Document:

THE TRAVELERS LIFE AND ANNUITY COMPANY·ONE TOWER SQUARE·HARTFORD CT·06183
A STOCK COMPANY

We are pleased to provide You the benefits of this annuity Certificate. Please read all attached forms carefully.

This Certificate is issued in consideration of the purchase payment. It is subject to the terms and conditions stated on the attached pages, all which are a part of it, and in the group contract. 

Executed at Hartford, Connecticut

by: /s/GEORGE C. KOKULIS

George C. Kokulis
 

President 

This is a legal contract between You and Us.     PLEASE READ YOUR CERTIFICATE CAREFULLY.

Certificate of Participation under a Modified Guaranteed Annuity Contract.

Non-Tax Qualified

	 	Elective Options

	 	Non Participating
	 

THE CASH SURRENDER VALUE MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE MARKET VALUE ADJUSTMENT FORMULA ON THE CERTIFICATE SPECIFICATIONS PAGE. THE CASH SURRENDER VALUE IS AVAILABLE WITHOUT APPLICATION OF THE MARKET VALUE DJUSTMENT AT THE END OF A GUARANTEE PERIOD.

	TL-14325		TLAC Ed. 4-95

TABLE OF CONTENTS

	Certificate Specifications	Page 3
	 	 
	Definitions	Page 5
	 	 
	Purchase Payment	Page 6
	 	 
	Certificate Control Provisions	Page 6
	 	 
	Crediting of Interest and Guarantee Periods	Page 7
	 	 
	Market Value Adjustment	Page 7
	 	 
	Transfer Between Guarantee Periods	Page 7
	 	 
	Termination Provisions	Page 8
	 	 
	Settlement Provisions	Page 9
	 	 
	General Provisions	Page 11
	 	 

Any Riders or Endorsements follow the Life Annuity Tables.

	TL-14325	Page 2	TLAC Ed. 4-95

CERTIFICATE  SPECIFICATIONS

	CERTIFICATE OWNER	 	[JOHN DOE]	 	 
	[JOINT CERTIFICATE OWNER]	 	 	 	 
	ANNUITANT	 	[JOHN DOE]	 	 
	[CONTINGENT ANNUITANT]	 	 	 	 
	CONTRACT OWNER	 	[TRAVELERS ANNUITY TRUST FOR BROKER/DEALERS]	 	 
	CERTIFICATE NUMBER	 	[SPECIMEN]	 	 
	CERTIFICATE DATE	 	[03-01-2002]	 	 
	ANNUITY COMMENCEMENT DATE	 	[03-15-2018]	 	MONTHLY LIFE ANNUITY
	[PURCHASE PAYMENT]	 	[$10,000]	 	 
	[INITIAL INTEREST RATE]	 	[ 5.00%]	 	 
	[INITIAL GUARANTEE PERIOD]	 	[ 6 years]	 	 
	 	 	 	 	 

Purchase Payment/Termination Amount

Minimum Purchase Payment Amount:   [$5,000]

Maximum Purchase Payment Amount:   [$1,000,000 unless We consent to a larger amount]

Termination Amount:      [$2,000]

Market Value Adjustment Formula

A Market Value Adjustment will be applied when a surrender occurs prior to the end of a Guarantee Period. The Market Value Adjustment is the difference between the Account Value and the Market Adjusted Value.

Market Adjusted Value = [ (Maturity Value)  x  [ 1/(1 + ic)] t/365

ic = the current Guaranteed Interest Rate (straight-line interpolation between whole years) that We are then crediting for a Guarantee Period of t days on this class of certificate(s).

t = the number of days remaining in the Guarantee Period adjusting for leap years.]

If the application of the Market Value Adjustment Formula results in an upward adjustment in the amount payable on any full or partial surrender, such upward adjustment will be limited to the lesser of the amount of the upward adjustment or the amount of any Surrender Charge associated with the amount being surrendered. 

If the application of the Market Value Adjustment Formula results in an upward adjustment in the amount applied to purchase annuity payments on the Annuity Commencement Date, such upward adjustment will be limited to the lesser of the upward adjustment or the amount of any Surrender Charge assessed on the Annuity Commencement Date.

			

CERTIFICATE SPECIFICATIONS

Surrender Charge

During the first seven years after a purchase payment is applied under the Certificate, a Surrender Charge may be deducted from any amount surrendered. This charge is a percentage of the Cash Value surrendered from a Certificate.

	Certificate Years Since Payment Was Applied
	 	Surrender Charge
	 
	1	 	7%	 
	2	 	6%	 
	3	 	5%	 
	4	 	4%	 
	5	 	3%	 
	6	 	2%	 
	7	 	1%	 
	THEREAFTER	 	0%	 

No Surrender Charge will apply at the end of an initial Guarantee Period of at least three years. Initial Guarantee Periods of one or two years are subject to Surrender Charge for a period of five years.

Principal Protection

The following amounts will never be less than the Purchase Payment reduced by amounts received from all prior partial surrenders (Account Value surrendered, adjusted by the Market Value Adjustment Formula less any Surrender Charge): 

	 	a.	 	Cash Surrender Value on full surrender;
	 	 	 
	 	b.	 	Death Benefit before annuity payments commence; 
	 	 	 
	 	c.	 	Amount applied to purchase the annuity payments on the Annuity Commencement Date;
	 	 	 
	 	d.	 	Account Value at the beginning of a subsequent Guarantee Period.

Free Withdrawal Amount

Interest credited in the previous Certificate Year may be withdrawn without a Market Value Adjustment or a surrender charge.

Automatic Renewal Guarantee Period

A [one-year] Guarantee Period.

 [Transfer Between Guarantee Periods

Transfers between Guaranteed Periods as described in the “Transfer Between Guarantee Periods” section of the Certificate are not permitted.

Guarantee Period Transfer Charge

[$0]]

			

DEFINITIONS

	(a)	Account Value - The sum of the purchase payment and all interest credited to that date, less the sum of all partial surrenders, surrender charges, and applicable premium tax deducted to that date..

	 (b)	Annuitant - The person on whose life this Certificate is issued and on whose life the annuity payments are made.

	(c)	Annuity Commencement Date - the date shown on the Certificate Specifications page.

	 (d)	Beneficiary(ies) - The person(s) entitled to receive benefits after Your death, the death of the Annuitant, or the death of the first of joint Certificate Owners.

	 (e)	Cash Surrender Value - The Cash Value less surrender charges and any applicable premium tax.

	(f)	Cash Value - The Account Value at the end of a Guarantee Period or the Market Adjusted Value before the end of a Guarantee Period.

	(g)	Certificate - The Certificate provided to You, the Certificate Owner, which describes the benefits, rights and obligations of You and Us.

	(h)	Certificate Date - The date shown on the Certificate Specifications page on which the Certificate is issued.

	(i)	Certificate Year(s) - The twelve month period(s) beginning with the Certificate Date.

	(j)	Contingent Annuitant - The person You designate prior to the Certificate Date who, upon the Annuitant’s death prior to the Annuity Commencement Date, becomes the Annuitant.

	(k)	Due Proof of Death - A copy of a certified death certificate; a copy of a certified decree of a court of competent   jurisdiction as to the finding of death; a written statement by a medical doctor who attended the deceased; or any other proof satisfactory to Us.

	(l)	Guaranteed Interest Rate - The annual effective interest rate credited to a purchase payment during the Guarantee Period as described in the Crediting of Interest and Guarantee Periods section.

	(m)	Guarantee Period - The period for which either an initial or subsequent Guarantee Interest Rate is credited.

	(n)	Market Adjusted Value - Reflects the relationship on the Surrender Date between the current Guaranteed Interest Rate for the duration remaining in the Guarantee Period and the Guaranteed Interest Rate that applies to Your Certificate.

	(o)	Market Value Adjustment - The difference between the Account Value and the Market Adjusted Value.

	(p)	Maturity Value - The accumulated value of a purchase payment at the Guaranteed Interest Rate at the end of the Guarantee Period selected less any partial surrender, surrender charges, and applicable premium tax previously deducted.

	(q)	Our Office - The home office of the Travelers Life and Annuity Company located at One Tower Square, Hartford, 

	(r)	Surrender Date - The date We receive Written Request for a surrender or the date You request the surrender to be  effective, if later.

	(t)	We, Us, Our - The Travelers Life and Annuity Company.

	(u)	Written Request - A written form satisfactory to Us and received at Our Office.

	(v)	You, Your - The Certificate Owner(s). The Certificate Owner(s) is the person(s) or entity named as such on the Certificate Specifications.

	TL-14327	Page 5	TLAC Ed. 4-95

PURCHASE PAYMENT

Purchase Payment - The minimum purchase payment is shown on the Certificate Specifications page. The purchase payment is payable to Our Office. We reserve the right to limit the amount of the purchase payment which will be accepted. 

Premium Tax - The premium tax is the amount of tax, if any charged by the state or municipality on a purchase payment, on the Cash Value upon surrender, or on the amount applied to elect an annuity option. We will deduct any applicable premium tax from the cash Value either upon death, surrender, annuitization or at the time the purchase payment is made but no earlier than when We have a tax liability under law.

CERTIFICATE CONTROL PROVISIONS

Allocation of Purchase Payment

The purchase payment (less applicable premium tax, if any) will be allocated to an account established for You by Us. Account Values will be determined in accordance with the terms of this Certificate.

Owner

The contract belongs to the contract owner shown on the Certificate Specifications page. The Certificate belongs You or to any person subsequently named in a Written Request of ownership assignment as provided below. As Certificate Owner, You have the sole power during the Annuitant’s lifetime to exercise any rights and to receive all benefits given in this Certificate provided You have not named an irrevocable Beneficiary and provided the Certificate is not assigned. 

You will be the recipient of all payments while the Annuitant is alive unless You direct them to an alternate recipient under a recorded payment direction. An alternate recipient under a payment direction does not become the Certificate Owner. A payment direction is revocable by You at any time by Written Request giving 30days advance notice. 

Joint Certificate Owners

Married spouse may be named as joint Certificate Owners in a Written Request prior to the Certificate Date. All rights of ownership must be exercised by joint action. Joint Certificate Owners own equal shares of any benefits accruing or payments made to them while both live. All rights of a joint Certificate Owner end at death if another joint Certificate Owner survives. The entire interest of the deceased joint Certificate Owner in this Certificate will pass to the surviving join Certificate Owner.

Assignments

Ownership Assignments

You may transfer ownership by Written Request. You may not revoke any assignment after the effective date. Once the ownership assignment is recorded by Us, it will take effect as of the date of Your Written Request, subject to any payments made or other action taken by Us before the recording. 

Unless provided otherwise, an ownership assignment does not affect the interest of any Beneficiary designated prior to the effective date of the transfer. Ownership assignments may have adverse tax consequences to You.

Collateral Assignments

You may collaterally assign ownership of all or a portion of this Certificate by Written Request without the approval of any Beneficiary unless irrevocably named. You may not exercise any rights of ownership while the assignment remains in effect without the approval of the collateral assignee. We are not responsible for the validity of any assignment. Once the collateral assignment is recorded by Us, it will take effect as of the date of your Written Request, subject to any payments made or any other action taken by Us before the request is received. 

If a claim is made based on an assignment, We may require proof of interest of the claimant. A recorded assignment takes precedence over any rights of a Beneficiary. Any amount due under a recorded assignment will be paid in a single sum. Collateral Assignments may have adverse tax consequences to You.

	TL-14327	Page 6	TLAC Ed. 4-95

Creditor Claim

To the extent permitted by law, the rights or benefits of the You or the Beneficiary under this Certificate are not subject to the claims of creditors or to any legal process.

Beneficiary

The Beneficiary is the surviving  joint Certificate Owner. If there is no surviving joint Certificate Owner, the Beneficiary is the party named in a Written Request. The Beneficiary has the right to receive any remaining Certificate benefits upon the death of the Certificate Owner, the first joint Certificate Owner, or the Annuitant, as described further in the Death Benefit provision.

The surviving joint Certificate Owner receives the entire Death Benefit to the exclusion of any party that is named as Beneficiary.

If there is more than one Beneficiary surviving the death of You as sole Certificate Owner, or the death of the Annuitant, the Beneficiaries will share equally in benefits unless different shares are recorded with Us in a Written Request prior to the death. 

Unless an irrevocable Beneficiary has been named, You have the right to change any Beneficiary by Written Request during the Annuitant’s lifetime and while the certificate continues.

Once a change in Beneficiary is recorded by Us, it will take effect on that date or on the date requested, if later, subject to Any payments made or other actions taken by Us before the recording.

If no Beneficiary has been named by You, or if no Beneficiary is living when You or the Annuitant dies, the interest of any Beneficiary will pass:

	(a)	 	if You are living, to You; or
	 	 	 
	(b)	 	if You have died, to Your estate. 

Annuitant

The Annuitant is the individual shown on the Certificate Specifications page on whose life the annuity payments are made. The Annuitant may not be changed after the Certificate Date.

Contingent Annuitant

You may name one individual as a Contingent Annuitant by Written Request prior to the Certificate Date. A Contingent Annuitant may not be changed, deleted or added to the Certificate after the Certificate Date.

If an Annuitant who is not also the certificate owner or a joint certificate owner dies prior to the Annuity Commencement Date while this Certificate is in effect and while the Contingent Annuitant is living:

	 (a)	 	the death benefit will not be payable upon the Annuitant’s death’
	 	 	 
	 (b)	 	the Contingent Annuitant becomes the Annuitant; and 
	 	 	 
	 (c)	 	all other rights and benefits provided by the Certificate will continue in effect.

When a Contingent Annuitant becomes the Annuitant, the Annuity Commencement Date remains the same as previously in Effect unless otherwise provided.

If the Annuitant dies simultaneously with You or with a joint certificate owner, distributions required by tax law must commence as described under the Tax Law Qualification section. The Contingent Annuitant does not become the Annuitant in this circumstance.

	TL-14327	Page 7	TLAC Ed. 4-95

CREDITING OF INTERST AND GUARANTEE PERIODS

The purchase payment (less surrenders made and less applicable premium tax, if any) will earn interest at the initial Guaranteed Interest Rate during the initial Guarantee Period. All interest earned will be credited daily. This compounding effect is reflected in the Guaranteed Interest Rates.

Within 60 days of the end of any Guarantee Period, We will notify You about selecting a subsequent Guarantee Period. If  no election is made, the automatic renewal guarantee period as stated on  Certificate Specifications pages will commence, unless You have:

	 	a	 	submitted a Written Request for a full surrender which we receive within 30 days prior to the end of the current Guarantee Period; or
	 	 	 
	 	b	 	elected by Written Request a Guarantee Period of a different duration from among those offered by Us within 30 days prior to the end of the current Guarantee Period; or
	 	 	 
	 	c	 	selected a subsequent Guarantee Period that extends beyond the Annuity Commencement Date then in effect. In this case, We will automatically establish a subsequent Guarantee Period that will end nearest to the Annuity Commencement Date then in effect, unless the Certificate subsequent  Guarantee Period of shorter duration.

At any time during the automatic renewal guarantee period, You may transfer to a Guarantee Period of a different duration without incurring a surrender charge or Market Value Adjustment.

The Account Value at the beginning of any subsequent Guarantee Period will be equal to the Account Value at the end of the Guaranteed Period just ending. The Account Value will earn interest at the subsequent Guaranteed Interest Rate during the subsequent Guarantee Period. There is no minimum Guaranteed Interest Rate for renewals.. However, this rate will be at least equal to the initial Guarantee Interest Rate being credited to purchase payments for new certificates at the time the subsequent Guaranteed Interest Rate is determined.

MARKET VALUE ADJUSTMENT

This certificate contain a Market Value Adjustment formula. The formula may result in upward or downward adjustments in the amount payable on any full or partial surrender made prior to the end of any Guarantee Period. Details of the Market Value Adjustment formula are described on the Certificate Specifications page.

The Market Value Adjustment formula will not be applied when You submit a Written Request for:

	 	a	 	a full or partial surrender at the end of any Guarantee Period if We receive the request within the 30 day period prior to the end of such Guarantee Period’ or
	 	 	 
	 	b	 	any interest credited during the previous Certificate Year.

TRANSFER BETWEEN GUARANTEE PERIODS

Once each Certificate Year after the first Certificate Year, You may elect by Written Request to transfer out of the current Guarantee Period and into a Guarantee Period of a different duration. At that time, a new Guarantee Period will be established for the duration You choose, and the Account Value at the beginning of the new Guarantee Period will equal the  Market Adjusted Value for the current Guarantee Period at the time of the transfer  There is no surrender charge for this transfer. We reserve the right to charge for any such transfer by reducing the Account Value at the beginning of the new Guarantee Period by an amount not to exceed $50.00. The Guarantee Period transfer charge is shown on the Certificate Specifications pages.

Surrender charges will continue to be based on the appropriate Certificate Year as determined from the original Certificate Date. 

	TL-14327	Page 8	TLAC Ed. 4-95

TERMINATION PROVISION

General Surrenders

Full and partial surrenders may be made under this  Certificate at any time. A surrender charge may be assessed on 

surrenders as stated on the Certificate Specification pages.

Special Surrenders

A full or partial surrender made at the end of a Guarantee Period may be subject to a surrender charge as set forth on  the Certificate Specifications page. The Market Value Adjustment will not be applied. A request for a surrender at the end of a Guarantee Period must be received by Written Request within the 30 day period prior to the end of such Guarantee Period.

No surrender charges will apply at the end of an initial Guarantee Period of at least three years. Initial Guarantee Periods of one or two years are subject to a surrender charge for a period of five years. No surrender charge will be applied upon annuitization unless the fifth annuity option is elected within the first Certificate Year.

In addition, if You notify Us by Written Request, We will send You any interest credited during the previous Certificate Year. No surrender charge or Market Value Adjustment will be imposed on such interest payments.

Termination After the Annuity Commencement Date

This certificate may not be surrendered after the commencement of annuity payments.

Payment Upon Surrender - Deferral of Payment

We may defer payment of a partial or full surrender request for up to six months from the date of the Written request. If payment is deferred for more than 30 days from the date the request is received, We will pay interest of 3 1/2% on the amount deferred.

Death Benefit

A death benefit is payable to the Beneficiary before annuity payments commence, upon the death of:

	 	a.	 	the Annuitant;
	 	 	 
	 	b.	 	You; or
	 	 	 
	 	c.	 	the first of joint certificate owners.

We will pay the Beneficiary the death benefit in a single sum upon receiving Due Proof of Death. The death benefit equals the Account Value as of the date We receive written notification of Due Proof of Death.

A death benefit is also due and payable to the Beneficiary when the Annuitant dies after annuity payments commence under options with remaining guaranteed payments or cash refunds.

A Beneficiary may request that a death benefit payable under this certificate be applied to an annuity option, subject to the Settlement Provisions.

If before annuity payments commence, the Annuitant dies with both joint Certificate Owners or You and a Contingent Annuitant surviving, the Contingent Annuitant becomes the Annuitant  and a death benefit is not payable.

	TL-14327	Page 9	TLAC Ed. 4-95

Tax Law Qualification

The following conditions, restrictions, and limitations must apply for certain death benefit payments as described below to maintain the federal tax deferred status of Your annuity:

	a)	 	If You die before annuity payments commence, the Beneficiary must receive the entire death benefit proceeds within five years of Your death unless:

	 	1.	 	the Beneficiary elects by Written Request to receive the proceeds over life or over a period not extending beyond life expectancy, and the payments begin within one year of Your death, or
	 	 	 
	 	2	 	 the sole Beneficiary is Your spouse who elects by Written Request to continue the Certificate deferral. Your spouse in this circumstance becomes the Certificate Owner and Annuitant (if the Annuitant has not survived).

	b)	 	If You are the first Joint Certificate Owner to die before annuity payments commence ,the surviving joint Certificate Owner who is the sole beneficiary for this purpose must receive the entire death benefit proceeds within five years of Your death unless:

	 	1.	 	the Beneficiary elects by Written Request to receive the proceeds over life or over a period not extending beyond life expectancy, and the payments begin within one year of Your death, or
	 	 	 
	 	2.	 	the Beneficiary elects by Written Request to continue the Certificate deferral. That individual becomes the sole Certificate Owner and also the Annuitant if You were the Annuitant or if the Annuitant died simultaneously with  You.

	c)	 	If the Certificate Owner is a non-natural person and the Annuitant dies before any annuity payments commence, the Beneficiary must receive the entire death benefit proceeds within five years of the death of the Annuitant.
	 	 	 
	d)	 	If You die or the Annuitant dies after annuity payments commence, the remaining value of the Certificate must be distributed at least as rapidly as under the method of distribution being used at the date of death. 
	 	 	 
	e)	 	If there is no Beneficiary named when You die, or if none survives You, and if there is no surviving joint Certificate Owner, ownership of the death benefit passes to Your estate. The estate or persons taking benefits through Your estate must receive the entire death benefit proceeds within five years of Your death.
	 	 	 
	f)	 	If the federal tax law, regulations or rules require a distribution more rapidly than described above to keep this annuity certificate tax deferred, we will administer the Certificate in accordance with the law, regulations and rules. We will provide You with a revised Certificate rider describing any necessary changes, following all regulatory approvals.

Termination of this Certificate

We reserve the right to terminate this certificate if the Account Value is less than the termination amount shown on the Certificate Specifications page. Termination will not occur until 31 days after We have mailed notice of termination to You at Your last know address. If the certificate is terminated, We will pay You the Cash Surrender Value, if any.

SETTLEMENT PROVISIONS

Annuity Benefit

On the Annuity Commencement Date, unless directed otherwise, We will apply the Cash Surrender Value, or any part thereof, less any applicable premium tax, to purchase the monthly annuity payments according to the annuity option elected. In the absence of such election, the second annuity option providing a life annuity with 120 months certain will apply. Election of any annuity option must be made by Written Request and received by Us at least 30 days prior to the date such election is to become effective  If the Annuity Commencement Date coincides with the end of any Guarantee Period, no Market Value Adjustment will be applied in the determination of the annuity payments. No surrender charge will be applied upon annuitization (unless the fifth annuity option is elected with the first Certificate Year).

You may change the Annuity Commencement Date at any time, as long as such change is made by Written Request and is received by Us at least 30 days prior to the scheduled Annuity Commencement date.

	TL-14327	Page 10	TLAC Ed. 4-95

You, or in the event you have not done so, the Beneficiary, may elect, in lieu of payment in one sum, that any amount due under this Certificate be applied under any of the annuity options described below. The election by the Beneficiary must be made within one year after Your death by Written Request to Our Office. with the exception of the sixth annuity option. The sixth annuity option must be elected at the time Due Proof of Death is provided to Us.

Death of Annuitant

In the event of Your death or the death of the Annuitant after annuity payments commence, any method of distribution must provide that any amount payable as a death benefit will be distributed at least as rapidly as under the method of distribution in effect at the time of Your death  or the death of the Annuitant..

Annuity Options.

Option 1. Life Annuity - An annuity payable monthly during the lifetime of the Annuitant, ceasing with the last payment due prior to the death of the Annuitant.

Option 2. Life Annuity with 120, 180, or 240 Monthly Payments Certain - An annuity providing monthly income to the Annuitant for a guaranteed period of 120 months, 180 months, or 240 months (as selected), and for as long thereafter as the Annuitant shall live.

Option 3. Cash Refund Life Annuity - An annuity payable monthly during the lifetime of the Annuitant, ceasing with the last payment due prior to the death of the Annuitant provided that, at the death of the Annuitant, the Beneficiary will receive an additional payment equal to the excess, if any, of (a) over (b) where:  (a) is the Cash Value applied on the Annuity Commencement Date under this option; and (b) is the dollar amount of annuity payments already paid.

Option 4. Joint and Last Survivor Annuity - An annuity payable monthly during the joint lifetime of the Annuitant and a secondary payee, and thereafter during the remaining lifetime of the survivor, ceasing with the last payment prior to the death of the survivor.

Option 5. Payments for a Designated Period - An amount payable monthly for the guaranteed number of years selected which may be from 5 to 30 years.

Option 6. Annuity Proceeds Settlement Option - Proceeds from the death benefit can be left with Us for a period not to exceed five years from the date of the Certificate Owner’s death prior to the Annuity Commencement Date. The proceeds will remain in the same Guarantee Period and continue to earn the same Guaranteed Interest Rate in effect at the time of death as long as this option is elected at the time Due Proof of Death is provided to Us. If the Guarantee Period ends before the end of the five year period, the Beneficiary may elect a new Guarantee Period with a duration not to exceed the time remaining in the period of five years from the date of the death of the Certificate Owner. If no election is made, the Certificate will automatically renew for a period of one year, provided that the five year period is not exceeded. Full or partial surrenders may be made at any time. A Market Value Adjustment will be applied to all surrenders except those occurring at the end
of a Guarantee Period or if the previous Certificate Year’s interest is being surrendered. This option is only available to Beneficiaries.

Annuity Tables

The attached tables show the dollar amount of the monthly payments for each $1000 of proceeds applied under the five annuity options. Under options 1, 2 or 3, the amount of each payment will depend upon the age of the Annuitant at the time the first payment is due. Under option 4, the amount of each payment will depend upon the ages of the Annuitant and the secondary payee at the time the first payment is due.

Betterment of Rates

If at the due date of the first annuity payment, We have declared a higher rate per $1,000 of proceeds applied under an annuity option, then the annuity payments will be based on the higher rates.

In no event will the annuity benefit, at the time of its commencement, be less than that which would be provided by applying the greater of the Cash Surrender Value or 95% of the Cash Value to purchase a single premium immediate annuity contract offered by Us or one of Our affiliates at the time to the same class of annuitants. 

	TL-14327	Page 11	TLAC Ed. 4-95

Minimum Amount

The minimum amount that can be placed under an annuity option is $2,000 unless We consent to a lesser amount.

Minimum Payment

The annuity option elected must result in a payment of at least $20.00. If at any time payments are less than $20.00, We have the right to change the frequency to an interval resulting in a payment of at least $20.00. If any amount due is less than $20.00 per year, We may make other arrangements that are equitable to the Annuitant. 

Date of Payment

The first payment under any annuity option shall be made on the Annuity Commencement Date. Subsequent payments shall be made on the same day of each month in accordance with the manner of payment selected.

GENERAL PROVISIONS

The Certificate

The entire Certificate between You and Us consists of the certificate and all attached pages.

Certificate Changes

The only way this Certificate may be changed is by a written endorsement signed by one of  Our officers.

Misstatement

If the Annuitant’s  sex or date of birth was misstated, all benefits of this Certificate are what the purchase payment would have purchase at the correct age and sex. Proof of Your age may be filed at any time at Our Office.

Incontestability

We will not contest this Certificate from its Certificate Date.

Required Reports

We will provide a report to You as often as required by law, but at least once in each Certificate Year before the due date of the first annuity payment.

Mortality and Expenses

Our actual mortality and expense experience will not affect the amount of any annuity payments or any other values under this Certificate.

Non-Participating

This Certificates does not share in Our surplus earnings, so You receive no dividends under it.

Conformity with State and Federal Laws

This Certificate is governed by the law of the state in which they are issued for delivery. Any paid-up  annuity, Cash Surrender Value or death benefit available under this Certificate will not be less than the minimum benefits required by the statutes of that state.

Upon receiving appropriate state approval, We may at any time make any changes, including retroactive changes, in this Certificate to the extent that the change is required to meet the requirements of any law or regulation issued by any governmental agency to which We or You are subject.

	TL-14327	Page 12	TLAC Ed. 4-95

LIFE ANNUITY TABLES
GUARANTEED AMOUNT OF MONTHLY ANNUITY PAYMENTS
PURCHASED WITH EACH $1,000 OF PROCEEDS APPLIED
OPTIONS 1, 2, AND 3 - SINGLE LIFE ANNUITIES

	MALE
ADJUSTED
AGE	NUMBER OF MONTHLY PAYMENTS GUARANTEED	CASH
REFUND
	NONE	120	180	240
	 	 	 	 	 	 
	45	3.87	3.85	3.82	3.77	3.72
	46	3.93	3.90	3.87	3.82	3.77
	47	3.99	3.96	3.92	3.87	3.82
	48	4.05	4.02	3.98	3.92	3.87
	49	4.12	4.09	4.04	3.97	3.92
	50	4.19	4.15	4.10	4.03	3.98
	51	4.27	4.22	4.17	4.08	4.04
	52	4.34	4.30	4.30	4.20	4.16
	53	4.43	4.37	4.30	4.20	4.16
	54	4.51	4.45	4.37	4.26	4.23
	55	4.60	4.54	4.45	4.32	4.30
	56	4.70	4.62	4.53	4.39	4.37
	57	4.80	4.72	4.61	4.45	4.44
	58	4.91	4.82	4.69	4.51	4.52
	59	5.03	4.92	4.78	4.58	4.61
	60	5.28	5.14	4.96	4.71	4.79
	61	5.28	5.27	5.06	4.78	4.88
	62	5.43	5.27	5.06	4.78	4.88
	63	5.58	5.39	5.16	4.84	4.98
	64	5.74	5.53	5.26	4.90	5.09
	65	5.91	5.66	5.36	4.96	5.20
	66	6.10	5.81	5.46	5.02	5.32
	67	6.30	5.96	5.56	5.08	5.44
	68	6.51	6.12	5.66	5.13	5.56
	69	6.73	6.28	5.77	5.18	5.70
	70	6.97	6.44	5.86	5.23	5.84
	71	7.23	6.61	5.96	5.27	5.99
	72	7.51	6.79	6.05	5.31	6.14
	73	7.80	6.96	6.14	5.34	6.30
	74	8.12	7.14	6.23	5.37	6.47
	75	8.46	7.32	6.31	5.40	6.65

Dollar amounts of the monthly annuity payments for the first, second, third and fourth options are based on the 1983 Individual Annuitant Mortality Table A with ages set back one year and a net investment rate of 3% per annum. The adjusted age of the person on whose life the annuity is based is determined from the actual age last birthday on the due date of the first annuity payment in the following manner:

	CALENDAR YEAR IN WHICH
FIRST PAYMENT IS DUE 	1995 - 2000     2001 - 2010     2011 - 2020     2021 & LATER

	ADJUSTED AGE IS
ACTUAL AGE	MINUS 0            MINUS 1       MINUS 2       MINUS 3

	TL-14246		

LIFE ANNUITY TABLES
GUARANTEED AMOUNT OF MONTHLY ANNUITY PAYMENTS
PURCHASED WITH EACH $1,000 OF PROCEEDS APPLIED
OPTIONS 1, 2, AND 3 - SINGLE LIFE ANNUITIES

	FEMALE
ADJUSTED
AGES	 	CASH
REFUND
	NONE	120	180	240
	 	 	 	 	 	 
	45	3.59	3.58	3.57	3.55	3.52
	46	3.64	3.63	3.61	3.59	3.56
	47	3.68	3.67	3.66	3.63	3.60
	48	3.74	3.72	3.71	3.68	3.64
	49	3.79	3.78	3.81	3.77	3.73
	50	3.85	3.83.	3.81	3.77	3.73
	51	3.90	3.89	3.86	3.82	3.78
	52	3.97	3.95	3.92	3.88	3.84
	53	4.03	4.01	3.98	3.93	3.89
	54	4.10	4.08	4.04	3.99	3.95
	55	4.18	4.15	4.11	4.05	4.01
	56	4.25	4.22	4.18	4.11	4.07
	57	4.34	4.30	4.25	4.17	4.14
	58	4.42	4.38	4.32	4.23	4.20
	59	4.52	4.47	4.40	4.30	4.28
	60	4.61	4.56	4.48	4.37	4.35
	61	4.72	4.66	4.57	4.44	4.43
	62	4.83	4.76	4.66	4.51	4.52
	63	4.95	4.87	4.75	4.58	4.61
	64	5.08	4.98	4.85	4.65	4.70
	65	5.21	5.10	4.95	4.72	4.80
	66	5.36	5.22	5.05	4.79	4.90
	67	5.51	5.36	5.16	4.86	5.01
	68	5.67	5.50	5.26	4.93	5.12
	69	5.85	5.65	5.38	5.00	5.25
	70	6.04	5.80	5.49	5.06	5.37
	71	6.25	5.97	5.60	5.12	5.51
	72	6.47	6.14	5.71	5.18	5.65
	73	6.71	6.32	5.83	5.23	5.80
	74	6.98	6.50	5.94	5.28	5.96
	75	7.26	6.69	6.04	5.32	6.13

Dollar amounts of the monthly annuity payments for the first, second, third, and fourth options are based on the 1983 Individual Annuitant Mortality Table A with ages set back one year and a net investment rate of 3 % per annum. The adjusted age of the person on whose life the life annuity is based is determined from the actual age last birthday on the due date of the first annuity payment in the following manner:

	CALENDAR YEAR IN WHICH
FIRST PAYMENT IS DUE 	1995 - 2000     2001 - 2010     2011 - 2020     2021 & LATER

	ADJUSTED AGE IS
ACTUAL AGE	MINUS 0            MINUS 1       MINUS 2       MINUS 3

	TL-14246		

LIFE ANNUITY TABLES
GUARANTEED DOLLAR AMOUNT OF MONTHLY ANNUITY PAYMENTS
PURCHASED WITH EACH $1,000 APPLIED

OPTION 4 - JOINT AND LAST SURVIVOR LIFE ANNUITY

	ADJUSTED
AGES	45	50	55	60	65	70	75
	 	 	 	 	 	 	 	 
	45	3.36	3.46	3.56	3.64	3.71	3.76	3.80
	50	3.42	3.56	3.69	3.82	3.93	4.01	4.08
	55	3.47	3.64	3.82	3.99	4.16	4.29	4.40
	60	3.51	3.70	3.92	4.15	4.39	4.61	4.79
	65	3.54	3.75	4.00	4.29	4.61	4.94	5.24
	70	3.56	3.78	4.07	4.41	4.80	5.25	5.70
	75	3.57	3.81	4.11	4.48	4.95	5.51	6.15

Dollar amounts of the monthly annuity payments for the first, second, third, and fourth options are based on the 1983 Individual Annuitant Mortality Table A with ages set back one year and a net investment rate of 3 % per annum. The adjusted age of the person on whose life the life annuity is based is determined from the actual age last birthday on the due date of the first annuity payment in the following manner:

	CALENDAR YEAR IN WHICH
FIRST PAYMENT IS DUE 	1995 - 2000     2001 - 2010     2011 - 2020     2021 & LATER

	ADJUSTED AGE IS
ACTUAL AGE	MINUS 0            MINUS 1       MINUS 2       MINUS 3

	TL-14246		

ANNUITY TABLES
GUARANTEED DOLLAR AMOUNT OF THE MONTHLY ANNUITY PAYMENTS

PURCHASED WITH EACH $1,000 OF PROCEEDS APPLIED

OPTION 5 - PAYMENTS FOR A DESIGNATED PERIOD

	NUMBER OF
YEARS	MONTHLY
PAYMENT
AMOUNT	 	NUMBER OF
YEARS	 	MONTHLY
PAYMENT
AMOUNT
	 	 	 	 	 	 
	5	17.91	 	18	 	5.96
	6	15.14	 	19	 	5.73
	7	13.16	 	20	 	5.51
	8	11.68	 	21	 	5.32
	9	10.53	 	22	 	5.15
	10	9.61	 	23	 	4.99
	11	8.86	 	24	 	4.84
	12	8.24	 	25	 	4.71
	13	7.71	 	26	 	4.59
	14	7.26	 	27	 	4.47
	15	6.87	 	28	 	4.37
	16	6.53	 	29	 	4.27
	17	6.23	 	30	 	4.18

The dollar amounts of the monthly annuity payments for the fifth option are based on a net investment rate of 3% per annum.

	TL-14246		

Certificate of Participation under a Modified Guaranteed Annuity Contract.

Non-Tax Qualified

Elective Options                Non Participating

L-14325EXHIBIT 4.1

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

                       MORGAN STANLEY ABS CAPITAL I INC.,

                                  as Depositor,

                             OCWEN FEDERAL BANK FSB,

                                  as Servicer,

                           CDC MORTGAGE CAPITAL INC.,

                             as Unaffiliated Seller,

                              BNC MORTGAGE, INC. ,

                                       and

                           IMPAC FUNDING CORPORATION,

                             as Responsible Parties,

                                       and

                   BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,

                                   as Trustee,

                         POOLING AND SERVICING AGREEMENT

                          Dated as of November 1, 2001

                      CDC MORTGAGE CAPITAL TRUST 2001 - HE1

                       MORTGAGE PASS-THROUGH CERTIFICATES,
                                 SERIES 2001-HE1

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

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
ARTICLE I DEFINITIONS 5

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES.......34

  Section 2.01   Conveyance of Mortgage Loans.................................34
  Section 2.02   Acceptance by the Trustee of the Mortgage Loans..............39
  Section 2.03   Representations, Warranties and Covenants of the
                 Unaffiliated Seller, the Responsible Parties and
                 the Servicer.................................................40
  Section 2.04   The Depositor and the Mortgage Loans.........................48
  Section 2.05   Delivery of Opinion of Counsel in Connection with
                 Substitution and Repurchase, Non-Qualified Mortgages.........48
  Section 2.06   Execution and Delivery of Certificates.......................48
  Section 2.07   REMIC Matters................................................49
  Section 2.08   Representations and Warranties of the Depositor..............49

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS....................50

  Section 3.01   Servicer to Service Mortgage Loans...........................50
  Section 3.02   Subservicing Agreements Between the Servicer
                 and Subservicers.............................................52
  Section 3.03   Successor Subservicers.......................................53
  Section 3.04   Liability of the Servicer....................................53
  Section 3.05   No Contractual Relationship Between Subservicers
                 and the Trustee..............................................53
  Section 3.06   Assumption or Termination of Subservicing Agreements
                 by Trustee...................................................54
  Section 3.07   Collection of Certain Mortgage Loan Payments;
                 Establishment of Certain Accounts............................54
  Section 3.08   Subservicing Accounts........................................57
  Section 3.09   Collection of Taxes, Assessments and Similar Items;
                 Escrow Accounts .............................................57
  Section 3.10   Collection Account...........................................58
  Section 3.11   Withdrawals from the Collection Account......................59
  Section 3.12   Investment of Funds in the Account...........................61
  Section 3.13   Maintenance of Hazard Insurance and Errors and Omissions
                 and Fidelity Coverage .......................................62
  Section 3.14   Enforcement of Due-On-Sale Clauses Assumption Agreements.....63
  Section 3.15   Realization Upon Defaulted Mortgage Loans....................64
  Section 3.16   Release of Mortgage Files....................................65
  Section 3.17   Title, Conservation and Disposition of REO Property..........66
  Section 3.18   Notification of Adjustments..................................68
  Section 3.19   Access to Certain Documentation and Information Regarding
                 the Mortgage Loans...........................................68

                                       i
<PAGE>

  Section 3.20   Documents, Records and Funds in Possession of the Servicer
                 to be Held for the Trustee...................................69
  Section 3.21   Servicing Compensation.......................................69
  Section 3.22   Annual Statement as to Compliance............................70
  Section 3.23   Annual Independent Public Accountants' Servicing
                 Statement; Financial Statements..............................70
  Section 3.24   Trustee to Act as Servicer...................................70
  Section 3.25   Compensating Interest........................................71
  Section 3.26   Credit Reporting; Gramm-Leach-Bliley Act.....................71

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER.........................72

  Section 4.01   Advances.....................................................72
  Section 4.02   Priorities of Distribution...................................73
  Section 4.03   Monthly Statements to Certificateholders.....................76
  Section 4.04   Certain Matters Relating to the Determination of LIBOR.......79
  Section 4.05   The Class A Insurance Policy.................................80
  Section 4.06   Effect of Payments by the Class A Certificate
                 Insurer; Subrogation.........................................82

ARTICLE V THE CERTIFICATES 82

  Section 5.01   The Certificates.............................................82
  Section 5.02   Certificate Register; Registration of Transfer and
                 Exchange of Certificates.....................................83
  Section 5.03   Mutilated, Destroyed, Lost or Stolen Certificates............88
  Section 5.04   Persons Deemed Owners........................................88
  Section 5.05   Access to List of Certificateholders' Names and Addresses....88
  Section 5.06   Maintenance of Office or Agency..............................89
  Section 5.07   Rights of the Class A Certificate Insurer to Exercise
                 Rights of Class A Certificateholders.........................89
  Section 5.08   Trustee To Act Solely with Consent of the Class A
                 Certificate Insurer..........................................90
  Section 5.09   Mortgage Loans, Trust Fund and Accounts Held for Benefit
                 of the Class A Certificate Insurer...........................90
  Section 5.10   Class A Certificate Insurer Default..........................90

ARTICLE VI THE DEPOSITOR AND THE SERVICER.....................................91

  Section 6.01   Respective Liabilities of the Depositor and the Servicer.....91
  Section 6.02   Merger or Consolidation of the Depositor or the Servicer.....91
  Section 6.03   Limitation on Liability of the Depositor, the Servicer
                 and Others...................................................91
  Section 6.04   Limitation on Resignation of the Servicer....................92
  Section 6.05   Additional Indemnification by the Servicer;
                 Third Party Claims...........................................93

ARTICLE VII DEFAULT 93

  Section 7.01   Events of Default............................................93
  Section 7.02   Trustee to Act; Appointment of Successor.....................95
  Section 7.03   Notification to Certificateholders...........................96

                                       ii
<PAGE>

ARTICLE VIII CONCERNING THE TRUSTEE...........................................96

  Section 8.01   Duties of the Trustee........................................96
  Section 8.02   Certain Matters Affecting the Trustee........................97
  Section 8.03   Trustee Not Liable for Certificates or Mortgage Loans........98
  Section 8.04   Trustee May Own Certificates.................................99
  Section 8.05   Trustee's Fees and Expenses..................................99
  Section 8.06   Eligibility Requirements for the Trustee.....................99
  Section 8.07   Resignation and Removal of the Trustee......................100
  Section 8.08   Successor Trustee...........................................100
  Section 8.09   Merger or Consolidation of the Trustee......................101
  Section 8.10   Appointment of Co-Trustee or Separate Trustee...............101
  Section 8.11   Tax Matters.................................................102
  Section 8.12   Periodic Filings............................................105
  Section 8.13   Tax Classification of Certain Accounts......................105

ARTICLE IX TERMINATION ......................................................105

  Section 9.01   Termination upon Liquidation or Purchase of
                 the Mortgage Loans..........................................105
  Section 9.02   Final Distribution on the Certificates......................106
  Section 9.03   Additional Termination Requirements.........................107

ARTICLE X MISCELLANEOUS PROVISIONS...........................................108

  Section 10.01  Amendment...................................................108
  Section 10.02  Recordation of Agreement; Counterparts......................109
  Section 10.03  Governing Law...............................................110
  Section 10.04  Intention of Parties........................................110
  Section 10.05  Notices.....................................................110
  Section 10.06  Severability of Provisions..................................111
  Section 10.07  Assignment..................................................112
  Section 10.08  Limitation on Rights of Certificateholders..................112
  Section 10.09  Inspection and Audit Rights.................................113
  Section 10.10  Certificates Nonassessable and Fully Paid...................113
  Section 10.11  The Class A Certificate Insurer Default.....................113
  Section 10.12  Third Party Beneficiary.....................................113

SCHEDULES

Schedule I       Mortgage Loan Schedule
Schedule II      Representations and Warranties of the Servicer
Schedule III-A   Representations and Warranties as to the BNC Mortgage Loans
Schedule III-B   Representations and Warranties as to the IFC Mortgage Loans
Schedule IV      Representations and Warranties as to the Unaffiliated Seller

                                      iii
<PAGE>

EXHIBITS

Exhibit A   Form of Class A, Class M, Class B Certificate
Exhibit B   Form of Class P Certificate
Exhibit C   Form of Class R Certificate
Exhibit D   Form of Class X Certificate
Exhibit E   Form of Initial Certification of Trustee
Exhibit F   Form of Final Certification of Trustee
Exhibit G   Form of Transfer Affidavit
Exhibit H   Form of Transferor Certificate
Exhibit I   Form of Rule 144A Letter
Exhibit J   Form of Request for Release
Exhibit K   Form of Contents for each Custodial File
Exhibit L   Form of Subsequent Transfer Agreement

                                       iv
<PAGE>

              THIS  POOLING  AND  SERVICING  AGREEMENT,  dated as of November 1,
2001,  among  MORGAN  STANLEY ABS  CAPITAL I INC.,  a Delaware  corporation,  as
depositor (the "DEPOSITOR"),  OCWEN FEDERAL BANK FSB, a federal savings bank, as
servicer (the "SERVICER"), CDC MORTGAGE CAPITAL INC., a New York corporation, as
unaffiliated seller (the "UNAFFILIATED SELLER"), BNC Mortgage, Inc. , a Delaware
corporation  ("BNC") and IMPAC  Funding  Corporation,  a California  corporation
("IFC"),  as responsible  parties (the "RESPONSIBLE  PARTIES") and BANKERS TRUST
COMPANY OF CALIFORNIA,  N.A., a national  banking  association,  as trustee (the
"TRUSTEE"),

                              W I T N E S S E T H:
                               - - - - - - - - - -

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

                              PRELIMINARY STATEMENT

              The Trustee shall elect that two segregated asset pools within the
Trust Fund be treated for federal  income tax purposes as comprising  two REMICs
(each a "REMIC" or, in the alternative,  the Lower Tier REMIC and the Upper Tier
REMIC,  respectively).  Each  Certificate,  other  than the  Class P and Class R
Certificates, represents ownership of a regular interest in the Upper Tier REMIC
for  purposes  of the  REMIC  Provisions.  The  Class R  Certificate  represents
ownership of the sole class of residual interest in each of the Lower Tier REMIC
and the Upper Tier REMIC for purposes of the REMIC  Provisions.  The Startup Day
for each  REMIC  described  herein is the  Closing  Date.  The  latest  possible
maturity date for each regular  interest is the date referenced for such regular
interests  in this  preliminary  statement.  The Upper Tier REMIC  shall hold as
assets the several classes of uncertificated  Lower Tier Regular Interests,  set
out below.  Each such Lower Tier  Regular  Interest  is hereby  designated  as a
regular interest in the Lower Tier REMIC. Class LT-A, Class LT-M-1, Class LT-M-2
and Class LT-B are hereby  designated  the LT Accretion  Directed  Classes.  The
Class P Certificate  represents  beneficial ownership of the Prepayment Charges,
which portion of the Trust Fund shall be treated as a grantor trust.

<TABLE>
<CAPTION>
                    LOWER TIER                                       CORRESPONDING
    LOWER TIER       INTEREST      INITIAL LOWER TIER                 UPPER TIER    LATEST POSSIBLE
CLASS DESIGNATION      RATE         PRINCIPAL AMOUNT                 REMIC CLASS     MATURITY DATE
-----------------   ---------- ------------------------------------  -------------  ----------------
<S>                     <C>    <C>                                        <C>       <C>
Class LT-A              (1)    1/2 initial Corresponding Upper Tier        A        January 25, 2032
                                  REMIC initial principal balance
Class LT-M-1            (1)    1/2 initial Corresponding Upper Tier       M-1       January 25, 2032
                                  REMIC initial principal balance
Class LT-M-2            (1)    1/2 initial Corresponding Upper Tier       M-2       January 25, 2032
                                  REMIC initial principal balance
Class LT-B              (1)    1/2 initial Corresponding Upper Tier        B        January 25, 2032
                                  REMIC initial principal balance
Class LT-Accrual        (1)    1/2 Pool Balance plus 1/2
                                   Subordinated Amount                              January 25, 2032
Class LT-R              (2)    1/2 Pool Balance plus 1/2
                                   Subordinated Amount                              January 25, 2032
Class LT-R              (2)    (2)
</TABLE>
<PAGE>

(1)    The  interest  rate  with  respect  to any  Distribution  Date for  these
       interests is a per annum variable rate equal to the WAC Cap.

(2)    The Class LT-R  Interest  is the sole class of  residual  interest in the
       Lower Tier REMIC and it does not have a  principal  amount or an interest
       rate.

              The  Lower  Tier  REMIC  shall  hold as assets  all of the  assets
included in the Trust Fund other than  Prepayment  Charges,  the Excess  Reserve
Fund Account, and the Lower Tier Regular Interests.

              On each Distribution Date, 50% of the increase in the Subordinated
Amount  will be payable  as a  reduction  of the  principal  balances  of the LT
Accretion  Directed  Classes (each such Class will be reduced by an amount equal
to 50% of any  increase in the  Subordinated  Amount that is  attributable  to a
reduction  in the  principal  balance  of its  Corresponding  Class) and will be
accrued  and added to the  principal  balance of the LT Accrual  Class.  On each
Distribution Date, the increase in the principal balance of the LT Accrual Class
may not exceed interest  accruals for such  Distribution Date for the LT Accrual
Class.  In the event that:  (i) 50% of the increase in the  Subordinated  Amount
exceeds (ii)  interest  accruals on the LT Accrual  Class for such  Distribution
Date, the excess for such  Distribution Date (accumulated with all such excesses
for  all  prior  Distribution  Dates)  will  be  added  to any  increase  in the
Subordinated  Amount for purposes of determining the amount of interest  accrual
on the LT  Accrual  Class  payable as  principal  on the LT  Accretion  Directed
Classes on the next  Distribution  Date  pursuant to the first  sentence of this
paragraph.  All payments of scheduled  principal  and  prepayments  of principal
generated by the Mortgage  Loans shall be allocated 50% to the LT Accrual Class,
and 50% to the LT  Accretion  Directed  Classes  (principal  payments  shall  be
allocated among such LT Accretion  Directed Classes in an amount equal to 50% of
the principal  amounts  allocated to their  respective  Corresponding  Classes),
until paid in full.  Notwithstanding the above,  principal payments allocated to
the Class X Certificates that result in the reduction in the Subordinated Amount
shall be allocated to the LT Accrual Class (until paid in full). Realized losses
shall  be  applied  so that  after  all  distributions  have  been  made on each
Distribution  Date  (i) the  principal  balances  of  each  of the LT  Accretion
Directed Class is equal to 50% of the principal  balance of their  Corresponding
Class, and (ii) the LT Accrual Class is equal to 50% of the aggregate  principal
balance of the Mortgage Pool plus 50% of the Subordinated Amount.

              The  Upper  Tier  REMIC  shall  issue  the  following  classes  of
interests and each Upper Tier Interest,  other than the Class UT-R Interest,  is
hereby designated as a regular interest in the Upper Tier REMIC.

                   UPPER TIER      INITIAL                      LATEST POSSIBLE
    UPPER TIER      INTEREST     UPPER TIER     CORRESPONDING       MATURITY
CLASS DESIGNATION     RATE    PRINCIPAL AMOUNT   CERTIFICATE          DATE
-----------------  ---------- ----------------  -------------   ----------------
Class A                (1)      $168,100,000     Class A(5)     January 25, 2032
Class M-1              (2)      $ 13,325,000     Class M-1(5)   January 25, 2032
Class M-2              (2)      $ 10,250,000     Class M-2(5)   January 25, 2032
Class B                (2)      $ 10,250,000     Class B(5)     January 25, 2032
Class X                (3)               (3)     Class X(3)     January 25, 2032
Class UT-R             (4)                       Class R

                                       2
<PAGE>

(1)    The Class A-1 Interests will bear interest  during each Interest  Accrual
       Period  thereafter  at a per annum  rate  equal to (a) on or prior to the
       Optional  Termination  Date, the least of (i) LIBOR plus 0.34%, (ii) 16%,
       and (iii) the WAC Cap or (b) after the  Optional  Termination  Date,  the
       least of (i) LIBOR plus 0.68%, (ii) 16%, and (iii) the WAC Cap.

(2)    The Class M-1, Class M-2 and Class B Interests will bear interest  during
       each Interest Accrual Period  thereafter at a per annum rate equal to (a)
       on or prior to the Optional Termination Date, the least of (i) LIBOR plus
       1.03%, 1.60% and 2.65%, respectively,  (ii) 16%, and (iii) the WAC Cap or
       (b) after the  Optional  Termination  Date,  the least of (i) LIBOR  plus
       1.545%, 2.40% and 3.975%, respectively, (ii) 16%, and (iii) the WAC Cap.

(3)    The Class X Interest has an initial principal balance of $2,580,188,  but
       it will not accrue interest on such balance but will accrue interest on a
       notional  principal  balance.  As of any  Distribution  Date, the Class X
       Interest shall have a notional  principal  balance equal to the aggregate
       of the principal  balances of the Lower Tier Regular  Interests as of the
       first day of the related  Interest  Accrual  Period.  With respect to any
       Interest  Accrual  Period,  the Class X Interest shall bear interest at a
       rate equal to the excess,  if any, of the WAC Cap over the product of (i)
       2 and (ii) the weighted average Pass-Through Rate of the Lower Tier REMIC
       Interests,  where the LT Accrual  Class is subject to a cap equal to zero
       and each LT  Accretion  Directed  Class is  subject to a cap equal to the
       Pass-Through  Rate  on  its  Corresponding  Class.  With  respect  to any
       Distribution  Date,  interest  that so accrues on the notional  principal
       balance of the Class X Interest  shall be deferred in an amount  equal to
       any increase in the Subordinated  Amount on such Distribution  Date. Such
       deferred interest shall not itself bear interest.

(4)    The Class UT-R  Interest  is the sole class of  residual  interest in the
       Upper Tier REMIC. The Class UT-R Interest does not have an interest rate.

(5)    Each of these  Certificates  will represent not only the ownership of the
       Corresponding  Class of Upper Tier Regular Interest but also the right to
       receive  payments from the Excess  Reserve Fund Account in respect of any
       Basis Risk  CarryForward  Amounts.  For federal income tax purposes,  the
       Trustee will treat a  Certificateholder's  right to receive payments from
       the Excess  Reserve Fund Account as payments made pursuant to an interest
       rate cap contract written by the Class X Certificateholder.

              The minimum  denomination  for each Class of  Certificates,  other
than the Class P, Class R and the Class X  Certificates,  will be  $25,000.  The
Class  P,  Class R and the  Class X  Certificates  will  each  represent  a 100%
Percentage Interest in such class.

              Set forth below are designations of Classes of Certificates to the
categories used herein:

                                       3
<PAGE>

Book-Entry Certificates.......   All Classes of Certificates other than the
                                 Physical Certificates.

Subordinated Certificates.....   Class M-1, Class M-2 and Class B Certificates.

Delay Certificates............   None.

ERISA-Restricted
  Certificates................   Class R Certificates, Class P Certificate and
                                 Class X Certificate; any certificate with a
                                 rating below the lowest applicable permitted
                                 rating under the Underwriters' Exemption.

Floating Rate Certificates....   Class A and Subordinated Certificates.

LIBOR Certificates............   Class A and Subordinated Certificates.

Non-Delay Certificates........   Class A, Class X and Subordinated Certificates.

Offered Certificates..........   All Classes of Certificates other than the
                                 Private Certificates.

Physical Certificates.........   Class P, Class X and Class R Certificates.

Private Certificates..........   Class P, Class X and Class R Certificates.

Rating Agencies...............   Moody's and Standard & Poor's.

Regular Certificates..........   All Classes of Certificates other than the
                                 Class P and Class R Certificates.

Residual Certificates.........   Class R Certificates.

                                       4
<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

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

              60+ DAY DELINQUENT  LOAN: Each Mortgage Loan with respect to which
any  portion  of a  Scheduled  Payment  is,  as of the last day of the prior Due
Period, two months or more past due (without giving effect to any grace period),
each Mortgage Loan in  foreclosure,  all REO Property and each Mortgage Loan for
which the Mortgagor has filed for bankruptcy.

              ACCEPTED SERVICING  PRACTICES:  With respect to any Mortgage Loan,
those mortgage servicing practices set forth in Section 3.01 of this Agreement.

              ACCOUNT:  Any of the Capitalized  Interest Account, the Collection
Account,  the Distribution  Account, any Escrow Account, the Excess Reserve Fund
Account, the Class A Insurance Payment Account or the Pre-Funding Account.  Each
Account shall be an Eligible Account.

              ACCRUED CERTIFICATE INTEREST  DISTRIBUTION AMOUNT: With respect to
any  Distribution  Date for each Class of  Certificates  (other than the Class X
Certificate), the amount of interest accrued during the related Interest Accrual
Period at the  applicable  Pass-Through  Rate on the related  Class  Certificate
Balance  immediately prior to such Distribution Date, as reduced by such Class's
share of Net Prepayment  Interest  Shortfalls and Relief Act Interest Shortfalls
for the related Due Period allocated to such Class pursuant to Section 4.02.

              ADDITION NOTICE: A written notice from the Unaffiliated  Seller to
the Trustee,  the Rating  Agencies and the Class A Certificate  Insurer that the
Unaffiliated Seller desires to make a Subsequent Transfer.

              ADJUSTABLE RATE MORTGAGE LOAN: A Mortgage Loan bearing interest at
an adjustable rate.

              ADJUSTED  MORTGAGE RATE: As to each Mortgage Loan and at any time,
the per annum rate equal to the Mortgage Rate less the Servicing Fee Rate.

              ADJUSTED NET MORTGAGE  RATE:  As to each  Mortgage Loan and at any
time, the per annum rate equal to the Mortgage Rate less the Expense Fee Rate.

              ADJUSTMENT  DATE: As to any Mortgage  Loan,  the first Due Date on
which the related  Mortgage  Rate  adjusts as set forth in the related  Mortgage
Note and each Due Date  thereafter  on which the  Mortgage  Rate  adjusts as set
forth in the related Mortgage Note.

              ADVANCE:  The  payment  required to be made by the  Servicer  with
respect to any  Distribution  Date pursuant to Section  4.01,  the amount of any
such payment  being equal to the aggregate of payments of principal and interest
(net of the  Servicing  Fee and net of any  net  income  in the  case of any REO
Property) on the Mortgage  Loans that were due during the related

                                       5
<PAGE>

Due  Period  and  not  received  as of the  close  of  business  on the  related
Determination  Date, less the aggregate  amount of any such delinquent  payments
that the Servicer has determined would  constitute a  Nonrecoverable  Advance if
advanced.

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

              AGREEMENT: This Pooling and Servicing Agreement and all amendments
or supplements hereto.

              AMOUNT HELD FOR FUTURE DISTRIBUTION: As to the Certificates on any
Distribution  Date, the aggregate  amount held in the Collection  Account at the
close of business on the related  Determination Date on account of (i) Principal
Prepayments  and  Liquidation  Proceeds on the Mortgage Loans received after the
end of the  related  Prepayment  Period and (ii) all  Scheduled  Payments on the
Mortgage Loans due after the end of the related Due Period.

              APPLIED  REALIZED  LOSS AMOUNT:  With respect to any  Distribution
Date, the amount,  if any, by which the aggregate Class  Certificate  Balance of
the Regular  Certificates after  distributions of principal on such Distribution
Date exceeds the aggregate Stated Principal  Balance of the Mortgage Loans as of
the last day of the immediately preceding Due Period.

              APPRAISED  VALUE:  The  value set  forth in an  appraisal  made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.

              ASSIGNMENT OF MORTGAGE:  An assignment of the Mortgage,  notice of
transfer or equivalent instrument in recordable form, (other than the assignee's
name and recording  information  not yet returned  from the  recording  office),
reflecting the sale of the Mortgage to the Trustee.

              BALLOON  LOAN:  Any  Mortgage  Loan that  provided  on the date of
origination for an amortization  schedule  extending  beyond its stated maturity
date.

              BASIC  PRINCIPAL   DISTRIBUTION   AMOUNT:   With  respect  to  any
Distribution  Date, the excess of (i) the Principal  Remittance  Amount for such
Distribution  Date over (ii) the Excess  Subordinated  Amount,  if any, for such
Distribution Date.

              BASIS  RISK  CARRYFORWARD  AMOUNT:  With  respect to each Class of
Regular  Certificates,  as of any  Distribution  Date, the sum of (A) if on such
Distribution Date the Pass-Through Rate for any Class of Regular Certificates is
based upon the WAC Cap,  the excess of (i) the amount of interest  such Class of
Certificates  would otherwise be entitled to receive on such  Distribution  Date
had  such  rate  been  calculated  as  the  sum  of  LIBOR  and  the  applicable
Pass-Through Margin on such Class of Certificates for such Distribution Date, up
to 16% over (ii) the amount of  interest  payable on such Class of  Certificates
calculated  at the WAC Cap for such  Distribution  Date and (B) the  Basis  Risk
CarryForward Amount for such Class of Certificates for all previous Distribution
Dates not previously paid, together with interest thereon at a rate equal

                                       6
<PAGE>

to the sum of LIBOR and the  applicable  Pass-Through  Margin  for such Class of
Certificates for such Distribution Date, up to 16%.

              BASIS RISK PAYMENT:  For any Distribution Date, an amount equal to
any Basis Risk CarryForward Amount, provided,  however, that with respect to any
Distribution  Date, the payment  cannot exceed the sum of the amounts  otherwise
distributable on the Class X Certificates.

              BEST'S: Best's Key Rating Guide, as the same shall be amended from
time to time.

              BNC: BNC Mortgage, Inc. , a Delaware corporation.

              BNC MORTGAGE  LOAN: A Mortgage Loan which was acquired from BNC by
the Unaffiliated  Seller pursuant to the BNC Purchase  Agreement,  and which has
been acquired by the Trust Fund.

              BNC PURCHASE  AGREEMENT:  The Mortgage  Loan  Purchase  Agreement,
dated as of September 20, 2001, by and between the Unaffiliated Seller and BNC.

              BOOK-ENTRY   CERTIFICATES:   As  specified   in  the   Preliminary
Statement.

              BUSINESS DAY: Any day other than (i) Saturday or Sunday, or (ii) a
day on which banking and savings and loan institutions,  in (a) the State of New
York, New Jersey and Florida,  (b) the state in which the  Servicer's  servicing
operations are located,  or (c) the State in which the Trustee's  operations are
located, are authorized or obligated by law or executive order to be closed.

              CAPITALIZED   INTEREST  ACCOUNT:  The  separate  Eligible  Account
created and maintained by the Trustee pursuant to Section 3.07(e) in the name of
the Trustee for the benefit of the  Offered  Certificateholders  and  designated
"Bankers Trust Company of California,  N.A., in trust for registered  holders of
CDC Mortgage Capital Trust 2001-HE1, Mortgage Pass-Through Certificates,  Series
2001-HE1".

              CAPITALIZED INTEREST REQUIREMENT: With respect to the Distribution
Dates  occurring in December 2001,  January 2002,  February 2002 and March 2002,
the excess, if any, of (x) the Accrued Certificate Interest Distribution Amounts
for all classes of the Offered  Certificates for such Distribution Date over (y)
the  sum of (i) all  scheduled  installments  of  interest  (net of the  related
Expense Fees) due on the Mortgage  Loans in the related Due Period plus (ii) the
Pre-Funding  Earnings available for deposit to the Distribution  Account on such
Distribution Date. In no event will the Capitalized Interest Requirement be less
than zero.

              CERTIFICATE:  Any one of the Certificates  executed by the Trustee
in substantially the forms attached hereto as exhibits.

              CERTIFICATE  BALANCE:  With respect to any Class of  Certificates,
other than the Class P or Class R Certificates,  at any date, the maximum dollar
amount of principal to which

                                       7
<PAGE>

the Holder  thereof is then entitled  hereunder,  such amount being equal to the
Denomination  thereof minus all distributions of principal  previously made with
respect thereto and in the case of any Subordinated Certificates, reduced by any
Applied  Realized  Loss  Amounts   applicable  to  such  Class  of  Subordinated
Certificates. The Class P and Class R Certificates have no Certificate Balance.

              CERTIFICATE  INSURANCE POLICY:  The Financial  Guaranty  Insurance
Policy No. 51198-N,  and all endorsements thereto dated the Closing Date, issued
by  the  Class  A   Certificate   Insurer   for  the  benefit  of  the  Class  A
Certificateholders.

              CERTIFICATE OWNER: With respect to a Book-Entry  Certificate,  the
Person who is the beneficial owner of such Book-Entry Certificate.

              CERTIFICATE REGISTER:  The register maintained pursuant to Section
5.02.

              CERTIFICATEHOLDER   OR   HOLDER:   The  person  in  whose  name  a
Certificate is registered in the Certificate  Register,  except that, solely for
the purpose of giving any consent  pursuant to this  Agreement,  any Certificate
registered in the name of the Depositor or any affiliate of the Depositor  shall
be deemed not to be Outstanding and the Percentage  Interest  evidenced  thereby
shall not be taken into account in determining  whether the requisite  amount of
Percentage  Interests  necessary  to  effect  such  consent  has been  obtained;
PROVIDED,  however,  that if any such Person (including the Depositor) owns 100%
of  the  Percentage  Interests  evidenced  by  a  Class  of  Certificates,  such
Certificates  shall be deemed to be  Outstanding  for purposes of any  provision
hereof that requires the consent of the Holders of  Certificates of a particular
Class as a  condition  to the taking of any  action  hereunder.  The  Trustee is
entitled  to  rely  conclusively  on a  certification  of the  Depositor  or any
affiliate of the Depositor in determining  which  Certificates are registered in
the name of an affiliate of the Depositor.

              CLASS: All Certificates  bearing the same class designation as set
forth in the Preliminary Statement.

              CLASS A CERTIFICATE INSURER:  Financial Security Assurance Inc., a
monoline  stock  insurance  company  organized and created under the laws of the
State of New York, and any successors thereto.

              CLASS A CERTIFICATE INSURER DEFAULT: The existence and continuance
of any of the following:

              (a)    the Class A Certificate Insurer shall have failed to
       make a  required  payment  when due under  the  Class A  Insurance
       Policy;

              (b)    the Class A Certificate Insurer shall have (i) filed
       a petition or commenced any case or proceeding under any provision
       or chapter  of the United  States  Bankruptcy  Code,  the New York
       State  Insurance  Law or any other  similar  federal  or state law
       relating to insolvency, bankruptcy,  rehabilitation,  liquidation,
       or reorganization,  (ii) made a general assignment for the benefit
       of its creditors or (iii) had an order for relief entered  against
       it under the United States Bankruptcy Code, the New York

                                       8
<PAGE>

       State  Insurance  Law or any other  similar  federal  or state law
       relating to insolvency, bankruptcy,  rehabilitation,  liquidation,
       or reorganization that is final and nonappealable; or

              (c)    a court  of  competent  jurisdiction,  the New  York
       Department  of  Insurance  or  any  other   competent   regulatory
       authority  shall  have  entered a final and  nonappealable  order,
       judgment or decree (i) appointing a custodian,  trustee, agent, or
       receiver  for the  Certificate  Insurer or for all or any material
       portion  of  its  property  or  (ii)  authorizing  the  taking  of
       possession  by a  custodian,  trustee,  agent,  or receiver of the
       Certificate  Insurer  or of  all or any  material  portion  of its
       property.

              CLASS  A  CERTIFICATES:   All   Certificates   bearing  the  class
designation of "Class A Certificates".

              CLASS A DEFICIENCY:  With respect to any Distribution Date and the
Class A Certificates, an amount equal to the excess of the sum of:

              (i)    the  excess  of  (x)  the  Accrued   Certificate   Interest
Distribution Amount for the Class A Certificates on such Distribution Date, over
(y) the Interest Amount Available,  less the Premium Amount and the Trustee Fee,
in each case for such Distribution Date; plus

              (ii)   the  Class A  Principal  Parity  Amount,  if any,  for such
Distribution Date.

              CLASS A INSURANCE  PAYMENT ACCOUNT:  The separate Eligible Account
created and maintained by the Trustee pursuant to Section 4.05(c) in the name of
the Trustee for the  benefit of the Class A  Certificateholders  and the Class A
Certificate Insurer, and designated "Bankers Trust Company of California,  N.A.,
in trust for Financial Security Assurance Inc. and the registered holders of CDC
Mortgage  Capital Trust 2001-HE1,  Mortgage  Pass-Through  Certificates,  Series
2001-HE1."

