Document:

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                                                                     EXHIBIT 4.2

                                                                  EXECUTION COPY

                                 TRUST AGREEMENT

                          dated as of February 1, 2000

                                 by and between

                          ACCREDITED HOME LENDERS, INC.
                                   as Sponsor,

                                       and

                            WILMINGTON TRUST COMPANY,
                                as Owner Trustee

                      ACCREDITED MORTGAGE LOAN TRUST 2000-1
                        Asset-Backed Notes, Series 2000-1

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<TABLE>
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                                Table of Contents
                                                                                                               PAGE
                                                                                                               ----
                                    ARTICLE I
                                   DEFINITIONS
<S>               <C>                                                                                          <C>
Section 1.01.     Capitalized Terms...............................................................................1
Section 1.02.     Other Definitional Provisions...................................................................5

                                   ARTICLE II
                                  ORGANIZATION

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

                                   ARTICLE III
                                   SUB-TRUSTS

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

                                   ARTICLE IV
                     CERTIFICATES AND TRANSFER OF INTERESTS

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

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

                                   ARTICLE VI
                         TAX PROVISIONS; CERTAIN DUTIES

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

                                   ARTICLE VII
                      AUTHORITY AND DUTIES OF OWNER TRUSTEE

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

                                  ARTICLE VIII
                          CONCERNING THE OWNER TRUSTEE

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

                                   ARTICLE IX
                          COMPENSATION OF OWNER TRUSTEE

Section 9.01.     Owner Trustee's Fees and Expenses..............................................................36
Section 9.02.     Indemnification................................................................................36
Section 9.03.     Payments to the Owner Trustee..................................................................37
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                                    ARTICLE X
                         TERMINATION OF TRUST AGREEMENT

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Section 10.01.    Termination of Trust Agreement.................................................................38

                                   ARTICLE XI
             SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

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

                                   ARTICLE XII
                                  MISCELLANEOUS

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

EXHIBITS

EXHIBIT A         Form of Certificate
EXHIBIT B         Form of Certificate of Trust
EXHIBIT C         Form of Investment Letter
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                  This TRUST AGREEMENT, dated as of February 1, 2000, by and
between ACCREDITED HOME LENDERS, INC., as sponsor (the "SPONSOR") and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee
(the "OWNER TRUSTEE").

                                    ARTICLE I

                                   DEFINITIONS

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

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

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

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

                  "BACKUP SERVICER" shall mean Advanta Mortgage Corp. USA, or
any successor backup servicer appointed pursuant to the Sale and Servicing
Agreement.

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

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

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

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

                  "CERTIFICATE" shall mean each Trust Certificate.

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

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

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

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

                  "CLASS A-1 NOTES" shall mean the Accredited Mortgage Loan
Trust 2000-1, Asset-Backed Notes, Series 2000-1, Class A-1.

                  "CLASS A-2 NOTES" shall mean the Accredited Mortgage Loan
Trust 2000-1, Asset-Backed Notes, Series 2000-1, Class A-2.

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

                  "CORPORATE TRUST OFFICE" shall mean, with respect to the
Owner Trustee, the principal corporate trust office of the Owner Trustee
located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Corporate Trust Administration; or at such other
address in the State of Delaware as the Owner Trustee may designate by notice
to the Certificateholders and the Sponsor, or the principal corporate trust
office of any successor Owner Trustee (the address (which shall be in the
State of Delaware) of which the successor owner trustee will notify the
Certificateholders and the Sponsor).

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

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

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

                  "GROUP 1 MORTGAGE LOANS" shall mean a pool of fixed rate
mortgage loans, as identified in the related Mortgage Loan Schedule.

                  "GROUP 2 MORTGAGE LOANS" shall mean a pool of
adjustable-rate mortgage loans, as identified in the related Mortgage Loan
Schedule.

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

                  "INDEMNIFICATION AGREEMENT": shall mean the Indemnification
Agreement, dated as of February 24, 2000, among the Note Insurer, the
Sponsor, the Trust and the Underwriter.

                  "INDENTURE" shall mean the Indenture, dated as of February
1, 2000, by and between the Trust and the Indenture Trustee.

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

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                  "INSURANCE AGREEMENT" shall mean the Insurance and
Indemnity Agreement dated as of February 1, 2000 among the Note Insurer, the
Trust and the Sponsor, including any amendments and supplements thereto.

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

                  "LOAN GROUP" shall mean either Loan Group 1 or Loan Group 2.

                  "LOAN GROUP 1" shall mean the pool of Mortgage Loans
identified in the Mortgage Loan Schedule as having been assigned to Loan
Group 1.

                  "LOAN GROUP 2" shall mean the pool of Mortgage Loans
identified in the Mortgage Loan Schedule as having been assigned to Loan
Group 2.

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

                  "MORTGAGE LOANS" shall mean the Group 1 Mortgage Loans and
the Group 2 Mortgage Loans.

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

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

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

                  "NOTE INSURER" shall mean Financial Security Assurance
Inc., a New York financial guaranty insurance company.

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

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

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

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

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

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

                  "OWNER TRUSTEE" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as
owner trustee under this Agreement, and any successor owner trustee hereunder.

                  "PAYMENT DATE" shall mean the 25th day of each month or, if
such 25th day is not a Business Day, the next succeeding Business Day,
commencing March 27, 2000.

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

                  "PREMIUM LETTER" shall mean the Premium Letter dated as of
February 29, 2000 between the Note Insurer and the Sponsor.

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

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

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

                  "SALE AND SERVICING AGREEMENT" shall mean the Sale and
Servicing Agreement, dated as of February 1, 2000, among the Sponsor, the
Trust, the Indenture Trustee, the Backup Servicer and the Master Servicer.

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

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

                  "SUB-TRUST" shall have the meaning specified in Section
3.01 and includes either Sub-Trust 1 or Sub-Trust 2, each of which constitute
a separate series of interests in the Trust Estate pursuant to Section
3806(b)(2) of the Business Trust Statute.

                  "SUB-TRUST 1" shall mean the portion of the Trust Estate
assigned to Sub-Trust 1.

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                  "SUB-TRUST 2" shall mean the portion of the Trust Estate
assigned to Sub-Trust 2.

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

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

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

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

                  "TRUST" shall mean the Accredited Home Equity Loan Trust
2000-1, the Delaware business trust created pursuant to this Agreement.

                  "TRUST CERTIFICATE" shall mean a certificate evidencing the
beneficial interest of a Certificateholder in the Trust consisting of
Sub-Trust 1 and Sub-Trust 2, substantially in the form attached hereto as
EXHIBIT A.

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

                  "UNDERWRITER" shall mean Lehman Brothers Inc.

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

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

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

         (c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions

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of accounting terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement
or in any such certificate or other document shall control.

         (d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation."

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

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

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<PAGE>

                                   ARTICLE II

                                  ORGANIZATION

         Section 2.01. NAME. The Trust governed hereby shall be known as
"Accredited Mortgage Loan Trust 2000-1," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued on behalf of the Trust.

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

         Section 2.08.  TITLE TO TRUST PROPERTY.

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

         (b) The Certificateholders shall not have legal title to any part of
the Owner Trust Estate. No transfer by operation of law or otherwise of any
interest of the Certificateholders shall

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operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of any part of the Owner
Trust Estate.

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

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

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

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

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

         (d) There are no proceedings or investigations pending or notice of
which has been received in writing before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Sponsor or its properties: (x) asserting the invalidity
of this Agreement, (y) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (z) seeking any determination
or ruling that should reasonably be expected to materially and adversely
affect the performance by the Sponsor of its obligations under, or the
validity or enforceability of, this Agreement.

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

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

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

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

         Section 2.11.  FEDERAL INCOME TAX TREATMENT OF THE TRUST.

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

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

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

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

                                      10

<PAGE>

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

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

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

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

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

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

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

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

                                      11

<PAGE>

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

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

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

                                      12

<PAGE>

                                   ARTICLE III

                                   SUB-TRUSTS

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

         Section 3.02.  ESTABLISHMENT OF SUB-TRUST.

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

                           Sub-Trust 1 and Sub-Trust 2

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

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

                  Section 3.04.  LIABILITIES OF SUB-TRUST.

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

                                       13

<PAGE>

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

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

                                       14

<PAGE>

                                   ARTICLE IV

                     CERTIFICATES AND TRANSFER OF INTERESTS

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

         Section 4.02. THE CERTIFICATES. The Certificates shall be issued as
a single certificate, substantially in the form of Exhibit A hereto, upon the
order of the Sponsor to the Owner Trustee concurrently with the sale and
assignment to the Trust of the Mortgage Loans. The Certificates shall
represent the entire beneficial ownership interest in the assets of the Trust
subject to the debt represented by the Notes. The Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Owner Trustee, as evidenced by its execution
thereof. The Certificates shall be executed on behalf of the Trust by manual
or facsimile signature of an Authorized Officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Trust, shall be valid, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices
at the date of authentication and delivery of such Certificates.

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

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

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

                                     15

<PAGE>

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

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

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

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

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

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

                                   16

<PAGE>

may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.

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

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

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

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

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

                                     17

<PAGE>

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

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

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

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

         (b) By its acceptance of a Certificate, each Prospective Holder
agrees and acknowledges that no legal or beneficial interest in all or any
portion of any Certificate may be transferred directly or indirectly to an
entity that holds residual securities as nominee to facilitate the clearance
and settlement of such securities through electronic book-entry changes in
accounts of

                                     18

<PAGE>

participating organizations (a "BOOK-ENTRY NOMINEE") and any such purported
transfer shall be void and have no effect.

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

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

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

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

         (e)  [Reserved].

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

                                     19

<PAGE>

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

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

                                     20

<PAGE>

                                    ARTICLE V

                            ACTIONS BY OWNER TRUSTEE

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

                  (l) confess a judgment against the Trust;

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

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

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

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

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

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

                                     22

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

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

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

                                     23

<PAGE>

                                   ARTICLE VI

                         TAX PROVISIONS; CERTAIN DUTIES

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

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

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

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

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

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

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

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

                                     24

<PAGE>

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

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

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

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

                                     25

<PAGE>

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

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

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

                  (xi) At the Trust's expense, the Sponsor shall (i) prepare, or
         cause to be prepared, and file or cause to be filed such tax returns
         relating to the Trust (including a partnership information return, IRS
         Form 1065) as are required by applicable federal, state, and local law,
         (ii) cause such returns to be signed in the manner required by law,
         (iii) make such elections as may from time to time be required or
         appropriate under any applicable law so as to maintain the Trust's
         classification as a partnership for tax purposes, (iv) prepare and
         deliver, or cause to be prepared and delivered, to the
         Certificateholders, no later than 120 days after the close of each
         Taxable Year (or no later than April 15th), a Schedule K-1, a copy of
         the Trust's informational tax return (IRS Form 1065), and such other
         reports (collectively, the "ANNUAL TAX REPORTS") setting forth in
         sufficient detail all such information and data with respect to the
         transactions effected by or involving the Trust during such Taxable
         Year as shall enable each Certificateholder to prepare its federal,
         state, and local income tax returns in accordance with the laws then
         prevailing, and (v) collect, or cause to be collected, any withholding
         tax as described in Section 5.02(c) with respect to income or
         distributions to Certificateholders.

                  (xii) The Sponsor shall, if required, be designated as the tax
         matters partner for the Trust within the meaning of Section 6231(a)(7)
         of the Code (the "TAX MATTERS PARTNER"). The Tax Matters Partner shall
         have the right and obligation to take all actions authorized and
         required, respectively, by the Code for the Tax Matters Partner. The
         Tax Matters Partner shall have the right to retain professional
         assistance in respect of any audit or controversy proceeding initiated
         with respect to the Trust by the Internal Revenue Service or any state
         or local taxing authority, and all expenses and fees incurred by the
         Tax Matters Partner on behalf of the Trust shall constitute expenses of
         the Trust. In the event the Tax Matters Partner receives notice of a
         final partnership adjustment under Section 6223(a)(2) of the Code, the
         Tax Matters Partner shall either (i) file a court petition for judicial
         review of such adjustment within the period provided under Section
         6226(a) of the Code, a copy of which petition shall be mailed to all
         other Holders on the

                                     26

<PAGE>

         date such petition is filed, or (ii) mail a written notice to all other
         Holders, within such period, that describes the Tax Matters Partner's
         reasons for determining not to file such a petition.

