution Date, an amount
equal to the aggregate Scheduled Balance of the Premium Pool 1 Mortgage Loans as
of such Distribution Date.

Class 1B-L Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(aa) hereof.

Class 1C-L Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(aa) hereof.

Class 2A Certificates: The Certificates designated as "Class 2A" on the face
thereof in substantially the form attached hereto as Exhibit A-2.

Class 2A-L Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(a) hereof.

Class 2B-L Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(aa) hereof.

Class 2C-L Interest: An uncertificated regular interest in the Lower-Tier REMIC
which is held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.1(aa) hereof.

Class A Certificate Rate: As to the Class 1A, Class A-R and Class A-LR
Certificates, 6.25% per annum. The Class 1A-PO Certificates are not entitled to
interest and do not have a Class A Certificate Rate. As of the first
Distribution Date, with respect to the Class 1A-WIO Certificates, the
Certificate Rate is 0.4071% per annum. As of each Distribution Date thereafter,
with respect to the Class 1A-WIO Certificates, the Certificate Rate is a per
annum rate equal to the excess of (A) the weighted average Net Mortgage Interest
Rates of the Premium Pool 1 Mortgage Loans (based on Scheduled Principal
Balances of such Mortgage Loans as of such date) over (B) 6.25%. As of the first
Distribution Date, with respect to the Class 2A Certificates, the Certificate
Rate is 6.2743% per annum. As of each Distribution Date thereafter, with respect
to the Class 2A Certificates, the Certificate Rate is a per annum

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rate equal to the weighted average Net Mortgage Interest Rates of the Pool 2
Mortgage Loans (based on Scheduled Principal Balances of such Mortgage Loans as
of such date).

Class A Certificates: The Group 1A Certificates or the Group 2A Certificates, as
applicable.

Class A Interest Accrual Amount: As to any Distribution Date, the sum of the
Interest Accrual Amounts for the Classes of Class A Certificates with respect to
such Distribution Date.

Class A Interest Percentage: As to any Distribution Date and any Class of Class
A Certificates (other than the Class 1A-PO Certificates), the percentage
calculated by dividing the Interest Accrual Amount of such Class (determined
without regard to clause (ii) of the definition thereof) by the Class A Interest
Accrual Amount (determined without regard to clause (ii) of the definition of
each Interest Accrual Amount).

Class A Percentage: The Group 1A Percentage or the Group 2A Percentage, as
applicable.

Class A Prepayment Percentage: The Group 1A Prepayment Percentage or the Group
2A Prepayment Percentage, as applicable.

Class A Unpaid Interest Shortfall: As to any Distribution Date and Class of
Class A Certificates, the amount, if any, by which the aggregate of the Group 1A
Interest Shortfall Amounts or Group 2A Interest Shortfall Amounts for such Class
for prior Distribution Dates is in excess of the amounts distributed in respect
of such Class on prior Distribution Dates pursuant to Clause (i) Paragraph
second of Section 4.1(a).

Class 1A Certificates: The Certificates designated as "Class 1A" on the face
thereof in substantially the form attached hereto as Exhibit A-1.

Class A-LR Certificates: The Certificates designated as "Class A-LR" on the face
thereof and in substantially the form attached hereto as Exhibit B-2.

Class A-R Certificates: The Certificates designated as "Class A-R" on the face
thereof in substantially the form attached hereto as Exhibit B-2.

Class B Certificate: Any one of the Class B-1 Certificates, Class B-2
Certificates, Class B-3 Certificates, Class B-4 Certificates or Class B-5
Certificates.

Class B Certificateholder: The registered holder of a Class B Certificate.

Class B-1 Certificates: The Certificates designated as "Class B-1" on the face
thereof in substantially the form attached hereto as Exhibit B-1.

Class B-1 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-1 Certificates pursuant to Clause
(ii) Paragraphs fourth, fifth and sixth of Section 4.1(a).

                                       8
<PAGE>   14

Class B-1 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Interest Accrual Amount of the Class B-1 Certificates with respect to
such Distribution Date exceeds the amount distributed in respect of the Class
B-1 Certificates on such Distribution Date pursuant to Clause (ii) Paragraph
fourth of Section 4.1(a).

Class B-1 Loan Pool 1 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 1, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 1 Class B-1 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-1 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-1 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-1 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-1 Loan Pool 2 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 2, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 2 Class B-1 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 2 Class B-1 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                                       9
<PAGE>   15

                 (iii) the Pool 2 Class B-1 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 2 Class B-1 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-1 Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each Outstanding Mortgage Loan, of the product of (x) the
Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:

                   (i) the Pool 1 Class B-1 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-1 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of (A) the principal portion of the
         Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy
         Loss Amount has been reduced to zero, the principal portion of any Debt
         Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-1 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-1 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-1 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-1 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-1 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-1 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan;

provided, however, that if an Optimal Adjustment Event occurs with respect to
such Class and such Distribution Date, the Class B-1 Optimal Principal Amount
will equal the lesser of (A)

                                       10
<PAGE>   16

the Class B-1 Optimal Principal Amount calculated as described in the preceding
provisions and (B) the Adjusted Principal Balance for the Class B-1
Certificates.

Class B-1 Principal Balance: As to the first Determination Date, the Original
Class B-1 Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class B-1 Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class B-1 Certificates on prior
Distribution Dates (A) pursuant to Clause (ii) Paragraph sixth of Section 4.1(a)
and (B) as a result of a Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class B-1 Certificates pursuant
to Section 4.2(b) and (ii) the Aggregate Adjusted Pool Amount as of the
preceding Distribution Date less the Aggregate Class A Principal Balance and the
Class M Principal Balance as of such Determination Date.

Class B-1 Principal Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-1 Certificates pursuant to Clause
(ii) Paragraph sixth of Section 4.1(a).

Class B-1 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class B-1 Interest Shortfall Amounts for
prior Distribution Dates is in excess of the amounts distributed in respect of
the Class B-1 Certificates on prior Distribution Dates pursuant to Clause (ii)
Paragraph fifth of Section 4.1(a).

Class B-2 Certificates: The Certificates designated as "Class B-2" on the face
thereof in substantially the form attached hereto as Exhibit B-1.

Class B-2 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-2 Certificates pursuant to Clause
(ii) Paragraphs seventh, eighth and ninth of Section 4.1(a).

Class B-2 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Interest Accrual Amount of the Class B-2 Certificates with respect to
such Distribution Date exceeds the amount distributed in respect of the Class
B-2 Certificates on such Distribution Date pursuant to Clause (ii) Paragraph
seventh of Section 4.1(a).

Class B-2 Loan Pool 1 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 1, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 1 Class B-2 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-2 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such

                                       11
<PAGE>   17

         Mortgage Loan during the Collection Period relating to such
         Distribution Date for each applicable type of Unscheduled Principal
         Receipt;

                 (iii) the Pool 1 Class B-2 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-2 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-2 Loan Pool 2 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 2, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 2 Class B-2 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 2 Class B-2 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 2 Class B-2 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 2 Class B-2 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-2 Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each Outstanding Mortgage Loan, of the product of (x) the
Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:

                   (i) the Pool 1 Class B-2 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-2 Percentage (with respect
         to each such Pool 2

                                       12
<PAGE>   18

         Mortgage Loan) of (A) the principal portion of the Monthly Payment due
         on the Due Date occurring in the month of such Distribution Date on
         such Mortgage Loan, less (B) if the Bankruptcy Loss Amount has been
         reduced to zero, the principal portion of any Debt Service Reduction
         with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-2 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-2 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-2 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-2 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-2 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-2 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan;

provided, however, that if an Optimal Adjustment Event occurs with respect to
such Class and such Distribution Date, the Class B-2 Optimal Principal Amount
will equal the lesser of (A) the Class B-2 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-2 Certificates.

Class B-2 Principal Balance: As to the first Determination Date, the Original
Class B-2 Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class B-2 Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class B-2 Certificates on prior
Distribution Dates (A) pursuant to Clause (ii) Paragraph ninth of Section 4.1(a)
and (B) as a result of a Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class B-2 Certificates pursuant
to Section 4.2(b) and (ii) the Aggregate Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Aggregate Class A Principal
Balance, the Class M Principal Balance and the Class B-1 Principal Balance as of
such Determination Date.

Class B-2 Principal Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-2 Certificates pursuant to Clause
(ii) Paragraph ninth of Section 4.1(a).

                                       13
<PAGE>   19

Class B-2 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class B-2 Interest Shortfall Amounts for
prior Distribution Dates is in excess of the amounts distributed in respect of
the Class B-2 Certificates on prior Distribution Dates pursuant to Clause (ii)
Paragraph eighth of Section 4.1(a).

Class B-3 Certificates: The Certificates designated as "Class B-3" on the face
thereof in substantially the form attached hereto as Exhibit B-1.

Class B-3 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-3 Certificates pursuant to Clause
(ii) Paragraphs tenth, eleventh and twelfth of Section 4.1(a).

Class B-3 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Interest Accrual Amount of the Class B-3 Certificates with respect to
such Distribution Date exceeds the amount distributed in respect of the Class
B-3 Certificates on such Distribution Date pursuant to Clause (ii) Paragraph
tenth of Section 4.1(a).

Class B-3 Pool 1 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 1, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 1 Class B-3 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-3 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-3 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-3 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-3 Loan Pool 2 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 2, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                                       14
<PAGE>   20

                   (i) the Pool 2 Class B-3 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 2 Class B-3 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 2 Class B-3 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 2 Class B-3 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-3 Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each Outstanding Mortgage Loan, of the product of (x) the
Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:

                   (i) the Pool 1 Class B-3 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-3 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of (A) the principal portion of the
         Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy
         Loss Amount has been reduced to zero, the principal portion of any Debt
         Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-3 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-3 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-3 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-3 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                                       15
<PAGE>   21

                  (iv) the Pool 1 Class B-3 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-3 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan;

provided, however, that if an Optimal Adjustment Event occurs with respect to
such Class and such Distribution Date, the Class B-3 Optimal Principal Amount
will equal the lesser of (A) the Class B-3 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-3 Certificates.

Class B-3 Principal Balance: As to the first Determination Date, the Original
Class B-3 Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class B-3 Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class B-3 Certificates on prior
Distribution Dates (A) pursuant to Clause (ii) Paragraph twelfth of Section
4.1(a) and (B) as a result of a Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class B-3 Certificates pursuant
to Section 4.2(b) and (ii) the Aggregate Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Aggregate Class A Principal
Balance, the Class M Principal Balance, the Class B-1 Principal Balance and the
Class B-2 Principal Balance as of such Determination Date.

Class B-3 Principal Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-3 Certificates pursuant to Clause
(ii) Paragraph twelfth of Section 4.1(a).

Class B-3 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class B-3 Interest Shortfall Amounts for
prior Distribution Dates is in excess of the amounts distributed in respect of
the Class B-3 Certificates on prior Distribution Dates pursuant to Clause (ii)
Paragraph eleventh of Section 4.1(a).

Class B-4 Certificates: The Certificates designated as "Class B-4" on the face
thereof in substantially the form attached hereto as Exhibit B-1.

Class B-4 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-4 Certificates pursuant to Clause
(ii) Paragraphs thirteenth, fourteenth and fifteenth of Section 4.1(a).

Class B-4 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Interest Accrual Amount of the Class B-4 Certificates with respect to
such Distribution Date exceeds the amount distributed in respect of the Class
B-4 Certificates on such Distribution Date pursuant to Clause (ii) Paragraph
thirteenth of Section 4.1(a).

                                       16
<PAGE>   22

Class B-4 Pool 1 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 1, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 1 Class B-4 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-4 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-4 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-4 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-4 Loan Pool 2 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 2, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 2 Class B-4 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 2 Class B-4 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 2 Class B-4 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                                       17
<PAGE>   23

                  (iv) the Pool 2 Class B-4 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-4 Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each Outstanding Mortgage Loan, of the product of (x) the
Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:

                   (i) the Pool 1 Class B-4 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-4 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of (A) the principal portion of the
         Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy
         Loss Amount has been reduced to zero, the principal portion of any Debt
         Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-4 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-4 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-4 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-4 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-4 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-4 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan;

provided, however, that if an Optimal Adjustment Event occurs with respect to
such Class and such Distribution Date, the Class B-4 Optimal Principal Amount
will equal the lesser of (A) the Class B-4 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-4 Certificates.

                                       18
<PAGE>   24

Class B-4 Principal Balance: As to the first Determination Date, the Original
Class B-4 Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class B-4 Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class B-4 Certificates on prior
Distribution Dates (A) pursuant to Clause (ii) Paragraph fifteenth of Section
4.1(a) and (B) as a result of a Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class B-4 Certificates pursuant
to Section 4.2(b) and (ii) the Aggregate Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Aggregate Class A Principal
Balance, the Class M Principal Balance, the Class B-1 Principal Balance, the
Class B-2 Principal Balance and the Class B-3 Principal Balance as of such
Determination Date.

Class B-4 Principal Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-4 Certificates pursuant to Clause
(ii) Paragraph fifteenth of Section 4.1(a).

Class B-4 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class B-4 Interest Shortfall Amounts for
prior Distribution Dates is in excess of the amounts distributed in respect of
the Class B-4 Certificates on prior Distribution Dates pursuant to Clause (ii)
Paragraph fourteenth of Section 4.1(a).

Class B-5 Certificates: The Certificates designated as "Class B-5" on the face
thereof in substantially the form attached hereto as Exhibit B-1.

Class B-5 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-5 Certificates pursuant to Clause
(ii) Paragraphs sixteenth, seventeenth and eighteenth of Section 4.1(a).

Class B-5 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Interest Accrual Amount of the Class B-5 Certificates with respect to
such Distribution Date exceeds the amount distributed in respect of the Class
B-5 Certificates on such Distribution Date pursuant to Clause (ii) Paragraph
sixteenth of Section 4.1(a).

Class B-5 Pool 1 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 1, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 1 Class B-5 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class B-5 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                                       19
<PAGE>   25

                 (iii) the Pool 1 Class B-5 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-5 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-5 Loan Pool 2 Optimal Principal Amount: As to any Distribution Date, an
amount equal to the sum, as to each Outstanding Mortgage Loan in Pool 2, of the
product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y)
the sum of:

                   (i) the Pool 2 Class B-5 Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 2 Class B-5 Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 2 Class B-5 Prepayment Percentage of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 2 Class B-5 Percentage of the excess of the
         unpaid principal balance of such Mortgage Loan substituted for a
         defective Mortgage Loan during the month preceding the month in which
         such Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class B-5 Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each Outstanding Mortgage Loan, of the product of (x) the
Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:

                   (i) the Pool 1 Class B-5 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-5 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of (A) the principal portion of the
         Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B)

                                       20
<PAGE>   26

         if the Bankruptcy Loss Amount has been reduced to zero, the principal
         portion of any Debt Service Reduction with respect to such Mortgage
         Loan;

                  (ii) the Pool 1 Class B-5 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-5 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class B-5 Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Pool 2 Class B-5 Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class B-5 Percentage (with respect to each
         such Pool 1 Mortgage Loan) or Pool 2 Class B-5 Percentage (with respect
         to each such Pool 2 Mortgage Loan) of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan;

provided, however, that if an Optimal Adjustment Event occurs with respect to
such Class and such Distribution Date, the Class B-5 Optimal Principal Amount
will equal the lesser of (A) the Class B-5 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-5 Certificates.

Class B-5 Principal Balance: As to the first Determination Date, the Original
Class B-5 Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class B-5 Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class B-5 Certificates on prior
Distribution Dates (A) pursuant to Clause (ii) Paragraph eighteenth of Section
4.1(a) and (b) the Realized Losses allocated through such Determination Date to
the Class B-5 Certificates pursuant to Section 4.2(b) and (ii) the Aggregate
Adjusted Pool Amount as of the preceding Distribution Date less the sum of the
Aggregate Class A Principal Balance, the Class M Principal Balance, the Class
B-1 Principal Balance, the Class B-2 Principal Balance, the Class B-3 Principal
Balance and the Class B-4 Principal Balance as of such Determination Date.

Class B-5 Principal Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class B-5 Certificates pursuant to Clause
(ii) Paragraph eighteenth of Section 4.1(a).

                                       21
<PAGE>   27

Class B-5 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class B-5 Interest Shortfall Amounts for
prior Distribution Dates is in excess of the amounts distributed in respect of
the Class B-5 Certificates on prior Distribution Dates pursuant to Clause (ii)
Paragraph seventeenth of Section 4.1(a).

Class M Certificates: The Certificates designated as "Class M" on the face
thereof in substantially the form attached hereto as Exhibit A-3.

Class M Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class M Certificates pursuant to Clause (ii)
Paragraphs first, second and third of Section 4.1(a).

Class M Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Interest Accrual Amount of the Class M Certificates with respect to
such Distribution Date exceeds the amount distributed in respect of the Class M
Certificates on such Distribution Date pursuant to Clause (ii) Paragraph first
of Section 4.1(a).

Class M Pool 1 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each Outstanding Mortgage Loan in Pool 1, of the product
of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum
of:

                   (i) the Pool 1 Class M Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 1 Class M Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 1 Class M Prepayment Percentage of the Scheduled
         Principal Balance of such Mortgage Loan which, during the month
         preceding the month of such Distribution Date, was repurchased by the
         Seller pursuant to Section 2.6; and

                  (iv) the Pool 1 Class M Percentage of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class M Pool 2 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each Outstanding Mortgage Loan in Pool 2, of the product
of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum
of:

                                       22
<PAGE>   28

                   (i) the Pool 2 Class M Percentage of (A) the principal
         portion of the Monthly Payment due on the Due Date occurring in the
         month of such Distribution Date on such Mortgage Loan, less (B) if the
         Bankruptcy Loss Amount has been reduced to zero, the principal portion
         of any Debt Service Reduction with respect to such Mortgage Loan;

                  (ii) the Pool 2 Class M Prepayment Percentage of all
         Unscheduled Principal Receipts that were received by the Master
         Servicer with respect to such Mortgage Loan during the Collection
         Period relating to such Distribution Date for each applicable type of
         Unscheduled Principal Receipt;

                 (iii) the Pool 2 Class M Prepayment Percentage of the Scheduled
         Principal Balance of such Mortgage Loan which, during the month
         preceding the month of such Distribution Date, was repurchased by the
         Seller pursuant to Section 2.6; and

                  (iv) the Pool 2 Class M Percentage of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed advances previously made by the Master
         Servicer in respect of such defective Mortgage Loan.

Class M Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each Outstanding Mortgage Loan, of the product of (x) the
Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:

                   (i) the Group 1 Class M Percentage (with respect to each such
         Pool 1 Mortgage Loan) or Group 2 Class M Percentage (with respect to
         each such Pool 2 Mortgage Loan) of (A) the principal portion of the
         Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy
         Loss Amount has been reduced to zero, the principal portion of any Debt
         Service Reduction with respect to such Mortgage Loan;

                  (ii) the Group 1 Class M Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Group 2 Class M Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of all
         Unscheduled Principal Receipts that were received by a Servicer with
         respect to such Mortgage Loan during the Collection Period relating to
         such Distribution Date for each applicable type of Unscheduled
         Principal Receipt;

                 (iii) the Group 1 Class M Prepayment Percentage (with respect
         to each such Pool 1 Mortgage Loan) or Group 2 Class M Prepayment
         Percentage (with respect to each such Pool 2 Mortgage Loan) of the
         Scheduled Principal Balance of such Mortgage Loan which, during the
         month preceding the month of such Distribution Date, was repurchased by
         the Seller pursuant to Section 2.6; and

                                       23
<PAGE>   29

                  (iv) the Group 1 Class M Percentage (with respect to each such
         Pool 1 Mortgage Loan) or Group 2 Class M Percentage (with respect to
         each such Pool 2 Mortgage Loan) of the excess of the unpaid principal
         balance of such Mortgage Loan substituted for a defective Mortgage Loan
         during the month preceding the month in which such Distribution Date
         occurs over the unpaid principal balance of such defective Mortgage
         Loan, less the amount allocable to the principal portion of any
         unreimbursed Periodic Advances previously made by the Master Servicer
         in respect of such defective Mortgage Loan;

provided, however, that if an Optimal Adjustment Event occurs with respect to
such Class and such Distribution Date, the Class M Optimal Principal Amount will
equal the lesser of (A) the Class M Optimal Principal Amount calculated as
described in the preceding provisions and (B) the Adjusted Principal Balance for
the Class M Certificates.

Class M Principal Balance: As to the first Determination Date, the Original
Class M Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class M Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class M Certificates on prior
Distribution Dates (A) pursuant to Clause (ii) Paragraph third of Section 4.1(a)
and (B) as a result of a Principal Adjustment (b) the Realized Losses allocated
through such Determination Date to the Class M Certificates pursuant to Section
4.2(b) and (ii) the Aggregate Adjusted Pool Amount as of the preceding
Distribution Date less the Aggregate Class A Principal Balance as of such
Determination Date.

Class M Principal Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class M Certificates pursuant to Clause (ii)
Paragraph third of Section 4.1(a).

Class M Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class M Interest Shortfall Amounts for prior
Distribution Dates is in excess of the amounts distributed in respect of the
Class M Certificates on prior Distribution Dates pursuant to Clause (ii)
Paragraph second of Section 4.1(a).

Closing Date: February 25, 1999.

Code: The Internal Revenue Code of 1986, as the same may be amended from time to
time (or any successor statute thereto).

Collection Account: The account created and maintained for the benefit of the
Holders of Certificates pursuant to Section 3.2(b).

Collection Period: With respect to any Distribution Date, the calendar month
immediately preceding the month in which such Distribution Date occurs.

Compensating Interest: As to any Distribution Date, the lesser of (a) the
aggregate Prepayment Interest Shortfall on the Mortgage Loans with respect to
such Distribution Date and (b) the Available Servicing Compensation for such
Distribution Date.

                                       24
<PAGE>   30

Corporate Trust Office: The principal office of the Trustee at which at any
particular time its corporate business shall be administered, which office on
the Closing Date is located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479.

Corresponding Upper-Tier Class or Classes: As to the following Uncertificated
Lower-Tier Interests, the Corresponding Upper-Tier Class or Classes, as follows:

<TABLE>
<CAPTION>
         Uncertificated Lower-Tier Interest             Corresponding Upper-Tier Class or Classes
         ----------------------------------             -----------------------------------------
         <S>                                            <C>

         Class 1A-L Interest                            Class 1A Certificates.

         Class 2A-L Interest                            Class 2A Certificates.

         Class 1A-LWIO Interest                         Class 1A-WIO Certificates.

         Class 1A-LR Interest                           Class A-R Certificate.

         Class 1A-LPO Interest                          Class 1A-PO Certificates.

         Class 1B-L Interest, Class 1C-L                Class M Certificates, Class B-1 Certificates, Class
         Interest, Class 2B-L Interest and              B-2 Certificates, Class B-3 Certificates, Class B-4
         Class 2C-L Interest.                           Certificates and Class B-5 Certificates.
</TABLE>

Cross-Over Date: The Distribution Date preceding the first Distribution Date on
which each of the Group 1A Percentage and Group 2A Percentage (in each case,
determined pursuant to clause (ii) of the definition thereof) equals or exceeds
100%.

Cross-Over Date Interest Shortfall: With respect to any Distribution Date that
occurs on or after the Cross-Over Date as to which an Unscheduled Principal
Receipt (other than a Prepayment in Full) has been received the amount of
interest that would have accrued at the Net Mortgage Loan Rate on the amount of
such Unscheduled Principal Receipt from the day of its receipt or, if earlier,
its application by the Master Servicer through the last day of the month in
which such Unscheduled Principal Receipt is received.

Current Class B-1 Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the sum of the
Principal Balances of the Class B-2, Class B-3, Class B-4 and Class B-5
Certificates by the Aggregate Non-PO Principal Balance. As to the first
Distribution Date, the Original Class B-1 Fractional Interest.

Current Class B-2 Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the sum of the
Principal Balances of the Class B-3, Class B-4 and Class B-5 Certificates by the
Aggregate Non-PO Principal Balance. As to the first Distribution Date, the
Original Class B-2 Fractional Interest.

Current Class B-3 Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the sum of the
Principal Balances of the

                                       25
<PAGE>   31

Class B-4 and Class B-5 Certificates by the Aggregate Non-PO Principal Balance.
As to the first Distribution Date, the Original Class B-3 Fractional Interest.

Current Class B-4 Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the Principal
Balance of the Class B-5 Certificates by the Aggregate Non-PO Principal Balance.
As to the first Distribution Date, the Original Class B-4 Fractional Interest.

Current Class M Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the sum of the
Principal Balances of the Class B-1, Class B-2, Class B-3, Class B-4 and Class
B-5 Certificates by the Aggregate Non-PO Principal Balance. As to the first
Distribution Date, the Original Class M Fractional Interest.

Current Group 1A Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Classes of Group 1A Certificates pursuant
to Clause (i) Paragraph first Clause (A) of Section 4.1(a) on such Distribution
Date.

Current Group 2A Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Classes of Group 2A Certificates pursuant
to Clause (i) Paragraph first Clause (B) of Section 4.1(a) on such Distribution
Date.

Current Subordinate Interest Distribution Amount: As to any Distribution Date,
the amount distributed in respect of the Classes of Subordinate Certificates
pursuant to Clause (ii) Paragraphs first, fourth, seventh, tenth, thirteenth and
sixteenth of Section 4.1(a) on such Distribution Date.

Curtailment: With respect to a Mortgage Loan, any payment of principal received
during a Collection Period as part of a payment that is in excess of the amount
of the Monthly Payment due for such Collection Period and which is not intended
to satisfy the Mortgage Loan in full, is not a Payahead, is not intended to cure
a delinquency or is not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month such payment is received.

Cut-Off Date: February 1, 1999.

Cut-Off Date Aggregate Loan Balance: The sum of the Cut-Off Date Aggregate Pool
1 Loan Balance and the Cut-Off Date Aggregate Pool 2 Loan Balance equal to
$212,629,523.39.

Cut-Off Date Aggregate Pool 1 Loan Balance: The aggregate of the Cut-Off Date
Principal Balances of the Pool 1 Mortgage Loans equal to $156,085,128.06.

Cut-Off Date Aggregate Pool 2 Loan Balance: The aggregate of the Cut-Off Date
Principal Balances of the Pool 2 Mortgage Loans equal to $56,544,395.33.

                                       26
<PAGE>   32

Cut-Off Date Principal Balance: As to each Mortgage Loan, its unpaid principal
balance as of the close of business on the Cut-Off Date (but without giving
effect to any Unscheduled Principal Receipts received or applied on the Cut-Off
Date), reduced by all payments of scheduled principal due on or before the
Cut-Off Date and not paid, and increased by scheduled monthly payments of
principal due after the Cut-Off Date but received by the Master Servicer on or
before the Cut-Off Date.

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
constituting a Deficient Valuation.

Defective Mortgage Loan: Any Mortgage Loan subject to retransfer pursuant to
Section 2.2 or 2.6.

Deficient Valuation: With respect to any Mortgage Loan, a valuation by a court
of competent jurisdiction of the Mortgaged Property in an amount less than the
then-outstanding indebtedness under the Mortgage Loan, or any reduction in the
amount of principal to be paid in connection with any scheduled Monthly Payment
that results in a permanent forgiveness of principal, which valuation or
reduction results from a proceeding under the Bankruptcy Code.

Definitive Certificates: As defined in Section 6.2(b)(ii).

Depositary Agreement: The Letter of Representations, dated February 25, 1999 by
and among DTC, the Depositor and the Trustee.

Depositor: First Union Residential Securitization Transactions, Inc., a North
Carolina corporation, and any successor thereto.

Depository: The initial Depository shall be The Depository Trust Company
("DTC"), the nominee of which is Cede & Co. The Depository shall at all times be
a "clearing corporation" as defined in Section 8-102(3) of the UCC of the State
of New York.

Depository Participant or DTC 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 eighteenth day of
the month in which such Distribution Date occurs (or if such day is not a
Business Day, the Business Day immediately succeeding such eighteenth day).

Discount Mortgage Loan:  Any Discount Pool 1 Mortgage Loan.

Discount Pool 1 Mortgage Loan: A Pool 1 Mortgage Loan with a Net Mortgage
Interest Rate of less than 6.25%.

Disqualified Organization: Either (i) the United States, (ii) any state or
political subdivision thereof, (iii) any foreign government, (iv) any
international organization, (v) any agency or

                                       27
<PAGE>   33

instrumentality of any of the foregoing, (vi) any tax-exempt 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, (vii) any organization described in
Section 1381(a)(2)(C) of the Code, or (viii) any other entity designated as a
Disqualified Organization by relevant legislation or regulations amending the
REMIC Provisions and in effect at or proposed to be effective as of the time of
the determination. In addition, 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 tax and a majority of its board
of directors is not selected by such governmental unit. For purposes of this
definition, the terms "United States" and "international organization" shall
have the meanings set forth in Section 7701 of the Code.

Distribution Account: The Eligible Account established and maintained by the
Trustee pursuant to Section 5.3.

Distribution Date: The twenty-fifth day of each month, or if such day is not a
Business Day, then the next Business Day, beginning in March, 1999.

Document Custodian: The Person designated pursuant to Section 3.16, initially,
the Trustee.

DTC: The Depository Trust Company or its successor in interest.

Due Date: As to any Mortgage Loan, the day of the month on which the Monthly
Payment is due from the Mortgagor which is the first day of each calendar month.

Electronic Ledger: The electronic master record of mortgage loans maintained by
the Master Servicer.

Eligible Account: An account that is either (i) maintained with a depository
institution whose debt obligations at the time of any deposit therein have the
highest short-term debt rating by S&P, (ii) one or more accounts with a
depository institution which accounts are fully insured by either the SAIF or
the BIF with a minimum long-term unsecured debt rating of BBB by S&P, (iii) a
segregated trust account maintained with the corporate trust department of (A)
the Trustee or an affiliate of the Trustee in its fiduciary capacity or (B) an
institution with capital and surplus of not less than $50,000,000 and with a
minimum long-term secured debt rating of BBB by S&P, (iv) an account the
deposits in which are fully FDIC insured or (v) otherwise acceptable to each
Rating Agency as evidenced by a letter from each Rating Agency to the Trustee,
without reduction or withdrawal of their then current ratings of the
Certificates.

Eligible Investments: One or more of the following (excluding any callable
investments purchased at a premium):

                          (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;

                                       28
<PAGE>   34

                         (ii) repurchase agreements on obligations specified in
         clause (i) maturing not more than three months from the date of
         acquisition thereof, provided that the short-term unsecured debt
         obligations of the party agreeing to repurchase such obligations are at
         the time rated by S&P and Moody's in its highest short-term rating
         category (which is A-1+ by S&P and P-1 for Moody's);

                        (iii) certificates of deposit, time deposits and
         bankers' acceptances of any U.S. depository institution or trust
         company incorporated under the laws of the United States or any state
         thereof and subject to supervision and examination by federal and/or
         state banking authorities, provided that the unsecured short-term debt
         obligations of such depository institution or trust company at the date
         of acquisition thereof have been rated by each of S&P and Moody's in
         its highest unsecured short-term debt rating category;

                         (iv) commercial paper (having original maturities of
         not more than 90 days) of any corporation incorporated under the laws
         of the United States or any state thereof which on the date of
         acquisition has been rated by S&P and Moody's in their highest
         short-term rating categories;

                          (v) interests in any money market fund, including any
         such fund advised by the Trustee or an affiliate thereof, which at the
         date of acquisition of the interests in such fund and throughout the
         time as the interest is held in such fund has a rating of Aaa by
         Moody's and either AAAm or AAAm G by S&P; and

                         (vi) other obligations or securities that are
         acceptable to each Rating Agency as an Eligible Investment hereunder
         and will not result in a reduction in the then current rating of the
         Certificates, as evidenced by a letter to such effect from each Rating
         Agency and with respect to which the Master Servicer has received
         confirmation that, for tax purposes, the investment complies with the
         last clause of this definition;

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 provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.

Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
a Defective Mortgage Loan which must, on the date of such substitution, (i) have
an outstanding Loan Balance (or in the case of a substitution of more than one
Mortgage Loan for a Defective Mortgage Loan, an aggregate outstanding Loan
Balance), equal to or not more than 10% less than the Loan Balance of such
Defective Mortgage Loan; (ii) have a Loan Rate not less than the current Loan
Rate of the Defective Mortgage Loan and not more than 1% in excess of the Loan

                                       29
<PAGE>   35

Rate of such Defective Mortgage Loan; (iii) have a Mortgage of the same or
higher level of lien priority as the Mortgage relating to the Defective Mortgage
Loan at the time such Mortgage was transferred to the Trust; (iv) have a
remaining term to maturity not more than six months earlier and not later than
the remaining term to maturity of the Defective Mortgage Loan; provided,
however, that a Mortgage Loan that meets all the other requirements of this
definition, but has a remaining term to maturity that is (A) not more than one
year longer than that of the Defective Mortgage Loan and (B) not later than the
maturity date of the latest maturing Mortgage Loan then owned by the Trust, will
not fail to qualify as an Eligible Substitute Mortgage Loan if the Loan Balance
of such Mortgage Loan on the date of such substitution, when added to the Loan
Balances (determined as of the date of the substitution of such loan) that
qualified as Eligible Substitute Mortgage Loans in reliance upon the provisions
of this proviso clause, does not exceed an amount equal to $5,000,000; (v)
comply with each representation and warranty set forth in Section 2.6 (deemed to
be made as of the date of substitution); (vi) have an original Loan-to-Value
Ratio not greater than that of the Defective Mortgage Loan; and (vii) have an
Original Loan Balance of not greater than $1,000,000. More than one Eligible
Substitute Mortgage Loan may be substituted for a Defective Mortgage Loan if
such Eligible Substitute Mortgage Loans meet the foregoing attributes in the
aggregate.

ERISA: As defined in Section 6.2(c).

Event of Default: As defined in Section 8.1.

Excess Bankruptcy Loss: With respect to any Distribution Date and any Mortgage
Loan as to which a Bankruptcy Loss is realized in the month preceding the month
of such Distribution Date, (i) if the Aggregate Current Bankruptcy Losses with
respect to such Distribution Date exceed the then-applicable Bankruptcy Loss
Amount, then the portion of such Bankruptcy Loss represented by the ratio of (a)
the excess of the Aggregate Current Bankruptcy Losses over the then-applicable
Bankruptcy Loss Amount, divided by (b) the Aggregate Current Bankruptcy Losses
or (ii) if the Aggregate Current Bankruptcy Losses with respect to such
Distribution Date are less than or equal to the then-applicable Bankruptcy Loss
Amount, then zero. In addition, any Bankruptcy Loss occurring with respect to a
Mortgage Loan on or after the Cross-Over Date will be an Excess Bankruptcy Loss.

Excess Fraud Loss: With respect to any Distribution Date and any Mortgage Loan
as to which a Fraud Loss is realized in the month preceding the month of such
Distribution Date, (i) if the Aggregate Current Fraud Losses with respect to
such Distribution Date exceed the then-applicable Fraud Loss Amount, then the
portion of such Fraud Loss represented by the ratio of (a) the excess of the
Aggregate Current Fraud Losses over the then-applicable Fraud Loss Amount,
divided by (b) the Aggregate Current Fraud Losses, or (ii) if the Aggregate
Current Fraud Losses with respect to such Distribution Date are less than or
equal to the then-applicable Fraud Loss Amount, then zero. In addition, any
Fraud Loss occurring with respect to a Mortgage Loan on or after the Cross-Over
Date will be an Excess Fraud Loss.

Excess Liquidation Proceeds: With respect to any Distribution Date, the excess,
if any, of aggregate Liquidation Proceeds in the Collection Period over the
amount that would have been

                                       30
<PAGE>   36

received if a Prepayment in Full had been made on the last day of such
Collection Period with respect to each Mortgage Loan which became a Liquidated
Mortgage Loan during such Collection Period.

Excess Special Hazard Loss: With respect to any Distribution Date and any
Mortgage Loan as to which a Special Hazard Loss is realized in the month
preceding the month of such Distribution Date, (i) if the Aggregate Current
Special Hazard Losses with respect to such Distribution Date exceed the
then-applicable Special Hazard Loss Amount, then the portion of such Special
Hazard Loss represented by the ratio of (a) the excess of the Aggregate Current
Special Hazard Losses over the then-applicable Special Hazard Loss Amount,
divided by (b) the Aggregate Current Special Hazard Losses, or (ii) if the
Aggregate Current Special Hazard Losses with respect to such Distribution Date
are less than or equal to the then-applicable Special Hazard Loss Amount, then
zero. In addition, any Special Hazard Loss occurring with respect to a Mortgage
Loan on or after the Cross-Over Date will be an Excess Special Hazard Loss.

Expenses: As defined in Section 11.3(b).

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

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

FHA: The Federal Housing Administration, or any successor thereto.

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

Final Scheduled Distribution Date: For each Class of Certificates, as set out in
Section 2.9(d).

First Distribution Date: The Distribution Date occurring in March, 1999.

Fitch: Fitch IBCA, Inc., provided that at any time it is a Rating Agency.

Foreclosure Proceedings: Proceedings or action for foreclosure, deed in lieu of
foreclosure or trustee's sale with respect to any Mortgage Loan and the related
Mortgaged Property.

Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the amount, if
any, by which (i) the aggregate of its Net Liquidation Proceeds exceeds (ii) the
related Loan Balance (plus accrued and unpaid interest thereon at the applicable
Loan Rate from the date interest was last paid through the date of receipt of
the final Liquidation Proceeds) of such Liquidated Mortgage Loan immediately
prior to the final recovery of its Liquidation Proceeds.

Fraud Loss: A Liquidated Loan Loss incurred with respect to Liquidated Mortgage
Loans as to which there was fraud in the origination of such Liquidated Mortgage
Loan.

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<PAGE>   37

Fraud Loss Amount: As of any Distribution Date after the Cut-Off Date an amount
equal to: (X) prior to the first anniversary of the Cut-Off Date an amount equal
to $2,126,295.24 minus the aggregate amount of Fraud Losses allocated solely to
the Subordinate Certificates in accordance with Section 4.2(a) since the Cut-Off
Date, and (Y) from the first through fifth anniversary of the Cut-Off Date, an
amount equal to (1) the lesser of (a) the Fraud Loss Amount as of the most
recent anniversary of the Cut-Off Date and (b) 1.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-Off Date minus (2) the Fraud Losses allocated solely to
the Subordinate Certificates in accordance with Section 4.2(a) since the most
recent anniversary of the Cut-Off Date. On and after the Cross-Over Date or
after the fifth anniversary of the Cut-Off Date the Fraud Loss Amount shall be
zero.

Group 1 Apportioned Interest Percentage: As to any Distribution Date and any
Class of Group 1A Certificates or Subordinate Certificates, the percentage
calculated by dividing (a) in the case of a Class of Group 1A Certificates, the
Interest Accrual Amount and in the case of a Class of Subordinate Certificates,
the Apportioned Interest Accrual Amount for the Group 1 Apportioned Principal
Balance of such Class by (b) the Group 1 Interest Accrual Amount (determined
without regard to clause (ii) of the definition of each Interest Accrual
Amount).

Group 1 Apportioned Principal Balance: As to any Distribution Date and any Class
of Subordinate Certificates, an amount equal to the product of (i) the Principal
Balance of the Class of Subordinate Certificates and (ii) a fraction, the
numerator of which is the Group 1 Subordinate Amount and the denominator of
which is the sum of the Group 1 Subordinate Amount and the Group 2 Subordinate
Amount.

Group 1 Class B-1 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-1 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-1 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 1 Class B-1
Percentage for such Distribution Date will be zero.

Group 1 Class B-1 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-1 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-1 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 1
Class B-1 Prepayment Percentage for such Distribution Date will be zero.

                                       32
<PAGE>   38

Group 1 Class B-2 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-2 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-2 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 1 Class B-2
Percentage for such Distribution Date will be zero.

Group 1 Class B-2 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-2 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-2 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 1
Class B-2 Prepayment Percentage for such Distribution Date will be zero.

Group 1 Class B-3 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-3 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-3 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 1 Class B-3
Percentage for such Distribution Date will be zero.

Group 1 Class B-3 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-3 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-3 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 1
Class B-3 Prepayment Percentage for such Distribution Date will be zero.

Group 1 Class B-4 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-4 Principal Balance (determined as of the

                                       33
<PAGE>   39

Determination Date preceding such Distribution Date) and the denominator of
which is the sum of the Principal Balances of the Classes of Subordinate
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d). Except as set forth in
Section 4.1(d)(ii), in the event that the Class B-4 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Group 1 Class B-4 Percentage for such Distribution Date will be
zero.

Group 1 Class B-4 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-4 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-4 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 1
Class B-4 Prepayment Percentage for such Distribution Date will be zero.

Group 1 Class B-5 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-5 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-5 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 1 Class B-5
Percentage for such Distribution Date will be zero.

Group 1 Class B-5 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-5 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-5 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 1
Class B-5 Prepayment Percentage for such Distribution Date will be zero.

Group 1 Class M Percentage: As to any Distribution Date, the percentage
calculated by multiplying the Group 1 Subordinated Percentage by either (i) if
any Class B Certificates are eligible to receive principal distributions for
such Distribution Date in accordance with Section 4.1(d), a fraction, the
numerator of which is the Class M Principal Balance (determined as of the
Determination Date preceding such Distribution Date) and the denominator of
which is the sum of the Principal Balances of the Classes of Subordinate
Certificates eligible to receive

                                       34
<PAGE>   40

principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d) or (ii) except as set forth in Section 4.1(d)(ii),
in the event that the Class B Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), one.

Group 1 Class M Prepayment Percentage: As to any Distribution Date, the
percentage calculated by multiplying the Group 1 Subordinated Prepayment
Percentage by either (i) if any Class B Certificates are eligible to receive
principal distributions for such Distribution Date in accordance with Section
4.1(d), a fraction, the numerator of which is the Class M Principal Balance
(determined as of the Determination Date preceding such Distribution Date) and
the denominator of which is the sum of the Principal Balances of the Classes of
Subordinate Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d) or (ii)
except as set forth in Section 4.1(d)(ii), in the event that the Class B
Certificates are not eligible to receive distributions of principal in
accordance with Section 4.1(d)(i), one.

Group 1 Class MB Percentage: Any one of the Group 1 Class M Percentages Group 1
Class B-1 Percentage, Group 1 Class B-2 Percentage, Group 1 Class B-3
Percentage, Group 1 Class B-4 Percentage or Group 1 Class B-5 Percentage.

Group 1 Interest Accrual Amount: As to any Distribution Date, the sum of the
Group 1A Interest Accrual Amount and the Apportioned Interest Accrual Amounts
for the Group 1 Apportioned Principal Balances of the Subordinate Certificates.

Group 1 Senior Certificates:  The Group 1A Certificates, collectively.

Group 1 Subordinate Amount: As to any Distribution Date, the excess of (i) the
Pool 1 Pool Balance (Non-PO Portion) over (ii) the Group 1A Non-PO Principal
Balance.

Group 1 Subordinate Prepayment Percentage: Any of the Group 1 Class M Prepayment
Percentage, Group 1 Class B-1 Prepayment Percentage, Group 1 Class B-2
Prepayment Percentage, Group 1 Class B-3 Prepayment Percentage, Group 1 Class
B-4 Prepayment Percentage or Group 1 Class B-5 Prepayment Percentage.

Group 1 Subordinated Percentage: As to any Distribution Date, the percentage
which is the difference between 100% and the Group 1A Percentage for such date.

Group 1 Subordinated Prepayment Percentage: As to any Distribution Date, the
percentage which is the difference between 100% and the Group 1A Prepayment
Percentage for such date.

Group 1A Certificate: Any of the Class 1A Certificates, Class 1A-WIO
Certificates, Class 1A-PO Certificates and Class A-R Certificates.

