Document:

<PAGE>

                      AMENDED AND RESTATED TRUST AGREEMENT

                            dated as of July 25, 2002

                                 by and between

                         ACCREDITED HOME LENDERS, INC.,
                                   as Sponsor,

                                       and

                     U.S. BANK TRUST, NATIONAL ASSOCIATION,

                                as Owner Trustee

                      ACCREDITED MORTGAGE LOAN TRUST 2002-1
                        Asset-Backed Notes, Series 2002-1

<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

                                                ARTICLE I
                                                DEFINITIONS

<S>               <C>                                                                                            <C>
Section 1.01.     Capitalized Terms...............................................................................1
Section 1.02.     Other Definitional Provisions...................................................................5

                                                ARTICLE II
                                               ORGANIZATION

Section 2.01.     Name............................................................................................7
Section 2.02.     Office..........................................................................................7
Section 2.03.     Purposes and Powers.............................................................................7
Section 2.04.     Appointment of Owner Trustee....................................................................8
Section 2.05.     Initial Capital Contribution of Owner Trust Estate..............................................8
Section 2.06.     Declaration of Trust............................................................................8
Section 2.07.     Liability of the Certificateholders.............................................................8
Section 2.08.     Title to Trust Property.........................................................................8
Section 2.09.     Situs of Trust..................................................................................9
Section 2.10.     Representations and Warranties of the Sponsor...................................................9
Section 2.11.     Federal Income Tax Treatment of the Trust......................................................10
Section 2.12.     Covenants of the Sponsor.......................................................................11
Section 2.13.     Covenants of the Certificateholders............................................................11

                                               ARTICLE III
                                                SUB-TRUSTS

Section 3.01.     Series Trust...................................................................................13
Section 3.02.     Establishment of Sub-Trust.....................................................................13
Section 3.03.     Assets of Sub-Trust............................................................................13
Section 3.04.     Liabilities of Sub-Trust.......................................................................13

                                                ARTICLE IV
                                  CERTIFICATES AND TRANSFER OF INTERESTS

Section 4.01.     Initial Ownership..............................................................................15
Section 4.02.     The Certificates...............................................................................15
Section 4.03.     Execution, Authentication and Delivery of Certificates.........................................15
Section 4.04.     Registration of Transfer and Exchange of Certificates..........................................15
Section 4.05.     Mutilated, Destroyed, Lost or Stolen Certificates..............................................16
Section 4.06.     Persons Deemed Owners..........................................................................17
Section 4.07.     Access to List of Certificateholders' Names and Addresses......................................17
Section 4.08.     Maintenance of Office or Agency................................................................17
Section 4.09.     Restrictions on Transfers of Certificates......................................................17
</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>

                                                ARTICLE V
                                         ACTIONS BY OWNER TRUSTEE

<S>               <C>                                                                                            <C>
Section 5.01.     Prior Notice to the Certificateholders with Respect to Certain Matters.........................21
Section 5.02.     Action by Certificateholders with Respect to Bankruptcy........................................22
Section 5.03.     Restrictions on Certificateholders' Power......................................................23
Section 5.04.     Majority Control...............................................................................23

                                                ARTICLE VI
                                      TAX PROVISIONS; CERTAIN DUTIES

Section 6.01.     Federal Income Tax Provisions..................................................................24
Section 6.02.     Withholding Taxes..............................................................................27
Section 6.03.     Accounting and Reports to the Certificateholders, the Internal Revenue
                  Service and Others.............................................................................28
Section 6.04.     Signature on Returns...........................................................................28

                                               ARTICLE VII
                                   AUTHORITY AND DUTIES OF OWNER TRUSTEE

Section 7.01.     General Authority..............................................................................29
Section 7.02.     General Duties.................................................................................29
Section 7.03.     Action upon Instruction........................................................................29
Section 7.04.     No Duties Except as Specified in this Agreement, the Basic Documents or any Instructions.......30
Section 7.05.     No Action Except under Specified Documents or Instructions.....................................31
Section 7.06.     Restrictions...................................................................................31

                                               ARTICLE VIII
                                       CONCERNING THE OWNER TRUSTEE

Section 8.01.     Acceptance of Trusts and Duties................................................................32
Section 8.02.     Furnishing of Documents........................................................................33
Section 8.03.     Representations and Warranties of the Owner Trustee............................................33
Section 8.04.     Reliance; Advice of Counsel....................................................................34
Section 8.05.     Not Acting in Individual Capacity..............................................................35
Section 8.06.     Owner Trustee Not Liable for the Certificates or Mortgage Loans................................35
Section 8.07.     Owner Trustee May Own Certificates and Notes...................................................35
Section 8.08.     Licenses.......................................................................................35

                                                ARTICLE IX
                                       COMPENSATION OF OWNER TRUSTEE

Section 9.01.     Owner Trustee's Fees and Expenses..............................................................36
Section 9.02.     Indemnification................................................................................36
Section 9.03.     Payments to the Owner Trustee..................................................................37
</TABLE>

                                       ii
<PAGE>
<TABLE>
<CAPTION>

                                                ARTICLE X
                                      TERMINATION OF TRUST AGREEMENT

<S>               <C>                                                                                            <C>
Section 10.01.    Termination of Trust Agreement.................................................................38

                                                ARTICLE XI
                          SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

Section 11.01.    Eligibility Requirements for Owner Trustee.....................................................40
Section 11.02.    Resignation or Removal of Owner Trustee........................................................40
Section 11.03.    Successor Owner Trustee........................................................................41
Section 11.04.    Merger or Consolidation of Owner Trustee.......................................................41
Section 11.05.    Appointment of Co-Trustee or Separate Trustee..................................................42

                                               ARTICLE XII
                                               MISCELLANEOUS

Section 12.01.    Supplements and Amendments.....................................................................44
Section 12.02.    No Legal Title to Owner Trust Estate in Certificateholders.....................................45
Section 12.03.    Limitations on Rights of Others................................................................45
Section 12.04.    Notices........................................................................................45
Section 12.05.    Severability...................................................................................46
Section 12.06.    Separate Counterparts..........................................................................46
Section 12.07.    Successors and Assigns.........................................................................46
Section 12.08.    No Petition....................................................................................46
Section 12.09.    No Recourse....................................................................................46
Section 12.10.    Headings.......................................................................................46
Section 12.11.    GOVERNING LAW..................................................................................46
Section 12.12.    Grant of Certificateholder Rights to Note Insurer..............................................46
Section 12.13.    Third-Party Beneficiary........................................................................47
Section 12.14.    Suspension and Termination of Note Insurer's Rights............................................47
Section 12.15.    Master Servicer................................................................................48
</TABLE>

                                      iii
<PAGE>

EXHIBITS

EXHIBIT A         Form of Trust Certificate
EXHIBIT B         Form of Certificate of Trust
EXHIBIT C         Form of Investment Letter
EXHIBIT D         Form of Transferor Certificate

                                       iv
<PAGE>

        This AMENDED AND RESTATED TRUST AGREEMENT, dated as of July 25, 2002, is
by and between ACCREDITED HOME LENDERS, INC., as sponsor (the "SPONSOR"), and
U.S. BANK TRUST, NATIONAL ASSOCIATION, a national banking association, as owner
trustee (the "OWNER TRUSTEE").

        NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     Section 1.01. CAPITALIZED TERMS. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:

        "AGREEMENT" shall mean this Trust Agreement, as may be amended and
supplemented from time to time.

        "ANNUAL TAX REPORTS" shall have the meaning assigned thereto in Section
6.01(c)(xi).

        "AUTHORIZED OFFICER" shall have the meaning assigned thereto in Appendix
I to the Indenture.

        "BACKUP SERVICER" shall mean Countrywide Home Loans Servicing LP, or any
successor backup servicer appointed pursuant to the Sale and Servicing
Agreement.

        "BASIC DOCUMENTS" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Insurance Agreement and the Indemnification
Agreement.

        "BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day that is either a legal holiday or a day on which the Note Insurer or
banking institutions in the State of New York, the State of Delaware, the State
of Minneapolis, the State of Maryland, or the state in which the Indenture
Trustee's office from which payments will be made to the Certificateholder, are
authorized or obligated by law, regulation or executive order to be closed.

        "BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.

        "CAPITAL ACCOUNT" shall have the meaning assigned thereto in Section
6.01(c)(i).

        "CERTIFICATE" shall mean each Trust Certificate.

        "CERTIFICATEHOLDER" shall mean each Person in whose name a Trust
Certificate is registered.

                                       1
<PAGE>

        "CERTIFICATE OF TRUST" shall mean the Certificate of Trust, in the form
of EXHIBIT B, to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.

        "CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean the
register mentioned and the registrar appointed pursuant to Section 4.04.

        "CLASS" shall mean either the Class A-1 Notes or the Class A-2 Notes.

        "CLASS A-1 NOTES" shall mean the Accredited Mortgage Loan Trust 2002-1,
Asset-Backed Notes, Series 2002-1, Class A-1.

        "CLASS A-2 NOTES" shall mean the Accredited Mortgage Loan Trust 2002-1,
Asset-Backed Notes, Series 2002-1, Class A-2.

        "CODE" shall mean the Internal Revenue Code of 1986, as amended, and,
where appropriate in context, Treasury Regulations promulgated thereunder.

        "CORPORATE TRUST OFFICE" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at 300
Delaware Avenue, Eighth Floor, Wilmington, Delaware 19801, Attention: Corporate
Trust Administration; or at such other address in the State of Delaware as the
Owner Trustee may designate by notice to the Certificateholders and the Sponsor,
or the principal corporate trust office of any successor Owner Trustee (the
address (which shall be in the State of Delaware) of which the successor Owner
Trustee will notify the Certificateholders and the Sponsor).

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

        "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

        "EXPENSES" shall have the meaning assigned to such term in Section 9.02.

        "GROUP I MORTGAGE LOANS" shall mean a pool of fixed rate mortgage loans,
as identified in the related Mortgage Loan Schedule.

        "GROUP II MORTGAGE LOANS" shall mean a pool of adjustable-rate mortgage
loans, as identified in the related Mortgage Loan Schedule.

        "HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning set forth
for "partner nonrecourse debt minimum gain" in Treasury Regulations Section
1.704-2(i)(2). A Certificateholder's share of Holder Nonrecourse Debt Minimum
Gain shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(5).

        "INDEMNIFICATION AGREEMENT" shall mean the Indemnification Agreement,
dated as of July 1, 2002, among the Note Insurer, the Sponsor, the Trust and the
Underwriter.

        "INDENTURE" shall mean the Indenture, dated as of July 1, 2002, by and
between the Trust and the Indenture Trustee.

                                       2
<PAGE>

        "INDENTURE TRUSTEE" means Wells Fargo Bank Minnesota, National
Association, a national banking association, as Indenture Trustee under the
Indenture.

        "INSURANCE AGREEMENT" shall mean the Insurance and Indemnity Agreement
dated as of July 1, 2002 among the Note Insurer, the Trust and the Sponsor,
including any amendments and supplements thereto.

        "INVESTMENT LETTER" shall have the meaning assigned to such term in
Section 4.04.

        "LOAN GROUP" shall mean either Loan Group I or Loan Group II.

        "LOAN GROUP I" shall mean the pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Loan Group I.

        "LOAN GROUP II" shall mean the pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Loan Group II.

        "MASTER SERVICER" shall mean Accredited Home Loans, Inc., or any
successor master servicer appointed pursuant to the Sale and Servicing
Agreement.

        "MORTGAGE LOANS" shall mean the Group I Mortgage Loans and the Group II
Mortgage Loans.

        "NON-U.S. PERSON" shall mean an individual, corporation, partnership or
other person other than a citizen or resident of the United States, a
corporation, partnership or other entity treated as a corporation or-
partnership organized in or under the laws of the United States or any state
thereof including the District of Columbia, an estate that is subject to U.S.
federal income tax regardless of the source of its income or a trust if (i) a
court in the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States Persons have the
authority to control all substantial decisions of the trust. Notwithstanding the
last clause of the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996 and treated as
United States Persons prior to such date, may elect to continue to be United
States Persons.

        "NOTEHOLDER" shall have the meaning assigned to such terms in the
Indenture.

        "NOTE INSURANCE POLICY" shall mean the financial guaranty insurance
policy issued by the Note Insurer for the benefit of the Noteholders.

        "NOTE INSURER" shall mean Ambac Assurance Corporation, a New York
financial guaranty insurance company.

        "NOTE INSURER DEFAULT" shall have the meaning assigned to such term in
the Indenture.

        "NOTE PRINCIPAL BALANCE" shall have the meaning assigned to such term in
the Indenture.

                                       3
<PAGE>

        "NOTES" shall mean the Class A-1 Notes and the Class A-2 Notes.

        "OUTSTANDING" shall have the meaning assigned to such term in the
Indenture.

        "OWNERSHIP INTEREST" means, with respect to any Certificate, any
ownership or security interest in such Certificate, including any interest in
such Certificate as the Certificateholder thereof and any other interest
therein, whether direct or indirect, legal or beneficial, as owner or as
pledgee.

        "OWNER TRUST ESTATE" shall mean the Trust Estate, including the
contribution of $1,000 referred to in Section 2.05 hereof.

        "OWNER TRUSTEE" shall mean U.S. Bank Trust, National Association, a
national banking association, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor owner trustee hereunder.

        "PAYMENT DATE" shall mean the 25th day of each month or, if such 25th
day is not a Business Day, the next succeeding Business Day, commencing August
26, 2002.

        "PERCENTAGE INTEREST" shall mean with respect to any Certificate, the
percentage portion of the Certificates evidenced thereby as stated on the face
of such Certificate.

        "PROSPECTIVE HOLDER" shall have the meaning set forth in Section
4.09(a).

        "RATING AGENCY CONDITION" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
ten (10) days (or such shorter period as is acceptable to each Rating Agency)
prior notice thereof and that each of the Rating Agencies shall have notified
the Indenture Trustee, the Sponsor, the Master Servicer, the Note Insurer, the
Owner Trustee and the Trust in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Notes that it
maintains without taking into account the Note Insurance Policy.

        "RECORD DATE" shall mean, with respect to the Certificates and any
Payment Date, the last Business Day of the month immediately preceding the month
in which such Payment Date occurs.

        "SALE AND SERVICING AGREEMENT" shall mean the Sale and Servicing
Agreement, dated as of July 1, 2002, among the Sponsor, the Trust, the Indenture
Trustee, the Backup Servicer and the Master Servicer.

        "SECRETARY OF STATE" shall mean the Secretary of State of the State of
Delaware.

        "SPONSOR" shall mean Accredited Home Lenders, Inc., a California
corporation.

        "SUB-TRUST" shall have the meaning specified in Section 3.01 and
includes either Sub-Trust I or Sub-Trust II, each of which constitute a separate
series of interests in the Trust Estate pursuant to Section 3806(b)(2) of the
Business Trust Statute.

                                       4
<PAGE>

        "SUB-TRUST I" shall mean the portion of the Trust Estate assigned to
Sub-Trust I.

        "SUB-TRUST II" shall mean the portion of the Trust Estate assigned to
Sub-Trust II.

        "TAXABLE YEAR" shall have the meaning assigned thereto in Section
6.01(c)(x).

        "TAX MATTERS PARTNER" shall have the meaning assigned thereto in Section
6.01(c)(xii).

        "TRANSFER" means any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.

        "TREASURY REGULATIONS" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

        "TRUST" shall mean the Accredited Home Equity Loan Trust 2002-1, the
Delaware business trust created pursuant to this Agreement.

        "TRUST CERTIFICATE" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust consisting of Sub-Trust I and
Sub-Trust II, substantially in the form attached hereto as EXHIBIT A. "TRUST
MINIMUM GAIN" shall have the meaning set forth for "partnership minimum gain" in
Treasury Regulations 1.704-2(b)(2) and 1.704-2(d). In accordance with Treasury
Regulations Section 1.704-2(d), the amount of Trust Minimum Gain is determined
by first computing, for each nonrecourse liability of the Trust, any gain the
Trust would realize if it disposed of the property subject to that liability for
no consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. A Certificateholder's share of Trust
Minimum Gain shall be determined in accordance with Treasury Regulations Section
1.704-2(g)(1).

        "UNDERWRITER" shall mean Lehman Brothers Inc.

        "UNITED STATES PERSON" shall have the meaning assigned to such term in
the Indenture.

     Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms used
herein and not otherwise defined herein have the meanings assigned to them in
Appendix I to the Indenture.

     (b) 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.

     (c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in

                                       5
<PAGE>

any such certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terns in this
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate or other
document shall control.

     (d) The words "hereof," "herein," "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; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."

     (e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terns and to the masculine as well
as to the feminine and neuter genders of such terms.

     (f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.

                                       6
<PAGE>

                                   ARTICLE II

                                  ORGANIZATION

     Section 2.01. NAME. The Trust governed hereby shall be known as "Accredited
Mortgage Loan Trust 2002-1," in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued on behalf of the Trust.

     Section 2.02. OFFICE. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in the State of
Delaware as the Owner Trustee may designate by written notice to the
Certificateholders, Indenture Trustee, the Note Insurer and the Sponsor.

     Section 2.03. PURPOSES AND POWERS. The purpose of the Trust is to engage in
the following activities:

        (a) to issue the Notes pursuant to the Indenture and to sell such Notes;

        (b) with the proceeds of the sale of the Notes and Certificates, to pay
     the organizational, startup and transactional expenses of the Trust and to
     purchase the Mortgage Loans to be included in the Owner Trust Estate from
     the Sponsor with the balance of such funds pursuant to the Sale and
     Servicing Agreement;

        (c) to assign, grant, transfer, pledge, mortgage and convey the Owner
     Trust Estate pursuant to the Indenture and to hold, manage and distribute
     to the Certificateholders any portion of the Owner Trust Estate released
     from the lien of, and remitted to the Trust pursuant to, the Indenture;

        (d) to enter into and perform its obligations under the Basic Documents
     to which it is or is to be a party;

        (e) to engage in those activities, including entering into agreements,
     that are necessary, suitable or convenient to accomplish the foregoing or
     are incidental thereto or connected therewith;

        (f) subject to compliance with the Basic Documents, to engage in such
     other activities as may be required in connection with conservation of the
     Owner Trust Estate and the making of distributions and payments to the
     Noteholders and the Certificateholders; and

        (g) to issue the Certificates pursuant to this Agreement.

        The Trust is hereby authorized by the initial beneficiary and the
Certificateholders to engage in the foregoing activities. The Trust shall not
engage in any activity other than in connection with the foregoing or other than
as required or authorized by the terms of this Agreement or the other Basic
Documents.

                                       7
<PAGE>

     Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Sponsor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein and in the Business Trust
Statute, and the Owner Trustee hereby accepts such appointment.

The Owner Trustee may engage, in the name of the Trust or in its own name on
behalf of the Trust, in the activities of the Trust, make and execute contracts
on behalf of the Trust and sue on behalf of the Trust.

     Section 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The
Sponsor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1,000. The Owner Trustee hereby
acknowledges receipt in trust from the Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Payment Account. The Sponsor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee. Concurrently with the execution of this
Agreement, the Trust will enter into the Sale and Servicing Agreement pursuant
to which it will purchase the Mortgage Loans, to be designated to the related
Sub-Trust, which comprise the remainder of the Owner Trust Estate.

     Section 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares that
it will hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Noteholders and the
Certificateholders, subject to the obligations of the Trust Under the Basic
Documents.

        It is the intention of the parties hereto that, solely for income and
franchise tax purposes, the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a security
arrangement, with the assets of the Trust being the Sub-Trusts consisting of
each Loan Group. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms, if any, consistent with the
characterization of the Trust, the Sub-Trusts and each Loan Group as provided in
the preceding sentence for such tax purposes. Effective as of the date hereof,
the Owner Trustee shall have all rights, powers and duties set forth herein and
in the Business Trust Statute with respect to accomplishing the purposes of the
Trust. The Owner Trustee shall file the Certificate of Trust with the Secretary
of State.

     Section 2.07. LIABILITY OF THE CERTIFICATEHOLDERS. Subject to Section 2.05,
no Certificateholder shall have any personal liability for any liability or
obligation of the Trust. The Certificates shall be fully paid and nonassessable.

     Section 2.08. TITLE TO TRUST PROPERTY.

     (a) Subject to the Indenture, legal title to all of the Owner Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which

                                       8
<PAGE>

case title shall be deemed to be vested in the Owner Trustee and/or a separate
trustee, as the case may be.

     (b) The Certificateholders shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any interest
of the Certificateholders shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of any part of the Owner Trust Estate.

     Section 2.09. SITUS OF TRUST. The Trust will be located and administered in
the State of Delaware. All accounts maintained at a bank by the Owner Trustee on
behalf of the Trust shall be located in the State of New York or the State of
Delaware. The Trust shall not have any employees; PROVIDED, HOWEVER, that
nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of Delaware. Payments will be received by
the Trust only in Delaware, and payments will be made by the Trust only from
Delaware. The only office of the Trust will be at the Corporate Trust Office in
the State of Delaware.

     Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The Sponsor
hereby represents and warrants to the Owner Trustee and the Note Insurer that:

     (a) The Sponsor is duly organized and validly existing as a corporation in
good standing under the laws of the State of California, with power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted.

     (b) The Sponsor has the power and authority to execute and deliver this
Agreement and to carry out its terms; the Sponsor has full power and authority
to transfer and assign the property to be transferred and assigned to and
deposited with the Trust and the Sponsor has duly authorized such transfer and
assignment and deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Sponsor by all necessary corporate action.

     (c) The consummation of the transactions contemplated by this Agreement and
the fulfillment of the terms hereof do not conflict with, result in any breach
of any of the terns and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or by-laws of the
Sponsor, or any indenture, agreement or other instrument to which the Sponsor is
a party or by which it is bound; nor result in the creation or imposition of any
lien upon any of its properties pursuant to the terns of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, any order, rule or regulation applicable to the Sponsor of
any court or of any Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Sponsor or its
properties.

     (d) There are no proceedings or investigations pending or notice of which
has been received in writing before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Sponsor or its properties: (x) asserting the invalidity of this Agreement, (y)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement or (z) seeking any determination or ruling that

                                       9
<PAGE>

should reasonably be expected to materially and adversely affect the performance
by the Sponsor of its obligations under, or the validity or enforceability of,
this Agreement.

     (e) The representations and warranties of the Sponsor in Article III of the
Sale and Servicing Agreement are true and correct.

     (f) The Sponsor has duly executed and delivered this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of the Sponsor,
enforceable against the Sponsor, in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
the application of equitable principles.

     (g) The Sponsor 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
other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Sponsor or its properties or might have consequences that
would materially and adversely affect its performance hereunder.

     (h) The Sponsor will hold itself out to the public under its own name as a
separate and distinct entity and conduct its business so as not to mislead
others as to the identity of the entity under which those others are concerned.
Without limiting the generality of the foregoing, all oral and written
communications, including without limitations, all letters, invoices, contracts,
statements and applications will be made solely in the name of the Trust if they
are made on behalf of the Trust and solely in the name of the Sponsor if they
are made on behalf of the Sponsor.

     Section 2.11. FEDERAL INCOME TAX TREATMENT OF THE TRUST.

     (a) For so long as the Trust has one Certificateholder for federal income
tax purposes, it will, pursuant to Treasury Regulations promulgated under
Section 7701 of the Code, be disregarded as an entity distinct from the
Certificateholder for all federal income tax purposes. Accordingly, for federal
income tax purposes, the Certificateholder will be treated as (i) owning all
assets owned by the Trust, (ii) having incurred all liabilities incurred by the
Trust, and (iii) all transactions between the Trust and the Certificateholder
will be disregarded.

     (b) In the event that the Trust has two or more Certificateholders for
federal income tax purposes, the Trust will be treated as a partnership. At any
such time that the Trust has two or more Certificateholders, this Agreement may
need to be amended, in accordance with Section 12.01 herein, and appropriate
provisions may need to be added so as to provide for treatment of the Trust as a
partnership.

     (c) The Owner Trustee shall have no obligation or liability for its failure
to treat the Trust as a partnership prior to the earlier of its receipt of
notice or its having actual knowledge that the Trust has more than a single
equity owner.

     (d) Neither the Owner Trustee nor any Certificateholder will, under any
circumstances, file a Form 8832, or any successor form, on behalf of the Trust.

                                       10
<PAGE>

     Section 2.12. COVENANTS OF THE SPONSOR. The Sponsor agrees and covenants
for the benefit of each Certificateholder, the Note Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:

     (a) it shall not create, incur or suffer to exist any indebtedness or
engage in any business, except, in each case, as permitted by its articles of
incorporation and by-laws and the Basic Documents;

     (b) it shall not, for any reason, institute proceedings for the Trust to be
adjudicated bankrupt or insolvent, or consent to or join in the institution of
bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;

     (c) it shall obtain from each counterparty to each Basic Document to which
it or the Trust is a party and each other agreement entered into on or after the
date hereof to which it or the Trust is a party, an agreement by each such
counterparty that prior to the occurrence of certain events specified in such
agreement, such counterparty shall not institute against, or join any other
Person in instituting against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and

     (d) it shall not, for any reason, withdraw or attempt to withdraw from this
Agreement or any other Basic Document to which it is a party, dissolve,
institute proceedings for it to be adjudicated a bankrupt or insolvent, or
consent to the institution of bankruptcy or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of it or a substantial part of its property, or make any assignment
for the benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any action in furtherance of any such action.

     Section 2.13. COVENANTS OF THE CERTIFICATEHOLDERS. Each Certificateholder
by becoming a beneficial owner of the Certificate or by its acceptance of a
Certificate agrees:

     (a) to be bound by the terns and conditions of the Certificates of which
such Certificateholder is the beneficial owner and of this Agreement and the
other Basic Documents, including any supplements or amendments hereto and
thereto and to perform the obligations of a Certificateholder as set forth
therein or herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee, the Note
Insurer and all other Certificateholders, present and future;

     (b) to the appointment of the Owner Trustee as such Certificateholder's
agent and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust

                                       11
<PAGE>

and, if requested by the Trust, to sign such federal income tax information
return in its capacity as holder of an interest in the Trust;

     (c) not to take any position in such Certificateholder's tax returns
inconsistent with those taken in any tax returns filed by the Trust; and

     (d) if such Certificateholder is other than an individual or other entity
holding its Certificate through a broker who reports securities sales on Form
1099-B, to notify the Owner Trustee in writing of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer.

                                       12
<PAGE>

                                   ARTICLE III

                                   SUB-TRUSTS

     Section 3.01. SERIES TRUST. The assets of the Trust shall be divided into
designated series as provided in Section 3806(b)(2) of the Business Trust
Statute (each series, a "SUB-TRUST"). Accordingly, it is the intent of the
parties hereto that Articles II, IV and X of this Agreement shall apply also
with respect to each such Sub-Trust as if each such Sub-Trust were a separate
business trust under the Business Trust Statute, and each reference to the term
"Trust" in such Articles shall be deemed to be a reference to each such
Sub-Trust to the extent necessary to give effect to the foregoing intent. The
use of the terms "Trust" or "Sub-Trust" in this Agreement shall in no event
alter the intent of the parties hereto that the Trust receive the full benefit
of the limitation on interseries liability as set forth in Section 3804 of the
Business Trust Statute.

     Section 3.02. ESTABLISHMENT OF SUB-TRUST.

             The Owner Trustee hereby establishes and designates two initial
Sub-Trusts, as follows:

                             Sub-Trust I and Sub-Trust II

             The provisions of this Article III shall be applicable to the above
designated Sub-Trusts.

     Section 3.03. ASSETS OF SUB-TRUST. All consideration received by the Owner
Trust Estate for the issuance or sale of the Notes relating to a particular Loan
Group and Sub-Trust, together with the entire Owner Trust Estate in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong solely to that Sub-Trust for all purposes, subject only to
the rights of creditors of such Sub-Trust and except as may otherwise be
provided in the Sale and Servicing Agreement or required by applicable tax laws,
and shall be so recorded upon the books of account of the Trust. Separate and
distinct records shall be maintained for each Sub-Trust and the assets
associated with a Sub-Trust shall be held and accounted for separately from the
other assets of the Owner Trust Estate, and any other Sub-Trust. In the event
that there is any Owner Trust Estate, or any income, earnings, profits, and
proceeds thereof, or funds or payments which are not readily identifiable as
belonging to any particular Sub-Trust, the Owner Trustee shall allocate them to
the Certificates generally. Each such allocation by the Owner Trustee shall be
conclusive and binding upon all Noteholders and Certificateholders for all
purposes.

     Section 3.04. LIABILITIES OF SUB-TRUST.

             The Owner Trust Estate belonging to each particular Sub-Trust shall
be charged with the liabilities of the Trust in respect of that Sub-Trust and
only that Sub-Trust and all expenses, costs, charges and reserves attributable
to that Sub-Trust, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging

                                       13
<PAGE>

to any particular Sub-Trust shall be allocated and charged by the Owner Trustee
to the Certificateholders generally, based on their Ownership Interest. Each
allocation of liabilities, expenses, costs, charges and reserves by the Owner
Trustee shall be conclusive and binding upon all Noteholders and
Certificateholders for all purposes. The Owner Trustee shall have full
discretion, to the extent not inconsistent with applicable law, to determine
which items shall be treated as income and which items as capital, and each such
determination and allocation shall be conclusive and binding upon the
Noteholders and the Certificateholders. Every written agreement, instrument or
other undertaking made or issued by or on behalf of a particular Sub-Trust shall
include a recitation limiting the obligation or claim represented thereby to
that Sub-Trust and its assets.

             Without limitation of the foregoing provisions of this Article, but
subject to the right of the Owner Trustee in its discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Sub-Trust shall be enforceable against the
assets of such Sub-Trust only, and not against the assets (i) of the Trust
generally or (ii) of any other Sub-Trust. Notice of this limitation on
interseries liabilities shall be set forth in the Certificate of Trust of the
Trust (whether originally or by amendment) as filed or to be filed in the Office
of the Secretary of State pursuant to the Business Trust Statute, and upon the
giving of such notice in the Certificate of Trust, the statutory provisions of
Section 3804 of the Business Trust Statute relating to limitations on
interseries liabilities (and the statutory effect under Section 3804 of setting
forth such notice in the Certificate of Trust) shall become applicable to the
Trust and each Sub-Trust. Every note, bond, contract, instrument, certificate or
other undertaking made or issued by or on behalf of a particular Sub-Trust shall
include a recitation limiting the obligation represented thereby to that
Sub-Trust and its assets in accordance with Section 3804(a) of the Business
Trust Statute.

                                       14
<PAGE>

                                   ARTICLE IV

                     CERTIFICATES AND TRANSFER OF INTERESTS

     Section 4.01. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Sponsor pursuant to Section 2.05 and the filing of the
Certificate of Trust with the Secretary of State and until the issuance of the
Certificates, the Sponsor shall be the sole owner of the Trust.