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

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

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

                                     27

<PAGE>

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

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

         Section 6.04.  SIGNATURE ON RETURNS.

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

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<PAGE>

                                   ARTICLE VII

                      AUTHORITY AND DUTIES OF OWNER TRUSTEE

         Section 7.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article IV, in each case, as the
Sponsor shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition, the Owner Trustee is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent the
Trust Request and the Trust Orders referred to in Section 2.11 of the Indenture,
directly to the Authenticating Agent to authenticate and deliver Class A-1 Notes
in the Original Note Principal Balance of $53,047,000 and Class A-2 Notes in the
Original Note Principal Balance of $120,429,000. In addition to the foregoing,
the Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents.

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

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

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

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

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

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

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<PAGE>

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

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

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

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

                                    30

<PAGE>

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

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

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

                                     31

<PAGE>

                                  ARTICLE VIII

                          CONCERNING THE OWNER TRUSTEE

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

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

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

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

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

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

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

                                     32

<PAGE>

                  (v) the Owner Trustee shall be under no obligation to exercise
         any of the rights or powers vested in it by this Agreement, or to
         institute, conduct or defend any litigation under this Agreement or
         otherwise or in relation to this Agreement or any Basic Document, at
         the request, order or direction of the Sponsor, any of the
         Certificateholders or the Note Insurer, unless such Certificateholders,
         the Sponsor or the Note Insurer have offered to the Owner Trustee
         security or indemnity reasonably satisfactory to it against the costs,
         expenses and liabilities that may be incurred by the Owner Trustee
         therein or thereby. The right of the Owner Trustee to perform any
         discretionary act enumerated in this Agreement or in any other Basic
         Document shall not be construed as a duty, and the Owner Trustee shall
         not be answerable for other than its gross negligence or willful breach
         or misconduct in the performance of any such act; and

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

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

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

                  (x) It is a Delaware banking corporation duly organized and
         validly existing in good standing under the laws of the State of
         Delaware. It has all requisite power and authority to execute, deliver
         and perform its obligations under this Agreement.

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<PAGE>

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

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

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

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

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

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

         (b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
other Basic Documents, the Owner Trustee (i) may, at the expense of the
Trust, act directly or through its agents or attorneys pursuant to agreements
entered into with any of them, and the Owner Trustee shall not be liable for
the conduct or misconduct of such agents or attorneys if such agents or
attorneys shall have been

                                     34

<PAGE>

selected by the Owner Trustee with reasonable care, and (ii) may, at the
expense of the Trust, consult with counsel, Accountants and other skilled
persons to be selected with reasonable care and employed by it. The Owner
Trustee shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the written opinion or advice of any such
counsel, Accountants or other such persons and not contrary to this Agreement
or any other Basic Document.

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

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

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

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

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                                   ARTICLE IX

                          COMPENSATION OF OWNER TRUSTEE

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

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

                                     36

<PAGE>

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

                                      37

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                                    ARTICLE X

                         TERMINATION OF TRUST AGREEMENT

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

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

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

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

                                     38

<PAGE>

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

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

                                      39

<PAGE>

                                   ARTICLE XI

             SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

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

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

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

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

                                     40

<PAGE>

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

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

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

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

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

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

                                     41

<PAGE>

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

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

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

                  (i) all rights, powers, duties and obligations conferred or
         imposed upon the Owner Trustee shall be conferred upon and exercised or
         performed by the Owner Trustee and such separate trustee or co-trustee
         jointly (it being understood that such separate trustee or co-trustee
         is not authorized to act separately without the Owner Trustee joining
         in such act), except to the extent that under any law of any
         jurisdiction in which any particular act or acts are to be performed,
         the Owner Trustee shall be incompetent or unqualified to perform such
         act or acts, in which event such rights, powers, duties, and
         obligations (including the holding of title to the Trust or any portion
         thereof in any such jurisdiction) shall be exercised and performed
         singly by such separate trustee or co-trustee, but solely at the
         direction of the Owner Trustee;

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

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

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

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<PAGE>

         (d) Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

                                     43

<PAGE>

                                   ARTICLE XII

                                  MISCELLANEOUS

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

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

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

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

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

                                     44
<PAGE>

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

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

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

         Section 12.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been given if (1)
personally delivered, (2) upon receipt by the intended recipient or three
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; (ii) if
to the Sponsor, Accredited Home Lenders, Inc., 15030 Avenue of Science, Suite
100, San Diego, California 92129, Attention: General Counsel, telecopy: (858)
676-2170; and (iii) if to the Note Insurer, Financial Security Assurance Inc.,
350 Park Avenue, New York, New York, 10022, Attention: Accredited Mortgage Loan
Trust 2000-1, telecopy: (212) 826-0100; or, as to each such party, at such other
address as shall be designated by such party in a written notice to each other
party.

         (b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.

                                     45

<PAGE>

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

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

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

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

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

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

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

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

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

                                     46

<PAGE>

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

         (a)  [Reserved].

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

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

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

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

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

                                     47

<PAGE>

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

                  [Remainder of Page Intentionally Left Blank]

                                     48

<PAGE>

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

                                        ACCREDITED HOME LENDERS, INC.,
                                             as Sponsor

                                        By: /s/ DAVID HERTZEL
                                           -------------------------------------
                                             Name: David Hertzel
                                             Title: General Counsel

                                        WILMINGTON TRUST COMPANY, as Owner
                                             Trustee under the Trust Agreement

                                        By: /s/ ANITA DELAGO
                                           -------------------------------------
                                             Name: Anita Delago
                                             Title:

                                     49

<PAGE>

                                                                     EXHIBIT A

                               FORM OF CERTIFICATE

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

NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM
THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO
THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN"),
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY AND (III) IS NOT DIRECTLY OR INDIRECTLY
PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OR, AS
INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.

THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS
NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH

<PAGE>

SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING
ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS
PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE.

                                     A-2

<PAGE>

Certificate No. __                                   Percentage Interest:___

                  THIS CERTIFIES THAT ______________ (the
"CERTIFICATEHOLDER") is the registered owner of a ___% Percentage Interest in
Accredited Mortgage Loan Trust 2000-1 (the "TRUST") existing under the laws
of the State of Delaware and created pursuant to that certain Trust
Agreement, dated as of February 1, 2000 (the "TRUST AGREEMENT"), by and
between Accredited Home Lenders, Inc., as sponsor, and Wilmington Trust
Company, not its individual capacity but solely as owner trustee under the
Trust Agreement (the "OWNER TRUSTEE"). Capitalized terms used but not
otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement. The Owner Trustee, on behalf of the Trust and not in its
individual capacity, has executed this Certificate by one of its duly
authorized signatories as set forth below. This Certificate is one of the
Certificates referred to in the Trust Agreement and is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement to
which the Certificateholder by virtue of the acceptance hereof agrees and by
which the Certificateholder hereof is bound. Reference is hereby made to the
Trust Agreement for the rights of the Certificateholder, as well as for the
terms and conditions of the Trust created by the Trust Agreement.

                  The recitals contained herein (other than the signature and
countersignature of the Owner Trustee) shall be taken as the statements of
the Sponsor, and the Owner Trustee assumes no responsibility for the
correctness thereof.

                  The Certificateholder, by its acceptance hereof, agrees not
to transfer this Certificate except in accordance with terms and provisions
of the Trust Agreement.

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

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

                                     A-3

<PAGE>

                  IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.

                                  ACCREDITED MORTGAGE LOAN
                                   TRUST 2000-1

                                  By:    WILMINGTON TRUST COMPANY, not in
                                         its individual capacity but solely as
                                         Owner Trustee under the Trust Agreement

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

Dated:

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Certificates referred to in the
within-mentioned Trust Agreement.

                                  WILMINGTON TRUST COMPANY, not in its
                                       individual capacity but solely as Owner
                                       Trustee under the Trust Agreement

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

Dated:

                                     A-4

<PAGE>

                                   ASSIGNMENT

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

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE

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

--------------------------------------------------------------------------------
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing __________ Attorney to transfer said Instrument on
the books of the Certificate Registrar, with full power of substitution in the
premises.

Dated:

                                                                             */
                                        ---------------------------------------
                                        Signature Guaranteed:

                                                                             */
                                        ---------------------------------------

------------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.

                                     A-5

<PAGE>

                                                                    EXHIBIT B

                          FORM OF CERTIFICATE OF TRUST

                             CERTIFICATE OF TRUST OF
                      ACCREDITED MORTGAGE LOAN TRUST 2000-1

                  THIS CERTIFICATE OF TRUST OF ACCREDITED MORTGAGE LOAN TRUST
2000-1 (the "Trust"), dated as of February __, 2000, is being duly executed
and filed by Wilmington Trust Company, a Delaware banking corporation, as
owner trustee (the "Owner Trustee"), to form a business trust under the
Delaware Business Trust Act (12 Del. Code, Section 3801 et seq.).

                  1. NAME. The name of the business trust formed hereby is
         Accredited Mortgage Loan Trust 2000-1.

                  2. DELAWARE TRUSTEE. The name and business address of the
         Owner Trustee of the Trust in the State of Delaware is Wilmington Trust
         Company, Rodney Square North, 110 North Market Street, Ninth Floor,
         Wilmington, Delaware 19890, Attention: Corporate Trust Administration.

                  3. SERIES. Pursuant to Section 3806(b)(2) of the Act, the
         Trust shall issue one or more series of beneficial interests having the
         rights and preferences set forth in the governing instrument of the
         Trust, as the same may be amended from time to time (each, a "Series"
         or "Sub-Trust").

                  4. NOTICE OF LIMITATION OF LIABILITIES OF EACH SERIES.
         Pursuant to Section 3804(a) of the Act, there shall be a limitation on
         liabilities of each Series such that (a) the debts, liabilities,
         obligations and expenses incurred, contracted for or otherwise existing
         with respect to a particular Series shall be enforceable against the
         assets of such Series only, and not against the assets of the Trust
         generally or the assets of any other Series thereof and (b) none of the
         debts, liabilities, obligations and expenses incurred, contracted for
         or otherwise existing with respect to the Trust generally or any other
         Series thereof shall be enforceable against the assets of such Series.

                  5. EFFECTIVE DATE. This Certificate of Trust shall be
         effective at 12:01 a.m. on February __, 2000.

                  IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.

                                     WILMINGTON TRUST COMPANY, not in its
                                          individual capacity but solely as
                                          Owner Trustee under a Trust Agreement,
                                          dated as of February 1, 2000.

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

<PAGE>

                                                                       EXHIBIT C

                            FORM OF INVESTMENT LETTER

                                    -------------------, ----

Accredited Home Lenders, Inc.
15030 Avenue of Science, Suite 100
San Diego, California 92129

Wilmington Trust Company
Rodney Square North,
110 North Market Street, Ninth Floor,
Wilmington, Delaware 19890
Attention:  Corporate Trust Administration

                  Re:      Accredited Mortgage Loan Trust 2000-1 (the "Trust")
                           ASSET-BACKED NOTES, SERIES 2000-1

Ladies and Gentlemen:

                  _________________________________________ (the
"Certificateholder") has purchased or acquired, or intends to purchase or
acquire from ________________, the current Certificateholder (the "Current
Certificateholder"), a Trust Certificate representing a 100% Percentage Interest
(the "Certificate") in the Trust, which represents an interest in the Trust
created pursuant to that certain Trust Agreement, dated as of February 1, 2000
(the "Trust Agreement"), by and between Accredited Home Lenders, Inc., as
Sponsor, and Wilmington Trust Company, as Owner Trustee. Capitalized terms used
and not otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement.

                                  CERTIFICATION

                  The undersigned, as an authorized officer or agent of the
Certificateholder, hereby certifies, represents, warrants and agrees on behalf
of the Certificateholder as follows:

                  1. The Certificateholder is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it was formed
and is authorized to invest in the Certificate. The person executing this letter
on behalf of the Certificateholder is duly authorized to do so on behalf of the
Certificateholder.

                  2. The Certificateholder hereby acknowledges that no transfer
of the Certificate may be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"); and applicable state securities laws, or is made in
accordance with the Securities Act and such laws.