Group 1A Certificates: The Class 1A, Class 1A-PO, Class 1A-WIO, Class A-R, Class
A-LR Certificates, collectively.

                                       35
<PAGE>   41

Group 1A Distribution Amount: As to any Distribution Date and any Class of Group
1A Certificates (other than the Class 1A-PO and Class 1A-WIO Certificates), the
amount distributable to such Class of Group 1A Certificates pursuant to Clause
(i) Paragraphs first Clause (A), second Clause (A) and third Clause (B)(1) of
Section 4.1(a). As to the Class 1A-PO Certificates, the amount distributable to
such Class pursuant to Clause (i) Paragraph third Clause (B)(2) of Section
4.1(a). As to the Class 1A-WIO, Certificates, the amount distributable to such
Class pursuant to Clause (i) Paragraphs first Clause (A) and second Clause (A)
of Section 4.1(a).

Group 1A Interest Accrual Amount: As to any Distribution Date, the sum of the
Interest Accrual Amounts for the Classes of Group 1A Certificates with respect
to such Distribution Date.

Group 1A Interest Percentage: As to any Distribution Date and any Class of Group
1A Certificates, the percentage calculated by dividing the Interest Accrual
Amount of such Class (determined without regard to clause (ii) of the definition
thereof) by the Group 1A Interest Accrual Amount (determined without regard to
clause (ii) of the definition of each Interest Accrual Amount).

Group 1A Interest Shortfall Amount: As to any Distribution Date and any Class of
Group 1A Certificates, any amount by which the Interest Accrual Amount of such
Class with respect to such Distribution Date exceeds the amount distributed in
respect of such Class on such Distribution Date pursuant to Clause (i) Paragraph
first Clause (A) of Section 4.1(a).

Group 1A Loss Denominator: As to any Determination Date, an amount equal to the
Group 1A Non-PO Principal Balance.

Group 1A Loss Percentage: As to any Determination Date and any Class of Group 1A
Certificates (other than the Class 1A-PO Certificates), the percentage
calculated by dividing the Principal Balance of such Class by the Group 1A Loss
Denominator (determined without regard to any such Principal Balance of any
Class of Group 1A Certificates not then outstanding), in each case determined as
of the preceding Determination Date.

Group 1A Non-PO Optimal Amount: As to any Distribution Date, the sum for such
Distribution Date of (i) the Group 1A Interest Accrual Amount, (ii) the
Aggregate Group 1A Unpaid Interest Shortfall and (iii) the Group 1A Non-PO
Optimal Principal Amount.

Group 1A Non-PO Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each Group 1 Mortgage Loan that is an Outstanding
Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such
Mortgage Loan, and (y) the sum of:

                   (i) the Group 1A Percentage of (A) the principal portion of
         the Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy
         Loss Amount has been reduced to zero, the principal portion of any Debt
         Service Reduction with respect to such Mortgage Loan;

                                       36
<PAGE>   42

                  (ii) the Group 1A Prepayment Percentage of all Unscheduled
         Principal Receipts that were received by the Master Servicer with
         respect to such Mortgage Loan during the Collection Period relating to
         such Distribution Date for each applicable type of Unscheduled
         Principal Receipt;

                 (iii) the Group 1A Prepayment Percentage of the Scheduled
         Principal Balance of such Mortgage Loan which, during the month
         preceding the month of such Distribution Date, was repurchased by the
         Seller pursuant to Section 2.6; and

                  (iv) the Group 1A Percentage of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed Periodic Advances previously made by the
         Master Servicer in respect of such defective Mortgage Loan.

Group 1A Non-PO Principal Balance: As of any date, an amount equal to the Group
1A Principal Balance less the Principal Balance of the Class 1A-PO Certificates.

Group 1A Non-PO Principal Distribution Amount: As to any Distribution Date, the
aggregate amount distributed in respect of the Classes of Group 1A Certificates
pursuant to Clause (i) Paragraph third Clause (B)(1) of Section 4.1(a).

Group 1A Percentage: As to any Distribution Date occurring on or prior to the
Cross-Over Date, the lesser of (i) 100% and (ii) the percentage obtained by
dividing the Group 1A Non-PO Principal Balance (determined as of the
Determination Date preceding such Distribution Date) by the Group 1 Pool Balance
(Non-PO Portion). As to any Distribution Date occurring subsequent to the
Cross-Over Date, 100% or such lesser percentage which will cause the Group 1A
Non-PO Principal Balance to decline to zero following the distribution made on
such Distribution Date.

Group 1A Prepayment Percentage: As to any Distribution Date to and including the
Distribution Date in February 2004, 100%. As to any Distribution Date subsequent
to February 2004 to and including the Distribution Date in February 2005, the
Group 1A Percentage as of such Distribution Date plus 70% of the Group 1
Subordinated Percentage as of such Distribution Date. As to any Distribution
Date subsequent to February 2005 to and including the Distribution Date in
February 2006, the Group 1A Percentage as of such Distribution Date plus 60% of
the Group 1 Subordinated Percentage as of such Distribution Date. As to any
Distribution Date subsequent to February 2006 to and including the Distribution
Date in February 2007, the Group 1A Percentage as of such Distribution Date plus
40% of the Group 1 Subordinated Percentage as of such Distribution Date. As to
any Distribution Date subsequent to February 2007 to and including the
Distribution Date in February 2008, the Group 1A Percentage as of such
Distribution Date plus 20% of the Group 1 Subordinated Percentage as of such
Distribution Date. As to any Distribution Date subsequent to February 2008, the
Group 1A Percentage as of such Distribution Date. The foregoing is subject to
the following: (i) if the aggregate distribution to Holders of Group 1A

                                       37
<PAGE>   43

Certificates on any Distribution Date of the Group 1A Prepayment Percentage
provided above of (a) Unscheduled Principal Receipts distributable on such
Distribution Date would reduce the Group 1A Non-PO Principal Balance below zero,
the Group 1A Prepayment Percentage for such Distribution Date shall be the
percentage necessary to bring the Group 1A Non-PO Principal Balance to zero and
thereafter the Group 1A Prepayment Percentage shall be zero and (ii) if the
Group 1A Percentage or Group 2A Percentage as of any Distribution Date is
greater than the Original Group 1A Percentage or Original Group 2A Percentage,
respectively, the Group 1A Prepayment Percentage for such Distribution Date
shall be 100%. Notwithstanding the foregoing, with respect to any Distribution
Date on which the following criteria are not met, the reduction of the Group 1A
Prepayment Percentage described in the second through sixth sentences of this
definition of Group 1A Prepayment Percentage shall not be applicable with
respect to such Distribution Date. In such event, the Group 1A Prepayment
Percentage for such Distribution Date will be determined in accordance with the
applicable provision, as set forth in the first through fifth sentences above,
which was actually used to determine the Group 1A Prepayment Percentage for the
Distribution Date occurring in the February preceding such Distribution Date (it
being understood that for the purposes of the determination of the Group 1A
Prepayment Percentage for the current Distribution Date, the current Group 1A
Percentage and Group 1 Subordinated Percentage shall be utilized). In order for
the reduction referred to in the second through sixth sentences to be
applicable, with respect to any Distribution Date (a) the average outstanding
principal balance on such Distribution Date and for the preceding five
Distribution Dates on the Pool 1 Mortgage Loans or Pool 2 Mortgage Loans that
were delinquent 60 days or more (including for this purpose any payments due
with respect to Mortgage Loans in foreclosure and REO Mortgage Loans) must be
less than 50% of the Group 1 Subordinate Amount or Group 2 Subordinate Amount,
as applicable and (b) cumulative Realized Losses on the Pool 1 Mortgage Loans
and the Pool 2 Mortgage Loans shall not exceed (1) 30% of the Original Group 1
Subordinated Principal Balance or Original Group 2 Subordinated Principal
Balance, as applicable, if such Distribution Date occurs between and including
March 2004 and February 2005 (2) 35% of the Original Group 1 Subordinated
Principal Balance or Original Group 2 Subordinated Principal Balance if such
Distribution Date occurs between and including March 2005 and February 2006, (3)
40% of the Original Group 1 Subordinated Principal Balance or Original Group 2
Subordinated Principal Balance, as applicable, if such Distribution Date occurs
between and including March 2006 and February 2007, (4) 45% of the Original
Group 1 Subordinated Principal Balance or Original Group 2 Subordinated
Principal Balance, as applicable, if such Distribution Date occurs between and
including March 2007 and February 2008, and (5) 50% of the Original Group 1
Subordinated Principal Balance or Original Group 2 Subordinated Principal
Balance, as applicable, if such Distribution Date occurs during or after March
2008. With respect to any Distribution Date on which the Group 1A Prepayment
Percentage is reduced below the Group 1A Prepayment Percentage for the prior
Distribution Date, the Master Servicer shall certify to the Trustee, based upon
information provided by each servicer as to the Mortgage Loans serviced by it
that the criteria set forth in the preceding sentence are met.

Group 1A Principal Balance: As of any date, an amount equal to the sum of the
Principal Balances for the Class 1A Certificates, Class 1A-PO Certificates and
Class A-R Certificate.

                                       38
<PAGE>   44

Group 1A Shortfall Percentage: As to any Distribution Date and any Class of
Group 1A Certificates, the percentage calculated by dividing the Class A Unpaid
Interest Shortfall for such Class by the Aggregate Group 1A Unpaid Interest
Shortfall, in each case determined as of the day preceding the applicable
Distribution Date.

Group 2 Apportioned Interest Percentage: As to any Distribution Date and any
Class of Group 2A Certificates or Subordinate Certificates, the percentage
calculated by dividing (a) in the case of a Class of Group 2A Certificates, the
Interest Accrual Amount and in the case of a Class of Subordinate Certificates,
the Apportioned Interest Accrual Amount for the Group 2 Apportioned Principal
Balance of such Class by (b) the Group 2 Interest Accrual Amount (determined
without regard to clause (ii) of the definition of each Interest Accrual
Amount).

Group 2 Apportioned Principal Balance: As to any Distribution Date and any Class
of Subordinate Certificates, an amount equal to the product of (i) the Principal
Balance of the Class of Subordinate Certificates and (ii) a fraction, the
numerator of which is the Group 2 Subordinate Amount and the denominator of
which is the sum of the Group 1 Subordinate Amount and the Group 2 Subordinate
Amount.

Group 2 Certificates:  The Class 2A Certificates.

Group 2 Class B-1 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-1 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-1 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 2 Class B-1
Percentage for such Distribution Date will be zero.

Group 2 Class B-1 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-1 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-1 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 2
Class B-1 Prepayment Percentage for such Distribution Date will be zero.

Group 2 Class B-2 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-2 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal

                                       39
<PAGE>   45

distributions for such Distribution Date in accordance with the provisions of
Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the event that the
Class B-2 Certificates are not eligible to receive distributions of principal in
accordance with Section 4.1(d)(i), the Group 2 Class B-2 Percentage for such
Distribution Date will be zero.

Group 2 Class B-2 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-2 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-2 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 2
Class B-2 Prepayment Percentage for such Distribution Date will be zero.

Group 2 Class B-3 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-3 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-3 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 2 Class B-3
Percentage for such Distribution Date will be zero.

Group 2 Class B-3 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-3 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-3 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 2
Class B-3 Prepayment Percentage for such Distribution Date will be zero.

Group 2 Class B-4 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-4 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-4 Certificates are not

                                       40
<PAGE>   46

eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Group 2 Class B-4 Percentage for such Distribution Date will be
zero.

Group 2 Class B-4 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-4 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-4 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 2
Class B-4 Prepayment Percentage for such Distribution Date will be zero.

Group 2 Class B-5 Percentage: As to any Distribution Date, except as set forth
in the next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinated Percentage by (ii) a fraction, the numerator of which is the Class
B-5 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Subordinate Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in the
event that the Class B-5 Certificates are not eligible to receive distributions
of principal in accordance with Section 4.1(d)(i), the Group 2 Class B-5
Percentage for such Distribution Date will be zero.

Group 2 Class B-5 Prepayment Percentage: As to any Distribution Date, except as
set forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinated Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class B-5 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Principal Balances of the Classes of Subordinate Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.1(d). Except as set forth in Section 4.1(d)(ii), in
the event that the Class B-5 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.1(d)(i), the Group 2
Class B-5 Prepayment Percentage for such Distribution Date will be zero.

Group 2 Class M Percentage: As to any Distribution Date, the percentage
calculated by multiplying the Group 2 Subordinated Percentage by either (i) if
any Class B Certificates are eligible to receive principal distributions for
such Distribution Date in accordance with Section 4.1(d), a fraction, the
numerator of which is the Class M Principal Balance (determined as of the
Determination Date preceding such Distribution Date) and the denominator of
which is the sum of the Principal Balances of the Classes of Subordinate
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d) or (ii) except as set
forth in Section 4.1(d)(ii), in the event that the Class B Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), one.

                                       41
<PAGE>   47

Group 2 Class M Prepayment Percentage: As to any Distribution Date, the
percentage calculated by multiplying the Group 2 Subordinated Percentage by
either (i) if any Class B Certificates are eligible to receive principal
distributions for such Distribution Date in accordance with Section 4.1(d), a
fraction, the numerator of which is the Class M Principal Balance (determined as
of the Determination Date preceding such Distribution Date) and the denominator
of which is the sum of the Principal Balances of the Classes of Subordinate
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d) or (ii) except as set
forth in Section 4.1(d)(ii), in the event that the Class B Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), one.

Group 2 Class MB Percentage: Any one of the Group 2 Class M Percentage, Group 2
Class B-1 Percentage, Group 2 Class B-2 Percentage, Group 2 Class B-3
Percentage, Group 2 Class B-4 Percentage or Group 2 Class B-5 Percentage.

Group 2 Class MB Prepayment Percentage: Any of the Group 2 Class M Prepayment
Percentage, Group 2 Class B-1 Prepayment Percentage, Group 2 Class B-2
Prepayment Percentage, Group 2 Class B-3 Prepayment Percentage, Group 2 Class
B-4 Prepayment Percentage or Group 2 Class B-5 Prepayment Percentage.

Group 2 Interest Accrual Amount: As to any Distribution Date, the sum of the
Group 2A Interest Accrual Amount and the Apportioned Interest Accrual Amounts
for the Group 2 Apportioned Principal Balances of the Subordinate Certificates.

Group 2 Subordinate Amount: As to any Distribution Date, the excess of (i) the
Pool 2 Pool Balance (Non-PO Portion) over (ii) the Group 2A Non-PO Principal
Balance.

Group 2 Subordinated Percentage: As to any Distribution Date, the percentage
which is the difference between 100% and the Group 2A Percentage for such date.

Group 2 Subordinated Prepayment Percentage: As to any Distribution Date, the
percentage which is the difference between 100% and the Group 2A Prepayment
Percentage for such date.

Group 2A Certificates:  The Class 2A Certificates.

Group 2A Distribution Amount: As to any Distribution Date and any Class of Group
2A Certificates, the amount distributable to such Class of Group 2A Certificates
pursuant to Clause (i) Paragraphs first Clause (B), second Clause (B) and third
Clause (A) of Section 4.1(a).

Group 2A Interest Accrual Amount: As to any Distribution Date, the sum of the
Interest Accrual Amounts for the Classes of Group 2A Certificates with respect
to such Distribution Date.

Group 2A Interest Percentage: As to any Distribution Date and any Class of Group
2A Certificates, the percentage calculated by dividing the Interest Accrual
Amount of such Class

                                       42
<PAGE>   48

(determined without regard to clause (ii) of the definition thereof) by the
Group 2A Interest Accrual Amount (determined without regard to clause (ii) of
the definition of each Interest Accrual Amount).

Group 2A Interest Shortfall Amount: As to any Distribution Date and any Class of
Group 2A Certificates, any amount by which the Interest Accrual Amount of such
Class with respect to such Distribution Date exceeds the amount distributed in
respect of such Class on such Distribution Date pursuant to Clause (i) Paragraph
first Clause (B) of Section 4.1(a).

Group 2A Loss Denominator: As to any Determination Date, an amount equal to the
Group 2A Non-PO Principal Balance.

Group 2A Loss Percentage: As to any Determination Date and any Class of Group 2A
Certificates, the percentage calculated by dividing the Principal Balance of
such Class by the Group 2A Loss Denominator (determined without regard to any
such Principal Balance of any Class of Group 2A Certificates not then
outstanding), in each case determined as of the preceding Determination Date.

Group 2A Non-PO Optimal Amount: As to any Distribution Date, the sum for such
Distribution Date of (i) the Group 2A Interest Accrual Amount, (ii) the
Aggregate Group 2A Unpaid Interest Shortfall and (iii) the Group 2A Non-PO
Optimal Principal Amount.

Group 2A Non-PO Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each Group 2 Mortgage Loan that is an Outstanding
Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such
Mortgage Loan, and (y) the sum of:

                   (i) the Group 2A Percentage of (A) the principal portion of
         the Monthly Payment due on the Due Date occurring in the month of such
         Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy
         Loss Amount has been reduced to zero, the principal portion of any Debt
         Service Reduction with respect to such Mortgage Loan;

                  (ii) the Group 2A Prepayment Percentage of all Unscheduled
         Principal Receipts that were received by the Master Servicer with
         respect to such Mortgage Loan during the Collection Period relating to
         such Distribution Date for each applicable type of Unscheduled
         Principal Receipt;

                 (iii) the Group 2A Prepayment Percentage of the Scheduled
         Principal Balance of such Mortgage Loan which, during the month
         preceding the month of such Distribution Date, was repurchased by the
         Seller pursuant to Section 2.6; and

                  (iv) the Group 2A Percentage of the excess of the unpaid
         principal balance of such Mortgage Loan substituted for a defective
         Mortgage Loan during the month preceding the month in which such
         Distribution Date occurs over the unpaid principal balance of such
         defective Mortgage Loan, less the amount allocable to the principal
         portion of any unreimbursed Periodic Advances previously made by the
         Master Servicer in respect of such defective Mortgage Loan.

                                       43
<PAGE>   49

Group 2A Non-PO Principal Balance: As of any date, an amount equal to the Group
2A Principal Balance.

Group 2A Non-PO Principal Distribution Amount: As to any Distribution Date, the
aggregate amount distributed in respect of the Classes of Group 2A Certificates
pursuant to Clause (i) Paragraph third Clause (A) of Section 4.1(a).

Group 2A Percentage: As to any Distribution Date occurring on or prior to the
Cross-Over Date, the lesser of (i) 100% and (ii) the percentage obtained by
dividing the Group 2A Non-PO Principal Balance (determined as of the
Determination Date preceding such Distribution Date) by the Group 2 Pool Balance
(Non-PO Portion). As to any Distribution Date occurring subsequent to the
Cross-Over Date, 100% or such lesser percentage which will cause the Group 2A
Non-PO Principal Balance to decline to zero following the distribution made on
such Distribution Date.

Group 2A Prepayment Percentage: As to any Distribution Date to and including the
Distribution Date in February 2004, 100%. As to any Distribution Date subsequent
to February 2004 to and including the Distribution Date in February 2005, the
Group 2A Percentage as of such Distribution Date plus 70% of the Group 2
Subordinated Percentage as of such Distribution Date. As to any Distribution
Date subsequent to February 2005 to and including the Distribution Date in
February 2006, the Group 2A Percentage as of such Distribution Date plus 60% of
the Group 2 Subordinated Percentage as of such Distribution Date. As to any
Distribution Date subsequent to February 2006 to and including the Distribution
Date in February 2007, the Group 2A Percentage as of such Distribution Date plus
40% of the Group 2 Subordinated Percentage as of such Distribution Date. As to
any Distribution Date subsequent to February 2007 to and including the
Distribution Date in February 2008, the Group 2A Percentage as of such
Distribution Date plus 20% of the Group 2 Subordinated Percentage as of such
Distribution Date. As to any Distribution Date subsequent to February 2008, the
Group 2A Percentage as of such Distribution Date. The foregoing is subject to
the following: (i) if the aggregate distribution to Holders of Group 2A
Certificates on any Distribution Date of the Group 2A Prepayment Percentage
provided above of (a) Unscheduled Principal Receipts distributable on such
Distribution Date would reduce the Group 2A Non-PO Principal Balance below zero,
the Group 2A Prepayment Percentage for such Distribution Date shall be the
percentage necessary to bring the Group 2A Non-PO Principal Balance to zero and
thereafter the Group 2A Prepayment Percentage shall be zero and (ii) if the
Group 1A Percentage or Group 2A Percentage as of any Distribution Date is
greater than the Original Group 1A Percentage or Original Group 2A Percentage,
respectively, the Group 2A Prepayment Percentage for such Distribution Date
shall be 100%. Notwithstanding the foregoing, with respect to any Distribution
Date on which the following criteria are not met, the reduction of the Group 2A
Prepayment Percentage described in the second through sixth sentences of this
definition of Group 2A Prepayment Percentage shall not be applicable with
respect to such Distribution Date. In such event, the Group 2A Prepayment
Percentage for such Distribution Date will be determined in accordance with the
applicable provision, as set forth in the first through fifth sentences above,
which was actually used to determine the Group 2A Prepayment Percentage for the
Distribution Date occurring in the

                                       44
<PAGE>   50

February preceding such Distribution Date (it being understood that for the
purposes of the determination of the Group 2A Prepayment Percentage for the
current Distribution Date, the current Group 2A Percentage and Group 2
Subordinated Percentage shall be utilized). In order for the reduction referred
to in the second through sixth sentences to be applicable, with respect to any
Distribution Date (a) the average outstanding principal balance on such
Distribution Date and for the preceding five Distribution Dates on the Pool 1
Mortgage Loans or Pool 2 Mortgage Loans that were delinquent 60 days or more
(including for this purpose any payments due with respect to Mortgage Loans in
foreclosure and REO Mortgage Loans) must be less than 50% of the Group 1
Subordinate Amount or Group 2 Subordinate Amount, as applicable and (b)
cumulative Realized Losses on the Group I Mortgage Loans or the Group 2 Mortgage
Loans shall not exceed (1) 30% of the Original Group 1 Subordinated Principal
Balance or Original Group 2 Subordinated Principal Balance, as applicable, if
such Distribution Date occurs between and including March 2004 and February 2005
(2) 35% of the Original Group 1 Subordinated Principal Balance or Original Group
2 Subordinated Principal Balance if such Distribution Date occurs between and
including March 2005 and February 2006, (3) 40% of the Original Group 1
Subordinated Principal Balance or Original Group 2 Subordinated Principal
Balance, as applicable, if such Distribution Date occurs between and including
March 2006 and February 2007, (4) 45% of the Original Group 1 Subordinated
Principal Balance or Original Group 2 Subordinated Principal Balance, as
applicable, if such Distribution Date occurs between and including March 2007
and February 2008, and (5) 50% of the Original Group 1 Subordinated Principal
Balance or Original Group 2 Subordinated Principal Balance, as applicable, if
such Distribution Date occurs during or after March 2008. With respect to any
Distribution Date on which the Group 2A Prepayment Percentage is reduced below
the Group 2A Prepayment Percentage for the prior Distribution Date, the Master
Servicer shall certify to the Trustee, based upon information provided by each
servicer as to the Mortgage Loans serviced by it that the criteria set forth in
the preceding sentence are met.

Group 2A Principal Balance: As of any date, an amount equal to the Principal
Balances for the Class 2A Certificates.

Group 2A Shortfall Percentage: As to any Distribution Date and any Class of
Group 2A Certificates, the percentage calculated by dividing the Class A Unpaid
Interest Shortfall for such Class by the Aggregate Group 2A Unpaid Interest
Shortfall, in each case determined as of the day preceding the applicable
Distribution Date.

Group Subordinate Amount: The Group 1 Subordinate Amount or the Group 2
Subordinate Amount, as applicable.

Holder: A Certificateholder.

Indirect DTC Participants: Entities such as banks, brokers, dealers or trust
companies, that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly.

                                       45
<PAGE>   51

Insolvency Event: With respect to a Mortgagor, any of the following events: (i)
A court having jurisdiction in the premises shall enter a decree or order for
relief in respect of the Mortgagor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appoint a receiver, liquidator, assignee, custodian, sequestrator (or other
similar official) of the Mortgagor or for all or substantially all of its
property, or order the winding up or liquidation of its affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (ii) the Mortgagor shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking of possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Mortgagor or for any substantial part of its property,
or shall make any general assignment for the benefit of creditors.

Insurance Proceeds: Proceeds paid by any insurer pursuant to any insurance
policy covering a Mortgage Loan, or amounts required to be paid by the Master
Servicer pursuant to Section 3.5 hereof, net of any component thereof (i)
covering any expenses incurred by or on behalf of the Master Servicer in
connection with obtaining such proceeds, (ii) that is applied to the restoration
or repair of the related Mortgaged Property or (iii) released to the Mortgagor
in accordance with the Master Servicer's normal servicing procedures.

Interest Accrual Amount: As to any Distribution Date and any Class of Class A
Certificates (other than the Class 1A-PO and Class 1A-WIO Certificates), (i) the
product of (a) 1/12th of the Class A Certificate Rate for such Class and (b) the
Principal Balance of such Class as of the Determination Date preceding such
Distribution Date minus (ii) the sum of (A) the Group 1 Apportioned Interest
Percentage or Group 2 Apportioned Interest Percentage, as applicable, of such
Class of the interest portion of any Excess Special Hazard Losses, Excess Fraud
Losses and Excess Bankruptcy Losses attributable to Pool 1 Mortgage Loans or
Pool 2 Mortgage Loans, respectively, with respect to such Distribution Date
pursuant to Section 4.2(e), (B) the Group 1A Interest Percentage or Group 2A
Interest Percentage of the interest portion of any Realized Losses (other than
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses)
allocated to the Group 1A Certificates or Group 2A Certificates, as applicable,
on or after the Cross-Over Date pursuant to Section 4.2(e) and (C) the Group 1A
Interest Percentage or Group 2A Interest Percentage of such Class of any
Non-Supported Interest Shortfall allocated to the Class A Certificates with
respect to such Distribution Date. As to any Distribution Date and the Class
1A-WIO Certificates, the Class 1A-WIO Interest Accrual Amount. The Class 1A-PO
Certificates have no Interest Accrual Amount.

                  As to any Distribution Date and any Class of Subordinate
Certificates, an amount equal to (i) the product of 1/12th of the Subordinate
Certificate Rate and the Principal Balance of such Class as of the Determination
Date preceding such Distribution Date minus (ii) the sum of (A) the Subordinate
Interest Percentage of such Class of any Non-Supported Interest Shortfall
allocated to the Subordinate Certificates with respect to such Distribution Date
and (B) the Group 1 Apportioned Interest Percentage or Group 2 Apportioned
Interest Percentage, as applicable, of such Class of the interest portion of any
Excess Special Hazard Losses,

                                       46
<PAGE>   52

Excess Fraud Losses and Excess Bankruptcy Losses attributable to the Pool 1
Mortgage Loans or Pool 2 Mortgage Loans, respectively, with respect to such
Distribution Date pursuant to Section 4.2(e).

Interest Accrual Period: As to any Distribution Date and each Class of
Certificates, the period from and including the first day of the calendar month
preceding the calendar month of such Distribution Date to but not including the
first day of the calendar month of such Distribution Date.

Interest Collections: As to any Distribution Date, all payments by or on behalf
of Mortgagors and any other amounts constituting interest (including without
limitation such portion of any payments of the Purchase Price for any Mortgage
Loan, Insurance Proceeds, Net Liquidation Proceeds and any Monthly Advance as is
allocable to interest of the applicable Mortgage Loan, any portion of Payaheads
constituting interest intended by the Mortgagor for application in the related
Collection Period and any Substitution Adjustment Amounts, but excluding
Foreclosure Profits and any portion of any Unreimbursed Advance as is allocable
to interest of the applicable Mortgage Loan and any portion of Payaheads
constituting interest intended by the Mortgagor for application in any
subsequent Collection Period) collected by the Master Servicer under the
Mortgage Loans during the related Collection Period.

Interested Person: The Depositor, the Master Servicer, any Holder of a
Certificate, or any Affiliate of any such Person.

Junior Subordinate Certificates: The Class B-3, Class B-4 and Class B-5
Certificates, collectively.

Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.

Liquidated Loan Loss: With respect to any Distribution Date, the aggregate of
the amount of losses with respect to each Mortgage Loan which became a
Liquidated Mortgage Loan during the related Collection Period equal to the
excess of (i) the unpaid principal balance of each such Liquidated Mortgage
Loan, plus accrued interest thereon in accordance with the amortization schedule
at the time applicable thereto at the applicable Net Mortgage Interest Rate from
the Due Date as to which interest was last paid with respect thereto through the
last day of the month preceding the month in which such Distribution Date
occurs, over (ii) Net Liquidation Proceeds with respect to such Liquidated
Mortgage Loan.

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

                                       47
<PAGE>   53

specified herein, as of the end of the related Collection Period that all
Liquidation Proceeds which it expects to recover with respect to the disposition
of the related Mortgage Loan have been recovered.

Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) which are
incurred by the Master Servicer in connection with the liquidation of any
Mortgage Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees and expenses and any
related and unreimbursed expenditures for real estate property taxes or for
property restoration, preservation or insurance against casualty loss or damage.

Liquidation Principal: The principal portion of Liquidation Proceeds received
with respect to each Mortgage Loan which became a Liquidated Mortgage Loan (but
not in excess of the principal balance thereof) during the related Collection
Period.

Liquidation Proceeds: Proceeds (including Insurance Proceeds) received in
connection with the liquidation of any Mortgage Loan or related REO or any
condemnation or taking by eminent domain, whether through trustee's sale,
foreclosure sale or otherwise (including rental income).

Liquidation Report:  As defined in Section 3.7.

Loan Balance: At the time of any determination, the principal balance of a
Mortgage Loan remaining to be paid at the close of business on the Cut-Off Date,
after deduction of all principal payments due on or before the Cut-Off Date
whether or not paid, reduced by all amounts distributed or to be distributed to
Certificateholders through the Distribution Date in the month of determination
that are reported as allocable to principal of such Mortgage Loan.

         In the case of a Substitute Mortgage Loan, "Loan Balance" shall mean,
at the time of any determination, the principal balance of such Substitute
Mortgage Loan transferred to the Trust on the date of substitution, reduced by
all amounts distributed or to be distributed to Certificateholders through the
Distribution Date in the month of determination that are reported as allocable
to principal of such Substitute Mortgage Loan.

         The Loan Balance of a Mortgage Loan (including a Substitute Mortgage
Loan) shall not be adjusted solely by reason of any bankruptcy or similar
proceeding or any moratorium or similar waiver or grace period. Whenever a
Realized Loss has been incurred with respect to a Mortgage Loan during a
calendar month, the Loan Balance of such Mortgage Loan shall be reduced by the
amount of such Realized Loss as of the Distribution Date next following the end
of such calendar month after giving effect to the allocation of Realized Losses
and distributions of principal to the Certificates.

Loan Rate: With respect to any Mortgage Loan as of any day, the per annum rate
of interest applicable under the related Mortgage Note to the calculation of
interest for such day on the Loan Balance.

                                       48
<PAGE>   54

Loan-to-Value Ratio: With respect to any Mortgage Loan as of any date, the
percentage equivalent of the fraction, the numerator of which is the Original
Loan Balance and the denominator of which is the Valuation of the related
Mortgaged Property as of the date of the execution of the related original
Mortgage.

Losses: As defined in Section 11.3(a).

Lower-Tier Distribution Amount: As defined in Section 4.1(aa).

Lower-Tier REMIC: REMIC I.

Majority Holders: The Holder or Holders of each Class of Certificates evidencing
Percentage Interests in excess of 51% in the aggregate of such Class.

Master Servicer: First Union National Bank, in its capacity as master servicer
under this Agreement, and its successors in interest or any successor master
servicer appointed in accordance with this Agreement that has accepted such
appointment in accordance with this Agreement.

Master Servicer Removal Right Event: The occurrence of:

         (i) on any Distribution Date, the Rolling Three Month Delinquency Rate
with respect to a Pool exceeds 10%; or

         (ii) (A) on any Distribution Date on or prior to the Distribution Date
that is the fifth annual anniversary of the initial Distribution Date, the Total
Losses with respect to a Pool exceed 5% of the Cut-Off Date Aggregate Loan
Balance; or (B) on any Distribution Date on or prior to the Distribution Date
that is the tenth annual anniversary of the initial Distribution Date, Total
Losses with respect to a Pool exceed 6% of the Cut-Off Date Aggregate Loan
Balance.

Master Servicing Fee: With respect to any Collection Period, the product of (i)
the Master Servicing Fee Rate divided by 12 and (ii) the Aggregate Loan Balance
as of the first day of such Collection Period.

Master Servicing Fee Rate: 0.02% per annum.

Merged Holder: As defined in Section 2.1(a).

Monthly Advance: As defined in Section 3.4.

Monthly Payment: For any Due Date with respect to any Mortgage Loan, the
scheduled monthly payment of principal of and interest due on such Mortgage Loan
(after adjustment for any Curtailments and Deficient Valuations occurring prior
to such Due Date but before any adjustment to such amortization schedule, other
than for Deficient Valuations, by reason of any bankruptcy or similar proceeding
or any moratorium or similar waiver or grace period) that is

                                       49
<PAGE>   55

payable by the Mortgagor under the related Mortgage Note on such Due Date during
such Collection Period (without regard to any rescheduling pursuant to Section
3.2(a)(ii)).

Moody's: Moody's Investors Service, Inc., provided that at any time it is a
Rating Agency.

Mortgage: The mortgage, deed of trust or other instrument creating a first lien
on an estate in fee simple interest in real property securing a Mortgage Loan.

Mortgage File: The mortgage documents listed in Section 2.1(a) pertaining to a
particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.

Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage Loans
included in the Trust on such date. The Mortgage Loan Schedule as of the Cut-Off
Date is the schedule set forth herein as Exhibit D. The Mortgage Loan Schedule
shall set forth as to each Mortgage Loan (i) the Cut-Off Date Principal Balance,
(ii) the name of the Mortgagor, (iii) the account number, (iv) the State and Zip
Code in which the Mortgaged Property is located, (v) the Loan Rate, (vi) the
stated maturity date of the Mortgage Note, (vii) the Loan-to-Value Ratio, (viii)
the Original Loan Balance, (ix) the Master Servicing Fee Rate; (x) the
Subservicing Fee Rate; (xi) the Due Date, (xii) the remaining number of months
to maturity as of the Cut-Off Date, (xiii) the first date on which a Monthly
Payment is due, (xiv) whether the Mortgaged Property is owner occupied or
non-owner occupied, (xv) whether the Mortgaged Property is a single family
residence, two-to-four family residence, a condominium or other property, and
(xvi) the applicable Pool and any other information set forth on Exhibit D. The
Mortgage Loan Schedule will be amended from time to time to reflect the
substitution of one or more Eligible Substitute Mortgage Loans for a Defective
Mortgage Loan from time to time hereunder.

Mortgage Loans: The mortgage loans that are transferred and assigned to the
Trustee pursuant to Sections 2.1 (including, without limitation, all Eligible
Substitute Mortgage Loans that are at any time substituted for any Defective
Mortgage Loans), together with the Related Documents, exclusive of Mortgage
Loans that are transferred to the Seller from time to time pursuant to Section
2.2 or 2.6, as from time to time are held as a part of the Trust, such mortgage
loans originally so held being identified in the Mortgage Loan Schedule
delivered at the Closing Date.

Mortgage Note: With respect to a Mortgage Loan, the note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

Mortgaged Property: The underlying property, including real property and
improvements thereon, securing a Mortgage Loan.

Mortgagor: The obligor or obligors under a Mortgage Note.

Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.

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Net Mortgage Interest Rate: With respect to each Mortgage Loan, a rate equal to
(i) the Loan Rate on such Mortgage Loan minus (ii) the sum of (a) the applicable
Master Servicing Fee Rate and (b) the applicable Subservicing Fee Rate, (iii)
the Trustee Fee Rate and (iv) the Trust Administration Fee Rate.

Nondisqualification Opinion: An Opinion of Counsel that a contemplated action
will not cause either REMIC I or REMIC II to fail to qualify as a REMIC at any
time that the Certificates are outstanding or cause a "prohibited transaction"
or "prohibited contribution" tax (as defined in the REMIC Provisions) to be
imposed on either REMIC.

Non-PO Fraction: With respect to any Pool 1 Mortgage Loan, the lesser of (i)
1.00 and (ii) the quotient obtained by dividing the Net Mortgage Interest Rate
for such Pool 1 Mortgage Loan by 6.25%, and with respect to any Pool 2 Mortgage
Loan, 1.00.

Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any Monthly
Advance or Servicing Advance previously made which in the good faith business
judgment of the Master Servicer will not be ultimately reimbursed pursuant to
Section 3.3(ii), or (ii) a Monthly Advance or Servicing Advance proposed to be
made in respect of a Mortgage Loan which in the good faith business judgment of
the Master Servicer, as evidenced by an Officer's Certificate delivered to the
Seller and the Trustee no later than the Business Day following such
determination, (A) would not be ultimately recoverable based on the Master
Servicer's determination of whether the amount of such advance together with all
previous advances exceeds the recoverable value of the Mortgaged Property
(without regard to the outstanding principal balance of the related Mortgage
Loan) net of any senior liens and estimated foreclosure costs and estimated REO
operation, management and maintenance costs or (B) would not be ultimately
reimbursed pursuant to Section 3.3(ii).

Non-Supported Interest Shortfall: With respect to any Distribution Date, the
excess, if any, of the aggregate Prepayment Interest Shortfall on the Mortgage
Loans over the aggregate Compensating Interest with respect to such Distribution
Date. With respect to each Distribution Date occurring on or after the
Cross-Over Date, the Non-Supported Interest Shortfall determined pursuant to the
preceding sentence will be increased by the amount of any Cross-Over Date
Interest Shortfall for such Distribution Date. Any Non-Supported Interest
Shortfall will be allocated to (a) the Group 1A Certificates and Group 2A
Certificates according to the percentage obtained by dividing the Group 1A
Principal Balance or Group 2A Principal Balance, as applicable, by the Aggregate
Non-PO Principal Balance and (b) the Subordinate Certificates according to the
percentage obtained by dividing the Subordinate Principal Balance by the
Aggregate Non-PO Principal Balance.

Notice of Default: As defined in Section 8.1.

Officer's Certificate: A certificate signed by the President, a Senior Vice
President, a Vice President, Assistant Vice President, the Treasurer, Assistant
Treasurer, Controller or Assistant Controller of the Depositor, the Seller or
the Master Servicer, as the case may be.

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Opinion of Counsel: A written opinion of counsel acceptable to the Trustee, who
may be in-house counsel for the Depositor, the Seller or the Master Servicer
(except that any opinion relating to taxation must be an opinion of independent
outside counsel).

Optimal Adjustment Event: With respect to any Class of Subordinate Certificates
and any Distribution Date, an Optimal Adjustment Event will occur with respect
to such Class if: (i) the Principal Balance of such Class on the Determination
Date succeeding such Distribution Date would have been reduced to zero
(regardless of whether such Principal Balance was reduced to zero as a result of
principal distribution or the allocation of Realized Losses) and (ii) (a) the
Principal Balance of any Class of Class A Certificates would be subject to
further reduction as a result of the third or sixth sentences of the definition
of Principal Balance or (b) the Principal Balance of any Class M Certificate or
in the case of any Class B Certificate, a Class of Class B Certificates with a
lower numerical designation would be reduced with respect to such Distribution
Date as a result of the application of clause (ii) of the definition of Class M
Principal Balance, Class B-1 Principal Balance, Class B-2 Principal Balance,
Class B-3 Principal Balance, Class B-4 Principal Balance or Class B-5 Principal
Balance.

Original Aggregate Non-PO Principal Balance. The Aggregate Non-PO Principal
Balance as of the Cut-Off Date, $205,874,100.

Original Aggregate Subordinate Percentage: The Aggregate Subordinate Percentage
as of the Cut-Off Date, 2.5%.

Original Class 1A-WIO Notional Amount: The original Class 1A-WIO Notional
Amount, $113,352,150.

Original Class B Principal Balance: The sum of the Original Class B-1 Principal
Balance, Original Class B-2 Principal Balance, Original Class B-3 Principal
Balance, Original Class B-4 Principal Balance, Original Class B-5 Principal
Balance, as set forth in Section 6.1(c).

Original Class B-1 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class B-2 Principal
Balance, the Original Class B-3 Principal Balance, the Original Class B-4
Principal Balance and the Original Class B-5 Principal Balance by the Original
Aggregate Non-PO Principal Balance. The Original Class B-1 Fractional Interest
is 1.1076492%.

Original Class B-1 Principal Balance: The Class B-1 Principal Balance as of the
Cut-Off Date, as set forth in Section 6.1(c).

Original Class B-2 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class B-3 Principal
Balance, the Original Class B-4 Principal Balance and the Original Class B-5
Principal Balance by the Original Aggregate Non-PO Principal Balance. The
Original Class B-2 Fractional Interest is 0.7553621%.

Original Class B-2 Principal Balance: The Class B-2 Principal Balance as of the
Cut-Off Date, as set forth in Section 6.1(c).

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<PAGE>   58

Original Class B-3 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class B-4 Principal
Balance and the Original Class B-5 Principal Balance by the Original Aggregate
Non-PO Principal Balance. The Original Class B-3 Fractional Interest is
0.4030749%.

Original Class B-3 Principal Balance: The Class B-3 Principal Balance as of the
Cut-Off Date, as set forth in Section 6.1(c).

Original Class B-4 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the Original Class B-5 Principal Balance by the
Original Aggregate Non-PO Principal Balance. The Original Class B-4 Fractional
Interest is 0.2013621%.

Original Class B-4 Principal Balance: The Class B-4 Principal Balance as of the
Cut-Off Date, as set forth in Section 6.1(c).

Original Class B-5 Principal Balance: The Class B-5 Principal Balance as of the
Cut-Off Date, as set forth in Section 6.1(c).

Original Class M Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the Original Class B Principal Balance by the
Original Aggregate Non-PO Principal Balance. The Original Class M Fractional
Interest is 1.6114577%.

Original Class M Principal Balance: The Class M Principal Balance as of the
Cut-Off Date, as set forth in Section 6.1(c).

Original Group 1 Subordinated Principal Balance: The aggregate of the Group 1
Apportioned Principal Balances of the Subordinate Certificates as of the Cut-Off
Date, $3,902,864.

Original Group 1A Percentage: The Group 1 Percentage as of the Cut-Off Date,
73.41%.

Original Group 2 Subordinated Principal Balance: The aggregate of the Group 2
Apportioned Principal Balances of the Subordinate Certificates as of the Cut-Off
Date, $1,414,395.

Original Group 2A Percentage: The Group 2A Percentage as of the Cut-Off Date,
26.59%.

Original Loan Balance: As to any Mortgage Loan, the original principal amount of
such Mortgage Loan outstanding on the date such loan was made.

Original Principal Balance: Any of the Original Principal Balances of the
Classes of Class A Certificates as set forth in Section 6.1(c); the Original
Class M Principal Balance, the Original Class B-1 Principal Balance, Original
Class B-2 Principal Balance, Original Class B-3 Principal Balance, Original
Class B-4 Principal Balance or Original Class B-5 Principal Balance as set forth
in Section 6.1(c).

Original Subordinate Principal Balance: The sum of the Original Class M
Principal Balance and the Original Class B Principal Balance.

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Outstanding Mortgage Loan: As of any date of determination, a Mortgage Loan
which has not been paid in full, is not a Liquidated Mortgage Loan and has not
been repurchased by the Seller.

Owner: As defined in Section 6.4.

Ownership Interest: With respect 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.

Payahead: With respect to any Due Date and Mortgage Loan, a Monthly Payment
received by the Master Servicer with the scheduled Monthly Payment for such Due
Date, intended by the related Mortgagor to be applied on a subsequent Due Date.