     Section 4.02. THE CERTIFICATES. The Certificates shall be issued as a
single certificate, substantially in the form of Exhibit A hereto, upon the
order of the Sponsor to the Owner Trustee concurrently with the sale and
assignment to the Trust of the Mortgage Loans. The Certificates shall represent
the entire beneficial ownership interest in the assets of the Trust subject to
the debt represented by the Notes. The Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an Authorized Officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be valid, notwithstanding that such individuals or any of them
shall 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 authentication
and delivery of such Certificates.

             A transferee of a Certificate shall become a Certificateholder, and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 4.04.

     Section 4.03. EXECUTION, AUTHENTICATION AND DELIVERY OF CERTIFICATES.
Concurrently with the initial transfer of the Mortgage Loans to the Trust
pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the
Certificates, representing 100% of the Percentage Interests of the Trust, to be
executed on behalf of the Trust, authenticated and delivered, at the written
direction of the Sponsor, to Accredited Home Lenders, Inc., as initial
Certificateholder. No Certificate shall entitle its holder to any benefit under
this Agreement, or shall be valid for any purpose, unless there shall appear on
such Certificate a certificate of authentication substantially in the form set
forth in EXHIBIT A, executed by the Owner Trustee or the Owner Trustee's
authenticating agent, by manual or facsimile signature; such authentication
shall constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.

     Section 4.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 4.08, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
"Certificate Registrar."

                                       15
<PAGE>

             Upon surrender for registration of transfer of any Certificate at
the office or agency maintained pursuant to Section 4.08, the Owner Trustee,
upon the satisfaction of the conditions set forth in Section 4.09(c), shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates of a like Percentage Interest dated
the date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of a like Percentage Interest upon surrender of the Certificates to
be exchanged at the office or agency maintained pursuant to Section 4.08.

             Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form, attached to the form of Certificate attached hereto as EXHIBIT A, or such
other form satisfactory to the Note Insurer, or, upon the occurrence and
continuation of a Note Insurer Default, satisfaction of the Rating Agency
Condition, duly executed by the Certificateholder or his attorney duly
authorized in writing.

             No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or 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.

             The preceding provisions of this Section 4.04 notwithstanding, the
Certificate Registrar shall not register transfers or exchanges of Certificates
for a period of fifteen (15) days preceding the Payment Date with respect to the
Certificates.

             Notwithstanding anything contained herein to the contrary, neither
the Certificate Registrar nor the Owner Trustee shall be responsible for
ascertaining whether any transfer complies with the registration provisions or
exemptions from the Securities Act of 1933, as amended, the Securities Act of
1934, as amended, applicable state securities law or the Investment Company Act
of 1940, as amended; PROVIDED, HOWEVER, that if an Investment Letter is
specifically required to be delivered to the Owner Trustee by a purchaser or
transferee of a Certificate, the Owner Trustee shall be under a duty to examine
the same to determine whether it conforms to the form of Investment Letter set
forth as EXHIBIT C hereto and shall promptly notify the party delivering the
same if such Investment Letter does not so conform.

     Section 4.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any
mutilated Certificate shall be surrendered to the Certificate Registrar, or if
the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Percentage Interest. In connection with
the issuance of any new Certificate under this Section 4.05, the Owner Trustee
or the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that

                                       16
<PAGE>

may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive 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 4.06. PERSONS DEEMED OWNERS. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be bound
by the terns of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 6.02 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.

     Section 4.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Certificate Registrar shall furnish or cause to be furnished to the Owner
Trustee, the Master Servicer, the Sponsor and the Indenture Trustee immediately
prior to each Payment Date, a list of the names and addresses of the
Certificateholders as of the most recent Record Date. If one or more
Certificateholder, together evidencing Percentage Interests totaling not less
than 25%, apply in writing to the Certificate Registrar, and such application
states that the applicants desire to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Certificates and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Certificate Registrar shall, within
five (5) Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, the
Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.

     Section 4.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall
maintain an office or offices or agency or agencies where notices and demands to
or upon the Owner Trustee in respect of the Basic Documents may be served, and
so long as the Owner Trustee is the Certificate Registrar, where Certificates
may be surrendered for registration of transfer or exchange and notices and
demands to or upon the Certificate Registrar in respect of the Certificates, may
be served. The Owner Trustee initially designates the Corporate Trust Office as
its principal corporate trust office for such purposes. The Owner Trustee shall
give prompt written notice to the Note Insurer, the Indenture Trustee, the
Sponsor and the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.

     Section 4.09. RESTRICTIONS ON TRANSFERS OF CERTIFICATES. (a) Each
prospective purchaser and any subsequent transferee of a Certificate (each, a
"PROSPECTIVE HOLDER"), other than the Sponsor, shall execute and deliver to the
Owner Trustee and the Certificate Registrar and any of their respective
successors an Investment Letter in the form of Exhibit C hereto to the effect
that:

             (i)   Such Person is (A) a "qualified institutional buyer" as
     defined in Rule 144A under the Securities Act of 1933, as amended (the
     "SECURITIES ACT"), and is aware that the seller of the Certificate may be
     relying on the exemption from the registration requirements of the
     Securities Act provided by Rule 144A and is acquiring such Certificate for
     its own account or for the account of one or more qualified institutional

                                       17
<PAGE>

     buyers for whom it is authorized to act, or (B) a Person involved in the
     organization or operation of the Trust or an affiliate of such Person
     within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as
     amended (including, but not limited to, the Sponsor).

             (ii)  Such Person understands that the Certificates have not been
     and will not be registered under the Securities Act and may be offered,
     sold, pledged or otherwise transferred only to a person whom the seller
     reasonably believes is (A) a qualified institutional buyer or (B) a Person
     involved in the organization or operation of the Trust or an affiliate of
     such Person, in a transaction pursuant to an effective registration
     statement under the Securities Act and any applicable state securities laws
     or exempt from the registration requirements of the Securities Act and any
     such state securities laws.

             (iii) Such Person understands that the Certificates bear a legend
     to the following effect:

                   "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
                   UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
                   ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY
                   OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF
                   (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A
                   "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
                   UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE
                   ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
                   FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE
                   LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR
                   OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON
                   WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT
                   OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO,
                   ACCREDITED HOME LENDERS, INC.) IN A TRANSACTION THAT IS
                   REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
                   OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
                   ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
                   CERTIFICATE UNDER THE ACT OR ANY STATE SECURITIES LAWS."

                                       18
<PAGE>

     (b)     By its acceptance of a Certificate, each Prospective Holder agrees
and acknowledges that no legal or beneficial interest in all or any portion of
any Certificate may be transferred directly or indirectly to an entity that
holds residual securities as nominee to facilitate the clearance and settlement
of such securities through electronic book-entry changes in accounts of
participating organizations (a "BOOK-ENTRY NOMINEE") and any such purported
transfer shall be void and have no effect.

             The Certificates shall bear an additional legend referring to the
restrictions contained in preceding paragraph to the following effect:

                   THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
                   DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED
                   TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE
                   REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE IS NOT
                   AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO
                   FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY
                   THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF
                   PARTICIPATING ORGANIZATIONS.

     (c)     No transfer of a Certificate or any beneficial interest therein
shall be made to any person unless the Note Insurer has given its prior written
consent to such transfer (or, upon the occurrence and continuance of a Note
Insurer Default, satisfaction of the Rating Agency Condition) and the Owner
Trustee has received a representation letter from the Prospective Holder to the
effect that such Prospective Holder (i) is not a person which is an employee
benefit plan, trust or account subject to Title I of ERISA or Section 4975 of
the Code or a governmental plan, as defined in Section 3(32) of ERISA, subject
to any federal, state or local law which is, to a material extent, similar to
the foregoing provisions of ERISA or the Code (any such person being a "PLAN"),
(ii) is not an entity, including an insurance company separate account or
general account, whose underlying assets include "plan assets" by reason of a
Plan's investment in the entity and (iii) is not directly or indirectly
purchasing such Certificate or interest therein on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with the assets of a Plan.

     (d)     The Owner Trustee shall not execute, and shall not countersign and
deliver, a Certificate in connection with any transfer thereof unless the
transferor shall have provided to the Owner Trustee an Investment Letter, signed
by the transferee, which certificate shall contain the consent of the transferee
to any amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Certificates to Book-Entry Nominees,
and an agreement by the transferee that it will not transfer a Certificate
without providing to the Owner Trustee an Investment Letter.

     (e)     [Reserved].

                                       19
<PAGE>

     (f)     Unless the Prospective Holder delivers a certificate to the Owner
Trustee to the effect that it is a United States Person, the Prospective Holder,
other than Accredited Home Lenders, Inc. or an affiliate of the Accredited Home
Lenders, Inc., shall obtain and deliver to the Note Insurer and the Owner
Trustee an Opinion of Counsel satisfactory to the Note Insurer to the effect
that, as a matter of federal income tax law, the transfer of the Certificate to
such Prospective Holder will not result in the imposition of any U.S.
withholding tax on payments in respect of the Mortgage Loans or the Certificate.

     (g)     The Certificates may not be pledged or transferred without delivery
to the Certificate Registrar of an Opinion of Counsel satisfactory to the Note
Insurer to the effect that such transfer would not jeopardize the tax treatment
of the Trust, would not subject the Trust to an entity-level tax, and would not
jeopardize the status of the Notes as debt for all purposes.

     (h)     No pledge or transfer of the Certificates shall be effective unless
such purchase or transfer is (i) to a single beneficial owner and (ii)
accompanied by an Opinion of Counsel satisfactory to the Owner Trustee and the
Note Insurer, which Opinion of Counsel shall not, unless otherwise agreed, be an
expense of the Trust, the Certificate Registrar, the Master Servicer, the Backup
Servicer, the Note Insurer or the Sponsor, to the effect such pledge or transfer
will not cause the Trust to be treated for federal income tax purposes as a
taxable mortgage pool, association or a publicly traded partnership taxable as a
corporation.

                                       20
<PAGE>

                                    ARTICLE V

                            ACTIONS BY OWNER TRUSTEE

     Section 5.01. PRIOR NOTICE TO THE CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. With respect to the following matters, the Owner Trustee shall
not take action (and the Certificateholders shall not direct the Owner Trustee
to take any action) unless at least thirty (30) days before the taking of such
action, the Owner Trustee shall have notified the Certificateholders (unless the
Certificateholders have directed the Owner Trustee to take action) and the Note
Insurer in writing of the proposed action and neither the Certificateholders nor
the Note Insurer shall have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders and/or the Note
Insurer have withheld consent or the Certificateholders have provided
alternative written direction (any direction by the Certificateholders shall
require the prior written consent of the Note Insurer):

             (a)   the initiation of any claim or lawsuit by the Trust (except
     claims or lawsuits brought in connection with the collection of the
     Mortgage Loans) and the compromise of any action, claim or lawsuit brought
     by or against the Trust (except with respect to the aforementioned claims
     or lawsuits for collection of the Mortgage Loans);

             (b)   the election by the Trust to file an amendment to the
     Certificate of Trust (unless such amendment is required to be filed under
     the Business Trust Statute);

             (c)   the amendment or other change to this Agreement or any Basic
     Document in circumstances where the consent of any Certificateholder is
     required; PROVIDED, that notwithstanding this Section 5.01, the prior
     written consent of the Note Insurer must be obtained for any amendment or
     change to this Agreement or ally other Basic Document;

             (d)   the amendment or other change to this Agreement or any other
     Basic Document in circumstances where the consent of any Certificateholder
     is not required and such amendment materially adversely affects the
     interest of the Certificateholders;

             (e)   the appointment pursuant to the Indenture of a successor Note
     Registrar, or Indenture Trustee or pursuant to this Agreement of a
     successor Certificate Registrar or the consent to the assignment by the
     Note Registrar or Indenture Trustee or Certificate Registrar of their
     respective obligations under the Indenture or this Agreement, as
     applicable;

             (f)   the consent to the waiver of any default of any Basic
     Document;

             (g)   the consent to the assignment by the Indenture Trustee or
     Master Servicer of their respective obligations under any Basic Document;

             (h)   except as provided in Article X hereof, dissolve, terminate
     or liquidate the Trust in whole or in part;

             (i)   merge or consolidate the Trust with or into any other entity,
     or convey or transfer all or substantially all of the Trust's assets to any
     other entity;

                                       21
<PAGE>

             (j)   cause the Trust to incur, assume or guaranty any indebtedness
     other than as set forth in this Agreement or the other Basic Documents;

             (k)   do any act which would make it impossible to carry on the
     ordinary business of the Trust as described in Section 2.03 hereof;

             (l)   confess a judgment against the Trust;

             (m)   possess Trust assets, or assign the Trust's right to
     property, for other than a Trust purpose;

             (n)   cause the Trust to lend any funds to any entity; or

             (o)   change the Trust's purpose and powers from those set forth in
     this Agreement.

             In addition the Trust shall not commingle its assets with those of
any other entity. The Trust shall maintain its financial and accounting books
and records separate from those of any other entity. Except as expressly set
forth herein, the Trust shall pay its indebtedness, operating expenses and
liabilities from its own funds, and the Trust shall not pay the indebtedness,
operating expenses and liabilities of any other entity. The Master Servicer, on
behalf of the Trust, shall maintain appropriate minutes or other records of all
appropriate action. The Trust shall maintain its office separate from the
offices of the Sponsor and the Master Servicer.

             Notwithstanding the other provisions of this Section 5.01, the
Owner Trustee shall not have the power, except upon the written direction of the
Certificateholders with the prior written consent of the Note Insurer, and to
the extent otherwise consistent with the Basic Documents, to (i) remove or
replace the Master Servicer or the Indenture Trustee, (ii) institute proceedings
to have the Trust declared or adjudicated bankrupt or insolvent, (iii) consent
to the institution of bankruptcy or insolvency proceedings against the Trust,
(iv) file a petition or consent to a petition seeking reorganization or relief
on behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or any similar official) of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit in writing its
inability to pay its debts generally as they become due, (viii) take any action,
or cause the Trust to take any action, in furtherance of any of the foregoing
(any of the above, a "BANKRUPTCY ACTION"). So long as the Indenture and the
Insurance Agreement remain in effect and no Note Insurer Default exists, no
Certificateholder shall have the power to take, and shall not take, any
Bankruptcy Action with respect to the Trust or direct the Owner Trustee to take
any Bankruptcy Action with respect to the Trust.

     Section 5.02. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior written consent and
approval of all Certificateholders and the prior written consent and approval of
the Note Insurer and the delivery to the Owner Trustee by each such
Certificateholder of a certification that such Certificateholder reasonably
believes

                                       22
<PAGE>

that the Trust is insolvent. The terms of this Section 5.02 shall survive for
one year and one day following the termination of this Agreement.

     Section 5.03. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the other Basic
Documents or would be contrary to Section 2.03, nor shall the Owner Trustee be
obligated to follow any such direction, if given.

     Section 5.04. MAJORITY CONTROL. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust at the time of the delivery of such notice and such action
shall be binding upon all Certificateholders.

                                       23
<PAGE>

                                   ARTICLE VI

                         TAX PROVISIONS; CERTAIN DUTIES

     Section 6.01. FEDERAL INCOME TAX PROVISIONS. (a) For so long as the Trust
has a single owner for federal income tax purposes, it will, pursuant to
Treasury Regulations promulgated under section 7701 of the Code, be disregarded
as an entity distinct from the Certificateholder for all federal income tax
purposes. Accordingly, for federal income tax purposes, the Certificateholder
will be treated as (i) owning all assets owned by the Trust, (ii) having
incurred all liabilities incurred by the Trust, and (iii) all transactions
between the Trust and the Certificateholder will be disregarded.

     (b)     Neither the Owner Trustee nor any Certificateholder will, under any
circumstances, and at any time, make an election of IRS Form 8832 or otherwise,
to classify the Trust as an association taxable as a corporation for federal,
state or any other applicable tax purpose.

     (c)     If the Trust is treated as a partnership (rather than disregarded
as a separate entity) for federal income tax purposes pursuant to Section 2.06,
the following provisions shall apply:

             (i)   A separate capital account (a "CAPITAL ACCOUNT") shall be
     established and maintained for each Certificateholder by the Sponsor, in
     accordance with Treasury Regulations Section 1.704-1 (b)(2)(iv). No
     Certificateholder shall be entitled to interest on its Capital Account or
     any capital contribution made by such Certificateholder to the Trust.

             (ii)  Upon termination of the Trust pursuant to Article X, any
     amounts available for distribution to Certificateholders shall be
     distributed to the Certificateholders with positive Capital Account
     balances in accordance with such balances. For purposes of this Section
     6.01(c)(ii), the Capital Account of each Certificateholder shall be
     determined after all adjustments made in accordance with this Section 6.01
     resulting from the Trust's operations and from all sales and dispositions
     of all or any part of the assets of the Trust. Any distributions pursuant
     to this Section 6.01(c)(ii) shall be made by the end of the Taxable Year in
     which the termination occurs (or, if later, within 90 days after the date
     of the termination).

             (iii) No Certificateholder shall be required to restore any deficit
     balance in its Capital Account. Furthermore, no Certificateholder shall be
     liable for the return of the Capital Account of, or of any capital
     contribution made to the Trust by, another Certificateholder.

             (iv)  Profit and loss of the Trust for each Taxable Year shall be
     allocated to the Certificateholders in accordance with their respective
     Percentage Interests.

             (v)   Notwithstanding any provision to the contrary, (i) any
     expense of the Trust that is a "nonrecourse deduction" within the meaning
     of Treasury Regulations Section 1.704-2(b)(1) shall be allocated in
     accordance with the Certificateholders' respective Percentage Interests,
     (ii) any expense of the Trust that is a "partner nonrecourse

                                       24
<PAGE>

     deduction" within the meaning of Treasury Regulations Section 1.704-2(i)(2)
     shall be allocated in accordance with Treasury Regulations Section
     1.704-2(i)(1), (iii) if there is a net decrease in Trust Minimum Gain
     within the meaning of Treasury Regulations Section 1.704-2(f)(1) for any
     Taxable Year, items of gain and income shall be allocated among the
     Certificateholders in accordance with Treasury Regulations Section
     1.704-2(f) and the ordering rules contained in Treasury Regulations Section
     1.704-2(i), and (iv) if there is a net decrease in Certificateholder
     Nonrecourse Debt Minimum Gain within the meaning of Treasury Regulations
     Section 1.704-2(i)(4) for any Taxable Year, items of gain and income shall
     be allocated among the Certificateholders in accordance with Treasury
     Regulations Section 1.704-2(i)(4) and the ordering rules contained in
     Treasury Regulations Section 1.704-2(j). A Certificateholder's "interest in
     partnership profits" for purposes of determining its share of the
     nonrecourse liabilities of the Trust within the meaning of Treasury
     Regulations Section 1.752-3(a)(3) shall be such Certificateholder's
     Percentage Interest.

             (vi)  If a Certificateholder receives in any Taxable Year an
     adjustment, allocation, or distribution described in subparagraphs (4),
     (5), or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) that
     causes or increases a negative balance in such Certificateholder's Capital
     Account that exceeds the sum of such Certificateholder's shares of Trust
     Minimum Gain and Certificateholder Nonrecourse Debt Minimum Gain, as
     determined in accordance with Treasury Regulations Sections 1.704-2(g) and
     1.704-2(i), such Certificateholder shall be allocated specially for such
     Taxable Year (and, if necessary, later Taxable Years) items of income and
     gain in an amount and manner sufficient to eliminate such negative Capital
     Account balance as quickly as possible as provided in Treasury Regulations
     Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of
     income or gain to a Certificateholder in accordance with this Section
     6.01(c)(vi), to the extent permitted by Regulations Section 1.704-1(b),
     items of expense or loss shall be allocated to such Certificateholder in an
     amount necessary to offset the income or gain previously allocated to such
     Certificateholder under this Section 6.01(c)(vi).

             (vii) Loss shall not be allocated to a Certificateholder to the
     extent that such allocation would cause a deficit in such
     Certificateholder's Capital Account (after reduction to reflect the items
     described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
     (6)) to exceed the sum of such Certificateholder's shares of Trust Minimum
     Gain and Certificateholder Nonrecourse Debt Minimum Gain. Any loss in
     excess of that limitation shall be allocated to all the Certificateholders
     in accordance with their respective Percentage Interests. After the
     occurrence of an allocation of loss to a Certificateholder in accordance
     with this Section 6.01(c)(vii), to the extent permitted by Treasury
     Regulations Section 1.704-1(b), profit shall be allocated to such
     Certificateholder in an amount necessary to offset the loss previously
     allocated to such Certificateholder under this Section 6.01(c)(vii).

             (viii) If a Certificateholder transfers any part or all of its
     Percentage Interest and the transferee is admitted as a Certificateholder
     as provided herein (a "TRANSFEREE CERTIFICATEHOLDER"), the distributive
     shares of the various items of profit and loss allocable among the
     Certificateholders during such Taxable Year shall be allocated between the

                                       25
<PAGE>

     transferor and the Transferee Certificateholder (at the election of the
     Certificateholders (including the transferor, but excluding the Transferee
     Certificateholder)) either (i) as if the Taxable Year had ended on the date
     of the transfer or (ii) based on the number of days of such Taxable Year
     that each was a Certificateholder without regard to the results of Trust
     activities in the respective portions of such Taxable Year in which the
     transferor and Transferee Certificateholder were Certificateholders.

             (ix)  "Profit" and "loss" and any items of income, gain, expense or
     loss referred to in this Section 6.01 shall be determined in accordance
     with federal income tax accounting principles as modified by Treasury
     Regulations Section 1.704-1(b)(2)(iv), except that profits and losses shall
     not include items of income, gain, and expense that are specially allocated
     pursuant to Sections 6.01(c)(v), 6.01(c)(vi) or 6.01(c)(vii) hereof. All
     allocations of income, profits, gains, expenses, and losses (and all items
     contained therein) for federal income tax purposes shall be identical to
     all allocations of such items set forth in this Section 6.01, except as
     otherwise required by Section 704(c) of the Code and Section 1.704-1(b)(4)
     of the Treasury Regulations.

             (x)   The taxable year of the Trust (the "TAXABLE YEAR") shall be
     the calendar year or such other taxable year as may be required by Section
     706(b) of the Code.

             (xi)  At the Trust's expense, the Sponsor shall (i) prepare, or
     cause to be prepared, and file or cause to be filed such tax returns
     relating to the Trust (including a partnership information return, IRS Form
     1065) as are required by applicable federal, state, and local law, (ii)
     cause such returns to be signed in the manner required by law, (iii) make
     such elections as may from time to time be required or appropriate under
     any applicable law so as to maintain the Trust's classification as a
     partnership for tax purposes, (iv) prepare and deliver, or cause to be
     prepared and delivered, to the Certificateholders, no later than 120 days
     after the close of each Taxable Year (or no later than April l5th), a
     Schedule K-1, a copy of the Trust's informational tax return (IRS Form
     1065), and such other reports (collectively, the "ANNUAL TAX REPORTS")
     setting forth in sufficient detail all such information and data with
     respect to the transactions effected by or involving the Trust during such
     Taxable Year as shall enable each Certificateholder to prepare its federal,
     state, and local income tax returns in accordance with the laws then
     prevailing, and (v) collect, or cause to be collected, any withholding tax
     as described in Section 5.02(c) with respect to income or distributions to
     Certificateholders.

             (xii) The Sponsor shall, if required, be designated as the tax
     matters partner for the Trust within the meaning of Section 6231(a)(7) of
     the Code (the "TAX MATTERS PARTNER"). The Tax Matters Partner shall have
     the right and obligation to take all actions authorized and required,
     respectively, by the Code for the Tax Matters Partner. The Tax Matters
     Partner shall have the right to retain professional assistance in respect
     of any audit or controversy proceeding initiated with respect to the Trust
     by the Internal Revenue Service or any state or local taxing authority, and
     all expenses and fees incurred by the Tax Matters Partner on behalf of the
     Trust shall constitute expenses of the Trust. In the event the Tax Matters
     Partner receives notice of a final partnership adjustment under Section
     6223(a)(2) of the Code, the Tax Matters Partner shall either (i) file a
     court petition for judicial review of such adjustment within the period
     provided under Section

                                       26
<PAGE>

     6226(a) of the Code, a copy of which petition shall be mailed to all other
     Holders on the date such petition is filed, or (ii) mail a written notice
     to all other Holders, within such period, that describes the Tax Matters
     Partner's reasons for determining not to file such a petition.

             (xiii) Except as otherwise provided in this Section 6.01 and
     Section 7.06, the Certificateholders shall instruct the Sponsor in writing
     as to whether to make any available election under the Code or any
     applicable state or local tax law on behalf of the Trust.

     Section 6.02. WITHHOLDING TAXES. In the event that any withholding tax is
imposed under federal, state, or local law on the Trust's payment (or
allocations of income) to a Certificateholder, such tax shall reduce the amount
otherwise distributable to such Certificateholder in accordance with this
Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is hereby
authorized and directed to retain in the Payment Account from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Indenture Trustee from contesting any such tax in appropriate proceedings,
and withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The Sponsor will provide the Indenture Trustee with a
statement indicating the amount of any such withholding tax. The amount of any
withholding tax imposed with respect to a Certificateholder shall be treated as
cash distributed to such Certificateholder at the time it is withheld by the
Indenture Trustee and remitted to the appropriate taxing authority from the
Payment Account at the direction of the Indenture Trustee, on behalf of the
Owner Trustee. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a Certificateholder who is
a Non-U.S. Person), the Indenture Trustee may in its sole discretion withhold
such amounts in accordance with this paragraph. In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax, the
Owner Trustee and the Indenture Trustee shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder agrees
in writing to reimburse the Owner Trustee for any out-of-pocket expenses
incurred.

             Any Certificateholder which is organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date such
Certificateholder becomes a Certificateholder, (a) so notify the Owner Trustee
and the Indenture Trustee, on behalf of the Trust, (b) (i) provide the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, with Internal Revenue
Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii) notify the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, that it is not
entitled to an exemption from United States withholding tax or a reduction in
the rate thereof on payments of interest. Any such Certificateholder agrees by
its acceptance of a Certificate, on an ongoing basis, to provide like
certification for each taxable year and to notify the Owner Trustee and the
Indenture Trustee, on behalf of the Trust, should subsequent circumstances arise
affecting the information provided. The Trust, the Owner Trustee and the
Indenture Trustee shall be fully protected in relying upon, and each
Certificateholder by its acceptance of a Certificate hereunder agrees to
indemnify and hold the Trust, the Owner Trustee and the Indenture Trustee
harmless against all claims or liability of any kind arising in connection with
or related to their reliance upon any documents, forms or information provided
by any Certificateholder. In addition, if the Indenture Trustee has

                                       27
<PAGE>

not withheld taxes on any payment made to any Certificateholder, and the
Indenture Trustee is subsequently required to remit to any taxing authority any
such amount not withheld, such Certificateholder shall return such amount to the
Indenture Trustee upon written demand by the Indenture Trustee. Neither the
Owner Trustee nor the Indenture Trustee shall be liable for damages to any
Certificateholder due to a violation of the Code unless and only to the extent
such liability is caused by the Owner Trustee's or the Indenture Trustee's
failure to act in accordance with its standard of care under this Agreement.

     Section 6.03. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS, THE
INTERNAL REVENUE SERVICE AND OTHERS. The Sponsor shall (a) maintain (or cause to
be maintained) the books of the Trust on a calendar year basis on the accrual
method of accounting, including, without limitation, the allocations of net
income under Section 6.01, and (b) deliver (or cause to be delivered) to each
Certificateholder such information, reports or statements as may be required by
the Code and applicable Treasury Regulations and as may be required to enable
each Certificateholder to prepare its respective federal and state income tax
returns. Consistent with the Trust's (and each Loan Groups' and Sub-Trusts')
characterization for tax purposes as a security arrangement for the issuance of
non-recourse debt, no federal income tax return shall be filed on behalf of the
Trust unless either (y) the Trust, the Sub-Trusts, the Owner Trustee or the
Certificateholders receive an Opinion of Counsel based on a change in applicable
law occurring after the date hereof that the Code requires such a filing or (z)
the Internal Revenue Service shall determine that the Trust (or a related Loan
Group or Sub-Trust) is required to file such a return. In the event that the
Trust (or a related Loan Group or Sub-Trust) is required to file tax returns,
the Owner Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Mortgage
Loans. The Owner Trustee shall prepare or shall cause to be prepared any tax
returns required to be filed by the Trust or the Sub-Trusts and shall remit such
returns to the Sponsor at least five days before such returns are due to be
filed. The Sponsor, or any other such party required by law, shall promptly sign
such returns and deliver such returns after signature to the Owner Trustee and
such returns shall be filed by, or at the direction of, the Owner Trustee with
the appropriate tax authorities. In no event shall the Sponsor be liable for any
liabilities, costs or expenses of the Trust or the Sub-Trusts arising out of the
application of any tax law, including federal, state, foreign or local income or
excise taxes or any other tax imposed on or measured by income (or any interest,
penalty or addition with respect thereto or arising from a failure to comply
therewith), except for any such liability, cost or expense attributable to the
Sponsor's breach of its obligations under this Agreement.

     Section 6.04. SIGNATURE ON RETURNS.

             In the event that the Trust files a federal income tax return as
provided in Section 6.03, the Owner Trustee shall sign on behalf of the Trust or
the Sub-Trusts the tax returns of the Trust or the Sub-Trusts, if any, unless
applicable law requires a Sponsor to sign such documents, in which case such
documents shall be signed by the Sponsor.

                                       28
<PAGE>

                                  ARTICLE VII

                      AUTHORITY AND DUTIES OF OWNER TRUSTEE

     Section 7.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article IV, in each case, as the
Sponsor shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition, the Owner Trustee is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent the
Trust Request and the Trust Orders referred to in Section 2.11 of the Indenture,
directly to the Authenticating Agent to authenticate and deliver Class A-1 Notes
in the Original Note Principal Balance of $68,704,000 and Class A-2 Notes in the
Original Note Principal Balance of $138,694,000. In addition to the foregoing,
the Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents.

     Section 7.02. GENERAL DUTIES. (a) It shall be the duty of the Owner
Trustee:

             (i)   to discharge (or cause to be discharged) all of its
     responsibilities pursuant to the terms of this Agreement and the Basic
     Documents to which the Trust is a party and to administer the Trust in the
     interest of the Certificateholders, subject to the Basic Documents and in
     accordance with the provisions of this Agreement; and

             (ii)  to obtain and preserve the Trust's qualification to do
     business in the State of Delaware.

     (b)     The Owner Trustee shall not be responsible for taking any action on
behalf of the Trust under any Basic Document unless specifically directed in
writing to do so in accordance with Section 7.03 of this Agreement.

     (c)     The Owner Trustee shall not be responsible for any matter regarding
the Securities Act, the Exchange Act or the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.