                  3. The Certificateholder understands that the Certificate
has not been and will not be registered under the Securities Act and may be
offered, sold, pledged or otherwise

<PAGE>

transferred to a person whom the transferor reasonably believes is (A) a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act) or (B) a Person involved in the organization or operation of the Trust
or an affiliate of such Person, in a transaction pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or exempt from the registration requirements of the
Securities Act and any such state securities laws. The Certificateholder
understands that the Certificate bears a legend to the foregoing effect.

                  4. The Certificateholder is acquiring the Certificate for
its own account or for accounts for which it exercises sole investment
discretion, and not with a view to or for sale or other transfer in
connection with any distribution of the Certificate in any manner that would
violate Section 5 of the Securities Act or any applicable state securities
laws, subject nevertheless to any requirement of law that the disposition of
the Certificateholder's property shall at all times be and remain within its
control.

                  5. The Certificateholder is (A) a "qualified institutional
buyer" (a "QIB") as defined in Rule 144A under the Securities Act, and is
aware that the transferor of the Certificate may be relying on an exemption
from the registration requirements of the Securities Act and is acquiring
such Certificate for its own account or for the account of one or more
qualified institutional buyers for whom it is authorized to act, or (B) a
Person involved in the organization or operation of the Trust or an affiliate
of such Person within the meaning of Rule 3a-7 of the Investment Company Act
of 1940, as amended (including, but not limited to, the Sponsor). The
Certificateholder is able to bear the economic risks of such an investment.
The Certificateholder is a QIB because [STATE FACTUAL BASIS FOR QIB STATUS]

                  6. If the Certificateholder sells or otherwise transfers
the registered ownership of such Certificate, the Certificateholder will
comply with the restrictions and requirements with respect to the transfer of
the ownership of the Certificate under the Trust Agreement, and the
Certificateholder will obtain from any subsequent purchaser or transferee
substantially the same certifications, representations, warranties and
covenants as required under the Trust Agreement in connection with such
subsequent sale or transfer thereof.

                  7. The Certificateholder is not an entity that will hold a
Certificate as nominee (a "Book Entry Nominee") to facilitate the clearance
and settlement of such security through electronic book-entry changes in
Accounts or participating organizations.

                  8. The Certificateholder (i) is not a person which is an
employee benefit plan, trust or account subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code or a governmental plan, as defined in Section 3(32) of ERISA, subject
to any federal, state or local law which is, to a material extent, similar to
the foregoing provisions of ERISA or the Code (any such person being a "Plan"),
(ii) is not an entity, including an insurance company separate account or
general account, whose underlying assets include "plan assets" by reason of a
Plan's investment in the entity and (iii) is not directly or indirectly
purchasing such Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.

                                     B-2

<PAGE>

                  9. The Certificateholder hereby agrees to indemnify each of
the Trust, the Indenture Trustee, the Note Insurer and the Owner Trustee
against any liability that may result if the Certificateholder's transfer of
a Certificate (or any portion thereof) is not exempt from the registration
requirements of the Securities Act and any applicable state securities laws
or is not made in accordance with such federal and state laws. Such
indemnification of the Trust, the Indenture Trustee and the Owner Trustee
shall survive the termination of the related Trust Agreement.

                  IN WITNESS WHEREOF, the Certificateholder has caused this
instrument to be executed on its behalf, pursuant to the authority of its
Board of Directors, by its duly authorized signatory this ____ day of
__________, 200_.

                                              [NAME OF CERTIFICATEHOLDER]

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

                                     B-3<PAGE>

                                                               EXECUTION COPY

                                                                 EXHIBIT 10.1

                          SALE AND SERVICING AGREEMENT

                          dated as of February 1, 2000

                                  by and among

                         ACCREDITED HOME LENDERS, INC.,
                                   as Sponsor,

                     ACCREDITED MORTGAGE LOAN TRUST 2000-1,
                                   as Issuer,

                         ACCREDITED HOME LENDERS, INC.,
                               as Master Servicer,

                           ADVANTA MORTGAGE CORP. USA
                               as Backup Servicer,

                                       and

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
                              as Indenture Trustee

<PAGE>

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                               PAGE

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

                                   ARTICLE II
                    SALE AND CONVEYANCE OF THE MORTGAGE LOANS

         Section 2.01.     Purchase and Sale of Initial Mortgage Loans............................................3
         Section 2.02.     Purchase and Sale of Subsequent Mortgage Loans.........................................3
         Section 2.03.     Purchase Price.........................................................................3
         Section 2.04.     Possession of Mortgage Files; Access to Mortgage Files.................................4
         Section 2.05.     Delivery of Mortgage Loan Documents....................................................4
         Section 2.06.     Acceptance of the Trust Estate; Certain Substitutions; Certification by the
                               Indenture Trustee..................................................................7
         Section 2.07.     Grant of Security Interest.............................................................8
         Section 2.08.     Further Action Evidencing Assignments..................................................9
         Section 2.09.     Assignment of Agreement...............................................................10

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         Section 3.01.     Representations of the Master Servicer................................................11
         Section 3.02.     Representations, Warranties and Covenants of the Sponsor..............................12
         Section 3.03.     Representations, Warranties and Covenants of the Backup Servicer......................13
         Section 3.04.     Representations, Warranties and Covenants of the Indenture Trustee....................14
         Section 3.05.     Covenants and Representations of the Sponsor and Master Servicer Regarding
                               Prepayment Charges................................................................15

                                   ARTICLE IV
                               THE MORTGAGE LOANS

         Section 4.01.     Representations and Warranties Concerning the Mortgage Loans..........................17
         Section 4.02.     Purchase and Substitution.............................................................24

                                    ARTICLE V
               ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

         Section 5.01.     The Master Servicer...................................................................26
         Section 5.02.     Collection of Certain Mortgage Loan Payments; Collection Account......................28
         Section 5.03.     Permitted Withdrawals from the Collection Account.....................................29
         Section 5.04.     Hazard Insurance Policies; Property Protection Expenses...............................30
</TABLE>

                                     (i)

<PAGE>

<TABLE>

         <S>               <C>                                                                                 <C>
         Section 5.05.     Assumption and Modification Agreements................................................32
         Section 5.06.     Realization Upon Defaulted Mortgage Loans.............................................32
         Section 5.07.     Indenture Trustee to Cooperate........................................................33
         Section 5.08.     Servicing Compensation; Payment of Certain Expenses by Master Servicer................35
         Section 5.09.     Annual Statement as to Compliance.....................................................35
         Section 5.10.     Annual Independent Public Accountants' Servicing Report...............................35
         Section 5.11.     Access to Certain Documentation.......................................................36
         Section 5.12.     Maintenance of Fidelity Bond..........................................................36
         Section 5.13.     Subservicing Agreements Between the Master Servicer and Subservicers..................36
         Section 5.14.     Reports to the Indenture Trustee; Collection Account Statements.......................37
         Section 5.15.     Optional Purchase of Defaulted Mortgage Loans.........................................38
         Section 5.16.     Reports to be Provided by the Master Servicer and the Backup Servicer.................39
         Section 5.17.     [Reserved]............................................................................40
         Section 5.18.     Periodic Advances.....................................................................40
         Section 5.19.     Indemnification; Third Party Claims...................................................41
         Section 5.20.     Maintenance of Corporate Existence and Licenses; Merger or Consolidation of
                               the Master Servicer and Backup Servicer...........................................41
         Section 5.21.     Assignment of Agreement by Master Servicer and Backup Servicer; Master
                               Servicer and Backup Servicer Not to Resign........................................41
         Section 5.22.     Periodic Filings with the Securities and Exchange Commission; Additional
                               Information.......................................................................42
         Section 5.23.     Administrative Duties.................................................................42
         Section 5.24.     Maintenance of and Claims Upon the Primary Mortgage Insurance Policy..................43

                                   ARTICLE VI
                              APPLICATION OF FUNDS

         Section 6.01.     Deposits to the Payment Account.......................................................44
         Section 6.02.     Collection of Money...................................................................44
         Section 6.03.     Application of Principal and Interest.................................................44
         Section 6.04.     [Reserved]............................................................................44
         Section 6.05.     Compensating Interest.................................................................44
         Section 6.06.     Effect of Payments by the Note Insurer; Subrogation...................................44

                                   ARTICLE VII
                                SERVICER DEFAULT

         Section 7.01.     Servicer Events of Default............................................................46
         Section 7.02.     Backup Servicer to Act; Appointment of Successor......................................49
         Section 7.03.     Waiver of Defaults....................................................................52
         Section 7.04.     Rights of the Note Insurer to Exercise Rights of the Noteholders......................52
         Section 7.05.     Indenture Trustee To Act Solely with Consent of the Note Insurer......................53
         Section 7.06.     Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note Insurer........53
         Section 7.07.     Note Insurer Default..................................................................53
</TABLE>
                                      (ii)

<PAGE>

                                  ARTICLE VIII
                                   TERMINATION

<TABLE>

         <S>               <C>                                                                                 <C>
         Section 8.01.     Termination...........................................................................55
         Section 8.02.     Additional Termination Requirements...................................................56
         Section 8.03.     Accounting Upon Termination of Master Servicer........................................56
         Section 8.04.     Retention and Termination of the Master Servicer......................................56

                                   ARTICLE IX
                                   [RESERVED]

                                    ARTICLE X
                            MISCELLANEOUS PROVISIONS

         Section 10.01.    Limitation on Liability...............................................................59
         Section 10.02.    Acts of Noteholders...................................................................59
         Section 10.03.    Amendment.............................................................................60
         Section 10.04.    Recordation of Agreement..............................................................61
         Section 10.05.    Duration of Agreement.................................................................61
         Section 10.06.    Notices...............................................................................61
         Section 10.07.    Severability of Provisions............................................................61
         Section 10.08.    No Partnership........................................................................62
         Section 10.09.    Counterparts..........................................................................62
         Section 10.10.    Successors and Assigns................................................................62
         Section 10.11.    Headings..............................................................................62
         Section 10.12.    No Petition...........................................................................62
         Section 10.13.    Third Party Beneficiary...............................................................62
         Section 10.14.    Intent of the Parties.................................................................62
         Section 10.15.    GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL..........................62

                                    EXHIBITS

         EXHIBIT A         Contents of the Mortgage File
         EXHIBIT B         Indenture Trustee's Acknowledgement of Receipt
         EXHIBIT C         Collateral Agent's Acknowledgement of Receipt
         EXHIBIT D         Initial Certification of Collateral Agent
         EXHIBIT E         Final Certification of Collateral Agent
         EXHIBIT F         Request for Release of Documents
         EXHIBIT G         Form of Subsequent Transfer Agreement
         EXHIBIT H         Prepayment Charge Schedule
         EXHIBIT I         Schedule Of Mortgage Loan With LTVs Greater Than 75%
                            Which Are Not Covered By The Primary Mortgage
                            Insurance Policy

                                    SCHEDULES

         SCHEDULE I        Mortgage Loan Schedule
</TABLE>

                                    (iii)

<PAGE>

         SALE AND SERVICING AGREEMENT, dated as of February 1, 2000 (this
"AGREEMENT"), by and among ACCREDITED HOME LENDERS, INC., a California
corporation, as sponsor (the "SPONSOR"), ACCREDITED MORTGAGE LOAN TRUST
2000-1, a Delaware statutory business trust, as issuer (the "TRUST"),
ACCREDITED HOME LENDERS, INC., a California corporation, as master servicer
(the "MASTER SERVICER"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation,
as backup servicer (the "BACKUP SERVICER"), and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as indenture trustee
(the "INDENTURE TRUSTEE").

                               W I T N E S S E T H

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

         WHEREAS, immediately after such purchase, the Trust will pledge such
Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture,
dated as of February 1, 2000 (the "INDENTURE"), between the Trust and the
Indenture Trustee, and issue the Accredited Mortgage Loan Trust 2000-1,
Asset-Backed Notes (the "NOTES");

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

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

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

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

                                    ARTICLE I

                                   DEFINITIONS

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

         Section 1.02.     PROVISIONS OF GENERAL  APPLICATION.  (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.

                  (b) The terms defined herein and in Appendix I to the
Indenture include the plural as well as the singular.