Paying Agent: Any paying agent appointed pursuant to Section 6.5.

Percentage Interest: With respect to any Certificate (other than a Class 1A-WIO
Certificate, Class A-R Certificate or Class A-LR Certificate), the undivided
percentage interest obtained by dividing the original principal balance of such
Certificate by the aggregate original principal balance of all Certificates of
such Class. With respect to the Class 1A-WIO Certificate, the Class A-R
Certificate or Class A-LR Certificate, the percentage interest specified on the
face of such Certificate.

Permitted Transferee: Any Person other than (i) the United States, a State or
any political subdivision or possession thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
international organization or any agency or instrumentality of either of the
foregoing, (iii) an organization which is exempt from tax imposed by Chapter 1
of the Code (except certain farmers' cooperatives described in Code Section 521)
unless such organization is subject to the tax imposed by Code Section 511, (iv)
a rural electric and telephone cooperative described in Code Section
1381(a)(2)(C), (v) a Person that is not a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate whose income is subject to United States federal income tax regardless of
its source, or 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, other than any such Person that holds its Residual Certificate in
connection with the conduct of a trade or business within the United States, and
(vi) any Person so designated in an Officer's Certificate delivered to the
Trustee by the Master Servicer based on a Nondisqualification Opinion delivered
to the Master Servicer and the Trustee to the effect that any Transfer to such
Person may cause the REMIC I or REMIC II any Holder of a Class A-R or Class A-LR
Certificate to incur tax liability that would not be imposed other than on
account of such Transfer. The terms "United States", "State" and "international
organization" shall have the meanings set forth in Code Section 7701 or
successor provisions. 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 tax,

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<PAGE>   60

and, with the exception of the FHMLC, a majority of its board of directors is
not selected by such governmental unit.

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

PO Fraction: With respect to any Discount Pool 1 Mortgage Loan, the difference
between 1.0 and the Non-PO Fraction for such Mortgage Loan; with respect to any
other Mortgage Loan or any Pool 2 Mortgage Loan, zero.

Pool: The Pool 1 Mortgage Loans or the Pool 2 Mortgage Loans, as applicable.

Pool 1 Adjusted Pool Amount: With respect to any Distribution Date, the Cut-Off
Date Aggregate Pool 1 Loan Balance minus the sum of (i) all amounts in respect
of principal received in respect of the Pool 1 Mortgage Loans (including,
without limitation, amounts received as Monthly Advances, principal payments and
Liquidation Proceeds in respect of principal) and distributed to Holders of
Certificates on such Distribution Date and all prior Distribution Dates and (ii)
the principal portion of all Realized Losses (other than Debt Service
Reductions) incurred on the Pool 1 Mortgage Loans from the Cut-Off Date through
the end of the month preceding such Distribution Date.

Pool 1 Adjusted Pool Amount (PO Portion): With respect to any Distribution Date,
the sum of the following amounts, calculated as follows, with respect to all
Pool 1 Mortgage Loans: the product of (i) the PO Fraction for each such Mortgage
Loan and (ii) the remainder of (A) the Cut-Off Date Principal Balance of such
Mortgage Loan minus (B) the sum of (x) all amounts in respect of principal
received in respect of such Mortgage Loan (including, without limitation,
amounts received as Monthly Advances, principal payments and Liquidation
Proceeds in respect of principal) and distributed to Holders of Certificates on
such Distribution Date and all prior Distribution Dates and (y) the principal
portion of any Realized Loss (other than a Debt Service Reduction) incurred on
such Pool 1 Mortgage Loan from the Cut-Off Date through the end of the month
preceding such Distribution Date.

Pool 1 Available Servicing Compensation: As to any Distribution Date, the
aggregate Subservicing Fee related to the Pool 1 Mortgage Loans for such
Distribution Date.

Pool 1 Discount Mortgage Loan: A Pool 1 Mortgage Loan with a Net Mortgage
Interest Rate of less than 6.250%.

Pool 1 Distribution Amount: As of any Distribution Date, the funds eligible for
distribution to the Holders of the Group 1A Certificates and the Subordinate
Certificates on such Distribution Date, which shall be the sum of (i) all
previously undistributed payments or other receipts on account of principal and
interest on or in respect of the Pool 1 Mortgage Loans (including, without
limitation, the proceeds of any repurchase of a Pool 1 Mortgage Loan by the
Seller and any Substitution Adjustment Amount) received by the Master Servicer
with respect to the applicable Due Date and any Unscheduled Principal Receipts
received by the Master Servicer

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<PAGE>   61

on or prior to the Business Day preceding such Distribution Date, (ii) all
Monthly Advances made by the Master Servicer and (iii) all other amounts
required to be placed in the Collection Account by the Master Servicer or the
Trustee on or prior to the Distribution Date, but excluding the following:

         (a) all scheduled payments of principal and interest collected but due
on a date subsequent to the related Due Date;

         (b) all Curtailments received after the related Collection Period
(together with any interest payment received with such prepayments to the extent
that it represents the payment of interest accrued on such Mortgage Loans for
the period subsequent to the previous calendar month);

         (c) all Prepayments in Full received after the related Collection
Period (together with any interest payment received with such Prepayment in Full
to the extent that it represents the payment of interest accrued on the related
Pool 1 Mortgage Loan for the period subsequent to the previous calendar month);

         (d) Net Liquidation Proceeds and Insurance Proceeds received on such
Pool 1 Mortgage Loans after the previous calendar month;

         (e) all amounts in the Collection Account which are due and
reimbursable to the Master Servicer pursuant to the terms of this Agreement;

         (f) the Master Servicing Fee, the Subservicing Fees, the Trustee Fee
and the Trust Administration Fee for each such Mortgage Loan;

         (g) Excess Liquidation Proceeds; and

         (h) Liquidation Proceeds received on such Mortgage Loan if such
Mortgage Loan is not a Liquidated Mortgage Loan before the end of the previous
calendar month.

Pool 1 Mortgage Loan: Each Mortgage Loan designated on the Mortgage Loan
Schedule as a Pool 1 Mortgage Loan.

Pool 1 Mortgage Loans: Those Mortgage Loans listed on the Mortgage Loan Schedule
as being in Pool 1.

Pool 1 Pool Balance (Non-PO Portion): As of any Distribution Date, the sum of
the amounts for each Pool 1 Mortgage Loan that is an outstanding Mortgage Loan
of the product of (i) the Non-PO Fraction for such Mortgage Loan and (ii) the
Scheduled Principal Balance of such Mortgage Loan.

Pool 1 Pool Balance (PO Portion): As of any Distribution Date, the sum of the
amounts for each outstanding Pool 1 Mortgage Loan of the product of (i) the PO
Fraction for such Mortgage Loan and (ii) the Scheduled Principal Balance of such
Mortgage Loan.

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<PAGE>   62

Pool 1 Scheduled Principal Balance: As to any Distribution Date, the aggregate
Scheduled Principal Balances of all Pool 1 Mortgage Loans that were outstanding
on the Due Date in the month preceding the month of such Distribution Date.

Pool 2 Adjusted Pool Amount: With respect to any Distribution Date, the Cut-Off
Date Aggregate Pool 2 Loan Balance minus the sum of (i) all amounts in respect
of principal received in respect of the Pool 2 Mortgage Loans (including,
without limitation, amounts received as Monthly Advances, principal payments and
Liquidation Proceeds in respect of principal) and distributed to Holders of
Certificates on such Distribution Date and all prior Distribution Dates and (ii)
the principal portion of all Realized Losses (other than Debt Service
Reductions) incurred on the Pool 2 Mortgage Loans from the Cut-Off Date through
the end of the month preceding such Distribution Date.

Pool 2 Adjusted Pool Amount (PO Portion): With respect to any Distribution Date,
zero.

Pool 2 Available Servicing Compensation: As to any Distribution Date, the
aggregate Subservicing Fee related to the Pool 2 Mortgage Loans for such
Distribution Date.

Pool 2 Distribution Amount: As of any Distribution Date, the funds eligible for
distribution to the Holders of the Group 2A Certificates and the Subordinate
Certificates on such Distribution Date, which shall be the sum of (i) all
previously undistributed payments or other receipts on account of principal and
interest on or in respect of the Pool 2 Mortgage Loans (including, without
limitation, the proceeds of any repurchase of a Pool 2 Mortgage Loan by the
Seller and any Substitution Adjustment Amount) received by the Master Servicer
with respect to the applicable Due Date and any Unscheduled Principal Receipts
received by the Master Servicer on or prior to the Business Day preceding such
Distribution Date, (ii) all Monthly Advances made by the Master Servicer and
(iii) all other amounts required to be placed in the Collection Account by the
Master Servicer or the Trustee on or prior to the Distribution Date, but
excluding the following:

         (a) all scheduled payments of principal and interest collected but due
on a date subsequent to the related Due Date;

         (b) all Curtailments received after the related Collection Period
(together with any interest payment received with such prepayments to the extent
that it represents the payment of interest accrued on such Mortgage Loans for
the period subsequent to the previous calendar month);

         (c) all Prepayments in Full received after the related Collection
Period (together with any interest payment received with such Prepayment in Full
to the extent that it represents the payment of interest accrued on the related
Pool 2 Mortgage Loan for the period subsequent to the previous calendar month);

         (d) Liquidation Proceeds and Insurance Proceeds received on such Pool 2
Mortgage Loans after the previous calendar month;

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<PAGE>   63

         (e) all amounts in the Collection Account which are due and
reimbursable to the Master Servicer pursuant to the terms of this Agreement;

         (f) the Master Servicing Fee, the Subservicing Fees, the Trustee Fee
and the Trust Administration Fee for each such Mortgage Loan; and

         (g) Excess Liquidation Proceeds; and

         (h) Liquidation Proceeds received on such Mortgage Loan if such
Mortgage Loan is not a Liquidated Mortgage Loan before the end of the previous
calendar month.

Pool 2 Mortgage Loan: The Mortgage Loans designated on the Mortgage Loan
Schedule as Pool 2 Mortgage Loans.

Pool 2 Pool Balance: As of any Distribution Date, the sum of the Scheduled
Principal Balance of each Pool 2 Mortgage Loan.

Pool 2 Pool Balance (Non-PO Portion): As of any Distribution Date, the sum of
the amounts for each Pool 2 Mortgage Loan that is an Outstanding Mortgage Loan
of the product of (i) the Non-PO Fraction for such Mortgage Loan and (ii) the
Scheduled Principal Balance of such Mortgage Loan.

Pool 2 Pool Balance (PO Portion): As of any Distribution Date, zero.

Pool 2 Scheduled Principal Balance: As to any Distribution Date, the aggregate
Scheduled Principal Balances of all Pool 2 Mortgage Loans that were outstanding
on the Due Date in the month preceding the month of such Distribution Date.

Pool 2 Weighted Average Net Mortgage Interest Rate: As to any Distribution Date,
a rate per annum equal to the average, expressed as a percentage of the Net
Mortgage Interest Rates of all outstanding Pool 2 Mortgage Loans as of the Due
Date in the month preceding the month of such Distribution Date, weighted on the
basis of the respective Scheduled Principal Balances of such Mortgage Loans.

Pool Delinquency Rate: As to any Collection Period and a Pool, the fraction,
expressed as a percentage, the numerator of which is equal to the aggregate Loan
Balance of all Mortgage Loans in such Pool that are 90 or more days delinquent
(including Mortgage Loans in foreclosure and REO) as of the close of business on
the last day of such Collection Period and the denominator of which is equal to
the Aggregate Loan Balance of such Pool as of the close of business on the last
day of such Collection Period.

Pool Scheduled Principal Balance: The sum of the Pool 1 Scheduled Principal
Balance and Pool 2 Scheduled Principal Balance.

Premium Pool 1 Mortgage Loan: A Pool 1 Mortgage Loan with a Net Mortgage
Interest Rate of 6.25% or greater.

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<PAGE>   64

Prepayment Assumption: A conditional rate of prepayment equal to 0.2% per annum
in the first month of the life of the mortgage loans and an additional
approximate 0.2% (expressed as a percentage per annum) in each month thereafter
until the thirtieth month; beginning in the thirtieth month and in each month
thereafter during the life of the mortgage loans, a conditional prepayment rate
of 6% per annum each month is assumed.

Prepayment In Full: With respect to any Mortgage Loan, a Mortgagor payment
consisting of a Principal Prepayment in the amount of the outstanding principal
balance of such loan and resulting in the full satisfaction of such obligation.

Prepayment Interest Shortfall: On any Distribution Date, the amount of interest,
if any, that would have accrued on any Mortgage Loan which was the subject of a
Prepayment in Full during the immediately preceding calendar month at the Net
Mortgage Interest Rate for such Mortgage Loan from the date of its Prepayment in
Full through the last day of the month prior to the month of such Distribution
Date.

Principal Adjustment: In the event that the Class M Optimal Principal Amount,
Class B-1 Optimal Principal Amount, Class B-2 Optimal Principal Amount, Class
B-3 Optimal Principal Amount, Class B-4 Optimal Principal Amount or Class B-5
Optimal Principal Amount is calculated in accordance with the proviso in such
definition with respect to any Distribution Date, the Principal Adjustment for
such Class of Subordinate Certificates shall equal the difference between (i)
the amount that would have been distributed to such Class as principal in
accordance with Section 4.1(a) for such Distribution Date, calculated without
regard to such proviso and assuming there are no Principal Adjustments for such
Distribution Date and (ii) the Adjusted Principal Balance for such Class.

Principal Balance: As of the first Determination Date and as to any Class of
Class A Certificates (other than the Class 1A-WIO Certificates), the Original
Principal Balance of such Class. As of any subsequent Determination Date prior
to the Cross-Over Date and as to any Class of Class A Certificates (other than
the Class 1A-WIO and Class 1A-PO Certificates), the Original Principal Balance
of such Class less the sum of (a) all amounts previously distributed in respect
of such Class on prior Distribution Dates (i) pursuant to Clause (i) Paragraph
third clause (B)(1) of Section 4.1(a), (ii) pursuant to Clause (iv) of Section
4.1(b) and (iii) as a result of a Principal Adjustment, and (b) the Realized
Losses allocated through such Determination Date to such Class pursuant to
Section 4.2(b). After the Cross-Over Date, each such Principal Balance will also
be reduced on each Determination Date by an amount equal to the product of the
Group 1A Loss Percentage or Group 2A Loss Percentage, as applicable, of such
Class and the excess, if any, of (i) the Group 1 Non-PO Principal Balance or
Group 2 Non-PO Principal Balance, as applicable, as of such Determination Date
without regard to this sentence over (ii) the difference between (A) the Pool 1
Adjusted Pool Amount or Pool 2 Adjusted Pool Amount, as applicable for the
preceding Distribution Date and (B) the Pool 1 Adjusted Pool Amount (PO Portion)
or Pool 2 Adjusted Pool Amount (PO Portion), as applicable, for the preceding
Distribution Date.

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                  The Class 1A-WIO Certificates are interest-only Certificates
and have no Principal Balance.

                  As of any subsequent Determination Date prior to the
Cross-Over Date and as to the Class 1A-PO Certificates, the Original Principal
Balance of such Class less the sum of (a) all amounts previously distributed in
respect of the Class 1A-PO Certificates on prior Distribution Dates pursuant to
Clause (i) Paragraphs third clause (B)(2) and fourth Clause (B) of Section
4.1(a), as applicable, and (b) the Realized Losses allocated through such
Determination Date to Class 1A-PO Certificates pursuant to Section 4.2(b). After
the Cross-Over Date, such Principal Balance will also be reduced on each
Determination Date by an amount equal to the difference, if any, between such
Principal Balance as of such Determination Date without regard to this sentence
and the Pool 1 Adjusted Pool Amount (PO Portion), as applicable, for the
preceding Distribution Date.

                  As to the Subordinate Certificates, Class M Principal Balance,
the Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-3
Principal Balance, Class B-4 Principal Balance and Class B-5 Principal Balance,
respectively.

Principal Collections: As to any Distribution Date, all payments by or on behalf
of Mortgagors and any other amounts constituting principal (including without
limitation such portion of any payments of the Purchase Price for any Mortgage
Loan, Insurance Proceeds, Net Liquidation Proceeds and any Monthly Advance as is
allocable to principal of the applicable Mortgage Loan, all Principal
Prepayments received during the related Collection Period, any portion of
Payaheads constituting principal intended by the Mortgagor for application in
the related Collection Period and any Substitution Adjustment Amounts, but
excluding Foreclosure Profits and any portion of any Unreimbursed Advance as is
allocable to principal of the applicable Mortgage Loan and any portion of
Payaheads constituting principal intended by the Mortgagor for application in
any subsequent Collection Period and the principal portion of any Liquidation
Proceeds received on Mortgage Loans that are not Liquidated Mortgage Loans
before the end of the related Collection Period) collected by the Master
Servicer under the Mortgage Loans during the related Collection Period.

Principal Prepayment: Any payment of principal on a Mortgage Loan which
constitutes a Prepayment in Full or a Curtailment.

Prospectus: The base prospectus dated July 24, 1998.

Prospectus Supplement: The prospectus supplement dated February 22, 1999
relating to the offering of the Group 1A Certificates, the Group 2A
Certificates, the Class M Certificates and the Class B-1 Certificates.

Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of the
Cut-Off Date, between the Seller, as seller, and the Depositor, as purchaser,
with respect to the Mortgage Loans.

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<PAGE>   66

Purchase Obligation: An obligation of the Seller to repurchase Mortgage Loans
under the circumstances and in the manner provided in Section 2.2 or Section
2.6(b).

Purchase Price: With respect to any Mortgage Loan to be repurchased or purchased
pursuant to Sections 2.2 or 2.6 on any date pursuant to any provision of this
Agreement, an amount equal to the sum of (i) the Loan Balance of such Mortgage
Loan as of the last day of the Collection Period ended immediately preceding the
date of repurchase or purchase, (ii) accrued and unpaid interest through such
Collection Period computed at the applicable Loan Rate on the Loan Balance
calculated as set forth in clause (i) of this definition, (iii) any delinquent
interest on such Mortgage Loan as to which no Monthly Advance has been made, and
(iv) all Unreimbursed Advances relating to such Mortgage Loan.

Qualified Mortgage: Has the meaning from time to time given to that term in
Section 860G(a)(3) of the Code.

Rating Agencies: S&P and Fitch.

Ratings: As of any date of determination, the ratings, if any, of the
Certificates as assigned by the Rating Agencies.

Realized Losses: With respect to any Distribution Date and a Pool, (i)
Liquidated Loan Losses (including Special Hazard Losses and Fraud Losses) with
respect to such Pool and (ii) Bankruptcy Losses with respect to such Pool
incurred in the month preceding the month of such Distribution Date.

Record Date: The close of business on the last day of the calendar month
preceding the month in which the related Distribution Date occurs.

Recovery: Any amount received on a Mortgage Loan subsequent to such Mortgage
Loan being determined to be a Liquidated Mortgage Loan.

Related Documents: As defined in Section 2.1(a).

Relevant Anniversary: As defined in the definition of "Bankruptcy Loss Amount."

REMIC: A "real estate mortgage investment conduit" within the meaning of Section
860D of the Code.

REMIC I: One of two separate REMICs comprising the Trust Fund, the assets of
which consist of the Mortgage Loans, such amounts as shall from time to time be
held in the Collection Account, the insurance policies, if any, relating to a
Mortgage Loan and property which secured a Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure.

REMIC I Regular Interests: The regular interests in REMIC I as described in
Section 2.7 of this Agreement.

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REMIC II: One of two separate REMICs comprising the Trust Fund, the assets of
which consist of the REMIC I Regular Interests.

REMIC II Regular Interests: The regular interests in REMIC II as described in
Section 2.7 of this Agreement.

REMIC Provisions: The provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear in Sections 860A through 860G
of Subchapter M of Chapter 1 of the Code, and related provisions, and Treasury
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.

Remittance Report: As defined in Section 5.2(a).

REO: A Mortgaged Property that is acquired by the Trustee in foreclosure or by
deed in lieu of foreclosure.

REO Mortgage Loan: Any Mortgage Loan which is not a Liquidated Loan and as to
which the indebtedness evidenced by the related Mortgage Note is discharged and
the related Mortgaged Property is held as part of the Trust.

Residual Certificateholder: The person in whose name a Residual Certificate is
registered on the Certificate Register.

Residual Certificates: The Class A-R Certificate and the Class A-LR Certificate,
which is hereby designated the sole Class of "residual interests" in REMIC II
and REMIC I, respectively, for purposes of Section 860G(a)(2) of the Code.

Responsible Officer: When used with respect to any Person, any officer of such
Person with direct responsibility for the administration of this Agreement and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.

Rolling Three Month Delinquency Rate: As to any Distribution Date, the average
of the Pool Delinquency Rates for each of the three (or one and two in the case
of the first and second Distribution Dates) immediately preceding Collection
Periods.

S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., provided that at any time it be a Rating Agency.

SAIF: The Savings Association Insurance Fund, as from time to time constituted,
created under the Financial Institutions Reform, Recovery and Enhancement Act of
1989, or if at any time after the execution of this instrument the Savings
Association Insurance Fund is not existing and performing duties now assigned to
it, the body performing such duties on such date.

Scheduled Principal Balance: As to any Mortgage Loan and Distribution Date, the
principal balance of such Mortgage Loan as of the Due Date in the month
preceding the month of such

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Distribution Date as specified in the amortization schedule at the time relating
thereto (before any adjustment to such amortization schedule by reason of any
bankruptcy (other than Deficient Valuations) or similar proceeding or any
moratorium or similar waiver or grace period) after giving effect to (A)
Unscheduled Principal Receipts received or applied by the related Servicer
during the related Collection Period for each applicable type of Unscheduled
Principal Receipt related to the Distribution Date occurring in the month
preceding such Distribution Date, (B) Deficient Valuations incurred prior to
such Due Date and (C) the payment of principal due on such Due Date and
irrespective of any delinquency in payment by the related Mortgagor.
Accordingly, the Scheduled Principal Balance of a Mortgage Loan which becomes a
Liquidated Mortgage Loan at any time through the last day of such related
Collection Period shall be zero.

Securities Act: As defined in Section 12.11.

Seller: First Union National Bank, in its capacity as seller under this
Agreement, and its successors in interest.

Servicing Advances: All reasonable and customary unanticipated "out of pocket"
costs and expenses incurred in the performance by the Master Servicer or a
Subservicer of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of the Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
and (iii) compliance with the obligations under Sections 3.5, 3.7 and 3.19, all
of which reasonable and customary unanticipated out-of-pocket costs and expenses
are reimbursable to the extent provided in Sections 3.3(ii) and 3.3(vii) and
3.7.

Servicing Certificate: A certificate completed and executed by a Servicing
Officer on behalf of the Master Servicer in accordance with Section 4.3.

Servicing Compensation: The Master Servicing Fees, Subservicing Fees and other
amounts to which the Master Servicer is entitled pursuant to Section 3.9.

Servicing Officer: Any officer of the Master Servicer or a Subservicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Trustee by the Master Servicer, as such list may be amended
from time to time.

Single-Family Residence: Has the meaning from time to time given to that term in
Section 25(e)(10) of the Code.

Special Hazard Loss: (i) A Liquidated Loan Loss suffered by a Mortgaged Property
on account of direct physical loss, exclusive of (a) any loss covered by a
hazard policy or a flood insurance policy maintained in respect of such
Mortgaged Property pursuant to a subservicing agreement and (b) any loss caused
by or resulting from:

                  (1) normal wear and tear;

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                  (2) infidelity, conversion or other dishonest act on the part
of the Trustee or the Servicer or any of their agents or employees; or

                  (3) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues; or (ii) any
Liquidated Loan Loss suffered by the Trust arising from or related to the
presence or suspected presence of hazardous wastes or hazardous substances on a
Mortgaged Property unless such loss to a Mortgaged Property is covered by a
hazard policy or a flood insurance policy maintained in respect of such
Mortgaged Property.

Special Hazard Loss Amount: As of any Distribution Date, an amount equal to
$2,126,295.24 minus the sum of (i) the aggregate amount of Special Hazard Losses
allocated solely to the Subordinate Certificates in accordance with Section
4.2(a) and (ii) the Special Hazard Adjustment Amount (as defined below) as most
recently calculated. For each anniversary of the Cut-Off Date, the "Special
Hazard Adjustment Amount" shall be equal to the amount, if any, by which the
amount calculated in accordance with the preceding sentence (without giving
effect to the deduction of the Special Hazard Adjustment Amount for such
anniversary) exceeds the greater of (A) the product of the Special Hazard
Percentage for such anniversary multiplied by the outstanding principal balance
of all the Mortgage Loans on the Distribution Date immediately preceding such
anniversary, (B) twice the outstanding principal balance of the Pool 2 Mortgage
Loan in the Trust which has the largest outstanding principal balance on the
Distribution Date immediately preceding such anniversary and (C) that which is
necessary to maintain the original ratings on the Certificates as evidenced by
letters to that effect delivered by the Rating Agencies to the Master Servicer
and the Trustee. On and or after the Cross-Over Date, the Special Hazard Loss
Amount shall be zero.

Special Hazard Percentage: As of each anniversary of the Cut-Off Date, 1.00%.

Startup Day: As specified in Section 2.9(i).

Subordinate Certificates: The Class M, Class B-1, Class B-2, Class B-3, Class
B-4, and Class B-5 Certificates.

Subordinate Certificate Rate: As of the first Distribution Date, with respect to
a Subordinate Certificate, the Certificate Rate is 6.2565% per annum. As of each
Distribution Date thereafter, with respect to a Subordinate Certificate, the
Certificate Rate is a per annum rate equal to (A) the sum of (i) the Subordinate
Loan Pool Component Balance of the Pool 1 Mortgage Loans, as of such
Distribution Date, multiplied by 6.25% and (ii) the Subordinate Loan Pool
Component Balance of the Pool 2 Mortgage Loans, as of such Distribution Date,
multiplied by the weighted average Net Mortgage Interest Rate of such Pool 2
Mortgage Loans (based on Scheduled Principal Balances of the Mortgage Loans as
of such Distribution Date) divided by (B) the aggregate Subordinate Loan Pool
Component Balance for both Pools. This may also be expressed as the weighted
average interest rate of the Class 1C-L Interest and the Class 2C-L Interest.

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Subordinate Distribution Amount: Any of the Class M, Class B-1, Class B-2, Class
B-3, Class B-4 or Class B-5 Distribution Amounts.

Subordinate Interest Accrual Amount: As to any Distribution Date, the sum of the
Interest Accrual Amounts for the Classes of Subordinate Certificates with
respect to such Distribution Date.

Subordinate Interest Percentage: As to any Distribution Date and any Class of
Subordinate Certificates, the percentage calculated by dividing the Interest
Accrual Amount of such Class (determined without regard to clause (ii) of the
definition thereof) by the Subordinate Interest Accrual Amount (determined
without regard to clause (ii) of the definition of each Interest Accrual
Amount).

Subordinate Interest Shortfall Amount: Any of the Class M Interest Shortfall
Amount, Class B-1 Interest Shortfall Amount, Class B-2 Interest Shortfall
Amount, Class B-3 Interest Shortfall Amount, Class B-4 Interest Shortfall Amount
or Class B-5 Interest Shortfall Amount.

Subordinate Loan Pool Component Balance: At any time for either Pool shall equal
the then outstanding aggregate Scheduled Principal Balance of the Mortgage Loans
in such Pool minus the then outstanding Certificate Principal Balance of the
Group 1A Certificates, with respect to Pool 1, or the Class 2A Certificates,
with respect to Pool 2.

Subordinate Loss Percentage: As to any Determination Date and any Class of
Subordinate Certificates then outstanding, the percentage calculated by dividing
the Principal Balance of such Class of Subordinate Certificates by the
Subordinate Principal Balance (determined without regard to any Principal
Balance of any Class of Subordinate Certificates not then outstanding), in each
case determined as of the preceding Determination Date.

Subordinate Optimal Principal Amount: Any of the Class M, Class B-1, Class B-2,
Class B-3, Class B-4 or Class B-5 Optimal Principal Amounts.

Subordinate Pool 1 Optimal Principal Amount: Any of the Class M, Class B-1,
Class B-2, Class B-3, Class B-4 or Class B-5 Pool 1 Optimal Principal Amounts.

Subordinate Pool 2 Optimal Principal Amount: Any of the Class M, Class B-1,
Class B-2, Class B-3, Class B-4 or Class B-5 Pool 2 Optimal Principal Amounts.

Subordinate Principal Balance: As of any date, an amount equal to the sum of the
Class M Principal Balance, Class B-1 Principal Balance, Class B-2 Principal
Balance, Class B-3 Principal Balance, Class B-4 Principal Balance and Class B-5
Principal Balance.

Subordinate Principal Distribution Amount: Any of the Class M, Class B-1, Class
B-2, Class B-3, Class B-4 or Class B-5 Principal Distribution Amounts.

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Subordinate Unpaid Interest Shortfall: Any of the Class M Unpaid Interest
Shortfall, Class B-1 Unpaid Interest Shortfall, Class B-2 Unpaid Interest
Shortfall, Class B-3 Unpaid Interest Shortfall, Class B-4 Unpaid Interest
Shortfall or Class B-5 Unpaid Interest Shortfall.

Subservicer: Any Person with whom the Master Servicer has entered into an
arrangement to subservice the Mortgage Loans.

Subservicing Fee: With respect to any Collection Period, the sum for each
Mortgage Loan of the product of (i) the Subservicing Fee Rate divided by 12 and
(ii) the Loan Balance for such Mortgage Loan as of the first day of such
Collection Period.

Subservicing Fee Rate: With respect to any Pool 1 Mortgage Loan, the rate set
forth on the Mortgage Loan Schedule, and with respect to any Pool 2 Mortgage
Loan 0.25%.

Substitute Mortgage Loan: As defined in Section 2.2(b).

Substitution Adjustment Amount: As to any Collection Period related to the
Distribution Date with respect to which the Seller substitutes one or more
Eligible Substitute Mortgage Loans pursuant to any provision hereof, the amount,
if any, by which (i) the aggregate Loan Balances at the end of such Collection
Period of all such Eligible Substitute Mortgage Loans being added to the Trust
is less than (ii) the aggregate Loan Balances at the end of such Collection
Period of the related Mortgage Loans being removed from the Trust, such amount
to be deposited into the Collection Account as provided in Section 2.7(a).

Substitution Date: As defined in Section 2.7(b).

Supplemental Mortgage Loan Schedule: As defined in Section 2.7(b).

Tax Matters Person: The Person designated by Section 11.1(a) as the "tax matters
person" of REMIC I and REMIC II as required by and in conformity with Treasury
Regulations Section 1.860F-4(d).

Total Losses: On any Distribution Date, the sum of the aggregate of all
Liquidated Loan Losses through and including such Distribution Date.

Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or other
form of assignment of any Ownership Interest in a Certificate.

Transfer Affidavit: As defined in Section 6.2(c)(iii)(A).

Transfer Date: With respect to any Mortgage Loan transferred to or retransferred
from the Trust hereunder, the date on which such transfer or retransfer is made
under the terms hereof, which date shall be the Closing Date in the case of all
of the Mortgage Loans originally listed on the Mortgage Loan Schedule.

Trust: The trust created by this Agreement.

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Trust Administration Fee: As to any Distribution Date, an amount equal to the
product of the Trust Administration Fee Rate divided by 12 and the Certificate
Principal Balance as of the first day of the preceding Collection Period.

Trust Administration Fee Rate: 0.0085% per annum.

Trust Administrator: First Union National Bank and its successors in interest.

Trust Assets: As specified in Section 2.1.

Trustee: Norwest Bank Minnesota, National Association and its successors in
interest or any successor Trustee appointed in accordance with this Agreement
that has accepted such appointment in accordance with this Agreement.

Trustee Fee: As to any Distribution Date, an amount equal to the product of the
Trustee Fee Rate divided by 12 and the Certificate Principal Balance as of the
first day of the preceding Collection Period.

Trustee Fee Rate: 0.005% per annum.

United States Person: A citizen or resident of the United States, a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any political subdivision thereof, or an estate whose income is
subject to United States federal income tax regardless of its source, or 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. The term "United
States" shall have the meaning set forth in Section 7701 of the Code.

Unpaid Interest Shortfall: With respect to each Class of Certificates, the
unpaid interest shortfall for each such Class.

Unreimbursed Advances: With respect to any Distribution Date, an amount equal to
the aggregate of all Monthly Advances made on prior Distribution Dates that have
not been reimbursed to the Master Servicer.

Unscheduled Principal Receipt: Any Principal Prepayment or other recovery of
principal on a Mortgage Loan, including, without limitation, Liquidation
Proceeds and proceeds received from any condemnation award or proceeds in lieu
of condemnation other than that portion of such proceeds released to the
Mortgagor in accordance with the terms of the Mortgage, but excluding any
Foreclosure Profits and proceeds of a repurchase of a Mortgage Loan by the
Seller and any Substitution Adjustment Amounts. Except as set forth in the last
sentence of Section 4.2(d) or 4.4(d), a Recovery shall not be treated as an
Unscheduled Principal Receipt.

Upper-Tier Certificate: Any one of the Class A Certificates (other than the
Class A-LR Certificate) and the Subordinate Certificates.

Upper-Tier REMIC: REMIC II.

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Valuation: With respect to any Mortgaged Property at any time referred to
herein, the appraised value of the Mortgaged Property based upon the most recent
appraisal made by or on behalf of the Master Servicer or the originator of the
related Mortgage Loan.

         SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.

         (a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.

         (b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles or regulatory accounting principles, the definitions contained herein
shall control.

         (c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; the word "including" when
used in this Agreement is intended to be illustrative and not exclusive;
Section, subsection, paragraph, clause and Exhibit references contained in this
Agreement are references to Sections, subsections, paragraphs, clauses and
Exhibits in or to this Agreement unless otherwise specified; and the definitions
of terms set forth herein are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as the feminine and neuter
genders of such terms.

         SECTION 1.3. CALCULATIONS.

         The calculation of interest on the Certificates and the calculation of
the Master Servicing Fees, Subservicing Fees, Trustee Fee and Trust
Administration Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All dollar amounts calculated hereunder shall be rounded
to the nearest penny with one-half of one penny being rounded down.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

         SECTION 2.1. CONVEYANCE OF MORTGAGE LOANS.

         (a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby sell, transfer, assign, set over and otherwise convey to
the Trust without recourse

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(subject to Sections 2.2 and 2.6), (1) all of its right, title and interest in
and to each Mortgage Loan (including all substitutions therefor), including its
Cut-Off Date Principal Balance, all interest accruing thereon on and after the
Cut-Off Date and all collections in respect of interest and principal received
on and after the Cut-Off Date (exclusive of payments in respect of interest on
the Mortgage Loans accrued prior to the Cut-Off Date and received thereafter);
(2) any Mortgaged Property converted to ownership through Foreclosure
Proceedings or otherwise; (3) any insurance policies related to the Mortgage
Loans; (4) all rights under any guaranty executed in connection with a Mortgage
Loan; (5) the related Mortgage Notes, Mortgages and other documents related to
the Mortgage Loans; (6) all other assets included or to be included in the Trust
for the benefit of the Certificateholders; (7) the Collection Account and the
Distribution Account and all funds and other assets deposited therein and all
instruments, securities (including, without limitation, Eligible Investments) or
other property in which the Collection Account and the Distribution Account may
be invested in whole or in part from time to time, including all amounts from
time to time on deposit therein (other than investment income earned on such
Eligible Investments); (8) the Depositor's rights under the Purchase Agreement,
including, without limitation, the representations and warranties of the Seller
thereunder together with all rights of the Depositor to require the Seller to
cure any breach thereof or to repurchase or substitute for any affected Mortgage
Loan in accordance with the Purchase Agreement; and (9) the proceeds of all of
the foregoing (all of the foregoing being referred to as the "Trust Assets").
The foregoing sale, transfer, assignment, set over and conveyance does not and
is not intended to result in a creation or an assumption by the Trustee of any
obligation of the Depositor, the Seller or any other Person in connection with
the Mortgage Loans or any agreement or instrument relating thereto except as
specifically set forth herein.

         In connection with such transfer, assignment and conveyance by the
Depositor, the Seller shall deliver to, and deposit with the Trustee, as
Document Custodian, on or before the Closing Date and, subject to the provisions
of Sections 3.16 and 3.17, the Document Custodian shall retain, the following
documents or instruments with respect to each Mortgage Loan (the "Related
Documents"):

                          (i) the original Mortgage Note, endorsed "Pay to the
         order of Norwest Bank Minnesota, National Association, as trustee for
         the registered holders from time to time of FURST Mortgage Loan Trust
         1999-A, Mortgage Pass-Through Certificates, Series 1999-A, without
         recourse," signed in the name of the Seller by an authorized officer,
         with all intervening endorsements showing a complete chain of title
         from the originator of such Mortgage Loan to the Seller or to the
         Merged Holder, if applicable;

                         (ii) the original Mortgage, with evidence of recording
         thereon, provided, that if the original Mortgage has been delivered for
         recording to the appropriate public recording office of the
         jurisdiction in which the Mortgaged Property is located but has not yet
         been returned to the Seller by such recording office, the Seller shall
         cause to be delivered to the Document Custodian a certified true copy
         of such original Mortgage so certified by the Seller, together with a
         certificate of the Depositor certifying that such original Mortgage has
         been so delivered to such recording office;

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<PAGE>   75

                        (iii) the original assignment of Mortgage, from the
         Seller to "Norwest Bank Minnesota, National Association, as trustee for
         the registered holders from time to time of FURST Mortgage Loan Trust
         1999-A, Mortgage Pass-Through Certificates, Series 1999-A," which
         assignment shall be in form and substance acceptable for recording;

                         (iv) the original attorney's opinion of title or the
         original policy of title insurance, provided, that if any such original
         policy of title insurance has not yet been received by the Seller, the
         Seller shall cause to be delivered to the Document Custodian a copy of
         such policy or a title insurance binder or commitment for the issuance
         of such policy;

                          (v) originals of all intervening assignments of
         Mortgage, with evidence of recording thereon, showing a complete chain
         of title from the originator to the Seller or to the Merged Holder, if
         applicable, provided, that if any such original intervening assignment
         of Mortgage has been delivered for recording to the appropriate public
         recording office of the jurisdiction in which the Mortgaged Property is
         located but has not yet been returned to the Seller by such recording
         office, the Seller may have delivered to the Document Custodian a
         certified true copy of such original assignment of Mortgage so
         certified by the Seller, together with a certificate of the Seller
         certifying that such original assignment of Mortgage has been so
         delivered to such recording office;

                           (vi) originals of all assumption and modification
         agreements, if any; and

provided, however, the Seller may deliver to the Document Custodian all Related
Documents other than those referred to in clause (i) above (except for those
Mortgage Notes relating to Mortgage Loans listed on Exhibit N which Mortgage
Notes may be delivered within 30 days after the Closing Date) within 180 days
after the Closing Date.

         In all such instances, the Seller will deliver or cause to be delivered
the original recorded Mortgage and assignments thereof to the Document Custodian
promptly upon receipt of the original recorded Mortgage.

         For all Mortgage Loans that were owned by the Seller on the Cut-Off
Date as successor by merger to the originator or previous holder, the Seller
shall deliver to the Trustee, as Document Custodian, on or before the Closing
Date, an officer's certificate identifying such Mortgage Loans and the
identities of the Persons (each, a "Merged Holder") that are reflected on the
related Mortgage Notes and Mortgage or assignment of Mortgage as the holder,
certifying that the Seller is successor by merger to each such Merged Holder and
certifying as to the authority of the officer signing the endorsement referred
to in clause (i) above and the assignment of Mortgage referred to in clause
(iii) above to execute the same. Such officer's certificate shall constitute
part of the Mortgage File of each such Mortgage Loan.

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         The Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Mortgages, the related Mortgage
Notes and the Related Documents, conveying good title thereto free and clear of
any liens and encumbrances, from the Depositor to the Trustee and that such
property not be part of the Depositor's estate or property of the Depositor in
the event of any insolvency by the Depositor. In the event that such conveyance
is deemed to be, or to be made as security for, a loan, the parties intend that
the Depositor shall be deemed to have granted and does hereby grant to the
Trustee a first priority perfected security interest in all of the Depositor's
right, title and interest in and to the Mortgages, the related Mortgage Notes
and the Related Documents, and that this Agreement shall constitute a security
agreement under applicable law.

         In connection with such assignment, transfer, sale and conveyance, the
Seller shall file, on or prior to the Closing Date, in the appropriate office of
any applicable state, county or other relevant jurisdiction, a UCC-1 financing
statement executed by the Seller as debtor, naming the Depositor as secured
party (and indicating that the security interest in such loans has been assigned
to the Trustee) and listing as collateral the Mortgages, the Mortgage Notes, the
Related Documents and other property constituting the Trust. The
characterization of the Seller as "debtor" and the Depositor as "secured party"
in any such financing statement is solely for protective purposes and shall in
no way be construed as being contrary to the intent of the parties that the
transfer of the Mortgage Loans by the Seller to the Depositor and the transfer
of the Mortgage Loans by the Depositor to the Trust be treated as a sale to the
Depositor and the Trust, respectively, of the respective Seller's entire right,
title and interest in and to the property specified in the preceding sentence.
In connection with such filing, the Seller shall cause to be filed all necessary
continuation statements thereof and amendments thereto and take or cause to be
taken such actions and execute such documents as are necessary to continue the
perfection and protect the Certificateholders' interest in such property.

         (b) The Seller shall use its best efforts, within 180 days of the
Closing Date with respect to the Mortgage Loans, at its own expense, to either
(i) record the assignment of each Mortgage in favor of the Trustee in the
appropriate real property office or other records office or (ii) deliver to the
Trustee the assignment of each Mortgage in favor of the Trustee in form for
recordation, together with an Opinion of Counsel to the effect that recording is
not required to protect the Trustee's right, title and interest in and to the
related Mortgage Loan or, in the event a court should recharacterize the
conveyance of the Mortgage Loans as a loan or a security for a loan, to perfect
a first priority security interest in favor of the Trustee in the related
Mortgage Loan. With respect to any Assignment of Mortgage as to which the
related recording information is unavailable within the applicable time period
set forth above, such Assignment of Mortgage shall be submitted for recording
within 30 days after receipt of such information but in no event later than one
year after the date such Assignment of Mortgage is otherwise required to be
recorded pursuant to this Section. In the event that any such Assignment of
Mortgage is lost or returned unrecorded because of a defect therein, the Seller
shall promptly prepare a substitute Assignment of Mortgage or cure such defect,
as the case may be, and thereafter the Depositor shall be required to submit
each such Assignment of Mortgage for recording. Any failure of the Seller to
comply with this Section 2.1(b) shall result in the obligation of the Seller to
purchase or substitute for the related Mortgage Loans pursuant to the provisions
of Section 2.2.