     Section 7.03. ACTION UPON INSTRUCTION. (a) Subject to Article V hereof, and
in accordance with the terms of the Basic Documents, the Certificateholders may
by written instruction direct the Owner Trustee in the management of the Trust
but only to the extent consistent with the limited purpose of the Trust. Such
direction may be exercised at anytime by written instruction of the
Certificateholders pursuant to Article V hereof. Without limiting the generality
of the foregoing, the Owner Trustee shall act as directed in writing by the
Certificateholders in connection with Note redemptions requested by the
Certificateholders, and shall take all actions and deliver all documents that
the Trust is required to take and deliver in accordance with Section 4.01 and
Article X of the Indenture in order to effect any redemption requested by the
Certificateholders.

                                       29
<PAGE>

     (b)     The Owner Trustee shall not be required to take any action
hereunder or under any other Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trust or is contrary
to the terms hereof or of any other Basic Document or is otherwise contrary to
law.

     (c)     Subject to Article V hereof, whenever the Owner Trustee is unable
to decide between alternative courses of action permitted or required by the
terms of this Agreement or under any other Basic Document, the Owner Trustee
shall promptly give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders and the Note Insurer requesting
instruction from the Certificateholders as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificateholders received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten (10)
days of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.

     (d)     Subject to Article V hereof, in the event that the Owner Trustee is
unsure as to the application of any provision of this Agreement or any other
Basic Document or any such provision is ambiguous as to its application, or is,
or appears to be, in conflict with any other applicable provision, or in the
event that this Agreement permits any determination by the Owner Trustee or is
silent or is incomplete as to the course of action that the Owner Trustee is
required to take with respect to a particular set of facts, the Owner Trustee
may give notice (in such form as shall be appropriate under the circumstances)
to the Certificateholders requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with any
such instruction received, the Owner Trustee shall not be liable, on account of
such action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten (10) days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the other Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.

     Section 7.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT, THE BASIC
DOCUMENTS OR ANY INSTRUCTIONS. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, this Agreement
or any document contemplated hereby to which the Trust is a party, except as
expressly provided by the terms of this Agreement, any other Basic Document or
in any document or written instruction received by the Owner Trustee pursuant to
Section 7.03; and no implied duties or obligations shall be read into this
Agreement or any other Basic Document against the Owner Trustee. The Owner
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 or to
prepare or file

                                       30
<PAGE>

any Securities and Exchange Commission filing for the Trust or to record this
Agreement or any other Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee in its individual
capacity that are not related to the ownership or the administration of the
Owner Trust Estate.

     Section 7.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the other Basic Documents and (iii) in
accordance with any document or written instruction delivered to the Owner
Trustee pursuant to Section 7.03.

     Section 7.06. RESTRICTIONS. Neither the Owner Trustee nor the Sponsor shall
take any action (a) that violates or results in a breach of or is inconsistent
with the purposes of the Trust set forth in Section 2.03 or (b) that, to the
actual knowledge of the Sponsor and the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section 7.06.

                                       31
<PAGE>

                                  ARTICLE VIII

                          CONCERNING THE OWNER TRUSTEE

     Section 8.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts, but only upon the terms of this Agreement subject to the
other Basic Documents. The Owner Trustee also agrees to disburse all moneys
actually received by it constituting part of the Owner Trust Estate upon the
terms of the other Basic Documents and this Agreement. The Owner Trustee shall
not be answerable or accountable hereunder or under any other Basic Document
under any circumstances, except (i) for its own willful breach or misconduct or
gross negligence or (ii) in the case of the inaccuracy of any representation or
warranty contained in Section 8.03 expressly made by the Owner Trustee in its
individual capacity. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):

     (a)     The Owner Trustee shall not be liable for any error of judgment
made by a Responsible Officer of the Owner Trustee;

     (b)     The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Certificateholders or the Note Insurer given in accordance with this Agreement;

     (c)     No provision of this Agreement or any other Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any other Basic Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;

     (d)     Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;

     (e)     The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Sponsor or for the form, character, genuineness, sufficiency, value or validity
of any of the Owner Trust Estate or for or in respect of the validity or
sufficiency of the Basic Documents, other than the certificate of authentication
on the Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any Certificateholders,
other than as expressly provided for herein and in the other Basic Documents;

     (f)     The Owner Trustee shall not be liable for the default or misconduct
of the Indenture Trustee or the Master Servicer under any of the Basic Documents
or otherwise and the Owner Trustee shall have no obligation or liability to
perform the obligations of the Trust under this Agreement or the other Basic
Documents that are required to be performed by the Sponsor, the Indenture
Trustee or the Master Servicer;

     (g)     The Owner 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 under this

                                       32
<PAGE>

Agreement or otherwise or in relation to this Agreement or any Basic Document,
at the request, order or direction of the Sponsor, any of the Certificateholders
or the Note Insurer, unless such Certificateholders, the Sponsor or the Note
Insurer have offered to the Owner Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee
to perform any discretionary act enumerated in this Agreement or in any other
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful breach or
misconduct in the performance of any such act; and

     (h)     Notwithstanding anything contained herein to the contrary, neither
U.S. Bank Trust, National Association in its individual capacity nor as Owner
Trustee shall be required to take any action in any jurisdiction other than in
the State of Delaware if the taking of such action will (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware; (ii) result in any fee, tax or other governmental charge under the
laws of any jurisdiction or any political subdivisions thereof in existence on
the date hereof other than the State of Delaware becoming payable by U.S. Bank
Trust, National Association; or (iii) subject U.S. Bank Trust, National
Association to personal jurisdiction in any jurisdiction other than the State of
Delaware for causes of action arising from acts unrelated to the consummation of
the transactions by U.S. Bank Trust, National Association in its individual
capacity or as Owner Trustee, as the case may be, contemplated hereby. The Owner
Trustee shall be entitled to obtain advice of counsel (which advice shall be an
expense of the Sponsor to determine whether any action required to be taken
pursuant to this Agreement or the other Basic Documents results in the
consequences described in clauses (i), (ii) and (iii) of the preceding sentence.
In the event that said counsel advises the Owner Trustee that such action will
result in such consequences, the Owner Trustee will appoint an additional
trustee pursuant to Section 11.05 hereof to proceed with such action.

     Section 8.02. FURNISHING OF DOCUMENTS. Subject to Section 4.07, the Owner
Trustee shall furnish to the Certificateholders promptly upon receipt of a
written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other instruments
furnished to the Owner Trustee under the Basic Documents. On behalf of the Owner
Trustee, the Sponsor shall furnish to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement and the Indenture.

     Section 8.03. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE. The
Owner Trustee hereby represents and warrants to the Sponsor and the
Certificateholders, that:

     (a)     It is a national banking association duly organized and validly
existing in good standing under the laws of the United States of America. It has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement.

     (b)     It has taken all action necessary to authorize the execution and
delivery by it of this Agreement, and this Agreement will be executed and
delivered by one of its officers who is duly authorized to execute and deliver
this Agreement on its behalf.

                                       33
<PAGE>

     (c)     Neither the execution nor the delivery by it of this Agreement nor
the consummation by it of the transactions contemplated hereby nor compliance by
it with any of the terns or provisions hereof will contravene any Delaware or
Federal law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws.

     (d)     This Agreement has been duly authorized, executed and delivered by
the Owner Trustee and constitutes a valid, legal and binding obligation of the
Owner Trustee, enforceable against it in accordance with the terms hereof,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law.

     (e)     The Owner Trustee 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 Owner Trustee or its properties or might have consequences
that would materially adversely affect its performance hereunder.

     (f)     No litigation is pending or, to the best of the Owner Trustee's
knowledge, threatened against the Owner Trustee which would prohibit its
entering into this Agreement or performing its obligations under this Agreement.

     Section 8.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, Note, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.

     (b)     In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Basic Documents, the Owner Trustee (i) may, at the expense of the Trust, act
directly or through its agents or attorneys pursuant to agreements entered into
with any of them, and the Owner Trustee shall not be liable for the conduct or
misconduct of such agents or attorneys if such agents or attorneys shall have
been selected by the Owner Trustee with reasonable care, and (ii) may, at the
expense of the Trust, consult with counsel, Accountants and other skilled
persons to be selected with reasonable care and employed by it. The Owner
Trustee shall not be liable for anything done, suffered or omitted in good faith
by it in accordance with the written opinion or advice of any such counsel,
Accountants or other such persons and not contrary to this Agreement or any
other Basic Document.

                                       34
<PAGE>

     Section 8.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
Section 8.03, in accepting the trusts hereby created, U.S. Bank Trust, National
Association acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any other Basic Document
shall look only to the Owner Trust Estate for payment or satisfaction thereof.

     Section 8.06. OWNER TRUSTEE NOT LIABLE FOR THE CERTIFICATES OR MORTGAGE
LOANS. The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) shall
be taken as the statements of the Sponsor, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
other Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates and as specified in
Section 8.03 hereof) or the Notes, or of any Mortgage Loans or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any security interest
created by any Mortgage Loan or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to the Certificateholders
under this Agreement or the Noteholders under the Indenture, including, without
limitation, the existence, condition and ownership of any Mortgaged Property,
the existence and enforceability of any insurance thereon, the existence and
contents of any Mortgage Loan on any computer or other record thereof, the
validity of the assignment of any Mortgage Loan to the Trust or of any
intervening assignment, the completeness of any Mortgage Loan, the performance
or enforcement of any Mortgage Loan, the compliance by the Sponsor or the Master
Servicer with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation or
any action of the Indenture Trustee or the Master Servicer or any subservicer
taken in the name of the Owner Trustee.

     Section 8.07. OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of the Certificates or the Notes and may deal with the Sponsor, the Indenture
Trustee, the Master Servicer and the Backup Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.

     Section 8.08. LICENSES. The Sponsor shall cause the Trust to use its best
efforts to obtain and maintain the effectiveness of any licenses required in
connection with this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.

                                       35
<PAGE>

                                   ARTICLE IX

                          COMPENSATION OF OWNER TRUSTEE

     Section 9.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Master Servicer and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Master Servicer for its other reasonable expenses hereunder as separately
agreed (the "OWNER TRUSTEE FEE").

     Section 9.02. INDEMNIFICATION. The Sponsor shall be liable as obligor for,
and shall indemnify the Owner Trustee (in its individual and trust capacities)
and its successors, assigns, agents and servants (collectively, the "INDEMNIFIED
PARTIES") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "EXPENSES") which may at any time be
imposed on, incurred by, or asserted against any Indemnified Party in any way
relating to or arising out of this Agreement, the other Basic Documents, the
Owner Trust Estate, the administration of the Owner Trust Estate or the action
or inaction of the Owner Trustee hereunder, except only that the Sponsor shall
not be liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 8.01. The indemnities contained in this Section 9.02 shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Sponsor will be entitled
to participate therein, with counsel selected by the Sponsor and reasonably
satisfactory to the Indemnified Parties, but after notice from an Indemnified
Party to the Sponsor of its election to assume the defense thereof, the Sponsor
shall not be liable to the Indemnified Party under this Section 9.02 for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense of such action; PROVIDED, HOWEVER, that this
sentence shall not be in effect if (1) the Sponsor shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of commencement of the
action, (2) the Sponsor shall have authorized the employment of counsel for the
Indemnified Party at the expense of the Sponsor or (3) in the event any such
claim involves a possible imposition of criminal liability or penalty or a
material civil penalty on such Indemnified Party, a conflict of interest between
such Indemnified Party and the Sponsor or another indemnitee or the granting of
material injunctive relief against such Indemnified Party, and such Indemnified
Party informs the Sponsor that such Indemnified Party desires to be represented
by separate counsel, in which case, the reasonable fees and expenses of such
separate counsel shall be born by the Sponsor. If the Sponsor assumes the
defense of any such proceeding, they shall be entitled to settle such proceeding
without any liability being assessed against any Indemnified Party or, if such
settlement provides for release of any such Indemnified Party without any
liability being assessed against any Indemnified Party in connection with all
matters relating to the proceeding which have been asserted against such
Indemnified Party in such proceeding by the other parties to such settlement,
without the prior written consent of such Indemnified Party, but otherwise only
with the prior written consent of such Indemnified Party.

                                       36
<PAGE>

     Section 9.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the Owner
Trustee pursuant to this Article IX shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.

                                       37
<PAGE>

                                    ARTICLE X

                         TERMINATION OF TRUST AGREEMENT

     Section 10.01. TERMINATION OF TRUST AGREEMENT. (a) This Agreement (other
than Article IX) shall terminate and the Trust shall dissolve and be of no
further force or effect on the earlier of: (i) the final payment or other
liquidation of the Mortgage Loans and the disposition of all REO Properties and
the remittance of all funds due hereunder with respect to such Mortgage Loans
and REP Properties after the satisfaction and discharge of the Indenture
pursuant to Section 4.01 of the Indenture; and (ii) the expiration of 21 years
from the death of the last survivor of descendants of Joseph P. Kennedy (the
late ambassador of the United States to the Court of St. James). The bankruptcy,
liquidation, dissolution, death or incapacity of the any Certificateholder or
the Sponsor shall not (x) operate to terminate this Agreement or the Trust, nor
(y) entitle Certificateholders' or the Sponsor's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the parties
hereto.

     (b)     Except as provided in Section 10.01(a) above, none of the Sponsor,
the Master Servicer, the Backup Servicer, the Note Insurer nor the
Certificateholders shall be entitled to revoke or terminate the Trust.

     (c)     Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Indenture Trustee for payment of the final distributions and cancellation, shall
be given by the Owner Trustee to the Certificateholders, the Note Insurer, the
Rating Agencies and the Indenture Trustee mailed within five (5) Business Days
of receipt by the Owner Trustee from the Master Servicer of notice of such
termination, which notice given by the Owner Trustee shall state (i) the Payment
Date upon or with respect to which final payment of the Certificates shall be
made upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Indenture Trustee therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of Certificates, subject to
Section 3808 of the Business Trust Statute, amounts distributable on such
Payment Date pursuant to the terms of the Indenture.

     (d)     In the event that Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Owner Trustee shall give a second written
notice to Certificateholders to surrender the Certificates for cancellation and
receive the final distribution with respect thereto. If within one year after
the second notice the Ownership Interest shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of the Certificates, and the cost thereof shall be paid out
of the funds and other assets that shall remain

                                       38
<PAGE>

subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Indenture Trustee to the
Certificateholders.

     (e)     Upon the winding up of the Trust in accordance with Section 3808 of
the Business Trust Statute and its termination, the Owner Trustee shall cause
the Certificate of Trust to be canceled by filing a certificate of cancellation
with the Secretary of State in accordance with the provisions of Section 3810 of
the Business Trust Statute.

                                       39
<PAGE>

                                   ARTICLE XI

             SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

     Section 11.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation or banking association satisfying
the provisions of Section 3807(a) of the Business Trust Statute; authorized to
exercise trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or state
authorities; and having (or having a parent that has) a rating of at least
"Baa3" by Moody's and "A-1" by S&P (or otherwise acceptable to the Rating
Agencies) and being acceptable to the Note Insurer. If such entity shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section 11.01, the combined capital and surplus of such entity shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section 11.01,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 11.02.

     Section 11.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Trust, the Sponsor, the Master Servicer,
the Backup Servicer, the Indenture Trustee and the Note Insurer. Upon receiving
such notice of resignation, the Note Insurer may (and, if the Note Insurer fails
to do so, the Sponsor shall promptly) appoint a successor Owner Trustee
(acceptable to the Note Insurer) by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within thirty (30) days after
the giving of such notice of resignation, the resigning Owner Trustee or the
Note Insurer may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.

             If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 11.01 and shall fail to resign after
written request therefor by the Certificateholders or the Sponsor, or if at any
time the Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Owner Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Note Insurer, or the Certificateholders or
the Sponsor with the written consent of the Note Insurer, may remove the Owner
Trustee. If the Certificateholders or the Sponsor or the Note Insurer shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Note Insurer, or the Sponsor with the written consent of the Note
Insurer, shall promptly appoint a successor Owner Trustee by written instrument
in duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee and payment
of all fees owed to the outgoing Owner Trustee.

             Any resignation or removal of the Owner Trustee and appointment of
a successor Owner Trustee pursuant to any of the provisions of this Section
11.02 shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 11.03,

                                       40
<PAGE>

written approval by the Note Insurer and payment of all fees and expenses owed
to the outgoing Owner Trustee. The Master Servicer shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies, the
Indenture Trustee and the Note Insurer.

     Section 11.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 11.02 shall execute, acknowledge and deliver to
the Trust, the Sponsor, the Indenture Trustee, the Note Insurer and to its
predecessor Owner Trustee an instrument accepting such appointment under this
Agreement, and thereupon, subject to the payment of all fees and expenses owed
to the outgoing Owner Trustee, the resignation or removal of the predecessor
Owner Trustee shall become effective and such successor Owner Trustee (if
acceptable to the Note Insurer), without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties, and obligations
of its predecessor under this Agreement, with like effect as if originally named
as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee all documents and statements
and moneys held by it under this Agreement; and the Sponsor and the predecessor
Owner 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 Owner Trustee all such rights, powers, duties, and
obligations.

             No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 11.01.

             Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 11.03, the Sponsor shall mail notice of the successor
of such Owner Trustee to the Certificateholders, the Indenture Trustee, the
Noteholders, the Note Insurer and the Rating Agencies. If the Sponsor fails to
mail such notice within ten (10) days after acceptance of appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such notice to
be mailed at the expense of the Sponsor.

             Any successor Owner Trustee appointed pursuant to this Section
11.03 shall file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of Delaware.

     Section 11.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation or
banking association into which the Owner Trustee may be merged or converted or
with which it may be consolidated or any corporation or banking association
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation or banking association succeeding
to all or substantially all of the corporate trust business of the Owner
Trustee, shall be the successor of the Owner Trustee hereunder, provided such
corporation or banking association shall be eligible pursuant to Section 11.01,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, except the filing of an amendment to the
Certificate of Trust, if appropriate, anything herein to the contrary
notwithstanding; PROVIDED, FURTHER, that the Owner Trustee shall mail notice of
such merger, conversion or consolidation to the Rating Agencies and; PROVIDED,
FURTHER, that the Owner Trustee shall file an amendment to the Certificate of
Trust as required under Section 11.03 above.

                                       41
<PAGE>

     Section 11.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

     (a)     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 Owner Trust Estate or any Mortgaged Property may at the
time be located, and for the purpose of performing certain duties and
obligations of the Owner Trustee with respect to the Trust and the Certificates,
the Owner Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Note Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 11.05, such powers, duties, obligations, rights and trusts as the Note
Insurer and the Owner Trustee may consider necessary or desirable. No co-trustee
or separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 11.01 and no notice of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 11.03.

     (b)     Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provision and conditions:

             (i)   all rights, powers, duties and obligations conferred or
     imposed upon the Owner Trustee shall be conferred upon and exercised or
     performed by the Owner 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 Owner 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, the Owner 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 Owner Trustee;

             (ii)  no trustee under this Agreement shall be personally liable by
     reason of any act or omission of any other trustee under this Agreement;
     and

             (iii) the Owner Trustee may at any time accept the resignation of
     or remove any separate trustee or co-trustee.

     (c)     Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to the separate trustees and co-trustees, as
if given to each of them. Every instrument appointing any separate trustee or
co-trustee, other than this Agreement, shall refer to this Agreement and to the
conditions of this Article XI. Each separate trustee and co-trustee, upon its
acceptance of appointment, shall be vested with the estates specified in its
instrument of appointment, either jointly with the Owner Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Owner Trustee.
Each such instrument shall be filed with the Owner Trustee.

                                       42
<PAGE>

     (d)     Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as 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 Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

                                       43
<PAGE>

                                   ARTICLE XII

                                  MISCELLANEOUS

     Section 12.01. SUPPLEMENTS AND AMENDMENTS. This Agreement may be amended by
the Sponsor and the Owner Trustee, with the prior written consent of the Note
Insurer, and with prior written notice to the Rating Agencies, but without the
consent of any of the Noteholders, the Certificateholders or the Indenture
Trustee, to cure any ambiguity, to correct or supplement any provisions in this
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement or of modifying in
any manner the rights of the Noteholders or the Certificateholders; PROVIDED,
HOWEVER, such action shall not adversely affect in any material respect the
interests of any Noteholder or Certificateholder. An amendment described above
shall be deemed not to adversely affect in any material respect the interests of
any Noteholder if the party requesting the amendment satisfies the Rating Agency
Condition with respect to such amendment.

             This Agreement may also be amended from time to time by the Sponsor
and the Owner Trustee, with the prior written consent of the Rating Agencies and
with the prior written consent of the Indenture Trustee, the Note Insurer, the
Noteholders evidencing more than 50% of the Note Principal Balance of the
Outstanding Notes of all of the Classes and the Certificateholders evidencing
more than 50% of the Percentage Interests of the Trust, 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
Noteholders or the Certificateholders; PROVIDED, HOWEVER, no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the Mortgage Loans or distributions
that shall be required to be made for the benefit of the Noteholders, the
Certificateholders or the Note Insurer, (b) reduce the aforesaid percentage of
the Outstanding Principal Balance of the Notes or the Percentage Interests
required to consent to any such amendment, in either case of clause (a) or (b)
without the consent of the holders of all the outstanding Notes, the Note
Insurer and the Certificateholders of all the outstanding Certificates.

             Promptly after the execution of any such amendment or consent, the
Sponsor shall furnish written notification of the substance of such amendment or
consent to the Certificateholders, the Indenture Trustee, the Note Insurer and
each of the Rating Agencies.

             It shall not be necessary for the consent of the
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.

             Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.

                                       44
<PAGE>

             Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent have
been met. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.

     Section 12.02. NO LEGAL TITLE TO OWNER TRUST ESTATE IN CERTIFICATEHOLDERS.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided beneficial ownership interest therein only in
accordance with Articles VI and X. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their ownership interest in the Owner Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.

     Section 12.03. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the
Certificateholders, the Note Insurer and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.

     Section 12.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been given if (1)
personally delivered, (2) upon receipt by the intended recipient or three
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; (ii) if
to the Sponsor, Accredited Home Lenders, Inc., 15030 Avenue of Science, Suite
100, San Diego, California 92128, Attention: General Counsel, telecopy: (858)
676-2170; and (iii) if to the Note Insurer, Ambac Assurance Corporation, One
State Street Plaza, New York, New York, 10004, Attention: Accredited Mortgage
Loan Trust 2002-1, telecopy: (858) 676-2170; or, as to each such party, at such
other address as shall be designated by such party in a written notice to each
other party.

     (b)     Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder 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.

                                       45
<PAGE>

     Section 12.05. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     Section 12.06. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

     Section 12.07. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Sponsor, the Note Insurer, the Owner Trustee and its successors and each
Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.

     Section 12.08. NO PETITION. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Sponsor
or the Trust, or join in any institution against the Sponsor or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy law in connection with any obligations relating to the Certificates,
the Notes, this Agreement or any of the other Basic Documents.

             This Section 12.08 will survive for one year and one day following
the termination of this Agreement.

     Section 12.09. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Master Servicer, the Backup Servicer, the Sponsor, the
Owner Trustee or any Affiliate thereof and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated in
this Agreement, the Certificates or the other Basic Documents.

     Section 12.10. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

     Section 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

     Section 12.12. GRANT OF CERTIFICATEHOLDER RIGHTS TO NOTE INSURER. (a) In
consideration for the issuance of the Certificates and for the guarantee of the
Notes by the Note Insurer pursuant to the Note Insurance Policy, the
Certificateholders hereby grant to the Note Insurer the right to act

                                       46
<PAGE>

as the holder of 100% of the outstanding Certificates for the purpose of
exercising the rights hereunder of the Certificateholders under this Agreement
without the consent of the Certificateholders, including the voting rights of
such Certificateholders hereunder, but excluding those rights requiring the
consent of all such Certificateholders, and any rights of such
Certificateholders to distributions under the Indenture; PROVIDED, that the
preceding grant of rights to the Note Insurer by the Certificateholders shall be
subject to Section 12.14.

     (b)     [Reserved].

     (c)     The duties and responsibilities of the Owner Trustee shall be
limited to those expressly provided for in this Agreement. The parties hereto
agree that except for purposes of the foregoing sentence, the Owner Trustee
shall have no management responsibilities or owe any fiduciary duties to the
Note Insurer (or the Noteholders in the event they succeed to the Note Insurer's
rights).

     (d)     Whenever in connection with its performance under this Agreement
the Owner Trustee receives inconsistent notices or advice from the Note Insurer
and the Certificateholders, the Owner Trustee shall, in the absence of a Note
Insurer Default, take the action required by the notices or advice received from
the Note Insurer.

     Section 12.13. THIRD-PARTY BENEFICIARY. The Indenture Trustee and the Note
Insurer are intended third-party beneficiaries of this Agreement, and this
Agreement shall be binding upon and inure to the benefit of the Indenture
Trustee and the Note Insurer; PROVIDED, that, notwithstanding the foregoing, for
so long as a Note Insurer Default is continuing with respect to its obligations
under the Note Insurance Policy, the Certificateholders shall succeed to the
Note Insurer's rights hereunder. Without limiting the generality of the
foregoing, all covenants and agreements in this Agreement that expressly confer
rights upon the Note Insurer shall be for the benefit of and run directly to the
Note Insurer, and the Note Insurer shall be entitled to rely on and enforce such
covenants to the same extent as if it were a party to this Agreement.

     Section 12.14. SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS. During
the continuation of a Note Insurer Default, rights granted or reserved to the
Note Insurer hereunder shall vest instead in the Certificateholders; PROVIDED,
that the Note Insurer shall be entitled to any distributions of reimbursements
as set forth in the Indenture and the Insurance Agreement and the Note Insurer
shall retain those rights under Section 12.01 to consent to any amendment of
this Agreement.

             At such time as either (i) the outstanding Note Principal Balance
of the Notes has been reduced to zero or (ii) the Note Insurance Policy has been
terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy). Then the rights and benefits granted or reserved to the
Note Insurer hereunder (including the rights to direct certain actions and
receive certain notices) shall terminate and the Certificateholders shall be
entitled to the exercise of such rights and to receive such benefits of the Note
Insurer following such termination to the extent that such rights and benefits
are applicable to the Certificateholders.

                                       47
<PAGE>

     Section 12.15. MASTER SERVICER. The Master Servicer is authorized to
prepare, or cause to be prepared, execute and deliver on behalf of the Trust all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust, the Sponsor or Owner Trustee to prepare, file or
deliver pursuant to the Basic Documents. Upon written request, the Owner Trustee
shall execute and deliver to the Master Servicer a limited power of attorney
appointing the Master Servicer the Trust's agent and attorney-in-fact to
prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.

                  [Remainder of Page Intentionally Left Blank]

                                       48
<PAGE>

             IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.

                                          ACCREDITED HOME LENDERS, INC.,
                                                   as Sponsor

                                          By: /s/ Ray W. McKewon
                                              ----------------------------------
                                              Name:  Ray W. McKewon
                                              Title: Executive Vice President

                                          U.S. BANK TRUST, NATIONAL ASSOCIATION,
                                          not in its individual capacity but
                                          solely as Owner Trustee under the
                                          Trust Agreement

                                          By: /s/ Patricia M. Child
                                              ----------------------------------
                                              Name:  Patricia M. Child
                                              Title: Vice President

                                       49<PAGE>

                                                      DB DRAFT OF AUGUST 8, 2002

                          SALE AND SERVICING AGREEMENT

                            dated as of July 1, 2002

                                  by and among

                         ACCREDITED HOME LENDERS, INC.,
                                   as Sponsor,

                     ACCREDITED MORTGAGE LOAN TRUST 2002-1,
                                   as Issuer,

                         ACCREDITED HOME LENDERS, INC.,
                               as Master Servicer,

                      COUNTRYWIDE HOME LOANS SERVICING LP,
                               as Backup Servicer,

                                       and

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                              as Indenture Trustee

<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                               Page
                                                                                                               ----

                                    ARTICLE I
                                   DEFINITIONS

<S>                 <C>                                                                                          <C>
Section 1.01.       Certain Defined Terms.........................................................................1
Section 1.02.       Provisions of General Application.............................................................1

                                   ARTICLE II
                    SALE AND CONVEYANCE OF THE MORTGAGE LOANS

Section 2.01.       Purchase and Sale of Mortgage Loans; Deposit of Derivatives...................................2
Section 2.02.       Reserved......................................................................................2
Section 2.03.       Purchase Price................................................................................2
Section 2.04.       Possession of Mortgage Files; Access to Mortgage Files........................................3
Section 2.05.       Delivery of Mortgage Loan Documents...........................................................3
Section 2.06.       Acceptance of the Trust Estate; Certain Substitutions; Certification by the
                     Indenture Trustee............................................................................5
Section 2.07.       Grant of Security Interest....................................................................7
Section 2.08.       Further Action Evidencing Assignments.........................................................8
Section 2.09.       Assignment of Agreement.......................................................................9

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

Section 3.01.       Representations of the Master Servicer........................................................9
Section 3.02.       Representations, Warranties and Covenants of the Sponsor.....................................11
Section 3.03.       Representations, Warranties and Covenants of the Backup Servicer.............................12
Section 3.04.       Representations, Warranties and Covenants of the Indenture Trustee...........................13
Section 3.05.       Covenants and Representations of the Sponsor and Master Servicer Regarding
                     Prepayment Charges..........................................................................14

                                   ARTICLE IV
                               THE MORTGAGE LOANS

Section 4.01.       Representations and Warranties Concerning the Mortgage Loans.................................14
Section 4.02.       Purchase and Substitution....................................................................21

                                    ARTICLE V
               ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

Section 5.01.       The Master Servicer..........................................................................23
Section 5.02.       Collection of Certain Mortgage Loan Payments; Collection Account.............................25
Section 5.03.       Permitted Withdrawals from the Collection Account............................................26
Section 5.04.       Hazard Insurance Policies; Property Protection Expenses......................................27
</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>
<S>                 <C>                                                                                          <C>
Section 5.05.       Assumption and Modification Agreements.......................................................29
Section 5.06.       Realization Upon Defaulted Mortgage Loans....................................................30
Section 5.07.       Indenture Trustee to Cooperate...............................................................31
Section 5.08.       Servicing Compensation; Payment of Certain Expenses by Master Servicer.......................32
Section 5.09.       Annual Statement as to Compliance............................................................32
Section 5.10.       Annual Independent Public Accountants' Servicing Report......................................33
Section 5.11.       Access to Certain Documentation..............................................................33
Section 5.12.       Maintenance of Fidelity Bond.................................................................33
Section 5.13.       Subservicing Agreements Between the Master Servicer and Subservicers.........................33
Section 5.14.       Reports to the Indenture Trustee; Collection Account Statements..............................34
Section 5.15.       Optional Purchase of Defaulted Mortgage Loans................................................35
Section 5.16.       Reports to be Provided by the Master Servicer and the Backup Servicer........................36
Section 5.17.       [Reserved]...................................................................................37
Section 5.18.       Periodic Advances............................................................................37
Section 5.19.       Indemnification; Third Party Claims..........................................................38
Section 5.20.       Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the
                     Master Servicer and Backup Servicer.........................................................38
Section 5.21.       Assignment of Agreement bar Master Servicer and Backup Servicer; Master Servicer and
                     Backup Servicer Not to Resign...............................................................38
Section 5.22.       Periodic Filings with the Securities and Exchange Commission Additional Information..........39
Section 5.23.       Administrative Duties........................................................................39

                                   ARTICLE VI
                              APPLICATION OF FUNDS

Section 6.01.       Deposits to the Payment Account..............................................................40
Section 6.02.       Collection of Money..........................................................................40
Section 6.03.       Application of Principal and Interest........................................................40
Section 6.04.       [Reserved]...................................................................................40
Section 6.05.       Compensating Interest........................................................................40
Section 6.06.       Effect of Payments by the Note Insurer; Subrogation..........................................41

                                   ARTICLE VII
                                SERVICER DEFAULT

Section 7.01.       Servicer Events of Default...................................................................41
Section 7.02.       Backup Servicer to Act: Appointment of Successor.............................................44
Section 7.03.       Waiver of Defaults...........................................................................47
Section 7.04.       Rights of the Note Insurer to Exercise Rights of the Noteholders.............................48
Section 7.05.       Indenture Trustee To Act Solely with Consent of the Note Insurer.............................48
Section 7.06.       Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note Insurer...............49
Section 7.07.       Note Insurer Default.........................................................................49
</TABLE>

                                       ii
<PAGE>
<TABLE>
<CAPTION>

                                  ARTICLE VIII
                                   TERMINATION

<S>                 <C>                                                                                          <C>
Section 8.01.       Termination..................................................................................49
Section 8.02.       Additional Termination Requirements..........................................................50
Section 8.03.       Accounting Upon Termination of Master Servicer...............................................50

                                   ARTICLE IX
                                   [RESERVED]

                                    ARTICLE X
                            MISCELLANEOUS PROVISIONS

Section 10.01.      Limitation on Liability......................................................................51
Section 10.02.      Acts of Noteholders..........................................................................52
Section 10.03.      Amendment....................................................................................52
Section 10.04.      Recordation of Agreement.....................................................................53
Section 10.05.      Duration of Agreement........................................................................53
Section 10.06.      Notices......................................................................................53
Section 10.07.      Severability of Provisions...................................................................54
Section 10.08.      No Partnership...............................................................................54
Section 10.09.      Counterparts.................................................................................54
Section 10.10.      Successors and Assigns.......................................................................54
Section 10.11.      Headings.....................................................................................54
Section 10.12.      No Petition..................................................................................55
Section 10.13.      Third Party Beneficiary......................................................................55
Section 10.14.      Intent of the Parties........................................................................55
Section 10.15.      GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.................................55

                                    EXHIBITS

Exhibit A            Contents of the Mortgage File
Exhibit B            Indenture Trustee's Acknowledgement of Receipt
Exhibit C            Indenture Trustee's Acknowledgement of Receipt
Exhibit D            Initial Certification of Indenture Trustee
Exhibit E            Final Certification of Indenture Trustee
                         Exhibit F     Request for Release of Documents

                                    SCHEDULES

Schedule 1           Mortgage Loan Schedule
</TABLE>

                                      iii
<PAGE>

     SALE AND SERVICING AGREEMENT, dated as of July 1, 2002 (this "AGREEMENT"),
by and among ACCREDITED HOME LENDERS, INC., a California corporation, as sponsor
(the "SPONSOR"), ACCREDITED MORTGAGE LOAN TRUST 2002-1, a Delaware statutory
business trust, as issuer (the "Trust"), ACCREDITED HOME LENDERS, INC., a
California corporation, as master servicer (the "MASTER SERVICER"), COUNTRYWIDE
HOME LOANS SERVICING LP, a Texas limited partnership, as backup servicer (the
"BACKUP SERVICER"), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as indenture trustee (the "INDENTURE TRUSTEE").