                                       1

<PAGE>

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

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

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

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

                                       2

<PAGE>

                                   ARTICLE II

                    SALE AND CONVEYANCE OF THE MORTGAGE LOANS

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

         Section 2.02. PURCHASE AND SALE OF SUBSEQUENT MORTGAGE LOANS. (a)
Subject to the satisfaction of the conditions set forth in Section 2.14(b) of
the Indenture, in consideration of the Trust's delivery on the related
Subsequent Transfer Dates to or upon the order of the Sponsor of all or a
portion of the balance of funds in the related Pre-Funding Account, the
Sponsor shall on any Subsequent Transfer Date sell, transfer, assign, set
over and convey to the Trust without recourse, but subject to terms and
provisions of this Agreement, all of the right, title and interest of the
Sponsor in and to the Subsequent Mortgage Loans in the related Loan Group,
including the Cut-Off Date Principal Balance, and interest due on, such
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Estate.

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

                  (b) In connection with the transfer and assignment of the
Subsequent Mortgage Loans to the Trust, the Sponsor shall satisfy the
document delivery requirements set forth in Section 2.05 hereof.

                  (c) For any Subsequent Mortgage Loan that has a first Due
Date that occurs later than the last day of the Due Period following the Due
Period in which the related Subsequent Cut-Off Date occurs, on each
applicable Servicer Payment Date, the Master Servicer will deposit into the
related Payment Account 30 days' interest at the related Mortgage Interest
Rate, net of the Servicing Fee, for each month after the month in which the
Subsequent Transfer occurs until, but not including, the month in which such
first Due Date occurs. Notwithstanding anything in Section 7.02 to the
contrary, neither the Backup Servicer nor the Indenture Trustee is obligated
to make such deposit in the event the Master Servicer fails to do so.

         Section 2.03. PURCHASE PRICE. On the Closing Date, as full
consideration for the Sponsor's sale of the Initial Mortgage Loans to the
Trust, the Underwriter, on behalf of the Trust, will deliver to, or at the
direction of, the Sponsor (i) an amount in cash equal to the sum of (A)
99.634375% and 99.650000% of the Original Note Principal Balance as of the
Closing Date of the Class A-1 Notes and the Class A-2 Notes, respectively,
plus (B) accrued interest on the

                                       3

<PAGE>

Original Note Principal Balance of the Class A-1 Notes at the rate of 7.94%
per annum from (and including) February 1, 2000 to (but not including) the
Closing Date, minus (C) the Original Pre-Funded Amount and the Original
Capitalized Interest Amount with respect to each Class of Notes, payable by
wire transfer of same day funds, and (ii) the Certificates to be issued
pursuant to the Trust Agreement.

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

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

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

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

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

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

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

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

                                       4

<PAGE>

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

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

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

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

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

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

         The Indenture Trustee, at the direction and authority of the parties to
this Agreement, shall promptly upon receipt thereof, with respect to each
Mortgage Note described in Section 2.05(a)(i) hereof and each assignment
described in Section 2.05(a)(iv) hereof, endorse such Mortgage Note and
assignment as follows: "Norwest Bank Minnesota, National Association, as
Indenture Trustee under the Indenture dated as of February 1, 2000, Accredited
Mortgage Loan Trust 2000-1."

                  (b) As promptly as practicable, but in any event within
thirty (30) days from the Closing Date or the Subsequent Transfer Date, as
applicable, the Sponsor shall promptly submit, or cause to be submitted for
recording in the appropriate public office for real property records, each
assignment referred to in Section 2.05(a)(iv); provided however, the Sponsor
need not cause to be recorded any assignment which relates to a Mortgage Loan
in any jurisdiction under the laws of which, as evidenced by an Opinion of
Counsel delivered by the Sponsor (at the Sponsor's expense) to the Indenture
Trustee, acceptable to the Rating Agencies and the Note Insurer, the
recordation of such assignment is not necessary to protect the Indenture
Trustee's, the Note Insurer's, the Noteholders' and the Certificates'
interest in the related Mortgage Loan. The Indenture Trustee, shall retain a
copy of each assignment submitted for recording. In the

                                       5

<PAGE>

event that any such assignment is lost or returned unrecorded because of a
defect therein, the Sponsor shall promptly prepare a substitute assignment or
cure such defect, as the case may be, and thereafter the Sponsor shall submit
each such assignment for recording. The costs relating to the delivery and
recordation of the documents in connection with the Mortgage Loans as
specified in this Article II shall be borne by the Sponsor.

                  (c) The Sponsor shall, within five (5) Business Days after
the receipt thereof, deliver, or cause to be delivered, to the Indenture
Trustee: (i) the original recorded Mortgage and related power of attorney, if
any, in those instances where a copy thereof certified by the Sponsor was
delivered to the Indenture Trustee; (ii) the original recorded assignment of
Mortgage from the Sponsor to the Indenture Trustee, which, together with any
intervening assignments of Mortgage, evidences a complete chain of assignment
from the originator of the Mortgage Loan to the Indenture Trustee, in those
instances where copies of such assignments certified by the Sponsor were
delivered to the Indenture Trustee; and (iii) the title insurance policy or
title opinion required in Section 2.05(a)(vi).

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

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

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

                                       6

<PAGE>

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

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

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

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

                  (iii)    to review (or cause to be reviewed) each Indenture
         Trustee's Mortgage File within one hundred eighty (180) days after the
         Closing Date or any Subsequent Transfer Date, as applicable (or, with
         respect to any Qualified Substitute Mortgage Loans, within one hundred
         eighty (180) days after receipt thereof), and to deliver to the Master
         Servicer, the Backup Servicer, the Sponsor and the Note Insurer a
         certification in the form attached hereto as EXHIBIT E to the effect
         that, except as otherwise noted, as to each Mortgage Loan listed in the
         related Mortgage Loan Schedule (other than any Mortgage Loan paid in
         full or any Mortgage Loan specifically identified in such certification
         as not

                                       7

<PAGE>

         covered by such certification), (i) all documents specified in
         Section 2.05 are in its possession, (ii) each such document has been
         reviewed by it and has not been mutilated, damaged, torn or otherwise
         physically altered (handwritten additions, changes or corrections shall
         not constitute physical alteration if they reasonably appear to be
         initialed by the Mortgagor), appears regular on its face and relates to
         such Mortgage Loan, and (iii) based on its examination and only as to
         the foregoing documents, the information set forth in items (i), (ii),
         (iii) and (vi) of the definition of "Mortgage Loan Schedule" accurately
         reflects the information set forth in the Indenture Trustee's Mortgage
         File delivered on such date.

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

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

         Section 2.07. GRANT OF SECURITY INTEREST. (a) It is intended that
the conveyance of the Mortgage Loans and other property by the Sponsor to the
Trust as provided in this Article II be,

                                       8

<PAGE>

and be construed for all purposes other than tax purposes as, a sale of the
Mortgage Loans and such other property by the Sponsor to the Trust. It is,
for all purposes other than tax purposes further, not intended that such
conveyance be deemed a pledge of the Mortgage Loans or such other property by
the Sponsor to the Trust to secure a debt or other obligation of the Sponsor.
However, in the event that the Mortgage Loans or any of such other property
are held to be property of the Sponsor, or if for any reason this Agreement
is held or deemed to create a security interest in the Mortgage Loans or any
of such other property, then it is intended that: (i) this Agreement shall
also be deemed to be a security agreement within the meaning of the Uniform
Commercial Code; (ii) the conveyance provided for in this Article II shall be
deemed to be a grant by the Sponsor to the Trust of a security interest in
all of the Sponsor's right, title and interest in and to the Mortgage Loans
and such other property and all amounts payable to the holders of the
Mortgage Loans in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property, including, without limitation, all
amounts from time to time held or invested in the Accounts whether in the
form of cash, instruments, securities or other property; (iii) the possession
by the Indenture Trustee, of the Mortgage Notes and such other items of
property as constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to the Uniform Commercial Code; and
(iv) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from
financial intermediaries, bailees or agents, as applicable, of the Indenture
Trustee for the purpose of perfecting such security interest under applicable
law. The Sponsor, the Master Servicer, on behalf of the Trust and the
Indenture Trustee, shall, to the extent consistent with this Agreement, take
such actions as may be reasonably necessary to ensure that, if this Agreement
were deemed to create a security interest in the Mortgage Loans or any of
such other property, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement.

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

         Section 2.08. FURTHER ACTION EVIDENCING ASSIGNMENTS. (a) The Master
Servicer agrees that, from time to time, at its expense, it shall cause the
Sponsor to, and the Sponsor agrees that it shall, promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary or appropriate, or that the Master Servicer or the
Indenture Trustee

                                       9

<PAGE>

may reasonably request, in order to perfect, protect or more fully evidence
the transfer of ownership of the Mortgage Loans and other assets in the Trust
Estate or to enable the Indenture Trustee, to exercise or enforce any of its
rights hereunder. Without limiting the generality of the foregoing, the
Master Servicer and the Sponsor will, upon the request of the Master Servicer
or the Indenture Trustee execute and file (or cause to be executed and filed)
such real estate filings, financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may
be necessary or appropriate.

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

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

                                      10

<PAGE>

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

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

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

                  (b) The Master Servicer has the power and authority to
make, execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement, and assuming the due authorization, execution and delivery hereof
by the other parties hereto constitutes, or will constitute, the legal, valid
and binding obligation of the Master Servicer, enforceable in accordance with
its terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).

                  (c) The Master Servicer is not required to obtain the
consent of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau
or agency which consent already has not been obtained in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except such as have been obtained prior to the Closing Date.

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

                  (e) There is no action, suit, proceeding or investigation
pending or threatened against the Master Servicer which, either in any one
instance or in the aggregate, is, in the Master Servicer's judgment, likely
to result in any material adverse change in the business, operations,
financial condition, properties, or assets of the Master Servicer, or in any
material impairment of the right or ability of the Master Servicer to carry
on its business substantially as now conducted, or in any material liability
on the part of the Master Servicer, or which would draw into question

                                      11

<PAGE>

the validity of this Agreement, the Notes, or the Mortgage Loans or of any
action taken or to be taken in connection with the obligations of the Master
Servicer contemplated herein or therein, or which would be likely to impair
materially the ability of the Master Servicer to perform its obligations
hereunder.

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

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

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

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

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

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

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

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

                  (d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or
court is required for the execution, delivery and performance of or
compliance by the Sponsor with this Agreement or the consummation by the

                                      12

<PAGE>

Sponsor of any of the transactions contemplated hereby, except as have been
made on or prior to the Closing Date.

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

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

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

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

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

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

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

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

                                      13

<PAGE>

the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).

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

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

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

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

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

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

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

                                      14

<PAGE>

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

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

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

                  (e) None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of,
or constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of association or bylaws of the Indenture
Trustee, or (B) of any term, condition or provision of any material
indenture, deed of trust, contract or other agreement or instrument to which
the Indenture Trustee is a party or by which it is bound; or (ii) results or
will result in a violation of any statute, rule, regulation, order, judgment
or decree applicable to the Indenture Trustee of any court or governmental
authority having jurisdiction over the Indenture Trustee or its subsidiaries;
and

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

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

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

                                      15

<PAGE>

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

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

                                      16

<PAGE>

                                   ARTICLE IV
                               THE MORTGAGE LOANS

     Section 4.01. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE
LOANS. The Sponsor makes the following representations and warranties to the
Master Servicer, the Backup Servicer, the Indenture Trustee, the Note Insurer
and the Trust as to the Mortgage Loans on which the Trust relies in accepting
the Mortgage Loans in trust and executing the Notes. Such representations,
warranties and covenants are made or deemed to be made (x) with respect to
the Initial Mortgage Loans, as of the Initial Cut-Off Date and (y) with
respect to the Subsequent Mortgage Loans, as of the related Subsequent
Cut-Off Date.

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

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

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

          (d) All of the original or certified documentation required to be
delivered to the Indenture Trustee pursuant to this Agreement (including all
material documents related thereto) with respect to each Mortgage Loan has
been or will be delivered to the Indenture Trustee in accordance with the
terms of this Agreement. Each of the documents and instruments specified to
be included therein has been duly executed and in due and proper form, and
each such document or instrument is in a form generally acceptable to prudent
mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the Mortgage Loans.

          (e)      [Reserved].

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

          (g) No Mortgage Loan in Loan Group 1 had a CLTV in excess of 90.00%
and No Mortgage Loan in Loan Group 2 had an LTV in excess of 90.00%.