              CLASS  A  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to  any
Distribution Date, the excess of (i) the aggregate Class Certificate Balances of
the Class A Certificates  immediately  prior to such Distribution Date over (ii)
the lesser of (A)  64.00%,  of the  aggregate  Stated  Principal  Balance of the
Mortgage  Loans as of the last day of the  related Due Period and (B) the Stated
Principal  Balances of the Mortgage  Loans as of the last day of the related Due
Period minus the Floor Amount.

              CLASS A PRINCIPAL PARITY AMOUNT:  With respect to any Distribution
Date, the excess, if any, of (i) the aggregate Class Certificate  Balance of the
Class A Certificates on that  Distribution  Date,  after taking into account any
reduction  therein on such Distribution Date from sources other than the Class A
Insurance Policy over (ii) the sum of the Pool Stated Principal Balance plus the
Pre-Funding Amount, in each case as of the last day of the related Due Period.

              CLASS  B  CERTIFICATES:   All   Certificates   bearing  the  class
designation of "Class B Certificates".

                                       9
<PAGE>

              CLASS  B  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to  any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A  Certificates  (after  taking into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class M-1 Principal  Distribution Amount
on such Distribution  Date), (C) the Class Certificate  Balance of the Class M-2
Certificates (after taking into account  distribution of the Class M-2 Principal
Distribution  Amount for such Distribution  Date), and (D) the Class Certificate
Balance of the Class B Certificates  immediately prior to such Distribution Date
over (ii) the lesser of (A) 97.00% of the aggregate Stated Principal  Balance of
the  Mortgage  Loans as of the last day of the  related  Due  Period and (B) the
Stated  Principal  Balances  of the  Mortgage  Loans  as of the  last day of the
related Due Period MINUS the Floor Amount; PROVIDED,  HOWEVER, that with respect
to any Distribution Date on which the Class Certificate Balances of the Class A,
Class M-1 and Class M-2  Certificates  have been  reduced  to zero,  the Class B
Principal Distribution Amount is the lesser of (x) the Class Certificate Balance
of the Class B Certificates and (y) the Principal Distribution Amount.

              CLASS CERTIFICATE BALANCE: With respect to any Class and as to any
date  of  determination,  the  aggregate  of  the  Certificate  Balances  of all
Certificates of such Class as of such date.

              CLASS  M-1  CERTIFICATES:   All  Certificates  bearing  the  class
designation of "Class M-1 Certificates".

              CLASS  M-2  CERTIFICATES:   All  Certificates  bearing  the  class
designation of "Class M-2 Certificates".

              CLASS M-1  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A  Certificates  (after  taking into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date),  and (B) the Class  Certificate  Balance  of the  Class M-1  Certificates
immediately  prior to such  Distribution Date over (ii) the lesser of (A) 77.00%
of the aggregate Stated  Principal  Balance of the Mortgage Loans as of the last
day of the  related  Due  Period and (B) the Stated  Principal  Balances  of the
Mortgage  Loans as of the last day of the  related  Due  Period  minus the Floor
Amount.

              CLASS M-2  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A  Certificates  (after  taking into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class M-1 Principal  Distribution Amount
on such Distribution  Date) and (C) the Class  Certificate  Balance of the Class
M-2  Certificates  immediately  prior to such  Distribution  Date  over (ii) the
lesser of (A) 87.00% of the aggregate Stated  Principal  Balance of the Mortgage
Loans as of the last day of the related Due Period and (B) the Stated  Principal
Balances  of the  Mortgage  Loans as of the last day of the  related  Due Period
minus the Floor Amount.

                                       10
<PAGE>

              CLASS  P  CERTIFICATES:   All   Certificates   bearing  the  class
designation of "Class P Certificates".

              CLASS  R  CERTIFICATES:   All   Certificates   bearing  the  class
designation of "Class R Certificates".

              CLASS X CERTIFICATES:  All Certificates bearing the designation of
"Class X Certificates".

              CLASS X DISTRIBUTABLE AMOUNT: On any Distribution Date, the sum of
(i) the amount of interest that has accrued on the Class X Regular  Interest and
not applied as an Extra Principal Distribution Amount on such Distribution Date,
plus any such accrued interest  remaining  undistributed from prior Distribution
Dates,  and (ii) any  portion  of the  principal  balance of the Class X Regular
Interest which is distributable as a Subordination  Reduction  Amount,  less any
amounts paid as a Basis Risk Payment.

              CLOSING DATE: November 29, 2001.

              CODE: The Internal  Revenue Code of 1986,  including any successor
or amendatory provisions.

              COLLECTION ACCOUNT: As defined in Section 3.10(a).

              COMPENSATING  INTEREST:  For any Distribution  Date, the lesser of
(a) the Prepayment  Interest  Shortfall,  if any, for the Distribution Date, and
(b)  the  amount  of  the  Servicing  Fee  payable  to  the  Servicer  for  such
Distribution Date.

              CONDEMNATION  PROCEEDS:  All awards of settlements in respect of a
Mortgaged  Property,  whether  permanent  or  temporary,  partial or entire,  by
exercise of the power of eminent domain or condemnation.

              CORPORATE  TRUST OFFICE:  The designated  office of the Trustee in
the State of California  at which at any  particular  time its  corporate  trust
business  with respect to this  Agreement is  administered,  which office at the
date of the  execution  of this  Agreement  is located  at 1761 East St.  Andrew
Place, Santa Ana, California 92705, Attn: Trust Administration-DC01M1, facsimile
no.  (714)   247-6478  and  which  is  the  address  to  which  notices  to  and
correspondence with the Trustee should be directed.

              CORRESPONDING  CLASS:  The class of interests in any REMIC created
under this Agreement  that  correspond to the Class of interests in another such
REMIC or to a Class of Certificates in the manner set out below:

                                       11
<PAGE>

          LOWER TIER               UPPER TIER               CORRESPONDING
       CLASS DESIGNATION            INTEREST                 CERTIFICATE
     --------------------       ----------------          -----------------
          Class LT-A                 Class A                   Class A
         Class LT-M-1               Class M-1                 Class M-1
         Class LT-M-2               Class M-2                 Class M-2
          Class LT-B                 Class B                   Class B

              CUMULATIVE LOSS PERCENTAGE: With respect to any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Applied  Realized  Loss Amounts  incurred from the Cut-off Date to the
last day of the preceding  calendar  month and the  denominator  of which is the
Scheduled  Principal  Balance  of the  Mortgage  Loans as of the  Cut-off  Date.

              CUSTODIAL  FILE:  With  respect to each  Mortgage  Loan,  the file
retained  by the  Trustee  consisting  of items (a) - (h) as listed on Exhibit K
hereto.

              CUT-OFF DATE: November 1, 2001.

              CUT-OFF  DATE  POOL  PRINCIPAL   BALANCE:   The  aggregate  Stated
Principal Balances of all Mortgage Loans as of the Cut-off Date.

              CUT-OFF  DATE  PRINCIPAL  BALANCE:  As to any Mortgage  Loan,  the
Stated  Principal  Balance  thereof as of the close of  business  on the Cut-off
Date.

              DATA  TAPE   INFORMATION:   The   information   provided   by  the
Unaffiliated  Seller as of November 1, 2001 to the  Depositor  setting forth the
following  information  with respect to each Mortgage Loan: (1) the  Mortgagor's
name; (2) as to each Mortgage Loan,  the Scheduled  Principal  Balance as of the
Cut-Off Date;  (3) the Mortgage Rate Cap; (4) the Index;  (5) a code  indicating
whether the  Mortgaged  Property is  owner-occupied;  (6) the type of  Mortgaged
Property;  (7) the  first  date on  which  the  Monthly  Payment  was due on the
Mortgage Loan and, if such date is not consistent with the Due Date currently in
effect,  such Due Date;  (8) the "paid through date" based on payments  received
from the related  Mortgagor;  (9) the original  principal amount of the Mortgage
Loan; (10) with respect to Adjustable Rate Mortgage Loans,  the Maximum Mortgage
Rate; (11) the type of Mortgage Loan (I.E.,  fixed or  adjustable);  (12) a code
indicating  the purpose of the loan (I.E.,  purchase,  rate and term  refinance,
equity  take-out  refinance);  (13) a code  indicating the  documentation  style
(I.E., full, asset verification, income verification and no documentation); (14)
the credit risk score (FICO  score);  (15) the loan credit grade  classification
(as  described  in the  Underwriting  Guidelines);  (16)  with  respect  to each
Adjustable Rate Mortgage Loan, the Minimum Mortgage Rate; (17) the Mortgage Rate
at  origination;  (18) with respect to each  Adjustable  Rate Mortgage Loan, the
first Adjustment Date immediately  following the Cut-off Date; (19) the Value of
the Mortgaged  Property;  (20) a code indicating the type of Prepayment  Charges
applicable  to such  Mortgage  Loan,  if any;  and  (21)  with  respect  to each
Adjustable  Rate Mortgage Loan, the Periodic  Mortgage Rate Cap. With respect to
the Mortgage Loans in the aggregate,  the Data Tape Information  shall set forth
the following  information,  as of the Cut-off Date:  (1) the number of Mortgage
Loans; (2) the current aggregate  outstanding  principal balance of the Mortgage
Loans; (3) the weighted average

                                       12
<PAGE>

Mortgage Rate of the Mortgage Loans;  and (4) the weighted  average  maturity of
the Mortgage Loans.

              DEBT  SERVICE  REDUCTION:  With  respect to any  Mortgage  Loan, a
reduction  by a court  of  competent  jurisdiction  in a  proceeding  under  the
Bankruptcy  Code in the  Scheduled  Payment for such  Mortgage Loan which became
final and  non-appealable,  except such a reduction  resulting  from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.

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

              DEFINITIVE  CERTIFICATES:  Any Certificate evidenced by a Physical
Certificate  and any  Certificate  issued  in lieu of a  Book-Entry  Certificate
pursuant to Section 5.02(e).

              DELAY CERTIFICATES: As specified in the Preliminary Statement.

              DELETED MORTGAGE LOAN: As defined in Section 2.03.

              DELINQUENT: A mortgage loan is "Delinquent" if any monthly payment
due on a due date is not made by the close of business on the next scheduled due
date for that  mortgage  loan. A mortgage  loan is "30 days  Delinquent"  if the
monthly  payment  has  not  been  received  by  the  close  of  business  on the
corresponding  day of the month  immediately  succeeding the month in which that
monthly payment was due or, if there was no corresponding  date (E.G., as when a
30-day month follows a 31-day month in which the payment was due on the 31st day
of that month),  then on the last day of that  immediately  preceding month; and
similarly for "60 days Delinquent" and "90 days Delinquent," etc.

              DELIVERY DATE:  With respect to the Initial  Mortgage  Loans,  the
Closing  Date;  with  respect to any  Subsequent  Mortgage  Loans,  the  related
Subsequent Transfer Date therefor.

              DENOMINATION:  With  respect to each  Certificate,  the amount set
forth  on  the  face  thereof  as  the  "Initial  Certificate  Balance  of  this
Certificate" or the Percentage Interest appearing on the face thereof.

              DEPOSITOR:   Morgan   Stanley  ABS  Capital  I  Inc.,  a  Delaware
corporation, or its successor in interest.

              DEPOSITORY:  The initial  Depository shall be The Depository Trust
Company,  the  nominee of which is CEDE & Co., as the  registered  Holder of the
Book-Entry  Certificates.  The  Depository  shall at all  times  be a  "clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code of
the State of New York.

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

                                       13
<PAGE>

              DETERMINATION  DATE:  With respect to each  Remittance  Date,  the
Business Day immediately preceding such Remittance Date.

              DISTRIBUTION  ACCOUNT:  The separate  Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(d) in the name of the Trustee
for the benefit of the  Certificateholders and designated "Bankers Trust Company
of  California,  N.A. in trust for  registered  holders of CDC Mortgage  Capital
Trust 2001-HE1, Mortgage Pass-Through Certificates, Series 2001-HE1".

              DISTRIBUTION  DATE:  The 25th day of each calendar month after the
initial issuance of the Certificates,  or if such day is not a Business Day, the
next succeeding Business Day, commencing in December 2001.

              DOCUMENT  EXCEPTION  REPORT:  The  report  attached  to  Exhibit F
hereto.

              DUE DATE:  The day of the month on which the Scheduled  Payment is
due on a Mortgage Loan, exclusive of any days of grace.

              DUE  PERIOD:  With  respect to each  Remittance  Date,  the period
commencing on the second day of the month  preceding the month of the Remittance
Date and ending on the first day of the month of the Remittance Date.

              ELIGIBLE ACCOUNT:  Either (i) a demand account  maintained with an
Eligible  Institution  or (ii) a trust  account or  accounts  maintained  with a
federal or state chartered depository institution or trust company acting in its
fiduciary  capacity or (iii) any other account acceptable to each Rating Agency.
Eligible  Accounts may bear interest,  and may include,  if otherwise  qualified
under this definition, accounts maintained with the Trustee.

              ELIGIBLE  INSTITUTION:  A federal  or state  chartered  depository
institution  or trust company,  which (x) with respect to any Eligible  Account,
the amounts on deposit in which will be held for 30 days or less, the commercial
paper,  short term debt obligations,  or other short-term  deposits of which are
rated at least A-1+ by Standard & Poor's and "P-1" by Moody's  (or a  comparable
rating if another  Rating Agency is specified by the Depositor by written notice
to the Servicer  and the  Trustee) or (y) with respect to any Eligible  Account,
the  amounts  on  deposit  in  which  will be held for  more  than 30 days,  the
long-term unsecured debt obligations of which are rated at least AA- by Standard
& Poor's and Aa3 by Moody's (or a comparable  rating if another Rating Agency is
specified by the Depositor by written notice to the Servicer and the Trustee).

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

              ERISA-QUALIFYING  UNDERWRITING:  A best efforts or firm commitment
underwriting  or private  placement  that meets the  requirements  of Prohibited
Transaction  Exemption  97-34,  62 Fed. Reg.  39021  (1997),  as amended (or any
successor  thereto),  or  any  substantially  similar  administrative  exemption
granted by the U.S. Department of Labor.

              ERISA-RESTRICTED  CERTIFICATE:  As  specified  in the  Preliminary
Statement.

                                       14
<PAGE>

              ESCROW ACCOUNT:  The Eligible Account or Accounts  established and
maintained pursuant to Section 3.09(b).

              ESCROW PAYMENTS: As defined in Section 3.09(b) of this Agreement.

              EVENT OF DEFAULT: As defined in Section 7.01.

              EXCESS RESERVE FUND ACCOUNT: The separate Eligible Account created
and  maintained by the Trustee  pursuant to Sections  3.07(b) and 3.07(c) in the
name of the  Trustee  for the  benefit  of the  Offered  Certificateholders  and
designated  "Bankers Trust Company of  California,  N.A. in trust for registered
holders  of  CDC  Mortgage   Capital  Trust  2001-HE1,   Mortgage   Pass-Through
Certificates, Series 2001-HE1".

              EXCESS SUBORDINATED AMOUNT: With respect to any Distribution Date,
the excess,  if any, of (a) the Subordinated  Amount on such  Distribution  Date
over (b) the Specified Subordinated Amount for such Distribution Date.

              EXPENSE FEES: As to each Mortgage  Loan,  the sum of the Servicing
Fee, the Trustee Fee and the Adjusted Premium Rate.

              EXPENSE  FEE  RATE:  As to  each  Mortgage  Loan,  the  sum of the
Servicing Fee Rate, and the Trustee Fee Rate.

              EXTRA PRINCIPAL  DISTRIBUTION AMOUNT: As of any Distribution Date,
the lesser of (x) the related Total Monthly Excess Spread for such  Distribution
Date and (y) the Subordination Deficiency for such Distribution Date.

              FANNIE MAE:  The Federal  National  Mortgage  Association,  or any
successor thereto.

              FANNIE MAE GUIDES:  The Fannie Mae  Sellers'  Guide and the Fannie
Mae Servicers' Guide and all amendments or additions thereto.

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

              FHLMC:  The Federal Home Loan  Mortgage  Corporation,  a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.

              FINAL CERTIFICATION:  A certification  submitted by the Trustee in
substantially the form of Exhibit F hereto.

              FINAL  RECOVERY  DETERMINATION:  With  respect  to  any  defaulted
Mortgage  Loan or any REO Property  (other than a Mortgage  Loan or REO Property
purchased  by  a  Responsible  Party  as  contemplated  by  this  Agreement),  a
determination  made by the Servicer  that all  Insurance  Proceeds,  Liquidation
Proceeds and other payments or recoveries which the Servicer,  in its reasonable
good faith judgment,  expects to be finally  recoverable in respect thereof have

                                       15
<PAGE>

been so recovered. The Servicer shall maintain records,  prepared by a Servicing
Officer, of each Final Recovery Determination made thereby.

              FINAL   SCHEDULED   DISTRIBUTION   DATE:   The   Final   Scheduled
Distribution  Date for each Class of  Certificates is the  Distribution  Date in
each of the following months:

                                                                FINAL SCHEDULED
                                                               DISTRIBUTION DATE
                                                               -----------------
Class A Certificates.........................................   January 25, 2032
Class M-1 Certificates.......................................   January 25, 2032
Class M-2 Certificates.......................................   January 25, 2032
Class B Certificates.........................................   January 25, 2032
Class X Certificates.........................................   January 25, 2032
Class P Certificates.........................................   January 25, 2032
Class R Certificates.........................................   January 25, 2032

              FIXED RATE MORTGAGE  LOAN: A Mortgage  Loan bearing  interest at a
fixed rate.

              FLOOR AMOUNT:  An amount equal to the product of (x) 0.50% and (y)
the Maximum Pool Principal Balance.

              GROSS MARGIN:  With respect to each Adjustable Rate Mortgage Loan,
the fixed  percentage  amount set forth in the related Mortgage Note to be added
to the applicable Index to determine the Mortgage Rate.

              IFC: IMPAC Funding Corporation, a California corporation.

              IFC MORTGAGE  LOAN: A Mortgage Loan which was acquired from IFC by
the Unaffiliated  Seller pursuant to the IFC Purchase  Agreement,  and which has
been acquired by the Trust Fund.

              IFC PURCHASE  AGREEMENT:  The Mortgage  Loan  Purchase  Agreement,
dated as of July 10, 2001 by and between the Unaffiliated Seller and IFC.

              I&I  PAYMENTS:  Payments  due and owing  under the  Insurance  and
Indemnity Agreement.

              INITIAL CUT-OFF DATE: The close of business on November 1, 2001.

              INITIAL  MORTGAGE  LOANS:  The  Mortgage  Loans  delivered  by the
Depositor on the Startup Date.

              INSURANCE  AND  INDEMNITY  AGREEMENT:  The Insurance and Indemnity
Agreement  dated as of November 1, 2001 among the Class A  Certificate  Insurer,
the  Depositor,  the  Servicer,  the  Unaffiliated  Seller,  BNC and IFC as such
agreement  may be amended or  supplemented  in  accordance  with the  provisions
thereof.

                                       16
<PAGE>

              INSURED PAYMENT:  With respect to any Distribution Date, the Class
A Deficiency for that Distribution Date.

              INDEX:  As to each  Adjustable  Rate Mortgage Loan, the index from
time to time in effect for the adjustment of the Mortgage Rate set forth as such
on the related Mortgage Note.

              INSURANCE  POLICY:  With respect to any Mortgage  Loan included in
the Trust Fund,  any insurance  policy,  including  all riders and  endorsements
thereto  in  effect,  including  any  replacement  policy  or  policies  for any
Insurance Policies.

              INSURANCE  PROCEEDS:  With respect to each Mortgage Loan, proceeds
of  insurance  policies  insuring  the  Mortgage  Loan or the related  Mortgaged
Property.

              INTEREST  ACCRUAL PERIOD:  With respect to each Class of Non-Delay
Certificates and the Corresponding Class of Lower Tier Regular Interests and any
Distribution  Date, the period commencing on the 25th day of the month preceding
the month in which such  Distribution  Date occurs and ending on the 24th day of
the month in which such  Distribution  Date  occurs (or in the case of the first
Distribution  Date,  the  period  from and  including  the  Closing  Date to but
excluding  such first  Distribution  Date).  For purposes of computing  interest
accruals on each Class of Non-Delay  Certificates,  each Interest Accrual Period
has the actual number of days in such month and each year is assumed to have 360
days.

              INTEREST AMOUNT AVAILABLE:  With respect to any Distribution Date,
the sum of (i) the Interest  Remittance  Amount received by the Trustee from the
Servicer on the related Remittance Date, (ii) the Pre-Funding  Earnings, if any,
deposited to the Distribution  Account on such  Distribution  Date and (iii) the
Capitalized Interest Requirement,  if any, deposited to the Distribution Account
on such Distribution Date.

              INTEREST RATE  ADJUSTMENT  DATE:  With respect to each  Adjustable
Rate Mortgage  Loan,  the date,  specified in the related  Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Rate is adjusted.

              INTEREST  REMITTANCE AMOUNT:  With respect to any Remittance Date,
the sum, without duplication, of:

              (i)    all scheduled  installments of interest due (or advanced by
       the Servicer) on the Mortgage Loans during the related Due Period;

              (ii)   Compensating   Interest   paid  by  the  Servicer  on  such
       Remittance Date;

              (iii)  the  interest   component   of  all  related   Substitution
       Adjustment Amounts and Repurchase Prices; and

              (iv)   the  interest  component  of  all  Condemnation   Proceeds,
       Insurance  Proceeds  and  Liquidation  Proceeds  received by the Servicer
       during the related  Prepayment  Period (in each case,  net (but not to be
       reduced below zero) of unreimbursed  expenses incurred in connection with
       a liquidation or foreclosure and unreimbursed Advances, if any); and

                                       17
<PAGE>

              (v)    the interest  component of the proceeds of any  termination
       of the Trust Fund.

REDUCED by the Servicing  Fee for the related Due Period,  together with amounts
in reimbursement for Advances previously made with respect to the Mortgage Loans
and other amounts as to which the Servicer is entitled to be reimbursed pursuant
to the Agreement.

              INVESTMENT ACCOUNT: As defined in Section 3.12(a).

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

              LATE  PAYMENT  RATE:  Has  the  meaning  ascribed  thereto  in the
Insurance and Indemnity Agreement.

              LIBOR:  With respect to any Interest  Accrual Period for the LIBOR
Certificates,   the  rate  determined  by  the  Trustee  on  the  related  LIBOR
Determination  Date on the basis of the offered rate for one-month  U.S.  dollar
deposits  as such rate  appears on Telerate  Page 3750 as of 11:00 a.m.  (London
time) on such date;  provided that if such rate does not appear on Telerate Page
3750,  the rate for such  date will be  determined  on the basis of the rates at
which  one-month  U.S.  dollar  deposits are offered by the  Reference  Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the London
interbank  market.  In such event, the Trustee will request the principal London
office of each of the Reference  Banks to provide a quotation of its rate. If at
least  two such  quotations  are  provided,  the rate for that  date will be the
arithmetic mean of the quotations  (rounded  upwards if necessary to the nearest
whole  multiple  of  1/16%).  If  fewer  than two  quotations  are  provided  as
requested,  the rate for that  date  will be the  arithmetic  mean of the  rates
quoted  by  major  banks  in  New  York  City,  selected  by  the  Servicer,  at
approximately  11:00 a.m. (New York City time) on such date for  one-month  U.S.
dollar loan to leading European banks.

              LIBOR CERTIFICATES: As specified in the Preliminary Statement.

              LIBOR  DETERMINATION  DATE:  With respect to any Interest  Accrual
Period  (other  than  the  initial   Interest  Accrual  Period)  for  the  LIBOR
Certificates,  the second London Business Day preceding the commencement of such
Interest Accrual Period.

              LIQUIDATED MORTGAGE LOAN: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
calendar month preceding the month of such Distribution Date and as to which the
Servicer has certified (in accordance  with this Agreement) that it has received
all amounts it expects to receive in  connection  with the  liquidation  of such
Mortgage Loan including the final disposition of an REO Property.

                                       18
<PAGE>

              LIQUIDATION  EVENT:  With respect to any Mortgage Loan, any of the
following events:  (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination  is made as to such Mortgage  Loan; or (iii) such Mortgage Loan is
removed from  coverage  under this  Agreement by reason of its being  purchased,
sold or replaced pursuant to or as contemplated by this Agreement.  With respect
to any REO  Property,  either  of the  following  events:  (i) a Final  Recovery
Determination  is made as to such REO  Property;  or (ii) such REO  Property  is
removed from  coverage  under this  Agreement  by reason of its being  purchased
pursuant to this Agreement.

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

              LOAN-TO-VALUE RATIO or LTV: With respect to any Mortgage Loan, the
ratio (expressed as a percentage) of the original  outstanding  principal amount
of the Mortgage Loan as of the Cut-off Date (unless otherwise indicated), to the
lesser of (a) the Appraised Value of the Mortgaged Property at origination,  and
(b) if the  Mortgage  Loan was made to finance  the  acquisition  of the related
Mortgaged Property, the purchase price of the Mortgaged Property.

              LONDON  BUSINESS  DAY:  Any day on which  dealings  in deposits of
United States dollars are transacted in the London interbank market.

              LOWER TIER REGULAR INTEREST: Each of the Class LT-A, Class LT-M-1,
Class  LT-M-2,  Class LT-B and Class  LT-Accrual  Interests  as described in the
Preliminary Statement.

              LOWER TIER REMIC: As described in the Preliminary Statement

              MAXIMUM  MORTGAGE  RATE:  With  respect  to each  Adjustable  Rate
Mortgage Loan, a rate that (i) is set forth on the Data Tape  Information and in
the related  Mortgage  Note and (ii) is the maximum  interest  rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be increased  during the
lifetime of such Mortgage Loan.

              MAXIMUM POOL PRINCIPAL  BALANCE:  The aggregate  Stated  Principal
Balances of all  Mortgage  Loans (both  Initial  Mortgage  Loans and  Subsequent
Mortgage Loans) as of their respective Cut-off Dates.

              MINIMUM  MORTGAGE  RATE:  With  respect  to each  Adjustable  Rate
Mortgage Loan, a rate that (i) is set forth on the Data Tape  Information and in
the related  Mortgage  Note and (ii) is the minimum  interest  rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be decreased  during the
lifetime of such Mortgage Loan.

              MONTHLY    STATEMENT:    The    statement    delivered    to   the
Certificateholders pursuant to Section 4.03.

              MOODY'S:  Moody's Investors Service, Inc. If Moody's is designated
as a Rating  Agency  in the  Preliminary  Statement,  for  purposes  of  Section
10.05(b) the address for notices to Moody's shall be Moody's Investors  Service,
Inc.,  99  Church  Street,  New York,  New York  10007,  Attention:  Residential
Mortgage  Pass-Through  Group,  or such other  address as Moody's may  hereafter
furnish to the Depositor and the Servicer.

                                       19
<PAGE>

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

              MORTGAGE FILE: The items pertaining to a particular  Mortgage Loan
contained in either the Servicing File or Custodial File.

              MORTGAGE LOANS:  An individual  Mortgage Loan which is the subject
of this  Agreement,  each  Mortgage  Loan  originally  sold and  subject to this
Agreement  being  identified on the Mortgage Loan Schedule,  which Mortgage Loan
includes,  without  limitation,  the  Mortgage  File,  the  Scheduled  Payments,
Principal Prepayments,  Liquidation Proceeds,  Condemnation Proceeds,  Insurance
Proceeds, REO Disposition proceeds, and all other rights, benefits, proceeds and
obligations  arising from or in connection  with such Mortgage  Loan,  excluding
replaced or repurchased Mortgage Loans.

              MORTGAGE  LOAN  SCHEDULE:  A schedule  of Mortgage  Loans  annexed
hereto as Schedule I, such schedule setting forth the following information with
respect to each  Mortgage  Loan:  (1) the  Unaffiliated  Seller's  Mortgage Loan
number; (2) the city, state and zip code of the Mortgaged  Property;  (3) a code
indicating  whether  the  Mortgaged  Property  is  a  single  family  residence,
two-family residence,  three-family  residence,  four-family  residence,  PUD or
condominium;  (4) the  current  Mortgage  Interest  Rate;  (5) the  current  net
Mortgage  Interest Rate; (6) the current Monthly Payment;  (7) the Gross Margin;
(8) the original term to maturity;  (9) the scheduled  maturity  date;  (10) the
principal balance of the Mortgage Loan as of the Cut-off Date after deduction of
payments  of  principal  due  on or  before  the  Cut-off  Date  whether  or not
collected;  (11) the Loan-to-Value Ratio; (12) the next Interest Rate Adjustment
Date;  (13) the lifetime  Mortgage  Interest Rate Cap; (14) whether the Mortgage
Loan is  convertible  or  not;  (15) a code  indicating  the  mortgage  guaranty
insurance  company;  (16) the  Servicing Fee and (17) if such Mortgage Loan is a
BNC Mortgage Loan or an IFC Mortgage Loan.

              MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor under a Mortgage Loan.

              MORTGAGE  RATE:  The annual rate of  interest  borne on a Mortgage
Note,  which shall be adjusted from time to time with respect to Adjustable Rate
Mortgage Loans.

              MORTGAGE RATE CAPS:  With respect to an  Adjustable  Rate Mortgage
Loan, the Periodic Mortgage Rate Cap, the Maximum Mortgage Rate, and the Minimum
Mortgage Rate for such Mortgage Loan.

              MORTGAGED  PROPERTY:  The real property (or leasehold  estate,  if
applicable)  identified on the Mortgage  Loan Schedule as securing  repayment of
the debt evidenced by a Mortgage Note.

              MORTGAGOR: The obligor(s) on a Mortgage Note.

              NET MONTHLY EXCESS CASH FLOW: For any Distribution Date the amount
remaining for  distribution  pursuant to  subsection  4.02(iii)  (before  giving
effect to distributions pursuant to such subsection).

                                       20
<PAGE>

              NET PREPAYMENT INTEREST SHORTFALL:  For any Distribution Date, the
amount by which the sum of the Prepayment Interest Shortfalls exceeds the sum of
the Compensating Interest payments made on such Distribution Date.

              NIMS TRUST:  CDC  Mortgage  Capital Inc.  NIM Trust  2001-HE1N,  a
Delaware business trust.

              NON-DELAY CERTIFICATES: As specified in the Preliminary Statement.

              NONRECOVERABLE  ADVANCE: Any Servicing Advances previously made or
proposed to be made in respect of a Mortgage Loan or REO Property, which, in the
good faith  business  judgment  of the  Servicer,  will not or, in the case of a
proposed  Servicing Advance,  would not, be ultimately  recoverable from related
Insurance Proceeds,  Liquidation Proceeds or otherwise. The determination by the
Servicer  that  it has  made a  Nonrecoverable  Advance  or  that  any  proposed
Servicing Advances, if made, would constitute a Nonrecoverable Advance, shall be
evidenced by an Officers' Certificate delivered to the Trustee.

              NONRECOVERABLE  P&I ADVANCE:  Any P&I Advance  previously  made or
proposed to be made in respect of a Mortgage  Loan or REO Property  that, in the
good faith  business  judgment  of the  Servicer,  will not or, in the case of a
proposed  P&I Advance,  would not be  ultimately  recoverable  from related late
payments,  Insurance  Proceeds or Liquidation  Proceeds on such Mortgage Loan or
REO Property as provided herein.

              NOTICE OF FINAL  DISTRIBUTION:  The notice to be provided pursuant
to Section 9.02 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.

              OFFERED CERTIFICATES: As specified in the Preliminary Statement.

              OFFICER'S  CERTIFICATE:  A certificate signed by an officer of the
Servicer with  responsibility for the servicing of the Mortgage Loans and listed
on a list delivered to the Trustee pursuant to this Agreement.

              OPINION  OF  COUNSEL:  A written  opinion of  counsel,  who may be
in-house counsel for the Servicer or the Subservicer, reasonably acceptable to
the Trustee and to the Class A Certificate Insurer, provided that any Opinion of
Counsel  relating to (a)  qualification  of the Mortgage Loans in a REMIC or (b)
compliance with the REMIC  Provisions,  must be (unless otherwise stated in such
Opinion of Counsel) an opinion of counsel who (i) is in fact  independent of the
Servicer  of the  Mortgage  Loans,  (ii)  does not have any  material  direct or
indirect  financial  interest  in the  Servicer of the  Mortgage  Loans or in an
affiliate of either and (iii) is not connected with the Servicer of the Mortgage
Loans as an officer, employee, director or person performing similar functions.

              OPTIONAL TERMINATION DATE: means:

              (i)    For so long as the  Class X  Certificates  are 100%  owned,
       either  directly  or  indirectly,  by  the  Unaffiliated  Seller  or  any
       Affiliate thereof,  then the Servicer may cause the Optional  Termination
       Date to occur on any Distribution Date when the aggregate

                                       21
<PAGE>

       Stated  Principal  Balance of the Mortgage Loans is 10.00% or less of the
       Maximum Pool Principal Balance; and

              (ii)   If the  Class X  Certificates  are not 100%  owned,  either
       directly  or  indirectly,  by the  Unaffiliated  Seller or any  Affiliate
       thereof,  then the Holders of a majority in Class Certificate  Balance of
       the Class X Certificates may cause the Optional Termination Date to occur
       on any Distribution  Date when the aggregate Stated Principal  Balance of
       the  Mortgage  Loans is  10.00%  or less of the  Maximum  Pool  Principal
       Balance,  and, if such Class X Certificateholders  do not do so, then the
       Servicer shall also have such right..

              ORIGINAL PRE-FUNDED AMOUNT: $29,912,476.

              OTS: Office of Thrift Supervision, and any successor thereto.

              OUTSTANDING:  With respect to the  Certificates  as of any date of
determination,  all Certificates  theretofore  executed and authenticated  under
this Agreement except:

              (i)    Certificates   theretofore   canceled  by  the  Trustee  or
       delivered to the Trustee for cancellation; and

              (ii)   Certificates  in  exchange  for  which  or in lieu of which
       other  Certificates  have been  executed  and  delivered  by the  Trustee
       pursuant to this Agreement.

              OUTSTANDING  MORTGAGE  LOAN:  As of any Due Date, a Mortgage  Loan
with a Stated Principal Balance greater than zero which was not the subject of a
Principal  Prepayment  in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.

              OWNERSHIP INTEREST: As to any Residual Certificate,  any ownership
interest in such  Certificate  including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial.

              P&I ADVANCE: As to any Mortgage Loan or REO Property,  any advance
made  by the  Servicer  in  respect  of any  Remittance  Date  representing  the
aggregate of all payments of principal and interest,  net of the Servicing  Fee,
that were due during the related Due Period on the Mortgage  Loans and that were
delinquent on the related  Determination Date, plus certain amounts representing
assumed  payments  not  covered  by any  current  net  income  on the  Mortgaged
Properties  acquired by foreclosure or deed in lieu of foreclosure as determined
pursuant to Section 4.01.

              PASS-THROUGH  MARGIN:  With  respect  to  each  Class  of  Regular
Certificates,   prior  to  the  first   Distribution  Date  after  the  Optional
Termination Date the following percentages:  Class A Certificates,  0.34%; Class
M-1  Certificates,   1.03%;   Class  M-2   Certificates,   1.60%;  and  Class  B
Certificates,   2.65%.  On  the  first  Distribution  Date  after  the  Optional
Termination   Date,  the  Pass-Through   Margins  shall  increase  to:  Class  A
Certificates,  0.68%,  Class M-1 Certificates,  1.545%,  Class M-2 Certificates,
2.40% and Class B Certificates, 3.975%.

                                       22
<PAGE>

              PASS-THROUGH  RATE: For each Class of Certificates  and each Lower
Tier Regular Interest,  the per annum rate set forth or calculated in the manner
described in the Preliminary Statement.

              PERCENTAGE  INTEREST:  As  to  any  Certificate,   the  percentage
interest  evidenced thereby in distributions  required to be made on the related
Class, such percentage  interest being set forth on the face thereof or equal to
the percentage  obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.

              PERIODIC  MORTGAGE RATE CAP:  With respect to an  Adjustable  Rate
Mortgage Loan, the periodic limit on each Mortgage  Interest Rate  adjustment as
set forth in the related Mortgage Note.

              PERMITTED   INVESTMENTS:   Any  one  or  more  of  the   following
obligations or securities  acquired at a purchase price of not greater than par,
regardless  of  whether  issued by the  Servicer,  the  Trustee  or any of their
respective Affiliates:

              (i)    direct  obligations of, or obligations  fully guaranteed as
       to timely  payment of principal and interest by, the United States or any
       agency or instrumentality  thereof,  provided such obligations are backed
       by the full faith and credit of the United States;

              (ii)   demand and time deposits in, certificates of deposit of, or
       bankers'  acceptances  (which shall each have an original maturity of not
       more than 90 days and, in the case of bankers'  acceptances,  shall in no
       event  have an  original  maturity  of more than 365 days or a  remaining
       maturity of more than 30 days)  denominated  in United States dollars and
       issued by, any Eligible Institution;

              (iii)  repurchase   obligations   with  respect  to  any  security
       described in clause (i) above  entered  into with a Eligible  Institution
       (acting as principal);

              (iv)   securities  bearing interest or sold at a discount that are
       issued  by any  corporation  incorporated  under  the laws of the  United
       States of America or any state  thereof and that are rated by each Rating
       Agency  that rates such  securities  in its highest  long-term  unsecured
       rating   categories  at  the  time  of  such  investment  or  contractual
       commitment providing for such investment;

              (v)    commercial  paper   (including  both   non-interest-bearing
       discount obligations and  interest-bearing  obligations payable on demand
       or on a  specified  date  not  more  than  30  days  after  the  date  of
       acquisition  thereof) that is rated by each Rating Agency that rates such
       securities in its highest  short-term  unsecured debt rating available at
       the time of such investment;

              (vi)   units of money market funds,  including  money market funds
       advised by the  Depositor or an Affiliate  thereof,  that have been rated
       "Aaa" by Moody's, and "AAA" by Standard & Poor's; and

              (vii)  if  previously  confirmed  in writing to the Trustee and to
       the Class A Certificate  Insurer,  any other demand, money market or time
       deposit, or any other

                                       23
<PAGE>

       obligation,  security or  investment,  as may be acceptable to the Rating
       Agencies as a permitted  investment of funds backing "Aaa" or "AAA" rated
       securities;

PROVIDED,  HOWEVER, that no instrument described hereunder shall evidence either
the  right  to  receive  (a)  only  interest  with  respect  to the  obligations
underlying such instrument or (b) both principal and interest  payments  derived
from  obligations  underlying  such  instrument  and the interest and  principal
payments  with  respect to such  instrument  provide a yield to  maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.

              PERMITTED TRANSFEREE: Any person other than (i) the United States,
any State or political  subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government,  International  Organization or
any agency or instrumentality of either of the foregoing,  (iii) an organization
(except  certain  farmers'  cooperatives  described  in section 521 of the Code)
which is exempt  from tax  imposed by Chapter 1 of the Code  (including  the tax
imposed by section 511 of the Code on unrelated  business taxable income) on any
excess inclusions (as defined in section 860E(c)(1) of the Code) with respect to
any  Residual  Certificate,  (iv)  rural  electric  and  telephone  cooperatives
described in section  1381(a)(2)(C) of the Code, (v) a Person that is not a U.S.
Person,  (vi) an "electing large partnership"  within the meaning of section 775
of the Code and (vii) any other Person so designated by the Depositor based upon
an Opinion of Counsel that the  Transfer of an Ownership  Interest in a Residual
Certificate to such Person may cause the REMIC hereunder to fail to qualify as a
REMIC at any time that the  Certificates  are  outstanding.  The  terms  "United
States," "State" and  "International  Organization"  shall have the meanings set
forth in section 7701 of the Code or successor  provisions.  A corporation  will
not be treated  as an  instrumentality  of the United  States or of any State or
political  subdivision  thereof for these  purposes if all of its activities are
subject  to tax and,  with the  exception  of the  Federal  Home  Loan  Mortgage
Corporation,  a  majority  of its board of  directors  is not  selected  by such
government unit.

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

              PHYSICAL CERTIFICATES: As specified in the Preliminary Statement.

              POOL STATED PRINCIPAL  BALANCE:  As to any Distribution  Date, the
aggregate of the Stated Principal Balances of the Mortgage Loans on the last day
of the related Due Period which were Outstanding Mortgage Loans on such day.

              PREFERENCE AMOUNT: Any amounts distributed in respect of the Class
A Certificates which are recovered from any Holder of a Class A Certificate as a
voidable  preference  by a trustee in  bankruptcy  pursuant to the United States
Bankruptcy Code or other similar law in accordance  with a final,  nonappealable
order of a court having  competent  jurisdiction  and which have not theretofore
been repaid to such Holder.

              PREFERENCE CLAIM: As defined in Section 4.05(f) hereof.

              PRE-FUNDING  ACCOUNT:  The separate  Eligible  Account created and
maintained by the Trustee pursuant to Section 3.07(f) in the name of the Trustee
for the benefit of the

                                       24
<PAGE>

Certificateholders,  and designated "Bankers Trust Company of California,  N.A.,
in trust for registered holders of CDC Mortgage Capital Trust 2001-HE1, Mortgage
Pass-Through Certificates, Series 2001-HE1".

              PRE-FUNDING  AMOUNT:  With  respect  to any  date,  the  amount on
deposit in the Pre-Funding Account.

              PRE-FUNDING  EARNINGS:  The actual investment earnings realized on
amounts deposited in the Pre-Funding Account.

              PRE-FUNDING  PERIOD: The period commencing on the Startup Date and
ending on the  earliest  to occur of (i) the date on which the amount on deposit
in the Pre-Funding  Account (exclusive of any investment  earnings) is less than
$100,000,  (ii) the date on which any Servicer Default occurs and (iii) February
28, 2002.

              PREMIUM  AMOUNT:  The  product of the Premium  Percentage  and the
Certificate  Balance  of the  Class A  Certificates  immediately  prior  to such
Distribution Date.

              PREMIUM  RATE:  The rate at which the  "Premium" is  determined as
described in the letter dated November 29, 2001 between the Unaffiliated  Seller
and the Class A Certificate Insurer.

              PREPAYMENT  CHARGE:  Any  prepayment  premium,  penalty  or charge
collected  by the Servicer  with respect to a Mortgage  Loan from a Mortgagor in
connection with any voluntary Principal Prepayment in full pursuant to the terms
of the related Mortgage Note.

              PREPAYMENT  INTEREST  SHORTFALL:  With  respect to any  Remittance
Date, the sum of, for each Mortgage Loan that was during the related  Prepayment
Period the subject of a Principal Prepayment that was applied by the Servicer to
reduce  the  outstanding  principal  balance  of  such  Mortgage  Loan on a date
preceding the Due Date in the succeeding  Prepayment  Period, an amount equal to
the  product of (a) the  Mortgage  Rate net of the  Servicing  Fee Rate for such
Mortgage  Loan,  (b) the amount of the  Principal  Prepayment  for such Mortgage
Loan, (c) 1/360 and (d) the number of days  commencing on the date on which such
Principal  Prepayment  was  applied  and  ending on the last day of the  related
Prepayment Period.

              PREPAYMENT  PERIOD:  With  respect  to any  Remittance  Date,  the
calendar  month  preceding  the  calendar  month in which such  Remittance  Date
occurs.

              PRINCIPAL  DISTRIBUTION AMOUNT: For any Distribution Date, the sum
of (i) the Basic Principal  Distribution  Amount for such  Distribution Date and
(ii) the Extra Principal Distribution Amount for such Distribution Date.

              PRINCIPAL  PREPAYMENT:  Any  full  or  partial  payment  or  other
recovery of  principal  on a Mortgage  Loan  (including  upon  liquidation  of a
Mortgage Loan) which is received in advance of its scheduled Due Date, excluding
any  prepayment  penalty or premium  thereon and which is not  accompanied by an
amount of interest  representing  scheduled interest due on any date or dates in
any month or months subsequent to the month of prepayment.

                                       25
<PAGE>

              PRINCIPAL  PREPAYMENT IN FULL: Any Principal  Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.

              PRINCIPAL  REMITTANCE AMOUNT: With respect to any Remittance Date,
the sum, without duplication, of:

              (i)    all scheduled installments of principal due (or advanced by
       the Servicer on) Mortgage Loans during the related Due Period;

              (ii)   the  principal  component  of  all  Condemnation  Proceeds,
       Insurance Proceeds and Liquidation Proceeds during the related Prepayment
       Period (in each case,  net of  remaining  (I.E.,  not  deducted  from the
       Interest Remittance Amount) unreimbursed  expenses incurred in connection
       with a liquidation or foreclosure and unreimbursed Advances, if any);

              (iii)  all  partial  or full  prepayments  on the  Mortgage  Loans
       received during the related Prepayment Period; and

              (iv)   the  principal   component  of  all  related   Substitution
       Adjustment Amounts or Repurchase Prices; and

              (v)    the principal  component of the proceeds of any termination
       of the Trust Fund.

reduced by remaining  amounts (I.E.,  not deducted from the Interest  Remittance
Amount)  in  reimbursement  for  Advances  previously  made with  respect to the
Mortgage  Loans and other  amounts as to which the  Servicer  is  entitled to be
reimbursed pursuant to this Agreement.

              PRIVATE CERTIFICATES: As specified in the Preliminary Statement.

              PROSPECTUS SUPPLEMENT:  The Prospectus Supplement,  dated November
26, 2001, relating to the Offered Certificates.

              PTCE 95-60: As defined in Section 5.02(b).

              PUD: Planned Unit Development.

              QUALIFIED  INSURER:  A mortgage  guaranty  insurance  company duly
qualified as such under the laws of the state of its principal place of business
and each state  having  jurisdiction  over such insurer in  connection  with the
insurance  policy issued by such insurer,  duly  authorized and licensed in such
states to transact a mortgage guaranty  insurance business in such states and to
write the insurance provided by the insurance policy issued by it, approved as a
FNMA- or  FHLMC-approved  mortgage  insurer  or having a claims  paying  ability
rating  of at  least  "AA"  or  equivalent  rating  by a  nationally  recognized
statistical  rating  organization.  Any  replacement  insurer  with respect to a
Mortgage Loan must have at least as high a claims paying  ability  rating as the
insurer it replaces had on the Closing Date.

                                       26
<PAGE>

              RATING  AGENCY:  Each  of the  Rating  Agencies  specified  in the
Preliminary  Statement.  If such  organization  or a  successor  is no longer in
existence,  "Rating  Agency"  shall be such  nationally  recognized  statistical
rating  organization,  or  other  comparable  Person,  as is  designated  by the
Depositor, notice of which designation shall be given to the Trustee. References
herein to a given rating or rating  category of a Rating  Agency shall mean such
rating category without giving effect to any modifiers.  For purposes of Section
10.05(b),  the  addresses for notices to each Rating Agency shall be the address
specified  therefor in the definition  corresponding  to the name of such Rating
Agency, or such other address as either such Rating Agency may hereafter furnish
to the Depositor and the Servicer.

              RECORD DATE: With respect to any  Distribution  Date, the close of
business on the Business  Day  immediately  preceding  such  Distribution  Date;
PROVIDED,  HOWEVER,  that for any  Certificate  issued in Definitive  Form,  the
Record Date shall be the close of business on the last Business Day of the month
preceding the month in which such applicable Distribution Date occurs.

              REFERENCE BANK: As defined in Section 4.04.

              REGULAR CERTIFICATES: As specified in the Preliminary Statement.

              REIMBURSEMENT  AMOUNT:  As of any  Distribution  Date,  the sum of
(a)(i)  all  Insured  Payments  previously  received  by  the  Trustee  and  all
Preference  Amounts  previously  paid by the Class A Certificate  Insurer and in
each case not previously  repaid to the Class A Certificate  Insurer pursuant to
Sections  6.05(a)(ii)  hereof plus (ii)  interest  accrued on each such  Insured
Payment and  Preference  Amounts not  previously  repaid  calculated at the Late
Payment Rate from the date the Trustee  received the related  Insured Payment or
Preference  Amounts were paid by the Class A Certificate  Insurer and (b)(i) any
amounts  then  due and  owing  to the  Class A  Certificate  Insurer  under  the
Insurance  and Indemnity  Agreement  (excluding  the Premium  Amount due on such
Distribution  Date),  as  certified  to the  Trustee by the Class A  Certificate
Insurer  plus  (ii)  interest  on such  amounts  at the  rate  specified  in the
Insurance and Indemnity Agreement.  The Class A Certificate Insurer shall notify
the  Trustee  and the  Unaffiliated  Seller of the  amount of any  Reimbursement
Amount.

              REMIC TRUST: The segregated pool of assets consisting of the Trust
Fund, exclusive of Prepayment Charges and the Excess Reserve Fund Account.

              RELIEF ACT INTEREST  SHORTFALL:  With respect to any  Distribution
Date and any Mortgage Loan, any reduction in the amount of interest  collectible
on such Mortgage Loan for the most recently  ended Due Period as a result of the
application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended.

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

              REMIC  PROVISIONS:  Provisions  of  the  federal  income  tax  law
relating to real estate mortgage investment  conduits,  which appear at sections
860A  through  860G of  Subchapter  M of  Chapter  1 of the  Code,  and  related
provisions, and regulations promulgated

                                       27
<PAGE>

thereunder,  as the  foregoing  may be in  effect  from  time to time as well as
provisions of applicable state laws.

              REMITTANCE  DATE:  The  18th  day  (or if such  18th  day is not a
Business Day, the first Business Day immediately preceding) of any month.

              REO  DISPOSITION:  The  final  sale  by the  Servicer  of any  REO
Property.

              REO IMPUTED INTEREST:  As to any REO Property,  for any period, an
amount  equivalent  to interest (at the Mortgage  Rate net of the  Servicing Fee
Rate that would have been  applicable  to the related  Mortgage Loan had it been
outstanding) on the unpaid principal balance of the Mortgage Loan as of the date
of acquisition  thereof (as such balance is reduced  pursuant to Section 3.17 by
any income from the REO Property treated as a recovery of principal).

              REO  PROPERTY:  A  Mortgaged  Property  acquired by the Trust Fund
through  foreclosure  or  deed-in-lieu  of  foreclosure  in  connection  with  a
defaulted Mortgage Loan.

              REPURCHASE  PRICE:  With respect to any Mortgage  Loan,  an amount
equal to the sum of (i) the unpaid principal balance of such Mortgage Loan as of
the date of repurchase,  (ii) interest on such unpaid principal  balance of such
Mortgage Loan at the Mortgage Rate from the last date through which interest has
been paid and  distributed to the Trustee to the date of  repurchase,  (iii) all
unreimbursed Servicing Advances and (iv) all expenses reasonably incurred by the
Servicer,  the  Trustee,  the Class A  Certificate  Insurer or the  Unaffiliated
Seller, as the case may be, in respect of a breach or defect, including, without
limitation,  expenses  arising  out  of  any  such  party's  enforcement  of the
Responsible Party's repurchase obligation, to the extent not included in (iii).

              REQUEST FOR  RELEASE:  The Request  for Release  submitted  by the
Servicer to the Trustee, substantially in the form of Exhibit J.

              RESIDUAL CERTIFICATES: As specified in the Preliminary Statement.

              RESPONSIBLE  OFFICER:  When used with respect to the Trustee,  any
Vice  President,  any Assistant Vice  President,  any Assistant  Secretary,  any
Assistant  Treasurer,  any Trust  Officer or any other  officer  of the  Trustee
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  and who  shall  have  direct
responsibility for the administration of this Agreement.

              RESPONSIBLE  PARTY:  With respect to any BNC Mortgage  Loan,  BNC;
with respect to any IFC Mortgage Loan, IFC.

              RULE 144A LETTER: As defined in Section 5.02(b).

              SCHEDULED  PAYMENT:  The scheduled  monthly  payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such Mortgage
Loan which, unless

                                       28
<PAGE>

otherwise  specified  herein,  shall give  effect to any  related  Debt  Service
Reduction  and any  Deficient  Valuation  that affects the amount of the monthly
payment due on such Mortgage Loan.

              SCHEDULED  PRINCIPAL  BALANCE:  With respect to any Mortgage Loan:
(a) as of the Cut-off Date, the outstanding  principal  balance of such Mortgage
Loan as of  such  date,  net of the  principal  portion  of all  unpaid  Monthly
Payments,  if any, due on or before such date; (b) as of any Due Date subsequent
to the Cut-off Date up to and  including  the Due Date in the calendar  month in
which a  Liquidation  Event  occurs  with  respect to such  Mortgage  Loan,  the
Scheduled  Principal Balance of such Mortgage Loan as of the Cut-off Date, minus
the sum of (i) the  principal  portion of each Monthly  Payment due on or before
such Due Date but subsequent to the Cut-off Date, whether or not received,  (ii)
all Principal  Prepayments  received  before such Due Date but after the Cut-off
Date,  (iii) the  principal  portion of all  Liquidation  Proceeds and Insurance
Proceeds  received  before such Due Date but after the Cut-off Date,  net of any
portion   thereof  that   represents   principal  due  (without  regard  to  any
acceleration of payments under the related  Mortgage and Mortgage Note) on a Due
Date  occurring on or before the date on which such  proceeds  were received and
(iv) any reduction in the principal  balance of such Mortgage Loan incurred with
respect thereto as a result of a Deficient  Valuation  occurring before such Due
Date,  but only to the extent such reduction in principal  balance  represents a
reduction in the portion of principal of such Mortgage Loan not yet due (without
regard to any  acceleration of payments under the related  Mortgage and Mortgage
Note) as of the  date of such  Deficient  Valuation;  and (c) as of any Due Date
subsequent  to the  occurrence  of a  Liquidation  Event  with  respect  to such
Mortgage Loan, zero.

              SECURITIES ACT: The Securities Act of 1933, as amended.

              SENIOR  ENHANCEMENT  PERCENTAGE:  With respect to any Distribution
Date, the percentage obtained by dividing (x) the sum of (i) the aggregate Class
Certificate  Balance of the Subordinated  Certificates and (ii) the Subordinated
Amount  (in each  case  after  taking  into  account  the  distributions  of the
Principal  Distribution  Amount for such Distribution Date) by (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period.

              SENIOR  SPECIFIED  ENHANCEMENT  PERCENTAGE:  As  of  any  date  of
determination, 36.0%.

              SERVICER:  Ocwen Federal Bank FSB, a federal savings bank, and its
successors and assigns, in its capacity as servicer hereunder.

              SERVICER  TERMINATION TEST: With respect to any Distribution Date,
the  Servicer  Termination  Test will be failed with  respect to the Servicer if
either:

              (a)    the Cumulative Loss Percentage exceeds 6.70%; or

              (b)    the quotient  (expressed as a percentage) of (x) the Stated
Principal  Balance of Mortgage Loans 60 days Delinquent or more as of the end of
the related Due Period (including  Mortgage Loans in bankruptcy,  foreclosure or
represented by an REO Property) over (y) the aggregate Stated Principal  Balance
of the Mortgage Loans as of the end of the related Due Period, exceeds 20%.

                                       29
<PAGE>

              SERVICING  ADVANCES:  The  reasonable  "out-of-pocket"  costs  and
expenses  (including  legal fees) incurred by the Servicer in the performance of
its servicing  obligations  in connection  with a default,  delinquency or other
unanticipated  event,  including,  but  not  limited  to,  the  cost  of (i) the
preservation,  restoration  and  protection  of a Mortgaged  Property,  (ii) any
enforcement or judicial proceedings,  including foreclosures and litigation,  in
respect  of  a  particular  Mortgage  Loan,  (iii)  the  management   (including
reasonable fees in connection therewith) and liquidation of any REO Property and
(iv) the  performance  of its  obligations  under  Section  3.01,  Section 3.09,
Section 3.13 and Section 3.15 hereof. The Servicer shall not be required to make
any Nonrecoverable Advances.

              SERVICING  FEE:  With  respect to each  Mortgage  Loan and for any
calendar month, an amount equal to one month's  interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which  interest on such Mortgage Loan accrues for such calendar  month.  Such
fee shall be payable monthly,  and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Servicer under this Agreement.
The  Servicing  Fee is payable  solely  from,  the interest  portion  (including
recoveries  with  respect to interest  from  Liquidation  Proceeds  and proceeds
received  with  respect to REO  Properties,  to the extent  permitted by Section
3.11)  of such  Monthly  Payment  collected  by the  Servicer,  or as  otherwise
provided under Section 3.11.

              SERVICING FEE RATE: With respect to each Mortgage Loan,  0.50% per
annum.

              SERVICING  FILE:  With  respect to each  Mortgage  Loan,  the file
retained by the Servicer  consisting  of originals or copies of all documents in
the Mortgage File which are not  delivered to the Trustee in the Custodial  File
and copies of the Mortgage Loan Documents set forth in Exhibit K hereto.

              SERVICING  OFFICER:  Any officer of the  Servicer  involved in, or
responsible  for, the  administration  and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Servicer on the Closing Date pursuant to this  Agreement,  as
such list may from time to time be amended.

              SIMILAR LAW: As defined in Section 5.02(b).

              SPECIFIED  SUBORDINATED  AMOUNT:  Prior to the Stepdown  Date,  an
amount equal to 1.50% of the Maximum Pool  Principal  Balance,  and on and after
the Stepdown  Date, an amount equal to 3.00% of the aggregate  Stated  Principal
Balance of the  Mortgage  Loans as of the last day of the  related  Due  Period,
subject to a minimum amount equal to the Floor Amount;  PROVIDED,  HOWEVER, that
if, on any  Distribution  Date,  a Trigger  Event has  occurred,  the  Specified
Subordinated  Amount shall not be reduced to the  applicable  percentage  of the
then current  aggregate Stated Principal Balance of the Mortgage Loans until the
Distribution Date on which a Trigger Event is no longer occurring.

              STANDARD & POOR'S:  Standard & Poor's Ratings Services, a division
of the  McGraw-Hill  Companies,  Inc.  If Standard & Poor's is  designated  as a
Rating Agency in the

                                       30
<PAGE>

Preliminary Statement,  for purposes of Section 10.05(b) the address for notices
to Standard & Poor's shall be Standard & Poor's,  55 Water,  New York,  New York
10041,  Attention:  Residential Mortgage Surveillance Group - Morgan Stanley ABS
Capital  I Inc.  2001-HE1,  or such  other  address  as  Standard  & Poor's  may
hereafter furnish to the Depositor and the Servicer.

              STARTUP DAY: The Closing Date.

              STATED  PRINCIPAL  BALANCE:  As to  each  Mortgage  Loan,  (i) the
principal  balance of the Mortgage  Loan at the Cut-off Date after giving effect
to payments of  principal  due on or before  such date,  to the extent  actually
received,  minus (ii) all amounts  previously  distributed  to the Trustee  with
respect to the related  Mortgage  Loan  representing  payments or  recoveries of
principal.

              STEPDOWN  DATE:  The later to occur of (i) the earlier to occur of
(a) the  Distribution  Date in  December  2004  and (b) the  date on  which  the
aggregate  Class  Certificate  Balances  of the Class A  Certificates  have been
reduced  to zero and (ii)  the  first  Distribution  Date on  which  the  Senior
Enhancement  Percentage  (calculated  for this  purpose  only after  taking into
account  payments  of  principal  on the  Mortgage  Loans on the last day of the
related  Due  Period but prior to any  applications  of  Principal  Distribution
Amount to the  Certificates)  is greater  than or equal to the Senior  Specified
Enhancement Percentage.

              SUBORDINATED  AMOUNT: As of any Distribution  Date, the excess, if
any, of (a) the aggregate Stated  Principal  Balance of the Mortgage Loans as of
the  end of  the  related  Due  Period  over  (b)  the  aggregate  of the  Class
Certificate  Balances of the Class A and  Subordinated  Certificates  as of such
Distribution  Date  (after  giving  effect  to  the  payment  of  the  Principal
Remittance Amount on such Certificates on such Distribution Date).

              SUBORDINATED   CERTIFICATES:   As  specified  in  the  Preliminary
Statement.

              SUBORDINATION  DEFICIENCY:  With respect to any Distribution Date,
the excess, if any, of (a) the Specified  Subordinated Amount applicable to such
Distribution   Date  over  (b)  the  Subordinated   Amount  applicable  to  such
Distribution Date.

              SUBORDINATION  REDUCTION AMOUNT:  With respect to any Distribution
Date,  an amount equal to the lesser of (a) the Excess  Subordinated  Amount and
(b) the Total Monthly Excess Spread.

              SUBSERVICER: As defined in Section 3.02(a).

              SUBSERVICING ACCOUNT: As defined in Section 3.08.

              SUBSERVICING AGREEMENT: As defined in Section 3.02 hereof.

              SUBSEQUENT CUT-OFF DATE: As to any Subsequent  Mortgage Loans, the
date specified in the Addition Notice delivered in connection  therewith,  which
date shall be the close of  business on the first day of the month in which such
Subsequent Mortgage Loans will be conveyed to the Trust Fund.

                                       31
<PAGE>

              SUBSEQUENT   MORTGAGE   LOANS:   The  Mortgage   Loans   hereafter
transferred and assigned to the Trust Fund pursuant to Section 2.01(d).

              SUBSEQUENT TRANSFER:  The transfer and assignment by the Depositor
to the Trust of the Subsequent Mortgage Loans pursuant to the terms hereof.

              SUBSEQUENT TRANSFER AGREEMENT:  A subsequent transfer agreement in
substantially the form of Exhibit L.

              SUBSEQUENT  TRANSFER  DATE: The Business Day on which a Subsequent
Transfer occurs.

              SUBSTITUTE  MORTGAGE  LOAN:  A  Mortgage  Loan  substituted  by  a
Responsible  Party for a Deleted  Mortgage  Loan which must, on the date of such
substitution,  as confirmed in a Request for Release,  substantially in the form
of  Exhibit  J, (i) have a Stated  Principal  Balance,  after  deduction  of the
principal portion of the Scheduled Payment due in the month of substitution, not
in excess of, and not more than 10% less than, the Stated  Principal  Balance of
the Deleted Mortgage Loan; (ii) be accruing interest at a rate no lower than and
not more than 1% per annum higher than, that of the Deleted Mortgage Loan; (iii)
have a  Loan-to-Value  Ratio no higher than that of the Deleted  Mortgage  Loan;
(iv) have a remaining  term to  maturity no greater  than (and not more than one
year less than that of) the  Deleted  Mortgage  Loan;  and (v) comply  with each
representation and warranty set forth in Section 2.03.

              SUBSTITUTION  ADJUSTMENT AMOUNT: The meaning ascribed to such term
pursuant to Section 2.03.

              TAX SERVICE CONTRACT: As defined in Section 3.09(a).

              TELERATE  PAGE 3750:  The display page  currently so designated on
the Bridge Telerate Service (or such other page as may replace that page on that
service for displaying comparable rates or prices).

              TOTAL  MONTHLY  EXCESS  SPREAD:  As to any  Distribution  Date, an
amount equal to the excess if any, of (i) the interest  collected or advanced on
the Mortgage  Loans for Due Dates during the related  Remittance  Period (net of
Expense  Fees)  over (ii) the sum of the  interest  payable  to the  Classes  of
Floating Rate Certificates on such Distribution Date.

              TRANSFER: Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.

              TRANSFER AFFIDAVIT: As defined in section 5.02(b).

              TRANSFEROR CERTIFICATE: As defined in Section 5.02(b).

              TRIGGER EVENT: With respect to the Certificates after the Stepdown
Date,  exists if the  quotient  (expressed  as a  percentage)  of (x) the Stated
Principal Balance of Mortgage Loans 60 days Delinquent or more, as of the end of
the related Due Period (including  Mortgage Loans in bankruptcy,  foreclosure or
represented by an REO Property), over (y) the aggregate Stated

                                       32
<PAGE>

Principal  Balance of the Mortgage Loans as of the end of the related Due Period
exceeds 40% of the prior period's Senior Enhancement Percentage.

              TRUST FUND: The corpus of the trust created  hereunder  consisting
of (i) the Mortgage  Loans and all interest  and  principal  received on or with
respect  thereto after the related  Cut-off Date,  other than such amounts which
were due on the Mortgage Loans on or before the related  Cut-off Date; (ii) each
Account, and all amounts deposited therein pursuant to the applicable provisions
of this  Agreement;  (iii)  property  that secured a Mortgage  Loan and has been
acquired by  foreclosure,  deed-in-lieu  of foreclosure  or otherwise;  (iv) all
rights of the Depositor  against the Unaffiliated  Seller under the Unaffiliated
Seller's  Agreement;  (v) the Class A Insurance Policy; and (vi) all proceeds of
the conversion, voluntary or involuntary, of any of the foregoing.

              TRUSTEE:  Bankers  Trust  Company  of  California,  N.A.  and  its
successors and, if a successor trustee is appointed hereunder, such successor.

              TRUSTEE FEE: As to any  Distribution  Date, an amount equal to the
product  of  one-twelfth  of the  Trustee  Fee  Rate  times  the  sum of (i) the
aggregate  Stated  Principal  Balances of the  Mortgage  Loans at the end of the
prior Due Period,  and (ii) the amount on deposit in the Pre-Funding  Account at
the end of such prior Due Period.

              TRUSTEE FEE RATE:  With respect to each Mortgage Loan,  0.012% per
annum.

              UNAFFILIATED   SELLER'S  AGREEMENT:   The  Unaffiliated   Seller's
Agreement,  dated as of the date hereof,  among the Unaffiliated  Seller and the
Depositor  relating  to the sale of the  Mortgage  Loans  from the  Unaffiliated
Seller to the Depositor.

              UNPAID INTEREST AMOUNTS: As of any Distribution Date and any Class
of  Certificates,  the sum of (a)  the  excess  of (i)  the  sum of the  Accrued
Certificate  Interest  Distribution  Amount for such  Distribution  Date and any
portion of such  Accrued  Certificate  Interest  Distribution  Amount from prior
Distribution  Dates remaining unpaid over (ii) the amount in respect of interest
on such Class of Certificates actually distributed on the preceding Distribution
Date and (b) 30 days'  interest  on such excess at the  applicable  Pass-Through
Rate (to the extent permitted by applicable law).

              UNPAID  REALIZED  LOSS  AMOUNT:  With  respect  to  any  Class  of
Subordinated  Certificates and as to any Distribution Date, is the excess of (i)
Applied  Realized  Loss  Amounts with respect to such Class over (ii) the sum of
all  distributions  in reduction of such  Applied  Realized  Loss Amounts on all
previous  Distribution Dates. Any amounts distributed to a Class of Subordinated
Certificates  in respect of any Unpaid  Realized Loss Amount will not be applied
to reduce the Class Certificate Balance of such Class.

              U.S.  PERSON:  Shall mean (i) a citizen or  resident of the United
States; (ii) a corporation (or entity treated as a corporation for tax purposes)
created or organized in the United States or under the laws of the United States
or of any state thereof,  including, for this purpose, the District of Columbia;
(iii) a  partnership  (or entity  treated  as a  partnership  for tax  purposes)
organized in the United  States or under the laws of the United States or of any
state thereof,  including,  for this purpose,  the District of Columbia  (unless
provided otherwise by

                                       33
<PAGE>

future Treasury regulations); (iv) an estate whose income is includible in gross
income for United States income tax purposes  regardless of its source; or (v) a
trust,  if a  court  within  the  United  States  is able  to  exercise  primary
supervision  over the  administration  of the trust and one or more U.S. Persons
have   authority   to  control   all   substantial   decisions   of  the  trust.
Notwithstanding  the  last  clause  of the  preceding  sentence,  to the  extent
provided in Treasury  regulations,  certain  trusts in  existence  on August 20,
1996,  and treated as U.S.  Persons prior to such date, may elect to continue to
be U.S. Persons.

              UPPER TIER  REGULAR  INTEREST:  As  described  in the  Preliminary
Statement.

              UPPER TIER REMIC: As described in the Preliminary Statement.

