Document:

EXHIBIT 4.1

<PAGE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2005-1
                                     Issuer
                             WELLS FARGO BANK, N.A.,
                            Securities Administrator
                                       and
                       HSBC BANK USA, NATIONAL ASSOCIATION

                                Indenture Trustee
                        ---------------------------------------

                                    INDENTURE

                          Dated as of January 28, 2005

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

                              MORTGAGE-BACKED NOTES

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

<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

<S>                                                                                                            <C>
ARTICLE I             Definitions................................................................................2

         Section 1.01          Definitions.......................................................................2
         Section 1.02          Incorporation by Reference of Trust Indenture Act.................................2
         Section 1.03          Rules of Construction.............................................................2

ARTICLE II            Original Issuance of Notes.................................................................3

         Section 2.01          Form..............................................................................3
         Section 2.02          Execution, Authentication and Delivery............................................3

ARTICLE III           Covenants..................................................................................4

         Section 3.01          Maintenance of Payment Account....................................................4
         Section 3.02          Maintenance of Office or Agency...................................................4
         Section 3.03          Money for Payments To Be Held in Trust; Paying Agent..............................4
         Section 3.04          Existence.........................................................................6
         Section 3.05          Payment of Principal and Interest.................................................6
         Section 3.06          Protection of Trust Estate.......................................................11
         Section 3.07          Opinions as to Trust Estate......................................................11
         Section 3.08          Performance of Obligations.......................................................12
         Section 3.09          Negative Covenants...............................................................12
         Section 3.10          Annual Statement as to Compliance................................................13
         Section 3.11          [Reserved].......................................................................13
         Section 3.12          Representations and Warranties Concerning the Mortgage Loans.....................13
         Section 3.13          Amendments to Sale and Servicing Agreement.......................................13
         Section 3.14          Master Servicer as Agent and Bailee of the Indenture Trustee.....................13
         Section 3.15          Investment Company Act...........................................................14
         Section 3.16          Issuer May Consolidate, etc......................................................14
         Section 3.17          Successor or Transferee..........................................................16
         Section 3.18          No Other Business................................................................16
         Section 3.19          No Borrowing.....................................................................16
         Section 3.20          Guarantees, Loans, Advances and Other Liabilities................................16
         Section 3.21          Capital Expenditures.............................................................16
         Section 3.22          Determination of Note Rate.......................................................16
         Section 3.23          Restricted Payments..............................................................17
         Section 3.24          Notice of Events of Default......................................................17
         Section 3.25          Further Instruments and Acts.....................................................17
         Section 3.26          Certain Representations Regarding the Trust Estate...............................17
         Section 3.27          Allocation of Realized Losses....................................................18
         Section 3.28          Special Derivative Contracts.....................................................18

ARTICLE IV            The Notes; Satisfaction and Discharge of Indenture........................................20

         Section 4.01          The Notes........................................................................20

                                       II
<PAGE>

         Section 4.02          Registration of and Limitations on Transfer and Exchange of Notes;
                               Appointment of Note Registrar and Certificate Registrar..........................20
         Section 4.03          Mutilated, Destroyed, Lost or Stolen Notes.......................................21
         Section 4.04          Persons Deemed Owners............................................................22
         Section 4.05          Cancellation.....................................................................22
         Section 4.06          Book-Entry Notes.................................................................22
         Section 4.07          Notices to Depository............................................................23
         Section 4.08          Definitive Notes.................................................................23
         Section 4.09          Tax Treatment....................................................................24
         Section 4.10          Satisfaction and Discharge of Indenture..........................................24
         Section 4.11          Application of Trust Money.......................................................26
         Section 4.12          [Reserved].......................................................................26
         Section 4.13          Repayment of Monies Held by Paying Agent.........................................26
         Section 4.14          Temporary Notes..................................................................26
         Section 4.15          Representation Regarding ERISA...................................................26

ARTICLE V             Default and Remedies......................................................................28

         Section 5.01          Events of Default................................................................28
         Section 5.02          Acceleration of Maturity; Rescission and Annulment...............................28
         Section 5.03          Collection of Indebtedness and Suits for Enforcement by Indenture Trustee........29
         Section 5.04          Remedies; Priorities.............................................................31
         Section 5.05          Optional Preservation of the Trust Estate........................................32
         Section 5.06          Limitation of Suits..............................................................33
         Section 5.07          Unconditional Rights of Noteholders To Receive Principal and Interest............33
         Section 5.08          Restoration of Rights and Remedies...............................................34
         Section 5.09          Rights and Remedies Cumulative...................................................34
         Section 5.10          Delay or Omission Not a Waiver...................................................34
         Section 5.11          Control By Noteholders...........................................................34
         Section 5.12          Waiver of Past Defaults..........................................................35
         Section 5.13          Undertaking for Costs............................................................35
         Section 5.14          Waiver of Stay or Extension Laws.................................................35
         Section 5.15          Sale of Trust Estate.............................................................35
         Section 5.16          Action on Notes..................................................................37
         Section 5.17          Performance and Enforcement of Certain Obligations...............................37

ARTICLE VI            The Indenture Trustee and Securities Administrator........................................39

         Section 6.01          Duties of Indenture Trustee and Securities Administrator.........................39
         Section 6.02          Rights of Indenture Trustee and Securities Administrator.........................40
         Section 6.03          Individual Rights of Indenture Trustee...........................................43
         Section 6.04          Indenture Trustee's and Securities Administrator's Disclaimers...................43
         Section 6.05          Notice of Event of Default.......................................................43
         Section 6.06          Reports by Indenture Trustee to Holders and Tax Administration...................43
         Section 6.07          Compensation.....................................................................43

                                       II
<PAGE>

         Section 6.08          Replacement of Indenture Trustee and the Securities Administrator................45
         Section 6.09          Successor Indenture Trustee and Securities Administrator by Merger...............46
         Section 6.10          Appointment of Co-Indenture Trustee or Separate Indenture Trustee................46
         Section 6.11          Eligibility; Disqualification....................................................47
         Section 6.12          Preferential Collection of Claims Against Issuer.................................47
         Section 6.13          Representations and Warranties...................................................48
         Section 6.14          Directions to Indenture Trustee and the Securities Administrator.................48
         Section 6.15          The Agents.......................................................................48
         Section 6.16          Other Basic Documents............................................................49

ARTICLE VII           Noteholders' Lists and Reports............................................................50

         Section 7.01          Issuer To Furnish Securities Administrator Names and Addresses of
                               Noteholders......................................................................50
         Section 7.02          Preservation of Information; Communications to Noteholders.......................50
         Section 7.03          Statements to Noteholders........................................................50

ARTICLE VIII          Accounts, Disbursements and Releases......................................................54

         Section 8.01          Collection of Money..............................................................54
         Section 8.02          [Reserved].......................................................................54
         Section 8.03          Officer's Certificate............................................................54
         Section 8.04          Termination Upon Distribution to Noteholders.....................................54
         Section 8.05          Release of Trust Estate..........................................................54
         Section 8.06          Surrender of Notes Upon Final Payment............................................55
         Section 8.07          Optional Redemption of the Notes.................................................55
         Section 8.08          Swap Agreement...................................................................56
         Section 8.09          Rights of Swap Provider..........................................................56

ARTICLE IX            Supplemental Indentures...................................................................57

         Section 9.01          Supplemental Indentures Without Consent of Noteholders...........................57
         Section 9.02          Supplemental Indentures With Consent of Noteholders..............................58
         Section 9.03          Execution of Supplemental Indentures.............................................59
         Section 9.04          Effect of Supplemental Indenture.................................................60
         Section 9.05          Conformity with Trust Indenture Act..............................................60
         Section 9.06          Reference in Notes to Supplemental Indentures....................................60

ARTICLE X             Miscellaneous.............................................................................61

         Section 10.01         Compliance Certificates and Opinions, etc........................................61
         Section 10.02         Form of Documents Delivered to Indenture Trustee.................................62
         Section 10.03         Acts of Noteholders..............................................................63
         Section 10.04         Notices etc., to Indenture Trustee, Securities Administrator, Issuer and
                               Rating Agencies..................................................................64
         Section 10.05         Notices to Noteholders; Waiver...................................................64
         Section 10.06         Conflict with Trust Indenture Act................................................65

                                      III

<PAGE>

         Section 10.07         Effect of Headings...............................................................65
         Section 10.08         Successors and Assigns...........................................................65
         Section 10.09         Separability.....................................................................65
         Section 10.10         [Reserved].......................................................................65
         Section 10.11         Legal Holidays...................................................................65
         Section 10.12         GOVERNING LAW....................................................................65
         Section 10.13         Counterparts.....................................................................66
         Section 10.14         Recording of Indenture...........................................................66
         Section 10.15         Issuer Obligation................................................................66
         Section 10.16         No Petition......................................................................66
         Section 10.17         Inspection.......................................................................66
         Section 10.18         Limitation of Liability of Owner Trustee.........................................67
</TABLE>

                                    EXHIBITS

Exhibit A-1...............Form of Class A-[__] Notes
Exhibit A-2...............Form of Class M-[__] Notes
Exhibit A-3...............Form of Class B-[__] Notes
Exhibit B.................Schedule of Notional Balances of the Swap Agreement

                                      IV

<PAGE>

<TABLE>
<CAPTION>

              RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE PROVISIONS*

          Trust Indenture
            Act Section                                                            Indenture Section
<S>        <C>                                                                    <C>
             310(a)(1)......................................................               6.11
                (a)(2)......................................................               6.11
                (a)(3)......................................................               6.10
                (a)(4)......................................................          Not Applicable
                (a)(5)......................................................               6.11
                (b).........................................................               6.08, 6.11
                (c).........................................................          Not Applicable
             311(a).........................................................               6.12
                (b).........................................................               6.12
                (c).........................................................          Not Applicable
             312(a).........................................................               7.01, 7.02(a)
                (b).........................................................               7.02(b)
                (c).........................................................               7.02(c)
             313(a).........................................................         Not Applicable
                (b).........................................................         Not Applicable
                (c).........................................................         Not Applicable
                (d).........................................................         Not Applicable
             314(a).........................................................               3.10
                 (b)........................................................               3.07
                (c)(1)......................................................               8.05(c), 10.01(a)
                (c)(2)......................................................               8.05(c), 10.01(a)
                (c)(3)......................................................          Not Applicable
                (d)(1)......................................................               8.05(c), 10.01(b)
                (d)(2)......................................................               8.05(c), 10.01(b)
                (d)(3)......................................................               8.05(c), 10.01(b)
                (e).........................................................              10.01(a)
             315(a).........................................................               6.01(b)
                (b).........................................................               6.05
                (c).........................................................               6.01(a)
                (d).........................................................               6.01(c)
                (d)(1)......................................................               6.01(c)
                (d)(2)......................................................               6.01(c)
                (d)(3)......................................................               6.01(c)
                (e).........................................................               5.13
             316(a)(1)(A)...................................................               5.11
             316(a)(1)(B)...................................................               5.12
             316(a)(2)......................................................          Not Applicable
             316(b).........................................................               5.07
             317(a)(1)......................................................               5.04
             317(a)(2)......................................................               5.03(d)
             317(b).........................................................               3.03(a)(i)
             318(a).........................................................              10.07
</TABLE>

                                       v
<PAGE>

                  This Indenture, dated as of January 28, 2005, is entered into
among People's Choice Home Loan Securities Trust Series 2005-1, a Delaware
statutory trust, as Issuer (the "Issuer"), Wells Fargo Bank, N.A., as Securities
Administrator (the "Securities Administrator"), and HSBC Bank USA, National
Association, a national banking association, as Indenture Trustee (the
"Indenture Trustee").

                                WITNESSETH THAT:

                  Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the Issuer's
People's Choice Home Loan Securities Trust Series 2005-1, Mortgage-Backed Notes,
Series 2005-1 (the "Notes").

                                 GRANTING CLAUSE

                  The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as trustee for the benefit of the Holders of the Notes and Swap
Provider, all of the Issuer's right, title and interest in and to whether now
existing or hereafter created by (a) the Mortgage Loans, Substitute Mortgage
Loans and the proceeds thereof and all rights under the Related Documents; (b)
all funds on deposit from time to time in the Protected Account excluding any
investment income from such funds; (c) all funds on deposit from time to time in
the Payment Account excluding any investment income from such funds; (d) any REO
Property, (e) the Required Insurance Policies and any amounts paid or payable by
the insurer under any Insurance Policy (to the extent the mortgagee has a claim
thereto), (f) all rights under (i) the Mortgage Loan Purchase Agreement as
assigned to the Issuer to the extent provided in Subsection 2.03(a) of the Sale
and Servicing Agreement and (ii) the rights with respect to the Servicing
Agreements, as assigned to the Issuer pursuant to the Assignment Agreements; (g)
the rights of the Issuer under the Swap Agreement and all payments received
under the Swap Agreement and (h) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing and all payments
on or under, and all proceeds of every kind and nature whatsoever in respect of,
any or all of the foregoing and all payments on or under, and all proceeds of
every kind and nature whatsoever in the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing (collectively,
the "Trust Estate" or the "Collateral").

                  The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.

                  The Indenture Trustee, as trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions hereof and each of the Indenture Trustee and the
Securities Administrator agree to perform their respective duties as Indenture
Trustee and Securities Administrator as required herein.

<PAGE>

                              ARTICLE I DEFINITIONS

                  Section 1.01 Definitions. For all purposes of this Indenture,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Definitions attached hereto as Appendix A which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.

                  Section 1.02 Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the Trust Indenture Act
(the "TIA"), the provision is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:

                  "Commission" means the Securities and Exchange Commission.

                  "indenture securities" means the Notes.

                  "indenture security holder" means a Noteholder.

                  "indenture to be qualified" means this Indenture.

                  "indenture trustee" or "institutional trustee" means the
Indenture Trustee.

                  "obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.

         All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rules have
the meanings assigned to them by such definitions.

                  Section 1.03 Rules of Construction. Unless the context
otherwise requires:

                  (i) a term has the meaning assigned to it;

                  (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time;

                  (iii) "or" is not exclusive;

                  (iv) "including" means including without limitation;

                  (v) words in the singular include the plural and words in the
plural include the singular; and

                  (vi) 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.

                                       2
<PAGE>

                      ARTICLE II ORIGINAL ISSUANCE OF NOTES

                  Section 2.01 Form. The Class A Notes, Class M Notes and Class
B Notes, together with the Securities Administrator's certificate of
authentication, shall be in substantially the form set forth in Exhibits A-1,
A-2 and A-3 to this Indenture, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture.

         The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders).

         The terms of the Notes set forth in Exhibits A-1, A-2 and A-3 to this
Indenture are part of the terms of this Indenture.

         Section 2.02 Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.

         Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

         The Securities Administrator shall upon Issuer Request authenticate and
deliver the Class IA1, Class IA2, Class IA3, Class IIA1, Class IIA2, Class M1,
Class M2, Class M3, Class M4, Class M5, Class B1, Class B2, Class B3, Class B4A
and Class B4B Notes for original issue in an aggregate initial principal amount
of $1,074,700,000. The Class IA1 Notes shall be issued in an aggregate initial
principal amount of $254,852,000, the Class IA2 Notes shall be issued in an
aggregate initial principal amount of $91,603,000, the Class IA3 Notes shall be
issued in an aggregate initial principal amount of $74,641,000, the Class IIA1
Notes shall be issued in an aggregate initial principal amount of $357,003,000,
the Class IIA2 Notes shall be issued in an aggregate initial principal amount of
$89,251,000, the Class M1 Notes shall be issued in an aggregate initial
principal amount of $40,700,000, the Class M2 Notes shall be issued in an
aggregate initial principal amount of $35,200,000, the Class M3 Notes shall be
issued in an aggregate initial principal amount of $22,000,000, the Class M4
Notes shall be issued in an aggregate initial principal amount of $38,500,000,
the Class M5 Notes shall be issued in an aggregate initial principal amount of
$17,600,000, the Class B1 Notes shall be issued in an aggregate initial
principal amount of $14,300,000, the Class B2 Notes shall be issued in an
aggregate initial principal amount of $11,000,000, the Class B3 Notes shall be
issued in an aggregate initial principal amount of $11,000,000, the Class B4A
Notes shall be issued in an aggregate initial principal amount of $15,050,000
and the Class B4B Notes shall be issued in an aggregate initial principal amount
of $2,000,000.

         Each of the Notes shall be dated the date of its authentication. The
Class IA1, Class IA2, Class IA3, Class IIA1 and Class IIA2 Notes shall be
issuable as registered Notes and the Notes shall be issuable in the minimum
initial Note Principal Balances of $25,000 and in integral multiples of $1 in
excess thereof. The Class M Notes and Class B Notes shall be issuable as

                                       3
<PAGE>

registered Notes and the Notes shall be issuable in the minimum initial Note
Principal Balances of $100,000 and in integral multiples of $1 in excess
thereof.

         No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Securities Administrator by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.

                              ARTICLE III COVENANTS

         Section 3.01 Maintenance of Payment Account. The Securities
Administrator shall maintain the Payment Account established pursuant to Section
4.04 of the Sale and Servicing Agreement in accordance with the requirements of
such Section. The Securities Administrator shall make all payments of principal
of and interest on the Notes (subject to Section 3.03) as provided in Section
3.05 herein from monies on deposit in the Payment Account.

         Section 3.02 Maintenance of Office or Agency. The Issuer will maintain
an office or agency where, subject to satisfaction of conditions set forth
herein, Notes may be surrendered for registration of transfer or exchange, and
where notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Securities
Administrator to serve as its agent for the foregoing purposes. If at any time
the Issuer shall fail to maintain any such office or agency or shall fail to
furnish the Securities Administrator with the address thereof, such surrenders
may be made at the Corporate Trust Office and notices and demands may be made or
delivered to the Corporate Trust Office, and the Issuer hereby appoints the
Securities Administrator as its agent to receive all such surrenders, notices
and demands.

         Section 3.03 Money for Payments To Be Held in Trust; Paying Agent. (a)
As provided in Section 3.01, all payments of amounts due and payable with
respect to any Notes that are to be made from amounts withdrawn from the Payment
Account pursuant to Section 3.05 shall be made on behalf of the Issuer by the
Securities Administrator or by the Paying Agent, based on information provided
by the Securities Administrator to the Paying Agent and no amounts so withdrawn
from the Payment Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section 3.03. The Securities Administrator shall
calculate the amount to be distributed to each Class and, based on such amounts,
the Securities Administrator shall determine the amount to be distributed to
each Noteholder. All of the Securities Administrator's calculations of payments
shall be based solely on information provided to the Securities Administrator by
the Master Servicer pursuant to Section 3.01 of the Sale and Servicing
Agreement. Neither the Securities Administrator nor the Indenture Trustee shall
be required to confirm, verify or recompute any such information but shall be
entitled to rely conclusively on such information. The Issuer hereby appoints
the Securities Administrator as its initial Paying Agent.

         The Issuer will cause each Paying Agent, other than the Securities
Administrator, to execute and deliver to the Securities Administrator and the
Indenture Trustee an instrument in

                                       4
<PAGE>

which such Paying Agent shall agree with the Securities Administrator and the
Indenture Trustee (and if the Securities Administrator or the Indenture Trustee
acts as Paying Agent it hereby so agrees), subject to the provisions of this
Section 3.03, that such Paying Agent will:

         (i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;

         (ii) give the Securities Administrator and the Indenture Trustee notice
of any default by the Issuer of which it has actual knowledge in the making of
any payment required to be made with respect to the Notes;

         (iii) at any time during the continuance of any such default, upon the
written request of either the Securities Administrator or the Indenture Trustee,
forthwith pay to the Securities Administrator all sums so held in trust by such
Paying Agent;

         (iv) immediately resign as Paying Agent and forthwith pay to the
Securities Administrator all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment;

         (v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith; and

         (vi) not commence a bankruptcy proceeding against the Issuer in
connection with this Indenture.

         The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Request direct any Paying Agent to pay to the Securities Administrator all sums
held in trust by such Paying Agent, such sums to be held by the Securities
Administrator upon the same trusts as those upon which the sums were held by
such Paying Agent; and upon such payment by any Paying Agent to the Securities
Administrator such Paying Agent shall be released from all further liability
with respect to such money.

         Subject to applicable laws with respect to escheat of funds, any money
held by the Securities Administrator or any Paying Agent in trust for the
payment of any amount due with respect to any Note and remaining unclaimed for
one year after such amount has become due and payable shall be discharged from
such trust and be paid to the Issuer; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Securities Administrator or such Paying Agent with
respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that the
Securities Administrator or such Paying Agent, before being required to make any
such repayment, shall at the expense and direction of the Issuer cause to be
published once, in an Authorized Newspaper published in the English language,
notice that such money remains unclaimed and that, after a date specified
therein which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
The Securities Administrator may also adopt and employ, at the

                                       5
<PAGE>

expense and direction of the Issuer, any other reasonable means of notification
of such repayment (including, but not limited to, mailing notice of such
repayment to Holders whose Notes have been called but have not been surrendered
for redemption or whose right to or interest in monies due and payable but not
claimed is determinable from the records of the Securities Administrator or of
any Paying Agent, at the last address of record for each such Holder).

         Section 3.04 Existence. The Issuer will keep in full effect its
existence, rights and franchises as a statutory trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States of
America, in which case the Issuer will keep in full effect its existence, rights
and franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Mortgage Loans and each other
instrument or agreement included in the Trust Estate.

         Section 3.05 Payment of Principal and Interest. (a) On each Payment
Date from amounts on deposit in the Payment Account, the Securities
Administrator shall pay to the Persons specified below the Interest Funds for
such Payment Date.

         (b) On each Payment Date, the Interest Funds shall be distributed in
the following order of priority, in each case to the extent of the Interest
Funds remaining for such Payment Date:

                  (i) to pay the Servicing Fee (to the extent not retained by
the Servicer);

                  (ii) to the Swap Provider, any Net Swap Payment or any Swap
Termination Payment (not triggered by a Swap Provider Trigger Event) owed to the
Swap Provider pursuant to the Swap Agreement;

                  (iii) concurrently, to the holders of the Class A Notes, pro
rata based on the entitlement of each such Class, the related Accrued Note
Interest for such classes for such Payment Date;

                  (iv) to the holders of the Class M1 Notes, the related Accrued
Note Interest for such class for such Payment Date;

                  (v) to the holders of the Class M2 Notes, the related Accrued
Note Interest for such class for such Payment Date;

                  (vi) to the holders of the Class M3 Notes, the related Accrued
Note Interest for such class for such Payment Date;

                  (vii) to the holders of the Class M4 Notes, the related
Accrued Note Interest for such class for such Payment Date;

                  (viii) to the holders of the Class M5 Notes, the related
Accrued Note Interest for such class for such Payment Date; and

                                       6
<PAGE>

                  (ix) to the holders of the Class B1 Notes, the related Accrued
Note Interest for such class for such Payment Date;

                  (x) to the holders of the Class B2 Notes, the related Accrued
Note Interest for such class for such Payment Date;

                  (xi) to the holders of the Class B3 Notes, the related Accrued
Note Interest for such class for such Payment Date;

                  (xii) concurrently, to the holders of the Class B4A Notes and
Class B4B Notes, pro rata based on the entitlement of each such Class, the
related Accrued Note Interest for such class for such Payment Date; and

                  (xiii) any remainder as part of the Net Monthly Excess
Cashflow to be allocated as described under section (e) above.

                  (c) On each Payment Date, (a) prior to the Stepdown Date or
(b) on which a Trigger Event is in effect, Principal Funds shall be paid in the
following order of priority:

                  (i) to the Swap Provider, any Net Swap Payments or any Swap
Termination Payment (not triggered by a Swap Provider Trigger Event) remaining
unpaid after all payments made pursuant to section (b) above have been made, on
such Payment Date;

                  (ii) the related Class A Principal Allocation Fraction of the
Principal Payment Amount shall be allocated concurrently as follows:

                    (A) sequentially, to the Class IA1, Class IA2 and Class IA3
                    Notes, in that order, until the Note Principal Balance of
                    each such Class is reduced to zero,

                    (B) concurrently, to the Class IIA1 Notes and Class IIA2
                    Notes, pro rata, PROVIDED HOWEVER, if a Group II Sequential
                    Trigger Event is in effect, principal will be allocated to
                    the Class IIA1 Notes and Class IIA2 Notes sequentially, in
                    that order, until the Note Principal Balance of each such
                    Class is reduced to zero;

                    provided, however, that after the aggregate Note Principal
                    Balance of any of the Class IA Notes or Class IIA Notes have
                    been reduced to zero, amounts otherwise distributable to
                    such retired Notes pursuant to clause (ii) above shall be
                    distributed to the Class A Notes of the unrelated group, in
                    the manner and order of priority set forth in clauses
                    (ii)(A) and (B) above as applicable, based on the Note
                    Principal Balances thereof, until the aggregate Note
                    Principal Balance thereof has been reduced to zero;

                  (iii) sequentially, to the Class M1, Class M2, Class M3, Class
M4, Class M5, Class B1, Class B2 and Class B3 Notes, in that order, until the
Note Principal Balance of each such Class is reduced to zero;

                                       7
<PAGE>

                  (iv) concurrently, to the Class B4A Notes and Class B4B Notes,
pro rata, until the Note Principal Balance of each such Class is reduced to
zero; and

                  (v) any remainder as part of the Net Monthly Excess Cashflow
to be allocated as described under section (e) below.

        (d) On each Payment Date (a) on or after the Stepdown Date and (b) on
which a Trigger Event is not in effect, Principal Funds shall be paid in the
following order of priority:

                  (i) to the Swap Provider, any Net Swap Payments or any Swap
Termination Payment (not triggered by a Swap Provider Trigger Event) remaining
unpaid after all payments made pursuant to section (b) above have been made, on
such Payment Date:

                  (ii) the related Class A Principal Allocation Fraction of the
Senior Principal Payment Amount shall be allocated concurrently as follows:

               (A) sequentially, to the Class IA1, Class IA2 and Class IA3
               Notes, in that order, until the Note Principal Balances of such
               Classes are reduced to zero,

               (B) concurrently on a pro rata basis, to the Class IIA1 Notes and
               Class IIA2 Notes, until the Note Principal Balance of each such
               Class is reduced to zero;

               provided, however, that after the aggregate Note Principal
               Balance of any of the Class IA Notes or Class IIA Notes have been
               reduced to zero, amounts otherwise distributable to such retired
               Notes pursuant to clause (ii) above shall be distributed to the
               Class A Notes of the unrelated groups, in the manner and order of
               priority set forth in clauses (ii)(A) and (B) above, as
               applicable, based on the Note Principal Balances thereof, until
               the aggregate Note Principal Balance thereof has been reduced to
               zero;

                  (iii) to the Class M1 Notes, the Class M1 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (iv) to the Class M2 Notes, the Class M2 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (v) to the Class M3 Notes, the Class M3 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (vi) to the Class M4 Notes, the Class M4 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (vii) to the Class M5 Notes, the Class M5 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                                       8
<PAGE>

                  (viii) to the Class B1 Notes, the Class B1 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (ix) to the Class B2 Notes, the Class B2 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (x) to the Class B3 Notes, the Class B3 Principal Payment
Amount until the Note Principal Balance thereof has been reduced to zero;

                  (xi) concurrently on a pro rata basis, to the Class B4A Notes
and Class B4B Notes, the Class B4 Principal Payment Amount, until the Note
Principal Balance thereof has been reduced to zero; and

                  (xii) any remainder as part of the Net Monthly Excess Cashflow
to be allocated as described under section (e) below.

        (e) On each Payment Date, any Net Monthly Excess Cashflow shall be
paid as follows:

                  (i) to pay the Indenture Trustee, unreimbursed Extraordinary
Expenses in excess of the limitation set forth in this Indenture;

                  (ii) to the Notes, an amount equal to any Extra Principal
Payment Amount, payable as part of the Principal Payment Amount in the same
manner and order of priority as described under sections (c) and (d) above;

                  (iii) concurrently on a pro rata basis, based on the amount of
any Basis Risk Shortfall Carry-Forward Amounts, to the Class A Notes, in an
amount equal to any Basis Risk Shortfall Carry-Forward Amount for such Class or
Classes;

                  (iv) sequentially, to the Class M1, Class M2, Class M3, Class
M4, Class M5, Class B1, Class B2 and Class B3 Notes, in that order, in an amount
equal to any Basis Risk Shortfall Carry-Forward Amount for such Class or
Classes;

                  (v) concurrently on a pro rata basis, based on the amount of
any Basis Risk Shortfall Carry-Forward Amounts to the Class B4A Notes and Class
B4B Notes, in an amount equal to any Basis Risk Shortfall Carry-Forward Amount
for such Class or Classes;

                  (vi) sequentially, to the Class M1, Class M2, Class M3, Class
M4, Class M5, Class B1, Class B2 and Class B3 Notes, in that order, in an amount
equal to any Deferred Interest for such Class or Classes;

                  (vii) concurrently on a pro rata basis, in accordance with the
amount of Deferred Interest due with respect to each such Class, to the Class
B4A Notes and Class B4B Notes, in an amount equal to any Deferred Interest for
such Class or Classes;

                  (viii) to the Swap Provider, any unpaid Swap Termination
Payment triggered by a Swap Provider Trigger Event pursuant to the Swap
Agreement;

                                       9
<PAGE>

                  (ix) any amount payable by the Trust for the purchase of a
substitute Swap Agreement, as provided in the Sale and Servicing Agreement; and

                  (x) any remaining amounts will be distributed to the
Certificate Paying Agent, as designee of the Issuer, for the benefit of the
Holders of the Owner Trust Certificates.

         (f) [Reserved].

         (g) [Reserved].

         (h) [Reserved].

                  (i) Each distribution with respect to a Book-Entry Note shall
be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Note Owners that it represents and to each indirect participating brokerage
firm (a "brokerage firm" or "indirect participating firm") for which it acts as
agent. Each brokerage firm shall be responsible for disbursing funds to the Note
Owners that it represents None of the Indenture Trustee, the Note Registrar, the
Paying Agent, the Depositor, the Securities Administrator or the Master Servicer
shall have any responsibility therefor except as otherwise provided by this
Indenture.

                  (j) Any installment of interest or principal, if any, payable
on any Note that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder shall have so requested at least
five Business Days prior to the related Record Date, be paid to each Holder of
record on the preceding Record Date, by wire transfer to an account specified in
writing by such Holder as of the preceding Record Date or in all other cases or
if no such instructions have been delivered to the Securities Administrator, by
check to such Noteholder mailed to such Holder's address as it appears in the
Note Register in the amount required to be distributed to such Holder on such
Payment Date pursuant to such Holder's Notes; PROVIDED, HOWEVER, that the
Securities Administrator shall not pay to such Holders any amount required to be
withheld from a payment to such Holder by the Code.

                  (k) The principal of each Note shall be due and payable in
full on the Final Scheduled Payment Date for such Note as provided in the forms
of Note set forth in Exhibits A-1, A-2 and A-3 to this Indenture. All principal
payments on the Notes shall be made to the Noteholders entitled thereto in
accordance with the Percentage Interests represented by such Notes. Upon notice
to the Securities Administrator by the Issuer, the Securities Administrator
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Final Scheduled Payment Date or other
final Payment Date (including any final Payment Date resulting from any
redemption pursuant to Section 8.07 hereof). Such notice shall to the extent
practicable be mailed no later than five Business Days prior to such Final
Scheduled Payment Date or other final Payment Date and shall specify that
payment of the principal amount and any interest due with respect to such Note
at the Final Scheduled Payment Date or other final Payment Date will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for such final

                                       10
<PAGE>

payment. No interest shall accrue on the Notes on or after the Final Scheduled
Payment Date or any such other final Payment Date.