          (h) Each Mortgage Loan in Loan Group 1 is either a valid and
subsisting first or second lien and each Mortgage Loan in Loan Group 2 is a
valid and subsisting first lien as identified on the Mortgage Loan Schedule
on the Mortgaged Property (subject in the case of any second mortgage only to
any related first mortgage loan or loans on such Mortgaged Property) and
subject in all cases to the exceptions to title set forth in the title
insurance policy, with

                                      17

<PAGE>

respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended to be
provided by such Mortgage. At the time each Mortgage Loan in Loan Group 2 was
originated, the originator was a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the
National Housing Act or a savings and loan association, a savings bank, a
commercial bank or similar banking institution which was supervised and
examined by a Federal or State authority or a mortgage banker or broker
licensed or authorized to do business in the jurisdiction in which the
related Mortgaged Property is located, applying the same standards and
procedures used by the Sponsor in originating Mortgage Loans directly.

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

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

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

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

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

          (n) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard California Land Title Association

                                      18

<PAGE>

form or American Land Title Association form, or other form acceptable in a
particular jurisdiction by a title insurance company authorized to transact
business in the state in which the related Mortgaged Property is situated, in
an amount at least equal to the original Principal Balance of such Mortgage
Loan insuring the mortgagee's interest under the related Mortgage Loan as the
holder of a valid first or second mortgage lien of record on the real
property described in the related Mortgage, as the case may be, subject only
to exceptions of the character referred to in paragraph (h) above, was
effective on the date of the origination of such Mortgage Loan, and, as of
the Closing Date such policy will be valid and inure to the benefit of the
Indenture Trustee on behalf of the Noteholders.

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

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

          (q) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law),
and all parties to each Mortgage Loan had full legal capacity to execute all
documents relating to such Mortgage Loan and convey the estate therein
purported to be conveyed.

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

          (s) Each original Mortgage and all subsequent assignments of the
original Mortgage have been recorded or are in the process of being recorded,
in the appropriate

                                      19

<PAGE>

jurisdictions wherein such recordation is necessary to perfect the lien
thereof for the benefit of the Sponsor, subject to the provisions of Section
2.05(b) of this Agreement.

          (t) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the
Noteholders and which has been delivered to the Indenture Trustee. The
substance of any such alteration or modification is reflected on the related
Mortgage Loan Schedule and has been approved by the Primary Mortgage
Insurance Provider, if applicable.

          (u) The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future
advances thereunder. All costs, fees and expenses incurred in making or
closing or recording such Mortgage Loans were paid.

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

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

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

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

          (z) Each Mortgage securing a Mortgage Note contains a provision for
the acceleration of the payment of the unpaid Principal Balance of the
related Mortgage Loan in the event the related Mortgaged Property is sold
without the prior consent of the mortgagee thereunder.

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

          (bb) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to
affect adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended.

                                       20

<PAGE>

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

          (dd) No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. As of
the related date of origination, all inspections, licenses and certificates
required to be made or issued with respect to all occupied portions of each
Mortgaged Property and, with respect to the use and occupancy of the same,
including, but not limited to, certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities and such Mortgaged Property is lawfully occupied under the
applicable law.

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

          (ff) With respect to each Mortgage Loan which constitutes a second
mortgage loan, either (i) no consent for such Mortgage Loan was required by
the holder of the related first mortgage prior to the making of such Mortgage
Loan or (ii) such consent has been obtained and is contained in the related
Indenture Trustee's Mortgage File.

          (gg) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (ii) otherwise by judicial foreclosure. There is
no homestead or other exemption available which materially interferes with
the right to sell the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage.

          (hh) Except for a Mortgage Payment not more than 29 days
contractually delinquent, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note and no
event which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a default, breach, violation or
event of acceleration; and the Sponsor has not waived any default, breach,
violation or event of acceleration.

          (ii) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in
whole or in part, except in connection with an assumption agreement which has
been approved by the Primary Mortgage Insurance Provider, if applicable, and
which has been delivered to the Indenture Trustee.

          (jj) The maturity date of each Mortgage Loan which is a second
mortgage loan is at least twelve months prior to the maturity date of the
related first mortgage loan if such first mortgage loan provides for a
balloon payment.

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<PAGE>

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

          (ll) (i) No action, error, omission, misrepresentation, negligence,
fraud or similar occurrence with respect to a Mortgage Loan has taken place
on the part of any person, including, without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan and (ii) no action has been taken or failed to
be taken, no event has occurred and no state of facts exists or had existed
on or prior to the Closing Date (whether or not known to the Sponsor on or
prior to such date) which has resulted or will result in an exclusion from,
denial of, or defense to coverage under the Primary Mortgage Insurance
Policy, if applicable (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 the Sponsor, 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 the Primary Mortgage Insurance Policy, or for any other reason
under such coverage, but not including the failure of the Primary Mortgage
Insurance Provider to pay by reason of such insurer's breach of the Primary
Mortgage Insurance Policy or the Primary Mortgage Insurance Provider's
financial inability to pay.

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

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

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

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

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

                                       22
<PAGE>

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

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

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

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

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

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

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

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

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

          (aaa) As of the Closing Date with respect to each Mortgage Loan
that is subject to the Primary Mortgage Insurance Policy, the Sponsor has not
taken any action, or omitted to

                                      23

<PAGE>

take any action, and there are no circumstances that would cause the Primary
Mortgage Insurance Provider to deny a claim with respect to such Mortgage
Loan;

          (bbb) [Reserved]; and

          (ccc) Except for the Mortgage Loans listed in Exhibit I, as of the
Cut-off Date, all of the Mortgage Loans having Loan-to-Value Ratios exceeding
75% are covered by the Primary Mortgage Insurance Policy.

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

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

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

          (d) The Master Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan
or Loans after the date of such substitution. Monthly Payments due with
respect to Qualified Substitute Mortgage Loans in or before the Due Period in
which the substitution occurs shall not be part of the Trust Estate and will
be retained by the Sponsor on the next succeeding Payment Date. For the Due
Period in which the substitution occurs, distributions to Noteholders will
include the Monthly Payment due on any Deleted Mortgage Loan for such Due
Period and thereafter the Sponsor shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loan. The Master Servicer

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<PAGE>

shall give written notice to the Backup Servicer, the Indenture Trustee and
the Note Insurer that such substitution has taken place and shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan
from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan or Loans. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects.

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

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

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

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<PAGE>

                                   ARTICLE V
               ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

     Section 5.01. THE MASTER SERVICER. (a) Acting directly or through one or
more Subservicers as provided in Section 5.13, the Master Servicer shall
service and administer the Mortgage Loans in accordance with this Agreement
and in accordance with Accepted Servicing Practices, and shall have full
power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable.

          (b) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Indenture Trustee with
respect to distributions, paying Compensating Interest and making Periodic
Advances and Servicing Advances pursuant hereto. The Master Servicer shall
follow its customary standards, policies and procedures in performing its
duties as Master Servicer. The Master Servicer shall cooperate with the
Indenture Trustee and furnish to the Indenture Trustee with reasonable
promptness information in its possession as may be necessary or appropriate
to enable the Indenture Trustee to perform its tax reporting duties
hereunder. The Indenture Trustee shall furnish the Master Servicer, the
Backup Servicer or any Subservicer with any powers of attorney and other
documents as the Indenture Trustee shall deem necessary or appropriate to
enable the Master Servicer, the Backup Servicer and any Subservicer to carry
out its servicing and administrative duties hereunder; provided, however, the
Master Servicer, the Backup Servicer or any Subservicer shall prepare for and
deliver to the Indenture Trustee for its execution any such powers of
attorney.

          (c) The Indenture Trustee is authorized to acknowledge, as
required, any subservicing agreement between a Subservicer and the Master
Servicer; PROVIDED, HOWEVER, that notwithstanding the terms of any such
subservicing agreement, the provisions of Section 5.13(c) hereof shall
control.

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

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<PAGE>

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

          (f) The Master Servicer may, and is hereby authorized to, perform
any of its servicing responsibilities with respect to all or certain of the
Mortgage Loans through a Subservicer as it may from time to time designate
with the approval of the Note Insurer as provided in Section 5.13, but no
such designation of a Subservicer shall serve to release the Master Servicer
from any of its obligations under this Agreement. Such Subservicer shall have
all the rights and powers of the Master Servicer with respect to such
Mortgage Loans under this Agreement.

          (g) Without limiting the generality of the foregoing, but subject
to Sections 5.05 and 5.06, the Master Servicer in its own name or in the name
of a Subservicer may be authorized and empowered pursuant to a power of
attorney executed and delivered by the Indenture Trustee to execute and
deliver, and may be authorized and empowered by the Indenture Trustee, to
execute and deliver, on behalf of itself, the Noteholders and the Indenture
Trustee or any of them, (i) any and all instruments of satisfaction or
cancellation or of partial or full release or discharge and all other
comparable instruments with respect to the Mortgage Loans and with respect to
the Mortgaged Properties, (ii) and to institute foreclosure proceedings or
obtain a deed in lieu of foreclosure so as to effect ownership of any
Mortgaged Property on behalf of the Indenture Trustee, and (iii) to hold
title to any Mortgaged Property upon such foreclosure or deed in lieu of
foreclosure on behalf of the Indenture Trustee; PROVIDED, HOWEVER, that
Section 5.07(a) shall constitute a power of attorney from the Indenture
Trustee to the Master Servicer or a Subservicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Mortgage Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 5.05 and 5.06, the Indenture Trustee shall
furnish the Master Servicer and any Subservicer with any powers of attorney
and other documents as the Master Servicer or such Subservicer shall
reasonably request to enable the Master Servicer and such Subservicer to
carry out their respective servicing and administrative duties hereunder;
provided, however, the Master Servicer or any Subservicer shall prepare for
and deliver to the Indenture Trustee for its execution any such powers of
attorney.

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

          (i) Servicing Advances incurred by the Master Servicer or any
Subservicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with

                                       27

<PAGE>

the payment of any taxes and assessments or other charges) on any Mortgaged
Property shall be recoverable by the Master Servicer or such Subservicer to
the extent described herein.

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

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

     Section 5.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION
ACCOUNT. (a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow Accepted Servicing Practices. Consistent with the foregoing, the
Master Servicer may in its discretion waive any assumption fees or other fees
which may be collected in the ordinary course of servicing such Mortgage
Loans.

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

          (c) The Master Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be
applied as of a date after the related Cut-Off Date (or, in the case of the
Initial Mortgage Loans, Monthly Payments due or to be applied after February
1, 2000), and thereafter, on each Business Day, but not less than two
Business Days after the date of collection, the following payments and
collections received or made by it (other than in respect of monthly payments
of principal on and interest of the Mortgage Loans that were due on or before
the related Cut-Off Date and monthly Payments due on February 1, 2000):

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

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

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<PAGE>

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

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

     (v)      all Net REO Proceeds;

     (vi)     all Net Liquidation Proceeds; and

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

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

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

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

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

          (b) to reimburse the Master Servicer for unreimbursed Periodic
Advances and unreimbursed Servicing Advances with respect to the Mortgage
Loans for which it has made a Periodic Advance or Servicing Advance, from
late or deferred payments collected, collections other than timely Monthly
Payments, Liquidation Proceeds, Insurance Proceeds and/or the Loan Repurchase
Price or Substitution Adjustment of or relating to such Mortgage Loans;

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<PAGE>

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

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

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

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

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

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

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

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

     The Master Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to this Section 5.03.