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<PAGE>   77

         (c) The Document Custodian agrees, for the benefit of
Certificateholders and the Trustee, within 180 days after the Closing Date
hereunder to review the Mortgage Files (and deliver a certificate to the Master
Servicer and the Seller as to the findings of such review) to ascertain that all
required documents set forth in paragraphs (i) - (vi) of Section 2.1(a) have
been executed and received, and that the Mortgage Notes have been endorsed
without recourse as specified in Section 2.1(a)(i), and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule and in so
doing the Document Custodian may rely on the purported due execution and
genuineness of any signature thereon. Within 90 days of the Closing Date, the
Document Custodian will deliver a certificate to the Master Servicer and the
Seller as to the status of such review. If within such 180-day period the
Document Custodian finds any document constituting a part of a Mortgage File not
to have been executed or received or to be unrelated to the Mortgage Loans
identified in said Mortgage Loan Schedule or, if in the course of its review,
the Document Custodian determines that such Mortgage File is otherwise defective
in any material respect, the Document Custodian shall promptly upon the
conclusion of its review of all of the Mortgage Files notify the Trustee, the
Depositor, the Master Servicer and the Seller, and the Seller shall have a
period of 60 days after such notice within which to correct or cure any such
defect; provided, however, that if such defect shall not have been corrected or
cured within such 60-day period due primarily to the failure of the related
office of real property or other records to return any document constituting a
part of a Mortgage File, the Seller shall so notify the Document Custodian and
the Trustee in writing and the period during which such defect may be corrected
or cured shall be extended until such time as any such documents are returned
from such related office (in no event, however, will such period extend beyond
one (1) year from the date of discovery of such defect); provided, that prior to
any such extension the Seller shall deliver to the Document Custodian a true
copy of such document with a certification by the Seller on the face of such
copy substantially as follows: "certified true and correct copy of original
which has been transmitted for recordation."

         (d) The Document Custodian shall have no responsibility for reviewing
any Mortgage File except as expressly provided in subsection (c) of Section 2.1.
Without limiting the effect of the preceding sentence, in reviewing any Mortgage
File pursuant to such subsection, the Document Custodian and the Trustee shall
have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment or endorsement is in proper or
recordable form (except, if applicable, to determine if the Trustee is the
assignee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded, but
shall not be required to determine whether any Person executing any document is
authorized to do so or whether any signature thereon is genuine. In addition,
with respect to documents referred to in clause (vi) of Section 2.1(a), the
Document Custodian shall only be obligated to identify whether any such
documents are included in the Mortgage File for each Mortgage Loan.

         SECTION 2.2. ACCEPTANCE BY TRUSTEE; RETRANSFER OF MORTGAGE LOANS.

         (a) The Trustee hereby acknowledges the sale and assignment of the
Mortgage Loans and the Related Documents pursuant to the terms of this Agreement
and declares that the Trustee holds and will hold such documents (to the extent
required to be held by the Trustee hereunder)

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<PAGE>   78

and all amounts received by it thereunder and hereunder in trust, upon the terms
herein set forth, for the use and benefit of all present and future
Certificateholders. The parties hereto do hereby create and establish, pursuant
to the laws of the State of North Carolina and this Agreement, the Trust, which,
for convenience, shall be known as "FURST Mortgage Loan Trust 1999-A."

         (b) If the time to correct or cure any defect of which the Trustee or
the Document Custodian, as the case may be, has notified the Seller following
review of the Mortgage Files by the Trustee or the Document Custodian, as the
case may be, has expired without any correction or cure, the Seller shall, no
later than two Business Days immediately preceding the Distribution Date in the
month following the Collection Period in which the time to correct or cure such
defect expired, repurchase the related Mortgage Loan (including any property
acquired in respect thereof and any insurance policy or Insurance Proceeds with
respect thereto) from the Trust at a price equal to the Purchase Price, which
amount shall be deposited into the Collection Account pursuant to Section 3.2 on
such Business Day or substitute a Mortgage Loan (each, a "Substitute Mortgage
Loan") that is an Eligible Substitute Mortgage Loan for such Mortgage Loan in
accordance with Section 2.7. Promptly upon receipt by the Trustee of written
notification signed by a Servicing Officer to the effect that the Purchase Price
for any such Mortgage Loan has been so deposited into the Collection Account,
the Document Custodian shall release to the Seller the Mortgage File for the
repurchased Mortgage Loan and the Trustee shall execute and deliver to the
Seller an assignment substantially in the form of Exhibit E, without recourse,
in order to vest in the Seller legal and beneficial ownership of such
repurchased or removed Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or Insurance Proceeds with respect thereto).
The form of assignment attached as Exhibit E may be modified from time to time
to the extent required by applicable law, as evidenced by an Opinion of Counsel
delivered to the Trustee, it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose. The obligation of the Seller to repurchase or substitute for
any Mortgage Loan shall constitute the sole remedy with respect to such defect
available to Certificateholders or the Trustee against the Seller on behalf of
Certificateholders. An Opinion of Counsel to the effect set forth in Section
2.7(d) shall be delivered to the Trustee in connection with any such repurchase.

         SECTION 2.3. REPRESENTATIONS AND WARRANTIES REGARDING THE DEPOSITOR.

         The Depositor represents and warrants to the Trustee on behalf of the
Certificateholders that as of the Closing Date:

                          (i) It is a corporation, validly existing and in good
         standing under the laws of North Carolina and has the requisite power
         and authority to own its assets and to transact the business in which
         it is currently engaged;

                         (ii) It has the power and authority to make, execute,
         deliver and perform this Agreement and all of the transactions
         contemplated under the Agreement, and has taken all necessary action to
         authorize the execution, delivery and performance of this Agreement.
         When executed and delivered, this Agreement will constitute its legal,
         valid and binding obligation enforceable in accordance with its terms,
         except as enforcement of such terms may be limited by bankruptcy,
         insolvency or similar laws

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<PAGE>   79

         affecting the enforcement of creditors' rights generally and by the
         availability of equitable remedies;

                        (iii) It holds all necessary licenses, certificates and
         permits from all government authorities necessary for conducting its
         business as it is presently conducted. It is not required to obtain the
         consent of any other party or any consent, license, approval or
         authorization from, or registration or declaration with, any
         governmental authority, bureau or agency in connection with the
         execution, delivery, performance, validity or enforceability of this
         Agreement, except for such consents, licenses, approvals or
         authorizations, or registrations or declarations, as shall have been
         obtained or filed, as the case may be, prior to the Closing Date;

                         (iv) The execution, delivery and performance of this
         Agreement by it will not conflict with or result in a breach of, or
         constitute a default under, any provision of any existing law or
         regulation or any order or decree of any court applicable to it or any
         of its properties or any provision of its Articles of Incorporation or
         Bylaws or constitute a material breach of, or result in the creation or
         imposition of any lien, charge or encumbrance upon any of its
         properties pursuant to, any mortgage, indenture, contract or other
         agreement to which it is a party or by which it may be bound;

                          (v) Neither this Agreement, the Prospectus nor the
         Prospectus Supplement nor any statement, report or other document
         prepared by the Depositor and furnished or to be furnished pursuant to
         this Agreement or in connection with the transactions contemplated
         hereby contains any untrue statement of material fact or omits to state
         a material fact necessary to make the statements contained herein or
         therein not misleading;

                         (vi) The Depositor is not in default with respect to
         any order or decree of any court or any order, regulation or demand of
         any federal, state, municipal or governmental agency, which default
         might have consequences that would materially and adversely affect the
         condition (financial or other) or operations of the Depositor or its
         properties or might have consequences that would adversely affect its
         performance hereunder;

                        (vii) No litigation or administrative proceeding of or
         before any court, tribunal or governmental body is currently pending,
         or to its knowledge threatened, against it or any of its properties or
         with respect to this Agreement or the Certificates which in its opinion
         has a reasonable likelihood of resulting in a material adverse effect
         on the transactions contemplated by this Agreement;

                       (viii) The transactions contemplated by this Agreement
         are in the ordinary course of business of the Depositor.

                         (ix) Immediately prior to the sale and assignment by
         the Depositor to the Trustee of each Mortgage Loan, the Depositor has
         good and marketable title to each Mortgage Loan (insofar as such title
         was conveyed to it by the Seller) subject to no prior

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<PAGE>   80

         lien, claim, participation interest, mortgage, security interest,
         pledge, charge or other encumbrance or other interest of any nature;

                          (x) As of the Closing Date, the Depositor has
         transferred all right, title and interest in the Mortgage Loans to the
         Trustee; and

                         (xi) The Depositor has not transferred the Mortgage
         Loans to the Trustee with any intent to hinder, delay or defraud any of
         its creditors.

         SECTION 2.4. REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER
SERVICER.

         The Master Servicer represents and warrants to the Trustee on behalf of
the Certificateholders that as of the Closing Date:

                          (i) It is a national banking association, validly
         existing and in good standing under the laws of the United States of
         America and has the requisite power and authority to own its assets and
         to transact the business in which it is currently engaged. It is duly
         qualified to do business and is in good standing in each jurisdiction
         in which the character of the business transacted by it or properties
         owned or leased by it requires such qualification and in which the
         failure so to qualify would have a material adverse effect on (a) its
         business, properties, assets, or condition (financial or other), (b)
         its performance of its obligations under this Agreement, (c) the value
         or marketability of the Mortgage Loans and (d) the ability to foreclose
         on the related Mortgaged Properties;

                         (ii) It has the power and authority to make, execute,
         deliver and perform this Agreement and all of the transactions
         contemplated under the Agreement, and has taken all necessary action to
         authorize the execution, delivery and performance of this Agreement.
         When executed and delivered, this Agreement will constitute its legal,
         valid and binding obligation enforceable in accordance with its terms,
         except as enforcement of such terms may be limited by bankruptcy,
         insolvency or similar laws affecting the enforcement of creditors'
         rights generally and by the availability of equitable remedies;

                        (iii) It holds all necessary licenses, certificates and
         permits from all government authorities necessary for conducting its
         business as it is presently conducted. It is not required to obtain the
         consent of any other party or any consent, license, approval or
         authorization from, or registration or declaration with, any
         governmental authority, bureau or agency in connection with the
         execution, delivery, performance, validity or enforceability of this
         Agreement, except for such consents, licenses, approvals or
         authorizations, or registrations or declarations, as shall have been
         obtained or filed, as the case may be, prior to the Closing Date;

                         (iv) The execution, delivery and performance of this
         Agreement by it will not conflict with or result in a breach of, or
         constitute a default under, any provision of any existing law or
         regulation or any order or decree of any court applicable to it or any
         of its properties or any provision of its Articles of Incorporation or
         Bylaws, or

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<PAGE>   81

         constitute a material breach of, or result in the creation or
         imposition of any lien, charge or encumbrance upon any of its
         properties pursuant to, any mortgage, indenture, contract or other
         agreement to which it is a party or by which it may be bound;

                          (v) Neither this Agreement nor the Prospectus nor the
         Prospectus Supplement, to the extent each relates to the Master
         Servicer, nor any statement, report or other document prepared by the
         Master Servicer and furnished or to be furnished pursuant to this
         Agreement or in connection with the transactions contemplated hereby
         contains any untrue statement of material fact or omits to state a
         material fact necessary to make the statements contained herein or
         therein not misleading;

                         (vi) The Master Servicer is not in default with respect
         to any order or decree of any court or any order, regulation or demand
         of any federal, state, municipal or governmental agency, which default
         might have consequences that would materially and adversely affect the
         condition (financial or other) or operations of the Master Servicer or
         its properties or might have consequences that would adversely affect
         its performance hereunder or under any subservicing agreement;

                        (vii) The collection practices used by the Master
         Servicer with respect to each Mortgage Note and Mortgage have been in
         all material respects legal, proper, prudent and customary in the
         mortgage origination and servicing business and in compliance with the
         Master Servicer's servicing procedures as described in the Prospectus
         and this Agreement;

                       (viii) No litigation or administrative proceeding of or
         before any court, tribunal or governmental body is currently pending,
         or to its knowledge threatened, against it or any of its properties or
         with respect to this Agreement or the Certificates which in its opinion
         has a reasonable likelihood of resulting in a material adverse effect
         on the transactions contemplated by this Agreement;

                         (ix) The transactions contemplated by this Agreement
         are in the ordinary course of business of the Master Servicer; and

                          (x) The Master Servicer's computer and other systems
         used in servicing the Mortgage Loans will be modified and maintained to
         operate in a manner such that at all times, including on and after
         January 1, 2000, the Master Servicer can service the Mortgage Loans in
         accordance with the terms of this Agreement.

         It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Document Custodian or the Trustee.

         Upon discovery by the Seller, the Depositor, the Master Servicer, or
the Trustee, as the case may be, of a breach of any of the foregoing
representations and warranties which materially and adversely affects the
interests of the Certificateholders, the Person discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its discovery
or its receipt of notice of breach, or, with the prior written consent of a
Responsible Officer of the Trustee,

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<PAGE>   82

such longer period specified in such consent, the Master Servicer shall cure
such breach in all material respects.

         SECTION 2.5. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER.

         The Seller represents and warrants to the Trustee on behalf of the
Certificateholders that as of the Closing Date:

                          (i) It is a national banking association, validly
         existing and in good standing under the laws of the United States of
         America and has the requisite power and authority to own its assets and
         to transact the business in which it is currently engaged. It is duly
         qualified to do business and is in good standing in each jurisdiction
         in which the character of the business transacted by it or properties
         owned or leased by it requires such qualification and in which the
         failure so to qualify would have a material adverse effect on (a) its
         business, properties, assets, or condition (financial or other), (b)
         its performance of its obligations under this Agreement, (c) the value
         or marketability of the Mortgage Loans and (d) the ability to foreclose
         on the related Mortgaged Properties;

                         (ii) It has the power and authority to make, execute,
         deliver and perform this Agreement and all of the transactions
         contemplated under the Agreement, and has taken all necessary action to
         authorize the execution, delivery and performance of this Agreement.
         When executed and delivered, this Agreement will constitute its legal,
         valid and binding obligation enforceable in accordance with its terms,
         except as enforcement of such terms may be limited by bankruptcy,
         insolvency or similar laws affecting the enforcement of creditors'
         rights generally and by the availability of equitable remedies;

                        (iii) It holds all necessary licenses, certificates and
         permits from all government authorities necessary for conducting its
         business as it is presently conducted. It is not required to obtain the
         consent of any other party or any consent, license, approval or
         authorization from, or registration or declaration with, any
         governmental authority, bureau or agency in connection with the
         execution, delivery, performance, validity or enforceability of this
         Agreement, except for such consents, licenses, approvals or
         authorizations, or registrations or declarations, as shall have been
         obtained or filed, as the case may be, prior to the Closing Date;

                         (iv) The execution, delivery and performance of this
         Agreement by it will not conflict with or result in a breach of, or
         constitute a default under, any provision of any existing law or
         regulation or any order or decree of any court applicable to it or any
         of its properties or any provision of its Articles of Association or
         Bylaws, or constitute a material breach of, or result in the creation
         or imposition of any lien, charge or encumbrance upon any of its
         properties pursuant to, any mortgage, indenture, contract or other
         agreement to which it is a party or by which it may be bound;

                          (v) No litigation or administrative proceeding of or
         before any court, tribunal or governmental body is currently pending,
         or to its knowledge threatened,

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<PAGE>   83

         against it or any of its properties or with respect to this Agreement
         or the Certificates which in its opinion has a reasonable likelihood of
         resulting in a material adverse effect on the transactions contemplated
         by this Agreement;

                         (vi) Neither this Agreement nor the Prospectus nor the
         Prospectus Supplement nor any statement, report or other document
         prepared by the Seller and furnished or to be furnished pursuant to
         this Agreement or in connection with the transactions contemplated
         hereby contains any untrue statement of material fact or omits to state
         a material fact necessary to make the statements contained herein or
         therein not misleading;

                        (vii) The Seller is not in default with respect to any
         order or decree of any court or any order, regulation or demand of any
         federal, state, municipal or governmental agency, which default might
         have consequences that would materially and adversely affect the
         condition (financial or other) or operations of the Seller or its
         properties or might have consequences that would adversely affect its
         performance hereunder;

                       (viii) The transfer, assignment and conveyance of the
         Mortgage Notes and the Mortgages by the Seller pursuant to this
         Agreement and the Purchase Agreement are not subject to the bulk
         transfer laws or any similar statutory provisions in effect in the
         State of North Carolina;

                         (ix) The transactions contemplated by this Agreement
         are in the ordinary course of business of the Seller; and

                          (x) The Seller is not insolvent, nor will it be made
         insolvent by the transfer of the Mortgage Loans, nor is the Seller
         aware of any pending insolvency.

         It is understood and agreed that the representations and warranties set
forth in this Section 2.5 shall survive delivery of the Mortgage Files to the
Document Custodian or the Trustee.

         Upon discovery by the Depositor, the Master Servicer, the Seller or the
Trustee, as the case may be, of a breach of any of the foregoing representations
and warranties which materially and adversely affects the interests of the
Certificateholders, the Person discovering such breach shall give prompt written
notice to the other parties. Within 60 days of its discovery or its receipt of
notice of breach, or, with the prior written consent of a Responsible Officer of
the Trustee, such longer period specified in such consent, the Seller shall cure
such breach in all material respects.

         SECTION 2.6. REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING
THIS AGREEMENT AND THE MORTGAGE LOANS; TRANSFER OF CERTAIN MORTGAGE LOANS.

         (a) The Seller represents and warrants to the Trustee on behalf of the
Certificateholders as follows as of the Closing Date with respect to the
Mortgage Loans:

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<PAGE>   84

                          (i) The information with respect to each Mortgage Loan
         set forth in the Mortgage Loan Schedule is true and correct in all
         material respects as of the applicable Cut-Off Date;

                         (ii) All of the Related Documents set forth in Section
         2.1 (including all material documents related thereto) will have been
         delivered to the Document Custodian within the time periods set forth
         in Section 2.1. Each Mortgage File contains each of the documents and
         instruments specified to be included therein duly executed and in due
         and proper form, and each such document or instrument is in a form
         generally acceptable to prudent mortgage lenders that regularly
         originate or purchase mortgage loans comparable to the Mortgage Loans
         for sale to prudent investors in the secondary market that invest in
         mortgage loans such as the Mortgage Loans;

                        (iii) (A) Each Mortgaged Property is improved by a
         single (one-to-four) family residential dwelling, including, without
         limitation, condominiums, townhouses, planned unit developments,
         manufactured homes and mobile homes. Each mobile home and manufactured
         home constituting any portion of any Mortgaged Property constitutes
         real property under applicable state law; and (B) each mobile home
         constituting any portion of any Mortgaged Property is a Single-Family
         Residence;

                           (iv) Each Mortgage Loan is being master serviced by
         the Master Servicer;

                          (v) Each Mortgage Note has a fixed rate of interest
         and an original term to maturity of not more than 30 years from the
         date on which the first monthly payment was due. Each Mortgage Note
         with respect to the Mortgage Loans will provide for a schedule of
         substantially level and equal Monthly Payments which are sufficient to
         amortize fully the principal balance of such Mortgage Loan over a
         period of time equal to the amortization period of such Mortgage Note;

                         (vi) Each Mortgage is a valid and subsisting first lien
         of record on the Mortgaged Property subject to the exceptions to title
         set forth in the title insurance policy or attorney's opinion, as the
         case may be, with respect to the related Mortgage Loan, which
         exceptions are generally acceptable to mortgage lending companies, and
         such other exceptions to which similar properties are commonly subject
         and which do not individually, or in the aggregate, materially and
         adversely affect the benefits of the security intended to be provided
         by such Mortgage. Any security agreement, chattel mortgage or
         equivalent document related to the Mortgage and delivered to the
         Document Custodian on behalf of the Trustee establishes in the Seller a
         valid and subsisting first lien and first priority security interest on
         the property described therein, and the Seller has full right to assign
         the same to the Trustee;

                        (vii) Except with respect to liens released immediately
         prior to the transfer herein contemplated, each Mortgage Note and
         related Mortgage have not been assigned or pledged and immediately
         prior to the transfer and assignment herein

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<PAGE>   85

         contemplated, the Seller held good, marketable and indefeasible title
         to, and was the sole owner and holder of, each Mortgage Loan subject to
         no Liens; the Seller has full right and authority under all
         governmental and regulatory bodies having jurisdiction over the Seller,
         subject to no interest or participation of, or agreement with, any
         party, to sell and assign the same pursuant to this Agreement; and
         immediately upon the transfer and assignment herein contemplated, the
         Seller shall have transferred all of its right, title and interest in
         and to each Mortgage Loan to the Depositor (or its assignee) and the
         Depositor (or its assignee) will hold good, marketable and indefeasible
         title, to, and be the sole owner of, each Mortgage Loan subject to no
         Liens;

                           (viii) None of the Mortgage Loans were delinquent
         (i.e. not 30 or more days past due) as of the Cut-Off Date;

                           (ix) To the best knowledge of the Seller, there is no
         delinquent tax, fee or assessment lien on any Mortgaged Property;

                           (x) No Mortgage Loan is subject to any right of
         rescission, set-off, counterclaim or defense, including the defense of
         usury, nor will the operation of any of the terms of any Mortgage Note
         or Mortgage, or the exercise of any right thereunder, render either the
         Mortgage Note or the Mortgage unenforceable in whole or in part, or
         subject to any right of rescission, set-off, counterclaim or defense,
         including the defense of usury, and no such right of rescission,
         set-off, counterclaim or defense has been asserted with respect
         thereto;

                           (xi) (A) There is no mechanics' lien or claim for
         work, labor or material affecting the Mortgaged Property which is or
         may be a lien prior to, or equal or coordinate with, the lien of the
         related Mortgage except those liens which are fully insured against by
         the title insurance policy referred to in clause (xiii) below; and (B)
         to the best of its knowledge, each Mortgaged Property is free of
         material damage and is in good repair;

                           (xii) Each Mortgage Loan at the time it was made
         complied in all material respects with applicable state and federal
         laws and regulations, including, without limitation, usury, equal
         credit opportunity, real estate settlement procedures, consumer credit,
         truth-in-lending and disclosure laws and consummation of the
         transactions contemplated hereby, including, without limitation, the
         receipt of interest, will not involve the violation of any such laws;

                           (xiii) Either an attorney's opinion of title has been
         obtained or a lender's title insurance policy or binder issued in
         standard American Land Title Association form by a title insurance
         company authorized to transact business in the state in which the
         related Mortgaged Property is situated in an amount at least equal to
         the original principal balance thereof insuring the Seller, its
         successor and assigns as to the first priority of the lien of the
         Mortgage, subject only to the exceptions of the character referred to
         in (vi) above, and the Seller is the sole insured of such lender's
         title insurance policy, and each such policy or binder is valid and
         remains in full force and effect, and a title search

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<PAGE>   86

         or other assurance of title customary in the relevant jurisdiction was
         obtained with respect to each Mortgage Loan as to which no title
         insurance policy or binder was issued;

                        (xiv) The improvements upon each Mortgaged Property are
         covered by a valid and existing hazard insurance policy with a
         generally acceptable carrier that provides for fire and extended
         coverage representing coverage described in Section 3.5;

                         (xv) A flood insurance policy is in effect with respect
         to each Mortgaged Property with a generally acceptable carrier in an
         amount representing coverage described in Section 3.5, if and to the
         extent required by Section 3.5;

                        (xvi) Each Mortgage and Mortgage Note is the legal,
         valid and binding obligation of the related Mortgagor and is
         enforceable by the Trustee or any co-trustee appointed hereunder
         against the Mortgagor in accordance with its terms, except only as such
         enforcement may be limited by bankruptcy, insolvency, reorganization,
         moratorium or other similar laws affecting the enforcement of
         creditors' rights generally and by general principles of equity
         (whether considered in a proceeding or action in equity or at law), and
         all parties to each Mortgage Loan and the Mortgagee had full legal
         capacity to execute all Mortgage Loan documents and to convey the
         estate therein purported to be conveyed;

                       (xvii) All individual insurance policies contain a
         standard mortgagee clause naming the Seller, its successors and
         assigns, as mortgagee. All premiums thereon have been paid. Each
         Mortgage obligates the Mortgagor thereunder to maintain all such
         insurance at the Mortgagor's cost and expense, and upon the Mortgagor's
         failure to do so, authorizes the holder of the Mortgage to obtain and
         maintain such insurance at the Mortgagor's cost and expense and to seek
         reimbursement therefor from the Mortgagor;

                      (xviii) The terms of the Mortgage Note and the Mortgage
         have not been impaired, altered or modified in any material respect,
         except by a written instrument which has been recorded or is in the
         process of being recorded, if necessary, to protect the interests of
         the Certificateholders and which has been or will be delivered to the
         Document Custodian on behalf of the Trustee. Each original Mortgage was
         recorded, and all subsequent assignments of the original Mortgage
         (other than the assignment to the Trustee) have been recorded in the
         appropriate jurisdictions wherein such recordation is necessary to
         perfect the lien thereof as against creditors of the Seller, or is in
         the process of being recorded;

                        (xix) No instrument of release or waiver has been
         executed in connection with any Mortgage Loan, and no Mortgagor has
         been released, in whole or in part;

                         (xx) No Mortgage Note permits or obligates the Seller
         to make future advances to the related Mortgagor at the option of the
         Mortgagor. There are no defaults in complying with the terms of the
         Mortgage, and either (1) any taxes, governmental assessments, insurance
         premiums, water, sewer and municipal charges or ground rents

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<PAGE>   87

         which previously became due and owing have been paid, or (2) an escrow
         of funds has been established in an amount sufficient to pay for every
         such item which remains unpaid and which has been assessed but is not
         yet due and payable. Except for payments in the nature of escrow
         payments, including without limitation, taxes and insurance payments,
         the Seller has not advanced funds, or induced, solicited or knowingly
         received any advance of funds by a party other than the Mortgagor,
         directly or indirectly, for the payment of any amount required by the
         Mortgage Note, except for interest accruing from the date of the
         Mortgage Note or date of disbursement of the Mortgage proceeds,
         whichever is greater, to the day which precedes by one month the Due
         Date of the first installment of principal and interest;

                        (xxi) To the best knowledge of the Seller, there is no
         proceeding pending or threatened for the total or partial condemnation
         of any Mortgaged Property, nor is such a proceeding currently
         occurring, and such property is undamaged by waste, fire, earthquake or
         earth movement, windstorm, flood, tornado or other casualty, so as to
         affect adversely the value of the Mortgaged Property as security for
         the Mortgage Loan or the use for which the premises were intended;

                       (xxii) To the best of its knowledge, no improvement
         located on or being part of any Mortgaged Property is in violation of
         any applicable zoning law or regulation. All inspections, licenses and
         certificates required to be made or issued with respect to all occupied
         portions of each Mortgaged Property and, with respect to the use and
         occupancy of the same, including but not limited to certificates of
         occupancy and fire underwriting certificates, have been made or
         obtained from the appropriate authorities and such Mortgaged Property
         is lawfully occupied under the applicable law;

                      (xxiii) The proceeds of each Mortgage Loan have been fully
         disbursed, and there is no obligation on the part of the mortgagee to
         make future advances thereunder. Any and all requirements as to
         completion of any on-site or off-site improvements and as to
         disbursements of any escrow funds therefor have been complied with. All
         costs, fees and expenses incurred in making or closing or recording the
         Mortgage Loans were paid;

                       (xxiv) No Mortgage Loan was originated under a buydown
         plan or under a limited documentation program or is in violation of the
         Home Ownership and Equity Protection Act of 1994;

                        (xxv) There is no obligation on the part of the Seller
         or any other party to make payments in addition to those made by the
         Mortgagor;

                       (xxvi) No Mortgage Loan has a shared appreciation
         feature, or other contingent interest feature;

                      (xxvii) Each Mortgage contains customary and enforceable
         provisions which render the rights and remedies of the holder thereof
         adequate for the realization against the related Mortgaged Property of
         the benefits of the security, including, (A) in

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<PAGE>   88

         the case of a Mortgage designated as a deed of trust, by trustee's
         sale, and (B) otherwise by judicial or non-judicial foreclosure. To the
         Seller's best knowledge, there is no homestead or other exemption
         available to the related Mortgagor which would materially interfere
         with the right to sell the Mortgaged Property at a trustee's sale or
         the right to foreclose the Mortgage except as set forth in the
         Prospectus;

                     (xxviii) Except for Mortgage Loans that are delinquent for
         a time period less than 30 days, there is no default, breach, violation
         or event of acceleration existing under any Mortgage or the related
         Mortgage Note and no event which, with the passage of time or with
         notice and the expiration of any grace or cure period, would constitute
         a default, breach, violation or event of acceleration; and neither the
         Seller, nor any other entity involved in originating or servicing a
         Mortgage Loan, has waived any default, breach, violation or event of
         acceleration;

                       (xxix) All amounts received after the Cut-Off Date with
         respect to the Mortgage Loans to which the Seller is not entitled have
         been deposited into the Collection Account and are as of the Closing
         Date in the Collection Account;

                        (xxx) Each of the Mortgage Loans was originated
         substantially in accordance with the credit underwriting guidelines set
         forth in the Prospectus and the Prospectus Supplement;

                       (xxxi) Each Mortgage Loan conforms, and all Mortgage
         Loans in the aggregate conform, in all material respects, to the
         description thereof set forth in the Prospectus Supplement; each
         Mortgage Note and Mortgage is in substantially the form of Exhibit F
         hereto;

                      (xxxii) The Mortgage Loans were not selected by the Seller
         for inclusion in the Trust on any basis intended to adversely affect
         the Trust;

                     (xxxiii) Each Mortgage Loan was originated based upon an
         appraisal of the related Mortgaged Property; each such appraisal is on
         a Fannie Mae-approved form signed prior to the approval of such
         Mortgage Loan application by a qualified appraiser, appointed by the
         Seller or the originator of such Mortgage Loan, as appropriate, who has
         no interest, direct or indirect, in the Mortgaged Property or in any
         loan made on the security thereof, and whose compensation is not
         affected by the approval or disapproval of such Mortgage Loan;

                      (xxxiv) Each Mortgage Loan was originated by the Seller or
         an affiliate of the Seller or purchased by the Seller;

                       (xxxv) Each Mortgaged Property is located in the state
         identified on the Mortgage Loan Schedule and consists of a
         single-family residence (which may be detached, part of a two- to
         four-family dwelling, a condominium unit, a mobile, manufactured or
         modular home, a townhouse or a unit in a planned unit development).
         With respect to the Cut-Off Date Aggregate Pool 1 Loan Balance and the
         Pool 1

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<PAGE>   89

         Mortgage Loans, (a) at least 75.89% of the Pool 1 Mortgage Loans (by
         Cut-Off Date Aggregate Pool 1 Loan Balance) are secured by real
         property improved by a one-family residence erected thereon, (b) no
         more than 0.27% of the Pool 1 Mortgage Loans (by Cut-Off Date Aggregate
         Pool 1 Loan Balance) are secured by real property improved by two- to
         four-family dwellings, and (c) no more than 23.84% of the Pool 1
         Mortgage Loans (by Cut-Off Date Aggregate Pool 1 Loan Balance) are
         secured by real property improved by individual condominium units and
         units in a planned unit development. With respect to the Cut-Off Date
         Aggregate Pool 2 Loan Balance and the Pool 2 Mortgage Loans, (a) at
         least 80.58% of the Pool 2 Mortgage Loans (by Cut-Off Date Aggregate
         Pool 2 Loan Balance) are secured by real property improved by a
         one-family residence erected thereon and (b) no more than 18.58% of the
         Pool 2 Mortgage Loans (by Cut-Off Date Aggregate Pool 2 Loan Balance)
         are secured by real property improved by two- to four-family dwellings;
         and no more than 0.61% are secured by real property improved by a
         single family residence other than those enumerated in clause (a) or
         (b) above.

                      (xxxvi) All Mortgage Loans had Loan-to-Value Ratios of
         less than or equal to 100%;

                     (xxxvii) With respect to the Cut-Off Date Aggregate Loan
         Balance, 0.27% and 0.00% of the Pool 1 Mortgage Loans and Pool 2
         Mortgage Loans, respectively, (by Cut-Off Date Principal Balance) are
         secured by Mortgaged Properties that are non-owner occupied properties
         (i.e., investor-owned);

                    (xxxviii) The Mortgage Note is not and has not been secured
         by any collateral, pledged account or other security except the lien of
         the corresponding Mortgage and the security interest of any applicable
         security agreement or chattel mortgage referred to in (vi) above;

                      (xxxix) Each Pool 1 Mortgage Loan was originated on or
         purchased after September, 1991 and each Pool 2 Mortgage Loan was
         originated on or purchased after May, 1998;

                   (xl) The Seller has not transferred the Mortgage Loans to the
         Depositor with any intent to hinder, delay or defraud any of its
         creditors;

                        (xli) To the best knowledge of the Seller, all parties
         which have had any interest in the Mortgage Loan, whether as
         originator, mortgagee, assignee, pledgee or otherwise, are (or, during
         the period in which they held and disposed of such interest, were): (1)
         in compliance with any and all applicable licensing requirements of the
         laws of the state wherein the Mortgaged Property is located, and (2)(A)
         organized under the laws of such state, or (B) qualified to do business
         in such state, or (C) federal savings and loan associations or national
         banks having principal offices in such state, or (D) not doing business
         in such state so as to require qualification or licensing, or (E) not
         otherwise required to be qualified or licensed in such state;

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<PAGE>   90

                       (xlii) To the best knowledge of the Seller, all parties
         to the Mortgage Note and the Mortgage had legal capacity to execute the
         Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
         been duly and properly executed by such parties;

                           (xliii) None of the Pool 1 Mortgage Loans or Pool 2
         Mortgage Loans are mobile homes or manufactured housing;

                           (xliv) None of the Mortgage Loans are Cooperative
         Share Mortgages;

                        (xlv) Each Mortgage Loan is directly secured by a
         mortgage on real property and either (1) substantially all of the
         proceeds of such Mortgage Loan were used to acquire or improve or
         protect an interest in real property that, as of the origination date,
         was the only security for the Mortgage Loan, provided, that the
         Mortgage Loan has not been modified in a manner that constituted a
         deemed exchange under Section 1001 of the Code at a time when the
         Mortgage Loan was not in default or default thereto was not reasonably
         foreseeable or (2) the fair market value of such real property was at
         least equal to 80% of the adjusted issue price of the Mortgage Loan (A)
         at origination (or, if the Mortgage Loan has been modified in a manner
         that constituted a deemed exchange under Section 1001 of the Code at a
         time when the Mortgage Loan was not in default or default with respect
         thereto was not reasonably foreseeable, the date of the last such
         modification) or (B) at the Closing Date;

                           (xlvi) Each Mortgage Loan constitutes a qualified
         mortgage under Section 860G(a)(3)(A) of the Code and Treasury
         Regulations Section 1.860G-2(a)(1) and (3);

                           (xlvii) The Cut-Off Date Principal Balance for each
         Mortgage Loan is the Loan Balance indicated on the Mortgage Loan
         Schedule for such Mortgage Loan as of the Cut-Off Date;

                     (xlviii) No misrepresentation of a material fact or fraud
         in respect of the origination, modification or amendment of any
         Mortgage Loan has taken place on the part of any Person, including,
         without limitation, the related Mortgagor, any appraiser, any builder
         or developer or any party involved in the origination of such Mortgage
         Loan;

                       (xlix) Each Mortgage contains a provision for the
         acceleration of the payment of the unpaid principal balance of the
         related Mortgage Loan in the event the related Mortgaged Property is
         sold without the prior consent of the mortgagee thereunder; and

                             (l) With respect to each Mortgage Loan secured by a
         mobile home or manufactured housing: (a) such mobile home or
         manufactured housing is permanently affixed to a foundation which is
         suitable for the soil conditions of the site; all foundations, both
         perimeter and interior, having footings that are located below the
         frost line; any wheels, axles and trailer hitches are removed from such
         mobile home or

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<PAGE>   91

         manufactured housing and (b) the related Mortgage Loan is covered under
         a standard real estate title insurance policy or attorney's title
         opinion or certificate that identified such mobile home or manufactured
         housing as part of the real property and insures or indemnifies against
         any loss if such mobile home or manufactured housing is determined not
         to be part of the real property.

                  With respect to the representations and warranties set forth
in this Section 2.6(a) that are made to the best of the Seller's knowledge or as
to which the Seller has no knowledge, if it is discovered by the Seller, the
Master Servicer, the Depositor, the Trustee or the Document Custodian that the
substance of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Mortgage Loan then,
notwithstanding the Seller's lack of knowledge with respect to the substance of
such representation and warranty being inaccurate at the time the representation
or warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty.

         (b) The representations and warranties set forth in Section 2.6(a)
shall survive the delivery of the Mortgage Files to the Document Custodian or
the Trustee. Upon discovery by the Seller, the Master Servicer, the Depositor or
the Trustee of a breach of any of the foregoing representations and warranties
with respect to any Mortgage Loan, the party discovering such breach shall give
written notice thereof to the other parties within five (5) days after such
discovery but only to the extent that such breach materially and adversely
affects the interests of Certificateholders. Promptly after its discovery or its
receipt of notice of any such breach, the Seller shall use all reasonable
efforts to cure such breach in all material respects. Unless at the expiration
of the 60-day period following receipt of such notice, such breach has been
cured in all material respects or otherwise does not exist or continue to exist,
the Seller shall, not later than two Business Days immediately preceding the
Distribution Date in the month following the related Collection Period in which
any such cure period expired (but in the case of a breach that if discovered
before the Startup Day, would have prevented the obligation from being a
"qualified mortgage" as defined in the Code, within 90 days of discovery of the
breach), but only to the extent that such uncured breach materially and
adversely affects the interests of the Certificateholders, repurchase at the
Purchase Price such Defective Mortgage Loan (including any property acquired in
respect thereof and any insurance policy or Insurance Proceeds with respect
thereto) in the same manner and subject to the same conditions as set forth in
Section 2.2 or shall substitute an Eligible Substitute Mortgage Loan in
accordance with Section 2.7. Upon making any such repurchase, the Seller shall
be entitled to receive an assignment of the repurchased or removed Mortgage Loan
and a release of the related Mortgage File from the Document Custodian to the
extent set forth in Section 2.2. The obligation of the Seller to repurchase or
replace any Mortgage Loan as to which a breach has occurred and is continuing
shall constitute the sole remedy against the Seller with respect to such breach
available to Certificateholders or the Trustee on behalf of Certificateholders.

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<PAGE>   92

         SECTION 2.7. SUBSTITUTION OF MORTGAGE LOANS.

         (a) On a Determination Date within two years following the Closing Date
and which is on or before the date on which the Seller would otherwise be
required to repurchase a Mortgage Loan under this Article II, the Seller may
deliver to the Trustee one or more Eligible Substitute Mortgage Loans in
substitution for any one or more of the Defective Mortgage Loans which the
Seller would otherwise be required to repurchase pursuant to this Article II. In
connection with any such substitution, the Seller shall calculate the
Substitution Adjustment Amount, if any, and shall deposit such amount, along
with the Unreimbursed Advances, unreimbursed Servicing Advances, unpaid Master
Servicing Fees and Subservicing Fees with respect to the Defective Mortgage Loan
to the Collection Account on or before the second Business Day prior to the
Distribution Date in the month succeeding the calendar month during which the
related Mortgage Loan became required to be purchased or replaced hereunder.

         (b) The Seller shall notify the Master Servicer and the Trustee in
writing not less than five Business Days before the related Determination Date
which is on or before the date on which the Seller would otherwise be required
to repurchase such Mortgage Loan pursuant to this Article II of its intention to
effect a substitution under this Section. On such Determination Date (the
"Substitution Date"), the Seller shall deliver to the Trustee, with a copy to
the Master Servicer (except as to (1) below), (1) the Eligible Substitute
Mortgage Loans to be substituted for the original Mortgage Loans, (2) a list of
the original Mortgage Loans to be substituted for by such Eligible Substitute
Mortgage Loans in the same format as required for the list provided on the
Closing Date, (3) an Officers' Certificate (A) stating that no default by the
Master Servicer described in Section 8.1 shall have occurred and be continuing,
(B) stating that the aggregate principal balance of all Eligible Substitute
Mortgage Loans (determined with respect to each Eligible Substitute Mortgage
Loan as of the Determination Date on which it was substituted) including the
principal balance of Eligible Substitute Mortgage Loans being substituted on
such Determination Date does not exceed an amount equal to 10% of the Aggregate
Loan Balance as of the Closing Date, (C) stating that all conditions precedent
to such substitution specified in subsection (a) have been satisfied and that
each such substituted Mortgage Loan constitutes an Eligible Substitute Mortgage
Loan and attaching as an exhibit a supplemental Mortgage Loan Schedule (the
"Supplemental Mortgage Loan Schedule") setting forth the same type of
information as appears on the Mortgage Loan Schedule and representing as to the
accuracy thereof and (D) confirming that the representations and warranties
contained in Section 2.6 are true and correct in all material respects with
respect to the Eligible Substitute Mortgage Loans on and as of such
Determination Date, provided that remedies for the inaccuracy of such
representations are limited as set forth in Section 2.6 and this Section 2.7,
(4) a Nondisqualification Opinion to the effect set forth below and (5) a
certificate stating that cash in the amount of the related Substitution
Adjustment Amount, if any, has been deposited to the Collection Account. Upon
receipt of the foregoing, the Trustee shall release such original Mortgage Loans
to the Seller.

         (c) Concurrently with the satisfaction of the conditions set forth in
Section 2.7(a) and (b) above and the transfer of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.7(a) above, Exhibit D to
this Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the

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<PAGE>   93

information set forth on the Supplemental Mortgage Loan Schedule with respect to
such Eligible Substitute Mortgage Loans, and all references in this Agreement to
Mortgage Loans shall include such Eligible Substitute Mortgage Loans and be
deemed to be made on or after the related Substitution Date, as the case may be,
as to such Eligible Substitute Mortgage Loans.

         (d) In connection with any Mortgage Loan that the Seller is required to
purchase or replace, the Seller shall deliver to the Trustee a
Nondisqualification Opinion to the effect that such purchase or substitution
will not cause (x) any federal tax to be imposed on REMIC I or REMIC II,
including without limitation, any Federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the start-up day" under Section 860G(d)(1) of the Code or (y) any portion of
REMIC I or REMIC II to fail to qualify as a REMIC at any time that any
Certificate is outstanding. In the event that such opinion indicates that a
repurchase or substitution will result in the imposition of a prohibited
transaction tax, give rise to net taxable income or be deemed a contribution to
the REMIC I or REMIC II after the "start-up day," the Seller shall not be
required to repurchase or replace any such Mortgage Loan unless and until the
Master Servicer has determined there is an actual or reasonably foreseeable
default with respect thereto.

         SECTION 2.8. EXECUTION AND AUTHENTICATION OF CERTIFICATES.

         The Trustee on behalf of the Trust shall cause to be executed,
authenticated and delivered on the Closing Date to or upon the order of the
Depositor, in exchange for the Mortgage Loans, concurrently with the sale,
assignment and conveyance to the Trustee of the Mortgage Loans, each Class of
Certificates in authorized denominations.

         SECTION 2.9. REMIC PROVISIONS.

         (a) This Agreement shall be construed so as to carry out the intention
of the parties that each of REMIC I and REMIC II be treated as a REMIC at all
times prior to the date on which the Trust is terminated. The "regular
interests" (within the meaning of Section 860G(a)(1) of the Code) in REMIC II
shall consist of the Class 1A Certificates, the Class 1A-PO Certificates, the
Class 1A-WIO Certificates, the Class 2A Certificates, the Class M Certificates,
the Class B-1 Certificates, the Class B-2 Certificates, the Class B-3
Certificates, the Class B-4 Certificates and the Class B-5 Certificates. The
"residual interest" (within the meaning of Section 860(G)(a)(2) of the Code) in
REMIC II shall consist of the Class A-R Certificate. The "regular interests"
(within the meaning of Section 860(G)(a)(1) of the Code) of REMIC I shall
consist of: the Class 1A-L Interest, the Class 1A-LR Interest, the Class 1B-L
Interest and the Class 1C-L Interest each of which will have an interest rate
equal to 6.25% per annum; the Class 1A-LPO Interest which will not bear
interest; the Class 1A-LWIO Interest which will bear interest at a per annum
rate equal to the excess of (A) the weighted average Net Mortgage Interest Rates
of the Premium Pool 1 Mortgage Loans (based on Scheduled Principal Balances of
such Mortgage Loans as of the date of calculation) over (B) 6.25%; and the Class
2A-L Interest, the Class 2B-L Interest and the Class 2C-L Interest each of which
will have an interest rate equal to the Pool 2 Weighted Average Net Mortgage
Interest Rate. The "residual interest" (within the

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<PAGE>   94

meaning of Section 860(G)(a)(2) of the Code) of REMIC I shall consist of the
Class A-LR Certificate.