                               W I T N E S S E T H

     WHEREAS, the Sponsor desires to sell to the Trust, and the Trust desires to
purchase from the Sponsor, the mortgage loans (the "MORTGAGE LOANS") listed on
Schedule I to this Agreement;

     WHEREAS, immediately after such purchase, the Trust will pledge such
Mortgage Loans to the Indenture Trustee pursuant to the terns of an Indenture,
dated as of July 1, 2002 (the "INDENTURE"), between the Trust and the Indenture
Trustee, and issue the Accredited Mortgage Loan Trust 2002-1, Asset-Backed Notes
(the "NOTES");

     WHEREAS, the Master Servicer has agreed to service the Mortgage Loans,
which constitute the principal assets of the Trust;

     WHEREAS, the Backup Servicer has agreed to act as backup servicer of the
Mortgage Loans, which constitute the principal assets of the Trust; and

     WHEREAS, the Indenture Trustee will hold the Mortgage Loans and certain
other assets pledged to the Indenture Trustee pursuant to the Indenture;

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Sponsor, the Trust, the Master Servicer, the Backup
Servicer and the Indenture Trustee hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     Section 1.01. CERTAIN DEFINED TERMS. Capitalized terms used herein but not
defined herein shall have the meanings ascribed to such terms in Appendix I
attached hereto.

     Section 1.02. PROVISIONS OF GENERAL APPLICATION. (a) The terms defined
herein and in Appendix I to the Indenture include the plural as well as the
singular.

             (b)   The words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole. Unless otherwise noted,
all references to Articles and Sections shall be deemed to refer to Articles and
Sections of this Agreement.

                                       1
<PAGE>

             (c)   Any reference to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute to
which reference is made and all regulations promulgated pursuant to such
statutes.

             (d)   All calculations of interest with respect to the Class A-1
Notes provided for herein shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations of interest with respect to
the Class A-2 Notes provided for herein shall be on the basis of a 360-day year
and the actual number of days elapsed in the related Accrual Period. All
calculations of interest with respect to any Mortgage Loan provided for herein
shall be made in accordance with the terms of the related Mortgage Note and
Mortgage or, if such documents do not specify the basis upon which interest
accrues thereon, on the basis of a 360 day year consisting of twelve 30-day
months, to the extent permitted by applicable law.

             (e)   Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Master Servicer; provided,
however, that, for purposes of calculating payments on the Notes, prepayments
with respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with Accepted Servicing Practices consistent with the
terms of the related Mortgage Note and Mortgage to reduce the outstanding
Principal Balance of such Mortgage Loan on which interest accrues.

                                   ARTICLE II

                    SALE AND CONVEYANCE OF THE MORTGAGE LOANS

     Section 2.01. PURCHASE AND SALE OF MORTGAGE LOANS; DEPOSIT OF DERIVATIVES.
(a) The Sponsor does hereby sell, transfer, assign, set over and convey to the
Trust, to be included as part of Sub-Trust 1 or Sub-Trust 2, as specified in the
Mortgage Loan Schedule, in each case without recourse, but subject to the terms
and provisions of this Agreement, all of the right, title and interest of the
Sponsor in and to the Mortgage Loans, including the Cut-Off Date Principal
Balance of, and interest due on, such Mortgage Loans listed on Schedule 1
attached hereto, and all other assets included or to be included in the Trust
Estate. In addition, on or prior to the Closing Date, the Sponsor shall cause
the Note Insurer to deliver the Note Insurance Policy.

             (b)   The Seller may deposit derivatives at any time into the
Accredited Mortgage Loan Trust 2002-1 and any such deposited derivatives shall
become part of the Trust Estate.

     Section 2.02. RESERVED.

     Section 2.03. PURCHASE PRICE. On the Closing Date, as full consideration
for the Sponsor's sale of the Mortgage Loans to the Trust, the Underwriter, on
behalf of the Trust, will deliver to, or at the direction of, the Sponsor (i) an
amount in cash equal to the sum of (A) 99.627000% and 99.650000% of the Original
Note Principal Balance as of the Closing Date of the Class A-1 Notes and the
Class A-2 Notes, respectively, plus (B) accrued interest on the Original Note
Principal Balance of the Class A-1 Notes at the rate of 4.930% per annum from
(and including) July 1, 2002 to (but not including) the Closing Date, and (ii)
the Certificates to be issued pursuant to the Trust Agreement.

                                       2
<PAGE>

     Section 2.04. POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES. (a)
Upon the receipt by the Sponsor, or its designee, of the purchase price for the
Mortgage Loans set forth in Section 2.03 hereof, the ownership of each Mortgage
Note, each Mortgage and the contents of the Mortgage File related to each
Mortgage Loan will be vested in the Trust, and will be pledged to the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer.

             (b)   Pursuant to Section 2.05 hereof, the Sponsor has delivered or
caused to be delivered the Indenture Trustee's Mortgage File related to each
Mortgage Loan to the Indenture Trustee.

             (c)   The Indenture Trustee will hold the Indenture Trustee's
Mortgage Files in trust pursuant to the terms of the Indenture for the benefit
of all present and future Noteholders and the Note Insurer.

             (d)   Consistent with the terms of the Indenture, the Indenture
Trustee shall afford the Sponsor, the Trust, the Note Insurer, the Master
Servicer and the Backup Servicer reasonable access to all records and
documentation regarding the Mortgage Loans relating to this Agreement, such
access being afforded at customary charges, upon reasonable prior written
request and during normal business hours at the offices of the Indenture
Trustee.

     Section 2.05. DELIVERY OF MORTGAGE LOAN DOCUMENTS. (a) In connection with
the transfer and assignment of the Mortgage Loans, the Sponsor shall on or
before the Closing Date, deliver, or cause to be delivered to the Indenture
Trustee (as pledgee of the Trust pursuant to the Indenture), the following
documents or instruments constituting the Indenture Trustee's Mortgage File with
respect to each Mortgage Loan so transferred or assigned:

                   (i)    the original Mortgage Note, endorsed without recourse
     in blank by the Sponsor, including all intervening endorsements showing a
     complete chain of endorsement;

                   (ii)   the related original Mortgage with evidence of
     recording indicated thereon or a copy thereof certified by the applicable
     recording office;

                   (iii)  each intervening mortgage assignment, with evidence of
     recording indicated thereon or if the original is not available, a copy
     thereof certified by the applicable recording office, if any, showing a
     complete chain of assignment from the originator of the related Mortgage
     Loan to the Sponsor (which assignment may, at the Sponsor's option, be
     combined with the assignment referred to in subpart (iv) hereof, in which
     case it must be in recordable form, but need not have been previously
     recorded);

                   (iv)   a mortgage assignment in recordable form (which, if
     acceptable for recording in the relevant jurisdiction, may be included in a
     blanket assignment or assignments) of each Mortgage from the Sponsor to the
     Indenture Trustee;

                   (v)    originals of all assumption, modification and
     substitution agreements in those instances where the terms or provisions of
     a Mortgage or Mortgage Note have been modified or such Mortgage or Mortgage
     Note has been assumed; and

                                       3
<PAGE>

                   (vi)   an original title insurance policy or title opinion
     (or (A) a copy of the title insurance policy or title opinion, or (B) the
     related binder, commitment or preliminary report, or copy thereof in which
     case the Sponsor hereby certifies that the original Mortgage has been
     delivered to the title insurance company that issued such binder,
     commitment or preliminary report).

     In instances where the original recorded Mortgage or any intervening
mortgage assignment or a completed assignment of the Mortgage in recordable form
cannot be delivered by the Sponsor to the Indenture Trustee prior to or
concurrently with the execution and delivery of this Agreement due to a delay in
connection with recording, the Sponsor may:

             (x)   in lieu of delivering such original recorded Mortgage or
     intervening mortgage assignment, deliver to the Indenture Trustee, a copy
     thereof and the Sponsor hereby certifies that the original Mortgage has
     been delivered to a title insurance company for recordation after receipt
     of its policy of title insurance or the related binder, commitment or
     preliminary report therefor; and

             (y)   with respect to clause (iii) above, in lieu of delivering the
     completed assignment in recordable form, deliver to the Indenture Trustee,
     the assignment in recordable form, otherwise complete except for recording
     information.

The Indenture Trustee is hereby authorized and directed, promptly upon receipt
thereof, with respect to each Mortgage Note described in Section 2.05(a)(i)
hereof and each assignment described in Section 2.05(a)(iv) hereof, to endorse
such Mortgage Note and assignment as follows: "Wells Fargo Bank Minnesota,
National Association, as Indenture Trustee under the Indenture dated as of July
1, 2002, Accredited Mortgage Loan Trust 2002-1."

             (b)   As promptly as practicable, but in any event within thirty
(30) days from the Closing Date, the Sponsor shall promptly submit, or cause to
be submitted for recording in the appropriate public office for real property
records, each assignment referred to in Section 2.05(a)(iv); provided however,
the Sponsor need not cause to be recorded any assignment which relates to a
Mortgage Loan in any jurisdiction under the laws of which, as evidenced by an
Opinion of Counsel delivered by the Sponsor (at the Sponsor's expense) to the
Indenture Trustee, acceptable to the Rating Agencies and the Note Insurer, the
recordation of such assignment is not necessary to protect the Indenture
Trustee's, the Note Insurer's, the Noteholders' and the Certificates' interest
in the related Mortgage Loan. The Indenture Trustee, shall retain a copy of each
assignment submitted for recording. In the event that any such assignment is
lost or returned unrecorded because of a defect therein, the Sponsor shall
promptly prepare a substitute assignment or cure such defect, as the case may
be, and thereafter the Sponsor shall submit each such assignment for recording.
The costs relating to the delivery and recordation of the documents in
connection with the Mortgage Loans as specified in this Article II shall be
borne by the Sponsor.

             (c)   The Sponsor shall, within five (5) Business Days after the
receipt thereof, deliver, or cause to be delivered, to the Indenture Trustee:
(i) the original recorded Mortgage and related power of attorney, if any, in
those instances where a copy thereof certified by the Sponsor was delivered to
the Indenture Trustee; (ii) the original recorded assignment of Mortgage from

                                       4
<PAGE>

the Sponsor to the Indenture Trustee, which, together with any intervening
assignments of Mortgage, evidences a complete chain of assignment from the
originator of the Mortgage Loan to the Indenture Trustee, in those instances
where copies of such assignments certified by the Sponsor were delivered to the
Indenture Trustee; and (iii) the title insurance policy or title opinion
required in Section 2.05(a)(vi).

     Notwithstanding anything to the contrary contained in this Section 2.05, in
those instances where the public recording office retains the original Mortgage,
power of attorney, if any, assignment or assignment of Mortgage after it has
been recorded or such original has been lost, the Sponsor shall be deemed to
have satisfied its obligations hereunder upon delivery to the Indenture Trustee,
of a copy of such Mortgage, power of attorney, if any, assignment or assignment
of Mortgage certified by the public recording office to be a true copy of the
recorded original thereof.

     From time to time the Sponsor may forward, or cause to be forwarded, to the
Indenture Trustee, additional original documents evidencing any assumption or
modification of a Mortgage Loan.

             (d)   All original documents relating to the Mortgage Loans that
are not required to be delivered to the Indenture Trustee, pursuant to Section
2.05(a) hereof are, and shall be, held by the Master Servicer or the Sponsor, as
the case may be, in trust for the benefit of the Indenture Trustee, on behalf of
the Noteholders and the Note Insurer. In the event that any such original
document is required pursuant to the terms of this Section 2.05 to be a part of
an Indenture Trustee's Mortgage File, such document shall be delivered promptly
to the Indenture Trustee. From and after the sale of the Mortgage Loans to the
Trust pursuant hereto, to the extent that the Sponsor retains legal title of
record to any Mortgage Loans prior to the vesting of legal title in the Trust,
such title shall be retained in trust for the Trust as the owner of the Mortgage
Loans, and the Indenture Trustee, as the pledgee of the Trust under the
Indenture. In acting as custodian of any original document which is part of the
Indenture Trustee's Mortgage Files, the Master Servicer agrees further that it
does not and will not have or assert any beneficial ownership interest in the
related Mortgage Loans or the Mortgage Files. Promptly upon the Master
Servicer's receipt of any such original document, the Master Servicer, on behalf
of the Trust, shall mark conspicuously each such original document, and its
master data processing records with a legend evidencing that the Trust has
purchased the related Mortgage Loan and all right and title thereto and interest
therein, and pledged such Mortgage Loan and all right and title thereto and
interest therein to the Indenture Trustee, on behalf of the Noteholders and the
Note Insurer.

     Section 2.06. ACCEPTANCE OF THE TRUST ESTATE; CERTAIN SUBSTITUTIONS;
CERTIFICATION BY THE INDENTURE TRUSTEE. (a) The Indenture Trustee agrees to
execute and deliver to the Sponsor, the Note Insurer, the Master Servicer and
the Backup Servicer on or prior to the Closing Date an acknowledgement of
receipt of the Note Insurance Policy in the form attached as EXHIBIT B hereto.

             (b)   The Indenture Trustee is authorized and directed to, and
agrees to, do the following:

                                       5
<PAGE>

                   (i)    execute and deliver to the Sponsor, the Note Insurer,
     the Master Servicer and the Backup Servicer, on or prior to the Closing
     Date with respect to each Mortgage Loan transferred on such date, an
     acknowledgement of receipt, in the form attached as EXHIBIT C hereto, of
     the original Mortgage Note as --------- required to be included in the
     Indenture Trustee's Mortgage File (with any exceptions noted) and declares
     that it will hold such documents and any amendments, replacements or
     supplements thereto, as well as any other assets included in the definition
     of Trust Estate and delivered to the Indenture Trustee, subject to the
     conditions set forth in the Indenture, for the benefit of the Noteholders
     and the Note Insurer.

                   (ii)   to review (or cause to be reviewed) each Indenture
     Trustee's Mortgage File within sixty (60) days after the Closing Date (or,
     with respect to any Qualified Substitute Mortgage Loans, within sixty (60)
     days after receipt thereof), and to deliver to the Master Servicer, the
     Backup Servicer, the Sponsor, and the Note Insurer a certification, in the
     form attached hereto as EXHIBIT D, to the effect that, except as otherwise
     noted, as to each Mortgage Loan listed in the related Mortgage Loan
     Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
     specifically identified in such certification as not covered by such
     certification), (i) all documents specified in Section 2.05(a) are in its
     possession, (ii) each such document has been reviewed by it and appears, on
     its face, not to have been mutilated, damaged, torn or otherwise physically
     altered (handwritten additions, changes or corrections shall not constitute
     physical alteration if they reasonably appear to have been initialed),
     appears regular on its face and relates to such Mortgage Loan, and (iii)
     based on its examination and only as to the foregoing documents, the
     information set forth on the Mortgage Loan Schedule as to the information
     set forth in (i), (ii) (with respect to property address only, excluding
     zip code), (iii) and (vi) of the definition of "Mortgage Loan Schedule"
     accurately reflects the information set forth in the Indenture Trustee's
     Mortgage File delivered on such date; PROVIDED HOWEVER, no certification of
     the Indenture Trustee shall -------- ------- constitute a determination by
     the Indenture Trustee of the proper form, adequacy or enforceability of any
     document included in the Indenture Trustee's Mortgage File.

                   (iii)  to review (or cause to be reviewed) each Indenture
     Trustee's Mortgage File within one hundred eighty (180) days after the
     Closing Date (or, with respect to any Qualified Substitute Mortgage Loans,
     within one hundred eighty (180) days after receipt thereof), and to deliver
     to the Master Servicer, the Backup Servicer, the Sponsor and the Note
     Insurer a certification in the form attached hereto as EXHIBIT E to the
     effect that, except as otherwise noted, as to each Mortgage Loan listed in
     the related Mortgage Loan Schedule (other than any Mortgage Loan paid in
     full or any Mortgage Loan specifically identified in such certification as
     not covered by such certification), (i) all documents specified in Section
     2.05(a) are in its possession, (ii) each such document has been reviewed by
     it and has not been mutilated, damaged, torn or otherwise physically
     altered (handwritten additions, changes or corrections shall not constitute
     physical alteration if they reasonably appear to be initialed by the
     Mortgagor), appears regular on its face and relates to such Mortgage Loan,
     and (iii) based on its examination and only as to the foregoing documents,
     the information set forth in items (i), (ii) (with respect to property
     address only, excluding zip code), (iii) and (vi) of the

                                       6
<PAGE>

     definition of "Mortgage Loan Schedule" accurately reflects the information
     set forth in the Indenture Trustee's Mortgage File delivered on such date.

     In performing any such review, the Indenture Trustee may conclusively rely
on the Sponsor as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Indenture Trustee's
review of the Indenture Trustee's Mortgage Files is limited solely to confirming
that the documents listed in Section 2.05 have been executed and received and
relate to the Indenture Trustee's Mortgage Files identified in the related
Mortgage Loan Schedule. The Indenture Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.

             (c)   If the Indenture Trustee during the process of reviewing the
Indenture Trustee's Mortgage Files finds any document constituting a part of a
Indenture Trustee's Mortgage File which is not executed, has not been received,
is unrelated to the Mortgage Loan identified in the related Mortgage Loan
Schedule, or does not conform to the requirements of Section 2.05 or the
description thereof as set forth in the related Mortgage Loan Schedule, the
Indenture Trustee shall promptly so notify the Master Servicer, the Backup
Servicer, the Sponsor, the Note Insurer and the Indenture Trustee. Upon receipt
of such notice respecting such defect, the Sponsor shall have a sixty (60) day
period after such notice within which to correct or cure any such defect. If,
however, within such sixty (60) day period, the Sponsor has not caused to be
remedied the defect and the defect materially and adversely affects the value of
the related Mortgage Loan or the interest of the Noteholders and the Note
Insurer in the related Mortgage Loan, the Sponsor will be obligated to either
(i) substitute in lieu of such Mortgage Loan a Qualified Substitute Mortgage
Loan in the manner and subject to the conditions set forth in this Section 2.06
or (ii) purchase such Mortgage Loan at a purchase price equal to the Loan
Repurchase Price. Upon receipt by the Indenture Trustee of two copies of a
certification, in the form attached hereto as EXHIBIT F, of a Servicing Officer
of such substitution or purchase and, in the case of a substitution, upon
receipt by the Indenture Trustee, of the related Indenture Trustee's Mortgage
File, and the deposit of the Loan Repurchase Price, in the case of a purchase,
or the Substitution Adjustment, if any, in connection with a substitution, in
the Collection Account, the Indenture Trustee shall release to the Master
Servicer for release to the Sponsor the related Indenture Trustee's Mortgage
File and the Indenture Trustee shall execute, without recourse, and deliver such
instruments of transfer furnished by the Sponsor as may be necessary to transfer
such Mortgage Loan to the Sponsor. The Indenture Trustee shall provide notice to
the Note Insurer if the Sponsor fails to repurchase or substitute for a Mortgage
Loan in accordance with the foregoing.

     Section 2.07. GRANT OF SECURITY INTEREST. (a) It is intended that the
conveyance of the Mortgage Loans and other property by the Sponsor to the Trust
as provided in this Article II be, and be construed for all purposes other than
tax purposes as, a sale of the Mortgage Loans and such other property by the
Sponsor to the Trust. It is, for all purposes other than tax purposes further,
not intended that such conveyance be deemed a pledge of the Mortgage Loans or
such other property by the Sponsor to the Trust to secure a debt or other
obligation of the Sponsor. However, in the event that the Mortgage Loans or any
of such other property are held to be property of the Sponsor, or if for any
reason this Agreement is held or deemed to create a

                                       7
<PAGE>

security interest in the Mortgage Loans or any of such other property, then it
is intended that: (i) this Agreement shall also be deemed to be a security
agreement within the meaning of the Uniform Commercial Code; (ii) the conveyance
provided for in this Article II shall be deemed to be a grant by the Sponsor to
the Trust of a security interest in all of the Sponsor's right, title and
interest in and to the Mortgage Loans and such other property and all amounts
payable to the holders of the Mortgage Loans in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including,
without limitation, all amounts from time to time held or invested in the
Accounts whether in the form of cash, instruments, securities or other property;
(iii) the possession by the Indenture Trustee, of the Mortgage Notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to the Uniform Commercial
Code; and (iv) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from financial intermediaries, bailees or agents, as applicable, of the
Indenture Trustee for the purpose of perfecting such security interest under
applicable law. The Sponsor, the Master Servicer, on behalf of the Trust and the
Indenture Trustee, shall, to the extent consistent with this Agreement, take
such actions as may be reasonably necessary to ensure that, if this Agreement
were deemed to create a security interest in the Mortgage Loans or any of such
other property, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement.

             (b)   The Sponsor, the Master Servicer and the Backup Servicer
shall take no action inconsistent with the Trust's ownership of the Trust Estate
and each shall indicate or shall cause to be indicated in its records and
records held on its behalf that ownership of each Mortgage Loan and the other
assets in the Trust Estate is vested in the Trust, as owner, and is pledged to
the Indenture Trustee, for the benefit of the Noteholders and the Note Insurer
pursuant to the terms of the Indenture. The Indenture Trustee is authorized to
act, pursuant to the terms of this Agreement for the benefit of the Noteholders
and Note Insurer and shall be authorized to act at the direction of such
parties. In addition, the Sponsor, the Master Servicer and the Backup Servicer
shall respond to any inquiries from third parties with respect to ownership of a
Mortgage Loan or any other asset in the Trust Estate by stating that it is not
the owner of such asset and that the Trust is the owner of such Mortgage Loan or
other asset in the Trust Estate, which is pledged to the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer.

     Section 2.08. FURTHER ACTION EVIDENCING ASSIGNMENTS. (a) The Master
Servicer agrees that, from time to time, at its expense, it shall cause the
Sponsor to, and the Sponsor agrees that it shall, promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or appropriate, or that the Master Servicer or the Indenture Trustee
may reasonably request, in order to perfect, protect or more fully evidence the
transfer of ownership of the Mortgage Loans and other assets in the Trust Estate
or to enable the Indenture Trustee, to exercise or enforce any of its rights
hereunder. Without limiting the generality of the foregoing, the Master Servicer
and the Sponsor will, upon the request of the Master Servicer or the Indenture
Trustee execute and file (or cause to be executed and filed) such real estate
filings,

                                       8
<PAGE>

financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate.

             (b)   The Sponsor hereby grants to the Master Servicer, the Backup
Servicer and the Indenture Trustee powers of attorney to execute all documents
on its behalf under this Agreement as may be necessary or desirable to
effectuate the foregoing.

     Section 2.09. ASSIGNMENT OF AGREEMENT. The Sponsor and the Master Servicer
hereby acknowledge and agree that the Trust may assign its interest under this
Agreement to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, as may be required to effect the purposes of the Indenture,
without further notice to, or consent of, the Sponsor or the Master Servicer,
and the Indenture Trustee shall succeed to such of the rights of the Trust
hereunder as shall be so assigned. The Trust shall, pursuant to the Indenture,
assign all of its right, title and interest in and to the Mortgage Loans and its
right to exercise the remedies created by Section 4.02 of this Agreement for
breaches of the representations, warranties, agreements and covenants of the
Sponsor contained in Sections 3.02 and 4.01 of this Agreement, assign such
right, title and interest to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer. The Sponsor agrees that, upon such assignment
to the Indenture Trustee, such representations, warranties, agreements and
covenants will run to and be for the benefit of the Indenture Trustee and the
Indenture Trustee may enforce, without joinder of the Sponsor or the Trust, the
repurchase obligations of the Sponsor set forth herein with respect to breaches
of such representations, warranties, agreements and covenants.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     Section 3.01. REPRESENTATIONS OF THE MASTER SERVICER. The Master Servicer
hereby represents and warrants to the Indenture Trustee, the Sponsor, the Trust,
the Note Insurer, the Backup Servicer and the Noteholders as of the Closing Date
and during the term of this Agreement that:

             (a)   The Master Servicer is duly organized, validly existing and
in good standing under the laws of its state of incorporation and has the power
to own its assets and to transact the business in which it is currently engaged.
The Master Servicer is duly qualified to do business as a foreign corporation
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 or the performance
of its obligations hereunder requires such qualification and in which the
failure so to qualify could reasonably be expected to have a material adverse
effect on the business, properties, assets, or condition (financial or other) of
the Master Servicer or the performance of its obligations hereunder.

             (b)   The Master Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement, and
assuming the due authorization, execution and delivery hereof by the other
parties hereto constitutes, or will constitute, the legal, valid and binding
obligation of the Master

                                       9
<PAGE>

Servicer, enforceable in accordance with its terms, except as enforcement of
such terms may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).

             (c)   The Master Servicer 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
which consent already has not been obtained in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, except such
as have been obtained prior to the Closing Date.

             (d)   The execution, delivery and performance of this Agreement by
the Master Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court or the charter or bylaws of the
Master Servicer, or constitute a breach of any mortgage, indenture, contract or
other Agreement to which the Master Servicer is a party or by which it may be
bound.

             (e)   There is no action, suit, proceeding or investigation pending
or threatened against the Master Servicer which, either in any one instance or
in the aggregate, is, in the Master Servicer's judgment, likely to result in any
material adverse change in the business, operations, financial condition,
properties, or assets of the Master Servicer, or in any material impairment of
the right or ability of the Master Servicer to carry on its business
substantially as now conducted, or in any material liability on the part of the
Master Servicer, or which would draw into question the validity of this
Agreement, the Notes, or the Mortgage Loans or of any action taken or to be
taken in connection with the obligations of the Master Servicer contemplated
herein or therein, or which would be likely to impair materially the ability of
the Master Servicer to perform its obligations hereunder.

             (f)   Neither this Agreement nor any statement, report, or other
document furnished by the Master Servicer pursuant to this Agreement or in
connection with the transactions contemplated hereby, including, without
limitation, the sale or placement of the Notes, contains any untrue statement of
fact provided by or on behalf of the Master Servicer or omits to state a fact
necessary to make the statements provided by or on behalf of the Master Servicer
contained herein or therein not misleading.

             (g)   The Master Servicer does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement.

             (h)   The Master Servicer is not an "investment company" or a
company "controlled by an investment company," within the meaning of the
Investment Company Act of 1940, as amended.

             (i)   The Master Servicer shall take all necessary steps to
maintain the Indenture Trustee's perfection and priority in the Mortgage Loans.

     It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.01 shall survive the delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and inure
to the benefit of the Indenture Trustee.

                                       10
<PAGE>

     Section 3.02. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR. The
Sponsor hereby represents, warrants and covenants to the Indenture Trustee, the
Trust, the Backup Servicer, the Note Insurer and the Master Servicer that as of
the date of this Agreement or as of such date specifically provided herein:

             (a)   The Sponsor is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.

             (b)   The Sponsor has the corporate power and authority to convey
the Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement.

             (c)   This Agreement has been duly and validly authorized, executed
and delivered by the Sponsor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Sponsor, enforceable against the Sponsor in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law).

             (d)   No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Sponsor with this Agreement or the consummation by the Sponsor of any of the
transactions contemplated hereby, except as have been made on or prior to the
Closing Date.