     Section 5.04. HAZARD INSURANCE POLICIES; PROPERTY PROTECTION EXPENSES.
(a) The Master Servicer shall cause to be maintained with respect to each
Mortgage Loan a hazard insurance policy with a carrier licensed in the state
in which the Mortgaged Property is located that provides for fire and
extended coverage, and which provides for a recovery by the named insured of
insurance proceeds relating to such Mortgage Loan in an amount not less than
the least of (i) the outstanding Principal Balance of the Mortgage Loan plus
the outstanding principal balance of any mortgage loan senior to such
Mortgage Loan, but in no event shall such amount be less than is necessary to
prevent the Mortgagor from becoming a coinsurer thereunder, (ii) the minimum
amount required to compensate for loss or damage on a replacement cost basis
and (iii) the full insurable value of the related Mortgage Property. The
Master Servicer shall also maintain on property acquired upon foreclosure, or
by deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable
value from time to time of the improvements which are a part of such property
or (ii) the sum of the Principal Balance of

                                     30

<PAGE>

such Mortgage Loan and the principal balance of any mortgage loan senior to
such Mortgage Loan at the time of such foreclosure plus accrued interest and
the good-faith estimate of the Master Servicer of related Liquidation
Expenses to be incurred in connection therewith. Amounts collected by the
Master Servicer under any such policies shall be deposited in the Collection
Account to the extent that they constitute Liquidation Proceeds or Insurance
Proceeds. Each hazard insurance policy shall contain a standard mortgage
clause naming the Master Servicer or a Subservicer, its successors and
assigns, as mortgagee. The Master Servicer shall be under no obligation to
require that any Mortgagor maintain earthquake (except as provided herein) or
other additional insurance and shall be under no obligation itself to
maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.

          (b) In the event that the Master Servicer shall obtain and maintain
a blanket policy with an insurer either (i) having a General Policy rating of
A:VIII or better in Best's Key Rating Guide or (ii) approved in writing by
the Note Insurer, such approval not to be unreasonably withheld, insuring
against fire, flood and hazards of extended coverage on all of the Mortgage
Loans, then, to the extent such policy names the Master Servicer as loss
payee and provides coverage in an amount equal to the aggregate unpaid
Principal Balance on the Mortgage Loans without co-insurance, and otherwise
complies with the requirements of this Section 5.04, the Master Servicer
shall be deemed conclusively to have satisfied its obligations with respect
to fire and hazard insurance coverage under this Section 5.04, it being
understood and agreed that such blanket policy may contain a deductible
clause, in which case the Master Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the preceding paragraph of this Section 5.04, and there shall
have been a loss which would have been covered by such policy, deposit in the
Collection Account from the Master Servicer's own funds the difference, if
any, between the amount that would have been payable under a policy complying
with the preceding paragraph of this Section 5.04 and the amount paid under
such blanket policy. Upon the request of the Indenture Trustee or the Note
Insurer, the Master Servicer shall cause to be delivered to the Indenture
Trustee or the Note Insurer, a certified true copy of such policy.

          (c) If the Mortgage Loan at the time of origination relates to a
Mortgaged Property in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards as
designated to the Master Servicer by the Sponsor, the Master Servicer will
cause to be maintained with respect thereto a flood insurance policy in a
form meeting the requirements of the current guidelines of the Federal
Insurance Administration with a generally acceptable carrier in an amount
representing coverage, and which provides for a recovery by the Master
Servicer on behalf of the Trust of insurance proceeds relating to such
Mortgage Loan of not less than the least of (i) the outstanding Principal
Balance of the related Mortgage Loan, plus the principal balance of the
related first lien, if any, (ii) the minimum amount required to compensate
for damage or loss on a replacement cost basis and (iii) the maximum amount
of insurance that is available under the Flood Disaster Protection Act of
1973. The Master Servicer shall indemnify the Trust and the Note Insurer out
of the Master Servicer's own funds for any loss to the Trust and the Note
Insurer resulting from the Master Servicer's failure to maintain the
insurance required by this Section.

                                      31
<PAGE>

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

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

     Section 5.06. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The Master
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Mortgaged Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Sponsor has not purchased pursuant to
Section 5.15, unless the Master Servicer reasonably believes that Net
Liquidation Proceeds with respect to such Mortgage Loan would not be
increased as a result of such foreclosure or other action, in which case,
such Mortgage Loan will be charged-off and will become

                                   32

<PAGE>

a Liquidated Mortgage Loan. The Master Servicer shall have no obligation to
purchase any Mortgaged Property at any foreclosure sale. In connection with
such foreclosure or other conversion, the Master Servicer shall exercise
foreclosure procedures with the same degree of care and skill in their
exercise or use, as it would ordinarily exercise or use under the
circumstances in the conduct of their own affairs. Any amounts including
Liquidation Expenses, advanced by the Master Servicer in connection with such
foreclosure or other action shall constitute Servicing Advances.

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

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

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

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

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

     Section 5.07. INDENTURE TRUSTEE TO COOPERATE. (a) Upon the payment in
full of any Mortgage Loan or the receipt by the Master Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Master Servicer or a Subservicer shall deliver to the
Indenture Trustee two copies of a Request for Release. Upon receipt of such
copies of the Request for Release, the Indenture Trustee shall promptly
release the related Indenture Trustee's Mortgage File, in trust to (i) the
Master Servicer or a Subservicer, as the case may be, (ii) an escrow agent or
(iii) any employee, agent or attorney of the Indenture Trustee, in each case
pending its release by the Master Servicer or a Subservicer, as the case may
be, such

                                      33

<PAGE>

escrow agent or such employee, agent or attorney of the Indenture Trustee, as
the case may be. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer
or a Subservicer is authorized to give, as attorney-in-fact for the Indenture
Trustee and the mortgagee under the Mortgage which secured the Mortgage Note,
an instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Mortgaged Property relating to such Mortgage, which instrument
of satisfaction or assignment, as the case may be, shall be delivered to the
Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection
with such instrument of satisfaction or assignment, as the case may be, shall
be chargeable to the Collection Account.

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

             (ii)     Each Request for Release may be delivered to the
          Indenture Trustee (x) via mail or courier, (y) via facsimile or (z)
          by such other means, including, without limitation, electronic or
          computer readable medium, as the Master Servicer or any Subservicer
          and the Indenture Trustee shall mutually agree. The Indenture
          Trustee shall promptly release the related Indenture Trustee's
          Mortgage File(s) within three (3) Business Days of receipt of 2
          copies of a properly completed Request for Release pursuant to
          clauses (x), (y) or (z) above or such shorter period as may be
          agreed upon by the Master Servicer or any Subservicer and the
          Indenture Trustee. Receipt of a Request for Release pursuant to
          clauses (x), (y) or (z) above shall be authorization to the
          Indenture Trustee to release such Indenture Trustee's Mortgage
          Files, provided the Indenture Trustee has determined that such
          Request for Release has been executed, with respect to clauses (x)
          or (y) above, or approved, with respect to clause (z) above, by a
          Servicing Officer of the Master Servicer or Subservicer, as the
          case may be. If the Indenture Trustee is unable to release the
          Indenture Trustee's Mortgage Files within the time frames
          previously specified, the Indenture Trustee shall immediately
          notify the Master Servicer or Subservicer, as the case may be,
          indicating the reason for such delay, but in no event shall such
          notification be later than five Business Days after receipt of a
          Request

                                       34

<PAGE>

          for Release. If the Master Servicer or a Subservicer, as the case
          may be, is required to pay penalties or damages due solely to the
          Indenture Trustee's negligent failure to release the related
          Indenture Trustee's Mortgage File or the Indenture Trustee's
          negligent failure to execute and release documents in a timely
          manner, the Indenture Trustee shall be liable for such penalties or
          damages.

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

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

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

     Section 5.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Master Servicer
will deliver to the Backup Servicer, the Trust, the Indenture Trustee, the
Rating Agencies, the Note Insurer and, the Sponsor on or before April 30 of
each year, beginning April 30, 2001, an Officer's Certificate of the Master
Servicer stating that (a) a review of the activities of the Master Servicer
during the preceding calendar year and of its performance under this
Agreement has been made under such officer's supervision and (b) to the best
of such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its material obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.

     Section 5.10. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before April 30 of each year, beginning April 30, 2001, the Master
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants
(who may also render other services to the Master Servicer) to furnish a
report to the Backup Servicer, the Trust, the Indenture Trustee, the Rating
Agencies, the Note Insurer and the Sponsor to the effect that such firm has
examined certain documents and records relating to the servicing of mortgage
loans under servicing agreements (including this

                                    35

<PAGE>

Agreement) substantially similar to this Agreement, and that such
examination, which has been conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Guide
for Audits of HUD Approved Nonsupervised Mortgagees (to the extent that the
procedures in such audit guide are applicable to the servicing obligations
set forth in such agreements), has disclosed no items of noncompliance with
the provisions of this Agreement which, in the opinion of such firm, are
material, except for such items of noncompliance as shall be set forth in
such report.

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

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

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

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

     Section 5.13. SUBSERVICING AGREEMENTS BETWEEN THE MASTER SERVICER AND
SUBSERVICERS. (a) The Master Servicer may enter into Subservicing Agreements
for any servicing and administration of Mortgage Loans with any institution
which is in compliance with the laws of each state necessary to enable it to
perform its obligations under such Subservicing Agreement. The Master
Servicer shall give notice to the Backup Servicer, the Note Insurer and the
Indenture Trustee of the appointment of any Subservicer and shall furnish to
the Backup Servicer, the Note Insurer and the Indenture Trustee a copy of the
Subservicing Agreement. The Master Servicer shall give notice to each Rating
Agency of the appointment of any Subservicer. No such appointment of a
Subservicer shall be effective without the consent of the Note Insurer. For
purposes of this Agreement, the Master Servicer shall be deemed to have
received payments on Mortgage Loans when any Subservicer has received such
payments. Any such Subservicing Agreement shall be consistent with and not
violate the provisions of this Agreement.

          (b) The Master Servicer may, with the consent of the Note Insurer,
terminate any Subservicing Agreement in accordance with the terms and
conditions of such Subservicing Agreement and thereafter directly service the
related Mortgage Loans itself or enter into a

                                     36

<PAGE>

Subservicing Agreement with a successor Subservicer that qualifies under
Subsection (a) of this Section 5.13. The Master Servicer shall give notice to
each Rating Agency of the termination of any Subservicer and the appointment
of any successor Subservicer.

          (c) The Master Servicer shall not be relieved of its obligations
under this Agreement notwithstanding any Subservicing Agreement or any of the
provisions of this Agreement relating to agreements or arrangements between
the Master Servicer and a Subservicer or otherwise, and the Master Servicer
shall be obligated to the same extent and under the same terms and conditions
as if it alone were servicing and administering the Mortgage Loans. The
Master Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Master Servicer by such Subservicer
and nothing contained in such Subservicing Agreement shall be deemed to limit
or modify this Agreement. The Trust shall not indemnify the Master Servicer
for any losses due to the Master Servicer's negligence.

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

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

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

     Section 5.14. REPORTS TO THE INDENTURE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS. Not later than twenty-five (25) days after each Payment Date, the
Master Servicer shall provide to the Backup Servicer and the Note Insurer a
statement, certified by a Servicing Officer, setting forth the status of the
Collection Account as of the close of business on the last day of the Due
Period preceding such Payment Date, stating that all payments required by
this Agreement to be made by the Master Servicer on behalf of the Indenture
Trustee have been made (or if any required payment has not been made by the
Master Servicer, specifying the nature and status thereof) and showing, for
the period covered by such statement, the aggregate of deposits into and
withdrawals from the Collection Account and the aggregate of deposits into
each Payment

                                    37

<PAGE>

Account as specified in Section 6.01. Such statement shall also state the
aggregate Stated Principal Balance and the aggregate unpaid principal balance
of all the Mortgage Loans as of the close of business on the last day of the
month preceding the month in which such Payment Date occurs.

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

          (b) After the Sponsor or an Affiliate of the Sponsor has
repurchased any Mortgage Loans which are 90 days or more Delinquent in an
aggregate amount equal to 1% of the Maximum Collateral Amount, then
notwithstanding the foregoing, unless the Note Insurer consents, the Sponsor
or an Affiliate of the Sponsor may only exercise its option pursuant to this
Section 5.15 with respect to the Mortgage Loan or Mortgage Loans (including
REO Mortgage Loans) that have been Delinquent for the longest period at the
time of such repurchase. Any request by the Sponsor or an Affiliate of the
Sponsor to the Note Insurer for consent to repurchase Mortgage Loans that are
not the most Delinquent shall be accompanied by a description of the Mortgage
Loans that have been Delinquent longer than the Mortgage Loan or Mortgage
Loans the Sponsor or such Affiliate proposes to repurchase. If the Note
Insurer fails to respond to such request within ten (10) Business Days after
receipt thereof, the Sponsor or such Affiliate may repurchase the Mortgage
Loan or Mortgage Loans proposed to be repurchased without the consent of, or
any further action by, the Note Insurer. Notice to the Note Insurer shall be
delivered in accordance with the terms of the Insurance Agreement.