              VOTING  RIGHTS:  The  portion of the  voting  rights of all of the
Certificates  which  is  allocated  to  any  Certificate.  As  of  any  date  of
determination,  (a) 1% of all Voting  Rights  shall be  allocated to the Class X
Certificates,  if any (such Voting  Rights to be allocated  among the holders of
Certificates of each such Class in accordance with their  respective  Percentage
Interests),  (b) 1% of all  Voting  Rights  shall be  allocated  to the  Class P
Certificates,  if any, and (c) the  remaining  Voting  Rights shall be allocated
among  Holders of the  remaining  Classes of  Certificates  in proportion to the
Certificate Balances of their respective Certificates on such date.

              WAC CAP: With respect to the Mortgage Loans as of any Distribution
Date, the product of (i) the weighted average of the Adjusted Net Mortgage Rates
then in effect on the beginning of the related Due Period on the Mortgage Loans,
minus in the case of the WAC Cap as it applies to the Class A Certificates only,
the Premium  Rate,  and (ii) a fraction,  the  numerator  of which is 30 and the
denominator of which is the actual number of days in the Interest Accrual Period
related to such Distribution Date.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

              Section 2.01 CONVEYANCE OF MORTGAGE LOANS.

              (a)    The Depositor, concurrently with the execution and delivery
hereof, hereby sells,

              (b)    transfers,  assigns, sets over and otherwise conveys to the
Trustee for the benefit of the  Certificateholders,  without  recourse,  all the
right,  title and interest of the Depositor in and to the Trust Fund, other than
any Subsequent  Mortgage Loans,  which will be so sold,  transferred,  assigned,
set-over and conveyed on the related Subsequent Transfer Date.

              (c)    In  connection  with the  transfer and  assignment  of each
Mortgage Loan, the  Unaffiliated  Seller has delivered or caused to be delivered
to the Trustee for the benefit of the Certificateholders the following documents
or instruments with respect to each Mortgage Loan so assigned:

                                       34
<PAGE>

                     (i)    the original  Mortgage Note bearing all  intervening
       endorsements   evidencing  a  complete  chain  of  assignment   from  the
       originator to the related  Responsible Party,  endorsed "Pay to the order
       of  _________,  without  recourse"  and signed in the name of the related
       Responsible Party by an authorized  officer.  To the extent that there is
       no  room  on the  face  of  the  Mortgage  Notes  for  endorsements,  the
       endorsement  may be contained  on an allonge,  if state law so allows and
       the Trustee is so advised by the related Responsible Party that state law
       so allows.  If the Mortgage Loan was acquired by a Responsible Party in a
       merger,  the  endorsement  must  be  by  "[related   Responsible  Party],
       successor by merger to [name of  predecessor]".  If the Mortgage Loan was
       acquired  or  originated  by the  related  Responsible  Party while doing
       business  under  another  name,  the  endorsement  must  be by  "[related
       Responsible Party], formerly known as [previous name]";

                     (ii)   the original of any guarantee executed in connection
       with the Mortgage Note;

                     (iii)  the  original  Mortgage  with  evidence of recording
       thereon. If in connection with any Mortgage Loan, the related Responsible
       Party cannot deliver or cause to be delivered the original  Mortgage with
       evidence of recording  thereon on or prior to the related  Delivery  Date
       because  of a delay  caused by the  public  recording  office  where such
       Mortgage has been delivered for  recordation or because such Mortgage has
       been lost or because such public  recording  office  retains the original
       recorded Mortgage,  the related  Responsible Party shall deliver or cause
       to be delivered to the Trustee,  a photocopy of such  Mortgage,  together
       with (i) in the case of a delay caused by the public recording office, an
       Officer's  Certificate of the related Responsible Party stating that such
       Mortgage has been dispatched to the appropriate  public  recording office
       for recordation and that the original recorded Mortgage or a copy of such
       Mortgage  certified  by such  public  recording  office  to be a true and
       complete  copy  of  the  original  recorded  Mortgage  will  be  promptly
       delivered to the Trustee upon receipt thereof by the related  Responsible
       Party; or (ii) in the case of a Mortgage where a public  recording office
       retains the original recorded Mortgage or in the case where a Mortgage is
       lost  after  recordation  in a public  recording  office,  a copy of such
       Mortgage  certified  by such  public  recording  office  to be a true and
       complete copy of the original recorded Mortgage;

                     (iv)   the  originals  of  all  assumption,   modification,
       consolidation or extension agreements, if any, with evidence of recording
       thereon;

                     (v)    the  original   Assignment   of  Mortgage  for  each
       Mortgage  Loan,  in form and  substance  acceptable  for  recording.  The
       Assignment of Mortgage shall be duly recorded by the related  Responsible
       Party to the  Trustee,  in the  manner  set forth in the third  paragraph
       following  clause (viii) below.  If the Mortgage Loan was acquired by the
       related Responsible Party in a merger, the Assignment of Mortgage must be
       made by  "[related  Responsible  Party],  successor by merger to [name of
       predecessor]".  If the Mortgage  Loan was acquired or  originated  by the
       related  Responsible  Party while doing  business under another name, the
       Assignment  of  Mortgage  must be by "[the  related  Responsible  Party],
       formerly known as [previous name]";

                                       35
<PAGE>

                     (vi)   the  originals  of all  intervening  assignments  of
       mortgage,  evidencing a complete chain of assignment  from the originator
       to the related  Responsible Party, with evidence of recording thereon, or
       if any  such  intervening  assignment  has not  been  returned  from  the
       applicable  recording office or has been lost or if such public recording
       office retains the original recorded assignments of mortgage, the related
       Responsible  Party shall deliver or cause to be delivered to the Trustee,
       a photocopy of such intervening assignment, together with (i) in the case
       of  a  delay  caused  by  the  public  recording   office,  an  Officer's
       Certificate   of  the  related   Responsible   Party  stating  that  such
       intervening Assignment of Mortgage has been dispatched to the appropriate
       public recording  office for recordation and that such original  recorded
       intervening  Assignment  of  Mortgage  or  a  copy  of  such  intervening
       Assignment  of Mortgage  certified by the  appropriate  public  recording
       office  to  be  a  true  and  complete  copy  of  the  original  recorded
       intervening  Assignment  of Mortgage  will be promptly  delivered  to the
       Trustee upon receipt thereof by the related Responsible Party; or (ii) in
       the case of an intervening  assignment  where a public  recording  office
       retains the original recorded intervening assignment or in the case where
       an intervening assignment is lost after recordation in a public recording
       office,  a copy of such intervening  assignment  certified by such public
       recording office to be a true and complete copy of the original  recorded
       intervening assignment;

                     (vii)  The original mortgagee policy of title insurance or,
       in the event such original title policy is unavailable,  a certified true
       copy of the related policy binder or commitment for title certified to be
       true and complete by the title insurance company; and

                     (viii) security  agreement,  chattel mortgage or equivalent
       document executed in connection with the Mortgage, if any.

              In the event an Officer's  Certificate of the related  Responsible
Party is  delivered  to the  Trustee  because  of a delay  caused by the  public
recording  office in returning any recorded  document,  the related  Responsible
Party shall deliver to the Trustee, within 90 days of the related Delivery Date,
an Officer's  Certificate which shall (i) identify the recorded  document,  (ii)
state that the  recorded  document  has not been  delivered  to the  Trustee due
solely to a delay caused by the public recording office,  (iii) state the amount
of time  generally  required by the  applicable  recording  office to record and
return a document  submitted  for  recordation,  and (iv)  specify  the date the
applicable  recorded  document  will  be  delivered  to the  Trustee;  provided,
HOWEVER,  that any  recorded  document  shall in any event be delivered no later
than 1 year  from  the  applicable  Delivery  Date.  An  extension  of the  date
specified  in (iv) above (but subject to the  one-year  PROVISO  therein) may be
requested from the Trustee, which consent shall not be unreasonably withheld.

              From time to time,  the  Servicer  shall  forward  to the  Trustee
additional original documents,  additional  documents  evidencing an assumption,
modification,  consolidation  or  extension of a Mortgage  Loan  approved by the
Servicer,  in  accordance  with the terms of this  Agreement.  All such mortgage
documents  held by the Trustee as to each  Mortgage  Loan shall  constitute  the
"CUSTODIAL FILE".

                                       36
<PAGE>

              On or prior to the related  Delivery Date, the  Responsible  Party
shall  deliver to the  Trustee  Assignments  of  Mortgages,  in blank,  for each
Mortgage  Loan. No later than thirty (30)  Business Days  following the later of
the  related  Delivery  Date  and the date of  receipt  by the  Servicer  of the
recording  information  for a Mortgage,  the Servicer shall  promptly  submit or
cause to be submitted for recording, at the expense of the Responsible Party, in
the  appropriate  public office for real property  records,  each  Assignment of
Mortgage  referred to in Section  2.01(b)(v).  The  Assignment of Mortgage shall
assign the Mortgage from the  Responsible  Party,  to "Bankers  Trust Company of
California,  N.A., as trustee under the Pooling and Servicing Agreement dated as
of November 1, 2001,  Morgan Stanley ABS Capital I Inc. Trust  2001-HE1." In the
event  that any such  assignment  is lost or  returned  unrecorded  because of a
defect  therein,  the  Responsible  Party shall  promptly  prepare a  substitute
assignment to cure such defect and thereafter  cause each such  assignment to be
duly recorded.

              On or prior to the Closing  Date,  the  Unaffiliated  Seller shall
deliver  to the  Trustee  a copy of the Data  Tape  Information  in  electronic,
machine readable medium in a form mutually acceptable to the Trustee.

              In the event that such original or copy of any document  submitted
for recordation to the appropriate  public  recording office is not so delivered
to the Trustee  within 90 days  following the related  Delivery Date, and in the
event that the  Responsible  Party does not cure such failure  within 30 days of
discovery or receipt of written notification of such failure from the Depositor,
the Trustee or the Class A Certificate Insurer, the related Mortgage Loan shall,
upon the  request  of the  Depositor,  the  Trustee  or the Class A  Certificate
Insurer, be repurchased by the related Responsible Party at the price and in the
manner specified in Section 2.03. The foregoing repurchase  obligation shall not
apply in the event  that the  related  Responsible  Party  cannot  deliver  such
original or copy of any document  submitted for  recordation to the  appropriate
public recording office within the specified period due to a delay caused by the
recording  office in the  applicable  jurisdiction;  PROVIDED  that the  related
Responsible  Party shall instead  deliver a recording  receipt of such recording
office or, if such recording receipt is not available,  an officer's certificate
of a servicing officer of the Responsible  Party,  confirming that such document
has been accepted for recording.

              Notwithstanding anything to the contrary contained in this Section
2.01, in those instances where the public  recording office retains or loses the
original  Mortgage or assignment after it has been recorded,  the obligations of
the  related  Responsible  Party  shall be deemed to have  been  satisfied  upon
delivery by the related  Responsible  Party to the Trustee  prior to the related
Delivery  Date of a copy of such  Mortgage  or  assignment,  as the case may be,
certified (such certification to be an original thereof) by the public recording
office to be a true and complete copy of the recorded original thereof.

              (d)    PURCHASE AND SALE OF SUBSEQUENT MORTGAGE LOANS. (i) Subject
to the  satisfaction  of the conditions  set forth in paragraph (ii) below,  and
upon the Trustee's receipt of a Subsequent  Transfer  Agreement  executed by all
other parties thereto, in consideration of the Trustee's delivery on the related
Subsequent  Transfer  Dates to or upon the  order of the  Depositor  of all or a
portion of the balance of funds in the Pre-Funding  Account, the Depositor shall
on any Subsequent Transfer Date sell,  transfer,  assign, set over and convey to
the  Trustee  without  recourse  but  subject  to terms and  provisions  of this
Agreement, all of the right, title and interest

                                       37
<PAGE>

of the  Depositor  in  and  to the  Subsequent  Mortgage  Loans,  including  the
outstanding principal of and interest due on such Subsequent Mortgage Loans, and
all other  related  assets  included  or to be  included  in the Trust Fund with
respect thereto.

              The amount released from the Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%) of the
aggregate Stated Principal Balances as of the related Subsequent Cut-Off Date of
the Subsequent Mortgage Loans so transferred.

              (ii)   The  Subsequent  Mortgage  Loans and the other property and
rights related thereto  described in paragraph (a) above shall be transferred by
the  Depositor  to the  Trust  Fund only  upon the  satisfaction  of each of the
following conditions on or prior to the related Subsequent Transfer Date:

                     (a)    the  Unaffiliated  Seller  shall have  provided  the
       Depositor,  the Trustee,  the Rating Agencies and the Class A Certificate
       Insurer with a timely  Addition  Notice,  which shall  include a Mortgage
       Loan  Schedule,  listing  the  Subsequent  Mortgage  Loans and shall have
       provided  any  other  information  reasonably  requested  by  any  of the
       foregoing with respect to the Subsequent Mortgage Loans;

                     (b)    the Servicer  shall have deposited in the Collection
       Account all  collections  of (x)  principal in respect of the  Subsequent
       Mortgage Loans received after the related Subsequent Cut-Off Date and (y)
       interest  due  on  the  Subsequent   Mortgage  Loans  after  the  related
       Subsequent Cut-Off Date;

                     (c)    as   of   each   Subsequent   Transfer   Date,   the
       Unaffiliated  Seller was not insolvent nor will be made insolvent by such
       transfer nor is the Unaffiliated Seller aware of any pending insolvency;

                     (d)    such  addition  will  not  result  in a  "prohibited
       transaction"  (as defined in the REMIC  Provisions) for any REMIC held by
       the Trust  Fund,  and will not cause any REMIC  held by the Trust Fund to
       cease to qualify as a REMIC,  as  evidenced by an Opinion of Counsel with
       respect to such matters (which may be a blanket opinion dated the Closing
       Date);

                     (e)    the Pre-Funding Period shall not have terminated;

                     (f)    the related  Responsible  Party shall have delivered
       to the Trustee an  Officer's  Certificate  stating  that each  Subsequent
       Mortgage Loan complies with each of the  representations  and  warranties
       made with respect thereto, as set forth in Schedule III hereto;

                     (g)    the Unaffiliated  Seller shall have delivered to the
       Trustee an Officer's  Certificate  confirming  the  satisfaction  of each
       condition  precedent specified in this paragraph (ii), and the Opinion of
       Counsel referenced in clause (d); and

                                       38
<PAGE>

                     (h)    the Unaffiliated Seller, the Responsible Parties and
       the Depositor  shall have  delivered to the Trustee an executed copy of a
       Subsequent  Transfer  Agreement,  substantially  in the form of Exhibit L
       hereto.

              (iii)  The obligation of the Trust Fund to purchase the Subsequent
Mortgage  Loans on a  Subsequent  Transfer  Date is subject to the  requirements
that, following the purchase of such Subsequent Mortgage Loans, and with respect
to the entire mortgage loan pool:

                     (a)    no more than 3% may be second liens;

                     (b)    no more than 15% may be Fixed Rate Mortgage Loans;

                     (c)    the weighted  average  original term to maturity may
       not exceed 360 months;

                     (d)    the weighted average gross Mortgage Rate must not be
       less than 9.30%, or more than 9.55%;

                     (e)    the weighted average LTV must not exceed 80%, and no
       more than 47% of the Mortgage Loans may have LTVs in excess of 80%;

                     (f)    no Mortgage Loan may have a Stated Principal Balance
       in excess of $550,000 as of the related Cut-Off Date;

                     (g)    at  least  90%  of  the  Mortgage  Loans  must  have
       prepayment penalties;

                     (h)    the weighted average Gross Margin for the Adjustable
       Rate Mortgage Loans must be at least 5.75%; and

                     (i)    the weighted  average credit score (FICO score) must
       be at least  600,  and not more than 20% of the  Mortgage  Loans may have
       credit scores below 550.

              Any of the above  requirements  may be waived or  modified  in any
respect by the Class A Certificate Insurer.

              (iv)   In  connection  with the  transfer  and  assignment  of the
Subsequent  Mortgage Loans, the  Unaffiliated  Seller shall satisfy the document
delivery requirements set forth in Section 2.01(b).

              Section 2.02 ACCEPTANCE BY THE TRUSTEE OF THE MORTGAGE LOANS.

              The Trustee shall  acknowledge,  on each Delivery Date, receipt of
the documents identified in the Initial Certification in the form annexed hereto
as Exhibit E, and declares  that it holds and will hold such  documents  and the
other  documents  delivered to it pursuant to Section 2.01, and that it holds or
will hold such other assets as are included in the Trust Fund,  in trust for the
exclusive use and benefit of all present and future  Certificateholders  and the
Class A  Certificate  Insurer.  The Trustee  acknowledges  that it will maintain
possession of the related

                                       39
<PAGE>

Mortgage Notes in the State of  California,  unless  otherwise  permitted by the
Rating Agencies and the Class A Certificate Insurer.

              In connection  with each  Delivery,  the Trustee shall deliver via
facsimile (with original to follow the next Business Day) to the Depositor,  the
Unaffiliated Seller and the Class A Certificate Insurer an Initial Certification
on or prior to the  related  Delivery  Date,  certifying  receipt of the related
Mortgage Notes and  Assignments of Mortgage for each related  Mortgage Loan. The
Trustee  shall  not be  responsible  to  verify  the  validity,  sufficiency  or
genuineness of any document in any Custodial File.

              Within 90 days after the related  Delivery Date, the Trustee shall
ascertain  that  all  documents  required  to be  delivered  to it  are  in  its
possession,  and shall deliver to the Depositor, the Unaffiliated Seller and the
Class A Certificate Insurer a Final Certification to the effect that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically  identified in such certification
as an  exception  and not  covered  by such  certification):  (i) all  documents
required to be delivered to it are in its  possession;  (ii) such documents have
been reviewed by it and appear regular on their face and relate to such Mortgage
Loan; (iii) based on its examination and only as to the foregoing documents, the
information  set forth in items (1),  (2),  (7),  and (9) of the  Mortgage  Loan
Schedule  and items (1),  (9) and (17) of the Data Tape  Information  respecting
such Mortgage Loan is correct;  and (iv) each Mortgage Note has been endorsed as
provided in Section 2.01 of this Agreement. The Trustee shall not be responsible
to verify the  validity,  sufficiency  or  genuineness  of any  document  in any
Custodial File.

              The Trustee shall retain  possession and custody of each Custodial
File in  accordance  with and  subject  to the  terms and  conditions  set forth
herein.  The Servicer shall promptly deliver to the Trustee,  upon the execution
or receipt  thereof,  the  originals  of such  other  documents  or  instruments
constituting the Custodial File as come into the possession of the Servicer from
time to time.

              Section  2.03  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS OF THE
UNAFFILIATED SELLER, THE RESPONSIBLE PARTIES AND THE SERVICER.

              (a)    The   Servicer   hereby  makes  the   representations   and
warranties set forth in Schedule II hereto to the Depositor and the Trustee,  as
of the Closing Date.

              (b)    CDC  Mortgage   Capital   Inc.,  in  its  capacity  as  the
Unaffiliated  Seller,  hereby makes the representations and warranties set forth
in Schedule IV hereto, as of the Closing Date.

              (c)    (i) BNC, in its capacity as the Responsible  Party,  hereby
makes the  representations  and  warranties  set forth in  Schedule  III-A  with
respect to the BNC Mortgage Loans, to the  Unaffiliated  Seller,  the Depositor,
the Class A  Certificate  Insurer and the  Trustee,  as of the related  Delivery
Date, as well as the following additional representations and warranties,  which
shall be deemed made as of each Delivery Date:

                     (a)    DUE ORGANIZATION AND AUTHORITY. BNC is a corporation
              duly  organized,  validly  existing and in good standing under the
              laws of the state of

                                       40
<PAGE>

              Delaware and has all  licenses  necessary to carry on its business
              as now being  conducted  and is  licensed,  qualified  and in good
              standing  in each state  wherein  it owns or leases  any  material
              properties or where a Mortgaged  Property is located,  if the laws
              of such  state  require  licensing  or  qualification  in order to
              conduct  business of the type  conducted  by BNC, and in any event
              BNC is in compliance with the laws of any such state to the extent
              necessary to ensure the enforceability of the related BNC Mortgage
              Loan and the  servicing  of such BNC Mortgage  Loan in  accordance
              with the terms of this  Agreement and the BNC Purchase  Agreement;
              BNC has the full  corporate  power,  authority  and legal right to
              hold,  transfer and convey the  Mortgage  Loans and to execute and
              deliver  this  Agreement  and the BNC  Purchase  Agreement  and to
              perform its obligations  hereunder and thereunder;  the execution,
              delivery and  performance  of this  Agreement and the BNC Purchase
              Agreement  (including all  instruments of transfer to be delivered
              pursuant to this  Agreement)  by BNC and the  consummation  of the
              transactions  contemplated  hereby  have  been  duly  and  validly
              authorized;  this Agreement and all agreements contemplated hereby
              have been duly executed and delivered  and  constitute  the valid,
              legal,  binding and enforceable  obligations of BNC, regardless of
              whether such enforcement is sought in a proceeding in equity or at
              law; and all requisite corporate or other action has been taken by
              BNC to make this Agreement and the BNC Purchase  Agreement and all
              agreements  contemplated  hereby  valid  and  binding  upon BNC in
              accordance with their terms;

                     (b)    ORDINARY COURSE OF BUSINESS. The consummation of the
              transactions  contemplated  by this Agreement and the BNC Purchase
              Agreement  are in the ordinary  course of business of BNC, and the
              transfer,  assignment and conveyance of the Mortgage Notes and the
              Mortgages by BNC pursuant to the BNC  Purchase  Agreement  are not
              subject to the bulk transfer or any similar  statutory  provisions
              in effect in any applicable jurisdiction;

                     (c)    NO CONFLICTS.  Neither the execution and delivery of
              this Agreement nor the BNC Purchase Agreement,  the acquisition or
              origination of the Mortgage Loans by BNC, the sale of the Mortgage
              Loans  to  the  Unaffiliated   Seller,  the  consummation  of  the
              transactions   contemplated   hereby  and  by  the  BNC   Purchase
              Agreement, nor the fulfillment of or compliance with the terms and
              conditions  of this  Agreement or of the BNC  Purchase  Agreement,
              will  conflict  with or result  in a breach  of any of the  terms,
              conditions  or  provisions  of  BNC's  charter,  by-laws  or other
              organizational documents or any legal restriction or any agreement
              or instrument to which BNC is now a party or by which it is bound,
              or constitute a default or result in an acceleration  under any of
              the  foregoing,  or  result  in the  violation  of any law,  rule,
              regulation, order, judgment or decree to which BNC or its property
              is subject,  or result in the creation or  imposition of any lien,
              charge or  encumbrance  that would have an adverse effect upon any
              of its properties pursuant to the terms of any mortgage, contract,
              deed of trust or other  instrument,  or impair the  ability of the
              Trust Fund to realize on the BNC Mortgage Loans,  impair the value
              of the Mortgage Loans, or impair the

                                       41
<PAGE>

              ability  of the  Trust  Fund to  realize  the full  amount  of any
              insurance benefits accruing pursuant to this Agreement;

                     (d)    ABILITY TO PERFORM;  SOLVENCY. BNC does not believe,
              nor does it have any  reason or cause to  believe,  that it cannot
              perform each and every covenant  contained in this Agreement or in
              the BNC Purchase Agreement. BNC is solvent and the sale of the BNC
              Mortgage Loans will not cause BNC to become insolvent. The sale of
              the BNC  Mortgage  Loans  is not  undertaken  with the  intent  to
              hinder, delay or defraud any of BNC's creditors;

                     (e)    NO  LITIGATION  PENDING.  There is no action,  suit,
              proceeding or  investigation  pending or  threatened  against BNC,
              before  any  court,   administrative   agency  or  other  tribunal
              asserting  the  invalidity  of this  Agreement or the BNC Purchase
              Agreement,  seeking  to  prevent  the  consummation  of any of the
              transactions  contemplated  by this  Agreement or the BNC Purchase
              Agreement  or  which,  either  in  any  one  instance  or  in  the
              aggregate,  may  result  in any  material  adverse  change  in the
              business, operations, financial condition, properties or assets of
              BNC, or in any material  impairment of the right or ability of BNC
              to carry on its business substantially as now conducted, or in any
              material  liability  on the part of BNC,  or which would draw into
              question  the  validity  of  this  Agreement,   the  BNC  Purchase
              Agreement or the BNC  Mortgage  Loans or of any action taken or to
              be taken in connection  with the  obligations of BNC  contemplated
              herein or in the BNC Purchase Agreement,  or which would be likely
              to impair the  ability  of BNC to perform  under the terms of this
              Agreement or the BNC Purchase Agreement;

                     (f)    NO   CONSENT   REQUIRED.   No   consent,   approval,
              authorization  or order of, or  registration  or filing  with,  or
              notice to any court or governmental  agency or body including HUD,
              the FHA or the VA is  required  for the  execution,  delivery  and
              performance  by the  Seller  of or  compliance  by BNC  with  this
              Agreement,  or the BNC  Purchase  Agreement  or the  BNC  Mortgage
              Loans,  the  delivery  of a portion of the  Mortgage  Files to the
              Trustee or the sale of the BNC Mortgage Loans or the  consummation
              of  the  transactions   contemplated  by  this  Agreement,  or  if
              required,  such  approval has been  obtained  prior to the related
              Delivery Date;

                     (g)    SELECTION  PROCESS.  The  BNC  Mortgage  Loans  were
              selected from among the outstanding  one- to four-family  mortgage
              loans in the  BNC's  portfolio  at the  related  sale  date to the
              Unaffiliated Seller as to which the representations and warranties
              set forth in Schedule  III-A could be made and such  selection was
              not made in a manner so as to affect  adversely  the  interests of
              the Unaffiliated Seller;

                     (h)    NO  BROKERS.  BNC has not  dealt  with  any  broker,
              investment  banker,  agent or other person that may be entitled to
              any commission or  compensation in connection with the sale of the
              BNC Mortgage Loans;

                                       42
<PAGE>

                     (i)    SALE   TREATMENT.   BNC  has  been  advised  by  its
              independent  certified  public  accountants  that under  generally
              accepted  accounting  principles  the transfer of the BNC Mortgage
              Loans may be treated as a sale on the books and records of BNC and
              BNC has determined  that the disposition of the BNC Mortgage Loans
              pursuant  to the BNC  Purchase  Agreement  will be  afforded  sale
              treatment for tax and accounting purposes;

                     (j)    REASONABLE   PURCHASE   PRICE.   The   consideration
              received by BNC upon the sale of the Mortgage  Loans under the BNC
              Purchase  Agreement  constitutes fair consideration and reasonably
              equivalent value for the BNC Mortgage Loans; and

                     (k)    OWNER OF  RECORD.  Immediately  prior to the sale of
              BNC of the BNC Mortgage Loans to the Unaffiliated  Seller, BNC was
              the  owner  of  record  of  each  Mortgage  and  the  indebtedness
              evidenced  by each  Mortgage  Note,  and  upon the sale of the BNC
              Mortgage  Loans to the  Unaffiliated  Seller,  BNC will retain the
              mortgage files with respect  thereto in trust only for the purpose
              of servicing  and  supervising  the servicing of each BNC Mortgage
              Loan.

                     (ii)   IFC, in its capacity as the  Responsible  Party with
respect  to the  IFC  Mortgage  Loans,  hereby  makes  the  representations  and
warranties  set  forth  in  Schedule  III-B  to  the  Unaffiliated  Seller,  the
Depositor,  the Class A Certificate  Insurer and the Trustee,  as of the related
Delivery  Date,  as  well  as  the  following  additional   representations  and
warranties, which shall be deemed made as of each Delivery Date:

                     (a)    DUE ORGANIZATION AND AUTHORITY. IFC is a corporation
              duly  organized,  validly  existing and in good standing under the
              laws of the state of Delaware  and has all  licenses  necessary to
              carry on its  business  as now being  conducted  and is  licensed,
              qualified  and in good  standing in each state  wherein it owns or
              leases any material  properties  or where a Mortgaged  Property is
              located,   if  the  laws  of  such  state  require   licensing  or
              qualification  in order to conduct  business of the type conducted
              by IFC, and in any event IFC is in compliance with the laws of any
              such state to the extent necessary to ensure the enforceability of
              the  related  IFC  Mortgage  Loan  and the  servicing  of such IFC
              Mortgage Loan in accordance  with the terms of this  Agreement and
              the IFC  Purchase  Agreement;  IFC has the full  corporate  power,
              authority  and  legal  right  to hold,  transfer  and  convey  the
              Mortgage  Loans and to execute and deliver this  Agreement and the
              IFC Purchase  Agreement and to perform its  obligations  hereunder
              and  thereunder;  the execution,  delivery and performance of this
              Agreement   and  the  IFC  Purchase   Agreement   (including   all
              instruments   of  transfer  to  be  delivered   pursuant  to  this
              Agreement)  by  IFC  and  the  consummation  of  the  transactions
              contemplated  hereby have been duly and validly  authorized;  this
              Agreement and all  agreements  contemplated  hereby have been duly
              executed and delivered and  constitute the valid,  legal,  binding
              and  enforceable  obligations  of IFC,  regardless of whether such
              enforcement is sought in a proceeding in equity or at law; and all
              requisite  corporate or other action has been taken by IFC to make
              this Agreement and the

                                       43
<PAGE>

              IFC Purchase  Agreement  and all  agreements  contemplated  hereby
              valid and binding upon IFC in accordance with their terms;

                     (b)    ORDINARY COURSE OF BUSINESS. The consummation of the
              transactions  contemplated  by this Agreement and the IFC Purchase
              Agreement  are in the ordinary  course of business of IFC, and the
              transfer,  assignment and conveyance of the Mortgage Notes and the
              Mortgages by IFC pursuant to the IFC  Purchase  Agreement  are not
              subject to the bulk transfer or any similar  statutory  provisions
              in effect in any applicable jurisdiction;

                     (c)    NO CONFLICTS.  Neither the execution and delivery of
              this Agreement nor the IFC Purchase Agreement,  the acquisition or
              origination of the Mortgage Loans by IFC, the sale of the Mortgage
              Loans  to  the  Unaffiliated   Seller,  the  consummation  of  the
              transactions   contemplated   hereby  and  by  the  IFC   Purchase
              Agreement, nor the fulfillment of or compliance with the terms and
              conditions  of this  Agreement or of the IFC  Purchase  Agreement,
              will  conflict  with or result  in a breach  of any of the  terms,
              conditions  or  provisions  of  IFC's  charter,  by-laws  or other
              organizational documents or any legal restriction or any agreement
              or instrument to which IFC is now a party or by which it is bound,
              or constitute a default or result in an acceleration  under any of
              the  foregoing,  or  result  in the  violation  of any law,  rule,
              regulation, order, judgment or decree to which IFC or its property
              is subject,  or result in the creation or  imposition of any lien,
              charge or  encumbrance  that would have an adverse effect upon any
              of its properties pursuant to the terms of any mortgage, contract,
              deed of trust or other  instrument,  or impair the  ability of the
              Trust Fund to realize on the IFC Mortgage Loans,  impair the value
              of the Mortgage  Loans, or impair the ability of the Trust Fund to
              realize  the  full  amount  of  any  insurance  benefits  accruing
              pursuant to this Agreement;

                     (d)    ABILITY TO PERFORM;  SOLVENCY. IFC does not believe,
              nor does it have any  reason or cause to  believe,  that it cannot
              perform each and every covenant  contained in this Agreement or in
              the IFC Purchase Agreement. IFC is solvent and the sale of the IFC
              Mortgage Loans will not cause IFC to become insolvent. The sale of
              the IFC  Mortgage  Loans  is not  undertaken  with the  intent  to
              hinder, delay or defraud any of IFC's creditors;

                     (e)    NO  LITIGATION  PENDING.  There is no action,  suit,
              proceeding or  investigation  pending or  threatened  against IFC,
              before  any  court,   administrative   agency  or  other  tribunal
              asserting  the  invalidity  of this  Agreement or the IFC Purchase
              Agreement,  seeking  to  prevent  the  consummation  of any of the
              transactions  contemplated  by this  Agreement or the IFC Purchase
              Agreement  or  which,  either  in  any  one  instance  or  in  the
              aggregate,  may  result  in any  material  adverse  change  in the
              business, operations, financial condition, properties or assets of
              IFC, or in any material  impairment of the right or ability of IFC
              to carry on its business substantially as now conducted, or in any
              material  liability  on the part of IFC,  or which would draw into
              question  the  validity  of  this  Agreement,   the  IFC  Purchase
              Agreement or the IFC  Mortgage  Loans or of any action taken or to

                                       44
<PAGE>

              be taken in connection  with the  obligations of IFC  contemplated
              herein or in the IFC Purchase Agreement,  or which would be likely
              to impair the  ability  of IFC to perform  under the terms of this
              Agreement or the IFC Purchase Agreement;

                     (f)    NO   CONSENT   REQUIRED.   No   consent,   approval,
              authorization  or order of, or  registration  or filing  with,  or
              notice to any court or governmental  agency or body including HUD,
              the FHA or the VA is  required  for the  execution,  delivery  and
              performance  by the  Seller  of or  compliance  by IFC  with  this
              Agreement,  or the IFC  Purchase  Agreement  or the  IFC  Mortgage
              Loans,  the  delivery  of a portion of the  Mortgage  Files to the
              Trustee or the sale of the IFC Mortgage Loans or the  consummation
              of  the  transactions   contemplated  by  this  Agreement,  or  if
              required,  such  approval has been  obtained  prior to the related
              Delivery Date;

                     (g)    SELECTION  PROCESS.  The  IFC  Mortgage  Loans  were
              selected from among the outstanding  one- to four-family  mortgage
              loans in the  IFC's  portfolio  at the  related  sale  date to the
              Unaffiliated Seller as to which the representations and warranties
              set forth in Schedule  III-B could be made and such  selection was
              not made in a manner so as to affect  adversely  the  interests of
              the Unaffiliated Seller;

                     (h)    NO  BROKERS.  IFC has not  dealt  with  any  broker,
              investment  banker,  agent or other person that may be entitled to
              any commission or  compensation in connection with the sale of the
              IFC Mortgage Loans;

                     (i)    SALE   TREATMENT.   IFC  has  been  advised  by  its
              independent  certified  public  accountants  that under  generally
              accepted  accounting  principles  the transfer of the IFC Mortgage
              Loans may be treated as a sale on the books and records of IFC and
              IFC has determined  that the disposition of the IFC Mortgage Loans
              pursuant  to the IFC  Purchase  Agreement  will be  afforded  sale
              treatment for tax and accounting purposes;

                     (j)    REASONABLE   PURCHASE   PRICE.   The   consideration
              received by IFC upon the sale of the Mortgage  Loans under the IFC
              Purchase  Agreement  constitutes fair consideration and reasonably
              equivalent value for the IFC Mortgage Loans; and

                     (k)    OWNER OF  RECORD.  Immediately  prior to the sale of
              IFC of the IFC Mortgage Loans to the Unaffiliated  Seller, IFC was
              the  owner  of  record  of  each  Mortgage  and  the  indebtedness
              evidenced  by each  Mortgage  Note,  and  upon the sale of the IFC
              Mortgage  Loans to the  Unaffiliated  Seller,  IFC will retain the
              mortgage files with respect  thereto in trust only for the purpose
              of servicing  and  supervising  the servicing of each IFC Mortgage
              Loan.

              (d)    It is  understood  and  agreed  by the  Servicer  and  each
Responsible Party that the  representations  and warranties set forth in Section
2.03 shall  survive the  transfer of the Mortgage  Loans to the Trust Fund,  and
shall inure to the benefit of the Trust Fund

                                       45
<PAGE>

notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
Assignment  of Mortgage or the  examination  or failure to examine any  Mortgage
File. Upon discovery by any of the related Responsible Party, the Depositor, the
Unaffiliated  Seller,  the  Class A  Certificate  Insurer,  the  Trustee  or the
Servicer of a breach of any of the foregoing representations and warranties, the
party discovering such breach shall give prompt written notice to the others.

              (e)    Within 30 days of the  earlier  of either  discovery  by or
notice  to the  related  Responsible  Party of that any  Mortgage  Loan does not
conform to the requirements as determined in the Trustee's review of the related
Custodial File or within 90 days of the earlier of either discovery by or notice
to the related  Responsible Party of any breach of a representation or warranty,
set forth in Section 2.03(b) that materially and adversely  affects the value of
the  Mortgage  Loans or the  interest of the  Trustee,  the Class A  Certificate
Insurer or the  Certificateholders  therein, the related Responsible Party shall
use its best  efforts to cause to be  remedied  a material  defect in a document
constituting  part of a Mortgage  File or  promptly  to cure such  breach in all
material respects and, if such defect or breach cannot be remedied,  the related
Responsible Party shall, (i) if such 30 or 90 day period, as applicable, expires
prior to the second  anniversary  of the  related  Delivery  Date,  remove  such
Mortgage Loan (a "DELETED  MORTGAGE LOAN") from the Trust Fund and substitute in
its  place  a  Substitute  Mortgage  Loan,  in the  manner  and  subject  to the
conditions set forth in this Section 2.03; or (ii) repurchase such Mortgage Loan
at the Repurchase Price; PROVIDED,  HOWEVER, that any such substitution pursuant
to (i) above shall not be effected  prior to the  delivery to the Trustee of the
Opinion of Counsel  required by Section  2.05, if any, and a Request for Release
substantially  in the  form of  Exhibit  K, and the  Mortgage  File for any such
Substitute  Mortgage  Loan.  In  the  event  that a  breach  shall  involve  any
representation or warranty set forth in Section 2.03(b),  and such breach cannot
be cured  within 60 days of the earlier of either  discovery by or notice to the
related  Responsible  Party of such breach,  all of the Mortgage  Loans shall be
repurchased by the related Responsible Party at the Repurchase Price.

              With respect to any Substitute Mortgage Loan or Loans, the related
Responsible  Party  shall  deliver  to  the  Trustee  for  the  benefit  of  the
Certificateholders  the Mortgage Note, the Mortgage,  the related  Assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.01,  with the Mortgage Note endorsed and the Mortgage  assigned as required by
Section  2.01.  No  substitution  is permitted to be made in any calendar  month
after the Determination Date for such month. Scheduled Payments due with respect
to Substitute Mortgage Loans in the Due Period of substitution shall not be part
of the Trust Fund and will be retained by the related  Responsible  Party on the
next  succeeding   Distribution  Date.  For  the  Due  Period  of  substitution,
distributions to Certificateholders  will include the monthly payment due on any
Deleted Mortgage Loan for such Due Period and thereafter the related Responsible
Party  shall be  entitled  to retain  all  amounts  received  in respect of such
Deleted Mortgage Loan.

              The Servicer shall amend the Mortgage Loan Schedule to reflect the
removal of such Deleted  Mortgage Loan and the  substitution  of the  Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended  Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan or
Loans shall be subject to the terms of this  Agreement in all respects,  and the
related  Responsible  Party  shall be deemed to have made with  respect  to such
Substitute  Mortgage  Loan  or  Loans,  as of  the  date  of  substitution,  the
representations  and warranties made pursuant to Section 2.03(b) with respect to
such Mortgage

                                       46
<PAGE>

Loan. Upon any such  substitution  and the deposit to the Collection  Account of
the amount required to be deposited therein in connection with such substitution
as described in the following paragraph,  the Trustee shall release the Mortgage
File relating to such Deleted Mortgage Loan to the related Responsible Party and
shall  execute and deliver at the related  Responsible  Party's  direction  such
instruments of transfer or assignment prepared by the related Responsible Party,
in each  case  without  recourse,  as shall be  necessary  to vest  title in the
related  Responsible  Party,  or its  designee,  the  Trustee's  interest in any
Deleted Mortgage Loan substituted for pursuant to this Section 2.03.

              For any month in which the related  Responsible  Party substitutes
one or more  Substitute  Mortgage Loans for one or more Deleted  Mortgage Loans,
the Servicer will determine the amount (if any) by which the aggregate principal
balance of all such Substitute  Mortgage Loans as of the date of substitution is
less than the aggregate  Stated  Principal  Balance of all such Deleted Mortgage
Loans  (after  application  of the  scheduled  principal  portion of the monthly
payments  due in the Due Period of  substitution).  The amount of such  shortage
(the "SUBSTITUTION ADJUSTMENT AMOUNT") plus, an amount equal to the aggregate of
any  unreimbursed  Advances and Servicing  Advances with respect to such Deleted
Mortgage  Loans shall be deposited  into the  Collection  Account by the related
Responsible  Party on or before the  Distribution  Account  Deposit Date for the
Distribution  Date in the month  succeeding  the calendar month during which the
related Mortgage Loan became required to be purchased or replaced hereunder.

              In addition to such repurchase obligation, the related Responsible
Party shall  indemnify  the  Depositor,  the  Unaffiliated  Seller,  the Class A
Certificate Insurer, the Trustee and any of their respective Affiliates and hold
such  parties  harmless   against  any  losses,   damages,   penalties,   fines,
forfeitures,  reasonable and necessary legal fees and related costs,  judgments,
and other  costs and  expenses  resulting  from any  claim,  demand,  defense or
assertion based on any grounded upon, or resulting from, a breach by the related
Responsible Party of any of its representations and warranties  contained in the
related Purchase Agreement or this Agreement.

              The Servicer shall amend the Mortgage Loan Schedule to reflect the
removal of such Deleted Mortgage Loan and the Servicer shall deliver the amended
Mortgage Loan Schedule to the Trustee.

              In the  event  that  the  related  Responsible  Party  shall  have
repurchased a Mortgage Loan, the Repurchase Price therefor shall be deposited in
the Collection Account pursuant to Section 3.10 on or before the Remittance Date
for the  Distribution  Date in the month  following  the month  during which the
related  Responsible  Party became obligated  hereunder to repurchase or replace
such Mortgage Loan and upon such deposit of the Repurchase  Price,  the delivery
of the Opinion of Counsel  required by Section 2.05 and receipt of a Request for
Release in the form of Exhibit J hereto,  the Trustee  shall release the related
Custodial File to such Person as directed by the Servicer, and the Trustee shall
execute and deliver at such Person's  direction such  instruments of transfer or
assignment  prepared by such Person, in each case without recourse,  as shall be
necessary to transfer  title from the Trustee.  It is understood and agreed that
the obligation under this Agreement of any Person to cure, repurchase or replace
any  Mortgage  Loan as to which a breach has occurred  and is  continuing  shall
constitute the sole remedy against such Persons respecting such breach available
to  Certificateholders,  the Depositor,  the  Unaffiliated  Seller,  the Class A
Certificate Insurer or the Trustee on their behalf.

                                       47
<PAGE>

              The  representations  and warranties made pursuant to this Section
2.03 shall survive delivery of the respective Custodial Files to the Trustee.

              Section 2.04 THE DEPOSITOR AND THE MORTGAGE LOANS.

              The Depositor hereby represents and warrants to the Trustee and to
the Class A  Certificate  Insurer with respect to each  Mortgage  Loan as of the
date hereof or such other date set forth herein that as of the related  Delivery
Date, and following the transfer of the Mortgage Loans to it by the Unaffiliated
Seller,  the  Depositor  had good title to the  Mortgage  Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.

              The Depositor hereby assigns, transfers and conveys to the Trustee
all of its rights with respect to the Initial  Mortgage Loans and shall, on each
subsequent  Transfer  Date,  convey all of its right,  title and  interest  with
respect to the related subsequent Mortgage Loans.

              Section  2.05  DELIVERY OF OPINION OF COUNSEL IN  CONNECTION  WITH
SUBSTITUTION AND REPURCHASE, NON-QUALIFIED MORTGAGES.

              (a)    Notwithstanding  any contrary  provision of this Agreement,
no  substitution  pursuant to Section 2.03 shall be made more than 30 days after
the related Delivery Date unless the related  Responsible  Party delivers to the
Trustee  an Opinion  of  Counsel,  at the  expense  of such  Responsible  Party,
addressed  to the  Trustee,  to the effect that such  substitution  will not (i)
result in the  imposition of the tax on "prohibited  transactions"  on the Trust
Fund or contributions  after the Startup Date, as defined in Sections 860F(a)(2)
and  860G(d) of the Code,  respectively  or (ii) cause the Trust Fund to fail to
qualify as a REMIC at any time that any Certificates are outstanding.

              (b)    Upon discovery by the Depositor,  a Responsible  Party, the
Unaffiliated  Seller,  the Class A  Certificate  Insurer,  the  Servicer  or the
Trustee that any Mortgage Loan does not constitute a "qualified mortgage" within
the meaning of Section  860G(a)(3) of the Code, the party  discovering such fact
shall  promptly  (and in any event within five (5) Business  Days of  discovery)
give written notice thereof to the other parties. In connection  therewith,  the
Trustee shall require the related  Responsible  Party to repurchase the affected
Mortgage Loan within 90 days of such  discovery in the same manner as it would a
Mortgage  Loan for a breach of  representation  or  warranty  made  pursuant  to
Section 2.03.  The Trustee shall reconvey to the related  Responsible  Party the
Mortgage Loan to be released pursuant hereto in the same manner, and on the same
terms and  conditions,  as it would a Mortgage Loan  repurchased for breach of a
representation or warranty contained in Section 2.03.

              Section 2.06 EXECUTION AND DELIVERY OF CERTIFICATES.

              The Trustee  acknowledges the transfer and assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor,  the Certificates in authorized
denominations  evidencing  directly or  indirectly  the entire  ownership of the
Trust Fund.  The Trustee  agrees to hold the Trust Fund and  exercise the rights
referred  to above for the  benefit of all  present  and  future  Holders of the
Certificates, and for the benefit of the Class A Certificate Insurer.

                                       48
<PAGE>

              Section 2.07 REMIC MATTERS.

              The Preliminary  Statement sets forth the designations for federal
income tax purposes of all  interests  created  hereby.  The  "Startup  Day" for
purposes of the REMIC Provisions shall be the Closing Date. The "latest possible
maturity date" is January 25, 2032, which is the Distribution Date following the
latest Mortgage Loan maturity date.

              Section 2.08 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

              The  Depositor  hereby  represents,  warrants and covenants to the
Trustee  and to the Class A  Certificate  Insurer and the that as of the date of
this Agreement or as of such date specifically provided herein:

              (a)    The  Depositor is a  corporation  duly  organized,  validly
existing and in good standing under the laws of the State of Delaware;

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

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

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

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

                                       49
<PAGE>

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

              (g)    The  Depositor  is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or  governmental  agency that may materially and adversely  affect its
performance hereunder; and

              (h)    Immediately  prior to the  transfer and  assignment  by the
Depositor to the Trustee,  the Depositor had, or, with respect to the subsequent
Mortgage Loans, will have, good title to, and was, or will be, the sole owner of
each Mortgage Loan, free of any interest of any other Person,  and the Depositor
has  transferred,  or shall  transfer,  all right,  title and  interest  in each
Mortgage Loan to the Trustee. The transfer of the Mortgage Note and the Mortgage
as and in the manner  contemplated  by this  Agreement is sufficient  either (i)
fully to transfer to the Trustee, for the benefit of the  Certificateholders and
for the  benefit  of the Class A  Certificate  Insurer,  all right,  title,  and
interest of the Depositor  thereto as note holder and mortgagee or (ii) to grant
to the Trustee, for the benefit of the Certificateholders and for the benefit of
the Class A Certificate  Insurer,  the security  interest referred to in Section
10.04 hereof.

              It is understood and agreed that the  representations,  warranties
and  covenants  set forth in this  Section  2.08 shall  survive  delivery of the
respective Custodial Files to the Trustee or to a custodian, as the case may be,
and shall inure to the benefit of the Trustee.

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

              Section 3.01 SERVICER TO SERVICE MORTGAGE LOANS.

              (a)    For and on  behalf  of the  Certificateholders  and for the
benefit of the Class A  Certificate  Insurer,  the  Servicer  shall  service and
administer the Mortgage Loans in accordance with the terms of this Agreement and
the respective  Mortgage Loans and, to the extent consistent with such terms, in
the same manner in which it services and administers  similar mortgage loans for
its own portfolio,  giving due consideration to customary and usual standards of
practice of mortgage lenders and loan servicers  administering  similar mortgage
loans but without regard to:

                     (i)    any relationship that the Servicer,  any Subservicer
       or any  Affiliate  of the Servicer or any  Subservicer  may have with the
       related Mortgagor;

                     (ii)   the ownership or non-ownership of any Certificate by
       the Servicer or any Affiliate of the Servicer;

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<PAGE>

                     (iii)  the  Servicer's  obligation  to make P&I Advances or
       Servicing Advances; or

                     (iv)   the Servicer's or any Subservicer's right to receive
       compensation for its services hereunder or with respect to any particular
       transaction.

              To the extent  consistent  with the foregoing,  the Servicer shall
seek to maximize the timely and complete  recovery of principal  and interest on
the Mortgage Notes. Subject only to the above-described  servicing standards and
the terms of this Agreement and of the respective  Mortgage Loans,  the Servicer
shall have full power and  authority,  acting alone or through  Subservicers  as
provided  in  Section  3.02,  to do or cause to be done  any and all  things  in
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer in its
own name or in the name of a Subservicer  is hereby  authorized and empowered by
the Trustee when the Servicer  believes it  appropriate  in its best judgment in
accordance with the servicing  standards set forth above, to execute and deliver
any and all instruments of satisfaction or  cancellation,  or of partial or full
release or discharge, and all other comparable instruments,  with respect to the
Mortgage  Loans  and  the  Mortgaged  Properties  and to  institute  foreclosure
proceedings  or  obtain a  deed-in-lieu  of  foreclosure  so as to  convert  the
ownership  of such  properties,  and to hold or cause  to be held  title to such
properties,  on behalf of the Trustee. The Servicer shall service and administer
the Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors  any reports  required to be provided to them thereby.
The Servicer  shall also comply in the  performance  of this  Agreement with all
reasonable  rules and  requirements  of each insurer  under any standard  hazard
insurance  policy.  Subject to Section 3.15, the Trustee shall  execute,  at the
written request of the Servicer, and furnish to the Servicer and any Subservicer
such  documents as are  necessary or  appropriate  to enable the Servicer or any
Subservicer to carry out their servicing and  administrative  duties  hereunder,
and the  Trustee  hereby  grants  to the  Servicer,  and  this  Agreement  shall
constitute,  a power of attorney  to carry out such duties  including a power of
attorney to take title to Mortgaged  Properties  after  foreclosure on behalf of
the Trustee.  The Trustee shall execute a separate power of attorney in favor of
the  Servicer  for the  purposes  described  herein to the extent  necessary  or
desirable  to enable the Servicer to perform its duties  hereunder.  The Trustee
shall not be liable for the actions of the  Servicer or any  Subservicers  under
such powers of attorney.

              (b)    Subject to Section 3.09(b)  hereof,  in accordance with the
standards of the preceding paragraph,  the Servicer shall advance or cause to be
advanced  funds as necessary for the purpose of effecting the timely  payment of
taxes and  assessments  on the Mortgaged  Properties,  which  advances  shall be
Servicing Advances  reimbursable in the first instance from related  collections
from the  Mortgagors  pursuant  to Section  3.09(b),  and further as provided in
Section 3.11. Any cost incurred by the Servicer or by  Subservicers in effecting
the timely payment of taxes and assessments on a Mortgaged Property shall not be
added  to  the  unpaid   principal   balance  of  the  related   Mortgage  Loan,
notwithstanding that the terms of such Mortgage Loan so permit.

              (c)    Notwithstanding anything in this Agreement to the contrary,
the Servicer may not make any future  advances  with respect to a Mortgage  Loan
(except as provided in Section  4.01) and the Servicer  shall not (i) permit any
modification with respect to any Mortgage

                                       51
<PAGE>

Loan that would  change the  Mortgage  Rate,  reduce or increase  the  principal
balance  (except for reductions  resulting from actual payments of principal) or
change  the  final  maturity  date on such  Mortgage  Loan  or (ii)  permit  any
modification,  waiver or amendment  of any term of any Mortgage  Loan that would
both (A) effect an exchange or  reissuance  of such  Mortgage Loan under Section
1001  of  the  Code  (or  final,  temporary  or  proposed  Treasury  regulations
promulgated  thereunder)  and (B) cause any REMIC to fail to  qualify as a REMIC
under the Code or the  imposition  of any tax on  "prohibited  transactions"  or
"contributions  after the  startup  date" under the REMIC  Provisions,  or (iii)
except as provided in Section 3.07(a), waive any Prepayment Charges.

              (d)    The Servicer may delegate its  responsibilities  under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.

              Section  3.02  SUBSERVICING  AGREEMENTS  BETWEEN THE  SERVICER AND
SUBSERVICERS.

              (a)    The Servicer may enter into  Subservicing  Agreements  with
Subservicers, for the servicing and administration of the Mortgage Loans.

              Each Subservicer  shall be (i) authorized to transact  business in
the state or states in which the related  Mortgaged  Properties it is to service
are  situated,  if and to the extent  required by  applicable  law to enable the
Subservicer  to perform its  obligations  hereunder  and under the  Subservicing
Agreement,  (ii) an  institution  approved as a mortgage loan  originator by the
Federal  Housing  Administration  or an  institution  that has deposit  accounts
insured  by the FDIC and (iii) a Freddie  Mac or Fannie  Mae  approved  mortgage
servicer.   Each   Subservicing   Agreement  must  impose  on  the   Subservicer
requirements  conforming to the provisions set forth in Section 3.08 and provide
for servicing of the Mortgage Loans consistent with the terms of this Agreement.
The Servicer will examine each Subservicing  Agreement and will be familiar with
the  terms  thereof.  The  terms  of  any  Subservicing  Agreement  will  not be
inconsistent with any of the provisions of this Agreement.  The Servicer and the
Subservicers may enter into and make amendments to the  Subservicing  Agreements
or enter into different forms of  Subservicing  Agreements;  PROVIDED,  HOWEVER,
that any such  amendments or different  forms shall be  consistent  with and not
violate  the  provisions  of this  Agreement,  and  that no  such  amendment  or
different form shall be made or entered into which could be reasonably  expected
to be materially adverse to the interests of the Trustee, without the consent of
the  Trustee.  Any  variation  without  the  consent  of the  Trustee  from  the
provisions  set  forth  in  Section  3.08  relating  to  insurance  or  priority
requirements   of  Subservicing   Accounts,   or  credits  and  charges  to  the
Subservicing   Accounts  or  the  timing  and  amount  of   remittances  by  the
Subservicers to the Servicer,  are conclusively  deemed to be inconsistent  with
this  Agreement  and  therefore  prohibited.  The Servicer  shall deliver to the
Trustee,  the  Unaffiliated  Seller,  the Class A  Certificate  Insurer  and the
Depositor  copies  of  all  Subservicing  Agreements,   and  any  amendments  or
modifications  thereof,  promptly upon the Servicer's  execution and delivery of
such instruments.

              (b)    As part of its servicing activities hereunder, the Servicer
(except as otherwise  provided in the last sentence of this paragraph),  for the
benefit of the Trustee,  shall enforce the obligations of each Subservicer under
the  related  Subservicing  Agreement,   including,   without  limitation,   any
obligation to make advances in respect of delinquent payments as

                                       52
<PAGE>

required by a  Subservicing  Agreement.  Such  enforcement,  including,  without
limitation,  the  legal  prosecution  of  claims,  termination  of  Subservicing
Agreements, and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Servicer,  in its good
faith business judgment, would require were it the owner of the related Mortgage
Loans.  The Servicer shall pay the costs of such enforcement at its own expense,
and shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement,  to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loans or (ii) from a specific recovery of
costs,  expenses  or  attorneys'  fees  against  the  party  against  whom  such
enforcement is directed.

              Section 3.03 SUCCESSOR SUBSERVICERS.

              The  Servicer  shall be entitled  to  terminate  any  Subservicing
Agreement  and the rights and  obligations  of any  Subservicer  pursuant to any
Subservicing  Agreement  in  accordance  with the terms and  conditions  of such
Subservicing  Agreement.  In the event of  termination of any  Subservicer,  all
servicing obligations of such Subservicer shall be assumed simultaneously by the
Servicer  without  any  act or  deed on the  part  of  such  Subservicer  or the
Servicer,  and the Servicer either shall service  directly the related  Mortgage
Loans or shall enter into a Subservicing  Agreement with a successor Subservicer
which qualifies under Section 3.02.

              Any  Subservicing  Agreement shall include the provision that such
agreement may be immediately  terminated by the Depositor or the Trustee without
fee,  in  accordance  with the terms of this  Agreement,  in the event  that the
Servicer shall, for any reason, no longer be the Servicer (including termination
due to an Event of Default).

              Section 3.04 LIABILITY OF THE SERVICER.

              Notwithstanding any Subservicing Agreement,  any of the provisions
of this Agreement  relating to agreements or  arrangements  between the Servicer
and a  Subservicer  or  reference  to actions  taken  through a  Subservicer  or
otherwise,  the Servicer  shall remain  obligated  and  primarily  liable to the
Trustee for the servicing and  administering of the Mortgage Loans in accordance
with the  provisions of Section 3.01 without  diminution  of such  obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of  indemnification  from the  Subservicer  and to the same extent and under the
same  terms  and  conditions  as  if  the  Servicer  alone  were  servicing  and
administering  the Mortgage Loans.  The Servicer shall be entitled to enter into
any agreement  with a Subservicer  for  indemnification  of the Servicer by such
Subservicer and nothing  contained in this Agreement shall be deemed to limit or
modify such indemnification.

              Section 3.05 NO CONTRACTUAL  RELATIONSHIP BETWEEN SUBSERVICERS AND
THE TRUSTEE.

              Any  Subservicing  Agreement  that  may be  entered  into  and any
transactions or services  relating to the Mortgage Loans involving a Subservicer
in its  capacity as such shall be deemed to be between the  Subservicer  and the
Servicer alone, and the Trustee (or any successor  Servicer) shall not be deemed
a party  thereto  and  shall  have no  claims,  rights,  obligations,  duties or
liabilities with respect to the Subservicer except as set forth in Section 3.06.
The Servicer

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<PAGE>

shall be solely liable for all fees owed by it to any Subservicer,  irrespective
of whether the Servicer's  compensation pursuant to this Agreement is sufficient
to pay such fees.

              Section 3.06 ASSUMPTION OR TERMINATION OF SUBSERVICING  AGREEMENTS
BY TRUSTEE.

              In the  event the  Servicer  at any time  shall for any  reason no
longer be the  Servicer  (including  by reason of the  occurrence  of a Event of
Default),  the Trustee or its designee shall thereupon  assume all of the rights
and  obligations  of the Servicer  under each  Subservicing  Agreement  that the
Servicer  may have entered  into,  with copies  thereof  provided to the Trustee
prior to the Trustee  assuming such rights and  obligations,  unless the Trustee
elects to terminate any  Subservicing  Agreement in accordance with its terms as
provided in Section 3.03.

              Upon such assumption,  the Trustee,  its designee or the successor
servicer  shall be deemed,  subject to Section  3.03, to have assumed all of the
Servicer's interest therein and to have replaced the Servicer as a party to each
Subservicing  Agreement to the same extent as if each Subservicing Agreement had
been  assigned to the assuming  party,  except that (i) the  Servicer  shall not
thereby be relieved  of any  liability  or  obligations  under any  Subservicing
Agreement  that arose  before it ceased to be the  Servicer and (ii) none of the
Depositor,  the Trustee,  their  designees or any  successor  Servicer  shall be
deemed to have assumed any  liability or  obligation  of the Servicer that arose
before it ceased to be the Servicer.

              The  Servicer at its expense  shall,  upon request of the Trustee,
deliver  to the  assuming  party all  documents  and  records  relating  to each
Subservicing  Agreement  and the  Mortgage  Loans  then  being  serviced  and an
accounting  of amounts  collected  and held by or on behalf of it, and otherwise
use its best  efforts  to effect  the  orderly  and  efficient  transfer  of the
Subservicing  Agreements  to the  assuming  party.

              Section  3.07  COLLECTION  OF  CERTAIN   MORTGAGE  LOAN  PAYMENTS;
ESTABLISHMENT OF CERTAIN ACCOUNTS.

              (a)    The Servicer shall make  reasonable  efforts to collect all
payments  called for under the terms and provisions of the Mortgage  Loans,  and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and  provisions  of any  applicable  insurance  policies,  follow such
collection  procedures  as it  would  follow  with  respect  to  mortgage  loans
comparable to the Mortgage Loans and held for its own account.  Consistent  with
the  foregoing,  the  Servicer  may (i) waive  any late  payment  charge  or, if
applicable, any penalty interest, or (ii) extend the due dates for the Scheduled
Payments  due on a  Mortgage  Note for a period  of not  greater  than 180 days;
provided that any  extension  pursuant to clause (ii) above shall not affect the
amortization  schedule of any  Mortgage  Loan for  purposes  of any  computation
hereunder,  except  as  provided  below.  In the  event of any such  arrangement
pursuant to clause (ii) above,  the Servicer shall make timely  advances on such
Mortgage Loan during such  extension  pursuant to Section 4.01 and in accordance
with the  amortization  schedule  of such  Mortgage  Loan  without  modification
thereof by reason of such  arrangements,  subject to Section 4.01(d) pursuant to
which the  Servicer  shall not be  required to make any such  advances  that are
Nonrecoverable P&I Advances. Notwithstanding the foregoing, the Servicer may not
waive,  in whole or in part, a  Prepayment  Charge,  except under the  following
circumstances: (i)

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<PAGE>

such waiver relates to a default or a reasonably  foreseeable default and would,
in the reasonable judgment of the Servicer,  maximize recovery of total proceeds
taking into account the value of such Prepayment Charge and the related Mortgage
Loan, and doing so is standard and customary in servicing mortgage loans similar
to the Mortgage Loans (including any waiver of a Prepayment Charge in connection
with a  refinancing  of a  Mortgage  Loan  that is  related  to a  default  or a
reasonably  foreseeable  default),  and in no event  will the  Servicer  waive a
Prepayment  Charge in connection  with a refinancing  of a Mortgage Loan that is
not  related  to a default  or a  reasonably  foreseeable  default  or (ii) such
Prepayment  Charge is not  permitted  to be collected  by  applicable  law. If a
Prepayment Charge is waived other than as permitted by the prior sentence,  then
the Servicer is required to pay the amount of such waived Prepayment Charge, for
the  benefit of the  Holders of the Class P  Certificates,  by  depositing  such
amount into the Collection Account together with and at the time that the amount
prepaid on the  related  Mortgage  Loan is  required  to be  deposited  into the
Collection Account.

              (b)    (i)    The Trustee shall  establish and maintain the Excess
Reserve Fund  Account,  on behalf of the Class X  Certificateholders,  to secure
their limited recourse obligation to pay to the Floating Rate Certificateholders
Basis Risk CarryForward Amounts.

                     (ii)   On each Distribution Date, the Trustee shall deposit
       the  amount  of any Basis  Risk  Payment  for such  date into the  Excess
       Reserve Fund Account.

              (c)    (i)    On each  Distribution  Date on which there  exists a
Basis Risk CarryForward  Amount on any Class of Certificates,  the Trustee shall
(1) withdraw  from the  Distribution  Account and deposit in the Excess  Reserve
Fund Account, as set forth in Section 4.02(a)(iii)(g), the lesser of the Class X
Distributable  Amount (without regard to the reduction in the definition thereof
with  respect to the Basis Risk  CarryForward  Amount) (to the extent  remaining
after the distributions specified in Sections 4.02(a)(iii)(a)-(f)) and the Basis
Risk  CarryForward  Amount and (2) withdraw from the Excess Reserve Fund Account
amounts necessary to pay to such Class or Classes of Certificates the Basis Risk
CarryForward  Amount. Such payments shall be allocated to those Classes on a pro
rata basis based upon the amount of Basis Risk CarryForward  Amount owed to each
such   Class  and  shall  be  paid  in  the   priority   set  forth  in  Section
4.02(a)(iii)(h) hereof.

                     (ii)   The Trustee  shall  account  for the Excess  Reserve
       Fund  Account as an outside  reserve  fund within the meaning of Treasury
       regulation  1.860G-2(h) and not as an asset of any REMIC created pursuant
       to this  Agreement.  The  beneficial  owner of the  Excess  Reserve  Fund
       Account is the Class X  Certificateholder.  For all federal tax purposes,
       amounts  transferred  by the Upper Tier REMIC to the Excess  Reserve Fund
       Account shall be treated as  distributions  by the Trustee to the Class X
       Certificateholder.

                     (iii)  Any  Basis  Risk  CarryForward  Amounts  paid by the
       Trustee to the Floating Rate Certificateholders shall be accounted for by
       the  Trustee  as  amounts  paid  first  to the  Holders  of the  Class  X
       Certificate and then to the respective  Class or Classes of Floating Rate
       Certificates.  In addition,  the Trustee  shall  account for the Floating
       Rate  Certificateholders'  rights  to  receive  payments  of  Basis  Risk
       CarryForward  Amounts as rights in a limited  recourse  interest rate cap
       contract  written  by the  Class X  Certificateholders  in  favor  of the
       Floating Rate Certificateholders.

                                       55
<PAGE>

                     (iv)   Notwithstanding  any  provision  contained  in  this
       Agreement,  the Trustee  shall not be required to make any payments  from
       the Excess  Reserve  Fund Account  except as expressly  set forth in this
       Section 3.07(c).

              (d)    The Trustee shall  establish and maintain the  Distribution
Account on behalf of the  Certificateholders.  The Trustee shall,  promptly upon
receipt, deposit in the Distribution Account and retain therein the following:

                     (i)    the aggregate amount remitted by the Servicer to the
       Trustee pursuant to 3.11;

                     (ii)   any amount  deposited  by the  Servicer  pursuant to
       Section 3.10 in connection with any losses on Permitted Investments; and

                     (iii)  any  other  amounts  deposited  hereunder  which are
       required to be deposited in the Distribution Account.

              In the event that the Servicer shall remit any amount not required
to be  remitted,  it may at any time  direct the  Trustee in writing to withdraw
such amount from the Distribution  Account, any provision herein to the contrary
notwithstanding.  Such direction may be accomplished by delivering notice to the
Trustee  which  describes  the amounts  deposited  in error in the  Distribution
Account.  All funds deposited in the  Distribution  Account shall be held by the
Trustee in trust for the  Certificateholders  until disbursed in accordance with
this  Agreement or withdrawn in accordance  with Section 4.02. In no event shall
the Trustee incur liability for withdrawals from the Distribution Account at the
direction of the Servicer.

              (e)    The Trustee shall  establish  and maintain the  Capitalized
Interest Account, on behalf of the Certificateholders.  On the Closing Date, the
Trustee  shall  deposit  $87,999 to the  Capitalized  Interest  Account from the
proceeds  of  the  sale  of  the  Offered  Certificates.  Withdrawals  from  the
Capitalized  Interest  Account shall be made in accordance with Sections 4.02(c)
and (d) hereof.  The Trustee shall account for the Capitalized  Interest Account
as an outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h)
and not as an  asset  of any  REMIC  created  pursuant  to this  Agreement.  The
beneficial  owner of the Capitalized  Interest Account shall be the Unaffiliated
Seller.

              (f)    The Trustee shall  establish  and maintain the  Pre-Funding
Account, on behalf of the  Certificateholders.  On the Closing Date, the Trustee
shall deposit the Original Pre-Funded Amount to the Pre-Funding Account from the
proceeds  of  the  sale  of  the  Offered  Certificates.  Withdrawals  from  the
Pre-Funding  Account shall be made in accordance with Sections 4.02(e),  (f) and
(g) hereof.

              (g)    The  Trustee  may  invest  the  funds  in the  Accounts  if
directed in writing by the Servicer,  with respect to the Collection Account and
the  Distribution  Account or by the  Unaffiliated  Seller,  with respect to the
Pre-Funding  Account  and the  Capitalized  Interest  Account in each  case,  in
Permitted  Investments,  which  directions  shall be in accordance  with Section
3.12.