         The initial balances of the REMIC I Regular Interests shall be as
follows:

                  Class 1A-L Interest           $150,744,000
                  Class 1A-LPO Interest         $1,438,164
                  Class 1A-LWIO Interest        $113,352,150 (notional amount)
                  Class 1A-LR Interest          $100
                  Class 1B-L Interest           $3,892,864.06
                  Class 1C-L Interest           $10,000
                  Class 2A-L Interest           $55,130,000
                  Class 2B-L Interest           $1,404,395.39
                  Class 2C-L Interest           $10,000

         (b) The Trustee shall provide to the Internal Revenue Service and to
the Person described in Section 860E(e)(3) and (6) of the Code the information
described in Treasury Regulation Section 1.860D-1(b)(5)(ii), or any successor
regulation thereto with respect to each REMIC. Such information will be provided
in the manner described in Treasury Regulation Section 1.860E-2(a)(5), or any
successor regulation thereto.

         (c) For federal income tax purposes, the Final Scheduled Distribution
Date for each Class of the Certificates is hereby set to be the Distribution
Date indicated below:

                                                     Final Scheduled
                    Class                            Distribution Date
                    -----                            -----------------
         Class 1A Certificates                       February 25, 2030

         Class 1A-PO Certificates                    February 25, 2030

         Class 1A-WIO Certificates                   February 25, 2030

         Class M Certificates                        February 25, 2030

         Class B-1 Certificates                      February 25, 2030

         Class B-2 Certificates                      February 25, 2030

         Class B-3 Certificates                      February 25, 2030

         Class B-4 Certificates                      February 25, 2030

         Class B-5 Certificates                      February 25, 2030

         Class 2A Certificates                       February 25, 2030

         Class A-R Certificate                       February 25, 2030

         Class A-LR Certificate                      February 25, 2030

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<PAGE>   95

         (d) The Closing Date is hereby designated as the "startup day" of REMIC
I and REMIC II within the meaning of Section 860G(a) (9) of the Code.

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         SECTION 3.1. THE MASTER SERVICER.

         (a) It is intended that the Trust formed hereunder shall consist of the
REMIC I and REMIC II and that the affairs of the Trust shall be conducted so as
to qualify REMIC I and REMIC II each as a "real estate mortgage investment
conduit" as defined in and in accordance with the REMIC Provisions. In
furtherance of such intentions, the Master Servicer covenants and agrees that it
shall not knowingly or intentionally take any action or omit to take any action
that would cause the termination of the REMIC status of REMIC I or REMIC II.

         (b) The Master Servicer shall service and administer the Mortgage Loans
in a manner consistent with the terms of this Agreement and with general
industry practice and shall have full power and authority, acting alone or
through a Subservicer, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable, it being
understood, however, that the Master Servicer shall at all times remain
responsible to the Trustee and the Certificateholders for the performance of its
duties and obligations hereunder in accordance with the terms hereof and any
amounts in respect of the Mortgage Loans received by any such Subservicer shall
be deemed to have been received by the Master Servicer whether or not actually
received by it. Without limiting the generality of the foregoing, the Master
Servicer shall continue, and is hereby authorized and empowered by the Trustee,
to execute and deliver, in connection with the Trust taking possession of any
Mortgaged Property or upon receipt from the Mortgagor of the amounts owed under
the related Mortgage Loan and upon delivery of written notice to the Trustee, on
behalf of itself, the Certificateholders and the Trustee or any of them, 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 with respect to the Mortgaged Properties. The Trustee shall upon
written request of a Servicing Officer furnish the Master Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties hereunder,
which powers of attorney or other documents shall be prepared by the Master
Servicer.

         The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.

         (c) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer shall
assume the terminated Master Servicer's rights under such subservicing
arrangements which termination or assumption will not violate the terms of such
arrangements.

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<PAGE>   96

         (d) [RESERVED]

         (e) The Master Servicer may agree to changes in the terms of a Mortgage
Loan that would not cause REMIC I or REMIC II to fail to qualify as a REMIC, as
evidenced by a Nondisqualification Opinion delivered by the Master Servicer to
the Trustee prior to the effective date of any such change, provided, however,
that such changes (i) do not adversely affect the interests of
Certificateholders, (ii) are consistent with prudent business practice, as
evidenced by an Officer's Certificate, substantially in the form of Exhibit G,
delivered by the Master Servicer to the Trustee prior to such effective date,
(iii) do not extend the maturity date of such Mortgage Loan in excess of one
year, and (iv) do not result in any change of the Loan Rate of such Mortgage
Loan.

         (f) [RESERVED]

         (g) The Master Servicer may enter into subservicing agreements for any
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such subservicing agreement and (1) has been designated as an
approved Seller/Servicer by FHLMC or Fannie Mae, or (2) is an Affiliate of the
Master Servicer. The Master Servicer shall give notice to the Trustee of the
appointment of any Subservicer. Any subservicing arrangement shall be consistent
with and not violate the provisions of this Agreement. The Master Servicer shall
not be relieved of its obligations under this Agreement notwithstanding any such
arrangement or any of the provisions of this Agreement relating to arrangements
between the Master Servicer and a Subservicer or otherwise, and the Master
Servicer shall be obligated to the same extent and under the same terms and
conditions as if the Master Servicer alone were servicing and administering the
Mortgage Loans. Any such arrangement shall be deemed to be between the
Subservicer and the Master Servicer alone and the Trustee and the Trust shall
not be deemed a party thereto and shall have no claims, rights, obligations,
duties or liabilities with respect to any Subservicer.

         (h) The Master Servicer and all Subservicers shall be deemed a single
entity for the purpose of determining compliance with the terms of this
Agreement and the Master Servicer shall be deemed to have received Principal
Collections and Interest Collections on the Mortgage Loans when any Subservicer
has received such Principal Collections and Interest Collections.

         (i) A Holder of Subordinate Certificates may direct the Master
Servicer, subject to the Mater Servicer's approval, to enter into a special
servicing agreement (in substantially the form of Exhibit R hereto) (the
"Special Servicing Agreement") with a special servicer chosen by such Holder and
acceptable to the Master Servicer (the "Special Servicer"). The Special Servicer
may have an interest in a Class of Subordinate Certificates. Pursuant to the
Special Servicing Agreement, the Master Servicer will contract with the Special
Servicer for the Servicing of Mortgage Loans that become Specially Serviced
Mortgage Loans (as defined in the Special Servicing Agreement) to the extent
that the Master Servicer is granted the authority in the related subservicing
agreement or has otherwise obtained the agreement of the related Subservicer to
transfer the servicing of such Specially Serviced Mortgage Loans and subject to
other conditions set forth in the Special Servicing Agreement.

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<PAGE>   97

         SECTION 3.2. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.

         (a) 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,
follow such collection procedures as it follows with respect to mortgage loans
in its servicing portfolio comparable to the Mortgage Loans. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or any
assumption fees or other fees which may be collected in the ordinary course of
servicing such Mortgage Loan and (ii) arrange with a Mortgagor a schedule for
the payment of interest due and unpaid; provided, that such arrangement is
consistent with the Master Servicer's policies with respect to the mortgage
loans it owns or services; provided, further, that notwithstanding such
arrangement such Mortgage Loans will be included in the information regarding
delinquent Mortgage Loans set forth in the Servicing Certificate and monthly
statement to Certificateholders pursuant to Section 5.2.

         (b) The Master Servicer shall establish and maintain a separate account
(the "Collection Account") which may, as provided in Section 3.2(d), be
maintained as a deposit account with the Seller, provided that, upon the
occurrence and continuance of the failure of any of the events described in
clauses (i) or (ii) of Section 3.2(d), the Collection Account shall be
established and maintained with an entity meeting the requirements of the
definition of "Eligible Account", as a separate trust account titled "Norwest
Bank Minnesota, National Association, as Trustee, in trust for the registered
holders of FURST Mortgage Pass-Through Certificates, Series 1999-A." Funds in
the Collection Account in respect of the Pool 1 Mortgage Loans and the Pool 2
Mortgage Loans and amounts withdrawn from the Collection Account attributable to
each of such Pools shall be accounted for separately. The Master Servicer shall
on the Closing Date deposit any amounts representing payments on and any
collections in respect of the Mortgage Loans received as of the Cut-Off Date and
prior to the Closing Date and due for periods after such Cut-Off Date and
thereafter deposit within two Business Days following receipt and identification
thereof by the Master Servicer the following payments and collections received
or made by it (without duplication) (excluding Liquidation Proceeds to the
extent they relate to a Mortgage Loan that is not a Liquidated Mortgage Loan at
the end of the related Collection Period:

                           (i) all Interest Collections and Principal
         Collections (including any Payaheads received);

                           (ii) Net Liquidation Proceeds net of any related
         Foreclosure Profit;

                           (iii) Insurance Proceeds;

                           (iv) any amounts payable in connection with the
         repurchase of any Mortgage Loan and the Substitution Adjustment Amount
         pursuant to Article II hereof; and

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<PAGE>   98

                           (v) any amount required to be deposited in the
         Collection Account pursuant to Sections 3.2(c), 3.4, 3.5, 3.7 or 3.13;

provided, however, with respect to each Collection Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Master Servicing Fee and the Subservicing Fee for such
Collection Period. The foregoing requirements respecting deposits to the
Collection Account are exclusive, it being understood that, without limiting the
generality of the foregoing, the Master Servicer need not deposit in the
Collection Account amounts representing Foreclosure Profits, fees (including
annual fees) or late charge penalties payable by Mortgagors, or amounts received
by the Master Servicer for the accounts of Mortgagors for application towards
the payment of taxes, insurance premiums, assessments and similar items. The
Master Servicer may retain, as additional servicing compensation, all
Foreclosure Profits and fees and late charge penalties collected from
Mortgagors.

         The Seller shall deposit the amounts required to be deposited in
respect of Mortgage Loans purchased by the Seller pursuant to Sections 2.2 and
2.6 to the Collection Account no later than the date specified therein.

         (c) All funds in the Collection Account shall be held (i) uninvested or
(ii) invested at the direction of the Master Servicer in Eligible Investments.
Any investments of funds in the Collection Account shall mature or be
withdrawable at par on or prior to the second Business Day preceding the
immediately succeeding Distribution Date. Any investment earnings on funds held
in the Collection Account shall be for the account of the Master Servicer and
may be withdrawn from the Collection Account by the Master Servicer at any time.
Any investment losses on funds held in the Collection Account shall be for the
account of the Master Servicer and promptly upon the realization of such loss
shall be contributed by the Master Servicer to the Collection Account. Any
references herein to amounts on deposit in the Collection Account shall refer to
amounts net of such investment earnings.

         (d) Notwithstanding anything in this Agreement to the contrary, (i) for
so long as (A) the Master Servicer remains an Affiliate of the Seller, (B) no
Event of Default shall have occurred and be continuing and (C) the Seller
maintains a short-term rating of at least A-1 by S&P, and for five Business Days
following any reduction, suspension, termination or withdrawal in such rating,
or (ii) if following the occurrence and continuation of any event described in
subclause (i) of this Section 3.2(d), an arrangement is established that is
satisfactory to the Rating Agencies and which does not in itself result in any
reduction of any rating issued in respect of the Senior Certificates, the Master
Servicer may establish and maintain the Collection Account as a deposit account
with the Seller.

         (e) For all purposes of this Agreement, any amount received at any time
during the term hereof by any Subservicer shall be deemed to constitute receipt
of such amount by the Master Servicer (receipt by the Master Servicer shall also
be deemed to occur on the same day as the amount is actually received by the
relevant Subservicer), regardless of whether the Master Servicer actually
receives such amount.

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         SECTION 3.3. WITHDRAWALS FROM THE COLLECTION ACCOUNT.

         The Trustee or the Master Servicer, if the Master Servicer is then
maintaining the Collection Account pursuant to Section 3.2(d), shall withdraw or
cause to be withdrawn funds from the Collection Account for the following
purposes:

                          (i) one Business Day prior to each Distribution Date,
         to deposit to the Distribution Account (a) the Pool 1 Distribution
         Amount and the Pool 2 Distribution Amount for such Distribution Date
         and (b) an amount equal to the Trustee Fee and Trust Administration
         Fee;

                         (ii) to reimburse the Master Servicer for any accrued
         unpaid Master Servicing Fees, Subservicing Fees and for unreimbursed
         Monthly Advances and Servicing Advances. The Master Servicer's right to
         reimbursement under this clause (ii) for unpaid Master Servicing Fees,
         Subservicing Fees and unreimbursed Servicing Advances shall be limited
         to late collections on the related Mortgage Loan, including Liquidation
         Proceeds, Insurance Proceeds and such other amounts as may be collected
         by the Master Servicer from the related Mortgagor or otherwise relating
         to the Mortgage Loan in respect of which such reimbursed amounts are
         owed. The Master Servicer's right to reimbursement under this clause
         (ii) for unreimbursed Monthly Advances shall be limited to collections,
         Liquidation Proceeds and Insurance Proceeds on the related Mortgage
         Loan;

                        (iii) to withdraw any amount received from a Mortgagor
         that is recoverable and sought to be recovered as a voidable preference
         by a trustee in bankruptcy pursuant to the United States Bankruptcy
         Code in accordance with a final, nonappealable order of a court having
         competent jurisdiction;

                         (iv) to pay to the Master Servicer interest earned in
         respect of Eligible Investments or on funds deposited in the Collection
         Account;

                          (v) to withdraw any funds deposited in the Collection
         Account that were not required to be deposited therein (such as
         Servicing Compensation) or were deposited therein in error and to pay
         such funds to the appropriate Person;

                         (vi) to pay the Servicing Compensation pursuant to
         Section 3.9 hereof to the extent not retained or paid pursuant to
         Section 3.2(b);

                        (vii) to reimburse the Master Servicer for
         Nonrecoverable Advances; and

                       (viii) (a) to pay the unpaid Class Principal Balance of
         the Class A-R Certificate and (b) to clear and terminate the Collection
         Account upon the termination of this Agreement and to pay any amounts
         remaining therein to the Class A-R Certificateholders.

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         SECTION 3.4. MONTHLY ADVANCES; COMPENSATING INTEREST.

         (a) No later than 12:00 noon New York City time on the first Business
Day immediately preceding each Distribution Date, the Master Servicer shall,
from its own funds, deposit in the Collection Account in immediately available
funds by wire transfer an amount (a "Monthly Advance") equal to the aggregate of
principal and interest portion of the Monthly Payment of each Mortgage Loan due
on the related Due Date, but not received by the Master Servicer on or before
the related Determination Date, such Monthly Advance to be in an amount net of
the Master Servicing Fee and Subservicing Fee payable with respect to such
Mortgage Loans on the related Distribution Date. Notwithstanding the foregoing,
the Master Servicer shall not be required to make a Monthly Advance if in the
good faith judgment and sole discretion of the Master Servicer, the Master
Servicer determines that such advance would constitute a Nonrecoverable Advance.
The determination by the Master Servicer that it has made, or would be making, a
Nonrecoverable Advance shall be evidenced by a certificate of a Responsible
Officer of the Master Servicer delivered to the Trustee and stating the basis
for such determination. The Master Servicer's obligation to make a Monthly
Advance with respect to any Mortgage Loan will continue until such Mortgage Loan
becomes a Liquidated Mortgage Loan. The Master Servicer may distribute Payaheads
paid to the Master Servicer not yet due in lieu of a required advance of
scheduled principal and interest, but must increase its advances in subsequent
months for which such Payaheads are due to cover scheduled payments represented
thereby.

         (b) If a Principal Prepayment occurs on any Mortgage Loan during any
Collection Period, the Compensating Interest shall be deposited by the Master
Servicer to the Collection Account one Business Day prior to the next succeeding
Distribution Date and shall be included in the amount to be made available to
the Trustee on such day.

         SECTION 3.5. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES.

         The Master Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Master Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the lesser of (A) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (B) the principal balance owing on such Mortgage Loan or (C) the
minimum amount required to compensate for damage or loss on a replacement cost
basis in each case in an amount not less than such amount as is necessary to
avoid the application of any co-insurance clause contained in the related hazard
insurance policy. The Master Servicer shall also maintain on property acquired
upon foreclosure, or by deed in lieu of foreclosure, hazard insurance with
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value from time to time of the improvements which are a part
of such property, (ii) the principal balance owing on such Mortgage Loan or
(iii) the minimum amount required to compensate for damage or loss on a
replacement cost basis at the time of such foreclosure or deed in lieu of
foreclosure plus accrued interest and the good-faith estimate of the Master
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Master Servicer under any such policies shall be
deposited in the Collection Account to the extent required by Section 3.2. If

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the Mortgage Property is in an area identified in the Federal Register by the
Flood 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 with a generally acceptable insurance
carrier, in an amount representing coverage not less than the least of (i) the
outstanding principal balance of the Mortgage Loan, (ii) the maximum insurable
value of the improvements securing such Mortgage Loan or (iii) the maximum
amount of insurance which is available under the National Flood Insurance Act of
1968, as amended, and the Flood Disaster Protection Act of 1973, as amended. The
Master Servicer shall also maintain on REO for the benefit of the Trust, (x)
fire and hazard insurance with extended coverage in an amount which is at least
equal to the replacement cost of the improvements which are a part of such
property, (y) public liability insurance and, (z) to the extent required and
available under the National Flood Insurance Act of 1968, as amended, and the
Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount
as provided above.

         SECTION 3.6. ASSUMPTION AND MODIFICATION AGREEMENTS.

         In any case in which a Mortgaged Property has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall exercise or refrain from
exercising its right to accelerate the maturity of such Mortgage Loan consistent
with the then current practice of the Master Servicer and without regard to the
inclusion of such Mortgage Loan in the Trust unless prohibited by law from doing
so. If it elects not to enforce its right to accelerate or if it is prevented
from doing so by applicable law, the Master Servicer (so long as such action
conforms with the Seller's underwriting standards at the time for new
origination) is authorized to take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Mortgage and, to the extent permitted by applicable law, the Mortgagor remains
liable thereon; provided, however, that the Master Servicer shall not enter into
any such assumption or modification agreement unless the Master Servicer has
determined that the Person to become liable under the Mortgage Loan has achieved
a credit grade under the Seller's then current credit scoring policy of at least
the same (or comparable) level achieved by the original Mortgagor at the time
the Mortgage Loan was originated and provided that the requirements of Section
3.1(e) are satisfied. The Master Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 3.6 and by forwarding to the Document Custodian the original
copy of such assumption and modification agreement. Any such assumption and
modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. No change in the terms of the related Mortgage Loan
may be made by the Master Servicer in connection with any such assumption to the
extent that such change would not be permitted to be made in respect of the
original Mortgage Loan pursuant to Section 3.1(e). Any fee collected by the
Master Servicer for entering into any such agreement will be retained by the
Master Servicer as additional servicing compensation.

         SECTION 3.7. REALIZATION UPON DEFAULTED MORTGAGE LOANS.

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         The Master Servicer shall pursue the liquidation of such of the
Mortgage Loans as come into and continue in default when, in the determination
of the Master Servicer, no satisfactory arrangements can be made for collection
of delinquent payments pursuant to Section 3.2. Each such liquidation shall be
either by sale of such Mortgage Loan or by foreclosure (or other comparable
conversion to ownership of the Mortgaged Property securing such Mortgage Loan)
as determined by the Master Servicer, to result in the receipt by the Trust of
the maximum recovery on such Mortgage Loan on a net present value basis (the
relevant discounting of anticipated collections to be performed at the related
Loan Rate). The determination with respect to the maximum recovery on a Mortgage
Loan shall be in accordance with, and consider the factors, costs, fees and
expenses described on Exhibit Q and the Master Servicer shall have no liability
for such determination, or actions taken pursuant to such determination, made in
good faith and absent gross negligence or willful misfeasance. If the Master
Servicer has actual knowledge or reasonably believes that any Mortgaged Property
is affected by hazardous or toxic wastes or substances and that the acquisition
of such Mortgaged Property would not be commercially reasonable, then the Master
Servicer will not cause the Trust to acquire title to such Mortgaged Property in
a foreclosure or similar proceeding. In connection with any foreclosure or other
conversion, the Master Servicer shall follow such practices and procedures as it
shall deem necessary or advisable and as shall be normal and usual in its
general mortgage servicing activities. The foregoing is subject to the proviso
that the Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or restoration of any property unless it shall
determine that such expenditure will increase Net Liquidation Proceeds. In
connection with any sale of any Mortgage Loan arranged by the Master Servicer,
the purchase price of such Mortgage Loan payable to the Trust will be equal to
the amount received from such purchaser net of costs and expenses related to
such sale (which fees shall include a disposition fee payable to the Master
Servicer as compensation for arranging such sale in an amount not more than $250
for each Mortgage Loan). Such purchase price shall be deposited into the
Collection Account pursuant to Section 3.2 on the day of such sale. Promptly
upon receipt by the Trustee and the Document Custodian of a written notification
signed by a Servicing Officer to the effect that such purchase price has been so
deposited into the Collection Account, the Document Custodian shall release to
the Master Servicer the Mortgage File for such sold Mortgage Loan and the
Trustee shall execute and deliver an assignment, prepared by the Master Servicer
and furnished by it to the Trustee, substantially in the form of Exhibit E.

         The Master Servicer shall cause to be deposited, no later than each
Determination Date, in the Collection Account, all revenues received with
respect to the related REO for the preceding Collection Period and shall retain
funds necessary for the proper operation, management and maintenance of the REO
and the fees of any managing agent acting on behalf of the Master Servicer.

         The disposition of REO shall be carried out by the Master Servicer for
cash at such price, and upon such terms and conditions, as the Master Servicer
deems to be in the best interest of the Certificateholders and, as soon as
practicable thereafter, the expenses of such sale shall be paid. The cash
proceeds of sale of the REO shall be deposited in the Collection Account in
accordance with Section 3.2, net of Foreclosure Profits accrued and unpaid
Master Servicing Fee and Subservicing Fee and unreimbursed Servicing Advances
and Monthly Advances payable to the

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Master Servicer in accordance with Section 3.3, for distribution to the
Certificateholders in accordance with Section 5.1 hereof.

         In the event that title to any Mortgage Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee (which may be the Master
Servicer) on behalf of Certificateholders.

         In the event that the Trust acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, such Mortgaged Property shall be disposed of by or on behalf of
the Trust within three (3) years after its acquisition by the Trust unless the
Trustee shall have received a Nondisqualification Opinion to the effect that the
holding by the Trust of such Mortgaged Property subsequent to three (3) years
after its acquisition will not result in the imposition of taxes on "prohibited
transactions" of the Trust as defined in Section 860F of the Code or cause the
Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding. Notwithstanding any other provision of this Agreement, (i) no
Mortgaged Property acquired by the Master Servicer pursuant to this Section
shall be rented (or allowed to continue to be rented) unless otherwise required
by law or otherwise used for the production of income by or on behalf of the
Trust, and (ii) no construction shall take place on such Mortgaged Property in
such a manner or pursuant to any terms, in either case, that would cause such
Mortgaged 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 the Trust
of any "net income from foreclosure property" which is subject to taxation
within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code. If a period
greater than three (3) years is permitted under this Agreement and is necessary
to sell any REO, the Master Servicer shall give appropriate notice to the
Trustee and the Certificateholders and shall report monthly to the Trustee as to
the progress being made in selling such REO.

         The Master Servicer will provide to the Trustee on each Distribution
Date a report in the form attached as Exhibit O (a "Liquidation Report") with
respect to each Liquidated Mortgage Loan during the related Collection Period.

         SECTION 3.8. TRUSTEE TO COOPERATE.

         On or before each Distribution Date, the Master Servicer will notify
the Trustee of the payment in full of the Loan Balance of any Mortgage Loan
during the preceding Collection Period. Upon any such payment in full, the
Master Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.1, if the assignments of Mortgage have been recorded as
required hereunder, an instrument of satisfaction regarding the related
Mortgage, which instrument of satisfaction shall be recorded by the Master
Servicer if required by applicable law and be delivered to the Person entitled
thereto. It is understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or transfer shall be reimbursed from
amounts deposited in the Collection Account.

         From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Document Custodian shall, or if the Trustee is holding
the Mortgage Files, the Trustee shall, upon request of the Master Servicer and
delivery to the Document Custodian or the

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Trustee, as applicable, of two copies of a trust receipt, in the form annexed
hereto as Exhibit I, signed by a Servicing Officer, release the related Mortgage
File to the Master Servicer and the Document Custodian or the Trustee, as
applicable, shall execute such documents, in the forms provided by the Master
Servicer, as shall be necessary to the prosecution of any such proceedings or
the taking of other servicing actions. Such trust receipt shall obligate the
Master Servicer to return the Mortgage File to the Trustee or the Document
Custodian appointed by it when the need therefor by the Master Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the trust receipt shall be released by the Document Custodian or the
Trustee, as applicable, to the Master Servicer.

         In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the Assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Master Servicer, execute an appropriate assignment
in the form provided to the Trustee by the Master Servicer to assign such
Mortgage Loan for the purpose of collection to the Master Servicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only), and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise enforce
the terms of the Mortgage Loan and deposit or credit the Net Liquidation
Proceeds, exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account, it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose. In the event that all delinquent payments due under any such
Mortgage Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Mortgage Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.

         SECTION 3.9. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
MASTER SERVICER.

         (a) The Master Servicer shall be entitled to receive the Master
Servicing Fee and the Subservicing Fee in accordance with the terms of this
Agreement as compensation for its services in connection with servicing the
Mortgage Loans. Moreover, additional servicing compensation in the form of late
payment charges, Foreclosure Profits or other receipts not required to be
deposited in the Collection Account shall be retained by the Master Servicer as
additional compensation. The Master Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder (including
payment of all other fees and expenses not expressly stated hereunder to be for
the account of the Certificateholders) and shall not be entitled to
reimbursement therefor except as specifically provided herein.

         (b) The Master Servicer shall be required to pay all expenses incurred
by it in connection with its activities under this Agreement, including fees and
disbursements of the independent accountants referred to in Section 3.11, taxes
imposed on the Master Servicer, and all other fees and expenses not expressly
stated hereunder to be for the account of the Certificateholders (including,
without limitation, the cost of obtaining Opinions of Counsel required under
this Agreement, except as otherwise provided herein), and shall not be entitled
to

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reimbursement therefor except to the extent that such expenses constitute
Liquidation Expenses or as otherwise specifically provided herein.

         SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.

         The Master Servicer, at its expense, will deliver to the Trustee, on or
before the last day of the fifth calendar month of each year, beginning in 2000,
an Officer's Certificate stating that (i) a review of the activities of the
Master Servicer during the preceding calendar year (or such shorter period as is
applicable in the case of the first report) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its material 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, the nature and status
thereof and the steps being taken to remedy such default. In addition, the
Master Servicer, at its expense, will deliver to the Trustee, on or before June
30, 1999, an Officer's Certificate stating that it is in compliance with Section
2.4(x).

         SECTION 3.11. ANNUAL SERVICING REPORT.

         Not later than the last day of the fifth month following the end of the
Master Servicer's fiscal year (December 31), beginning in 2000, the Master
Servicer, at its expense, shall cause a firm of independent public accountants
reasonably acceptable to the Depositor to furnish a letter or letters to the
Depositor and the Trustee to the effect that such firm has with respect to the
Master Servicer's overall servicing operations examined such operations in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers, and stating such firm's conclusions relating thereto.

         SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.

         The Master Servicer and the Document Custodian shall provide to the
Trustee, and, to the extent that any Certificateholder is a federally insured
savings association, the Office of Thrift Supervision, successor to the Federal
Home Loan Bank Board, to the FDIC and the supervisory agents and examiners of
the Office of Thrift Supervision, reasonable access to the documentation
regarding the Mortgage Loans, and the right to inspect the Master Servicer's
servicing operations and discuss such operations, such access being afforded
without charge but only upon reasonable notice and reasonable in scope and
during normal business hours at their respective offices. Nothing in this
Section 3.12 shall derogate from the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section 3.12 as a result of such obligation shall not constitute a
breach of this Section 3.12.

         SECTION 3.13. MAINTENANCE OF CERTAIN INSURANCE POLICIES.

         (a) The Master Servicer shall during the term of its service as
servicer maintain in force (i) a policy or policies of insurance covering errors
and omissions in the performance of its

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obligations as Master Servicer hereunder and (ii) a fidelity bond in respect of
its officers, employees or agents. Each such policy or policies and bond shall,
together, comply with the requirements from time to time of Fannie Mae for
persons performing servicing for mortgage loans purchased by Fannie Mae. Any
such fidelity bond and errors and omissions insurance shall protect and insure
the Master Servicer against losses, including losses resulting from forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of Master
Servicer employees. Such fidelity bond shall also protect and insure the Master
Servicer against losses in connection with the release or satisfaction of a
Mortgage Loan without having obtained payment in full of the indebtedness
secured thereby. No provision of this Section 3.13 requiring such fidelity bond
and errors and omissions insurance shall diminish or relieve the Master Servicer
from its duties and obligations as set forth in this Agreement. Upon the request
of the Trustee or any Certificateholder, the Master Servicer shall cause to be
delivered to the Trustee or such Certificateholder a certified true copy of such
fidelity bond and insurance policy.

         (b) In the event that the Master Servicer shall obtain and maintain a
blanket policy consistent with prudent industry standards insuring against fire
and hazards of extended coverage on all of the Mortgage Loans, then, to the
extent such policy names the Master Servicer as loss payee and provides coverage
in an amount equal to the aggregate unpaid principal balance on the Mortgage
Loans without co-insurance, and otherwise complies with the requirements of
Section 3.5, the Master Servicer shall be deemed conclusively to have satisfied
its obligations with respect to fire and hazard (including flood) insurance
coverage under Section 3.5, it being understood and agreed that such blanket
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 a policy complying with Section 3.5, and there shall have been a loss
which would have been covered by such policy, deposit in the Collection Account
the difference, if any, between the amount that would have been payable under a
policy complying with Section 3.5 and the amount paid under such blanket policy.
Upon the request of the Trustee or any Certificateholder, the Master Servicer
shall cause to be delivered to the Trustee or such Certificateholder, as the
case may be, a certified true copy of such policy. 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, and
Certificateholders, claims under any such policy in a timely fashion in
accordance with the terms of such policy.

         SECTION 3.14. REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED
PROPERTY, RETURNS RELATING TO MORTGAGE INTEREST RECEIVED FROM INDIVIDUALS AND
RETURNS RELATING TO CANCELLATION OF INDEBTEDNESS.

         The Master Servicer shall make reports of foreclosures and abandonments
of any Mortgaged Property for each calendar year beginning in 1999. The Master
Servicer shall file reports relating to each instance occurring during the
previous calendar year in which the Master Servicer (i) on behalf of the Trustee
acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that any Mortgaged Property has been abandoned.
The reports from the Master Servicer shall be in form and substance sufficient
to meet the reporting requirements imposed by Sections 6050J, 6050H and 6050P of
the Code.

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         SECTION 3.15. REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION.

         The Trust Administrator shall, on behalf of the Trust, cause to be
filed with the Securities and Exchange Commission any periodic reports required
to be filed under the provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder. Upon the request of the Trust Administrator, each of the Seller, the
Master Servicer and the Depositor shall cooperate with the Trust Administrator
in the preparation of any such report and shall provide to the Trust
Administrator in a timely manner all such information or documentation as the
Trust Administrator may reasonably request in connection with the performance of
its duties and obligations under this Section.

         SECTION 3.16. CUSTODY OF MORTGAGE FILES.

         The Trustee hereby agrees to act as Document Custodian of the Related
Documents for each Mortgage Loan. From time to time following delivery of the
Mortgage Files and the Related Documents to the Trustee pursuant to Section
2.01(a) hereof, the Trustee may engage the services of another Person (other
than the Depositor or an Affiliate of the Depositor) who is acceptable to the
Depositor, the Seller and the Master Servicer with the consent of the Rating
Agencies, to act as Document Custodian. Upon execution of a custodial agreement
consistent with the terms hereof, such Document Custodian shall maintain
possession of the Mortgage Files, or such part of them as the Trustee shall
direct, as agent of the Trustee pursuant to the terms of such custodial
agreement. The Seller shall be required to pay the Trustee (or any other Person
designated by the Trustee to act as document custodian) reasonable fees based on
the reciprocal fees charged by the Trustee and the Seller for similar services.
The Document Custodian (if other than the Trustee) shall acknowledge that it is
bailee for the Trustee and is holding all of Related Documents delivered to it
in trust for the Trustee. The Trustee shall not be liable to any Person for
actions or failures to take action of the Document Custodian, unless, and only
to the extent, such actions or failures to act constitute willful misconduct or
negligence.

         While the Mortgage Files and the Related Documents are required to be
in the possession of the Trustee or a Document Custodian appointed by it, the
Trustee shall provide the Master Servicer written notification of any change in
the location of the Mortgage Files within 5 Business Days of such change.

         SECTION 3.17. DUTIES OF DOCUMENT CUSTODIAN; AUTHORITY; INDEMNIFICATION.

         (a) Safekeeping. The Document Custodian shall hold the Mortgage Files
for the benefit of the Trustee and maintain such accurate and complete accounts,
records and computer systems pertaining to each Mortgage File as shall enable
the Depositor, the Seller, the Master Servicer and the Trustee to comply with
this Agreement. The Document Custodian shall act with reasonable care, using
that degree of skill and attention in the performance of its duties as it
exercises with respect to the mortgage files relating to all comparable mortgage
loans that it owns or services for itself or others. The Document Custodian
shall promptly report to the Trustee and the Master Servicer any failure on its
part to hold the Mortgage Files and maintain its accounts, records and computer
systems as herein provided and promptly take appropriate action to remedy any
such failure.

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         (b) Maintenance of and Access to Records. The Document Custodian shall
maintain each Mortgage File at one of its offices specified in Schedule 1 or at
such other office as shall be specified to the Trustee by written notice
immediately upon any change in location. The Document Custodian (if other than
the Trustee) shall make available to the Trustee or its duly authorized
representatives, attorneys or auditors a list of locations of the Mortgage Files
and the related accounts, records and computer systems maintained by the
Document Custodian at such times during normal business hours as the Trustee
shall instruct.

         (c) Release of Documents. Upon receipt of two copies of a written
instruction in the form of Exhibit I from the Trustee (if other than the
Document Custodian), the Master Servicer or a Subservicer, the Document
Custodian shall release any Mortgage File to the Trustee, the Trustee's agent,
the Trustee's designee, the Master Servicer or a Subservicer requested in such
written instruction, as the case may be, at such place or places as requested in
such written instruction, as soon as practicable. The Document Custodian shall,
upon written request, provide written notice to the Master Servicer monthly of
any such release to a Subservicer.

         (d) Review of Documents. The Document Custodian shall perform the
review (described in Section 2.1(c)) of each Related Document in each Mortgage
File within 180 days from (i) the Closing Date, with respect to each Mortgage
Loan transferred to the Trust on the Closing Date and (ii) the Transfer Date,
with respect to each Eligible Substitute Mortgage Loan transferred to the Trust.
Upon completion of such 180-day period, the Document Custodian will notify the
Trustee (if the Trustee is not also the Document Custodian) and the Master
Servicer of any material defect discovered in such review and the Trustee shall
notify the Depositor of such material defect, as provided in Section 2.1(c) and
on each annual anniversary of the Closing Date shall provide the Trustee, the
Master Servicer and the Depositor a report updating the status of such defects.

         (e) Instructions; Authority To Act. The Document Custodian (if other
than the Trustee) shall be deemed to have received proper instructions with
respect to the Mortgage Files upon its receipt of written instructions signed by
a Responsible Officer of the Trustee.

         (f) Document Custodian's Indemnification. The Document Custodian shall
indemnify the Seller, the Master Servicer, the Depositor, the Trust, and the
Trustee (if the Trustee is not also the Document Custodian), and each of their
officers, directors and agents for any and all liabilities, obligations, losses,
compensatory damages, payments, costs or expenses of any kind whatsoever that
may be imposed on, incurred by or asserted against any such person or any of
their officers, directors and agents as the result of any improper act or
omission in any way relating to the maintenance and custody by the Document
Custodian as custodian of the Mortgage Files; provided, however, that the
Document Custodian shall not be liable to any such Person for any amount and any
portion of any such amount resulting from the willful misfeasance, bad faith or
negligence of such Person. The provisions of this Section 3.17(f) shall survive
the termination of this Agreement.

         (g) Location of Mortgage Loans. The Mortgage Loans and Related
Documents shall not be located outside the State of Minnesota unless the
Document Custodian shall deliver an

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Opinion of Counsel to the Trustee to the effect that all actions have been
taken, including the filing of UCC financing statements, to perfect the rights
of the Trustee in the Mortgage Loans and Related Documents.

         SECTION 3.18. [RESERVED]

         SECTION 3.19. PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES.

         With respect to each Mortgage Loan, the Master Servicer shall maintain
accurate records reflecting fire and hazard (including flood) insurance
coverage.

         With respect to each Mortgage Loan as to which the Master Servicer
maintains escrow accounts, the Master Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of primary mortgage guaranty insurance premiums, if any, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Master Servicer in amounts sufficient for such purposes,
as allowed under the terms of the Mortgage. To the extent that a Mortgage does
not provide for escrow payments, the Master Servicer shall, if it has received
notice of a default or deficiency, monitor such payments to determine if they
are made by the Mortgagor.

                                   ARTICLE IV

                            DISTRIBUTIONS IN RESPECT
                     OF CERTIFICATES; SERVICING CERTIFICATES

         SECTION 4.1. DISTRIBUTIONS.

                  (a) On each Distribution Date, the Pool 1 Distribution Amount
and Pool 2 Distribution Amount will be applied in the following amounts, to the
extent the Pool 1 Distribution Amount and Pool 2 Distribution Amount are
sufficient therefor, in the manner and in the order of priority as follows,
subject to adjustment in accordance with Section 4.1(b)(iii) below:

                  (i) with respect to the Group 1A Certificates and Group 2A
Certificates, from the Pool 1 Distribution Amount and Pool 2 Distribution
Amount, respectively, as follows:

                  first, (A) to the Classes of Group 1A Certificates, pro rata,
based upon their respective Interest Accrual Amounts, in an aggregate amount up
to the Group 1A Interest

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Accrual Amount with respect to such Distribution Date or (B) to the Classes of
Group 2A Certificates, pro rata, based upon their respective Interest Accrual
Amounts, in an aggregate amount up to the Group 2A Interest Accrual Amount with
respect to such Distribution Date;

                  second, (A) to the Classes of Group 1A Certificates, pro rata,
based upon their respective Class A Unpaid Interest Shortfalls, in an aggregate
amount up to the Aggregate Group 1A Unpaid Interest Shortfall or (B) to the
Classes of Group 2A Certificates, pro rata, based upon their respective Class A
Unpaid Interest Shortfalls, in an aggregate amount up to the Aggregate Group 2A
Unpaid Interest Shortfall;

                  third, (A) to the Classes of Group 2A Certificates in an
aggregate amount up to the Group 2A Non-PO Optimal Principal Amount, such
distribution to be allocated among such Classes in accordance with Section
4.1(b)(i) or Section 4.1(c), as applicable, or (B) concurrently, to the Group 1A
Certificates (other than the Class 1A-PO Certificates) and the Class 1A-PO
Certificates, pro rata, based on their respective Group 1A Non-PO Optimal
Principal Amount and Class 1A-PO Optimal Principal Amount, (1) to the Classes of
Group 1A Certificates (other than the Class 1A-PO Certificates), in an aggregate
amount up to the Group 1A Non-PO Optimal Principal Amount, such distribution to
be allocated among such Classes in accordance with Section 4.1(b)(i) or Section
4.1(c), as applicable, and (2) to the Class 1A-PO Certificates in an amount up
to the Class 1A-PO Optimal Principal Amount;

                  fourth, to the Class 1A-PO Certificates in an amount up to the
Class 1A-PO Deferred Amount from amounts otherwise distributable (without regard
to this Clause (i) Paragraph fourth) first to the Class B-5 Certificates
pursuant to Clause (ii) Paragraph eighteenth, below, second to the Class B-4
Certificates pursuant to Clause (ii) Paragraph fifteenth, below, third to the
Class B-3 Certificates pursuant to Clause (ii) Paragraph twelfth, below, fourth
to the Class B-2 Certificates pursuant to Clause (ii) Paragraph ninth, below,
fifth to the Class B-1 Certificates pursuant to Clause (ii) Paragraph sixth
below, and sixth to the Class M Certificates pursuant to Clause (ii) Paragraph
third below; provided, however, to the extent necessary to reduce the Class
1A-PO Deferred Amount to zero, any amounts otherwise distributable to a Class of
Subordinate Certificates will be allocated to the Class 1A-PO Deferred Amount;
and

                  (ii) to the Subordinate Certificates, from the Pool 1
Distribution Amount and Pool 2 Distribution Amount, subject to Section
4.1(b)(iii), as follows:

                  first, to the Class M Certificates in an amount up to the
Interest Accrual Amount for the Class M Certificates with respect to such
Distribution Date;

                  second, to the Class M Certificates in an amount up to the
Class M Unpaid Interest Shortfall;

                  third, to the Class M Certificates in an amount up to the
Class M Optimal Principal Amount; provided, however, that the amount
distributable to the Class M Certificates pursuant to this Clause (ii) Paragraph
third will be reduced by the amount, if any, that would

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have been distributable to the Class M Certificates hereunder used to pay the
Class 1A-PO Deferred Amount as provided in Clause (i) Paragraph fourth above;

                  fourth, to the Class B-1 Certificates in an amount up to the
Interest Accrual Amount for the Class B-1 Certificates with respect to such
Distribution Date;

                  fifth, to the Class B-1 Certificates in an amount up to the
Class B-1 Unpaid Interest Shortfall;

                  sixth, to the Class B-1 Certificates in an amount up to the
Class B-1 Optimal Principal Amount; provided, however, that the amount
distributable to the Class B-1 Certificates pursuant to this Clause (ii)
Paragraph sixth will be reduced by the amount, if any, that would have been
distributable to the Class B-1 Certificates hereunder used to pay the Class
1A-PO Deferred Amount as provided in Clause (i) Paragraph fourth above;

                  seventh, to the Class B-2 Certificates in an amount up to the
Interest Accrual Amount for the Class B-2 Certificates with respect to such
Distribution Date;

                  eighth, to the Class B-2 Certificates in an amount up to the
Class B-2 Unpaid Interest Shortfall;

                  ninth, to the Class B-2 Certificates in an amount up to the
Class B-2 Optimal Principal Amount; provided, however, that the amount
distributable to the Class B-2 Certificates pursuant to this Clause (ii)
Paragraph ninth will be reduced by the amount, if any, that would have been
distributable to the Class B-2 Certificates hereunder used to pay the Class
1A-PO Deferred Amount as provided in Clause (i) Paragraph fourth above;

                  tenth, to the Class B-3 Certificates in an amount up to the
Interest Accrual Amount for the Class B-3 Certificates with respect to such
Distribution Date;

                  eleventh, to the Class B-3 Certificates in an amount up to the
Class B-3 Unpaid Interest Shortfall;

                  twelfth, to the Class B-3 Certificates in an amount up to the
Class B-3 Optimal Principal Amount; provided, however, that the amount
distributable to the Class B-3 Certificates pursuant to this Clause (ii)
Paragraph twelfth will be reduced by the amount, if any, that would have been
distributable to the Class B-3 Certificates hereunder used to pay the Class
1A-PO Deferred Amount as provided in Clause (i) Paragraph fourth above;

                  thirteenth, to the Class B-4 Certificates in an amount up to
the Interest Accrual Amount for the Class B-4 Certificates with respect to such
Distribution Date;

                  fourteenth, to the Class B-4 Certificates in an amount up to
the Class B-4 Unpaid Interest Shortfall;

                  fifteenth, to the Class B-4 Certificates in an amount up to
the Class B-4 Optimal Principal Amount; provided, however, that the amount
distributable to the Class B-4

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Certificates pursuant to this Clause (ii) Paragraph fifteenth will be reduced by
the amount, if any, that would have been distributable to the Class B-4
Certificates hereunder used to pay the Class 1A-PO Deferred Amount as provided
in Clause (i) Paragraph fourth above;

                  sixteenth, to the Class B-5 Certificates in an amount up to
the Interest Accrual Amount for the Class B-5 Certificates with respect to such
Distribution Date;

                  seventeenth, to the Class B-5 Certificates in an amount up to
the Class B-5 Unpaid Interest Shortfall;

                  eighteenth, to the Class B-5 Certificates in an amount up to
the Class B-5 Optimal Principal Amount; provided, however, that the amount
distributable to the Class B-5 Certificates pursuant to this Clause (ii)
Paragraph eighteenth will be reduced by the amount, if any, that would have been
distributable to the Class B-5 Certificates hereunder used to pay the Class
1A-PO Deferred Amount as provided in Clause (i) Paragraph fourth above; and

                  nineteenth, to the Holder of the Class A-R Certificate, any
amounts remaining in the Distribution Account, and to the Holder of the Class
A-LR Certificate, any amounts remaining in the Collection Account.