          (c) After the Sponsor or an Affiliate of the Sponsor has
repurchased any Mortgage Loans which are 90 days or more Delinquent in an
aggregate amount equal to 3% of the Maximum Collateral Amount, then
notwithstanding the foregoing, unless the Note Insurer

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<PAGE>

consents, the Sponsor or an Affiliate of the Sponsor may not repurchase such
additional Mortgage Loans.

     Section 5.16. REPORTS TO BE PROVIDED BY THE MASTER SERVICER AND THE
BACKUP SERVICER.

          (a) By 3:00 p.m. eastern time on the second Business Day following
the fifteenth (15th) day of each month (the "Servicer Reporting Date"), the
Master Servicer shall deliver to the Indenture Trustee, the Backup Servicer,
the Underwriter, Intex, Bloomberg and the Note Insurer (via E-mail at
rmgtapes@fsa.com) a Servicer Remittance Report for the related Servicer
Payment Date setting forth the following information with respect to all
Mortgage Loans as well as a break out as to each Loan Group as of the close
of business on the last Business Day of the prior calendar month (except as
otherwise provided in clause (v) below):

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

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

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

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

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

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<PAGE>

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

             (vii)    the book value of any REO Property;

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

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

             (x)      the aggregate of claims (i) pending under the Primary
          Mortgage Insurance Policy, (ii) denied by the Primary Mortgage
          Insurance Provider during the related Collection Period and (iii)
          paid by the Primary Mortgage Insurance Provider during the related
          Collection Period.

                  (b)      [Reserved].

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

     Section 5.17.     [Reserved].

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

     The Master Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to

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have been made, such determination being conclusive for purposes of
withdrawals from the Collection Account pursuant to Section 5.03 hereof.

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

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

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

     Section 5.21. ASSIGNMENT OF AGREEMENT BY MASTER SERVICER AND BACKUP
SERVICER; MASTER SERVICER AND BACKUP SERVICER NOT TO RESIGN. Neither the
Master Servicer nor the Backup Servicer shall assign this Agreement nor
resign from the obligations and duties hereby imposed

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<PAGE>

on it except by the consent of the Note Insurer, or upon the determination
that the Master Servicer's or Backup Servicer's duties hereunder are no
longer permissible under applicable law and that such incapacity cannot be
cured by the Master Servicer or the Backup Servicer, as applicable, without
incurring, in the reasonable judgment of the Note Insurer, unreasonable
expense, or, in the case of the Backup Servicer, in the event of the
permitted resignation or removal of the Backup Servicer as Subservicer under
the Subservicing Agreement between the Master Servicer and the Backup
Servicer of even date herewith. Any such determination that the Master
Servicer's or the Backup Servicer's duties hereunder are no longer
permissible under applicable law permitting the resignation of the Master
Servicer or the Backup Servicer, as applicable, shall be evidenced by a
written Opinion of Counsel (who may be counsel for the Master Servicer or the
Backup Servicer) to such effect delivered to the Indenture Trustee, the
Trust, the Sponsor, the Note Insurer and the Backup Servicer or the Master
Servicer, as applicable. No such resignation of the Master Servicer shall
become effective until the Backup Servicer or a successor master servicer
appointed in accordance with the terms of this Agreement has assumed the
Master Servicer's responsibilities and obligations hereunder in accordance
with Section 7.02. The Master Servicer or the Backup Servicer, as applicable,
shall provide the Indenture Trustee, the Rating Agencies and the Note Insurer
with 30 days' prior written notice of its intention to resign pursuant to
this Section 5.21.

     Section 5.22. PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION; ADDITIONAL INFORMATION. Within 15 days after each Payment Date,
the Indenture Trustee shall, in accordance with industry standards, file with
the Commission via the Electronic Data Gathering and Retrieval System
(EDGAR), a Form 8-K with a copy of the statement to the Certificateholders
for such Distribution Date as an exhibit thereto. Prior to January 30, 2001,
the Indenture Trustee shall, in accordance with industry standards, file a
Form 15 Suspension Notification with respect to the Trust, if applicable.
Prior to March 30, 2001, the Indenture Trustee shall file a Form 10-K, in
substance conforming to industry standards, with respect to the Trust. The
Sponsor hereby grants to the Indenture Trustee a limited power of attorney to
execute and file each such document on behalf of the Trust. Such power of
attorney shall continue until either the earlier of (i) receipt by the
Indenture Trustee from the Sponsor of written termination of such power of
attorney and (ii) the termination of the Trust. The Master Servicer and the
Sponsor each agree to promptly furnish to the Indenture Trustee, from time to
time upon request, such further information, reports, and financial
statements within its control related to this Agreement and the Mortgage
Loans as the Indenture Trustee reasonably deems appropriate to prepare and
file all necessary reports with the Commission. The Indenture Trustee shall
have no responsibility to file any items other than those specified in this
section.

     Section 5.23.     ADMINISTRATIVE DUTIES.

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

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<PAGE>

Trust to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Trust to take pursuant to the Basic Documents.

          (b)      DUTIES WITH RESPECT TO THE TRUST.

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

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

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

     Section 5.24. MAINTENANCE OF AND CLAIMS UPON THE PRIMARY MORTGAGE
INSURANCE POLICY. The Master Servicer shall, on behalf of the Issuer, the
Indenture Trustee, the Noteholders and the Note Insurer, maintain the Primary
Mortgage Insurance Policy and prepare and file in a timely basis with the
Primary Mortgage Insurance Provider, with a copy to the Note Insurer, all
claims that may be made under the Primary Mortgage Insurance Policy with
respect to Primary Mortgage Insurance Mortgage Loans. Consistent with its
rights and obligations hereunder, the Master Servicer shall take all actions
required under the Primary Mortgage Insurance Policy as a condition to the
payment of any such claim. Any amount received from the Primary Mortgage
Insurance Provider with respect to any Primary Mortgage Insurance Mortgage
Loan shall be deposited by the Master Servicer on each Business Day, but no
less than two Business Days after the date of receipt thereof, into the
Collection Account for distribution on the related Payment Date as part of
Liquidation Proceeds for the related Loan Group.

     Assuming that the premium for the Primary Mortgage Insurance Policy is
paid to the Primary Mortgage Insurance Provider in accordance with the terms
of the Indenture, the Master Servicer shall exercise its best reasonable
efforts to maintain and keep the Primary Mortgage Insurance Policy in full
force and effect throughout the terms of the Basic Documents, unless the
coverage thereunder has been exhausted through the payment of claims.

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<PAGE>

                                   ARTICLE VI
                              APPLICATION OF FUNDS

     Section 6.01. DEPOSITS TO THE PAYMENT ACCOUNT. On each Servicer Payment
Date, the Master Servicer shall cause to be deposited in the related Payment
Account, from funds on deposit in the Collection Account, an amount equal to
the Servicer Remittance Amount with respect to the related Payment Date,
minus any portion thereof payable to the Master Servicer or the Backup
Servicer pursuant to Section 5.03. On each Servicer Payment Date, the Master
Servicer shall also deposit into the related Payment Account any amounts
required to be deposited in connection with a Subsequent Mortgage Loan
pursuant to Section 2.14(b) of the Indenture.

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

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

     Section 6.04.     [Reserved].

     Section 6.05. COMPENSATING INTEREST. Not later than the Servicer Payment
Date, the Master Servicer shall remit to the Indenture Trustee (without right
to reimbursement therefor) for deposit into the related Payment Account, an
amount equal to, for all of the Mortgage Loans, the lesser of (a) the
Prepayment Interest Shortfalls for all of the Mortgage Loans for the related
Payment Date resulting from Principal Prepayments in full during the related
Prepayment Period and (b) its aggregate Servicing Fee with respect to all of
the Mortgage Loans for the related Due Period (the "COMPENSATING INTEREST").

     Section 6.06. EFFECT OF PAYMENTS BY THE NOTE INSURER; SUBROGATION.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Notes which is made with moneys received
pursuant to the terms of the Note Insurance Policy shall not be considered
payment of the Notes from the Trust Estate. The Sponsor, the Master Servicer,
the Trust and the Indenture Trustee acknowledge and agree, that without the
need for any further action on the part of the Note Insurer, the Sponsor, the
Master Servicer, the Trust, the Indenture Trustee or the Note Registrar (a)
to the extent the Note Insurer makes payments, directly or indirectly, on
account of principal of or interest on the Notes to the Holders of such
Notes, the

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<PAGE>

Note Insurer will be fully subrogated to, and each Noteholder, the Master
Servicer, the Sponsor, the Trust and the Indenture Trustee hereby delegate
and assign to the Note Insurer, to the fullest extent permitted by law, the
rights of such Holders to receive such principal and interest from the Trust
Estate, including, without limitation, any amounts due to the Noteholders in
respect of securities law violations arising from the offer and sale of the
Notes, and (b) the Note Insurer shall be paid such amounts from the sources
and in the manner provided herein for the payment of such amounts and as
provided in the Insurance Agreement. The Indenture Trustee and the Master
Servicer shall cooperate in all respects with any reasonable request by the
Note Insurer for action to preserve or enforce the Note Insurer's rights or
interests under this Agreement without limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.

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<PAGE>
                                  ARTICLE VII
                                SERVICER DEFAULT

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

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

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

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

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

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

             (vi)     the Master Servicer shall admit in writing its
          inability generally to pay its debts as they become due, file a
          petition to take advantage of any applicable insolvency

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<PAGE>

          or reorganization statute, make an assignment for the benefit of its
          creditors, or voluntarily suspend payment of its obligations;

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

             (viii)   if on any Payment Date the Rolling Three Month
          Delinquency Rate exceeds 5.0%;

             (ix)     if on any Payment Date, Twelve Month Loss Amount
          exceeds 1.50% of the Aggregate Principal Balance of the Mortgage
          Loans, as of the close of business on the later of April 1, 2000
          and the first day of the twelfth preceding calendar month;

             (x)      if (a) on any Payment Date occurring before March 1,
          2001, the aggregate Cumulative Loan Losses since the Initial
          Cut-Off Date exceed 1.25% of the Cut-Off Date Aggregate Principal
          Balance of the Mortgage Loans in both Loan Groups, (b) on any
          Payment Date after March 1, 2001 and before March 1, 2002, the
          aggregate Cumulative Loan Losses since the Initial Cut-Off Date
          exceed 1.75% of the Cut-Off Date Aggregate Principal Balance of the
          Mortgage Loans in both Loan Groups, (c) on any Payment Date on or
          after March 1, 2002 and before March 1, 2003, the aggregate
          Cumulative Loan Losses since the Initial Cut-Off Date exceed 2.75%
          of the Cut-Off Date Aggregate Principal Balance of the Mortgage
          Loans in both Loan Groups, (d) on any Payment Date on or after
          March 1, 2003 and before March 1, 2004, the aggregate Cumulative
          Loan Losses since the Initial Cut-Off Date exceed 3.50% of the
          Cut-Off Date Aggregate Principal Balance of the Mortgage Loans in
          both Loan Groups, or (e) on any Payment Date on or after March 1,
          2004, the aggregate Cumulative Loan Losses since the Initial
          Cut-Off Date exceed 4.50% of the Cut-Off Date Aggregate Principal
          Balance of the Mortgage Loans in both Loan Groups;

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

             (xii)    a Servicer Extension Notice shall not have been
          delivered as set forth n Section 8.04 hereof.

          II. The following events shall each constitute a "BACKUP SERVICER
EVENT OF DEFAULT" hereunder:

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

           (ii) a decree or order of a court or agency or supervisory
          authority having jurisdiction in an involuntary case under any
          present or future federal or state bankruptcy,

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<PAGE>

           insolvency or similar law or for the appointment of a conservator
           or receiver or liquidation in any insolvency, readjustment of
           debt, marshalling of assets and liabilities or similar
           proceedings, or for the winding-up or liquidation of its affairs,
           shall have been entered against the Backup Servicer and such
           decree or order shall have remained in force, undischarged or
           unstayed for a period of ninety (90) days;

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

            (iv) the Backup Servicer shall admit in writing its inability
           generally to pay its debts as they become due, file a petition to
           take advantage of any applicable insolvency or reorganization
           statute, make an assignment for the benefit of its creditors, or
           voluntarily suspend payment of its obligations; and

            (v)       the Backup Servicer is no longer a Subservicer.