                  Section 3.06 Protection of Trust Estate. (a) The Issuer will
from time to time prepare, execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and will take such other
action necessary or advisable to:

                  (i) maintain or preserve the lien and security interest (and
the priority thereof) of this Indenture or carry out more effectively the
purposes hereof;

                  (ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;

                  (iii) cause the Issuer or the Indenture Trustee to enforce any
of the rights to the Mortgage Loans; or

                  (iv) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee and the Noteholders in the Trust Estate against
the claims of all persons and parties.

         (b) Except as otherwise provided in this Indenture, the Indenture
Trustee shall not remove or permit the Custodian to remove any portion
of the Trust Estate that consists of money or is evidenced by an instrument,
certificate or other writing from the jurisdiction in which it was held at the
date of the most recent Opinion of Counsel delivered pursuant to Section 3.07
hereof (or from the jurisdiction in which it was held as described in the
Opinion of Counsel delivered on the Closing Date pursuant to Section 3.07(a)
hereof, or if no Opinion of Counsel has yet been delivered pursuant to Section
3.07(b) hereof, unless the Indenture Trustee shall have first received an
Opinion of Counsel to the effect that the lien and security interest created by
this Indenture with respect to such property will continue to be maintained
after giving effect to such action or actions).

         The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to sign any financing statement, continuation statement or
other instrument required to be signed pursuant to this Section 3.06 upon the
Issuer's preparation thereof and delivery to the Indenture Trustee with
appropriate instructions.

         Section 3.07 Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the lien and first
priority security interest in the Collateral and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action is
necessary to make such lien and first priority security interest effective.

        (b) On or before April 15 in each calendar year, beginning in 2006, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at the
expense of the Issuer either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording,

                                       11
<PAGE>

filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and with respect to the execution and
filing of any financing statements and continuation statements as is necessary
to maintain the lien and first priority security interest in the Collateral and
reciting the details of such action or stating that in the opinion of such
counsel no such action is necessary to maintain such lien and security interest
Such Opinion of Counsel shall also describe the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest in the Collateral until December 31
in the following calendar year.

         Section 3.08 Performance of Obligations. (a) The Issuer will punctually
perform and observe all of its obligations and agreements contained in this
Indenture, the Basic Documents and in the instruments and agreements included in
the Trust Estate.

         (b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer.

         (c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any of the documents relating to
the Mortgage Loans or any such instrument, except such actions as the Master
Servicer is expressly permitted to take under the Sale and Servicing Agreement.
The Indenture Trustee, as pledgee of the Mortgage Loans, may (but is not
obligated to) exercise the rights of the Issuer to direct the actions of the
Master Servicer pursuant to the Sale and Servicing Agreement.

         (d) The Issuer may retain an administrator and may enter into contracts
with other Persons for the performance of the Issuer's obligations hereunder,
and performance of such obligations by such Persons shall be deemed to be
performance of such obligations by the Issuer.

          Section 3.09 Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:

                  (i) except as expressly permitted by this Indenture, sell,
transfer, exchange or otherwise dispose of the Trust Estate;

                  (ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any claim against
any present or former Noteholder by reason of the payment of the taxes levied or
assessed upon any part of the Trust Estate;

                  (iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any lien,

                                       12
<PAGE>

charge, excise, claim, security interest, mortgage or other encumbrance (other
than the lien of this Indenture) to be created on or extend to or otherwise
arise upon or burden the Trust Estate or any part thereof or any interest
therein or the proceeds thereof or (C) permit the lien of this Indenture not to
constitute a valid first priority security interest in the Trust Estate; or

                  (iv) waive or impair, or fail to assert rights under, the
Mortgage Loans, or impair or cause to be impaired the Issuer's interest in the
Mortgage Loans, the Mortgage Loan Purchase Agreement or in any Basic Document,
if any such action would materially and adversely affect the interests of the
Noteholders.

         Section 3.10 Annual Statement as to Compliance. The Issuer will deliver
to the Indenture Trustee, by March 30 of each year commencing with the calendar
year 2006, an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:

                  (i) a review of the activities of the Issuer during the
previous calendar year and of its performance under this Indenture has been made
under such Authorized Officer's supervision; and

                  (ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof.

         Section 3.11 [Reserved].

         Section 3.12 Representations and Warranties Concerning the Mortgage
Loans. The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit
of the representations and warranties made by the Seller in the Mortgage Loan
Purchase Agreement concerning the Seller and the Mortgage Loans to the same
extent as though such representations and warranties were made directly to the
Indenture Trustee. If a Responsible Officer of the Indenture Trustee has actual
knowledge of any breach of any representation or warranty made by the Seller in
the Mortgage Loan Purchase Agreement, the Indenture Trustee shall promptly
notify the Seller of such finding and the Seller's obligation to cure such
defect or repurchase or substitute for the related Mortgage Loan.

         Section 3.13 Amendments to Sale and Servicing Agreement. The Issuer
covenants with the Indenture Trustee that it will not enter into any amendment
or supplement to the Sale and Servicing Agreement except in accordance with
Section 7.01 of the Sale and Servicing Agreement.

         Section 3.14 Master Servicer as Agent and Bailee of the Indenture
Trustee. (a) Solely for purposes of perfection under Section 9-305 of the
Uniform Commercial Code or other similar applicable law, rule or regulation of
the state in which such property is held by the Master Servicer, the Issuer and
the Indenture Trustee hereby acknowledge that the Master Servicer is acting as
bailee of the Indenture Trustee in holding amounts on deposit in the Payment
Account, as well as its bailee in holding any Related Documents released to the
Master Servicer, and any other items constituting a part of the Trust Estate
which from time to time come into the possession of the Master Servicer. It is
intended that, by the Master Servicer's acceptance of

                                       13
<PAGE>

such bailee arrangement, the Indenture Trustee, as a secured party of the
Mortgage Loans, will be deemed to have possession of such Related Documents,
such monies and such other items for purposes of Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Master
Servicer. The Indenture Trustee shall not be liable with respect to such
documents, monies or items while in possession of the Master Servicer and the
Master Servicer shall not otherwise be deemed to be the agent of the Indenture
Trustee.

         (b) Solely for purposes of perfection under Section 9-305 of the
Uniform Commercial Code or other similar applicable law, rule or regulation of
the state in which such property is held by the Servicer, the Issuer and the
Indenture Trustee hereby acknowledge that the Servicer is acting as bailee of
the Indenture Trustee in holding amounts on deposit in the Protected Account, as
well as its bailee in holding any Related Documents released to the Servicer,
and any other items constituting a part of the Trust Estate which from time to
time come into the possession of the Servicer. It is intended that, by the
Servicer's acceptance of such bailee arrangement, the Indenture Trustee, as a
secured party of the Mortgage Loans, will be deemed to have possession of such
Related Documents, such monies and such other items for purposes of Section
9-305 of the Uniform Commercial Code of the state in which such property is held
by the Servicer. The Indenture Trustee shall not be liable with respect to such
documents, monies or items while in possession of the Servicer and the Servicer
shall not otherwise be deemed to be the agent of the Indenture Trustee.

         Section 3.15 Investment Company Act. The Issuer shall not become an
"investment company" or be under the "control" of an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
PROVIDED, HOWEVER, that the Issuer shall be in compliance with this Section 3.15
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.

         Section 3.16 Issuer May Consolidate, etc. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:

                  (i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any state or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form reasonably satisfactory
to the Indenture Trustee, the due and punctual payment of the principal of and
interest on all Notes, and all other amounts payable to the Indenture Trustee
and the Securities Administrator, the payment to the Certificate Paying Agent of
all amounts due to the Certificateholders, and the performance or observance of
every agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;

                  (ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing;

                                       14
<PAGE>

                  (iii) each of the Rating Agencies shall have notified the
Issuer that such transaction shall not cause the rating of the Notes to be
reduced, suspended or withdrawn or to be considered by such Rating Agency to be
below investment grade;

                  (iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered a copy thereof to the Indenture Trustee) to the effect that
such transaction will not (A) result in a "significant modification" of the
Notes under Treasury Regulation section 1.1001-3, or adversely affect the status
of the Notes as indebtedness for federal income tax purposes and (B) cause the
Trust to be subject to an entity level tax for federal income tax purposes;

                  (v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and

                  (vi) the Issuer shall have delivered to the Indenture Trustee
an Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for or relating to such
transaction have been complied with (including any filing required by the
Exchange Act), and that such supplemental indenture is enforceable against the
Issuer.

         (b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:

                  (i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer, the conveyance or transfer of which is
hereby restricted, shall (A) be a United States citizen or a Person organized
and existing under the laws of the United States of America or any state
thereof, (B) expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of and interest on all
Notes and the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as provided
herein, (C) expressly agree by means of such supplemental indenture that all
right, title and interest so conveyed or transferred shall be subject and
subordinate to the rights of the Holders of the Notes, (D) unless otherwise
provided in such supplemental indenture, expressly agree to indemnify, defend
and hold harmless the Issuer and the Indenture Trustee against and from any
loss, liability or expense arising under or related to this Indenture and the
Notes and (E) expressly agree by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make all
filings with the Commission (and any other appropriate Person) required by the
Exchange Act in connection with the Notes;

                  (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;

                  (iii) each of the Rating Agencies shall have notified the
Issuer that such transaction shall not cause the ratings of the Notes to be
reduced, suspended or withdrawn;

                  (iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered a copy thereof to the Indenture Trustee) to the effect that
such transaction will not (A)

                                       15
<PAGE>

result in a "significant modification" of the Notes under Treasury Regulation
section 1.1001-3, or adversely affect the status of the Notes as indebtedness
for federal income tax purposes, and (B) cause the Trust to be subject to an
entity level tax for federal income tax purposes;

                  (v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and

                  (vi) the Issuer shall have delivered to the Indenture Trustee
an Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filing required by the
Exchange Act).

         Section 3.17 Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.16(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.

         (b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee of such conveyance or transfer.

         Section 3.18 No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning and selling and managing the
Mortgage Loans and the issuance of the Notes and Certificates in the manner
contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.

         Section 3.19 No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes under this Indenture.

         Section 3.20 Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by this Indenture or the Basic Documents, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.

         Section 3.21 Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).

         Section 3.22 Determination of Note Rate. On each Interest Determination
Date the Securities Administrator shall determine One-Month LIBOR and the
related Note Rate for each

                                       16
<PAGE>

Class of Notes for the following Accrual Period. The establishment of One-Month
LIBOR on each Interest Determination Date by the Securities Administrator and
the Securities Administrator's calculation of the rate of interest applicable to
each Class of Notes for the related Accrual Period shall (in the absence of
manifest error) be final and binding.

         Section 3.23 Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that
the Issuer may make, or cause to be made, distributions and payments to the
Owner Trustee, the Indenture Trustee, Noteholders, the Certificateholders, the
Securities Administrator, the Master Servicer and the Servicer as contemplated
by, and to the extent funds are available for such purpose under this Indenture,
and the Basic Documents. The Issuer will not, directly or indirectly, make
payments to or distributions from the Payment Account except in accordance with
this Indenture and the Basic Documents.

         Section 3.24 Notice of Events of Default. The Issuer shall give the
Indenture Trustee, the Securities Administrator and the Rating Agencies prompt
written notice of each Event of Default hereunder and under the Trust Agreement.

         Section 3.25 Further Instruments and Acts. Upon request of the
Indenture Trustee (it being understood that the Indenture Trustee is not
obligated to make such request), the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.

         Section 3.26 Certain Representations Regarding the Trust Estate.

         (a) With respect to that portion of the Collateral described in clauses
(a) through (h) of the definition of Trust Estate, the Issuer represents to the
Indenture Trustee that:

                  (i) This Indenture creates a valid and continuing security
interest (as defined in the applicable UCC) in the Collateral 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 Issuer.

                  (ii) In each case, within the meaning of the applicable UCC:
(A) the Collateral described in clauses (a) through (c) constitute "deposit
accounts" or "instruments," as applicable; (B) the Collateral described in
clause (d) constitutes "real property;"(C) the Collateral described in clauses
(f) through (h) constitute "general intangibles."

                  (iii) The Issuer owns and has good and marketable title to the
Collateral, free and clear of any lien, claim or encumbrance of any Person.

                  (iv) The Issuer has taken all steps necessary to cause the
Indenture Trustee to become the account holder of the Collateral.

                                       17
<PAGE>

                  (v) Other than the security interest granted to the Indenture
Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the Collateral.

                  (vi) The Collateral is not in the name of any Person other
than the Issuer or the Indenture Trustee. The Issuer has not consented to the
bank maintaining the Collateral to comply with instructions of any Person other
than the Indenture Trustee.

         (b) With respect to any Collateral in which a security interest may be
perfected by filing, the Issuer has not authorized the filing of, and is not
aware of any financing statements against, the Issuer, that include a
description of collateral covering such Collateral, other than any financing
statement relating to the security interest granted to the Indenture Trustee
hereunder or that has been terminated. The Issuer is not aware of any judgment
or tax lien filings against the Issuer.

         (c) The Issuer 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 all Collateral granted to the Indenture Trustee hereunder
in which a security interest may be perfected by filing. Any financing statement
that is filed in connection with this Section 3.26 shall contain a statement
that a purchase or security interest in any collateral described therein will
violate the rights of the secured party named in such financing statement.

         (d) The foregoing representations may not be waived and shall survive
the issuance of the Notes.

         Section 3.27 Allocation of Realized Losses. (a) Prior to each Payment
Date, the Master Servicer shall determine, based solely on information provided
to it by the Servicer, the total amount of Realized Losses that occurred during
the related Prepayment Period.

         (b) Any Realized Losses on the Mortgage Loans shall be allocated on any
Payment Date (i) first, to Net Monthly Excess Cashflow, through an increased
distribution of the Extra Principal Payment Amount for that Payment Date as
provided in Section 3.05 hereof; and (ii) second, in reduction of the
Overcollateralized Amount, until reduced to zero.

         Section 3.28 Special Derivative Contracts.

         (a) At the direction of the Seller, the Indenture Trustee shall, on
behalf of the Trust Estate, enter into Special Derivative Contracts for the
benefit of the Owner Trust Certificates. Any acquisition of a Special Derivative
Contract shall be accompanied by (i) an appropriate amendment to this Indenture,
(ii) any Opinion of Counsel required by Section 10.01 and (iii) the consent of
each Holder of an Owner Trust Certificate to the acquisition of such Special
Derivative Contract.

         (b) All collections, proceeds and other amounts in respect of the
Special Derivative Contracts payable by the Special Derivative Counterparty
shall be distributed to the Owner Trust Certificates on the Payment Date
following receipt thereof by the Securities Administrator on behalf of the
Indenture Trustee.

                                       18
<PAGE>

         (c) Any Special Derivative Contract that provides for any payment
obligation on the part of the Trust Estate must (i) be without recourse to the
assets of the Trust Estate, (ii) contain a non-petition covenant provision from
the Special Derivative Counterparty, (iii) limit payment dates thereunder to
Payment Dates and (iv) contain a provision limiting any cash payments due to the
Special Derivative Counterparty on any day under such Special Derivative
Contract solely to funds available therefor in the Payment Account available to
make payments to the Holders of the Owner Trust Certificates on such Payment
Date.

         (d) Each Special Derivative Contract must (i) provide for the direct
payment of any amounts by the Special Derivative Counterparty thereunder to the
Payment Account at least one Business Day prior to the related Payment Date,
(ii) contain an assignment of all of the Trust Estate's rights (but none of its
obligations) under such Special Derivative Contract to the Indenture Trustee on
behalf the Owner Trust Certificateholders and shall include an express consent
to the Special Derivative Counterparty to such assignment, (iii) provide that in
the event of the occurrence of an Event of Default, such Special Derivative
Contract shall terminate upon the direction of a 50.01% or greater Percentage
Interest of the Owner Trust Certificates and (iv) prohibit the Special
Derivative Counterparty from "setting-off' or "netting" other obligations of the
Trust Estate and its Affiliates against such Special Derivative Counterparty's
payment obligations thereunder.

                                       19
<PAGE>

                                   ARTICLE IV

               THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE

         Section 4.01 The Notes. Each Class of Notes shall be registered in the
name of a nominee designated by the Depository. Beneficial Owners will hold
interests in the Notes through the book-entry facilities of the Depository in
minimum initial Note Principal Balances of $25,000 and integral multiples of $1
in excess thereof with respect to the Class IA1, Class IA2, Class IA3, Class
IIA1 and Class IIA2 Notes and in minimum initial Note Principal Balances of
$100,000 and in integral multiples of $1 in excess thereof with respect to the
Class M Notes and Class B Notes.

         The Indenture Trustee and Securities Administrator may for all purposes
(including the making of payments due on the Notes) deal with the Depository as
the authorized representative of the Beneficial Owners with respect to the Notes
for the purposes of exercising the rights of Holders of the Notes hereunder.
Except as provided in the next succeeding paragraph of this Section 4.01, the
rights of Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08
hereof, Beneficial Owners shall not be entitled to definitive certificates for
the Notes as to which they are the Beneficial Owners. Requests and directions
from, and votes of, the Depository as Holder of the Notes shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners. The
Securities Administrator may establish a reasonable record date in connection
with solicitations of consents from or voting by Noteholders and give notice to
the Depository of such record date. Without the consent of the Issuer and the
Securities Administrator, no Note may be transferred by the Depository except to
a successor Depository that agrees to hold such Note for the account of the
Beneficial Owners.

         In the event the Depository Trust Company resigns or is removed as
Depository, the Depositor may appoint a successor Depository. If no successor
Depository has been appointed within 30 days of the effective date of the
Depository's resignation or removal, each Beneficial Owner shall be entitled to
certificates representing the Notes it beneficially owns in the manner
prescribed in Section 4.08.

         The Notes shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Securities Administrator and delivered by the
Securities Administrator to or upon the order of the Issuer.

         Section 4.02 Registration of and Limitations on Transfer and Exchange
of Notes; Appointment of Note Registrar and Certificate Registrar. The Issuer
shall cause to be kept at the office of the Note Registrar (which shall be the
office specified in Section 3.02) a Note Register in which, subject to such
reasonable regulations as it may prescribe, the Note Registrar shall provide for
the registration of Notes and of transfers and exchanges of Notes as herein
provided.

         Subject to the restrictions and limitations set forth below, upon
surrender for registration or transfer of any Note at the office specified in
Section 3.02, the Issuer shall execute and the Note Registrar shall authenticate
and deliver, in the name of the designated transferee or

                                       20
<PAGE>

transferees, one or more new Notes in authorized initial Note Principal Balances
evidencing the same Class and aggregate Percentage Interests.

         Subject to the foregoing, at the option of the Noteholders, Notes may
be exchanged for other Notes of like tenor and in authorized initial Note
Principal Balances evidencing the same Class and aggregate Percentage Interests
upon surrender of the Notes to be exchanged at the office specified in Section
3.02. Whenever any Notes are so surrendered for exchange, the Issuer shall
execute and the Securities Administrator shall authenticate and deliver the
Notes which the Noteholder making the exchange is entitled to receive. Each Note
presented or surrendered for registration of transfer or exchange shall (if so
required by the Note Registrar) be duly endorsed by, or be accompanied by a
written instrument of transfer in form reasonably satisfactory to the Note
Registrar duly executed by the Holder thereof or his attorney duly authorized in
writing with such signature guaranteed by a commercial bank or trust company.
Notes delivered upon any such transfer or exchange will evidence the same
obligations, and will be entitled to the same rights and privileges, as the
Notes surrendered.

         No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.

         The Issuer hereby appoints the Securities Administrator as (i)
Certificate Registrar to keep at the office of its designated agent as specified
in Section 3.02, a Certificate Register pursuant to Section 3.04 of the Trust
Agreement 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 thereof pursuant to Section 3.04 of the Trust
Agreement and (ii) Note Registrar under this Indenture. The Securities
Administrator hereby accepts such appointments.

         Section 4.03 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Securities Administrator, or the Securities
Administrator receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Securities Administrator
such security or indemnity as may be required by it to hold the Issuer, the
Indenture Trustee and the Securities Administrator harmless, then, in the
absence of notice to the Issuer, the Note Registrar or the Securities
Administrator that such Note has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the UCC are met, the Issuer
shall execute, and upon its request the Securities Administrator shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; PROVIDED, HOWEVER, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable without surrender thereof. If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to the
proviso to the preceding sentence, a bona fide purchaser of the original Note in
lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Securities Administrator shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost

                                       21
<PAGE>

or expense incurred by the Issuer, the Indenture Trustee or the Securities
Administrator in connection therewith.

         Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Securities Administrator) connected therewith.

         Every replacement Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.

         The provisions of this Section 4.03 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.

         Section 4.04 Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Securities Administrator,
the Paying Agent and any agent of the Issuer or the Securities Administrator may
treat the Person in whose name any Note is registered (as of the day of
determination) as the owner of such Note for the purpose of receiving payments
of principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Indenture Trustee, the Securities Administrator, the Paying Agent or any agent
of the Issuer, the Indenture Trustee or the Securities Administrator shall be
affected by notice to the contrary.

         Section 4.05 Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Securities Administrator, be delivered to the Securities
Administrator and shall be promptly cancelled by the Securities Administrator.
The Issuer may at any time deliver to the Securities Administrator for
cancellation any Notes previously authenticated and delivered hereunder which
the Issuer may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly cancelled by the Securities Administrator. No Notes
shall be authenticated in lieu of or in exchange for any Notes cancelled as
provided in this Section 4.05, except as expressly permitted by this Indenture.
All cancelled Notes may be held or disposed of by the Securities Administrator
in accordance with its standard retention or disposal policy as in effect at the
time unless the Issuer shall direct by an Issuer Request that they be destroyed
or returned to it; PROVIDED, HOWEVER, that such Issuer Request is timely and the
Notes have not been previously disposed of by the Securities Administrator.

         Section 4.06 Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. The Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Depository, and
no Beneficial Owner will receive a Definitive Note representing such Beneficial
Owner's interest in such Note, except as provided in Section 4.08. With respect
to

                                       22
<PAGE>

such Notes, unless and until definitive, fully registered Notes (the "Definitive
Notes") have been issued to Beneficial Owners pursuant to Section 4.08:

                  (i) the provisions of this Section 4.06 shall be in full force
and effect;

                  (ii) the Note Registrar, the Indenture Trustee, the Paying
Agent and the Securities Administrator shall be entitled to deal with the
Depository for all purposes of this Indenture (including the payment of
principal of and interest on the Notes and the giving of instructions or
directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Beneficial Owners of the Notes;

                  (iii) to the extent that the provisions of this Section 4.06
conflict with any other provisions of this Indenture, the provisions of this
Section 4.06 shall control;

                  (iv) the rights of Beneficial Owners shall be exercised only
through the Depository and shall be limited to those established by law and
agreements between such Owners of Notes and the Depository and/or the Depository
Participants. Unless and until Definitive Notes are issued pursuant to Section
4.08, the initial Depository will make book-entry transfers among the Depository
Participants and receive and transmit payments of principal of and interest on
the Notes to such Depository Participants; and

                  (v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Note Principal Balances of the Notes, the Depository
shall be deemed to represent such percentage with respect to the Notes only to
the extent that it has received instructions to such effect from Beneficial
Owners and/or Depository Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has delivered
such instructions to the Securities Administrator and the Indenture Trustee, as
required by this Indenture.

         Section 4.07 Notices to Depository. Whenever a notice or other
communication to the Note Holders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Beneficial Owners pursuant to
Section 4.08, the Indenture Trustee or Securities Administrator, as applicable,
shall give all such notices and communications specified herein to be given to
Holders of the Notes to the Depository, and shall have no obl igation to the
Beneficial Owners.

         Section 4.08 Definitive Notes. If (i) the Depositor advises the
Securities Administrator in writing that the Depository is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Depositor is unable to locate a qualified successor within 30 days
or (ii) the Depositor notifies the Indenture Trustee and the Depository of its
intent to terminate the book entry system through the Depository and, upon
receipt of notice of such intent from the Depository, the Beneficial Owners of
the Book-Entry Notes agree to initiate such termination. Upon surrender to the
Securities Administrator of the typewritten Notes representing the Book-Entry
Notes by the Depository, accompanied by registration instructions, the Issuer
shall execute and the Securities Administrator shall authenticate the Definitive
Notes in accordance with the instructions of the Depository. None of the Issuer,
the Note Registrar or the Securities Administrator shall be liable for any delay
in

                                       23
<PAGE>

delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Securities Administrator shall recognize the Holders of the
Definitive Notes as Noteholders.

         In addition, if an Event of Default has occurred and is continuing,
each Note Owner materially adversely affected thereby may at its option request
a Definitive Note evidencing such Noteholder's interest in the related Class of
Notes. In order to make such request, such Noteholder shall, subject to the
rules and procedures of the Depository, provide the Depository or the related
Depository Participant with directions for the Securities Administrator to
exchange or cause the exchange of the Noteholder's interest in such Class of
Notes for an equivalent interest in fully registered definitive form. Upon
receipt by the Securities Administrator of instructions from the Depository
directing the Securities Administrator to effect such exchange (such
instructions to contain information regarding the Class of Notes and the Note
Principal Balance being exchanged, the Depository Participant account to be
debited with the decrease, the registered holder of and delivery instructions
for the Definitive Note, and any other information reasonably required by the
Securities Administrator), (i) the Securities Administrator shall instruct the
Depository to reduce the related Depository Participant's account by the
aggregate Note Principal Balance of the Definitive Note, (ii) the Securities
Administrator shall execute, authenticate and deliver, in accordance with the
registration and delivery instructions provided by the Depository, a Definitive
Note evidencing such Noteholder's interest in such Class of Notes and (iii) the
Securities Administrator shall execute and authenticate a new Book-Entry Note
reflecting the reduction in the Note Principal Balance of such Class of Notes by
the amount of the Definitive Notes.

         Section 4.09 Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness. The Issuer, the Indenture Trustee and the Securities
Administrator (in accordance with Section 6.06 hereof), by entering into this
Indenture, and each Noteholder, by its acceptance of its Note (and each
Beneficial Owner by its acceptance of an interest in the applicable Book-Entry
Note), agree to treat the Notes for federal, state and local income, single
business and franchise tax purposes as indebtedness. The Issuer shall be a "U.S.
person" (as that term is used in section 1.1441-4(a)(3)(ii) of United States
Treasury Regulations) for United States federal income tax purposes.

         Section 4.10 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09,
3.17, 3.19 and 3.20, (v) the rights, obligations (to the extent applicable to
the provisions of the Indenture remaining in effect) and immunities of the
Indenture Trustee and Securities Administrator hereunder (including the rights
of the Indenture Trustee and Securities Administrator under Section 6.07 and the
obligations of the Securities Administrator under Section 4.11), and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes and shall

                                       24
<PAGE>

release and deliver, or cause the Custodian to deliver, the Collateral to or
upon the order of the Issuer, when:

(a)      either:

               (1) all Notes theretofore authenticated and delivered (other than
          (i) Notes that have been destroyed, lost or stolen and that have been
          replaced or paid as provided in Section 4.03 hereof and (ii) Notes for
          whose payment money has theretofore been deposited in trust or
          segregated and held in trust by the Issuer and thereafter repaid to
          the Issuer or discharged from such trust, as provided in Section 3.03)
          have been delivered to the Securities Administrator for cancellation;
          or

               (2) all Notes not theretofore delivered to the Securities
          Administrator for cancellation

               (A) have become due and payable,

               (B) will become due and payable at the Final Scheduled Payment
               Date within one year, or

               (C) have been called for early redemption and the Trust has been
               terminated pursuant to Section 8.07 hereof,

         and the Issuer, in the case of (2)A or (2)B above, has irrevocably
         deposited or caused to be irrevocably deposited with the Securities
         Administrator, cash or direct obligations of or obligations guaranteed
         by the United States of America (which will mature prior to the date
         such amounts are payable), in trust for such purpose, in an amount
         sufficient to pay and discharge the entire indebtedness on such Notes
         then outstanding not theretofore delivered to the Securities
         Administrator for cancellation when due on the Final Scheduled Payment
         Date or other final Payment Date and has delivered to the Securities
         Administrator and the Indenture Trustee a verification report from a
         nationally recognized accounting firm certifying that the amounts
         deposited with the Securities Administrator are sufficient to pay and
         discharge the entire indebtedness of such Notes, or, in the case of
         (2)c. above, the Issuer shall have complied with all requirements of
         Section 8.07 hereof,

         (b) the Issuer has paid or caused to be paid all other sums payable
hereunder; and

         (c) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel, each meeting the applicable requirements
of Section 10.01 hereof, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with and, if the Opinion of Counsel relates to a deposit made in
connection with Section 4.10(a)(2)B above, such opinion shall further be to the
effect that such deposit will constitute an "in-substance defeasance" within the
meaning of Revenue Ruling 85-42, 1985-1 C.B. 36, and in accordance therewith,
the Issuer will be the owner of the assets deposited in trust for federal income
tax purposes.

                                       25
<PAGE>

         Section 4.11 Application of Trust Money. All monies deposited with the
Securities Administrator pursuant to Section 4.10 hereof shall be held in trust
and applied by it, to the extent not otherwise applied to reimburse the
Indenture Trustee and the Securities Administrator for any amounts due and owing
to such parties pursuant to this Indenture or any other amount excluded by
definition from Interest Funds and Principal Funds for such Payment Date, in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent or the Issuer, Certificate Paying
Agent as designee of the Issuer, as the Securities Administrator may determine,
to the Holders of Securities, of all sums due and to become due thereon for
principal and interest or otherwise; but such monies need not be segregated from
other funds except to the extent required herein or required by law.

         Section 4.12 [Reserved].

Section 4.13 Repayment of Monies Held by Paying Agent. In connection with the
satisfaction and discharge of this Indenture with respect to the Notes, all
monies then held by any Person other than the Securities Administrator under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Securities Administrator to be held and applied
according to Section 3.05 and thereupon such Person shall be released from all
further liability with respect to such monies.

         Section 4.14 Temporary Notes. Pending the preparation of any Definitive
Notes, the Issuer may execute and upon its written direction, the Securities
Administrator may authenticate and make available for delivery, temporary Notes
that are printed, lithographed, typewritten, photocopied or otherwise produced,
in any denomination, substantially of the tenor of the Definitive Notes in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.

         If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of the
Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes
upon surrender of the temporary Notes at the Corporate Trust Office of the
Securities Administrator, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Securities Administrator shall authenticate and make available for delivery,
in exchange therefor, Definitive Notes of authorized denominations and of like
tenor, class and aggregate principal amount. Until so exchanged, such temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as Definitive Notes.

         Section 4.15 Representation Regarding ERISA. By acquiring a Note or
interest therein, each Holder of such Note or Beneficial Owner of any such
interest shall be deemed to represent that either (1) it is not acquiring the
Note with Plan Assets or (2) (A) the acquisition, holding and transfer of such
Note will not give rise to a nonexempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code and (B) the Notes are rated investment
grade or better and such person believes that the Notes are properly treated as
indebtedness without substantial equity features for purposes of the Department
of Labor regulation 29 C.F.R. ss. 2510.3-101, and agrees to so treat the Notes.
Alternatively, regardless of the rating of the Notes, such person may provide
the Securities Administrator and the Owner Trustee with an Opinion of Counsel,
which

                                       26
<PAGE>

Opinion of Counsel will not be at the expense of the Issuer, the Depositor, the
Seller, any Underwriter, the Owner Trustee, the Indenture Trustee, the
Securities Administrator, the Master Servicer or the Servicer which opines that
the acquisition, holding and transfer of such Note or interest therein is
permissible under applicable law, will not constitute or result in a non-exempt
prohibited transaction under ERISA or Section 4975 of the Code and will not
subject the Issuer, the Seller, the Depositor, any Underwriter, the Owner
Trustee, the Indenture Trustee, the Securities Administrator, the Master
Servicer or the Servicer to any obligation in addition to those undertaken in
the Indenture and the other Basic Documents.