             (e)   None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of incorporation or bylaws of the Sponsor,
or (B) of any term, condition or provision of any material indenture, deed of
trust, contract or other agreement or instrument to which the Sponsor or any of
its subsidiaries is a party or by which it or any of its subsidiaries is bound;
(ii) results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Sponsor of any court or governmental
authority having jurisdiction over the Sponsor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans.

             (f)   There are no actions, suits or proceedings before or against
or investigations of, the Sponsor pending, or to the knowledge of the Sponsor,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Sponsor's reasonable judgment, might
materially and adversely affect the performance by the Sponsor of its
obligations under this Agreement, or the validity or enforceability of this
Agreement.

                                       11
<PAGE>

             (g)   The Sponsor 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 that may materially and adversely affect its
performance hereunder.

     It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.

     Section 3.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BACKUP
SERVICER. The Backup Servicer hereby represents, warrants and covenants to the
Indenture Trustee, the Trust, the Master Servicer, the Note Insurer and the
Sponsor that as of the date of this Agreement:

             (a)   The Backup Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.

             (b)   The Backup Servicer has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate transactions
contemplated by this Agreement.

             (c)   This Agreement has been duly and validly authorized, executed
and delivered by the Backup Servicer, all requisite corporate action having been
taken, and, assuming the due authorization, execution and delivery hereof by the
other parties hereto, constitutes or will constitute the legal, valid and
binding agreement of the Backup Servicer, enforceable against the Backup
Servicer in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law).

             (d)   No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Backup Servicer with this Agreement or the consummation by the Backup Servicer
of any of the transactions contemplated hereby, except as have been made on or
prior to the Closing Date.

             (e)   None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the certificate of incorporation or bylaws of the Backup
Servicer, or (B) of any term, condition or provision of any material indenture,
deed of trust, contract or other agreement or instrument to which the Backup
Servicer or any of its subsidiaries is a party or by which it or any of its
subsidiaries is bound; (ii) results or will result in a violation of any law,
rule, regulation, order, judgment or decree applicable to the Backup Servicer of
any court or governmental authority having jurisdiction over the Backup Servicer
or its subsidiaries; or (iii) results in the creation or imposition of any lien,
charge or encumbrance which would have a material adverse effect upon the
Mortgage Loans or any documents or instruments evidencing or securing the
Mortgage Loans;

                                       12
<PAGE>

             (f)   There are no actions, suits or proceedings before or against
or investigations of, the Backup Servicer pending, or to the knowledge of the
Backup Servicer, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Backup Servicer's
reasonable judgment, might materially and adversely affect the performance by
the Backup Servicer of its obligations under this Agreement, or the validity or
enforceability of this Agreement; and

             (g)   The Backup 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 that may materially and adversely affect
its performance hereunder.

     It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.

     Section 3.04. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INDENTURE
TRUSTEE. The Indenture Trustee hereby represents, warrants and covenants to the
Backup Servicer, the Trust, the Master Servicer, the Note Insurer and the
Sponsor that as of the date of this Agreement or as of such date specifically
provided herein:

             (a)   The Indenture Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America.

             (b)   The Indenture Trustee has the requisite power and authority
to execute, deliver and perform, and to enter into and consummate transactions
contemplated by this Agreement.

             (c)   This Agreement has been duly and validly authorized, executed
and delivered by the Indenture Trustee, all requisite action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Indenture Trustee, enforceable against the Indenture Trustee in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law).

             (d)   No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Indenture Trustee with this Agreement or the consummation by the Indenture
Trustee of any of the transactions contemplated hereby, except as have been made
on or prior to the Closing Date;

             (e)   None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of association or bylaws of the Indenture
Trustee, or (B) of any term, condition or provision of any material indenture,
deed of trust, contract or other agreement or

                                       13
<PAGE>

instrument to which the Indenture Trustee is a party or by which it is bound; or
(ii) results or will result in a violation of any statute, rule, regulation,
order, judgment or decree applicable to the Indenture Trustee of any court or
governmental authority having jurisdiction over the Indenture Trustee or its
subsidiaries; and

             (f)   There are no actions, suits or proceedings before or against
or investigations of, the Indenture Trustee pending, or to the knowledge of the
Indenture Trustee, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Indenture Trustee's
reasonable judgment, would materially and adversely affect the performance by
the Indenture Trustee of its obligations under this Agreement, or the validity
or enforceability of this Agreement.

     It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.04 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee.

     Section 3.05. COVENANTS AND REPRESENTATIONS OF THE SPONSOR AND MASTER
SERVICER REGARDING PREPAYMENT CHARGES. (a) The Master Servicer will not waive
any Prepayment Charge or part of a Prepayment Charge unless in connection with a
Mortgage Loan that is in default or for which a default is reasonably
foreseeable.

             (b)   The Sponsor hereby represents and warrants that the
information set forth in the Prepayment Charge Schedule is complete, true and
correct in all material respects at the date or dates respecting which such
information is furnished and each Prepayment Charge is permissible and
enforceable in accordance with its terms (except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally)
under applicable law.

             (c)   Upon discovery by the Sponsor or the Indenture Trustee of a
breach of the foregoing, the party discovering such breach shall give prompt
written notice to the other parties. Within 60 days of the earlier of discovery
by the Master Servicer or receipt of notice by the Master Servicer of breach,
the Master Servicer shall cure such breach in all material respects. If the
covenant made by the Master Servicer in clause (a) above is breached the Master
Servicer must pay into the Collection Account the amount of the waived
Prepayment Charge. If the representation made by the Sponsor in clause (b) above
is breached, the Sponsor must pay into the Collection Account the amount of the
scheduled Prepayment Charge, less any amount previously collected and paid by
the Master Servicer into the Collection Account. The foregoing obligations of
the Master Servicer and the Sponsor shall be the sole and exclusive remedies for
a breach of Section 3.05(a) or (b).

                                   ARTICLE IV

                               THE MORTGAGE LOANS

     Section 4.01. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE LOANS.
The Sponsor makes the following representations and warranties to the Master
Servicer, the Backup Servicer, the Indenture Trustee, the Note Insurer and the
Trust as to the Mortgage Loans on

                                       14
<PAGE>

which the Trust relies in accepting the Mortgage Loans in trust and executing
the Notes. Such representations, warranties and covenants are made or deemed to
be made as of the Cut-Off Date.

             (a)   The information with respect to each Mortgage Loan set forth
in the Mortgage Loan Schedule is true and correct as of the Cut-Off Date, based
on Cut-Off Date Principal Balances.

             (b)   Each Mortgage Loan is being serviced either (i) through the
Master Servicer or (ii) a Person controlling, controlled by or under common
control with the Master Servicer and qualified to service mortgage loans.

             (c)   Each Mortgage Loan was underwritten or reunderwritten
pursuant to the Underwriting Guidelines which conform in all material respects
to the description thereof set forth in the Prospectus Supplement.

             (d)   All of the original or certified documentation required to be
delivered to the Indenture Trustee pursuant to this Agreement (including all
material documents related thereto) with respect to each Mortgage Loan has been
or will be delivered to the Indenture Trustee in accordance with the terms of
this Agreement. Each of the documents and instruments specified to be included
therein has been 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.

             (e)   [Reserved].

             (f)   Each Mortgaged Property is improved by a single (one to four)
family residential dwelling, which may include condominiums, individual units in
a planned unit development and townhouses but shall not include cooperatives.

             (g)   No Mortgage Loan had an LTV in excess of 90%.

             (h)   Each Mortgage Loan in Loan Group 1 is a valid and subsisting
first lien and each Mortgage Loan in Loan Group 2 is a valid and subsisting
first lien as identified on the Mortgage Loan Schedule on the Mortgaged Property
and subject in all cases to the exceptions to title set forth in the title
insurance policy, with respect to the related Mortgage Loan, which exceptions
are generally acceptable to banking institutions in connection with their
regular mortgage lending activities, 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. At the time each Mortgage Loan in Loan Group 2
was originated, the originator was a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act or a savings and loan association, a savings bank, a commercial bank
or similar banking institution which was supervised and examined by a Federal or
State authority or a mortgage banker or broker licensed or authorized to do
business in the jurisdiction in which the related

                                       15

                                       15
<PAGE>

Mortgaged Property is located, applying the same standards and procedures used
by the Sponsor in originating Mortgage Loans directly.

             (i)   Immediately prior to the transfer and assignment herein
contemplated, the Sponsor held good and marketable title to, and was the sole
owner of, each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Indenture Trustee will hold
good and marketable title to, and be the sole owner of, each Mortgage Loan
subject to no liens, charges, mortgages, encumbrances or rights of others except
liens which will be released simultaneously with such transfer and assignment.

             (j)   There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial damage
and is in good repair.

             (k)   There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or 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.

             (l)   There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph (n) below.

             (m)   Each Mortgage Loan at the time it was made complied with, and
each Mortgage Loan at all times was serviced in compliance with, in each case,
in all material respects, applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, the Home Ownership and Equity Protection Act of 1994,
real estate settlement procedure, usury, equal credit opportunity, disclosure
and recording laws.

             (n)   With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard California Land Title Association form or
American Land Title Association form, or other form acceptable in a particular
jurisdiction 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 of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a valid
first mortgage lien of record on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the character
referred to in paragraph (h) above, was effective on the date of the origination
of such Mortgage Loan, and, as of the Closing Date such policy will be valid and
inure to the benefit of the Indenture Trustee on behalf of the Noteholders.

                                       16
<PAGE>

             (o)   The improvements upon each Mortgaged Property are covered by
a valid and existing hazard insurance policy (which may be a blanket policy of
the type described in this Agreement) with a generally acceptable carrier that
provides for fire and extended coverage representing coverage not less than the
least of (i) the outstanding Principal Balance of the related Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis or (iii) the full insurable value of the Mortgaged
Property.

             (p)   If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in this Agreement) in a form meeting the requirements of the
current guidelines of the Federal Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (i) the outstanding
Principal Balance of the related Mortgage Loan (together, in the case of a
second mortgage loan, with the outstanding principal balance of the first
mortgage loan), (ii) the minimum amount required to compensate for damage or
loss on a replacement cost basis or (iii) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973.

             (q)   Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable 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 had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed.

             (r)   The Sponsor has caused to be performed any and all acts
required to be performed to preserve the rights and remedies of the Indenture
Trustee in any Insurance Policies applicable to any Mortgage Loan delivered by
the Sponsor including, to the extent such Mortgage Loan is not covered by a
blanket policy described in this Agreement, any necessary notifications of
insurers, assignments of policies or interests therein, and establishments of
coinsured, joint loss payee and mortgagee rights in favor of the Indenture
Trustee.

             (s)   The Sponsor has caused or will have caused, within ten days,
the filing of all appropriate financing statements in the proper filing office
in the appropriate jurisdictions under applicable law in order to perfect the
security interest in the original Mortgage Note and all subsequent assignments
of the original Mortgage, granted to the Indenture Trustee hereunder, subject to
the provisions of Section 2.05(b) of this Agreement.

             (t)   The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
Noteholders and which has been delivered to the Indenture Trustee

             (u)   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. All costs, fees and expenses incurred in making or closing or
recording such Mortgage Loans were paid.

                                       17
<PAGE>

             (v)   Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related Mortgage
Note is not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage.

             (w)   No Mortgage Loan was originated under a buydown plan.

             (x)   No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature.

             (y)   Each Mortgaged Property is located in the state identified in
the Mortgage Loan Schedule and consists of one or more parcels of real property
with a residential dwelling erected thereon.

             (z)   Each Mortgage securing a Mortgage Note 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.

             (aa)  Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-Off Date, have been consolidated with the outstanding
principal amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term
reflected on the Mortgage Loan Schedule. The consolidated principal amount does
not exceed the original principal amount of the related Mortgage Loan. No
Mortgage Note permits or obligates the Master Servicer, the Backup Servicer, the
Sponsor or any other Person to make future advances to the related Mortgagor at
the option of the Mortgagor.

             (bb)  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 each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, 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.

             (cc)  All of the improvements which were included for the purposes
of determining the Appraised Value of any Mortgaged Property lie wholly within
the boundaries and building restriction lines of such Mortgaged Property, and no
improvements on adjoining properties encroach upon such Mortgaged Property,
except as stated in the related title insurance policy and affirmatively
insured.

             (dd)  No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. As of the
related date of origination, 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.

                                       18
<PAGE>

             (ee)  With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Sponsor or the Trust to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the related Mortgagor.

             (ff)  [Reserved].

             (gg)  [Reserved].

             (hh)  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 (i) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (ii) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage.

             (ii)  Except for a Mortgage Payment not more than 29 days
contractually delinquent, 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 the Sponsor has not waived any default, breach, violation or
event of acceleration.

             (jj)  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.

             (kk)  [Reserved]

             (ll)  The Sponsor has no actual knowledge that there exists on any
Mortgaged Property any hazardous substances, hazardous wastes or solid wastes,
as such terms are defined in the CERCLA, the Resource Conservation and Recovery
Act of 1976, or other federal, state or local environmental legislation.

             (mm)  No action, error, omission, misrepresentation, negligence,
fraud or similar occurrence with respect to a Mortgage Loan has taken place on
the part of any person, including, without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan.

             (nn)  The Sponsor has not solicited the Mortgagor in connection
with any refinancing.

             (oo)  If the Mortgage Loan is an adjustable rate Mortgage Loan, all
of the adjustments to the Mortgage Interest Rate, to the amount of the monthly
payment, and to the principal balance have been made in accordance with the
terms of the related Mortgage Note.

                                       19
<PAGE>

             (pp)  The origination and collection practices used with respect to
the Mortgage Loan have been in all respects legal, proper, prudent and customary
in the mortgage origination and servicing business.

             (qq)  An appraisal of the related Mortgaged Property was made
and signed, prior to the approval of the Mortgage Loan application, by a
qualified appraiser who met the requirements of the Sponsor's appraisal policy
and procedures and who had no interest, direct or indirect in the Mortgaged
Property or in any loan made on the security thereof, whose compensation was not
affected by the approval or disapproval of the Mortgage Loan.

             (rr)  The Mortgagor has received all disclosure materials required
by applicable law with respect to the making of adjustable rate mortgage loans;
and if the Mortgage Loan is a refinanced Mortgage Loan, the Mortgagor has
received all disclosure and rescission materials required by applicable law with
respect to the making of a refinanced Mortgage Loan, and evidence of such
receipt is and will remain in the Master Servicer's file.

             (ss)  If the residential dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development), such condominium or planned unit development
project meets the Sponsor's eligibility requirements.

             (tt)  As of the Cut-Off Date, no Mortgage Loan was more than 29
days contractually delinquent or had been dishonored. No Mortgage Loan has been
thirty or more days delinquent more than one time in the twelve months preceding
the Cut-Off Date.

             (uu)  The Sponsor has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a person other than the Mortgagor,
directly or indirectly, for the payment of any amount required under the
Mortgage Loan, except for interest prepaid upon the closing of the Mortgage
Loan. No Mortgage Loan contains any provision pursuant to which Monthly Payments
are: (i) paid or partially paid with funds deposited in any separate account
established by the Sponsor, the Mortgagor, or anyone on behalf of the Mortgagor
or (ii) paid by any source other than the Mortgagor. The Mortgage Loan is not
deemed a graduated payment mortgage loan and the Mortgage Loan does not have a
shared appreciation or other contingent interest feature.

             (vv)  No foreclosure proceedings are pending against the Mortgaged
Property and the Mortgage Loan is not subject to any pending bankruptcy or
insolvency proceeding, and to the Sponsor's best knowledge, no material
litigation or material lawsuit relating to the Mortgage Loan is pending.

             (ww)  Principal payments on the Mortgage Loan commenced or will
commence within sixty days after the proceeds of the Mortgage Loan were
disbursed.

             (xx)  With respect to escrow deposits, if any, all such payments
are in the possession of, or under the control of, the Master Servicer and there
exists no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made or could be made. No escrow deposits or
escrow advances or other charges or payments due the Master Servicer have been
capitalized under any Mortgage or the related Mortgage Note.

                                       20
<PAGE>

             (yy)  The Sponsor used no selection procedures that identified the
Mortgage Loans as being less desirable or valuable than other comparable
mortgage loans originated or acquired by the Sponsor. The Mortgage Loans are
representative of the Sponsor's portfolio of fixed-rate or adjustable-rate
mortgage loans, as applicable.

             (zz)  Each Mortgage Loan conforms, and all such Mortgage Loans in
the aggregate conform in all material respects to the description thereof set
forth in the Prospectus Supplement.

             (aaa) All requirements for the valid transfer of each Insurance
Policy, including any assignments or notices required in each Insurance Policy,
have been satisfied.

             (bbb) This Agreement creates a valid and continuing security
interest (as defined in the applicable UCC) in the Mortgage Loans in favor of
the Indenture Trustee, which security interest is prior to all other liens, and
is enforceable as such as against creditors of and purchasers from the Sponsor.

             (ccc) The Mortgage Loans constitute "instruments" within the
meaning of the applicable UCC.

             (ddd) The Sponsor has received all consents and approvals required
by the terms of the Mortgage Loans to the sale of the Mortgage Loans hereunder
to the Owner Trustee and the subsequent pledge to the Indenture Trustee.

             (eee) Other than the security interest granted to the Indenture
Trustee pursuant to the Indenture, the Sponsor has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the Mortgage Loans.
The Sponsor has not authorized the filing of and is not aware of any financing
statements against it that include a description of collateral covering the
Mortgage Loans other than any financing statement relating to the security
interest granted to the Indenture Trustee hereunder or that has been terminated.
Debtor is not aware of any judgment or tax lien filings against the Sponsor.

             (fff) All financing statements filed or to be filed against the
Sponsor in favor of the Indenture Trustee in connection herewith describing the
Mortgage Loans contain a statement to the following effect: "A purchase of or
security interest in any collateral described in this financing statement will
violate the rights of the Indenture Trustee."

     It is understood and agreed that the representations, warranties and
covenants set forth in this Section 4.01 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee on behalf of the Noteholders and
the Note Insurer.

     Section 4.02. PURCHASE AND SUBSTITUTION. (a) It is understood and agreed
that the representations and warranties set forth in Section 4.01 shall survive
the transfer of the Mortgage Loans by the Sponsor to the Trust, the subsequent
pledge thereof by the Trust to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, and the delivery of the Notes to the
Noteholders, and shall continue in full force and effect, notwithstanding any
restrictive

                                       21
<PAGE>

or qualified endorsement on the Mortgage Notes and notwithstanding subsequent
termination of this Agreement.

             (b)   Upon discovery by the Sponsor, the Master Servicer, the
Indenture Trustee, the Note Insurer or a Noteholder of a breach of any of the
representations and warranties in Section 4.01 which materially and adversely
affects the value of any Mortgage Loan, or which materially and adversely
affects the interests of the Note Insurer or the Noteholders in the related
Mortgage Loan, the party discovering such breach or failure shall promptly (and
in any event within five (5) days of the discovery) give written notice thereof
to the others. Within sixty (60) days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, the Sponsor
shall (a) promptly cure such breach in all material respects, (b) purchase such
Mortgage Loan on the next succeeding Servicer Payment Date, in the manner and at
the price specified in Section 2.06(c) and this Section 4.02, or (c) remove such
Mortgage Loan from the Trust Estate (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner specified in Section 2.06 and this Section 4.02. The Indenture
Trustee shall deliver prompt written notice to the Note Insurer and the Rating
Agencies of any repurchase or substitution made pursuant to this Section 4.02 or
Section 2.06(c).

             (c)   As to any Deleted Mortgage Loan for which the Sponsor
substitutes a Qualified Substitute Mortgage Loan or Loans, the Master Servicer
shall cause the Sponsor to effect such substitution by delivering to the
Indenture Trustee a certification, in the form attached hereto as EXHIBIT F,
executed by a Servicing Officer, and the documents described in Sections
2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.

             (d)   The Master Servicer shall deposit in the Collection Account
all payments received in connection with such Qualified Substitute Mortgage Loan
or Loans after the date of such substitution. Monthly Payments due with respect
to Qualified Substitute Mortgage Loans in or before the Due Period in which the
substitution occurs shall not be part of the Trust Estate and will be retained
by the Sponsor on the next succeeding Payment Date. For the Due Period in which
the substitution occurs, distributions to Noteholders will include the Monthly
Payment due on any Deleted Mortgage Loan for such Due Period and thereafter the
Sponsor shall be entitled to retain all amounts received in respect of such
Deleted Mortgage Loan. The Master Servicer shall give written notice to the
Backup Servicer, the Indenture Trustee and the Note Insurer that such
substitution has taken place and shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects.

             (e)   With respect to any Mortgage Loan that has been converted to
an REO Mortgage Loan, all references in this Section 4.02 or Section 2.06 to
"Mortgage Loan" shall be deemed to also refer to the REO Mortgage Loan. With
respect to any Mortgage Loan that the Sponsor is required to repurchase that is
or becomes a Liquidated Mortgage Loan, in lieu of repurchasing such Mortgage
Loan, the Master Servicer shall deposit into the related Payment Account,
pursuant to Section 8.01 of the Indenture, an amount equal to the amount of the
Liquidated Loan Loss, if any, incurred in connection with the liquidation of
such Mortgage Loan

                                       22
<PAGE>

within the same time period in which the Master Servicer or Sponsor would have
otherwise been required to repurchase such Mortgage Loan.

             (f)   It is understood and agreed that the obligations of the
Sponsor set forth in Sections 2.06 and 4.02 to cure, purchase or substitute for
a defective Mortgage Loan, or to indemnify as described in Section 4.02(g)
constitute the sole remedies of the Indenture Trustee, the Note Insurer and the
Noteholders respecting a breach of the representations and warranties of the
Sponsor set forth in Section 4.01 of this Agreement.

             (g)   The Sponsor shall be obligated to indemnify the Indenture
Trustee, the Trust, the Owner Trustee, the Noteholders and the Note Insurer for
any third party claims arising out of a breach by the Sponsor of representations
or warranties regarding the Mortgage Loans.

                                    ARTICLE V

               ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

     Section 5.01. THE MASTER SERVICER. (a) The Master Servicer shall service
and administer the Mortgage Loans in accordance with this Agreement and in
accordance with Accepted Servicing Practices, and shall have full power and
authority, acting alone, to do or cause to be done any and all things in
connection with such servicing and administration which it may deem necessary or
desirable.

             (b)   The Master Servicer shall exercise its discretion consistent
with Accepted Servicing Practices and the terms of this Agreement, with respect
to the enforcement of defaulted Mortgage Loans in such manner as will maximize
the receipt of principal and interest with respect thereto, including but not
limited to the sale of such Mortgage Loan to a third party, the modification of
such Mortgage Loan, or foreclosure upon the related property with a Mortgage and
disposition thereof.

             (c)   The duties of the Master Servicer shall include collecting
and posting of all payments, responding to inquiries of Mortgagors or by
federal, state or local government authorities with respect to the Mortgage
Loans, investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Indenture Trustee with respect
to distributions, paying Compensating Interest and making Periodic Advances and
Servicing Advances pursuant hereto. The Master Servicer shall follow its
customary standards, policies and procedures in performing its duties as Master
Servicer. The Master Servicer shall cooperate with the Indenture Trustee and
furnish to the Indenture Trustee with reasonable promptness information in its
possession as may be necessary or appropriate to enable the Indenture Trustee to
perform its tax reporting duties hereunder. The Indenture Trustee shall furnish
the Master Servicer, or the Backup Servicer with any powers of attorney and
other documents as the Indenture Trustee shall deem necessary or appropriate to
enable the Master Servicer, and the Backup Servicer to carry out its servicing
and administrative duties hereunder; provided, however, the Master Servicer, or
the Backup Servicer shall prepare for and deliver to the Indenture Trustee for
its execution any such powers of attorney; provided, further, that the Indenture
Trustee shall not be responsible for any misuse of any such power of attorney.

                                       23
<PAGE>

             (d)   [Reserved].

             (e)   The Master Servicer shall, in accordance with Accepted
Servicing Practices, have the right to approve requests of Mortgagors for
consent to (i) partial releases of Mortgage Loans and (ii) alterations, removal,
demolition or division of Mortgaged Properties subject to Mortgage Loans. No
such request shall be approved by the Master Servicer unless: (x) the provisions
of the related Mortgage Note have been complied with; (y) the LTV (which may,
for this purpose, be determined at the time of any such action in a manner
reasonably acceptable to the Note Insurer) after any release does not exceed the
LTV set forth for such Mortgage Loan in the Mortgage Loan Schedule; and (z) the
lien priority, monthly payment, Mortgage Interest Rate or maturity date of the
related Mortgage is not affected except in accordance with Section 5.02;
PROVIDED, HOWEVER, that the foregoing requirements (x), (y) and (z) shall not
apply to any such situation described in this paragraph if such situation
results from any condemnation or easement activity by a governmental entity.

             (f)   Notwithstanding anything else contained herein, the Master
Servicer may not, without the consent of the Note Insurer, agree to a
modification or extension of any Mortgage Loan unless both (i) such Mortgage
Loan is in default or a default thereon is reasonably foreseeable and (ii) such
modification or extension would not result in the Master Servicer agreeing to
modifications or extensions on Mortgage Loans with aggregate Cut-Off Date
Principal Balances of more than 5.0% of the Maximum Collateral Amount. In
addition, the Master Servicer may not agree to more than (i) one modification or
extension with respect to any individual Mortgage Loan in a calendar year or
(ii) three modifications or extensions of an individual Mortgage Loan during the
life of such Mortgage Loan.

             (g)   [Reserved].

             (h)   Without limiting the generality of the foregoing, but subject
to Sections 5.05 and 5.06, the Master Servicer in its own name may be authorized
and empowered pursuant to a power of attorney executed and delivered by the
Indenture Trustee to execute and deliver, and may be authorized and empowered by
the Indenture Trustee, to execute and deliver, on behalf of itself, the
Noteholders and the Indenture Trustee or any of them, (i) 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, (ii) and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Mortgaged Property on behalf of the Indenture Trustee, and
(iii) to hold title to any Mortgaged Property upon such foreclosure or deed in
lieu of foreclosure on behalf of the Indenture Trustee; PROVIDED, HOWEVER, that
Section 5.07(a) shall constitute a power of attorney from the Indenture Trustee
to the Master Servicer to execute an instrument of satisfaction (or assignment
of mortgage without recourse) with respect to any Mortgage Loan paid in full (or
with respect to which payment in full has been escrowed). Subject to Sections
5.05 and 5.06, the Indenture Trustee shall furnish the Master Servicer with any
powers of attorney and other documents as the Master Servicer shall reasonably
request to enable the Master Servicer to carry out their respective servicing
and administrative duties hereunder; provided, however, the Master Servicer
shall prepare for and deliver to the Indenture Trustee for its execution any
such powers of attorney; provided, further, that the Indenture Trustee shall not
be responsible for any misuse of any such power of attorney.

                                       24
<PAGE>

             (i)   The Master Servicer shall give prompt notice to the Backup
Servicer, the Indenture Trustee and the Note Insurer of any action, of which the
Master Servicer has actual knowledge, to (i) assert a claim against the Trust or
(ii) assert jurisdiction over the Trust.

             (j)   Servicing Advances incurred by the Master Servicer in
connection with the servicing of the Mortgage Loans (including any penalties in
connection with the payment of any taxes and assessments or other charges) on
any Mortgaged Property shall be recoverable by the Master Servicer to the extent
described herein.

             (k)   The Master Servicer shall be entitled to rely, and shall be
fully protected in relying, upon any promissory note, writing, resolution,
notice, consent, certificate, affidavit, letter, e-mail, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Mortgagor(s)),
independent accountants and other experts selected by the Master Servicer.

             (l)   The Master Servicer shall have no liability to the Sponsor,
the Indenture Trustee, the Owner Trustee, the Note Insurer, any Noteholder or
any other Person for any action taken, or for refraining from the taking of any
action, in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that the foregoing shall not apply to any breach of
representations or warranties made by the Master Servicer herein, or to any
specific liability imposed upon the Master Servicer pursuant to this Agreement
or any liability that would otherwise be imposed upon the Master Servicer by
reason of its willful misconduct, bad faith or negligence in the performance of
its duties hereunder or by reason of its failure to perform its obligations or
duties hereunder.

     Section 5.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION
ACCOUNT. (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 Accepted Servicing Practices. Consistent with the foregoing, the Master
Servicer may in its discretion waive any assumption fees or other fees which may
be collected in the ordinary course of servicing such Mortgage Loans.

             (b)   The Master Servicer shall establish and maintain, in the name
of the Indenture Trustee, the Collection Account, in trust for the benefit of
the Noteholders and the Note Insurer. The Collection Account shall be
established and maintained as an Eligible Account.

             (c)   The Master Servicer shall deposit in the Collection Account
any amounts representing Monthly Payments on the Mortgage Loans due or to be
applied as of a date after the Cut-Off Date (or, in the case of the Mortgage
Loans, Monthly Payments due or to be applied after July 1, 2002), and
thereafter, on each Business Day, but not less than two Business Days after the
date of collection, the following payments and collections received or made by
it (other than in respect of monthly payments of principal on and interest of
the Mortgage Loans that were due on or before the related Cut-Off Date and
monthly Payments due on July 1, 2002):

                                       25
<PAGE>

                   (i)    payments of interest on the Mortgage Loans including
     Prepayment Charges;

                   (ii)   payments of principal of the Mortgage Loans, including
     Principal Prepayments;

                   (iii)  the Loan Repurchase Price of Mortgage Loans
     repurchased pursuant to Sections 2.06(c) or 4.02;

                   (iv)   the Substitution Adjustment received in connection
     with Mortgage Loans for which Qualified Substitute Mortgage Loans are
     received pursuant to Sections 2.06 and 4.02;

                   (v)    all Net REO Proceeds;

                   (vi)   all Net Liquidation Proceeds; and

                   (vii)  all Insurance Proceeds (including, for this purpose,
     any amounts required to be deposited by the Master Servicer pursuant to
     Section 5.04 hereof).

     It is understood that the Master Servicer need not deposit amounts
representing fees, late payment charges or extension or other administrative
charges (other than Prepayment Charges) payable by Mortgagors, or amounts
received by the Master Servicer for the account of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and similar items
or foreclosure proceeds to the extent payable to the related Mortgagor.

             (d)   The Master Servicer shall invest any funds in the Collection
     Account in Permitted Investments, which shall mature not later than the
     Business Day next preceding the Servicer Payment Date next following the
     date of such investment (except that any investment held by the Indenture
     Trustee may mature on such Servicer Payment Date) and shall not be sold or
     disposed of prior to its maturity. All net income and gain realized from
     any such investment shall be for the benefit of the Master Servicer and
     shall be subject to its withdrawal or order on a Servicer Payment Date. The
     Master Servicer shall deposit from its own funds the amount of any loss, to
     the extent not offset by investment income or earnings, in the Collection
     Account upon the realization of such loss.