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

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<PAGE>

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

     Section 7.02. BACKUP SERVICER TO ACT; APPOINTMENT OF SUCCESSOR. (a) (i)
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.01 or fails to receive a Servicer Extension Notice
pursuant to Section 8.04, or the Indenture Trustee receives the resignation
of the Master Servicer evidenced by an Opinion of Counsel pursuant to Section
5.21, or the Master Servicer is removed as Master Servicer pursuant to this
Article VII, in which event the Indenture Trustee shall promptly notify the
Rating Agencies, and except as otherwise provided in this Section 7.02, the
Backup Servicer or another successor master servicer selected by the Note
Insurer shall be the successor in all respects to the Master Servicer in its
capacity as master servicer under this Agreement and the transactions set
forth or provided for in this Agreement, and shall be subject to all the
responsibilities, restrictions, duties, liabilities and termination
provisions relating thereto placed on the Master Servicer by the terms and
provisions of this Agreement. The Backup Servicer or another successor master
servicer and the Indenture Trustee shall take such action, consistent with
this Agreement, as shall be necessary to effect any such succession. If the
Backup Servicer or any other successor master servicer is acting as Master
Servicer hereunder, it shall be subject to termination under Section 7.01
upon the occurrence or continuation of a Servicer Event of Default applicable
to it as Master Servicer. The Backup Servicer hereby agrees to act as
successor master servicer pursuant to the terms of this Agreement upon the
termination or resignation of the Master Servicer as provided in this Section
7.02. Any successor master servicer and the Backup Servicer prior to its
becoming the successor master servicer shall not be liable for any actions or
omissions of any master servicer prior to it or breaches of representations
and warranties of the master servicer prior to it. The Backup Servicer or any
other successor master servicer, as successor master servicer, shall be
obligated to pay Compensating Interest pursuant to Section 6.05 in any event
and to make Periodic Advances pursuant to Section 5.18 unless, and only to
the extent the Backup Servicer determines reasonably and in good faith that
such advances would not be recoverable from the proceeds of the related
Mortgage Loan pursuant to Section 5.03, such determination to be evidenced by
a certification of a Responsible Officer of the Backup Servicer delivered to
the Note Insurer.

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<PAGE>

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

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

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

              (d) The Indenture Trustee, the Backup Servicer and any
successor master servicer or backup servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Indenture
Trustee, the Backup Servicer and any successor master servicer in effecting
the termination of the Master Servicer's servicing responsibilities and
rights hereunder and shall promptly provide the Indenture Trustee, the Backup
Servicer or such successor master servicer, as applicable, at the Master
Servicer's cost and expense, all documents and records reasonably requested
by it to enable it to assume the Master Servicer's functions hereunder and
shall promptly also transfer to the Indenture Trustee, the Backup Servicer or
such successor master servicer, as applicable, all amounts that then have
been or should have been deposited in the Collection Account by the Master
Servicer or that are thereafter received with respect to the Mortgage Loans,
including without limitation all Liquidation Proceeds and Insurance Proceeds,
and payments of insurance deductible amounts by the Master Servicer pursuant
to Section 5.04(b) with respect to all insurance claims arising during the
Master Servicer's tenure. Any collections received by the Master Servicer
after such removal or resignation shall be endorsed by it to the Backup
Servicer or (if the Backup Servicer is not the successor master servicer) to
the Indenture Trustee and remitted directly to the Backup Servicer or the
Indenture Trustee, as applicable (or, at the direction of the Indenture
Trustee, to any other successor master servicer). Neither the Backup
Servicer, the Indenture Trustee nor any other successor master servicer shall
be held liable by reason of any failure to make, or any delay in making, any
payment hereunder or any portion thereof caused by (i) the failure of the
Master Servicer to deliver, or any delay in delivering, cash, documents or
records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Master Servicer hereunder. Notwithstanding
anything to the contrary herein, no appointment of a successor master
servicer under this Agreement shall be effective until the Note Insurer shall
have consented thereto, and written notice of such proposed

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<PAGE>

appointment shall have been provided by the Indenture Trustee to the Note
Insurer and the Backup Servicer. The Indenture Trustee shall not resign as
Master Servicer until a successor master servicer reasonably acceptable to
the Note Insurer has been appointed. The Note Insurer shall have the right to
remove the Indenture Trustee as successor Master Servicer under this Section
7.02 without cause, and the Indenture Trustee shall appoint such other
successor master servicer as directed by the Note Insurer.

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

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

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

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<PAGE>

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

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

         Section 7.03. WAIVER OF DEFAULTS. The Note Insurer or the Majority
Noteholders may, on behalf of all Noteholders, and subject to the consent of
the Note Insurer, waive any events permitting removal of the Master Servicer
as master servicer pursuant to this Article VII; PROVIDED, HOWEVER, that the
Majority Noteholders may not waive a default in making a required payment on
a Note without the consent of the Holder of such Note. Upon any waiver of a
past default, such default shall cease to exist, and any Servicer Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the
Indenture Trustee to the Rating Agencies and the Note Insurer.

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

                  (c) undertake any litigation.

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

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

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

         Section 7.07. NOTE INSURER DEFAULT. During the continuation of a
Note Insurer Default, rights granted or reserved to the Note Insurer
hereunder shall vest instead in the

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<PAGE>

Certificateholders; PROVIDED, that the Note Insurer shall be entitled to any
distributions of reimbursements as set forth in the Indenture and the
Insurance Agreement and the Note Insurer shall retain those rights under
Section 10.03 to consent to any amendment of this Agreement.

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

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<PAGE>

                                  ARTICLE VIII

                                   TERMINATION

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

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

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

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

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

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<PAGE>

of any responsibility for such funds and the Noteholders shall look only to
the Certificateholders for payment and not to the Note Insurer. Such funds
shall remain uninvested.

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

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

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

                  (b) deliver to the successor master servicer or, if none
shall yet have been appointed, to the Indenture Trustee all Mortgage Files
and related documents and statements held by it hereunder and a Mortgage Loan
portfolio computer tape;

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

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

         Section 8.04. RETENTION AND TERMINATION OF THE MASTER SERVICER. The
Master Servicer hereby covenants and agrees to act as Master Servicer under
this Agreement for an initial term commencing on the Closing Date and
expiring on June 30, 2000 (the "INITIAL TERM"). Thereafter, the Initial Term
shall be extendible in the sole discretion of the Note Insurer by written
notice (each, a "SERVICER EXTENSION NOTICE") of the Note Insurer (or the
Indenture Trustee if revocable written standing instructions of the Note
Insurer have been previously delivered to the Indenture Trustee), for any
specified number of three (3) month terms to the Master Servicer and the
Backup Servicer. Each such Servicer Extension Notice, if any, shall be
delivered by the Note Insurer (or the Indenture Trustee, as applicable,) to
the other parties to this Agreement. The Master Servicer hereby agrees that,
as of the date hereof and upon its receipt of any Servicer Extension Notice,
the Master Servicer shall be bound for the duration of the Initial Term and
the term covered by any such Servicer Extension Notice to act as the Master
Servicer, subject to and in accordance with the other provisions of this
Agreement. The Master Servicer agrees that if, as of the fifteenth day prior
to the last day of any such servicing term, the Master Servicer shall not
have received a Servicer Extension Notice from the Note Insurer or Indenture
Trustee, as

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<PAGE>

applicable, the Master Servicer shall, within five (5) days thereafter, give
written notice of such non-receipt to the Note Insurer, the Backup Servicer
and the Indenture Trustee. The failure of the Note Insurer or the Indenture
Trustee, as applicable, to deliver a Servicer Extension Notice by the end of
any such three-month term shall result in the automatic termination of the
Master Servicer, with the same effect as if a notice of termination had been
given under Section 7.01.

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<PAGE>

                                   ARTICLE IX

                                   [RESERVED]

                                      58

<PAGE>

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

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

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

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

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

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<PAGE>

                  (c) No Noteholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Notes, be construed so as to constitute the Noteholders from time to time as
partners or members of an association; nor shall any Noteholder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.

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

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

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

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

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<PAGE>

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

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

         Section 10.06. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given
when delivered to (i) in the case of the Master Servicer, Accredited Home
Lenders, Inc., 15030 Avenue of Science, Suite 100, San Diego, California
92129, Attention: Director of Operations with a copy to General Counsel; (ii)
in the case of the Backup Servicer, Advanta Mortgage Corp. USA, 10790 Rancho
Bernardo Road, San Diego, California 92127 Attention: Senior Vice President
Loan Servicing; (iii) in the case of the Trust, Accredited Mortgage Loan
Trust 2000-1, c/o the Owner Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration; (iv) in the case of the Indenture Trustee,
Norwest Bank Minnesota, National Association, 11000 Broken Land Parkway,
Columbia, Maryland 21044, Attention: Corporate Trust Services, Accredited
Series 2000-1, with a copy to the following address: Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate
Trust Services, Accredited Series 2000-1; (v) in the case of the Sponsor,
Accredited Home Lenders, Inc., 15030 Avenue of Science, Suite 100, San Diego,
California 92129, Attention: Corporate Trust Administration; (vi) in the case
of the Underwriter, Lehman Brothers Inc., 200 Vesey Street, Three World
Financial Center, New York, New York 10285, Attention: Martin P. Harding;
(vii) in the case of the Note Insurer, Financial Security Assurance Inc., 350
Park Avenue, New York, New York 10022, Attention: Surveillance Department (in
each case in which notice or other communication to the Note Insurer refers
to an Event of Default, a Servicer Event of Default or a claim on the Note
Insurance Policy or with respect to which failure on the part of the Note
Insurer to respond shall be deemed to constitute consent or acceptance, then
a copy of such notice or other communication should also be sent to the
attention of each of the General Counsel and the Head- Financial Guaranty
Group, and shall be marked to indicate "URGENT MATERIAL ENCLOSED"); (viii) in
the case of Standard & Poor's Rating Services, 55 Water Street, New York, New
York 10004, Attention: Residential Mortgage Surveillance Group; (ix) in the
case of Moody's Investors Service, Inc., 99 Church Street, New York, New York
10007, Attention: Keith Wofford; and (x) in the case of the Noteholders, as
set forth in the Note Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Noteholders shall be effective upon
mailing or personal delivery.

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

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<PAGE>

way affect the validity or enforceability of the other covenants, agreements,
provisions or terms of this Agreement.

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

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

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

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

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

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

         Section 10.13. THIRD PARTY BENEFICIARY. The parties agree that each
of the Owner Trustee and the Note Insurer is intended and shall have all
rights of a third-party beneficiary of this Agreement.

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

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

                                      62

<PAGE>

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

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

                  [Remainder of Page Intentionally Left Blank]

                                      63

<PAGE>

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

                                 ACCREDITED HOME LENDERS, INC.,
                                 as Sponsor

                                 By: /s/ David Hertzel
                                     -----------------------------------
                                      Name:   David Herzel
                                      Title:  General Counsel

                                 ACCREDITED MORTGAGE LOAN
                                   TRUST 2000-1

                                 By:      WILMINGTON TRUST COMPANY, not in its
                                 individual capacity, but solely as Owner
                                 Trustee under the Trust Agreement

                                 By: /s/ Anita Delago
                                     -----------------------------------
                                      Name:  Anita Delago
                                      Title:

                                 ACCREDITED HOME LENDERS, INC.,
                                   as Master Servicer

                                 By: /s/ David Hertzel
                                     -----------------------------------
                                      Name:   David Hertzel
                                      Title:  General Counsel

                                 NORWEST BANK MINNESOTA, NATIONAL
                                   ASSOCIATION, as Indenture Trustee

                                 By: /s/ Amy Doyle
                                     -----------------------------------
                                      Name:   Amy Doyle
                                      Title:  Assistant Vice President

                                 ADVANTA MORTGAGE CORP. USA,
                                   as Backup Servicer

                                 By: /s/ Mary Ware
                                     -----------------------------------
                                      Name:   Mary Ware
                                      Title:

                [Signature Page to Sale and Servicing Agreement]

<PAGE>

                                                                      SCHEDULE I

                             MORTGAGE LOAN SCHEDULE

                                      I-1

<PAGE>

                                                                      APPENDIX I

                                  DEFINED TERMS

                          [See Appendix I to Indenture]

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