                                       27
<PAGE>

                         ARTICLE V DEFAULT AND REMEDIES

         Section 5.01 Events of Default. The Issuer shall deliver to the
Indenture Trustee, within five days after learning of the occurrence of an Event
of Default, written notice in the form of an Officer's Certificate of any event
which with the giving of notice and the lapse of time would become an Event of
Default under clause (iii), (iv) or (v) of the definition of "Event of Default",
its status and what action the Issuer is taking or proposes to take with respect
thereto. The Indenture Trustee shall not be deemed to have knowledge of any
Event of Default unless a Responsible Officer has actual knowledge thereof or
unless written notice of such Event of Default is received by a Responsible
Officer and such notice references the Notes, the Trust Estate or this
Indenture.

         Section 5.02 Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee at the written direction of the Holders of Notes representing
not less than a majority of the aggregate Note Principal Balance of the Notes
may declare the Notes to be immediately due and payable, by a notice in writing
to the Issuer (and to the Indenture Trustee if such notice is given by
Noteholders), and upon any such declaration the unpaid Note Principal Balance of
the Notes, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable.

         At any time after such declaration of acceleration of maturity with
respect to an Event of Default has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture Trustee as
hereinafter in this Article V provided, Holders of the Notes representing not
less than a majority of the aggregate Note Principal Balance of the Notes, by
written notice to the Issuer and the Indenture Trustee, may, subject to Section
5.12, waive the related Event of Default and rescind and annul such declaration
and its consequences if:

            (i) the Issuer has paid or deposited with the Indenture Trustee or
Securities Administrator a sum sufficient to pay:

               (A) all payments of principal of and interest on the Notes and
               all other amounts that would then be due hereunder or upon the
               Notes if the Event of Default giving rise to such acceleration
               had not occurred;

               (B) all sums paid or advanced by the Indenture Trustee hereunder
               and the reasonable compensation, expenses, disbursements and
               advances of the Indenture Trustee and its agents and counsel; and

               (C) all Events of Default, other than the nonpayment of the
               principal of the Notes that has become due solely by such
               acceleration, have been cured or waived as provided in Section
               5.12.

No such rescission shall affect any subsequent default or impair any right
consequent thereto.

                                       28
<PAGE>

         Section 5.03   Collection of Indebtedness and Suits for Enforcement by
                        Indenture Trustee.

         (a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer shall, upon demand of the Indenture Trustee,
acting at the direction of the Holders of a majority of the aggregate Note
Principal Balances of the Notes, pay to the Securities Administrator, for the
benefit of the Holders of Notes, the whole amount then due and payable on the
Notes for principal and interest, with interest at the applicable Note Rate upon
the overdue principal, and in addition thereto such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.

         (b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 10.16 hereof may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor the Notes, wherever
situated, the monies adjudged or decreed to be payable.

         (c) If an Event of Default occurs and is continuing, the Indenture
Trustee, subject to the provisions of Section 10.16 hereof may, as more
particularly provided in Section 5.04 hereof, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings, as directed in writing by Holders of a majority of the
aggregate Note Principal Balances of the Notes, to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.

         (d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, as directed in writing by Holders
of a majority of the aggregate Note Principal Balances of the Notes,
irrespective of whether the principal of any Notes shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
the Indenture Trustee shall have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
Proceedings or otherwise:

                                       29
<PAGE>

         (i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for reasonable compensation
to the Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;

         (ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby trustee
or Person performing similar functions in any such Proceedings;

         (iii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on their
behalf, and

         (iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture Trustee
or the Holders of Notes allowed in any judicial proceedings relative to the
Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Securities Administrator and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such Noteholders, to
pay to the Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee.

         (e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.

         (f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes, subject to Section 5.05 hereof.

         (g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee s

                                       30
<PAGE>

hall be a party), the Indenture Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such Proceedings.

         Section 5.04 Remedies; Priorities. (a) If an Event of Default shall
have occurred and be continuing and if an acceleration has been declared and not
rescinded pursuant to Section 5.02 hereof, the Indenture Trustee subject to the
provisions of Section 10.16 hereof may, and shall, at the written direction of
the Holders of a majority of the aggregate Note Principal Balances of the Notes
(subject to Section 6.02(k)) do one or more of the following (subject to Section
5.05 hereof):

         (i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under this
Indenture with respect thereto, whether by declaration or otherwise, enforce any
judgment obtained and collect from the Issuer and any other obligor upon such
Notes monies adjudged due;

         (ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;

         (iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies of
the Indenture Trustee and the Holders of the Notes; and

         (iv) sell the Trust Estate or any portion thereof or rights or interest
therein, at one or more public or private sales called and conducted in any
manner permitted by law;

PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A) the
Indenture Trustee obtains the consent of the Holders of 100% of the aggregate
Note Principal Balance of the Notes, (B) the proceeds of such sale or
liquidation distributable to the Holders of the Notes are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for principal
and interest or (C) the Indenture Trustee determines that the Mortgage Loans
will not continue to provide sufficient funds for the payment of principal of
and interest on the applicable Notes as they would have become due if the Notes
had not been declared due and payable, and the Indenture Trustee obtains the
consent of Holders of 66-2/3% of the aggregate Note Principal Balance of the
Notes. In determining such sufficiency or insufficiency with respect to clause
(B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an
opinion (obtained at the expense of the Trust) of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such purpose.
Notwithstanding the foregoing, so long as an "Event of Default" under the
related Servicing Agreement has not occurred, any Sale of the Trust Estate shall
be made subject to the continued servicing of the Mortgage Loans by the Servicer
as provided in the related Servicing Agreement.

         (b) If the Indenture Trustee or Securities Administrator collects any
money or property pursuant to this Article V, the Securities Administrator shall
pay out the money or property in the following order:

                  FIRST: to the Indenture Trustee and the Securities
         Administrator for amounts due under Section 6.07 hereof or the Sale and
         Servicing Agreement, to the Master Servicer

                                       31
<PAGE>

         for amounts due under the Sale and Servicing Agreement, to the
         Servicer, for amounts due under the related Servicing Agreement, to
         the Custodian for amounts due under Section 3.4 of the Custodial
         Agreement and to the Swap Provider any Net Swap Payments or Swap
         Termination Payment (other than a Swap Termination Payment triggered
         by a Swap Provider Trigger Event) due under the Swap Agreement;

                  SECOND: to the Noteholders for amounts due and unpaid on the
         Notes with respect to interest (not including any Basis Risk Shortfall
         Carry-Forward Amounts), first, to the Class IA Noteholders and Class
         IIA Noteholders, second, sequentially, to the Class M1 Noteholders,
         Class M2 Noteholders, Class M3 Noteholders, Class M4 Noteholders, Class
         M5 Noteholders, Class B1 Noteholders, Class B2 Noteholders and Class B3
         Noteholders, and third, concurrently, to the Class B4A Noteholders and
         Class B4B Noteholders according to the amounts due and payable on the
         Notes for interest;

                  THIRD: to the Noteholders for amounts due and unpaid on the
         Notes with respect to principal, and to each Noteholder ratably,
         without preference or priority of any kind, according to the amounts
         due and payable on such Notes for principal, until the Note Principal
         Balance of each such Class is reduced to zero;

                  FOURTH: to the Noteholders, first, to the Class M1
         Noteholders, second, to the Class M2 Noteholders, third, to the Class
         M3 Noteholders, fourth, to the Class M4 Noteholders, fifth, to the
         Class M5 Noteholders, sixth, to the Class B1 Noteholders, seventh, to
         the Class B2 Noteholders, eighth, to the Class B3 Noteholders, ninth,
         to the Class B4A Noteholders, tenth, to the Class B4B Noteholders, the
         amount of any related Deferred Interest not previously paid;

                  FIFTH: to the Noteholders for amounts due and unpaid on the
         Notes with respect to any related Basis Risk Shortfall Carry-Forward
         Amounts, first, to the Class IA Noteholders, second, to the Class IIA
         Noteholders, third, to the Class M1 Noteholders, fourth, to the Class
         M2 Noteholders, fifth, to the Class M3 Noteholders, sixth, to the Class
         M4 Noteholders, seventh, to the Class M5 Noteholders, eighth, to the
         Class B1 Noteholders, ninth, to the Class B2 Noteholders, tenth, to the
         Class B3 Noteholders, eleventh, to the Class B4A Noteholders, twelfth,
         to the Class B4B Noteholders;

                  SIXTH: to the Swap Provider, any unpaid Swap Termination
         Payment triggered by a Swap Provider Trigger Event; and

                    SEVENTH: to the payment of the remainder, if any to the
         Certificate Paying Agent on behalf of the Issuer or to any other
         person legally entitled thereto.

         The Securities Administrator may fix a record date and Payment Date for
any payment to Noteholders pursuant to this Section 5.04. At least 15 days
before such record date, the Securities Administrator shall mail to each
Noteholder a notice that states the record date, the Payment Date and the amount
to be paid.

         Section 5.05 Optional Preservation of the Trust Estate. If the Notes
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may elect to take

                                       32
<PAGE>

and maintain possession of the Trust Estate. It is the desire of the parties
hereto and the Noteholders that there be at all times sufficient funds for the
payment of principal of and interest on the Notes and other obligations of the
Issuer and, the Indenture Trustee shall take such desire into account when
determining whether or not to take and maintain possession of the Trust Estate.
In determining whether to take and maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.

         Section 5.06 Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless and subject to the provisions of Section 10.16 hereof

         (i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;

         (ii) the Holders of not less than 25% of the aggregate Note Principal
Balances of the Notes have made a written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;

         (iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;

         (iv) the Indenture Trustee for 60 days after its receipt of such notice
of request and offer of indemnity has failed to institute such Proceedings; and

         (v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a majority
of the Note Principal Balances of the Notes.

It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.

         Subject to the last paragraph of Section 5.11 herein, in the event the
Indenture Trustee shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Holders of Notes, each representing less
than a majority of the Note Principal Balances of the Notes, the Indenture
Trustee shall take such action as requested by the Holders representing the
highest amount (in the aggregate) of Note Principal Balances notwithstanding any
other provisions of this Indenture.

         Section 5.07 Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on,

                                       33
<PAGE>

if any, such Note on or after the respective due dates thereof expressed in such
Note or in this Indenture and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.

         Section 5.08 Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.

         Section 5.09 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

         Section 5.10 Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Indenture
Trustee or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as
the case may be.

         Section 5.11 Control By Noteholders. The Holders of a majority of the
aggregate Note Principal Balances of Notes shall have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee (subject to the Indenture Trustee's right to
receive indemnity, as provided herein); provided that:

         (i) such direction shall not be in conflict with any rule of law or
with this Indenture;

         (ii) any direction to the Indenture Trustee to sell or liquidate the
Trust Estate shall be by Holders of Notes representing not less than 100% of the
Note Principal Balances of the Notes; and

         (iii) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction of the
Holders of Notes representing a majority of the Note Principal Balances of the
Notes.

Notwithstanding the rights of Noteholders set forth in this Section 5.11 the
Indenture Trustee need not take any action that it deems unduly prejudicial to
any Noteholder or that it determines might subject it to liability.

                                       34
<PAGE>

         Section 5.12 Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02 hereof,
the Holders of Notes representing not less than a majority of the aggregate Note
Principal Balance of the Notes may waive any past Event of Default and its
consequences except an Event of Default (a) with respect to payment of principal
of or interest on any of the Notes or (b) in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the Holder of
each Note. In the case of any such waiver, the Issuer, the Indenture Trustee and
the Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively, but no such waiver shall extend to any subsequent or
other Event of Default or impair any right consequent thereto.

         Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.

         Section 5.13 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note and each Beneficial Owner of any interest
therein by such Holder's or Beneficial Owner's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Note
Principal Balances of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture.

         Section 5.14 Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.

         Section 5.15 Sale of Trust Estate. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 hereof is expressly subject to the provisions of Section 5.05
hereof and this Section 5.15. The power to effect any such Sale shall not be
exhausted by any one or more Sales as to any portion of the Trust Estate
remaining unsold, but shall continue unimpaired until the entire Trust Estate
shall have been sold or all amounts payable on the Notes and under this
Indenture shall have been paid. The Indenture Trustee may from time to time
postpone any public Sale by public announcement made at the time and place of
such Sale. The Indenture Trustee hereby expressly waives its right to any amount
fixed by law as compensation for any Sale.

                                       35
<PAGE>

         (b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless

               (A) the Holders of all Notes consent to or direct the Indenture
               Trustee to make, such Sale, or

               (B) the proceeds of such Sale would be not less than the entire
               amount which would be payable to the Noteholders under the Notes,
               in full payment thereof in accordance with Section 5.02 hereof,
               on the Payment Date next succeeding the date of such Sale, or

               (C) the Indenture Trustee determines that the conditions for
               retention of the Trust Estate set forth in Section 5.05 hereof
               cannot be satisfied (in making any such determination under
               clauses (2) or (3) of this Section 5.15(b), the Indenture Trustee
               may rely upon an opinion of an Independent investment banking
               firm obtained and delivered as provided in Section 5.05 hereof)
               and the Holders of Notes representing at least 66-2/3% of the
               Note Principal Balances of the Notes consent to such Sale.

The purchase by the Indenture Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or other disposition thereof for
purposes of this Section 5.15(b).

         (c) Unless the Holders representing at least 66-2/3% of the Note
Principal Balances of the Notes have otherwise consented or directed the
Indenture Trustee, at any public Sale of all or any portion of the Trust Estate
at which a minimum bid equal to or greater than the amount described in
paragraph (2) of subsection (b) of this Section 5.15 has not been established by
the Indenture Trustee and no Person bids an amount equal to or greater than such
amount, the Indenture Trustee, acting in its capacity as Indenture Trustee on
behalf of the Noteholders, shall bid an amount (which shall include the
Indenture Trustee's right, in its capacity as Indenture Trustee, to credit bid)
at least $1.00 more than the highest other bid in order to preserve the Trust
Estate on behalf of the Noteholders; provided, sufficient funds are in the Trust
Estate to make such bid.

         (d) In connection with a Sale of all or any portion of the Trust
Estate,

               (A) any Holder or Holders of Notes may bid for and purchase the
               property offered for sale, and upon compliance with the terms of
               sale may hold, retain and possess and dispose of such property,
               without further accountability, and may, in paying the purchase
               money therefor, deliver any Notes or claims for interest thereon
               in lieu of cash up to the amount which shall, upon distribution
               of the net proceeds of such sale, be payable thereon, and such
               Notes, in case the amounts so payable thereon shall be less than
               the amount due thereon, shall be returned to the Holders thereof
               after being appropriately stamped to show such partial payment;

               (B) the Indenture Trustee, may bid for and acquire the property
               offered for Sale in connection with any Sale thereof, and,
               subject to any requirements of, and to the extent permitted by,
               applicable law in

                                       36
<PAGE>

               connection therewith, may purchase all or any portion of the
               Trust Estate in a private sale, and, in lieu of paying cash
               therefor, may make settlement for the purchase price by crediting
               the gross Sale price against the sum of (A) the amount which
               would be distributable to the Holders of the Notes and Holders of
               Certificates as a result of such sale on the Payment Date next
               succeeding the date of such Sale and (B) the expenses of the Sale
               and of any Proceedings in connection therewith which are
               reimbursable to it, without being required to produce the Notes
               in order to complete any such Sale or in order for the net Sale
               price to be credited against such Notes, and any property so
               acquired by the Indenture Trustee shall be held and dealt with by
               it in accordance with the provisions of this Indenture;

               (C) the Indenture Trustee shall execute and deliver an
               appropriate instrument of conveyance, prepared by the Issuer and
               satisfactory to the Indenture Trustee, transferring its interest
               in any portion of the Trust Estate in connection with a Sale
               thereof;

               (D) the Indenture Trustee is hereby irrevocably appointed the
               agent and attorney-in-fact of the Issuer to transfer and convey
               its interest in any portion of the Trust Estate in connection
               with a Sale thereof, and to take all action necessary to effect
               such Sale; and

               (E) no purchaser or transferee at such a Sale shall be bound to
               ascertain the Indenture Trustee's authority, inquire into the
               satisfaction of any conditions precedent or see to the
               application of any monies.

         Section 5.16 Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee or the Securities Administrator shall be applied by the Securities
Administrator upon receipt in accordance with Section 5.04(b) hereof.

         Section 5.17 Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so, the Issuer in
its capacity as holder of the Mortgage Loans, shall take all such lawful action
as the Indenture Trustee may request to cause the Issuer to compel or secure the
performance and observance by the Seller and the Master Servicer, as applicable,
of each of their obligations to the Issuer under or in connection with the
Mortgage Loan Purchase Agreement and the Sale and Servicing Agreement, and to
exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer under or in connection with the Mortgage Loan Purchase Agreement
and the Sale and Servicing Agreement to the extent and in the manner directed by
the Indenture Trustee, as pledgee of the Mortgage Loans, including the
transmission of notices of default on the part of the Seller or the Master
Servicer thereunder and the institution of legal or administrative actions or
proceedings to

                                       37
<PAGE>

compel or secure performance by the Seller or the Master Servicer of each of
their obligations under the Mortgage Loan Purchase Agreement and the Sale and
Servicing Agreement.

         (b) The Indenture Trustee, as pledgee of the Mortgage Loans, may, and
at the direction (which direction shall be in writing or by telephone (confirmed
in writing promptly thereafter)) of the Holders of 66-2/3% of the Note Principal
Balances of the Notes (subject to Section 6.02(k)) shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller or the
Master Servicer under or in connection with the Mortgage Loan Purchase Agreement
and the Sale and Servicing Agreement, including the right or power to take any
action to compel or secure performance or observance by the Seller or the Master
Servicer, as the case may be, of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Mortgage Loan Purchase Agreement and the Sale and
Servicing Agreement, as the case may be, and any right of the Issuer to take
such action shall not be suspended.

                                       38
<PAGE>

          ARTICLE VI THE INDENTURE TRUSTEE AND SECURITIES ADMINISTRATOR

     Section 6.01 Duties of Indenture Trustee and Securities Administrator. (a)
If an Event of Default of which the Indenture Trustee has actual knowledge or
has received written notice has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.

     (b) Except during the continuance of an Event of Default of which the
Indenture Trustee has actual knowledge or has received written notice, in the
case of the Indenture Trustee and, at any time, in the case of the Securities
Administrator:

         (i) the Indenture Trustee and the Securities Administrator undertake to
perform such duties and only such duties as are specifically set forth in this
Indenture and the other Basic Documents to which it is a party and no implied
covenants or obligations shall be read into this Indenture and the other Basic
Documents against the Indenture Trustee or the Securities Administrator; and

         (ii) in the absence of bad faith on its part, the Indenture Trustee and
the Securities Administrator may each conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to each of the Indenture Trustee and the
Securities Administrator and conforming to the requirements of this Indenture;
however, the Indenture Trustee and the Securities Administrator shall each
examine the certificates and opinions to determine whether or not they conform
on their face to the requirements of this Indenture.

     (c) The Indenture Trustee and the Securities Administrator may not be
relieved from liability for each of its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

         (i) this paragraph does not limit the effect of paragraph (b) of this
Section 6.01;

         (ii) neither the Indenture Trustee nor the Securities Administrator
shall be liable for any error of judgment made in good faith by a Responsible
Officer unless it is proved that the Indenture Trustee or the Securities
Administrator, as applicable, was negligent in ascertaining the pertinent facts;
and

         (iii) neither the Indenture Trustee nor the Securities Administrator
shall be liable with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it from Noteholders or from the
Issuer, which they are entitled to give under the Basic Documents.

     (d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.

                                       39
<PAGE>

     (e) Money held in trust by the Indenture Trustee need not be segregated
from other trust funds except to the extent required by law or the terms of this
Indenture, the Sale and Servicing Agreement or the Trust Agreement.

     (f) No provision of this Indenture shall require the Indenture Trustee or
the Securities Administrator to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or indemnity satisfactory to it against
such risk or liability is not reasonably assured to it.

     (g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.

     (h) The Indenture Trustee shall act in accordance with Sections 6.03 and
6.04 of the Sale and Servicing Agreement and shall act as successor to the
Master Servicer or appoint a successor Master Servicer in accordance with
Section 6.02 of the Sale and Servicing Agreement.

     (i) In order to comply with its duties under the USA Patriot Act of 2001,
the Indenture Trustee shall obtain and verify certain information and
documentation from the other parties to this Indenture including, but not
limited to, each such party's name, address and other identifying information.

     Section 6.02 Rights of Indenture Trustee and Securities Administrator.
Except as provided in Section 6.01: (a) The Indenture Trustee and the Securities
Administrator may rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Indenture Trustee and the
Securities Administrator need not investigate any fact or matter stated in the
document.

     (b) Before the Indenture Trustee or the Securities Administrator acts or
refrains from acting, it may require an Officer's Certificate or an Opinion of
Counsel. Neither the Indenture Trustee nor the Securities Administrator shall be
liable for any action it takes or omits to take in good faith in reliance on an
Officer's Certificate or Opinion of Counsel.

     (c) Neither the Indenture Trustee nor the Securities Administrator shall be
liable for any action it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers; PROVIDED, HOWEVER, that the
Indenture Trustee's or Securities Administrator's conduct does not constitute
willful misconduct, negligence or bad faith.

     (d) The Indenture Trustee or the Securities Administrator may each consult
with counsel, and the advice or Opinion of Counsel (which shall not be at the
expense of the Indenture Trustee or the Securities Administrator) with respect
to legal matters relating to this Indenture and the Notes shall be full and
complete authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.

     (e) For the limited purpose of effecting any action to be undertaken by
each of the Indenture Trustee and the Securities Administrator, but not
specifically as a duty of the Indenture

                                       40
<PAGE>

Trustee or the Securities Administrator in the Indenture, each of the Indenture
Trustee and the Securities Administrator may execute any of the trusts or powers
hereunder or perform any duties hereunder, either directly or by or through
agents, attorneys, custodians or nominees appointed with due care, and shall not
be responsible for any willful misconduct or negligence on the part of any
agent, attorney, custodian or nominee so appointed.

     (f) The Indenture Trustee or its Affiliates are permitted to receive
additional compensation that could be deemed to be in the Indenture Trustee's
economic self-interest for (i) serving as investment adviser, administrator,
shareholder servicing agent, custodian or sub-custodian with respect to certain
of the Permitted Investments, (ii) using Affiliates to effect transactions in
certain Permitted Investments and (iii) effecting transactions in certain
Permitted Investments. Such compensation shall not be considered an amount that
is reimbursable or payable to the Indenture Trustee (i) pursuant to Sections
5.04(b) or 6.07 hereunder or (ii) out of Interest Funds or Principal Funds.

     (g) Anything in this Indenture to the contrary notwithstanding, in no event
shall the Indenture Trustee or the Securities Administrator be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Indenture Trustee or
the Securities Administrator, respectively, has been advised of the likelihood
of such loss or damage and regardless of the form of action.

     (h) None of the Securities Administrator, the Issuer or the Indenture
Trustee shall be responsible for the acts or omissions of the other, it being
understood that this Indenture shall not be construed to render them partners,
joint venturers or agents of one another.

     (i) Neither the Indenture Trustee nor the Securities Administrator shall be
required to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not reasonably assured to it, and none of the provisions
contained in this Indenture shall in any event require the Indenture Trustee or
the Securities Administrator to perform, or be responsible for the manner of
performance of, any of the obligations of the Master Servicer under the Sale and
Servicing Agreement, except during such time, if any, as the Indenture Trustee
shall be the successor to, and be vested with the rights, duties, powers and
privileges of, the Master Servicer in accordance with the terms of the Sale and
Servicing Agreement.

     (j) Except for those actions that the Indenture Trustee or the Securities
Administrator are required to take hereunder, neither the Indenture Trustee nor
the Securities Administrator shall have any obligation or liability to take any
action or to refrain from taking any action hereunder in the absence of written
direction as provided hereunder.

     (k) Neither the Indenture Trustee nor the Securities Administrator shall be
under any obligation to exercise any of the trusts or powers vested in it by
this Indenture, other than its obligation to give notices pursuant to this
Indenture, or to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the Noteholders
pursuant to the provisions of this Indenture, unless such Noteholders shall have

                                       41
<PAGE>

offered to the Indenture Trustee or the Securities Administrator, as applicable,
reasonable security or indemnity reasonably satisfactory to it against the
costs, expenses and liabilities which may be incurred therein or thereby.
Nothing contained herein shall, however, relieve the Indenture Trustee of the
obligation, upon the occurrence of an Event of Default of which a Responsible
Officer of the Indenture Trustee has actual knowledge (which has not been cured
or waived), to exercise such of the rights and powers vested in it by this
Indenture and to use the same degree of care and skill in their exercise as a
prudent person would exercise under the circumstances in the conduct of his own
affairs.

     (l) Neither the Indenture Trustee nor the Securities Administrator shall be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by Holders of Notes representing not less than 25%
of the Note Principal Balance of the Notes and provided that the payment within
a reasonable time to the Indenture Trustee or the Securities Administrator, as
applicable, of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Indenture Trustee or
the Securities Administrator, as applicable, reasonably assured to the Indenture
Trustee or the Securities Administrator, as applicable, by the security afforded
to it by the terms of this Indenture. The Indenture Trustee or the Securities
Administrator may require indemnity reasonably satisfactory to it against such
expense or liability as a condition to taking any such action. The reasonable
expense of every such examination shall be paid by the Noteholders requesting
the investigation.

     (m) Should the Indenture Trustee or the Securities Administrator deem the
nature of any action required on its part to be unclear, the Indenture Trustee
or the Securities Administrator, respectively, may require prior to such action
that it be provided by the Depositor with reasonable further instructions.

     (n) The right of the Indenture Trustee or the Securities Administrator to
perform any discretionary act enumerated in this Indenture shall not be
construed as a duty, and neither the Indenture Trustee nor the Securities
Administrator shall be accountable for other than its negligence or willful
misconduct in the performance of any such act.

     (o) Neither the Indenture Trustee nor the Securities Administrator shall be
required to give any bond or surety with respect to the execution of the trust
created hereby or the powers granted hereunder.

     (p) Neither the Indenture Trustee nor the Securities Administrator shall
have any duty to conduct any affirmative investigation as to the occurrence of
any condition requiring the repurchase of any Mortgage Loan by the Seller
pursuant to this Indenture or the Mortgage Loan Purchase Agreement, as
applicable, or the eligibility of any Mortgage Loan for purposes of this
Indenture.

     (q) The Indenture Trustee shall not be deemed to have notice or actual
knowledge of any Event of Default unless actually known to a Responsible Officer
of the Indenture Trustee or written notice thereof (making reference to this
Indenture or the Notes) is received by the Indenture Trustee at the Corporate
Trust Office.

                                       42
<PAGE>

     Section 6.03 Individual Rights of Indenture Trustee. (a) The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee, subject to the
requirements of the Trust Indenture Act. Any Note Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Indenture Trustee
must comply with Sections 6.11 and 6.12 hereof.

     (b) The Securities Administrator in its individual or any other capacity
may become the owner or pledgee of Notes and may otherwise deal with the Issuer
or its Affiliates with the same rights it would have if it were not Securities
Administrator, subject to the requirements of the Trust Indenture Act.

     Section 6.04 Indenture Trustee's and Securities Administrator's
Disclaimers. Neither the Indenture Trustee nor the Securities Administrator
shall be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Notes or the other Basic Documents, neither
shall be accountable for the Issuer's use of the proceeds from the Notes, and
neither shall be responsible for any statement of the Issuer in the Indenture or
in any document issued in connection with the sale of the Notes or in the Notes
other than, with respect to the Securities Administrator only, the Securities
Administrator 's certificate of authentication.

     Section 6.05 Notice of Event of Default. Subject to Section 5.01, the
Indenture Trustee shall promptly mail to each Noteholder notice of the Event of
Default after a Responsible Officer of the Indenture Trustee obtains actual
knowledge or written notice of such event, unless such Event of Default shall
have been waived or cured. Except in the case of an Event of Default in payment
of principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.

     Section 6.06 Reports by Securities Administrator to Holders and Tax
Administration. The Securities Administrator shall deliver to each Noteholder
such information as may be required and such other customary information as the
Securities Administrator may determine and/or to be required by the Internal
Revenue Service or by a federal or state law or rules or regulations to enable
such holder to prepare its federal and state income tax returns.

     The Securities Administrator shall prepare and file (or cause to be
prepared and filed), on behalf of the Owner Trustee, all tax returns (if any)
and information reports, tax elections and such annual or other reports of the
Issuer as are necessary for preparation of tax returns and information reports
as provided in Section 5.03 of the Trust Agreement, including without limitation
Form 1099. All tax returns and information reports shall be signed by the Owner
Trustee as provided in Section 5.03 of the Trust Agreement.

     Section 6.07 Compensation. An annual fee shall be paid to the Indenture
Trustee by the Master Servicer pursuant to a separate agreement between the
Indenture Trustee and the Master Servicer. In addition, the Indenture Trustee
and the Securities Administrator will each be entitled to recover from the
Payment Account pursuant to Section 4.05(a) of the Sale and Servicing Agreement
all reasonable out-of-pocket expenses, disbursements and advances and the
expenses of the Indenture Trustee and the Securities Administrator,
respectively, in connection

                                       43
<PAGE>

with any breach of this Indenture or any claim or legal action (including any
pending or threatened claim or legal action) or otherwise incurred or made by
the Indenture Trustee or the Securities Administrator, respectively, in the
administration of the trusts hereunder or under any other Basic Document
(including the reasonable compensation, expenses and disbursements of its
counsel) except any such expense, disbursement or advance as may arise from its
own negligence or intentional misconduct or which is the responsibility of the
Noteholders as provided herein. Such compensation and reimbursement obligation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust. Additionally, each of the Indenture Trustee and the
Securities Administrator and any director, officer, employee or agent of the
Indenture Trustee or the Securities Administrator shall be indemnified by the
Trust and held harmless against any loss, liability or expense (including
reasonable attorney's fees and expenses) incurred in the administration of the
Basic Documents (other than its ordinary out of pocket expenses incurred
hereunder) or in connection with any claim or legal action relating to (a) the
Basic Documents or (b) the Notes, other than any loss, liability or expense
incurred by reason of its own negligence or intentional misconduct, or which is
the responsibility of the Noteholders as provided herein. Notwithstanding the
foregoing, each of the Indenture Trustee and the Securities Administrator and
any director, officer, employee or agent of the Indenture Trustee and the
Securities Administrator shall also be indemnified by the Trust and held
harmless against any loss, liability or expense (including reasonable attorney's
fees and expenses) incurred in the administration of its duties and
responsibilities or the exercise of its rights under the Swap Agreement or in
connection with any claim or legal action relating to the Swap Agreement which
is the responsibility of the Noteholders as provided herein. Such indemnity and
agreement to hold harmless shall survive the termination of this Agreement or
the resignation or removal of the Indenture Trustee and the Securities
Administrator, as applicable, hereunder.

         The Issuer's payment obligations to the Indenture Trustee and
Securities Administrator pursuant to this Section 6.07 shall survive the
discharge of this Indenture and the termination or resignation of the Indenture
Trustee or Securities Administrator. When the Indenture Trustee or the
Securities Administrator incurs expenses after the occurrence of an Event of
Default with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.

         The Indenture Trustee agrees to fully perform its duties under this
Indenture notwithstanding any failure on the part of the Issuer to make any
payments, reimbursements or indemnifications to the Indenture Trustee pursuant
to this Section 6.07 (subject to the second paragraph of the definition of
Extraordinary Expenses).