     Section 5.03. PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Master
Servicer may make withdrawals from the Collection Account, on or prior to any
Servicer Payment Date, for the following purposes:

             (a)   to pay to the Sponsor amounts received in respect of any
Defective Mortgage Loan purchased or substituted for by the Sponsor to the
extent that the payment of any such amounts on the Servicer Payment Date upon
which the proceeds of such purchase are paid would make the total amount
distributed in respect of any such Mortgage Loan on such Servicer Payment Date
greater than the Loan Repurchase Price or the Substitution Adjustment therefor;

             (b)   to reimburse the Master Servicer for unreimbursed Periodic
Advances and unreimbursed Servicing Advances with respect to the Mortgage Loans
for which it has made a

                                       26
<PAGE>

Periodic Advance or Servicing Advance, from late or deferred payments collected,
collections other than timely Monthly Payments, Liquidation Proceeds, Insurance
Proceeds and/or the Loan Repurchase Price or Substitution Adjustment of or
relating to such Mortgage Loans;

             (c)   to reimburse the Master Servicer for any Periodic Advances
and Servicing Advances determined in good faith to have become Nonrecoverable
Advances, such reimbursement to be made from any funds in the Collection
Account;

             (d)   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 Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction;

             (e)   to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein;

             (f)   to pay the Master Servicer the Servicing Compensation
pursuant to Section 5.08 hereof to the extent not retained or paid;

             (g)   to pay the Backup Servicer the Backup Servicing Fee pursuant
to Section 5.08 hereof to the extent payments in respect of these amounts have
not been previously retained or paid;

             (h)   without duplication, and solely out of amounts which are
payable to a former master servicer pursuant to Section 7.02(g), to pay to the
Backup Servicer, the Indenture Trustee or any successor master servicer amounts
paid by them in connection with the transfer of the Master Servicer's servicing
obligations pursuant to Article VII hereof and required under such Article VII
to be borne by the Master Servicer;

             (i)   to withdraw income on the Collection Account as provided in
Section 5.02(d); and

             (j)   amounts deposited into the Collection Account in respect of
late fees, assumption fees and similar fees (other than Prepayment Charges).

     The Master Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the Collection
Account pursuant to this Section 5.03. Furthermore, in the event that servicing
has been transferred to the Backup Servicer, all reimbursements in respect of
Servicer Advances and Periodic Advances shall be made on a first in, first out
priority basis (i.e. the longest outstanding Servicer Advance or Periodic
Advance will be reimbursed first).

     Section 5.04. HAZARD INSURANCE POLICIES; PROPERTY PROTECTION EXPENSES. (a)
The Master Servicer shall cause to be maintained with respect to each Mortgage
Loan a hazard insurance policy with a carrier licensed in the state in which the
Mortgaged Property is located that provides for fire and extended coverage, and
which provides for a recovery by the named insured of insurance proceeds
relating to such Mortgage Loan in an amount not less than the least of (i) the
outstanding Principal Balance of the Mortgage Loan plus the outstanding
principal balance of

                                       27
<PAGE>

any mortgage loan senior to such Mortgage Loan, but in no event shall such
amount be less than is necessary to prevent the Mortgagor from becoming a
coinsurer thereunder, (ii) the minimum amount required to compensate for loss or
damage on a replacement cost basis and (iii) the full insurable value of the
related Mortgage Property. 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 or (ii) the sum of the Principal Balance of such Mortgage
Loan and the principal balance of any mortgage loan senior to such Mortgage Loan
at the time of such 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 that they
constitute Liquidation Proceeds or Insurance Proceeds. Each hazard insurance
policy shall contain a standard mortgage clause naming the Master Servicer, its
successors and assigns, as mortgagee. The Master Servicer shall be under no
obligation to require that any Mortgagor maintain earthquake (except as provided
herein) or other additional insurance and shall be under no obligation itself to
maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.

             (b)   In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer either (i) having a General Policy
rating of A:VIII or better in Best's Key Rating Guide or (ii) approved in
writing by the Note Insurer, such approval not to be unreasonably withheld,
insuring against fire, flood 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 this Section 5.04, the Master Servicer shall
be deemed conclusively to have satisfied its obligations with respect to fire
and hazard insurance coverage under this Section 5.04, 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 the
preceding paragraph of this Section 5.04, and there shall have been a loss which
would have been covered by such policy, deposit in the Collection Account from
the Master Servicer's own funds the difference, if any, between the amount that
would have been payable under a policy complying with the preceding paragraph of
this Section 5.04 and the amount paid under such blanket policy. Upon the
request of the Indenture Trustee or the Note Insurer, the Master Servicer shall
cause to be delivered to the Indenture Trustee or the Note Insurer, a certified
true copy of such policy.

             (c)   If the Mortgage Loan at the time of origination relates to a
Mortgaged Property in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards as designated to the
Master Servicer by the Sponsor, the Master Servicer will cause to be maintained
with respect thereto a flood insurance policy in a form meeting the requirements
of the current guidelines of the Federal Insurance Administration with a
generally acceptable carrier in an amount representing coverage, and which
provides for a recovery by the Master Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan of not less than the least of
(i) the outstanding Principal Balance of the related

                                       28
<PAGE>

Mortgage Loan, plus the principal balance of the related first lien, if any,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973. The Master Servicer
shall indemnify the Trust and the Note Insurer out of the Master Servicer's own
funds for any loss to the Trust and the Note Insurer resulting from the Master
Servicer's failure to maintain the insurance required by this Section.

     Section 5.05. ASSUMPTION AND MODIFICATION AGREEMENTS. When a Mortgaged
Property has been or is about to be conveyed by the Mortgagor, the Master
Servicer shall, to the extent it has knowledge of such conveyance or prospective
conveyance, exercise its rights to accelerate the maturity of the related
Mortgage Loan under any "due-on-sale" clause contained in the related Mortgage
or Mortgage Note; PROVIDED, HOWEVER, that the Master Servicer shall not exercise
any such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Master Servicer, is not enforceable under applicable law or (ii) the Master
Servicer reasonably believes that to permit an assumption of the Mortgage Loan
would not materially and adversely affect the interest of the Noteholders or of
the Note Insurer. In such event, the Master Servicer shall enter into an
assumption and modification agreement with the Person to whom such property has
been or is about to be conveyed, pursuant to which such Person becomes liable
under the Mortgage Note and, unless prohibited by applicable law or the mortgage
documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Master Servicer is authorized to enter into
a substitution of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Mortgage Note; PROVIDED, HOWEVER, that to
the extent any such substitution of liability agreement would be delivered by
the Master Servicer outside of its usual procedures for mortgage loans held in
its own portfolio the Master Servicer shall, prior to executing and delivering
such agreement, obtain the prior written consent of the Note Insurer. The
Mortgage Loan, if assumed, shall conform in all respects to the requirements and
representations and warranties of this Agreement. The Master Servicer shall
notify the Indenture Trustee that any applicable assumption or substitution
agreement has been completed by forwarding to the Indenture Trustee the original
copy of such assumption or substitution agreement, which copy shall be added by
the Indenture Trustee to the related Indenture Trustee's Mortgage File and which
shall, for all purposes, be considered a part of such Indenture Trustee's
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Master Servicer shall be responsible for
promptly recording any such assumption or substitution agreements. In connection
with any such assumption or substitution agreement, the required monthly payment
on the related Mortgage Loan shall not be changed but shall remain as in effect
immediately prior to the assumption or substitution, the stated maturity or
outstanding Principal Balance of such Mortgage Loan shall not be changed, the
Mortgage Interest Rate shall not be changed nor shall any required monthly
payments of principal or interest be deferred or forgiven. Any fee collected by
the Master Servicer for consenting to any such conveyance or entering into an
assumption or substitution agreement shall be retained by or paid to the Master
Servicer as additional servicing compensation.

     Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law

                                       29
<PAGE>

or any assumption which the Master Servicer may be restricted by law from
preventing, for any reason whatsoever.

     Section 5.06. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The Master
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Mortgaged Properties relating to defaulted Mortgage Loans
as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Sponsor has not purchased pursuant to Section
5.15, unless the Master Servicer reasonably believes that Net Liquidation
Proceeds with respect to such Mortgage Loan would not be increased as a result
of such foreclosure or other action, in which case, such Mortgage Loan will be
charged-off and will become a Liquidated Mortgage Loan. The Master Servicer
shall have no obligation to purchase any Mortgaged Property at any foreclosure
sale. In connection with such foreclosure or other conversion, the Master
Servicer shall exercise foreclosure procedures with the same degree of care and
skill in their exercise or use, as it would ordinarily exercise or use under the
circumstances in the conduct of their own affairs. Any amounts including
Liquidation Expenses, advanced by the Master Servicer in connection with such
foreclosure or other action shall constitute Servicing Advances.

     Pursuant to its efforts to sell any REO Property, the Master Servicer
either itself or through an agent selected by the Master Servicer shall manage,
conserve, protect and operate such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the Master
Servicer, rent the same, or any part thereof, as the Master Servicer deems to be
in the best interest of the Trust and Note Insurer for the period prior to the
sale of such REO Property. The net income generated from the REO Property and
the proceeds from a sale of any REO Property shall be deposited in the
Collection Account.

             (b)   If the Master Servicer has reason to believe that a Mortgaged
Property which the Master Servicer is contemplating acquiring in foreclosure or
by deed in lieu of foreclosure contains environmental or hazardous waste risks
known to the Master Servicer, the Master Servicer shall notify the Backup
Servicer, the Indenture Trustee and the Note Insurer and obtain the consent of
the Note Insurer prior to acquiring the Mortgaged Property. The Master Servicer
shall not institute foreclosure actions with respect to such a property if it
reasonably believes that such action would not be consistent with the Accepted
Servicing Practices, and in no event shall the Master Servicer be required to
manage, operate or take any other action with respect thereto which the Master
Servicer in good faith believes will result in "clean-up" or other liability
under applicable law, unless the Master Servicer receives an indemnity
acceptable to it in its sole discretion.

             (c)   The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts if any it expects to recover from or
on account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a Liquidated Mortgage Loan.

             (d)   Net Foreclosure Profits, if any, shall be paid directly to
the Sponsor.

                                       30
<PAGE>

             (e)   With respect to its obligations under this Section 5.06, the
Master Servicer shall take all such actions as it reasonably believes are
consistent with Accepted Servicing Practices.

     Section 5.07. INDENTURE TRUSTEE TO COOPERATE. (a) Upon the payment in full
of any Mortgage Loan or the receipt by the Master Servicer of a notification
that payment in full will be escrowed in a manner customary for such purposes,
the Master Servicer shall deliver to the Indenture Trustee two copies of a
Request for Release. Upon receipt of such copies of the Request for Release, the
Indenture Trustee shall promptly release the related Indenture Trustee's
Mortgage File, in trust to (i) the Master Servicer (ii) an escrow agent or (iii)
any employee, agent or attorney of the Indenture Trustee, in each case pending
its release by the Master Servicer, such escrow agent or such employee, agent or
attorney of the Indenture Trustee, as the case may be. Upon any such payment in
full, or the receipt of such notification that such funds have been placed in
escrow, the Master Servicer is authorized to give, as attorney-in-fact for the
Indenture Trustee and the mortgagee under the Mortgage which secured the
Mortgage Note, an instrument of satisfaction (or assignment of Mortgage without
recourse) regarding the Mortgaged Property relating to such Mortgage, which
instrument of satisfaction or assignment, as the case may be, shall be delivered
to the Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection with
such instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Collection Account.

             (b)   (i) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Indenture Trustee shall (except in the case of the payment
or liquidation pursuant to which the related Indenture Trustee's Mortgage File
is released to an escrow agent or an employee, agent or attorney of the
Indenture Trustee), upon request of the Master Servicer and delivery to the
Indenture Trustee of two copies of a Request for Release, release the related
Indenture Trustee's Mortgage File to the Master Servicer and shall execute such
documents as shall be necessary to the prosecution of any such proceedings,
including, without limitation, an assignment without recourse of the related
Mortgage to the Master Servicer. The Indenture Trustee shall complete in the
name of the Indenture Trustee any endorsement in blank on any Mortgage Note
prior to releasing such Mortgage Note to the Master Servicer. Such receipt shall
obligate the Master Servicer to return the Indenture Trustee's Mortgage File to
the Indenture Trustee when the need therefor by the Master Servicer no longer
exists unless the Mortgage Loan shall be liquidated, in which case, the Master
Servicer shall deliver 2 copies of a Request for Release indicating such loan
has been paid in full. Upon receipt, the Indenture Trustee will acknowledge by
signing and returning one copy to the Master Servicer.

                   (ii)   Each Request for Release may be delivered to the
     Indenture Trustee (x) via mail or courier, (y) via facsimile or (z) by such
     other means, including, without limitation, electronic or computer readable
     medium, as the Master Servicer and the Indenture Trustee shall mutually
     agree. The Indenture Trustee shall promptly release the related Indenture
     Trustee's Mortgage File(s) within three (3) Business Days of receipt of 2
     copies of a properly completed Request for Release pursuant to clauses (x),
     (y) or (z)

                                       31
<PAGE>

     above or such shorter period as may be agreed upon by the Master Servicer
     and the Indenture Trustee. Receipt of a Request for Release pursuant to
     clauses (x), (y) or (z) above shall be authorization to the Indenture
     Trustee to release such Indenture Trustee's Mortgage Files, provided the
     Indenture Trustee has determined that such Request for Release has been
     executed, with respect to clauses (x) or (y) above, or approved, with
     respect to clause (z) above, by a Servicing Officer of the Master Servicer.
     If the Indenture Trustee is unable to release the Indenture Trustee's
     Mortgage Files within the time frames previously specified, the Indenture
     Trustee shall immediately notify the Master Servicer, indicating the reason
     for such delay, but in no event shall such notification be later than five
     Business Days after receipt of a Request for Release. If the Master
     Servicer, is required to pay penalties or damages due solely to the
     Indenture Trustee's negligent failure to release the related Indenture
     Trustee's Mortgage File or the Indenture Trustee's negligent failure to
     execute and release documents in a timely manner, the Indenture Trustee
     shall be liable for such penalties or damages.

             (c)   No costs associated with the procedures described in this
Section 5.07 shall be an expense of the Trust.

     Section 5.08. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY MASTER
SERVICER. The Master Servicer shall be entitled to receive and retain, out of
collections on the Mortgage Loans for each Due Period, as servicing compensation
for such Due Period, an amount (the "SERVICING FEE") equal to the product of
one-twelfth of the Servicing Fee Rate and the aggregate Stated Principal Balance
of the Mortgage Loans in each Loan Group as of the beginning of such Due Period.
Additional servicing compensation in the form of assumption fees, late payment
charges or extension and other administrative charges (other than Prepayment
Charges) shall be retained by the Master Servicer. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder (including payment of the Indenture Trustee Fee to the extent that
monies in the Collection Account are insufficient therefor, as provided in
Section 6.16 of the Indenture, and all other fees and expenses not expressly
stated hereunder to be payable by or from another source) and shall not be
entitled to reimbursement therefor except as specifically provided herein.

     The Backup Servicer shall be entitled to receive, and the Master Servicer
shall pay, out of collections on the Mortgage Loans for each Due Period, as
servicing compensation for such Due Period, an amount (the "Backup Servicing
Fee") equal to the product of one-twelfth of the Backup Servicing Fee Rate and
the aggregate Stated Principal Balance of the Mortgage Loans in each Loan Group
as of the beginning of such Due Period. The Backup Servicer will also be
entitled to an upfront fee of $7,500.00.

     Section 5.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Master Servicer will
deliver to the Backup Servicer, the Trust, the Indenture Trustee, the Rating
Agencies, the Note Insurer and, the Sponsor on or before April 30 of each year,
beginning April 30, 2003, an Officer's Certificate of the Master Servicer
stating that (a) a review of the activities of the Master Servicer during the
preceding calendar year and of its performance under this Agreement has been
made under such officer's supervision and (b) 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 and the nature and status thereof.

                                       32
<PAGE>

     Section 5.10. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT. On
or before April 30 of each year, beginning April 30, 2003, the Master Servicer
at its expense shall cause a firm of independent public accountants that is a
member of the American Institute of Certified Public Accountants (who may also
render other services to the Master Servicer) to furnish a report to the Backup
Servicer, the Trust, the Indenture Trustee, the Rating Agencies, the Note
Insurer and the Sponsor to the effect that such firm has examined certain
documents and records relating to the servicing of mortgage loans under
servicing agreements (including this Agreement) substantially similar to this
Agreement, and that such examination, which has been conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
the Audit Guide for Audits of HUD Approved Nonsupervised Mortgagees (to the
extent that the procedures in such audit guide are applicable to the servicing
obligations set forth in such agreements), has disclosed no items of
noncompliance with the provisions of this Agreement which, in the opinion of
such firm, are material, except for such items of noncompliance as shall be set
forth in such report.

     Section 5.11. ACCESS TO CERTAIN DOCUMENTATION. The Master Servicer shall
provide to the Backup Servicer, the Indenture Trustee, the Note Insurer, the
FDIC and the supervisory agents and examiners (as required in the latter case by
applicable State and federal regulations) of each of the foregoing access to the
documentation regarding the Mortgage Loans, such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Master Servicer designated by it.

     Upon any change in the format of the computer tape maintained by the Master
Servicer in respect of the Mortgage Loans, the Master Servicer shall deliver a
copy of such computer tape to the Indenture Trustee and the Backup Servicer and
in addition shall provide a copy of such computer tape to the Indenture Trustee,
the Backup Servicer and the Note Insurer at such other times as the Indenture
Trustee or the Note Insurer may reasonably request.

     The Master Servicer shall keep confidential (including from affiliates
thereof) information concerning the Mortgage Loans, except as required by law.

     Section 5.12. MAINTENANCE OF FIDELITY BOND. The Master Servicer and the
Backup Servicer shall each, during the term of its service as Master Servicer
and Backup Servicer, respectively, maintain in force a fidelity bond and errors
and omissions insurance in respect of their respective officers, employees or
agents. Such bond and insurance shall comply with the requirements from time to
time of Fannie Mae for Persons performing servicing for mortgage loans purchased
by such association.

     Section 5.13. SUBSERVICING AGREEMENTS BETWEEN THE MASTER SERVICER AND
SUBSERVICER AND SUBSERVICERS. (a) 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. The Master Servicer shall give notice to the Backup Servicer, the
Note Insurer and the Indenture Trustee of the appointment of any subservicer and
shall furnish to the Backup Servicer, the Note Insurer and the Indenture Trustee
a copy of the subservicing agreement. The Master Servicer shall give notice to
each Rating Agency of the appointment of any subservicer. No such appointment of
a subservicer shall be effective without the consent of the Note Insurer.

                                       33
<PAGE>

For purposes of this Agreement, the Master Servicer shall be deemed to have
received payments on Mortgage Loans when any subservicer has received such
payments. Any such subservicing agreement shall be consistent with and not
violate the provisions of this Agreement.

             (b)   The Master Servicer may, with the consent of the Note
Insurer, terminate any subservicing agreement in accordance with the terms and
conditions of such subservicing agreement and thereafter directly service the
related Mortgage Loans itself or enter into a subservicing agreement with a
successor subservicer that qualifies under Subsection (a) of this Section 5.13.
The Master Servicer shall give notice to each Rating Agency of the termination
of any subservicer and the appointment of any successor subservicer.

             (c)   The Master Servicer shall not be relieved of its obligations
under this Agreement notwithstanding any subservicing agreement or any of the
provisions of this Agreement relating to agreements or 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 it
alone were servicing and administering the Mortgage Loans. The Master Servicer
shall be entitled to enter into any agreement with a subservicer for
indemnification of the Master Servicer by such subservicer and nothing contained
in such subservicing agreement shall be deemed to limit or modify this
Agreement. The Trust shall not indemnify the Master Servicer for any losses due
to the Master Servicer's negligence.

             (d)   Any subservicing agreement and any other transactions or
services relating to the Mortgage Loans involving a subservicer shall be deemed
to be between the subservicer and the Master Servicer alone and the Backup
Servicer, the Note Insurer, the Indenture Trustee and the Noteholders shall not
be deemed parties thereto and shall have no claims, rights, obligations, duties
or liabilities with respect to any Subservicer except as set forth in Subsection
(e) of this Section 5.13 and the related Subservicing Agreement.

             (e)   Notwithstanding any contrary provision contained herein, in
connection with the assumption of the responsibilities, duties and liabilities
and of the authority, power and rights of the Master Servicer hereunder by the
Backup Servicer, the Indenture Trustee or any other successor master servicer
pursuant to Section 7.02, it is understood and agreed that the Master Servicer's
rights and obligations under any subservicing agreement then in force between
the Master Servicer and a subservicer may be assumed or terminated (without
cost) by the Backup Servicer, the Indenture Trustee or any other successor
master servicer at its option as successor to the Master Servicer.

     The Master Servicer shall, upon request of the Backup Servicer, the
Indenture Trustee or the Note Insurer, but at the expense of the Master
Servicer, deliver to the assuming party documents and records relating to each
subservicing agreement and an accounting of amounts collected and held by it and
otherwise use its best reasonable efforts to effect the orderly and efficient
transfer of the subservicing agreements to the assuming party, without the
payment of any fee by the Backup Servicer, the Indenture Trustee, any
Noteholders or the Note Insurer, notwithstanding any contrary provision in any
subservicing agreement.

     Section 5.14. REPORTS TO THE INDENTURE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS. Not later than twenty-five (25) days after each Payment Date, the
Master Servicer shall provide to the

                                       34
<PAGE>

Backup Servicer and the Note Insurer a statement, certified by a Servicing
Officer, setting forth the status of the Collection Account as of the close of
business on the last day of the Due Period preceding such Payment Date, stating
that all payments required by this Agreement to be made by the Master Servicer
on behalf of the Indenture Trustee have been made (or if any required payment
has not been made by the Master Servicer, specifying the nature and status
thereof) and showing, for the period covered by such statement, the aggregate of
deposits into and withdrawals from the Collection Account and the aggregate of
deposits into each Payment Account as specified in Section 6.01. Such statement
shall also state the aggregate Stated Principal Balance and the aggregate unpaid
principal balance of all the Mortgage Loans as of the close of business on the
last day of the month preceding the month in which such Payment Date occurs.

     Section 5.15. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS. (a) The
Sponsor, in its sole discretion, shall have the right to elect (by written
notice sent to the Master Servicer, the Indenture Trustee and the Note Insurer),
but shall not be obligated, to purchase for its own account from the Trust any
Mortgage Loan which is ninety (90) days or more Delinquent in the manner at the
Loan Repurchase Price (except that the amount described in the definition of
Loan Repurchase Price shall in no case be net of the Servicing Fee and the
Backup Servicing Fee). The purchase price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account and the Indenture
Trustee, upon the Indenture Trustee's receipt of notice by the Master Servicer
of such deposit, shall release or cause to be released to the purchaser of such
Mortgage Loan the related Indenture Trustee's Mortgage File and shall execute
and deliver such instruments of transfer or assignment prepared by the purchaser
of such Mortgage Loan, in each case without recourse, as shall be necessary to
vest in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant
hereto and the purchaser of such Mortgage Loan shall succeed to all the
Indenture Trustee's right, title and interest in and to such Mortgage Loan and
all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Mortgage Loan
shall thereupon own such Mortgage Loan, and all security and documents, free of
any further obligation to the Indenture Trustee, the Note Insurer or the
Noteholders with respect thereto. The purchaser of such Mortgage Loan shall give
written notice to the Note Insurer of the means by which any Mortgage Loan
purchased pursuant to this Section 5.15 is ultimately disposed of and any other
information regarding any such Mortgage Loan reasonably requested by the Note
Insurer.

             (b)   After the Sponsor or an Affiliate of the Sponsor has
repurchased any Mortgage Loans which are 90 days or more Delinquent in an
aggregate amount equal to 1% of the Maximum Collateral Amount, then
notwithstanding the foregoing, unless the Note Insurer consents, the Sponsor or
an Affiliate of the Sponsor may only exercise its option pursuant to this
Section 5.15 with respect to the Mortgage Loan or Mortgage Loans (including REO
Mortgage Loans) that have been Delinquent for the longest period at the time of
such repurchase. Any request by the Sponsor or an Affiliate of the Sponsor to
the Note Insurer for consent to repurchase Mortgage Loans that are not the most
Delinquent shall be accompanied by a description of the Mortgage Loans that have
been Delinquent longer than the Mortgage Loan or Mortgage Loans the Sponsor or
such Affiliate proposes to repurchase. If the Note Insurer fails to respond to
such request within ten (10) Business Days after receipt thereof, the Sponsor or
such Affiliate may repurchase the Mortgage Loan or Mortgage Loans proposed to be
repurchased

                                       35
<PAGE>

without the consent of, or any further action by, the Note Insurer. Notice to
the Note Insurer shall be delivered in accordance with the terms of the
Insurance Agreement.

     Section 5.16. REPORTS TO BE PROVIDED BY THE MASTER SERVICER AND THE BACKUP
SERVICER. (a) By 3:00 p.m. eastern time on the second Business Day following the
fifteenth (15th) day of each month (the "Servicer Reporting Date"), the Master
Servicer shall deliver to the Indenture Trustee, the Backup Servicer, the
Underwriter, Intex, Bloomberg and the Note Insurer a Servicer Remittance Report
for the related Servicer Payment Date setting forth the following information
with respect to all Mortgage Loans as well as a break out as to each Loan Group
as of the close of business on the last Business Day of the prior calendar month
(except as otherwise provided in clause (v) below):

                   (i)    the total number of Mortgage Loans and the Aggregate
     Principal Balances thereof, together with the number, Aggregate Principal
     Balances of such Mortgage Loans and the percentage (based on the Aggregate
     Principal Balances of the Mortgage Loans) of the Aggregate Principal
     Balances of such Mortgage Loans to the Aggregate Principal Balance of all
     Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days Delinquent and (C)
     90 or more days Delinquent;

                   (ii)   the number, Aggregate Principal Balances of all
     Mortgage Loans and percentage (based on the Aggregate Principal Balances of
     the Mortgage Loans) of the Aggregate Principal Balances of such Mortgage
     Loans to the Aggregate Principal Balance of all Mortgage Loans in
     foreclosure proceedings and the number, Aggregate Principal Balances of all
     Mortgage Loans and percentage (based on the Aggregate Principal Balances of
     the Mortgage Loans) of any such Mortgage Loans also included in any of the
     statistics described in the foregoing clause (i);

                   (iii)  the number, Aggregate Principal Balances of all
     Mortgage Loans and percentage (based on the Aggregate Principal Balances of
     the Mortgage Loans) of the Aggregate Principal Balances of such Mortgage
     Loans to the Aggregate Principal Balance of all Mortgage Loans relating to
     Mortgagors in bankruptcy proceedings and the number, Aggregate Principal
     Balances of all Mortgage Loans and percentage (based on the Aggregate
     Principal Balances of the Mortgage Loans) of any such Mortgage Loans also
     included in any of the statistics described in the foregoing clause (i);

                   (iv)   the number, Aggregate Principal Balances of all
     Mortgage Loans and percentage (based on the Aggregate Principal Balances of
     the Mortgage Loans) of the Aggregate Principal Balances of such Mortgage
     Loans to the Aggregate Principal Balance of all Mortgage Loans relating to
     REO Properties and the number, Aggregate Principal Balances of all Mortgage
     Loans and percentage (based on the Aggregate Principal Balances of the
     Mortgage Loans) of any such Mortgage Loans also included in any of the
     statistics described in the foregoing clause (i);

                   (v)    the weighted average Mortgage Interest Rate for the
     Mortgage Loans in Loan Group 1 and Loan Group 2, in each case, as of the
     Due Date occurring in the Due Period related to such Payment Date;

                                       36
<PAGE>

                   (vi)   the weighted average remaining term to stated maturity
     of all Mortgage Loans;

                   (vii)  the book value of any REO Property;

                   (viii) the Cumulative Loan Losses during the related
     Collection Period; and

                   (ix)   such other loan level information as either (a) the
     Indenture Trustee may reasonably request to enable it to prepare the
     Indenture Trustee's Remittance Report or (b) the Note Insurer may
     reasonably request.

             (b)   [Reserved].

             (c)   In addition to the other obligations of the Backup Servicer
     under this Agreement, the Backup Servicer shall establish and maintain a
     system of transaction accounting in regard to the Mortgage Loans
     substantially similar to that maintained by the Master Servicer and post to
     such system all information relating to the Mortgage Loans obtained by the
     Backup Servicer pursuant to Section 5.16 and 5.18, to enable the Backup
     Servicer to perform the obligations of a successor master servicer
     immediately upon any termination or resignation of the Master Servicer.

     Section 5.17. [Reserved].

     Section 5.18. PERIODIC ADVANCES. If, on any Servicer Payment Date, the
Master Servicer determines that any Monthly Payments due during the related Due
Period have not been received as of the end of the related Due Period, the
Master Servicer shall determine the amount of any Periodic Advance required to
be made with respect to the related Payment Date. The Master Servicer shall
deliver, one (1) Business Day after such Servicer Payment Date, a magnetic tape,
diskette (or such other electronic medium used by the Master Servicer for such
purpose) to the Backup Servicer indicating the payment status of each Mortgage
Loan as of the date which is two Business Days prior to such Servicer Payment
Date. The Master Servicer shall include in the amount to be deposited in the
related Payment Account on such Servicer Payment Date an amount equal to the
Periodic Advance, if any, which deposit may be made in whole or in part from
funds in the Collection Account being held for future payment or withdrawal on
or in connection with Payment Dates in subsequent months, other than any such
amounts which are voluntary Principal Prepayments in full. Any funds being held
for future payment to Noteholders and so used shall be replaced by the Master
Servicer from its own funds by deposit in the Collection Account on or before
the Business Day preceding any future Servicer Payment Date to the extent that
funds in the Collection Account on such Servicer Payment Date shall be less than
the Servicer Remittance Amount for such Payment Date.

     The Master Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such Periodic
Advance shall be deemed to have been made, such determination being conclusive
for purposes of withdrawals from the Collection Account pursuant to Section 5.03
hereof.

                                       37
<PAGE>

     Section 5.19. INDEMNIFICATION; THIRD PARTY CLAIMS. The Master Servicer
agrees to indemnify and to hold each of the Trust, the Owner Trustee, the
Sponsor, the Backup Servicer, the Indenture Trustee, the Note Insurer and each
Noteholder harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses (including attorneys' fees and expenses) that the Trust, the Owner
Trustee, the Sponsor, the Backup Servicer, the Indenture Trustee, the Note
Insurer and any Noteholder (or any director, officer, employee or agent of the
foregoing) may sustain in any way related to the failure of the Master Servicer
to perform its duties and service the Mortgage Loans in compliance with the
terns of this Agreement and the other Basic Documents. Each indemnified party
and the Master Servicer shall immediately notify the other indemnified parties
if a claim is made by a third party with respect to this Agreement and the other
Basic Documents and the Master Servicer 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 Trust, the Owner Trustee, the Sponsor, the Backup
Servicer, the Master Servicer, the Indenture Trustee, the Note Insurer and/or a
Noteholder (or any director, officer, employee or agent of the foregoing) in
respect of such claim. The obligations of the Master Servicer under this Section
5.19 arising prior to any resignation or termination of the Master Servicer
hereunder shall survive the resignation or termination of the Master Servicer or
the termination of this Agreement.