                  Notwithstanding the foregoing, after the Principal Balance or
notional amount of any Class (other than the Class A-R or Class A-LR
Certificates) has been reduced to zero, such Class will be entitled to no
further distributions of principal or interest (including, without limitation,
any Unpaid Interest Shortfalls).

                  With respect to any Distribution Date, the amount of the
Principal Adjustment, if any, attributable to any Class of Subordinate
Certificates will be allocated to the Classes of Class A Certificates (other
than the Class 1A-WIO and Class 1A-PO Certificates), the Class M Certificates
and any Class of Class B Certificates with a lower numerical designation pro
rata based on their outstanding Principal Balances.

                  (aa) Distributions on the Uncertificated Lower-Tier Interests.
On each Distribution Date, each Uncertificated Lower-Tier Interest shall receive
distributions in respect of principal in an amount equal to the amount of
principal distributed to its respective Corresponding Upper-Tier Class or
Classes as provided herein; provided, however, that principal payments made on
the REMIC II Regular Interests relating to payments received on the Pool 1
Mortgage Loans shall be distributed to the Class 1B-L Interests and Class 1C-L
Interest and principal payments made on the REMIC II Regular Interests relating
to payments received on the Pool 2 Mortgage Loans shall be distributed to the
Class 2B-L Interest and the Class 2C-L Interest and in such a manner as to
maintain a ratio of the balance of the Class 1C-L Interest to the balance of the
Class 2C-L Interest equal to the ratio of the Pool 1 Balance less the Aggregate
Group 1A Principal Balance to the Pool 2 Balance less the Group 2A Principal
Balance. On each Distribution Date, each Uncertificated Lower-Tier Interest
shall receive distributions in respect of interest in an amount equal to the
Interest Accrual Amounts and Unpaid Interest Shortfalls, as the case may be, in
respect of its Corresponding Upper-Tier Class or Classes, in each case to the
extent actually distributed thereon. Such amounts

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distributed to the Uncertificated Lower-Tier Interests in respect of principal
and interest with respect to any Distribution Date are referred to herein
collectively as the "Lower-Tier Distribution Amount."

                   (b) The Class 1A-WIO Certificates are interest-only
Certificates and are not entitled to distributions in respect of principal.

                           (i) On each Distribution Date prior to the Cross-Over
         Date, the Group 1A Non-PO Principal Distribution Amount will be
         allocated and distributed in reduction of the Principal Balances of the
         Classes of Group 1A Certificates, concurrently, to the Class 1A, Class
         A-R and Class A-LR Certificates, pro rata, until the Principal Balance
         of each such Class has been reduced to zero;

                   (ii) On each Distribution Date prior to the Cross-Over-Date,
the Group 2A Non-PO Principal Distribution Amount will be distributed to the
Class 2A Certificates until the Principal Balance of each such Class has been
reduced to zero.

                  (iii) Notwithstanding the foregoing, (X) on any Distribution
Date occurring prior to the Cross-Over Date but on or after the date on which
the Principal Balances of the Group 1A Certificates (other than the Class 1A-PO
Certificates) or the Principal Balances of the Group 2A Certificates have been
reduced to zero and on which (a) the Aggregate Subordinate Percentage for such
Distribution Date is less than 200% of the Original Aggregate Subordinate
Percentage or (b) the aggregate outstanding principal balance of the Mortgage
Loans in either Pool delinquent 60 days or more over the preceding six months as
a percentage of the related Group Subordinate Amount is greater than or equal to
50%, the remaining Class or Classes of Class A Certificates (other than the
Class 1A-PO Certificates) will be entitled to receive as principal, in addition
to any principal payments described in Section 4.1(a) above, in accordance with
the priorities set forth in Section 4.1(b)(i) or (ii) above and until the
Principal Balance of each such Class of Class A Certificates has been reduced to
zero, amounts otherwise distributable (without regard to this Clause (iii))
first to the Class B-5 Certificates pursuant to Clause (ii) Paragraph eighteenth
above, second to the Class B-4 Certificates pursuant to Clause (ii) Paragraph
fifteenth above, third to the Class B-3 Certificates pursuant to Clause (ii)
Paragraph twelfth above, fourth to the Class B-2 Certificates pursuant to Clause
(ii) Paragraph ninth above, fifth to the Class B-1 Certificates pursuant to
Clause (ii) Paragraph sixth above and sixth to the Class M Certificates pursuant
to Clause (ii) Paragraph third above but in each case only up to the applicable
Apportioned Subordinate Principal Distribution Amount for such Class of
Subordinate Certificates and (Y) if on any Distribution Date the Group 1A Non-PO
Principal Balance or Group 2A Non-PO Principal Balance (after giving effect to
all distributions on such Distribution Date) is greater than the Group 1A Pool
Balance (Non-PO Portion) or Group 2A Pool Balance (Non-PO Portion), respectively
(the Group 1A Certificates or Group 2A Certificates, as applicable, in such
instance, the "Undercollateralized Group"), the Class A Certificates (other than
the Class 1A-PO Certificates) of the Undercollateralized Group will be entitled
to receive first in respect of any Class A Unpaid Interest Shortfalls therefor
(including any Group 1A Interest Shortfall Amount or Group 2A Interest Shortfall
Amount, as applicable, arising on such Distribution Date) and second as

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principal, in addition to any principal payments described in Section 4.1(a)
above, in accordance with the priorities set forth in Section 4.1(b)(i) or (ii)
above and until the aggregate Principal Balance of the Class A Certificates
(other than the Class 1A-PO Certificates) of the Undercollateralized Group
equals the Pool 1 Pool Balance (Non-PO Portion) or Pool 2 Pool Balance (Non-PO
Portion), as applicable (such amount, the "Undercollateralized Amount"), all
amounts otherwise distributable (without regard to this Clause (iii)) first to
the Class B-5 Certificates pursuant to Clause (ii) Paragraph eighteenth above,
second to the Class B-4 Certificates pursuant to Clause (ii) Paragraph fifteenth
above, third to the Class B-3 Certificates pursuant to Clause (ii) Paragraph
twelfth above, fourth to the Class B-2 Certificates pursuant to Clause (ii)
Paragraph ninth above, fifth to the Class B-1 Certificates pursuant to Clause
(ii) Paragraph sixth above and sixth to the Class M Certificates pursuant to
Clause (ii) Paragraph third above (less any amounts used to pay any Class 1A-PO
Deferred Amounts).

                  (c) Notwithstanding the foregoing, on each Distribution Date
occurring on or subsequent to the Cross-Over Date, (x) the Group 1A Non-PO
Principal Distribution Amount shall be distributed among the Classes of Group 1A
Certificates (other than the Class 1A-PO Certificates) and (y) the Group 2A
Non-PO Principal Distribution Amount shall be distributed among the Classes of
Group 2A Certificates pro rata in accordance with their outstanding Principal
Balances without regard to either the proportions or the priorities set forth in
Section 4.1(b)(ii).

                  (d) (i) For purposes of determining whether the Classes of
Subordinate Certificates are eligible to receive distributions of principal with
respect to any Distribution Date, the following tests shall apply:

                  (A) if the Current Class M Fractional Interest is less than
         the Original Class M Fractional Interest and the Class M Principal
         Balance is greater than zero, the Class B-1, Class B-2, Class B-3,
         Class B-4 and Class B-5 Certificates shall not be eligible to receive
         distributions of principal; or

                  (B) if the Current Class B-1 Fractional Interest is less than
         the Original Class B-1 Fractional Interest and the Class B-1 Principal
         Balance is greater than zero, the Class B-2, Class B-3, Class B-4 and
         Class B-5 Certificates shall not be eligible to receive distributions
         of principal; or

                  (C) if the Current Class B-2 Fractional Interest is less than
         the Original Class B-2 Fractional Interest and the Class B-2 Principal
         Balance is greater than zero, the Class B-3, Class B-4 and Class B-5
         Certificates shall not be eligible to receive distributions of
         principal; or

                  (D) if the Current Class B-3 Fractional Interest is less than
         the Original Class B-3 Fractional Interest and the Class B-3 Principal
         Balance is greater than zero, the Class B-4 and Class B-5 Certificates
         shall not be eligible to receive distributions of principal; or

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                  (E) if the Current Class B-4 Fractional Interest is less than
         the Original Class B-4 Fractional Interest and the Class B-4 Principal
         Balance is greater than zero, the Class B-5 Certificates shall not be
         eligible to receive distributions of principal.

                  (ii) Notwithstanding the foregoing, if on any Distribution
Date the aggregate distributions to Holders of the Classes of Subordinate
Certificates entitled to receive distributions of principal would reduce the
Principal Balances of the Classes of Subordinate Certificates entitled to
receive distributions of principal below zero, first the Group 1 Class MB
Prepayment Percentage and Group 2 Class MB Prepayment Percentage of any affected
Class of Subordinate Certificates for such Distribution Date beginning with the
affected Class with the lowest numerical Class designation (or the Class M
Certificates if the Class M Certificates are affected) and then, if necessary,
the Group 1 Class MB Percentage and Group 2 Class MB Percentage of such Class of
the Subordinate Certificates for such Distribution Date shall be reduced to the
respective percentages necessary to bring the Principal Balance of such Class of
Subordinate Certificates to zero. The Class MB Prepayment Percentages and the
Class MB Percentages of the remaining Classes of Subordinate Certificates will
be recomputed substituting for the Group 1 Subordinated Prepayment Percentage
and Group 2 Subordinated Prepayment Percentages and Group 1 Subordinated
Percentage and Group 2 Subordinated Percentage in such computations the
difference between (A) the Group 1 Subordinated Prepayment Percentage or Group 2
Subordinated Prepayment Percentage or Group 1 Subordinated Percentage or Group 2
Subordinated Percentage, as the case may be, and (B) the percentages determined
in accordance with the preceding sentence necessary to bring the Principal
Balances of the affected Classes of Subordinate Certificates to zero; provided,
however, that if the Principal Balances of all the Classes of Subordinate
Certificates eligible to receive distributions of principal shall be reduced to
zero on such Distribution Date, the Group 1 Class MB Prepayment Percentage,
Group 2 Class MB Prepayment Percentage, Group 1 Class MB Percentage and Group 2
Class MB Percentage of the Class of Subordinate Certificates with the lowest
numerical Class designation (or the Class M Certificates if applicable) which
would otherwise be ineligible to receive distributions of principal in
accordance with this Section shall equal the remainder of the Group 1
Subordinated Prepayment Percentage and Group 2 Subordinated Prepayment
Percentage for such Distribution Date minus the sum of the Group 1 Class MB
Prepayment Percentages and Group 2 Class MB Prepayment Percentages of the
Classes of Subordinate Certificates having lower numerical Class designations,
if any, and the remainder of the Group 1 Subordinated Percentage and Group 2
Subordinated Percentage for such Distribution Date minus the sum of the Group 1
Class MB Percentages and Group 2 Class MB Percentages of the Classes of
Subordinate Certificates having lower numerical Class designations, if any,
respectively. Any entitlement of any Class of Subordinate Certificates to
principal payments solely pursuant to this clause (ii) shall not cause such
Class to be regarded as being eligible to receive principal distributions for
the purpose of applying the definition of its Group 1 Class MB Percentage, Group
2 Class MB Percentage, Group 2 Class MB Prepayment Percentage or Group 2 Class
MB Prepayment Percentage.

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         SECTION 4.2. ALLOCATION OF REALIZED LOSSES.

                  (a) With respect to any Distribution Date, the principal
portion of Realized Losses (other than Debt Service Reductions, Excess Special
Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses) occurring with
respect to Pool 1 Mortgage Loans and Pool 2 Mortgage Loans will be allocated as
follows:

                  first, to the Class B-5 Certificates until the Class B-5
Principal Balance has been reduced to zero;

                  second, to the Class B-4 Certificates until the Class B-4
Principal Balance has been reduced to zero;

                  third, to the Class B-3 Certificates until the Class B-3
Principal Balance has been reduced to zero;

                  fourth, to the Class B-2 Certificates until the Class B-2
Principal Balance has been reduced to zero;

                  fifth, to the Class B-1 Certificates until the Class B-1
Principal Balance has been reduced to zero;

                  sixth, to the Class M Certificates until the Class M Principal
Balance has been reduced to zero; and

                  seventh, (i) with respect to such losses occurring with
respect to Pool 2 Mortgage Loans, to the Group 2A Certificates based on the
Non-PO Fraction of such Mortgage Loans and (ii) with respect to such losses
occurring with respect to Pool 1 Mortgage Loans, concurrently, to the Group 1A
Certificates (other than the Class 1A-PO Certificates) and Class 1A-PO
Certificates, pro rata, based on the Non-PO Fraction and the PO Fraction of such
Mortgage Loans, respectively.

                  This allocation of Realized Losses will be effected through
the reduction of the applicable Class's Principal Balance.

                  (b) With respect to any Distribution Date, the principal
portion of Excess Special Hazard Losses, Excess Fraud Losses and Excess
Bankruptcy Losses occurring with respect to any Pool 1 Mortgage Loan allocable
to the Class 1A-PO Certificates, will equal the product of the amount of any
such principal loss and the PO Fraction for such Mortgage Loan. The principal
portion of any Excess Special Hazard Losses, Excess Fraud Losses and Excess
Bankruptcy Losses with respect to any Mortgage Loan in Pool 2 remaining after
allocation to the Class 1A-PO Certificates, in accordance with the preceding
sentence shall be allocated among the Group 1A Certificates (other than the
Class 1A-PO Certificates), and each Class of Subordinate Certificates based on
the Group 1A Non-PO Principal Balance in the case of such Group 1A Certificates
and the Group 1 Apportioned Principal Balance in the case of each

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Class of Subordinate Certificates, respectively. Any such loss allocated to the
Group 1A Certificates shall be allocated on the subsequent Determination Date to
the outstanding Classes of Group 1A Certificates (other than the Class 1A-PO
Certificates) in accordance with the Group 1A Loss Percentages as of such
Determination Date.

                  (c) Any Realized Losses allocated to a Class of Class A
Certificates, Class M Certificates or Class B Certificates pursuant to Section
4.2(a) or Section 4.2(b) shall be allocated among the Certificates of such Class
based on their Percentage Interests.

                  (d) In the event that there is a Recovery of an amount in
respect of principal of a Mortgage Loan of a Pool which had previously been
allocated as a Realized Loss to any Classes of Class A Certificates or any
Classes of Subordinate Certificates, each outstanding Class to which such
Realized Loss had previously been allocated shall be entitled to its share (with
respect to the Class 1A-PO Certificates, based on the PO Fraction of such
Mortgage Loan and, with respect to the Class A Certificates (other than the
Class 1A-PO Certificates) and Subordinate Certificates, based on their pro rata
share of the Non-PO Fraction of such Pool 1 Mortgage Loan) of such Recovery up
to the amount of such Realized Loss previously allocated to such Class on the
Distribution Date in the month following the month in which such recovery is
received. When the Principal Balance of a Class of Certificates has been reduced
to zero, such Class shall not be entitled to any share of such Recovery. In the
event that the amount of such Recovery exceeds the amount of such Recovery
allocated to each outstanding Class in accordance with the preceding provisions,
each outstanding Class shall be entitled to its pro rata share (determined as
described above) of such excess up to the amount of any unrecovered Realized
Loss previously allocated to such Class.

                  (e) The interest portion of Excess Special Hazard Losses,
Excess Fraud Losses and Excess Bankruptcy Losses occurring with respect to any
Pool 1 Mortgage Loan or Pool 2 Mortgage Loan shall be allocated among (i) each
Class of Group 1A Certificates or Group 2A Certificates, as applicable, and (ii)
each Class of Subordinate Certificates, pro rata based upon each Class's Group 1
Apportioned Interest Percentage or Group 2 Apportioned Interest Percentage, as
applicable for the related Distribution Date. In addition, after the Subordinate
Principal Balance has been reduced to zero, the interest portion of Realized
Losses (other than Excess Special Hazard Losses, Excess Fraud Losses and Excess
Bankruptcy Losses) occurring with respect to any Pool 1 Mortgage Loan or Pool 2
Mortgage Loan will be allocated among the outstanding Classes of Group 1A
Certificates and Group 2A Certificates, respectively, based on their Group 1A
Interest Percentages and Group 2A Interest Percentages.

                  (f) Realized Losses allocated in accordance with this Section
4.2 will be allocated on the Determination Date in the second month following
the month in which such loss was incurred with respect to the preceding
Distribution Date.

                  (g) With respect to any Distribution Date, the principal
portion of Realized Losses and recoveries attributable to previously allocated
Realized Losses allocated pursuant to this Section 4.2 will be allocated to each
Uncertificated Lower-Tier Interest in an amount equal to the amount allocated to
its respective Corresponding Upper-Tier Class or Classes as

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provided above, and the principal portion of Realized Losses and recoveries
attributable to previously allocated Realized Losses allocated pursuant to the
Section 4.2 will be allocated between the Class 1B-L Interest and the Class 1C-L
Interest, or the Class 2B-L Interest and the Class 2C-L Interest, as the case
may be, in such a manner to maintain a ratio of the balance of the Class 1C-L
Interest to the balance of the Class 2C-L Interest equal to the ratio of the
Pool 1 Balance less the Group 1A Principal Balance to the Pool 2 Balance less
the Group 2A Principal Balance.

                  With respect to any Distribution Date, the interest portion of
Realized Losses allocated pursuant to this Section 4.2 will be allocated to each
Uncertificated Lower-Tier Interest in the same relative proportions as interest
is allocated to such Uncertificated Lower-Tier Interest.

         SECTION 4.3. SERVICING CERTIFICATE.

         Not later than the Determination Date each month, the Master Servicer
shall deliver to the Trust Administrator a Servicing Certificate (substantially
in the form of Exhibit H or the form of computer readable media or such other
electronic form as may be agreed to by the Trust Administrator and the Master
Servicer) (which Servicing Certificate shall be deemed to constitute a
certification that the information contained in such Servicing Certificate is
true and correct in all material respects), stating the related Collection
Period, Due Date, Distribution Date, the series number of the Certificates, the
date of this Agreement, and:

                          (i) the aggregate amount of collections received on
         the Mortgage Loans on or prior to the Determination Date in respect of
         such Collection Period and Due Date, separately stating the amounts
         received in respect of Principal Collections and Interest Collections;

                         (ii) the aggregate amount of collections due on the
         Mortgage Loans for such Collection Period, whether or not such amounts
         were collected, separately stating the amounts due in respect of
         principal and interest; and

                        (iii) any other information regarding the Mortgage Loans
         necessary for the Trustee to make distributions and payments in
         accordance with Section 5.1 and for the Trust Administrator to prepare
         the reports required to be delivered to Certificateholders pursuant to
         Section 5.2.

         The Trust Administrator shall conclusively rely upon the information
contained in a Servicing Certificate for purposes of making distributions
pursuant to Section 5.1 and for all other purposes, shall have no duty to
inquire into such information and shall have no liability in so relying. The
format and content of the Servicing Certificate may be modified by the mutual
agreement of the Master Servicer and the Trust Administrator.

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                                    ARTICLE V

                             PAYMENTS; STATEMENTS TO
                CERTIFICATEHOLDERS; RIGHTS OF CERTIFICATEHOLDERS;

         SECTION 5.1. PAYMENTS.

         (a) With respect to the Distribution Account, on each Distribution
Date, the Trustee shall make the following disbursements from amounts
transferred thereto pursuant to Section 3.3(i), in the following order of
priority, and each such disbursement shall be treated as having occurred only
after all preceding disbursements have occurred:

                  (i) First, to the Trustee, the Trustee Fee;

                  (ii) Second, to each Certificateholder, from the amount and to
the extent of the Pool 1 Distribution Amount and the Pool 2 Distribution Amount,
respectively, such Certificateholder's share (based on the aggregate Percentage
Interests represented by the Certificates of the applicable Class held by such
Certificateholder) of the amounts and in the order of priority as set forth in
Article IV, by wire transfer in immediately available funds for the account of
each Certificateholder, or by any other means of payment acceptable to each
Certificateholder of record on the immediately preceding Record Date (other than
as provided in Section 10.1 respecting the final distribution), as specified by
each such Certificateholder and at the address of such Holder appearing in the
Certificate Register.

         (b) All reductions in the Certificate Principal Balance of a
Certificate effected by distributions of principal or allocations of Realized
Losses with respect to Mortgage Loans made on any Distribution Date shall be
binding upon all Holders of such Certificate and of any Certificate issued upon
the registration of transfer or exchange therefor or in lieu thereof, whether or
not such distribution is noted on such Certificate. The final distribution of
principal of each Certificate (and the final distribution with respect to the
Class A-R Certificate upon termination of the Trust) shall be payable in the
manner provided above only upon presentation and surrender thereof on or after
the Distribution Date therefor at the office or agency of the Trustee specified
in the notice delivered pursuant to Section 5.1(c) or Section 10.1.

         (c) Whenever, on the basis of Curtailments, Prepayments in Full and
Monthly Payments on the Mortgage Loans and Insurance Proceeds and Liquidation
Proceeds received and expected to be received during the applicable Collection
Period, the Trustee believes, that the entire remaining unpaid Class Principal
Balance of any Class of Certificates will become distributable on the next
Distribution Date, the Trustee, shall, no later than the Determination Date of
the month of such Distribution Date, mail or cause to be mailed to each Person
in whose name a Certificate to be so retired is registered at the close of
business on the Record Date, to the underwriters and to each Rating Agency a
notice to the effect that:

                  (i) it is expected that funds sufficient to make such final
         distribution will be available in the Collection Account on such
         Distribution Date, and

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<PAGE>   120

                  (ii) if such funds are available, (A) such final distribution
         will be payable on such Distribution Date, but only upon presentation
         and surrender of such Certificate at the office or agency of the
         Certificate Registrar maintained for such purpose (the address of which
         shall be set forth in such notice), and (B) no interest shall accrue on
         such Certificate after such Distribution Date.

         (d) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 10.1 respecting the final
distribution) by check or money order mailed to such Certificateholder at the
address appearing in the Certificate Register by wire transfer. Distributions
among Certificateholders shall be made in proportion to the Percentage Interests
evidenced by the Certificates held by such Certificateholders.

         (e) Distributions on Book-Entry Certificates. 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 Paying Agent, the Trustee, the Depositor,
the Master Servicer or the Seller shall have any responsibility therefor except
as otherwise provided by applicable law.

         SECTION 5.2. STATEMENTS.

         (a) Not later than 12:00 a.m. New York time on the day that is two
Business Days before each Distribution Date, the Trust Administrator will
deliver to the Trustee (by hard copy) and the Master Servicer, the Depositor and
the Seller (by electronic transmission) in the format specified in Exhibit K
(unless otherwise agreed to by the parties hereto), with a hard copy thereof to
be delivered on such Distribution Date, a statement (the "Remittance Report")
(based solely on the computer or electronic Servicing Certificate for such
Distribution Date provided pursuant to Section 4.1) containing the information
set forth below with respect to such Distribution Date:

         (i) the aggregate amount of the distribution to each Class of
Certificateholders on such Distribution Date;

         (ii) the amount of distribution set forth in paragraph (i) above in
respect of interest;

         (iii) the amount of distribution set forth in paragraph (i) above in
respect of principal;

         (iv) the Pool Distribution Amount for such Distribution Date in respect
of each Pool;

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<PAGE>   121

         (v) any Interest Shortfall Amount arising with respect to each Class,
any remaining unpaid Interest Shortfall Amount with respect to each Class, after
giving effect to such distribution and any Non-Supported Interest Shortfall or
the interest portion of Realized Losses allocable to such Class with respect to
such Distribution Date;

         (vi) for each Pool: the Adjusted Pool Amount, the Adjusted Pool Amount
(PO Portion), if applicable, and the Pool Scheduled Principal Balance of the
Mortgage Loans in such Pool and the aggregate Scheduled Principal Balance of the
Discount Pool 1 Mortgage Loans for such Distribution Date;

         (vii) for each Group of Certificates: the Class A Percentage, Class M
Percentage and Class B Percentage of each Class of Class B Certificates for the
following Distribution Date (without giving effect to Unscheduled Principal
Receipts for the related Pool received after the applicable Collection Period
for the current Distribution Date that are applied during such Collection
Period);

         (viii) the Class 1A-PO Deferred Amount;

         (ix) the aggregate Master Servicing Fee, Subservicing Fee, Trust
Administration Fee and Trustee Fee;

         (x) the Aggregate Loan Balance, as of the close of business on the last
day of the preceding Collection Period in respect of the Pool 1 Mortgage Loans
and the Pool 2 Mortgage Loans;

         (xi) the Class Principal Balance for each Class after giving effect to
payments allocated to principal above;

         (xii) the number and aggregate Loan Balances of the Mortgage Loans as
to which the scheduled monthly payment is delinquent for 30-59 days, 60-89 days
and 90 or more days, respectively, as of the end of the Collection Period in
respect of the Pool 1 Mortgage Loans and the Pool 2 Mortgage Loans;

         (xiii) the book value of any real estate which is acquired by the Trust
through foreclosure or grant of deed in lieu of foreclosure in respect of the
Pool 1 Mortgage Loans and the Pool 2 Mortgage Loans;

         (xiv) the aggregate amount of Prepayments received on the Mortgage
Loans during the previous Collection Period in respect of the Pool 1 Mortgage
Loans and the Pool 2 Mortgage Loans;

         (xv) the aggregate amount of scheduled principal payments received on
the Mortgage Loans during the previous Collection Period in respect of the Pool
1 Mortgage Loans and the Pool 2 Mortgage Loans;

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<PAGE>   122

         (xvi) the weighted average maturity of the Mortgage Loans as of the
first day of the month prior to the Distribution Date in respect of the Pool 1
Mortgage Loans and the Pool 2 Mortgage Loans;

         (xvii) the weighted average Loan Rate on the Mortgage Loans as of the
first day of the month prior to the Distribution Date in respect of the Pool 1
Mortgage Loans and the Pool 2 Mortgage Loans;

         (xviii) the aggregate amount of Realized Losses related to such
Collection Period in respect of the Pool 1 Mortgage Loans and the Pool 2
Mortgage Loans;

         (xix) the Aggregate Loan Balance and the Weighted Average Loan Rate, in
respect of the Pool 1 Mortgage Loans and the Pool 2 Mortgage Loans; and

         (xx) the Notional Amount of the Class 1A-WIO Certificates.

         The Trustee shall forward such report to the Certificateholders on such
Distribution Date. The Trustee may fully rely upon the information contained in
each Remittance Report and shall have no liability with respect to information
provided by the Master Servicer or the Trust Administrator or to any payments or
distributions made by the Trustee hereunder in reliance on such information. The
Trustee shall not be obligated to verify, recompute, reconcile or recalculate
any information contained in any Remittance Report.

         To the extent that there are inconsistencies between the telecopy of
the Remittance Report and the hard copy thereof, the Master Servicer may rely
upon the latter.

         In the case of information furnished pursuant to subclause (i) 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 Cut-Off
Date.

         (b) Within a reasonable period of time after the end of each calendar
year, the Trust Administrator shall furnish to each Person who at any time
during the calendar year was a Certificateholder, 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 (ii) and
(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 Trustee shall forward to the
Residual Certificateholders a copy of the reports forwarded to any other
Certificateholders in respect of such Distribution Date and a statement setting
forth the amounts actually distributed to the Residual Certificateholders on
such Distribution Date together with such other information as the Trustee deems
necessary or appropriate.

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<PAGE>   123

         (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 Residual 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 Residual 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) The Master Servicer and the Trust Administrator shall furnish to
each Certificateholder (if requested in writing), during the term of this
Agreement, such periodic, special, or other reports or information, whether or
not provided for herein, as shall be necessary, reasonable, or appropriate with
respect to the Certificateholder or otherwise with respect to the purposes of
this Agreement, all such reports or information to be provided by and in
accordance with such applicable instructions and directions (if requested in
writing) as the Certificateholder may reasonably require; provided, that the
Master Servicer and the Trust Administrator shall be entitled to be reimbursed
by such Certificateholder for their respective fees and actual expenses
associated with providing such reports, if such reports are not generally
produced in the ordinary course of their respective businesses or readily
obtainable.

         (f) Reports and computer tapes furnished by the Master Servicer
pursuant to this Agreement shall be deemed confidential and of a proprietary
nature, and shall not be copied or distributed except to the extent provided in
this Agreement and to the extent required by law, and to the extent the Seller
instructs the Trust Administrator in acting to furnish information regarding the
Trust or the Mortgage Loans to third-party information providers. No Person
entitled to receive copies of such reports or tapes or lists of
Certificateholders shall use the information therein for the purpose of
soliciting the customers of the Seller or for any other purpose except as set
forth in this Agreement.

         SECTION 5.3. DISTRIBUTION ACCOUNT.

         The Trustee shall establish at the Corporate Trust Office a separate
trust account (the "Distribution Account") titled "Norwest Bank Minnesota,
National Association as Trustee, in trust for the registered holders of FURST
Mortgage Pass-Through Certificates, Series 1999-A." The Distribution Account
shall be maintained as an Eligible Account. The Trustee shall deposit any
amounts representing payments on and any collections in respect of the Mortgage
Loans received by it immediately following receipt thereof, including, without
limitation, all amounts withdrawn by the Master Servicer from the Collection
Account pursuant to Section 3.3 for deposit to the Distribution Account.

         SECTION 5.4. INVESTMENT OF ACCOUNTS.

         (a) Consistent with any requirements of the Code, all or a portion of
the Distribution Account held by the Trustee shall be (i) uninvested or (ii)
invested and reinvested by the Trustee,

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in one or more Eligible Investments bearing interest or sold at a discount. Any
investment earnings on funds held in the Distribution Account shall be for the
account of the Trustee. No such investment in such accounts shall mature later
than the Business Day immediately preceding the next Distribution Date (except
that (i) if such Eligible Investment is an obligation of or is advised or
managed by the Trustee or an affiliate of the Trustee, then such Eligible
Investment shall mature not later than such Distribution Date and (ii) any other
date as may be approved by the Rating Agencies).

         (b) If any amounts are needed for disbursement from any Account held by
the Trustee and sufficient uninvested funds are not available to make such
disbursements, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account.

         (c) The Trustee shall deposit in the Distribution Account from its own
funds the amount of any loss incurred in respect of any Eligible Investment held
therein which is in excess of the income and gain thereon immediately upon
realization of such loss, without any right to reimbursement therefor.

         SECTION 5.5. [RESERVED]

                                   ARTICLE VI

                                THE CERTIFICATES

         SECTION 6.1. THE CERTIFICATES.

         (a) The Group 1A Certificates, the Class 2A Certificates, the Class M
Certificates, the Class B Certificates, the Residual Certificates shall be
substantially in the forms set forth in Exhibits A-1, A-2, A-3, B-1 and B-2,
respectively, and shall, on original issue, be executed, authenticated and
delivered by the Trustee to or upon the order of the Seller concurrently with
the sale and assignment to the Trustee of the Trust Assets.

         The Group 1A Certificates (other than the Class 1A-WIO Certificates and
the Residual Certificates), the Class 2A Certificates, the Class M Certificates
and the Class B Certificates shall be initially evidenced by one or more
certificates representing the entire aggregate Original Class Principal Balance
for each Class and shall be held in minimum dollar denominations of $25,000 and
integral dollar multiples in excess thereof. The Class 1A-WIO Certificates shall
be initially evidenced by one or more certificates representing the entire Class
1A-WIO Notional Amount as of the Cut-Off Date and shall be held in minimum
dollar denominations of $56,352,150 and integral dollar multiples in excess
thereof. The Class A-R Certificate and Class A-LR Certificate shall each be
initially evidenced by one certificate representing the entire Original Class
Principal Balance of such Class.

         (b) The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer under its seal imprinted
thereon. Certificates bearing the

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manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such authentication
upon any Certificate 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.

         Subject to Section 6.2(b), the Group 1A Certificates (other than the
Class A-R and Class A-LR Certificates), the Class 2A Certificates, the Class M
Certificates, the Class B-1 Certificates, and the Class B-2 Certificates shall
be Book-Entry Certificates. The Class A-R, Class A-LR, Class B-3, Class B-4 and
Class B-5 Certificates shall not be Book-Entry Certificates.

         (c) The principal balance (or with respect to the Class 1A-WIO
Certificates, the notional amount) of each class of Certificates as of the
Cut-Off Date is:

                  Class                         Principal Amount
                  -----                         ----------------
         Class 1A Certificates                       $150,744,000

         Class 2A Certificates                        $55,130,000

         Class 1A-PO Certificates                      $1,438,164

         Class 1A-WIO Certificates             $113,352,150.27(1)

         Class M Certificates                          $1,914,000

         Class B-1 Certificates                        $1,064,000

         Class B-2 Certificates                          $744,000

         Class B-3 Certificates                          $744,000

         Class B-4 Certificates                          $426,000

         Class B-5 Certificates                       $425,259.29

         Class A-R Certificate                                $50

         Class A-LR                                           $50

(1) Notional amount

         SECTION 6.2. REGISTRATION OF TRANSFER AND EXCHANGE OF THE CERTIFICATES.

         (a) The Certificate Registrar shall maintain or cause to be maintained
a Certificate Register in its Corporate Trust Office in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of the Certificates and of

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Transfers of the Certificates as herein provided. The Trustee shall initially
serve as Certificate Registrar for the purpose of registering the Certificates
and Transfers of the Certificates as herein provided. Neither the Trustee nor
the Certificate Registrar shall be required to monitor, determine or inquire as
to compliance with the transfer restrictions with respect to the Junior
Subordinate Certificates in the form of Book-Entry Certificates. Neither the
Trustee nor the Certificate Registrar shall have any liability for transfers of
Book-Entry Certificates made through the book-entry facilities of DTC or between
or among any Depository Participants or Certificate Owners, made in violation of
applicable restrictions.

         Upon surrender for registration of Transfer of any Certificate (other
than Book-Entry Certificates which shall be subject to Section 6.2(b)(i) and
(ii) below) at any office or agency of the Certificate Registrar maintained for
such purpose pursuant to the foregoing paragraph and, in the case of the Class M
Certificates, the Class B Certificates and Residual Certificates upon the
satisfaction of those conditions applicable to such Certificates, as set forth
in Sections 6.2(b) and (c) hereof, the Trustee shall execute, authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of a like Class and of the same aggregate Percentage Interest.

         At the option of the Certificateholders, Certificates (other than
Book-Entry Certificates which shall be subject to Section 6.2(b)(i) and (ii)
below) may be exchanged for other Certificates in authorized denominations and
the same aggregate Percentage Interests, upon surrender of the Certificates to
be exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute, authenticate and deliver
the Certificates of such Class which the Certificateholder making the exchange
is entitled to receive. Every Certificate presented or surrendered for
registration of Transfer or exchange shall (if so required by the Trustee or the
Certificate Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder thereof or its attorney duly authorized
in writing.

         No service charge shall be made for any registration of Transfer or
exchange of any Certificates, but the Certificate Registrar 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 shall be
canceled by the Certificate Registrar and disposed of pursuant to its standard
procedures.

         (b) (i) Except as provided in paragraph (b)(ii) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of such Certificates may not
be transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal

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with the Depository as representative of the Certificate Owners of the
Certificates for purposes of exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and Persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners; (vii) the
Depository shall be responsible for crediting the amount of distributions to the
accounts of the Certificate Owners entitled thereto, in accordance with the
Depository's normal procedures; (viii) unless and until Definitive Certificates
are issued pursuant to Section 6.2(b)(ii) below, the Depository will make
book-entry transfers among the Depository Participants and receive and transmit
distributions of principal of and interest on the Book-Entry Certificates to
such Depository Participants; and (ix) whenever notice or other communication to
the Certificate Owners is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.2(b)(ii) below, the Trustee shall give all such notices and
communications specified herein to be given to such Certificate Owners to the
Depository.

                  All transfers by Certificate Owners of Book-Entry Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owners. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners that it represents or of brokerage firms for which its acts
as agent in accordance with the Depository's normal procedures. The parties
hereto are hereby authorized to execute a Depositary Agreement with the
Depository or take such other action as may be necessary or desirable to
register a Book-Entry Certificate to Depository. In the event of any conflict
between the terms of any such Depositary Agreement and this Agreement the terms
of this Agreement shall control.

                  (ii) If (i)(x) the Depository or the Depositor advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as Depository, and (y) the Trustee or the
Depositor is unable to locate a qualified successor, (ii) the Depositor, at its
sole option, with consent of the Trustee, elects to terminate the book-entry
system through the Depository or (iii) after the occurrence of an Event of
Default, the Certificate Owners of each Class of Book-Entry Certificates
representing Percentage Interests aggregating not less than 51% advises the
Trustee and Depository through the Depository Participants in writing that the
continuation of a book-entry system through the Depository to the exclusion of
definitive, fully registered certificates (the "Definitive Certificates") to
Certificate Owners is no longer in the best interests of the Certificate Owners.
Upon surrender to the Trustee of each Class of Book-Entry Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall, at the Depositor's expense, in the case of (i)
and (ii) above, or the Seller's expense, in the case of (iii) above, execute and
authenticate the Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, the Trustee, the Master Servicer,
any Paying Agent and the Depositor shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.

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                  (iii) No Transfer of a Class B-3 Certificate, Class B-4
Certificate, or Class B-5 Certificate shall be made or registered unless such
Transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with the
Securities Act and laws. In the event that such a Transfer of a Class B-3
Certificate, Class B-4 Certificate, or Class B-5 Certificate is to be made, the
Trustee may require (A) a certificate from the Certificateholder desiring to
effect such transfer substantially in the form attached hereto as Exhibit L-1
and a certificate from such Certificateholder's prospective transferee
substantially in the form attached hereto either as Exhibit L-2A or as Exhibit
L-2B; or (B) a written Opinion of Counsel substantially in the form of Exhibit
L-3 or otherwise acceptable to the Trustee to the effect that such Transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from the Securities Act and laws or is being made pursuant to
such Act and laws. The Holder of a Class B-3 Certificate, Class B-4 Certificate,
or Class B-5 Certificate desiring to effect such Transfer shall, and does hereby
agree to, indemnify the Trustee and the Master Servicer 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.

         No Opinion of Counsel delivered pursuant to this subsection 6.2(b)(iii)
shall be an expense of the Trustee or the Master Servicer, but shall, in each
case, be paid either by the Holder of the Class B-3 Certificate, Class B-4
Certificate, or Class B-5 Certificate subject to the proposed Transfer or by the
proposed transferee.

         (c) No Transfer of a Class M Certificate in the form of a Definitive
Certificate, a Class B Certificate in the form of a Definitive Certificate or
Residual Certificate shall be made or registered unless the Trustee shall have
received either (i) a representation letter in the form of Exhibit J from the
transferee of such Class M Certificate, Class B Certificate or Residual
Certificate, or (ii) in the case of any such Class M Certificate, Class B
Certificate or Residual Certificate presented for registration in the name of an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and to Section 4975 of the Code (or comparable
provisions of any subsequent enactments), or a trustee of any such plan, an
Opinion of Counsel in form and substance satisfactory to the Trustee to the
effect that the purchase or holding of such Class M Certificate, Class B
Certificate or Residual Certificate will not result in the assets of the Trust
being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee, the
Depositor, the Master Servicer or the Seller to any obligation in addition to
those undertaken in this Agreement. No representation letter or Opinion of
Counsel delivered pursuant to this subsection 6.2(c) shall be an expense of the
Trustee, the Depositor, the Master Servicer or the Seller, but shall, in each
case, be paid either by the Holder of the Class M Certificate, Class B
Certificate or Residual Certificate subject to the proposed Transfer or by the
proposed transferee.

         By its acceptance of a Class M Certificate, a Class B Certificate or
Residual Certificate, whether upon original issuance or subsequent transfer,
each Holder of such Certificate acknowledges the restrictions on transfer of
such Certificate set forth thereon and in this Agreement and agrees that it will
transfer such a Certificate only as provided herein. In addition, each purchaser
of a Class M Certificate in the form of a Book-Entry Certificate or a Class B

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Certificate in the form of a Book-Entry Certificate shall be deemed to have made
the representation contained in paragraph 3 on the fifth page of Exhibit J
hereto.

         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 (vi) 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:

               (i) Each Person holding or acquiring any Ownership Interest in a
         Residual Certificate shall be a Permitted Transferee, shall not be
         holding or acquiring such Ownership Interest on behalf of any Person
         that is not a Permitted Transferee and shall promptly notify the
         Trustee of any change or impending change in its status or the status
         of any beneficial owner as a Person who is not 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) No Ownership Interest in a Residual Certificate may be
         transferred without the express written consent of the Trustee. In
         connection with any proposed registered Transfer of any Ownership
         Interest in a Residual Certificate, the Trustee shall, as a condition
         to such consent, require delivery to it of each of the following:

                           (A) an affidavit from the proposed transferee in the
                  form attached as Exhibit M (a "Transfer Affidavit") to the
                  effect that (a) 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; (b) the proposed transferee does
                  not have the intention to impede the assessment or collection
                  of tax legally required to be paid with respect to any
                  Ownership Interest in a Residual Certificate; (c) it has no
                  present knowledge or expectation that it will become insolvent
                  or subject to a bankruptcy proceeding for so long as it holds
                  any Ownership Interest in a Residual Certificate; and (d) it
                  will abide by the provisions of clause (vii) below; and

                           (B) a covenant of the proposed transferee stating
                  that the proposed transferee agrees to be bound by and to
                  abide by the Transfer restrictions applicable to the Residual
                  Certificates.

                  (iv) Notwithstanding the delivery of a Transfer Affidavit by a
         proposed transferee under clause (iii) above, if an officer of the
         Trustee assigned to its Corporate Trust Administration Department has
         actual knowledge that the proposed transferee is not a Permitted
         Transferee, no Transfer of any Ownership Interest in a Residual
         Certificate to such proposed transferee shall be effected.