         The obligations of the Issuer set forth in this Section 6.07 are
nonrecourse obligations solely of the Issuer and will be payable only from the
Trust Estate with respect to the Notes (subject to the second paragraph of the
definition of Extraordinary Expenses) and following application of the proceeds
of the Trust Estate in accordance with the priority of payments hereof, any
outstanding but unpaid obligations of the Issuer will be extinguished. The
Indenture Trustee hereby agrees that it has no rights or claims against the
Issuer directly and shall only look to the Trust Estate to satisfy the Issuer's
obligations under this Section 6.07. The Indenture

                                       44
<PAGE>

Trustee also hereby agrees not to file or join in filing any petition in
bankruptcy or commence any similar proceeding in respect of the Issuer.

         Section 6.08 Replacement of Indenture Trustee and the Securities
Administrator. No resignation or removal of the Indenture Trustee or the
Securities Administrator and no appointment of a successor Indenture Trustee or
successor Securities Administrator shall become effective until the acceptance
of appointment by the successor Indenture Trustee or successor Securities
Administrator pursuant to this Section 6.08. The Indenture Trustee or the
Securities Administrator may resign at any time by so notifying the Issuer. Any
resignation or removal of the Securities Administrator shall result in the
automatic removal of the Master Servicer to the extent that Wells Fargo Bank,
N.A. is both the Securities Administrator and Master Servicer. Holders of a
majority of Note Principal Balances of the Notes may remove either of the
Indenture Trustee or the Securities Administrator by so notifying the Indenture
Trustee or the Securities Administrator and may appoint a successor Indenture
Trustee or successor Securities Administrator. The Issuer shall remove the
Indenture Trustee or the Securities Administrator, as applicable, if:

         (i) the Indenture Trustee or the Securities Administrator fails to
comply with Section 6.11 hereof;

         (ii) the Indenture Trustee or the Securities Administrator is adjudged
a bankrupt or insolvent;

         (iii) a receiver or other public officer takes charge of the Indenture
Trustee or the Securities Administrator or its property; or

         (iv) the Indenture Trustee or the Securities Administrator otherwise
becomes incapable of acting.

         If the Indenture Trustee or the Securities Administrator resigns or is
removed or if a vacancy exists in the office of the Indenture Trustee or the
Securities Administrator for any reason (the Indenture Trustee or the Securities
Administrator in such event being referred to herein as the retiring Indenture
Trustee or the retiring Securities Administrator), the Issuer shall promptly
appoint a successor Indenture Trustee or successor Securities Administrator.

         Each of a successor Indenture Trustee or successor Securities
Administrator shall deliver a written acceptance of its appointment to the
retiring Indenture Trustee or the retiring Securities Administrator, as
applicable, and to the Issuer. Thereupon, the resignation or removal of the
retiring Indenture Trustee or the retiring Securities Administrator shall become
effective, and the successor Indenture Trustee or successor Securities
Administrator shall have all the rights, powers and duties of the Indenture
Trustee or the Securities Administrator, as applicable, under this Indenture.
The successor Indenture Trustee or successor Securities Administrator shall each
mail a notice of its succession to Noteholders. The retiring Indenture Trustee
or the retiring Securities Administrator shall promptly transfer all property
held by it as Indenture Trustee or Securities Administrator, as applicable, to
the successor Indenture Trustee or successor Securities Administrator.

                                       45
<PAGE>
         If a successor Indenture Trustee or successor Securities Administrator
does not take office within 60 days after the retiring Indenture Trustee or the
retiring Securities Administrator, as applicable, resigns or is removed, the
retiring Indenture Trustee or the retiring Securities Administrator, the Issuer
or the Holders of a majority of Note Principal Balances of the Notes may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee or successor Securities Administrator.

         Notwithstanding the replacement of the Indenture Trustee or the
Securities Administrator pursuant to this Section, the Issuer's obligations
under Section 6.07 shall continue for the benefit of the retiring Indenture
Trustee or the retiring Securities Administrator.

         Section 6.09 Successor Indenture Trustee and Securities Administrator
by Merger. If the Indenture Trustee or the Securities Administrator consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation, without any
further act, shall be the successor Indenture Trustee or successor Securities
Administrator, as applicable; provided, that such corporation or banking
association shall be otherwise qualified and eligible under Section 6.11 hereof.
The Indenture Trustee and the Securities Administrator shall each provide the
Rating Agencies with prior written notice of any such transaction.

         If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture and any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee and deliver such Notes so
authenticated; and if at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is in the Notes or in this Indenture provided
that the certificate of the Indenture Trustee shall have.

         Section 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Trust Estate, or any part hereof, and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Indenture Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 6.11 hereof.

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

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

                                       46
<PAGE>

Indenture 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 Indenture 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 Indenture 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 Estate 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 Indenture Trustee;

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

               (iii) the Indenture 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 Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.

         (d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture 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 Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

         Section 6.11 Eligibility; Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee
and the Securities Administrator shall each have a combined capital and surplus
of at least $50,000,000 as set forth in its most recent published annual report
of condition and it or its parent shall have a long-term debt rating of Baa3 or
better by Moody's and BBB or better by Standard & Poor's. The Indenture Trustee
shall comply with TIA ss. 310(b), including the optional provision permitted by
the second sentence of TIA ss. 310(b)(9); PROVIDED, HOWEVER, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA ss. 310(b)(1) are met.

         Section 6.12 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An

                                       47
<PAGE>

Indenture Trustee who has resigned or been removed shall be subject to TIA ss.
311(a) to the extent indicated.

Section 6.13      Representations and Warranties.  The Indenture Trustee hereby
represents that:

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

               (ii) The Indenture Trustee has the power and authority to execute
and deliver this Indenture and to carry out its terms; and the execution,
delivery and performance of this Indenture have been duly authorized by the
Indenture Trustee by all necessary corporate action;

               (iii) The consummation of the transactions contemplated by this
Indenture and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of association or
bylaws of the Indenture Trustee or any material agreement or other instrument to
which the Indenture Trustee is a party or by which it is bound which would
adversely affect its performance under this Indenture; and

               (iv) There are no proceedings or investigations pending or to,
the Indenture Trustee's knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Indenture Trustee: (A) asserting the invalidity of this Indenture (B)
seeking to prevent the consummation of any of the transactions contemplated by
this Indenture or (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Indenture Trustee of its obligations
under, or the validity or enforceability of, this Indenture.

         Section 6.14 Directions to Indenture Trustee and the Securities
                      Administrator.

         (a) The Indenture Trustee is hereby directed (i) to accept the pledge
of the Mortgage Loans and hold the assets of the Trust Estate in trust for the
Noteholders, and (ii) to take all other actions as shall be required to be taken
by it pursuant to the terms of this Indenture and the Sale and Servicing
Agreement.

         (b) The Securities Administrator is hereby directed (i) to authenticate
and deliver the Notes substantially in the form prescribed by Exhibits A-1, A-2
and A-3 to this Indenture in accordance with the terms of this Indenture, and
(ii) to take all other actions as shall be required to be taken by the
Securities Administrator pursuant to the terms of this Indenture and the Sale
and Servicing Agreement.

         Section 6.15 The Agents. The provisions of this Indenture relating to
the limitations of the Indenture Trustee's liability and to its rights and
protections shall inure also to the Securities Administrator, Paying Agent, Note
Registrar and Certificate Registrar.

                                       48
<PAGE>

         Section 6.16 Other Basic Documents. Each of the Indenture Trustee and
Securities Administrator is hereby authorized and directed to execute and
deliver the Sale and Servicing Agreement and any other Basic Documents (other
than this Indenture) naming it as a party. Neither the Indenture Trustee nor the
Securities Administrator shall be responsible for the sufficiency of the terms
of any of the Basic Documents. In entering into and acting under the other Basic
Documents, each of the Indenture Trustee and Securities Administrator shall be
entitled to all of the rights, immunities, indemnities and other protections set
forth in this Article VI.

                                       49
<PAGE>

                   ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS

         Section 7.01 Issuer To Furnish Securities Administrator Names and
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
the Securities Administrator (a) not more than five days after each Record Date,
a list, in such form as the Securities Administrator may reasonably require, of
the names and addresses of the Holders of Notes as of such Record Date, (b) at
such other times as the Securities Administrator may request in writing, within
30 days after receipt by the Issuer of any such request, a list of similar form
and content as of a date not more than 10 days prior to the time such list is
furnished; PROVIDED, HOWEVER, that so long as the Securities Administrator is
the Note Registrar, no such list shall be required to be furnished to the
Securities Administrator.

         Section 7.02 Preservation of Information; Communications to
Noteholders. (a) The Securities Administrator shall preserve, in as current a
form as is reasonably practicable, the names and addresses of the Holders of
Notes contained in the most recent list furnished to the Securities
Administrator as provided in Section 7.01 hereof and the names and addresses of
Holders of Notes received by the Securities Administrator in its capacity as
Note Registrar. The Securities Administrator may destroy any list furnished to
it as provided in such Section 7.01 upon receipt of a new list so furnished.

         (b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.

         (c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).

         Section 7.03 Statements to Noteholders. (a) With respect to each
Payment Date, the Securities Administrator shall make available to each
Noteholder and each Certificateholder, the Swap Provider, the Depositor, the
Owner Trustee, the Indenture Trustee, the Certificate Paying Agent and each
Rating Agency, a statement setting forth the following information as to the
Notes, to the extent applicable:

               (i) the Note Principal Balance of each Class of Notes immediately
prior to such Payment Date;

               (ii) the Interest Funds, Principal Funds and Net Monthly Excess
Cashflow payable to each Class of Noteholders for such Payment Date, and the
Basis Risk Shortfall Carry-Forward Amount on each Class of Notes for such
Payment Date;

               (iii) the amount of such distribution to each Class of Notes
applied to reduce the Note Principal Balance thereof;

               (iv) the amount of such distribution to Holders of each Class of
Notes allocable to interest and the aggregate amount of Accrued Note Interest
with respect to each Class during the related Accrual Period;

               (v) the Note Rates for each Class of Notes with respect to such
Payment Date;

                                       50
<PAGE>

               (vi) the Note Principal Balance of each Class of Notes
immediately after such Payment Date;

               (vii) the amount for distribution to the Certificates;

               (viii) the number and the aggregate Stated Principal Balance of
the Mortgage Loans as of the end of the related Due Period;

               (ix) the amount of Scheduled Principal and Principal Prepayments,
(including but separately identifying the principal amount of Principal
Prepayments, Insurance Proceeds, the purchase price in connection with the
purchase of Mortgage Loans, cash deposits in connection with substitutions of
Mortgage Loans and Excess Liquidation Proceeds) and the number and principal
balance of Mortgage Loans purchased or substituted for during the relevant
period and cumulatively since the Cut-off Date in the aggregate;

                  (x) the aggregate Note Principal Balance of each Class of
Notes, after giving effect to the amounts distributed on such Payment Date,
separately identifying any reduction thereof due to Realized Losses other than
pursuant to an actual distribution of principal and the aggregate Note Principal
Balance of the Notes after giving effect to the distribution of principal on
such Payment Date;

                  (xi) information regarding any Mortgage Loan delinquencies as
of the end of the related Prepayment Period, including the aggregate number and
aggregate Outstanding Principal Balance of Mortgage Loans (a) delinquent 30 to
59 days on a contractual basis, (b) delinquent 60 to 89 days on a contractual
basis, and (c) delinquent 90 or more days on a contractual basis, in each case
as of the close of business on the last Business Day of the immediately
preceding month;

                  (xii) the Overcollateralization Increase Amount,
Overcollateralization Target Amount, the Overcollateralization Release Amount
and Overcollateralized Amount, if any, in each case as of the related Payment
Date;

                  (xiii) the amount of any Monthly Advances, Compensating
Interest Payments and outstanding unreimbursed advances by the Master Servicer
or Servicer;

                  (xiv) the aggregate Realized Losses with respect to the
related Payment Date and cumulative Realized Losses since the Closing Date;

                  (xv) with respect to each Mortgage Loan which incurred a
Realized Loss during the related Prepayment Period, (i) the loan number, (ii)
the Stated Principal Balance of such Mortgage Loan as of the Cut-off Date, (ii)
the Stated Principal Balance of such Mortgage Loan as of the beginning of the
related Due Period, (iii) the Excess Liquidation Proceeds with respect to such
Mortgage Loan and (iv) the amount of the Realized Loss with respect to such
Mortgage Loan;

                  (xvi) the number and aggregate Stated Principal Balance of
Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan Purchase
Agreement for the related Payment Date and cumulatively since the Closing Date;

                                       51
<PAGE>

                  (xvii) the number and aggregate Outstanding Principal Balance
of all Mortgage Loans as to which the Mortgaged Property was REO Property as of
the end of the related Due Period;

                  (xviii) the book value (the sum of (A) the Outstanding
Principal Balance of the Mortgage Loan, (B) accrued interest through the date of
foreclosure and (C) foreclosure expenses) of any REO Property; provided that, in
the event that such information is not available to the Securities Administrator
on the Payment Date, such information shall be furnished promptly after it
becomes available;

                  (xix) the Average Loss Severity Percentage;

                  (xx) the number of Mortgage Loans in the foreclosure process
as of the end of the related Due Period and the aggregate Outstanding Principal
Balance of such Mortgage Loans;

                  (xxi) the amount of any Prepayment Interest Shortfalls less
any Compensating Interest paid by the Servicer or Master Servicer to cover
Prepayment Interest Shortfalls for such Payment Date;

                  (xxii) the aggregate Stated Principal Balance of Mortgage
Loans purchased by the Servicer pursuant to Section 3.21 of the Sale and
Servicing Agreement for the related Payment Date and cumulatively since the
Closing Date;

                  (xxiii) the aggregate Stated Principal Balance of defaulted
Mortgage Loans sold by the Servicer pursuant to Section 3.13 of the Sale and
Servicing Agreement or Sections 4.03, 4.17 and 4.18 of the related Servicing
Agreement for the related Payment Date and cumulatively since the Closing Date;
provided that, in the event that such information is not available to the
Securities Administrator on the Payment Date, such information shall be
furnished promptly after it becomes available; and

                  (xxiv) the amount, if any, required to be paid under the Swap
Agreement for such Payment Date.

         In addition, by January 31 of each calendar year following any year
during which the Notes are outstanding, the Securities Administrator shall
furnish a report to each Noteholder of record if so requested in writing at any
time during each calendar year as to the aggregate of amounts reported pursuant
to (iii) and (iv) with respect to the Notes for such calendar year.

         The Securities Administrator may conclusively rely upon the information
provided by the Master Servicer pursuant to Section 3.01 of the Sale and
Servicing Agreement and by the Swap Provider under the Swap Agreement in its
preparation of monthly statements to Noteholders. In addition, the Securities
Administrator shall make available statements to Certificateholders on each
Payment Date in accordance with Section 5.04 of the Trust Agreement.

         The Securities Administrator may make available each month, to any
interested party, the monthly statement to Noteholders via the Securities
Administrator's website initially located at "www.ctslink.com." Assistance in
using the website can be obtained by calling the Securities

                                       52
<PAGE>

Administrator's customer service desk at (301) 815-6600. Parties that are unable
to use the above distribution option are entitled to have a paper copy mailed to
them via first class mail by calling the Securities Administrator's customer
service desk and indicating such. The Securities Administrator shall have the
right to change the way such reports are distributed in order to make such
distribution more convenient and/or more accessible to the parties, and the
Securities Administrator shall provide timely and adequate notification to all
parties regarding any such change.

                                       53
<PAGE>

               ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES

         Section 8.01 Collection of Money. Except as otherwise expressly
provided herein, the Securities Administrator may demand payment or delivery of,
and shall receive and collect, directly and without intervention or assistance
of any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Securities Administrator pursuant to this Indenture. The
Securities Administrator shall apply all such money received by it as provided
in this Indenture. Except as otherwise expressly provided in this Indenture, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Estate, the Indenture Trustee
may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.

         Section 8.02 [Reserved].

         Section 8.03 Officer's Certificate. The Indenture Trustee shall receive
at least seven Business Days' notice when requested by the Issuer to take any
action pursuant to Section 8.05(a) hereof, accompanied by copies of any
instruments to be executed, and the Indenture Trustee shall, except in the case
of a repurchase of a Mortgage Loan pursuant to Sections 2.02 or 3.21 of the Sale
and Servicing Agreement, also require, as a condition to such action, an
Officer's Certificate, in form and substance satisfactory to the Indenture
Trustee, stating the legal effect of any such action, outlining the steps
required to complete the same, and concluding that all conditions precedent to
the taking of such action have been complied with.

         Section 8.04 Termination Upon Distribution to Noteholders. This
Indenture and the respective obligations and responsibilities of the Issuer, the
Securities Administrator and the Indenture Trustee created hereby shall
terminate upon the distribution to Noteholders, the Certificate Paying Agent on
behalf of the Certificateholders, the Securities Administrator and the Indenture
Trustee of all amounts required to be distributed pursuant to Article III;
PROVIDED, HOWEVER, that in no event shall the trust created hereby continue
beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.

         Section 8.05 Release of Trust Estate. (a) Subject to the payment of its
fees, expenses and indemnities, the Indenture Trustee may, and when required by
the provisions of this Indenture shall, execute instruments prepared by the
Issuer to release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture, including for
the purposes of any repurchase by the Seller of a Mortgage Loan pursuant to
Section 2.02 of the Sale and Servicing Agreement or any repurchase by the
Servicer of a Mortgage Loan pursuant to Section 3.21 of the Sale and Servicing
Agreement; provided, however, any such conveyance shall be without recourse to
the Indenture Trustee and without any obligation on its part to make any
representations or warranties with respect to such property released from the
lien of this Indenture. No party relying upon an instrument executed by the
Indenture Trustee as provided in Article VIII hereunder shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent, or see to the application of any monies.

                                       54
<PAGE>

         (b) The Indenture Trustee shall, at such time as (i) it is notified by
the Securities Administrator that there are no Notes Outstanding and (ii) all
sums due to the Indenture Trustee pursuant to this Indenture have been paid,
release any remaining portion of the Trust Estate that secured the Notes from
the lien of this Indenture.

         (c) The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of a request from the
Issuer which, except in the case of a repurchase of a Mortgage Loan pursuant to
Sections 2.02 or 3.21 of the Sale and Servicing Agreement, shall also be
accompanied by an Officers' Certificate and an Opinion of Counsel stating that
all applicable requirements have been satisfied and upon receipt of such
certificates required under Section 10.01(b).

         Section 8.06 Surrender of Notes Upon Final Payment. By acceptance of
any Note, the Holder thereof agrees to surrender such Note to the Securities
Administrator promptly, prior to such Noteholder's receipt of the final payment
thereon.

         Section 8.07 Optional Redemption of the Notes. (a) The Majority
Certificateholder shall have the option to redeem the Notes in whole, but not in
part, on any Payment Date on or after the Payment Date on which the aggregate
Stated Principal Balance of the Mortgage Loans as of the end of the prior Due
Period is less than or equal to 10% of the aggregate Stated Principal Balance of
the Mortgage Loans as of the Cut-off Date. The aggregate redemption price for
the Notes will be equal to the unpaid Note Principal Balance of the Notes as of
the Payment Date on which the proposed redemption will take place in accordance
with the foregoing, together with accrued and unpaid interest thereon at the
applicable Note Rate through such Payment Date (including any Basis Risk
Shortfall Carry-Forward Amounts), plus an amount sufficient to pay in full all
amounts owing to the Indenture Trustee, the Master Servicer and the Securities
Administrator pursuant to any Basic Document (which amounts shall be specified
by such Person in writing upon request of the Issuer, the Master Servicer and
the Securities Administrator, as applicable) and amounts due and owing to the
Swap Provider.

         (b) In order to exercise the foregoing option, the Majority
Certificateholder shall provide written notice of its exercise of such option to
the Indenture Trustee, the Securities Administrator, the Owner Trustee and the
Master Servicer at least 15 days prior to its exercise. Following receipt of the
notice, the Securities Administrator shall provide notice to the Noteholders of
the final payment on the Notes. In addition, the Majority Certificateholder
shall, not less than one Business Day prior to the proposed Payment Date on
which such redemption is to be made, deposit the aggregate redemption price
specified in (a) above with the Securities Administrator, who shall deposit the
aggregate redemption price into the Payment Account and shall, on the Payment
Date after receipt of the funds, apply such funds to make final payments of
principal and interest on the Notes in accordance with Section 3.05 hereof and
payment in full to the Securities Administrator and the Master Servicer, and
this Indenture shall be discharged subject to the provisions of Section 4.10
hereof. If for any reason the amount deposited by the Majority Certificateholder
is not sufficient to make such redemption or such redemption cannot be completed
for any reason, the amount so deposited by the Majority Certificateholder with
the Securities Administrator shall be immediately returned to the Majority
Certificateholder in full and shall not be used for any other purpose or be
deemed to be part of the Trust Estate.

                                       55
<PAGE>

                  Section 8.08 Swap Agreement. On each Payment Date for which
the Securities Administrator has received a payment under the Swap Agreements,
the Securities Administrator shall pay such amounts pursuant to priorities
provided in Section 3.05. On each Payment Date, the Securities Administrator
shall pay in accordance with the monthly report furnished by it with respect to
such Payment Date pursuant to Section 7.03 in the order of priority and to the
extent specified in Section 3.05 of this Agreement any payments made by the Swap
Provider to the Securities Administrator on behalf of the Trust for such Payment
Date with respect to the Swap Agreement.

                  Section 8.09 Rights of Swap Provider.

                  The Swap Provider shall be deemed a third-party beneficiary of
this Indenture to the same extent as if it were a party hereto and shall have
the right to enforce all obligations of the parties to this Indenture to the
Swap Provider, which obligations include but are not limited to the obligation
of the Securities Administrator (A) to pay to the Swap Provider, pursuant to the
priorities provided in Section 3.05, any Net Swap Payment required pursuant to
the Swap Agreement and any Swap Termination Payment required pursuant to the
Swap Agreement, (B) to establish and maintain the Payment Account, to make such
deposits thereto, investments therein and payments therefrom as are required
pursuant to Section 3.01. For the protection and enforcement of the provisions
of this Section the Swap Provider shall be entitled to such relief as can be
given either at law or in equity.

                                       56
<PAGE>

                       ARTICLE IX SUPPLEMENTAL INDENTURES

         Section 9.01 Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior notice to the
Rating Agency, the Issuer, the Securities Administrator and the Indenture
Trustee, when authorized by an Issuer Request in the case of the Securities
Administrator and the Indenture Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the TIA as in force at the date of the execution thereof), in
form satisfactory to the Indenture Trustee and the Securities Administrator, for
any of the following purposes:

                  (i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;

                  (ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and in
the Notes contained;

                  (iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;

                  (iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;

                  (v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be inconsistent with
any other provision herein or in any supplemental indenture;

                  (vi) to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided, that such action shall not materially and adversely affect the
interests of the Holders of the Notes;

                  (vii) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall be necessary
to facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI hereof; or

                  (viii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification of
this Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be expressly
required by the TIA;

PROVIDED, HOWEVER, that no such indenture supplements shall be entered into
unless the Indenture Trustee and the Securities Administrator shall have
received an Opinion of Counsel not at the expense of the Indenture Trustee or
the Securities Administrator as to the enforceability of any such indenture
supplement against the Issuer and to the effect that (i) such indenture
supplement is authorized or permitted hereunder and will not materially and
adversely affect the Holders of

                                       57
<PAGE>

the Notes and (ii) entering into such indenture supplement will not result in a
"significant modification" of the Notes under Treasury Regulation Section
1.1001-3 or adversely affect the status of the Notes as indebtedness for federal
income tax purposes; and PROVIDED FURTHER that no indenture supplement shall be
entered into without the prior written consent of the Swap Counterparty if such
indenture supplement would materially adversely affect the rights or obligations
of the Swap Counterparty under the Swap Agreement or this Indenture.

         The Indenture Trustee and the Securities Administrator are hereby
authorized to join in the execution of any such supplemental indenture and to
make any further appropriate agreements and stipulations that may be therein
contained.

         (b) The Issuer, the Securities Administrator and the Indenture Trustee,
when authorized by an Issuer Request in the case of the Securities Administrator
and the Indenture Trustee and the Indenture Trustee, may, also without the
consent of any of the Holders of the Notes and prior notice to the Rating
Agency, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that
such action as evidenced by an Opinion of Counsel, (i) is authorized or
permitted by this Indenture, and shall not (ii) adversely affect in any material
respect the interests of any Noteholder and (iii) will not cause the Issuer to
be subject to an entity level tax for federal income tax purposes; and PROVIDED
HOWEVER that no indenture supplement shall be entered into without the prior
written consent of the Swap Counterparty if such indenture supplement would
materially adversely affect the rights or obligations of the Swap Counterparty
under the Swap Agreement or this Indenture.

          Section 9.02 Supplemental Indentures With Consent of Noteholders. The
Issuer, the Securities Administrator and the Indenture Trustee, when authorized
by an Issuer Request in the case of the Securities Administrator and the
Indenture Trustee, also may, with prior notice to the Rating Agency and, with
the consent of the Holders of not less than a majority of the Note Principal
Balance of each Class of Notes affected thereby, by Act (as defined in Section
10.03 hereof) of such Holders delivered to the Issuer, the Securities
Administrator and the Indenture Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without
the consent of the Holder of each Note affected thereby:

                  (i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof or the
interest rate thereon, change the provisions of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the Trust Estate
to payment of principal of or interest on the Notes, or change any place of
payment where, or the coin or currency in which, any Note or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof;

                                       58
<PAGE>

                  (ii) reduce the percentage of the Note Principal Balances of
the Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required for
any waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;

                  (iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" or modify or alter the exception in the
definition of the term "Holder";

                  (iv) reduce the percentage of the Note Principal Balances of
the Notes required to direct the Indenture Trustee to direct the Issuer to sell
or liquidate the Trust Estate pursuant to Section 5.04 hereof;

                  (v) modify any provision of this Section 9.02 except to
increase any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or waived
without the consent of the Holder of each Note affected thereby;

                  (vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date (including the calculation of any
of the individual components of such calculation); or

                  (vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate the
lien of this Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security provided by the lien of this Indenture;

and PROVIDED, FURTHER, that such action shall not, as evidenced by an Opinion of
Counsel, cause the Issuer to be subject to an entity level tax; and PROVIDED
FURTHER that no indenture supplement shall be entered into without the prior
written consent of the Swap Counterparty if such indenture supplement would
materially adversely affect the rights or obligations of the Swap Counterparty
under the Swap Agreement or this Indenture.

         Any such action shall not adversely affect in any material respect the
interest of any Holder (other than a Holder who shall consent to such
supplemental indenture) as evidenced by an Opinion of Counsel (provided by, and
at the expense of, the Person requesting such supplemental indenture) delivered
to the Indenture Trustee and the Securities Administrator.

         It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.

         Promptly after the execution by the Issuer, the Securities
Administrator and the Indenture Trustee of any supplemental indenture pursuant
to this Section 9.02, the Securities Administrator shall mail to the Holders of
the Notes to which such amendment or supplemental indenture relates a notice
setting forth in general terms the substance of such supplemental indenture. Any
failure of the Securities Administrator to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.

                                       59
<PAGE>

          Section 9.03 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee and the Securities Administrator shall
be entitled to receive, and subject to Sections 6.01 and 6.02 hereof, shall be
fully protected in relying upon, an Opinion of Counsel not at the expense of the
Indenture Trustee or the Securities Administrator stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee and the Securities Administrator each may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's or the Securities Administrator's own rights, duties,
liabilities or immunities under this Indenture or otherwise.

          Section 9.04 Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Securities Administrator, the
Issuer and the Holders of the Notes shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.

          Section 9.05 Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.

          Section 9.06 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Securities Administrator
shall, bear a notation in form approved by the Securities Administrator as to
any matter provided for in such supplemental indenture. If the Issuer or the
Securities Administrator shall so determine, new Notes so modified as to
conform, in the opinion of the Securities Administrator and the Issuer, to any
such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Securities Administrator in exchange for
Outstanding Notes.

                                       60
<PAGE>

                            ARTICLE X MISCELLANEOUS

          Section 10.01 Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee or the Securities
Administrator to take any action under any provision of this Indenture, the
Issuer shall furnish to the Indenture Trustee and the Securities Administrator
(i) an Officer's Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and (ii) an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished provided they are
substantially to the same effect.

         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

               (1) a statement that each signatory of such certificate or
          opinion has read or has caused to be read such covenant or condition
          and the definitions herein relating thereto;

               (2) a brief statement as to the nature and scope of the
          examination or investigation upon which the statements or opinions
          contained in such certificate or opinion are based;

               (3) a statement that, in the opinion of each such signatory, such
          signatory has made such examination or investigation as is necessary
          to enable such signatory to express an informed opinion as to whether
          or not such covenant or condition has been complied with;

               (4) a statement as to whether, in the opinion of each such
          signatory, such condition or covenant has been complied with; and

               (5) if the signatory of such certificate or opinion is required
          to be Independent, the statement required by the definition of the
          term "Independent Certificate".

     (b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 10.01 (a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days prior to such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited and
a report from a nationally recognized accounting firm verifying such value. For
the avoidance of doubt, this Section 10.01(b) does not apply to the substitution
of a Substitute Mortgage Loan for any Deleted Mortgage Loan, any repurchase of
Mortgage Loans or as otherwise set forth in this Indenture.

                                       61
<PAGE>

                  (ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (b)(i) above, the
Issuer shall also deliver to the Indenture Trustee an Independent Certificate
from a nationally recognized accounting firm as to the same matters, if the fair
value of the securities to be so deposited and of all other such securities made
the basis of any such withdrawal or release since the commencement of the then
current fiscal year of the Issuer, as set forth in the certificates delivered
pursuant to clause (i) above and this clause (ii), is 10% or more of the Note
Principal Balances of the Notes, but such a certificate need not be furnished
with respect to any securities so deposited, if the fair value thereof as set
forth in the related Officer's Certificate is less than $25,000 or less than one
percent of the Note Principal Balances of the Notes.

                  (iii) Whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days prior to
such release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.

                  (iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities and of all other
property or securities released from the lien of this Indenture since the
commencement of the then-current calendar year, as set forth in the certificates
required by clause (iii) above and this clause (iv), equals 10% or more of the
Note Principal Balances of the Notes, but such certificate need not be furnished
in the case of any release of property or securities if the fair value thereof
as set forth in the related Officer's Certificate is less than $25,000 or less
than one percent of the then Note Principal Balances of the Notes.

          Section 10.02 Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.

         Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Seller or the Issuer, stating that the information with respect to such
factual matters is in the possession of the Seller or the Issuer, unless such

                                       62
<PAGE>

counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.

         Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

         Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.

         Section 10.03 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee, and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section 10.03
hereof.

         (b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.

         (c) The ownership of Notes shall be proved by the Note Registrar.

         (d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.

                                       63
<PAGE>

         Section 10.04 Notices etc., to Indenture Trustee, Securities
Administrator, Issuer and Rating Agencies. Any request, demand, authorization,
direction, notice, consent, waiver or act of Noteholders or other documents
provided or permitted by this Indenture shall be in writing and if such request,
demand, authorization, direction, notice, consent, waiver or act of Noteholders
is to be made upon, given or furnished to or filed with:

                  (i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if in writing and made, given,
furnished or filed to or with the Indenture Trustee at the Corporate Trust
Office. The Indenture Trustee shall promptly transmit any notice received by it
from the Noteholders to the Issuer;

                  (ii) the Securities Administrator by any Noteholder or by the
Issuer shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Securities Administrator at Wells Fargo Bank,
N.A., P.O. Box 98, Columbia Maryland 21046 (or, in the case of overnight
deliveries, 9062 Old Annapolis Road, Columbia, Maryland 21045) (Attention:
Corporate Trust Services - People's Choice 2005-1), facsimile no.: (410)
715-2380, or such other address as may hereafter be furnished to the other
parties hereto in writing. The Securities Administrator shall promptly transmit
any notice received by it from the Noteholders to the Issuer

                  (iii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer addressed to: People's Choice Home
Loan Securities Trust Series 2005-1, in care of Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at any other address previously
furnished in writing to the Indenture Trustee by the Issuer. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.