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<PAGE>

              (h)    The Servicer shall give notice to the Trustee,  each Rating
Agency  and  the  Depositor  of  any  proposed  change  of the  location  of the
Collection Account not later than 30 days and not more than 45 days prior to any
change thereof.

              Section 3.08 SUBSERVICING ACCOUNTS.

              In those cases where a  Subservicer  is servicing a Mortgage  Loan
pursuant  to a  Subservicing  Agreement,  the  Subservicer  will be  required to
establish and maintain one or more  accounts  (collectively,  the  "SUBSERVICING
ACCOUNT").  The  Subservicing  Account  shall be an  Eligible  Account and shall
otherwise be acceptable to the Servicer.  The  Subservicer  shall deposit in the
clearing  account  (which  account  must be an  Eligible  Account)  in  which it
customarily  deposits  payments and  collections on mortgage loans in connection
with its mortgage loan  servicing  activities on a daily basis,  and in no event
more than one Business Day after the Subservicer's receipt thereof, all proceeds
of Mortgage Loans received by the Subservicer less its servicing compensation to
the extent permitted by the Subservicing Agreement, and shall thereafter deposit
such  amounts in the  Subservicing  Account,  in no event more than two Business
Days after the deposit of such funds into the clearing account.  The Subservicer
shall thereafter  deposit such proceeds in the Collection  Account or remit such
proceeds to the  Servicer for deposit in the  Collection  Account not later than
two Business Days after the deposit of such amounts in the Subservicing Account.
For purposes of this  Agreement,  the Servicer  shall be deemed to have received
payments on the Mortgage Loans when the Subservicer receives such payments.

              Section 3.09  COLLECTION OF TAXES,  ASSESSMENTS AND SIMILAR ITEMS;
ESCROW ACCOUNTS.

              (a)    The Servicer  shall ensure that each of the Mortgage  Loans
shall be covered by a paid-in-full, life-of-the-loan tax service contract with a
nationally  recognized provider acceptable to the Servicer (each, a "TAX SERVICE
CONTRACT").  Each Tax Service Contract shall be assigned to the Trustee,  or its
designee, at the Servicer's expense in the event that the Servicer is terminated
as Servicer of the related Mortgage Loan.

              (b)    To the extent that the services described in this paragraph
(b) are not otherwise  provided pursuant to the Tax Service Contracts  described
in paragraph (a) hereof, the Servicer undertakes to perform such functions.  The
Servicer  shall  establish  and  maintain,   or  cause  to  be  established  and
maintained,  one or more  accounts  (the  "ESCROW  ACCOUNTS"),  which  shall  be
Eligible  Accounts.  The Servicer  shall deposit in the clearing  account (which
account must be an Eligible  Account) in which it customarily  deposits payments
and collections on mortgage loans in connection with its mortgage loan servicing
activities  on a daily  basis,  and in no event more than one Business Day after
the Servicer's receipt thereof,  all collections from the Mortgagors (or related
advances  from  Subservicers)  for the  payment  of taxes,  assessments,  hazard
insurance  premiums  and  comparable  items for the  account  of the  Mortgagors
("ESCROW  PAYMENTS")  collected  on  account  of the  Mortgage  Loans  and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more
than two Business Days after the deposit of such funds in the clearing  account,
for the purpose of effecting the payment of any such items as required under the
terms of this  Agreement.  Withdrawals  of amounts from an Escrow Account may be
made  only  to (i)  effect  payment  of  taxes,  assessments,  hazard  insurance
premiums, and

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comparable  items;  (ii)  reimburse the Servicer (or a Subservicer to the extent
provided in the related  Subservicing  Agreement) out of related collections for
any  advances  made  pursuant  to  Section  3.01  (with  respect  to  taxes  and
assessments) and Section 3.13 (with respect to hazard  insurance);  (iii) refund
to Mortgagors  any sums as may be determined to be overages;  (iv) pay interest,
if required  and as described  below,  to  Mortgagors  on balances in the Escrow
Account;  (v) clear and terminate the Escrow  Account at the  termination of the
Servicer's  obligations  and  responsibilities  in respect of the Mortgage Loans
under this Agreement or (vi) recover amounts  deposited in error. As part of its
servicing  duties,  the  Servicer or  Subservicers  shall pay to the  Mortgagors
interest on funds in Escrow Accounts,  to the extent required by law and, to the
extent that interest earned on funds in the Escrow Accounts is insufficient,  to
pay such  interest  from its or  their  own  funds,  without  any  reimbursement
therefor.  To the extent that a Mortgage  does not provide for Escrow  Payments,
the Servicer shall determine whether any such payments are made by the Mortgagor
in a manner and at a time that avoids the loss of the Mortgaged  Property due to
a tax  sale  or  the  foreclosure  of a tax  lien.  The  Servicer  assumes  full
responsibility  for the  payment  of all such bills  within  such time and shall
effect  payments  of all such bills  irrespective  of the  Mortgagor's  faithful
performance  in the  payment of same or the making of the  Escrow  Payments  and
shall  make  advances  from its own funds to  effect  such  payments;  PROVIDED,
HOWEVER, that such advances are deemed to be Servicing Advances.

              Section 3.10 COLLECTION ACCOUNT.

              (a)    On behalf of the Trustee,  the Servicer shall establish and
maintain,  or cause  to be  established  and  maintained,  one or more  Eligible
Accounts (such account or accounts, the "COLLECTION ACCOUNT"), held in trust for
the benefit of the Trustee. On behalf of the Trustee, the Servicer shall deposit
or cause to be  deposited  in the  clearing  account  (which  account must be an
Eligible  Account) in which it customarily  deposits payments and collections on
mortgage loans in connection  with its mortgage loan  servicing  activities on a
daily basis,  and in no event more than one  Business  Day after the  Servicer's
receipt thereof,  and shall thereafter deposit in the Collection  Account, in no
event  more than two  Business  Days  after the  deposit  of such funds into the
clearing account, as and when received or as otherwise required  hereunder,  the
following  payments and  collections  received or made by it  subsequent  to the
related  Cut-off  Date  (other than in respect of  principal  or interest on the
related Mortgage Loans due on or before the related Cut-off Date, and except for
$135,810.00 in interest, which is being retained by the Unaffiliated Seller), or
payments  (other than Principal  Prepayments)  received by it on or prior to the
related Cut-off Date but allocable to a Due Period subsequent thereto:

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

                     (ii)   all  payments  on  account of  interest  (net of the
       related Servicing Fee) on each Mortgage Loan;

                     (iii)  all Insurance  Proceeds to the extent such Insurance
       Proceeds  are  not to be  applied  to  the  restoration  of  the  related
       Mortgaged  Property or released to the related  Mortgagor  in  accordance
       with the express  requirements  of law or in accordance  with prudent and
       customary servicing practices and Liquidation Proceeds;

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                     (iv)   any  amounts  required to be  deposited  pursuant to
       Section  3.12  in  connection  with  any  losses  realized  on  Permitted
       Investments with respect to funds held in the Collection Account;

                     (v)    any amounts required to be deposited by the Servicer
       pursuant  to the second  paragraph  of Section  3.13(a) in respect of any
       blanket policy deductibles;

                     (vi)   all proceeds of any  Mortgage  Loan  repurchased  or
       purchased in accordance with this Agreement; and

                     (vii)  all Prepayment Charges collected by the Servicer.

              The foregoing  requirements for deposit in the Collection Accounts
shall be exclusive,  it being  understood and agreed that,  without limiting the
generality of the foregoing, payments in the nature of late payment charges, NSF
fees, reconveyance fees, assumption fees and other similar fees and charges need
not be  deposited  by the  Servicer in the  Collection  Account and shall,  upon
collection,  belong to the Servicer as additional compensation for its servicing
activities.  In the event the Servicer shall deposit in the  Collection  Account
any amount not required to be  deposited  therein,  it may at any time  withdraw
such amount from the Collection  Account,  any provision  herein to the contrary
notwithstanding.

              (b)    Funds  in  the  Collection   Account  may  be  invested  in
Permitted  Investments  in accordance  with the  provisions set forth in Section
3.12.  The  Servicer  shall give notice to the Trustee and the  Depositor of the
location of the Collection  Account  maintained by it when established and prior
to any change thereof.

              Section 3.11 WITHDRAWALS FROM THE COLLECTION ACCOUNT.

              (a)    The Servicer  shall,  from time to time,  make  withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.01:

                     (i)    On or prior to the Remittance  Date, to remit to the
       Trustee (i) the Trustee Fee with  respect to such  Distribution  Date and
       (ii) the Interest  Remittance Amount and the Principal  Remittance Amount
       in respect of the related  Distribution  Date  together  with all amounts
       representing  Prepayment  Charges from the Mortgage Loans received during
       the related Prepayment Period;

                     (ii)   to reimburse the Servicer for P&I Advances, but only
       to the extent of amounts  received which represent Late  Collections (net
       of the related Servicing Fees) of Monthly Payments on Mortgage Loans with
       respect  to which  such P&I  Advances  were made in  accordance  with the
       provisions of Section 4.01;

                     (iii)  to pay  the  Servicer  or any  Subservicer  (a)  any
       unpaid  Servicing Fees or (b) any  unreimbursed  Servicing  Advances with
       respect  to each  Mortgage  Loan,  but  only to the  extent  of any  Late
       Collections, Liquidation Proceeds, Insurance Proceeds or other amounts as
       may be collected by the Servicer from a Mortgagor,  or otherwise received
       with respect to such Mortgage Loan (or the related REO Property);

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<PAGE>

                     (iv)   to pay to the Servicer as servicing compensation (in
       addition to the  Servicing  Fee) on the  Remittance  Date any interest or
       investment income earned on funds deposited in the Collection Account;

                     (v)    to  pay  to  the  related  Responsible  Party,  with
       respect to each Mortgage Loan relating to such Responsible Party that has
       previously  been  purchased or replaced  pursuant to this  Agreement  all
       amounts  received   thereon   subsequent  to  the  date  of  purchase  or
       substitution, as the case may be;

                     (vi)   to  reimburse  the  Servicer  for any P&I Advance or
       Servicing Advance previously made which the Servicer has determined to be
       a  Nonrecoverable  P&I  Advance or  Nonrecoverable  Servicing  Advance in
       accordance with the provisions of Section 4.01;

                     (vii)  to pay, or to reimburse the Servicer for advances in
       respect  of,  expenses  incurred in  connection  with any  Mortgage  Loan
       pursuant to Section 3.15;

                     (viii) to  reimburse  the  Servicer  or the  Depositor  for
       expenses incurred by or reimbursable to the Servicer or the Depositor, as
       the case may be, pursuant to Section 6.03;

                     (ix)   to reimburse the Servicer,  the Unaffiliated Seller,
       the  Depositor,  the Class A Certificate  Insurer or the Trustee,  as the
       case may be, for expenses reasonably incurred in respect of the breach or
       defect giving rise to the purchase  obligation under Section 2.03 of this
       Agreement  that were  included in the  Repurchase  Price of the  Mortgage
       Loan,  including  any  expenses  arising  out of the  enforcement  of the
       purchase obligation;

                     (x)    to withdraw any amounts  deposited in the Collection
       Account in error; and

                     (xi)   to clear and terminate the  Collection  Account upon
       termination of this Agreement.

              (b)    The Servicer shall keep and maintain  separate  accounting,
on a Mortgage  Loan by Mortgage Loan basis,  for the purpose of  justifying  any
withdrawal  from the Collection  Account,  to the extent held by or on behalf of
it, pursuant to subclauses  (a)(ii),  (iii), (v), (vi),  (vii),  (viii) and (ix)
above.  The Servicer shall provide written  notification  to the Trustee,  on or
prior to the next succeeding  Remittance  Date, upon making any withdrawals from
the Collection Account pursuant to subclause (a)(vii) above.

              Section 3.12 INVESTMENT OF FUNDS IN THE ACCOUNT.

              (a)    The  Servicer may direct the Trustee to invest the funds in
the Collection Account and the Distribution Account, and the Unaffiliated Seller
may direct the  Trustee to invest the funds in the  Pre-Funding  Account and the
Capitalized  Interest  Account  (each of such  Accounts,  for  purposes  of this
Section 3.12, an "INVESTMENT  Account"),  in one or more  Permitted  Investments
bearing interest or sold at a discount,  and maturing,  unless payable on demand
no

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later than the Business Day  immediately  preceding the date on which such funds
are required to be withdrawn from such account  pursuant to this Agreement.  All
such Permitted Investments shall be held to maturity,  unless payable on demand.
Any  investment of funds in an  Investment  Account shall be made in the name of
the  Trustee.  The Trustee  shall be entitled to sole  possession  (except  with
respect to  investment  direction  of funds held in the related  Account and any
income and gain realized thereon) over each such investment, and any certificate
or other instrument  evidencing any such investment shall be delivered  directly
to the Trustee or its agent, together with any document of transfer necessary to
transfer  title to such  investment  to the  Trustee.  In the event  amounts  on
deposit  in an  Investment  Account  are at any  time  invested  in a  Permitted
Investment payable on demand, the Trustee may:

              (x)    consistent with any notice required to be given thereunder,
                     demand  that  payment  thereon be made on the last day such
                     Permitted  Investment may otherwise  mature hereunder in an
                     amount  equal to the lesser of (1) all amounts then payable
                     thereunder  and (2) the amount  required to be withdrawn on
                     such date; and

              (y)    demand  payment of all  amounts  due  thereunder  that such
                     Permitted  Investment  would  not  constitute  a  Permitted
                     Investment in respect of funds thereafter on deposit in the
                     Investment Account.

              (b)    (i)    All income and gain realized from the  investment of
funds deposited in the Collection  Account and the Distribution  Account held by
or on behalf of the Servicer, shall be for the benefit of the Servicer and shall
be subject to its withdrawal in the manner set forth in Section 3.11 in the case
of income in the Collection Account,  and on each Distribution Date, the Trustee
shall  withdraw  from the  Distribution  Account,  and remit to the Servicer all
amounts in respect of such income and gain in the Distribution Account.  Whether
in regard to the Collection  Account or the Distribution  Account,  the Servicer
shall  deposit  in the  Collection  Account  or  the  Distribution  Account,  as
applicable,  the amount of any loss of principal incurred in respect of any such
Permitted   Investment  made  with  funds  in  such  accounts  immediately  upon
realization of such loss.

                     (ii)   All income and gain realized from the  investment of
       funds deposited in the Pre-Funding  Account and the Capitalized  Interest
       Account held by or on behalf of the Unaffiliated Seller shall be retained
       in such Investment Account,  subject to withdrawal as provided in Section
       4.02.  Whether in regard to the  Pre-Funding  Account or the  Capitalized
       Interest   Account,   the  Unaffiliated   Seller  shall  deposit  in  the
       Pre-Funding  Account or the Capitalized  Interest Account, as applicable,
       the  amount of any loss of  principal  incurred  in  respect  of any such
       Permitted  Investment made with funds in such accounts  immediately  upon
       realization of such loss.

              (c)    Except as otherwise  expressly  provided in this Agreement,
if any  default  occurs  in the  making of a  payment  due  under any  Permitted
Investment,  or if a default occurs in any other performance  required under any
Permitted  Investment,  the Trustee shall take such action as may be appropriate
to  enforce  such  payment  or   performance,   including  the  institution  and
prosecution of appropriate proceedings.  The Trustee shall not be liable for the
amount of

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any loss  incurred in respect of any  investment  or lack of investment of funds
held in any Investment Account or the Distribution Account if made in accordance
with this Section 3.12.

              Section  3.13  MAINTENANCE  OF HAZARD  INSURANCE  AND  ERRORS  AND
OMISSIONS AND FIDELITY COVERAGE.

              (a)    The Servicer shall cause to be maintained for each Mortgage
Loan fire insurance with extended coverage on the related Mortgaged  Property in
an  amount  which is at least  equal to the least of (i) the  current  principal
balance of such Mortgage Loan, (ii) the amount necessary to fully compensate for
any damage or loss to the  improvements  that are a part of such  property  on a
replacement cost basis and (iii) the maximum insurable value of the improvements
which are a part of such Mortgaged Property,  in each case in an amount not less
than such amount as is necessary  to avoid the  application  of any  coinsurance
clause contained in the related hazard insurance policy. The Servicer shall also
cause  to be  maintained  fire  insurance  with  extended  coverage  on each REO
Property  in an amount  which is at least equal to the lesser of (i) the maximum
insurable value of the  improvements  which are a part of such property and (ii)
the outstanding  principal  balance of the related  Mortgage Loan at the time it
became an REO Property,  plus accrued  interest at the Mortgage Rate and related
Servicing  Advances.  The  Servicer  will  comply  in the  performance  of  this
Agreement with all reasonable  rules and  requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Servicer under any such
policies  (other than amounts to be applied to the  restoration or repair of the
property  subject to the  related  Mortgage  or amounts  to be  released  to the
Mortgagor in accordance  with the  procedures  that the Servicer would follow in
servicing loans held for its own account, subject to the terms and conditions of
the related  Mortgage  and Mortgage  Note) shall be deposited in the  Collection
Account,  subject to withdrawal  pursuant to Section 3.11.  Any cost incurred by
the Servicer in  maintaining  any such  insurance  shall not, for the purpose of
calculating  distributions  to the  Trustee,  be added to the  unpaid  principal
balance of the related  Mortgage  Loan,  notwithstanding  that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or other
additional  insurance is to be required of any Mortgagor  other than pursuant to
such  applicable  laws and  regulations  as shall at any time be in force and as
shall  require  such  additional  insurance.  If the  Mortgaged  Property or REO
Property is at any time in an area  identified  in the  Federal  Register by the
Federal  Emergency  Management  Agency as having special flood hazards and flood
insurance  has been made  available,  the Servicer will cause to be maintained a
flood insurance policy in respect  thereof.  Such flood insurance shall be in an
amount  equal to the lesser of (i) the unpaid  principal  balance of the related
Mortgage Loan and (ii) the maximum  amount of such  insurance  available for the
related Mortgaged  Property under the national flood insurance program (assuming
that the area in which such Mortgaged  Property is located is  participating  in
such program).

              In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:X or better in Best's
(or such other rating that is comparable to such rating) insuring against hazard
losses on all of the Mortgage  Loans,  it shall  conclusively  be deemed to have
satisfied  its  obligations  as set  forth in the first  two  sentences  of this
Section  3.13,  it being  understood  and agreed  that such policy may contain a
deductible  clause,  in which case the Servicer  shall,  in the event that there
shall not have been maintained on the related Mortgaged Property or REO Property
a policy  complying with the first two sentences of this Section 3.13, and there
shall have been one or more losses which would have been

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covered by such policy, deposit to the Collection Account from its own funds the
amount not otherwise payable under the blanket policy because of such deductible
clause.  In connection with its activities as administrator  and servicer of the
Mortgage Loans, the Servicer agrees to prepare and present, on behalf of itself,
the  Trustee  claims  under  any such  blanket  policy  in a timely  fashion  in
accordance with the terms of such policy.

              (b)    The  Servicer  shall keep in force  during the term of this
Agreement a policy or policies of insurance  covering  errors and  omissions for
failure in the performance of the Servicer's  obligations  under this Agreement,
which  policy or  policies  shall be in such form and amount that would meet the
requirements  of  Fannie  Mae or  Freddie  Mac if it were the  purchaser  of the
Mortgage Loans,  unless the Servicer has obtained a waiver of such  requirements
from Fannie Mae or Freddie Mac. The Servicer shall also maintain a fidelity bond
in the form and amount that would meet the requirements of Fannie Mae or Freddie
Mac, unless the Servicer has obtained a waiver of such  requirements from Fannie
Mae or Freddie Mac. The  Servicer  shall  provide the Trustee with copies of any
such insurance  policies and fidelity bond. The Servicer shall be deemed to have
complied with this provision if an Affiliate of the Servicer has such errors and
omissions and fidelity bond coverage and, by the terms of such insurance  policy
or fidelity bond, the coverage afforded thereunder extends to the Servicer.  Any
such errors and  omissions  policy and  fidelity  bond shall by its terms not be
cancelable  without  thirty  days'  prior  written  notice to the  Trustee.  The
Servicer  shall also cause each  Subservicer  to maintain a policy of  insurance
covering  errors  and  omissions  and a  fidelity  bond  which  would  meet such
requirements.

              Section  3.14  ENFORCEMENT  OF  DUE-ON-SALE   CLAUSES   ASSUMPTION
AGREEMENTS.

              The  Servicer  will,  to  the  extent  it  has  knowledge  of  any
conveyance or prospective  conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute  conveyance or by contract of sale,  and whether or not the
Mortgagor  remains or is to remain  liable  under the  Mortgage  Note and/or the
Mortgage),  exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto;  PROVIDED,  HOWEVER,
that the  Servicer  shall not be  required  to take such  action if, in its sole
business judgment,  the Servicer believes it is not in the best interests of the
Trust Fund and shall not  exercise  any such  rights if  prohibited  by law from
doing so. If the Servicer  reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause or if any of the other conditions set forth
in the proviso to the preceding  sentence apply, the Servicer will enter into an
assumption  and  modification  agreement  from or with the  person  to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person  becomes  liable under the Mortgage Note and, to the extent  permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original  Mortgagor is released  from  liability  and such
person is  substituted  as the Mortgagor  and becomes  liable under the Mortgage
Note,  provided that no such substitution  shall be effective unless such person
satisfies the underwriting criteria of the Servicer, has a credit risk rating at
least  equal  to  that  of  the  original  Mortgagor.  In  connection  with  any
assumption,   modification  or  substitution,  the  Servicer  shall  apply  such
underwriting  standards  and follow such  practices  and  procedures as shall be
normal and usual in its general mortgage servicing  activities and as it applies
to other mortgage loans owned solely by it. The Servicer shall not take or enter
into any assumption and modification agreement,

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however,  unless (to the extent  practicable in the circumstances) it shall have
received  confirmation,  in  writing,  of  the  continued  effectiveness  of any
applicable  hazard insurance policy, or a new policy meeting the requirements of
this  Section is  obtained.  Any fee  collected by the Servicer in respect of an
assumption  or  substitution  of  liability  agreement  will be  retained by the
Servicer as  additional  servicing  compensation.  In  connection  with any such
assumption,  no material term of the Mortgage Note  (including,  but not limited
to, the related  Mortgage Rate and the amount of the  Scheduled  Payment) may be
amended or modified, except as otherwise required pursuant to the terms thereof.
The Servicer shall notify the Trustee that any such  substitution,  modification
or  assumption  agreement  has been  completed by  forwarding to the Trustee the
executed original of such substitution or assumption  agreement,  which document
shall be added to the related  Mortgage  File and shall,  for all  purposes,  be
considered  a part of  such  Mortgage  File  to the  same  extent  as all  other
documents and instruments constituting a part thereof.

              Notwithstanding  the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other  violation of its  obligations  hereunder by reason of any assumption of a
Mortgage  Loan by operation  of law or by the terms of the Mortgage  Note or any
assumption which the Servicer may be restricted by law from preventing,  for any
reason  whatever.  For purposes of this Section 3.14, the term  "assumption"  is
deemed  to also  include  a sale  (of the  Mortgaged  Property)  subject  to the
Mortgage that is not  accompanied by an assumption or  substitution of liability
agreement.

              Section 3.15 REALIZATION UPON DEFAULTED MORTGAGE LOANS.

              The Servicer shall use its best efforts, consistent with customary
servicing practices as described in Section 3.01, to foreclose upon or otherwise
comparably  convert  (which may  include an  acquisition  of REO  Property)  the
ownership of  properties  securing  such of the Mortgage  Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent  payments  pursuant to Section 3.07,  and which are not
released  from this  Agreement  pursuant  to any  other  provision  hereof.  The
Servicer  shall use reasonable  efforts to realize upon such defaulted  Mortgage
Loans in such manner as will  maximize the receipt of principal  and interest by
the Trustee,  taking into account, among other things, the timing of foreclosure
proceedings.  The  foregoing is subject to the  provisions  that, in any case in
which Mortgaged Property shall have suffered damage from an uninsured cause, the
Servicer shall not be required to expend its own funds toward the restoration of
such property  unless it shall  determine in its sole  discretion  (i) that such
restoration  will  increase  the net  proceeds  of  liquidation  of the  related
Mortgage Loan to the Trustee,  after  reimbursement to itself for such expenses,
and  (ii)  that  such  expenses  will be  recoverable  by the  Servicer  through
Insurance Proceeds or Liquidation  Proceeds from the related Mortgaged Property,
as contemplated in Section 3.11. The Servicer shall be responsible for all other
costs and expenses  incurred by it in any such proceedings;  PROVIDED,  HOWEVER,
that it shall be entitled to reimbursement thereof from the related property, as
contemplated in Section 3.11.

              The proceeds of any liquidation or REO Disposition, as well as any
recovery   resulting  from  a  partial   collection  of  Insurance  Proceeds  or
Liquidation Proceeds or any income from an REO Property,  will be applied in the
following order of priority: first, to reimburse the Servicer or any Subservicer
for any related unreimbursed Servicing Advances, pursuant to

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Section  3.11 or 3.17;  second,  to accrued and unpaid  interest on the Mortgage
Loan  or REO  Imputed  Interest,  at the  Mortgage  Rate,  to  the  date  of the
liquidation or REO Disposition,  or to the Due Date prior to the Remittance Date
on  which  such  amounts  are to be  distributed  if not  in  connection  with a
liquidation or REO Disposition; third, to reimburse the Servicer for any related
unreimbursed P&I Advances,  pursuant to Section 3.11; and fourth,  as a recovery
of principal of the Mortgage Loan. If the amount of the recovery so allocated to
interest is less than a full recovery thereof,  that amount will be allocated as
follows:  first,  to unpaid  Servicing  Fees;  and  second,  as  interest at the
Mortgage Rate (net of the  Servicing  Fee Rate).  The portion of the recovery so
allocated to unpaid  Servicing  Fees shall be  reimbursed to the Servicer or any
Subservicer  pursuant to Section  3.11 or 3.17.  The portions of the recovery so
allocated to interest at the Mortgage  Rate (net of the  Servicing Fee Rate) and
to  principal  of the  Mortgage  Loan  shall be applied as  follows:  first,  to
reimburse the Servicer or any Subservicer for any related unreimbursed Servicing
Advances in accordance with Section 3.11 or 3.17, and second,  to the Trustee in
accordance with the provisions of Section 4.02, subject to the last paragraph of
Section 3.17 with respect to certain excess recoveries from an REO Disposition.

              Notwithstanding  anything to the  contrary  contained  herein,  in
connection with a foreclosure or acceptance of a deed in lieu of foreclosure, in
the event the Servicer has received actual notice of, or has actual knowledge of
the  presence  of,  hazardous  or toxic  substances  or  wastes  on the  related
Mortgaged  Property,  or if the Trustee otherwise  requests,  the Servicer shall
cause an  environmental  inspection or review of such  Mortgaged  Property to be
conducted by a qualified  inspector.  Upon  completion  of the  inspection,  the
Servicer  shall  promptly  provide  the  Trustee  with a  written  report of the
environmental inspection.

              After reviewing the environmental  inspection report, the Servicer
shall  determine how to proceed with respect to the Mortgaged  Property.  In the
event (a) the  environmental  inspection  report  indicates  that the  Mortgaged
Property is contaminated by hazardous or toxic  substances or wastes and (b) the
Servicer  determines to proceed with foreclosure or acceptance of a deed in lieu
of  foreclosure,  the Servicer  shall be  reimbursed  for all  reasonable  costs
associated with such  foreclosure or acceptance of a deed in lieu of foreclosure
and any related  environmental  clean-up costs, as applicable,  from the related
Liquidation  Proceeds,  or if the Liquidation Proceeds are insufficient to fully
reimburse the  Servicer,  the Servicer  shall be entitled to be reimbursed  from
amounts in the Collection  Account pursuant to Section 3.11 hereof. In the event
the Servicer  determines not to proceed with foreclosure or acceptance of a deed
in  lieu  of  foreclosure,   the  Servicer  shall  be  reimbursed  from  general
collections  for  all  Servicing  Advances  made  with  respect  to the  related
Mortgaged Property from the Collection Account pursuant to Section 3.11 hereof.

              Section 3.16 RELEASE OF MORTGAGE FILES.

              (a)    Upon  the  payment  in full of any  Mortgage  Loan,  or the
receipt by the Servicer of a notification that payment in full shall be escrowed
in a manner  customary for such  purposes,  the Servicer  will,  within five (5)
Business  Days of the  payment in full,  notify the  Trustee by a  certification
(which  certification  shall  include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited  in the  Collection  Account  pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Custodial File. Upon receipt of such

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certification  and  request,  the  Trustee  shall  promptly  release the related
Custodial  File to the  Servicer  within  two (2)  Business  Days.  No  expenses
incurred  in  connection   with  any  instrument  of  satisfaction  or  deed  of
reconveyance shall be chargeable to the Collection Account.

              (b)    From time to time and as  appropriate  for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose,  collection under
any insurance  policy  relating to the Mortgage Loans,  the Trustee shall,  upon
request of the Servicer  and delivery to the Trustee,  of a Request for Release,
release the related  Custodial File to the Servicer,  and the Trustee shall,  at
the direction of the Servicer,  execute such  documents as shall be necessary to
the  prosecution  of any such  proceedings  and the  Servicer  shall  retain the
Mortgage File in trust for the benefit of the Trustee.  Such Request for Release
shall  obligate  the  Servicer  to  return  each and every  document  previously
requested  from the Custodial  File to the Trustee when the need therefor by the
Servicer no longer exists,  unless the Mortgage Loan has been liquidated and the
Liquidation  Proceeds  relating to the Mortgage Loan have been  deposited in the
Collection  Account or the Mortgage File or such document has been  delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or  non-judicially,  and
the Servicer has delivered to the Trustee a certificate  of a Servicing  Officer
certifying  as to the name and address of the Person to which such Mortgage File
or such  document was  delivered  and the purpose or purposes of such  delivery.
Upon receipt of a certificate of a Servicing  Officer stating that such Mortgage
Loan  was  liquidated  and  that  all  amounts  received  or to be  received  in
connection  with such  liquidation  that are required to be  deposited  into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO  Property,  a copy of the  Request  for  Release  of  Documents  shall be
released by the Trustee to the Servicer or its designee.

              Upon written  certification  of a Servicing  Officer,  the Trustee
shall  execute and deliver to the  Servicer  any court  pleadings,  requests for
trustee's sale or other  documents  reasonably  necessary to the  foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment  against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a  deficiency  judgment,  or to  enforce  any  other  remedies  or rights
provided by the Mortgage  Note or Mortgage or  otherwise  available at law or in
equity,  or shall  exercise  and  deliver to the  Servicer  a power of  attorney
sufficient  to authorize  the Servicer to execute such  documents on its behalf.
Each such certification shall include a request that such pleadings or documents
be executed by the Trustee and a statement  as to the reason such  documents  or
pleadings  are  required  and that the  execution  and  delivery  thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the  termination  of  such a lien  upon  completion  of the  foreclosure  or
trustee's sale.

              Section 3.17 TITLE, CONSERVATION AND DISPOSITION OF REO PROPERTY.

              (a)    This Section  shall apply only to REO  Properties  acquired
for the account of the Trustee and shall not apply to any REO Property  relating
to a Mortgage Loan which was purchased or repurchased  from the Trustee pursuant
to any  provision  hereof.  In the event that title to any such REO  Property is
acquired, the deed or certificate of sale shall be issued to the Servicer, or to
its nominee, on behalf of the Trustee.

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<PAGE>

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

              (c)    The  Servicer  shall use its best efforts to dispose of the
REO  Property as soon as possible  (subject to the  Trustee's  right to veto any
proposed  sale of REO  Property)  and shall sell such REO  Property in any event
within one year  after  title has been  taken to such REO  Property,  unless the
Servicer  determines,  and gives an  appropriate  notice to the  Trustee to such
effect,  that a longer period is necessary for the orderly  liquidation  of such
REO Property.  If a period longer than one year is permitted under the foregoing
sentence and is necessary to sell any REO  Property,  the Servicer  shall report
monthly  to the  Trustee  as to the  progress  being  made in  selling  such REO
Property.  Notwithstanding  its veto rights,  the Trustee has no obligation with
respect to REO dispositions.

              (d)    [Reserved].

              (e)    The Servicer shall  segregate and hold all funds  collected
and received in connection  with the operation of any REO Property  separate and
apart from its own funds and general  assets and shall deposit such funds in the
Collection Account.

              (f)    The  Servicer  shall  deposit net of  reimbursement  to the
Servicer for any related  outstanding  Servicing  Advances and unpaid  Servicing
Fees provided in Section 3.11 hereof, or cause to be deposited, on a daily basis
in the Collection  Account all revenues received with respect to the related REO
Property and shall withdraw  therefrom funds necessary for the proper operation,
management and maintenance of the REO Property.

              (g)    The Servicer, upon an REO Disposition, shall be entitled to
reimbursement  for any related  unreimbursed  Servicing  Advances as well as any
unpaid  Servicing  Fees  from  proceeds  received  in  connection  with  the REO
Disposition, as further provided in Section 3.11.

              (h)    Any net  proceeds  which are in  excess  of the  applicable
Stated  Principal  Balance plus all unpaid REO Imputed  Interest thereon through
the date of the REO Disposition  shall be retained by the Servicer as additional
servicing compensation.

              (i)    The Servicer shall use its reasonable best efforts to sell,
or cause the  Subservicer to sell, any REO Property as soon as possible,  but in
no event later than the conclusion of the third  calendar year  beginning  after
the year of its acquisition by the REMIC unless (i) the Servicer  applies for an
extension of such period from the Internal Revenue Service pursuant to the REMIC
Provisions and Code Section 856(e)(3), in which event such REO

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<PAGE>

Property  shall be sold  within the  applicable  extension  period,  or (ii) the
Servicer  obtains  for the  Trustee  an  Opinion of  Counsel,  addressed  to the
Depositor,  the Trustee and the Servicer,  to the effect that the holding by the
REMIC of such REO  Property  subsequent  to such  period  will not result in the
imposition of taxes on "prohibited  transactions"  as defined in Section 860F of
the Code or cause  the  REMIC to fail to  qualify  as a REMIC  under  the  REMIC
Provisions or  comparable  provisions  of relevant  state laws at any time.  The
Servicer shall manage,  conserve,  protect and operate each REO Property for the
Trustee  solely for the purpose of its prompt  disposition  and sale in a manner
which  does not cause  such REO  Property  to fail to  qualify  as  "foreclosure
property"  within the meaning of Section  860G(a)(8) or result in the receipt by
the REMIC of any  "income  from  non-permitted  assets"  within  the  meaning of
Section  860F(a)(2)(B) of the Code or any "net income from foreclosure property"
which is subject to taxation under Section  860G(a)(1) of the Code.  Pursuant to
its efforts to sell such REO  Property,  the  Servicer  shall  either  itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may,  incident to its conservation and protection of
the interests of the Trustee on behalf of the Certificateholders, rent the same,
or any part  thereof,  as the Servicer  deems to be in the best  interest of the
Trustee on behalf of the  Certificateholders for the period prior to the sale of
such REO  Property;  provided,  however,  that any rent received or accrued with
respect to such REO Property  qualifies as "rents from real property" as defined
in Section 856(d) of the Code.

              Section 3.18 NOTIFICATION OF ADJUSTMENTS.

              With respect to each  Adjustable  Rate Mortgage Loan, the Servicer
shall adjust the Mortgage Rate on the related  interest rate adjustment date and
shall adjust the Scheduled  Payment on the related mortgage  payment  adjustment
date, if applicable,  in compliance with the  requirements of applicable law and
the related  Mortgage and Mortgage  Note. The Servicer shall execute and deliver
any and all necessary notices required under applicable law and the terms of the
related  Mortgage  Note and Mortgage  regarding  the Mortgage Rate and Scheduled
Payment adjustments. The Servicer shall promptly, upon written request therefor,
deliver to the Trustee such  notifications  and any additional  applicable  data
regarding such  adjustments and the methods used to calculate and implement such
adjustments.  Upon the  discovery  by the Servicer or the receipt of notice from
the Trustee that the Servicer has failed to adjust a Mortgage  Rate or Scheduled
Payment in accordance with the terms of the related  Mortgage Note, the Servicer
shall  deposit in the  Collection  Account  from its own funds the amount of any
interest loss caused as such interest loss occurs.

              Section  3.19  ACCESS TO  CERTAIN  DOCUMENTATION  AND  INFORMATION
REGARDING THE MORTGAGE LOANS.

              The Servicer shall provide,  or cause the  Subservicer to provide,
to the Depositor,  the Unaffiliated Seller, the Class A Certificate Insurer, the
Trustee,  the OTS or the FDIC and the examiners and  supervisory  agents thereof
access to the documentation regarding the Mortgage Loans in its possession. Such
access shall be afforded  without  charge,  but only upon  reasonable  and prior
written  request and during normal business hours at the offices of the Servicer
or any  Subservicer.  Nothing in this Section shall derogate from the obligation
of any such  party to observe  any  applicable  law  prohibiting  disclosure  of
information regarding the Mortgagors and

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the failure of any such party to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.

              Section 3.20  DOCUMENTS,  RECORDS AND FUNDS IN  POSSESSION  OF THE
SERVICER TO BE HELD FOR THE TRUSTEE.

              The  Servicer  shall  account  fully to the  Trustee for any funds
received by the  Servicer or which  otherwise  are  collected by the Servicer as
Liquidation  Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All
Mortgage  Files and funds  collected  or held by, or under the  control  of, the
Servicer  in respect of any  Mortgage  Loans,  whether  from the  collection  of
principal and interest payments or from Liquidation Proceeds,  including but not
limited to, any funds on deposit in the Collection Account, shall be held by the
Servicer  for and on behalf of the  Trustee and shall be and remain the sole and
exclusive property of the Trustee,  subject to the applicable provisions of this
Agreement.  The Servicer also agrees that it shall not create,  incur or subject
any Mortgage File or any funds that are  deposited in any Account,  or any funds
that  otherwise  are or may become due or payable to the Trustee for the benefit
of the  Certificateholders,  to any claim, lien,  security  interest,  judgment,
levy,  writ of  attachment  or other  encumbrance,  or assert by legal action or
otherwise  any claim or right of setoff  against any Mortgage  File or any funds
collected on, or in connection with, a Mortgage Loan, except,  however, that the
Servicer shall be entitled to set off against and deduct from any such funds any
amounts that are properly due and payable to the Servicer under this Agreement.

              Section 3.21 SERVICING COMPENSATION.

              (a)    As compensation for its activities hereunder,  the Servicer
shall,  with respect to each Mortgage  Loan, be entitled to retain from deposits
to the Collection Account and from Liquidation Proceeds,  Insurance Proceeds and
REO Proceeds  related to such Mortgage  Loan,  the Servicing Fee with respect to
each  Mortgage  Loan  (less  any  portion  of  such  amounts   retained  by  any
Subservicer).  In  addition,  the Servicer  shall be entitled to recover  unpaid
Servicing  Fees out of  related  late  collections  to the extent  permitted  in
Section 3.11.  The right to receive the Servicing Fee may not be  transferred in
whole or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement;  PROVIDED,  HOWEVER, that
the Servicer  may pay from the  Servicing  Fee any amounts due to a  Subservicer
pursuant to a Subservicing Agreement entered into under Section 3.02.

              (b)    Additional servicing compensation in the form of assumption
or modification  fees, late payment  charges,  NSF fees,  reconveyance  fees and
other similar fees and charges (other than Prepayment Charges) shall be retained
by the  Servicer  only to the extent  such fees or charges  are  received by the
Servicer. The Servicer shall also be entitled pursuant to Section 3.11(a)(iv) to
withdraw from the Collection Account and the Distribution Account, as additional
servicing compensation, interest or other income earned on deposits therein.

              (c)    The Servicer shall be required to pay all expenses incurred
by it in connection with its servicing  activities  hereunder (including payment
of premiums for any blanket policy  insuring  against hazard losses  pursuant to
Section  3.13,  servicing  compensation  of the  Subservicer  to the  extent not
retained by it and the fees and expenses of independent

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accountants and any agents appointed by the Servicer), and shall not be entitled
to reimbursement therefor except as specifically provided in Section 3.11.

              Section 3.22 ANNUAL STATEMENT AS TO COMPLIANCE.

              The  Servicer  will  deliver  or  cause  to be  delivered  to  the
Depositor, the Rating Agencies, the Unaffiliated Seller, the Class A Certificate
Insurer,  and the  Trustee  on or  before  November  15 of each  calendar  year,
commencing  in 2002,  an Officers'  Certificate  stating,  as to each  signatory
thereof,  that  (i) a  review  of the  activities  of the  Servicer  during  the
preceding  calendar year and of  performance  under this  Agreement or a similar
agreement has been made under such officers'  supervision,  and (ii) to the best
of such officers'  knowledge,  based on such review,  the Servicer has fulfilled
all of its obligations  under this Agreement  throughout such year, or, if there
has been a default in the  fulfillment of any such  obligation,  specifying each
such default known to such officers and the nature and status thereof.

              Section  3.23 ANNUAL  INDEPENDENT  PUBLIC  ACCOUNTANTS'  SERVICING
STATEMENT; FINANCIAL STATEMENTS.

              Not later than November  15th of each calendar year  commencing in
2002, the Servicer, at its expense,  shall cause a nationally recognized firm of
independent  certified  public  accountants  to  furnish to the  Depositor,  the
Unaffiliated Seller, the Class A Certificate  Insurer, the Servicer,  the Rating
Agencies  and the Trustee a report  stating that (i) it has obtained a letter of
representation  regarding  certain  matters from the  management of the Servicer
which includes an assertion that the Servicer has complied with certain  minimum
residential mortgage loan servicing standards,  identified in the Uniform Single
Attestation  Program for Mortgage  Bankers  established by the Mortgage  Bankers
Association of America,  with respect to the servicing of  residential  mortgage
loans during the most recently completed fiscal year and (ii) on the basis of an
examination  conducted by such firm in accordance with standards  established by
the American Institute of Certified Public  Accountants,  such representation is
fairly stated in all material  respects,  subject to such  exceptions  and other
qualifications  that may be  appropriate.  In rendering its report such firm may
rely, as to matters  relating to the direct  servicing of  residential  mortgage
loans by Subservicers, upon comparable reports of firms of independent certified
public accountants rendered on the basis of examinations conducted in accordance
with the same standards  (rendered  within one year of such report) with respect
to those Subservicers.

              Section 3.24 TRUSTEE TO ACT AS SERVICER.

              In the event that the  Servicer  shall for any reason no longer be
the Servicer hereunder (including by reason of an Event of Default), the Trustee
or its successor shall thereupon assume all of the rights and obligations of the
Servicer  hereunder arising thereafter (except that the Trustee shall not be (i)
liable  for  losses of the  Servicer  pursuant  to  Section  3.10 or any acts or
omissions  of the  predecessor  Servicer  hereunder),  (ii)  obligated  to  make
Advances if it is prohibited from doing so by applicable law, (iii) obligated to
effectuate  repurchases or substitutions of Mortgage Loans hereunder,  including
but not limited to repurchases or  substitutions  pursuant to Section 2.03, (iv)
responsible for expenses of the Servicer  pursuant to Section 2.03 or (v) deemed
to have made any representations  and warranties of the Servicer hereunder.  Any
such assumption shall be subject to Section 7.02.

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<PAGE>

              Every  subservicing  agreement  entered into by the Servicer shall
contain a provision  giving the successor  Servicer the option to terminate such
agreement in the event a successor Servicer is appointed.

              If the  Servicer  shall for any  reason no longer be the  Servicer
(including  by  reason  of any  Event of  Default),  the  Trustee  (or any other
successor Servicer) may, at its option, succeed to any rights and obligations of
the  Servicer  under any  subservicing  agreement in  accordance  with the terms
thereof;  provided that the Trustee (or any other successor  Servicer) shall not
incur  any  liability  or have any  obligations  in its  capacity  as  successor
Servicer  under a  subservicing  agreement  arising  prior  to the  date of such
succession  unless it expressly  elects to succeed to the rights and obligations
of the Servicer  thereunder;  and the Servicer  shall not thereby be relieved of
any liability or obligations  under the subservicing  agreement arising prior to
the date of such succession.

              The  Servicer  shall,  upon  request  of the  Trustee,  but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to each  subservicing  agreement  (if any) and the Mortgage  Loans then
being serviced  thereunder and an accounting of amounts collected held by it and
otherwise use its best efforts to effect the orderly and  efficient  transfer of
the subservicing agreement to the assuming party.

              Section 3.25 COMPENSATING INTEREST.

              The Servicer shall remit to the Trustee on each Remittance Date an
amount  from its own funds  equal to the lesser of (a) the  Prepayment  Interest
Shortfall, if any, for such Remittance Date, and (b) the amount of the Servicing
Fee payable to the Servicer for such Remittance Date.

              Section 3.26 CREDIT REPORTING; GRAMM-LEACH-BLILEY ACT.

              (a)    The  Servicer  agrees to  accurately  and fully  report its
borrower  credit files with  respect to the  Mortgage  Loans to all three credit
repositories in a timely manner.

              (b)    The   Servicer   shall   comply   with   Title   V  of  the
Gramm-Leach-Bliley  Act of  1999  and  all  applicable  regulations  promulgated
thereunder,  relating to the Mortgage Loans and the related  borrowers and shall
provide all required notices thereunder prior to the July 1, 2001 effective date
and annually thereafter.

                                   ARTICLE IV

                                DISTRIBUTIONS AND
                            ADVANCES BY THE SERVICER

              Section 4.01 ADVANCES.

              (a)    The amount of P&I  Advances to be made by the  Servicer for
any Remittance Date shall equal,  subject to Section 4.01(c), the sum of (i) the
aggregate  amount of Scheduled  Payments (with each interest portion thereof net
of the related  Servicing Fee), due on the Due Date  immediately  preceding such
Remittance Date in respect of the Mortgage Loans,

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which  Scheduled  Payments  were not received as of the close of business on the
last Business Day of the immediately  preceding  calendar month,  plus (ii) with
respect to each REO Property, which REO Property was acquired during or prior to
the  related  Prepayment  Period  and  as to  which  such  REO  Property  an REO
Disposition did not occur during the related  Prepayment Period, an amount equal
to the excess,  if any, of the Scheduled  Payments  (with each interest  portion
thereof  net of the  related  Servicing  Fee)  that  would  have been due on the
related Due Date in respect of the related  Mortgage Loans,  over the net income
from such REO Property transferred to the Collection Account for distribution on
such Remittance Date.

              (b)    On  the  Remittance  Date,  the  Servicer  shall  remit  in
immediately  available  funds to the  Trustee an amount  equal to the  aggregate
amount of P&I Advances,  if any, to be made in respect of the Mortgage Loans and
REO Properties for the related  Remittance Date either (i) from its own funds or
(ii) from the Collection Account, to the extent of funds held therein for future
distribution  (in which case, it will cause to be made an  appropriate  entry in
the records of Collection Account that Amounts Held For Future Distribution have
been,  as permitted by this Section  4.01,  used by the Servicer in discharge of
any such P&I  Advance) or (iii) in the form of any  combination  of (i) and (ii)
aggregating  the total amount of P&I  Advances to be made by the  Servicer  with
respect to the Mortgage  Loans and REO  Properties.  Any Amounts Held For Future
Distribution  and so used shall be  appropriately  reflected  in the  Servicer's
records and replaced by the Servicer by deposit in the Collection  Account on or
before any future Remittance Date to the extent required.

              (c)    The obligation of the Servicer to make such P&I Advances is
mandatory,  notwithstanding any other provision of this Agreement but subject to
(d)  below,  and,  with  respect to any  Mortgage  Loan or REO  Property,  shall
continue until a Final  Recovery  Determination  in connection  therewith or the
removal thereof from coverage under this Agreement, except as otherwise provided
in this Section.

              (d)    Notwithstanding  anything  herein to the  contrary,  no P&I
Advance or  Servicing  Advance  shall be  required to be made  hereunder  by the
Servicer if such P&I Advance or Servicing  Advance would, if made,  constitute a
Nonrecoverable P&I Advance or Nonrecoverable  Advance.  The determination by the
Servicer  that it has made a  Nonrecoverable  P&I  Advance  or a  Nonrecoverable
Advance or that any proposed P&I Advance or Servicing  Advance,  if made,  would
constitute  a   Nonrecoverable   P&I  Advance  or  a   Nonrecoverable   Advance,
respectively,  shall be evidenced by an  Officers'  Certificate  of the Servicer
delivered to the Trustee.

              (e)    Except as otherwise  provided herein, the Servicer shall be
entitled to reimbursement pursuant to Section 3.11 hereof for Servicing Advances
from recoveries from the related Mortgagor or from all Liquidation  Proceeds and
other  payments or recoveries  (including  Insurance  Proceeds and  Condemnation
Proceeds) with respect to the related Mortgage Loan.

              Section 4.02 PRIORITIES OF DISTRIBUTION.

              (a)    On each  Distribution  Date,  the  Trustee  will  make  the
disbursements  and  transfers  from amounts then on deposit in the  Distribution
Account in the following order of priority:

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<PAGE>

                     (i)    (x)    from the Interest  Amount  Available,  to the
       Class A Certificate  Insurer,  the Premium  Amount and to the Trustee the
       Trustee Fee, in each case for such  Distribution  Date; to the holders of
       each Class of Certificates, in the following order of priority:

                            (y)    from the remaining Interest Amount Available,
       plus in the case of clause (a) below,  the related portion of any Insured
       Payment,

                     (a)    to the Class A Certificates, the Accrued Certificate
              Interest  Distribution  Amount  for  such  Class  and  any  Unpaid
              Interest  Amounts for such Class for such  Distribution  Date,  as
              described in Section 4.02(a);

                     (b)    to the Class A  Certificate  Insurer,  the amount of
              any  Reimbursement  Amount  then owing to it on account of a prior
              drawing relating to interest on the Class A Certificates;

                     (c)    to  the  Class   M-1   Certificates,   the   Accrued
              Certificate  Interest  Distribution  Amount for such Class on such
              Distribution Date;

                     (d)    to  the  Class   M-2   Certificates,   the   Accrued
              Certificate  Interest  Distribution  Amount for such Class on such
              Distribution Date;

                     (e)    to the Class B Certificates, the Accrued Certificate
              Interest  Distribution  Amount for such Class on such Distribution
              Date;

                     (ii)   (A)  on  each   Distribution  Date  (1)  before  the
       Stepdown  Date or (2) with respect to which a Trigger Event is in effect,
       to the  holders of the related  Class or Classes of Offered  Certificates
       then entitled to distributions of principal as set forth below,  from the
       Principal   Remittance   Amount,   an  amount  equal  to  the   Principal
       Distribution Amount in the following order of priority:

                     (a)    to  the  Class  A  Certificates,   until  the  Class
              Certificate Balance thereof is reduced to zero;

                     (b)    to the Class A  Certificate  Insurer,  the amount of
              any  Reimbursement  Amount  then owing to it on account of a prior
              drawing relating to principal on the Class A Certificates; and

                     (c)    sequentially to the Class M-1, Class M-2 and Class B
              Certificates,   in  that  order,   until  the   respective   Class
              Certificate Balances are reduced to zero;

                            (B)    on each  Distribution  Date (1) on and  after
the Stepdown  Date and (2) as long as a Trigger  Event is not in effect,  to the
holders of the related Class or Classes of Offered Certificates then entitled to
distribution of principal, from the Principal Remittance Amount, an amount equal
to, in the aggregate, the Principal Distribution Amount in the following amounts
and order of priority:

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<PAGE>

                     (a)    the lesser of (x) the Principal  Distribution Amount
              and (y) the Class A Principal  Distribution  Amount to the Class A
              Certificates,  until  the Class  Certificate  Balance  thereof  is
              reduced to zero;

                     (b)    the  lesser of (x) the  excess of (i) the  Principal
              Distribution  Amount over (ii) the amount distributed to the Class
              A Certificateholders in clause (ii)(B)(a) above and (y) the amount
              of any Reimbursement  Amount then owing to the Class A Certificate
              Insurer on account of a prior drawing relating to principal on the
              Class A Certificates;

                     (c)    the  lesser of (x) the  excess of (i) the  Principal
              Distribution  Amount over (ii) the amount distributed to the Class
              A Certificateholders in clause (ii)(B)(a) above and to the Class A
              Certificate  Insurer in clause  (ii)(B)(b) above and (y) the Class
              M-1   Principal    Distribution    Amount   to   the   Class   M-1
              Certificateholders,  until the Class  Certificate  Balance thereof
              has been reduced to zero;

                     (d)    the  lesser of (x) the  excess of (i) the  Principal
              Distribution  Amount over (ii) the amount distributed to the Class
              A  Certificateholders  in clause  (ii)(B)(a) above, to the Class A
              Certificate  Insurer in clause  (ii)(B)(b) above, and to the Class
              M-1 Certificates in clause  (ii)(B)(c) above and (y) the Class M-2
              Principal Distribution Amount to the Class M-2 Certificateholders,
              until the Class  Certificate  Balance  thereof has been reduced to
              zero;

                     (e)    the  lesser of (x) the  excess of (i) the  Principal
              Distribution  Amount over (ii) the amount distributed to the Class
              A  Certificateholders  in clause  (ii)(B)(a) above, to the Class A
              Certificate  Insurer in clause  (ii)(B)(b) above, and to the Class
              M-1  Certificates in clause  (ii)(B)(c) above and to the Class M-2
              Certificates  in  clause  (ii)(B)(d)  above  and (y)  the  Class B
              Principal  Distribution Amount to the Class B  Certificateholders,
              until the Class  Certificate  Balance  thereof has been reduced to
              zero;

                     (iii)  any  amount  remaining  after the  distributions  in
       clauses (i) and (ii) above shall be distributed in the following order of
       priority:

                     (a)    to the Class A Certificate Insurer, to the extent of
              any remaining Reimbursement Amount then owing to it;

                     (b)    to the  holders of the Class M-1  Certificates,  any
              Unpaid Interest Amounts for such Class;

                     (c)    to the  holders of the Class M-1  Certificates,  any
              Unpaid Realized Loss Amount for such Class;

                     (d)    to the  holders of the Class M-2  Certificates,  any
              Unpaid Interest Amounts for such Class;

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<PAGE>

                     (e)    to the  holders of the Class M-2  Certificates,  any
              Unpaid Realized Loss Amount for such Class;

                     (f)    to the  holders  of the  Class B  Certificates,  any
              Unpaid Interest Amounts for such Class;

                     (g)    to the  holders  of the  Class B  Certificates,  any
              Unpaid Realized Loss Amount for such Class;

                     (h)    to the Excess  Reserve Fund  Account,  the amount of
              any Basis Risk Payment for such Distribution Date;

                     (i)    from funds on deposit  in the  Excess  Reserve  Fund
              Account,  an amount  equal to any Basis Risk  CarryForward  Amount
              with  respect  to  any   Floating   Rate   Certificate   for  such
              Distribution  Date to the Floating Rate  Certificates  in the same
              order  and  priority  in  which   Accrued   Certificate   Interest
              Distribution   Amount  is   allocated   among  those   Classes  of
              Certificates;

                     (j)    to the  holders  of the  Class X  Certificates,  the
              remainder  of the Class X  Distributable  Amount  not  distributed
              pursuant to Sections 4.02(a)(iii)(a)-(h); and

                     (iv)   to the  holders  of the  Class R  Certificates,  any
       remaining amount.

              (b)    On  each  Distribution   Date,  all  amounts   representing
Prepayment   Charges  from  the  Mortgage  Loans  received  during  the  related
Prepayment   Period  will  be   distributed  to  the  holders  of  the  Class  P
Certificates.

              (c)    On the December 2001, January 2002, February 2002 and March
2002  Distribution  Dates,  the  Trustee  shall  transfer  from the  Capitalized
Interest   Account  to  the  Distribution   Account  the  Capitalized   Interest
Requirement, if any, for such Distribution Date.

              (d)    On  the  Distribution   Date  following  either  the  final
Subsequent  Transfer Date or February 28, 2002  whichever  date is earlier,  any
amounts remaining in the Capitalized Interest Account, after taking into account
the transfers in respect of the Distribution Date described in clause (c) above,
shall be paid to the Unaffiliated Seller.

              (e)    On each Subsequent  Transfer Date, the Unaffiliated  Seller
shall instruct in writing the Trustee to withdraw from the  Pre-Funding  Account
an amount equal to 100% of the  aggregate  Stated  Principal  Balances as of the
related  Subsequent  Cut-Off Date of the  Subsequent  Mortgage Loans sold to the
Trust Fund on such  Subsequent  Transfer Date and pay such amount to or upon the
order of the Unaffiliated  Seller upon  satisfaction of the conditions set forth
in Section  2.01(c)  hereof  with  respect to such  transfer.  The  Trustee  may
conclusively rely on such written instructions from the Unaffiliated Seller.

              (f)    If  the  Pre-Funding   Amount   (exclusive  of  Pre-Funding
Earnings)  has been  reduced to  $100,000  or less by the close of  business  on
January 1, 2002,  or  February  1, 2002 then,  on the  January  25,  2002 or the
February 25, 2002 Distribution Dates, respectively, after

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<PAGE>

giving effect to any  reductions  in the  Pre-Funding  Amount on such date,  the
Trustee shall withdraw from the Pre-Funding  Account on such date and deposit in
the Distribution  Account the amount on deposit in the Pre-Funding Account other
than any Pre-Funding Earnings; if the Pre-Funding Amount has not been reduced to
zero by the close of business on February 28, 2002,  the Trustee shall  withdraw
from the  Pre-Funding  Account  the  amount on deposit  therein,  other than the
Pre-Funding Earnings, and deposit such amount on the March 25, 2002 Distribution
Date into the Distribution Account. Each amount so deposited to the Distribution
Account  pursuant to the preceding  sentence shall be distributed to the Holders
of the Offered Certificates, PRO RATA, based on their relative Class Certificate
Balances  immediately  prior to the  related  Distribution  Date,  as a separate
payment of principal, on the related Distribution Date.

              (g)    On the December 26,  January 25,  February 25 and March 25,
2002 Distribution Dates the Trustee shall transfer from the Pre-Funding  Account
to the Distribution Account the Pre-Funding Earnings, if any, applicable to each
such date.

              (h)    On any Distribution Date, any Relief Act Shortfalls and Net
Prepayment Interest Shortfalls for such Distribution Date will be allocated as a
reduction in the following order:

                     (1)    First,  to the  amount of  interest  payable  to the
                            Class X Certificates; and

                     (2)    Second,  pro rata,  as a  reduction  of the  Accrued
                            Certificate  Interest  Distribution  Amount  for the
                            Class A, Class M and Class B Certificates,  based on
                            the amount of interest to which such  classes  would
                            otherwise be entitled.

              Section 4.03 MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

              (a)    Not later than each  Distribution  Date,  the Trustee shall
make  available to each  Certificateholder,  the Servicer,  the  Depositor,  the
Unaffiliated  Seller,  the Class A Certificate  Insurer and each Rating Agency a
statement setting forth with respect to the related distribution:

                     (i)    the   amount   thereof   allocable   to   principal,
       separately  identifying the aggregate amount of any Principal Prepayments
       and Liquidation Proceeds included therein;

                     (ii)   the amount thereof allocable to interest, any Unpaid
       Interest Amounts  included in such  distribution and any remaining Unpaid
       Interest Amounts after giving effect to such distribution, any Basis Risk
       CarryForward  Amount  for such  Distribution  Date and the  amount of all
       Basis Risk  CarryForward  Amount covered by  withdrawals  from the Excess
       Reserve Fund Account on such Distribution Date;

                     (iii)  if the  distribution to the Holders of such Class of
       Certificates is less than the full amount that would be  distributable to
       such  Holders if there were  sufficient  funds  available  therefor,  the
       amount of the shortfall and the allocation thereof

                                       76
<PAGE>

       as between principal and interest,  including any Basis Risk CarryForward
       Amount not covered by amounts in the Excess Reserve Fund Account;

                     (iv)   the  Class  Certificate  Balance  of each  Class  of
       Certificates after giving effect to the distribution of principal on such
       Distribution Date;

                     (v)    the Pool Stated Principal  Balance for the following
       Distribution Date;

                     (vi)   the amount of the Servicing Fees paid to or retained
       by the Servicer or Subservicer (with respect to the Subservicers,  in the
       aggregate) with respect to such Distribution Date;

                     (vii)  the  Pass-Through   Rate  for  each  such  Class  of
       Certificates with respect to such Distribution Date;

                     (viii) the amount of Advances  included in the distribution
       on such  Distribution  Date and the aggregate amount of Advances reported
       by the  servicer  as  outstanding  as of the  close of  business  on such
       Distribution Date;

                     (ix)   the  number  and   aggregate   Scheduled   Principal
       Balances  of  Mortgage  Loans (1) as to which the  Scheduled  Payment  is
       delinquent  1 to 30  days,  31 to 59  days,  60 to 89 days and 90 or more
       days, (2) as to which the Scheduled  Payment is delinquent 31 to 60 days,
       61 to 90 days and 91 or more days, (3) that have become REO Property, (4)
       that are in foreclosure  and (5) that are in bankruptcy,  in each case as
       of the close of  business  on the last  Business  Day of the  immediately
       preceding month;

                     (x)    For each of the preceding 12 calendar months, or all
       calendar  months since the related  Cut-off Date,  whichever is less, the
       aggregate  dollar  amount  of  the  Scheduled  Payments  (A)  due  on all
       Outstanding  Mortgage  Loans on each of the Due Dates in each such  month
       and (B)  delinquent 60 days or more on each of the Due Dates in each such
       month;

                     (xi)   with respect to any Mortgage Loan that became an REO
       Property during the preceding  calendar month, the loan number and Stated
       Principal  Balance of such  Mortgage  Loan as of the close of business on
       the  Determination  Date preceding such Distribution Date and the date of
       acquisition thereof;

                     (xii)  the total  number and  principal  balance of any REO
       Properties  (and market value,  if available) as of the close of business
       on the Determination Date preceding such Distribution Date;

                     (xiii) whether  a  Trigger   Event  has   occurred  and  is
       continuing  (including  the  calculation  of  thereof  and the  aggregate
       outstanding balance of all 60+ Day Delinquent Loans)

                     (xiv)  the amount on deposit  in the  Excess  Reserve  Fund
       Account (after giving effect to distributions on such Distribution Date);

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<PAGE>

                     (xv)    the  aggregate  amount  of  Applied  Realized  Loss
       Amounts  incurred  during  the  preceding  calendar  month and  aggregate
       Applied Realized Loss Amounts through such Distribution Date;

                     (xvi)   the amount of any Net  Monthly  Excess Cash Flow on
       such   Distribution   Date   and   the   allocation    thereof   to   the
       Certificateholders  with  respect to Applied  Realized  Losses and Unpaid
       Interest Amounts;

                     (xvii)  the Subordinated  Amount and Required  Subordinated
       Amount;

                     (xviii) the  Interest   Remittance  Amount,  the  Principal
       Remittance  Amount and the Prepayment  Charges  remitted by Servicer with
       respect to that Distribution Date;

                     (xix)   the  Pre-Funded  Amount  as of the end of the prior
       Due Period;

                     (xx)    the  amount  of  any  principal  prepayment  on the
       Certificates resulting from the application of unused Pre-Funding Account
       moneys;

                     (xxi)   the  Class A  Deficiency  Amount  and  the  Insured
       Payment for such Distribution Date; and

                     (xxii)  the Reimbursement  Amount immediately prior to such
       Distribution  Date,  and  the  amount  of any  payments  to the  Class  A
       Certificate Insurer on account thereof on such Distribution Date.

              (b)    The  Trustee's   responsibility  for  providing  the  above
statement  is  limited  to the  availability,  timeliness  and  accuracy  of the
information  derived  from the  Servicer  or,  in the case of the  Reimbursement
Amount, from the Class A Certificate Insurer. The Trustee will provide the above
statement  via the  Trustee's  internet  website.  The  Trustee's  website  will
initially   be   located   at   http:\\www-apps.gis.deutsche-bank.com\invr   and
assistance  in using the  website  can be  obtained  by  calling  the  Trustee's
investor  relations desk at  1-800-735-7777.  A paper copy of the statement will
also be made available upon request.

              (c)    Within a  reasonable  period of time  after the end of each
calendar year, the Trustee shall cause to be furnished to each Person who at any
time during the calendar year was a  Certificateholder,  a statement  containing
the  information  set forth in clauses  (a)(i),  (a)(ii)  and  (a)(vii)  of this
Section 4.03  aggregated  for such calendar year or applicable  portion  thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall  be  deemed  to have  been  satisfied  to the  extent  that  substantially
comparable  information  shall  be  provided  by  the  Trustee  pursuant  to any
requirements of the Code as from time to time in effect.

              (d)    Not later than the  Determination  Date, the Servicer shall
furnish to the Trustee a monthly  remittance  advice  statement  containing such
information  as shall be  reasonably  requested  by the  Trustee to provide  the
reports  required by Section 4.03(a) as to the  accompanying  remittance and the
period  ending  on the  close  of  business  on  the  last  Business  Day of the
immediately preceding month.

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<PAGE>

              The  Servicer  shall  furnish to the  Trustee an  individual  loan
accounting  report,  as of the last  Business  Day of each  month,  to  document
Mortgage  Loan  payment  activity on an  individual  Mortgage  Loan basis.  With
respect to each month, the  corresponding  individual loan accounting report (in
electronic  format)  shall be  received by the Trustee no later than the related
Determination Date, which report shall contain the following:

                     (i)    with respect to each Scheduled  Payment,  the amount
       of such remittance allocable to principal (including a separate breakdown
       of any Principal Prepayment,  including the date of such prepayment,  and
       any  prepayment  penalties or premiums,  along with a detailed  report of
       interest on principal  prepayment  amounts  remitted in  accordance  with
       Section 3.25);

                     (ii)   with respect to each Scheduled  Payment,  the amount
       of such remittance allocable to interest and assumption fees;

                     (iii)  the amount of servicing compensation received by the
       Servicer during the prior  distribution  period;

                     (iv)   the  individual  and  aggregate   Stated   Principal
       Balance of the Mortgage Loans;

                     (v)    the  individual  and aggregate  Scheduled  Principal
       Balances of the Mortgage Loans;

                     (vi)   the  aggregate  of any  expenses  reimbursed  to the
       Servicer during the prior  distribution  period pursuant to Section 3.05;
       and

                     (vii)  the  number  and  aggregate   outstanding  principal
       balances of Mortgage Loans (a) delinquent (1) 30 to 59 days, (2) 60 to 89
       days, (3) 90 days or more; (b) as to which foreclosure has commenced; and
       (c) as to which REO Property has been acquired.

              Section  4.04 CERTAIN  MATTERS  RELATING TO THE  DETERMINATION  OF
LIBOR.

              Until all of the LIBOR  Certificates are paid in full, the Trustee
will at all times  retain at least  four  Reference  Banks  for the  purpose  of
determining LIBOR with respect to each Interest Determination Date. The Servicer
initially shall designate the Reference Banks.  Each "REFERENCE BANK" shall be a
leading bank engaged in transactions in Eurodollar deposits in the international
Eurocurrency  market,  shall not control,  be controlled  by, or be under common
control  with,  the Trustee and shall have an  established  place of business in
London.  If any such Reference Bank should be unwilling or unable to act as such
or if the Servicer  should  terminate its  appointment  as Reference  Bank,  the
Servicer shall promptly appoint or cause to be appointed another Reference Bank.
The Trustee shall have no liability or  responsibility to any Person for (i) the
selection of any Reference  Bank for purposes of  determining  LIBOR or (ii) any
inability  to  retain  at  least  four  Reference   Banks  which  is  caused  by
circumstances beyond its reasonable control.