     Section 5.20. MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER OR
CONSOLIDATION OF THE MASTER SERVICER AND BACKUP SERVICER. (a) Each of the Master
Servicer and the Backup Servicer will keep in full effect its existence, rights
and franchises as a corporation, will obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction necessary to protect
the validity and enforceability of this Agreement or any of the Mortgage Loans
and to perform its duties under this Agreement and will otherwise operate its
business so as to cause the representations and warranties under Section 3.01
hereof to be true and correct at all times under this Agreement.

             (b)   Any corporation into which the Master Servicer or the Backup
Servicer may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer or the Backup Servicer shall be a party, or any corporation
succeeding to all or substantially all of the business of the Master Servicer or
the Backup Servicer, shall be the successor of the Master Servicer or the Backup
Servicer, as applicable, hereunder, only with the consent of the Note Insurer
but without the execution or filing of any paper or any further act on the part
of any of the parties hereto provided that, in the case of the Master Servicer,
such corporation meets the qualifications set forth in Section 7.02(b). The
Master Servicer or the Backup Servicer, as applicable, shall send notice of any
such merger or consolidation to the Owner Trustee, the Indenture Trustee, the
Note Insurer and the Master Servicer or the Backup Servicer, as applicable.

     Section 5.21. ASSIGNMENT OF AGREEMENT BY MASTER SERVICER AND BACKUP
SERVICER; MASTER SERVICER AND BACKUP SERVICER NOT TO RESIGN. Neither the Master
Servicer nor the Backup Servicer shall assign this Agreement nor resign from the
obligations and duties hereby imposed on it except with the prior consent of the
Note Insurer, or upon the determination that the Master Servicer's or Backup
Servicer's duties hereunder are no longer permissible under applicable law and
that such incapacity cannot be cured by the Master Servicer or the Backup
Servicer, as

                                       38
<PAGE>

applicable, without incurring, in the reasonable judgment of the Note Insurer,
unreasonable expense. Any such determination that the Master Servicer's or the
Backup Servicer's duties hereunder are no longer permissible under applicable
law permitting the resignation of the Master Servicer or the Backup Servicer, as
applicable, shall be evidenced by a written Opinion of Counsel (who may be
counsel for the Master Servicer or the Backup Servicer) to such effect delivered
to the Indenture Trustee, the Trust, the Sponsor, the Note Insurer and the
Backup Servicer or the Master Servicer, as applicable. No such resignation of
the Master Servicer shall become effective until the Backup Servicer or a
successor master servicer appointed in accordance with the terms of this
Agreement has assumed the Master Servicer's responsibilities and obligations
hereunder in accordance with Section 7.02. The Master Servicer or the Backup
Servicer, as applicable, shall provide the Indenture Trustee, the Rating
Agencies and the Note Insurer with 30 days' prior written notice of its
intention to resign pursuant to this Section 5.21.

     Section 5.22. PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION
ADDITIONAL INFORMATION. Within 15 days after each Payment Date, the Indenture
Trustee shall, in accordance with industry standards, file with the Commission
via the Electronic Data Gathering and Retrieval System (EDGAR), a Form 8-K with
a copy of the statement to the Certificateholders for such Distribution Date as
an exhibit thereto. Prior to July 31, 2003, the Indenture Trustee shall, in
accordance with industry standards, file a Form 15 Suspension Notification with
respect to the Trust, if applicable. Prior to September 15, 2003, the Indenture
Trustee shall file a Form 10-K, in substance conforming to industry standards,
with respect to the Trust. The Sponsor hereby grants to the Indenture Trustee a
limited power of attorney to execute and file each such document on behalf of
the Trust. Such power of attorney shall continue until either the earlier of (i)
receipt by the Indenture Trustee from the Sponsor of written termination of such
power of attorney and (ii) the termination of the Trust. The Master Servicer and
the Sponsor each agree to promptly furnish to the Indenture Trustee, from time
to time upon request, such further information, reports, and financial
statements within its control related to this Agreement and the Mortgage Loans
as the Indenture Trustee reasonably deems appropriate to prepare and file all
necessary reports with the Commission. The Indenture Trustee shall have no
responsibility to file any items other than those specified in this section.

     Section 5.23. ADMINISTRATIVE DUTIES. (a) DUTIES WITH RESPECT TO THE BASIC
DOCUMENTS. The Master Servicer shall perform all its duties and the duties of
the Trust under the Basic Documents. In addition, the Master Servicer shall
consult with the Owner Trustee as the Master Servicer deems appropriate
regarding the duties of the Trust under the Basic Documents. The Master Servicer
shall monitor the performance of the Trust and shall advise the Owner Trustee
when action is necessary to comply with the Trust's duties under the Basic
Documents. The Master Servicer shall prepare for execution by the Trust or shall
cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Trust to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Trust to take pursuant to the Basic Documents.

             (b)   DUTIES WITH RESPECT TO THE TRUST. In addition to the duties
of the Master Servicer set forth in this Agreement or any of the Basic
Documents, the Master Servicer shall perform such calculations and shall prepare
for execution by the Trust or the Owner Trustee or shall cause the preparation
by other appropriate Persons of all such documents, reports, filings,

                                       39
<PAGE>

instruments, certificates and opinions as it shall be the duty of the Trust or
the Owner Trustee to prepare, file or deliver pursuant to this Agreement or any
of the Basic Documents or under state and federal tax and securities laws shall
take all appropriate action that it is the duty of the Trust to take pursuant to
this Agreement or any of the Basic Documents. In accordance with the directions
of the Trust or the Owner Trustee, the Master Servicer shall administer,
perform, or supervise the performance of such other activities in connection
with the Basic Documents as are not covered by any of the foregoing provisions
and as are expressly requested by the Trust or the Owner Trustee and are
reasonably within the capability of the Master Servicer.

     In carrying out the foregoing duties under this Agreement, the Master
Servicer may enter into transactions with or otherwise deal with any of its
Affiliates; provided, however, that the terms of any such transactions or
dealings shall be in accordance with any directions received from the Trust and
shall be, in the Master Servicer's opinion, no less favorable to the Trust in
any material respect.

             (c)   ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Master Servicer shall furnish to the Owner Trustee from time to time such
additional information regarding the Trust or the Basic Documents as the Owner
Trustee shall reasonably request.

                                   ARTICLE VI

                              APPLICATION OF FUNDS

     Section 6.01. DEPOSITS TO THE PAYMENT ACCOUNT. By 12:00 noon (Eastern Time)
on each Servicer Payment Date, the Master Servicer shall cause to be deposited
in the related Payment Account, from funds on deposit in the Collection Account,
an amount equal to the Servicer Remittance Amount with respect to the related
Payment Date, minus any portion thereof payable to the Master Servicer or the
Backup Servicer pursuant to Section 5.03.

     Section 6.02. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Indenture Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Indenture Trustee by the Master Servicer and (b)
Insured Amounts. The Indenture Trustee shall hold all such money and property
received by it, as part of the Trust Estate and shall apply it as provided in
the Indenture.

     Section 6.03. APPLICATION OF PRINCIPAL AND INTEREST. In the event that Net
Liquidation Proceeds on a Liquidated Mortgage Loan are less than the Principal
Balance of the related Mortgage Loan plus accrued interest thereon, or any
Mortgagor makes a partial payment of any Monthly Payment due on a Mortgage Loan,
such Net Liquidation Proceeds or partial payment shall be applied to payment of
the related Mortgage Note as provided therein, and if not so provided, first to
interest accrued at the Mortgage Interest Rate and then to principal.

     Section 6.04. [Reserved].

     Section 6.05. COMPENSATING INTEREST. Not later than the Servicer Payment
Date, the Master Servicer shall remit to the Indenture Trustee (without right to
reimbursement therefor) for

                                       40
<PAGE>

deposit into the related Payment Account, an amount equal to, for all of the
Mortgage Loans, the lesser of (a) the Prepayment Interest Shortfalls for all of
the Mortgage Loans for the related Payment Date resulting from Principal
Prepayments in full during the related Prepayment Period and (b) its aggregate
Servicing Fee with respect to all of the Mortgage Loans for the related Due
Period (the "Compensating Interest").

     Section 6.06. EFFECT OF PAYMENTS BY THE NOTE INSURER; SUBROGATION. Anything
herein to the contrary notwithstanding, any payment with respect to principal of
or interest on the Notes which is made with moneys received pursuant to the
terms of the Note Insurance Policy shall not be considered payment of the Notes
from the Trust Estate. The Sponsor, the Master Servicer, the Trust and the
Indenture Trustee acknowledge and agree, that without the need for any further
action on the part of the Note Insurer, the Sponsor, the Master Servicer, the
Trust, the Indenture Trustee or the Note Registrar (a) to the extent the Note
Insurer makes payments, directly or indirectly, on account of principal of or
interest on the Notes to the Holders of such Notes, the Note Insurer will be
fully subrogated to, and each Noteholder, the Master Servicer, the Sponsor, the
Trust and the Indenture Trustee hereby delegate and assign to the Note Insurer,
to the fullest extent permitted by law, the rights of such Holders to receive
such principal and interest from the Trust Estate, including, without
limitation, any amounts due to the Noteholders in respect of securities law
violations arising from the offer and sale of the Notes, and (b) the Note
Insurer shall be paid such amounts from the sources and in the manner provided
herein for the payment of such amounts and as provided in the Insurance
Agreement. The Indenture Trustee and the Master Servicer shall cooperate in all
respects with any reasonable request by the Note Insurer for action to preserve
or enforce the Note Insurer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.

                                  ARTICLE VII

                                SERVICER DEFAULT

     Section 7.01. SERVICER EVENTS OF DEFAULT. (a) I. The following events shall
each constitute a "Servicer Event of Default" hereunder:

                   (i)    any failure by the Master Servicer to remit to the
     Indenture Trustee any payment required to be made by the Master Servicer
     under the terms of this Agreement (other than Servicing Advances covered by
     clause (ii) below), which continues unremedied for one (1) Business Day
     after the date upon which written notice of such failure, requiring the
     same to be remedied, shall have been given to the Master Servicer and the
     Note Insurer by the Indenture Trustee or to the Master Servicer and the
     Indenture Trustee by the Note Insurer or Noteholders affected thereby
     evidencing Percentage Interests of at least 25%;

                   (ii)   the failure by the Master Servicer to make any
     required Servicing Advance, which failure continues unremedied for a period
     of thirty (30) days after the date on which written notice of such failure,
     requiring the same to be remedied, shall have been given to the Master
     Servicer by the Indenture Trustee or to the Master Servicer and the
     Indenture Trustee by the Note Insurer or Noteholders affected thereby
     evidencing Percentage Interests of at least 25%;

                                       41
<PAGE>

                   (iii)  any failure on the part of the Master Servicer duly to
     observe or perform in any material respect any other of the covenants or
     agreements on the part of the Master Servicer contained in this Agreement,
     or the failure of any representation and warranty made pursuant to Section
     3.01(a) hereof to be true and correct which continues unremedied for a
     period of thirty (30) days after the date on which written notice of such
     failure, requiring the same to be remedied, shall have been given to the
     Master Servicer by the Indenture Trustee or to the Master Servicer and the
     Indenture Trustee by the Note Insurer or Noteholders affected thereby
     evidencing Percentage Interests of at least 25%;

                   (iv)   a decree or order of a court or agency or supervisory
     authority having jurisdiction in an involuntary case under any present or
     future federal or state bankruptcy, insolvency or similar law or for the
     appointment of a conservator or receiver or liquidation in any insolvency,
     readjustment of debt, marshalling of assets and liabilities or similar
     proceedings, or for the winding-up or liquidation of its affairs, shall
     have been entered against the Master Servicer and such decree or order
     shall have remained in force, undischarged or unstayed for a period of
     ninety (90) days;

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

                   (vi)   the Master Servicer shall admit in writing its
     inability generally to pay its debts 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;

                   (vii)  the Note Insurer shall notify the Indenture Trustee of
     any "event of default" under the Insurance Agreement;

                   (viii) if on any Payment Date the Rolling Six Month
     Delinquency Rate exceeds 14.0%;

                   (ix)   if on any Payment Date, the Twelve Month Loss Amount
     exceeds 2.50% of the Aggregate Principal Balance of the Mortgage Loans, as
     of the close of business on the first day of the twelfth preceding calendar
     month;

                   (x)    if the total stockholders' equity of the Master
     Servicer, as determined by the Master Servicer's independent accountants in
     accordance with generally accepted accounting principles, shall be less
     than the sum of (1) $30 million and (2) 75% of the net proceeds to the
     Master Servicer of any initial public offering of its common stock;

                   (xi)   if the total on- or off-balance sheet financing
     available to the Master Servicer shall be less than $400 million;

                   (xii)  the occurrence of an Event of Default under the
     Indenture; or

                                       42
<PAGE>

             II.   The following events shall each constitute a "Backup Servicer
Event of Default" hereunder:

                   (i)    any failure on the part of the Backup Servicer duly to
     observe or perform in any material respect any other of the covenants or
     agreements on the part of the Backup Servicer contained in this Agreement,
     or the failure of any representation and warranty made pursuant to Section
     3.03(a) hereof to be true and correct which continues unremedied for a
     period of thirty (30) days after the date on which written notice of such
     failure, requiring the same to be remedied, shall have been given to the
     Backup Servicer by the Indenture Trustee or to the Backup Servicer and the
     Indenture Trustee by the Note Insurer or Noteholders affected thereby
     evidencing Percentage Interests of at least 25%;

                   (ii)   a decree or order of a court or agency or supervisory
     authority having jurisdiction in an involuntary case under any present or
     future federal or state bankruptcy, insolvency or similar law or for the
     appointment of a conservator or receiver or liquidation in any insolvency,
     readjustment of debt, marshalling of assets and liabilities or similar
     proceedings, or for the winding-up or liquidation of its affairs, shall
     have been entered against the Backup Servicer and such decree or order
     shall have remained in force, undischarged or unstayed for a period of
     ninety (90) days;

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

                   (iv)   the Backup Servicer shall admit in writing its
     inability generally to pay its debts 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.

     So long as a Servicer Event of Default shall have occurred and not have
been remedied: (x) with respect solely to Section 7.01(a)(I)(i), if such payment
is in respect of Periodic Advances or Compensating Interest owing by the Master
Servicer and such payment is not made by 12:00 noon New York time on the second
Business Day prior to the applicable Payment Date, the Indenture Trustee, upon
receipt of written notice or discovery by a Responsible Officer of the Indenture
Trustee of such failure, shall give immediate telephonic and facsimile notice of
such failure to a Servicing Officer of the Master Servicer and the Backup
Servicer and to the Note Insurer, and the Indenture Trustee may, with the
consent of the Note Insurer, and shall, at the direction of the Note Insurer,
terminate all of the rights and obligations of the Master Servicer under this
Agreement, except for the Master Servicer's indemnification obligation under
Section 5.19, and the Backup Servicer, the Indenture Trustee or a successor
master servicer appointed in accordance with Section 7.02, shall immediately
make such Periodic Advance or payment of Compensating Interest as provided in
Section 7.02 and assume, pursuant to Section 7.02 hereof, the duties of a
successor master servicer; (y) with respect to that portion of Section
7.01(a)(I)(i) not referred to in the preceding clause (x) and with respect to
clauses (ii), (iii), (iv), (v), (vi), (vii) and (xi) of Section 7.01(a)(I) or
clauses (i) through (iv) of Section 7.01(a)(II), the Indenture Trustee shall,
but only at the direction of the Note Insurer or the Majority Noteholders, by
notice

                                       43
<PAGE>

in writing to the Master Servicer, the Backup Servicer and a Responsible Officer
of the Indenture Trustee and subject to the prior written consent of the Note
Insurer in the case of any removal at the direction of the Majority Noteholders,
and in addition to whatever rights such Noteholders may have at law or equity to
damages, including injunctive relief and specific performance, terminate all the
rights and obligations of the Master Servicer or Backup Servicer, as applicable,
under this Agreement, except for the Master Servicer's indemnification
obligations under Section 5.19, and in and to the Mortgage Loans and the
proceeds thereof, as Master Servicer; and (z) with respect to clauses
(viii)-(xi) of Section 7.01(a)(I), the Indenture Trustee shall, but only at the
direction of the Note Insurer, after notice in writing to the Master Servicer,
the Backup Servicer and a Responsible Officer of the Indenture Trustee,
terminate all the rights and obligations of the Master Servicer under this
Agreement, except for the Master Servicer's indemnification obligations under
Section 5.19, and in and to the Mortgage Loans and the proceeds thereof, as
Master Servicer. Upon 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 Mortgage Loans or otherwise, shall, subject to Section 7.02, pass
to and be vested in the Backup Servicer, or another successor master servicer
selected by the Note Insurer, and the Backup Servicer or another successor
master servicer is hereby authorized and empowered to execute and deliver, on
behalf of the Master Servicer, as attorney-in-fact or otherwise, at the expense
of the Master Servicer, any and all documents and other instruments and do or
cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the Mortgage Loans and related
documents. The Master Servicer agrees to cooperate (and to pay any related costs
and expenses) with the Indenture Trustee and the Backup Servicer or another
successor master servicer in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Backup Servicer or another successor master servicer, for
administration by it of all amounts which shall at the time be credited by the
Master Servicer to the Collection Account or thereafter received with respect to
the Mortgage Loans. The Indenture Trustee shall promptly notify the Note Insurer
and the Rating Agencies of the occurrence of a Servicer Event of Default upon
discovery or receipt of notice by a Responsible Officer of the Indenture
Trustee; provided, however, the Indenture Trustee shall not be obligated to
monitor the Master Servicer's compliance with the terms hereof or to determine
the occurrence of any Servicer Event of Default.

     Section 7.02. BACKUP SERVICER TO ACT: APPOINTMENT OF SUCCESSOR. (a) (i) On
and after the time the Master Servicer receives a notice of termination pursuant
to Section 7.01, or the Indenture Trustee receives the resignation of the Master
Servicer evidenced by an Opinion of Counsel pursuant to Section 5.21, or the
Master Servicer is removed as Master Servicer pursuant to this Article VII, in
which event the Indenture Trustee shall promptly notify the Rating Agencies, and
except as otherwise provided in this Section 7.02, the Backup Servicer (provided
the Backup Servicer receives 20 days' prior notice) or another successor master
servicer selected by the Note Insurer shall be the successor in all respects to
the Master Servicer in its capacity as master servicer under this Agreement and
the transactions set forth or provided for in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Master Servicer by the
terms and provisions of this Agreement. The Backup Servicer or another successor
master servicer and the Indenture Trustee shall take such action, consistent
with this Agreement, as shall be necessary to effect any such succession. If the
Backup Servicer or any other successor master servicer is acting as

                                       44
<PAGE>

Master Servicer hereunder, it shall be subject to termination under Section 7.01
upon the occurrence or continuation of a Servicer Event of Default applicable to
it as Master Servicer. The Backup Servicer hereby agrees to act as successor
master servicer pursuant to the terms of this Agreement upon the termination or
resignation of the Master Servicer as provided in this Section 7.02. Any
successor master servicer and the Backup Servicer prior to its becoming the
successor master servicer shall not be liable for any actions, omissions or
defaults of any master servicer prior to it or breaches of representations and
warranties of the master servicer prior to it. The Backup Servicer or any other
successor master servicer, as successor master servicer, shall be obligated to
pay Compensating Interest pursuant to Section 6.05 in any event and to make
Periodic Advances pursuant to Section 5.18 unless, and only to the extent the
Backup Servicer determines reasonably and in good faith that such advances would
not be recoverable from the proceeds of the related Mortgage Loan pursuant to
Section 5.03, such determination to be evidenced by a certification of a
Responsible Officer of the Backup Servicer delivered to the Note Insurer.

                   (ii)   In the event that the Backup Servicer is terminated or
     resigns pursuant to this Agreement or otherwise becomes unable to perform
     its obligations under this Agreement, the Note Insurer may (or if the Note
     Insurer fails to do so promptly the Indenture Trustee will) appoint a
     successor backup servicer in accordance with the provisions of this Section
     7.02; provided, that any successor backup servicer, shall satisfy the
     requirements set forth in Section 7.02(b) and shall be approved by the
     Rating Agencies and the Note Insurer.

             (b)   Any successor master servicer or successor backup servicer
hereunder (other than the Indenture Trustee) shall be a housing and home finance
institution, bank or mortgage servicing institution which has been designated as
an approved seller-servicer by Fannie Mae or Freddie Mac, having equity of not
less than $5,000,000 as determined in accordance with GAAP, as the successor to
the Master Servicer or the Backup Servicer hereunder in the assumption of all or
any part of the responsibilities, duties or liabilities of the Master Servicer
or the Backup Servicer, as applicable, hereunder.

             (c)   In the event the Backup Servicer is the successor master
servicer, it shall be entitled to the same Servicing Compensation (including the
Servicing Fee as adjusted pursuant to the definition thereof) and other funds
pursuant to Section 5.08 hereof as the Master Servicer if the Master Servicer
had continued to act as master servicer hereunder, and shall continue to be
entitled to the Backup Servicing Fee.

             (d)   The Indenture Trustee, the Backup Servicer and any successor
master servicer or backup servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Master
Servicer agrees to cooperate with the Indenture Trustee, the Backup Servicer and
any successor master servicer in effecting the termination of the Master
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Indenture Trustee, the Backup Servicer or such successor master
servicer, as applicable, at the Master Servicer's cost and expense, all
documents and records reasonably requested by it to enable it to assume the
Master Servicer's functions hereunder and shall promptly also transfer to the
Indenture Trustee, the Backup Servicer or such successor master servicer, as
applicable, all amounts that then have been or should have been deposited in the

                                       45
<PAGE>

Collection Account by the Master Servicer or that are thereafter received with
respect to the Mortgage Loans, including without limitation all Liquidation
Proceeds and Insurance Proceeds, and payments of insurance deductible amounts by
the Master Servicer pursuant to Section 5.04(b) with respect to all insurance
claims arising during the Master Servicer's tenure. Any collections received by
the Master Servicer after such removal or resignation shall be endorsed by it to
the Backup Servicer or (if the Backup Servicer is not the successor master
servicer) to the Indenture Trustee and remitted directly to the Backup Servicer
or the Indenture Trustee, as applicable (or, at the direction of the Indenture
Trustee, to any other successor master servicer). Neither the Backup Servicer,
the Indenture Trustee nor any other successor master servicer shall be held
liable by reason of any failure to make, or any delay in making, any payment
hereunder or any portion thereof caused by (i) the failure of the Master
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Master Servicer hereunder. Notwithstanding anything to the contrary
herein, no appointment of a successor master servicer under this Agreement shall
be effective until the Note Insurer shall have consented thereto, and written
notice of such proposed appointment shall have been provided by the Indenture
Trustee to the Note Insurer and the Backup Servicer. The Indenture Trustee shall
not resign as Master Servicer until a successor master servicer reasonably
acceptable to the Note Insurer has been appointed. The Note Insurer shall have
the right to remove the Indenture Trustee as successor Master Servicer under
this Section 7.02 without cause, and the Indenture Trustee shall appoint such
other successor master servicer as directed by the Note Insurer.

             (e)   In the event that the Master Servicer is terminated hereunder
and no Backup Servicer is obligated to act as successor master servicer and no
other successor master servicer has been appointed hereunder, the Indenture
Trustee may appoint a successor master servicer (which may be an affiliate of
the Indenture Trustee) or petition a court of competent jurisdiction to appoint
a successor master servicer. Pending appointment of a successor master servicer
hereunder, the Indenture Trustee shall act in such capacity; provided, however,
that the Indenture Trustee, in its capacity as successor master servicer pending
appointment of another successor master servicer, (i) shall be obligated to make
Periodic Advances or Servicing Advances only to the extent that the Indenture
Trustee deems such advances to be recoverable, (ii) shall be obligated to make
Compensating Interest payments in respect of any Payment Date only to the extent
of any Servicing Fee received by the Indenture Trustee in respect of such
Payment Date, (iii) shall not be obligated to perform any other duties or
obligations of the Master Servicer hereunder until the Indenture Trustee has
received all master servicing records and files from the predecessor master
servicer or backup servicer and in no event later than 90 days following the
termination of the Master Servicer; provided, however, the Indenture Trustee
shall use its reasonable efforts to perform the duties and obligations of the
Master Servicer prior to the and of such 90 day period, (iv) shall not be
obligated to perform any of the administrative duties specified in Section 5.23
hereof, and (v) shall be entitled to payment of all Servicing Compensation and
the Backup Servicing Fee. In connection with any appointment and assumption of
duties of a successor master servicer, the Indenture Trustee may make such
arrangements for the compensation of such successor master servicer out of
payments on Mortgage Loans as the Note Insurer and such successor shall agree;
provided, however, that such compensation may not be in excess of that permitted
the Master Servicer pursuant to Section 5.08, together with other Servicing
Compensation and the Backup Servicing Fee. The Master

                                       46
<PAGE>

Servicer, the Indenture Trustee and such successor Master Servicer shall take
such action, consistent with this Agreement, as shall be necessary to effectuate
any such succession.

             (f)   In the event the Backup Servicer, the Indenture Trustee, or
any successor master servicer incurs out-of-pocket expenses other than Servicing
Advances or Periodic Advances in connection with the transfer of master
servicing hereunder, which expenses are required to be borne by the Master
Servicer hereunder, and such expenses are not promptly reimbursed by the Master
Servicer or recoverable out of amounts reimbursable to the Master Servicer out
of the Collection Account, the Indenture Trustee shall make such reimbursement
to the applicable party out of funds in each Payment Account on any Payment Date
after all Payments to Noteholders on such Payment Date have been made and the
Reserve Payment Amount has been made to the Reserve Account but before any
distribution to the Certificateholders. The right of the Indenture Trustee to
reimbursement from any Payment Account for any of the Indenture Trustee's costs
and expenses in connection with the transfer of any master servicing hereunder
shall be in addition to any rights of the Indenture Trustee to indemnification
and reimbursement under the Indenture.

             (g)   In the event that the Master Servicer is terminated or
resigns hereunder, and at such time the Master Servicer has made unreimbursed
Periodic Advances or Servicing Advances out of its own funds,

                   (i)    any such Periodic Advances or Servicing Advances shall
     be allocated by the successor master servicer in whole or in part to
     specific Mortgage Loans which are delinquent at the time of the transfer of
     master servicing, which allocation shall be based on loan-level accounts of
     the portion of each Periodic Advance or Servicing Advance which has been
     funded by the Master Servicer from its own funds consistently maintained by
     the former Master Servicer, or, if no such accounts exist, then in the
     successor master servicer's discretion;

                   (ii)   following the transfer of master servicing, the
     successor master servicer shall reimburse the former Master Servicer for
     such Periodic Advances and Servicing Advances in accordance with the
     allocations determined in accordance with clause (i) above only out of the
     proceeds of the Mortgage Loans to which they relate and otherwise subject
     to Section 5.03, or, to the extent the successor master servicer determines
     any such Periodic Advance or Servicing Advance to be a Nonrecoverable
     Advance, out of any funds in the Collection Account.

     Section 7.03. WAIVER OF DEFAULTS. The Note Insurer or the Majority
Noteholders may, on behalf of all Noteholders, and subject to the consent of the
Note Insurer, waive any events permitting removal of the Master Servicer as
master servicer pursuant to this Article VII; PROVIDED, HOWEVER, that the
Majority Noteholders may not waive a default in making a required payment on a
Note without the consent of the Holder of such Note. Upon any waiver of a past
default, such default shall cease to exist, and any Servicer 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.
Notice of any such waiver shall be given by the Indenture Trustee to the Rating
Agencies and the Note Insurer.

                                       47
<PAGE>

     Section 7.04. RIGHTS OF THE NOTE INSURER TO EXERCISE RIGHTS OF THE
NOTEHOLDERS. By accepting its Note, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall be deemed to be the Noteholders
for all purposes (other than with respect to the receipt of payment on the
Notes) and shall have the right to exercise all rights of the Noteholders under
this Agreement and under the Notes without any further consent of the
Noteholders, including, without limitation:

             (a)   the right to require the Sponsor to repurchase Mortgage Loans
pursuant to Sections 2.06 and 4.02 hereof to the extent set forth therein;

             (b)   the right to give notices of breach or to terminate the
rights and obligations of the Master Servicer as master servicer pursuant to
Section 7.01 hereof and to consent to or direct waivers of Master Servicer
defaults pursuant to Section 7.03 hereof;

             (c)   the right to direct the actions of the Indenture Trustee
during the continuance of a Servicer Event of Default pursuant to Sections 7.01
and 7.02 hereof;

             (d)   the right to institute proceedings against the Master
Servicer pursuant to Section 7.01 hereof;

             (e)   the right to remove the Indenture Trustee pursuant to Section
6.09 of the Indenture;

             (f)   the right to direct foreclosures upon the failure of the
Master Servicer to do so in accordance with the provisions of Section 5.06 of
this Agreement; and

             (g)   any rights or remedies expressly given the Majority
Noteholders.

     In addition, each Noteholder agrees that, subject to Section 10.02, unless
a Note Insurer Default exists, the rights specifically enumerated above may only
be exercised by the Noteholders with the prior written consent of the Note
Insurer.

     Section 7.05. INDENTURE TRUSTEE TO ACT SOLELY WITH CONSENT OF THE NOTE
INSURER. Unless a Note Insurer Default exists, the Indenture Trustee shall not,
without the Note Insurer's consent or unless directed by the Note Insurer:

             (a)   terminate the rights and obligations of the Master Servicer
as master servicer pursuant to Section 7.01 hereof;

             (b)   agree to any amendment pursuant to Section 10.03 hereof; or

             (c)   undertake any litigation.

     The Note Insurer may, in writing and in its sole discretion renounce all or
any of its rights under Sections 7.04, 7.05 or 7.06 or any requirement for the
Note Insurer's consent for any period of time.

                                       48
<PAGE>

     Section 7.06. MORTGAGE LOANS, TRUST ESTATE AND ACCOUNTS HELD FOR BENEFIT OF
THE NOTE INSURER. (a) The Indenture Trustee shall hold the Trust Estate and the
Indenture Trustee's Mortgage Files, for the benefit of the Noteholders and the
Note Insurer, and all references in this Agreement, the Notes and in any of the
other Basic Documents to the benefit of Noteholders shall be deemed to include
the Note Insurer. The Indenture Trustee shall cooperate in all reasonable
respects with any reasonable request by the Note Insurer for action to preserve
or enforce the Note Insurer's rights or interests under this Agreement, the
Notes and in any of the Basic Documents unless, as stated in an Opinion of
Counsel addressed to the Indenture Trustee and the Note Insurer, such action is
adverse to the interests of the Noteholders or diminishes the rights of the
Noteholders or imposes additional burdens or restrictions on the Noteholders.