         Notices required to be given to the Rating Agency by the Issuer, the
Indenture Trustee, the Securities Administrator or the Owner Trustee shall be in
writing, mailed first-class postage pre-paid, to, in the case of Standard &
Poor's, at the following address: Standard & Poor's, 55 Water Street, 41st
Floor, New York, New York 10041, Attention of Asset Backed Surveillance
Department, in the case of Moody's, at the following address: Moody's Investors
Service, Inc., 99 Church Street, New York, New York 10007; or at such other
address as shall be designated by written notice to the other parties.

         Section 10.05 Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Person's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given regardless of
whether such notice is in fact actually received.

                                       64
<PAGE>

         Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.

         In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.

         Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.

         Section 10.06 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.

         The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

         Section 10.07 Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.

         Section 10.08 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.

         Section 10.09 Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

         Section 10.10 [Reserved].

         Section 10.11 Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

         Section 10.12 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,

                                       65
<PAGE>

RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.

         Section 10.13 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

         Section 10.14 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
at its expense (which may be counsel to the Issuer, the Indenture Trustee or any
other counsel reasonably acceptable to the Indenture Trustee) to the effect that
such recording is necessary either for the protection of the Noteholders or any
other Person secured hereunder or for the enforcement of any right or remedy
granted to the Indenture Trustee under this Indenture.

         Section 10.15 Issuer Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Securities
Administrator, the Owner Trustee or the Indenture Trustee on the Notes or under
this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Indenture Trustee or the Owner Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Securities Administrator,
the Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of Article
VI, VII and VIII of the Trust Agreement.

         Section 10.16 No Petition. The Indenture Trustee and the Securities
Administrator, by entering into this Indenture, each Noteholder, by accepting a
Note, and each Certificateholder, by accepting a Certificate, hereby covenant
and agree that they will not at any time prior to one year from the date of
termination hereof, institute against the Depositor or the Issuer, or join in
any institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents; provided however, that nothing herein shall prohibit the
Indenture Trustee from filing proofs of claim in any proceeding.

         Section 10.17 Inspection. The Issuer agrees that, at its expense, on
reasonable prior notice, it shall permit any representative of the Indenture
Trustee or the Securities Administrator, during the Issuer's normal business
hours, to examine all the books of account, records, reports and other papers of
the Issuer, to make copies and extracts therefrom, to cause such books to be
audited by Independent certified public accountants, and to discuss the Issuer's
affairs, finances

                                       66
<PAGE>

and accounts with the Issuer's officers, employees, and Independent certified
public accountants, all at such reasonable times and as often as may be
reasonably requested. The Indenture Trustee shall cause its representatives to
hold in confidence all such information except to the extent disclosure may be
required by law, regulation, judicial process or made to the Indenture Trustee's
auditors, regulators, attorneys or other governmental authorities and except to
the extent that the Indenture Trustee or the Securities Administrator may
reasonably determine that such disclosure is consistent with its obligations
hereunder.

         Section 10.18 Limitation of Liability of Owner Trustee.

         It is expressly understood and agreed by the parties that (a) this
document is executed and delivered by Wilmington Trust Company, not individually
or personally, but solely as Owner Trustee, in the exercise of the powers and
authority conferred and vested in it, pursuant to the Trust Agreement, (b) 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 Wilmington Trust Company but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, 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 (d) under no
circumstances shall Wilmington Trust Company 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;
provided, however, that this provision shall in no way limit or restrict the
liabilities of Wilmington Trust Company under the Basic Documents to which it is
a party.

                                       67
<PAGE>

         IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the
Securities Administrator have caused their names to be signed hereto by their
respective officers thereunto duly authorized, all as of the day and year first
above written.

                       PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES
                       2005-1, as Issuer
                       BY: Wilmington Trust Company, not in its individual
                       capacity but solely as Owner Trustee

                       By: /s/ Joann A. Rozell
                           ----------------------------
                       Name: Joann A. Rozell
                       Title: Assistant Vice President

                       HSBC BANK USA, NATIONAL ASSOCIATION, as Indenture Trustee

                       By:  /s/ Wendy Zhang
                           ----------------------------
                       Name: Wendy Zhang
                       Title: Assistant Vice President

                       WELLS FARGO BANK, N.A., as Securities Administrator

                       By:  /s/ Peter A. Gobell
                           ----------------------------
                       Name: Peter A. Gobell
                       Title: Vice President

<PAGE>

STATE OF NEW YORK                    )
                                     )  ss:
COUNTY OF NEW YORK                   )

              On this 28th day of January 2005, before me personally appeared
     ____________ to me known, who being by me duly sworn, did depose and say,
     that s/he is a Vice President of the Indenture Trustee, one of the
     corporations described in and which executed the above instrument; and that
     he signed his name thereto by like order.

                                        Notary Public

                                        ----------------------------
                                        NOTARY PUBLIC

[NOTARIAL SEAL]

<PAGE>

STATE OF DELAWARE                            )
                                             )  ss:
COUNTY OF NEWCASTLE                          )

         On this 28th day of January 2005, before me personally appeared
_________________________ to me known, who being by me duly sworn, did depose
and say, that s/he is a ______________________ of the Owner Trustee, one of the
entities described in and which executed the above instrument; and that she
signed her name thereto by like order.

                                        Notary Public

                                        ----------------------------
                                        NOTARY PUBLIC

[NOTARIAL SEAL]

<PAGE>

STATE OF MARYLAND                            )
                                             )  ss:
COUNTY OF HOWARD                             )

         On this 28th day of January 2005 before me, a notary public in and for
said State, personally appeared ______________________, known to me to be an
_______________________of Wells Fargo Bank, N.A., the entity that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said entity, and acknowledged to me that such entity executed the
within instrument.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                        ----------------------------
                                        NOTARY PUBLIC

[Notarial Seal]

<PAGE>

                                   EXHIBIT A-1

                           FORM OF CLASS A-[__] NOTES

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE SECURITIES ADMINISTRATOR
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN WILL BE
DEEMED TO REPRESENT TO ONE OF THE REPRESENTATIONS CONTAINED IN SECTION 4.15 OF
THE INDENTURE.

THIS NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST AS PROVIDED IN THE INDENTURE
REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON
THIS NOTE.

PRINCIPAL OF THIS NOTE IS PAYABLE OVER TIME AS SET FORTH HEREIN ACCORDINGLY, THE
OUTSTANDING PRINCIPAL OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN
ON THE FACE HEREOF.

                                      A-1-1

<PAGE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2005-1
                              MORTGAGE-BACKED NOTES
                                  CLASS A-[__]

AGGREGATE NOTE PRINCIPAL                       NOTE INTEREST
BALANCE:  $[             ]                     RATE: Adjustable Rate
INITIAL NOTE PRINCIPAL                         NOTE NO. [_]
BALANCE OF THIS NOTE: $[       ]
PERCENTAGE INTEREST: 100%                      CUSIP NO.[              ]

         People's Choice Home Loan Securities Trust Series 2005-1 (the
"Issuer"), a Delaware statutory trust, for value received, hereby promises to
pay to Cede & Co. or registered assigns, the principal sum of
($_________________) in monthly installments on the twenty-fifth day of each
month or, if such day is not a Business Day, the next succeeding Business Day
(each a "Payment Date"), commencing in February 2005 and ending on or before the
Payment Date occurring in February 2035 (the "Final Scheduled Payment Date") and
to pay interest on the Note Principal Balance of this Note (this "Note")
outstanding from time to time as provided below.

         This Note is one of a duly authorized issue of the Issuer's
Mortgage-Backed Notes, Series 2005-1 (the "Notes"), issued under an Indenture
dated as of January 28, 2005 (the "Indenture"), among the Issuer, Wells Fargo
Bank, N.A. (the "Securities Administrator") and HSBC Bank USA, National
Association, as indenture trustee (the "Indenture Trustee", which term includes
any successor Indenture Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Indenture Trustee, and the
Holders of the Notes and the terms upon which the Notes are to be authenticated
and delivered. All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

         Payments of principal and interest on this Note will be made on each
Payment Date to the Noteholder of record as of the related Record Date. The
"Note Principal Balance" of a Note as of any date of determination is equal to
the initial Note Principal Balance thereof, reduced by the aggregate of all
amounts previously paid with respect to such Note on account of principal and
the aggregate amount of cumulative Realized Losses allocated to such Note on all
prior Payment Dates.

         The principal of, and interest on, this Note are due and payable as
described in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. All payments made by the Issuer with respect to this Note shall
be equal to this Note's pro rata share of the aggregate payments on all Class
A-[__] Notes as described above, and shall be applied as between interest and
principal as provided in the Indenture.

                                      A-1-2

<PAGE>

         All principal and interest accrued on the Notes, if not previously
paid, will become finally due and payable at the Final Scheduled Payment Date.

         The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on or after the Payment Date on
which the aggregate Stated Principal Balance of the Mortgage Loans as of the end
of the prior Due Period is less than or equal to10% of the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date.

         The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Class A-[__] Notes, and
each Holder hereof, by its acceptance of this Note, agrees that (i) such Note
will be limited in right of payment to amounts available from the Trust Estate
as provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Securities Administrator, the Owner Trustee, the Indenture Trustee,
the Depositor, the Master Servicer, the Servicer or any of their respective
affiliates, or to the assets of any of the foregoing entities, except the assets
of the Issuer pledged to secure the Class A-[__] Notes pursuant to the Indenture
and the rights conveyed by the Issuer under the Indenture.

         Any payment of principal or interest payable on this Note which is
punctually paid on the applicable Payment Date shall be paid to the Person in
whose name such Note is registered at the close of business on the Record Date
for such Payment Date by check mailed to such person's address as it appears in
the Note Register on such Record Date, except for the final installment of
principal and interest payable with respect to such Note, which shall be payable
as provided below. Notwithstanding the foregoing, upon written request with
appropriate instructions by the Holder of this Note delivered to the Securities
Administrator at least five Business Days prior to the Record Date, any payment
of principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States
designated by such Holder. All scheduled reductions in the principal amount of a
Note (or one or more predecessor Notes) effected by payments of principal made
on any Payment Date shall be binding upon all Holders of this Note and of any
note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note. The final
payment of this Note shall be payable upon presentation and surrender thereof on
or after the Payment Date thereof at the office designated by the Securities
Administrator or the office or agency of the Issuer maintained by it for such
purpose pursuant to Section 3.02 of the Indenture.

         Subject to the foregoing provisions, each Note delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Note shall carry the right to unpaid principal and interest that were
carried by such other Note.

         If an Event of Default as defined in the Indenture shall occur and be
continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Principal Balance of the Notes, the amount payable to the Holder of this
Note will be equal to the sum of the unpaid Note Principal Balance of the Notes,
together with accrued and unpaid interest thereon as described in the Indenture.
The Indenture

                                      A-1-3

<PAGE>

provides that, notwithstanding the acceleration of the maturity of the Notes,
under certain circumstances specified therein, all amounts collected as proceeds
of the Trust Estate securing the Notes or otherwise shall continue to be applied
to payments of principal of and interest on the Notes as if they had not been
declared due and payable.

         The Holder of this Note or Beneficial Owner of any interest herein is
deemed to represent that either (1) it is not acquiring the Note with Plan
Assets or (2) (A) the acquisition, holding and transfer of a Note will not give
rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section
4975 of the Code and (B) the Notes are rated investment grade or better and such
person believes that the Notes are properly treated as indebtedness without
substantial equity features for purposes of the DOL Regulations, and agrees to
so treat the Notes. Alternatively, regardless of the rating of the Notes, such
person may provide the Securities Administrator and the Owner Trustee with an
Opinion of Counsel, which Opinion of Counsel will not be at the expense of the
Issuer, the Seller, any Underwriter, the Owner Trustee, the Indenture Trustee,
the Securities Administrator, the Master Servicer, the Servicer or any successor
servicer which opines that the acquisition, holding and transfer of such Note or
interest therein is permissible under applicable law, will not constitute or
result in a non-exempt prohibited transaction under ERISA or Section 4975 of the
Code and will not subject the Issuer, the Seller, the Depositor, any
Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer, the
Securities Administrator or the Servicer to any obligation in addition to those
undertaken in the Indenture.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Issuer. Upon surrender for registration of transfer of, or presentation of a
written instrument of transfer for, this Note at the office or agency designated
by the Issuer pursuant to the Indenture, accompanied by proper instruments of
assignment in form satisfactory to the Securities Administrator, one or more new
Notes of any authorized denominations and of a like aggregate initial Note
Principal Balance, will be issued to the designated transferee or transferees.

         Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Securities Administrator and any agent of
the Issuer, the Securities Administrator or the Indenture Trustee may treat the
Person in whose name this Note is registered as the owner of such Note (i) on
the applicable Record Date for the purpose of making payments and interest of
such Note, and (ii) on any other date for all other purposes whatsoever, as the
owner hereof, whether or not this Note be overdue, and none of the Issuer, the
Securities Administrator, the Indenture Trustee or any such agent of the Issuer,
the Securities Administrator or the Indenture Trustee shall be affected by
notice to the contrary.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Holders of a majority of all Notes at the time
outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the aggregate Note Principal Balance
of the Notes on behalf of the Holders of all the Notes, to waive any past
Default under the Indenture and its consequences. Any such waiver by the Holder,
at the time of the giving thereof, of this Note (or any one or more predecessor
Notes) shall bind the Holder of every Note issued upon the

                                      A-1-4

<PAGE>

registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon such Note. The Indenture
also permits the Issuer, the Indenture Trustee and the Securities Administrator
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of the Holders of the Notes issued thereunder.

         Initially, the Notes will be registered in the name of Cede & Co. as
nominee of DTC, acting in its capacity as the Depository for the Notes. The
Notes will be delivered by the clearing agency in denominations as provided in
the Indenture and subject to certain limitations therein set forth. The Notes
are exchangeable for a like aggregate initial Note Principal Balance of Notes of
different authorized denominations, as requested by the Holder surrendering
same.

         Unless the Certificate of Authentication hereon has been executed by
the Securities Administrator by manual signature, this Note shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.

         AS PROVIDED IN THE INDENTURE, THIS NOTE AND THE INDENTURE CREATING THIS
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

                                      A-1-5

<PAGE>

         IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.

Dated: January ___, 2005
                                   PEOPLE'S CHOICE HOME LOAN SECURITIES
                                   TRUST SERIES 2005-1

                                   BY: WILMINGTON TRUST COMPANY,
                                   not in its individual  capacity
                                   but solely in its capacity as Owner Trustee
                                   By:_______________________________________
                                   Authorized Signatory

            SECURITIES ADMINISTRATOR'S CERTIFICATE OF AUTHENTICATION

This is one of the Class A-[__] Notes referred to in the within-mentioned
Indenture.

WELLS FARGO BANK, N.A., as Securities Administrator
By:______________________________________
     Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

         The following abbreviations, when used in the inscription on the face
of the Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>

<S>   <C>                                    <C>    <C>
               TEN COM                       --      as tenants in common
               TEN ENT                       --      as tenants by the entireties
               JT TEN                        --      as joint tenants with right of survivorship and not as
                                                     tenants in common
      UNIF GIFT MIN ACT                      --             Custodian
                                                     ______________________________________________________
                                                          (Cust)                           (Minor)

                                                     under Uniform Gifts to Minor Act _____________________
                                                                                                 (State)
</TABLE>

                  Additional abbreviations may also be used though not in the
above list.

<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

          PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
                                    ASSIGNEE:

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

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

   ---------------------------------------------------------------------------
  (Please print or typewrite name and address, including zip code, of assignee)

--------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.

Dated:
       --------------------         -------------------------------------------
Signature Guaranteed by

         NOTICE: The signature(s) to this assignment must correspond with the
name as it appears upon the face of the within Note in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.

                                      A-1-8

<PAGE>

                                   EXHIBIT A-2

                            FORM OF CLASS M-[_] NOTES

THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A NOTES [AND CLASS
M-1 NOTES] AS DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE SECURITIES ADMINISTRATOR
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN WILL BE
DEEMED TO REPRESENT TO ONE OF THE REPRESENTATIONS CONTAINED IN SECTION 4.15 OF
THE INDENTURE.

THIS NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE
REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON
THIS NOTE.

PRINCIPAL OF THIS NOTE IS PAYABLE OVER TIME AS SET FORTH HEREIN. ACCORDINGLY,
THE OUTSTANDING PRINCIPAL OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.

                                      A-2-1

<PAGE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2005-1
                              MORTGAGE-BACKED NOTES
                                   CLASS M-[_]

AGGREGATE NOTE PRINCIPAL                          NOTE INTEREST
BALANCE:  $[             ]                        RATE: Adjustable Rate
INITIAL NOTE PRINCIPAL                            NOTE NO. 1
BALANCE OF THIS NOTE: $[             ]
PERCENTAGE INTEREST: 100%                         CUSIP NO.[              ]

         People's Choice Home Loan Securities Trust Series 2005-1 (the
"Issuer"), a Delaware statutory trust, for value received, hereby promises to
pay to Cede & Co. or registered assigns, the principal sum of
______________________________ ($___________) in monthly installments on the
twenty-fifth day of each month or, if such day is not a Business Day, the next
succeeding Business Day (each a "Payment Date"), commencing in February 2005 and
ending on or before the Payment Date occurring in February 2035 (the "Final
Scheduled Payment Date") and to pay interest on the Note Principal Balance of
this Note (this "Note") outstanding from time to time as provided below.

         This Note is one of a duly authorized issue of the Issuer's
Mortgage-Backed Notes, Series 2005-1 (the "Notes"), issued under an Indenture
dated as of January 28, 2005 (the "Indenture"), among the Issuer, Wells Fargo
Bank, N.A. (the "Securities Administrator") and HSBC Bank USA, National
Association, as indenture trustee (the "Indenture Trustee", which term includes
any successor Indenture Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Indenture Trustee, and the
Holders of the Notes and the terms upon which the Notes are to be authenticated
and delivered. All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

         Payments of principal and interest on this Note will be made on each
Payment Date to the Noteholder of record as of the related Record Date. The
"Note Principal Balance" of a Note as of any date of determination is equal to
the initial Note Principal Balance thereof, reduced by the aggregate of all
amounts previously paid with respect to such Note on account of principal and
the aggregate amount of cumulative Realized Losses allocated to such Note on all
prior Payment Dates.

         The principal of, and interest on, this Note are due and payable as
described in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. All payments made by the Issuer with respect to this Note shall
be equal to this Note's pro rata share of the aggregate payments on all Class
M-[_] Notes as described above, and shall be applied as between interest and
principal as provided in the Indenture.

         All principal and interest accrued on the Notes, if not previously
paid, will become finally due and payable at the Final Scheduled Payment Date.

                                      A-2-2

<PAGE>

         The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on or after the Payment Date on
which the aggregate Stated Principal Balance of the Mortgage Loans is less than
or equal to 10% of aggregate Stated Principal Balance of the Mortgage Loans as
of the Cut-off Date.

         The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Class M-[_] Notes, and
each Holder hereof, by its acceptance of this Note, agrees that (i) such Note
will be limited in right of payment to amounts available from the Trust Estate
as provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Securities Administrator, the Owner Trustee, the Indenture Trustee,
the Depositor, the Master Servicer, the Servicer or any of their respective
affiliates, or to the assets of any of the foregoing entities, except the assets
of the Issuer pledged to secure the Class M-[_] Notes pursuant to the Indenture
and the rights conveyed by the Issuer under the Indenture.

         Any payment of principal or interest payable on this Note which is
punctually paid on the applicable Payment Date shall be paid to the Person in
whose name such Note is registered at the close of business on the Record Date
for such Payment Date by check mailed to such person's address as it appears in
the Note Register on such Record Date, except for the final installment of
principal and interest payable with respect to such Note, which shall be payable
as provided below. Notwithstanding the foregoing, upon written request with
appropriate instructions by the Holder of this Note delivered to the Securities
Administrator at least five Business Days prior to the Record Date, any payment
of principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States
designated by such Holder. All scheduled reductions in the principal amount of a
Note (or one or more predecessor Notes) effected by payments of principal made
on any Payment Date shall be binding upon all Holders of this Note and of any
note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note. The final
payment of this Note shall be payable upon presentation and surrender thereof on
or after the Payment Date thereof at the office designated by the Securities
Administrator or the office or agency of the Issuer maintained by it for such
purpose pursuant to Section 3.02 of the Indenture.

         Subject to the foregoing provisions, each Note delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Note shall carry the right to unpaid principal and interest that were
carried by such other Note.

         If an Event of Default as defined in the Indenture shall occur and be
continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Principal Balance of the Notes, the amount payable to the Holder of this
Note will be equal to the sum of the unpaid Note Principal Balance of the Notes,
together with accrued and unpaid interest thereon as described in the Indenture.
The Indenture provides that, notwithstanding the acceleration of the maturity of
the Notes, under certain circumstances specified therein, all amounts collected
as proceeds of the Trust Estate securing the Notes or otherwise shall continue
to be applied to payments of principal of and interest on the Notes as if they
had not been declared due and payable.

                                      A-2-3

<PAGE>

         The Holder of this Note or Beneficial Owner of any interest herein is
deemed to represent that either (1) it is not acquiring the Note with Plan
Assets or (2) (A) the acquisition, holding and transfer of a Note will not give
rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section
4975 of the Code and (B) the Notes are rated investment grade or better and such
person believes that the Notes are properly treated as indebtedness without
substantial equity features for purposes of the DOL Regulations, and agrees to
so treat the Notes. Alternatively, regardless of the rating of the Notes, such
person may provide the Securities Administrator and the Owner Trustee with an
Opinion of Counsel, which Opinion of Counsel will not be at the expense of the
Issuer, the Seller, any Underwriter, the Owner Trustee, the Indenture Trustee,
the Securities Administrator, the Master Servicer, the Servicer or any successor
servicer which opines that the acquisition, holding and transfer of such Note or
interest therein is permissible under applicable law, will not constitute or
result in a non-exempt prohibited transaction under ERISA or Section 4975 of the
Code and will not subject the Issuer, the Seller, the Depositor, any
Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer, the
Servicer or any successor servicer to any obligation in addition to those
undertaken in the Indenture.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Issuer. Upon surrender for registration of transfer of, or presentation of a
written instrument of transfer for, this Note at the office or agency designated
by the Issuer pursuant to the Indenture, accompanied by proper instruments of
assignment in form satisfactory to the Securities Administrator, one or more new
Notes of any authorized denominations and of a like aggregate initial Note
Principal Balance, will be issued to the designated transferee or transferees.

         Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Securities Administrator and any agent of
the Issuer, the Securities Administrator or the Indenture Trustee may treat the
Person in whose name this Note is registered as the owner of such Note (i) on
the applicable Record Date for the purpose of making payments and interest of
such Note, and (ii) on any other date for all other purposes whatsoever, as the
owner hereof, whether or not this Note be overdue, and none of the Issuer, the
Securities Administrator, the Indenture Trustee or any such agent of the Issuer,
the Securities Administrator or the Indenture Trustee shall be affected by
notice to the contrary.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Holders of a majority of all Notes at the time
outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the aggregate Note Principal Balance
of the Notes on behalf of the Holders of all the Notes, to waive any past
Default under the Indenture and its consequences. Any such waiver by the Holder,
at the time of the giving thereof, of this Note (or any one or more predecessor
Notes) shall bind the Holder of every Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not notation
of such consent or waiver is made upon such Note. The Indenture also permits the
Issuer, the Indenture Trustee and the Securities Administrator to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
the Holders of the Notes issued thereunder.

                                      A-2-4

<PAGE>

         Initially, the Notes will be registered in the name of Cede & Co. as
nominee of DTC, acting in its capacity as the Depository for the Notes. The
Notes will be delivered by the clearing agency in denominations as provided in
the Indenture and subject to certain limitations therein set forth. The Notes
are exchangeable for a like aggregate initial Note Principal Balance of Notes of
different authorized denominations, as requested by the Holder surrendering
same.

         Unless the Certificate of Authentication hereon has been executed by
the Securities Administrator by manual signature, this Note shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.

         AS PROVIDED IN THE INDENTURE, THIS NOTE AND THE INDENTURE CREATING THIS
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

                                      A-2-5

<PAGE>

         IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.

Dated: January ___, 2005
                                    PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST
                                    SERIES 2005-1
                                     BY: WILMINGTON TRUST COMPANY,  not in
                                         its individual capacity but
                                         solely in its capacity as Owner Trustee

                                    By:____________________________________
                                         Authorized Signatory

            SECURITIES ADMINISTRATOR'S CERTIFICATE OF AUTHENTICATION

This is one of the Class M-[_] Notes referred to in the within-mentioned
Indenture.

WELLS FARGO BANK, N.A., as Securities Administrator

By:____________________________________
     Authorized Signatory

                                      A-2-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

         The following abbreviations, when used in the inscription on the face
of the Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>

<S>   <C>                                    <C>    <C>
               TEN COM                       --      as tenants in common
               TEN ENT                       --      as tenants by the entireties
               JT TEN                        --      as joint tenants with right of survivorship and not as
                                                     tenants in common
      UNIF GIFT MIN ACT                      --             Custodian
                                                     ______________________________________________________
                                                          (Cust)                           (Minor)

                                                     under Uniform Gifts to Minor Act _____________________
                                                                                                 (State)
</TABLE>

                      Additional abbreviations may also be used though not in
the above list.

                                      A-2-7

<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
                                  OF ASSIGNEE:

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

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

   ---------------------------------------------------------------------------
  (Please print or typewrite name and address, including zip code, of assignee)

--------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ________________________ attorney to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.

Dated:
         --------------------                --------------------------

Signature Guaranteed by
                        --------------------------
         NOTICE: The signature(s) to this assignment must correspond with the
name as it appears upon the face of the within Note in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.

                                      A-2-8

<PAGE>

                                   EXHIBIT A-3

                            FORM OF CLASS B-[_] NOTES

THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A, CLASS M [AND CLASS
B-1] NOTES AS DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE SECURITIES ADMINISTRATOR
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN WILL BE
DEEMED TO REPRESENT TO ONE OF THE REPRESENTATIONS CONTAINED IN SECTION 4.15 OF
THE INDENTURE.

THIS NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE
REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON
THIS NOTE.

PRINCIPAL OF THIS NOTE IS PAYABLE OVER TIME AS SET FORTH HEREIN. ACCORDINGLY,
THE OUTSTANDING PRINCIPAL OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.

                                      A-3-1

<PAGE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2005-1
                              MORTGAGE-BACKED NOTES
                                   CLASS B-[_]

AGGREGATE NOTE PRINCIPAL                       NOTE INTEREST
BALANCE:  $[             ]                     RATE: Adjustable Rate
INITIAL NOTE PRINCIPAL                         NOTE NO. 1
BALANCE OF THIS NOTE: $[             ]
PERCENTAGE INTEREST: 100%                      CUSIP NO [              ]

         People's Choice Home Loan Securities Trust Series 2005-1 (the
"Issuer"), a Delaware statutory trust, for value received, hereby promises to
pay to Cede & Co. or registered assigns, the principal sum of
______________________________ ($___________) in monthly installments on the
twenty-fifth day of each month or, if such day is not a Business Day, the next
succeeding Business Day (each a "Payment Date"), commencing in February 2005 and
ending on or before the Payment Date occurring in February 2035 (the "Final
Scheduled Payment Date") and to pay interest on the Note Principal Balance of
this Note (this "Note") outstanding from time to time as provided below.

         This Note is one of a duly authorized issue of the Issuer's
Mortgage-Backed Notes, Series 2005-1 (the "Notes"), issued under an Indenture
dated as of January 28, 2005 (the "Indenture"), among the Issuer, Wells Fargo
Bank, N.A. (the "Securities Administrator") and HSBC Bank USA, National
Association, as indenture trustee (the "Indenture Trustee", which term includes
any successor Indenture Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Indenture Trustee, and the
Holders of the Notes and the terms upon which the Notes are to be authenticated
and delivered. All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

         Payments of principal and interest on this Note will be made on each
Payment Date to the Noteholder of record as of the related Record Date. The
"Note Principal Balance" of a Note as of any date of determination is equal to
the initial Note Principal Balance thereof, reduced by the aggregate of all
amounts previously paid with respect to such Note on account of principal and
the aggregate amount of cumulative Realized Losses allocated to such Note on all
prior Payment Dates.

         The principal of, and interest on, this Note are due and payable as
described in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. All payments made by the Issuer with respect to this Note shall
be equal to this Note's pro rata share of the aggregate payments on all Class
B-[_] Notes as described above, and shall be applied as between interest and
principal as provided in the Indenture.

         All principal and interest accrued on the Notes, if not previously
paid, will become finally due and payable at the Final Scheduled Payment Date.

                                      A-3-2

<PAGE>

         The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on or after the Payment Date on
which the aggregate Stated Principal Balance of the Mortgage Loans is less than
or equal to 10% of aggregate Stated Principal Balance of the Mortgage Loans as
of the Cut-off Date.

         The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Class B-[_] Notes, and
each Holder hereof, by its acceptance of this Note, agrees that (i) such Note
will be limited in right of payment to amounts available from the Trust Estate
as provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Securities Administrator, the Owner Trustee, the Indenture Trustee,
the Depositor, the Master Servicer, the Servicer or any of their respective
affiliates, or to the assets of any of the foregoing entities, except the assets
of the Issuer pledged to secure the Class B-[_] Notes pursuant to the Indenture
and the rights conveyed by the Issuer under the Indenture.

         Any payment of principal or interest payable on this Note which is
punctually paid on the applicable Payment Date shall be paid to the Person in
whose name such Note is registered at the close of business on the Record Date
for such Payment Date by check mailed to such person's address as it appears in
the Note Register on such Record Date, except for the final installment of
principal and interest payable with respect to such Note, which shall be payable
as provided below. Notwithstanding the foregoing, upon written request with
appropriate instructions by the Holder of this Note delivered to the Securities
Administrator at least five Business Days prior to the Record Date, any payment
of principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States
designated by such Holder. All scheduled reductions in the principal amount of a
Note (or one or more predecessor Notes) effected by payments of principal made
on any Payment Date shall be binding upon all Holders of this Note and of any
note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note. The final
payment of this Note shall be payable upon presentation and surrender thereof on
or after the Payment Date thereof at the office designated by the Securities
Administrator or the office or agency of the Issuer maintained by it for such
purpose pursuant to Section 3.02 of the Indenture.

         Subject to the foregoing provisions, each Note delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Note shall carry the right to unpaid principal and interest that were
carried by such other Note.

         If an Event of Default as defined in the Indenture shall occur and be
continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Principal Balance of the Notes, the amount payable to the Holder of this
Note will be equal to the sum of the unpaid Note Principal Balance of the Notes,
together with accrued and unpaid interest thereon as described in the Indenture.
The Indenture provides that, notwithstanding the acceleration of the maturity of
the Notes, under certain circumstances specified therein, all amounts collected
as proceeds of the Trust Estate securing the Notes or otherwise shall continue
to be applied to payments of principal of and interest on the Notes as if they
had not been declared due and payable.