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<PAGE>

              The  Pass-Through  Rate for each Class of LIBOR  Certificates  for
each  Interest  Accrual  Period shall be determined by the Trustee on each LIBOR
Determination  Date so long as the LIBOR  Certificates  are  outstanding  on the
basis of LIBOR and the respective formulae appearing in footnotes  corresponding
to the LIBOR  Certificates  in the table  relating  to the  Certificates  in the
Preliminary   Statement.   The  Trustee   shall  not  have  any   liability   or
responsibility  to  any  Person  for  its  inability,   following  a  good-faith
reasonable effort, to obtain quotations from the Reference Banks or to determine
the arithmetic mean referred to in the definition of LIBOR,  all as provided for
in this Section 4.04 and the definition of LIBOR. The establishment of LIBOR and
each Pass-Through  Rate for the LIBOR  Certificates by the Trustee shall (in the
absence of manifest error) be final,  conclusive and binding upon each Holder of
a Certificate and the Trustee.

              Section 4.05 THE CLASS A INSURANCE POLICY.

              (a)    Within two (2) days  following  each  Remittance  Date, the
Trustee shall determine with respect to the immediately  following  Distribution
Date,  the  amount  to be  on  deposit  in  the  Distribution  Account  on  such
Distribution  Date as a result of the (i) Servicer's  remittance of the Interest
Remittance Amount and the Principal  Remittance Amount on the related Remittance
Date,  and  (ii)  any  transfers  to the  Distribution  Account  made  from  the
Capitalized  Interest  Account and/or the Pre-Funding  Account  relating to such
Distribution  Date pursuant to Section 4.02 hereof,  excluding the amount of any
Insured Payment.

              (b)    If on any Distribution  Date there is a Class A Deficiency,
the  Trustee  shall  complete  a Notice in the form of  Exhibit A to the Class A
Insurance  Policy and submit such notice to the Class A  Certificate  Insurer no
later than 12:00 noon New York City time on the second  Business  Day  preceding
such  Distribution  Date as a claim for an Insured Payment in an amount equal to
such Class A Deficiency.

              (c)    The Trustee shall establish a separate Eligible Account for
the benefit of Holders of the Class A  Certificates  and the Class A Certificate
Insurer referred to herein as the "Class A Insurance Payment Account" over which
the  Trustee  shall have  exclusive  control and sole right of  withdrawal.  The
Trustee  shall  deposit upon receipt any amount paid under the Class A Insurance
Policy in the  Insurance  Payment  Account and  distribute  such amount only for
purposes  of  payment to the Class A  Certificateholders  of the Class A Insured
Amount and such  amount may not be applied  to satisfy  any costs,  expenses  or
liabilities of the Servicer,  the Trustee or the Trust Fund.  Amounts paid under
the Class A Insurance  Policy,  to the extent  needed to pay the Class A Insured
Amount  shall  be  transferred  to  the  Distribution  Account  on  the  related
Distribution  Date  and  disbursed  by  the  Class  A  Trustee  to the  Class  A
Certificateholders  in  accordance  with Section 4.02. It shall not be necessary
for such  payments  to be made by checks  or wire  transfers  separate  from the
checks  or  wire  transfers  used  to pay  other  distributions  to the  Class A
Certificateholders with other funds available to make such payment. However, the
amount of any payment of principal or of interest on the Class A Certificates to
be paid from funds  transferred from the Class A Insurance Payment Account shall
be noted as provided in paragraph (d) below in the  Certificate  Register and in
the statement to be furnished to Holders of the Class A Certificates pursuant to
Section 4.03(a).  Funds held in the Class A Insurance  Payment Account shall not
be invested. Any funds remaining in the Class A Insurance Payment Account on the
first Business Day following a Distribution  Date shall be returned to the Class
A

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<PAGE>

Certificate  Insurer  pursuant  to  the  written  instructions  of the  Class  A
Certificate Insurer by the end of such Business Day.

              (d)    The Trustee  shall keep a complete and  accurate  record of
the amount of interest and principal  paid in respect of any Class A Certificate
from moneys received under the Class A Insurance Policy. The Class A Certificate
Insurer shall have the right to inspect such records at reasonable  times during
normal business hours upon one Business Day's prior notice to the Trustee.

              (e)    In the event that the Trustee has received a certified copy
of an order of the appropriate court that any Insured Payment has been voided in
whole or in part as a preference  payment under  applicable  bankruptcy law, the
Trustee shall so notify the Class A Certificate  Insurer,  shall comply with the
provisions  of the Class A  Insurance  Policy to obtain  payment  by the Class A
Certificate  Insurer of such voided Insured  Payment,  and shall, at the time it
provides notice to the Class A Certificate Insurer, notify, by mail to the Class
A Certificateholders of the affected Certificates that, in the event any Class A
Certificateholder's   Insured   Payment   is  so   recovered,   such   Class   A
Certificateholder  will be entitled to payment pursuant to the Class A Insurance
Policy, a copy of which shall be made available through the Trustee, the Class A
Certificate  Insurer or the Class A Certificate  Insurer's fiscal agent, if any,
and the Trustee shall  furnish to the Class A Certificate  Insurer or its fiscal
agent,  if any, its records  evidencing the payments which have been made by the
Trustee and  subsequently  recovered  from the Class A  Certificateholders,  and
dates on which such payments were made.

              (f)    The Trustee shall  promptly  notify the Class A Certificate
Insurer  of any  proceeding  or  the  institution  of any  action,  of  which  a
Responsible  Officer of the Trustee has actual knowledge,  seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "PREFERENCE  CLAIM") of any distribution  made with respect to
the Class A  Certificates.  Each Class A  Certificateholder,  by its purchase of
Class A  Certificates,  the  Servicer  and the Trustee  agree that,  the Class A
Certificate  Insurer (so long as no Class A Certificate  Insurer Default exists)
may at  any  time  during  the  continuation  of any  proceeding  relating  to a
Preference  Claim  direct  all  matters  relating  to  such  Preference   Claim,
including,  without  limitation,  (i) the  direction  of any appeal of any order
relating to such Preference Claim and (ii) the posting of any surety, supersedes
or performance bond pending any such appeal. In addition and without  limitation
of the  foregoing,  the Class A Certificate  Insurer shall be subrogated to, and
each Class A Certificateholder,  the Trustee hereby delegates and assigns to the
Class A Certificate  Insurer, to the fullest extent permitted by law, the rights
the  Trustee  and each  Class A  Certificateholder  in the  conduct  of any such
Preference Claim, including,  without limitation, all rights of any party to any
adversary  proceeding  or  action  with  respect  to any court  order  issued in
connection with any such Preference Claim.

              (g)    The  Trustee  shall,   upon   retirement  of  the  Class  A
Certificates,  furnish  to the  Class A  Certificate  Insurer  a notice  of such
retirement,  and, upon retirement of the Class A Certificates and the expiration
of the term of the Class A  Insurance  Policy,  surrender  the Class A Insurance
Policy to the Class A Certificate Insurer for cancellation.

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<PAGE>

              Section  4.06  EFFECT  OF  PAYMENTS  BY THE  CLASS  A  CERTIFICATE
INSURER; SUBROGATION.

              Anything herein to the contrary notwithstanding,  any payment with
respect to  principal of or interest on the Class A  Certificates  which is made
with moneys received pursuant to the terms of the Class A Insurance Policy shall
not be considered  payment of the Class A Certificates  from the Trust Fund. The
Depositor,  the  Servicer  and the Trustee  acknowledge,  and each Holder by its
acceptance  of a Class A  Certificate  agrees,  that  without  the  need for any
further  action on the part of the Class A Certificate  Insurer,  the Depositor,
the  Servicer,  the Trustee or the  Certificate  Registrar (a) to the extent the
Class A Certificate Insurer makes payments,  directly or indirectly,  on account
of principal of or interest on the Class A  Certificates  to the Holders of such
Class A Certificates,  the Class A Certificate  Insurer will be fully subrogated
to, and each Class A  Certificateholder,  the  Servicer  and the Trustee  hereby
delegate and assign to the Class A Certificate  Insurer,  to the fullest  extent
permitted  by law,  the rights of such  Holders to receive  such  principal  and
interest from the Trust Fund, including,  without limitation, any amounts due to
the Class A  Certificateholders  in respect of securities law violations arising
from  the  offer  and  sale of the  Class A  Certificates,  and (b) the  Class A
Certificate  Insurer  shall be paid such  amounts  from the  sources  and in the
manner  provided  herein for the payment of such  amounts and as provided in the
Insurance and Indemnity Agreement.  The Trustee and the Servicer shall cooperate
in all respects with any reasonable  request by the Class A Certificate  Insurer
for action to preserve or enforce the Class A  Certificate  Insurer's  rights or
interests  under this  Agreement  without  limiting the rights or affecting  the
interests of the Holders as otherwise set forth herein.

                                    ARTICLE V

                                THE CERTIFICATES

              Section 5.01 THE CERTIFICATES.

              The  Certificates  shall be  substantially  in the forms  attached
hereto as exhibits.  The  Certificates  shall be issuable in registered form, in
the minimum denominations, integral multiples in excess thereof (except that one
Certificate  in each Class may be issued in a different  amount which must be in
excess of the applicable minimum  denomination) and aggregate  denominations per
Class set forth in the Preliminary Statement.

              The Depositor  hereby  directs the Trustee to register the Class X
and the Class P Certificates  as follows:  "Bankers Trust Company of California,
N.A.,  as  Indenture  Trustee on behalf of the  Noteholders  of the CDC Mortgage
Capital  NIM  Trust  2001-HE1N",  and  to  deliver  such  Class  X and  Class  P
Certificates to Bankers Trust Company of California, N.A., as trustee of the NIM
Trust.

              Subject to Section 9.02  respecting the final  distribution on the
Certificates,  on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately  available funds to the account of such holder at a bank
or other entity having appropriate  facilities therefor,  if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related  Record
Date and (ii) such Holder shall hold (A) 100% of the Class  Certificate  Balance
of any Class of

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Certificates  or  (B)  Certificates  of  any  Class  with  aggregate   principal
Denominations  of not less than $1,000,000 or (y) by check mailed by first class
mail to such  Certificateholder  at the address of such holder  appearing in the
Certificate Register.

              The  Certificates   shall  be  executed  by  manual  or  facsimile
signature  on behalf  of the  Trustee  by an  authorized  officer.  Certificates
bearing the manual or facsimile  signatures of individuals who were, at the time
such signatures were affixed,  authorized to sign on behalf of the Trustee shall
bind the  Trustee,  notwithstanding  that such  individuals  or any of them have
ceased to be so  authorized  prior to the  countersignature  and delivery of any
such  Certificates or did not hold such offices at the date of such Certificate.
No  Certificate  shall be entitled to any benefit  under this  Agreement,  or be
valid for any purpose,  unless countersigned by the Trustee by manual signature,
and such countersignature upon any Certificate shall be conclusive evidence, and
the only evidence,  that such  Certificate  has been duly executed and delivered
hereunder.  All Certificates shall be dated the date of their  countersignature.
On the Closing Date, the Trustee shall countersign the Certificates to be issued
at the direction of the Depositor, or any affiliate thereof.

              The  Depositor  shall  provide,  or cause to be  provided,  to the
Trustee  on a  continuous  basis,  an  adequate  inventory  of  Certificates  to
facilitate transfers.

              Section 5.02  CERTIFICATE  REGISTER;  REGISTRATION OF TRANSFER AND
EXCHANGE OF CERTIFICATES.

              (a)    The Trustee  shall  maintain,  or cause to be maintained in
accordance  with the provisions of Section 5.06, a Certificate  Register for the
Trust Fund in which,  subject to the provisions of subsections (b) and (c) below
and to such  reasonable  regulations  as it may  prescribe,  the  Trustee  shall
provide for the  registration of Certificates  and of transfers and exchanges of
Certificates as herein provided.  Upon surrender for registration of transfer of
any  Certificate,  the Trustee  shall  execute and  deliver,  in the name of the
designated  transferee or transferees,  one or more new Certificates of the same
Class and aggregate Percentage Interest.

              At  the  option  of  a  Certificateholder,   Certificates  may  be
exchanged for other  Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest upon surrender of the
Certificates  to be exchanged  at the office or agency of the Trustee.  Whenever
any  Certificates  are so surrendered  for exchange,  the Trustee shall execute,
authenticate,  and deliver the Certificates which the  Certificateholder  making
the exchange is entitled to receive.  Every Certificate presented or surrendered
for  registration  of  transfer or exchange  shall be  accompanied  by a written
instrument of transfer in form  satisfactory to the Trustee duly executed by the
holder thereof or his attorney duly authorized in writing.

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

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              All  Certificates  surrendered  for  registration  of  transfer or
exchange  shall be  cancelled  and  subsequently  destroyed  by the  Trustee  in
accordance with the Trustee's customary procedures.

              (b)    No transfer of a Private  Certificate  shall be made unless
such transfer is made pursuant to an effective  registration statement under the
Securities Act and any applicable  state  securities  laws or is exempt from the
registration  requirements under said Act and such state securities laws. Except
with respect to the transfer of the Class X and Class P Certificates to the NIMs
Trust  on the  Closing  Date,  in the  event  that a  transfer  is to be made in
reliance upon an exemption  from the  Securities  Act and such laws, in order to
assure  compliance with the Securities Act and such laws, the  Certificateholder
desiring to effect  such  transfer  shall  certify to the Trustee in writing the
facts  surrounding the transfer in substantially the form set forth in Exhibit H
(the  "TRANSFEROR  CERTIFICATE")  and either (i) there shall be delivered to the
Trustee a letter in substantially the form of Exhibit I (the "RULE 144A LETTER")
or (ii) there shall be delivered to the Trustee at the expense of the transferor
an Opinion of Counsel that such transfer may be made without  registration under
the  Securities  Act.  The  Depositor  shall  provide to any Holder of a Private
Certificate  and any  prospective  transferee  designated  by any  such  Holder,
information  regarding the related  Certificates and the Mortgage Loans and such
other  information as shall be necessary to satisfy the condition to eligibility
set  forth in Rule  144A(d)(4)  for  transfer  of any such  Certificate  without
registration  thereof  under the  Securities  Act  pursuant to the  registration
exemption  provided by Rule 144A. The Trustee and the Servicer  shall  cooperate
with the  Depositor in providing  the Rule 144A  information  referenced  in the
preceding  sentence,  including  providing  to the  Depositor  such  information
regarding the  Certificates,  the Mortgage Loans and other matters regarding the
Trust Fund as the  Depositor  shall  reasonably  request to meet its  obligation
under the preceding sentence.  Each Holder of a Private Certificate  desiring to
effect such transfer shall,  and does hereby agree to, indemnify the Trustee and
the  Depositor  and the Servicer  against any  liability  that may result if the
transfer  is not so exempt or is not made in  accordance  with such  federal and
state laws.

              Except  with  respect to the  transfer  of the Class X and Class P
Certificates  to  the  NIMs  Trust  on  the  Closing  Date,  no  transfer  of an
ERISA-Restricted  Certificate  shall  be made  unless  the  Trustee  shall  have
received  either (i) a  representation  from the transferee of such  Certificate
acceptable  to and in form and  substance  satisfactory  to the  Trustee (in the
event such Certificate is a Private Certificate or a Residual Certificate,  such
requirement  is  satisfied  only by the  Trustee's  receipt of a  representation
letter  from the  transferee  substantially  in the form of  Exhibit  I), to the
effect that such  transferee  is not an  employee  benefit  plan or  arrangement
subject to Section 406 of ERISA, a plan subject to Section 4975 of the Code or a
plan  subject to any  Federal,  state or local law  ("SIMILAR  LAW")  materially
similar to the foregoing provisions of ERISA or the Code, nor a person acting on
behalf of any such plan or arrangement  nor using the assets of any such plan or
arrangement to effect such transfer, or (ii) if the ERISA-Restricted Certificate
is a  Private  Certificate  other  than a  Residual  Certificate  or a  Class  P
Certificate that has been the subject of an ERISA-Qualifying  Underwriting,  and
the purchaser is an insurance company, a representation that the purchaser is an
insurance  company that is purchasing such  Certificates with funds contained in
an "insurance  company general account" (as such term is defined in Section V(e)
of Prohibited  Transaction  Class  Exemption  95-60 ("PTCE  95-60") and that the
purchase and holding of such  Certificates  are covered under Sections I and III
of PTCE  95-60 or (iii)  in the  case of any such  ERISA-Restricted  Certificate
other than a Residual

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Certificate or Class P Certificate  presented for registration in the name of an
employee benefit plan subject to Title I of ERISA, a plan or arrangement subject
to  Section  4975  of the  Code  (or  comparable  provisions  of any  subsequent
enactments),  or a plan subject to Similar Law, or a trustee of any such plan or
any other person acting on behalf of any such plan or  arrangement or using such
plan's or  arrangement's  assets,  an  Opinion of  Counsel  satisfactory  to the
Trustee and the  Servicer,  which  Opinion of Counsel shall not be an expense of
the Trustee,  the Servicer or the Trust Fund,  addressed to the Trustee,  to the
effect that the purchase or holding of such  ERISA-Restricted  Certificate  will
not result in the assets of the Trust Fund being deemed to be "plan  assets" and
subject  to the  prohibited  transaction  provisions  of  ERISA  and the Code or
similar  violation  of  Similar  Law and will not  subject  the  Trustee  or the
Servicer to any  obligation  in addition to those  expressly  undertaken in this
Agreement or to any  liability.  For purposes of the  preceding  sentence,  with
respect to an ERISA-Restricted  Certificate that is not a Private Certificate or
a Residual  Certificate,  in the event the representation  letter referred to in
the preceding sentence is not furnished,  such representation shall be deemed to
have  been  made  to the  Trustee  by the  transferee's  (including  an  initial
acquiror's) acceptance of the ERISA-Restricted  Certificates.  In the event that
such  representation  is  violated,  or any  attempt  to  transfer  to a plan or
arrangement  subject to Section 406 of ERISA,  a plan subject to Section 4975 of
the Code or a plan subject to Similar  Law, or a person  acting on behalf of any
such plan or  arrangement  or using the assets of any such plan or  arrangement,
without such Opinion of Counsel, such attempted transfer or acquisition shall be
void and of no effect.

              To the extent permitted under  applicable law (including,  but not
limited to,  ERISA),  the Trustee  shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not  permitted  by this  Section  5.02(b) or for making any payments due on such
Certificate  to the Holder  thereof or taking any other  action with  respect to
such Holder under the  provisions of this  Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.

              (c)    Each Person who has or who acquires any Ownership  Interest
in a Residual  Certificate  shall be deemed by the  acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following  provisions,
and the rights of each Person  acquiring  any  Ownership  Interest in a Residual
Certificate are expressly subject to the following provisions:

                     (i)    Each  Person  holding  or  acquiring  any  Ownership
       Interest in a Residual  Certificate  shall be a Permitted  Transferee and
       shall  promptly  notify the Trustee of any change or impending  change in
       its status as a Permitted Transferee.

                     (ii)   No Ownership Interest in a Residual  Certificate may
       be  registered  on the Closing Date or  thereafter  transferred,  and the
       Trustee  shall not  register  the  Transfer of any  Residual  Certificate
       unless,  in addition to the certificates  required to be delivered to the
       Trustee  under  subparagraph  (b)  above,  the  Trustee  shall  have been
       furnished with an affidavit (a "TRANSFER AFFIDAVIT") of the initial owner
       or the proposed transferee in the form attached hereto as Exhibit G.

                     (iii)  Each  Person  holding  or  acquiring  any  Ownership
       Interest in a Residual  Certificate  shall agree (A) to obtain a Transfer
       Affidavit from any other Person

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       to whom such  Person  attempts to Transfer  its  Ownership  Interest in a
       Residual Certificate,  (B) to obtain a Transfer Affidavit from any Person
       for whom such Person is acting as nominee, trustee or agent in connection
       with any Transfer of a Residual  Certificate  and (C) not to Transfer its
       Ownership Interest in a Residual  Certificate or to cause the Transfer of
       an Ownership Interest in a Residual Certificate to any other Person if it
       has actual knowledge that such Person is not a Permitted Transferee.

                     (iv)   Any attempted or purported Transfer of any Ownership
       Interest in a Residual Certificate in violation of the provisions of this
       Section  5.02(c)  shall be  absolutely  null and void and  shall  vest no
       rights in the purported  Transferee.  If any purported  transferee  shall
       become a Holder of a Residual  Certificate in violation of the provisions
       of this Section  5.02(c),  then the last preceding  Permitted  Transferee
       shall be restored to all rights as Holder thereof retroactive to the date
       of  registration  of Transfer of such Residual  Certificate.  The Trustee
       shall  be  under no  liability  to any  Person  for any  registration  of
       Transfer  of a  Residual  Certificate  that is in fact not  permitted  by
       Section  5.02(b) and this Section  5.02(c) or for making any payments due
       on such Certificate to the Holder thereof or taking any other action with
       respect to such Holder under the  provisions of this Agreement so long as
       the  Transfer  was  registered  after  receipt  of the  related  Transfer
       Affidavit,  Transferor  Certificate and the Rule 144A Letter. The Trustee
       shall be  entitled  but not  obligated  to  recover  from any Holder of a
       Residual  Certificate that was in fact not a Permitted  Transferee at the
       time it became a Holder or, at such  subsequent  time as it became  other
       than  a  Permitted  Transferee,   all  payments  made  on  such  Residual
       Certificate at and after either such time. Any such payments so recovered
       by the  Trustee  shall be paid and  delivered  by the Trustee to the last
       preceding Permitted Transferee of such Certificate.

                     (v)    The  Depositor  shall use its best  efforts  to make
       available,  upon  receipt  of  written  request  from  the  Trustee,  all
       information necessary to compute any tax imposed under Section 860E(e) of
       the Code as a result of a Transfer of an Ownership Interest in a Residual
       Certificate to any Holder who is not a Permitted Transferee.

              The restrictions on Transfers of a Residual  Certificate set forth
in this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual  Certificate  may be  deleted)  with  respect to  Transfers
occurring after delivery to the Trustee of an Opinion of Counsel,  which Opinion
of  Counsel  shall  not be an  expense  of the  Trust  Fund,  the  Trustee,  the
Unaffiliated Seller or the Servicer,  to the effect that the elimination of such
restrictions  will not cause the Trust  Fund  hereunder  to fail to qualify as a
REMIC at any  time  that the  Certificates  are  outstanding  or  result  in the
imposition of any tax on the Trust Fund, a Certificateholder  or another Person.
Each  Person  holding  or  acquiring  any  Ownership   Interest  in  a  Residual
Certificate  hereby consents to any amendment of this Agreement which,  based on
an Opinion of Counsel furnished to the Trustee,  is reasonably  necessary (a) to
ensure that the record  ownership of, or any beneficial  interest in, a Residual
Certificate is not transferred,  directly or indirectly, to a Person that is not
a Permitted  Transferee and (b) to provide for a means to compel the Transfer of
a  Residual  Certificate  which  is held  by a  Person  that is not a  Permitted
Transferee to a Holder that is a Permitted Transferee.

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<PAGE>

              (d)    The  preparation  and  delivery  of  all  certificates  and
opinions  referred to above in this Section  5.02 in  connection  with  transfer
shall be at the expense of the parties to such transfers.

              (e)    Except as provided below, the Book-Entry Certificates shall
at all times remain  registered in the name of the Depository or its nominee and
at all times: (i) registration of the Certificates may not be transferred by the
Trustee  except  to  another  Depository;  (ii) the  Depository  shall  maintain
book-entry  records with respect to the  Certificate  Owners and with respect to
ownership and transfers of such  Book-Entry  Certificates;  (iii)  ownership and
transfers of  registration  of the Book-Entry  Certificates  on the books of the
Depository shall be governed by applicable rules  established by the Depository;
(iv) the  Depository  may  collect  its usual and  customary  fees,  charges and
expenses from its Depository  Participants;  (v) the Trustee shall deal with the
Depository,   Depository   Participants  and  indirect  participating  firms  as
representatives  of the Certificate  Owners of the Book-Entry  Certificates  for
purposes of exercising the rights of holders under this Agreement,  and requests
and directions for and votes of such  representatives  shall not be deemed to be
inconsistent if they are made with respect to different  Certificate Owners; and
(vi) the  Trustee  may  rely  and  shall be  fully  protected  in  relying  upon
information   furnished  by  the  Depository  with  respect  to  its  Depository
Participants  and  furnished  by the  Depository  Participants  with  respect to
indirect  participating  firms and persons  shown on the books of such  indirect
participating firms as direct or indirect Certificate Owners.

              All transfers by  Certificate  Owners of  Book-Entry  Certificates
shall be made in accordance  with the  procedures  established by the Depository
Participant  or  brokerage  firm  representing  such  Certificate   Owner.  Each
Depository   Participant   shall  only  transfer   Book-Entry   Certificates  of
Certificate  Owners it  represents  or of  brokerage  firms for which it acts as
agent in accordance with the Depository's normal procedures.

              If (x) (i) the Depository or the Depositor  advises the Trustee in
writing that the Depository is no longer  willing or able to properly  discharge
its  responsibilities  as  Depository,  and (ii) the Trustee or the Depositor is
unable to locate a qualified successor,  (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository or (z) after the  occurrence of an Event of Default,  Certificate
Owners  representing at least 51% of the  Certificate  Balance of the Book-Entry
Certificates  together  advise  the  Trustee  and  the  Depository  through  the
Depository  Participants in writing that the continuation of a book-entry system
through the  Depository  is no longer in the best  interests of the  Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the  occurrence  of any such  event and of the  availability  of  definitive,
fully-registered  Certificates  (the "DEFINITIVE  Certificates")  to Certificate
Owners  requesting the same.  Upon surrender to the Trustee of the related Class
of  Certificates  by the Depository,  accompanied by the  instructions  from the
Depository   for   registration,   the  Trustee   shall  issue  the   Definitive
Certificates.  Neither the  Servicer,  the  Depositor  nor the Trustee  shall be
liable for any delay in delivery of such  instruction and each may  conclusively
rely on, and shall be protected in relying on, such instructions.  The Depositor
shall  provide  the  Trustee  with an  adequate  inventory  of  certificates  to
facilitate  the  issuance  and  transfer of  Definitive  Certificates.  Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed to be imposed upon and
performed  by the  Trustee,  to the  extent  applicable  with  respect  to  such
Definitive Certificates and the Trustee shall recognize the

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Holders  of  the  Definitive   Certificates  as  Certificateholders   hereunder;
PROVIDED,  that the  Trustee  shall  not by  virtue  of its  assumption  of such
obligations  become  liable to any party  for any act or  failure  to act of the
Depository.

              Section 5.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

              If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives  evidence to its  satisfaction of the destruction,  loss or
theft of any  Certificate  and (b)  there is  delivered  to the  Depositor,  the
Servicer,  the Class A  Certificate  Insurer  and the Trustee  such  security or
indemnity as may be required by them to hold each of them harmless, then, in the
absence of notice to the Trustee that such  Certificate  has been  acquired by a
bona fide  purchaser,  the Trustee shall execute,  countersign  and deliver,  in
exchange  for or in lieu  of any  such  mutilated,  destroyed,  lost  or  stolen
Certificate,  a new Certificate of like Class, tenor and Percentage Interest. In
connection with the issuance of any new Certificate under this Section 5.03, the
Trustee may require  the payment of a sum  sufficient  to cover any tax or other
governmental  charge  that may be  imposed  in  relation  thereto  and any other
expenses  (including the fees and expenses of the Trustee) connected  therewith.
Any  replacement   Certificate  issued  pursuant  to  this  Section  5.03  shall
constitute  complete and  indefeasible  evidence of ownership,  as if originally
issued,  whether or not the lost, stolen or destroyed Certificate shall be found
at any time.

              Section 5.04 PERSONS DEEMED OWNERS.

              The Servicer, the Trustee, the Depositor,  the Class A Certificate
Insurer and any agent of the Servicer,  the  Depositor,  the Class A Certificate
Insurer or the  Trustee  may treat the Person in whose name any  Certificate  is
registered  as the  owner  of such  Certificate  for the  purpose  of  receiving
distributions  as  provided  in  this  Agreement  and  for  all  other  purposes
whatsoever,  and neither the Servicer,  the Trustee, the Depositor,  the Class A
Certificate  Insurer nor any agent of the Servicer,  the Depositor,  the Class A
Certificate  Insurer  or the  Trustee  shall be  affected  by any  notice to the
contrary.

              Section  5.05  ACCESS  TO LIST OF  CERTIFICATEHOLDERS'  NAMES  AND
ADDRESSES.

              If three or more  Certificateholders  (a) request such information
in writing from the Trustee,  (b) state that such  Certificateholders  desire to
communicate  with other  Certificateholders  with  respect to their rights under
this  Agreement  or  under  the  Certificates,  and  (c)  provide  a copy of the
communication  which  such  Certificateholders  propose to  transmit,  or if the
Depositor  or  Servicer  shall  request  such  information  in writing  from the
Trustee,  then the Trustee shall,  within ten Business Days after the receipt of
such request,  provide the Depositor, the Servicer or such Certificateholders at
such recipients' expense the most recent list of the  Certificateholders of such
Trust   Fund  held  by  the   Trustee,   if  any.   The   Depositor   and  every
Certificateholder,  by  receiving  and  holding a  Certificate,  agree  that the
Trustee shall not be held  accountable  by reason of the  disclosure of any such
information as to the list of the  Certificateholders  hereunder,  regardless of
the source from which such information was derived.

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              Section 5.06 MAINTENANCE OF OFFICE OR AGENCY.

              The Trustee will maintain or cause to be maintained at its expense
an office or offices or agency or agencies  in New York City where  Certificates
may be  surrendered  for  registration  of  transfer  or  exchange.  The Trustee
initially  designates  its offices for such purposes  located at 123  Washington
Street, New York, New York 10006. The Trustee will give prompt written notice to
the  Certificateholders  of any change in such  location  of any such  office or
agency.

              Section 5.07 RIGHTS OF THE CLASS A CERTIFICATE INSURER TO EXERCISE
RIGHTS OF CLASS A CERTIFICATEHOLDERS.

              By   accepting   its   Class   A   Certificate,   each   Class   A
Certificateholder  agrees  that  unless a Class A  Certificate  Insurer  Default
exists,  the  Class A  Certificate  Insurer  shall be  deemed  to be the Class A
Certificateholders  for all purposes  (other than with respect to the receipt of
payment on the Class A  Certificates)  and shall have the right to exercise  all
rights of the Class A  Certificateholders  under  this  Agreement  and under the
Class  A   Certificates   without   any   further   consent   of  the   Class  A
Certificateholders, including, without limitation:

              (a)    the right to require the Responsible  Parties to repurchase
Mortgage  Loans  pursuant to Section 2.03 hereof to the extent set forth in such
Sections;

              (b)    the right to give  notices  of breach or to  terminate  the
rights and  obligations  of the  Servicer as servicer  pursuant to Section  7.01
hereof;

              (c)    the right to direct the actions of the  Trustee  during the
continuance  of a Servicer  default  pursuant  to Sections  3.24,  7.01 and 7.02
hereof;

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

              (e)    the right to direct  the  Trustee  to  investigate  certain
matters pursuant to Sections 8.01 and 8.02 hereof;

              (f)    the right to remove the Trustee  pursuant  to Section  8.07
hereof;

              (g)    any  rights  or  remedies   expressly  given  the  Class  A
Certificateholders.

              In  addition,  each  Certificateholder  agrees  that,  subject  to
Section 10.11,  unless a Class A Certificate  Insurer Default exists, the rights
specifically  enumerated  above may only be exercised by the  Certificateholders
with the prior written consent of the Class A Certificate Insurer.

              Section  5.08  TRUSTEE TO ACT SOLELY  WITH  CONSENT OF THE CLASS A
CERTIFICATE INSURER.

              Unless a Class A Certificate  Insurer Default exists,  the Trustee
shall not, without the Class A Certificate  Insurer's consent or unless directed
by the Class A Certificate Insurer:

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<PAGE>

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

              (b)    agree to any amendment pursuant to Section 10.01 hereof; or

              (c)    undertake any litigation.

              The Class A  Certificate  Insurer  may, in writing and in its sole
discretion  renounce  all or  any of its  rights  under  this  Agreement  or any
requirement  for the Class A  Certificate  Insurer's  consent  for any period of
time.

              Section 5.09  MORTGAGE  LOANS,  TRUST FUND AND  ACCOUNTS  HELD FOR
BENEFIT OF THE CLASS A CERTIFICATE INSURER.

              (a)    The  Trustee  shall hold the Trust  Fund and the  Custodial
Files for the  benefit  of the  Certificateholders  and the Class A  Certificate
Insurer and all  references  in this  Agreement and in the  Certificates  to the
benefit of Holders of the  Certificates  shall be deemed to include  the Class A
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Class A Certificate Insurer for action to preserve
or enforce the Class A  Certificate  Insurer's  rights or  interests  under this
Agreement  and the Class A  Certificates  unless,  as stated  in an  Opinion  of
Counsel  addressed  to the Trustee  and the Class A  Certificate  Insurer,  such
action  is  adverse  to the  interests  of the  Class  A  Certificateholders  or
diminishes the rights of the Class A  Certificateholders  or imposes  additional
burdens or restrictions on the Class A Certificateholders.

              (b)    The Servicer hereby  acknowledges  and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Class A Certificate Insurer, and all references in this Agreement
to the benefit of or actions on behalf of the Certificateholders shall be deemed
to include the Class A Certificate Insurer.

              Section 5.10 CLASS A CERTIFICATE INSURER DEFAULT.

              Notwithstanding  anything  elsewhere  in this  Agreement or in the
Certificates to the contrary,  if a Class A Certificate  Insurer Default exists,
or if and to the  extent  the Class A  Certificate  Insurer  has  delivered  its
written  renunciation of all of its rights under this Agreement,  all provisions
of this Agreement  which (a) permit the Class A Certificate  Insurer to exercise
rights  of the Class A  Certificateholders,  (b)  restrict  the  ability  of the
Certificateholders,  the  Servicer  or the Trustee to act without the consent or
approval of the Class A Certificate  Insurer,  (c) provide that a particular act
or thing must be acceptable to the Class A Certificate  Insurer,  (d) permit the
Class A  Certificate  Insurer to direct (or otherwise to require) the actions of
the Trustee, the Servicer or the Certificateholders, (e) provide that any action
or omission  taken with the consent,  approval or  authorization  of the Class A
Certificate Insurer shall be authorized hereunder or shall not subject the party
taking or omitting to take such action to any  liability  hereunder or (f) which
have a similar  effect,  shall be of no further force and effect and the Trustee
shall administer the Trust Fund and perform its obligations hereunder solely for
the  benefit  of the  Holders  of the  Certificates.  Nothing  in the  foregoing
sentence,  nor any action taken  pursuant  thereto or in  compliance  therewith,
shall be  deemed  to have  released  the Class A  Certificate  Insurer  from any
obligation   or  liability  it  may  have  to  any  party  or  to  the  Class  A

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Certificateholders hereunder, under any other agreement,  instrument or document
(including,   without  limitation,  the  Class  A  Insurance  Policy)  or  under
applicable law.

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

              Section  6.01  RESPECTIVE  LIABILITIES  OF THE  DEPOSITOR  AND THE
SERVICER.

              The Depositor and the Servicer  shall each be liable in accordance
herewith only to the extent of the  obligations  specifically  and  respectively
imposed upon and undertaken by them herein.

              Section  6.02  MERGER OR  CONSOLIDATION  OF THE  DEPOSITOR  OR THE
SERVICER.

              The  Depositor  and the Servicer will each keep in full effect its
existence,  rights and franchises as a corporation  or federal  savings bank, as
the case may be, under the laws of the United States or under the laws of one of
the states  thereof and will each obtain and  preserve its  qualification  to do
business  as  a  foreign   corporation  in  each   jurisdiction  in  which  such
qualification   is  or  shall  be   necessary   to  protect  the   validity  and
enforceability  of this  Agreement,  or any of the Mortgage Loans and to perform
its respective duties under this Agreement.

              Any Person into which the  Depositor or the Servicer may be merged
or  consolidated,  or any Person  resulting from any merger or  consolidation to
which the Depositor or the Servicer shall be a party,  or any person  succeeding
to the business of the Depositor or the Servicer,  shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder,  without the execution
or  filing  of any paper or any  further  act on the part of any of the  parties
hereto, anything herein to the contrary notwithstanding; PROVIDED, HOWEVER, that
the  successor  or surviving  Person to the Servicer  shall be qualified to sell
mortgage  loans to, and to service  mortgage  loans on behalf of,  Fannie Mae or
FHLMC.

              Section  6.03  LIMITATION  ON  LIABILITY  OF  THE  DEPOSITOR,  THE
SERVICER AND OTHERS.

              Neither the  Depositor,  the Servicer nor any of their  directors,
officers,  employees or agents of the Depositor  shall be under any liability to
the Certificateholders for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement,  or for errors in judgment;
PROVIDED,  HOWEVER,  that this provision  shall not protect the  Depositor,  the
Servicer or any such Person against any breach of  representations or warranties
made by it herein or protect the Depositor or any such Person from any liability
which would otherwise be imposed by reasons of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties  hereunder.  The Depositor and any director,  officer,
employee or agent of the Depositor may rely in good faith on any document of any
kind prima FACIE  properly  executed and submitted by any Person  respecting any
matters arising hereunder. The Depositor and any director,  officer, employee or
agent of the Depositor  shall be indemnified by the Trust Fund and held harmless
against any loss,  liability or expense  incurred in connection  with any audit,
controversy or judicial  proceeding  relating to a governmental taxing authority
or any legal action relating to this Agreement or the  Certificates,  other than
any loss, liability or expense related to any specific Mortgage Loan or Mortgage

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Loans  (except  as any such  loss,  liability  or  expense  shall  be  otherwise
reimbursable  pursuant to this  Agreement)  and any loss,  liability  or expense
incurred by reason of willful misfeasance,  bad faith or gross negligence in the
performance  of  duties  hereunder  or  by  reason  of  reckless   disregard  of
obligations  and  duties  hereunder.  The  Depositor  shall  not  be  under  any
obligation  to appear  in,  prosecute  or defend  any legal  action  that is not
incidental  to its  respective  duties  hereunder  and which in its  opinion may
involve it in any expense or liability;  PROVIDED,  HOWEVER,  that the Depositor
may in its  discretion  undertake any such action that it may deem  necessary or
desirable in respect of this  Agreement and the rights and duties of the parties
hereto and  interests of the Trustee and the  Certificateholders  hereunder.  In
such  event,  the legal  expenses  and costs of such  action  and any  liability
resulting therefrom shall be expenses,  costs and liabilities of the Trust Fund,
and the  Depositor  shall  be  entitled  to be  reimbursed  therefor  out of the
Collection Account.

              Neither the Servicer nor any of the officers,  employees or agents
of the Servicer shall be under any liability to the Trustee or the Depositor for
any action taken or for  refraining  from the taking of any action in good faith
pursuant to this  Agreement;  PROVIDED,  HOWEVER,  that this provision shall not
protect  the  Servicer or any such person  against any breach of  warranties  or
representations  made herein,  or failure to perform its  obligations  in strict
compliance  with the  terms of this  Agreement,  or any  liability  which  would
otherwise be imposed by reason of any breach of the terms and conditions of this
Agreement.  The Servicer and any officer,  employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising  hereunder.  The Servicer
shall not be under any  obligation  to appear in,  prosecute or defend any legal
action which is not  incidental  to its duties to service the Mortgage  Loans in
accordance  with this  Agreement  and which in its opinion may involve it in any
expenses or liability;  PROVIDED,  HOWEVER,  that the Servicer may undertake any
such  action  which  it may deem  necessary  or  desirable  in  respect  to this
Agreement and the rights and duties of the parties  hereto.  In such event,  the
legal  expenses and costs of such action and any liability  resulting  therefrom
shall be expenses,  costs and liabilities for which the Depositor or the Trustee
will be  liable  as set  forth  in this  Agreement,  and the  Servicer  shall be
entitled  to be  reimbursed  therefor  from the  Depositor  or the  Trustee,  as
applicable, upon written demand.

              Section 6.04 LIMITATION ON RESIGNATION OF THE SERVICER.

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

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              Section 6.05  ADDITIONAL  INDEMNIFICATION  BY THE SERVICER;  THIRD
PARTY CLAIMS.

              The  Servicer  shall  indemnify  the  Responsible   Parties,   the
Depositor,  the  Unaffiliated  Seller  and the  Trustee  and hold them  harmless
against any and all claims,  losses,  damages,  penalties,  fines,  forfeitures,
reasonable and necessary legal fees and related costs, judgments,  and any other
costs,  fees and expenses that any of them may sustain in any way related to any
breach by the Servicer, of any of its representations and warranties referred to
in Section  2.03(a) or the  failure of the  Servicer  to perform  its duties and
service  the  Mortgage  Loans  in  strict  compliance  with  the  terms  of this
Agreement.  The Servicer  immediately shall notify the Responsible  Parties, the
Depositor, the Unaffiliated Seller and the Trustee if a claim is made by a third
party with respect to this  Agreement or the  Mortgage  Loans,  assume (with the
prior  written  consent  of  the  Responsible   Parties,   the  Depositor,   the
Unaffiliated  Seller and the  Trustee) the defense of any such claim and pay all
expenses in connection  therewith,  including  counsel  fees,  and promptly pay,
discharge and satisfy any judgment or decree which may be entered  against it or
any Responsible Party, the Depositor,  the Unaffiliated Seller or the Trustee in
respect of such claim.

                                   ARTICLE VII

                                     DEFAULT

              Section 7.01 EVENTS OF DEFAULT.

              "EVENT OF DEFAULT,"  wherever  used  herein,  means any one of the
following events:

              (a)    any  failure by the  Servicer  to remit to the  Trustee any
payment  required to be made under the terms of this Agreement  which  continues
unremedied  for a period of one Business  Day after the date upon which  written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Depositor,  by the Class A Certificate  Insurer or by the
Trustee or to the Trustee by Certificateholders  evidencing percentage interests
of at least 25% in the Certificates; or

              (b)    failure  on the part of the  Servicer  duly to  observe  or
perform in any material  respect any other of the covenants or agreements on the
part of the Servicer set forth in this Agreement which continues  unremedied for
a period of forty-five days (except that such number of days shall be fifteen in
the case of a failure to pay any premium for any insurance policy required to be
maintained  under  this  Agreement)  after the  earlier of (i) the date on which
written  notice of such failure,  requiring the same to be remedied,  shall have
been given to the Servicer by the Depositor, by the Class A Certificate Insurer,
or by the  Trustee,  or to the  Trustee by  Certificateholders  of  Certificates
evidencing  percentage  interests of at least 25% in the  Certificates  and (ii)
actual knowledge of such failure by a Servicing Officer of the Servicer; or

              (c)    a  decree  or order of a court  or  agency  or  supervisory
authority  having  jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency,  bankruptcy,  readjustment of debt, marshalling
of assets and  liabilities  or similar  proceedings,  or for the  winding-up  or
liquidation  of its affairs,  shall have been  entered  against the Servicer and

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such decree or order shall have remained in force undischarged or unstayed for a
period of sixty days; or

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

              (e)    the  Servicer  shall admit in writing its  inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable  insolvency or  reorganization  statute,  make an assignment  for the
benefit of its creditors, or voluntarily suspend payment of its obligations;

              (f)    any  failure by the  Servicer of the  Servicer  Termination
Test; or

              (g)    any failure of the  Servicer to make any P&I Advance on any
Remittance  Date required to be made from its own funds pursuant to Section 4.01
which  continues  unremedied  for one Business  Day  immediately  following  the
Remittance Date; or

              (h)    A breach of any representation and warranty of the Servicer
referred to in Section  2.03(a),  which  materially  and  adversely  affects the
interests of the  Certificateholders and which continues unremedied for a period
of thirty days after the date upon which written  notice of such breach is given
to the Servicer by the Trustee,  by the Class A Certificate  Insurer,  or by the
Depositor,  or to the Trustee by Certificateholders  entitled to at least 25% of
the Voting Rights in the Certificates.

              If an Event of Default  described  in clauses  (a)  through (h) of
this Section 7.01 shall occur, then, and in each and every such case, so long as
such Event of Default shall not have been  remedied,  the Trustee may, or at the
direction of the Class A Certificate Insurer, or of Holders holding at least 51%
of the Voting Rights,  the Trustee  shall,  by notice in writing to the Servicer
(with a copy to each Rating Agency), terminate all of the rights and obligations
of the Servicer  under this  Agreement and in and to the Mortgage  Loans and the
proceeds  thereof,  other  than its  rights  as a  Certificateholder  hereunder;
PROVIDED, HOWEVER, that the Trustee shall not be required to give written notice
to the Servicer of the  occurrence  of an Event of Default  described in clauses
(b) through (h) of this Section 7.01 unless and until a  Responsible  Officer of
the Trustee has actual  knowledge of the occurrence of such an Event of Default.
On and after the receipt by the Servicer of such written  notice,  all authority
and power of the Servicer hereunder,  whether with respect to the Mortgage Loans
or otherwise, shall pass to and be vested in the Trustee. The Trustee shall make
any P&I  Advance  which the  Servicer  failed to make  subject to Section  4.01,
whether or not the obligations of the Servicer have been terminated  pursuant to
this  Section.  The Trustee is hereby  authorized  and  empowered to execute and
deliver, on behalf of the Servicer,  as  attorney-in-fact or otherwise,  any and
all documents and other  instruments,  and to do or accomplish all other acts or
things  necessary  or  appropriate  to effect  the  purposes  of such  notice of
termination,  whether to complete the transfer and  endorsement or assignment of
the  Mortgage  Loans and  related  documents,  or  otherwise.  Unless  expressly
provided in such written notice, no such termination shall affect any obligation
of the  Servicer to pay amounts  owed  pursuant to Article  VIII.  The  Servicer
agrees to  cooperate  with the  Trustee  in  effecting  the

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termination of the Servicer's responsibilities and rights hereunder,  including,
without limitation,  the transfer to the Trustee of all cash amounts which shall
at the time be credited to the  Collection  Account,  or  thereafter be received
with respect to the Mortgage Loans.

              Notwithstanding  any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a  Scheduled  Payment  on a  Mortgage  Loan which was due prior to the notice
terminating  such Servicer's  rights and  obligations as Servicer  hereunder and
received  after such notice,  that portion  thereof to which such Servicer would
have been entitled  pursuant to Sections 3.11, and any other amounts  payable to
such Servicer  hereunder the entitlement to which arose prior to the termination
of its activities hereunder.

              Section 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

              On  and  after  the  time  the  Servicer   receives  a  notice  of
termination  pursuant to Section 3.24 or Section 7.01, the Trustee shall, unless
the Class A  Certificate  Insurer  shall  have  named an  alternative  successor
Servicer  and given  written  notice  thereof to the Trustee of at least 30 days
prior to the  effective  date of the transfer of  servicing  to such  successor,
subject to and to the extent  provided in Section  3.05, be the successor to the
Servicer in its capacity as servicer under this  Agreement and the  transactions
set  forth  or   provided   for   herein   and  shall  be  subject  to  all  the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and  provisions  hereof and applicable law including the obligation
to make P&I  Advances  or  Servicing  Advances  pursuant  to  Section  4.01.  As
compensation  therefor,  the Trustee shall be entitled to all funds  relating to
the Mortgage  Loans that the Servicer  would have been entitled to charge to the
Collection Account or Distribution  Account if the Servicer had continued to act
hereunder  including,  if the  Servicer was  receiving  the  Servicing  Fee, the
Servicing Fee and the income on  investments  or gain related to the  Collection
Account and Distribution Account.

              Notwithstanding  the  foregoing,  if the  Trustee  has  become the
successor to the Servicer in accordance  with Section 7.01,  the Trustee may, if
it shall be unwilling to so act, or shall, if it is prohibited by applicable law
from making P&I Advances and Servicing  Advances  pursuant to Section 4.01 or if
it is  otherwise  unable to so act,  appoint,  or petition a court of  competent
jurisdiction to appoint, any established mortgage loan servicing institution the
appointment  of which does not adversely  affect the then current  rating of the
Certificates by each Rating Agency,  as the successor to the Servicer  hereunder
in the  assumption  of  all or any  part  of  the  responsibilities,  duties  or
liabilities of the Servicer hereunder. Any successor to the Servicer shall be an
institution  which is a Fannie Mae and FHLMC  approved  seller/servicer  in good
standing,  which has a net worth of at least  $30,000,000,  which is  willing to
service the Mortgage  Loans and which executes and delivers to the Depositor and
the Trustee an agreement accepting such delegation and assignment, containing an
assumption  by such  Person of the  rights,  powers,  duties,  responsibilities,
obligations  and  liabilities  of the Servicer  (other than  liabilities  of the
Servicer  under Section 6.03 incurred prior to termination of the Servicer under
Section  7.01),  with  like  effect  as if  originally  named as a party to this
Agreement;  PROVIDED that each Rating Agency acknowledges that its rating of the
Certificates in effect  immediately prior to such assignment and delegation will
not be  qualified or reduced,  as a result of such  assignment  and  delegation.
Pending  appointment  of a successor  to the  Servicer  hereunder,  the Trustee,
unless  the  Trustee is  prohibited  by law from so  acting,  shall,  subject to
Section 3.05, act in such

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capacity as  hereinabove  provided.  In  connection  with such  appointment  and
assumption,  the Trustee may make such arrangements for the compensation of such
successor  out of  payments  on Mortgage  Loans as it and such  successor  shall
agree;  PROVIDED,  HOWEVER,  that no such compensation shall be in excess of the
Servicing  Fee Rate and  amounts  paid to the  Servicer  from  investments.  The
Trustee  and such  successor  shall  take  such  action,  consistent  with  this
Agreement, as shall be necessary to effectuate any such succession.  Neither the
Trustee  nor any other  successor  servicer  shall be  deemed  to be in  default
hereunder  by  reason  of any  failure  to make,  or any  delay in  making,  any
distribution  hereunder or any portion thereof or any failure to perform, or any
delay in performing,  any duties or responsibilities  hereunder,  in either case
caused by the failure of the  Servicer  to deliver or  provide,  or any delay in
delivering or providing, any cash, information, documents or records to it.

              Any successor to the Servicer as servicer shall give notice to the
Mortgagors of such change of servicer and shall,  during the term of its service
as  servicer,  maintain  in force the policy or  policies  that the  Servicer is
required to maintain pursuant to Section 6.05.

              Section 7.03 NOTIFICATION TO CERTIFICATEHOLDERS.

              (a)    Upon any  termination  of or  appointment of a successor to
the  Servicer,   the  Trustee  shall  give  prompt  written  notice  thereof  to
Certificateholders, the Class A Certificate Insurer, the Unaffiliated Seller and
to each Rating Agency.

              (b)    Within  60  days  after  the  occurrence  of any  Event  of
Default, the Trustee shall transmit by mail to all Certificateholders, the Class
A Certificate  Insurer, the Unaffiliated Seller and each Rating Agency notice of
each such Event of Default hereunder known to the Trustee,  unless such Event of
Default shall have been cured or waived.

                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

              Section 8.01 DUTIES OF THE TRUSTEE.

              The  Trustee,  before the  occurrence  of an Event of Default  and
after  the  curing  of all  Events  of  Default  that may have  occurred,  shall
undertake  to perform such duties and only such duties as are  specifically  set
forth in this  Agreement.  In case an Event of Default has  occurred and remains
uncured,  the Trustee shall  exercise such of the rights and powers vested in it
by this  Agreement,  and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.

              The  Trustee,  upon  receipt  of  all  resolutions,  certificates,
statements,  opinions, reports, documents, orders or other instruments furnished
to the Trustee that are  specifically  required to be furnished  pursuant to any
provision of this Agreement shall examine them to determine  whether they are in
the form required by this  Agreement.  The Trustee shall not be responsible  for
the  accuracy or content of any  resolution,  certificate,  statement,  opinion,
report, document, order, or other instrument.

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<PAGE>

              No provision of this  Agreement  shall be construed to relieve the
Trustee from liability for its own negligent  action,  its own negligent failure
to act or its own willful misconduct.

              Unless an Event of Default  known to the Trustee has  occurred and
is continuing,

              (a)    the  duties  and   obligations  of  the  Trustee  shall  be
determined solely by the express provisions of this Agreement, the Trustee shall
not be  liable  except  for  the  performance  of  the  duties  and  obligations
specifically  set forth in this Agreement,  no implied  covenants or obligations
shall be read into this  Agreement  against  the  Trustee,  and the  Trustee may
conclusively  rely, as to the truth of the statements and the correctness of the
opinions expressed  therein,  upon any certificates or opinions furnished to the
Trustee and conforming to the  requirements  of this Agreement which it believed
in good  faith to be  genuine  and to have  been  duly  executed  by the  proper
authorities respecting any matters arising hereunder;

              (b)    the  Trustee  shall not be liable for an error of  judgment
made in good faith by a  Responsible  Officer  or  Responsible  Officers  of the
Trustee,  unless  it is  finally  proven  that  the  Trustee  was  negligent  in
ascertaining the pertinent facts; and

              (c)    the Trustee  shall not be liable with respect to any action
taken,  suffered,  or omitted to be taken by it in good faith in accordance with
the direction of the Class A Certificate  Insurer, or of Holders of Certificates
evidencing  not less than 25% of the Voting Rights of  Certificates  relating to
the  time,  method,  and  place of  conducting  any  proceeding  for any  remedy
available to the Trustee,  or exercising  any trust or power  conferred upon the
Trustee under this Agreement.

              Section 8.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.

              Except as otherwise provided in Section 8.01:

              (a)    the  Trustee  may  request  and  rely  upon  and  shall  be
protected in acting or  refraining  from acting upon any  resolution,  Officer's
Certificate,  certificate  of  auditors  or any  other  certificate,  statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document  believed by it to be genuine and to have been signed or
presented  by the  proper  party  or  parties  and  the  Trustee  shall  have no
responsibility  to ascertain or confirm the  genuineness of any signature of any
such party or parties;

              (b)    the Trustee may consult with counsel, financial advisers or
accountants  and  the  advice  of  any  such  counsel,   financial  advisers  or
accountants and any Opinion of Counsel shall be full and complete  authorization
and  protection  in  respect of any action  taken or  suffered  or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;

              (c)    the  Trustee  shall not be  liable  for any  action  taken,
suffered or omitted by it in good faith and believed by it to be  authorized  or
within the discretion or rights or powers conferred upon it by this Agreement;

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              (d)    the  Trustee  shall not be bound to make any  investigation
into the facts or  matters  stated in any  resolution,  certificate,  statement,
instrument,  opinion, report, notice, request, consent, order, approval, bond or
other paper or  document,  unless  requested  in writing so to do by the Class A
Certificate Insurer, or by Holders of Certificates  evidencing not less than 25%
of the Voting Rights allocated to each Class of Certificates;

              (e)    the  Trustee  may  execute  any of  the  trusts  or  powers
hereunder  or perform  any duties  hereunder  either  directly  or by or through
agents,  accountants or attorneys and the Trustee shall not be  responsible  for
any misconduct or negligence on the part of any agents, accountants or attorneys
appointed with due care by it hereunder;

              (f)    the Trustee shall not be required to risk or expend its own
funds or otherwise  incur any financial  liability in the  performance of any of
its duties or in the  exercise  of any of its rights or powers  hereunder  if it
shall have  reasonable  grounds for  believing  that  repayment of such funds or
adequate indemnity against such risk or liability is not assured to it;

              (g)    the  Trustee  shall  not be  liable  for  any  loss  on any
investment  of funds  pursuant  to this  Agreement  (other than as issuer of the
investment security);

              (h)    the  Trustee  shall not be deemed to have  knowledge  of an
Event of Default until a Responsible  Officer of the Trustee shall have received
written notice thereof; and

              (i)    the Trustee shall be under no obligation to exercise any of
the trusts,  rights or powers  vested in it by this  Agreement or to  institute,
conduct or defend any litigation hereunder or in relation hereto at the request,
order or direction of any of the Certificateholders, pursuant to this Agreement,
unless such  Certificateholders  shall have  offered to the  Trustee  reasonable
security or indemnity  satisfactory to the Trustee  against the costs,  expenses
and liabilities which may be incurred therein or thereby.

              Section  8.03  TRUSTEE  NOT LIABLE FOR  CERTIFICATES  OR  MORTGAGE
LOANS.

              The recitals  contained  herein and in the  Certificates  shall be
taken  as  the   statements  of  the  Depositor  and  the  Trustee   assumes  no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of the  Certificates  or of any
Mortgage  Loan or  related  document  other than with  respect to the  Trustee's
execution and  countersignature  of the  Certificates.  The Trustee shall not be
accountable  for the use or  application by the Depositor or the Servicer of any
funds paid to the Depositor or the Servicer in respect of the Mortgage  Loans or
deposited in or withdrawn  from the  Collection  Account by the Depositor or the
Servicer.

              The Trustee shall have no  responsibility  for filing or recording
any financing or  continuation  statement in any public office at any time or to
otherwise  perfect or maintain the  perfection of any security  interest or lien
granted to it  hereunder  (unless  the Trustee  shall have become the  successor
Servicer).

              The  Trustee  executes  the  Certificates  not in  its  individual
capacity but solely as Trustee of the Trust Fund created by this  Agreement,  in
the  exercise  of the powers and  authority  conferred  and vested in it by this
Agreement. Each of the undertakings and agreements made on

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the part of the Trustee on behalf of the Trust Fund in the  Certificates is made
and  intended not as a personal  undertaking  or agreement by the Trustee but is
made and intended for the purpose of binding only the Trust Fund.

              Section 8.04 TRUSTEE MAY OWN CERTIFICATES.

              The Trustee in its individual or any other capacity may become the
owner or pledgee  of  Certificates  with the same  rights as it would have if it
were not the Trustee.

              Section 8.05 TRUSTEE'S FEES AND EXPENSES.

              As  compensation  for its  activities  under this  Agreement,  the
Trustee may withdraw from the Distribution Account on each Distribution Date the
Trustee Fee for the  Distribution  Date. The Trustee and any director,  officer,
employee,  or agent of the Trustee shall be indemnified by the Servicer  against
any loss, liability, or expense (including reasonable attorney's fees) resulting
from any error in any tax or  information  return  prepared  by the  Servicer or
incurred in connection with any claim or legal action relating to

              (a)    this Agreement,

              (b)    the Certificates, or

              (c)    the  performance of any of the Trustee's  duties under this
                     Agreement,

                     other than any loss, liability, or expense incurred because
of willful  misfeasance,  bad faith,  or negligence in the performance of any of
the Trustee's  duties under this  Agreement.  This  indemnity  shall survive the
termination of this Agreement or the resignation or removal of the Trustee under
this Agreement.

              The Trustee shall not be entitled to payment or reimbursement from
the Unaffiliated Seller for any routine ongoing expenses incurred by the Trustee
in the  ordinary  course of its duties as Trustee,  Registrar,  or paying  agent
under  this  Agreement  or for any  other  expenses,  including  indemnification
payments.

              Section 8.06 ELIGIBILITY REQUIREMENTS FOR THE TRUSTEE.

              The  Trustee  hereunder  shall at all  times be a  corporation  or
association organized and doing business under the laws of a state or the United
States of  America,  authorized  under  such laws to  exercise  corporate  trust
powers,  having a combined capital and surplus of at least $50,000,000,  subject
to supervision  or  examination by federal or state  authority and with a credit
rating  which  would not cause  either of the Rating  Agencies  to reduce  their
respective  then current  ratings of the  Certificates  (or having provided such
security  from  time  to time as is  sufficient  to  avoid  such  reduction)  as
evidenced in writing by each Rating Agency.  If such  corporation or association
publishes  reports of  condition  at least  annually,  pursuant to law or to the
requirements of the aforesaid  supervising or examining authority,  then for the
purposes  of  this  Section  8.06  the  combined  capital  and  surplus  of such
corporation  or  association  shall be deemed  to be its  combined  capital  and
surplus as set forth in its most recent  report of  condition so  published.  In
case at any time the Trustee shall cease to be eligible in accordance  with this

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Section 8.06,  the Trustee shall resign  immediately  in the manner and with the
effect  specified in Section 8.07. The entity serving as Trustee may have normal
banking and trust  relationships  with the Depositor  and its  affiliates or the
Servicer and its affiliates;  provided,  however,  that such entity cannot be an
affiliate of the Depositor,  the Unaffiliated  Seller or the Servicer other than
the Trustee in its role as successor to the Servicer.

              Section 8.07 RESIGNATION AND REMOVAL OF THE TRUSTEE.

              The  Trustee  may at any time  resign and be  discharged  from the
trusts hereby  created by giving written notice of resignation to the Depositor,
the Servicer,  the Class A Certificate  Insurer,  the Unaffiliated  Seller, each
Rating  Agency not less than 60 days before the date  specified  in such notice,
when,  subject  to  Section  8.08,  such  resignation  is to  take  effect,  and
acceptance by a successor  trustee in  accordance  with Section 8.08 meeting the
qualifications  set forth in Section 8.06. If no successor  trustee meeting such
qualifications shall have been so appointed and have accepted appointment within
30 days after the giving of such notice or  resignation,  the resigning  Trustee
may  petition  any court of  competent  jurisdiction  for the  appointment  of a
successor trustee.

              If  at  any  time  the  Trustee  shall  cease  to be  eligible  in
accordance  with  Section 8.06 and shall fail to resign  after  written  request
thereto by the Depositor,  or if at any time the Trustee shall become  incapable
of acting,  or shall be adjudged as bankrupt or insolvent,  or a receiver of the
Trustee or of its property shall be appointed,  or any public officer shall take
charge or control of the  Trustee or of its  property or affairs for the purpose
of rehabilitation, conservation or liquidation, or a tax is imposed with respect
to the Trust Fund by any state in which the Trustee or the Trust Fund is located
and the  imposition  of such  tax  would  be  avoided  by the  appointment  of a
different trustee, then the Depositor or the Servicer may remove the Trustee and
appoint a successor  trustee  reasonably  acceptable  to the Class A Certificate
Insurer  by  written  instrument,  in  triplicate,  one copy of  which  shall be
delivered to the Trustee, one copy to the Servicer and one copy to the successor
trustee.

              The Class A  Certificate  Insurer or the  Holders of  Certificates
entitled to at least 51% of the Voting Rights may at any time remove the Trustee
and  appoint a  successor  trustee  by written  instrument  or  instruments,  in
triplicate,  signed by such Holders or their  attorneys-in-fact duly authorized,
one complete set of which shall be  delivered  by the  successor  Trustee to the
Servicer, one complete set to the Trustee so removed and one complete set to the
successor so appointed. The successor trustee shall notify each Rating Agency of
any removal of the Trustee.

              Any  resignation  or removal of the Trustee and  appointment  of a
successor  trustee  pursuant to this Section 8.07 shall  become  effective  upon
acceptance of appointment by the successor trustee as provided in Section 8.08.

              Section 8.08 SUCCESSOR TRUSTEE.

              Any successor  trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and  the  Servicer  an  instrument  accepting  such  appointment  hereunder  and
thereupon the  resignation  or removal of the  predecessor  trustee shall become
effective and such successor trustee, without any further

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act, deed or conveyance,  shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder,  with the like effect as if
originally  named as trustee  herein.  The  Depositor,  the Class A  Certificate
Insurer, the Servicer and the predecessor trustee shall execute and deliver such
instruments  and do such other  things as may  reasonably  be required  for more
fully and certainly  vesting and  confirming  in the successor  trustee all such
rights, powers, duties, and obligations.

              No successor trustee shall accept  appointment as provided in this
Section  8.08 unless at the time of its  acceptance,  the  successor  trustee is
eligible under Section 8.06 and its  appointment  does not adversely  affect the
then current rating of the Certificates.

              Upon acceptance of appointment by a successor  trustee as provided
in this Section 8.08, the Depositor  shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice  within 10 days after  acceptance  of  appointment  by the successor
trustee,  the  successor  trustee  shall  cause such  notice to be mailed at the
expense of the Depositor.

              Section 8.09 MERGER OR CONSOLIDATION OF THE TRUSTEE.

              Any corporation  into which the Trustee may be merged or converted
or with  which it may be  consolidated  or any  corporation  resulting  from any
merger,  conversion or  consolidation  to which the Trustee shall be a party, or
any  corporation  succeeding  to the  business  of  the  Trustee,  shall  be the
successor of the Trustee  hereunder,  provided  that such  corporation  shall be
eligible  under  Section  8.06  without the  execution or filing of any paper or
further act on the part of any of the  parties  hereto,  anything  herein to the
contrary notwithstanding.

              Section 8.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

              Notwithstanding  any other  provisions of this  Agreement,  at any
time, for the purpose of meeting any legal  requirements of any  jurisdiction in
which any part of the Trust Fund or property  securing any Mortgage  Note may at
the time be located,  the Servicer and the Trustee acting jointly shall have the
power and shall  execute  and  deliver  all  instruments  to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons,  in such capacity and for the
benefit  of the  Certificateholders,  such  title to the Trust  Fund or any part
thereof,  whichever is applicable,  and, subject to the other provisions of this
Section  8.10,  such  powers,  duties,  obligations,  rights  and  trusts as the
Servicer and the Trustee may  consider  appropriate.  If the Servicer  shall not
have  joined in such  appointment  within 15 days  after the  receipt by it of a
request to do so, or in the case an Event of Default  shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment.  No
co-trustee or separate trustee  hereunder shall be required to meet the terms of
eligibility  as a  successor  trustee  under  Section  8.06  and  no  notice  to
Certificateholders  of the  appointment  of any  co-trustee or separate  trustee
shall be required under Section 8.08.

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

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              (a)    To the extent  necessary to effectuate the purposes of this
Section 8.10, all rights,  powers,  duties and obligations  conferred or imposed
upon the Trustee,  except for the obligation of the Trustee under this Agreement
to advance funds on behalf of the  Servicer,  shall be conferred or imposed upon
and  exercised  or  performed  by the  Trustee  and  such  separate  trustee  or
co-trustee jointly (it being understood that such separate trustee or co-trustee
is not  authorized to act separately  without the Trustee  joining in such act),
except  to the  extent  that  under  any law of any  jurisdiction  in which  any
particular act or acts are to be performed  (whether as Trustee  hereunder or as
successor  to the  Servicer  hereunder),  the Trustee  shall be  incompetent  or
unqualified  to perform such act or acts,  in which event such  rights,  powers,
duties and obligations  (including the holding of title to the applicable  Trust
Fund or any portion  thereof in any such  jurisdiction)  shall be exercised  and
performed  singly by such  separate  trustee  or  co-trustee,  but solely at the
direction of the Trustee;

              (b)    No  trustee  hereunder  shall  be  held  personally  liable
because  of any  act or  omission  of  any  other  trustee  hereunder  and  such
appointment  shall not, and shall not be deemed to, constitute any such separate
trustee or co-trustee as agent of the Trustee;

              (c)    The Trustee may at any time  accept the  resignation  of or
remove any separate trustee or co-trustee; and

              (d)    The Servicer,  and not the Trustee, shall be liable for the
payment of reasonable  compensation,  reimbursement and  indemnification  to any
such separate trustee or co-trustee.

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

              Any separate  trustee or co-trustee  may, at any time,  constitute
the Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not  prohibited  by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name.  If any separate  trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties,  rights,  remedies  and trusts shall vest in and be exercised by the
Trustee,  to the extent  permitted by law,  without the  appointment of a new or
successor trustee.

              Section 8.11 TAX MATTERS.