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                  (v) Any attempted or purported registered Transfer of any
         Ownership Interest in a Residual Certificate in violation of the
         provisions of subsections 6.2(b) or (c) shall be absolutely null and
         void and shall vest no rights in the purported Transferee, to the
         extent permitted by applicable law. If any purported Transferee shall,
         in violation of the provisions of subsections 6.2(b) or (c), become a
         Holder of a Residual Certificate, the prior Holder of such Certificate
         that is a Permitted Transferee shall, upon discovery that the
         registration of Transfer of such Residual Certificate was not permitted
         by subsections 6.2(b) or (c), be restored to all rights as Holder
         thereof retroactive to the date of registration of Transfer of such
         Residual Certificate. The Trustee shall be under no liability to any
         Person for any registration of Transfer of a Residual Certificate that
         is in fact not permitted by subsections 6.2(b) or (c) or for making any
         distributions due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the provisions of
         the Agreement. The Trustee shall be entitled, but shall not be
         obligated, to recover from any Holder of a Residual Certificate that
         was 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 shall be distributed and
         delivered by the Trustee to the prior Holder of such Certificate that
         is a Permitted Transferee.

                  (vi) If any Person other than a Person who is a Permitted
         Transferee acquires any Ownership Interest in a Residual Certificate in
         violation of the restrictions in subsections 6.2(b) or (c), the Trustee
         shall have the right, but shall not be obligated, without notice to the
         Holder of such Residual Certificate or any other Person having an
         Ownership Interest therein, to sell such Residual Certificate to a
         purchaser selected by the Trustee on such terms as the Trustee may
         choose. Such purchaser may be the Trustee itself or any affiliate of
         the Trustee. The proceeds of such sale, net of commissions (which may
         include commissions payable to the Trustee or its affiliates), expenses
         and taxes due, if any, shall be remitted by the Trustee to the previous
         Holder of such Residual Certificate that is a Permitted Transferee,
         except that in the event that the Trustee determines that the Holder of
         such Residual Certificate may be liable for any amount due under
         subsection 6.2(b) or (c) or any other provisions of this Agreement, the
         Trustee may withhold a corresponding amount from such remittance as
         security for such claim. The terms and conditions of any sale under
         this clause (vi) shall be determined in the sole discretion of the
         Trustee, and the Trustee shall not be liable to any Person having an
         Ownership Interest in a Residual Certificate as a result of its
         exercise of such discretion.

                  (vii) Each Person holding or acquiring any Ownership Interest
         in a Residual Certificate shall provide the Trustee with its written
         agreement (in form and substance satisfactory to the Trustee) (a) to
         require a Transfer Affidavit in the form of Exhibit M hereto from any
         other Person to whom such Person attempts to transfer any Ownership
         Interest in a Residual Certificate and (b) not to transfer any
         Ownership Interest in, or to cause the transfer of any Ownership
         Interest in, a Residual Certificate if it has actual knowledge that
         such other Person is not a Permitted Transferee or will be holding any
         Ownership Interest in a Residual Certificate on behalf of a Person that
         is not a Permitted Transferee.

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         Upon notice to the Trustee by any Person, or if an officer of the
Trustee assigned to its Corporate Trustee Administration Department otherwise
has actual knowledge, that any Ownership Interest in a Residual Certificate has
been transferred, either directly or indirectly, to any Person that is not a
Permitted Transferee or an agent thereof (including a broker, nominee or
middleman) in contravention of the foregoing restrictions, the Trustee agrees to
furnish to the Internal Revenue Service and to the Person described in Section
860E(e)(3) of the Code the information described in Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Treasury Regulation Section
1.860E-2(a)(5), or any successor regulation thereto. The Trustee shall be
permitted to be reimbursed by such Person for the cost of providing such
information, but the Trustee shall in all events be required to furnish such
information.

         The foregoing provisions of the third and fourth paragraphs of
subsection 6.2(c) shall cease to apply to Transfers occurring on or after the
date on which there shall have been delivered to the Trustee, in form
satisfactory to the Trustee, a Nondisqualification Opinion.

         SECTION 6.3. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

         If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (ii) there is delivered
to the Trustee, the Depositor and the Certificate Registrar such reasonable
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Trustee or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, 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 6.3, the Trustee or the Certificate Registrar 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 Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 6.3, 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 6.4. PERSONS DEEMED OWNERS.

         Prior to due presentation of a Certificate for registration of
Transfer, the Seller, the Master Servicer, the Trustee, the Certificate
Registrar, any Paying Agent, and any agent of the Seller, the Master Servicer,
the Trustee, any Paying Agent or the Certificate Registrar may treat the Person,
including a Depository, in whose name any Certificate is registered as the owner
(the "Owner") of such Certificate for the purpose of receiving distributions
pursuant to Section 5.1 and for all other purposes whatsoever, and none of the
Seller, the Master Servicer, the Depositor, the Trustee, the Certificate
Registrar, nor any agent of any of them shall be affected by notice to the
contrary.

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         SECTION 6.5. APPOINTMENT OF PAYING AGENT.

         (a) The Paying Agent shall make distributions to the Holders of
Certificates from the Distribution Account pursuant to Section 5.1 and shall
report the amounts of such distributions to the Trustee. The duties of the
Paying Agent may include the obligation (i) to withdraw funds from the
Distribution Account for the purpose of making the distributions referred to
above and (ii) to distribute statements and provide information to
Certificateholders as required hereunder. The Paying Agent hereunder shall at
all times be a national banking association or a corporation duly incorporated
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a successor
Paying Agent, which appointment shall be reasonably satisfactory to the
Depositor and the Seller.

         (b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Holders of Certificates in trust for
the benefit of the Holders of Certificates entitled thereto until such sums
shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code regarding the withholding of payments in
respect of federal income taxes due from Certificate Owners and otherwise comply
with the provisions of this Agreement applicable to it.

         SECTION 6.6. MAINTENANCE OF OFFICE OR AGENCY.

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in Minneapolis, Minnesota where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.

                                   ARTICLE VII

                 THE DEPOSITOR, THE SELLER, THE MASTER SERVICER
                           AND THE TRUST ADMINISTRATOR

         SECTION 7.1. LIABILITY OF THE DEPOSITOR, THE SELLER, THE MASTER
SERVICER AND THE TRUST ADMINISTRATOR.

         The Seller, the Master Servicer and the Trust Administrator shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Seller, the Master Servicer and the Trust
Administrator, as the case may be, herein. The Depositor shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Depositor.

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         SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SELLER, THE MASTER SERVICER OR THE TRUST ADMINISTRATOR.

         Any corporation into which the Depositor, the Seller, the Master
Servicer or the Trust Administrator may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Depositor, the Seller, the Master Servicer or the Trust Administrator shall be a
party, or any corporation succeeding to the business of the Depositor, the
Seller, the Master Servicer or the Trust Administrator (which, in the case of
the Master Servicer, may be limited to its residential mortgage servicing
business) shall be the successor of the Depositor, the Seller, the Master
Servicer or the Trust Administrator, 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.

         SECTION 7.3. LIMITATION ON LIABILITY OF THE MASTER SERVICER, THE TRUST
ADMINISTRATOR AND OTHERS.

         None of the Master Servicer, the Trust Administrator or any of the
directors or officers or employees or agents of the Master Servicer or the Trust
Administrator shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Master Servicer or the Trust Administrator in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Master Servicer, the Trust Administrator or any
such Person against any liability which would otherwise be imposed by reason of
its willful misfeasance, bad faith or gross negligence in the performance of
duties of the Master Servicer or the Trust Administrator, as applicable, or by
reason of its reckless disregard of its obligations and duties of the Master
Servicer or the Trust Administrator, as applicable, hereunder. The Master
Servicer, the Trust Administrator and any director or officer or employee or
agent of the Master Servicer or the Trust Administrator may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Master Servicer, the Trust
Administrator and any director or officer or employee or agent of the Master
Servicer or the Trust Administrator shall be indemnified by the Trust and held
harmless 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 related 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 related to the Master Servicer's or
the Trust Administrator's, as applicable, failure to perform its obligations
under this Agreement or any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Master Servicer nor the Trust Administrator shall be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to duties to service the Mortgage Loans in accordance with this
Agreement, and which in its opinion may involve it in any expense or liability;
provided, however, that the Master Servicer or the Trust Administrator may in
its sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Agreement, and the rights and duties of the parties
hereto and the interests of the Certificateholders hereunder. In such event, the
reasonable legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust

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and the Master Servicer or the Trust Administrator, as applicable, shall be
entitled to be reimbursed therefor. The Master Servicer's and the Trust
Administrator's right to indemnity or reimbursement pursuant to this Section 7.3
shall survive any resignation or termination of the Master Servicer or the Trust
Administrator, as applicable, pursuant to Section 7.4 or 8.1 with respect to any
losses, expenses, costs or liabilities arising prior to such resignation or
termination (or arising from events that occurred prior to such resignation or
termination).

         SECTION 7.4. MASTER SERVICER NOT TO RESIGN.

         Subject to the provisions of Section 7.2, the Master Servicer shall not
resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it or its subsidiaries or
Affiliates, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer or its
subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Master Servicer has proposed a
successor Master Servicer to the Trustee in writing and such proposed successor
Master Servicer is reasonably acceptable to the Trustee; and (b) each Rating
Agency shall have delivered a letter to the Trustee prior to the appointment of
the successor Master Servicer stating that the proposed appointment of such
successor Master Servicer as Master Servicer hereunder will not result in the
reduction or withdrawal of the then current rating of any Class of Certificates;
provided, however, that no such resignation by the Master Servicer shall become
effective until such successor Master Servicer or, in the case of (i) above, the
Trustee shall have assumed the Master Servicer's responsibilities and
obligations hereunder (including, without limitation the obligations of the
Master Servicer under Section 3.4) or the Trustee shall have designated a
successor Master Servicer in accordance with Section 8.2. Any such resignation
shall not relieve the Master Servicer of responsibility for any of the
obligations specified in Sections 8.1 and 8.2 as obligations that survive the
resignation or termination of the Master Servicer. Any such determination
permitting the resignation of the Master Servicer pursuant to clause (i) above
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Trustee and the Certificateholders. The Master Servicer shall have no claim
(whether by subrogation or otherwise) or other action against any
Certificateholder for any amounts paid by the Master Servicer pursuant to any
provision of this Agreement. The Trustee shall provide written notice to each
Holder of a Certificate promptly after any resignation by the Master Servicer
hereunder.

         SECTION 7.5. DELEGATION OF DUTIES.

         In the ordinary course of business, the Master Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those with which the Master Servicer complies pursuant to Section
3.1. Such delegation shall not relieve the Master Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.4. The Master Servicer shall provide
the Trustee with written notice prior to the delegation of any of its duties to
any Person other than any of the Master Servicer's Affiliates or their
respective successors and assigns.

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         SECTION 7.6. INDEMNIFICATION OF THE TRUST BY THE SELLER AND MASTER
SERVICER.

         (a) The Master Servicer shall indemnify and hold harmless the Trust and
the Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of the Master Servicer's activities or omissions
in servicing or administering the Mortgage Loans that are not in accordance with
this Agreement, including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim related
to the Master Servicer's failure to perform hereunder. Any such indemnification
shall not be payable from the assets of the Trust. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. The provisions of this Section shall survive the
termination of the Agreement.

         (b) Notwithstanding anything to the contrary contained herein, the
Seller (i) agrees to be liable directly to the injured party for the entire
amount and (ii) shall indemnify and hold harmless the Trust and the Trustee from
and against any loss, liability, expense, damage, claim or injury (including,
without limitation, any prohibited transactions tax imposed on the Trust, but
excluding any loss, liability, expense, damage, claim or injury attributable to
a Holder of a Regular Certificate in its capacity as an investor in such
Certificate as a result of defaults on the Mortgage Loans) arising out of or
based on this Agreement by reason of any acts, omissions, or alleged acts or
omissions arising out of activities of the Trust or the Trustee, or the actions
of the Master Servicer or the Trust Administrator including, in either case, but
not limited to, amounts payable to the Master Servicer pursuant to Section 7.3,
any judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim; provided, that the Seller shall not indemnify the
Trustee (but shall indemnify any other injured party) if such loss, liability,
expense, damage or injury is due to the Trustee's willful malfeasance, bad faith
or negligence or by reason of the Trustee's reckless disregard of its
obligations hereunder. The provisions of this indemnity shall run directly to
and be enforceable by an injured party subject to the limitations hereof. The
provisions of this Section shall survive the termination of the Agreement.

                                  ARTICLE VIII

                                     DEFAULT

         SECTION 8.1. EVENTS OF DEFAULT.

         If any one of the following events (an "Event of Default") shall occur
and be continuing:

                  (i) (A) The failure by the Master Servicer to make any Monthly
         Advance; or (B) any other failure by the Master Servicer to deposit in
         any Account any deposit required to be made under the terms of this
         Agreement which continues unremedied for a period of two Business Days
         after the earlier of (a) knowledge of the Master Servicer of such
         failure and (b) the date upon which written notice of such failure,
         requiring the same

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         to be remedied, and stating that such notice is a "Notice of Default"
         hereunder, shall have been given to the Master Servicer by the Trustee
         or to the Master Servicer and the Trustee by any Certificateholder; or

                  (ii) The failure by the Master Servicer to make any required
         Servicing Advance which failure continues unremedied for a period of 30
         days, or the failure on the part of the Master Servicer duly to observe
         or perform in any material respect any other covenants or agreements of
         the Master Servicer set forth in the Certificates or in this Agreement,
         which failure, in each case, materially and adversely affects the
         interests of Certificateholders and which continues unremedied for a
         period of 60 days after the earlier of (a) knowledge of the Master
         Servicer of such failure and (b) date on which written notice of such
         failure, requiring the same to be remedied, and stating that such
         notice is a "Notice of Default" hereunder, shall have been given to the
         Master Servicer by the Trustee or to the Master Servicer and the
         Trustee by any Certificateholder; or

                  (iii) The entry against the Master Servicer of a decree or
         order by a court or agency or supervisory authority having jurisdiction
         in the premises for the appointment of a trustee, conservator, receiver
         or liquidator in any insolvency, conservatorship, receivership,
         readjustment of debt, marshalling of assets and liabilities or similar
         proceedings, or for the winding up or liquidation of its affairs, and
         the continuance of any such decree or order unstayed and in effect for
         a period of 60 consecutive days; or

                  (iv) The consent by the Master Servicer to the appointment of
         a trustee, conservator, receiver or liquidator in any insolvency,
         conservatorship, receivership, readjustment of debt, marshalling of
         assets and liabilities or similar proceedings of or relating to the
         Master Servicer or of or relating to substantially all of its property;
         or 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 voluntarily suspend
         payment of its obligations;

                  (v) Any breach by the Master Servicer of a representation or
         warranty made in Section 2.4, which breach continues unremedied for a
         period of 60 days after the earlier of (a) knowledge of the Master
         Servicer of such failure and (b) the date on which written notice of
         such breach, requiring the same to be remedied, and stating that such
         notice is a "Notice of Default" hereunder, shall have been given to the
         Master Servicer by the Trustee or to the Master Servicer and the
         Trustee by any Certificateholder; or

                  (vi) the occurrence of a Master Servicer Removal Right Event;

then, and in each and every such case, so long as an Event of Default shall not
have been remedied by the Master Servicer within the time periods provided for
above, (x) subject to the succeeding paragraph, with respect solely to clause
(i)(A) above, if such Monthly Advance is not made by 4:00 P.M. New York time on
the second Business Day following written notice to the Master Servicer of such
event, the Trustee shall terminate all of the rights and obligations of the
Master Servicer under this Agreement and the Trustee, or a successor Master
Servicer appointed

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in accordance with Section 8.2, shall immediately make such Monthly Advance and
assume, pursuant to Section 8.2 hereof, the duties of a successor Master
Servicer and (y) in the case of clause (i)(B), (ii), (iii), (iv), (v), or (vi),
the Trustee shall, at the direction of the Holders of each Class Certificates
evidencing Percentage Interests aggregating not less than 51% by notice then
given in writing to the Master Servicer, terminate all of the rights and
obligations of the Master Servicer as Master Servicer under this Agreement. Upon
the Trustee's obtaining actual knowledge that a required amount described in
clause (i) above has not been made by the Master Servicer, the Trustee shall
notify the Master Servicer in writing as soon as is reasonably practical. Any
such notice to the Master Servicer shall also be given to each Rating Agency and
each Certificateholder. 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 or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section 8.1; and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master Servicer as
attorney-in-fact or otherwise, 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 of each Mortgage Loan and related documents, or otherwise. The
Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer hereunder,
including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Master Servicer and to be deposited by it in the Collection Account, or that
have been deposited by the Master Servicer in the Collection Account or
thereafter received by the Master Servicer with respect to the Mortgage Loans.
All costs and expenses (including attorneys' fees) incurred in connection with
transferring the Mortgage Files to the successor Master Servicer and amending
this Agreement to reflect such succession as Master Servicer pursuant to this
Section 8.1 shall be paid by the predecessor Master Servicer (or if the
predecessor Master Servicer is the Trustee, the initial Master Servicer) upon
presentation of reasonable documentation of such costs and expenses.

         Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.1(i) for a period of ten Business Days or under Section 8.1(ii)
for a period of 30 Business Days, shall not constitute an Event of Default if
such delay or failure could not be prevented by the existence of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
of God or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Master Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Agreement
and the Master Servicer shall provide the Trustee and the Certificateholders
with an Officers' Certificate giving prompt notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
The Master Servicer shall immediately notify the Trustee in writing of any Event
of Default and such notice shall include references to this Agreement, the
Trust, and the Certificates. Furthermore, for purposes of this Section 8.1, the
Trustee shall not be deemed to have knowledge of an Event of Default unless a
Responsible Officer of the Trustee assigned to and working in the Corporate
Trust Office has actual knowledge thereof or unless written notice of any event
which is in fact such an Event of Default is received by the Trustee.

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         SECTION 8.2. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

         (a) On and after the time the Master Servicer receives a notice of
termination pursuant to Section 8.1 or has resigned pursuant to Section 7.4, the
Trustee shall be the successor in all respects to the Master Servicer in its
capacity as 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 placed on the Master Servicer by the terms and
provisions hereof, provided, however, that 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
Trustee shall be entitled to all such compensation and expenses as the Master
Servicer would have been entitled to hereunder if no such notice of termination
had been given. Notwithstanding the above, (i) if the Trustee is unwilling to
act as successor Master Servicer, or (ii) if the Trustee is legally unable so to
act, the Trustee may (in the situation described in clause (i) above) or shall
(in the situation described in clause (ii) above) appoint or petition a court of
competent jurisdiction to appoint, any established housing and home finance
institution, bank or other mortgage loan servicer having a net worth of not less
than $50,000,000 as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer hereunder. Pending appointment of a successor to the Master
Servicer hereunder, unless the Trustee is prohibited by law from so acting, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation and expenses which the Master Servicer would otherwise have
received pursuant to Section 3.9 (or such lesser compensation as the Trustee and
such successor shall agree). The appointment of a successor Master Servicer
shall not affect any liability of the predecessor Master Servicer which may have
arisen under this Agreement prior to its termination as Master Servicer
(including, without limitation, the obligation to pay any deductible under an
insurance policy pursuant to Section 3.5 or to indemnify the Trustee pursuant to
Section 7.6), nor shall any successor Master Servicer be liable for any acts or
omissions of the predecessor Master Servicer or for any breach by such Master
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.

         (b) Any successor, including the Trustee, to the Master Servicer as
Master Servicer shall during the term of its service as Master Servicer (i)
continue to service and administer the Mortgage Loans for the benefit of
Certificateholders and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13.

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         SECTION 8.3. WAIVER OF DEFAULTS.

         The Trustee may, on behalf of all Certificateholders, waive any events
permitting removal of the Master Servicer as servicer pursuant to this Article
VIII, provided, however, that the Trustee may not waive a default in making a
required distribution on a Certificate without the consent of the Holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived.

         SECTION 8.4. NOTIFICATION TO CERTIFICATEHOLDERS.

         Upon any termination or appointment of a successor to the Master
Servicer pursuant to this Article VIII or Section 7.4, the Trustee shall give
prompt written notice thereof to the Certificateholders at their respective
addresses appearing in the Certificate Register and each Rating Agency.

                                   ARTICLE IX

                                   THE TRUSTEE

         SECTION 9.1. DUTIES OF TRUSTEE.

         The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred (which has not been cured) of
which a Responsible Officer of the Trustee has actual knowledge, the Trustee
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 his or her own
affairs.

         The Trustee represents and warrants to the Seller, the Master Servicer
and the Depositor that the Trustee's computer and other systems used in
performing its duties and obligations under this Agreement will be modified and
maintained to operate in a manner such that at all times, including on and after
January 1, 2000, (1) the Trustee can perform such duties and obligations in
accordance with the terms of this Agreement and (2) the Trustee can operate its
business in the same manner as it is operating on the date hereof.

         The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are in
the form required by this Agreement; provided, however, that the Trustee will
not be responsible for the accuracy or content of any such resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments.

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         No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:

                  (i) prior to the occurrence of an Event of Default, and after
         the curing of all such Events of Default which may have occurred, the
         duties and obligations of the Trustee shall be determined solely by the
         express provisions of this Agreement, the Trustee shall not 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 and,
         in the absence of bad faith on the part of the Trustee, the Trustee 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 and conforming to the requirements of
         this Agreement;

                  (ii) the Trustee shall not be personally liable for an error
         of judgment made in good faith by a Responsible Officer of the Trustee,
         unless it shall be proved that the Trustee was negligent in
         ascertaining or investigating the facts related thereto;

                  (iii) the Trustee shall not be personally liable with respect
         to any action taken, suffered or omitted to be taken by it in good
         faith in accordance with the consent or direction of the
         Certificateholders under this Agreement; and

                  (iv) the Trustee shall not be charged with knowledge of any
         failure by the Master Servicer to comply with the obligations of the
         Master Servicer referred to in clauses (i) and (ii) of Section 8.1
         unless a Responsible Officer of the Trustee at the Corporate Trust
         Office obtains actual knowledge of such failure or the Trustee receives
         written notice of such failure from the Master Servicer.

         The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Depositor, the Seller or the Master Servicer under
this Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Master Servicer in accordance with the terms of this Agreement.

         SECTION 9.2. CERTAIN MATTERS AFFECTING THE TRUSTEE.

         Except as otherwise provided in Section 9.1:

                  (i) the Trustee may request and rely upon, and shall be
         protected in acting or refraining from acting upon, any resolution,
         Officer's 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

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         and to have been signed or presented by the proper party or parties,
         and the manner of obtaining consents and of evidencing the
         authorization of the execution thereof by Certificateholders shall be
         subject to such reasonable regulations as the Trustee may prescribe;

                  (ii) the Trustee may consult with counsel and any written
         advice of such counsel or 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 advice or Opinion of Counsel;

                  (iii) the Trustee shall be under no obligation to exercise any
         of the rights 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
         Certificateholders, pursuant to the provisions of this Agreement,
         unless such Certificateholders shall have offered to the Trustee
         reasonable security or indemnity against the costs, expenses and
         liabilities which may be incurred therein or thereby; the right of the
         Trustee to perform any discretionary act enumerated in this Agreement
         shall not be construed as a duty, and the Trustee shall not be
         answerable for other than its negligence or willful misconduct in the
         performance of any such act; nothing contained herein shall, however,
         relieve the Trustee of the obligations, upon the occurrence of an Event
         of Default (which has not been cured) of which a Responsible Officer of
         the Trustee has actual knowledge, 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 his or her own affairs;

                  (iv) the Trustee shall not 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 an Event of Default and after
         the curing of all Events of Default which may have occurred, the
         Trustee shall not 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 documents; provided, however, that if the payment within
         a reasonable time to the Trustee 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, not reasonably assured to the Trustee by
         the security afforded to it by the terms of this Agreement, the Trustee
         may require reasonable indemnity against such cost, expense or
         liability as a condition to such proceeding. Nothing in this clause (v)
         shall derogate from the obligation of the Master Servicer to observe
         any applicable law prohibiting disclosure of information regarding the
         Mortgagors;

                  (vi) the Trustee shall not be accountable, shall have no
         liability and makes no representation as to any acts or omissions
         hereunder of the Master Servicer until such

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         time as the Trustee may be required to act as Master Servicer pursuant
         to Section 8.2 and thereupon only for the acts or omissions of the
         Trustee as successor Master Servicer; and

                  (vii) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents or attorneys or a custodian.

         SECTION 9.3. TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.

         The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Master Servicer of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Master Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Master Servicer. The Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any mortgage or the maintenance of any such
perfection and priority or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 8.2 and thereupon only for the acts or
omissions of the successor Master Servicer); the validity of the assignment of
any Mortgage Loan to the Trustee or of any intervening assignment; the
completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer); the compliance by the Depositor or
the Master Servicer with any warranty or representation made under this
Agreement or in any related document or the accuracy of any such warranty or
representation; any investment of monies by or at the direction of the Master
Servicer or any loss resulting therefrom, it being understood that the Trustee
shall remain responsible for any Trust property that it may hold in its
individual capacity; the acts or omissions of any of the Depositor, the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer), any subservicer or any Mortgagor; any
action of the Master Servicer (other than if the Trustee shall assume the duties
of the Master Servicer pursuant to Section 8.2 and thereupon only for the acts
or omissions of the Trustee as successor Master Servicer), or any Subservicer
taken in the name of the Trustee; the failure of the Master Servicer or any
Subservicer to act or perform any duties acquired of it as agent of the Trustee
hereunder; or any action by the Trustee taken at the instruction of the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer); provided, however, that the foregoing
shall not relieve the Trustee of its obligation to perform its duties under this
Agreement, including, without limitation, the Trustee's review of the Mortgage
Files pursuant to

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Section 2.1(c). The Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder (unless the Trustee shall have become the successor
Master Servicer).

         SECTION 9.4. TRUSTEE MAY OWN CERTIFICATES.

         The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not Trustee and may transact any banking and/or trust business with the
Depositor, the Seller, the Master Servicer or their Affiliates.

         SECTION 9.5. TRUSTEE'S AND DOCUMENT CUSTODIAN'S EXPENSES.

         The Trustee shall be entitled to receive the Trustee Fee pursuant to
Section 5.1(a)(i) and, unless payable by the Master Servicer pursuant to Section
7.6(a), the Seller will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement or any other
agreement related hereto (including the reasonable compensation and the expenses
and disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith or which is the responsibility of Certificateholders
hereunder. In addition, unless payable by the Master Servicer pursuant to
Section 7.6(a), the Seller covenants and agrees to indemnify the Trustee and any
directors, officers, employees and agents of the Trustee from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
other than those resulting from the Trustee's negligence or bad faith of the
Trustee. In the event the Seller fails to perform its obligations hereunder,
then the Trustee shall be indemnified by the Trust for the payment of the
Trustee's monthly fee which right of the Trustee shall have priority over all
other distributions and payments from the Distribution Account. This section
shall survive termination of this Agreement or the resignation or removal of any
Trustee hereunder.

         The Document Custodian shall be entitled to receive the fee agreed to
with the Seller. In addition, the Seller covenants and agrees to indemnify the
Document Custodian and any directors, officers, employees and agents of the
Document Custodian from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses other than those resulting from the
Document Custodian's negligence or bad faith of the Document Custodian. This
section shall survive termination of this Agreement or the resignation or
removal of any Document Custodian hereunder.

         SECTION 9.6. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.

         The Trustee hereunder shall at all times be a national banking
association or a corporation duly incorporated and validly existing under the
laws of the United States of America or any state thereof, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, subject to supervision or examination by federal or
state authority and having (or in the case of a bank or corporation included in
a bank holding

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company system, the related bank holding company shall have) a rating with
respect to its long-term unsecured debt obligations of at least A- by S&P and
Baa3 by Moody's (or such lower rating as such Rating Agencies may from time to
time agree). If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 9.6, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. The principal office of the Trustee (other than the initial Trustee)
shall be in a state with respect to which an Opinion of Counsel has been
delivered to such Trustee at the time such Trustee is appointed Trustee to the
effect that the Trust will not be a taxable entity under the laws of such state.
In case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 9.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 9.7.

         SECTION 9.7. RESIGNATION OR REMOVAL OF TRUSTEE.

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor, the Seller,
the Master Servicer and each Rating Agency. Upon receiving such notice of
resignation, Depositor shall promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor Trustee; provided, however, that
any such successor Trustee shall be subject to the prior written approval of the
Master Servicer. If no successor Trustee shall have been so appointed and having
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

         If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.6 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or if a
tax is imposed or threatened with respect to the Trust by any state in which the
Trustee is located, then the Depositor may remove the Trustee. If the Depositor
removes the Trustee under the authority of the immediately preceding sentence,
the Depositor shall promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee. Immediately upon its appointment
and qualification hereunder, the successor Trustee shall provide written notice
to each Holder of a Certificate of its appointment and qualification.

         The Holders of Certificates evidencing Percentage Interests aggregating
at least 51% may at any time remove the Trustee by written instrument or
instruments delivered to the Depositor, the Master Servicer, the Seller and the
Trustee and shall thereupon use their best efforts to appoint a successor
trustee in accordance with this Section.

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         Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.7 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.8.

         SECTION 9.8. SUCCESSOR TRUSTEE.

         Any successor Trustee appointed as provided in Section 9.7 shall
execute, acknowledge and deliver to the Depositor and to its predecessor Trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Trustee. The
Depositor, the Master Servicer and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations.

         No successor Trustee shall accept appointment as provided in this
Section 9.8 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.6.

         Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.8, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.

         SECTION 9.9. MERGER OR CONSOLIDATION OF TRUSTEE.

         Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any, merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such Person
shall be eligible under the provisions of Section 9.6, 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 9.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Mortgaged Property may at the time be located, the
Depositor and the Trustee shall each have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof,

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and, subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. The parties hereto acknowledge that any such
co-trustee or separate trustee will act as co-trustee or separate trustee
hereunder pursuant to any co-trustee agreement between the Trustee and such
co-trustee or separate Trustee, and shall be entitled to the same rights and
subject to the same standards as the Trustee with respect to all rights and
immunities of the Trustee, including with respect to indemnification and the
obligations and duties of the Depositor, the Seller or the Master Servicer to
the Trustee pursuant to the terms hereof. Any such co-trustee or separate
trustee shall be subject to the written approval of the Master Servicer. If the
Master Servicer shall not have joined in such appointment within 15 days after
the receipt by it of a request so to do, or in the case an 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
9.6 and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 9.8. The Master Servicer shall
be responsible for the fees of any co-trustee or separate trustee appointed
hereunder.

         Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

                  (i) 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 (it being understood that such separate trustee or
         co-trustee is not authorized to act separately without the Trustee
         joining in such act), except to the extent that under any law of any
         jurisdiction in which any particular act or acts are to be performed
         (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 the Trust or any portion
         thereof in any such jurisdiction) shall be exercised and performed
         singly by such separate trustee or co-trustee, but solely at the
         direction of the Trustee;

                  (ii) no trustee hereunder shall be held personally liable by
         reason of any act or omission of any other trustee hereunder; and

                  (iii) the Master Servicer and the Trustee may each at any time
         accept the resignation of or remove any separate trustee or co-trustee
         except that following the occurrence of an Event of Default, the
         Trustee acting alone may accept the resignation or remove any separate
         trustee or co-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 IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts 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

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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 and a copy thereof given to the Depositor and
the Master Servicer.

         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 9.11. LIMITATION OF LIABILITY.

         The Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it by this Agreement. Each of the undertakings
and agreements made on the part of the Trustee in the Certificates is made and
intended not as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.

         SECTION 9.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES.

         All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such preceding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders in respect of which such
judgment has been recovered.

         SECTION 9.13. SUITS FOR ENFORCEMENT.

         In case an Event of Default or other default by the Master Servicer,
the Seller or the Depositor hereunder shall occur and be continuing, the
Trustee, in its discretion, may proceed to protect and enforce its rights and
the rights of the Holders of Certificates under this Agreement by a suit, action
or proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy, as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee and the Certificateholders.

         SECTION 9.14. WAIVER OF BOND REQUIREMENT.

         The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.

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         SECTION 9.15. WAIVER OF INVENTORY, ACCOUNTING AND APPRAISAL
REQUIREMENT.

         The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust with any court, agency or body at any time or in any
manner whatsoever.

                                    ARTICLE X

                                   TERMINATION

         SECTION 10.1. TERMINATION.

         (a) The respective obligations and responsibilities of the Depositor,
the Seller, the Master Servicer, the Trust Administrator, the Document Custodian
and the Trustee created hereby (other than the obligation of the Trustee to make
certain payments to Certificateholders after the final Distribution Date and the
obligation of the Master Servicer to send certain notices as hereinafter set
forth) shall terminate upon notice to the Trustee of the earliest of (i) the
Distribution Date on which the Aggregate Class Principal Balance has been
reduced to zero, (ii) the final payment or other liquidation of the last
Mortgage Loan in the Trust, (iii) the optional purchase by the Master Servicer
of the Mortgage Loans pursuant to Section 10.1(b) and (iv) the Distribution Date
in February, 2030. Notwithstanding the foregoing, in no event shall the trust
created hereby continue beyond the expiration of 21 years from the death of the
last surviving descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James's, living on the date hereof.

         (b) The Master Servicer shall have the right to exercise the option to
effect the transfer to it of each Mortgage Loan pursuant to Section 10.1(a)
above on any Distribution Date on or after the Distribution Date immediately
prior to which the Aggregate Loan Balance is less than five percent (5%) of the
Cut-Off Date Aggregate Loan Balance by purchasing, on the next succeeding
Distribution Date, all of the outstanding Mortgage Loans at a price equal to the
sum of the Aggregate Loan Balance and accrued and unpaid interest thereon at the
weighted average of the Loan Rates through the end of the Collection Period
preceding the final Distribution Date. The exercise of such purchase right shall
be conditioned upon receipt by the Trustee of a Nondisqualification Opinion. If
such right is exercised, the Master Servicer shall provide to the Trustee the
certification required by Section 3.8 and, promptly following payment of the
repurchase price, the Trustee shall execute proper instruments acknowledging
termination and discharge of this Agreement in the form provided by the Master
Servicer. Such certificate shall be delivered by the Master Servicer to the
Trustee in a timely manner so as to enable the Trustee to timely notify the
Holders of Certificates pursuant to Section 10.1(c).

         (c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Holders of Certificates may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation,

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shall be given promptly by the Trustee (upon receipt of written directions from
the Master Servicer, if the Master Servicer is exercising its right to
retransfer the Mortgage Loans, given not later than the first day of the month
preceding the month of such final distribution) by letter to the Holders of
Certificates mailed not earlier than the 15th day and not later than the 25th
day of the month next preceding the month of such final distribution specifying
(i) the Distribution Date upon which final distribution of the Certificates will
be made, (ii) the amount of each such final distribution and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable. In
the event written directions are delivered by the Master Servicer to the Trustee
as described in the preceding sentence, the Master Servicer shall deposit in the
Distribution Account on or before the Distribution Date for such final
distribution in immediately available funds an amount which, when added to the
funds on deposit in the Distribution Account that are payable to the Holders of
Certificates, will be equal to the retransfer amount for the Mortgage Loans
computed as above provided.

         (d) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Holders thereof on the Distribution Date
for such final distribution, in proportion to the Percentage Interests of their
respective Certificates and to the extent that funds are available for such
purpose, an amount equal to the amount required to be distributed to Holders of
such Certificates pursuant to Section 5.1 for such Distribution Date.

         (e) In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before such final
Distribution Date, the Trustee shall promptly following such date cause all
funds in the Distribution Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate escrow account for the
benefit of such Certificateholders and the Master Servicer (if the Master
Servicer has exercised its right to purchase the Mortgage Loans) or the Trustee
(in any other case) shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and receive
the final distribution with respect thereto. If within nine months after the
second notice all the Certificates shall not have been surrendered for
cancellation, the Class A-R Certificateholder shall be entitled to all unclaimed
funds and other assets which remain subject hereto and the Trustee upon transfer
of such funds shall be discharged of any responsibility for such funds and the
Certificateholders shall look to the Class A-R Certificateholder for payment.

         SECTION 10.2. ADDITIONAL TERMINATION REQUIREMENTS.

         (a) In the event that the Master Servicer exercises its purchase option
as provided in Section 10.1, the Trust shall be terminated in accordance with
the following additional requirements, unless the Trustee has received a
Nondisqualification Opinion to the effect that the failure of the Trust to
comply with the requirements of this subsection 10.2(a) will not (A) result in
the imposition of taxes on "prohibited transactions" of the Trust, as defined in
Section 860F of the Code, or contributions to either REMIC I or REMIC II after
the "startup day," as defined in Section 860G(d) of the Code, or (B) cause
either REMIC I or REMIC II to fail to qualify as a REMIC at any time any
Certificate is outstanding:

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                  (i) within ninety (90) days prior to the final Distribution
         Date set forth in the notice given by the Trustee under Section 10.1,
         the Trustee, at the direction of the Depositor, shall adopt a plan of
         complete liquidation of the Trust in the form prepared by the
         Depositor;

                  (ii) at or after the time of adoption of such a plan of
         complete liquidation and at or prior to the Distribution Date for the
         final distribution, the Trustee shall sell all of the assets of the
         Trust either to the Depositor or other purchaser of the assets of the
         Trust, as the case may be, for cash; provided, however, that in the
         event that a calendar quarter ends after the time of adoption of such a
         plan of complete liquidation but prior to the such final Distribution
         Date, the Trustee shall not sell any of the assets of the Trust prior
         to the close of that calendar quarter; and

                  (iii) the Trustee shall make the distributions specified in
         subsection 10.1(d) and (e) on or before the final Distribution Date
         referred to in clause (i) above.

         (b) The Trustee hereby agrees to adopt a plan of complete liquidation
as specified in subsection 10.2(a) upon the written direction of the Depositor
and to take such other action in connection therewith as may be reasonably
requested by the Depositor.

                                   ARTICLE XI

                              REMIC ADMINISTRATION

         SECTION 11.1. REMIC ADMINISTRATION.

         (a) It is intended that the REMIC I and REMIC II shall each constitute,
and that the affairs of the REMIC I and REMIC II shall be conducted so as to
qualify REMIC I and REMIC II as REMICs as defined in and in accordance with the
REMIC Provisions. In furtherance of such intention, the Trust Administrator
covenants and agrees that it shall act as agent (and the Trust Administrator is
hereby appointed to act as agent) and as agent of the Tax Matters Person on
behalf of each REMIC in the Trust, and that in such capacities, it shall:

                  (i) prepare, sign and file, or cause to be prepared and filed,
         in a timely manner, a U.S. Real Estate Mortgage Investment Conduit
         Income Tax Return (Form 1066) and any other Tax Return required to be
         filed by each REMIC in the Trust, using a calendar year as the taxable
         year for each REMIC in the Trust;

                  (ii) make, or cause to be made, an election, on behalf of each
         of REMIC I and REMIC II, to be treated as a REMIC on the federal tax
         return of each REMIC in the Trust for its first taxable year;

                  (iii) prepare and forward, or cause to be prepared and
         forwarded, to the Trustee, the Certificateholders and to the Internal
         Revenue Service and any other relevant

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         governmental taxing authority all information returns or reports as and
         when required to be provided to them in accordance with the REMIC
         Provisions;

                  (iv) to the extent that the affairs of the Trust are within
         its control, conduct such affairs of the Trust at all times that any
         Certificates are outstanding so as to maintain the status of each REMIC
         in the Trust as a REMIC under the REMIC Provisions and any other
         applicable federal, state and local laws, including, without
         limitation, information reports relating to "original issue discount,"
         as defined in the Code, based upon the Prepayment Assumption and
         calculated by using the issue price of the Certificates;

                  (v) not knowingly or intentionally take any action or omit to
         take any action that would cause the termination of the REMIC status of
         each REMIC in the Trust;

                  (vi) pay or cause to be paid from the Trust the amount of any
         and all federal, state, and local taxes, imposed upon the Trustee or
         the Certificateholders in connection with the Trust or the Mortgage
         Loans, prohibited transaction taxes as defined in Section 860F of the
         Code imposed on the Trust when and as the same shall be due and payable
         (but such obligation shall not prevent the Trust Administrator or any
         other appropriate Person from contesting any such tax in appropriate
         proceedings and shall not prevent the Trustee from withholding payment
         of such tax, if permitted by law, pending the outcome of such
         proceedings). The Master Servicer shall reimburse the Trust for any
         taxes paid by it pursuant to this clause (vi) to the extent that such
         taxes are imposed as a result of the bad faith, willful misfeasance or
         negligence of the Master Servicer in the performance of its obligations
         hereunder;

                  (vii) ensure that any such returns or reports filed on behalf
         of each REMIC in the Trust by the Trust Administrator are properly
         executed by the appropriate person;

                  (viii) represent each REMIC in the Trust in any administrative
         or judicial proceedings relating to an examination or audit by any
         governmental taxing authority, request an administrative adjustment as
         to any taxable year of each REMIC in the Trust, enter into settlement
         agreements with any government taxing agency, extend any statute of
         limitations relating to any item of the Trust and otherwise act on
         behalf of each REMIC in the Trust in relation to any tax matter
         involving the Trust at the expense of the Master Servicer;

                  (ix) as provided in Section 6.2 hereof, make available
         information necessary for the computation of any tax imposed (1) on
         transferors of Residual Certificates to transferees that are not
         Permitted Transferees or (2) on pass-through entities, any interest in
         which is held by an entity which is not a Permitted Transferee. The
         Trustee covenants and agrees that it will cooperate with the Master
         Servicer and the Trust Administrator in the foregoing matters and that
         it will sign, as Trustee, any and all tax returns prepared by the Trust
         Administrator required to be filed on behalf of the Trust.
         Notwithstanding the foregoing, at such time as the Trustee becomes the
         successor Master Servicer, the Holder of the largest Percentage
         Interest of each Class of Residual Certificates shall serve as Tax

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         Matters Person for such Class until such time as an entity is appointed
         to succeed the Trustee as master servicer;

                  (x) make available to the Internal Revenue Service and those
         Persons specified by the REMIC Provisions all information necessary to
         compute any tax imposed (A) as a result of the Transfer of an Ownership
         Interest in a Residual Certificate to any Person who is not a Permitted
         Transferee, including the information described in Treasury regulations
         sections 1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
         inclusions" of such Residual Certificate and (B) as a result of any
         regulated investment company, real estate investment trust, common
         trust fund, partnership, trust, estate or organization described in
         Section 1381 of the Code that holds an Ownership Interest in a Residual
         Certificate having as among its record holders at any time any Person
         that is not a Permitted Transferee. Reasonable compensation for
         providing such information may be accepted by the Trust Administrator;
         and

                  (xi) Upon filing with the Internal Revenue Service, the Trust
         Administrator shall furnish to the Holders of the Residual Certificates
         the Form 1066 and each Form 1066Q and shall respond promptly to written
         requests made not more frequently than quarterly by any Holder of
         Residual Certificates with respect to the following matters but only to
         the extent the Trustee has the information available with respect to
         such matters:

                           (1) The original projected principal and interest
                  cash flows on the Closing Date on each class of regular and
                  residual interests created hereunder and on the Mortgage
                  Loans, based on the Prepayment Assumption;

                           (2) The projected remaining principal and interest
                  cash flows as of the end of any calendar quarter with respect
                  to each class of regular and residual interests created
                  hereunder and the Mortgage Loans, based on the Prepayment
                  Assumption;

                           (3) The Prepayment Assumption (and any multiple
                  thereof used to calculate the issue price of the Certificates)
                  and any interest rate assumptions used in determining the
                  projected principal and interest cash flows described above;

                           (4) The original issue discount (or, in the case of
                  the Mortgage Loans, market discount) or premium accrued or
                  amortized through the end of such calendar quarter with
                  respect to each class of regular or residual interests created
                  hereunder and with respect to the Mortgage Loans, together
                  with each constant yield to maturity used in computing the
                  same;

                           (5) The treatment of losses realized with respect to
                  the Mortgage Loans or the regular interests created hereunder,
                  including the timing and amount of any cancellation of
                  indebtedness income of each REMIC with respect to such regular
                  interests or bad debt deductions claims with respect to the
                  Mortgage Loans;

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                           (6) The amount and timing of any non-interest
                  expenses of each REMIC; and

                           (7) Any taxes (including penalties and interest)
                  imposed on each REMIC, including, without limitation, taxes on
                  "prohibited transactions," "contribution" or "net income from
                  foreclosure property" or state or local income or franchise
                  taxes.