                                      A-3-3

<PAGE>

         The Holder of this Note or Beneficial Owner of any interest herein is
deemed to represent that either (1) it is not acquiring the Note with Plan
Assets or (2) (A) the acquisition, holding and transfer of a Note will not give
rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section
4975 of the Code and (B) the Notes are rated investment grade or better and such
person believes that the Notes are properly treated as indebtedness without
substantial equity features for purposes of the DOL Regulations, and agrees to
so treat the Notes. Alternatively, regardless of the rating of the Notes, such
person may provide the Securities Administrator and the Owner Trustee with an
Opinion of Counsel, which Opinion of Counsel will not be at the expense of the
Issuer, the Seller, any Underwriter, the Owner Trustee, the Indenture Trustee,
the Securities Administrator, the Master Servicer, the Servicer or any successor
servicer which opines that the acquisition, holding and transfer of such Note or
interest therein is permissible under applicable law, will not constitute or
result in a non-exempt prohibited transaction under ERISA or Section 4975 of the
Code and will not subject the Issuer, the Seller, the Depositor, any
Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer, the
Servicer or any successor servicer to any obligation in addition to those
undertaken in the Indenture.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Issuer. Upon surrender for registration of transfer of, or presentation of a
written instrument of transfer for, this Note at the office or agency designated
by the Issuer pursuant to the Indenture, accompanied by proper instruments of
assignment in form satisfactory to the Securities Administrator, one or more new
Notes of any authorized denominations and of a like aggregate initial Note
Principal Balance, will be issued to the designated transferee or transferees.

         Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Securities Administrator and any agent of
the Issuer, the Securities Administrator or the Indenture Trustee may treat the
Person in whose name this Note is registered as the owner of such Note (i) on
the applicable Record Date for the purpose of making payments and interest of
such Note, and (ii) on any other date for all other purposes whatsoever, as the
owner hereof, whether or not this Note be overdue, and none of the Issuer, the
Securities Administrator, the Indenture Trustee or any such agent of the Issuer,
the Securities Administrator or the Indenture Trustee shall be affected by
notice to the contrary.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Holders of a majority of all Notes at the time
outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the aggregate Note Principal Balance
of the Notes on behalf of the Holders of all the Notes, to waive any past
Default under the Indenture and its consequences. Any such waiver by the Holder,
at the time of the giving thereof, of this Note (or any one or more predecessor
Notes) shall bind the Holder of every Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not notation
of such consent or waiver is made upon such Note. The Indenture also permits the
Issuer, the Indenture Trustee and the Securities Administrator to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
the Holders of the Notes issued thereunder.

                                      A-3-4

<PAGE>
         Initially, the Notes will be registered in the name of Cede & Co. as
nominee of DTC, acting in its capacity as the Depository for the Notes. The
Notes will be delivered by the clearing agency in denominations as provided in
the Indenture and subject to certain limitations therein set forth. The Notes
are exchangeable for a like aggregate initial Note Principal Balance of Notes of
different authorized denominations, as requested by the Holder surrendering
same.

         Unless the Certificate of Authentication hereon has been executed by
the Securities Administrator by manual signature, this Note shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.

         AS PROVIDED IN THE INDENTURE, THIS NOTE AND THE INDENTURE CREATING THIS
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

                                      A-3-5

<PAGE>

         IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.

Dated: January ___, 2005
                                   PEOPLE'S CHOICE HOME LOAN SECURITIES
                                   TRUST SERIES 2005-1

                                    BY:     WILMINGTON TRUST COMPANY, not in its
                                            individual capacity but solely in
                                            its capacity as Owner Trustee

                                   By:
                                        ----------------------------------------
                                        Authorized Signatory

            SECURITIES ADMINISTRATOR'S CERTIFICATE OF AUTHENTICATION

This is one of the Class B-[_] Notes referred to in the within-mentioned
Indenture.

WELLS FARGO BANK, N.A., as Securities Administrator

By:
   ---------------------------
     Authorized Signatory

                                      A-3-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

         The following abbreviations, when used in the inscription on the face
of the Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>

<S>   <C>                                    <C>    <C>
               TEN COM                       --      as tenants in common
               TEN ENT                       --      as tenants by the entireties
               JT TEN                        --      as joint tenants with right of survivorship and not as
                                                     tenants in common
      UNIF GIFT MIN ACT                      --             Custodian
                                                     ______________________________________________________
                                                          (Cust)                           (Minor)

                                                     under Uniform Gifts to Minor Act _____________________
                                                                                                 (State)
</TABLE>

                      Additional abbreviations may also be used though not in
the above list.

                                      A-3-7

<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

     PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:

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

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

   ---------------------------------------------------------------------------
  (Please print or typewrite name and address, including zip code, of assignee)

--------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ________________________ attorney to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.

Dated:
         ---------------------------           --------------------------------

Signature Guaranteed by
                       --------------------------------
         NOTICE: The signature(s) to this assignment must correspond with the
name as it appears upon the face of the within Note in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.

                                      A-3-8

<PAGE>

                                    EXHIBIT B

               SCHEDULE OF NOTIONAL BALANCES OF THE SWAP AGREEMENT

    PERIOD    NOTIONAL BALANCE ($)          PERIOD        NOTIONAL BALANCE ($)
    ------    --------------------          ------        --------------------
      1           1,100,000,000               31              87,067,388
      2           1,059,213,562               32              83,888,805
      3           1,019,622,659               33              80,826,147
      4             981,160,602               34              77,875,182
      5             943,766,875               35              75,031,833
      6             907,387,070               36              72,292,172
      7             871,972,793               37              65,030,517
      8             837,481,545               38              62,687,231
      9             803,876,574               39              60,428,049
      10            771,126,686               40              58,249,959
      11            739,206,872               41              56,150,057
      12            708,604,211               42              54,125,543
      13            679,271,987               43              52,173,716
      14            651,157,314               44              50,291,974
      15            624,209,512               45              48,477,806
      16            598,380,017               46              46,728,793
      17            573,622,291               47              45,042,599
      18            549,891,738               48              43,416,975
      19            527,145,622               49              41,849,752
      20            505,342,991               50              40,338,836
      21            484,444,600               51              38,882,212
      22            464,412,840               52              37,477,932
      23            445,211,674               53              36,124,123
      24            426,806,564               54              34,818,976
      25            108,831,346               55              33,560,746
      26            104,858,897               56              32,347,753
      27            101,031,364               57              31,178,376
      28             97,343,453               58              30,051,050
      29             93,790,066               59              28,964,244
      30             90,366,288               60              27,916,508

      *This reconciliation and tie shall not, for any purpose, be deemed to be
part of the within indenture.

                                      A-3-9

<PAGE>

                                   APPENDIX A
                                   DEFINITIONS

                  ACCEPTED MASTER SERVICING PRACTICES: With respect to any
Mortgage Loan, as applicable, either (x) those customary mortgage servicing
practices of prudent mortgage servicing institutions that master service
mortgage loans of the same type and quality as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, to the extent
applicable to the Master Servicer (except in its capacity as successor to the
Servicer), or (y) as provided in the Servicing Agreements to the extent
applicable to the Servicer, but in no event below the standard set forth in
clause (x).

                  ACCOUNT: The Payment Account and the Protected Account as the
context may require.

                  ACCRUAL PERIOD: With respect to each Class of Offered Notes
(other than the Class B4B Notes) and any Payment Date, the period from the
preceding Payment Date (or, in the case of the first Payment Date, from the
Closing Date) to and including the day prior to the current Payment Date. With
respect to any Payment Date and the Class B4B Notes, the prior calendar month.

                  ACCRUED NOTE INTEREST: With respect to any Payment Date and
each Class of Offered Notes, interest accrued during the related Accrual Period
at the then-applicable Note Rate on the related Note Principal Balance thereof
immediately prior to such Payment Date, provided, however, that for any class of
Subordinate Notes, such amount shall be reduced by the amount, if any, specified
in clause (a) of the definition of Deferred Interest for such Class for such
Payment Date. The Accrued Note Interest on the Offered Notes (other than the
Class B4B Notes) shall be calculated on the basis of a 360-day year and the
actual number of days in the related accrual period. The Accrued Note Interest
on the Class B4B Notes will be calculated on the basis of a 360-day year that
consists of twelve 30-day months.

                  ADMINISTRATION AGREEMENT: The Administration Agreement, dated
as of January 28, 2005, among the Issuer, the Depositor, the Owner Trustee and
the Securities Administrator, as administrator.

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

                  AGREEMENTS: The Sale and Servicing Agreement, the Servicing
Agreements, the Indenture, the Trust Agreement, the Administration Agreement,
the Mortgage Loan Purchase Agreement and the Custodial Agreement.

<PAGE>

                  APPLICABLE CREDIT RATING: For any long-term deposit or
security, a credit rating of AAA in the case of S&P or Aaa in the case of
Moody's. For any short-term deposit or security, a rating of A-l+ in the case of
S&P or P-1 in the case of Moody's.

                  APPRAISED VALUE: The appraised value of the related mortgaged
property at the time of origination of such Mortgage Loan.

                  ASSIGNMENT AGREEMENTS: The People's Choice Assignment
Agreement and the JPMorgan Chase Assignment Agreement.

                  ASSIGNMENT OF MORTGAGE: An assignment of Mortgage, notice of
transfer or equivalent instrument, in recordable form, which is sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property is located
to reflect of record the sale of the Mortgage, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties located in the
same county, if permitted by law.

                  AUTHORIZED NEWSPAPER: A newspaper of general circulation in
the Borough of Manhattan, The City of New York, printed in the English language
and customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.

                  AUTHORIZED OFFICER: With respect to the Issuer, any officer of
the Owner Trustee or the Depositor who is authorized to act for the Owner
Trustee or the Depositor in matters relating to the Issuer and who is identified
on the list of Authorized Officers delivered by the Owner Trustee and the
Depositor to the Indenture Trustee and Securities Administrator on the Closing
Date (as such list may be modified or supplemented from time to time
thereafter).

                  AVAILABLE FUNDS RATE: With respect to any Payment Date, a per
annum rate equal to the product of (i) the quotient of (a) 360 divided by (b)
the actual number of days in the Accrual Period (30 in the case of the Class B4B
Notes), multiplied by (ii) the quotient of (a) the sum of (I) the total interest
received or advanced on the Mortgage Loans for the related Due Period at the Net
Mortgage Rate, plus (II) any amounts received by the Trust pursuant to the Swap
Agreement for such Payment Date, minus (III) any amounts paid by the Trust
pursuant to the Swap Agreement on such Payment Date (other than Swap Termination
Payments triggered by a Swap Provider Trigger Event), divided by (b) the
aggregate Note Balance as of the first day of the related Accrual Period.

                  AVERAGE LOSS SEVERITY PERCENTAGE: With respect to any Payment
Date, the percentage equivalent of a fraction, the numerator of which is the sum
of the Loss Severity Percentages for each Mortgage Loan which had a Realized
Loss and the denominator of which is the number of Mortgage Loans which had
Realized Losses.

                  BANKRUPTCY CODE: The United States Bankruptcy Code, as amended
as codified in 11 U.S.C. ss.ss. 101-1330.

                  BANKRUPTCY LOSS: With respect to any Mortgage Loan, any
Deficient Valuation or Debt Service Reduction related to such Mortgage Loan as
reported by the Servicer to the Master Servicer.

                                      -2-
<PAGE>

                  BASIC DOCUMENTS: The Trust Agreement, the Certificate of
Trust, the Indenture, the Sale and Servicing Agreement, the Administration
Agreement, the Servicing Agreements, the Mortgage Loan Purchase Agreement, the
Assignment Agreements, the Swap Agreement, the Custodial Agreement and the other
documents and certificates delivered in connection with any of the above.

                  BASIC PRINCIPAL PAYMENT AMOUNT: With respect to any Payment
Date, the excess, if any, of (x) the Principal Funds for such Payment Date over
(y) the Overcollateralization Release Amount.

                  BASIS RISK SHORTFALL: With respect to any Class of Offered
Notes (other than the Class B4B Notes), on each Payment Date where clause (iii)
of the definition of "Note Rate" is less than clauses (i) or (ii) of the
definition of "Note Rate", the excess, if any, of (x) the aggregate Accrued Note
Interest thereon for such Payment Date calculated pursuant to the lesser of
clauses (i) or (ii) of the definition of Note Rate over (y) interest accrued on
the Mortgage Loans at the Available Funds Rate. With respect to the Class B4B
Notes, on each Payment Date where clause (ii) of the definition of "Note Rate"
with respect to the Class B4B Notes is less than clause (i) of the definition of
"Note Rate" with respect to the Class B4B Notes, the excess, if any, of (x) the
aggregate Accrued Note Interest thereon for such Payment Date over (y) interest
accrued on the mortgage loans at the related Available Funds Rate.

                  BASIS RISK SHORTFALL CARRY-FORWARD AMOUNT: With respect to
each Class of Offered Notes (other than the Class B4B Notes) and any Payment
Date, as determined separately for each such Class of Offered Notes, an amount
equal to the aggregate amount of Basis Risk Shortfall for such Offered Notes on
such Payment Date, plus any unpaid Basis Risk Shortfall for such Class of
Offered Notes from prior Payment Dates, plus interest thereon at the Note Rate
(without regard to the Available Funds Rate) for such Payment Date, to the
extent previously unreimbursed from the Net Monthly Excess Cashflow.

                  BENEFICIAL OWNER: With respect to any Note, the Person who is
the beneficial owner of such Note as reflected on the books of the Depository or
on the books of a Person maintaining an account with such Depository (directly
as a Depository Participant or indirectly through a Depository Participant, in
accordance with the rules of such Depository).

                  BOOK-ENTRY NOTES: Each Class of Offered Notes for so long as
they are issued, maintained and transferred at the DTC.

                  BUSINESS DAY: Any day other than (i) a Saturday or a Sunday,
or (ii) a day on which the New York Stock Exchange or Federal Reserve is closed
or on which banking institutions in the jurisdiction in which the Indenture
Trustee, the Master Servicer, the Servicer or the Securities Administrator is
located are authorized or obligated by law or executive order to be closed.

                  CERTIFICATE DISTRIBUTION ACCOUNT: The account or accounts
created and maintained pursuant to Section 3.09(c) of the Trust Agreement. The
Certificate Distribution Account shall be an Eligible Account.

                                      -3-
<PAGE>

                  CERTIFICATE PAYING AGENT: The certificate paying agent
appointed pursuant to Section 3.09 of the Trust Agreement, which shall initially
be the Securities Administrator.

                  CERTIFICATE PERCENTAGE INTEREST: With respect to each
Certificate, the Certificate Percentage Interest stated on the face thereof.

                  CERTIFICATE REGISTER: The register maintained by the
Certificate Registrar in which the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates.

                  CERTIFICATE REGISTRAR: Initially, the Securities
Administrator, in its capacity as Certificate Registrar, or any successor to the
Securities Administrator in such capacity pursuant to the Trust Agreement.

                  CERTIFICATE OF TRUST: The Certificate of Trust filed for the
Trust pursuant to Section 3810(a) of the Statutory Trust Statute.

                  CERTIFICATES or OWNER TRUST CERTIFICATES: The People's Choice
Home Loan Securities Trust Series 2005-1, Owner Trust Certificates, Series
2005-1, evidencing the beneficial ownership interest in the Trust and executed
by the Owner Trustee in substantially the form set forth in Exhibit A to the
Trust Agreement.

                  CERTIFICATEHOLDER or HOLDER: The Person in whose name a
Certificate is registered in the Certificate Register. Owners of Certificates
that have been pledged in good faith may be regarded as Holders if the pledgee
establishes to the satisfaction of the Securities Administrator or the Owner
Trustee, as the case may be, the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Issuer, any other obligor upon the
Certificates or any Affiliate of any of the foregoing Persons.

                  CLASS: Any of the Class IA1, Class IA2, Class IA3, Class IIA1,
Class IIA2, Class M1, Class M2, Class M3, Class M4, Class M5, Class B1, Class
B2, Class B3, Class B4A or Class B4B Notes.

                  CLASS A NOTES: Any of the Class IA1, Class IA2, Class IA3,
Class IIA1 and Class IIA2 Notes in the form attached as Exhibit A-1 to the
Indenture.

                  CLASS A PRINCIPAL ALLOCATION FRACTION: For any Payment Date
and each Class of Class A Notes, a fraction, (x) the numerator of which is the
Principal Funds with respect to the Mortgage Loans in the related Loan Group to
be distributed on that Payment Date, and (y) the denominator of which is the
Principal Funds for all of the Mortgage Loans to be distributed on that Payment
Date.

                  CLASS B NOTES: Any of the Class B1, Class B2, Class B3, Class
B4A and Class B4B Notes in the form attached as Exhibit A-3 to the Indenture.

                  CLASS B4 NOTES:  The Class B4A Notes and Class B4B Notes.

                                      -4-
<PAGE>

                  CLASS B1 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3, Class M4 and
Class M5 Notes (after taking into account the distribution of the Class IA1,
Class IA2, Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3,
Class M4 and Class M5 Principal Payment Amounts on such Payment Date) and (ii)
the Note Principal Balance of the Class B1 Notes immediately prior to such
Payment Date over (y) the lesser of (a) the aggregate Stated Principal Balance
of the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced, and unscheduled collections of principal
received during the related Prepayment Period, and after reduction for Realized
Losses incurred during the related Prepayment Period) multiplied by
approximately 88.30% and (b) the amount, if any, by which (i) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) exceeds (ii) the Overcollateralization Floor.

                  CLASS B2 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3, Class M4, Class
M5 and Class B1 Notes (after taking into account the distribution of the Class
IA1, Class IA2, Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3,
Class M4, Class M5 and Class B1 Principal Payment Amounts on such Payment Date)
and (ii) the Note Principal Balance of the Class B2 Notes immediately prior to
such Payment Date over (y) the lesser of (a) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period, and after reduction for
Realized Losses incurred during the related Prepayment Period) multiplied by
approximately 90.30% and (b) the amount, if any, by which (i) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) exceeds (ii) the Overcollateralization Floor.

                  CLASS B3 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3, Class M4, Class
M5, Class B1 and Class B2 Notes (after taking into account the distribution of
the Class IA1, Class IA2, Class IA3, Class IIA1, Class IIA2, Class M1, Class M2,
Class M3, Class M4, Class M5, Class B1 and Class B2 Principal Payment Amounts on
such Payment Date) and (ii) the Note Principal Balance of the Class B3 Notes

                                      -5-
<PAGE>

immediately prior to such Payment Date over (y) the lesser of (a) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by approximately 92.30% and (b) the amount, if any, by which
(i) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the Overcollateralization Floor.

                  CLASS B4 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3, Class M4, Class
M5, Class B1, Class B2 and Class B3 Notes (after taking into account the
distribution of the Class IA1, Class IA2, Class IA3, Class IIA1, Class IIA2,
Class M1, Class M2, Class M3, Class M4, Class M5, Class B1, Class B2 and Class
B3 Principal Payment Amounts on such Payment Date) and (ii) the Note Principal
Balance of the Class B4 Notes immediately prior to such Payment Date over (y)
the lesser of (a) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) multiplied by approximately 95.40% and (b)
the amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  CLASS IA NOTES:  The Class IA1, Class IA2 and Class IA3 Notes.

                  CLASS IIA NOTES:  The Class IIA1 and Class IIA2 Notes.

                  CLASS M NOTES: Any of the Class M1, Class M2, Class M3, Class
M4 and Class M5 Notes in the form attached as Exhibit A-2 to the Indenture.

                  CLASS M1 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1 and Class IIA2 Notes (after taking into account the
distribution of the Class IA1, Class IA2, Class IA3, Class IIA1 and Class IIA2
Principal Payment Amounts on such Payment Date) and (ii) the Note Principal
Balance of the Class M1 Notes immediately prior to such Payment Date over (y)
the lesser of (a) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due

                                      -6-
<PAGE>

Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by approximately 65.10% and (b) the amount, if any, by which
(i) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the Overcollateralization Floor.

                  CLASS M2 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2 and Class M1 Notes (after taking into account
the distribution of the Class IA1, Class IA2, Class IA3, Class IIA1, Class IIA2
Notes and Class M1 Principal Payment Amounts on such Payment Date) and (ii) the
Note Principal Balance of the Class M2 Notes immediately prior to such Payment
Date over (y) the lesser of (a) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) multiplied by approximately
71.50% and (b) the amount, if any, by which (i) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period, and after reduction for
Realized Losses incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  CLASS M3 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1 and Class M2 Notes (after taking
into account the distribution of the Class IA1, Class IA2, Class IA3, Class
IIA1, Class IIA2, Class M1 and Class M2 Principal Payment Amounts on such
Payment Date) and (ii) the Note Principal Balance of the Class M3 Notes
immediately prior to such Payment Date over (y) the lesser of (a) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by approximately 75.50% and (b) the amount, if any, by which
(i) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the Overcollateralization Floor.

                                      -7-
<PAGE>

                  CLASS M4 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2 and Class M3 Notes (after
taking into account the distribution of the Class IA1, Class IA2, Class IA3,
Class IIA1, Class IIA2, Class M1, Class M2 and Class M3 Principal Payment
Amounts on such Payment Date) and (ii) the Note Principal Balance of the Class
M4 Notes immediately prior to such Payment Date over (y) the lesser of (a) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) multiplied by approximately 82.50% and (b) the amount, if
any, by which (i) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) exceeds (ii) the Overcollateralization
Floor.

                  CLASS M5 PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, an amount equal to the excess (if any) of (x)
the sum of (i) the aggregate Note Principal Balance of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3 and Class M4
Notes (after taking into account the distribution of the Class IA1, Class IA2,
Class IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3 and Class M4
Principal Payment Amounts on such Payment Date) and (ii) the Note Principal
Balance of the Class M5 Notes immediately prior to such Payment Date over (y)
the lesser of (a) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) multiplied by approximately 85.70% and (b)
the amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  CLOSING DATE:  January 28, 2005.

                  CODE: The Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.

                  COLLATERAL: The meaning specified in the Granting Clause of
the Indenture.

                  COMMISSION:  The Securities and Exchange Commission.

                                      -8-
<PAGE>

                  COMPANY:  People's Choice Funding, Inc.

                  COMPENSATING INTEREST: With respect to any Payment Date, any
payments made by the Master Servicer or the Servicer from its own funds to cover
Prepayment Interest Shortfalls.

                  COMPENSATING INTEREST PAYMENT: As defined in Section 3.23 of
the Sale and Servicing Agreement.

                  CORPORATE TRUST OFFICE: With respect to the Indenture Trustee,
the principal corporate trust office of the Indenture Trustee at which at any
particular time its engagement under the Indenture shall be administered, which
office at the date of the execution of this instrument is located at HSBC Bank
USA, National Association, 452 Fifth Avenue, New York, New York 10018,
Attention: Corporate Trust. With respect to the Owner Trustee, the principal
corporate trust office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date of the
execution of this Trust Agreement is located at Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
People's Choice Home Loan Securities Trust Series 2005-1. The Corporate Trust
Office of the Note Registrar, Certificate Registrar and Securities Administrator
for purposes of presentment and surrender of the Notes and the Certificates for
the final payment or distribution thereon and for transfer is located at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: People's
Choice Home Loan Securities Trust Series 2005-1, and for all other purposes is
located at P.O. Box 98, Columbia, Maryland 21046 (or, for overnight deliveries,
9062 Old Annapolis Road, Columbia, Maryland 21045), Attention: People's Choice
Home Loan Securities Trust Series 2005-1, or any other address that the
Securities Administrator may designate from time to time by notice to the
Noteholders and the Certificateholders.

                  CUSTODIAL AGREEMENT: The custodial agreement dated as of
January 28, 2005, among the Issuer, the Indenture Trustee, the Depositor, the
Master Servicer, the Securities Administrator and the Custodian, relating to the
People's Choice Home Loan Securities Trust Series 2005-1, Mortgage-Backed Notes,
Series 2005-1.

                  CUSTODIAN: Wells Fargo Bank, N.A. and its successors and
assigns.

                  CUT-OFF DATE: With respect to the Mortgage Loans, January 1,
2005.

                  CUT-OFF DATE BALANCE:  $1,100,066,942.68.

                  CUT-OFF DATE PRINCIPAL BALANCE: With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the Cut-off Date after applying
the principal portion of Monthly Payments due on or before such date, whether or
not received, and without regard to any payments due after such date.

                  DEBT SERVICE REDUCTION: Any reduction of the Scheduled
Payments which a Mortgagor is obligated to pay with respect to a Mortgage Loan
as a result of any proceeding under the Bankruptcy Code or any other similar
state law or other proceeding.

                                      -9-
<PAGE>

                  DEFAULT: Any occurrence which is or with notice or the lapse
of time or both would become an Event of Default.

                  DEFERRED INTEREST: For each Class of Subordinate Notes and any
Payment Date, will equal the sum of (a) the aggregate amount of interest accrued
at the applicable Note Rate during the related Accrual Period on the portion of
the Principal Deficiency Amount allocated to that Class, (b) any amounts
described in clause (a) for such Class for prior Payment Dates that remain
unpaid, and (c) interest accrued for the Accrual Period related to such Payment
Date on the amount in clause (b) at the Note Rate applicable to such Class.

                  DEFICIENT VALUATION: With respect to any Mortgage Loan, a
valuation of the Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding indebtedness under the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code or
any other similar state law or other proceeding.

                  DEFINITIVE NOTES: The meaning specified in Section 4.06 of the
Indenture.

                  DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be
replaced with a Substitute Mortgage Loan.

                  DELINQUENCY RATE For any month, the fraction, expressed as a
percentage, the numerator of which is the aggregate outstanding principal
balance of all Mortgage Loans 60 or more days delinquent (including all
foreclosures, mortgage loans subject to bankruptcy proceedings and REO
properties) as of the close of business on the last day of such month, and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans as of the close of business on the last day of such month.

                  DEPOSITOR: People's Choice Home Loan Securities Corp., a
Delaware corporation, or its successor in interest.

                  DEPOSITORY: The Depository Trust Company, the nominee of which
is Cede & Co., or any successor thereto.

                  DEPOSITORY PARTICIPANT: A Person for whom, from time to time,
the Depository effects book-entry transfers and pledges of securities deposited
with the Depository.

                  DESIGNATED DEPOSITORY INSTITUTION: A depository institution
(commercial bank, federal savings bank, mutual savings bank or savings and loan
association) or trust company (which may include the Indenture Trustee), the
deposits of which are fully insured by the FDIC to the extent provided by law.

                  DETERMINATION DATE: With respect to any Payment Date, the 15th
day of the related month, or if the 15th day of such month is not a Business
Day, the immediately preceding Business Day.

                  DUE DATE: With respect to each Mortgage Loan, the first day of
the month.

                                      -10-
<PAGE>

                  DUE PERIOD: With respect to any Payment Date, the period
commencing on the second day of the month immediately preceding the month in
which such Payment Date occurs and ending on the first day of the month in which
such Payment Date occurs.

                  ELIGIBLE ACCOUNT: Any of (i) a segregated account maintained
with a federal or state chartered depository institution (A) the short-term
obligations of which are rated A-1 or better by S&P and P-1 by Moody's at the
time of any deposit therein or (B) insured by the FDIC (to the limits
established by such corporation), the uninsured deposits in which account are
otherwise secured such that, as evidenced by an Opinion of Counsel (obtained by
the Person requesting that the account be held pursuant to this clause (i))
delivered to the Securities Administrator prior to the establishment of such
account, the Noteholders will have a claim with respect to the funds in such
account and a perfected first priority security interest against any collateral
(which shall be limited to Permitted Investments, each of which shall mature not
later than the Business Day immediately preceding the Payment Date next
following the date of investment in such collateral or the Payment Date if such
Permitted Investment is an obligation of the institution that maintains the
Payment Account) securing such funds that is superior to claims of any other
depositors or general creditors of the depository institution with which such
account is maintained, (ii) a segregated trust account or accounts maintained
with a federal or state chartered depository institution or trust company with
trust powers acting in its fiduciary capacity or (iii) a segregated account or
accounts of a depository institution acceptable to the Rating Agencies (as
evidenced in writing by the Rating Agencies that use of any such account as the
Payment Account will not have an adverse effect on the then-current ratings
assigned to the Classes of Notes then rated by such Rating Agency). Eligible
Accounts may bear interest.

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

                  EVENT OF DEFAULT: With respect to the Indenture, any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):

                           (i) a failure by the Issuer to pay (a) Accrued Note
                  Interest on any Class of Notes or (b) the Principal Payment
                  Amount with respect to a Payment Date on such Payment Date
                  which failure is not cured within 3 business days; or

                           (ii) the failure by the Issuer on the Final Scheduled
                  Payment Date to pay all Accrued Note Interest and to reduce
                  the Note Principal Balance of any Class of Notes to zero; or

                           (iii) there occurs a default in the observance or
                  performance of any covenant or agreement of the Issuer made in
                  the Indenture, or any representation or warranty of the Issuer
                  made in the Indenture or in any certificate or other writing
                  delivered pursuant hereto or in connection herewith proving to
                  have been incorrect in any material respect as of the time
                  when the same shall have been made, and such default shall
                  continue or not be cured, or the circumstance or condition in
                  respect of which such representation or warranty was incorrect
                  shall not have been eliminated or otherwise cured, for a
                  period of 60 days after there

                                      -11-
<PAGE>

                  shall have been given, by registered or certified mail, to the
                  Issuer by the Indenture Trustee or to the Issuer and the
                  Indenture Trustee by the Holders of at least 25% of the
                  aggregate Note Principal Balance of the Outstanding Notes, a
                  written notice specifying such default or incorrect
                  representation or warranty and requiring it to be remedied and
                  stating that such notice is a notice of default hereunder; or

                           (iv) there occurs the filing of a decree or order for
                  relief by a court having jurisdiction in the premises in
                  respect of the Issuer or any substantial part of the Trust
                  Estate in an involuntary case under any applicable federal or
                  state bankruptcy, insolvency or other similar law now or
                  hereafter in effect, or appointing a receiver, liquidator,
                  assignee, custodian, trustee, sequestrator or similar official
                  of the Issuer or for any substantial part of the Trust Estate,
                  or ordering the winding-up or liquidation of the Issuer's
                  affairs, and such decree or order shall remain unstayed and in
                  effect for a period of 60 consecutive days; or

                           (v) there occurs the commencement by the Issuer of a
                  voluntary case under any applicable federal or state
                  bankruptcy, insolvency or other similar law now or hereafter
                  in effect, or the consent by the Issuer to the entry of an
                  order for relief in an involuntary case under any such law, or
                  the consent by the Issuer to the appointment or taking
                  possession by a receiver, liquidator, assignee, custodian,
                  trustee, sequestrator or similar official of the Issuer or for
                  any substantial part of the assets of the Trust Estate, or the
                  making by the Issuer of any general assignment for the benefit
                  of creditors, or the failure by the Issuer generally to pay
                  its debts as such debts become due, or the taking of any
                  action by the Issuer in furtherance of any of the foregoing.

                  EXCESS LIQUIDATION PROCEEDS: To the extent that such amount is
not required by law to be paid to the related Mortgagor, the amount, if any, by
which Liquidation Proceeds with respect to a Liquidated Mortgage Loan exceed the
sum of (i) the Outstanding Principal Balance of such Mortgage Loan and accrued
but unpaid interest at the related Mortgage Rate through the last day of the
month in which the related Liquidation Date occurs, (ii) related Liquidation
Expenses (including Liquidation Expenses which are payable therefrom to the
Servicer or the Master Servicer in accordance with the Servicing Agreements or
the Sale and Servicing Agreement) and (iii) unreimbursed advances by the
Servicer or the Master Servicer and Monthly Advances.

                  EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

                  EXPENSES: The meaning specified in Section 7.02 of the Trust
Agreement.

                  EXTRAORDINARY EXPENSE: Any amounts payable or reimbursable to
the Indenture Trustee pursuant to Section 6.07 of the Indenture, including
indemnifications thereunder, and any other costs, expenses and liabilities that
are required to be borne by the Trust Estate in accordance with applicable law
or the terms of the Indenture (including, without limitation, the

                                      -12-
<PAGE>

cost of various opinions of and advice from counsel required to be obtained in
connection with the Indenture Trustee's performance of its duties under the
Indenture).