              It is  intended  that the assets  with  respect to which any REMIC
election  pertaining  to the  Trust  Fund is to be  made,  as set  forth  in the
Preliminary  Statement,  shall  constitute,  and that  the  conduct  of  matters
relating to such assets shall be such as to qualify such assets as, a

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"real estate mortgage  investment  conduit" as defined in and in accordance with
the REMIC  Provisions.  In furtherance of such intention,  the Trustee covenants
and agrees  that it shall act as agent (and the Trustee is hereby  appointed  to
act as agent) on behalf of any the REMIC and that in such capacity it shall:

              (a)    prepare  and file in a timely  manner,  a U.S.  Real Estate
Mortgage  Investment  Conduit Income Tax Return (Form 1066 or any successor form
adopted by the Internal  Revenue Service) and prepare and file with the Internal
Revenue  Service and  applicable  state or local tax  authorities  income tax or
information returns for each taxable year with respect to any REMIC described in
the Preliminary  Statement  containing such  information and at the times and in
the  manner  as may be  required  by the  Code  or  state  or  local  tax  laws,
regulations,   or  rules,  and  furnish  to  Certificateholders  the  schedules,
statements  or  information  at such times and in such manner as may be required
thereby;

              (b)    within  thirty  days of the  Closing  Date,  furnish to the
Internal  Revenue  Service on Forms 8811 or as otherwise  may be required by the
Code,  the name,  title,  address,  and telephone  number of the person that the
holders of the  Certificates may contact for tax information  relating  thereto,
together with such  additional  information as may be required by such Form, and
update such information at the time or times in the manner required by the Code;

              (c)    make an election  that each of the Lower Tier REMIC and the
Upper Tier REMIC be treated as a REMIC on the  federal  tax return for its first
taxable year (and, if necessary, under applicable state law);

              (d)    prepare  and forward to the  Certificateholders  and to the
Internal  Revenue  Service  and,  if  necessary,  state  tax  authorities,   all
information  returns and reports as and when  required to be provided to them in
accordance with the REMIC Provisions,  including the calculation of any original
issue  discount  using the  Prepayment  Assumption (as defined in the Prospectus
Supplement);

              (e)    provide  information  necessary for the  computation of tax
imposed on the  transfer  of a Residual  Certificate  to a Person  that is not a
Permitted  Transferee,  or an  agent  (including  a  broker,  nominee  or  other
middleman) of a Non-Permitted  Transferee,  or a pass-through  entity in which a
Non-Permitted  Transferee is the record  holder of an interest  (the  reasonable
cost of computing and furnishing  such  information may be charged to the Person
liable for such tax);

              (f)    to the  extent  that they are under  its  control,  conduct
matters  relating  to  such  assets  at all  times  that  any  Certificates  are
outstanding so as to maintain the status as a REMIC under the REMIC Provisions;

              (g)    not knowingly or  intentionally  take any action or omit to
take any action  that would  cause the  termination  of the REMIC  status of any
REMIC created hereunder;

              (h)    pay,  from the sources  specified in the last  paragraph of
this Section 8.11, the amount of any federal or state tax, including  prohibited
transaction  taxes as described  below,  imposed on any REMIC created  hereunder
before its  termination  when and as the same shall be due and payable (but such
obligation shall not prevent the Trustee or any other appropriate

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Person from  contesting  any such tax in appropriate  proceedings  and shall not
prevent the Trustee from  withholding  payment of such tax, if permitted by law,
pending the outcome of such proceedings);

              (i)    cause  federal,  state or local  income tax or  information
returns to be signed by the  Trustee or such other  person as may be required to
sign such returns by the Code or state or local laws, regulations or rules;

              (j)    maintain records relating to each REMIC created  hereunder,
including the income,  expenses,  assets, and liabilities  thereof on a calendar
year basis and on the accrual method of accounting and the fair market value and
adjusted basis of the assets  determined at such intervals as may be required by
the Code,  as may be  necessary  to prepare the  foregoing  returns,  schedules,
statements or information; and

              (k)    as and when necessary and appropriate, represent each REMIC
created hereunder in any administrative or judicial  proceedings  relating to an
examination  or  audit  by  any  governmental   taxing  authority,   request  an
administrative  adjustment  as  to  any  taxable  year  of  each  REMIC  created
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations  relating to any tax item of any REMIC created
hereunder,  and  otherwise  act on behalf of the  REMIC in  relation  to any tax
matter or controversy involving it.

              The   Trustee   shall   treat   the   rights   of  the   Class   P
Certificateholders   to  Prepayment  Charges  as  the  beneficial  ownership  of
interests in a grantor  trust,  and not as an  obligation  of any REMIC  created
hereunder, for federal income tax purposes.

              To enable the Trustee to perform its duties under this  Agreement,
the  Depositor  shall  provide to the Trustee  within ten days after the Closing
Date all information or data that the Trustee requests in writing and determines
to be relevant for tax  purposes to the  valuations  and offering  prices of the
Certificates,  including the price, yield, prepayment assumption,  and projected
cash flows of the Certificates and the Mortgage Loans.  Moreover,  the Depositor
shall provide  information to the Trustee  concerning the value to each Class of
Certificates  of the right to receive Basis Risk  CarryForward  Amounts from the
Excess  Reserve Fund Account.  Thereafter,  the  Depositor  shall provide to the
Trustee  promptly upon written  request  therefor any additional  information or
data that the Trustee may, from time to time,  reasonably  request to enable the
Trustee  to perform  its  duties  under this  Agreement.  The  Depositor  hereby
indemnifies  the  Trustee  for any  losses,  liabilities,  damages,  claims,  or
expenses  of the  Trustee  arising  from any  errors or  miscalculations  of the
Trustee that result from any failure of the Depositor to provide, or to cause to
be provided, accurate information or data to the Trustee on a timely basis.

              If any tax is imposed on  "prohibited  transactions"  of any REMIC
created  hereunder  as defined in Section  860F(a)(2)  of the Code,  on the "net
income from foreclosure property" of such REMIC as defined in Section 860G(c) of
the Code,  on any  contribution  to the REMIC after the Startup Day  pursuant to
Section 860G(d) of the Code, or any other tax is imposed,  including any minimum
tax imposed on the REMIC  pursuant to Sections 23153 and 24874 of the California
Revenue and Taxation Code, if not paid as otherwise provided for

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herein,  the tax shall be paid by (i) the  Trustee  if such tax arises out of or
results  from  negligence  of  the  Trustee  in  the  performance  of any of its
obligations  under this  Agreement,  (ii) the Servicer,  in the case of any such
minimum tax, and otherwise if such tax arises out of or results from a breach by
the Servicer of any of its obligations  under this Agreement,  (iii) the related
Responsible  Party if such tax arises out of or  results  from that  Responsible
Party's  obligation  to  repurchase a Mortgage Loan pursuant to Section 2.03, or
(iv) in all  other  cases,  or if the  Trustee,  the  Servicer,  or the  related
Responsible  Party fails to honor its  obligations  under the preceding  clauses
(i),  (ii),  or (iii),  any such tax will be paid with  amounts  otherwise to be
distributed to the Certificateholders, as provided in Section 4.02(a).

              Section 8.12 PERIODIC FILINGS.

              Pursuant to written  instructions from the Depositor,  the Trustee
shall  prepare,  execute  and file  all  periodic  reports  required  under  the
Securities  Exchange  Act of 1934 in  conformity  with the  terms of the  relief
granted to issuers similar to the Trust Fund. In connection with the preparation
and filing of such periodic reports, the Depositor and the Servicer shall timely
provide to the  Trustee  all  material  information  available  to them which is
required  to be  included  in such  reports  and not  known to them to be in the
possession of the Trustee and such other  information as the Trustee  reasonably
may request from either of them and otherwise  reasonably  shall  cooperate with
the Trustee.  The Trustee shall have no liability with respect to any failure to
properly prepare or file such periodic reports resulting from or relating to the
Trustee's  inability or failure to obtain any information not resulting from its
own negligence or willful misconduct.

              Section 8.13 TAX CLASSIFICATION OF CERTAIN ACCOUNTS.

              For  federal  income tax  purposes,  the  Trustee  shall treat the
Excess  Reserve Fund Account as an outside  reserve fund,  within the meaning of
Treasury Regulation ss. 1.860-2(h),  that is beneficially owned by the holder of
the Class X  Certificate.  The Trustee shall treat the rights that each Class of
Certificates has to receive payments of Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account as rights to receive payments under an interest rate
cap contract  written by the Class X  Certificateholder  in favor of each Class.
Accordingly,  each  Class of  Certificates  (excluding  the Class X, Class P and
Class R  Certificates)  will  comprise  two  components  - an Upper Tier Regular
Interest and an interest in a cap contract. The Trustee shall allocate the issue
price  for a Class of  Certificates  between  two  components  for  purposes  of
determining the issue price of the Upper Tier Regular  Interest  component based
on information received from the Depositor.

                                   ARTICLE IX

                                   TERMINATION

              Section  9.01  TERMINATION  UPON  LIQUIDATION  OR  PURCHASE OF THE
MORTGAGE LOANS.

              Subject to Section 9.03, the obligations and  responsibilities  of
the Depositor,  the Servicer and the Trustee  created hereby with respect to the
Trust Fund shall terminate upon the earlier of (a) the purchase, on or after the
applicable Optional Termination Date, by the Servicer

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or the Class X Certificateholders  of all Mortgage Loans (and REO Properties) at
the price equal to the sum of (i) 100% of the Stated  Principal  Balance of each
Mortgage Loan (other than in respect of REO Property)  plus one month's  accrued
interest thereon at the applicable Adjusted Mortgage Rate and (ii) the lesser of
(x) the  appraised  value of any REO Property as determined by the higher of two
appraisals  completed by two independent  appraisers selected by the Servicer at
the  expense  of the  Servicer  and (y) the  Stated  Principal  Balance  of each
Mortgage Loan related to any REO Property,  in each case plus accrued and unpaid
interest thereon at the applicable  Adjusted Net Mortgage Rate and (b) the later
of (i) the maturity or other  liquidation (or any Advance with respect  thereto)
of the last Mortgage Loan remaining in the Trust Fund and the disposition of all
REO  Property and (ii) the  distribution  to  Certificateholders  of all amounts
required to be distributed to them pursuant to this Agreement. In no event shall
the trusts  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's,  living on the date
hereof.

              No such  purchase  will be  permitted  without  the consent of the
Class A  Certificate  Insurer,  unless no draw on the Class A  Insurance  Policy
would be made on the final Distribution Date.

              Section 9.02 FINAL DISTRIBUTION ON THE CERTIFICATES.

              If on any Determination  Date, the Servicer  determines that there
are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the  Collection  Account,  the Servicer shall direct the
Trustee promptly to send a Notice of Final Distribution each  Certificateholder.
If the  Servicer  elects to terminate  the Trust Fund  pursuant to clause (a) of
Section  9.01,  at  least  20  days  prior  to the  date  the  Notice  of  Final
Distribution  is to be mailed to the  affected  Certificateholders  the Servicer
shall notify the Depositor  and the Trustee of the date the Servicer  intends to
terminate the Trust Fund and of the applicable  repurchase price of the Mortgage
Loans and REO Properties.

              A Notice of Final  Distribution,  specifying the Distribution Date
on which  Certificateholders may surrender their Certificates for payment of the
final  distribution and cancellation,  shall be given promptly by the Trustee by
letter to Certificateholders  mailed not earlier than the 15th day and not later
than  the  10th  day of the  month  next  preceding  the  month  of  such  final
distribution.  Any such  Notice  of Final  Distribution  shall  specify  (a) the
Distribution Date upon which final distribution on the Certificates will be made
upon   presentation   and  surrender  of  Certificates  at  the  office  therein
designated,  (b) the amount of such final distribution,  (c) the location of the
office or agency at which such  presentation and surrender must be made, and (d)
that the Record  Date  otherwise  applicable  to such  Distribution  Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified. The Servicer will give such Notice
of Final  Distribution  to each  Rating  Agency at the time such Notice of Final
Distribution is given to Certificateholders.

              In the event  such  Notice  of Final  Distribution  is given,  the
Servicer shall cause all funds in the  Collection  Account to be remitted to the
Trustee for deposit in the Distribution Account on the Business Day prior to the
applicable  Distribution  Date in an amount equal to the final  distribution  in
respect of the  Certificates.  Upon such final deposit with respect to the Trust

                                      106
<PAGE>

Fund and the  receipt by the  Trustee of a Request  for  Release  therefor,  the
Trustee  shall  promptly  release to the  Servicer the  Custodial  Files for the
Mortgage Loans.

              Upon presentation and surrender of the  Certificates,  the Trustee
shall cause to be distributed to the  Certificateholders  of each Class, in each
case on the final  Distribution Date and in the order set forth in Section 4.02,
in  proportion  to  their  respective  Percentage  Interests,  with  respect  to
Certificateholders of the same Class, an amount equal to (i) as to each Class of
Regular Certificates  (except the Class X Certificate),  the Certificate Balance
thereof plus for each such Class and the Class X  Certificate  accrued  interest
thereon  in the  case  of an  interest-bearing  Certificate  and  (ii) as to the
Residual  Certificates,  the  amount,  if any,  which  remains on deposit in the
Distribution  Account  (other than the amounts  retained to meet  claims)  after
application pursuant to clause (i) above.

              In the  event  that  any  affected  Certificateholders  shall  not
surrender  Certificates  for  cancellation  within  six  months  after  the date
specified in the above mentioned written notice, the Trustee shall give a second
written  notice  to  the  remaining   Certificateholders   to  surrender   their
Certificates for cancellation  and receive the final  distribution  with respect
thereto.  If within  six  months  after the  second  notice  all the  applicable
Certificates  shall not have been surrendered for cancellation,  the Trustee may
take appropriate  steps, or may appoint an agent to take  appropriate  steps, to
contact  the  remaining   Certificateholders   concerning   surrender  of  their
Certificates,  and the cost  thereof  shall be paid out of the  funds  and other
assets  which  remain a part of the Trust  Fund.  If within  one year  after the
second notice all Certificates shall not have been surrendered for cancellation,
the Class R  Certificateholders  shall be  entitled to all  unclaimed  funds and
other assets of the Trust Fund which remain subject hereto.

              Section 9.03 ADDITIONAL TERMINATION REQUIREMENTS.

              In the event the  Servicer  exercises  its  purchase  option  with
respect to the Mortgage  Loans as provided in Section 9.01, the Trust Fund shall
be terminated in accordance with the following additional  requirements,  unless
the Trustee has been supplied with an Opinion of Counsel,  at the expense of the
Servicer, to the effect that the failure to comply with the requirements of this
Section  9.03 will not (i)  result  in the  imposition  of taxes on  "prohibited
transactions"  on either REMIC as defined in Section  860F of the Code,  or (ii)
cause  either the Lower Tier REMIC or the Upper Tier REMIC to fail to qualify as
a REMIC at any time that any Certificates are outstanding:

              (a)    The Trustee  shall sell all of the assets of the Trust Fund
to the  Servicer,  and,  within 90 days of such sale,  shall  distribute  to the
Certificateholders  the proceeds of such sale in complete liquidation of each of
the Lower Tier REMIC and the Upper Tier REMIC.

              (b)    The Trustee  shall attach a statement to the final  federal
income  tax  return  for each of the Lower  Tier  REMIC and the Upper Tier REMIC
stating that pursuant to Treasury Regulation ss. 1.860F-1,  the first day of the
90-day  liquidation period for each such REMIC was the date on which the Trustee
sold the assets of the Trust Fund to the Servicer.

                                      107
<PAGE>

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

              Section 10.01 AMENDMENT.

              This  Agreement  may be  amended  from  time  to  time  by (x) the
Depositor, the Class A Certificate Insurer, the Servicer and the Trustee and (y)
BNC,  IFC and the  Unaffiliated  Seller,  but the  consent of any of these three
parties is only  required if the  amendment  would  affect  such party,  but (z)
without the consent of any of the  Certificateholders  (i) to cure any ambiguity
or mistake,  (ii) to correct any defective provision herein or to supplement any
provision  herein which may be  inconsistent  with any other  provision  herein,
(iii) to add to the duties of the  Depositor  or the  Servicer,  (iv) to add any
other provisions with respect to matters or questions  arising  hereunder or (v)
to  modify,  alter,  amend,  add to or  rescind  any of the terms or  provisions
contained in this Agreement;  PROVIDED, that any action pursuant to clauses (iv)
or (v) above shall not, as evidenced by an Opinion of Counsel  (which Opinion of
Counsel  shall not be an expense of the  Trustee or the Trust  Fund),  adversely
affect in any  material  respect the  interests  of any  Certificateholder;  and
PROVIDED, FURTHER, that the amendment shall not be deemed to adversely affect in
any  material  respect the  interests  of the  Certificateholders  if the Person
requesting  the amendment  obtains a letter from each Rating Agency stating that
the  amendment  would  not  result  in  the  downgrading  or  withdrawal  of the
respective  ratings then assigned to the  Certificates;  it being understood and
agreed that any such letter in and of itself will not represent a  determination
as to the  materiality of any such amendment and will represent a  determination
only as to the credit issues affecting any such rating.

              In  addition,  (x)  the  Trustee,  the  Depositor,   the  Class  A
Certificate  Insurer  and the  Servicer  and (y) BNC,  IFC and the  Unaffiliated
Seller,  but the consent of any of these three  parties is only  required if the
amendment would affect such party, but (z) also may at any time and from time to
time amend this  Agreement  without  the  consent of the  Certificateholders  to
modify,  eliminate  or add to any of its  provisions  to such extent as shall be
necessary or helpful to (i) maintain the  qualification  of the Lower Tier REMIC
and the Upper Tier REMIC under the Code,  (ii) avoid or minimize the risk of the
imposition  of any tax on the Lower Tier REMIC or the Upper Tier REMIC  pursuant
to the Code that would be a claim at any time prior to the final  redemption  of
the  Certificates  or (iii)  comply  with any  other  requirements  of the Code;
PROVIDED,  that the  Trustee  has been  provided  an Opinion of  Counsel,  which
opinion shall be an expense of the party requesting such opinion but in any case
shall not be an expense of the  Trustee or the Trust  Fund,  to the effect  that
such  action is  necessary  or helpful  to, as  applicable,  (i)  maintain  such
qualification,  (ii) avoid or minimize the risk of the  imposition of such a tax
or (iii) comply with any such requirements of the Code.

              This  Agreement  may also be amended  from time to time by (x) the
Depositor,  the Servicer,  the Unaffiliated  Seller and the Trustee and (y) BNC,
IFC and the Unaffiliated Seller, but the consent of any of these parties is only
required if the amendment  would affect such party,  and (z) with the consent of
the Holders of Certificates evidencing Percentage Interests aggregating not less
than 662/3% of each Class of  Certificates  affected  thereby for the purpose of
adding any  provisions  to or changing in any manner or  eliminating  any of the
provisions  of this  Agreement  or of  modifying in any manner the rights of the
Holders of Certificates; PROVIDED,

                                      108
<PAGE>

HOWEVER, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of,  payments  required to be  distributed  on any  Certificate
without the consent of the Holder of such Certificate,  (ii) adversely affect in
any material  respect the interests of the Holders of any Class of  Certificates
in a manner other than as  described in (i),  without the consent of the Holders
of Certificates of such Class evidencing, as to such Class, Percentage Interests
aggregating not less than 662/3%,  or (iii) reduce the aforesaid  percentages of
Certificates the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all such Certificates then outstanding.

              Notwithstanding  any  contrary  provision of this  Agreement,  the
Trustee  shall not consent to any  amendment to this  Agreement  unless it shall
have first received an Opinion of Counsel, which opinion shall not be an expense
of the Trustee or the Trust Fund,  to the effect  that such  amendment  will not
cause the imposition of any tax on any REMIC or the  Certificateholders or cause
any REMIC to fail to  qualify as a REMIC at any time that any  Certificates  are
outstanding.

              Notwithstanding  the foregoing  provisions of this Section  10.01,
with  respect  to  any  amendment  that  significantly  modifies  the  permitted
activities of the Trustee or the Servicer, any Certificate beneficially owned by
the Depositor,  the  Unaffiliated  Seller,  BNC, IFC or any of their  respective
Affiliates  shall be deemed not to be  outstanding  (and shall not be considered
when  determining  the  percentage  of  Certificateholders  consenting  or  when
calculating the total number of  Certificates  entitled to consent) for purposes
of  determining  if the  requisite  consents  of  Certificateholders  under this
Section 10.01 have been obtained.

              Promptly  after the execution of any  amendment to this  Agreement
requiring the consent of  Certificateholders,  the Trustee shall furnish written
notification   of  the   substance   or  a  copy  of  such   amendment  to  each
Certificateholder and each Rating Agency.

              It shall not be  necessary  for the consent of  Certificateholders
under  this  Section  10.01  to  approve  the  particular  form of any  proposed
amendment,  but it  shall  be  sufficient  if such  consent  shall  approve  the
substance  thereof.  The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.

              Nothing in this Agreement  shall require the Trustee to enter into
an amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Trust Fund),  satisfactory  to the Trustee that
(i) such amendment is permitted and is not prohibited by this Agreement and that
all  requirements  for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely  affect in any material  respect the
interests  of any  Certificateholder  or (B) the  conclusion  set  forth  in the
immediately  preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

              Section 10.02 RECORDATION OF AGREEMENT; COUNTERPARTS.

              This Agreement is subject to recordation in all appropriate public
offices  for real  property  records  in all the  counties  or other  comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording

                                      109
<PAGE>

office or  elsewhere,  such  recordation  to be effected by the  Servicer at its
expense,  but only upon receipt of an Opinion of Counsel to the effect that such
recordation   materially   and   beneficially   affects  the  interests  of  the
Certificateholders.

              For the purpose of facilitating  the recordation of this Agreement
as herein  provided  and for other  purposes,  this  Agreement  may be  executed
simultaneously in any number of counterparts,  each of which  counterparts shall
be deemed to be an original,  and such counterparts shall constitute but one and
the same instrument.

              Section 10.03 GOVERNING LAW.

              THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE  SUBSTANTIVE  LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE  PERFORMED  IN THE STATE OF NEW YORK AND THE  OBLIGATIONS,  RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

              Section 10.04 INTENTION OF PARTIES.

              It is the express intent of the parties hereto that the conveyance
(i) of the  Mortgage  Loans by the  Depositor  and (ii) of the Trust Fund by the
Depositor to the Trustee each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be deemed
a pledge thereof. However, in the event that,  notwithstanding the intent of the
parties,  such assets are held to be the property of the Depositor,  as the case
may be, or if for any other reason this  Agreement is held or deemed to create a
security interest in either such assets, then (i) this Agreement shall be deemed
to be a security  agreement within the meaning of the Uniform Commercial Code of
the State of New York and (ii) the  conveyances  provided for in this  Agreement
shall be deemed to be an assignment and a grant by the Depositor to the Trustee,
for the benefit of the Certificateholders,  of a security interest in all of the
assets transferred, whether now owned or hereafter acquired.

              The Depositor for the benefit of the Certificateholders and of the
Class A Certificate Insurer shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure  that,  if this  Agreement  were
deemed to create a security  interest in the Trust Fund, such security  interest
would be deemed to be a  perfected  security  interest of first  priority  under
applicable  law  and  will be  maintained  as such  throughout  the  term of the
Agreement.  The Depositor  shall arrange for filing any Uniform  Commercial Code
continuation  statements in  connection  with any security  interest  granted or
assigned to the Trustee for the benefit of the Certificateholders.

              Section 10.05 NOTICES.

              (a)    The Trustee shall use its best efforts to promptly  provide
notice to each Rating  Agency with respect to each of the  following of which it
has actual knowledge:

              1.     Any material change or amendment to this Agreement;

                                      110
<PAGE>

              2.     The  occurrence  of any Event of Default  that has not been
                     cured;

              3.     The  resignation  or  termination  of the  Servicer  or the
Trustee and the appointment of any successor;

              4.     The repurchase or  substitution  of Mortgage Loans pursuant
to Section 2.03; and

              5.     The final payment to Certificateholders.

              (b)    In addition,  the Trustee  shall  promptly  furnish to each
Rating Agency copies of the following:

              1.     Each  report to  Certificateholders  described  in  Section
4.03; and

              2.     Any notice of a purchase  of a Mortgage  Loan  pursuant  to
Section 2.02, 2.03 or 3.11.

              All directions,  demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case of
the Depositor or the  Underwriter,  Morgan  Stanley ABS Capital I Inc. or Morgan
Stanley & Co. Incorporated,  1585 Broadway, New York, New York 10036, Attention:
Gregory Walker,  Esq., (b) in the case of the Servicer,  Ocwen Federal Bank FSB,
1675 Palm  Beach  Lakes  Blvd.,  Suite  10A,  West Palm  Beach,  Florida  33401,
Attention: Secretary, or such other address as may be hereafter furnished to the
parties hereto in writing, (c) in the case of the Trustee to the Corporate Trust
Office,  Bankers Trust Company of California,  N.A., 1761 East St. Andrew Place,
Santa Ana, California  92705-4934,  Attention:  Trust Administration  DC01M1, or
such other address as the Trustee may hereafter  furnish to the parties  hereto,
(d) in the case of the Unaffiliated  Seller, CDC Mortgage Capital,  Inc., 9 West
57th Street, New York, New York 10019,  Attention General Counsel, or such other
address as the Unaffiliated  Seller may hereafter furnish to the parties hereto,
(e) in the  case  of  BNC,  BNC  Mortgage,  Inc.,  1063  McGaw  Avenue,  Irvine,
California  92604,  Attention:  President,  or at such  other  address as may be
furnished  to the  parties  hereto,  (f) in  the  case  of  IFC,  IMPAC  Funding
Corporation,  15050 Avenue of Science,  Suite 101, San Diego,  California 92128,
Attention: President, or at such other address as may be finished to the parties
hereto,  and  (g) in the  case  of  each of the  Rating  Agencies,  the  address
specified  therefor in the definition  corresponding  to the name of such Rating
Agency.  Notices to Certificateholders  shall be deemed given when mailed, first
class  postage  prepaid,   to  their  respective   addresses  appearing  in  the
Certificate Register.

              Section 10.06 SEVERABILITY OF PROVISIONS.

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

                                      111
<PAGE>

              Section 10.07 ASSIGNMENT.

              Notwithstanding  anything to the contrary contained herein, except
as provided in Section 6.02,  this Agreement may not be assigned by the Servicer
without  the prior  written  consent  of the  Trustee,  the Class A  Certificate
Insurer and Depositor;  PROVIDED,  HOWEVER, that the Servicer may pledge or sell
its  interest  in any  reimbursements  for P&I  Advances or  Servicing  Advances
hereunder.

              Section 10.08 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

              The death or incapacity of any Certificateholder shall not operate
to  terminate  this  Agreement  or the trust  created  hereby,  nor entitle such
Certificateholder's  legal  representative or heirs to claim an accounting or to
take any  action or  commence  any  proceeding  in any court for a  petition  or
winding  up of the  trust  created  hereby,  or  otherwise  affect  the  rights,
obligations and liabilities of the parties hereto or any of them.

              No  Certificateholder  shall  have any  right to vote  (except  as
provided herein) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto,  nor shall anything
herein set forth or contained in the terms of the  Certificates  be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third  party by reason of any  action  taken by the  parties  to this  Agreement
pursuant to any provision hereof.

              No Certificateholder shall have any right by virtue or by availing
itself of any  provisions  of this  Agreement to institute  any suit,  action or
proceeding in equity or at law upon or under or with respect to this  Agreement,
unless such Holder  previously  shall have given to the Trustee a written notice
of an Event of Default and of the continuance  thereof, as herein provided,  and
unless the Holders of  Certificates  evidencing  not less than 25% of the Voting
Rights evidenced by the Certificates, and the Class A Certificate Insurer, shall
also have made written request to the Trustee to institute such action,  suit or
proceeding  in its own name as Trustee  hereunder  and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses,
and liabilities to be incurred therein or thereby,  and the Trustee, for 60 days
after its  receipt of such  notice,  request and offer of  indemnity  shall have
neglected or refused to institute any such action, suit or proceeding;  it being
understood   and   intended,    and   being   expressly   covenanted   by   each
Certificateholder  with every other  Certificateholder  and the Trustee, that no
one or more Holders of Certificates  shall have any right in any manner whatever
by  virtue  or by  availing  itself  or  themselves  of any  provisions  of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates,  or to obtain or seek to obtain priority over or preference
to any other such Holder or to enforce any right under this Agreement, except in
the manner herein provided and for the common benefit of all Certificateholders.
For the protection and enforcement of the provisions of this Section 10.08, each
and every  Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.

                                      112
<PAGE>

              Section 10.09 INSPECTION AND AUDIT RIGHTS.

              The Servicer  agrees that,  on reasonable  prior  notice,  it will
permit any representative of the Depositor, the Unaffiliated Seller, the Class A
Certificate  Insurer or the Trustee during the Servicer's normal business hours,
to examine all the books of account,  records,  reports and other  papers of the
Servicer relating to the Mortgage Loans, to make copies and extracts  therefrom,
to cause such books to be audited by independent  certified  public  accountants
selected by the party  conducting  the  inspection  and to discuss its  affairs,
finances  and  accounts  relating  to the  Mortgage  Loans  with  its  officers,
employees and independent public accountants (and by this provision the Servicer
hereby  authorizes  said  accountants to discuss with such  representative  such
affairs,  finances and accounts),  all at such reasonable  times and as often as
may be reasonably requested.  Any out-of-pocket expense of the Servicer incident
to the  exercise  by  the  Depositor,  the  Unaffiliated  Seller,  the  Class  A
Certificate  Insurer or the Trustee of any right under this Section  10.09 shall
be borne by the Servicer.

              Section 10.10 CERTIFICATES NONASSESSABLE AND FULLY PAID.

              It is the intention of the Depositor that Certificateholders shall
not be personally  liable for  obligations of the Trust Fund, that the interests
in the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

              Section 10.11 THE CLASS A CERTIFICATE INSURER DEFAULT.

              Any right  conferred to the Class A  Certificate  Insurer shall be
suspended  during  any  period in which a Class A  Certificate  Insurer  Default
exists.  At such time as the  Class A  Certificates  are no  longer  outstanding
hereunder,  and no amounts  owed to the Class A  Certificate  Insurer  hereunder
remain  unpaid,  the  Class  A  Certificate  Insurer's  rights  hereunder  shall
terminate.

              Section 10.12 THIRD PARTY BENEFICIARY.

              The parties agree that the Class A Certificate Insurer is intended
and shall have all rights of a third-party beneficiary of this Agreement.

              Section 10.13 WAIVER OF JURY TRIAL.

              EACH  PARTY  HEREBY  KNOWLINGLY,  VOLUNTARILY  AND  INTENTIONALLY,
WAIVES (TO THE EXTENT  PERMITTED BY  APPLICABLE  LAW) ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE  ARISING  UNDER OR RELATING TO THIS  AGREEMENT  AND
AGREES THAT ANY SUCH  DISPUTE  SHALL BE TRIED BEFORE A JUDGE  SITTING  WITHOUT A
JURY.

              Section 10.14 LIMITATION OF DAMAGES.

              NOTWITHSTANDING  ANYTHING  CONTAINED  HEREIN TO THE CONTRARY,  THE
PARTIES HERETO AGREE THAT NO PARTY HERETO SHALL BE

                                      113
<PAGE>

LIABLE TO ANY OTHER  PARTY  HERETO FOR ANY  SPECIAL,  CONSEQUENTIAL  OR PUNITIVE
DAMAGES WHATSOEVER,  WHETHER IN CONTRACT,  TORT (INCLUDING NEGLIGENCE AND STRICT
LIABILITY)  OR ANY OTHER  LEGAL OR  EQUITABLE  PRINCIPLES;  PROVIDED  THAT,  THE
FOREGOING  PROVISION  SHALL  NOT  LIMIT  OR  RELIEVE  ANY  PARTY  HERETO  OF ANY
OBLIGATION  UNDER THIS AGREEMENT TO INDEMNIFY ANY OTHER PARTY HERETO AGAINST ANY
DAMAGES  IMPOSED  UPON SUCH  PARTY BY A FINAL  ORDER OF ANY  COURT OF  COMPETENT
JURISDICTION  IN CONNECTION  WITH ANY LEGAL ACTION BROUGHT AGAINST SUCH PARTY BY
ANY THIRD PARTY.

                                  * * * * * * *

                                      114
<PAGE>

              IN WITNESS  WHEREOF,  the  Depositor,  the Trustee,  BNC, IFC, the
Unaffiliated Seller and the Servicer have caused their names to be signed hereto
by their  respective  officers  thereunto duly authorized as of the day and year
first above written.

                            MORGAN STANLEY ABS CAPITAL I INC.,
                                as Depositor

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

                            BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                solely as Trustee and not in its individual
                                capacity

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

                            OCWEN FEDERAL BANK FSB,
                                as Servicer

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

                            CDC MORTGAGE CAPITAL INC.,
                                as Unaffiliated Seller

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

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

                            BNC MORTGAGE, INC.,
                                as a Responsible Party

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

<PAGE>

                            IMPAC FUNDING CORPORATION,
                                as a Responsible Party

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

             [Signature Page to the Pooling and Servicing Agreement]

<PAGE>

                                   SCHEDULE I

                             Mortgage Loan Schedule
          [See Exhibit A to the Unaffiliated Seller's Agreement, Tab 2]

                                     S-I-1
<PAGE>

                                   SCHEDULE II

                       CDC MORTGAGE CAPITAL TRUST 2001-HE1

                       Mortgage Pass-Through Certificates,
                                 Series 2001-HE1

                 REPRESENTATIONS AND WARRANTIES OF THE SERVICER

              OCWEN  FEDERAL  BANK  FSB  (the  "SERVICER"")   hereby  makes  the
representations  and  warranties set forth in this Schedule II to the Depositor,
the Unaffiliated  Seller, the Class A Certificate Insurer and the Trustee, as of
the  Closing  Date.  Capitalized  terms used but not  otherwise  defined in this
Schedule  II  shall  have the  meanings  ascribed  thereto  in the  Pooling  and
Servicing  Agreement  (the  "POOLING AND SERVICING  AGREEMENT")  relating to the
above-referenced Series.

              (1)    The  Servicer  is a federal  savings  bank duly  organized,
       validly existing and in good standing under the laws of the United States
       of America and is duly  authorized  and qualified to transact any and all
       business  contemplated  by this  Pooling and  Servicing  Agreement  to be
       conducted by the  Servicer in any state in which a Mortgaged  Property is
       located or is otherwise not required under  applicable law to effect such
       qualification and, in any event, is in compliance with the doing business
       laws of any such State, to the extent  necessary to ensure its ability to
       enforce  each  Mortgage  Loan  and  to  service  the  Mortgage  Loans  in
       accordance with the terms of this Pooling and Servicing Agreement;

              (2)    The  Servicer  has the full power and  authority to service
       each Mortgage  Loan,  and to execute,  deliver and perform,  and to enter
       into and consummate  the  transactions  contemplated  by this Pooling and
       Servicing  Agreement and has duly  authorized by all necessary  action on
       the part of the Servicer the execution,  delivery and performance of this
       Pooling  and  Servicing   Agreement;   and  this  Pooling  and  Servicing
       Agreement, assuming the due authorization, execution and delivery thereof
       by the other  parties  thereto,  constitutes  a legal,  valid and binding
       obligation  of  the  Servicer,   enforceable   against  the  Servicer  in
       accordance   with  its  terms,   except  to  the  extent   that  (a)  the
       enforceability   thereof  may  be  limited  by  bankruptcy,   insolvency,
       moratorium,  receivership  and other  similar laws relating to creditors'
       rights  generally  and  (b)  the  remedy  of  specific   performance  and
       injunctive  and other  forms of  equitable  relief  may be subject to the
       equitable  defenses and to the  discretion  of the court before which any
       proceeding therefor may be brought;

              (3)    The  execution  and delivery of this Pooling and  Servicing
       Agreement by the  Servicer,  the  servicing of the Mortgage  Loans by the
       Servicer hereunder,  the consummation by the Servicer of any other of the
       transactions  herein  contemplated,  and the fulfillment of or compliance
       with the terms  hereof  are in the  ordinary  course of  business  of the
       Servicer  and will not (A) result in a breach of any term or provision of
       the organizational documents of the Servicer or (B) conflict with, result
       in a breach,  violation or acceleration of, or result in a default under,
       the terms of any other  material  agreement  or  instrument  to which the
       Servicer is a party or by which it may be bound, or any statute,

                                     S-II-1
<PAGE>

       order or regulation  applicable to the Servicer of any court,  regulatory
       body, administrative agency or governmental body having jurisdiction over
       the Servicer;  and the Servicer is not a party to, bound by, or in breach
       or  violation  of any  indenture or other  agreement  or  instrument,  or
       subject to or in  violation of any statute,  order or  regulation  of any
       court, regulatory body, administrative agency or governmental body having
       jurisdiction  over it, which materially and adversely  affects or, to the
       Servicer's  knowledge,  would  in the  future  materially  and  adversely
       affect,  (x) the ability of the Servicer to perform its obligations under
       this Pooling and  Servicing  Agreement or (y) the  business,  operations,
       financial  condition,  properties  or assets of the  Servicer  taken as a
       whole;

              (4)    the Servicer is an approved  seller/servicer for Fannie Mae
       or Freddie Mac in good standing and is a HUD approved  mortgagee pursuant
       to Section 203 and Section 211 of the National Housing Act;

              (5)    No  litigation  is pending  against the Servicer that would
       materially and adversely affect the execution, delivery or enforceability
       of this Pooling and Servicing Agreement or the ability of the Servicer to
       service the  Mortgage  Loans or to perform  any of its other  obligations
       hereunder in accordance with the terms hereof;

              (6)    No consent,  approval,  authorization or order of any court
       or  governmental  agency or body is required for the execution,  delivery
       and  performance  by the Servicer of, or compliance by the Servicer with,
       this Pooling and Servicing  Agreement or the consummation by the Servicer
       of the transactions contemplated by this Pooling and Servicing Agreement,
       except for such consents,  approvals,  authorizations  or orders, if any,
       that have been obtained prior to the Closing Date; and

              (7)    The Servicer  covenants that its computer and other systems
       used in servicing  the Mortgage  Loans  operate in a manner such that the
       Servicer can service the Mortgage  Loans in accordance  with the terms of
       this Pooling and Servicing Agreement.

                                     S-II-2
<PAGE>

                                 SCHEDULE III-A

                       CDC MORTGAGE CAPITAL TRUST 2001-HE1

                       Mortgage Pass-Through Certificates,
                                 Series 2001-HE1

             REPRESENTATIONS AND WARRANTIES AS TO THE MORTGAGE LOANS

              BNC Mortgage,  Inc. ("BNC") hereby makes the  representations  and
warranties set forth in this Schedule  III-A, as to the BNC Mortgage Loans only,
to the Depositor,  the Unaffiliated  Seller, the Class A Certificate Insurer and
the Trustee,  as of the related Cut-off Date, the related Delivery Date, or date
of origination of the Mortgage Loan (as applicable).  Capitalized terms used but
not otherwise  defined in this Schedule  III-A shall have the meanings  ascribed
thereto in the Pooling and Servicing Agreement.

              (a)    MORTGAGE LOANS AS DESCRIBED.  The  information set forth in
the Mortgage Loan Schedule is complete, true and correct;

              (b)    PAYMENTS  CURRENT.  All payments  required to be made up to
the related  Delivery  Date under the terms of the Mortgage  Note have been made
and credited.  As of the related  Delivery  Date, no payment  required under the
Mortgage  Loan is 30  days or more  delinquent  nor has any  payment  under  the
Mortgage Loan been 30 days or more  delinquent at any time since the origination
of the Mortgage Loan. The first Monthly  Payment after the related  Cut-off Date
shall be made with  respect to the  Mortgage  Loan on its Due Date or within the
grace period, all in accordance with the terms of the related Mortgage Note;

              (c)    NO OUTSTANDING CHARGES.  There are no defaults in complying
with the terms of the  Mortgage  securing  the  Mortgage  Loan,  and all  taxes,
governmental  assessments,   insurance  premiums,  water,  sewer  and  municipal
charges,  leasehold  payments or ground  rents which  previously  became due and
owing have been paid,  or an escrow of funds has been  established  in an amount
sufficient  to pay for every such item which  remains  unpaid and which has been
assessed but is not yet due and  payable.  Except for (A) payments in the nature
of escrow payments and (B) interest  accruing from the date of the Mortgage Note
or date of disbursement  of the Mortgage Loan proceeds,  whichever is earlier to
the day which  precedes  by one month the Due Date of the first  installment  of
principal  and  interest,  including,  without  limitation,  taxes and insurance
payments,  BNC has not  advanced  funds,  or  induced,  solicited  or  knowingly
received any advance of funds by a party other than the  Mortgagor,  directly or
indirectly, for the payment of any amount required under the Mortgage Loan;

              (d)    ORIGINAL TERMS  UNMODIFIED.  The terms of the Mortgage Note
and Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of  origination  except  by a  written  instrument  which has been
recorded,  if necessary to protect the  interests of the Trustee,  and which has
been  delivered  to the  Trustee,  and the terms of which are  reflected  in the
Mortgage  Loan  Schedule.  The  substance  of any  such  waiver,  alteration  or
modification  has been  approved  by the title  insurer,  if any,  to the extent
required  by the  policy,  and its  terms are  reflected  on the  Mortgage  Loan
Schedule,  if applicable.  No Mortgagor has been released,  in whole or in part,
except in connection with an assumption agreement, approved

                                   S-III-A-1
<PAGE>

by the title insurer, to the extent required by the policy, and which assumption
agreement is part of the Custodial  File  delivered to the Trustee and the terms
of which are reflected in the Mortgage Loan Schedule;

              (e)    NO DEFENSES.  The Mortgage Loan is not subject to any right
of rescission,  set-off, counterclaim or defense, including, without limitation,
the defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable,  in whole or in part, or subject to
any right of rescission,  set-off,  counterclaim or defense, including,  without
limitation,  the  defense of usury,  and no such right of  rescission,  set-off,
counterclaim or defense has been asserted with respect thereto, and no Mortgagor
was a debtor in any state or federal bankruptcy or insolvency  proceeding at, or
subsequent to, the time the Mortgage Loan was originated;

              (f)    HAZARD  INSURANCE.  Pursuant to the terms of the  Mortgage,
all buildings or other improvements upon the Mortgaged Property are insured by a
generally  acceptable insurer against loss by fire, hazards of extended coverage
and such  other  hazards  as are  provided  for in the  Fannie  Mae Guides or by
Freddie  Mac, as well as the  following  additional  requirements:  set forth in
Section 2.10 of the Interim Servicing Agreement attached hereto as EXHIBIT B. If
required by the National Flood Insurance Act of 1968, as amended,  each Mortgage
Loan is covered by a flood  insurance  policy  meeting the  requirements  of the
current  guidelines of the Federal  Insurance  Administration  in effect,  which
policy  conforms  to Fannie Mae and Freddie  Mac, as well as the  aforementioned
additional  requirements.  All individual  insurance policies contain a standard
mortgagee clause naming BNC and its successors and assigns as mortgagee, and all
premiums thereon have been paid and such policies may not be reduced, terminated
or  cancelled  without  30 days'  prior  written  notice to the  mortgagee.  The
Mortgage  obligates  the Mortgagor  thereunder to maintain the hazard  insurance
policy at the Mortgagor's cost and expense, and on the Mortgagor's failure to do
so,  authorizes the holder of the Mortgage to obtain and maintain such insurance
at such Mortgagor's cost and expense,  and to seek  reimbursement  therefor from
the Mortgagor. Where required by state law or regulation, the Mortgagor has been
given an  opportunity  to choose the carrier of the required  hazard  insurance,
provided  the policy is not a "MASTER"  or  "BLANKET"  hazard  insurance  policy
covering a  condominium,  or any hazard  insurance  policy  covering  the common
facilities of a planned unit  development.  The hazard  insurance  policy is the
valid and binding  obligation of the insurer,  is in full force and effect,  and
will be in full force and effect and inure to the  benefit of the  Trustee  upon
the consummation of the  transactions  contemplated by the Pooling and Servicing
Agreement.  BNC has not engaged in, and has no knowledge of the  Mortgagor's  or
any  servicer's  having  engaged in, any act or omission  which would impair the
coverage of any such  policy,  the  benefits  of the  endorsement  provided  for
herein,  or the validity and binding effect of such policy,  including,  without
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be  received,  retained or realized by any
attorney,  firm or other person or entity,  and no such unlawful items have been
received, retained or realized by BNC;

              (g)    COMPLIANCE WITH APPLICABLE  LAWS. Any and all  requirements
of any  federal,  state or local  law,  including,  without  limitation,  usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit  opportunity  and disclosure  laws  applicable to the Mortgage Loan
have been complied with, the consummation of the transactions

                                   S-III-A-2
<PAGE>

contemplated  hereby  will  not  involve  the  violation  of any  such  laws  or
regulations,  and  BNC  shall  maintain  in its  possession,  available  for the
Trustee's inspection,  and shall deliver to the Trustee upon demand, evidence of
compliance with all such requirements;

              (h)    NO  SATISFACTION  OF  MORTGAGE.  The  Mortgage has not been
satisfied,  canceled,  subordinated  or rescinded,  in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole
or in part,  nor has any  instrument  been  executed  that would effect any such
release,  cancellation,  subordination  or  rescission.  BNC has not  waived the
performance  by the  Mortgagor  of any  action,  if the  Mortgagor's  failure to
perform such action would cause the Mortgage Loan to be in default,  nor has BNC
waived any default resulting from any action or inaction by the Mortgagor;

              (i)    LOCATION  AND TYPE OF  MORTGAGED  PROPERTY.  The  Mortgaged
Property  is a fee  simple  property  located  in the  state  identified  in the
Mortgage  Loan  Schedule  except that with respect to real  property  located in
jurisdictions in which the use of leasehold  estates for residential  properties
is a widely-accepted  practice, the Mortgaged Property may be a leasehold estate
and consists of a single parcel of real  property with a detached  single family
residence erected thereon, or a two- to four-family  dwelling,  or an individual
residential condominium unit in a low-rise condominium project, or an individual
unit in a planned  unit  development  and that no residence or dwelling is (i) a
mobile home or (ii) a manufactured home; PROVIDED, HOWEVER, that any condominium
unit  or  planned  unit  development  shall  conform  with  BNC's   Underwriting
Guidelines. As of the date of origination,  no portion of the Mortgaged Property
was used for commercial purposes, and since the date of origination,  no portion
of the Mortgaged Property has been used for commercial purposes;  provided, that
Mortgaged  Properties  which  contain a home office shall not be  considered  as
being used for  commercial  purposes as long as the  Mortgaged  Property has not
been altered for  commercial  purposes  and is not storing any  chemicals or raw
materials  other than those  commonly  used for  homeowner  repair,  maintenance
and/or household purposes;

              (j)    VALID FIRST LIEN.  Each Mortgage is a valid and  subsisting
first  lien of  record  on a  single  parcel  of real  estate  constituting  the
Mortgaged  Property,  including all buildings and  improvements on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating and
air  conditioning  systems  located  in or annexed  to such  buildings,  and all
additions,  alterations and replacements made at any time,  subject in all cases
to the exceptions to title set forth in the title insurance  policy with respect
to the related  Mortgage  Loan,  which  exceptions  are generally  acceptable to
prudent mortgage lending  companies,  and such other exceptions to which similar
properties  are  commonly  subject  and  which  do not  individually,  or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Mortgage. The lien of the Mortgage is subject only to:

                     (A)    the  lien  of  current  real   property   taxes  and
              assessments not yet due and payable;

                     (B)    covenants,  conditions and  restrictions,  rights of
              way,  easements  and other  matters of the public record as of the
              date  of  recording   acceptable  to  prudent   mortgage   lending
              institutions   generally  and  specifically  referred  to  in  the
              lender's title insurance policy delivered to the originator of the

                                   S-III-A-3
<PAGE>

              Mortgage  Loan  and  (a)  specifically  referred  to or  otherwise
              considered  in  the  appraisal  made  for  the  originator  of the
              Mortgage Loan or (b) which do not  adversely  affect the Appraised
              Value of the Mortgaged Property set forth in such appraisal; and

                     (C)    other matters to which like  properties are commonly
              subject which do not materially interfere with the benefits of the
              security  intended  to be  provided  by the  Mortgage  or the use,
              enjoyment,   value  or  marketability  of  the  related  Mortgaged
              Property.

Any security  agreement,  chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan  establishes and creates a valid,
subsisting,  enforceable  and perfected  first lien and first priority  security
interest with respect to each Mortgage  Loan on the property  described  therein
and BNC has full right to sell and assign the same to the  Unaffiliated  Seller.
The Mortgaged  Property was not, as of the date of  origination  of the Mortgage
Loan,  subject  to a  mortgage,  deed of  trust,  deed to  secure  debt or other
security instrument creating a lien subordinate to the lien of the Mortgage;

              (k)    VALIDITY OF MORTGAGE  DOCUMENTS.  The Mortgage Note and the
Mortgage  and any other  agreement  executed  and  delivered  by a Mortgagor  or
guarantor,  if applicable,  in connection with a Mortgage Loan are genuine,  and
each is the legal, valid and binding obligation of the maker thereof enforceable
in accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related  agreement had legal  capacity to enter into the Mortgage
Loan and to execute and deliver the  Mortgage  Note,  the Mortgage and any other
related  agreement,  and the  Mortgage  Note,  the  Mortgage  and any other such
related  agreement  have been duly and  properly  executed by other such related
parties.   The  documents,   instruments  and  agreements   submitted  for  loan
underwriting were not falsified and contain no untrue statement of material fact
or omit to state a material fact  required to be stated  therein or necessary to
make the information and statements  therein not  misleading.  No fraud,  error,
omission, misrepresentation,  negligence or similar occurrence with respect to a
Mortgage  Loan has  taken  place on the part of any  Person,  including  without
limitation, the Mortgagor, any appraiser, any builder or developer, or any other
party  involved in the  origination  or servicing of the Mortgage  Loan. BNC has
reviewed all of the documents  constituting the servicing file and has made such
inquiries  as it  deems  necessary  to make  and  confirm  the  accuracy  of the
representations set forth herein;

              (l)    FULL  DISBURSEMENT OF PROCEEDS.  The Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully disbursed and there
is no requirement for future advances  thereunder,  and any and all requirements
as to completion of any on-site or off-site  improvement and as to disbursements
of any escrow  funds  therefor  have been  complied  with.  All costs,  fees and
expenses  incurred in making or closing the Mortgage  Loan and the  recording of
the Mortgage  were paid,  and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage;

              (m)    OWNERSHIP.  Immediately  prior to the sale of the  Mortgage
Loan to the Unaffiliated  Seller, BNC was the sole owner of record and holder of
the Mortgage Loan and the indebtedness  evidenced by each Mortgage Note and upon
the sale of the Mortgage Loans to the Unaffiliated  Seller,  BNC will retain the
Custodial Files or any part thereof with respect thereto

                                   S-III-A-4
<PAGE>

not  delivered  to the Trustee,  in trust only for the purpose of servicing  and
supervising  the  servicing of each  Mortgage  Loan.  The  Mortgage  Loan is not
assigned  or  pledged,  and BNC has  good,  indefeasible  and  marketable  title
thereto,  and has full  right to  transfer  and  sell the  Mortgage  Loan to the
Unaffiliated  Seller free and clear of any  encumbrance,  equity,  participation
interest,  lien, pledge,  charge, claim or security interest, and has full right
and authority subject to no interest or participation of, or agreement with, any
other party,  to sell and assign each  Mortgage  Loan and  following the sale of
each Mortgage Loan, the Unaffiliated Seller will own such Mortgage Loan free and
clear of any encumbrance,  equity, participation interest, lien, pledge, charge,
claim or security  interest.  BNC intends to  relinquish  all rights to possess,
control  and  monitor  the  Mortgage  Loan.  After  the  date of the sale of the
Mortgage Loan to the  Unaffiliated  Seller,  BNC will have no right to modify or
alter the terms of the sale of the Mortgage Loan and BNC will have no obligation
or right to repurchase  the Mortgage Loan or substitute  another  Mortgage Loan,
except as provided in the BNC Purchase  Agreement  and the Pooling and Servicing
Agreement;

              (n)    DOING BUSINESS.  All parties which have had any interest in
the Mortgage Loan,  whether as mortgagee,  assignee,  pledgee or otherwise,  are
(or,  during the period in which they held and disposed of such interest,  were)
(1) in compliance with any and all applicable licensing requirements of the laws
of the state  wherein the  Mortgaged  Property  is  located,  and (2) either (i)
organized under the laws of such state, or (ii) qualified to do business in such
state,  or (iii) a federal  savings and loan  association,  a savings  bank or a
national bank having a principal office in such state, or (3) not doing business
in such state;

              (o)    LTV. No Mortgage Loan has an LTV greater than 95%;

              (p)    TITLE  INSURANCE.  The Mortgage  Loan is covered by an ALTA
lender's title insurance policy or other generally  acceptable form of policy or
insurance  acceptable to Fannie Mae or Freddie Mac and each such title insurance
policy is issued by a title insurer  acceptable to Fannie Mae or Freddie Mac and
qualified to do business in the  jurisdiction  where the  Mortgaged  Property is
located, insuring BNC, its successors and assigns, as to the first priority lien
of the Mortgage in the original  principal amount of the Mortgage Loan,  subject
only to the exceptions  contained in clauses (1) and (2) of paragraph (j) above,
and in the case of Adjustable Rate Mortgage Loans, against any loss by reason of
the invalidity or  unenforceability of the lien resulting from the provisions of
the Mortgage  providing for adjustment to the Mortgage Interest Rate and Monthly
Payment. Where required by state law or regulation, the Mortgagor has been given
the opportunity to choose the carrier of the required  mortgage title insurance.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress,  and against  encroachments by or upon the Mortgaged Property or any
interest  therein.  The title  policy does not  contain  any special  exceptions
(other than the standard  exclusions) for zoning and uses and has been marked to
delete the standard survey exception or to replace the standard survey exception
with a specific  survey  reading.  BNC, its successor and assigns,  are the sole
insureds of such  lender's  title  insurance  policy,  and such  lender's  title
insurance  policy is valid and  remains  in full force and effect and will be in
force and effect upon the consummation of the  transactions  contemplated by the
Pooling and  Servicing  Agreement.  No claims have been made under such lender's
title insurance policy,  and no prior holder of the related Mortgage,  including
BNC, has done, by act or omission,  anything  which would impair the coverage of
such lender's title insurance policy, including, without limitation, no unlawful
fee, commission, kickback or

                                   S-III-A-5
<PAGE>

other unlawful  compensation  or value of any kind has been or will be received,
retained or realized by any  attorney,  firm or other  person or entity,  and no
such unlawful items have been received, retained or realized by BNC;

              (q)    NO  DEFAULTS.  There is no default,  breach,  violation  or
event  which  would  permit  acceleration  existing  under the  Mortgage  or the
Mortgage  Note and no event  which,  with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default,  breach,
violation or event which would permit acceleration, and neither the Unaffiliated
Seller nor any of its affiliates nor any of their respective predecessors,  have
waived any default, breach, violation or event which would permit acceleration;

              (r)    NO  MECHANICS'  LIENS.  There are no  mechanics' or similar
liens or claims which have been filed for work, labor or material (and no rights
are outstanding  that under the law could give rise to such liens) affecting the
related  Mortgaged  Property  which  are or may be liens  prior  to, or equal or
coordinate with, the lien of the related Mortgage;

              (s)    LOCATION   OF   IMPROVEMENTS;    NO   ENCROACHMENTS.    All
improvements  which were  considered in determining  the Appraised  Value of the
Mortgaged  Property lay wholly within the  boundaries  and building  restriction
lines of the Mortgaged  Property,  and no improvements  on adjoining  properties
encroach  upon  the  Mortgaged   Property.   The  Mortgaged   Property  and  all
improvements  located  on or  being  part  of  the  Mortgaged  Property  are  in
compliance  with  all  applicable  zoning  and  building  laws,  ordinances  and
regulations;

              (t)    ORIGINATION;   PAYMENT   TERMS.   The  Mortgage   Loan  was
originated  by a  mortgagee  approved  by the  Secretary  of  Housing  and Urban
Development  pursuant  to  Sections  203 and 211 of the Act, a savings  and loan
association,  a savings bank, a commercial bank, credit union, insurance company
or other similar  institution  which is supervised  and examined by a federal or
state authority.  The documents,  instruments and agreements  submitted for loan
underwriting were not falsified and contain no untrue statement of material fact
or omit to state a material fact  required to be stated  therein or necessary to
make the  information and statements  therein not  misleading.  No Mortgage Loan
contains  terms or  provisions  which  would  result in  negative  amortization.
Principal  payments on the Mortgage Loan commenced no more than sixty days after
funds were disbursed in connection with the Mortgage Loan. The Mortgage Interest
Rate as well as the Lifetime Rate Cap and the Mortgage  Interest Rate Cap are as
set forth in the Mortgage Loan Schedule. The Mortgage Interest Rate is adjusted,
with respect to Adjustable Rate Mortgage Loans, on each Interest Rate Adjustment
Date to equal the Index plus the Gross Margin (rounded up or down to the nearest
0.125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable
in equal monthly  installments of principal and interest,  which installments of
interest,  with respect to Adjustable Rate Mortgage Loans, are subject to change
due to the  adjustments  to the Mortgage  Interest  Rate on each  Interest  Rate
Adjustment Date, with interest calculated and payable in arrears,  sufficient to
amortize the Mortgage Loan fully by the stated  maturity date,  over an original
term of not more than thirty years from  commencement  of  amortization.  Unless
otherwise specified on the Mortgage Loan Schedule,  the Mortgage Loan is payable
on the first day of each month.  There are no  convertible  mortgage loans which
contain a provision  allowing the Mortgagor to convert the Mortgage Note from an
adjustable  interest rate Mortgage Note to a fixed  interest rate Mortgage Note.
The Due Date of

                                   S-III-A-6
<PAGE>

the first  payment under the Mortgage Note is no more than 60 days from the date
of the Mortgage Note;

              (u)    CUSTOMARY  PROVISIONS.  The Mortgage contains customary and
enforceable  provisions  such as to render the rights and remedies of the holder
thereof  adequate  for the  realization  against the  Mortgaged  Property of the
benefits  of the  security  provided  thereby,  including,  (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial  foreclosure.  Upon  default  by a  Mortgagor  on a  Mortgage  Loan and
foreclosure  on, or trustee's  sale of, the Mortgaged  Property  pursuant to the
proper procedures,  the holder of the Mortgage Loan will be able to deliver good
and merchantable title to the Mortgaged Property. There is no homestead or other
exemption  available to a Mortgagor which would interfere with the right to sell
the  Mortgaged  Property  at a  trustee's  sale or the  right to  foreclose  the
Mortgage,  subject to applicable  federal and state laws and judicial  precedent
with respect to bankruptcy and right of redemption or similar law;

              (v)    CONFORMANCE  WITH AGENCY AND UNDERWRITING  GUIDELINES.  The
Mortgage  Loan  was   underwritten  in  accordance  with  the  BNC  Underwriting
Guidelines (a copy of which is attached hereto).  The Mortgage Note and Mortgage
are on forms  acceptable  to Freddie  Mac or Fannie Mae and  neither BNC nor any
servicer has made any  representations to a Mortgagor that are inconsistent with
the mortgage instruments used;

              (w)    OCCUPANCY  OF THE  MORTGAGED  PROPERTY.  As of the  related
Delivery Date the Mortgaged  Property is lawfully occupied under applicable law.
All inspections,  licenses and  certificates  required to be made or issued with
respect to all occupied portions of the Mortgaged  Property and, with respect to
the use and occupancy of the same,  including but not limited to certificates of
occupancy and fire  underwriting  certificates,  have been made or obtained from
the  appropriate  authorities.  BNC  has  not  received  notification  from  any
Governmental Authority that the Mortgaged Property is in material non-compliance
with such laws or regulations, is being used, operated or occupied unlawfully or
has failed to have or obtain such inspection,  licenses or certificates,  as the
case may be. BNC has not received  notice of any violation or failure to conform
with any such law, ordinance,  regulation, standard, license or certificate. The
Mortgagor  represented  at the time of origination of the Mortgage Loan that the
Mortgagor  would  occupy  the  Mortgaged  Property  as the  Mortgagor's  primary
residence  (except as  identified  as non-owner  occupied in the  Mortgage  Loan
Schedules);

              (x)    NO ADDITIONAL COLLATERAL.  The Mortgage Note is not and has
not been secured by any collateral except the lien of the corresponding Mortgage
and the  security  interest  of any  applicable  security  agreement  or chattel
mortgage referred to in clause (j) above;

              (y)    DEEDS OF TRUST.  In the event the  Mortgage  constitutes  a
deed of trust, a trustee,  authorized and duly qualified under applicable law to
serve as such, has been properly designated and currently so serves and is named
in the  Mortgage  (or in the case of a  substitution  of trustee,  is named in a
properly recorded substitution of trustee),  and no fees or expenses are or will
become payable by the  Unaffiliated  Seller,  the Trustee or the Servicer to the
trustee  under the deed of trust,  except in  connection  with a trustee's  sale
after default by the Mortgagor;

                                   S-III-A-7
<PAGE>

              (z)    ACCEPTABLE  INVESTMENT.   There  are  no  circumstances  or
conditions with respect to the Mortgage,  the Mortgaged Property, the Mortgagor,
the Custodial  File or the  Mortgagor's  credit  standing that can reasonably be
expected to cause private institutional investors to regard the Mortgage Loan as
an unacceptable  investment,  cause the Mortgage Loan to become  delinquent,  or
adversely  affect the value or  marketability of the Mortgage Loan, or cause the
Mortgage Loan to prepay during any period  materially  faster or slower than the
mortgage loans originated by BNC generally;

              (aa)   DELIVERY OF MORTGAGE  DOCUMENTS.  The  Mortgage  Note,  the
Mortgage,  the  Assignment  of Mortgage and any other  documents  required to be
delivered under the Pooling and Servicing  Agreement for each Mortgage Loan have
been delivered to the Trustee;

              (bb)   CONDOMINIUMS/PLANNED  UNIT  DEVELOPMENTS.  If the Mortgaged
Property is a condominium  unit or a planned unit  development  (other than a de
minimis planned unit  development)  such condominium or planned unit development
project  meets  the  eligibility  standards  set  forth in the BNC  Underwriting
Guidelines;

              (cc)   TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage with
respect  to each  Mortgage  Loan is in  recordable  form and is  acceptable  for
recording under the laws of the jurisdiction in which the Mortgaged  Property is
located.  The transfer,  assignment and conveyance of the Mortgage Notes and the
Mortgages  by BNC are not  subject to the bulk  transfer  or  similar  statutory
provisions in effect in any applicable jurisdiction;

              (dd)   DUE-ON-SALE. With respect to each Fixed Rate Mortgage Loan,
the Mortgage  contains an  enforceable  provision  for the  acceleration  of the
payment of the unpaid  principal  balance of the Mortgage Loan in the event that
the Mortgaged Property is sold or transferred  without the prior written consent
of the  mortgagee  thereunder,  and to the  best  of the  Unaffiliated  Seller's
knowledge, such provision is enforceable;

              (ee)   NO  BALLOON  MORTGAGE  LOANS.  The  Mortgage  Loan is not a
Balloon Mortgage Loan;

              (ff)   NO BUYDOWN PROVISIONS;  NO GRADUATED PAYMENTS OR CONTINGENT
INTERESTS.  The  Mortgage  Loan does not  contain  provisions  pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any separate
account established by BNC, the Mortgagor, or anyone on behalf of the Mortgagor,
or paid by any source  other than the  Mortgagor  nor does it contain  any other
similar provisions which may constitute a "buydown" provision. The Mortgage Loan
is not a graduated  payment mortgage loan, and the Mortgage Loan does not have a
shared  appreciation or other  contingent  interest  feature.  The  indebtedness
evidenced by the Mortgage Note is not  convertible  to an ownership  interest in
the Mortgaged Property or the Mortgagor and BNC has not financed nor does it own
directly or indirectly,  any equity of any form in the Mortgaged Property or the
Mortgagor;

              (gg)   CONSOLIDATION OF FUTURE ADVANCES.  Any future advances made
to the  Mortgagor  prior to the  Cut-off  Date have been  consolidated  with the
outstanding principal amount secured by the Mortgage,  and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the

                                   S-III-A-8
<PAGE>

consolidated principal amount is expressly insured as having first lien priority
by a  title  insurance  policy,  an  endorsement  to  the  policy  insuring  the
mortgagee's  consolidated  interest or by other  title  evidence  acceptable  to
Fannie Mae and Freddie Mac. The  consolidated  principal  amount does not exceed
the original principal amount of the Mortgage Loan;

              (hh)   MORTGAGED PROPERTY UNDAMAGED; NO CONDEMNATION  PROCEEDINGS.
There  is  no  proceeding  pending  or  threatened  for  the  total  or  partial
condemnation of the Mortgaged  Property.  The Mortgaged Property is undamaged by
waste, fire,  earthquake or earth movement,  windstorm,  flood, tornado or other
casualty  so as to affect  adversely  the  value of the  Mortgaged  Property  as
security for the Mortgage  Loan or the use for which the premises  were intended
and  each  Mortgaged  Property  is in good  repair.  There  have  not  been  any
condemnation  proceedings with respect to the Mortgaged  Property and BNC has no
knowledge of any such proceedings in the future;

              (ii)   COLLECTION  PRACTICES;   ESCROW  DEPOSITS;   INTEREST  RATE
ADJUSTMENTS. The origination, servicing and collection practices used by BNC and
any  servicer  with  respect to the  Mortgage  Loan have been in all respects in
compliance with Accepted Servicing  Practices,  applicable laws and regulations,
and have been in all respects legal and proper.  With respect to escrow deposits
and Escrow Payments, all such payments are in the possession of Seller and there
exist no deficiencies in connection  therewith for which customary  arrangements
for repayment thereof have not been made. Each Mortgage Loan is covered by a tax
service  contract.  All Escrow  Payments have been collected in full  compliance
with state and federal law and the  provisions of the related  Mortgage Note and
Mortgage.  An escrow of funds is not  prohibited by applicable  law and has been
established  in an amount  sufficient to pay for every item that remains  unpaid
and has been  assessed  but is not yet due and  payable.  No escrow  deposits or
Escrow  Payments or other charges or payments due the  Unaffiliated  Seller have
been capitalized  under the Mortgage or the Mortgage Note. All Mortgage Interest
Rate adjustments have been made in strict  compliance with state and federal law
and the terms of the related  Mortgage and Mortgage Note on the related Interest
Rate Adjustment  Date. If,  pursuant to the terms of the Mortgage Note,  another
index was selected for  determining  the Mortgage  Interest Rate, the same index
was used with  respect to each  Mortgage  Note which  required a new index to be
selected,  and such  selection  did not  conflict  with the terms of the related
Mortgage Note. BNC and/or a servicer  executed and delivered any and all notices
required  under  applicable  law and the terms of the related  Mortgage Note and
Mortgage   regarding  the  Mortgage   Interest  Rate  and  the  Monthly  Payment
adjustments.  Any interest  required to be paid  pursuant to state,  federal and
local law has been properly paid and credited;

              (jj)   MORTGAGE  LOAN  ATTRIBUTES:   The  Mortgage  Loan  has  the
characteristics set forth on the Mortgage Loan Schedule;

              (kk)   OTHER INSURANCE POLICIES. No action,  inaction or event has
occurred  and no state of facts  exists or has existed that has resulted or will
result in the  exclusion  from,  denial  of, or defense  to  coverage  under any
applicable  special hazard insurance policy or bankruptcy bond,  irrespective of
the cause of such  failure  of  coverage.  BNC has  caused  or will  cause to be
performed  any and all acts  required to preserve the rights and remedies of the
Trustee in any insurance policies  applicable to the Mortgage Loans,  including,
without  limitation,  any necessary  notifications  of insurers,  assignments of
policies or interests therein, and establishments of

                                   S-III-A-9
<PAGE>

coinsured,  joint loss payee and  mortgagee  rights in favor of the Trustee.  In
connection  with the placement of any such  insurance,  no  commission,  fee, or
other  compensation  has  been  or will be  received  by BNC or by any  officer,
director,  or employee of BNC or any designee of BNC or any corporation in which
BNC or any officer,  director,  or employee had a financial interest at the time
of placement of such insurance;