             (b)   The Master Servicer hereby acknowledges and agrees that it
shall service the Mortgage Loans for the benefit of the Noteholders and for the
benefit of the Note Insurer, and all references in this Agreement and in any of
the other Basic Documents to the benefit of or actions on behalf of the
Noteholders shall be deemed to include the Note Insurer.

     Section 7.07. NOTE INSURER DEFAULT. During the continuation of a Note
Insurer Default, rights granted or reserved to the Note Insurer hereunder shall
vest instead in the Noteholders; provided, that the Note Insurer shall be
entitled to any distributions of reimbursements as set forth in the Indenture
and the Insurance Agreement and the Note Insurer shall retain those rights under
Section 10.03 to consent to any amendment of this Agreement.

     At such time as either (i) the outstanding Note Principal Balance of the
Notes has been reduced to zero or (ii) the Note Insurance Policy has been
terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy, except for breach thereof by the Note Insurer), then the
rights and benefits granted or reserved to the Note Insurer hereunder (including
the rights to direct certain actions and receive certain notices) shall
terminate and the Certificateholders shall be entitled to the exercise of such
rights and to receive such benefits of the Note Insurer following such
termination to the extent that such rights and benefits are applicable to the
Certificateholders.

                                  ARTICLE VIII

                                   TERMINATION

     Section 8.01. TERMINATION. (a) Subject to Section 8.02, this Agreement
shall terminate upon notice to the Indenture Trustee of either: (i) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Note Insurer and the Indenture Trustee or (ii) mutual consent of
the Owner Trustee, on behalf of the Trust, at the direction of all the
Certificateholders, the Indenture Trustee, the Master Servicer, the Note Insurer
and all Noteholders in writing.

             (b)   In addition, subject to Section 8.02, the Sponsor may, at its
sole option, cost and expense, terminate the Trust in accordance with the terms
of Section 10.01 of the Indenture.

                                       49
<PAGE>

             (c)   If on any date, the Master Servicer determines that there are
no outstanding Mortgage Loans and no other funds or assets in the Trust Estate
other than funds in the Payment Accounts, the Master Servicer shall send a final
payment notice promptly to the Indenture Trustee, who shall forward notice to
each Noteholder in accordance with Section 8.01(d).

             (d)   Notice of any termination, specifying the Payment Date upon
which the Trust will terminate and the Noteholders shall surrender their Notes
to the Indenture Trustee for final payment and cancellation, shall be given
promptly by the Master Servicer to the Indenture Trustee, who shall forward the
notice by letter to Noteholders mailed during the month of such final payment
before the Servicer Payment Date in such month, specifying (i) the Payment Date
upon which final payment of the Notes will be made upon presentation and
surrender of Notes at the office of the Indenture Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Payment Date is not applicable, payments being made
only upon presentation and surrender of the Notes at the office of the Indenture
Trustee therein specified. The obligations of the Note Insurer hereunder shall
terminate upon the deposit by the Sponsor with the Indenture Trustee of a sum
sufficient to purchase all of the Mortgage Loans and REO Properties as set forth
in Section 10.01 of the Indenture or when the Note Principal Balance of the
Notes has been reduced to zero.

             (e)   In the event that all of the Noteholders do not surrender
their Notes for cancellation within six (6) months after the time specified in
the above-mentioned written notice, the Indenture Trustee shall give a second
written notice to the remaining Noteholders to surrender their Notes for
cancellation and receive the final payment with respect thereto. If within six
(6) months after the second notice, all of the Notes shall not have been
surrendered for cancellation, the Indenture Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Noteholders concerning surrender of their Notes and the cost thereof shall be
paid out of the funds and other assets which remain subject hereto. If within
nine (9) months after the second notice all the Notes shall not have been
surrendered for cancellation, the Certificateholders shall be entitled to all
unclaimed funds and other assets which remain subject hereto and the Indenture
Trustee upon transfer of such funds shall be discharged of any responsibility
for such funds and the Noteholders shall look only to the Certificateholders for
payment and not to the Note Insurer. Such funds shall remain uninvested.

     Section 8.02. ADDITIONAL TERMINATION REQUIREMENTS. By their acceptance of
the Notes, the Holders thereof hereby agree to appoint the Master Servicer as
their attorney in fact to: (i) adopt a plan of complete liquidation (and the
Noteholders hereby appoint the Indenture Trustee as their attorney in fact to
sign such plan) as appropriate or upon the written request of the Note Insurer
and (ii) to take such other action in connection therewith as may be reasonably
required to carry out such plan of complete liquidation all in accordance with
the terms hereof.

     Section 8.03. ACCOUNTING UPON TERMINATION OF MASTER SERVICER. Upon
termination of the Master Servicer, the Master Servicer shall, at its expense:

             (a)   deliver to the successor master servicer or, if none shall
yet have been appointed, to the Indenture Trustee, the funds in any Account
administered by the Master Servicer;

                                       50
<PAGE>

             (b)   deliver to the successor master servicer or, if none shall
yet have been appointed, to the Indenture Trustee all Mortgage Files and related
documents and statements held by it hereunder and a Mortgage Loan portfolio
computer tape (such delivery to take place within 24 hours if the successor
master servicer is the Backup Servicer);

             (c)   deliver to the successor master servicer, or, if none shall
yet have been appointed, to the Indenture Trustee a full accounting of all
funds, including a statement showing the Monthly Payments collected by it and a
statement of monies held in trust by it for the payments or charges with respect
to the Mortgage Loans; and

             (d)   execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to the successor master servicer and to more
fully and definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Master Servicer under this
Agreement.

     Section 8.04. TERMINATION OF BACKUP SERVICER AS SUCCESSOR MASTER SERVICER.
In the event the Backup Servicer becomes the successor master servicer and is
terminated for reasons other than the occurrence of a Servicer Event of Default,
then the Backup Servicer will be entitled to a release fee of $10.00 per
Mortgage Loan (subject to a minimum of $5,000.00).

                                   ARTICLE IX

                                   [RESERVED]

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

     Section 10.01. LIMITATION ON LIABILITY. (a) None of the Trust, the Owner
Trustee, the Sponsor, the Master Servicer, the Backup Servicer, the Indenture
Trustee or any of the directors, officers, employees or agents of such Persons
shall be under any liability to the Trust, the Noteholders or the Note Insurer
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; PROVIDED, HOWEVER,
that this provision shall not protect the Trust, the Owner Trustee, the Sponsor,
the Master Servicer, the Backup Servicer, the Indenture Trustee or any such
Person against liability for any breach of warranties or representations made
herein by such party, or against any specific liability imposed on each such
party pursuant to this Agreement or against any liability which would otherwise
be imposed upon such party by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of failure to perform its
obligations or duties hereunder. The Trust, the Owner Trustee, the Sponsor, the
Master Servicer, the Backup Servicer, the Indenture Trustee and any director,
officer, employee or agent of such Person may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any
appropriate Person respecting any matters arising hereunder.

             (b)   It is expressly understood and agreed by the parties hereto
that (i) this Agreement is executed and delivered by U.S. Bank Trust, National
Association, not individually

                                       51
<PAGE>

or personally but solely as Owner Trustee under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it under the Trust
Agreement, (ii) each of the representations, undertakings and agreements herein
made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by U.S. Bank Trust, National
Association but is made and intended for the purpose for binding only the Trust,
(iii) nothing herein contained shall be construed as creating any liability on
U.S. Bank Trust, National Association, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the parties hereto and by any Person claiming
by, through or under the parties hereto and (iv) under no circumstances shall
U.S. Bank Trust, National Association be personally liable for the payment of
any indebtedness or expenses of the Trust or be liable for the breach or failure
of any obligation, representation, warranty or covenant made or undertaken by
the Trust under this Agreement or any other related documents.

     Section 10.02. ACTS OF NOTEHOLDERS. (a) Except as otherwise specifically
provided herein, whenever Noteholder action, consent or approval is required
under this Agreement, such action, consent or approval shall be deemed to have
been taken or given on behalf of, and shall be binding upon, all Noteholders if
the Majority Noteholders or the Note Insurer agrees to take such action or give
such consent or approval.

             (b)   The death or incapacity of any Noteholder shall not operate
to terminate this Agreement or the Trust, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.

             (c)   No Noteholder shall have any right to vote (except as
expressly provided for herein) 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 Notes, be construed
so as to constitute the Noteholders from time to time as partners or members of
an association; nor shall any Noteholder 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.

     Section 10.03. AMENDMENT. (a) This Agreement may be amended from time to
time by the Owner Trustee, on behalf of the Trust, the Master Servicer, the
Sponsor, the Backup Servicer and the Indenture Trustee by written agreement,
upon the prior written consent of the Note Insurer, without notice to or consent
of the Noteholders to cure any ambiguity, to correct or supplement any
provisions herein, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by (i) an Opinion of Counsel,
at the expense of the party requesting the change, delivered to the Indenture
Trustee or (ii) a letter from each Rating Agency confirming that such action
will not result in the reduction, qualification or withdrawal of the
then-current ratings on the Notes (without taking into account the Note
Insurance Policy), adversely affect in any material respect the interests of any
Noteholder. The Indenture Trustee shall give prompt written notice to the Rating
Agencies of any amendment made pursuant to this Section 10.03.

                                       52
<PAGE>

             (b)   This Agreement may be amended from time to time by the Owner
Trustee, on behalf of the Trust, the Master Servicer, the Sponsor, the Backup
Servicer and the Indenture Trustee, with the consent of the Note Insurer, the
Noteholders representing at least 51% of the outstanding Principal Balance of
the Notes of each affected Class and all of the Certificateholders; PROVIDED,
HOWEVER, that no such amendment shall reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be paid on any Class of Notes without the consent of the Holders of such Class
of Notes or reduce the percentage for the Holders of which are required to
consent to any such amendment without the consent of the Holders of 100% of such
Class of Notes affected thereby.

             (c)   It shall not be necessary for the consent of Holders under
this Section 10.03 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.

             (d)   In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by Article IX of the Indenture or the
modifications thereby of the trusts created by the Indenture, the Indenture
Trustee shall be entitled to receive, and (subject to Section 6.01 of the
Indenture) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by the Indenture. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties or immunities under the Indenture or
otherwise. The Master Servicer, on behalf of the Trust, shall cause executed
copies of any supplemental indentures to be delivered to the Note Insurer and
the Rating Agencies.

     Section 10.04. RECORDATION OF AGREEMENT. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Master Servicer at the Noteholders' expense on direction
and at the expense of Majority Noteholders requesting such recordation, but only
when accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders or is
necessary for the administration or servicing of the Mortgage Loans.

     Section 10.05. DURATION OF AGREEMENT. This Agreement shall continue in
existence and effect until terminated as herein provided.

     Section 10.06. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
to (i) in the case of the Master Servicer, Accredited Home Lenders, Inc., 15030
Avenue of Science, Suite 100, San Diego, California 92129, Attention: Director
of Operations with a copy to General Counsel; (ii) in the case of the Backup
Servicer, Countrywide Home Loans Servicing LP, 7105 Corporate Drive, Plano,
Texas 75024, Attention: Accredited Mortgage Loan Trust 2002-1; (iii) in the case
of the Trust, Accredited Mortgage Loan Trust 2002-1, c/o the Owner Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration; (iv) in
the case of the Indenture Trustee, Wells Fargo Bank Minnesota, National
Association, 9062 Old Annapolis Road, Columbia, MD

                                       53
<PAGE>

21045-1951, Attention: Corporate Trust Services, Accredited Series 2002-1, with
a copy to the following address: Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479, Attention: Corporate Trust Services, Accredited Series 2002-1;
(v) in the case of the Sponsor, Accredited Home Lenders, Inc., 15030 Avenue of
Science, Suite 100, San Diego, California 92129, Attention: Corporate Trust
Administration; (vi) in the case of the Underwriter, Lehman Brothers Inc., 745
Seventh Avenue, 7th Floor, New York, New York 10019, Attention: Samir Tabet;
(vii) in the case of the Note Insurer, Ambac Assurance Corporation, One State
Street Plaza, New York, New York 10004, Attention: Jeff Nabi (in each case in
which notice or other communication to the Note Insurer refers to an Event of
Default, a Servicer Event of Default or a claim on the Note Insurance Policy or
with respect to which failure on the part of the Note Insurer to respond shall
be deemed to constitute consent or acceptance, then a copy of such notice or
other communication should also be sent to the attention of each of the General
Counsel and the Head- Financial Guaranty Group, and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"); (viii) in the case of Standard & Poor's Rating
Services, 55 Water Street, New York, New York 10004, Attention: Residential
Mortgage Surveillance Group; (ix) in the case of Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007, Attention: Keith Wofford; and
(x) in the case of the Noteholders, as set forth in the Note Register. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice by such party, except that notices to the Noteholders
shall be effective upon mailing or personal delivery.

     Section 10.07. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.

     Section 10.08. NO PARTNERSHIP. Nothing herein contained shall be deemed or
construed to create a co-partnership or joint venture between the parties hereto
and the services of the Master Servicer shall be rendered as an independent
contractor and not as agent for the Noteholders.

     Section 10.09. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.

     Section 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Trust, the Master Servicer, the Backup
Servicer, the Sponsor, the Indenture Trustee and the Noteholders and their
respective successors and permitted assigns.

     Section 10.11. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

                                       54
<PAGE>

     Section 10.12. NO PETITION. The Master Servicer and the Backup Servicer, by
entering into this Agreement, hereby covenant and agree that they will not at
any time institute against the Sponsor or the Trust, or join in any institution
against the Sponsor or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy law in connection with any
obligations relating to the Certificates, the Notes, this Agreement or any of
the other Basic Documents.

     This Section 10.12 will survive for one year and one day following the
termination of this Agreement.

     Section 10.13. THIRD PARTY BENEFICIARY. The parties agree that each of the
Owner Trustee and the Note Insurer is intended and shall have all rights of a
third-party beneficiary of this Agreement. Without limiting the generality of
the foregoing, all covenants and agreements in this Agreement that expressly
confer rights upon the Insurer shall be for the benefit of and run directly to
the Note Insurer, and the Note Insurer shall be entitled to rely on and enforce
such covenants to the same extent as if it were a party to this Agreement.

     Section 10.14. INTENT OF THE PARTIES. It is the intent of the parties
hereto and Noteholders that, for federal income taxes, state and local income or
franchise taxes and other taxes imposed on or measured by income, the Notes be
treated as debt. The parties to this Agreement and the Holder of each Note, by
acceptance of its Note, and each Beneficial Owner thereof, agree to treat, and
to take no action inconsistent with the treatment of, the related Notes in
accordance with the preceding sentence for purposes of federal income taxes,
state and local income and franchise taxes and other taxes imposed on or
measured by income.

     Section 10.15. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.

             (b)   THE TRUST, THE MASTER SERVICER, THE SPONSOR, THE BACKUP
SERVICER AND THE INDENTURE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S.
MAILS, POSTAGE PREPAID. THE TRUST, THE SPONSOR, THE MASTER SERVICER, THE BACKUP
SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 10.15 SHALL AFFECT THE
RIGHT OF THE TRUST, THE SPONSOR, THE MASTER SERVICER, THE BACKUP

                                       55
<PAGE>

SERVICER OR THE INDENTURE TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION OR PROCEEDING
IN THE COURTS OF ANY OTHER JURISDICTION.

             (c)   THE TRUST, THE SPONSOR, THE MASTER SERVICER, THE BACKUP
SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A
JURY.

                  [Remainder of Page Intentionally Left Blank]

                                       56
<PAGE>

     IN WITNESS WHEREOF, the Master Servicer, the Backup Servicer, the Trust,
the Indenture Trustee and the Sponsor have caused their names to be signed
hereto by their respective officers thereunto duly authorized as of the day and
year first above written.

                                  ACCREDITED HOME LENDERS, INC.,
                                   as Sponsor

                                  By: /s/ Ray W. McKewon
                                      ------------------------------------
                                      Name:  Ray W. McKewon
                                      Title: Executive Vice President

                                  ACCREDITED MORTGAGE LOAN TRUST 2002-1

                                  By: U.S. BANK TRUST, NATIONAL ASSOCIATION,
                                      not in its individual capacity, but solely
                                      as Owner Trustee under the Trust Agreement

                                  By: /s/ Patricia M. Child
                                      ------------------------------------
                                      Name:  Patricia M. Child
                                      Title: Vice President

                                  ACCREDITED HOME LENDERS, INC.,
                                   as Master Servicer

                                  By: /s/ Ray W. McKewon
                                      ------------------------------------
                                      Name:  Ray W. McKewon
                                      Title: Executive Vice President

                                  WELLS FARGO BANK MINNESOTA, NATIONAL
                                  ASSOCIATION,
                                  as Indenture Trustee

                                  By: /s/ Jack A. Aini
                                      ------------------------------------
                                      Name:  Jack A. Aini
                                      Title: Vice President

                                  COUNTRYWIDE HOME LOANS SERVICING LP,
                                   as Backup Servicer

                                  By:  /s/ Michael Schloessmann
                                      ------------------------------------
                                       Name:  Michael Schloessmann
                                       Title: Senior Vice President

                [Signature Page to Sale and Servicing Agreement]

                                       57
<PAGE>
                                                                      SCHEDULE I

                             MORTGAGE LOAN SCHEDULE

                                      I-1
<PAGE>

                                                                      APPENDIX I

                                  DEFINED TERMS

                          [See Appendix I to Indenture]

                                      I-2
<PAGE>

                    EXHIBITS TO SALE AND SERVICING AGREEMENT

                                      I-3
<PAGE>

                                                                       EXHIBIT A

                          CONTENTS OF THE MORTGAGE FILE

     With respect to each Mortgage Loan, the Mortgage File shall include each of
the following items (copies to the extent the originals have been delivered to
the Indenture Trustee for the benefit of the Noteholders and the Note Insurer,
pursuant to Section 2.05 of the Sale and Servicing Agreement), all of which
shall be available for inspection by the Noteholders, to the extent required by
applicable laws:

     1.      the original Mortgage Note, endorsed without recourse in blank by
the Sponsor, including all intervening endorsements showing a complete chain of
endorsement;

     2.      the related original Mortgage with evidence of recording indicated
thereon or a copy thereof certified by the applicable recording office;

     3.      each intervening mortgage assignment, with evidence of recording
indicated thereon or if the original is not available, a copy thereof certified
by the applicable recording office, if any, showing a complete chain of
assignment from the originator of the related Mortgage Loan to the Sponsor
(which assignment may, at the Sponsor's option, be combined with the assignment
referred to in subpart (4) hereof, in which case it must be in recordable form,
but need not have been previously recorded);

     4.      a mortgage assignment in recordable form (which, if acceptable for
recording in the relevant jurisdiction, maybe included in a blanket assignment
or assignments) of each Mortgage from the Sponsor to the Indenture Trustee;

     5.      originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a Mortgage or
Mortgage Note have been modified or such Mortgage or Mortgage Note has been
assumed; and

     6.      an original title insurance policy or title opinion (or (A) a copy
of the title insurance policy or title opinion, or (B) the related binder,
commitment or preliminary report, or copy thereof in which case the Sponsor
hereby certifies that the original Mortgage has been delivered to the title
insurance company that issued such binder, commitment or preliminary report).

     In instances where the original recorded Mortgage or any intervening
mortgage assignment or a completed assignment of the Mortgage in recordable form
cannot be delivered by the Sponsor to the Indenture Trustee prior to or
concurrently with the execution and delivery of this Agreement, due to a delay
in connection with recording, the Sponsor may:

     (a)     with respect to item (3) above, in lieu of delivering such original
recorded Mortgage or intervening mortgage assignment, deliver to the Indenture
Trustee, a copy thereof; provided, that the Sponsor certifies that the original
Mortgage has been delivered to a title insurance company for recordation after
receipt of its policy of title insurance or the related binder, commitment or
preliminary report; and

                                      A-1
<PAGE>

     (b)     in lieu of delivering the completed assignment in recordable form,
deliver to the Indenture Trustee, the assignment in recordable form, otherwise
complete except for recording information.

                                      A-2
<PAGE>

                                                                       EXHIBIT B

                  INDENTURE TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT

<TABLE>
<CAPTION>
                                                                     July ___, 2002
<S>                                                          <C>
Lehman Brothers Inc.                                         Accredited Home Lenders, Inc.
3 World Financial Center                                     15030 Avenue of Science, Suite 100
New York, New York  10285                                    San Diego, California  92128
Countrywide Home Loans Servicing LP                          Ambac Assurance Corporation
4500 Park Granada, Mail Stop CH-143, Calabasas,              One State Street Plaza
California  91302                                            New York, New York  10022
</TABLE>

     Re:     Sale and Servicing Agreement, dated as of July 1, 2002 among
             Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
             Accredited Mortgage Loan Trust 2002-1, Countrywide Home Loans
             Servicing LP, as Backup Servicer, and Wells Fargo Bank Minnesota,
             NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE

Ladies and Gentlemen:

     In accordance with Section 2.06(a) of the above-captioned Sale and
Servicing Agreement, the undersigned, as Indenture Trustee, hereby acknowledges
receipt by it in good faith without notice of adverse claims, of the Note
Insurance Policy and declares that it holds and will hold such Note Insurance
Policy in trust for the exclusive use and benefit of all present and future
Noteholders pursuant to the terms of the Indenture dated as of July 1, 2002, by
and between Accredited Mortgage Loan Trust 2002-1 and the Indenture Trustee.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in Appendix I to the Indenture.

                                            WELLS FARGO BANK MINNESOTA,
                                            NATIONAL ASSOCIATION,
                                            as Indenture Trustee

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

                                      B-1
<PAGE>

                                                                       EXHIBIT C

                 INDENTURE TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT

<TABLE>
<CAPTION>
                                                                    July ___, 2002
<S>                                                          <C>
Lehman Brothers Inc.                                         Accredited Home Lenders, Inc.
3 World Financial Center                                     15030 Avenue of Science, Suite 100
New York, New York 10285                                     San Diego, California  92128
Countrywide Home Loans Servicing LP                          Ambac Assurance Corporation
4500 Park Granada, Mail Stop CH-143, Calabasas, California   One State Street Plaza
91302                                                        New York, New York 10022
</TABLE>

     Re:     Sale and Servicing Agreement, dated as of July 1, 2002 among
             Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
             Accredited Mortgage Loan Trust 2002-1, Countrywide Home Loans
             Servicing LP, as Backup Servicer, and Wells Fargo Bank Minnesota,
             NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE

Ladies and Gentlemen:

     In accordance with Section 2.06(b)(i) of the above-captioned Sale and
Servicing Agreement, the undersigned, as Indenture Trustee, hereby acknowledges
receipt by it in good faith without notice of adverse claims, subject to the
provisions of Sections 2.04 and 2.05 of the Sale and Servicing Agreement (as
such provisions relate to the Mortgage Loan), of, with respect to each Mortgage
Loan, a Mortgage File containing the original Mortgage Note, except with respect
to the list of exceptions attached hereto, and based on its examination and only
as to the foregoing, the information set forth in items (i), (ii) (with respect
to property address only, excluding zip code), (iii) and (vi) of the definition
of the "Mortgage Loan Schedule" accurately reflects information set forth in the
Mortgage Note, and declares that it holds and will hold such documents and the
other documents delivered to it constituting the Indenture Trustee's Mortgage
Files, and that it holds or will hold all such assets and such other assets
included in the definition of "Trust Estate" that are delivered to it for the
exclusive use and benefit of all present and future Noteholders and the Note
Insurer.

     The Indenture Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced Sale
and Servicing Agreement. The Indenture Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
such documents or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.

                                      C-1
<PAGE>

     The Mortgage Loan Schedule is attached to this Receipt.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in Appendix I to the Indenture, dated as of July 1,
2002, by and between Accredited Mortgage Loan Trust 2002-1 and the Indenture
Trustee.

                                              WELLS FARGO BANK MINNESOTA,
                                              NATIONAL ASSOCIATION,
                                              as Indenture Trustee

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

                                      C-2
<PAGE>

                                                                       EXHIBIT D

                   INITIAL CERTIFICATION OF INDENTURE TRUSTEE

<TABLE>
<CAPTION>
                                                                           _________, 2002
<S>                                                          <C>
Lehman Brothers Inc.                                         Accredited Home Lenders, Inc.
3 World Financial Center                                     15030 Avenue of Science, Suite 100
New York, New York 10285                                     San Diego, California  92128
Countrywide Home Loans Servicing LP,                         Ambac Assurance Corporation
as Backup Servicer                                           One State Street Plaza
4500 Park Granada, Mail Stop CH-143,                         New York, New York 10022
Calabasas, California  91302
</TABLE>

     Re:     Sale and Servicing Agreement, dated as of July 1, 2002 among
             Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
             Accredited Mortgage Loan Trust 2002-1, Countrywide Home Loans
             Servicing LP, as Backup Servicer, and Wells Fargo Bank Minnesota,
             NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE

Ladies and Gentlemen:

     In accordance with the provisions of Section 2.06(b)(ii) of the
above-referenced Sale and Servicing Agreement, the undersigned, as Indenture
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05(a) of the Sale and Servicing Agreement and has
determined that, except as noted on the attachment hereto, (i) all documents
required to be delivered to it pursuant to Section 2.05 of the above-referenced
Sale and Servicing Agreement are in its possession, (ii) such documents have
been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections do not constitute physical alteration if they reasonably
appear to have been initialed by the Mortgagor) appears regular on its face and
relates to such Mortgage Loan and (iii) based on its examination and only as to
the foregoing documents, the information set forth in the Mortgage Loan Schedule
as to the information in clauses (i), (ii) (with respect to property address
only, excluding zip code), (iii) and (vi) of the definition of "Mortgage Loan
Schedule" respecting such Mortgage Loan accurately reflects the information set
forth in Indenture Trustee's Mortgage File. The Indenture Trustee has made no
independent examination of such documents beyond the review specifically
required in the above-referenced Sale and Servicing Agreement. The Indenture
Trustee makes no representations as to: (x) the validity, legality,
enforceability or genuineness of any such documents contained in each or any of
the Mortgage

                                      D-1
<PAGE>

Loans identified on the Mortgage Loan Schedule, or (y) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.

                                               WELLS FARGO BANK MINNESOTA,
                                               NATIONAL ASSOCIATION,
                                               as Indenture Trustee

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

                                      D-2
<PAGE>

                                                                       EXHIBIT E

                    FINAL CERTIFICATION OF INDENTURE TRUSTEE

<TABLE>
<CAPTION>
                                                              ___________, 2002
<S>                                                          <C>
Lehman Brothers Inc.                                         Accredited Home Lenders, Inc.
3 World Financial Center                                     15030 Avenue of Science, Suite 100
New York, New York 10285                                     San Diego, California  92128
Countrywide Home Loans Servicing LP,                         Ambac Assurance Corporation
as Backup Servicer                                           One State Street Plaza
4500 Park Granada, Mail Stop CH-143,                         New York, New York 10022
Calabasas, California  91302
</TABLE>

     Re:     Sale and Servicing Agreement, dated as of July 1, 2002 among
             Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
             Accredited Mortgage Loan Trust 2002-1, Countrywide Home Loans
             Servicing LP, as Backup Servicer, and Wells Fargo Bank Minnesota,
             NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE

Ladies and Gentlemen:

     In accordance with the provisions of Section 2.06(b)(iii) of the
above-referenced Sale and Servicing Agreement, the undersigned, as Indenture
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05(a) of the Sale and Servicing Agreement and has
determined that (i) all documents required to be delivered to it pursuant to
Section 2.05 of the above referenced Sale and Servicing Agreement are in its
possession, (ii) such documents have been reviewed by it and appear regular on
their face and have not been mutilated, damaged, torn or otherwise physically
altered (handwritten additions, changes or corrections do not constitute
physical alteration if they reasonably appear to have been initialed by the
Mortgagor) appears regular on its face and relates to such Mortgage Loan and
(iii) based on its examination and only as to the foregoing documents, the
information set forth in items (i), (ii) (with respect to property address only,
excluding zip code), (iii) and (vi) of the definition of the Mortgage Loan
Schedule respecting such Mortgage Loan that can be determined from the face of
such documents accurately reflects the information set forth in the Indenture
Trustee's Mortgage File. The Indenture Trustee has made no independent
examination of such documents beyond the review specifically required in the
above-referenced Sale and Servicing Agreement. The Indenture Trustee makes no

                                      E-1
<PAGE>

representations as to: (x) the validity, legality, enforceability or genuineness
of any such documents contained in each or any of the Mortgage Loans identified
on the Mortgage Loan Schedule, or (y) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.

                                              WELLS FARGO BANK MINNESOTA,
                                              NATIONAL ASSOCIATION,
                                              as Indenture Trustee

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

                                      E-2
<PAGE>

                                                                       EXHIBIT F

                        REQUEST FOR RELEASE OF DOCUMENTS

To:  Wells Fargo Bank Minnesota, National Association
     2030 Main Street, Suite 100
     Irvine, California 92614
     Attention: Mortgage Document Custody

     Re:     Sale & Servicing Agreement, dated as of July 1, 2002 by and among
             Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
             Accredited Mortgage Loan Trust 2002-1, as Issuer, Countrywide Home
             Loans Servicing LP, as Backup Servicer, and Wells Fargo Bank
             Minnesota, National Association, as Indenture TRUSTEE
             ("CUSTODIAN/INDENTURE TRUSTEE")

     In connection with the administration of the Mortgage Loans held by you as
Indenture Trustee for the Issuer pursuant to the above-captioned Sale and
Servicing Agreement, we request the release, and hereby acknowledge receipt, of
the Indenture Trustee's Mortgage File for the Mortgage Loan described below, for
the reason indicated.

MORTGAGE LOAN NUMBER:

MORTGAGOR NAME, ADDRESS & ZIP CODE:

REASON FOR REQUESTING DOCUMENTS (check one):

____ 1.     Mortgage Paid in Full
____ 2.     Foreclosure
____ 3.     Substitution
____ 4.     Other Liquidation (Repurchases, etc.)
____ 5.     Nonliquidation Reason:                           Reason:
                                                                    ------------

Address to which Indenture Trustee should
Deliver the Mortgage File:
                                              ----------------------------------

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

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

                                      F-1

                                       62
<PAGE>

                                           By:
                                              ----------------------------------
                                                       (authorized signer)
                                           Issuer:
                                                  ------------------------------
                                           Address:
                                                   -----------------------------

                                           Date:
                                                --------------------------------

Custodian/Indenture Trustee

[---------------------]

Please acknowledge the execution of the above request by your signature and date
below:

------------------------------------       -------------------------------------
Signature                                  Date

Documents returned to Custodian:

Custodian Date

------------------------------------       -------------------------------------
Signature                                  Date

                                      F-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}]]