                  The Securities Administrator may make withdrawals from the
Payment Account to pay the Indenture Trustee or reimburse the Indenture Trustee
the amount of any Extraordinary Expenses at any time, up to a limit of $150,000
of Extraordinary Expenses per calendar year; provided, however, that the
Indenture Trustee shall not have any obligation to incur additional
Extraordinary Expenses in excess of such annual limit unless it has received
security or indemnity reasonably satisfactory to it for such additional
Extraordinary Expenses. The Indenture Trustee shall be held harmless and shall
not be liable for any consequences to the Noteholders resulting from any failure
of the Indenture Trustee to incur any Extraordinary Expenses for which it is not
assured reimbursement.

                  EXTRA PRINCIPAL PAYMENT AMOUNT: With respect to any Payment
Date, the lesser of (i) the Net Monthly Excess Cashflow for such Payment Date
and (ii) the excess, if any, of (a) the Overcollateralization Target Amount over
(b) the Overcollateralized Amount on such Payment Date (after taking into
account payments to the Offered Notes of the Basic Principal Payment Amount on
such Payment Date).

                  FANNIE MAE: Fannie Mae (formerly, the Federal National
Mortgage Association), or any successor thereto.

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

                  FEE AGREEMENT: The Fee Agreement dated as of January 28, 2005,
between the Owner Trustee and the Seller.

                  FINAL CERTIFICATION: The final certification delivered by the
Custodian pursuant to Section 2.3(c) of the Custodial Agreement in the form
attached thereto as Exhibit Three.

                  FINAL SCHEDULED PAYMENT DATE: With respect to each Class of
Notes, the Payment Date in February 2035.

                  FIVE-YEAR HYBRID MORTGAGE LOAN: An adjustable-rate Mortgage
Loan which has an initial fixed period of five years.

                  FIXED SWAP PAYMENT: With respect to each Payment Date, a fixed
amount equal to the product of (x) a fixed rate equal to 3.370% per annum, (y)
the notional amount for that Payment Date, as provided in the schedule of
notional balances attached as Exhibit B to the Indenture and (z) a fraction, the
numerator of which is 30 and the denominator of which is 360 provided that the
numerator is 27 for the first Payment Date.

                  FLOATING SWAP PAYMENT: With respect to each Payment Date, an
amount equal to the product of (x) one-month LIBOR as determined pursuant to the
interest rate Swap Agreement, (y) the notional amount for that Payment Date, as
provided in the schedule of notional balances attached as Exhibit B to the
Indenture and (z) a fraction, the numerator of which is equal to the number of
days in the related calculation period as provided in the Swap Agreement and the
denominator of which is 360 provided that the numerator is 28 for the first
Payment Date.

                                      -13-
<PAGE>

                  FREDDIE MAC: Freddie Mac (formerly, the Federal Home Loan
Mortgage Corporation), or any successor thereto.

                  GRANT: Pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to the Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of such collateral or other agreement or
instrument and all other moneys payable thereunder, to give and receive notices
and other communications, to make waivers or other agreements, to exercise all
rights and options, to bring proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party is
or may be entitled to do or receive thereunder or with respect thereto.

                  GROSS MARGIN: As to each Mortgage Loan, the fixed percentage
set forth in the related Mortgage Note and indicated on the Mortgage Loan
Schedule which percentage is added to the related Index on each Interest
Adjustment Date to determine (subject to rounding, the minimum and maximum
Mortgage Rate and the Periodic Rate Cap) the Mortgage Rate until the next
Interest Adjustment Date.

                  GROUP II SEQUENTIAL TRIGGER EVENT: A Group II Sequential
Trigger Event is in effect with respect to any Payment Date, if cumulative
realized losses on loan group II for such Payment Date as a percentage of the
aggregate Stated Principal Balance of Mortgage Loans in Loan Group II as of the
Cut-off Date are greater than 3.50%.

                  INDEMNIFIED PARTY: The meaning specified in Section 7.02 of
the Trust Agreement.

                  INDENTURE: The indenture dated as of January 28, 2005, among
the Issuer, the Indenture Trustee and the Securities Administrator, relating to
the People's Choice Home Loan Securities Trust Series 2005-1, Mortgage-Backed
Notes, Series 2005-1.

                  INDENTURE TRUSTEE: HSBC Bank USA, National Association, and
its successors and assigns or any successor indenture trustee appointed pursuant
to the terms of the Indenture.

                  INDEPENDENT: When used with respect to any specified Person,
the Person (i) is in fact independent of the Issuer, any other obligor on the
Notes, the Seller, the Master Servicer, the Depositor and any Affiliate of any
of the foregoing Persons, (ii) does not have any direct financial interest or
any material indirect financial interest in the Issuer, any such other obligor,
the Seller, the Master Servicer, the Depositor or any Affiliate of any of the
foregoing Persons and (iii) is not connected with the Issuer, any such other
obligor, the Seller, the Master Servicer, the Depositor or any Affiliate of any
of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.

                  INDEPENDENT CERTIFICATE: A certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 10.01 of the
Indenture, made by an independent appraiser or other expert

                                      -14-
<PAGE>

appointed by an Issuer Request, and such opinion or certificate shall state that
the signer has read the definition of "Independent" in this Indenture and that
the signer is Independent within the meaning thereof.

                  INDEX: The index, if any, specified in a Mortgage Note by
reference to which the related Mortgage Rate will be adjusted from time to time.

                  INITIAL CERTIFICATION: The initial certification delivered by
the Custodian pursuant to Section 2.3(a) of the Custodial Agreement in the form
attached thereto as Exhibit One.

                  INSURANCE POLICY: With respect to any Mortgage Loan, any
standard hazard insurance policy, flood insurance policy or title insurance
policy.

                  INSURANCE PROCEEDS: Amounts paid by the insurer under any
Insurance Policy covering any Mortgage Loan or Mortgaged Property other than
amounts required to be paid over to the Mortgagor pursuant to law or the related
Mortgage Note or Security Instrument and other than amounts used to repair or
restore the Mortgaged Property or to reimburse insured expenses.

                  INTEREST ADJUSTMENT DATE: With respect to a Mortgage Loan, the
date, if any, specified in the related Mortgage Note on which the Mortgage Rate
is subject to adjustment.

                  INTEREST DETERMINATION DATE: With respect to the first Accrual
Period, the second LIBOR Business Day preceding the Closing Date, and with
respect to each Accrual Period thereafter, the second LIBOR Business Day
preceding the related Payment Date on which such Accrual Period commences.

                  INTEREST FUNDS: For any Payment Date will equal the sum of (i)
all interest received or advanced by the Securities Administrator in the related
Due Period and available in the Payment Account on that Payment Date, (ii) any
Net Swap Payments or Swap Termination Payment received by the Securities
Administrator relating to such Payment Date, (iii) all Compensating Interest
paid with respect to mortgage loans that prepaid during the related Prepayment
Period and (iv) the portion of any purchase price or other amount paid with
respect to the Mortgage Loans allocable to interest; net of any amounts
reimbursable to the Master Servicer, the Servicer, the Securities Administrator,
the Indenture Trustee and the Owner Trustee as provided in the Agreements.

                  INTERIM CERTIFICATION: The interim certification delivered by
the Custodian pursuant to Section 2.3(b) of the Custodial Agreement in the form
attached thereto as Exhibit Two.

                  INVESTMENT COMPANY ACT: The Investment Company Act of 1940, as
amended, and any amendments thereto.

                  IRS:  The Internal Revenue Service.

                  ISDA MASTER AGREEMENT: 1992 ISDA Master Agreement
(Multicurrency -- Cross Border).

                                      -15-
<PAGE>

                  ISSUER: People's Choice Home Loan Securities Trust Series
2005-1, a Delaware statutory trust, or its successor in interest.

                  ISSUER REQUEST: A written order or request signed in the name
of the Issuer by any one of its Authorized Officers and delivered to the
Indenture Trustee or Securities Administrator, as applicable.

                  JPMORGAN CHASE ASSIGNMENT AGREEMENT: The agreement attached as
Exhibit E to the Sale and Servicing Agreement, whereby the JPMorgan Chase
Servicing Agreement was assigned to the Issuer.

                  JPMORGAN CHASE SERVICING AGREEMENT: The Servicing Agreement,
dated January 1, 2005 between People's Choice Funding, Inc., as owner and
JPMorgan Chase Bank, National Association, as servicer.

                  LIBOR BUSINESS DAY: A day on which banks are open for dealing
in foreign currency and exchange in London and New York City.

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

                  LIQUIDATED MORTGAGE LOAN: Any defaulted Mortgage Loan as to
which the Servicer or the Master Servicer has determined that all amounts it
expects to recover from or on account of such Mortgage Loan have been recovered.

                  LIQUIDATION DATE: With respect to any Liquidated Mortgage
Loan, the date on which the Master Servicer or the Servicer has certified that
such Mortgage Loan has become a Liquidated Mortgage Loan.

                  LIQUIDATION EXPENSES: With respect to a Mortgage Loan in
liquidation, unreimbursed expenses paid or incurred by or for the account of the
Master Servicer or the Servicer in connection with the liquidation of such
Mortgage Loan and the related Mortgage Property, such expenses including (a)
property protection expenses, (b) property sales expenses, (c) foreclosure and
sale costs, including court costs and reasonable attorneys' fees, and (d)
similar expenses reasonably paid or incurred in connection with liquidation.

                  LIQUIDATION PROCEEDS: Amounts received in connection with the
liquidation of a defaulted Mortgage Loan, whether through trustee's sale,
foreclosure sale, Insurance Proceeds, condemnation proceeds or otherwise.

                  LOAN-TO-VALUE RATIO: Has the meaning assigned to such term in
the Servicing Agreements.

                                      -16-
<PAGE>

                  LOSS SEVERITY PERCENTAGE: With respect to any Payment Date,
the percentage equivalent of a fraction, the numerator of which is the amount of
Realized Losses incurred on a Mortgage Loan and the denominator of which is the
Stated Principal Balance of such Mortgage Loan immediately prior to the
liquidation of such Mortgage Loan.

                  LOST NOTES: The original Mortgage Notes that have been lost,
as indicated on the Mortgage Loan Schedule.

                  MAJORITY CERTIFICATEHOLDER: A Holder of a 50.01% or greater
Certificate Percentage Interest of the Certificates.

                  MASTER SERVICER: Wells Fargo Bank, N.A., and its successors
and assigns.

                  MASTER SERVICER CERTIFICATION: A written certification
covering servicing of the Mortgage Loans by all Servicers and signed by an
officer of the Master Servicer that complies with (i) the Sarbanes-Oxley Act of
2002, as amended from time to time, and (ii) the February 21, 2003 Statement by
the Staff of the Division of Corporation Finance of the Securities and Exchange
Commission Regarding Compliance by Asset-Backed Issuers with Exchange Act Rules
13a-14 and 15d-14, as in effect from time to time; provided that if, after the
Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the Statement
referred to in clause (ii) is modified or superceded by any subsequent
statement, rule or regulation of the Securities and Exchange Commission or any
statement of a division thereof, or (c) any future releases, rules and
regulations are published by the Securities and Exchange Commission from time to
time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects
the form or substance of the required certification and results in the required
certification being, in the reasonable judgment of the Master Servicer,
materially more onerous than the form of the required certification as of the
Closing Date, the Master Servicer Certification shall be as agreed to by the
Master Servicer, the Company and the Seller following a negotiation in good
faith to determine how to comply with any such new requirements.

                  MASTER SERVICER EVENT OF DEFAULT: Has the meaning assigned to
such term in Section 6.01 of the Sale and Servicing Agreement.

                  MASTER SERVICING COMPENSATION: For any Payment Date, any
investment income on funds on deposit in the Payment Account which is payable to
the Master Servicer on such Payment Date pursuant to Sections 3.14 and 4.04(d)
of the Sale and Servicing Agreement.

                  MAXIMUM NOTE RATE: With respect to each Class of Offered Notes
(other than the Class B4B Notes), 15.00% per annum.

                  MATERIAL DEFECT: The meaning specified in Section 2.02(a) of
the Sale and Servicing Agreement.

                  MAXIMUM LIFETIME MORTGAGE RATE: The maximum level to which a
Mortgage Rate can adjust in accordance with its terms, regardless of changes in
the applicable Index.

                  MERS: Mortgage Electronic Registration Systems, Inc., a
corporation organized and existing under the laws of the State of Delaware, or
any successor thereto.

                                      -17-
<PAGE>

                  MERS(R) SYSTEM: The system of recording transfers of Mortgages
electronically maintained by MERS.

                  MIN: The Mortgage Identification Number for Mortgage Loans
registered with MERS on the MERS(R) System.

                  MINIMUM LIFETIME MORTGAGE RATE: The minimum level to which a
Mortgage Rate can adjust in accordance with its terms, regardless of changes in
the applicable Index.

                  MOM LOAN: With respect to any Mortgage Loan, MERS acting as
the mortgagee of such Mortgage Loan, solely as nominee for the originator of
such Mortgage Loan and its successors and assigns, at the origination thereof,
or as nominee for any subsequent assignee of the originator pursuant to an
assignment of mortgage to MERS.

                  MONTHLY ADVANCE: An advance of principal or interest required
to be made by the Servicer pursuant to the Servicing Agreements or the Master
Servicer pursuant to Section 3.22 of the Sale and Servicing Agreement.

                  MONTHLY PAYMENT: With respect to any Mortgage Loan (including
any REO Property) and any Due Date, the payment of principal and interest due
thereon, or in the case of an Interest Only Mortgage Loan, the payment of (i)
interest or (ii) principal and interest, if applicable, accordance with the
amortization schedule at the time applicable thereto (after adjustment, if any,
for partial Principal Prepayments and for Deficient Valuations occurring prior
to such Due Date but before any adjustment to such amortization schedule by
reason of any bankruptcy, other than a Deficient Valuation, or similar
proceeding or any moratorium or similar waiver or grace period).

                  MOODY'S: Moody's Investors Service, Inc.

                  MORTGAGE: The mortgage, deed of trust or other instrument
reflected on the Mortgage Loan Schedule as securing a Mortgage Loan.

                  MORTGAGE FILE: The file containing the Related Documents
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to the Sale and Servicing Agreement.

                  MORTGAGE LOAN: A mortgage loan transferred and assigned to the
Trust pursuant to Section 2.01 or Section 2.04 of the Sale and Servicing
Agreement, as identified in the Mortgage Loan Schedule, including a mortgage
loan the property securing which has become an REO Property.

                  MORTGAGE LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase
Agreement dated as of the Cut-off Date between the Seller and the Depositor,
whereby the Mortgage Loans are being sold to the Depositor by the Seller.

                  MORTGAGE LOAN SCHEDULE: With respect to any date, the schedule
of Mortgage Loans held by the Issuer on such date. The schedule of Mortgage
Loans as of the Cut-off Date is

                                      -18-
<PAGE>

the schedule set forth in Exhibit A to the Sale and Servicing Agreement, which
schedule sets forth as to each Mortgage Loan:

                           (i) the loan number;

                           (ii) the city, state and zip code of the Mortgaged
                  Property;

                           (iii) the Mortgage Rate;

                           (iv) the Servicing Fee Rate;

                           (v) the Net Rate;

                           (vi) the original term to maturity;

                           (vii) the maturity date;

                           (viii) the stated remaining term to maturity;

                           (ix) the original principal balance;

                           (x) the first Payment Date;

                           (xi) the Monthly Payment in effect as of the Cut-off
                  Date;

                           (xii) the Cut-off Date Principal Balance;

                           (xiii) the Loan-to-Value Ratio at origination;

                           (xiv) the paid-through date of the Mortgage Loan;

                           (xv) the Issuer of any Primary Mortgage Insurance
                  Policy;

                           (xvi) the Index and the Gross Margin, if applicable;

                           (xvii) the Maximum Lifetime Mortgage Rate, if
                  applicable;

                           (xviii) the Minimum Lifetime Mortgage Rate, if
                  applicable;

                           (xix) the Interest Adjustment Date frequency and
                  Payment Date frequency, if applicable;

                           (xx) the number of days delinquent, if any; and

                           (xxi) a code identifying whether the Mortgage Loan is
                  a Two-Year Hybrid Mortgage Loan, Three-Year Hybrid Mortgage
                  Loan or Five-Year Hybrid Mortgage Loan.

                                      -19-
<PAGE>

                  The Mortgage Loan Schedule shall also set forth the total
number of Mortgage Loans, the total of each of the amounts described under (ix)
and (xii) above for all of the Mortgage Loans, the weighted average by principal
balance of each of the rates described under (iii), (iv) and (v) above for all
of the Mortgage Loans and the weighted average remaining term to maturity by
unpaid principal balance as of the Cut-off Date for all of the Mortgage Loans.

                  MORTGAGE NOTE: The originally executed note or other evidence
of the indebtedness of a Mortgagor under the related Mortgage Loan.

                  MORTGAGED PROPERTY: Land and improvements securing the
indebtedness of a Mortgagor under the related Mortgage Loan or, in the case of
REO Property, such REO Property.

                  MORTGAGE RATE: The annual rate at which interest accrues from
time to time on any Mortgage Loan pursuant to the related Mortgage Note, which
rate is initially equal to the "Mortgage Rate" set forth with respect thereto on
the Mortgage Loan Schedule.

                  MORTGAGOR:  The obligor on a Mortgage Note.

                  NET LIQUIDATION PROCEEDS: Any Liquidation Proceeds net of
unreimbursed advances by the Servicer, Monthly Advances, expenses incurred by
the Servicer in connection with the liquidation of such Mortgage Loan and the
related Mortgaged Property, and any other amounts payable to the Servicer under
the Servicing Agreements.

                  NET MONTHLY EXCESS CASHFLOW: For any Payment Date, the sum of
(a) any Overcollateralization Release Amount and (b) the excess of (x) the
Interest Funds for such Payment Date over (y) the sum of the aggregate Accrued
Note Interest for the Offered Notes and amounts payable to the Servicer and Swap
Provider (other than Swap Termination Payments triggered by a Swap Provider
Trigger Event).

                  NET MORTGAGE RATE: With respect to each Mortgage Loan, the
then applicable Mortgage Rate thereon minus the Servicing Fee Rate.

                  NET SWAP PAYMENT: With respect to each Payment Date, a Net
Swap Payment will be required to be made (a) by the Trust, to the Swap Provider,
to the extent that the Fixed Swap Payment for such Payment Date exceeds the
Floating Swap Payment for such Payment Date, or (b) by the Swap Provider, to the
Trust, to the extent that the Floating Swap Payment exceeds the Fixed Swap
Payment for such Payment Date.

                  NONRECOVERABLE ADVANCE: Any advance or Monthly Advance (i)
which was previously made or is proposed to be made by the Master Servicer, the
Indenture Trustee solely as successor Master Servicer, or the Servicer and (ii)
which, in the good faith judgment of the Master Servicer, the Indenture Trustee
as successor Master Servicer or the Servicer, will not or, in the case of a
proposed advance or Monthly Advance, would not, be ultimately recoverable by the
Master Servicer, the Indenture Trustee as successor Master Servicer, or the
Servicer from Liquidation Proceeds, Insurance Proceeds or future payments on the
Mortgage Loan for which such advance or Monthly Advance was made or is proposed
to be made.

                                      -20-
<PAGE>

                  NOTE:  A Class A Note, Class M Note or Class B Note.

                  NOTE MARGIN: With respect to the Class IA1, Class IA2, Class
IA3, Class IIA1, Class IIA2, Class M1, Class M2, Class M3, Class M4, Class M5,
Class B1, Class B2, Class B3 and Class B4A Notes, on any Payment Date prior to
the Step-Up Date, 0.160%, 0.270%, 0.370%, 0.285%, 0.330%, 0.530%, 0.550%,
0.580%, 0.900%, 1.000%, 1.550%, 1.650%, 2.600% and 3.750% per annum,
respectively, and on any Payment Date on and after the Step-Up Date, 0.320%,
0.540%, 0.740%, 0.570%, 0.660%, 0.795%, 0.825%, 0.870%, 1.350%, 1.500%, 2.325%,
2.475%, 3.900% and 5.625% per annum, respectively.

                  NOTE OWNER:  The Beneficial Owner of a Book-Entry Note.

                  NOTE PRINCIPAL BALANCE: With respect to any Offered Note as of
any date of determination, the initial Note Principal Balance thereof reduced by
the aggregate of all amounts allocable to principal previously paid with respect
to such Offered Note.

                  NOTE RATE: With respect to each Payment Date and the Offered
Notes (other than the Class B4B Notes), a floating rate equal to the least of
(i) One-Month LIBOR plus the related Note Margin, (ii) the Maximum Note Rate and
(iii) the Available Funds Rate with respect to such Payment Date. With respect
to the Class B4B Notes for each Payment Date, the lesser of (i) prior to the
Step-Up Date, 6.50%, and with respect to each Payment Date on and after the
Step-Up Date, 7.00%, and (ii) the Available Funds Rate with respect to such
Payment Date.

                  NOTE REGISTER: The register maintained by the Note Registrar
in which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.

                  NOTE REGISTRAR: The Securities Administrator, in its capacity
as Note Registrar, or any successor to the Securities Administrator in such
capacity.

                  NOTEHOLDER OR HOLDER: The Person in whose name a Note is
registered in the Note Register, except that, any Note registered in the name of
the Depositor, the Issuer, the Indenture Trustee, the Seller, the Securities
Administrator or the Master Servicer or any Affiliate of any of them shall be
deemed not to be a holder or holders, nor shall any so owned be considered
outstanding, for purposes of giving any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or the Trust Agreement;
provided that, in determining whether the Indenture Trustee or Securities
Administrator shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Indenture Trustee or Securities Administrator has
actual knowledge to be so owned shall be so disregarded. Owners of Notes that
have been pledged in good faith may be regarded as Holders if the pledgee
establishes to the satisfaction of the Securities Administrator or the Owner
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes or any Affiliate of
any of the foregoing Persons.

                  OFFERED NOTES:  The Class A, Class M and Class B Notes.

                  OFFICER'S CERTIFICATE: With respect to the Master Servicer, a
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of

                                      -21-
<PAGE>

the Master Servicer and delivered to the Indenture Trustee or the Securities
Administrator, as applicable. With respect to the Issuer, a certificate signed
by any Authorized Officer of the Issuer, under the circumstances described in,
and otherwise complying with, the applicable requirements of Section 10.01 of
the Indenture, and delivered to the Indenture Trustee. Unless otherwise
specified, any reference in the Indenture to an Officer's Certificate shall be
to an Officer's Certificate of any Authorized Officer of the Issuer.

                  ONE-MONTH LIBOR: With respect to any Accrual Period, the rate
determined by the Securities Administrator on the related Interest Determination
Date on the basis of the London interbank offered rate for one-month United
States dollar deposits, as such rates appear on the Telerate Screen Page 3750,
as of 11:00 a.m. (London time) on such Interest Determination Date.

                  In the event that on any Interest Determination Date, Telerate
Screen 3750 fails to indicate the London interbank offered rate for one-month
United States dollar deposits, then One-Month LIBOR for the related Interest
Accrual Period will be established by the Securities Administrator as follows:

                           (i) If on such Interest Determination Date two or
                  more Reference Banks provide such offered quotations,
                  One-Month LIBOR for the related Accrual Period shall be the
                  arithmetic mean of such offered quotations (rounded upwards if
                  necessary to the nearest whole multiple of 1/16%).

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

                  The establishment of One-Month LIBOR on each Interest
Determination Date by the Securities Administrator and the Securities
Administrator's calculation of the rate of interest applicable for the related
Accrual Period shall (in the absence of manifest error) be final and binding.

                  OPINION OF COUNSEL: A written opinion of counsel acceptable to
the Indenture Trustee which counsel may be in-house counsel for the Depositor or
the Seller if acceptable to the Indenture Trustee and the Rating Agencies or
outside counsel for the Depositor, the Seller, the Issuer or the Master
Servicer, as the case may be.

                  OUTSTANDING: With respect to the Notes, as of the date of
determination, all Notes theretofore executed, authenticated and delivered under
this Indenture except:

                           (i) Notes theretofore canceled by the Note Registrar
                  or delivered to the Securities Administrator for cancellation;
                  and

                           (ii) Notes in exchange for or in lieu of which other
                  Notes have been executed, authenticated and delivered pursuant
                  to the Indenture unless proof satisfactory to the Securities
                  Administrator is presented that any such Notes are held by a
                  holder in due course.

                                      -22-
<PAGE>

                  OUTSTANDING MORTGAGE LOAN: With respect to any Due Date, a
Mortgage Loan which, prior to such Due Date, was not the subject of a Principal
Prepayment in full, did not become a Liquidated Mortgage Loan and was not
purchased or replaced.

                  OUTSTANDING PRINCIPAL BALANCE: As of the time of any
determination, the principal balance of a Mortgage Loan remaining to be paid by
the Mortgagor, or, in the case of an REO Property, the principal balance of the
related Mortgage Loan remaining to be paid by the Mortgagor at the time such
property was acquired by the Trust.

                  OVERCOLLATERALIZATION DEFICIENCY AMOUNT: With respect to any
Payment Date, the amount, if any, by which the Overcollateralization Target
Amount exceeds the Overcollateralized Amount on such Payment Date (after giving
effect to distributions in respect of the Basic Principal Payment Amount on such
Payment Date).

                  OVERCOLLATERALIZATION FLOOR: An amount equal to approximately
0.50% of the aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date.

                  OVERCOLLATERALIZATION RELEASE AMOUNT: With respect to any
Payment Date, will equal the lesser of (x) the Principal Funds for such Payment
Date and (y) the amount, if any, by which the Overcollateralized Amount exceeds
the Overcollateralization Target Amount on such Payment Date (after giving
effect to distributions in respect of the Basic Principal Payment Amount on such
Payment Date).

                  OVERCOLLATERALIZATION TARGET AMOUNT: With respect to any
Payment Date prior to the Stepdown Date, 2.30% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date. With respect to any
Payment Date on or after the Stepdown Date, the greater of (x) 4.60% of the
aggregate Stated Principal Balance of the Mortgage Loans and (y) the
Overcollateralization Floor; provided, however, that if a Trigger Event is in
effect on any Payment Date, the Overcollateralization Target Amount will be
equal to the Overcollateralization Target Amount on the prior Payment Date.

                  OVERCOLLATERALIZED AMOUNT: For any Payment Date, the amount,
if any, by which (i) the aggregate Stated Principal Balance of the Mortgage
Loans (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, unscheduled collections
of principal received during the related Prepayment Period and any Realized
Losses on the Mortgage Loans during the related Prepayment Period) exceeds (ii)
the aggregate Note Principal Balance of the Offered Notes as of such Payment
Date (after giving effect to distributions in respect of the Basic Principal
Payment Amount on such Payment Date).

                  OWNER TRUST ESTATE: The corpus of the Issuer created by the
Trust Agreement, which consists of items referred to in Section 3.01 of the
Trust Agreement.

                  OWNER TRUSTEE: Wilmington Trust Company and its successors and
assigns or any successor owner trustee appointed pursuant to the terms of the
Trust Agreement.

                  PAYING AGENT: Any paying agent or co-paying agent appointed
pursuant to Section 3.03 of the Indenture, which initially shall be the
Securities Administrator.

                                      -23-
<PAGE>

                  PAYMENT ACCOUNT: The trust account or accounts created and
maintained pursuant to Section 4.04 of the Sale and Servicing Agreement, which
shall be denominated "HSBC Bank USA, National Association, as Indenture Trustee
f/b/o holders of People's Choice Home Loan Securities Trust Series 2005-1,
Mortgage-Backed Notes, Series 2005-1 - Payment Account." The Payment Account
shall be an Eligible Account.

                  PAYMENT ACCOUNT DEPOSIT DATE: The Business Day prior to each
Payment Date.

                  PAYMENT DATE: The 25th day of each month, or if such day is
not a Business Day, then the next Business Day, commencing in February 2005.

                  PEOPLE'S CHOICE ASSIGNMENT AGREEMENT: The agreement attached
as Exhibit F to the Sale and Servicing Agreement, whereby the People's Choice
Servicing Agreement was assigned to the Issuer.

                  PEOPLE'S CHOICE SERVICING AGREEMENT: The Servicing Agreement,
dated August 1, 2004 between People's Choice Home Loan Securities Corp. as owner
and People's Choice Home Loan, Inc., as servicer.

                  PERCENTAGE INTEREST: With respect to any Note, the percentage
obtained by dividing the Note Principal Balance of such Note by the aggregate
Note Principal Balances of all Notes of that Class. With respect to any
Certificate, the percentage as stated on the face thereof.

                  PERIODIC RATE CAP: With respect to each Mortgage Loan, the
maximum adjustment that can be made to the Mortgage Rate on each Interest
Adjustment Date in accordance with its terms, regardless of changes in the
applicable Index.

                  PERMITTED INVESTMENTS: Any one or more of the following
obligations or securities held in the name of the Indenture Trustee for the
benefit of the Noteholders:

                  (i) direct obligations of, and obligations the timely payment
of which are fully guaranteed by the United States of America or any agency or
instrumentality of the United States of America the obligations of which are
backed by the full faith and credit of the United States of America;

                  (ii) (a) demand or time deposits, federal funds or bankers'
acceptances issued by any depository institution or trust company incorporated
under the laws of the United States of America or any state thereof (including
the Indenture Trustee, Securities Administrator or the Master Servicer or its
Affiliates acting in its commercial banking capacity) and subject to supervision
and examination by federal and/or state banking authorities, provided that the
commercial paper and/or the short-term debt rating and/or the long-term
unsecured debt obligations of such depository institution or trust company at
the time of such investment or contractual commitment providing for such
investment have the Applicable Credit Rating or better from the Rating Agencies
and (b) any other demand or time deposit or certificate of deposit that is fully
insured by the Federal Deposit Insurance Corporation;

                  (iii) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued or guaranteed by
an agency or instrumentality of the

                                      -24-
<PAGE>

United States of America, the obligations of which are backed by the full faith
and credit of the United States of America, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (ii)(a) above where the Securities Administrator holds the security
therefor;

                  (iv) securities bearing interest or sold at a discount issued
by any corporation (including the Indenture Trustee, Securities Administrator or
the Master Servicer or its Affiliates) incorporated under the laws of the United
States of America or any state thereof that have the Applicable Credit Rating or
better from the Rating Agencies at the time of such investment or contractual
commitment providing for such investment; provided, however, that securities
issued by any particular corporation will not be Permitted Investments to the
extent that investments therein will cause the then outstanding principal amount
of securities issued by such corporation and held as part of the Trust to exceed
10% of the aggregate Outstanding Principal Balances of all the Mortgage Loans
and Permitted Investments held as part of the Trust as determined by the Master
Servicer;

                  (v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof) having
the Applicable Credit Rating or better from the Rating Agencies at the time of
such investment;

                  (vi) a Reinvestment Agreement issued by any bank, insurance
company or other corporation or entity;

                  (vii) any other demand, money market or time deposit,
obligation, security or investment as may be acceptable to the Rating Agencies
as evidenced in writing by the Rating Agencies to the Securities Administrator;
and

                  (viii) any money market or common trust fund having the
Applicable Credit Rating or better from the Rating Agencies, including any such
fund for which the Indenture Trustee, Securities Administrator or Master
Servicer or any affiliate of the Indenture Trustee, Securities Administrator or
Master Servicer acts as a manager or an advisor; provided, however, that no
instrument or security shall be a Permitted Investment if such instrument or
security evidences a right to receive only interest payments with respect to the
obligations underlying such instrument or if such security provides for payment
of both principal and interest with a yield to maturity in excess of 120% of the
yield to maturity at par or if such instrument or security is purchased at a
price greater than par as determined by the Master Servicer.

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

                  PLAN: Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA or Section 4975 of the Code.

                                      -25-
<PAGE>

                  PLAN ASSETS: Assets of a Plan within the meaning of Department
of Labor regulation 29 C.F.R. ss. 2510.3-101.