              (ll)   NO VIOLATION OF ENVIRONMENTAL  LAWS. The Mortgaged Property
is free  from any and all toxic or  hazardous  substances  and  there  exists no
violation of any local, state or federal  environmental law, rule or regulation.
There is no  pending  action or  proceeding  directly  involving  the  Mortgaged
Property in which compliance with any  environmental  law, rule or regulation is
an  issue;  and  nothing  further  remains  to be done to  satisfy  in full  all
requirements of each such law, rule or regulation constituting a prerequisite to
use and enjoyment of said property;

              (mm)   SOLDIERS' AND SAILORS'  CIVIL RELIEF ACT. The Mortgagor has
not notified BNC, and BNC has no knowledge of any relief requested or allowed to
the Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940;

              (nn)   APPRAISAL. BNC has delivered to the Trustee an appraisal of
the Mortgaged Property signed prior to the approval of the Mortgage  application
by an appraiser qualified under Fannie Mae and Freddie Mac guidelines who (i) is
licensed in the state  where the  Mortgaged  Property  is  located,  (ii) has no
interest,  direct or indirect,  in the Mortgaged  Property or in any Loan or the
security therefor,  and (iii) does not receive  compensation that is affected by
the approval or disapproval of the Mortgage Loan. The appraisal  shall have been
made within one hundred and eighty (180) days of the origination of the Mortgage
Loan  and  shall be  completed  in  compliance  with the  Uniform  Standards  of
Professional  Appraisal Practice,  and all applicable Federal and state laws and
regulations.  If the  appraisal  was made more than one hundred and twenty (120)
days before the  origination  of the Mortgage  Loan, BNC shall have received and
deliver to the Trustee a recertification of the appraisal;

              (oo)   DISCLOSURE  MATERIALS.   The  Mortgagor  has  received  all
disclosure  materials  required by applicable  law and BNC has complied with all
applicable  law with  respect to the  making of the  Mortgage  Loans.  BNC shall
deliver to the servicer such disclosure statement;

              (pp)   CONSTRUCTION OR REHABILITATION OF MORTGAGED  PROPERTY.  The
Mortgage Loan was not made in connection with the construction or rehabilitation
of a Mortgaged  Property or facilitating the trade-in or exchange of a Mortgaged
Property;

              (qq)   VALUE OF  MORTGAGED  PROPERTY.  BNC has no knowledge of any
circumstances existing that could reasonably be expected to adversely affect the
value or the  marketability  of the  Mortgaged  Property or Mortgage  Loan or to
cause the Mortgage Loan to prepay during any period  materially faster or slower
than similar mortgage loans originated by BNC generally;

              (rr)   NO DEFENSE TO INSURANCE COVERAGE.  No action has been taken
or failed to be taken, no event has occurred and no state of facts exists or has
existed on or prior to the related Delivery Date (whether or not known to BNC on
or prior to such date) which has resulted

                                   S-III-A-10
<PAGE>

or will result in an exclusion from, denial of, or defense to coverage under any
primary  mortgage  insurance  (including,  without  limitation,  any exclusions,
denials or defenses which would limit or reduce the  availability  of the timely
payment of the full amount of the loss  otherwise due thereunder to the insured)
whether arising out of actions, representations,  errors, omissions, negligence,
or fraud of BNC, the related  Mortgagor or any party involved in the application
for such coverage,  including the appraisal,  plans and specifications and other
exhibits or documents  submitted  therewith to the insurer under such  insurance
policy,  or for any other  reason under such  coverage,  but not  including  the
failure  of such  insurer  to pay by  reason  of such  insurer's  breach of such
insurance  policy or such  insurer's  financial  inability to pay. In connection
with  the  placement  of any  such  insurance,  no  commission,  fee,  or  other
compensation  has been or will be received by BNC or any  designee of BNC or any
corporation in which BNC or any officer,  director,  or employee had a financial
interest at the time of placement of such insurance;

              (ss)   QUALIFIED  MORTGAGE.  The  Mortgage  Loan  is  a  qualified
mortgage under Section 860G(a)(3) of the Code;

              (tt)   [Reserved];

              (uu)   LEASEHOLDS.  If the Mortgage Loan is secured by a long-term
residential lease, (1) the lessor under the lease holds a fee simple interest in
the land;  (2) the terms of such lease  expressly  permit the  mortgaging of the
leasehold  estate,  the assignment of the lease without the lessor's consent and
the  acquisition  by the holder of the Mortgage of the rights of the lessee upon
foreclosure  or assignment in lieu of  foreclosure  or provide the holder of the
Mortgage with substantially similar protections;  (3) the terms of such lease do
not (a) allow the  termination  thereof  upon the lessee's  default  without the
holder of the  Mortgage  being  entitled  to  receive  written  notice  of,  and
opportunity to cure, such default, (b) allow the termination of the lease in the
event of damage or  destruction  as long as the  Mortgage is in  existence,  (c)
prohibit the holder of the Mortgage from being insured (or receiving proceeds of
insurance)  under the  hazard  insurance  policy  or  policies  relating  to the
Mortgaged Property or (d) permit any increase in rent other than pre-established
increases  set forth in the lease;  (4) the  original  term of such lease is not
less than 15 years;  (5) the term of such lease does not terminate  earlier than
five years after the maturity date of the Mortgage  Note;  and (6) the Mortgaged
Property is located in a jurisdiction  in which the use of leasehold  estates in
transferring ownership in residential properties is a widely accepted practice;

              (vv)   PREPAYMENT  PENALTY.  The  information  set  forth  on  the
Mortgage Loan Schedule with respect to prepayment  penalties is true and correct
in all  material  respects.  With  respect  to each  Mortgage  Loan  that  has a
prepayment  penalty feature,  each such prepayment  penalty is enforceable,  and
each prepayment penalty is permitted  pursuant to federal,  state and local law.
Each  such  prepayment  penalty  is in an  amount  equal to the  maximum  amount
permitted under applicable law;

              (ww)   ASSUMABILITY. With respect to each Adjustable Rate Mortgage
Loan,  the Mortgage Note  provides  that after the related  first  Interest Rate
Adjustment  Date,  a  related  Mortgage  Loan may only be  assumed  if the party
assuming  such Mortgage Loan meets  certain  credit  requirements  stated in the
Mortgage Loan;

                                   S-III-A-11
<PAGE>

              (xx)   CONVERSION  TO  FIXED  INTEREST   RATE.   With  respect  to
Adjustable Rate Mortgage Loans, the Mortgage Loan is not a Convertible  Mortgage
Loan;

              (yy)   ESCROW  ANALYSIS.  With respect to each  Mortgage,  BNC has
within the last twelve months (unless such Mortgage was  originated  within such
twelve month period) analyzed the required Escrow Payments for each Mortgage and
adjusted the amount of such payments so that, assuming all required payments are
timely  made,  any  deficiency  will  be  eliminated  on  or  before  the  first
anniversary of such analysis,  or any overage will be refunded to the Mortgagor,
in accordance with RESPA and any other applicable law;

              (zz)   NO SECTION 32 LOANS.  The Mortgage Loan is not a Section 32
Loan;

              (aaa)  SINGLE-PREMIUM  CREDIT LIFE INSURANCE POLICY. In connection
with the  origination  of the Mortgage Loan, no proceeds from such Mortgage Loan
were used to finance or acquire a single-premium credit life insurance policy;

              (bbb)  REGARDING  THE  MORTGAGOR.  The  Mortgagor  is one or  more
natural  persons and/or trustees for an Illinois land trust or a trustee under a
"living  trust"  and such  "living  trust"  is in  compliance  with  Fannie  Mae
guidelines for such trusts;

              (ccc)  INSURANCE. BNC has caused or will cause to be performed any
and all acts required to preserve the rights and remedies of the Servicer and/or
the  Trustee  in  any  insurance  policies  applicable  to the  Mortgage  Loans,
including,   without  limitation,   any  necessary  notifications  of  insurers,
assignments of policies or interests  therein,  and establishments of coinsured,
joint  loss  payee and  mortgagee  rights in favor of the  Servicer  and/or  the
Trustee;

              (ddd)  SIMPLE INTEREST  MORTGAGE LOANS. The Mortgage Loan is not a
simple interest Mortgage Loan;

              (eee)  FLOOD CERTIFICATION  CONTRACT.  BNC shall have obtained, at
its own cost, a life of loan,  transferable flood certification contract for the
Mortgage Loan and has assigned all such contracts to the Trustee;

              (fff)  ORIGINATION  DATE.  The date of origination of the Mortgage
Loan shall be no earlier  than two (2)  months  prior to the date such  Mortgage
Loan is first purchased by the Unaffiliated Seller;

              (ggg)  NO  EXCEPTION.  The  Trustee  has not  noted  any  material
exceptions on an exception  report with respect to the Mortgage Loan which would
materially  adversely affect the Mortgage Loan or the Trustee's ownership of the
Mortgage Loan;

              (hhh)  MORTGAGE SUBMITTED FOR RECORDATION. The Mortgage either has
been  or  will  promptly  be  submitted  for   recordation  in  the  appropriate
governmental  recording office of the jurisdiction  where the Mortgaged Property
is located;

              (iii)  ENDORSEMENTS.  The Mortgage  Note has been  endorsed by BNC
for its own  account and not as a  fiduciary,  trustee,  trustor or  beneficiary
under a trust agreement;

                                   S-III-A-12
<PAGE>

              (jjj)  ACCURACY OF INFORMATION.  All  information  provided to the
Unaffiliated  Seller,  the  Servicer or the  Trustee by BNC with  respect to the
Mortgage Loan is accurate in all material respects;

              (kkk)  MORTGAGOR BANKRUPTCY. On or prior to the date 30 days after
the  related  Delivery  Date,  the  Mortgagor  has not  filed or will not file a
bankruptcy petition or has not become the subject or will not become the subject
of  involuntary  bankruptcy  proceedings  or has not  consented  to or will  not
consent to the  filing of a  bankruptcy  proceeding  against it or to a receiver
being appointed in respect of the related Mortgaged Property;

              (lll)  NO  CONSTRUCTION   LOANS  No  Mortgage  Loan  was  made  in
connection  with (a)  facilitating  the  trade-in  or  exchange  of a  Mortgaged
Property or (b) the  construction  or  rehabilitation  of a Mortgaged  Property,
unless the Mortgage Loan is a construction-to-permanent  mortgage loan listed on
the Mortgage Loan Schedule which has been fully disbursed, all construction work
is complete and a completion certificate has been issued;

              (mmm)  NO  EQUITY  PARTICIPATION.  No  document  relating  to  the
Mortgage Loan provides for any contingent or additional  interest in the form of
participation  in the cash flow of the  Mortgaged  Property  or a sharing in the
appreciation of the value of the Mortgaged Property.  The indebtedness evidenced
by the  Mortgage  Note  is  not  convertible  to an  ownership  interest  in the
Mortgaged  Property or the  Mortgagor  and BNC has not  financed nor does it own
directly or indirectly,  any equity of any form in the Mortgaged Property or the
Mortgagor; and

              (nnn)  PROCEEDS OF MORTGAGE  LOAN.  The  proceeds of the  Mortgage
Loan have not been and shall not be used to  satisfy,  in whole or in part,  any
debt owed or owing by the  Mortgagor to BNC or any  Affiliate  or  correspondent
thereof  unless  such  debt was  originated  more  than 24  months  prior to the
origination of such Mortgage Loan.

                                   S-III-A-13
<PAGE>

                                 SCHEDULE III-B

                            IMPAC FUNDING CORPORATION

                       Mortgage Pass-Through Certificates,
                                 Series 2001-HE1

             REPRESENTATIONS AND WARRANTIES AS TO THE MORTGAGE LOANS

              IMPAC Funding Corporation ("IFC") hereby makes the representations
and  warranties set forth in this Schedule  III-B,  as to the IFC Mortgage Loans
only, to the Depositor, the Unaffiliated Seller, the Class A Certificate Insurer
and the Trustee,  as of the related  Cut-off Date, the related  Delivery Date or
date of origination of the Mortgage Loan (as applicable). Capitalized terms used
but not  otherwise  defined  in this  Schedule  III-B  shall  have the  meanings
ascribed thereto in the Pooling and Servicing Agreement.

              (a)    MORTGAGE LOANS AS DESCRIBED.  The  information set forth in
the Mortgage Loan Schedule is complete, true and correct;

              (b)    PAYMENTS  CURRENT.  All payments  required to be made up to
the related  Delivery  Date under the terms of the Mortgage  Note have been made
and credited.  As of the related  Delivery  Date, no payment  required under the
Mortgage  Loan is 30  days or more  delinquent  nor has any  payment  under  the
Mortgage Loan been 30 days or more  delinquent at any time since the origination
of the Mortgage Loan;

              (c)    NO OUTSTANDING CHARGES.  There are no defaults in complying
with the terms of the  Mortgage  securing  the  Mortgage  Loan,  and all  taxes,
governmental  assessments,   insurance  premiums,  water,  sewer  and  municipal
charges,  leasehold  payments or ground  rents which  previously  became due and
owing have been paid,  or an escrow of funds has been  established  in an amount
sufficient  to pay for every such item which  remains  unpaid and which has been
assessed but is not yet due and  payable.  Except for (A) payments in the nature
of escrow payments and (B) interest  accruing from the date of the Mortgage Note
or date of disbursement of the Mortgage Loan proceeds,  whichever is earlier, to
the day which  precedes  by one month the Due Date of the first  installment  of
principal  and  interest,  including,  without  limitation,  taxes and insurance
payments,  IFC has not  advanced  funds,  or  induced,  solicited  or  knowingly
received any advance of funds by a party other than the  Mortgagor,  directly or
indirectly, for the payment of any amount required under the Mortgage Loan;

              (d)    ORIGINAL TERMS  UNMODIFIED.  The terms of the Mortgage Note
and Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of  origination  except  by a  written  instrument  which has been
recorded,  if necessary to protect the  interests of the Trustee,  and which has
been  delivered  to the  Trustee,  and the terms of which are  reflected  in the
Mortgage  Loan  Schedule.  The  substance  of any  such  waiver,  alteration  or
modification  has been  approved  by the title  insurer,  if any,  to the extent
required  by the  policy,  and its  terms are  reflected  on the  Mortgage  Loan
Schedule,  if applicable.  No Mortgagor has been released,  in whole or in part,
except  in  connection  with an  assumption  agreement,  approved  by the  title
insurer, to the extent required by the policy, and which assumption agreement is
part

                                   S-III-B-1
<PAGE>

of the  Mortgage  Loan File  delivered to the Trustee and the terms of which are
reflected in the Mortgage Loan Schedule;

              (e)    NO DEFENSES.  The Mortgage Loan is not subject to any right
of rescission,  set-off, counterclaim or defense, including, without limitation,
the defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable,  in whole or in part, or subject to
any right of rescission,  set-off,  counterclaim or defense, including,  without
limitation,  the  defense of usury,  and no such right of  rescission,  set-off,
counterclaim or defense has been asserted with respect thereto, and no Mortgagor
was a debtor in any state or federal bankruptcy or insolvency  proceeding at, or
subsequent to, the time the Mortgage Loan was originated;

              (f)    HAZARD  INSURANCE.  Pursuant to the terms of the  Mortgage,
all buildings or other improvements upon the Mortgaged Property are insured by a
generally  acceptable insurer against loss by fire, hazards of extended coverage
and such  other  hazards  as are  provided  for in the  Fannie  Mae Guides or by
Freddie Mac, as well as the following  additional  requirements.  If required by
the National  Flood  Insurance  Act of 1968,  as amended,  each Mortgage Loan is
covered by a flood  insurance  policy  meeting the  requirements  of the current
guidelines  of the Federal  Insurance  Administration  in effect,  which  policy
conforms to Fannie Mae and Freddie Mac, as well as the aforementioned additional
requirements.  All individual  insurance  policies contain a standard  mortgagee
clause naming IFC and its successors and assigns as mortgagee,  and all premiums
thereon  have been paid and such  policies  may not be  reduced,  terminated  or
cancelled  without 30 days' prior written notice to the mortgagee.  The Mortgage
obligates the Mortgagor  thereunder to maintain the hazard  insurance  policy at
the  Mortgagor's  cost and  expense,  and on the  Mortgagor's  failure to do so,
authorizes  the holder of the Mortgage to obtain and maintain such  insurance at
such Mortgagor's cost and expense,  and to seek reimbursement  therefor from the
Mortgagor.  Where  required by state law or  regulation,  the Mortgagor has been
given an  opportunity  to choose the carrier of the required  hazard  insurance,
provided  the policy is not a "MASTER"  or  "BLANKET"  hazard  insurance  policy
covering a  condominium,  or any hazard  insurance  policy  covering  the common
facilities of a planned unit  development.  The hazard  insurance  policy is the
valid and binding  obligation of the insurer,  is in full force and effect,  and
will be in full force and effect and inure to the  benefit of the  Trustee  upon
the consummation of the  transactions  contemplated by the Pooling and Servicing
Agreement.  IFC has not engaged in, and has no knowledge of the  Mortgagor's  or
any  servicer's  having  engaged in, any act or omission  which would impair the
coverage of any such  policy,  the  benefits  of the  endorsement  provided  for
herein,  or the validity and binding effect of such policy,  including,  without
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be  received,  retained or realized by any
attorney,  firm or other person or entity,  and no such unlawful items have been
received, retained or realized by IFC;

              (g)    COMPLIANCE WITH APPLICABLE  LAWS. Any and all  requirements
of any  federal,  state or  local  law  including,  without  limitation,  usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit  opportunity  and disclosure  laws  applicable to the Mortgage Loan
have been complied  with,  the  consummation  of the  transactions  contemplated
hereby will not involve the violation of any such laws or  regulations,  and IFC
shall

                                   S-III-B-2
<PAGE>

maintain in its possession,  available for the Trustee's  inspection,  and shall
deliver  to the  Trustee  upon  demand,  evidence  of  compliance  with all such
requirements;

              (h)    NO  SATISFACTION  OF  MORTGAGE.  The  Mortgage has not been
satisfied,  canceled,  subordinated  or rescinded,  in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole
or in part,  nor has any  instrument  been  executed  that would effect any such
release,  cancellation,  subordination  or  rescission.  IFC has not  waived the
performance  by the  Mortgagor  of any  action,  if the  Mortgagor's  failure to
perform such action would cause the Mortgage Loan to be in default,  nor has IFC
waived any default resulting from any action or inaction by the Mortgagor;

              (i)    LOCATION  AND TYPE OF  MORTGAGED  PROPERTY.  The  Mortgaged
Property  is a fee  simple  property  located  in the  state  identified  in the
Mortgage  Loan  Schedule and consists of a single parcel of real property with a
detached  single family  residence  erected  thereon,  or a two- to  four-family
dwelling,  or  an  individual   residential   condominium  unit  in  a  low-rise
condominium  project,  or an individual unit in a planned unit  development or a
manufactured home; PROVIDED,  HOWEVER, that any condominium unit or planned unit
development shall not fall within any of the "Ineligible Projects" of part VIII,
Section  102 of the  Fannie  Mae  Selling  Guide  and  shall  conform  with  the
Underwriting  Guidelines.  In the  case of any  Mortgaged  Properties  that  are
manufactured homes (a "MANUFACTURED HOME MORTGAGE LOANS"), (i) such Manufactured
Home  Mortgage  Loan  conforms  with the  applicable  Fannie Mae or Freddie  Mac
requirements  regarding mortgage loans related to manufactured  dwellings,  (ii)
the related manufactured  dwelling is permanently affixed to the land, (iii) the
related  manufactured  dwelling  and the related  land are subject to a Mortgage
properly filed in the appropriate  public  recording office and naming Seller as
mortgagee,  (iv) the applicable  laws of the  jurisdiction  in which the related
Mortgaged  Property is located will deem the  manufactured  dwelling  located on
such Mortgaged Property to be a part of the real property on which such dwelling
is located,  and (v) such  Manufactured  Home  Mortgage  Loan is (x) a qualified
mortgage  under  Section  860G(a)(3)  of the Internal  Revenue Code of 1986,  as
amended  and (y)  secured by  manufactured  housing  treated as a single  family
residence under Section 25(e)(10) of the Code. As of the date of origination, no
portion of the Mortgaged  Property was used for commercial  purposes,  and since
the date of origination,  no portion of the Mortgaged Property has been used for
commercial  purposes;  provided,  that Mortgaged Properties which contain a home
office shall not be considered as being used for commercial  purposes as long as
the Mortgaged  Property has not been altered for commercial  purposes and is not
storing  any  chemicals  or raw  materials  other than those  commonly  used for
homeowner repair, maintenance and/or household purposes;

              (j)    VALID FIRST AND SECOND LIEN.  Each  Mortgage is a valid and
subsisting  first lien,  with respect to First Lien Loans,  or second lien, with
respect  to Second  Lien  Loans,  of record  on a single  parcel of real  estate
constituting the Mortgaged Property, including all buildings and improvements on
the  Mortgaged  Property  and  all  installations  and  mechanical,  electrical,
plumbing,  heating and air  conditioning  systems  located in or annexed to such
buildings,  and all additions,  alterations and  replacements  made at any time,
subject in all cases to the exceptions to title set forth in the title insurance
policy with respect to the related Mortgage Loan, which exceptions are generally
acceptable to prudent mortgage lending  companies,  and such other exceptions to
which similar properties are commonly subject and which do not individually,  or
in the aggregate,  materially and adversely  affect the benefits of the security

                                   S-III-B-3
<PAGE>

intended to be provided by such Mortgage. In no event shall any Mortgage Loan be
in a lien position  more junior than a second lien.  The lien of the Mortgage is
subject only to:

                            (A)    with  respect to Second Lien Loans,  the lien
              of the first mortgage on the Mortgaged Property;

                            (B)    the lien of current real  property  taxes and
              assessments not yet due and payable;

                            (C)    covenants,   conditions   and   restrictions,
              rights of way, easements and other matters of the public record as
              of the date of recording  acceptable to prudent  mortgage  lending
              institutions   generally  and  specifically  referred  to  in  the
              lender's title insurance policy delivered to the originator of the
              Mortgage  Loan  and  (a)  specifically  referred  to or  otherwise
              considered  in  the  appraisal  made  for  the  originator  of the
              Mortgage Loan and (b) which do not adversely  affect the Appraised
              Value of the Mortgaged Property set forth in such appraisal; and

                            (D)    other  matters to which like  properties  are
              commonly  subject  which  do not  materially  interfere  with  the
              benefits of the  security  intended to be provided by the Mortgage
              or the use,  enjoyment,  value  or  marketability  of the  related
              Mortgaged Property.

Any security  agreement,  chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan  establishes and creates a valid,
subsisting, enforceable and perfected (A) first lien and first priority security
interest  with  respect to each First Lien Loan,  or (B) second  lien and second
priority  security  interest  with  respect to each Second Lien Loan,  in either
case,  on the  property  described  therein  and IFC has full  right to sell and
assign the same to the Unaffiliated  Seller.  The Mortgaged Property was not, as
of the date of origination of the Mortgage Loan, subject to a mortgage,  deed of
trust,  deed to  secure  debt  or  other  security  instrument  creating  a lien
subordinate to the lien of the Mortgage;

              (k)    VALIDITY OF MORTGAGE  DOCUMENTS.  The Mortgage Note and the
Mortgage  and any other  agreement  executed  and  delivered  by a Mortgagor  or
guarantor,  if applicable,  in connection with a Mortgage Loan are genuine,  and
each is the legal, valid and binding obligation of the maker thereof enforceable
in accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related  agreement had legal  capacity to enter into the Mortgage
Loan and to execute and deliver the  Mortgage  Note,  the Mortgage and any other
related  agreement,  and the  Mortgage  Note,  the  Mortgage  and any other such
related  agreement  have been duly and  properly  executed by other such related
parties.   The  documents,   instruments  and  agreements   submitted  for  loan
underwriting were not falsified and contain no untrue statement of material fact
or omit to state a material fact  required to be stated  therein or necessary to
make the information and statements  therein not  misleading.  No fraud,  error,
omission, misrepresentation,  negligence or similar occurrence with respect to a
Mortgage  Loan has taken  place on the part of any  Person,  including,  without
limitation, the Mortgagor, any appraiser, any builder or developer, or any other
party involved in the origination or servicing of the Mortgage Loan. IFC

                                   S-III-B-4
<PAGE>

has reviewed all of the documents  constituting  the servicing file and has made
such  inquiries  as it deems  necessary  to make and confirm the accuracy of the
representations set forth herein;

              (l)    FULL  DISBURSEMENT OF PROCEEDS.  The Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully disbursed and there
is no requirement for future advances  thereunder,  and any and all requirements
as to completion of any on-site or off-site  improvement and as to disbursements
of any escrow  funds  therefor  have been  complied  with.  All costs,  fees and
expenses  incurred in making or closing the Mortgage  Loan and the  recording of
the Mortgage  were paid,  and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage;

              (m)    OWNERSHIP.  Immediately  prior to the sale of the  Mortgage
Loan to the Unaffiliated  Seller, IFC was the sole owner of record and holder of
the Mortgage Loan and the indebtedness  evidenced by each Mortgage Note and upon
the sale of the Mortgage Loans to the Unaffiliated  Seller,  IFC will retain the
Custodial  Files or any part thereof with respect  thereto not  delivered to the
Trustee,  in  trust  only for the  purpose  of  servicing  and  supervising  the
servicing of each Mortgage  Loan.  The Mortgage Loan is not assigned or pledged,
and IFC has good,  indefeasible and marketable title thereto, and has full right
to transfer and sell the Mortgage Loan to the Unaffiliated Seller free and clear
of any encumbrance,  equity, participation interest, lien, pledge, charge, claim
or security interest, and has full right and authority subject to no interest or
participation  of, or agreement  with, any other party,  to sell and assign each
Mortgage Loan pursuant to this Agreement and following the sale of each Mortgage
Loan, the Unaffiliated  Seller will own such Mortgage Loan free and clear of any
encumbrance,  equity,  participation  interest,  lien, pledge,  charge, claim or
security interest. IFC intends to relinquish all rights to possess,  control and
monitor the Mortgage  Loan.  After the date of the sale of the Mortgage  Loan to
the Unaffiliated  Seller, IFC will have no right to modify or alter the terms of
the  sale of the  Mortgage  Loan  and IFC will  have no  obligation  or right to
repurchase  the Mortgage Loan or substitute  another  Mortgage  Loan,  except as
provided in the IFC Purchase Agreement and the Pooling and Servicing Agreement;

              (n)    DOING  BUSINESS.  All  parties  which  have or have had any
interest  in the  Mortgage  Loan,  whether as  mortgagee,  assignee,  pledgee or
otherwise,  are (or,  during the period in which they held and  disposed of such
interest,  were)  (1) in  compliance  with  any  and  all  applicable  licensing
requirements of the laws of the state wherein the Mortgaged Property is located,
and (2) either (i) organized  under the laws of such state, or (ii) qualified to
do business in such state,  or (iii) a federal savings and loan  association,  a
savings bank or a national bank having a principal  office in such state, or (3)
not doing business in such state;

              (o)    CLTV,  LTV. No Mortgage Loan that is a Second Lien Loan has
a CLTV in excess of 95%. No Mortgage Loan has an LTV greater than 95%;

              (p)    TITLE  INSURANCE.  The Mortgage  Loan is covered by an ALTA
lender's title insurance policy or other generally  acceptable form of policy or
insurance  acceptable to Fannie Mae or Freddie Mac and each such title insurance
policy is issued by a title insurer  acceptable to Fannie Mae or Freddie Mac and
qualified to do business in the  jurisdiction  where the  Mortgaged  Property is
located, insuring IFC, its successors and assigns, as to the first priority lien
(with  respect to First Lien  Loans) or second  priority  lien (with  respect to
Second Lien Loans) of the

                                   S-III-B-5
<PAGE>

Mortgage in the original  principal amount of the Mortgage Loan, subject only to
the exceptions  contained in clauses (1) and (2) of paragraph (j) above,  and in
the case of Adjustable  Rate Mortgage  Loans,  against any loss by reason of the
invalidity or  unenforceability of the lien resulting from the provisions of the
Mortgage  providing  for  adjustment  to the Mortgage  Interest Rate and Monthly
Payment. Where required by state law or regulation, the Mortgagor has been given
the opportunity to choose the carrier of the required  mortgage title insurance.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress,  and against  encroachments by or upon the Mortgaged Property or any
interest  therein.  The title  policy does not  contain  any special  exceptions
(other than the standard  exclusions) for zoning and uses and has been marked to
delete the standard survey exception or to replace the standard survey exception
with a specific  survey  reading.  IFC, its successor and assigns,  are the sole
insureds of such  lender's  title  insurance  policy,  and such  lender's  title
insurance  policy is valid and  remains  in full force and effect and will be in
force and effect upon the consummation of the  transactions  contemplated by the
Pooling and  Servicing  Agreement.  No claims have been made under such lender's
title insurance policy,  and no prior holder of the related Mortgage,  including
IFC, has done, by act or omission,  anything  which would impair the coverage of
such lender's title insurance policy, including, without limitation, no unlawful
fee,  commission,  kickback or other unlawful  compensation or value of any kind
has been or will be  received,  retained or realized  by any  attorney,  firm or
other person or entity, and no such unlawful items have been received,  retained
or realized by IFC;

              (q)    NO  DEFAULTS.  There is no default,  breach,  violation  or
event  which  would  permit  acceleration  existing  under the  Mortgage  or the
Mortgage  Note and no event  which,  with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default,  breach,
violation or event which would permit acceleration, and neither the Unaffiliated
Seller nor any of its affiliates nor any of their respective predecessors,  have
waived any default,  breach, violation or event which would permit acceleration.
With respect to each Second Lien Loan,  (i) the prior  mortgage is in full force
and effect, (ii) there is no default, breach, violation or event of acceleration
existing under such prior mortgage or the related  mortgage note, (iii) no event
which,  with the passage of time or with notice and the  expiration of any grace
or cure  period,  would  constitute  a default,  breach,  violation  or event of
acceleration thereunder,  and either (A) the prior mortgage contains a provision
which allows or (B) applicable law requires, the mortgagee under the Second Lien
Loan to receive notice of, and affords such mortgagee an opportunity to cure any
default by payment in full or otherwise under the prior mortgage;

              (r)    NO  MECHANICS'  LIENS.  There are no  mechanics' or similar
liens or claims which have been filed for work, labor or material (and no rights
are outstanding  that under the law could give rise to such liens) affecting the
related  Mortgaged  Property  which  are or may be liens  prior  to, or equal or
coordinate with, the lien of the related Mortgage;

              (s)    LOCATION   OF   IMPROVEMENTS;    NO   ENCROACHMENTS.    All
improvements  which were  considered in determining  the Appraised  Value of the
Mortgaged  Property lay wholly within the  boundaries  and building  restriction
lines of the Mortgaged  Property,  and no improvements  on adjoining  properties
encroach  upon  the  Mortgaged   Property.   The  Mortgaged   Property  and  all
improvements  located  on or  being  part  of  the  Mortgaged  Property  are  in
compliance  with  all  applicable  zoning  and  building  laws,  ordinances  and
regulations;

                                   S-III-B-6
<PAGE>

              (t)    ORIGINATION;   PAYMENT   TERMS.   The  Mortgage   Loan  was
originated  by a  mortgagee  approved  by the  Secretary  of  Housing  and Urban
Development  pursuant  to  Sections  203 and 211 of the Act, a savings  and loan
association,  a savings bank, a commercial bank, credit union, insurance company
or other similar  institution  which is supervised  and examined by a federal or
state authority.  The documents,  instruments and agreements  submitted for loan
underwriting were not falsified and contain no untrue statement of material fact
or omit to state a material fact  required to be stated  therein or necessary to
make the  information and statements  therein not  misleading.  No Mortgage Loan
contains  terms or  provisions  which  would  result in  negative  amortization.
Principal  payments on the Mortgage Loan commenced no more than sixty days after
funds were disbursed in connection with the Mortgage Loan. The Mortgage Interest
Rate as well as the Lifetime Rate Cap and the Mortgage  Interest Rate Cap are as
set forth on the Mortgage Loan Schedule. The Mortgage Interest Rate is adjusted,
with respect to Adjustable Rate Mortgage Loans, on each Interest Rate Adjustment
Date to equal the Index plus the Gross Margin (rounded up or down to the nearest
0.125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable
in equal monthly  installments of principal and interest,  which installments of
interest,  with respect to Adjustable Rate Mortgage Loans, are subject to change
due to the  adjustments  to the Mortgage  Interest  Rate on each  Interest  Rate
Adjustment Date, with interest calculated and payable in arrears,  sufficient to
amortize the Mortgage Loan fully by the stated  maturity date,  over an original
term of not more than thirty years from  commencement  of  amortization.  Unless
otherwise specified on the Mortgage Loan Schedule,  the Mortgage Loan is payable
on the first day of each month.  There are no  Convertible  Mortgage Loans which
contain a provision  allowing the Mortgagor to convert the Mortgage Note from an
adjustable  interest rate Mortgage Note to a fixed  interest rate Mortgage Note.
The Due Date of the first  payment  under the  Mortgage  Note is no more than 60
days from the date of the Mortgage Note;

              (u)    CUSTOMARY  PROVISIONS.  The Mortgage contains customary and
enforceable  provisions  such as to render the rights and remedies of the holder
thereof  adequate  for the  realization  against the  Mortgaged  Property of the
benefits  of the  security  provided  thereby,  including,  (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial  foreclosure.  Upon  default  by a  Mortgagor  on a  Mortgage  Loan and
foreclosure  on, or trustee's  sale of, the Mortgaged  Property  pursuant to the
proper procedures,  the holder of the Mortgage Loan will be able to deliver good
and merchantable title to the Mortgaged Property. There is no homestead or other
exemption  available to a Mortgagor which would interfere with the right to sell
the  Mortgaged  Property  at a  trustee's  sale or the  right to  foreclose  the
Mortgage,  subject to applicable  federal and state laws and judicial  precedent
with respect to bankruptcy and right of redemption or similar law;

              (v)    CONFORMANCE  WITH AGENCY AND UNDERWRITING  GUIDELINES.  The
Mortgage  Loan  was   underwritten  in  accordance  with  the  IFC  Underwriting
Guidelines (a copy of which is attached hereto).  The Mortgage Note and Mortgage
are on forms  acceptable  to Freddie Mac or Fannie Mae and neither  IFC, nor any
servicer has made any  representations to a Mortgagor that are inconsistent with
the mortgage instruments used;

              (w)    OCCUPANCY  OF THE  MORTGAGED  PROPERTY.  As of the  related
Delivery Date the Mortgaged  Property is lawfully occupied under applicable law.
All inspections,  licenses and  certificates  required to be made or issued with
respect to all occupied portions of the Mortgaged

                                   S-III-B-7
<PAGE>

Property and,  with respect to the use and occupancy of the same,  including but
not limited to  certificates  of occupancy and fire  underwriting  certificates,
have  been  made or  obtained  from  the  appropriate  authorities.  IFC has not
received  notification  from  any  Governmental  Authority  that  the  Mortgaged
Property is in material  non-compliance with such laws or regulations,  is being
used,  operated  or  occupied  unlawfully  or has failed to have or obtain  such
inspection,  licenses or certificates,  as the case may be. IFC has not received
notice of any  violation  or failure to  conform  with any such law,  ordinance,
regulation,   standard,  license  or  certificate.  If  the  Mortgaged  Property
associated  with a Mortgage  Loan is identified on the Mortgage Loan Schedule as
being  owner-occupied,  the Mortgagor  represented at the time of origination of
such Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence;

              (x)    NO ADDITIONAL COLLATERAL.  The Mortgage Note is not and has
not been secured by any collateral except the lien of the corresponding Mortgage
and the  security  interest  of any  applicable  security  agreement  or chattel
mortgage referred to in clause (j) above;

              (y)    DEEDS OF TRUST.  In the event the  Mortgage  constitutes  a
deed of trust, a trustee,  authorized and duly qualified under applicable law to
serve as such, has been properly designated and currently so serves and is named
in the  Mortgage  (or in the case of a  substitution  of trustee,  is named in a
properly recorded substitution of trustee),  and no fees or expenses are or will
become payable by the  Unaffiliated  Seller,  the Trustee or the Servicer to the
trustee  under the deed of trust,  except in  connection  with a trustee's  sale
after default by the Mortgagor;

              (z)    ACCEPTABLE  INVESTMENT.   There  are  no  circumstances  or
conditions with respect to the Mortgage,  the Mortgaged Property, the Mortgagor,
the Custodial  File or the  Mortgagor's  credit  standing that can reasonably be
expected to cause private institutional investors to regard the Mortgage Loan as
an unacceptable  investment,  cause the Mortgage Loan to become  delinquent,  or
adversely  affect the value or  marketability of the Mortgage Loan, or cause the
Mortgage Loan to prepay during any period  materially  faster or slower than the
mortgage loans originated by IFC generally;

              (aa)   DELIVERY OF MORTGAGE  DOCUMENTS.  The  Mortgage  Note,  the
Mortgage,  the  Assignment  of Mortgage and any other  documents  required to be
delivered under the Pooling and Servicing  Agreement for each Mortgage Loan have
been delivered to the Trustee;

              (bb)   CONDOMINIUMS/PLANNED  UNIT  DEVELOPMENTS.  If the Mortgaged
Property is a condominium  unit or a planned unit  development  (other than a de
minimis planned unit  development)  such condominium or planned unit development
project is (i)  acceptable  to Fannie Mae or  Freddie  Mac or (ii)  located in a
condominium  or planned unit  development  project  which has  received  project
approval  from Fannie Mae or Freddie Mac.  The  representations  and  warranties
required  by  Fannie  Mae with  respect  to such  condominium  or  planned  unit
development have been satisfied and remain true and correct;

              (cc)   TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage with
respect  to each  Mortgage  Loan is in  recordable  form and is  acceptable  for
recording under the laws of the jurisdiction in which the Mortgaged  Property is
located. The transfer, assignment and

                                   S-III-B-8
<PAGE>

conveyance of the Mortgage Notes and the Mortgages by IFC are not subject to the
bulk  transfer  or  similar  statutory  provisions  in effect in any  applicable
jurisdiction;

              (dd)   DUE-ON-SALE. With respect to each Fixed Rate Mortgage Loan,
the Mortgage  contains an  enforceable  provision  for the  acceleration  of the
payment of the unpaid  principal  balance of the Mortgage Loan in the event that
the Mortgaged Property is sold or transferred  without the prior written consent
of the mortgagee thereunder;

              (ee)   BALLOON  MORTGAGE LOANS. The Mortgage Loan is not a Balloon
Mortgage Loan;

              (ff)   NO BUYDOWN PROVISIONS;  NO GRADUATED PAYMENTS OR CONTINGENT
INTERESTS.  The  Mortgage  Loan does not  contain  provisions  pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any separate
account established by IFC, the Mortgagor, or anyone on behalf of the Mortgagor,
or paid by any source  other than the  Mortgagor  nor does it contain  any other
similar provisions which may constitute a "buydown" provision. The Mortgage Loan
is not a graduated  payment mortgage loan, and the Mortgage Loan does not have a
shared  appreciation or other  contingent  interest  feature.  The  indebtedness
evidenced by the Mortgage Note is not  convertible  to an ownership  interest in
the Mortgaged Property or the Mortgagor and IFC has not financed nor does it own
directly or indirectly,  any equity of any form in the Mortgaged Property or the
Mortgagor;

              (gg)   CONSOLIDATION OF FUTURE ADVANCES.  Any future advances made
to the  Mortgagor  prior to the  Cut-off  Date have been  consolidated  with the
outstanding principal amount secured by the Mortgage,  and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the consolidated principal amount is expressly
insured as having  first or second,  as  applicable,  lien  priority  by a title
insurance  policy,  an  endorsement  to  the  policy  insuring  the  mortgagee's
consolidated  interest or by other title  evidence  acceptable to Fannie Mae and
Freddie Mac. The  consolidated  principal  amount does not exceed the  principal
amount of the Mortgage Loan when such loan was originated;

              (hh)   MORTGAGED PROPERTY UNDAMAGED; NO CONDEMNATION  PROCEEDINGS.
There  is  no  proceeding  pending  or  threatened  for  the  total  or  partial
condemnation of the Mortgaged  Property.  The Mortgaged Property is undamaged by
waste, fire,  earthquake or earth movement,  windstorm,  flood, tornado or other
casualty  that could affect  adversely  the value of the  Mortgaged  Property as
security for the Mortgage  Loan or the use for which the premises  were intended
and  each  Mortgaged  Property  is in good  repair.  There  have  not  been  any
condemnation  proceedings  with  respect  to  the  Mortgaged  Property  and  the
Unaffiliated Seller has no knowledge of any such proceedings in the future;

              (ii)   COLLECTION  PRACTICES;   ESCROW  DEPOSITS;   INTEREST  RATE
ADJUSTMENTS. The origination, servicing and collection practices used by IFC and
any  servicer  with  respect to the  Mortgage  Loan have been in all respects in
compliance with Accepted Servicing  Practices,  applicable laws and regulations,
and have been in all respects legal and proper.  With respect to escrow deposits
and Escrow  Payments (other than with respect to Second Lien Loans for which the
mortgagee under the prior mortgage lien is collecting Escrow Payments), all such
payments

                                   S-III-B-9
<PAGE>

are in the  possession  of IFC and there  exist no  deficiencies  in  connection
therewith for which customary  arrangements for repayment  thereof have not been
made. Each Mortgage Loan is covered by a life of loan tax service contract.  All
Escrow  Payments have been collected in full  compliance  with state and federal
law and the provisions of the related  Mortgage Note and Mortgage.  An escrow of
funds is not prohibited by applicable law and has been  established in an amount
sufficient  to pay for every item that remains  unpaid and has been assessed but
is not yet due and  payable.  No escrow  deposits  or Escrow  Payments  or other
charges or payments due the Unaffiliated  Seller have been capitalized under the
Mortgage or the Mortgage Note. All Mortgage  Interest Rate adjustments have been
made in  strict  compliance  with  state  and  federal  law and the terms of the
related Mortgage and Mortgage Note on the related Interest Rate Adjustment Date.
If,  pursuant to the terms of the Mortgage Note,  another index was selected for
determining the Mortgage  Interest Rate, the same index was used with respect to
each Mortgage Note which required a new index to be selected, and such selection
did not  conflict  with the terms of the  related  Mortgage  Note.  IFC and/or a
servicer  executed and delivered any and all notices  required under  applicable
law and the  terms of the  related  Mortgage  Note and  Mortgage  regarding  the
Mortgage  Interest  Rate  and the  Monthly  Payment  adjustments.  Any  interest
required to be paid  pursuant to state,  federal and local law has been properly
paid and credited;

              (jj)   MORTGAGE  LOAN  ATTRIBUTES:   The  Mortgage  Loan  has  the
characteristics set forth on the Mortgage Loan Schedule;

              (kk)   OTHER INSURANCE POLICIES. No action,  inaction or event has
occurred  and no state of facts  exists or has existed that has resulted or will
result in the  exclusion  from,  denial  of, or defense  to  coverage  under any
applicable  special hazard insurance policy or bankruptcy bond,  irrespective of
the cause of such  failure  of  coverage.  IFC has  caused  or will  cause to be
performed  any and all acts  required to preserve the rights and remedies of the
Trustee in any insurance policies  applicable to the Mortgage Loans,  including,
without  limitation,  any necessary  notifications  of insurers,  assignments of
policies or interests therein, and establishments of coinsured, joint loss payee
and mortgagee  rights in favor of the Trustee.  In connection with the placement
of any such insurance,  no commission,  fee, or other  compensation  has been or
will be received by IFC or by any officer,  director,  or employee of IFC or any
designee of IFC or any  corporation  in which IFC or any officer,  director,  or
employee had a financial interest at the time of placement of such insurance;

              (ll)   NO VIOLATION OF ENVIRONMENTAL  LAWS. The Mortgaged Property
is free  from any and all toxic or  hazardous  substances  and  there  exists no
violation of any local, state or federal  environmental law, rule or regulation.
There is no  pending  action or  proceeding  directly  involving  the  Mortgaged
Property in which compliance with any  environmental  law, rule or regulation is
an  issue;  and  nothing  further  remains  to be done to  satisfy  in full  all
requirements of each such law, rule or regulation constituting a prerequisite to
use and enjoyment of said property;

              (mm)   SOLDIERS' AND SAILORS'  CIVIL RELIEF ACT. The Mortgagor has
not notified IFC, and IFC has no knowledge of any relief requested or allowed to
the Mortgagor  under the Soldiers' and Sailors'  Civil Relief Act of 1940;

                                   S-III-B-10
<PAGE>

              (nn)   APPRAISAL. IFC has delivered to the Trustee an appraisal of
the Mortgaged Property signed prior to the approval of the Mortgage  application
by an appraiser qualified under Fannie Mae and Freddie Mac guidelines who (i) is
licensed in the state  where the  Mortgaged  Property  is  located,  (ii) has no
interest,  direct or indirect,  in the Mortgaged  Property or in any Loan or the
security therefor,  and (iii) does not receive  compensation that is affected by
the approval or disapproval of the Mortgage Loan. The appraisal  shall have been
made within one hundred and eighty (180) days of the origination of the Mortgage
Loan  and  shall be  completed  in  compliance  with the  Uniform  Standards  of
Professional  Appraisal  Practice and all applicable  Federal and state laws and
regulations.  If the  appraisal  was made more than one hundred and twenty (120)
days before the  origination  of the Mortgage  Loan, IFC shall have received and
delivered to the Trustee a recertification of the appraisal;

              (oo)   DISCLOSURE MATERIALS. The Mortgagor has, and has executed a
statement  to the  effect  that  the  Mortgagor  has,  received  all  disclosure
materials  required by applicable  law and IFC has complied with all  applicable
law with respect to the making of the Mortgage  Loans.  IFC shall deliver to the
Servicer such disclosure statement;

              (pp)   CONSTRUCTION OR REHABILITATION OF MORTGAGED  PROPERTY.  The
Mortgage Loan was not made in connection with the construction or rehabilitation
of a Mortgaged  Property or facilitating the trade-in or exchange of a Mortgaged
Property;

              (qq)   VALUE OF  MORTGAGED  PROPERTY.  IFC has no knowledge of any
circumstances existing that could reasonably be expected to adversely affect the
value or the  marketability  of the  Mortgaged  Property or Mortgage  Loan or to
cause the Mortgage Loan to prepay during any period  materially faster or slower
than similar mortgage loans originated by IFC generally;

              (rr)   NO DEFENSE TO INSURANCE COVERAGE.  No action has been taken
or failed to be taken, no event has occurred and no state of facts exists or has
existed on or prior to the related Delivery Date (whether or not known to IFC on
or prior to such date) which has resulted or will result in an  exclusion  from,
denial  of,  or  defense  to  coverage  under  any  primary  mortgage  insurance
(including,  without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss  otherwise due thereunder to the insured)  whether  arising out of actions,
representations,  errors,  omissions,  negligence,  or fraud of IFC, the related
Mortgagor or any party involved in the application for such coverage,  including
the  appraisal,  plans  and  specifications  and  other  exhibits  or  documents
submitted therewith to the insurer under such insurance policy, or for any other
reason under such coverage, but not including the failure of such insurer to pay
by reason of such insurer's  breach of such  insurance  policy or such insurer's
financial  inability  to pay.  In  connection  with  the  placement  of any such
insurance,  no  commission,  fee,  or  other  compensation  has  been or will be
received by IFC or any  designee of IFC or any  corporation  in which IFC or any
officer, director, or employee had a financial interest at the time of placement
of such insurance;

              (ss)   QUALIFIED  MORTGAGE.  The  Mortgage  Loan  is  a  qualified
mortgage under Section 860G(a)(3) of the Code;

              (tt)   [Reserved].

                                   S-III-B-11
<PAGE>

              (uu)   LEASEHOLDS.  If the Mortgage Loan is secured by a long-term
residential lease, (1) the lessor under the lease holds a fee simple interest in
the land;  (2) the terms of such lease  expressly  permit the  mortgaging of the
leasehold  estate,  the assignment of the lease without the lessor's consent and
the  acquisition  by the holder of the Mortgage of the rights of the lessee upon
foreclosure  or assignment in lieu of  foreclosure  or provide the holder of the
Mortgage with substantially similar protections;  (3) the terms of such lease do
not (a) allow the  termination  thereof  upon the lessee's  default  without the
holder of the  Mortgage  being  entitled  to  receive  written  notice  of,  and
opportunity to cure, such default, (b) allow the termination of the lease in the
event of damage or  destruction  as long as the  Mortgage is in  existence,  (c)
prohibit the holder of the Mortgage from being insured (or receiving proceeds of
insurance)  under the  hazard  insurance  policy  or  policies  relating  to the
Mortgaged Property or (d) permit any increase in rent other than pre-established
increases  set forth in the lease;  (4) the  original  term of such lease is not
less than 15 years;  (5) the term of such lease does not terminate  earlier than
five years after the maturity date of the Mortgage  Note;  and (6) the Mortgaged
Property is located in a jurisdiction  in which the use of leasehold  estates in
transferring ownership in residential properties is a widely accepted practice;

              (vv)   PREPAYMENT  PENALTY.  The  Mortgage  Loan is  subject  to a
prepayment  penalty as provided in the related Mortgage Note except as set forth
on the Mortgage  Loan  Schedule.  With respect to each  Mortgage Loan that has a
prepayment  penalty feature,  each such prepayment  penalty is enforceable,  and
each prepayment penalty is permitted  pursuant to federal,  state and local law.
Each  such  prepayment  penalty  is in an  amount  equal to the  maximum  amount
permitted under applicable law;

              (ww)   ASSUMABILITY. With respect to each Adjustable Rate Mortgage
Loan,  the Mortgage Note  provides  that after the related  first  Interest Rate
Adjustment  Date,  a  related  Mortgage  Loan may only be  assumed  if the party
assuming  such Mortgage Loan meets  certain  credit  requirements  stated in the
Mortgage Loan;

              (xx)   CONVERSION  TO  FIXED  INTEREST   RATE.   With  respect  to
Adjustable Rate Mortgage Loans, the Mortgage Loan is not a Convertible  Mortgage
Loan;

              (yy)   ESCROW  ANALYSIS.  With respect to each  Mortgage,  IFC has
within the last twelve months (unless such Mortgage was  originated  within such
twelve month period) analyzed the required Escrow Payments for each Mortgage and
adjusted the amount of such payments so that, assuming all required payments are
timely  made,  any  deficiency  will  be  eliminated  on  or  before  the  first
anniversary of such analysis,  or any overage will be refunded to the Mortgagor,
in accordance with RESPA and any other applicable law;

              (zz)   SECTION  32 LOANS.  The  Mortgage  Loan is not a Section 32
Loan;

              (aaa)  SINGLE-PREMIUM  CREDIT LIFE INSURANCE POLICY. In connection
with the  origination  of the Mortgage Loan, no proceeds from such Mortgage Loan
were used to finance or acquire a single-premium credit life insurance policy;

                                   S-III-B-12
<PAGE>

              (bbb)  REGARDING  THE  MORTGAGOR.  The  Mortgagor  is one or  more
natural  persons and/or trustees for an Illinois land trust or a trustee under a
"living  trust"  and such  "living  trust"  is in  compliance  with  Fannie  Mae
guidelines for such trusts;

              (ccc)  INSURANCE. IFC has caused or will cause to be performed any
and all acts required to preserve the rights and remedies of the Servicer and/or
the  Trustee  in  any  insurance  policies  applicable  to the  Mortgage  Loans,
including,   without  limitation,   any  necessary  notifications  of  insurers,
assignments of policies or interests  therein,  and establishments of coinsured,
joint  loss  payee and  mortgagee  rights in favor of the  Servicer  and/or  the
Trustee;

              (ddd)  SIMPLE INTEREST  MORTGAGE LOANS. The Mortgage Loan is not a
simple interest Mortgage Loan;

              (eee)  FLOOD CERTIFICATION  CONTRACT.  IFC shall have obtained, at
its own cost, a life of loan,  transferable flood certification contract for the
Mortgage  Loan and has  assigned all such  contracts to the Servicer  and/or the
Trustee;

              (fff)  CONSENT.  Either (a) no consent for the Second Lien Loan is
required  by the holder of the related  first lien or (b) such  consent has been
obtained and is contained in the Mortgage File;

              (ggg)  ORIGINATION  DATE.  The date of origination of the Mortgage
Loan shall be no earlier  than four (4) months  prior to the date such  Mortgage
Loan is first purchased by the Unaffiliated Seller;

              (hhh)  NO  EXCEPTION.  The  Trustee  has not  noted  any  material
exceptions on an exception  report with respect to the Mortgage Loan which would
materially  adversely affect the Mortgage Loan or the Trustee's ownership of the
Mortgage Loan;

              (iii)  MORTGAGE SUBMITTED FOR RECORDATION. The Mortgage either has
been  or  will  promptly  be  submitted  for   recordation  in  the  appropriate
governmental  recording office of the jurisdiction  where the Mortgaged Property
is located;

              (jjj)  ENDORSEMENTS.  The Mortgage  Note has been  endorsed by IFC
for its own  account and not as a  fiduciary,  trustee,  trustor or  beneficiary
under a trust agreement;

              (kkk)  ACCURACY OF INFORMATION.  All  information  provided to the
Unaffiliated  Seller,  the  Servicer or the  Trustee by IFC with  respect to the
Mortgage Loan is accurate in all material respects; and

              (lll)  MORTGAGOR BANKRUPTCY. On or prior to the date 90 days after
the  related  Closing  Date,  the  Mortgagor  has not  filed  or will not file a
bankruptcy petition or has not become the subject or will not become the subject
of  involuntary  bankruptcy  proceedings  or has not  consented  to or will  not
consent to the  filing of a  bankruptcy  proceeding  against it or to a receiver
being appointed in respect of the related Mortgaged Property.

                                   S-III-B-13
<PAGE>

                                   SCHEDULE IV

              CDC Mortgage  Capital Inc.  hereby makes the  representations  and
warranties  set  forth  in  this  Schedule  IV to the  Depositor,  the  Class  A
Certificate Insurer and the Trustee, as of the Closing Date.

(a)    DUE ORGANIZATION AND AUTHORITY.  The Unaffiliated Seller is a corporation
       duly organized,  validly  existing and in good standing under the laws of
       the  state  of New York and has all  licenses  necessary  to carry on its
       business as now being  conducted  and is licensed,  qualified and in good
       standing in each state wherein it owns or leases any material  properties
       or where a  Mortgaged  Property  is  located,  if the laws of such  state
       require  licensing or  qualification  in order to conduct business of the
       type  conducted  by  the  Unaffiliated  Seller,  and  in  any  event  the
       Unaffiliated  Seller is in compliance  with the laws of any such state to
       the extent  necessary;  the  Unaffiliated  Seller has the full  corporate
       power,  authority  and legal right to execute and deliver this  Agreement
       and to perform its  obligations  hereunder;  the execution,  delivery and
       performance  of  this  Agreement  by  the  Unaffiliated  Seller  and  the
       consummation of the transactions  contemplated  hereby have been duly and
       validly authorized; this Agreement and all agreements contemplated hereby
       have been duly executed and delivered and  constitute  the valid,  legal,
       binding  and  enforceable   obligations  of  the   Unaffiliated   Seller,
       regardless  of whether  such  enforcement  is sought in a  proceeding  in
       equity or at law; and all  requisite  corporate  action has been taken by
       the  Unaffiliated  Seller  to make  this  Agreement  and  all  agreements
       contemplated  hereby  valid and binding upon the  Unaffiliated  Seller in
       accordance with their terms;

(b)    NO CONFLICTS.  Neither the execution and delivery of this Agreement,  the
       consummation of the transactions contemplated hereby, nor the fulfillment
       of or compliance  with the terms and conditions of this  Agreement,  will
       conflict  with or result in a breach of any of the terms,  conditions  or
       provisions of the  Unaffiliated  Seller's charter or by-laws or any legal
       restriction  or any  agreement or  instrument  to which the  Unaffiliated
       Seller is now a party or by which it is bound, or constitute a default or
       result  in an  acceleration  under  any of  the  foregoing,  except  such
       unfulfillment,  non-compliance or default or acceleration does not in the
       aggregate  have a material  adverse  effect on the  operation,  business,
       condition (business or otherwise) of the Unaffiliated Seller or result in
       the violation of any law, rule, regulation,  order, judgment or decree to
       which the  Unaffiliated  Seller or its  property is subject,  except such
       violation does not in the aggregate have a material adverse effect on the
       operation,   business,   condition   (business  or   otherwise)   of  the
       Unaffiliated  Seller or result in the creation or imposition of any lien,
       charge or  encumbrance  that would have an adverse effect upon any of its
       properties pursuant to the terms of any mortgage, contract, deed of trust
       or other instrument;

(c)    NO  LITIGATION  PENDING.   There  is  no  action,  suit,   proceeding  or
       investigation  pending  nor,  to  the  Unaffiliated  Seller's  knowledge,
       threatened   against   the   Unaffiliated   Seller,   before  any  court,
       administrative  agency or other tribunal asserting the invalidity of this
       Agreement, seeking to prevent the consummation of any of the transactions
       contemplated by this Agreement or which, either in any one instance or in
       the aggregate, may result in any material adverse change in the business,
       operations, financial condition, properties or

                                     S-IV-1
<PAGE>

       assets of the Unaffiliated  Seller, or in any material  impairment of the
       right or  ability  of the  Unaffiliated  Seller to carry on its  business
       substantially  as now  conducted,  or which would draw into  question the
       validity  of this  Agreement  or of any  action  taken  or to be taken in
       connection with the obligations of the Unaffiliated  Seller  contemplated
       herein,  or which would be likely to impair materially the ability of the
       Unaffiliated Seller to perform under the terms of this Agreement;

(d)    NO CONSENT REQUIRED. No consent, approval,  authorization or order of, or
       registration  or filing  with,  or  notice  to any court or  governmental
       agency  or body  including  HUD,  the FHA or the VA is  required  for the
       execution,  delivery and  performance  by the  Unaffiliated  Seller of or
       compliance  by  the  Unaffiliated  Seller  with  this  Agreement  or  the
       consummation of the  transactions  contemplated by this Agreement,  or if
       required, such approval has been obtained prior to the Closing Date;

                                     S-IV-2
<PAGE>

                                    EXHIBIT A

Unless this  Certificate  is presented by an  authorized  representative  of the
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer,  exchange,  or payment, and any certificate 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.

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE  REPRESENTS AN
INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
AS THOSE  TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER ASSETS.

Certificate No.                             :               [A-1/M-1-1/M-2-1/B]

Cut-off Date                                :               November 1, 2001

First Distribution Date                     :               December 26, 2001

Initial Certificate Balance of
this Certificate
("Denomination")                            :               A    $168,100,000

                                                            M-1  $ 13,325,000

                                                            M-2  $ 10,250,000

                                                            B    $ 10,250,000

Initial Certificate Balances of all
Certificates of this Class                  :               A    $168,000,000

                                                            M-1  $ 13,325,000

                                                            M-2  $ 10,250,000

                                                            B    $ 10,250,000

CUSIP                                       :               A 12506YAA7

                                                            M-1 12506YAB5

                                                            M-2 12506YAC3

                                                            B 12506YAD1

                                      A-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1
                          [Class A-][Class M-][Class B]

              evidencing a percentage interest in the distributions allocable to
              the Certificates of the above-referenced Class.

              Principal in respect of this Certificate is distributable  monthly
as set forth herein.  Accordingly,  the  Certificate  Balance at any time may be
less than the Certificate Balance as set forth herein. This Certificate does not
evidence an  obligation  of, or an  interest  in, and is not  guaranteed  by the
Depositor,  the Unaffiliated  Seller, any Responsible Party, the Servicer or the
Trustee  referred to below or any of their respective  affiliates.  Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

              This  certifies  that  CEDE & CO. is the  registered  owner of the
Percentage  Interest  evidenced  by this  Certificate  (obtained by dividing the
denomination of this  Certificate by the aggregate of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  pursuant to a Pooling  and  Servicing  Agreement  dated as of the
Cut-off Date specified above (the "AGREEMENT")  among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "DEPOSITOR"), Ocwen Federal Bank FSB, as servicer (the
"SERVICER"),   CDC  Mortgage   Capital   Inc.,  as   unaffiliated   seller  (the
"UNAFFILIATED  SELLER"),  BNC Mortgage,  Inc. and Impac Funding Corporation,  as
responsible  parties (the  "RESPONSIBLE  PARTIES")  and Bankers Trust Company of
California,  N.A., as trustee (the "TRUSTEE"). To the extent not defined herein,
the capitalized  terms used herein have the meanings  assigned in the Agreement.
This  Certificate  is issued under and is subject to the terms,  provisions  and
conditions of the Agreement,  to which Agreement the Holder of this  Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

              Reference  is  hereby  made  to the  further  provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

              This  Certificate  shall not be entitled to any benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      A-2
<PAGE>

              IN WITNESS WHEREOF,  the Trustee has caused this Certificate to be
duly executed.

                                      Dated:

                                      BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                        not in its individual capacity,
                                        but solely as Trustee

                                      By:
                                         ---------------------------------------

Countersigned:

By:
   --------------------------------------------
   Authorized Signatory of
   BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
   not in its individual capacity,
   but solely as Trustee

                                      A-3
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

              This Certificate is one of a duly authorized issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2001-HE1  Mortgage   Pass-Through
Certificates,  Series 2001-HE1 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

              The  Certificateholder,  by its  acceptance  of this  Certificate,
agrees  that it will look  solely to the funds on  deposit  in the  Distribution
Account  for  payment  hereunder  and  that the  Trustee  is not  liable  to the
Certificateholders  for  any  amount  payable  under  this  Certificate  or  the
Agreement  or,  except as expressly  provided in the  Agreement,  subject to any
liability under the Agreement.

              This  Certificate  does not purport to summarize the Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

              Pursuant to the terms of the  Agreement,  a  distribution  will be
made on the 25th day of each  month or, if such day is not a Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution  Date is the Business Date immediately  preceding such Distribution
Date, provided,  however, that for any Definitive Certificates,  the Record Date
shall be the last  Business  Day of the month next  preceding  the month of such
Distribution Date.

              Distributions on this  Certificate  shall be made by wire transfer
of immediately  available funds to the account of the Holder hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  appearing in the Certificate Register. The final distribution
on each Certificate  will be made in like manner,  but only upon presentment and
surrender of such Certificate at the offices  designated by the Trustee for such
purposes,  or such other location specified in the notice to  Certificateholders
of such final distribution.

              The Agreement  permits,  with certain exceptions therein provided,
the amendment  thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer, with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the

                                      A-4
<PAGE>

Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate  and of any  Certificate  issued  upon  the  transfer  hereof  or in
exchange  therefor or in lieu hereof  whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

              As provided in the  Agreement  and subject to certain  limitations
therein  set forth,  the  transfer of this  Certificate  is  registrable  in the
Certificate  Register of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes,  accompanied by a written  instrument of transfer in form satisfactory
to the Trustee and the Certificate  Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing,  and thereupon one or more
new  Certificates of the same Class in authorized  denominations  and evidencing
the same aggregate  Percentage  Interest in the Trust Fund will be issued to the
designated transferee or transferees.

              The  Certificates  are issuable  only as  registered  Certificates
without coupons in denominations  specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

              No  service  charge  will be made  for any  such  registration  of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

              The Depositor,  the Servicer, the Unaffiliated Seller, the Class A
Certificate  Insurer,  the Responsible  Parties and the Trustee and any agent of
any of them may treat the Person in whose name this Certificate is registered as
the owner  hereof for all  purposes,  and no such party shall be affected by any
notice to the contrary.

              On any  Distribution  Date on which the aggregate Stated Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

              Any term used herein that is defined in the  Agreement  shall have
the  meaning  assigned in the  Agreement,  and  nothing  herein  shall be deemed
inconsistent with that meaning.

                                      A-5
<PAGE>

                                   ASSIGNMENT

              FOR VALUE RECEIVED, the undersigned hereby sell(s),  assign(s) and
transfer(s)  unto
                  --------------------------------------------------------------

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

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

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

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

              I (We) further direct the Trustee to issue a new  Certificate of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

-------------------------------------------------------------------------------.

Dated:

                                           -------------------------------------
                                           Signature by or on behalf of assignor

                                      A-6
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

              The assignee should include the following for purposes of
distribution:

              Distributions  shall be made, by wire  transfer or  otherwise,  in
immediately available funds to
                              --------------------------------------------------

--------------------------------------------------------------------------------
for the account of
                   -------------------------------------------------------------
account number        , or, if mailed by check, to
               -------                             -----------------------------
Applicable statements should be mailed to
                                          --------------------------------------

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

              This information is provided by
                                              ----------------------------------

the assignee named above, or  --------------------------------------------------
as its agent.

                                      A-7
<PAGE>

                                    EXHIBIT B

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEROR  DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT  H TO THE  AGREEMENT  REFERRED  TO HEREIN  AND  EITHER  (I) THE  TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE  AGREEMENT  REFERRED
TO HEREIN OR (II) THE TRUSTEE  RECEIVES AN OPINION OF COUNSEL,  DELIVERED AT THE
EXPENSE OF THE TRANSFEROR,  THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION  LETTER TO THE EFFECT
THAT SUCH  TRANSFEREE  IS NOT AN EMPLOYEE  BENEFIT  PLAN  SUBJECT TO THE TITLE I
EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED,  OF A PLAN SUBJECT
TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO  APPLICABLE  FEDERAL,  STATE OR
LOCAL LAW ("SIMILAR  LAW")  MATERIALLY  SIMILAR TO THE  FOREGOING  PROVISIONS OF
ERISA OR THE CODE,  OR A PERSON  INVESTING  ON BEHALF OF OR WITH PLAN  ASSETS OF
SUCH A PLAN, OR A REPRESENTATION OR AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO
THE CONTRARY HEREIN,  ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF
OF AN EMPLOYEE  BENEFIT  PLAN  SUBJECT TO TITLE I OF ERISA,  SECTION 4975 OF THE
CODE OR SIMILAR LAW WITHOUT THE REPRESENTATION  LETTER OR THE OPINION OF COUNSEL
SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.

Certificate No.                             :                 1

Cut-off Date                                :                 November 1, 2001

First Distribution Date                     :                 December 26, 2001

Percentage Interest of this Certificate ("DENOMINATION")      :        100%
                                          ------------

CUSIP                                       :

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

                                      B-1
<PAGE>

                                     Class P

              evidencing a percentage interest in the distributions allocable to
              the Certificates of the above-referenced Class.

              Distributions  in respect of this  Certificate  are  distributable
monthly as set forth herein.  This  Certificate  does not evidence an obligation
of,  or an  interest  in,  and  is  not  guaranteed  by  the  Depositor,  either
Responsible Party, the Unaffiliated Seller, the Servicer or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate nor the
Mortgage  Loans  are  guaranteed  or  insured  by  any  governmental  agency  or
instrumentality.

              This  certifies  that  Bankers  Trust  of  California,   N.A.,  as
Indenture Trustee,  is the registered owner of the Percentage Interest evidenced
by this  Certificate  (obtained by dividing the denomination of this Certificate
by the aggregate of the  denominations of all Certificates of the Class to which
this Certificate belongs) in certain monthly distributions pursuant to a Pooling
and  Servicing  Agreement  dated as of the  Cut-off  Date  specified  above (the
"AGREEMENT")  among  MORGAN  STANLEY  ABS  CAPITAL  I INC.,  as  depositor  (the
"DEPOSITOR"), Ocwen Federal Bank FSB, as servicer (the "SERVICER"), CDC Mortgage
Capital Inc., as unaffiliated seller (the "UNAFFILIATED  SELLER"), BNC Mortgage,
Inc.  and  Impac  Funding  Corporation,  as  responsible  parties  ("RESPONSIBLE
PARTIES"),  and Bankers  Trust  Company of  California,  N.A.,  as trustee  (the
"TRUSTEE").  To the extent not defined herein, the capitalized terms used herein
have the meanings  assigned in the Agreement.  This  Certificate is issued under
and is subject to the terms,  provisions  and  conditions of the  Agreement,  to
which  Agreement  the  Holder of this  Certificate  by virtue of the  acceptance
hereof assents and by which such Holder is bound.