         SECTION 11.2. PROHIBITED TRANSACTIONS AND ACTIVITIES.

         Subject to the provisions of Article II, neither the Trustee nor the
Master Servicer shall permit the sale, disposition or substitution of a Mortgage
Note or the substitution of a property for a Mortgaged Property (except in a
disposition pursuant to (i) the bankruptcy or insolvency of the REMIC I or REMIC
II or (ii) the termination of the REMIC I or REMIC II in a "qualified
liquidation" as defined in Section 860F(a)(4) of the Code), nor acquire any
assets for the REMIC I or REMIC II (other than REO), nor sell or dispose of any
investments in the Accounts for gain, nor accept any contributions to the REMIC
I or REMIC II (except as contemplated by Section 4.2), unless it has received
(x) a Nondisqualification Opinion (at the expense of the Person requesting the
Trustee or the Master Servicer to take such action) to the effect that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of the REMIC I or REMIC II as a REMIC or of the
Certificates, other than the Residual Certificates, or Lower-Tier regular
interests as the regular interests therein, (b) result in the encumbrance of the
assets transferred or assigned to the REMIC I or REMIC II (except pursuant to
the provisions of this Agreement) or (c) cause the REMIC I or REMIC II to be
subject to a tax on "prohibited transactions" or "prohibited contributions"
pursuant to the REMIC Provisions and (y) (i) as to any sale or disposition of a
Mortgage Note, a statement in writing by the Master Servicer delivered to the
Trustee setting forth the analysis described in Section 3.7 hereof and stating
the Master Servicer's determination was made in accordance with Section 3.7 or
(ii) as to any other described transaction, a statement delivered to the Trustee
by the party requesting such transaction that the transaction will not reduce
the aggregate disposition of interest or principal on the Certificates.

         SECTION 11.3. INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND LOSS OF
REMIC STATUS.

         (a) In the event that the REMIC I or REMIC II fails to qualify as a
REMIC, loses its status as a REMIC, or incurs state or local taxes, or a tax as
a result of a prohibited transaction or contribution or the receipt of "net
income from foreclosure property" subject to taxation under the REMIC Provisions
due to the willful misfeasance, bad faith or negligent performance by the Trust
Administrator of its duties and obligations specifically set forth herein, or by
reason of the Trust Administrator's reckless disregard of its obligations and
duties thereunder, the Trust Administrator shall indemnify the Trust against any
and all losses, claims, damages, liabilities or expenses ("Losses") resulting
therefrom; provided, however, that the Trust Administrator shall not be liable
for any Losses attributable to the action or inaction of the Depositor, the
Master Servicer, the Trustee, the Seller or a Holder of a Residual Certificates
nor for any Losses resulting from misinformation provided by the Depositor, the
Servicer, the Seller or the Holder

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of a Residual Certificates on which the Trust Administrator has relied. The
foregoing shall not be deemed to limit or restrict the rights and remedies of
successor Holders of the Residual Certificates at law or in equity.

         (b) In the event that REMIC I or REMIC II fails to qualify as a REMIC,
loses its status as a REMIC, or incurs state or local taxes, or a tax as a
result of a prohibited transaction or contribution or the receipt of "net income
from foreclosure property" subject to taxation under the REMIC Provisions due to
the willful misfeasance, bad faith or negligent performance of the Master
Servicer in the performance of its duties and obligations set forth herein, or
by reason of the Master Servicer's reckless disregard of its obligations and
duties hereunder, the Master Servicer shall indemnify the Trust against any and
all tax related liabilities and expenses, including interest and penalties
("Expenses") resulting therefrom; provided, however, that the Master Servicer
shall not be liable for any such Expenses attributable to the action or inaction
of the Trustee, the Depositor the Seller, or the Holder of the Residual
Certificates nor for any such Expenses resulting from misinformation provided by
the Trustee, the Depositor, the Seller or a Holder of the Residual Certificates
on which the Master Servicer has reasonably relied.

         The foregoing shall not be deemed to limit or restrict the rights and
remedies of any successor Holders of the Residual Certificates at law or in
equity.

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

         SECTION 12.1. AMENDMENT.

         This Agreement may be amended from time to time by the Depositor, the
Master Servicer, the Seller, the Trust Administrator, the Document Custodian and
the Trustee, in each case without the consent of any of the Certificateholders
(i) to cure any ambiguity, (ii) to correct any defective provisions or to
correct or supplement any provisions herein that may be inconsistent with any
other provisions herein or the Prospectus Supplement or the Prospectus, (iii) to
add to the duties of the Depositor, the Seller, the Trust Administrator, the
Trustee (subject to the penultimate paragraph of this Section 12.1) or the
Master Servicer, (iv) to add any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement, (v) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating agency in order to maintain or improve any rating of the
Certificates (it being understood that, after obtaining the ratings in effect on
the Closing Date, none of the Trustee, the Trust Administrator, the Depositor or
the Master Servicer is obligated to obtain, maintain or improve any such
rating), or (vi) to add, delete or modify any provision to such extent as shall
be necessary or desirable to maintain the qualification of REMIC I or REMIC II
as a REMIC; provided, however, that such action shall be accompanied by a
Nondisqualification Opinion.

         This Agreement also may be amended from time to time by the Depositor,
the Master Servicer, the Seller, the Document Custodian and the Trustee; and the
Master Servicer may from

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time to time consent to the amendment of this Agreement with the consent of the
Majority Holders for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Certificateholders; provided, however, that no such
amendment shall (A) reduce in any manner the amount of, or delay the timing of,
payments on the Certificates without the consent of the Holder of such
Certificate, or (B) reduce the aforesaid percentage required to consent to any
such amendment, without the consent of the Holders of all Certificates then
outstanding. Prior to execution of any such amendment, the Depositor shall
furnish the Trustee with a Nondisqualification Opinion stating whether such
amendment would cause REMIC I or REMIC II to fail to qualify as a REMIC. An
amendment made with the consent of Certificateholders and executed in accordance
with this Section 12.1 shall be permitted or authorized by this Agreement
notwithstanding that such Opinion of Counsel may conclude that such amendment
would cause the REMIC I to fail to qualify as a REMIC; provided, however, that
the Trustee shall not be liable to any Person for any amendment to this
Agreement permitted under the terms hereof.

         Prior to the execution of any such amendment, the Master Servicer shall
furnish written notification of the substance of such amendment to each Rating
Agency. In addition, promptly after the execution of any such amendment made
with the consent of the Holders of the Certificates, the Trustee shall furnish
fully executed original counterparts of the instruments effecting such amendment
to the each Holder of a Certificate.

         The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.

         The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.

         In connection with any amendment pursuant to this Section 12.1, the
Trustee shall be entitled to receive an Opinion of Counsel to the effect that
such amendment is authorized or permitted by this Agreement.

         SECTION 12.2. RECORDATION OF AGREEMENT.

         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, but only upon direction
of Holders of a majority of the Certificates accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of Holders of Certificates. The Holders of Certificates requesting
such recordation shall bear all costs and expenses of such recordation. The
Master Servicer shall have no obligation to ascertain whether such recordation
so 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

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counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.

         SECTION 12.3. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
in Section 12.1) 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.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions 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 Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of 25% or more of Percentage Interests in any Class of the
Certificates shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 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 being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, 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 12.3, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.

         SECTION 12.4. GOVERNING LAW.

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

         SECTION 12.5. NOTICES.

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         All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by certified mail, return receipt requested, to (a) in the case of the Seller,
First Union National Bank, 8739 Research Drive, URP4, Charlotte, North Carolina
28288-0121, Attention: Mortgage Finance, (b) in the case of the Master Servicer,
First Union National Bank, One First Union Center, Charlotte, North Carolina
28288, Attention: Structured Products Servicing and in the case of the Trust
Administrator, First Union National Bank, One First Union Center, Charlotte,
North Carolina 28288, Attention: Mortgage Finance, (c) in the case of the
Trustee, at Norwest Bank Minnesota, National Association, 11000 Broken Land
Parkway, Columbia, Maryland 21044, Attention: Todd Emerick, FURST 1999-A, or in
the case of the Document Custodian, at Norwest Bank Minnesota, National
Association, 1015 Tenth Avenue, S.E., Minneapolis, Minnesota 55479, Attention:
FURST 1999-A, (d) in the case of the Depositor, First Union Residential
Securitization Transactions, Inc., One First Union Center, Charlotte, North
Carolina 28288-0600, Attention: Patrick J. Tadie, (e) in case of S&P, 26
Broadway, New York, New York 10004, and (f) in the case of Fitch, One State
Street Plaza, New York, New York 10004 or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party. 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. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice. Any
notice or other document required to be delivered or mailed by the Trustee to
any Rating Agency shall be given on a best efforts basis and only as a matter of
courtesy and accommodation and the Trustee shall have no liability for failure
to deliver such notice or document to any Rating Agency.

         SECTION 12.6. SEVERABILITY OF PROVISIONS.

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever 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 12.7. CERTIFICATES NONASSESSABLE AND FULLY PAID.

         The parties agree that the Holders of Certificates shall not be
personally liable for obligations of the Trust, that the beneficial ownership
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and that the Certificates
upon execution, authentication and delivery thereof by the Trustee pursuant to
Section 6.1 are and shall be deemed fully paid.

         SECTION 12.8. THIRD-PARTY BENEFICIARIES.

         This Agreement will inure to the benefit of and be binding upon the
parties hereto, the Certificateholders, the Owners and their respective
successors and permitted assigns. Except as

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otherwise provided in this Agreement, no other Person will have any right or
obligation hereunder.

         SECTION 12.9. COUNTERPARTS.

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

         SECTION 12.10. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

         The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.

         SECTION 12.11. PROVISION OF INFORMATION TO PROSPECTIVE PURCHASERS; RULE
144A.

         For so long as any Class B-3, Class B-4 or Class B-5 Certificate is a
"restricted security" within the meaning of Rule 144(a)(3) under the Securities
Act of 1933, as amended (the "Securities Act"), the Trust Administrator shall,
upon the request of any Owner and any prospective purchaser of such Class B-3,
Class B-4 or Class B-5 Certificate, make available to such Owner and any
prospective purchaser of such Class B-3, Class B-4 or Class B-5 Certificate
designated by such Owner (a) a copy of a private resale memorandum, to be
prepared by the Seller for this purpose, (b) a copy of the most recent report
distributed to the Owners pursuant to Section 5.2 hereof, together with (c) any
additional information required pursuant to Rule 144A, as from time to time
amended, under the Securities Act in order for a sale of such Class B-3, Class
B-4 or Class B-5 Certificates by such Owner to such prospective purchaser to
qualify for the exemption under the Securities Act provided by Rule 144A;
provided, however, that the Trust Administrator shall have no obligation to
deliver any information or item described in clauses (a) or (c) unless and until
the Seller shall provide the same to the Trust Administrator and the Trust
Administrator 's obligation with respect to such delivery shall be limited to
any such information or item supplied to it by the Seller. The Seller shall
promptly furnish to the Trust Administrator, upon receipt of a request from the
Trustee or any Holder of a Class B-3, Class B-4 or Class B-5 Certificate the
items described in clauses (a) and (c) to the Trustee.

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         IN WITNESS WHEREOF, the Depositor, the Seller, the Master Servicer, the
Trust Administrator, the Trustee and the Document Custodian have caused this
Agreement to be duly executed by their respective officers all as of the day and
year first above written.

                                  FIRST UNION RESIDENTIAL SECURITIZATION
                                  TRANSACTIONS, INC., as Depositor

                                  By /s/ Patrick J. Tadie
                                     -------------------------------------------
                                     Title:  Vice President

                                  FIRST UNION NATIONAL BANK, as Seller

                                  By /s/ Patrick J. Tadie
                                     -------------------------------------------
                                     Title:  Vice President

                                  FIRST UNION NATIONAL BANK, as Master Servicer

                                  By /s/ Jeffery B. Mandel
                                     -------------------------------------------
                                     Title: Vice President

                                  FIRST UNION NATIONAL BANK, as Trust
                                  Administrator

                                  By /s/ Patrick J. Tadie
                                     -------------------------------------------
                                     Title: Vice President

                                  NORWEST BANK MINNESOTA, NATIONAL
                                  ASSOCIATION, as Trustee

                                  By /s/ Michael L. Mayer
                                     -------------------------------------------
                                     Title:  Vice President

<PAGE>   160

                                  NORWEST BANK MINNESOTA, NATIONAL
                                  ASSOCIATION, as Document Custodian

                                  By /s/ Michael L. Mayer
                                     -------------------------------------------
                                     Title: Vice President

<PAGE>   161

COMMONWEALTH OF NORTH CAROLINA

COUNTY OF MECKLENBURG

         I, a Notary Public of the County and State of aforesaid, certify that
Patrick J. Tadie personally came before me this day and acknowledged that [s]he
is a Senior Vice President of First Union Residential Securitization
Transactions, Inc., and that by authority duly given and as the act of the
corporation, [s]he signed [his] [her] name thereto.

         WITNESS my hand and official stamp or seal, this 25th day of February,
1999.

                                                       /s/ Tina M. Cox
                                             -----------------------------------
                                                        Notary Public
My Commission Expires:

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

     (Notary Seal)

<PAGE>   162

STATE OF NORTH CAROLINA

COUNTY OF MECKLENBURG

         I, a Notary Public of the County and State of aforesaid, certify that
Michael L. Mayer personally came before me this day and acknowledged that he is
an Vice President of Norwest Bank Minnesota, National Association, and that by
authority duly given and as the act of the corporation, he signed his name
thereto.

         WITNESS my hand and official stamp or seal, this 25th day of February,
1999.

                                                      /s/ Tina M. Cox
                                             -----------------------------------
                                                        Notary Public
My Commission Expires:

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

     (Notary Seal)

<PAGE>   163

STATE OF NORTH CAROLINA

COUNTY OF MECKLENBURG

         I, a Notary Public of the County and State of aforesaid, certify that
Michael L. Mayer personally came before me this day and acknowledged that he is
an Vice President of Norwest Bank Minnesota, National Association, and that by
authority duly given and as the act of the corporation, he signed his name
thereto.

         WITNESS my hand and official stamp or seal, this 25th day of February,
1999.

                                                      /s/ Tina M. Cox
                                             -----------------------------------
                                                        Notary Public
My Commission Expires:

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

     (Notary Seal)

<PAGE>   164

STATE OF NORTH CAROLINA

COUNTY OF MECKLENBURG

         I, a Notary Public of the County and State of aforesaid, certify that
Patrick J. Tadie personally came before me this day and acknowledged that [s]he
is a Vice President of First Union National Bank, a national banking
association, and that by authority duly given and as the act of the corporation,
[s]he signed [his] [her] name thereto.

         WITNESS my hand and official stamp or seal, this 25th day of February,
1999.

                                                      /s/ Tina M. Cox
                                             -----------------------------------
                                                        Notary Public
My Commission Expires:

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

     (Notary Seal)

<PAGE>   165

STATE OF NORTH CAROLINA

COUNTY OF MECKLENBURG

         I, a Notary Public of the County and State of aforesaid, certify that
Jeffrey B. Mandel personally came before me this day and acknowledged that he is
a Vice President of First Union National Bank, and that by authority duly given
and as the act of the corporation, he signed his name thereto.

         WITNESS my hand and official stamp or seal, this 25th day of February,
1999.

                                                      /s/ Tina M. Cox
                                             -----------------------------------
                                                        Notary Public
My Commission Expires:

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

     (Notary Seal)<PAGE>   1

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

           FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.,

                                  as Purchaser,

                                       and

                           FIRST UNION NATIONAL BANK,

                                   as Seller,

                        MORTGAGE LOAN PURCHASE AGREEMENT

                          Dated as of February 1, 1999

                        FURST MORTGAGE LOAN TRUST 1999-A

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

<PAGE>   2

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

<S>                                                                                                            <C>
ARTICLE I   DEFINITIONS...........................................................................................1
         Section 1.1 Definitions..................................................................................1

ARTICLE II  SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE.....................................................2
         Section 2.1 Sale of Mortgage Loans.......................................................................2
         Section 2.2 Reserved.....................................................................................2
         Section 2.3 Obligations of Seller Upon Sale..............................................................2
         Section 2.3 Payment of Purchase Price for the Mortgage Loans.............................................4

ARTICLE III  REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH..................................................5
         Section 3.1 Seller Representations and Warranties........................................................5
         Section 3.2 Seller Representations and Warranties Relating to the Mortgage Loans.........................6

ARTICLE IV  SELLER'S COVENANTS....................................................................................7
         Section 4.1 Covenants of the Seller......................................................................7

ARTICLE V  SERVICING..............................................................................................7
         Section 5.1 Servicing....................................................................................7

ARTICLE VI  INDEMNIFICATION WITH RESPECT TO THE MORTGAGE LOANS....................................................8
         Section 6.1 Indemnification..............................................................................8

ARTICLE VII TERMINATION..........................................................................................11
         Section 7.1 Termination.................................................................................11

ARTICLE VIII  MISCELLANEOUS PROVISIONS...........................................................................12
         Section 8.1 Amendment...................................................................................12
         Section 8.2 Governing Law...............................................................................12
         Section 8.3 Notices.....................................................................................12
         Section 8.4 Severability of Provisions..................................................................13
         Section 8.5 Counterparts................................................................................13
         Section 8.6 Further Agreements..........................................................................13
         Section 8.7 Intention of the Parties....................................................................13
         Section 8.8 Successors and Assigns: Assignment of Purchase Agreement....................................14
         Section 8.9 Survival....................................................................................14

         SCHEDULE I                 MORTGAGE LOANS
</TABLE>

<PAGE>   3

         MORTGAGE LOAN PURCHASE AGREEMENT (the "Purchase Agreement"), dated as
of February 1, 1999 between First Union National Bank (the "Seller") and First
Union Residential Securitization Transactions, Inc. (the "Purchaser").

                               W I T N E S S E T H

         WHEREAS, the Seller is the owner of the notes or other evidence of
indebtedness (the "Mortgage Notes") so indicated on Schedule I hereto referred
to below, and Related Documents (as defined in Section 2.3 hereof)
(collectively, the "Mortgage Loans"); and

         WHEREAS, the Seller, in the case of the Mortgage Loans, owns the
mortgages (the "Mortgages") on the properties (the "Mortgaged Properties")
securing such Mortgage Loans, including rights to (a) any property acquired by
foreclosure or deed in lieu of foreclosure or otherwise and (b) the proceeds of
any insurance policies covering the Mortgage Loans or the Mortgaged Properties
or the obligors on the Mortgage Loans;

         WHEREAS, the parties hereto desire that the Seller sell the Mortgage
Loans to the Purchaser pursuant to the terms of this Purchase Agreement; and

         WHEREAS, pursuant to the terms of a Pooling and Servicing Agreement
dated as of February 1, 1999 (the "Pooling and Servicing Agreement") among the
Purchaser, as depositor, the Seller, as seller, as master servicer (the "Master
Servicer") and as Trust Administrator, Norwest Bank Minnesota, National
Association, as document custodian and as trustee (the "Trustee"), the Purchaser
will convey the Mortgage Loans to FURST Mortgage Loan Trust 1999-A (the "Trust
Fund"); and

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.1 DEFINITIONS.

         All capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.

<PAGE>   4

                                   ARTICLE II

                SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE

         SECTION 2.1 SALE OF MORTGAGE LOANS.

         The Seller, concurrently with the execution and delivery of this
Purchase Agreement, does hereby sell, assign, set over, and otherwise convey to
the Purchaser, without recourse, all of its right, title and interest in, to and
under the following, whether now existing or hereafter acquired and wherever
located: the Mortgage Loans, including the related Cut-Off Date Loan Balances,
and all payments in respect of the Mortgage Loans received on and after the
Cut-Off Date (exclusive of payments in respect of interest on the Mortgage Loans
accrued prior to the Cut-Off Date and received thereafter); property which
secured a Mortgage Loan and which has been acquired by foreclosure or deed in
lieu of foreclosure; the interest of the Seller in any insurance policies in
respect of the Mortgage Loans; all rights under any guaranty executed in
connection with a Mortgage Loan; and all proceeds of the foregoing.

         SECTION 2.2 RESERVED.

         SECTION 2.3 OBLIGATIONS OF SELLER UPON SALE.

         In connection with any transfer pursuant to Section 2.1 hereof, the
Seller further agrees, at its own expense, on or prior to the Closing Date, (a)
to indicate in its books and records that the related Mortgage Loans have been
sold to the Purchaser or to the Trustee, as assignee of the Purchaser, as
applicable, pursuant to this Purchase Agreement and (b) to deliver to the
Purchaser a computer file containing a true and complete list of all such
Mortgage Loans specifying for each such Mortgage Loan, as of the applicable
Cut-Off Date, (i) its account number and (ii) the related Cut-Off Date Loan
Balance. Such file, which forms a part of Exhibit D to the Pooling and Servicing
Agreement, shall also be marked as Schedule I to this Purchase Agreement and is
hereby incorporated into and made a part of this Purchase Agreement.

         The Seller agrees to prepare, execute and file UCC-1 financing
statements with the Secretary of State in the State of North Carolina (which
shall have been filed on or before the Closing Date with respect to the Mortgage
Loans) describing the applicable Mortgage Loans and naming the Seller as debtor
and, with respect to the Mortgage Loans, the Purchaser (and indicating that such
loans have been assigned to the Trustee) as secured party and all necessary
continuation statements and any amendments to the UCC-1 financing statements
required to reflect a change in the name or corporate structure of the Seller or
the filing of any additional UCC-1 financing statements due to the change in the
principal office of the Seller, as are necessary to perfect and protect the
Trustee's interest in each Mortgage Loan, the payments thereon and the proceeds
thereof.

<PAGE>   5

         In connection with any conveyance by the Seller, the Seller shall on
behalf, and at the direction of, the Purchaser deliver to, and deposit with, the
Trustee, as Document Custodian on or before the Closing Date, the following
documents or instruments with respect to each Mortgage Loan (the "Related
Documents"):

                  (i) the original Mortgage Note, endorsed "Pay to the order of
         Norwest Bank Minnesota, National Association, as trustee for the
         registered holders from time to time of FURST Mortgage Loan Trust
         1999-A, Mortgage Pass-Through Certificates, Series 1999-A, without
         recourse," signed in the name of the Seller by an authorized officer,
         with all intervening endorsements showing a complete chain of title
         from the originator of such Mortgage Loan to the Seller;

                  (ii) the original Mortgage, with evidence of recording
         thereon, provided, that if the original Mortgage has been delivered for
         recording to the appropriate public recording office of the
         jurisdiction in which the Mortgaged Property is located but has not yet
         been returned to the Seller by such recording office, the Seller shall
         cause to be delivered to the Document Custodian a certified true copy
         of such original Mortgage so certified by the Seller, together with a
         certificate of the Seller certifying that such original Mortgage has
         been so delivered to such recording office; in all such instances, the
         Seller shall deliver or cause to be delivered the original recorded
         Mortgage to the Document Custodian promptly upon receipt of the
         original recorded Mortgage;

                  (iii) the original assignment of Mortgage, from the Seller to
         "Norwest Bank Minnesota, National Association, as trustee for the
         registered holders from time to time of FURST Mortgage Loan Trust
         1999-A," which assignment shall be in form and substance acceptable for
         recording;

                  (iv) the original attorney's opinion of title or the original
         policy of title insurance, provided, that if any such original policy
         of title insurance has not yet been received by the Seller, the Seller
         shall cause to be delivered to the Document Custodian a copy of such
         policy or a title insurance binder or commitment for the issuance of
         such policy;

                  (v) originals of all intervening assignments of Mortgage, with
         evidence of recording thereon, showing a complete chain of title from
         the originator of the Mortgage Loan to the Seller, provided, that if
         any such original intervening assignment of Mortgage has been delivered
         for recording to the appropriate public recording office of the
         jurisdiction in which the Mortgaged Property is located but has not yet
         been returned to the Seller by such recording office, the Seller may
         have delivered to the Document Custodian a certified true copy of such
         original assignment of Mortgage so certified by the Seller, together
         with a certificate of the Seller certifying that such original
         assignment of Mortgage has been so delivered to such recording office;
         in all such instances, the Seller shall deliver or cause to

<PAGE>   6

         be delivered any such original assignments to the Document Custodian
         promptly upon receipt thereof; and

                  (vi) originals of all assumption and modification agreements,
         if any; provided, however, the Seller may deliver to the Document
         Custodian all of the above documents other than those referred to in
         clause (i) above (which shall be delivered on or before the Closing
         Date) within 60 days after the Closing Date.

         For all Mortgage Loans that were owned by the Seller on the Cut-Off
Date as successor by merger to the originator or previous holder, the Seller
shall deliver to the Trustee, as Document Custodian, on or before the Closing
Date, an officer's certificate identifying such Mortgage Loans and the
identities of the Persons (each, a "Merged Holder") that are reflected on the
related Mortgage Notes and Mortgage or assignment of Mortgage as the holder,
certifying that the Seller is successor by merger to each such Merged Holder and
certifying as to the authority of the officer signing the endorsement referred
to in clause (i) above and the assignment of Mortgage referred to in clause
(iii) above to execute the same. Such officer's certificate shall constitute
part of the Mortgage File of each such Mortgage Loan.

         The Seller further hereby confirms to the Purchaser that, as of the
Closing Date, it has caused the portions of the Electronic Ledger relating to
the Mortgage Loans maintained by the Master Servicer to be clearly and
unambiguously marked to indicate that the Mortgage Loans have been sold to the
Purchaser or the Trustee as assignee of the Purchaser, as applicable.

         The Purchaser hereby acknowledges its acceptance of all right, title
and interest to the Mortgage Loans and other property, now existing and
hereafter created, conveyed to it pursuant to Section 2.1.

         The parties hereto intend that (a) the transaction set forth herein
with respect to the Mortgage Loans be a sale by the Seller to the Purchaser of
all the Seller's right, title and interest in and to the Mortgage Loans and
other related property described above and (b) in the event the transaction set
forth herein with respect to the Mortgage Loans is deemed not to be a sale, the
Seller shall be deemed to have granted and does hereby grant to the Purchaser a
security interest in all of the Seller's right, title and interest in, to and
under the Mortgage Loans and other related property described above, whether now
existing or hereafter created, to secure all of the Seller's obligations
hereunder, and this Purchase Agreement shall constitute a security agreement
under applicable law.

         SECTION 2.4 PAYMENT OF PURCHASE PRICE FOR THE MORTGAGE LOANS.

         (a) In consideration of the sale of the Mortgage Loans from the Seller
to the Purchaser on the Closing Date, the Purchaser agrees to pay to the Seller
on the Closing Date by transfer of immediately available funds, an amount equal
to $212,394,583.69 (the "Purchase Price").

<PAGE>   7

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES;
                               REMEDIES FOR BREACH

         SECTION 3.1 SELLER REPRESENTATIONS AND WARRANTIES.

         The Seller represents and warrants to the Purchaser as of the Closing
Date and as of each Transfer Date:

               (i) It is a national banking association existing under the laws
         of the United States of America and has the requisite power and
         authority to own its assets and to transact the business in which it is
         currently engaged. It is duly qualified to do business and is in good
         standing in each jurisdiction in which the character of the business
         transacted by it or properties owned or leased by it requires such
         qualification and in which the failure so to qualify would have a
         material adverse effect on (a) its business, properties, assets, or
         condition (financial or other), (b) its performance of its obligations
         under this Purchase Agreement, (c) the value or marketability of the
         Mortgage Loans and (d) the ability to foreclose on the related
         Mortgaged Properties;

              (ii) It has the power and authority to make, execute, deliver and
         perform this Purchase Agreement and all of the transactions
         contemplated under this Purchase Agreement, and has taken all necessary
         action to authorize the execution, delivery and performance of this
         Purchase Agreement. When executed and delivered, this Purchase
         Agreement will constitute its legal, valid and binding obligation
         enforceable in accordance with its terms, except as enforcement of such
         terms may be limited by bankruptcy, insolvency or similar laws
         affecting the enforcement of creditors' rights generally and by the
         availability of equitable remedies;

             (iii) It holds all necessary licenses, certificates and permits
         from all government authorities necessary for conducting its business
         as it is presently conducted. It is not required to obtain the consent
         of any other party or any consent, license, approval or authorization
         from, or registration or declaration with, any governmental authority,
         bureau or agency in connection with the execution, delivery,
         performance, validity or enforceability of this Purchase Agreement,
         except for such consents, licenses, approvals or authorizations, or
         registrations or declarations, as shall have been obtained or filed, as
         the case may be, prior to the Closing Date;

              (iv) The execution, delivery and performance of this Purchase
         Agreement by it will not conflict with or result in a breach of, or
         constitute a default under, any provision of any existing law or
         regulation or any order or decree of any court applicable to it or any
         of

<PAGE>   8

         its properties or any provision of its Articles of Association or
         Bylaws, or constitute a material breach of, or result in the creation
         or imposition of any lien, charge or encumbrance upon any of its
         properties pursuant to, any mortgage, indenture, contract or other
         agreement to which it is a party or by which it may be bound;

               (v) No litigation or administrative proceeding of or before any
         court, tribunal or governmental body is currently pending, or to its
         knowledge threatened, against it or any of its properties or with
         respect to this Purchase Agreement or the Certificates which in its
         opinion has a reasonable likelihood of resulting in a material adverse
         effect on the transactions contemplated by this Purchase Agreement;

              (vi) The transactions contemplated by this Purchase Agreement are
         in the ordinary course of business of the Seller; and

             (vii) The Seller is not insolvent, nor will it be made insolvent by
         the transfer of the Mortgage Loans, nor is the Seller aware of any
         pending insolvency.

                  It is understood and agreed that the representations and
         warranties set forth in this Section 3.1 shall survive delivery of the
         Mortgage Files to the Document Custodian on behalf of the Purchaser.

         SECTION 3.2 SELLER REPRESENTATIONS AND WARRANTIES RELATING TO THE
MORTGAGE LOANS.

         The Seller represents and warrants to the Purchaser that, as of the
Closing Date with respect to the Mortgage Loans it has made the representations
and warranties set forth in Section 2.6(a) of the Pooling and Servicing
Agreement for the benefit of the Purchaser or the Trustee as applicable. Such
representations and warranties are incorporated by reference in this Section
3.2, and the Purchaser may rely thereon as if such representations and
warranties were fully set forth herein.

         With respect to the representations and warranties set fort in this
Section 3.2 that are made to the best of the Seller's knowledge or as to which
the Seller has no knowledge, if it is discovered by the Purchaser, the Seller,
the Master Servicer, the Trust Administrator or a Responsible Officer of the
Trustee that the substance of any such representation and warranty is inaccurate
and such inaccuracy materially and adversely affects the value of the related
Mortgage Loan then notwithstanding the Seller's lack of knowledge with respect
to the substance of such representation and warranty being inaccurate at the
time the representation or warranty was made, such inaccuracy shall be deemed a
breach of the applicable representation or warranty and with respect to any
breach of such representation or warranty or of any other representation or
warranty, the Seller shall cure, repurchase or substitute in accordance with the
Pooling and Servicing Agreement.

<PAGE>   9

         It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the respective Mortgage
Files to the Document Custodian on behalf of the Purchaser.

                                   ARTICLE IV

                               SELLER'S COVENANTS

         SECTION 4.1 COVENANTS OF THE SELLER.

         (a) The Seller hereby covenants that except for the transfer hereunder,
the Seller will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Mortgage Loan,
or any interest therein; the Seller will notify the Trustee, as assignee of the
Purchaser, of the existence of any Lien on any Mortgage Loan immediately upon
discovery thereof; and the Seller will defend the right, title and interest of
the Trust Fund, as assignee of the Purchaser, in, to and under the Mortgage
Loans, against all claims of third parties claiming through or under the Seller;
provided, however, that nothing in this Section 4.1 shall prevent or be deemed
to prohibit the Seller from suffering to exist upon any of the Mortgage Loans
any Liens for municipal or other local taxes and other governmental charges if
such taxes or governmental charges shall not at the time be due and payable or
if the Seller shall currently be contesting the validity thereof in good faith
by appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto.

         (b) During the period commencing on the first day of the offering of
the Senior Certificates, the Class M Certificates, the Class B-1 Certificates
and the Class B-2 Certificates (collectively the "Offered Certificates") to the
public and ending on the Closing Date, the Seller shall not, without the prior
written consent of First Union Capital Markets Corp., ("FCMC") sell or enter
into agreements with other underwriters (other than FCMC and PaineWebber
Incorporated) to sell mortgage pass-through securities, collateralized mortgage
obligations or similar securities representing interests in or secured by
residential mortgage loans purchased or originated by the Seller.

                                    ARTICLE V

                                MASTER SERVICING

         SECTION 5.1 MASTER SERVICING.

         First Union National Bank will be the Master Servicer of the Mortgage
Loans pursuant to the terms and conditions of the Pooling and Servicing
Agreement.

<PAGE>   10

                                   ARTICLE VI

               INDEMNIFICATION WITH RESPECT TO THE MORTGAGE LOANS

         SECTION 6.1 INDEMNIFICATION.

         (a) The Seller agrees to indemnify and hold harmless the Purchaser,
each of its directors, each of its officers who have signed the registration
statement, and each of its directors and each person or entity who controls the
Purchaser or any such person, within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Securities Act"), against any and all losses,
claims, damages or liabilities, joint and several, to which the Purchaser, or
any such person or entity may become subject, under the Securities Act or
otherwise, and will reimburse the Purchaser and each such controlling person for
any legal or other expenses incurred by the Purchaser or such controlling person
in connection with investigating or defending any such loss, claims, damages or
liabilities insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Prospectus
Supplement or any amendment or supplement to the Prospectus Supplement approved
in writing by the Seller or the omission or the alleged omission to state
therein a material fact necessary in order to make the statements in the
Prospectus Supplement or any amendment or supplement to the Prospectus
Supplement approved in writing by the Seller, in the light of the circumstances
under which they were made, not misleading, but only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
relates to the information contained in the Prospectus Supplement under the
captions: "Summary of Terms--The Mortgage Loans," "Risk Factors" (other than
"--Book-Entry System; and "--Certificate Ratings"), "The Seller and the Master
Servicer" and "The Mortgage Loan Pool" and the corresponding information in the
"Summary of Terms" (such information, the "Seller Information"). This indemnity
agreement will be in addition to any liability which the Seller may otherwise
have.

         (b) The Purchaser agrees to indemnify and hold harmless the Seller
against any and all losses, claims, damages or liabilities, joint and several,
to which the Seller, or any such person or entity may become subject, under the
Securities Act or otherwise, and will reimburse the Seller for any legal or
other expenses incurred by the Seller or such controlling person in connection
with investigating or defending any such losses, claims, damages or liabilities
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Prospectus Supplement or any
amendment or supplement to the Prospectus Supplement or the omission or the
alleged omission to state therein a material fact necessary in order to make the
statements in the Prospectus Supplement or any amendment or supplement to the
Prospectus Supplement, in the light of the circumstances under which they were
made, not misleading, but only to the extent that such

<PAGE>   11

untrue statement or alleged untrue statement or omission or alleged omission
relates to the information contained in the Prospectus Supplement other than the
Seller Information. This indemnity agreement will be in addition to any
liability which the Purchaser may otherwise have.

         (c) Promptly after receipt by any indemnified party under this Article
VI of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Article VI, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Article VI except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Article VI.

         If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Article VI for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation.

         Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Purchaser, if the indemnified parties
under this Article VI consist of the Purchaser, or by the Seller, if the
indemnified parties under this Article VI consist of the Seller.

<PAGE>   12

         Each indemnified party, as a condition of the indemnity agreements
contained in Section 6.1(a) and (b), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.

         Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.

         (d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Article VI
is for any reason held to be unenforceable although applicable in accordance
with its terms, the Seller, on the one hand, and the Purchaser, on the other,
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred by the
Seller and the Purchaser in such proportions as shall be appropriate to reflect
the relative benefits received by the Seller, on the one hand, and the
Purchaser, on the other, from the sale of the Mortgage Loans such that the
Purchaser is responsible for that portion represented by the percentage that the
underwriting discount with respect to the Offered Certificates (the
"Underwriting Discount") bears to the sum of the Purchase Price and the
Underwriting Discount and the Seller shall be responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls the Purchaser within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Purchaser and each director of
the Seller, each officer of the Seller, and each person, if any, who controls
the Seller within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Seller. Notwithstanding anything in this
paragraph (d) to the contrary, the Purchaser shall not be required to contribute
an amount in excess of the amount of the Underwriting Discount.

         (e) The Seller agrees to indemnify and to hold each of the Purchaser,
the Trustee, each Certificateholder and the Master Servicer harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Purchaser, the
Trustee and any Certificateholder may sustain in any way (i) related to the
failure of the Seller to perform its duties in compliance with the terms of this
Purchase Agreement or (ii) arising from a breach by the Seller of its
representations and warranties in Article III of this

<PAGE>   13

Purchase Agreement. The Seller shall immediately notify the Purchaser, the
Trustee and each Certificateholder if a claim is made by a third party with
respect to this Purchase Agreement, the Seller shall assume 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 Purchaser, the Master Servicer, the Seller, the
Trustee and/or Certificateholder in respect of such claim.

                                   ARTICLE VII

                                   TERMINATION

         SECTION 7.1 TERMINATION.

         The respective obligations and responsibilities of the Seller and the
Purchaser created hereby shall terminate, except for the Seller's and the
Purchaser's indemnity obligations as provided herein, upon the termination of
the Trust Fund as provided in Article X of the Pooling and Servicing Agreement.

                                  ARTICLE VIII

                            MISCELLANEOUS PROVISIONS

         SECTION 8.1 AMENDMENT.

         This Purchase Agreement may be amended from time to time by the Seller
and the Purchaser by written agreement signed by the Seller and the Purchaser.

         SECTION 8.2 GOVERNING LAW.

         THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.

         SECTION 8.3 NOTICES.

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

<PAGE>   14

                      if to the Seller:

                      First Union National Bank
                      One First Union Center
                      Charlotte, North Carolina  28288
                      Attention:  Patrick J. Tadie

or, such other address as may hereafter be furnished to the Purchaser in writing
by the Seller.

                      if to the Purchaser:

                      First Union Residential Securitization Transactions, Inc.
                      One First Union Center
                      Charlotte, North Carolina  28288-0600
                      Attention:  Patrick J. Tadie

or such other address as may hereafter be furnished to the Seller in writing by
the Purchaser.

         SECTION 8.4 SEVERABILITY OF PROVISIONS.

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

         SECTION 8.5 COUNTERPARTS.

         This Purchase Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original and such counterparts, together,
shall constitute one and the same agreement.

         SECTION 8.6 FURTHER AGREEMENTS.

         The Purchaser and the Seller each agree to execute and deliver to the
other such additional documents, instruments or agreements as may be necessary
or reasonable and appropriate to effectuate the purposes of this Purchase
Agreement or in connection with the issuance of any series of Certificates
representing interests in the Mortgage Loans.

<PAGE>   15

         SECTION 8.7 INTENTION OF THE PARTIES.

         It is the intention of the parties that the Purchaser is purchasing,
and the Seller is selling, the Mortgage Loans rather than pledging the Mortgage
Loans to secure a loan by the Purchaser to the Seller. Accordingly, the parties
hereto each intend to treat the transaction for federal income tax purposes and
all other purposes as a sale by the Seller, and a purchase by the Purchaser, of
the Mortgage Loans. The Purchaser will have the right to review the Mortgage
Loans and the related Mortgage Files to determine the characteristics of the
Mortgage Loans which will affect the federal income tax consequences of owning
the Mortgage Loans and the Seller will cooperate with all reasonable requests
made by the Purchaser in the course of such review.

         SECTION 8.8 SUCCESSORS AND ASSIGNS: ASSIGNMENT OF PURCHASE AGREEMENT.

         The Purchase Agreement shall bind and inure to the benefit of and be
enforceable by the Seller, the Purchaser and the Trustee. The obligations of the
Seller under this Purchase Agreement cannot be assigned or delegated to a third
party without the consent of the Purchaser, which consent shall be at the
Purchaser's sole discretion, except that the Purchaser acknowledges and agrees
that the Seller may assign its obligations hereunder to any Person into which
the Seller is merged or any corporation resulting from any merger, conversion or
consolidation to which the Seller is a party or any Person succeeding to the
business of the Seller. The parties hereto acknowledge that the Purchaser is
acquiring the Mortgage Loans for the purpose of contributing them to a trust
that will issue a series of Certificates representing undivided interests in
such Mortgage Loans. As an inducement to the Purchaser to purchase the Mortgage
Loans, the Seller acknowledges and consents to the assignment by the Purchaser
to the Trustee of all of the Purchaser's rights against the Seller pursuant to
this Purchase Agreement insofar as such rights relate to Mortgage Loans
transferred to such Trustee and to the enforcement or exercise of any right or
remedy against the Seller pursuant to this Purchase Agreement by the Trustee
under the Pooling and Servicing Agreement. Such enforcement of a right or remedy
by the Trustee shall have the same force and effect as if the right or remedy
had been enforced or exercised by the Purchaser directly. The parties
acknowledge and agree that the Trustee is an intended third party beneficiary of
this Purchase Agreement (including, specifically, the indemnification provisions
of Section 6.1(e)) and that the Trustee shall be entitled to enforce the
provisions of this Purchase Agreement against the parties hereto.

         SECTION 8.9 SURVIVAL.

         The representations and warranties set forth in Article III and the
provisions of Article VI shall survive the purchase of the Mortgage Loans
hereunder.

<PAGE>   16

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

                                             FIRST UNION RESIDENTIAL
                                             SECURITIZATION TRANSACTIONS, INC.,
                                               as Purchaser

                                             By:    /s/ Patrick J. Tadie
                                                --------------------------------
                                             Name:  Patrick J. Tadie
                                             Title:    Vice President

                                             FIRST UNION NATIONAL BANK,
                                             as Seller

                                             By:    /s/ Patrick J. Tadie
                                                --------------------------------
                                             Name:  Patrick J. Tadie
                                             Title:    Vice President

<PAGE>   17

STATE OF NORTH CAROLINA    )
                           )ss.:
MECKLENBURG COUNTY         )

         On the 25th day of February, 1999 before me, a Notary Public in and for
said State, personally appeared Patrick Tadie, known to me to be a Vice
President of FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., the
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.

/s/ Tina M. Cox
---------------------------------------
Notary Public

(NOTARIAL SEAL)

Commission Expires: 8/6/2003

<PAGE>   18

STATE OF NORTH CAROLINA    )
                           )ss.:
MECKLENBURG COUNTY         )

         On the 25th day of February, 1999 before me, a Notary Public in and for
said State, personally appeared Patrick Tadie, known to me to be a Vice
President of FIRST UNION NATIONAL BANK, the national banking association 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
national banking 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.

/s/ Tina M. Cox
---------------------------------------
Notary Public

(NOTARIAL SEAL)

Commission Expires: 8/6/2003

<PAGE>   19

                                   SCHEDULE I

                                 MORTGAGE LOANS

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