                  POOL BALANCE: With respect to any date of determination, the
aggregate of the Stated Principal Balances of all Mortgage Loans as of such
date.

                  PREPAYMENT INTEREST SHORTFALL: With respect to any Payment
Date and any Mortgage Loan that was subject to a principal prepayment in full or
a principal prepayment in part during the related Prepayment Period, the sum of
the differences between (a) interest actually received in the related Prepayment
Period as a result of such principal prepayment in full or principal prepayment
in part or other unscheduled receipt of principal (including as a result of a
liquidation) on each Mortgage Loan as to which such a payment in received and
(b) the scheduled interest portion of the monthly payment of such Mortgage Loan,
adjusted to the applicable Net Mortgage Rate.

                  PREPAYMENT PERIOD: With respect any Payment Date, the calendar
month immediately preceding the month in which such Payment Date occurs.

                  PRIMARY MORTGAGE INSURANCE POLICY: Any primary mortgage
guaranty insurance policy issued in connection with a Mortgage Loan which
provides compensation to a Mortgage Note holder in the event of default by the
obligor under such Mortgage Note or the related Security Instrument, if any, or
any replacement policy therefor through the related Accrual Period for such
Class relating to a Payment Date.

                  PRINCIPAL DEFICIENCY AMOUNT: For any Payment Date, the
Principal Deficiency Amount shall equal the excess of the aggregate Note
Principal Balance of the Offered Notes after giving effect to payments on such
Payment Date over the aggregate Stated Principal Balance of the Mortgage Loans
as of the first day of the Due Period for the month in which such Payment Date
occurs. On any Payment Date, the total Principal Deficiency Amount shall be
allocated among the classes of Subordinate Notes as follows: first, to the Class
B4A Notes and Class B4B Notes, pro rata, second, to the Class B3 Notes, third,
to the Class B2 Notes, fourth, to the Class B1 Notes, fifth, to the Class M5
Notes, sixth, to the Class M4 Notes, seventh, to the Class M3 Notes, eighth, to
the Class M2 Notes and ninth, to the Class M1 Notes.

                  PRINCIPAL FUNDS: For any Payment Date and any Loan Group or
the Mortgage Loans in the aggregate, as applicable, the sum of (i) the principal
portion of all scheduled monthly payments on the related Mortgage Loans due on
the related Due Date, to the extent received or advanced; (ii) the principal
portion of all proceeds of the repurchase of a Mortgage Loan in the related Loan
Group (or, in the case of a substitution, certain amounts representing a
principal adjustment) as required by the Mortgage Loan Purchase Agreement during
the preceding calendar month; (iii) the principal portion of all other
unscheduled collections received during the preceding calendar month in respect
of the related Mortgage Loans, including full and partial prepayments, the
proceeds of any repurchase of such Mortgage Loans by the Seller or holder of the
Owner Trust Certificates, Liquidation Proceeds and Insurance Proceeds, in each
case to the extent applied as recoveries of principal; net of any amounts
reimbursable to the Master Servicer, the Servicer, the Securities Administrator,
the Indenture Trustee and the Owner Trustee as provided in the Agreements (to
the extent not reimbursed from Interest Funds).

                                      -26-
<PAGE>

                  PRINCIPAL PAYMENT AMOUNT: For any Payment Date, the Basic
Principal Payment Amount plus the Extra Principal Payment Amount.

                  PRINCIPAL PREPAYMENT: Any payment (whether partial or full) or
other recovery of principal on a Mortgage Loan which is received in advance of
its scheduled Due Date to the extent that it is not accompanied by an amount as
to interest representing scheduled interest due on any date or dates in any
month or months subsequent to the month of prepayment, including Insurance
Proceeds and Repurchase Proceeds, including any prepayment penalty or premium
but excluding the principal portion of Net Liquidation Proceeds received at the
time the Mortgage Loan becomes a Liquidated Mortgage Loan.

                  PROCEEDING: Any suit in equity, action at law or other
judicial or administrative proceeding.

                  PROSPECTUS: The Prospectus Supplement, dated January 24, 2005,
together with the attached Prospectus, dated January 24, 2005.

                  PROTECTED ACCOUNT: An account established and maintained for
the benefit of Noteholders by the Servicer with respect to the Mortgage Loans
and with respect to REO Property pursuant to the Servicing Agreements. The
Protected Account shall be an Eligible Account.

                  PURCHASER: People's Choice Home Loan Securities Corp., a
Delaware corporation, and its successors and assigns.

                  QUALIFIED INSURER: Any insurance company duly qualified as
such under the laws of the state or states in which the related Mortgaged
Property or Mortgaged Properties is or are located, duly authorized and licensed
in such state or states to transact the type of insurance business in which it
is engaged and approved as an insurer by the Master Servicer, so long as the
claims paying ability of which is acceptable to the Rating Agencies for
mortgage-backed notes having the same rating as the Notes rated by the Rating
Agencies as of the Closing Date.

                  RATING AGENCY: Any nationally recognized statistical rating
organization, or its successor, that rated the Notes at the request of the
Depositor at the time of the initial issuance of the Notes. Initially, Standard
& Poor's and Moody's. If such organization or a successor is no longer in
existence, "Rating Agency" with respect to the Notes shall be such nationally
recognized statistical rating organization, or other comparable Person,
designated by the Depositor, notice of which designation shall be given to the
Indenture Trustee and Master Servicer. References herein to the highest short
term unsecured rating category of a Rating Agency shall mean A-1 or better in
the case of Standard & Poor's, P-1 in the case of Moody's and in the case of any
other Rating Agency shall mean such equivalent ratings. References herein to the
highest long-term rating category of a Rating Agency shall mean "AAA" in the
case of Standard & Poor's, "Aaa" in the case of Moody's and in the case of any
other Rating Agency, such equivalent rating.

                  REALIZED LOSS: Any (i) Bankruptcy Loss or (ii) as to any
Liquidated Mortgage Loan, (x) the Outstanding Principal Balance of such
Liquidated Mortgage Loan plus accrued and unpaid interest thereon at the
Mortgage Rate through the last day of the month of such

                                      -27-
<PAGE>

liquidation, less (y) the related Net Liquidation Proceeds with respect to such
Mortgage Loan and the related Mortgage Property.

                  RECORD DATE: With respect to any Book-Entry Notes (other than
the Class B4B Notes) and any Payment Date, the close of business on the Business
Day immediately preceding such Payment Date. With respect to the Class B4B Notes
and any Offered Notes that are not Book-Entry Notes, the close of business on
the last Business Day of the calendar month preceding such Payment Date.

                  REFERENCE BANKS: Leading banks selected by the Securities
Administrator and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) whose quotations appear on the Telerate Screen Page 3750 on the
Interest Determination Date in question, (iii) which have been designated as
such by the Securities Administrator and (iv) not controlling, controlled by, or
under common control with, the Company or the Seller.

                  REINVESTMENT AGREEMENTS: One or more reinvestment agreements,
acceptable to the Rating Agencies, from a bank, insurance company or other
corporation or entity (including the Indenture Trustee).

                  RELATED DOCUMENTS: With respect to each Mortgage Loan, the
documents specified in Section 2.01(b)(i)-(vii) of the Sale and Servicing
Agreement and any documents required to be added to such documents pursuant to
the Sale and Servicing Agreement or the Mortgage Loan Purchase Agreement.

                  RELIEF ACT: The Servicemembers Civil Relief Act, as amended,
or any similar state law.

                  RELIEF ACT MORTGAGE LOAN: Any Mortgage Loan as to which the
Scheduled Payment thereof has been reduced due to the application of the Relief
Act.

                  REO PROPERTY: A Mortgaged Property acquired in the name of the
Indenture Trustee, for the benefit of the Noteholders, by foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.

                  REPURCHASE PRICE: With respect to any Mortgage Loan required
to be repurchased, an amount equal to the sum of (1) 100% of the Stated
Principal Balance of such Mortgage Loan plus accrued but unpaid interest on the
Stated Principal Balance at the related Mortgage Rate through and including the
last day of the month of repurchase, (2) any unreimbursed Monthly Advances and
servicing advances payable to the Servicer of the Mortgage Loan and (3) any
costs and damages incurred by the trust in connection with any violation of such
Mortgage Loan of any anti-predatory lending laws.

                  REPURCHASE PROCEEDS: The Repurchase Price in connection with
any repurchase of a Mortgage Loan by the Seller and any cash deposit in
connection with the substitution of a Mortgage Loan.

                                      -28-
<PAGE>

                  REQUEST FOR RELEASE: A request for release in the form
attached to the Sale and Servicing Agreement as Exhibit B.

                  REQUIRED INSURANCE POLICY: With respect to any Mortgage Loan,
any insurance policy which is required to be maintained from time to time under
the Sale and Servicing Agreement with respect to such Mortgage Loan.

                  RESERVE INTEREST RATE: With respect to any Interest
Determination Date, the rate per annum that the Securities Administrator
determines to be either (i) the arithmetic mean (rounded upwards if necessary to
the nearest whole multiple of 0.0625%) of the one-month United States dollar
lending rates which New York City banks selected by the Securities Administrator
are quoting on the relevant Interest Determination Date to the principal London
offices of leading banks in the London interbank market or (ii) in the event
that the Securities Administrator can determine no such arithmetic mean, the
lowest one-month United States dollar lending rate which New York City banks
selected by the Securities Administrator are quoting on such Interest
Determination Date to leading European banks.

                  RESPONSIBLE OFFICER: With respect to the Securities
Administrator, any officer of the Securities Administrator with direct
responsibility for the administration of the Indenture and also, with respect to
a particular matter, any other officer to whom such matter is referred because
of such officer's knowledge of and familiarity with the particular subject; and
with respect to the Indenture Trustee, any vice president, assistant vice
president, any assistant secretary or any assistant treasurer or any other
officer of the Indenture Trustee working in its Corporate Trust Office
customarily performing functions similar to those performed by any of the above
designated officers who at such time shall be officers to whom, with respect to
a particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject or who shall have direct
responsibility for the administration of this Indenture.

                  ROLLING THREE MONTH DELINQUENCY RATE: With respect to any
Payment Date, the average of the Delinquency Rates for each of the three (or one
and two, in the case of the first and second Payment Dates, respectively)
immediately preceding months

                  SALE AND SERVICING AGREEMENT: The Sale and Servicing
Agreement, dated January 28, 2005, among the Depositor, the Issuer, the
Indenture Trustee, Wells Fargo Bank, N.A., as master servicer and securities
administrator, and People's Choice Funding, Inc., as seller and company.

                  SCHEDULED PAYMENT: With respect to any Mortgage Loan and any
month, the scheduled payment or payments of principal and interest due during
such month on such Mortgage Loan which either is payable by a Mortgagor in such
month under the related Mortgage Note or, in the case of REO Property, would
otherwise have been payable under the related Mortgage Note.

                  SCHEDULED PRINCIPAL: The principal portion of any Scheduled
Payment.

                  SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

                                      -29-
<PAGE>

                  SECURITIES ADMINISTRATOR: Wells Fargo Bank, N.A., or its
successor in interest, or any successor securities administrator appointed as
herein provided.

                  SECURITY:  Any of the Certificates or Notes.

                  SECURITYHOLDER or HOLDER: Any Noteholder or a
Certificateholder.

                  SECURITY INSTRUMENT: A written instrument creating a valid
first lien on a Mortgaged Property securing a Mortgage Note, which may be any
applicable form of mortgage, deed of trust, deed to secure debt or security
deed, including any riders or addenda thereto.

                  SELLER: People's Choice Funding, Inc.., and its successors and
assigns.

                  SENIOR ENHANCEMENT PERCENTAGE: For any Payment Date, the
percentage obtained by dividing (x) the sum of (i) the aggregate Note Principal
Balance of the Class M Notes and Class B Notes and (ii) the related
Overcollateralized Amount, in each case prior to the distribution of the
Principal Payment Amount on such Payment Date, by (y) the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to
be made on that Payment Date.

                  SENIOR PRINCIPAL PAYMENT AMOUNT: For any applicable Payment
Date on or after the Stepdown Date as long as a Trigger Event has not occurred
with respect to such Payment Date, the lesser of (A) the Principal Payment
Amount, and (B) an amount equal to the excess (if any) of (x) the aggregate Note
Principal Balance of the Class IA1, Class IA2, Class IA3, Class IIA1 and Class
IIA2 Notes immediately prior to such Payment Date over (y) the lesser of (a) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) multiplied by approximately 57.70% and (b) the amount, if
any, by which (i) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) exceeds (ii) the Overcollateralization
Floor

                  SERVICER: Initially, People's Choice Home Loan, Inc. and its
successors and assigns, or any successor servicer appointed pursuant to the
provisions of the People's Choice Servicing Agreement. Commencing on April 1,
2005, JPMorgan Chase Bank, National Association, and its successors and assigns,
or any successor servicer appointed pursuant to the provisions of the JPMorgan
Chase Servicing Agreement.

                  SERVICER REMITTANCE DATE: With respect to each Mortgage Loan,
the 18th day of any month, or if such 18th day is not a Business Day, the first
Business Day immediately preceding or succeeding, pursuant to the applicable
servicing agreement, such 18th day.

                                      -30-
<PAGE>

                  SERVICING AGREEMENTS: The People's Choice Servicing Agreement
and the JPMorgan Chase Servicing Agreement, or any other similar Servicing
Agreement entered into with respect to this transaction, as applicable.

                  SERVICING FEE: With respect to each Mortgage Loan and for any
calendar month, an amount equal to one twelfth of the product of the Servicing
Fee Rate multiplied by the Stated Principal Balance of the mortgage loans as of
the Due Date in the preceding calendar month. The Servicing Fee is payable
solely from collections of interest on the mortgage loans.

                  SERVICING FEE RATE: With respect to any Mortgage Loan, 0.50%
per annum.

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

                  SPECIAL DERIVATIVE CONTRACT: Any ISDA Master Agreement,
together with the related Schedule and Confirmation, entered into by the
Indenture Trustee and a Special Derivative Counterparty in accordance with
Section 3.28.

                  SPECIAL DERIVATIVE COUNTERPARTY: Any counterparty to a Special
Derivative Contract as provided in Section 3.28.

                  STANDARD & POOR'S: Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.

                  STATED PRINCIPAL BALANCE: With respect to any Mortgage Loan as
of any date of determination, the principal balance thereof as of the Cut-off
Date, after application of all scheduled principal payments due on or before the
Cut-off Date, whether or not received, reduced by all amounts allocable to
principal that have been distributed to noteholders with respect to such
Mortgage Loan on or before such date, as further reduced to the extent of any
Realized Loss.

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

                  STEPDOWN DATE: The later to occur of (x) the Payment Date
occurring in February 2008 and (y) the first Payment Date for which the Senior
Enhancement Percentage is greater than or equal to twice the Senior Enhancement
Percentage on the Closing Date.

                  STEP-UP DATE: The first Payment Date following the first month
in which the aggregate unpaid principal balance of the Mortgage Loans, and
properties acquired in respect thereof, remaining in the trust has been reduced
to less than or equal to 10% of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date.

                  SUBORDINATE NOTES: Each of the Class M Notes and the Class B
Notes.

                                      -31-
<PAGE>

                  SUBSTITUTE MORTGAGE LOAN: A mortgage loan tendered to the
Indenture Trustee or the Custodian pursuant to the Mortgage Loan Purchase
Agreement or Section 2.04 of the Sale and Servicing Agreement, as applicable, in
each case, (i) which has an Outstanding Principal Balance not greater nor
materially less than the Mortgage Loan for which it is to be substituted; (ii)
which has a Mortgage Rate and Net Rate not less than, and not materially greater
than, such Mortgage Loan; (iii) which has a maturity date not materially earlier
or later than such Mortgage Loan and not later than the latest maturity date of
any Mortgage Loan; (iv) which is of the same property type and occupancy type as
such Mortgage Loan; (v) which has a Loan-to-Value Ratio not greater than the
Loan-to-Value Ratio of such Mortgage Loan; (vi) which is current in payment of
principal and interest as of the date of substitution; (vii) as to which the
payment terms do not vary in any material respect from the payment terms of the
Mortgage Loan for which it is to be substituted and (viii) which has a Gross
Margin and Maximum Lifetime Mortgage Rate no less than those of such Mortgage
Loan, has the same Index and interval between Interest Adjustment Dates as such
Mortgage Loan, and a Minimum Lifetime Mortgage Rate no lower than that of such
Mortgage Loan.

                  SWAP AGREEMENT: The interest rate Swap Agreement between the
Seller or the Indenture Trustee and the Swap Provider for the benefit of the
Offered Notes.

                  SWAP PROVIDER:  Bear Stearns Financial Products Inc.

                  SWAP PROVIDER TRIGGER EVENT: With respect to any Payment Date,
(i) an Event of Default under the interest rate Swap Agreement with respect to
which the Swap Provider is a Defaulting Party (as defined in the interest rate
Swap Agreement), (ii) a Termination Event under the interest rate Swap Agreement
with respect to which the Swap Provider is the sole Affected Party (as defined
in the interest rate Swap Agreement) or (iii) an Additional Termination Event
under the interest rate Swap Agreement with respect to which the Swap Provider
is the sole Affected Party.
                  SWAP TERMINATION PAYMENT: Any lump-sum amount calculated in
accordance with the Swap Agreement in connection with an "Event of Default", a
"Termination Event" or an "Additional Termination Event" under the Swap
Agreement.

                  TELERATE SCREEN PAGE 3750: The display designated as page 3750
on the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks).

                  THREE-YEAR HYBRID MORTGAGE LOAN: An adjustable-rate Mortgage
Loan which has an initial fixed period of three years.

                  TREASURY REGULATIONS: 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.

                  TRIGGER EVENT: A Trigger Event is in effect with respect to
any Payment Date if:

                                      -32-
<PAGE>

         (1) the Rolling Three Month Delinquency Rate as of the close of
business on the last day of the preceding calendar month exceeds 37.75% of the
Senior Enhancement Percentage; or

         (2) the cumulative amount of Realized Losses incurred on the Mortgage
Loans from the Cut-off Date through the end of the calendar month immediately
preceding such Payment Date exceeds the applicable percentage set forth below of
the aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date:

<TABLE>
<CAPTION>
         DISTRIBUTION DATE                                             PERCENTAGE
         -----------------                                             ----------
<S>                                                           <C>
         February 2008 to January 2009                        3.50% for the first month, plus an additional 1/12th of 2.00% for each
                                                              month thereafter.
         February 2009 to January 2010                        5.50% for the first month, plus an additional 1/12th of 1.50% for each
                                                              month thereafter.
         February 2010 to January 2011                        7.00% for the first month, plus an additional 1/12th of 0.40% for each
                                                              month thereafter.
         February 2011 and thereafter                         7.40%
</TABLE>

                  TRUST: People's Choice Home Loan Securities Trust Series
2005-1 to be created pursuant to the Trust Agreement.

                  TRUST AGREEMENT: The Amended and Restated Trust Agreement
dated as of January 28, 2005, among the Owner Trustee, the Depositor and Wells
Fargo Bank, N.A., as securities administrator, certificate registrar and
certificate paying agent, relating to the Trust.

                  TRUST ESTATE: The meaning specified in the Granting Clause of
the Indenture.

                  TRUST INDENTURE ACT or TIA: The Trust Indenture Act of 1939,
as amended from time to time, as in effect on any relevant date.

                  TWO-YEAR HYBRID MORTGAGE LOAN: An adjustable-rate Mortgage
Loan which has an initial fixed period of two years.

                  UCC: The Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.

                  UNDERWRITERS: Bear, Stearns & Co. Inc, Lehman Brothers Inc.
and Wachovia Capital Markets, LLC.

                  UNINSURED CAUSE: Any cause of damage to a Mortgaged Property
or related REO Property such that the complete restoration of such Mortgaged
Property or related REO Property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to the Servicing
Agreements, without regard to whether or not such policy is maintained.

                                      -33-Exhibit 99.6

                             DC ASSET MANAGEMENT LLC
                                830 THIRD AVENUE
                            NEW YORK, NEW YORK 10022

As of September 1, 2004

DynTek, Inc.
18881 Von Karman Avenue
Suite 250
Irvine, California 92612

Attention: Steven J. Ross, Chairman, CEO and President

Dear Mr. Ross:

      This letter,  when executed by the parties  hereto,  will  memorialize our
understanding  and  constitute  an agreement  between  DynTek,  Inc., a Delaware
corporation (the "Company"),  and DC Asset Management LLC ("DCAM"),  pursuant to
which the  Company  agrees to retain  DCAM and DCAM agrees to be retained by the
Company under the terms and conditions set forth below:

      1. The Company  hereby  retains DCAM to negotiate,  evaluate and structure
merger,  acquisition  and  other  transactions,  and DCAM  hereby  accepts  such
retention,  for a term  commencing on the date hereof and ending on September 1,
2005. As  compensation  for the services  DCAM will provide to the Company,  the
Company shall within thirty days of the  execution of this  Agreement,  issue to
DCAM five-year  warrants to purchase  1,150,000  shares of the Company's  common
stock,  $.0001 par value per share (the "Common Stock").  A form of such warrant
is attached hereto as Exhibit A (the "Warrants").  The Company agrees to provide
to DCAM such  registration  rights  with  respect to the shares of Common  Stock
underlying the Warrants as set forth in Exhibit B attached hereto.  The parties,
prior  to  any   registration,   agree  to  enter  into  a  customary   form  of
indemnification agreement.

      2. The Company shall  reimburse DCAM for any and all  reasonable  expenses
incurred  by DCAM in the  performance  of its duties  hereunder,  and DCAM shall
account for such expenses to the Company by  submission  of vouchers  reasonably
satisfactory  to the Company  setting forth in reasonable  detail the amount and
reason for such cost or expense.

      3. All  obligations  of DCAM  contained  herein shall be subject to DCAM's
reasonable  availability  for such  performance,  in view of the  nature  of the
requested service and the amount of notice received. DCAM shall devote such time
and effort to the performance of its duties hereunder as DCAM shall determine is
reasonably necessary for such performance. DCAM may look to such others for such
factual  information,   investment   recommendations,   economic  advice  and/or
research,  upon which to base its advice to the Company  hereunder,  as it shall
deem appropriate.  The Company shall furnish to DCAM all information relevant to
the performance by DCAM of its obligations  under this Agreement,  or particular
projects as to which DCAM is acting as  advisor,  which will permit DCAM to know
all  facts  material  to  the

                                       1
<PAGE>

advice to be rendered,  and all materials or information reasonably requested by
DCAM.  In the event  that the  Company  fails or  refuses  to  furnish  any such
material or  information  reasonably  requested  by DCAM,  and thus  prevents or
impedes DCAM's performance hereunder, any inability of DCAM to perform shall not
be a breach of its obligations hereunder.

      4. Subject to Section 5, nothing  contained in this Agreement  shall limit
or restrict the right of DCAM or of any partner,  affiliate,  employee, agent or
representative of DCAM, to be a partner,  director,  officer, employee, agent or
representative  of, or to engage  in,  any other  business,  whether or not of a
similar nature to the Company's business,  nor to limit or restrict the right of
DCAM to render services of any kind to any other corporation,  firm,  individual
or association.

      5. DCAM will hold,  and will use its  commercially  reasonable  efforts to
cause its officers, directors, employees,  consultants,  advisors, and agents to
hold, in confidence any confidential  information  which the Company provides to
DCAM  pursuant to this  Agreement.  DCAM may disclose  such  information  to its
officers, directors, employees,  consultants, advisors and agents, in connection
with the services to be rendered as contemplated  by this Agreement,  so long as
such persons are informed by DCAM of the confidential nature of such information
and are directed by DCAM to treat such information  confidentially in accordance
herewith.  Notwithstanding the foregoing, DCAM shall not be required to maintain
confidentiality  with respect to information (i) which is or becomes part of the
public domain; (ii) of which DCAM had independent  knowledge prior to disclosure
to it by the  Company;  (iii)  which  comes into the  possession  of DCAM in the
normal and  routine  course of its own  business  from and  through  independent
non-confidential  sources;  or (iv) which is required to be disclosed by DCAM by
governmental requirements.  If DCAM is requested or required (by oral questions,
interrogatories,   requests  for  information  or  document   subpoenas,   civil
investigative   demands,  or  similar  process)  to  disclose  any  confidential
information   supplied  to  it  by  the  Company,  or  the  existence  of  other
negotiations   in  the  course  of  its   dealings   with  the  Company  or  its
representatives,  DCAM shall,  unless  prohibited  by law,  promptly  notify the
Company  of such  request(s)  so  that  the  Company  may  seek  an  appropriate
protective order.

      6. Because we will be acting on your behalf, it is our practice to receive
indemnification.   A  copy  of  our  standard  indemnification  provisions  (the
"Indemnification  Provisions") is attached to this Agreement and is incorporated
herein and made a part hereof.

      7. This Agreement may not be transferred,  assigned or delegated by any of
the parties hereto without the prior written consent of the other party hereto.

      8. The failure or neglect of the parties  hereto to insist,  in any one or
more instances, upon the strict performance of any of the terms or conditions of
this  Agreement,  or their waiver of strict  performance  of any of the terms or
conditions  of  this   Agreement,   shall  not  be  construed  as  a  waiver  or
relinquishment  in the  future of such  term or  condition,  but the same  shall
continue in full force and effect.

      9. Any notices hereunder shall be sent to the Company and to DCAM at their
respective  addresses  set  forth  above.  Any  notice  shall  be  given by hand
delivery,  facsimile  transmission  or  overnight  delivery or courier  service,
against receipt therefor, and shall be

                                       2
<PAGE>

deemed to have been given when  received.  Either party may  designate any other
address to which notice shall be given, by giving written notice to the other of
such change of address in the manner herein provided.

      10.  This  Agreement  has been  made in the State of New York and shall be
construed and governed in accordance with the laws thereof without giving effect
to principles governing conflicts of law.

      11. This Agreement contains the entire agreement between the parties,  may
not be altered  or  modified,  except in  writing  and signed by the party to be
charged  thereby,  and  supersedes any and all previous  agreements  between the
parties relating to the subject matter hereof.

      12. This  Agreement  shall be binding  upon the  parties  hereto and their
respective heirs, administrators, successors and permitted assigns.

                                       3
<PAGE>

      If you are in agreement with the  foregoing,  please execute two copies of
this letter in the space provided below and return them to the undersigned.

                                                 Yours truly,

                                                 DC ASSET MANAGEMENT LLC

                                                 By: /s/ Richard Smithline
                                                     Name: Richard Smithline
                                                     Title: President

ACCEPTED AND AGREED TO
AS OF THE DATE FIRST
ABOVE WRITTEN:

DYNTEK, INC.

By: /s/ Steven Ross
    Name: Steve Ross
    Title: CEO

                                       4
<PAGE>

                           INDEMNIFICATION PROVISIONS

      DynTek, Inc., a Delaware corporation (the "Company"),  agrees to indemnify
and hold harmless DC Asset  Management LLC ("DCAM")  against any and all losses,
claims, damages, obligations,  penalties, judgments, awards, liabilities, costs,
expenses and  disbursements  (and any and all actions,  suits,  proceedings  and
investigations  in  respect  thereof  and any and all  legal  and  other  costs,
expenses  and  disbursements  in giving  testimony  or  furnishing  documents in
response to a subpoena or otherwise)  (each a "Liability"),  including,  without
limitation,  the costs,  expenses and  disbursements,  as and when incurred,  of
investigating,  preparing or  defending  any such action,  suit,  proceeding  or
investigation  (whether or not in connection  with litigation in which DCAM is a
party),  directly or indirectly,  relating to, based upon, arising out of, or in
connection  with,  its acting for the Company under the  Agreement,  dated as of
September 1, 2004,  between the Company and DCAM to which these  indemnification
provisions are attached and form a part (the "Agreement"),  except to the extent
that any such  Liability  is found in a final  judgment by a court of  competent
jurisdiction  (not subject to further  appeal) to have  resulted  primarily  and
directly from DCAM's gross  negligence or willful  misconduct.  The Company also
agrees that DCAM shall not have any liability  (whether  direct or indirect,  in
contract or tort or  otherwise)  to the Company  for or in  connection  with the
engagement of DCAM,  except to the extent that any such  liability is found in a
final  judgment by a court of  competent  jurisdiction  (not  subject to further
appeal) to have resulted  primarily and directly from DCAM's gross negligence or
willful misconduct.

      The indemnification provisions shall be in addition to any liability which
the Company may otherwise have to DCAM or the persons  identified  below in this
sentence and shall  extend to the  following:  DCAM,  its  affiliated  entities,
partners,  employees,  legal counsel, agents and controlling persons (within the
meaning of the federal securities laws), and the officers, directors, employees,
legal counsel,  agents and controlling persons of any of them. All references to
DCAM in these indemnification  provisions shall be understood to include any and
all of the foregoing.

      If any action, suit, proceeding or investigation is commenced, as to which
DCAM  proposes  to demand  indemnification,  it shall  notify the  Company  with
reasonable  promptness  (but any failure by DCAM to notify the Company shall not
relieve the  Company  from its  obligations  hereunder);  and the Company  shall
promptly assume the defense of such action,  suit,  proceeding or investigation,
including  the  employment  of  counsel  (reasonably  satisfactory  to DCAM) and
payment  of fees and  expenses.  DCAM  shall  have the right to  retain  its own
counsel of its own choice to represent it and such counsel shall,  to the extent
consistent with its  professional  responsibilities,  cooperate with the Company
and any counsel  designated  by the  Company,  but the fees and expenses of such
counsel  employed  by  DCAM  shall  be at the  expense  of DCAM  unless  (i) the
employment of such counsel shall have been  authorized in writing by the Company
in connection  with the defense of such action,  (ii) the Company shall not have
promptly employed counsel  reasonably  satisfactory to DCAM, or (iii) DCAM shall
have reasonably concluded that there may be one or more legal defenses available
to it which are different from or additional to those  available to the Company,
in any of which events such fees and expenses  shall be borne by the Company and
the  Company  shall not have the right to direct the  defense of such  action on
behalf of DCAM.  The  Company  shall be liable for any  settlement

                                       5
<PAGE>

of any claim against DCAM made with the Company's written consent, which consent
shall not be  unreasonably  withheld.  The Company shall not,  without the prior
written consent of DCAM,  settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as unconditional term thereof, the giving by the
claimant to DCAM of an  unconditional  release from all  liability in respect of
such claim.

      In order to provide for just and  equitable  contribution,  if a claim for
indemnification  pursuant to these indemnification  provisions is made but it is
found in a final judgment by a court of competent  jurisdiction  (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express  provisions hereof provide for  indemnification in such case,
then the Company, on the one hand, and DCAM, on the other hand, shall contribute
to the losses,  claims,  damages,  obligations,  penalties,  judgments,  awards,
liabilities, costs, expenses, and disbursements to which the indemnified persons
may be subject in accordance with the relative benefits received by the Company,
on the one hand, and DCAM, on the other hand, and also the relative fault of the
Company,  on the one hand,  and DCAM, on the other hand, in connection  with the
statements,  acts or omissions which resulted in such losses,  claims,  damages,
obligations,  penalties,  judgements,  awards,  liabilities,  costs, expenses or
disbursements  and  the  relevant   equitable   considerations   shall  also  be
considered.  No person found liable for a fraudulent  misrepresentation shall be
entitled to  contribution  from any person who is not also found liable for such
fraudulent  misrepresentation.  Notwithstanding the foregoing, DCAM shall not be
obligated to  contribute  any amount  hereunder  that exceeds the amount of fees
previously received by DCAM pursuant to the Agreement.

      Neither  termination  nor completion of the engagement of DCAM referred to
above shall  affect  these  indemnification  provisions  which shall then remain
operative and in full force and effect.

                                       6
<PAGE>

                                                                       EXHIBIT A

<PAGE>

                                                                       EXHIBIT B

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]