              This  Certificate  does not have a  Pass-Through  Rate and will be
entitled  to  distributions  only to the extent set forth in the  Agreement.  In
addition,  any distribution of the proceeds of any remaining assets of the Trust
will be made only upon  presentment  and  surrender of this  Certificate  at the
offices  designated  by the  Trustee for such  purpose,  or the office or agency
maintained by the Trustee.

              No  transfer of a  Certificate  of this Class shall be made unless
such disposition is exempt from the registration  requirements of the Securities
Act of 1933, as amended (the "1933 ACT"),  and any applicable  state  securities
laws or is made in  accordance  with the 1933 Act and such laws. In the event of
any such  transfer,  the  Trustee  shall  require  the  transferor  to execute a
transferor  certificate (in  substantially  the form attached to the Pooling and
Servicing  Agreement) and deliver either (i) a Rule 144A Letter,  in either case
substantially  in the form attached to the Agreement,  or (ii) a written Opinion
of  Counsel  to the  Trustee  that  such  transfer  may be made  pursuant  to an
exemption,  describing the applicable exemption and the basis therefor, from the
1933 Act or is being made  pursuant  to the 1933 Act,  which  Opinion of Counsel
shall be an expense of the transferor.

              No  transfer of a  Certificate  of this Class shall be made unless
the Trustee shall have received a  representation  letter from the transferee of
such  Certificate,  acceptable to and in form and substance  satisfactory to the
Trustee,  to the effect that such  transferee  is not an employee  benefit  plan
subject to Section 406 of ERISA, Section 4975 of the Code or Similar

                                      B-2
<PAGE>

Law, or a person acting on behalf of or investing  plan assets of any such plan,
which representation letter shall not be an expense of the Trustee.

              Reference  is  hereby  made  to the  further  provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

              This  Certificate  shall not be entitled to any benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      B-3
<PAGE>

              IN WITNESS WHEREOF,  the Trustee has caused this Certificate to be
duly executed.

Dated:

                                      BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                        not in its individual capacity,
                                        but solely as Trustee

                                      By:
                                         ---------------------------------------

     Countersigned:

By:
   --------------------------------------------
   Authorized Signatory of
   BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
   not in its individual capacity,
   but solely as Trustee

                                      B-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

              This Certificate is one of a duly authorized issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2001-HE1  Mortgage   Pass-Through
Certificates,  Series 2001-HE1 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

              The  Certificateholder,  by its  acceptance  of this  Certificate,
agrees  that it will look  solely to the funds on  deposit  in the  Distribution
Account  for  payment  hereunder  and  that the  Trustee  is not  liable  to the
Certificateholders  for  any  amount  payable  under  this  Certificate  or  the
Agreement  or,  except as expressly  provided in the  Agreement,  subject to any
liability under the Agreement.

              This  Certificate  does not purport to summarize the Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

              Pursuant to the terms of the  Agreement,  a  distribution  will be
made on the 25th day of each month or, if such 25th day is not a  Business  Day,
the Business Day immediately following (the "DISTRIBUTION Date"),  commencing on
the first Distribution Date specified on the face hereof, to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

              Distributions on this  Certificate  shall be made by wire transfer
of immediately  available funds to the account of the Holder hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  appearing in the Certificate Register. The final distribution
on each Certificate  will be made in like manner,  but only upon presentment and
surrender of such Certificate at the offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

              The Agreement  permits,  with certain exceptions therein provided,
the amendment  thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate and of any Certificate issued upon

                                      B-5
<PAGE>

the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

              As provided in the  Agreement  and subject to certain  limitations
therein  set forth,  the  transfer of this  Certificate  is  registrable  in the
Certificate  Register of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the office or agency  maintained  by the  Trustee in New York,  New
York,  accompanied by a written  instrument of transfer in form  satisfactory to
the Trustee and the Certificate  Registrar duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

              The  Certificates  are issuable  only as  registered  Certificates
without coupons in denominations  specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

              No  service  charge  will be made  for any  such  registration  of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

              The Depositor,  the Servicer, the Unaffiliated Seller, the Class A
Certificate  Insurer,  the Responsible  Parties and the Trustee and any agent of
any of them may treat the Person in whose name this Certificate is registered as
the owner  hereof for all  purposes,  and no such party shall be affected by any
notice to the contrary.

              On any  Distribution  Date on which the aggregate Stated Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

              Any term used herein that is defined in the  Agreement  shall have
the  meaning  assigned in the  Agreement,  and  nothing  herein  shall be deemed
inconsistent with that meaning.

                                      B-6
<PAGE>

                                   ASSIGNMENT

              FOR VALUE RECEIVED, the undersigned hereby sell(s),  assign(s) and
transfer(s)  unto
                  --------------------------------------------------------------

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

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

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

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

              I (We) further direct the Trustee to issue a new  Certificate of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

-------------------------------------------------------------------------------.

Dated:

                                           -------------------------------------
                                           Signature by or on behalf of assignor

                                      B-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

              The assignee should include the following for purposes of
distribution:

              Distributions  shall be made, by wire  transfer or  otherwise,  in
immediately available funds to
                               -------------------------------------------------

--------------------------------------------------------------------------------
for the account of
                   -------------------------------------------------------------
account number        , or, if mailed by check, to
               -------                             -----------------------------
Applicable statements should be mailed to
                                          --------------------------------------

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

              This information is provided by
                                             -----------------------------------
the assignee named above, or
                            ----------------------------------------------------
as its agent.

                                      B-8
<PAGE>

                                    EXHIBIT C

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEREE  DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS (i)
TO A PERMITTED  TRANSFEREE  AND THE TRANSFER IS MADE IN COMPLIANCE  WITH SECTION
5.02(c) OF THE AGREEMENT, AND (ii) THE TRANSFEREE DELIVERS TO THE TRUSTEE EITHER
A  REPRESENTATION  LETTER TO THE EFFECT THAT SUCH  TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO THE EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED,  OR A PLAN  SUBJECT  TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT TO
MATERIALLY  SIMILAR  PROVISIONS  OF  APPLICABLE  FEDERAL,  STATE  OR  LOCAL  LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN. IN THE EVENT THAT SUCH REPRESENTATION IS VIOLATED,  OR ANY ATTEMPT IS MADE
TO TRANSFER  TO A PLAN OR  ARRANGEMENT  SUBJECT TO SECTION 406 OF ERISA,  A PLAN
SUBJECT TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT  TO  SIMILAR  LAW,  OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR  ARRANGEMENT  OR USING THE ASSETS OF
ANY SUCH PLAN OR ARRANGEMENT,  SUCH ATTEMPTED  TRANSFER OR ACQUISITION  SHALL BE
VOID AND OF NO EFFECT.

Certificate No.                             :                  1

Cut-off Date                                :                  November 1, 2001

First Distribution Date                     :                  December 26, 2001

Percentage Interest of this
Certificate ("DENOMINATION")                :                  100%
              ------------

CUSIP                                       :

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

                                     Class R

              evidencing a percentage interest in the distributions allocable to
              the Certificates of the above-referenced Class.

                                      C-1
<PAGE>

              Distributions  in respect  of this  Certificate  is  distributable
monthly as set forth herein. This Class R Certificate has no Certificate Balance
and is not entitled to distributions  in respect of principal or interest.  This
Certificate  does not evidence an  obligation  of, or an interest in, and is not
guaranteed  by the  Depositor,  the  Servicer,  the  Unaffiliated  Seller or the
Trustee  referred to below or any of their respective  affiliates.  Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

              This  certifies  that CDC Mortgage  Capital Inc. is the registered
owner of the Percentage  Interest  specified above of any monthly  distributions
due to the Class R  Certificates  pursuant to a Pooling and Servicing  Agreement
dated as of the Cut-Off  Date  specified  above (the  "AGREEMENT")  among MORGAN
STANLEY ABS CAPITAL I INC., as depositor (the  "DEPOSITOR"),  Ocwen Federal Bank
FSB, as servicer (the  "SERVICER"),  CDC Mortgage  Capital Inc., as unaffiliated
seller  (the  "UNAFFILIATED  SELLER"),  BNC  Mortgage,  Inc.  and Impac  Funding
Corporation,  as  responsible  parties (the  "RESPONSIBLE  PARTIES") and Bankers
Trust Company of California, N.A., as trustee (the "TRUSTEE"). To the extent not
defined herein,  the capitalized terms used herein have the meanings assigned in
the  Agreement.  This  Certificate  is issued under and is subject to the terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

              Any  distribution  of the proceeds of any remaining  assets of the
Trust  Fund will be made only upon  presentment  and  surrender  of this Class R
Certificate  at the offices  designated  by the Trustee for such purposes or the
office or agency maintained by the Trustee in California.

              No  transfer  of a Class R  Certificate  shall be made  unless the
Trustee shall have received a representation  letter from the transferee of such
Certificate,  acceptable  to and  in  form  and  substance  satisfactory  to the
Trustee,  to the effect that such transferee is not an employee  benefit plan or
arrangement  subject to Section 406 of ERISA, a plan or  arrangement  subject to
Section 4975 of the Code or a plan subject to Similar Law, or a person acting on
behalf of any such plan or arrangement  nor using the assets of any such plan or
arrangement to effect such transfer, which representation letter shall not be an
expense of the Trustee,  the Servicer or the Trust Fund.  In the event that such
representation  is  violated,  or any  attempt is made to  transfer to a plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of
the Code or a plan subject to Similar  Law, or a person  acting on behalf of any
such plan or  arrangement  or using the assets of any such plan or  arrangement,
such attempted transfer or acquisition shall be void and of no effect.

              Each  Holder of this  Class R  Certificate  shall be deemed by the
acceptance or acquisition  an Ownership  Interest in this Class R Certificate to
have  agreed to be bound by the  following  provisions,  and the  rights of each
Person  acquiring  any  Ownership  Interest  in  this  Class R  Certificate  are
expressly  subject  to the  following  provisions:  (i) each  Person  holding or
acquiring  any  Ownership  Interest  in this  Class  R  Certificate  shall  be a
Permitted  Transferee  and shall  promptly  notify the  Trustee of any change or
impending  change in its status as a  Permitted  Transferee,  (ii) no  Ownership
Interest in this Class R  Certificate  may be  registered on the Closing Date or
thereafter transferred,  and the Trustee shall not register the Transfer of this
Certificate unless, in addition to the certificates  required to be delivered to
the Trustee under Section 5.02(b) of the Agreement,  the Trustee shall have been
furnished with a Transfer

                                      C-2
<PAGE>

Affidavit of the initial  owner or the proposed  transferee in the form attached
as Exhibit G to the  Agreement,  (iii) each  Person  holding  or  acquiring  any
Ownership  Interest  in this  Class R  Certificate  shall  agree (A) to obtain a
Transfer  Affidavit  from any  other  Person  to whom such  Person  attempts  to
Transfer  its  Ownership  Interest  this  Class R  Certificate,  (B) to obtain a
Transfer  Affidavit  from any Person for whom such  Person is acting as nominee,
trustee or agent in connection with any Transfer of this Class R Certificate and
(C) not to Transfer the  Ownership  Interest in this Class R  Certificate  or to
cause the Transfer of the Ownership  Interest in this Class R Certificate to any
other  Person if it has actual  knowledge  that such  Person is not a  Permitted
Transferee  and  (iv) any  attempted  or  purported  Transfer  of the  Ownership
Interest in this Class R Certificate in violation of the provisions herein shall
be  absolutely  null  and  void  and  shall  vest  no  rights  in the  purported
Transferee.

              Reference  is  hereby  made  to the  further  provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

              This  Certificate  shall not be entitled to any benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      C-3
<PAGE>

              IN WITNESS WHEREOF,  the Trustee has caused this Certificate to be
duly executed.

Dated:

                                      BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                        not in its individual capacity,
                                        but solely as Trustee

                                      By:
                                         ---------------------------------------

     Countersigned:

By:
   ------------------------------------------
   Authorized Signatory of
   BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
   not in its individual capacity,
   but solely as Trustee

                                      C-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

              This Certificate is one of a duly authorized issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2001-HE1  Mortgage   Pass-Through
Certificates,  Series 2001-HE1 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

              The  Certificateholder,  by its  acceptance  of this  Certificate,
agrees  that it will look  solely to the funds on  deposit  in the  Distribution
Account  for  payment  hereunder  and  that the  Trustee  is not  liable  to the
Certificateholders  for  any  amount  payable  under  this  Certificate  or  the
Agreement  or,  except as expressly  provided in the  Agreement,  subject to any
liability under the Agreement.

              This  Certificate  does not purport to summarize the Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

              Pursuant to the terms of the  Agreement,  a  distribution  will be
made on the 25th day of each  month or, if such day is not a Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

              Distributions on this  Certificate  shall be made by wire transfer
of immediately  available funds to the account of the Holder hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  appearing in the Certificate Register. The final distribution
on each Certificate  will be made in like manner,  but only upon presentment and
surrender of such Certificate at the offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

              The Agreement  permits,  with certain exceptions therein provided,
the amendment  thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate and of any Certificate issued upon

                                      C-5
<PAGE>

the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

              As provided in the  Agreement  and subject to certain  limitations
therein  set forth,  the  transfer of this  Certificate  is  registrable  in the
Certificate  Register of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the  office or agency  maintained  by the  Trustee  in  California,
accompanied  by a written  instrument  of transfer in form  satisfactory  to the
Trustee and the Certificate Registrar duly executed by the holder hereof or such
holder's  attorney  duly  authorized  in writing,  and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

              The  Certificates  are issuable  only as  registered  Certificates
without coupons in denominations  specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

              No  service  charge  will be made  for any  such  registration  of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

              The Depositor,  the Servicer, the Unaffiliated Seller, the Class A
Certificate  Insurer,  the Responsible  Parties and the Trustee and any agent of
any of them may treat the Person in whose name this Certificate is registered as
the owner  hereof for all  purposes,  and no such party shall be affected by any
notice to the contrary.

              On any  Distribution  Date on which the aggregate Stated Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance,  the Servicer and/or the Class X Certificateholder  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

              Any term used herein that is defined in the  Agreement  shall have
the  meaning  assigned in the  Agreement,  and  nothing  herein  shall be deemed
inconsistent with that meaning.

                                      C-6
<PAGE>

                                   ASSIGNMENT

              FOR VALUE RECEIVED, the undersigned hereby sell(s),  assign(s) and
transfer(s)  unto
                  --------------------------------------------------------------

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

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

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

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

              I (We) further direct the Trustee to issue a new  Certificate of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

-------------------------------------------------------------------------------.

Dated:

                                           -------------------------------------
                                           Signature by or on behalf of assignor

                                      C-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

              The assignee should include the following for purposes of
distribution:

              Distributions  shall be made, by wire  transfer or  otherwise,  in
immediately available funds to
                              --------------------------------------------------

--------------------------------------------------------------------------------
for the account of
                   -------------------------------------------------------------
account number        , or, if mailed by check, to
               -------                             -----------------------------

--------------------------------------------------------------------------------
Applicable statements should be mailed to
                                          --------------------------------------

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

              This information is provided by
                                             -----------------------------------
the assignee named above, or
                            ----------------------------------------------------

                                      C-8
<PAGE>

                                    EXHIBIT D

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE  IS A "REGULAR
INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEROR  DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT  H TO THE  AGREEMENT  REFERRED  TO HEREIN  AND  EITHER  (I) THE  TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE  AGREEMENT  REFERRED
TO HEREIN OR (II) THE TRUSTEE  RECEIVES AN OPINION OF COUNSEL,  DELIVERED AT THE
EXPENSE OF THE TRANSFEROR,  THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT  AS  PROVIDED  IN THE  POOLING  AND  SERVICING  AGREEMENT,  NEITHER  THIS
CERTIFICATE  NOR ANY INTEREST  HEREIN MAY BE  TRANSFERRED  UNLESS THE TRANSFEREE
DELIVERS  TO THE  TRUSTEE  A  REPRESENTATION  LETTER  TO THE  EFFECT  THAT  SUCH
TRANSFEREE  IS NOT AN EMPLOYEE  BENEFIT PLAN SUBJECT TO THE EMPLOYEE  RETIREMENT
INCOME  SECURITY ACT OF 1974,  AS AMENDED,  OR A PLAN SUBJECT TO SECTION 4975 OF
THE CODE,  OR A PLAN  SUBJECT TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT TO
MATERIALLY  SIMILAR  PROVISIONS  OF  APPLICABLE  FEDERAL,  STATE  OR  LOCAL  LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN.  NOTWITHSTANDING  ANYTHING  ELSE TO THE  CONTRARY  HEREIN,  ANY  PURPORTED
TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN SUBJECT TO ERISA,  A
PLAN  SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO SIMILAR LAW, OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN IN
VIOLATION OF THE TRANSFER  RESTRICTIONS  SET FORTH IN THE POOLING AND  SERVICING
AGREEMENT SHALL BE VOID AND OF NO EFFECT.

Certificate No.                             :                 1

Cut-off Date                                :                 November 1, 2001

First Distribution Date                     :                 December 26, 2001

Percentage Interest of this
Certificate ("Denomination")                :                 100%

CUSIP                                       :

                                      D-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

                                     Class X

              evidencing a percentage interest in the distributions allocable to
              the Certificates of the above-referenced Class.

              Distributions  in respect of this  Certificate  are  distributable
monthly as set forth herein.  This  Certificate  does not evidence an obligation
of, or an interest in, and is not guaranteed by the Depositor, the Servicer, the
Unaffiliated  Seller or the Trustee referred to below or any of their respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

              This  certifies  that  Bankers  Trust  of  California,   N.A.,  as
Indenture Trustee,  is the registered owner of the Percentage Interest evidenced
by this  Certificate  (obtained by dividing the denomination of this Certificate
by the aggregate of the  denominations of all Certificates of the Class to which
this Certificate belongs) in certain monthly distributions pursuant to a Pooling
and  Servicing  Agreement  dated as of the  Cut-off  Date  specified  above (the
"AGREEMENT")  among  MORGAN  STANLEY  ABS  CAPITAL  I INC.,  as  depositor  (the
"DEPOSITOR"), Ocwen Federal Bank FSB, as servicer (the "SERVICER"), CDC Mortgage
Capital Inc., as unaffiliated seller (the "UNAFFILIATED  SELLER"), BNC Mortgage,
Inc. and Impac Funding  Corporation,  as responsible  parties (the  "RESPONSIBLE
PARTIES")  and  Bankers  Trust  Company of  California,  N.A.,  as trustee  (the
"TRUSTEE").  To the extent not defined herein, the capitalized terms used herein
have the meanings  assigned in the Agreement.  This  Certificate is issued under
and is subject to the terms,  provisions  and  conditions of the  Agreement,  to
which  Agreement  the  Holder of this  Certificate  by virtue of the  acceptance
hereof assents and by which such Holder is bound.

              This   Certificate   does  not  have  a  Certificate   Balance  or
Pass-Through  Rate and will be entitled to distributions  only to the extent set
forth in the Agreement.  In addition,  any  distribution  of the proceeds of any
remaining  assets of the Trust will be made only upon  presentment and surrender
of this  Certificate at the offices  designated by the Trustee for such purposes
or the office or agency maintained by the Trustee.

              No  transfer of a  Certificate  of this Class shall be made unless
such disposition is exempt from the registration  requirements of the Securities
Act of 1933, as amended (the "1933 ACT"),  and any applicable  state  securities
laws or is made in  accordance  with the 1933 Act and such laws. In the event of
any such  transfer,  the  Trustee  shall  require  the  transferor  to execute a
transferor  certificate (in  substantially  the form attached to the Pooling and
Servicing  Agreement) and deliver either (i) a Rule 144A Letter,  in either case
substantially  in the form attached to the Agreement,  or (ii) a written Opinion
of  Counsel  to the  Trustee  that  such  transfer  may be made  pursuant  to an
exemption,  describing the applicable exemption and the basis therefor, from the
1933 Act or is being made  pursuant  to the 1933 Act,  which  Opinion of Counsel
shall be an expense of the transferor.

                                      D-2
<PAGE>

                  No  transfer  of a  Certificate  of this  Class  shall be made
unless the Trustee shall have received either (i) a  representation  letter from
the  transferee  of such  Certificate,  acceptable  to and in form and substance
satisfactory  to the  Trustee,  to the  effect  that such  transferee  is not an
employee  benefit  plan  subject to Section 406 of ERISA or Section  4975 of the
Code or any materially similar provisions of applicable Federal,  state or local
law ("SIMILAR  LAW") or a person acting on behalf of or investing plan assets of
any such  plan,  which  representation  letter  shall not be an  expense  of the
Trustee,  or (ii) if the Certificate has been the subject of an ERISA-Qualifying
Underwriting,  and the purchaser is an insurance company, a representation  that
the purchaser is an insurance company which is purchasing such Certificates with
funds  contained  in an  "insurance  company  general  account" (as such term is
defined in Section V(e) of Prohibited  Transaction  Class Exemption 95-60 ("PTCE
95-60"))  and that the  purchase  and holding of such  Certificates  are covered
under  Sections I and III of PTCE 95-60,  or (iii) in the case of a  Certificate
presented for  registration  in the name of an employee  benefit plan subject to
ERISA,  or a plan  or  arrangement  subject  to  Section  4975 of the  Code  (or
comparable provisions of any subsequent enactments) or a plan subject to Similar
Law, or a trustee of any such plan or any other  person  acting on behalf of any
such plan or  arrangement  or using  such  plan's or  arrangement's  assets,  an
Opinion of Counsel  satisfactory to the Trustee and the Servicer,  which Opinion
of Counsel  shall not be an expense of the  Trustee,  the  Servicer or the Trust
Fund,  addressed to the  Trustee,  to the effect that the purchase or holding of
such Certificate will not result in the assets of the Trust Fund being deemed to
be "plan assets" and subject to the prohibited  transaction  provisions of ERISA
and the Code and will not subject the Trustee or the Servicer to any  obligation
in addition to those expressly undertaken in this Agreement or to any liability.

              Reference  is  hereby  made  to the  further  provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

              This  Certificate  shall not be entitled to any benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      D-3
<PAGE>

              IN WITNESS WHEREOF,  the Trustee has caused this Certificate to be
duly executed.

Dated:

                                      BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                        not in its individual capacity,
                                        but solely as Trustee

                                      By:
                                         ---------------------------------------

     Countersigned:

By:
   ------------------------------------------
   Authorized Signatory of
   BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
   not in its individual capacity,
   but solely as Trustee

                                      D-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2001-HE1
               Mortgage Pass-Through Certificates, Series 2001-HE1

              This Certificate is one of a duly authorized issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2001-HE1  Mortgage   Pass-Through
Certificates,  Series 2001-HE1 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

              The  Certificateholder,  by its  acceptance  of this  Certificate,
agrees  that it will look  solely to the funds on  deposit  in the  Distribution
Account  for  payment  hereunder  and  that the  Trustee  is not  liable  to the
Certificateholders  for  any  amount  payable  under  this  Certificate  or  the
Agreement  or,  except as expressly  provided in the  Agreement,  subject to any
liability under the Agreement.

              This  Certificate  does not purport to summarize the Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

              Pursuant to the terms of the  Agreement,  a  distribution  will be
made on the 25th day of each month or, if such 25th day is not a  Business  Day,
the Business Day immediately following (the "DISTRIBUTION Date"),  commencing on
the first Distribution Date specified on the face hereof, to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

              Distributions on this  Certificate  shall be made by wire transfer
of immediately  available funds to the account of the Holder hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  appearing in the Certificate Register. The final distribution
on each Certificate  will be made in like manner,  but only upon presentment and
surrender of such Certificate at the offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

              The Agreement  permits,  with certain exceptions therein provided,
the amendment  thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate  and of any  Certificate  issued  upon

                                      D-5
<PAGE>

the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

              As provided in the  Agreement  and subject to certain  limitations
therein  set forth,  the  transfer of this  Certificate  is  registrable  in the
Certificate  Register of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the office or agency  maintained  by the  Trustee in New York,  New
York,  accompanied by a written  instrument of transfer in form  satisfactory to
the Trustee and the Certificate  Registrar duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

              The  Certificates  are issuable  only as  registered  Certificates
without coupons in denominations  specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

              No  service  charge  will be made  for any  such  registration  of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

              The Depositor,  the Servicer, the Unaffiliated Seller, the Class A
Certificate  Insurer,  the Responsible  Parties and the Trustee and any agent of
any of them may treat the Person in whose name this Certificate is registered as
the owner  hereof for all  purposes,  and no such party shall be affected by any
notice to the contrary.

              On any  Distribution  Date on which the aggregate Stated Principal
Balance  of the  Mortgage  Loans is less  than or  equal  to 10% of the  Maximum
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

              Any term used herein that is defined in the  Agreement  shall have
the  meaning  assigned in the  Agreement,  and  nothing  herein  shall be deemed
inconsistent with that meaning.

                                      D-6
<PAGE>

                                   ASSIGNMENT

              FOR VALUE RECEIVED, the undersigned hereby sell(s),  assign(s) and
transfer(s)  unto
                  --------------------------------------------------------------

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

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

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

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

              I (We) further direct the Trustee to issue a new  Certificate of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

-------------------------------------------------------------------------------.

Dated:

                                           -------------------------------------
                                           Signature by or on behalf of assignor

                                      D-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

              The assignee should include the following for purposes of
distribution:

              Distributions  shall be made, by wire  transfer or  otherwise,  in
immediately available funds to
                              --------------------------------------------------

--------------------------------------------------------------------------------
for the account of
                   -------------------------------------------------------------
account number        , or, if mailed by check, to
               -------                             -----------------------------

--------------------------------------------------------------------------------
Applicable statements should be mailed to
                                          --------------------------------------

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

              This information is provided by
                                             -----------------------------------
the assignee named above, or
                            ----------------------------------------------------

                                      D-8
<PAGE>

                                    EXHIBIT E

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

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

              Re:    Pooling and Servicing  Agreement  among MORGAN  STANLEY ABS
                     CAPITAL I INC.,  as  Depositor,  Ocwen Federal Bank FSB, as
                     Servicer,   CDC  Mortgage  Capital  Inc.,  as  Unaffiliated
                     Seller, BNC Mortgage,  Inc. and Impac Funding  Corporation,
                     as  Responsible  Parties,  and  Bankers  Trust  Company  of
                     California,  N.A., as Trustee,  CDC Mortgage  Capital Trust
                     Series 2001-HE1

Gentlemen:

              In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "POOLING AND SERVICING  AGREEMENT"),  for each Mortgage
Loan listed in the Mortgage Loan  Schedule  (other than any Mortgage Loan listed
in the attached schedule), it has received:

              (i)    the  original  Mortgage  Note,  endorsed as provided in the
following form: "Pay to the order of ________, without recourse"; and

              (ii)   a duly executed  assignment  of the Mortgage  (which may be
included in a blanket assignment or assignments).

              Based on its review and  examination  and only as to the foregoing
documents,  such  documents  appear  regular on their  face and  related to such
Mortgage Loan.

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

                                      E-1
<PAGE>

              Capitalized   words  and  phrases   used  herein  shall  have  the
respective meanings assigned to them in the Pooling and Servicing Agreement.

                                      BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                        as Trustee

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

                                      E-2
<PAGE>

                                    EXHIBIT F

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

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

              Re:    Pooling and Servicing  Agreement  among MORGAN  STANLEY ABS
                     CAPITAL I INC.,  as  Depositor,  Ocwen Federal Bank FSB, as
                     Servicer,   CDC  Mortgage  Capital  Inc.,  as  Unaffiliated
                     Seller, BNC Mortgage,  Inc. and Impac Funding  Corporation,
                     as  Responsible  Parties,  and  Bankers  Trust  Company  of
                     California,  N.A., as Trustee,  CDC Mortgage  Capital Trust
                     Series 2001-HE1

Gentlemen:

              In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "POOLING AND SERVICING AGREEMENT"), the undersigned, as
Trustee,  hereby  certifies that as to each Mortgage Loan listed in the Mortgage
Loan  Schedule  (other  than any  Mortgage  Loan  paid in full or  listed on the
attached Document Exception Report) it has received:

              (i)    The original  Mortgage Note,  endorsed in the form provided
in Section 2.01 of the Pooling and  Servicing  Agreement,  with all  intervening
endorsements  showing a complete chain of endorsement from the originator to the
last endorsee.

              (ii)   The original recorded Mortgage.

              (iii)  A duly  executed  assignment  of the  Mortgage  in the form
provided  in Section  2.01 of the Pooling and  Servicing  Agreement;  or, if the
Unaffiliated  Seller  has  certified  or the  Trustee  otherwise  knows that the
related Mortgage has not been returned from the applicable  recording  office, a
copy of the assignment of the Mortgage (excluding  information to be provided by
the recording office).

              (iv)   The original or duplicate  original recorded  assignment or
assignments  of the Mortgage  showing a complete  chain of  assignment  from the
originator to the last endorsee.

              (v)    The original or duplicate  original  lender's  title policy
and all riders  thereto or, any one of an  original  title  binder,  an original
preliminary  title  report or an original  title  commitment,  or a copy thereof
certified by the title company.

                                      F-1
<PAGE>

              Based on its review and  examination  and only as to the foregoing
documents,  (a) such documents  appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (1), (2), (7), and (9)
of the  Mortgage  Loan  Schedule  and items  (1),  (9) and (17) of the Data Tape
Information accurately reflects information set forth in the Custodial File.

              The Trustee has made no  independent  examination of any documents
contained  in each  Mortgage  File  beyond  the  review  of the  Custodial  File
specifically required in the Pooling and Servicing Agreement.  The Trustee makes
no   representations   as  to:   (i)  the   validity,   legality,   sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
File of any of the Mortgage Loans  identified on the Mortgage Loan Schedule,  or
(ii) the collectability,  insurability, effectiveness or suitability of any such
Mortgage Loan.  Notwithstanding anything herein to the contrary, the Trustee has
made no  determination  and  makes  no  representations  as to  whether  (i) any
endorsement is sufficient to transfer all right, title and interest of the party
so endorsing, as Noteholder or assignee thereof, in and to that Mortgage Note or
(ii) any assignment is in recordable form or sufficient to effect the assignment
of and  transfer  to the  assignee  thereof,  under  the  Mortgage  to which the
assignment relates.

              Capitalized   words  and  phrases   used  herein  shall  have  the
respective meanings assigned to them in the Pooling and Servicing Agreement.

                                      BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                        as Trustee

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

                                      F-2
<PAGE>

                                    EXHIBIT G

                               TRANSFER AFFIDAVIT

                MORGAN STANLEY ABS CAPITAL I INC. Trust 2001-HE1,
                       Mortgage Pass-Through Certificates,
                                 Series 2001-HE1

STATE OF                            )

                                    ) ss.:

COUNTY OF                           )

              The  undersigned,  being  first duly  sworn,  deposes  and says as
follows:

              1.     The undersigned is an officer of  ___________________,  the
proposed  Transferee  of an  Ownership  Interest in a Class R  Certificate  (the
"CERTIFICATE")  issued  pursuant to the Pooling and  Servicing  Agreement,  (the
"AGREEMENT"),  relating  to the  above-referenced  Series,  by and among  MORGAN
STANLEY ABS CAPITAL I INC., as depositor (the  "DEPOSITOR"),  Ocwen Federal Bank
FSB, as  servicer,  CDC  Mortgage  Capital  Inc.,  as  unaffiliated  seller (the
"UNAFFILIATED  SELLER"),  BNC Mortgage,  Inc. and Impac Funding Corporation,  as
responsible  parties (the  "RESPONSIBLE  PARTIES")  and Bankers Trust Company of
California,  N.A., as Trustee. Capitalized terms used, but not defined herein or
in  Exhibit 1 hereto,  shall  have the  meanings  ascribed  to such terms in the
Agreement.  The Transferee has authorized the undersigned to make this affidavit
on behalf of the Transferee for the benefit of the Depositor and the Trustee.

              2.     The Transferee  is, as of the date hereof,  and will be, as
of the date of the Transfer, a Permitted Transferee. The Transferee is acquiring
its Ownership  Interest in the Certificate  for its own account.  The Transferee
has no knowledge that any such affidavit is false.

              3.     The  Transferee has been advised of, and  understands  that
(i) a tax will be imposed on  Transfers of the  Certificate  to Persons that are
not Permitted Transferees;  (ii) such tax will be imposed on the transferor, or,
if such  Transfer  is through  an agent  (which  includes  a broker,  nominee or
middleman) for a Person that is not a Permitted  Transferee,  on the agent;  and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent  Transferee furnished to such Person an affidavit that
such  subsequent  Transferee  is a  Permitted  Transferee  and,  at the  time of
Transfer,  such Person  does not have actual  knowledge  that the  affidavit  is
false.

              4.     The Transferee has been advised of, and understands  that a
tax will be imposed on a "pass-through entity" holding the Certificate if at any
time during the taxable year of the  pass-through  entity a Person that is not a
Permitted  Transferee  is the record  holder of an interest in such entity.  The
Transferee  understands  that such tax will not be imposed  for any period  with
respect to which the  record  holder  furnishes  to the  pass-through  entity an
affidavit that such record holder is a Permitted Transferee and the pass-through
entity does not have actual  knowledge that such  affidavit is false.  (For this
purpose, a "pass-through entity" includes a

                                      G-1
<PAGE>

regulated  investment  company,  a real estate  investment trust or common trust
fund, a partnership,  trust or estate,  and certain  cooperatives and, except as
may  be  provided  in  Treasury   Regulations,   persons  holding  interests  in
pass-through entities as a nominee for another Person.)

              5.     The  Transferee  has  reviewed  the  provisions  of Section
5.02(c)  of  the  Agreement  and  understands  the  legal  consequences  of  the
acquisition  of an Ownership  Interest in the  Certificate,  including,  without
limitation,   the  restrictions  on  subsequent  Transfers  and  the  provisions
regarding  voiding the Transfer and mandatory  sales.  The Transferee  expressly
agrees to be bound by and to abide by the  provisions of Section  5.02(c) of the
Agreement  and  the  restrictions  noted  on the  face of the  Certificate.  The
Transferee  understands and agrees that any breach of any of the representations
included herein shall render the Transfer to the Transferee  contemplated hereby
null and void.

              6.     The Transferee agrees to require a Transfer  Affidavit from
any Person to whom the Transferee attempts to Transfer its Ownership Interest in
the  Certificate,  and in connection  with any Transfer by a Person for whom the
Transferee is acting as nominee,  trustee or agent,  and the Transferee will not
Transfer  its  Ownership   Interest  or  cause  any  Ownership  Interest  to  be
Transferred  to  any  Person  that  the  Transferee  knows  is  not a  Permitted
Transferee.  In  connection  with  any  such  Transfer  by the  Transferee,  the
Transferee  agrees to deliver to the Trustee a certificate  substantially in the
form set forth as Exhibit H to the Agreement (a "TRANSFEROR CERTIFICATE") to the
effect that such Transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.

              7.     The  Transferee  does not have the  intention to impede the
assessment or collection of any tax legally  required to be paid with respect to
the Certificate.

              8.     The   Transferee's   taxpayer   identification   number  is
__________.

              9.     The Transferee is a U.S.  Person as defined in Code Section
7701(a)(30).

              10.    The  Transferee  is  aware  that the  Certificate  may be a
"noneconomic   residual  interest"  within  the  meaning  of  proposed  Treasury
regulations  promulgated  pursuant  to the Code and  that  the  transferor  of a
noneconomic  residual interest will remain liable for any taxes due with respect
to the income on such residual  interest,  unless no significant  purpose of the
transfer was to impede the assessment or collection of tax.

              11.    *[The Transferee has computed any consideration  paid to it
to acquire the Class  [R][LR]  Certificate  in  accordance  with  proposed  U.S.
Treasury Regulations Sections  1.860E-1(a)(4)(iii) and 1.860E-1(c)(5) (or, after
they have been finalized,  the final  regulations)  by computing  present values
using a discount rate equal to the applicable Federal rate prescribed by Section
1274(d) of the Code, compounded semi-annually.]

              [The  Transferee  has  computed  any  consideration  paid to it to
acquire the Class [R][LR]  Certificate in accordance with proposed U.S. Treasury
Regulations Sections 1.860E-

-------------------
              * Insert appropriate paragraph, if applicable.

                                      G-2
<PAGE>

1(a)(4)(iii) and 1.860E-1(c)(5)  (or, after they have been finalized,  the final
regulations) by computing present values using a discount rate at least equal to
the rate at which the Transferee  regularly  borrows,  in the ordinary course of
its trade or business,  substantial  funds from  unrelated  third  parties.  The
Transferee  has  provided  all  information  necessary  to  demonstrate  to  the
transferor that it regularly borrows at such rate.]

              [The  transfer  of the Class  [R][LR]  Certificate  complies  with
Section 6 of Revenue Procedure 2001-12 (the "REVENUE PROCEDURE"),  2001-3 I.R.B.
335  (January 16,  2001) (or  comparable  provisions  of  applicable  final U.S.
Treasury Regulations) and, accordingly,

              (i)    the Transferee is an "eligible  corporation," as defined in
                     Section  860L(a)(2)  of the Code,  as to which  income from
                     Class [R][LR]  Certificate will only be taxed in the United
                     States;

              (ii)   at the  time  of the  transfer,  and  at the  close  of the
                     Transferee's  two fiscal  years  preceding  the year of the
                     transfer,  the  Transferee  had gross assets for  financial
                     reporting  purposes  (excluding  any obligation of a person
                     related  to the  Investor  within  the  meaning  of Section
                     860L(g)  of the  Code) in excess  of $100  million  and net
                     assets in excess of $10 million;

              (iii)  the Transferee will transfer the Class [R][LR]  Certificate
                     only to  another  "eligible  corporation,"  as  defined  in
                     Section  860(a)(2)  of  the  Code,  in a  transaction  that
                     satisfies  the  requirements  of  Section 4 of the  Revenue
                     Procedure; and

              (iv)   the Transferee  determined the consideration  paid to it to
                     acquire the Class [R][LR]  Certificate  based on reasonable
                     market   assumptions   (including,   but  not  limited  to,
                     borrowing  and  investment   rates,   prepayment  and  loss
                     assumptions,  expense  and  reinvestment  assumptions,  tax
                     rates and other factors specific to the Transferee) that it
                     has determined in good faith.]

              [Reserved]

              12.    The  Transferee  is not an  employee  benefit  plan that is
subject to ERISA or a plan that is subject to Section 4975 of the Code,  and the
Transferee is not acting on behalf of or investing plan assets of such a plan.

                                      * * *

                                      G-3
<PAGE>

              IN WITNESS  WHEREOF,  the Transferee has caused this instrument to
be executed on its behalf,  pursuant to authority of its Board of Directors,  by
its duly authorized officer and its corporate seal to be hereunto affixed,  duly
attested, this __ day of ________, 20__.

                                             -----------------------------------
                                             Print Name of Transferee

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

[Corporate Seal]

ATTEST:

------------------------------------
[Assistant] Secretary

              Personally appeared before me the above-named __________, known or
proved to me to be the same person who executed the foregoing  instrument and to
be the ___________ of the Transferee, and acknowledged that he executed the same
as his free act and deed and the free act and deed of the Transferee.

              Subscribed and sworn before me this __ day of ________, 20__.

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

                                             My Commission expires the __ day
                                             of _________, 20__

                                      G-4
<PAGE>

                                    EXHIBIT H

                         FORM OF TRANSFEROR CERTIFICATE

                                                                __________, 20__

MORGAN STANLEY ABS CAPITAL I INC.
1585 Broadway
New York, New York 10036
Attention:  Gregory Walker

Bankers Trust Company of California, N.A.,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

       Re:    CDC Mortgage Capital Trust, Series 2001-HE1, Mortgage Pass-Through
              Certificates, Series 2001-HE1, Class ___

Ladies and Gentlemen:

              In connection  with our  disposition of the above  Certificates we
certify that (a) we understand  that the  Certificates  have not been registered
under the Securities Act of 1933, as amended (the "ACT"), and are being disposed
by us in a transaction that is exempt from the registration  requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any  Certificates  from, any person,  or otherwise  approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other  action which would result in, a violation of Section 5 of the Act and
(c) to the  extent  we are  disposing  of a  Residual  Certificate,  we  have no
knowledge the Transferee is not a Permitted Transferee.

Very truly yours,

                                            ------------------------------------
                                            Print Name of Transferor

                                            By:
                                            ------------------------------------
                                            Authorized Officer

                                      H-1
<PAGE>

                                    EXHIBIT I

                            FORM OF RULE 144A LETTER

                                                              ____________, 20__

MORGAN STANLEY ABS CAPITAL I INC.
1585 Broadway
New York, New York 10036
Attention:  Gregory Walker

Bankers Trust Company of California, N.A.,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

       Re:    CDC  Mortgage  Capital  Trust  2001,  Series  2001-HE1,
              Mortgage Pass-THROUGH CERTIFICATES, SERIES 2001-HE1, CLASS ___
              --------------------------------------------------------------

Ladies and Gentlemen:

              In connection  with our  acquisition of the above  Certificates we
certify that (a) we understand that the  Certificates  are not being  registered
under  the  Securities  Act of  1933,  as  amended  (the  "ACT"),  or any  state
securities laws and are being  transferred to us in a transaction that is exempt
from the  registration  requirements  of the Act and any such laws,  (b) we have
such  knowledge and  experience  in financial  and business  matters that we are
capable of evaluating the merits and risks of  investments in the  Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor  concerning the purchase of the  Certificates and all matters relating
thereto or any  additional  information  deemed  necessary  to our  decision  to
purchase  the  Certificates,  (d) we are not an  employee  benefit  plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan or arrangement that is subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, nor are we acting on behalf of any such plan or arrangement
nor using the assets of any such plan or arrangement to effect such  acquisition
or, with respect to a Class X Certificate, the purchaser is an insurance company
that is  purchasing  this  certificate  with funds  contained  in an  "insurance
company general  account" (as such term is defined in Section V(e) of Prohibited
Transaction  Class  Exemption  95-60  ("PTCE  95-60") and that the  purchase and
holding of such Certificates are covered under Sections I and III of PTCE 95-60,
(e) we have not,  nor has  anyone  acting on our  behalf  offered,  transferred,
pledged,  sold or otherwise  disposed of the  Certificates,  any interest in the
Certificates or any other similar  security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the Certificates, any interest
in the Certificates or any other similar security from, or otherwise  approached
or negotiated with respect to the Certificates, any interest in the Certificates
or any other  similar  security  with,  any  person in any  manner,  or made any
general  solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the Certificates
under  the  Securities  Act  or  that  would  render  the   disposition  of  the
Certificates  a  violation  of  Section  5 of  the  Securities  Act  or  require
registration  pursuant  thereto,  nor  will  act,  nor  has  authorized  or will
authorize any person to act,

                                      I-1
<PAGE>

in such  manner  with  respect to the  Certificates,  (f) to the extent that the
Certificate  transferred  is a Class X Certificate,  we are a  bankruptcy-remote
entity and (g) we are a "qualified  institutional buyer" as that term is defined
in Rule 144A under the Securities Act and have completed  either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are aware
that the sale to us is being made in reliance on Rule 144A. We are acquiring the
Certificates  for our own  account  or for  resale  pursuant  to Rule  144A  and
further, understand that such Certificates may be resold, pledged or transferred
only (i) to a person reasonably  believed to be a qualified  institutional buyer
that  purchases  for  its  own  account  or  for  the  account  of  a  qualified
institutional buyer to whom notice is given that the resale,  pledge or transfer
is being made in reliance on Rule 144A,  or (ii)  pursuant to another  exemption
from registration under the Securities Act.

                                      I-2
<PAGE>

                                                            ANNEX 1 TO EXHIBIT I

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [For Transferees Other Than Registered Investment Companies]

              The undersigned  (the "BUYER") hereby  certifies as follows to the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification relates with respect to the Certificates described therein:

              1.     As indicated below, the undersigned is the President, Chief
Financial  Officer,  Senior Vice  President  or other  executive  officer of the
Buyer.

              2.     In connection  with purchases by the Buyer,  the Buyer is a
"qualified  institutional  buyer" as that term is defined in Rule 144A under the
Securities  Act of 1933, as amended  ("RULE  144A")  because (i) the Buyer owned
and/or invested on a discretionary  basis  $_________ in securities  (except for
the  excluded  securities  referred to below) as of the end of the Buyer's  most
recent fiscal year (such amount being  calculated  in accordance  with Rule 144A
and (ii) the Buyer satisfies the criteria in the category marked below.

              ____   CORPORATION,  ETC. The Buyer is a corporation (other than a
                     bank, savings and loan association or similar institution),
                     Massachusetts  or similar business trust,  partnership,  or
                     charitable  organization  described in Section 501(c)(3) of
                     the Internal Revenue Code of 1986, as amended.

              ____   BANK.   The  Buyer  (a)  is  a  national  bank  or  banking
                     institution   organized   under  the  laws  of  any  State,
                     territory  or the  District of  Columbia,  the  business of
                     which  is   substantially   confined   to  banking  and  is
                     supervised by the State or territorial  banking  commission
                     or  similar  official  or is a foreign  bank or  equivalent
                     institution,  and (b) has an audited  net worth of at least
                     $25,000,000 as demonstrated in its latest annual  financial
                     statements, a copy of which is attached hereto.

              ____   SAVINGS  AND LOAN.  The  Buyer  (a) is a  savings  and loan
                     association,  building  and loan  association,  cooperative
                     bank, homestead  association or similar institution,  which
                     is supervised and examined by a State or Federal  authority
                     having  supervision  over  any  such  institutions  or is a
                     foreign   savings  and  loan   association   or  equivalent
                     institution  and (b) has an  audited  net worth of at least
                     $25,000,000 as demonstrated in its latest annual  financial
                     statements, a copy of which is attached hereto.

              ____   BROKER-DEALER. The Buyer is a dealer registered pursuant to
                     Section 15 of the Securities Exchange Act of 1934.

              ____   INSURANCE COMPANY.  The Buyer is an insurance company whose
                     primary and predominant business activity is the writing of
                     insurance  or  the  reinsuring  of  risks  underwritten  by
                     insurance  companies and which is

                                      I-3
<PAGE>

                     subject to supervision by the insurance  commissioner  or a
                     similar  official  or agency of a State,  territory  or the
                     District of Columbia.

              ____   STATE OR LOCAL PLAN.  The Buyer is a plan  established  and
                     maintained by a State, its political  subdivisions,  or any
                     agency or  instrumentality  of the  State or its  political
                     subdivisions, for the benefit of its employees.

              ____   ERISA PLAN.  The Buyer is an employee  benefit  plan within
                     the meaning of Title I of the  Employee  Retirement  Income
                     Security Act of 1974.

              ____   INVESTMENT  ADVISOR.  The  Buyer is an  investment  advisor
                     registered under the Investment Advisors Act of 1940.

              ____   SMALL  BUSINESS  INVESTMENT  COMPANY.   Buyer  is  a  small
                     business  investment  company  licensed  by the U.S.  Small
                     Business  Administration under Section 301(c) or (d) of the
                     Small Business Investment Act of 1958.

              ____   BUSINESS   DEVELOPMENT   COMPANY.   Buyer  is  a   business
                     development company as defined in Section 202(a)(22) of the
                     Investment Advisors Act of 1940.

              3.     The term  "SECURITIES"  as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated  with the Buyer,  (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a  dealer,   (iii)   securities   issued  or  guaranteed  by  the  U.S.  or  any
instrumentality  thereof,  (iv) bank deposit notes and  certificates of deposit,
(v) loan participations,  (vi) repurchase agreements, (vii) securities owned but
subject  to a  repurchase  agreement  and  (viii)  currency,  interest  rate and
commodity swaps.

              4.     For  purposes  of  determining  the  aggregate   amount  of
securities  owned and/or  invested on a  discretionary  basis by the Buyer,  the
Buyer used the cost of such  securities  to the Buyer and did not include any of
the  securities  referred to in the  preceding  paragraph,  except (i) where the
Buyer reports its securities  holdings in its financial  statements on the basis
of their market value, and (ii) no current  information with respect to the cost
of those securities has been published. If clause (ii) in the preceding sentence
applies,  the securities may be valued at market.  Further,  in determining such
aggregate amount,  the Buyer may have included  securities owned by subsidiaries
of the Buyer, but only if such  subsidiaries are consolidated  with the Buyer in
its  financial   statements  prepared  in  accordance  with  generally  accepted
accounting  principles and if the investments of such  subsidiaries  are managed
under the Buyer's direction.  However,  such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting  company  under the  Securities  Exchange Act of
1934, as amended.

              5.     The Buyer  acknowledges  that it is familiar with Rule 144A
and  understands  that  the  seller  to it  and  other  parties  related  to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.

                                      I-4
<PAGE>

              6.     Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions  herein.  Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification  as of the date of such purchase.  In addition,  if the Buyer is a
bank or  savings  and loan is  provided  above,  the Buyer  agrees  that it will
furnish to such parties updated annual financial  statements promptly after they
become available.

                                            ------------------------------------
                                            Print Name of Transferor

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

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

                                      I-5
<PAGE>

                                                            ANNEX 2 TO EXHIBIT I

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

              The undersigned  (the "BUYER") hereby  certifies as follows to the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification relates with respect to the Certificates described therein:

              1.     As indicated below, the undersigned is the President, Chief
Financial  Officer or Senior Vice  President  of the Buyer or, if the Buyer is a
"qualified  institutional  buyer" as that term is defined in Rule 144A under the
Securities  Act of 1933,  as amended  ("RULE  144A")  because Buyer is part of a
Family of  Investment  Companies (as defined  below),  is such an officer of the
Adviser.

              2.     In  connection  with  purchases  by  Buyer,  the Buyer is a
"qualified  institutional  buyer" as  defined in SEC Rule 144A  because  (i) the
Buyer is an investment  company  registered under the Investment  Company Act of
1940,  as amended  and (ii) as marked  below,  the Buyer  alone,  or the Buyer's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the  excluded  securities  referred  to below) as of the end of the Buyer's
most recent fiscal year.  For purposes of  determining  the amount of securities
owned by the Buyer or the Buyer's  Family of Investment  Companies,  the cost of
such  securities  was used,  except (i) where the Buyer or the Buyer's Family of
Investment Companies reports its securities holdings in its financial statements
on the basis of their market value, and (ii) no current information with respect
to the cost of  those  securities  has been  published.  If  clause  (ii) in the
preceding sentence applies, the securities may be valued at market.

              ____   The Buyer  owned  $______  in  securities  (other  than the
                     excluded securities referred to below) as of the end of the
                     Buyer's   most  recent   fiscal  year  (such  amount  being
                     calculated in accordance with Rule 144A).

              ____   The Buyer is part of a Family of Investment Companies which
                     owned in the aggregate $ ________ in securities (other than
                     the excluded securities referred to below) as of the end of
                     the Buyer's  most recent  fiscal  year (such  amount  being
                     calculated in accordance with Rule 144A).

              3.     The term "FAMILY OF  INVESTMENT  COMPANIES"  as used herein
means two or more registered  investment companies (or series thereof) that have
the same  investment  adviser or  investment  advisers that are  affiliated  (by
virtue of being  majority owned  subsidiaries  of the same parent or because one
investment adviser is a majority owned subsidiary of the other).

              4.     The term  "SECURITIES"  as used herein does not include (i)
securities  of  issuers  that are  affiliated  with the Buyer or are part of the
Buyer's Family of Investment Companies,  (ii) securities issued or guaranteed by
the  U.S.  or  any  instrumentality   thereof,  (iii)  bank  deposit  notes  and
certificates of deposit,  (iv) loan participations,  (v) repurchase  agreements,

                                      I-6
<PAGE>

(vi) securities owned but subject to a repurchase  agreement and (vii) currency,
interest rate and commodity swaps.

              5.     The Buyer is familiar with Rule 144A and  understands  that
the  parties  listed  in the Rule  144A  Transferee  Certificate  to which  this
certification  relates are relying and will  continue to rely on the  statements
made  herein  because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

              6.     Until  the  date  of  purchase  of  the  Certificates,  the
undersigned  will  notify  the  parties  listed  in  the  Rule  144A  Transferee
Certificate  to  which  this  certification   relates  of  any  changes  in  the
information  and  conclusions  herein.  Until such notice is given,  the Buyer's
purchase  of  the   Certificates   will  constitute  a  reaffirmation   of  this
certification by the undersigned as of the date of such purchase.

                                            ------------------------------------
                                            Print Name of Transferor

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

                                            IF AN ADVISER:

                                            ------------------------------------
                                                     Print Name of Buyer

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

                                      I-7
<PAGE>

                                    EXHIBIT J

                               REQUEST FOR RELEASE
                                  (for Trustee)

To:    [Address]

       Re:

              In connection with the  administration  of the Mortgage Loans held
by you as the  Trustee  on  behalf of the  Certificateholders,  we  request  the
release,  and acknowledge receipt, of the (Custodial  File/[specify  documents])
for the Mortgage Loan described below, for the reason indicated.

MORTGAGOR'S NAME, ADDRESS & ZIP CODE:

MORTGAGE LOAN NUMBER:

SEND CUSTODIAL FILE TO:

REASON FOR REQUESTING DOCUMENTS (CHECK ONE)

              ____1. Mortgage Loan Paid in Full.  (The Company hereby  certifies
                     that all amounts received in connection therewith have been
                     credited  to the  Collection  Account  as  provided  in the
                     Pooling and Servicing Agreement.)

              ____2. Mortgage Loan Repurchase Pursuant to Subsection 2.03 of the
                     Pooling  and  Servicing  Agreement.   (The  Company  hereby
                     certifies  that the  repurchase  price has been credited to
                     the  Collection  Account as  provided  in the  Pooling  and
                     Servicing Agreement.)

              ____3. Mortgage Loan Liquidated By _________________. (The Company
                     hereby   certifies   that  all  proceeds  of   foreclosure,
                     insurance,  condemnation  or other  liquidation  have  been
                     finally  received  and credited to the  Collection  Account
                     pursuant to the Pooling and Servicing Agreement.)

              ____4. Mortgage Loan in Foreclosure.

              ____5. Other (explain).

              If box 1, 2 or 3  above  is  checked,  and if all or  part  of the
Custodial File was previously  released to us, please release to us our previous
request  and receipt on file with you, as well as any  additional  documents  in
your possession relating to the specified Mortgage Loan.

                                      J-1
<PAGE>

              If box 4 or 5 above  is  checked,  upon our  return  of all of the
above  documents  to you as the  Trustee,  please  acknowledge  your  receipt by
signing in the space indicated below, and returning this form.

                                               OCWEN FEDERAL BANK FSB

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

                                      J-2
<PAGE>

                                    EXHIBIT K

                         CONTENTS OF EACH MORTGAGE FILE

              With  respect  to each  Mortgage  Loan,  the  Mortgage  File shall
include each of the following items,  which shall be available for inspection by
the  Purchaser  and which shall be retained by the  Servicer or delivered to and
retained by the Trustee, as applicable:

              [(a)   The  original   Mortgage   Note  bearing  all   intervening
                     endorsements,  showing a complete chain of endorsement from
                     the  originator to the last  endorsee  endorsed "Pay to the
                     order  of  _______________  without  recourse"  and  signed
                     (which may be by  facsimile  signature)  in the name of the
                     last endorsee by an authorized  officer. To the extent that
                     there  is no room on the  face of the  Mortgage  Notes  for
                     endorsements,  the  endorsement  may  be  contained  on  an
                     allonge,  if state  law so  allows  and the  Trustee  is so
                     advised  by  the  Unaffiliated  Seller  that  state  law so
                     allows.

              (b)    The original of any guaranty  executed in  connection  with
                     the Mortgage Note.

              (c)    The original  Mortgage,  with evidence of recording thereon
                     or a certified  true copy of such  Mortgage  submitted  for
                     recording.  If in connection  with any Mortgage  Loan,  the
                     Unaffiliated Seller cannot deliver or cause to be delivered
                     the original Mortgage with evidence of recording thereon on
                     or prior to the Closing  Date  because of a delay caused by
                     the public  recording  office where such  Mortgage has been
                     delivered for recordation or because such Mortgage has been
                     lost or because such public  recording  office  retains the
                     original recorded Mortgage,  the Unaffiliated  Seller shall
                     deliver  or  cause  to  be  delivered  to  the  Trustee,  a
                     photocopy of such  Mortgage,  together with (i) in the case
                     of a  delay  caused  by the  public  recording  office,  an
                     Officer's  Certificate  of  the  Unaffiliated  Seller  or a
                     certificate  from an escrow  company,  a title  company  or
                     closing  attorney  stating  that  such  Mortgage  has  been
                     dispatched to the appropriate  public  recording office for
                     recordation  and that the original  recorded  Mortgage or a
                     copy of such  Mortgage  certified by such public  recording
                     office  to be a true  and  complete  copy  of the  original
                     recorded Mortgage will be promptly delivered to the Trustee
                     upon receipt thereof by the  Responsible  Party; or (ii) in
                     the  case of a  Mortgage  where a public  recording  office
                     retains the original recorded Mortgage or in the case where
                     a Mortgage is lost after  recordation in a public recording
                     office,  a copy of such  Mortgage  certified by such public
                     recording  office  to be a true  and  complete  copy of the
                     original recorded Mortgage.

              (d)    The    originals   of   all    assumption,    modification,
                     consolidation  or extension  agreements,  with  evidence of
                     recording   thereon  or  a  certified  true  copy  of  such
                     agreement submitted for recording.

                                      K-1
<PAGE>

              (e)    The original  Assignment of Mortgage for each Mortgage Loan
                     endorsed in blank.

              (f)    Originals of all  intervening  assignments  of mortgage (if
                     any)  evidencing a complete  chain of  assignment  from the
                     applicable originator to the last endorsee with evidence of
                     recording   thereon  or  a  certified  true  copy  of  such
                     intervening   assignments   of   mortgage   submitted   for
                     recording,  or if any such  intervening  assignment has not
                     been returned from the applicable  recording  office or has
                     been lost or if such public  recording  office  retains the
                     original recorded assignments of mortgage, the Unaffiliated
                     Seller  shall  deliver  or  cause  to be  delivered  to the
                     Trustee,  a  photocopy  of  such  intervening   assignment,
                     together  with  (i) in the  case of a delay  caused  by the
                     public recording  office,  an Officer's  Certificate of the
                     Unaffiliated   Seller  or  a  certificate  from  an  escrow
                     company, a title company or a closing attorney stating that
                     such intervening Assignment of Mortgage has been dispatched
                     to the appropriate  public recording office for recordation
                     and that such original recorded  intervening  Assignment of
                     Mortgage  or a  copy  of  such  intervening  Assignment  of
                     Mortgage  certified  by the  appropriate  public  recording
                     office  to be a true  and  complete  copy  of the  original
                     recorded   intervening   Assignment  of  Mortgage  will  be
                     promptly  delivered to the Trustee upon receipt  thereof by
                     the   Responsible   Party;  or  (ii)  in  the  case  of  an
                     intervening  assignment  where a  public  recording  office
                     retains the original recorded intervening  assignment or in
                     the case  where an  intervening  assignment  is lost  after
                     recordation in a public  recording  office,  a copy of such
                     intervening  assignment  certified by such public recording
                     office  to be a true  and  complete  copy  of the  original
                     recorded intervening assignment.

              (g)    The original mortgagee title insurance policy or attorney's
                     opinion of title and abstract of title.

              (h)    The original of any security agreement, chattel mortgage or
                     equivalent   document   executed  in  connection  with  the
                     Mortgage (if provided).

              (i)    Residential loan application.

              (j)    Mortgage Loan closing statement.

              (k)    Verification of employment and income, if applicable.

              (l)    Verification of acceptable evidence of source and amount of
                     downpayment.

              (m)    Credit report on Mortgagor.

              (n)    Residential appraisal report.

              (o)    Photograph of the Mortgaged Property.

                                      K-2
<PAGE>

              (p)    Survey of the Mortgaged Property.

              (q)    Copy   of   each    instrument    necessary   to   complete
                     identification  of any exception set forth in the exception
                     schedule  in  the  title   policy,   I.E.,   map  or  plat,
                     restrictions, easements, sewer agreements, home association
                     declarations, etc.

              (r)    All required disclosure statements.

              (s)    If required in an  appraisal,  termite  report,  structural
                     engineer's    report,    water   portability   and   septic
                     certification.

              (t)    Sales Contract, if applicable.

Evidence   of  payment  of  taxes  and   insurance,   insurance   claim   files,
correspondence,  current and historical  computerized  data files (which include
records of tax receipts and payment history from the date of  origination),  and
all other  processing,  underwriting  and closing  papers and records  which are
customarily contained in a mortgage loan file and which are required to document
the Mortgage Loan or to service the Mortgage Loan.]

                                      K-3
<PAGE>

                                    EXHIBIT L

                      FORM OF SUBSEQUENT TRANSFER AGREEMENT

                       CDC MORTGAGE CAPITAL TRUST 2001-HE1

              Pursuant  to  separate  Mortgage  Loan  Purchase  Agreements,  BNC
Mortgage, Inc. ("BNC") and IMPAC Funding Corporation ("IFC") have agreed to sell
to CDC Mortgage Capital Inc. (the "UNAFFILIATED  SELLER") certain mortgage loans
(each,  a  "MORTGAGE  LOAN").  These  Mortgage  Loans may in turn be sold by the
Unaffiliated  Seller to MORGAN STANLEY ABS CAPITAL I INC. (the  "DEPOSITOR") and
then sold by the  Depositor  to the CDC Mortgage  Capital  Trust  2001-HE1  (the
"TRUST  FUND").  The  Trust  Fund was  established  pursuant  to a  Pooling  and
Servicing  Agreement,  dated as of November 1, 2001 (the  "POOLING AND SERVICING
AGREEMENT")  among BNC,  IFC, the  Unaffiliated  Seller,  the  Depositor,  Ocwen
Federal Bank FSB, as Servicer  (the  "SERVICER")  and Bankers  Trust  Company of
California,  N.A.,  as  trustee  (the  "TRUSTEE").  The  Pooling  and  Servicing
Agreement  permits a pre-funding  feature,  allowing for the  acquisition by the
Trust Fund of Subsequent Mortgage Loans during the Pre-Funding Period.

              Capitalized  terms used herein and not  defined  herein have their
respective meanings as set forth in the Pooling and Servicing Agreement.

              CONVEYANCE OF SUBSEQUENT  MORTGAGE  LOANS.  [BNC/IFC]  does hereby
irrevocably  sell,  transfer,  assign,  set over  and  otherwise  convey  to the
Unaffiliated  Seller,  without recourse (except as otherwise explicitly provided
for  herein)  all of its  right,  title and  interest  in and to the  Subsequent
Mortgage  Loans,  exclusive of the  obligations of [BNC/IFC] with respect to the
Subsequent Mortgage Loans but including  specifically,  without limitation,  the
Mortgages, the Custodial Files and all other documents, materials and properties
appurtenant thereto and the Mortgage Notes, including all interest and principal
collected by the Originators on or with respect to the Subsequent Mortgage Loans
after the related Subsequent Cut-Off Date, together with all of its right, title
and interest in and to the proceeds received after such Subsequent  Cut-Off Date
of  any  related  insurance  policies.  [BNC/IFC]  shall  deliver  the  required
documentation in accordance with the delivery  requirements set forth in Section
2.01 of the Pooling and Servicing Agreement.

              The Unaffiliated  Seller does hereby  irrevocably sell,  transfer,
assign, set over and otherwise convey to the Depositor, without recourse (except
as  otherwise  explicitly  provided  for  herein)  all of its  right,  title and
interest in and to the Subsequent  Mortgage Loans,  exclusive of the obligations
of the  Unaffiliated  Seller or any other Person with respect to the  Subsequent
Mortgage Loans but including  specifically,  without limitation,  the Mortgages,
the  Custodial  Files  and  all  other   documents,   materials  and  properties
appurtenant thereto and the Mortgage Notes, including all interest and principal
collected  by the  Unaffiliated  Seller  on or with  respect  to the  Subsequent
Mortgage Loans after the related Subsequent  Cut-Off Date,  together with all of
its  right,  title and  interest  in and to the  proceeds  received  after  such
Subsequent  Cut-Off  Date of any  related  insurance  policies  on behalf of the
Depositor.

              The Depositor does hereby irrevocably sell, transfer,  assign, set
over and  otherwise  convey to the  Trust  Fund,  without  recourse  (except  as
otherwise explicitly provided

                                      L-1
<PAGE>

for  herein)  all of its  right,  title and  interest  in and to the  Subsequent
Mortgage  Loans,  exclusive  of the  obligations  of the  Depositor or any other
Person with respect to the Subsequent Mortgage Loans but including specifically,
without limitation,  the Mortgages, the Custodial Files and all other documents,
materials and properties  appurtenant thereto and the Mortgage Notes,  including
all interest and principal  collected by the Depositor on or with respect to the
Subsequent  Mortgage Loans after the related Subsequent  Cut-Off Date,  together
with all of its right,  title and interest in and to the proceeds received after
such Subsequent  Cut-Off Date of any related insurance policies on behalf of the
Trust Fund.

              The expenses and costs  relating to the delivery of the Subsequent
Mortgage Loans specified in this Subsequent  Transfer  Agreement and the Pooling
and Servicing Agreement shall be borne by the Unaffiliated Seller.

              The Responsible  Parties and the Unaffiliated Seller hereby affirm
the  representations  and  warranties  set forth in the  Pooling  and  Servicing
Agreement,  respectively,  that relate to the  Subsequent  Mortgage Loans on the
date hereof.  The Responsible  Parties and the  Unaffiliated  Seller each hereby
deliver  notice and  confirm  that each of the  conditions  set forth in Section
2.01(c) of the Pooling and  Servicing  Agreement  are  satisfied  as of the date
hereof.

              Additional terms of the sale are attached hereto as Attachment A.

              To  the  extent  permitted  by  applicable  law,  this  Subsequent
Transfer  Agreement,  or a memorandum thereof if permitted under applicable law,
is subject to  recordation in all  appropriate  public offices for real property
records in all counties or other comparable jurisdictions in which any or all of
the  properties  subject  to the  Mortgages  are  situated,  and  in  any  other
appropriate  public  recording  office  or  elsewhere,  such  recordation  to be
effected by the Servicer at the  Unaffiliated  Seller's  expense,  but only when
accompanied  by an  opinion  of  counsel  to the  effect  that such  recordation
materially and beneficially affects the interests of the  Certificateholders  or
is necessary for the administration or servicing of the Mortgage Loans.

              This Agreement  shall be construed in accordance  with the laws of
the State of New York and the  obligations,  rights and  remedies of the parties
hereunder  shall be  determined  in accordance  with such laws,  without  giving
effect to the principles of conflicts of laws.

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

              All terms and  conditions of the Pooling and  Servicing  Agreement
are hereby ratified,  confirmed and incorporated herein;  PROVIDED,  that in the
event of any conflict the provisions of this Subsequent Transfer Agreement shall
control over the conflicting provisions of the Pooling and Servicing Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                      L-2
<PAGE>

                              BNC MORTGAGE, INC. ,
                              as a Responsible Party

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

                              IMPAC FUNDING CORPORATION,
                                  as a Responsible Party

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

                              CDC MORTGAGE CAPITAL INC., as Unaffiliated Seller

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

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

                              MORGAN STANLEY ABS CAPITAL I INC.,
                                  as Depositor

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

                              OCWEN FEDERAL BANK FSB,
                                  as Servicer

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

                                      L-3
<PAGE>

                              BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                  as Trustee

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

                                      L-4

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